In Diamond Castle Partners IV PRC, L.P. v. IAC/Interactive Corp.,1 the Appellate Division, First Department, considered a situation where there appeared to be a conflict between an Indemnification clause and a No Third-Party Beneficiaries clause in a purchase agreement for the acquisition of a business. In the indemnification clause, seller agreed to hold buyer and buyer’s “affiliates” harmless against, inter alia, any loss or damage caused by seller’s representations and warranties in the agreement being untrue. The no third-party beneficiaries clause provided that only parties to the agreement, and their successors and assigns, could pursue a remedy for breach of the agreement.
Buyer’s affiliates sued to recover losses allegedly suffered because of the inaccuracy of statements in seller’s representations and warranties. Defendant seller moved to dismiss arguing that because of the no third-party beneficiaries clause, plaintiffs, who were not signatories to the purchase agreement, lacked standing. The Supreme Court rejected defendant’s argument and denied the motion. The First Department affirmed.
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