Contract - 3rd Party Beneficiaries

Question 1

What is the critical issue in third pty beneficiary law?

Answer 1

Whether the 3rd pty has standing to enforce the contract

Question 2

How are 3rd pty beneficiaries classified?

Answer 2

First Restatement

1. Creditor beneficiary
2. Donee beneficiary
3. Incidental beneficiary

Second Restatement

1. Intended beneficiary
2. Mere incidental beneficiary

Question 3

What is a creditor beneficiary?

Answer 3

That is when the promise seeks a performance from the promisor that will satisfy an obligation owed to 3rd pty

Question 4

What is a donee beneficiary?

Answer 4

A promise seeks a performance from the promisor in order to make a gift of that performance to a 3rd pty

Question 5

What is an incidental beneficiary?

Answer 5

Third parties who will benefit from a promisor’s performance from a practical matter but are not either creditor or donee beneficiaries

Question 6

How do you determine if someone is an intended beneficiary?

Answer 6

simply the intent to benefit teat (did the contracting parties clearly intend to benefit the beneficiary)

Question 7

What is a mere incidental beneficiary?

Answer 7

third parties who will benefit from a promisor’s performance as a practical matter but are not intended beeficiaries.

Question 8

What third pty beneficiaries have rights?

Answer 8

Both under 1st & 2nd Restatement, incidential beneficiariesdo not have any righ tto seek enforcement of the K (only intended beneficiaries can)

Question 9

What rights do 3rd pty beneficiaries have against the promisor?

Answer 9

Any 3rd pty beneficiary, except incidental, has the right to secure enforcement of the agreement from a breaching promisor

(an intended 3rd pty ben. can sue the promisor)******

Question 10

What rights do 3rd pty beneficiaries have against the promisee?

Answer 10

3rd pty ben. have no rights against the promisee unless there was a prior obligation between the promisee & the 3rd pty

Question 11

When does the right to sue vest?

Answer 11

A pty to a K is free to modify or rescind it by mutual consent even a 3rd pty ben. provision unless & until the ben. rights vest.

There are 4 situations in which an intened ben. right’s vest:

1. the ben. bring suit on the matter
2. The ben. changes his positionin justifiable reliance on the K
3. The ben. manifest assent to the K @ the request of the promisor/promisee
4. The rights of the ben. have vested under an express term in the K

Question 12

What defenses does the promisor have against a 3rd pty ben.?

Answer 12

any valid defenses that the promisor has against the promise are also effective against the 3rd pty ben.

Question 13

What rights does the promisee have against the promisor?

Answer 13

If the promisor does not perform, the promisee can bring a claim for breach of contract unless

The promisor’s performance was to benefit a donee ben.

• then the promise has not suffered any economic loss and therefore cannot recover damages though he may obtain specific performance if appropiate

The promisor’s performance was to benefit a creditor ben.:

• the promise may secure a specific performance of the promisor’s obligation
  
  • If money damages then Por is exposed to double liability to the Pee & 3rd pty ben.
  • some cts refuse to allow Pee to recover damages from the Por unless the Pee has already made payments to the ben. to cover the default