Third Party Beneficiaries Flashcards
Third party defined
Not a party to the contract
What are the three traditional categories of 3PB?
1) donee
2) creditor
3) incidental
Define the three categories of 3PB
Donee-gifted as part of the contract
Creditor-debt satisfied by performance of contract
Incidental-just happens to benefit from performance
What is the more modern classification of 3PB
Intentional and unintentional
True or False: Donee, creditor, and incidental beneficiaries all have rights under the contract
False. Incidental beneficiaries are irrelevant to the contract and have no rights
True or false: a creditor beneficiary can sue any party to the contract
True. Creditor can sue promisor for the promise or promisee for underlying obligation, but only one recovery is allowed
True or False: donee beneficiary can sue both parties to a contract
False. Donee can only sue the promisor
Can a donee beneficiary ever sue the promisee?
Yes, if promisee tells them about contract and reliance is foreseeable and occurs to detriment, can sue
Until the 3rd parties rights —, can be terminated or modified
Are vested
True or False: after a 3rd parties rights have vested, the contract can only be terminated or modified with their consent
True. Once vested, the third party must agree to rescission or modification
When does a 3PB’s rights vest?
1) manifests assent to the promise in a manner requested by parties
2) brings suit to enforce promise OR
3) materially changes position in justifiable reliance on promise
Availability of defenses in 3PB scenario
Promisor has same defense as would against original promisee. Beneficiary is liable for counterclaims that promisor can establish against promisee not to exceed what is owed under contract
