Rights and Duties of Third Parties

Question 1

What is privity?

Answer 1

standing to sue

Question 2

Who has privity?

Answer 2

Normally duty under K only owed to party of the K
Exception:
INTENDED third party beneficiaries

Question 3

Incidental 3rd Party Beneficiary

Answer 3

a 3rd party who fortuitously acquires a benefit from the original K w/o intent of parties

Question 4

Intended Beneficiary

Answer 4

INtended beneficiary is a 3rd party upon whom both of the original parties intended to confer a right from the original K and who has an independent right of enforcement.

Question 5

One is an intended beneficiary if: (3 part test

Answer 5

K bestows pecuniary benefit

2. K gives promisor reason to know said benefit was contemplated by the promisee (probably b/c referenced in K); and
3. was one of her motivating causes or making the K (not principal cause, but motivating cause)

Question 6

2 types of intended beneficiaries

Answer 6

1. Creditor Beneficiary: party who is designated so that the promisee may satisfy an obligation to pay money to the beneficiary
2. Donee Beneficiary - where promisor simply intends to make a gift or seeks to benefit someone and aims are altruistic

Question 7

Intro Language for Exam

Answer 7

All bilateral Ks ahve both promisor & promisee b/c of reciprocal inducement.
Thus, when looking at 3rd party beneficiaries you are looking at one of the promises to determine who is promisor and who is promisee.
Duty normally owed only when one is party to K or in privity.
party in privity has standing
Exception
Primary ? is whether the K manifests an INTENT to benefit a 3rd party

Question 8

Consequential Damages under Govt K

Answer 8

Restatement:  Consequential damages must be expressly states in K to be recoverable
Policy:  govt Ks create potential hazards for large group of people.  If class too big, can't properly assess risk.  Can't estimate risk of venture (Hadley).  To high risk = cost of insurance too high = taxpayer burden  
Must narrow class to identifiable group of people; citizens get insurance to protect self