Third Parties Flashcards
Restatement § 302 Intended Beneficiaries
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if the parties recognize that the beneficiary has a right to performance and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary a gift.
Restatement § 302 Incidental Beneficiaries
(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.
Restatement § 302 Intended and Incidental Beneficiaries Promise to Pay the Promisee’s Debt
A owes C a debt of $100. The debt is barred by the statute of limitations or by a discharge in bankruptcy, or is unenforceable because of the Statute of Frauds. B promises A to pay the barred or unenforceable debt.
C is an intended beneficiary under Subsection (1)(a).
Restatement § 302 Intended and Incidental Beneficiaries Promise to Pay the Promisee’s Debt
B promises A to furnish support for A’s minor child C, whom A is bound by law to support.
C is an intended beneficiary under Subsection (1)(a).
Restatement § 302 Intended and Incidental Beneficiaries Promise to Pay the Promisee’s Debt
B promises A to pay whatever debts A may incur in a certain undertaking. A incurs in the undertaking debts to C, D and E.
If the promise is interpreted as a promise that B will pay C, D and E, they are intended beneficiaries under Subsection (1)(a); if the money is to be paid to A in order that he may be provided with money to pay C, D and E, they are at most incidental beneficiaries. Gift Promise
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
A, an insurance company, promises B in a policy of insurance to pay $10,000 on B’s death to C, B’s wife.
C is an intended beneficiary under Subsection (1)(b).
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
C is a troublesome person who is annoying A. A dislikes him but, believing the best way to obtain freedom from annoyance is to make a present, secures from B a promise to give C a box of cigars.
C is an intended beneficiary under Subsection (1)(b).
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
A’s son C is indebted to D. With the purpose of assisting C, A secures from B a promise to pay the debt to D.
Both C and D are intended beneficiaries under Subsection (1)(b).
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
A owes C $100 for money lent. B promises A to pay C $200, both as a discharge of the debt and as an indication of A’s gratitude to C for making the loan.
C is an intended beneficiary under Subsection (1)(a) as to the amount of the debt and under Subsection (1)(b) as to the excess.
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
A conveys land to B in consideration of B’s promise to pay $15,000 as follows: $5,000 to C, A’s wife, on whom A wishes to make a settlement, $5,000 to D to whom A is indebted in that amount, and $5,000 to E, a life insurance company, to purchase an annuity payable to A during his life.
C is an intended beneficiary under Subsection (1)(b); D is an intended beneficiary under Subsection (1)(a); E is an incidental beneficiary.
Restatement § 302 Intended and Incidental Beneficiaries Gift Promise
A owes C $100. Not knowing of any such debt, B promises A to pay $100 to C.
C is an intended beneficiary under Subsection (1)(a) if A manifests an intention that the payment is to satisfy the debt, an intended beneficiary under Subsection (1)(b) if A manifests an intention to make a gift of $100, leaving outstanding the original debt.
Restatement § 302 Intended and Incidental Beneficiaries Other Intended Beneficiaries
A, the operator of a chicken processing and fertilizer plant, contracts with B, a municipality, to use B’s sewage system. With the purpose of preventing harm to landowners downstream from its system, B obtains from A a promise to remove specified types of waste from its deposits into the system.
C, a downstream landowner, is an intended beneficiary under Subsection (1)(b).
Restatement § 302 Intended and Incidental Beneficiaries Other Intended Beneficiaries
A, a corporation, contracts with B, an insurance company, that B shall pay to any future buyer of a car from A the loss he may suffer by the burning or theft of the car within one year after sale. Later A sells a car to C, telling C about the insurance.
C is an intended beneficiary.
Restatement § 302 Intended and Incidental Beneficiaries Other Intended Beneficiaries
B contracts to build a house for A. Pursuant to the contract, B and his surety S execute a payment bond to A by which they promise A that all of B’s debts for labor and materials on the house will be paid. B later employs C as a carpenter and buys lumber from D
C and D are intended beneficiaries of S’s promise to A, whether or not they have power to create liens on the house.
Restatement § 302 Intended and Incidental Beneficiaries Other Intended Beneficiaries
C asserts that A owes him $100. A does not owe this money, or think that he owes it, but rather than engage in litigation and in order to obtain peace of mind A secures a promise from B to pay C $100.
C is an intended beneficiary.
Restatement § 302 Intended and Incidental Beneficiaries Other Intended Beneficiaries
A, a labor union, enters into a collective bargaining agreement with B, an employer, in which B promises not to discriminate against any employee because of his membership in A.
All B’s employees who are members of A are intended beneficiaries of the promise.
Restatement § 302 Intended and Incidental Beneficiaries
A buys food from B, a grocer, for household use, relying on B’s express warranty. C, A’s minor child, is injured in person by breach of the warranty.
Under Uniform Commercial Code § 2-318, without regard to the intention of A or B, the warranty extends to C.
Restatement § 302 Intended and Incidental Beneficiaries Incidental Beneficiaries
B contracts with A to erect an expensive building on A’s land. C’s adjoining land would be enhanced in value by the performance of the contract.
C is an incidental beneficiary.
Restatement § 302 Intended and Incidental Beneficiaries Incidental Beneficiaries
B contracts with A to buy a new car manufactured by C.
C is an incidental beneficiary, even though the promise can only be performed if money is paid to C.
Restatement § 302 Intended and Incidental Beneficiaries Incidental Beneficiaries
A, a labor union, promises B, a trade association, not to strike against any member of B during a certain period. One of the members of B charters a ship from C on terms under which such a strike would cause financial loss to C.
C is an incidental beneficiary of A’s promise.
Restatement § 302 Intended and Incidental Beneficiaries Incidental Beneficiaries
A contracts to erect a building for C. B then contracts with A to supply lumber needed for the building.
C is an incidental beneficiary of B’s promise, and B is an incidental beneficiary of C’s promise to pay A for the building.
Restatement § 302 Intended and Incidental Beneficiaries Trust and Agency.
A, an insurance company, promises B in a policy of insurance to pay $10,000 on B’s death to C as trustee for B’s wife D.
C is an intended beneficiary and may enforce his rights as trustee; D’s rights as beneficiary of the trust and the contract are enforceable only in the manner in which rights of other trust beneficiaries are enforced.
Restatement § 304 Creation of Duty to Beneficiary
A promise in a contract creates a duty in the promisor to any intended beneficiary to perform the promise, and the intended beneficiary may enforce the duty.
Restatement § 304 Creation of Duty to Beneficiary Promise to Pay the Promisee’s Debt
A owes C $100. For consideration B promises A to pay the debt. B breaks his contract.
C may sue B and obtain judgment for the amount of the debt.
Restatement § 304 Creation of Duty to Beneficiary Promise to Pay the Promisee’s Debt
A transfers Blackacre to B subject to a mortgage in favor of C, which B assumes and agrees to pay.
After default C may sue B and get judgment for the amount of the mortgage debt, or, after foreclosure by sale, for the amount of any deficiency in the sum realized by the sale.
Restatement § 304 Creation of Duty to Beneficiary Promise to Pay the Promisee’s Debt
A owes C $100. For consideration B promises A to pay $100 to C in satisfaction of the debt. Later the statute of limitations bars an action by C against A.
That fact is not of itself a defense in an action by C against B.
Restatement § 304 Creation of Duty to Beneficiary Promise to Pay the Promisee’s Debt
A promises C to have a fence built between their lands, and C pays A the price. B contracts with A to assume A’s obligation to C, and A promises to pay B on completion of the work.
On B’s failure to build the fence, C may recover damages from B. But a contract by B to build the fence for A would ordinarily not be a contract to assume A’s obligation to C.
Restatement § 304 Creation of Duty to Beneficiary Gift Promise
A gives money to B, his son, who promises in consideration thereof to pay A’s daughter C, $5000 on A’s death. A dies and B fails to pay C.
C may sue on the promise and obtain judgment for $5000.
Restatement § 304 Creation of Duty to Beneficiary Other Intended Beneficiaries
A owes C $1000. For consideration B promises A to pay C $1000 for an assignment of C’s right.
On tender of such an assignment C can recover from B on his promise.
Restatement § 304 Creation of Duty to Beneficiary Other Intended Beneficiaries
A’s son C is indebted to D. With the purpose of assisting C, A secures from B for consideration a promise to pay the debt to D.
D may enforce B’s promise for D’s own benefit.
Restatement § 304 Creation of Duty to Beneficiary Other Intended Beneficiaries
A owns property subject to a mortgage in favor of C. C asserts and A denies that A is personally liable for the mortgage debt. To resolve the dispute, A transfers the property to B on B’s promise to pay the mortgage debt.
C may enforce B’s promise for C’s own benefit whether or not A is personally liable.
Restatement § 304 Creation of Duty to Beneficiary Other Intended Beneficiaries
A, a common carrier, is required as a condition of its license to maintain liability insurance covering claims for bodily injury arising out of A’s operations, and files a policy written by B. C claims to have been injured under circumstances covered by the policy.
C may maintain a direct action against B.
Restatement § 304 Creation of Duty to Beneficiary Other Intended Beneficiaries
A transfers property to B. A promises to use money received from B to discharge all A’s obligations “including C’s fees” up to $20,000; B promises to discharge all obligations in excess of $20,000 which A “is found to be responsible to pay including C’s fees.”
C cannot maintain an action against B on the promise before A’s liability has been established.
