Monday, May 14, 2007

Fourth Circuit addresses third-party beneficiary theory with military procurement contracts

In SECRETARY OF STATE v. TRIMBLE NAVIGATION LTD, the UK brought suit against a US contractor under a third-party beneficiary theory for failing to provide goods pursuit to a contract between the US government and the contractor. A panel of the Fourth Circuit held that no third-party beneficiary theory was permissible because statutory law provides methods by which the foreign power can contract directly with the contractor. As pointed out by Judge Traxler in dissent, the majority's reasoning is pretty weak:

The mere fact that a procurement for cash transaction does not involve a direct contractual relationship between the foreign purchaser and the defense contractor does not dictate that UKMOD’s claim is statutorily barred. Indeed, any third-party beneficiary claim assumes the plaintiff does not have a direct contractual relationship with the defendant.

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