## Facts

- Corrugated Paper Products, Inc. (Corrugated) wanted to purchase a used “cut-off” knife for its Mishawaka, Indiana facility and contacted Atlas Corrugated Machinery, Inc. (Atlas), a dealer in used paper-industry equipment.
- Longview Fibre Company (Longview) had a cut-off knife for sale and informed Atlas of the availability.
- In discussions between Atlas and Longview, Atlas told Longview it had a prospective buyer. Longview sought assurance that Atlas would purchase the knife “for its own account,” regardless of whether Atlas later resold the knife to any third party, and Atlas agreed.
- It was common in the industry for a dealer like Atlas to contract with a seller while already having a downstream buyer in mind, but still to buy on its own account.
- Corrugated personnel spoke directly with Longview employees about the knife’s specifications, performance, and condition.
- A Corrugated representative traveled to Longview’s Cedar Rapids, Iowa plant and inspected the knife in operation.
- Corrugated and Atlas entered into a written agreement under which Corrugated would buy the knife from Atlas; Corrugated paid Atlas a $5,000 deposit.
- After receiving Corrugated’s deposit, Atlas sent Longview a written purchase order for the knife along with a $5,000 payment.
- The knife ultimately was not shipped to Corrugated. Corrugated later learned Atlas had changed its shipping directions so the knife went to a different buyer.
- Corrugated sued Atlas and Longview for breach of contract in federal court (diversity). Corrugated obtained summary judgment against Atlas, but the judgment was uncollectible.
- The district court granted summary judgment to Longview, rejecting Corrugated’s claim that it could enforce the Longview–Atlas contract as a third-party beneficiary. Corrugated appealed.

## Issues

1. Under Indiana law, was Corrugated an intended third-party beneficiary of the Longview–Atlas contract, allowing Corrugated to sue Longview for breach when the knife was not delivered to Corrugated?

## Decision

- The Seventh Circuit affirmed the district court’s grant of summary judgment for Longview.
- Corrugated failed to produce facts showing that Longview and Atlas intended to give Corrugated enforceable rights under their contract.
- Any benefit to Corrugated from performance of the Longview–Atlas contract was incidental, so Corrugated could not maintain a contract claim against Longview.

## Legal Principles

- Under Indiana law, a nonparty may enforce a contract only when the contracting parties intended the contract to directly benefit that nonparty.
- A foreseeable benefit to a downstream purchaser is not enough; the question is whether conferring enforceable rights on the third party was part of the contracting parties’ intent.
- Evidence that the seller knew a dealer had a prospective customer, or that the customer communicated with the seller about the goods, does not by itself show intent to create third-party enforcement rights.
- When the seller requires the dealer to purchase “for its own account” and without tying the seller’s obligations to any resale, that understanding weighs strongly against third-party beneficiary status.
- Summary judgment is proper when the record, viewed favorably to the nonmovant, lacks evidence from which a reasonable factfinder could conclude the contracting parties intended to benefit the claimed third-party beneficiary.

## Conclusion

Because the record showed Longview contracted to sell the knife to Atlas as an independent purchaser—insisting Atlas buy for its own account—and did not show an intent by Longview and Atlas to give Corrugated enforceable rights, Corrugated was only an incidental beneficiary and could not sue Longview on the Longview–Atlas contract; the Seventh Circuit therefore affirmed summary judgment for Longview.


Corrugated Paper Products, Inc. v. Longview Fibre Co., 868 F.2d 908 (1989)