Legal Malpractice Avoidance Tip – Third-Party Beneficiaries
An attorney may form a privileged relationship with a client either expressly or implicitly. Attorneys owe a duty of care to their clients. However, under certain narrow circumstances, individuals who are not actual parties to a contract between attorneys and their clients may have standing to enforce this contract and thus sue the attorney for legal malpractice. These individuals are recognized as intended third-party beneficiaries of the contract. The recognition of this standard is important, because the lack of privity between the plaintiff and the attorney would usually bar the plaintiff from both tort and contract claims against the attorney.
In Pennsylvania, the courts have limited this expansion of the duty of care to intended third party beneficiaries in estate planning matters. Plaintiffs have standing to sue for a claim of malpractice where (1) it is clear that the testator intended to benefit the plaintiff, and (2) the beneficiary has no other means by which to obtain his expectancy. In a couple of leading cases, courts barred third-party plaintiffs from recovering under negligence theories because the plaintiffs and attorneys did not have an attorney-client relationship. The plaintiffs ultimately recovered under a third-party beneficiary theory because the attorney breached a contract with his client.
It is foreseeable that the right of intended third party beneficiaries to sue attorneys for malpractice may extend beyond the area of estate planning. An attorney hired to perform a legal service may have a non-client third party who directly benefits from that service. Failure to effectuate the client’s intent combined with the third-party’s loss of that benefit may create liability to both the client and the third-party beneficiary.