The issue decided by the Supreme Court of Florida (“Florida Supreme Court”) in its written opinion filed on September 22, 2016 was whether the father who became a resident of the defendant Florida nursing home is bound by an arbitration clause in the nursing home contract signed by his son and the defendant nursing home.
The father was admitted to the defendant nursing home in 2009 at which time the son signed the nursing home contract, which included an arbitration clause. The father did not sign the contract.
While under the defendant nursing home’s care in 2011, the father developed an eye infection that eventually required the removal of his left eye. In 2012, the son filed suit on his father’s behalf, alleging negligence and statutory violations. The defendant nursing home moved to compel arbitration and to stay the judicial proceedings. The trial court granted the defendant nursing home’s motion to compel arbitration, and the father appealed. The father died while the appeal was pending.
The intermediate appellate court affirmed the trial court’s decision, finding that the father was the intended third-party beneficiary of the nursing home contract and therefore the defendant nursing home could bind him to its contract even though he never signed it.
The Third-Party Beneficiary Doctrine
The third-party beneficiary doctrine provides that under certain circumstances, a person may sue to enforce a contract, even though the person is not a party to the contract. To establish an action for breach of a third party beneficiary contract, the third-party beneficiary must allege and prove: (1) the existence of a contract; (2) the clear or manifest intent of the contracting parties that the contract primarily and directly benefit the third party; (3) breach of the contract by a contracting party; and (4) damages to the third party resulting from the breach.
The Florida Supreme Court stated that the third-party beneficiary doctrine enables a non-contracting party to enforce a contract against a contracting party, and not the other way around (the purpose behind the third-party beneficiary doctrine is to do justice for the non-contracting third-party beneficiary). The Florida Supreme Court stated that the third-party beneficiary doctrine does not permit two parties to bind a third, without the third party’s agreement, merely by conferring a benefit on the third party.
The Florida Supreme Court also stated that it could not conclude that the son was the father’s representative based on the facts of the case (the attorney for the defendant nursing home expressly stated during oral argument that it was not the position of the defendant nursing home that the son was the agent of his father in signing the admission documents; the defendant nursing home expressly disclaimed any reliance on agency principles).
The Father’s Mental Capacity
The Florida Supreme Court held that the father’s mental capacity does not impact the outcome of this case (the defendant nursing home explicitly conceded that a nursing home resident’s mental capacity or competence is irrelevant to the question of whether an individual can be bound to the terms of a contract as a third party beneficiary). If the father lacked the required mental capacity to execute binding contracts, the defendant nursing home could have availed itself of the Florida Legislature’s comprehensive statutory scheme governing incapacitated individuals: any adult person could have petitioned for a court to adjudicate the father incapacitated and appoint a guardian, and an appointed guardian would have held the power to contract on the father’s behalf for his residency at the defendant nursing home.
The Florida Supreme Court’s majority opinion was followed by two dissenting opinions.
Source Mendez v. Hampton Court Nursing Center, LLC, No. SC14-1349.
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