On appeal, the Tribunal found that Dorothy`s estate was not bound by the agreement and its compromise clause. In accordance with the general principles of contract law, a third-party beneficiary is considered to accept a contract if he accepts benefits or attempts to exercise rights under that contract. Dorothy was a “third beneficiary” of the residence agreement signed by her son. The crucial issue for the court was Dorothea`s mental capacity – or her absence. Although Dorothy accepted the benefits of the contract (services and home of the institution), her lack of intellectual capacity required meant that her acceptance of the benefits did not ratify the contract. From time to time, we publish interesting trust and estate case summaries. Today`s article examines a recent decision by the Oregon Appeals Court in the growing area of elderly law. In this case, she is an elderly woman with limited mental capacity and asks whether she can be considered a third party beneficiary (under contract law) of a residence contract signed on her behalf. The case also deals with the issue of arbitration clauses in residence agreements for the elderly. Arbitration clauses such as those at issue in this case have been the subject of a number of recent 9th Circuit cases.
The residence agreement contained a clause requiring arbitration for any claim or dispute related to the agreement or services “provided to us.” After about a year in the factory, Dorothy died as a result of a fall. The personal representative of his estate sued the institution for negligent death. The defendants (unsuccessfully) moved to force arbitration on the grounds that the estate was bound by the compromise clause of the residence agreement as the third beneficiary of the contract. Background: Dorothy Drury suffered from dementia and her mental abilities were severely compromised when her son Eddie put her in the accused`s foster home. Eddie signed the institution`s admissions file and residency contract. At that time, he was not yet Dorothy`s tutor or curator and had no mandate for them.