## Facts

- EasyLink Services Corporation (EasyLink) owned India.com, Inc. (ICI), an internet services subsidiary experiencing financial difficulties.
- EasyLink decided to sell ICI; Sandeep Dalal, an ICI executive facing termination, acted as a broker to find a buyer.
- Dalal facilitated negotiations with Business India Publications Limited (BI) for BI’s purchase of ICI.
- EasyLink and BI executed a Stock Purchase Agreement (SPA) that included an express clause negating any intent to create rights or remedies in nonparties.
- A disclosure schedule to the SPA identified Dalal as the broker and stated he was entitled to a commission under terms described in the schedule.
- Separately, EasyLink and Dalal entered a brokerage agreement under which EasyLink would pay Dalal a commission if the EasyLink–BI sale closed.
- EasyLink terminated the SPA before closing; the sale did not close.
- Dalal alleged EasyLink intentionally aborted the transaction to avoid paying his commission.
- ICI sued Dalal on unrelated claims; Dalal counterclaimed against EasyLink, including breach of contract, breach of the implied covenant of good faith and fair dealing, and recovery as a third-party beneficiary of the SPA.

## Issues

1. Whether Dalal could recover a commission as a third-party beneficiary of the SPA despite an express clause disclaiming third-party rights.
2. Whether EasyLink waived reliance on the SPA’s no–third-party-beneficiaries clause by failing to raise it earlier in the litigation.
3. If Dalal was not a third-party beneficiary, whether EasyLink could still be liable under the separate brokerage agreement (and implied covenant) for intentionally frustrating closing to avoid the commission.

## Decision

- The Second Circuit reversed the judgment awarding Dalal damages on a third-party-beneficiary theory.
- The court held the SPA’s express no–third-party-beneficiaries clause barred Dalal’s attempt to enforce the SPA, notwithstanding his identification in a disclosure schedule.
- The court rejected the district court’s ruling that EasyLink had waived reliance on the negating clause.
- The court remanded for further proceedings on Dalal’s remaining theory that EasyLink breached the separate brokerage agreement (including potentially the implied covenant) by deliberately preventing the transaction from closing.

## Legal Principles

- Under New York contract law, a nonparty may enforce a contract only if the contract manifests a clear intent to benefit that nonparty.
- An explicit contractual clause negating third-party beneficiary rights is generally controlling and forecloses third-party enforcement.
- Reference to a broker and a commission in a disclosure schedule does not create enforceable third-party rights when the primary agreement expressly disclaims such rights; it may merely acknowledge obligations arising from a separate contract.
- Waiver of a contractual defense is not inferred lightly; a court must find a sufficient basis in the litigation record to conclude the defense was relinquished.

## Conclusion

The court enforced the SPA’s express disclaimer of third-party rights, eliminating Dalal’s ability to recover his commission as an SPA beneficiary and rejecting waiver of that defense, while leaving open on remand whether EasyLink wrongfully prevented closing in breach of Dalal’s separate brokerage agreement and related good-faith obligations.


India.com, Inc. v. Dalal, 412 F.3d 315 (2d Cir. 2005)