Third parties

Question 1

Third-party beneficiary contracts: parties

Answer 1

In a third-party beneficiary contract:

• The “promisor” is the party making the promise that the outsider is trying to enforce;
• The “promisee” is the counterparty to the promise who could enforce the contract but is not doing so;
• The “third-party beneficiary” is the outsider suing the promisor for breach.

To recover, a third-party beneficiary must have been an intended beneficiary.

The promisor can assert any contract defenses it would have against the promisee.

Question 2

Third-party beneficiary contracts: creditor beneficiary

Answer 2

A third-party beneficiary in a contract where the promisee repays a debt owed to the third party through a deal with the promisor.

Question 3

Third-party beneficiary contracts: donee beneficiary

Answer 3

A third-party beneficiary in a contract where the promisee intends to gift enforcement to the third party.

Question 4

Third-party beneficiary contracts: revoking third-party rights

Answer 4

The initial counterparties may revoke the third party’s enforcement rights unless the latter’s rights vest by:

(1) Detrimental reliance on the rights;
(2) Assent by the beneficiary to the contract; or
(3) The filing of a lawsuit by the beneficiary to enforce the contract.