## Facts

- A developer sold lots in a coastal subdivision by real estate contracts that promised installation of a water system for the plat, with purchasers contributing to the cost and agreeing to use the system.
- The developer later assigned its vendor interests in some contracts to investors, who paid the developer and received assignments and deeds intended to secure payment of remaining contract balances.
- After the developer’s principal died, the remaining undeveloped portion was sold to a successor entity that expressly assumed the obligation to install the water system for the entire development, including already-sold lots.
- Neither the developer nor the successor installed the water system.
- Prior litigation established the successor’s default on the assumed obligation and that the failure to install the system contributed to purchaser defaults and related litigation, including judgments that impaired the investors’ vendor interests.
- The investors filed a Washington class action seeking rescission and damages against the developer’s successor-in-interest and enforcement against the successor entity as third-party beneficiaries of its assumption agreement.

## Issues

1. Whether assigning the vendor interests in the real estate contracts relieved the original vendor (assignor) of its contractual duty to install the promised water system.
2. Whether the assignee-investors were intended third-party beneficiaries of the agreement in which the successor entity assumed the duty to install the water system for the entire development.

## Decision

- The Washington Supreme Court reversed the dismissal and remanded.
- The court held the original vendor’s assignment of its vendor interests did not discharge its own contractual duty to install the water system absent an agreement amounting to a novation.
- The court held the assignee-investors were intended third-party beneficiaries of the successor entity’s express assumption of the water-system obligation and could sue to enforce that promise.

## Legal Principles

- Assignment of contract rights does not, by itself, relieve the assignor of its contractual duties; discharge of duties requires an agreement effecting a novation or other clear release.
- Delegation or assumption by another party may create additional obligors but does not eliminate the original obligor’s liability absent a valid release.
- A nonparty may enforce a contract as a third-party beneficiary when the contract’s terms and circumstances show intent to benefit that nonparty; an incidental benefit is insufficient.
- An express assumption of obligations for an entire development, including previously sold lots, can manifest intent to benefit those whose interests depend on performance of the assumed obligation.

## Conclusion

The court reinstated the investors’ claims, holding the original vendor remained potentially liable for failing to install the promised water system despite assigning vendor interests, and that the investors could directly enforce the successor’s assumed obligation as intended third-party beneficiaries.


Lonsdale v. Chesterfield, 662 P.2d 385 (Wash. 1983)