When A Company Can Enforce A Contract’s Terms – Even If They Weren’t A Party To The Original Contract – Under New York Law January 1, 2010

Strange as it may sound, there are times that you can reap the benefit of a contract’s provisions even if you had nothing to do with the contract at the time it was signed. And this is exactly what happened in Corbett v. Firstline Security, Inc., et al.

In this case, the plaintiff sued to recover damages against her alarm company following a burglary.  At one point during the contract period, Firstline was acquired by ADT, a large home security alarm company. The Court’s decision which dismissed the claims against the defendants is significant for two (2) reasons:

1. The Court held that “courts applying New York law will enforce a shortened statute of limitations when it is reasonable and agreed to by contract.” (The Court also noted that reducing the claim period to one year is not unreasonable as a matter of law.) See, e.g., Cab Associates v. City of New York, 32 A.D.3d 229, 323, 820 N.Y.S.2d 21 (N.Y. 2006); and,
2. As a general rule, a party may not invoke the provisions of a contract to which it is not an original party. There are limited exceptions to this rule, however,  which include the following theories: (1) assumption;  (2) piercing the corporate veil or alter ego; (3)  incorporation by reference; (4) third-party beneficiary theories; or, (5) waiver [or] estoppel. Arthur Andersen LLP v. Carlisle, 129 S.Ct. 1896, 1902, 173 L.Ed.2d 832 (2009).

Here, the Court held that “assumption” was applicable.  Since the original Alarm Services Contract with Firstline Security Inc. specified that any lawsuit be brought within one year of the event that causing loss, damage or liability, ADT was also entitled to the benefit of that contractual provision, rendering plaintiff’s claim untimely.

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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