Third Party Beneficiaries

Question 1

Incidental v. Intended Beneficiaries

Answer 1

ONLY intended beneficiaries have K rights.

To determine if intended beneficiary courts consider whether 3rd party:

1. Is identified in the K
2. Receives performance directly from the promisor
3. Has some relationship with the promisee to indicate intent to benefit

Question 2

Creditor v. Donee Beneficiary

Answer 2

Both intended beneficiaries.

Creditor - person to whom debt is owed by promisee.

Donee - person who the promisee intends to benefit gratuitously

Question 3

What is the significance of vesting?

Answer 3

Prior to vesting, parties can modify/cancel K without consent of the 3rd party.

Question 4

When do the rights of the beneficiary vest?

Answer 4

1. 3rd party beneficiary manifests assent to K,
2. 3rd party beneficiary files suit to enforce, or
3. 3rd party materially changes position in reliance on the promise
   Exception: Contractual language can still allow 3rd parties rights to be terminated, despite above rule. Ex. Insurance policy that allows a change in beneficary

Question 5

Who can sue?

Answer 5

1. Beneficiary v. Promisor- Can sue promisor on K. Promisor can raise any defense that the ptormisor has agains the promisee.
2. Promisee v. Promisor - can sue both at law and in equity for SP if promisor not performing

Beneficiary CANNOT recover from promisee.
***Exception: if beneficiary is creditor, can recover original debt from promisee

Question 6

Vocabulary

Answer 6

• Promisor - person who is to render performance that benefits the 3rd party
• Promisee - person who OBTAINS the promise for the 3rd party
• 3rd party beneficiary - person who gets benefit

Question 7

Assignments that Must be in Writing

Answer 7

1. Wage assignments
2. Assignments for interest in land
3. Assignments of right to sue for more than 5k
4. Assignments intended as security interests under Article 9