18. Third Party Beneficiaries

Question 1

What is required for an intended TP beneficiary?

Answer 1

Identified in contract
- NOT incidental

Receives direct performance from Promisor

Relationship w/ Promisee

Question 2

What types of TP beneficiaries are there?

Answer 2

Creditor TP
- Promisor to perform for TP a debt owed by Promisee to TP

Donee TP
- Promisor to perform for TP a gift intended by Promisee to TP

Question 3

When may TP enforce the contract?

Answer 3

TP’s rights must be vested

• TP assents to contract (in manner invited by parties)
• TP sues to enforce contract
• TP materially changes position (justifiable reliance on contract)
• Contract expressly states vesting

Question 4

When may the parties modify or rescind the contract?

Answer 4

If TP’s rights vested => TP must consent

If TP’s rights NOT vested => TP’s consent not required

Question 5

What are Promisor’s rights if TP sues Promisor?

Answer 5

If Promisor made ‘absolute’ promise to pay TP => Promisor can NOT use same defence vs Promisee/TP
- Specified amount

If Promisor made promise to pay TP => Promisor can use same defence vs Promisee/TP
- NO specified amount

Defences

• Illegality
• Impossibility
• Lack of assent
• Lack of consideration
• Failure of condition

Question 6

How may TP sue Promisee?

Answer 6

TP creditor
- Sue Promisee/Promisor (only one of them)

TP donee

1) Foreseeable reliance
2) Actual detrimental reliance
3) Can sue Promisee (by promissory estoppel) (not as TP beneficiary)

Question 7

How may Promisee sue Promisor?

Answer 7

Recover from Promisor
- Promisor fails to perform for TP Creditor (NOT Donee)

Specific performance from Promisor

• TP Creditor
• TP Donee (modern view - should at least obtain nominal damages) (traditional view - NO cause of action due to TP not suffering damages)