9. Third Party beneficiaries Flashcards
What is a creditor beneficiary?
A promisee seeks a performance from the promisor that will benefit a third party to satisfy a debt or other obligation owed by the promisee to the third party.
What is a donee beneficiary?
A promisee seeks a performance from the promisor that will benefit a third party to make a gift of that performance to the third party.
What defines an incidental beneficiary?
Third parties who will benefit from a promisor’s performance as a practical matter, but who may not meet the test for creditor or donee beneficiary.
What is an intended beneficiary according to the Second Restatement?
The promised performance will satisfy an obligation of the promisee to pay money to the beneficiary or the promisee intends to give the beneficiary the benefit of the promised performance.
What are the rights of a third-party beneficiary against the promisor?
Any third-party beneficiary, other than an incidental beneficiary, has a right to secure enforcement of the agreement from a breaching promisor.
Does a third-party beneficiary have rights against the promisee?
A third-party beneficiary has NO RIGHTS against the promisee in the event that the performance is not forthcoming.
What can a First Restatement creditor beneficiary elect to do?
A First Restatement creditor beneficiary can elect to sue either the promisee on the prior obligation or the promisor on the third-party beneficiary contract.
What is the rule regarding a Second Restatement intended beneficiary’s ability to sue?
A Second Restatement intended beneficiary can ONLY sue the promisee if the beneficiary would have fallen into the First Restatement’s definition of a creditor beneficiary.
Are the promisee’s preexisting obligations discharged by a third-party beneficiary contract?
No, the promisee’s preexisting obligations to a creditor or intended beneficiary are NOT discharged by the formation of a third-party beneficiary contract.
What is the rule regarding the vesting of the right to sue for third-party beneficiaries?
A third-party beneficiary does NOT automatically have the right to seek enforcement of the contract or prevent modification by the original parties.
What happens to the ability of original parties to modify or rescind the contract once a third-party beneficiary’s rights vest?
Once the third-party beneficiary’s rights vest, the ability of the original parties to make any future rescissions or modifications will be terminated.
What is the rule regarding ineffective modification or rescission by original parties?
If the third-party beneficiary’s rights vest before notification of any modification or rescission, the modification or rescission will be ineffective.
When does vesting occur for an intended beneficiary?
Vesting occurs when: * the beneficiary brings suit on the matter * the beneficiary changes position in justifiable reliance * the beneficiary manifests assent to the contract * the rights vest under an express term of the contract.
What defenses are available to the promisor against a third-party beneficiary?
Any valid defenses the promisor would have to the enforcement of the contract, such as impracticability or breach by the promisee, would also be effective against the beneficiary.
What claim does a promisee have against the promisor for nonperformance?
The promisee has a claim for breach of contract against the promisor.
