“[A]s a general rule, it is only the private parties to contracts – as opposed to third parties or public authorities – who have the legal standing to sue for breach of contract.” See, generally, “Contract as Empowerment,” 83 U. Chi. L. Rev. 759, at note 120 (Spring 2016). But, “[e]very year, more than 100 reported court opinions consider the question whether an outsider can sue for damages under a contract made by others – in part because the law is so ambiguous.” See, discussion in “An ‘App’ for Third Party Beneficiaries,” 91 Wash. L. Rev. 1663 (Dec. 2016).
Both Kansas and Missouri follow the general rule that one must be a party or intended beneficiary of a contract to have standing to sue for breach of that contract. See, Verni v. Cleveland Chiropractic College, 212 S.W.3d 150, 153 (Mo. en banc 2007); compare, Cornwell v. Jesperson, 238 Kan. 110 at 115, 118, 708 P.2d 515 (1985), and Noller v. GMC Truck & Coach Div., General Motors Corp., 244 Kan. 612 at 617, 772 P.2d 271 (1989).
Neither Kansas nor Missouri treats the issue as one of capacity. The cases in both jurisdictions find that a plaintiff not a party to a contract lacks standing, not capacity. See, Midwestern Health Mgmt. v. Walker, 208 S.W.3d 295, 297 (Mo. App. 2006) (denial of assignment of account raised issue of standing, not capacity); Byers v. Snyder, 44 Kan. App.2d 380 at 385, 237 P.3d 1258 (Kan. App. 2010) (defense that plaintiffs not intended beneficiaries of contract raised issue of standing, implicating court’s jurisdiction).
This distinction has a difference. The rules of civil procedure lead to different methods of addressing lack of capacity vs. lack of standing.
Under the Federal and Kansas rules a plaintiff need not allege capacity to sue (except to establish jurisdiction in the federal court). F.R.Civ.P. 9(a)(1)(A), K.S.A. 60-209(a)(A). Under Missouri’s fact pleading rules a plaintiff need only plead the “ultimate fact” of capacity. Mo.R.Civ.P. 55.13. But, all of these rules require a party raising an issue of capacity to do so by specific denial supported by facts. F.R.Civ.P. 9(a)(2), K.S.A. 60-209(a)(2), Mo.R.Civ.P. 55.13.
On the other hand, the waiver provision of the rules does not apply to the defense of lack of subject matter. See, F.R.Civ.P. 12(h)(1), K.S.A. 60-212(h)(1), and Mo.R.Civ.P. 55.27(g).
In other words, the defense of lack of jurisdiction due to lack of standing cannot be waived. But, lack of capacity is waivable if not presented by specific denial. See, City of Wellston v. SBC Communs., Inc., 203 S.W.3d 189, 192 (Mo. en banc 2006); Douglas Landscape & Design, L.L.C. v. Miles, 51 Kan. App.2d 779 at Syl. ¶2, 355 P.3d 700 (Kan. App. 2015).
Since the cases in Missouri and Kansas treat the right to sue on a contract as providing standing for purposes of subject matter jurisdiction, a party can raise the issue at any time, even on appeal. See, Verni, supra, at 153; Byers, supra, at 385.
Texas courts handle this issue differently. In Texas, the right to sue as a party, intended beneficiary, or assignee of a contract provides capacity to sue.[1] If a defendant establishes that a plaintiff has no right to sue on a contract, the court must dismiss the plaintiff’s case on the merits, not for lack of subject matter jurisdiction. See, e.g., John C. Flood of DC, Inc. v. Supermedia, L.L.C., 408 S.W.3d 645, 650 (Tex.App.-Dallas 2013, pet. denied).
This difference means that in Texas a party must address the plaintiff’s right to sue on a contract immediately by a verified denial or waive the defense. Tex. R.Civ.P.93. But, in Kansas, Missouri, or federal courts not applying Texas law, a party can theoretically wait.
[1] Under Texas law a plaintiff must have standing and capacity. Coastal Liquids Transportation, L.P. v. Harris County Appraisal District, 46 S.W.3d 880,884 (Tex. 2001).