The court stated it this way: “…the broad and unqualified language of the enurement clause constitutes an express stipulation by the contracting parties that they intended the benefit of the Agreement to be shared by future owners of Mr.Sills’s lands, as his successors or assigns or by way of inheritance.The language of the enurement clause unequivocally confirms that the contracting parties intended and agreed that the benefit of the Agreement would extend to an aggregation or class of persons that includes successor landowner of Mr. On the admitted findings of the motion judge, the Browns are Mr. In this sense, the Browns are not strangers or ‘third parties’ to the Agreement.
Most commercial agreements contain a clause stating that the contract is binding upon and for the benefit of “successors.” For example, Article 10.1 of the CCDC Cost Plus Contract states that the contract “shall enure to the benefit of and be binding on…successors”. Recently, the Ontario Court of Appeal considered this issue in Brown v. Factual Background Let’s remind ourselves of the facts in Brown v. In 1953, a municipality signed an agreement with a farmer under which the municipality agreed to maintain and repair a storm sewer drainage system that it had constructed on and near the farmer’s lands.
Do those who enter into the contract know who the successors are? In that article I was concerned with whether inaction could amount to acceptance of a repudiation of a contract.
The municipality, the Town of Belleville, defended the action on a number of grounds.
It said that the limitation period had expired because the Browns or their predecessors had long ago accepted the municipalities’ repudiation of contract.
If necessary, the court said that it would apply the exceptions to the rule prohibiting third party enforcement of a contract and allow the Browns to enforce the drainage agreement when they so clearly fell within the category of persons who were intended to have its benefit.
The Court of Appeal considered one further objection of Belleville, namely, that the Browns were using the 1953 agreement as a sword – to bring an action and positively enforce rights – rather than as a shield – or as a defence.Belleville decision answers one of the issues arising from “successor” clauses.Based on that decision, a person falling within the clause does not have to worry about the old rule that contract law does not recognize the rights of third parties. Belleville, a later owner of the same land that is affected by the agreement is a successor.In the modern cases in the Supreme Court recognizing the rights of third parties to rely on contract they had not signed, those third parties were asserting the contract as a defence.The Court of Appeal held that this distinction made no difference in the presence of the enurement clause: “I recognize that London Drugs and Fraser River were cases where the third-party beneficiaries sought to rely, by way of defence, on the benefit of the contractual provisions at issue to resist claims brought against them – they were not seeking to enforce the affirmative benefit of the relevant contractual provisions…..What about the owner of other interests in the land such as owners of easements or mortgagees?The issue becomes even more complicated when one considers building contracts.Is the electrical subcontractor the “successor” of the contractor? If the contractor assigned the electrical part of the main contract to the electrical subcontractor (if it were permitted to do so), then the enurement clause would likely apply because that clause would likely be expressed to include assignees.If the clause includes both successors and assigns, then the word “successors” must be given a wider meaning than “assisgns”, but who does it include?Nonetheless, it is my view that the Browns’ status as the successors of the original covenantee under the Agreement affords them the right to seek to enforce the original covenantor’s contractual obligations, as against the original covenantor. Sills’s successors, the Browns stood ready to comply with the activity required of them under the Agreement- the provision of access to their lands.In all these circumstances, the application of the principled exception to the privity rule advances the interests of justice.” (emphasis added Analysis The Brown v.