                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 01-1711
AMERICAN UNITED LOGISTICS, INC. and
CENTRAL AMERICAN WAREHOUSING CO., INC.,
                            Third-Party Plaintiffs-Appellants,

                                 v.

CATELLUS DEVELOPMENT CORPORATION, et al.,
                           Third-Party Defendants-Appellees.
                          ____________
No. 01-2310
NABISCO, INC.,
                                               Plaintiff-Appellant,
                                 v.

AMERICAN UNITED LOGISTICS, INC., et al.,
                                            Defendants-Appellees.
                          ____________
           Appeals from the United States District Court
       for the Northern District of Illinois, Eastern Division.
             No. 99 C 0763—Elaine E. Bucklo, Judge.
                          ____________
 ARGUED JANUARY 25, 2002—DECIDED FEBRUARY 12, 2003
                    ____________
2                                 Nos. 01-1711 & 01-2310

    Before MANION, KANNE, and WILLIAMS, Circuit Judges.
  WILLIAMS, Circuit Judge. A warehouse that Nabisco,
Inc. leased to store its products contained chemical resi-
dues which contaminated its packaged food products, and
it sought to recover the replacement costs of those prod-
ucts. Nabisco sued those involved in the warehouse lease,
construction, and floor finishing process, alleging that
their negligence and breach of their duties to warn al-
lowed chemicals to damage its property. American United
Logistics (“AUL”), Nabisco’s warehouse partner, and Cen-
tral American Warehousing, AUL’s affiliate, also filed suit
against the property developer, contractor, and subcon-
tractors, claiming breach of warranty and contract. The
district court dismissed Nabisco’s negligence and breach
of duty to warn claims, finding that the economic loss
doctrine barred tort recovery. Additionally, the court
dismissed Central and AUL’s claims, ruling that they did
not have a right to enforce warranties issued by the prop-
erty developer, contractor, and subcontractors. We affirm
the judgment against Nabisco, reverse the judgments
against Central and remand for further proceedings, and
reverse in part and affirm in part the judgments against
AUL and remand for further proceedings.


                    I. BACKGROUND
A. The Facts
  Nabisco and AUL were warehousing partners for
Nabisco’s snack food products. Nabisco asked that AUL
find additional warehouse space for snack food products,
and they signed a “Public Warehouse Storage, Handling
and Inventory Agreement” (“warehouse agreement”). Under
the warehouse agreement, AUL agreed to provide ware-
house space and other services for the storage and handling
of Nabisco’s bakery products. In addition, the warehouse
agreement specifically required AUL to keep poisonous,
Nos. 01-1711 & 01-2310                                    3

dangerous chemicals and foul odors in a separate part of the
warehouse. Under the warehouse agreement, AUL’s lia-
bility for any damage to Nabisco’s property was limited to
$1 million per occurrence.
  AUL contacted Catellus Construction Corporation to
find available warehouse space in Illinois. AUL told Catel-
lus that the warehouse was for Nabisco and that it must
be suitable for the storage of retail food products. Accord-
ing to the parties, Catellus expressed reservations about
entering into the contract with AUL because AUL had
only been in existence for a short time, and Catellus pre-
ferred to contract with AUL’s affiliate, Central. Conse-
quently, Catellus and Central signed a Single Tenant
Industrial Lease (the “tenant lease”) for warehouse space
that Catellus already had under construction. Eight months
earlier, Catellus had hired Krusinski Construction as
the warehouse contractor. Krusinski in turn hired G.A.
Blocker Grading Contractor, Inc. to excavate the subgrade
underneath the concrete warehouse floor and Brandonisio
Construction Corporation to prepare the concrete floor.
  According to its contract with Krusinski, Brandonisio
was supposed to use a finishing product known as Sonisil
on the floor; instead Brandonisio used Cure & Seal, a
different finishing product manufactured by Specco. Cure
& Seal contains aromatic hydrocarbons, which are air-
borne chemicals that have a fragrance, odor, perfume, or
scent. As a result of this error, Krusinski contracted
with Artlow Systems, Division of Archem, Inc. to strip
the floor and fix the sealant problems, but Krusinski
failed to specify the stripping agent to be used to remove
the finish. Artlow used a product called Arsolv, manufac-
tured by Hydrite Chemical Company, to strip the floor,
which also contains aromatic hydrocarbons.
 Shortly after the floor finishing process was complete,
Nabisco began using the warehouse. A month later, Nabisco
4                                  Nos. 01-1711 & 01-2310

began receiving complaints from customers regarding a
chemical odor and flavor in certain snack food products
such as Chips Ahoy and Oreo cookies. Nabisco investigated
and learned that the complaints were all related to products
that had passed through the Illinois warehouse. Test
results indicated that all Nabisco products stored in the
warehouse that were wrapped in polypropylene were
contaminated with aromatic hydrocarbons. The contam-
ination made them unfit for sale but did not pose a health
risk. These actions followed.


B. District Court Proceedings
    1. Nabisco’s claims.
  Nabisco sued AUL, Central, Catellus, Krusinski,
Brandonisio, and Artlow, alleging negligence. In addi-
tion, Nabisco sued Specco and Hydrite claiming a breach
of their duty to warn users of the effect of their products
on polypropylene-packaged food products. Nabisco al-
leges that chemical emissions from the finishing products
infiltrated its polypropylene-wrapped packaged goods
as soon as these products entered the warehouse. Nabisco
supports this argument by submitting evidence that no
matter how long its products were in the warehouse, they
were all contaminated by aromatic hydrocarbons. Fur-
thermore, Nabisco proffers the testimony of experts who
concluded that contamination occurred immediately. Nabis-
co seeks $30 million for the costs incurred as a result of
the contamination, including the cost of testing the ware-
house and recalling and destroying contaminated products.
  In May 2000, Magistrate Judge Ashman recommended
that Nabisco’s negligence and duty to warn claims be
dismissed, holding that Nabisco’s claims were actually
contractual disputes barred by the economic loss doctrine.
District Judge Bucklo adopted the magistrate judge’s
findings and ruled that the contamination of Nabisco’s
Nos. 01-1711 & 01-2310                                         5

products was not a “sudden or calamitous” occurrence, and
thus not exempt from the economic loss doctrine. The
district court granted Nabisco leave to file its fourth
amended complaint, but denied Nabisco’s attempt to al-
lege new facts to support its negligence claims.1


    2. Central and AUL’s claims.
  In response to Nabisco’s fourth amended complaint,
Central filed suit against Krusinski, Brandonisio, Artlow,
and Blocker for breach of warranty. Central maintains
that Catellus assigned its rights to enforce any warran-
ties arising out of the construction contracts to Central.
AUL, Central’s affiliate, also filed a third-party complaint
against Catellus. Relying on prior negotiations and the
tenant lease between Central and Catellus, AUL alleged
that it was a direct third-party beneficiary of the tenant
lease and had the same rights as Central under the lease.
Additionally, AUL brought claims against Krusinski,
Brandonisio, Artlow, and Blocker, asserting that it had
a right to recover damages as Nabisco’s bailee. The de-
fendants sued by AUL and Central moved to dismiss
those claims, asserting various defenses, including lack
of standing. Judge Bucklo granted the defendants’ mo-
tions to dismiss the complaints of AUL and Central and
denied AUL leave to amend.
   AUL and Central jointly filed a motion seeking clari-
fication of the judgment. In response to this motion for
clarification, the district court reinstated Central’s claim
against Blocker, the excavation contractor, and issued its



1
  Nabisco’s other claims remain before the district court. Seek-
ing resolution of the same matters as AUL and Central, Nabisco
sought and received a Rule 54(b) judgment on its dismissed claims
shortly after AUL’s and Central’s claims were dismissed.
6                                    Nos. 01-1711 & 01-2310

final judgment against AUL and Central with respect to
all claims except Blocker’s. Nabisco, AUL, and Central
timely appealed.


                       II. ANALYSIS
  When reviewing claims dismissed pursuant to Rule
12(b)(6), we ask whether the plaintiffs can prove any set
of facts supporting their claims that would entitle them
to relief. We accept all the well-pleaded factual allega-
tions in the complaint as true and draw all reasonable
inferences in favor of the nonmoving parties. See Albany
Bank & Trust Co. v. Exxon Mobil Corp., 310 F.3d 969, 971
(7th Cir. 2002). Our review of the district court’s deci-
sion to grant a motion to dismiss under Rule 12(b)(6) is
de novo. Id. We review the court’s denial of leave to
amend complaints for an abuse of discretion. See J.D.
Marshall Int’l, Inc. v. Redstart, Inc., 935 F.2d 815, 819 (7th
Cir. 1991).


A. Nabisco’s Tort Claims2
    1. Negligence and the economic loss doctrine.
  The economic loss doctrine denies a tort remedy for
product defects when the loss “is rooted in disappointed
contractual or commercial expectations.” See Mutual Serv.
Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601, 615
(7th Cir. 2001) (quoting Collins v. Reynard, 607 N.E.2d
1185, 1188 (Ill. 1992) (Miller, C.J., concurring)). Contract
law provides the proper remedy for disappointed commer-
cial expectations, such as when a product is unfit for its
intended use. See Moorman Mfg. Co. v. Nat’l Tank Co., 435


2
  The parties agree that Illinois law applies to their diversity
claims.
Nos. 01-1711 & 01-2310                                     7

N.E.2d 443, 450 (Ill. 1982). Recovery in tort for disap-
pointed commercial expectations due to breach of implied
duties and warranties between non-contracting parties is
also barred by the economic loss doctrine. See Redarowicz
v. Ohlendorf, 441 N.E.2d 324, 327 (Ill. 1982); Moorman,
435 N.E.2d at 450. To recover in tort under the economic
loss doctrine, a party must show harm above and beyond
a party’s contractual or commercial expectations. In re
Chicago Flood Litigation, 680 N.E.2d 265, 276 (Ill. 1997).
   In Chicago Flood, a broken water main in Chicago
flooded many downtown businesses. Id. at 268. The Illi-
nois Supreme Court held that only plaintiffs who lost
perishable inventory as a result of interrupted electrical
service could recover in tort. Id. at 276. The court reasoned
that these plaintiffs were not “seek[ing] damages for the
loss of continuous electrical service, which is a disap-
pointed commercial expectation.” Id. Instead, the plain-
tiffs sought damages for perished goods, which were re-
coverable because “[s]uch damages are above and beyond
class plaintiffs’ disappointed commercial expectation” and
thus, “fall outside the definition of economic loss and are
recoverable in tort.” Id.
  In this case, Nabisco asserts that it lost $30 million in
part due to AUL’s alleged negligence which made the
warehouse and its products unfit for use. However, in
contrast to the plaintiffs’ claims in Chicago Flood, Nabis-
co’s claims of recovery for contamination were not above
and beyond their commercial expectations. In fact, Nabis-
co bargained for and received a contractual protection
against contamination in the form of AUL’s promise to
keep harmful chemicals in a separate part of the ware-
house. This expectation was not met, and as a result
Nabisco suffered a loss. Although Nabisco spent more to
address the contamination than it was entitled to recover
from AUL, Nabisco accepted this risk when it contracted
to hold AUL responsible for a maximum of $1 million for
8                                    Nos. 01-1711 & 01-2310

breaching this term. Nabisco cannot circumvent this
bargained-for limitation by suing in tort for those disap-
pointed commercial expectations addressed in the contract.
See Moorman, 435 N.E.2d at 450. Its negligence claim
against AUL is therefore barred by the economic loss
doctrine.
  Nabisco’s negligence claims against Central, Catellus,
Krusinski, and the subcontractors are also barred by the
economic loss doctrine. Nabisco alleges that Central,
Catellus, Krusinski, and the subcontractors breached their
warranties against latent defects. See Redarowicz, 441
N.E.2d at 327. However, the damages that Nabisco seeks
are economic losses, which are addressed by contract law,
not tort law.3 In Redarowicz, the second purchaser of a
house discovered that there were latent defects that caused
the chimney and adjoining brick wall to separate from
the house. Id. at 326. The purchaser’s claims were for
deterioration and loss of bargain resulting from inferior
workmanship. Id. at 327. The court found that the losses
from the latent defects were disappointed commercial
expectations because the only losses the purchaser in-
curred were “additional expenses for living conditions
that were less than what was bargained for.” Id. Like
Redarowicz’s claims, Nabisco’s negligence claims against
Central, Catellus, Krusinski, and the subcontractors are
for the recovery of losses due to a construction defect.
Nabisco claims that as a result of the defendants’ breach
its products were contaminated, making them unfit to
sell and causing Nabisco to lose the bargained-for use of
the warehouse. These losses are for disappointed com-
mercial expectations, which were contemplated by the


3
   Although the law of torts developed out of the law of warran-
ties, the law of warranties and contract law remain the appro-
priate manner in which to redress a purchaser’s disappointed
commercial expectations. Moorman, 435 N.E.2d at 450.
Nos. 01-1711 & 01-2310                                          9

contract. Therefore, unless Nabisco qualifies for an ex-
ception, its negligence claims against AUL, Central,
Catellus, Krusinski, and the subcontractors are barred
by the economic loss doctrine.


    2. Exceptions to the economic loss doctrine.
  There are three exceptions to the Moorman economic
loss rule,4 though the parties agree that only one excep-
tion is at issue—whether Nabisco’s property damage
was caused by a sudden, calamitous, or dangerous occur-
rence. See Chicago Flood, 680 N.E.2d at 275; Moorman,
435 N.E.2d at 449-50. In deciding whether the occurrence
was sudden, dangerous, or calamitous, the court must
determine the nature of the defect and the manner of
occurrence. See Trans States Airlines v. Pratt & Whitney
Canada, Inc., 682 N.E.2d 45, 49 (Ill. 1997); Moorman, 435
N.E.2d at 449. Even when the evidence is viewed in the
light most favorable to Nabisco, we conclude that the
nature and manner of the contamination of Nabisco’s
bakery products does not fall under this exception.
  In contamination cases, Illinois courts have generally
rejected the application of the sudden or calamitous oc-
currence exception, unless the defect makes the product
hazardous or unreasonably dangerous. See Dixie-Portland
Flour Mills, Inc. v. Nation Enters., Inc., 613 F. Supp.
985, 989 (N.D. Ill. 1985) (contamination of flour by sand
did not fall under exception); NBD Bank v. Krueger Ringier,


4
   The other two exceptions to the economic loss doctrine are:
1) “the plaintiff ’s damages are proximately caused by a defen-
dant’s intentional, false representation,” or 2) “the plaintiff ’s
damages are proximately caused by a negligent misrepresenta-
tion by a defendant in the business of supplying information
for the guidance of others in their business transactions.” See
Chicago Flood, 680 N.E.2d at 275.
10                                  Nos. 01-1711 & 01-2310

Inc., 686 N.E.2d 704, 708 (Ill. App. Ct. 1997) (contamina-
tion of land by petroleum did not fall under exception);
Cloverhill Pastry-Vend Corp. v. Cont’l Carbonics Prod-
ucts, Inc., 574 N.E.2d 80, 82-83 (Ill. App. Ct. 1991) (con-
tamination of bakery products by metal chips did not
fall under exception); cf. Electronics Group, Inc. v. Central
Roofing Co., 518 N.E.2d 369, 371 (Ill. App. Ct. 1987)
(flooding due to faulty roof fell within exception); United
Air Lines, Inc. v. CEI Indus. of Ill., Inc., 499 N.E.2d
558, 563 (Ill. App. Ct. 1986) (flooding and roof collapse
due to faulty roof fell within exception).
   Loss from contamination is recoverable notwithstand-
ing the economic loss rule if the product becomes inher-
ently and unreasonably dangerous. In Board of Educa-
tion v. A, C & S, Inc., 546 N.E.2d 580 (Ill. 1989), the court
acknowledged that it was “artificial” to call asbestos
contamination “sudden,” so the court held that recovery
for contamination was not barred by the economic loss
doctrine if the contamination was hazardous or unrea-
sonably dangerous. Id. at 588-90; see also Blommer Choco-
late Co. v. Bongards Creameries, Inc., 635 F. Supp. 911,
916-17 (N.D. Ill. 1985) (loss from contamination of choco-
late by salmonella-infected whey is recoverable because
it poses a health risk to consumers).
  Here, however, Nabisco alleges in its third amended
complaint that the contamination did not pose a health
risk. Given this allegation, Nabisco could not plead any
facts that would support a finding that the contamina-
tion of its products meets the requirements for the ap-
plication of this exception to Moorman. See Thomas
v. Farley, 31 F.3d 557, 558-59 (7th Cir. 1994) (“[I]f a
plaintiff . . . plead[s] particulars, and they show that he
has no claim, then he is out of luck—he has pleaded him-
self out of court.”); R.J.R. Serv., Inc. v. Aetna Cas. &
Sur. Co., 895 F.2d 279, 280 (7th Cir. 1988) (stating that
a court is “not obliged to ignore any facts set forth in the
Nos. 01-1711 & 01-2310                                  11

complaint that undermine the plaintiff’s claim”). There-
fore, we agree with the district court that Nabisco’s neg-
ligence claims are barred by the economic loss doctrine
and were properly dismissed.
  Nabisco sought leave to amend its complaint to add
additional facts showing that its products were contami-
nated as soon as they entered the warehouse, but did
not seek to withdraw its allegation that the contamina-
tion posed no health risk. Therefore, the proposed amend-
ment would have been futile and the district court did
not abuse its discretion in denying it.


 3. Failure to warn.
  Nabisco’s claims against Specco and Hydrite for breach
of their duties to warn are based on the same negli-
gence claims discussed above. Specco and Hydrite’s al-
leged breach was a direct and proximate cause of Nabis-
co’s commercial loss. Nabisco is seeking recovery for its
lost commercial expectations of storing its products in
an uncontaminated warehouse and selling its products
to consumers. Those who suffer loss of commercial ex-
pectations such as reduced value, repair and replacement,
or lost profits are barred from tort recovery and are rele-
gated to seeking recovery under contract law. Moorman,
435 N.E.2d at 450 (quoting Pa. Glass Sand Corp. v. Cater-
pillar Tractor Co., 652 F.2d 1165, 1174-75 (3d Cir. 1981)).
Nabisco does not meet any of the exceptions to the eco-
nomic loss doctrine. Hence, the district court’s dismissal
of Nabisco’s duty to warn claims was proper.


B. Mandatory Arbitration of Central’s Breach of Warranty
   Claims
  The district court ruled that the mandatory arbitra-
tion provision in the tenant lease between Catellus and
12                                    Nos. 01-1711 & 01-2310

Central applies to all of Central’s claims, including those
against Krusinski and the subcontractors, and that each
of the parties Central brought a claim against must sub-
mit to arbitration.5 The court left open the question of
whether there was a valid assignment to Central of
Catellus’s rights.
  Although the Federal Arbitration Act favors resolution
of disputes through arbitration, its provisions are not to
be construed so broadly as to include claims that were
never intended for arbitration. AGCO Corp. v. Anglin,
216 F.3d 589, 593 (7th Cir. 2000). To decide whether par-
ties agreed to arbitrate their claims, this court must look
at the intent of the parties at the time the contract
was executed. Id. at 593-94. We review the district
court’s ruling to compel arbitration de novo. Harter v.
Iowa Grain Co., 220 F.3d 544, 549-50 (7th Cir. 2000).
  In this case, the intent of the parties is clear. The arbitra-
tion provision in the tenant lease between Central and
Catellus applies only to the tenant lease. In the multitude
of contracts in this action, there are no other contractual
arbitration provisions. If Catellus had intended to re-
quire the contractor or the subcontractors to arbitrate
their claims, then an arbitration provision would have
been added to these contracts.6 Therefore, the contractor


5
  We note on appeal that the subcontractors agree that the
district court’s determination of their intent to arbitrate was
in error, and therefore no parties here dispute that the subcon-
tractors did not agree to arbitrate issues pertaining to the
warehouse construction. Nevertheless, the issue of whether the
contractor and the subcontractors are required to submit to
arbitration is still before this court.
6
  Furthermore, we note that Catellus entered into these con-
struction contracts eight months before it executed the tenant
lease. We find it difficult to imagine that at the time of these
                                                   (continued...)
Nos. 01-1711 & 01-2310                                      13

and the subcontractors cannot be required to arbitrate
this dispute.
  The court further ruled that the arbitrator must de-
cide whether there was a valid assignment of Catellus’s
rights to Central. However, in the very next paragraph the
court held that there was no evidence that Central was
assigned the right to sue. It is unclear whether the issue
of assignment was decided and, based on the limited
record before the court, we cannot decide the matter.
This is because the issue of assignment of warranty rights
depends on unresolved questions of fact based on the
parties’ intentions. See Bd. of Managers of Medinah on
Lake Homeowners Ass’n v. Bank of Ravenswood, 692
N.E.2d 402, 405 (Ill. App. Ct. 1998) ( the parties’ intentions
to create an assignment is a question of fact and “must
be determined based upon the instruments executed as
well as the surrounding circumstances”); Rivan Die Mold
Corp. v. Stewart-Warner Corp., 325 N.E.2d 357, 361 (Ill.
App. Ct. 1975). We cannot say as a matter of law that
there was no assignment, so we remand the issue to
the district court. If the court determines that there was
an assignment, then the breach of warranty claims should
not have been dismissed.
  The district court dismissed Central’s breach of war-
ranty claim, concluding that Central could not enforce
the warranties issued by the contractor and subcontrac-
tors. The parties agree that the subcontractors all issued
warranties relating to the proper design and construction
of the warehouse, though they disagree as to the intended
recipients of these provisions. Central asserts that as a
result of Catellus’s assignment of rights to Central under


6
  (...continued)
construction contracts, the parties intended to incorporate the
arbitration provision of the later tenant lease.
14                                  Nos. 01-1711 & 01-2310

the tenant lease, it can sue the subcontractors for breach
of warranty. In response, the subcontractors argue that
the warranties in their contract extend only to Krusinski,
not Catellus, and Central does not have standing to sue
them for breach of warranty claims.
   Contrary to the subcontractors’ argument, their war-
ranties do extend to Catellus. In Section 9.8 of the sub-
contractors’ agreement, the subcontractors warrant their
work against defects and agree to satisfy the warranty
obligations without cost to the “Owner or Contractor.” The
first page of the subcontractors’ agreement lists Catellus
as the “Owner.” Therefore, the plain language of the sub-
contractors’ agreement reflects that Catellus has the right
to enforce the subcontractors’ warranties. So, if the dis-
trict court determines that there was a valid assignment
of Catellus’s rights under the subcontractors’ agreement
to Central, Central has a right to maintain breach of
warranty claims against all of the subcontractors. Thus,
the district court’s ruling requiring mandatory arbitra-
tion for Catellus’s breach of warranty claims is reversed
and the issue of whether there was a valid assignment
of Central’s rights to Catellus is remanded for further
proceedings.


C. AUL’s Third-Party Beneficiary Claims
  A direct third-party beneficiary is a person who, although
not a party to the contract, the contracting parties in-
tended to benefit from the contract. See A.E.I. Music
Network, Inc. v. Bus. Computers, Inc., 290 F.3d 952, 955
(7th Cir. 2002); XL Disposal Corp. v. John Sexton Con-
tractors Co., 659 N.E.2d 1312, 1316 (Ill. 1995). By contrast,
an incidental third-party beneficiary is a person who, not
a party to the contract, receives a benefit from the con-
tract unintended by the contracting parties. See, e.g.,
A.E.I. Music Network, 290 F.3d at 955; Altevogt v. Brink-
oetter, 421 N.E.2d 182, 187-88 (Ill. 1981). Only a direct
Nos. 01-1711 & 01-2310                                         15

third-party beneficiary may enforce the contract because
the contracting parties intended for the beneficiary to
receive the benefits of the contract. See A.E.I. Music
Network, 290 F.3d at 955; Altevogt, 421 N.E.2d at 187. To
decide whether a party is a direct or an incidental third-
party beneficiary, we must determine the intent of the
parties based on the contract as a whole as well as the
understandings between the parties at the time of the
contract’s execution. See A.J. Maggio Co. v. Willis, 738
N.E.2d 592, 599 (Ill. App. Ct. 2000); Ball Corp. v. Bohlin
Bldg. Corp., 543 N.E.2d 106, 107 (Ill. App. Ct. 1989).7
  AUL argues that it was a direct third-party beneficiary
of the tenant lease between Central and Catellus because
Catellus acknowledged that Central would operate the
warehouse using AUL’s name. Specifically, the tenant
lease states in Paragraph 15 that Central will conduct
its operations under its name and under the name of its
affiliate AUL, and these operations will not constitute
subletting. In addition, AUL argues that Catellus knew
all along that Central and AUL were virtually identical
corporations under the common control and ownership
of Concepcion because initially Concepcion approached
Catellus about the warehouse space on AUL’s behalf.8
  In response, Catellus argues, and the district court
ruled, that Section 17.1.8 of the tenant lease defeats AUL’s


7
  Catellus argues that under Illinois law it is presumed that
the parties to a contract intend that the contract’s provisions
apply only to them—not to third parties. See Ball Corp., 543
N.E.2d at 107. However, this is not a full reading of Ball
Corp., which also states that the intent to create a direct third-
party beneficiary is determined by the contract’s language and
the surrounding circumstances at the time of the contract’s
execution. Id.
8
 These negotiations were managed by Frolian Concepcion, who
wholly owns AUL and Central.
16                                     Nos. 01-1711 & 01-2310

claim that it was a direct third-party beneficiary since
it clearly states that “nothing herein is intended to create
any third party benefit.” However, Paragraph 15 makes
Section 17.1.8 ambiguous because Paragraph 15 clearly
confers an intended benefit on AUL: the authority
to operate the warehouse. Catellus also asserts that no
direct third-party beneficiary was created by the con-
tract because Central’s name, not AUL, is on the con-
tract. Nevertheless, AUL’s name remained in the contract
as the operator of the warehouse space, an intended bene-
fit. The acknowledgment of AUL in the contract and the
alleged discussions during contract negotiations are
enough to show that Central and Catellus intended AUL
to receive a benefit from the contract. Therefore, AUL
has stated a valid third-party beneficiary claim under
Illinois law.9


                     III. CONCLUSION
  For the reasons discussed, as to No. 01-2310, we AFFIRM
the judgment of the district court against Nabisco. As
to Central’s claims under No. 01-1711, we REVERSE the
judgment of the district court and REMAND for proceed-
ings consistent with this opinion. Furthermore, under
No. 01-1711, we AFFIRM the court’s denial of AUL’s motion
for leave to amend its complaint, but REVERSE the judg-
ment of the court regarding AUL’s third-party beneficiary
claims and REMAND for further proceedings consistent
with this opinion.


9
  AUL tried to add a bailment claim on Nabisco’s behalf to pursue
negligence claims against Catellus and the construction subcon-
tractors. However, if Nabisco does not have a valid negligence
claim against these parties, then neither does AUL. Thus, AUL’s
bailment claims are also barred by the economic loss doctrine. The
district court denied AUL’s motion to amend and we affirm.
Nos. 01-1711 & 01-2310                                17

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit




                 USCA-02-C-0072—2-12-03
