California Civil Code Section 1717 Provides for Mutuality of Remedy in Favor of a Third Party Beneficiary

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In Cargill Inc. v. Souza, 2011 DJDAR 17680 (2011), the California Court of Appeal for the Fifth Appellate District decided a novel case relating to the attempt by a litigant’s attempt to enforce a fee clause in a contract against a purported third party beneficiary of the agreement.

The Teixeiras borrowed $1 million from the Souzas to buy cattle and farm equipment. The Teixeiras executed a promissory note (the “Note”) and a security agreement (the “Agreement”) in favor of the Souzas. The Note and the Agreement created a security interest on behalf of the Souzas in the cattle and farm equipment. In addition, the Teixeiras bought feed from Cargill Inc. The feed purchase resulted in a further unsecured indebtedness in favor of Cargill in the sum of $262,000.

The Teixeiras soon defaulted on the promissory notes.

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Published In: Civil Remedies Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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