P entered into agreements to purchase from Clyde Hutcheson three subdivision lots. As required by city ordinance, Hutcheson had posted a performance bond on August 7, 1973, with D as surety, to guarantee construction of off-site improvements on these lots. Following several extensions granted Hutcheson to perform on the bond, P filed a complaint against Hutcheson and the City of Flagstaff seeking damages and a writ of mandamus compelling the City of Flagstaff to complete the off-site improvements as soon as possible. The Superior Court ordered the City to complete the improvements on or before June 15, 1977. The off-site improvements were finally completed in the summer of 1977. On November 29, 1977, Ps amended their complaint to add D as a party. Ps sought damages from D due to Hutcheson's failure to complete the off-site improvements. Ps claimed they were third-party beneficiaries of the performance bond. Ps alleged that D has assumed all obligations and damages owed by Hutcheson to Ps by virtue of a November 4, 1976, assignment agreement. Partial summary judgment was entered in favor of D and Ps appealed.

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