Third Party Beneficiary Contracts

Question 1

What is the critical issue in third-party beneficiary law ?

Answer 1

Whether the 3d party beneficiary has standing to enforce the K (Can they sue?)

Question 2

When is a 3d party beneficiary contract created?

Answer 2

When the parties to a K intend that the performance by one of the parties is to benefit a 3d pers. who is not a party to the contract

Question 3

When is there a creditor beneficiary ?

Answer 3

Third Party is a Creditor Beneficiary if:

• Performance of a promise would satisfy an actual duty of the promisee to a 3d party AND
• promisee did not intend to make a gift to the 3d party

Question 4

Who can the Creditor Beneficiary sue?

Answer 4

Can sue either promisor or the promisee to enforce the K

Question 5

When is there a donee beneficiary ?

Answer 5

When promisee entered the K for the purp. of giving a gift to a 3d pers.

Question 6

Who can a Donee Beneficiary Sue?

Answer 6

Has the right to sue the promisor

Question 7

When is there an incidental beneficairy ?

Answer 7

One who benefits from a K even though there is no contractual intent to benefit that person

Question 8

Who can an incidental beneficiary sue?

Answer 8

Has no right to enforce the K

Question 9

When is there an intended beneficiary?

Answer 9

When a contracting party intends to benefit the 3d party

1. One to whom the promise of the performance satisfies the obligation of the promisee to pay money to the beneficiary OR
2. the circ. indicate the promisee intends to give the benef. the benefit of the promised perf.

Creditor or Donee

Question 10

What are an incidental beneficiary’s rights under the K?

Answer 10

They have no rights to seek enforcement of the k

Question 12

What are the intended beneficiary’s rights under a K ?

Answer 12

• Promisor - can secure the enforcement of agreement from breaching promisor (the performer)
• Promisee - Only has rights against the promisee if prior oblig. b/w the promisee and the 3d party benef.

Question 13

When do the rights of an intended beneficiary vest?

Answer 13

Rights vest when beneficiary:

1. Detrimentally relies on the rights created,
2. Manifests assent to the K at one party’s request, OR
3. Files suit to enforce the K

Question 14

What is the effect when the beneficiary’s rights vest?

Answer 14

The orig. parties to the K are both bound to perform the contract

• Any efforts by promisor or promisee to rescind or modify after vesting are void
  
  • Unless, 3d party agrees to rescission or modification

Question 15

What defenses are available to promisors in 3d party actions?

Answer 15

Promisor can raise any defense against third party that he had against the orig. promisee

Question 16

What is the promisee’s right against the promisor in 3d party beneficiary situations?

Answer 16

When the promisor doesn’t perf.

• Promisee has a claim for breach of K against promisor

Question 17

What is the promisee’s right against the promisor when the 3d party beneficiary is a donee beneficiary?

Answer 17

If promisor’s perf. is intended to benefit a donee benef.

• Promisee has suffered no econ. loss AND
• Can’t get damages
• Specific perf. may be avail

Question 18

What is the promisee’s right against the promisor when the 3d party beneficiary is a Creditor beneficiary?

Answer 18

If the promisor’s performance is intended to benefit a creditor benef.

• The promisee may seek enforcement of the promisor’s obligation