986:
excellent reputation, then
Charlie is an incidental beneficiary. Neither Andrew nor Bethany is entering into the contract with the particular intent to benefit Charlie. Andrew simply wants his house properly renovated; Bethany simply wants to be paid to do the renovation. If the contract is breached by either party in a way that results in Charlie never being hired for the job, Charlie nonetheless has no rights to recover anything under the contract. Similarly, if Andrew were to promise to buy Bethany a
39:
1108:
In other words, if the promisor is owed money by the promisee, any award to the third party for the promisor's failure to perform can be reduced by the amount thus owed. If the promisor is owed more than the value of the contract, the beneficiary's recovery will be reduced to nothing (but the third party can never be made to assume an actual debt).
847:
either relied on or accepted the benefit. A promisee nominates a third party usually for one of two reasons—either the promisee owes something to the third party and the performance of this new obligation will discharge it, or the promisee will somehow get a material benefit by giving something to the third party.
1156:
of the contract, provided that the beneficiary has not already sued the promisor. Furthermore, if the promisee was in debt to a creditor beneficiary, and the failure of the promisor to perform caused the promisee to be held liable for that debt, the promisee can sue to recover the amount of the debt.
1107:
Because the promisor can assert any defenses that could be asserted against the promisee, the beneficiary also becomes liable for counterclaims on the contract that the promisor could establish against the promisee. This liability can never exceed the amount that the promisor owes under the contract.
1053:
Once the beneficiary's rights have vested, the original parties to the contract are both bound to perform the contract. Any efforts by the promisor or the promisee to rescind or modify the contract at that point are void. Indeed, if the promisee changed his mind and offered to pay the promisor money
870:
to perform and, by expressing his consent, initially substitutes himself for an intended party to a contract and therefore binds himself. Also, as a somewhat distinct rule, the intended beneficiary of a third-party contract does not need to be in existence at the time the contract is concluded. This
1087:
Where a contract for the benefit of a third party is breached by the non-performance of the promisor, the beneficiary can sue the promisor for the breach just as any party to a contract can sue the other. Because the rights of the third party are defined by the contract created between the promisor
1119:
against both. If the suit is successful against one party to the contract, the other party will be dismissed. Because the creditor beneficiary is receiving the performance of the promisor in order to fulfill the promisee's debt, the failure of the promisor to perform means that the beneficiary can
846:
While the law on this subject varies, there is nonetheless a commonly accepted construction of third-party rights in the laws of most countries. A right of action arises only when it appears the object of the contract was to benefit the third party's interests and the third-party beneficiary has
985:
An incidental beneficiary is a party who stands to benefit from the execution of the contract, although that was not the intent of either contracting party. For example, if Andrew hires
Bethany to renovate his house and insists that she use a specific house painter, Charlie, because he has an
1088:
and the promisee, the promisor may assert against the beneficiary any defenses to the contract that could be asserted against the promisee. These include all of the traditional basis by which the formation of a contract may be challenged (e.g., lack of
1010:
the third party (though this requirement has an unusual meaning under the law). Although there is a presumption that the promisor intends to promote the interests of the third party in this way, if Andrew contracts with
Bethany to have a thousand
1137:, 224 NY 233, 120 NE 639 ). A donee beneficiary is when a contract is made expressly for giving a gift to a third party, the third party is known as the donee beneficiary. The most common donee beneficiary contract is a life insurance policy.
1015:
delivered to the home of Andrew's worst enemy
Charlie, then Charlie is still considered to be the intended beneficiary of that contract. (This would be illegal if the intent was to scare his enemy; contracts are voided based on criminality.)
1507:
300:
854:
The parties A (promisee) and B (promisor) contract each in his own name but with the intention of creating an opportunity for C (third-party beneficiary) to acquire a benefit, conditional upon acceptance, from B;
960:
is tenuous so that acceptance of a benefit does not create a right, but rather entrenches that right. In either case, the contracting parties may vary or rescind the contract until acceptance or reliance.
1590:
1500:
862:
In either case, a third-party contract differs from agency in that the promisee acts in his own name and for himself, whereas an agent or representative does not. It is also distinguishable from a
1152:
The promisee can also sue the promisor for failing to pay the third party beneficiary. Under the common law, such suits were barred, but courts have since determined that the promisee can sue for
305:
1006:
to a second party—the "promisor"—in exchange for the promisor's agreement to provide some product or service to the third-party beneficiary named in the contract. The promisee must have an
1344:
1391:
952:, or expectation; in other words, he does not have the right to accept, but rather a mere competency. Acceptance may also be a suspensive condition in certain contracts. Under
1746:
519:
1424:
1405:
568:
1514:
693:
260:
1902:
1694:
1337:
858:
C immediately acquires a conditional right, from which A is able to release B until the moment of acceptance, when the right of A to release B is extinguished.
817:
1597:
944:
A third-party beneficiary only acquires a right of action to enforce his benefit once he has accepted the benefit provided for in the contract. Under the
1850:
678:
3 Historically restricted in common law jurisdictions but generally accepted elsewhere; availability varies between contemporary common law jurisdictions
1100:) and all of the traditional bases by which non-performance on the contract may be excused (e.g., failure of consideration, impossibility, illegality,
1875:
1330:
1040:
to
Charlie and Andrew agrees to provide some consideration to Bethany in exchange for her promise to pay Charlie the amount of the gift. Under old
1805:
1479:
1472:
1384:
738:
1687:
1521:
890:
The contracting parties must have intended to confer a benefit, and not a simple interest, to a third party, either expressly or impliedly
1044:
principles, the donee beneficiary actually had a greater claim to the benefits this created, but such distinctions have been abolished.
1252:
Elzette, Muller, "The
Treatment of Life Insurance Policies in Deceased Estates with a Perspective on the Calculation of Estate Duty",
1141:
1486:
1030:
to
Charlie, and Andrew agrees to provide some consideration to Bethany in exchange for her promise to pay Charlie some of the debt
1583:
1546:
1398:
1280:
324:
288:
956:, acceptance is not necessary to be vested in a right of action, but is necessary to be liable. Before acceptance, however, the
1621:
789:
when the third party relies on or assents to the relationship, and gives the third party the right to sue either the promisor (
1701:
1562:
1528:
317:
1649:
1002:
The distinction that creates an intended beneficiary is that one party—the "promisee"—makes an agreement to provide some
867:
583:
173:
1739:
883:
For third-party rights to come into existence, certain contractual criteria must be met to show an object to benefit:
812:, which restricts rights, obligations, and liabilities arising from a contract to the contracting parties (said to be
68:
1950:
1680:
1443:
1353:
731:
682:
603:
329:
1493:
1169:
578:
537:
449:
1895:
1416:
1377:
833:
385:
98:
800:
A contract made in favor of a third party is known as a "third-party beneficiary contract." Under traditional
797:, or anchor party) of the contract, depending on the circumstances under which the relationship was created.
1732:
1608:
1535:
707:
558:
217:
948:
interpretation, however, prior to formal acceptance of the benefit, the third-party beneficiary only has a
1834:
1101:
283:
243:
168:
144:
126:
1996:
1812:
1643:
1078:
If the beneficiary's rights vest pursuant to an express term in the contract providing for such vesting.
1055:
893:
The third-party beneficiary must be named or referred to, or is a member of a distinct class referred to
763:, is a person who may have the right to sue on a contract, despite not having originally been an active
724:
711:
700:
573:
563:
507:
131:
1454:
1368:
1153:
850:
There are also two possible ways to explain the functioning of the contractual relationship: either,
591:
428:
278:
157:
63:
58:
1941:
1768:
1631:
1181:
809:
347:
238:
103:
83:
977:. The burden is on the third party to plead and prove that he was indeed an intended beneficiary.
1868:
1843:
1753:
1569:
871:
means a contract may benefit an unborn person (usually a family member) or secure benefits for a
633:
596:
438:
410:
376:
269:
254:
248:
222:
1970:
1961:
1886:
1764:
1097:
490:
479:
200:
149:
140:
121:
78:
1909:
1778:
1723:
1673:
1660:
969:
In order for a third party beneficiary to have any rights under the contract, he must be an
781:) is the intended beneficiary of the contract, as opposed to a mere incidental beneficiary (
513:
400:
395:
357:
352:
195:
178:
1269:, eds. Hector L. MacQueen & Reinhard Zimmermann (Edinburgh: Edinburgh UP, 2006), 215–6.
1072:
If the beneficiary expressly assented to the contract at the request of one of the parties;
1061:
There are four ways to determine whether the third party beneficiary's rights have vested:
887:
A valid contract must exist between two contracting parties and not some other relationship
1916:
1576:
1555:
516:(also implied covenant of good faith and fair dealing or duty to negotiate in good faith)
405:
135:
112:
17:
1931:
1796:
1785:
1616:
1186:
1089:
991:
897:
710:, and Canadian jurisprudence in both Québec and the common law provinces pertaining to
651:
542:
473:
458:
206:
53:
1215:
1990:
1664:
1093:
1003:
773:
442:
190:
163:
93:
1305:
1434:
945:
935:
Evidence that the third party knew of the provision intended for his or her benefit
872:
646:
641:
628:
419:
73:
38:
825:
764:
484:
390:
295:
212:
1462:
1041:
1012:
829:
801:
686:
669:
88:
1322:
1243:, eds. Reinhard Zimmerman & Daniel Visser (Oxford: Oxford UP, 1996), 356.
1124:. The failure of performance simply means that the debt has never been paid.
1458:
1191:
953:
637:
312:
1508:
Arizona
Cartridge Remanufacturers Ass'n Inc. v. Lexmark International Inc.
929:
The third party coming under onerous obligations on the faith of having a
1066:
987:
760:
467:
362:
185:
30:
1196:
1115:
can sue both the promisor and the promisee, but the beneficiary cannot
786:
433:
875:, such as a company, still in the process of forming or registering.
1019:
There are two common situations involving intended beneficiaries:
916:
must be irrevocable. This is established by any of the following:
1144:, Chapter 6, Sections 133-147, covers third-party beneficiaries.
896:
The intention to benefit must generally be irrevocable (though a
808:
principle was not recognized, instead relying on the doctrine of
1591:
Atlantic Marine
Construction Co. v. United States District Court
1501:
In re Zappos.com, Inc., Customer Data
Security Breach Litigation
1037:
1027:
623:
1326:
994:
would have no grounds upon which to recover for the lost sale.
836:
is unique in abandoning privity early in the mid-19th century.
1075:
If the beneficiary files a lawsuit to enforce the contract; or
903:
Some intimation to the third party of the contract's existence
756:
613:
1267:
European Contract Law: Scots and South African Perspectives
1054:
not to perform, the third party could sue the promisee for
832:
countries are also making reforms in this area, though the
1392:
Kansas City Wholesale Grocery Co. v. Weber Packing Corp.
1241:
Southern Cross: Civil Law and Common Law in South Africa
703:
both in Québec and in the country's common law provinces
1131:
can sue the promisor directly to enforce the promise. (
820:
introduced a number of allowances and exceptions for
706:
7 Specific to civil law jurisdictions, the American
1960:
1940:
1930:
1885:
1860:
1833:
1826:
1795:
1763:
1722:
1715:
1659:
1630:
1607:
1545:
1453:
1433:
1415:
1367:
1360:
1747:Douglas v. U.S. District Court ex rel Talk America
1425:Baltimore & Ohio Railroad Co. v. United States
520:Contract A and Contract B in Canadian contract law
1406:Lefkowitz v. Great Minneapolis Surplus Store, Inc
1172:allows a third-party to sue for debt collection.
1903:Helene Curtis Industries, Inc. v. United States
1515:Step-Saver Data Systems, Inc. v. Wyse Technology
1695:G. L. Christian and Associates v. United States
1254:Tydskrif vir Hedendaagse Romeins –Hollandse Reg
675:2 Specific to civil and mixed law jurisdictions
1338:
990:, and were to later go back on that promise,
732:
8:
1265:Philip Sutherland, "Third-Party Contracts",
818:Contracts (Rights of Third Parties) Act 1999
1598:Salsbury v. Northwestern Bell Telephone Co.
1308:. Historical Society of the New York Courts
920:Delivery of the contract to the third party
712:contractual and pre-contractual negotiation
1937:
1851:Lenawee County Board of Health v. Messerly
1830:
1719:
1364:
1345:
1331:
1323:
1216:"Legal Definition of ius quaesitum tertio"
739:
725:
26:
1876:SCO Group, Inc. v. DaimlerChrysler Corp.
1385:Gottlieb v. Tropicana Hotel & Casino
1058:with the third party's contract rights.
793:, or performing party) or the promisee (
767:to the contract. This right, known as a
1806:Williams v. Walker-Thomas Furniture Co.
1480:Ticketmaster Corp. v. Tickets.com, Inc.
1207:
659:
611:
550:
529:
499:
457:
418:
375:
339:
268:
230:
111:
45:
29:
1120:still sue the promisee to recover the
508:Duty of honest contractual performance
1688:Henningsen v. Bloomfield Motors, Inc.
1522:Bowers v. Baystate Technologies, Inc.
1036:– e.g., when Andrew wishes to make a
696:of International Commercial Contracts
7:
1065:If the beneficiary knows of and has
685:and other civil codes based on the
1487:Nguyen v. Barnes & Noble, Inc.
1148:Rights that accrue to the promisee
965:Intended v. incidental beneficiary
866:under which the third party has a
25:
1142:Restatement (Second) of Contracts
1622:Jacob & Youngs, Inc. v. Kent
1584:King v. Trustees of Boston Univ.
1399:Ever-Tite Roofing Corp. v. Green
1281:"Restatement of Contracts, 1933"
510:(or doctrine of abuse of rights)
325:Enforcement of foreign judgments
289:Hague Choice of Court Convention
37:
816:to the contract). However, the
771:, arises when the third party (
1702:Kellogg Bridge Co. v. Hamilton
1563:Wood v. Lucy, Lady Duff-Gordon
1529:Bragg v. Linden Research, Inc.
1235:David J. Joubert, "Agency and
1026:– e.g., when Andrew owes some
318:Singapore Mediation Convention
1:
1650:MacPherson v. Buick Motor Co.
926:Intimation to the third party
692:5 Explicitly rejected by the
459:Quasi-contractual obligations
923:Registration for publication
1740:Harris v. Blockbuster, Inc.
2013:
1951:Drennan v. Star Paving Co.
1771:(unwritten & informal)
1681:Seixas and Seixas v. Woods
1444:Ellefson v. Megadeth, Inc.
1354:United States contract law
1140:In the United States, the
330:Hague Judgments Convention
1716:Defense against formation
1494:ProCD, Inc. v. Zeidenberg
1170:New York Court of Appeals
681:4 Specific to the German
18:Third party beneficiaries
1896:United States v. Spearin
1417:Implied-in-fact contract
1378:Leonard v. Pepsico, Inc.
386:Anticipatory repudiation
136:unequal bargaining power
1733:Morrison v. Amway Corp.
1609:Substantial performance
1536:Feldman v. Google, Inc.
1306:"Lawrence v. Fox, 1859"
1168:, 1859, decided in the
900:policy is an exception)
753:third-party beneficiary
708:Uniform Commercial Code
683:BĂĽrgerliches Gesetzbuch
368:Third-party beneficiary
340:Rights of third parties
218:Accord and satisfaction
1102:frustration of purpose
1069:on the rights created;
981:Incidental beneficiary
975:incidental beneficiary
864:promesse de porte-fort
439:Liquidated, stipulated
284:Forum selection clause
169:Frustration of purpose
1813:Buchwald v. Paramount
1644:De Cicco v. Schweizer
1056:tortious interference
912:To be enforceable, a
701:Canadian contract law
69:Abstraction principle
1369:Offer and acceptance
1218:. legal-glossary.org
1154:specific performance
1113:creditor beneficiary
1067:detrimentally relied
1024:Creditor beneficiary
1008:intention to benefit
998:Intended beneficiary
971:intended beneficiary
958:ius quaesitum tertio
931:ius quaesitum tertio
914:ius quaesitum tertio
841:Ius quaesitum tertio
822:ius quaesitum tertio
806:ius quaesitum tertio
769:ius quaesitum tertio
530:Related areas of law
429:Specific performance
279:Choice of law clause
244:Contract of adhesion
158:Culpa in contrahendo
64:Meeting of the minds
59:Offer and acceptance
1942:Promissory estoppel
1827:Cancelling Contract
1256:, 69, 2006, p. 262.
1182:Beneficial interest
1083:Breach and defenses
973:, as opposed to an
868:negative obligation
810:privity of contract
694:UNIDROIT Principles
468:Promissory estoppel
348:Privity of contract
301:New York Convention
261:UNIDROIT Principles
104:Collateral contract
99:Implication-in-fact
84:Invitation to treat
1869:Stoddard v. Martin
1844:Sherwood v. Walker
1754:McMichael v. Price
1570:Kirksey v. Kirksey
1473:Specht v. Netscape
1361:Contract formation
1034:Donee beneficiary
514:Duty of good faith
411:Fundamental breach
377:Breach of contract
306:UNCITRAL Model Law
270:Dispute resolution
255:Contra proferentem
249:Integration clause
223:Exculpatory clause
1984:
1983:
1980:
1979:
1971:Britton v. Turner
1962:Unjust enrichment
1926:
1925:
1887:Misrepresentation
1822:
1821:
1765:Statute of frauds
1711:
1710:
1237:Stipulatio Alteri
1129:donee beneficiary
1098:statute of frauds
1049:Vesting of rights
879:Object to benefit
783:penitus extraneus
749:
748:
592:England and Wales
500:Duties of parties
491:Negotiorum gestio
480:Unjust enrichment
201:Statute of frauds
150:Unconscionability
122:Misrepresentation
79:Mirror image rule
16:(Redirected from
2004:
1938:
1910:Laidlaw v. Organ
1831:
1779:Buffaloe v. Hart
1767:(written) &
1724:Illusory promise
1720:
1674:Hawkins v. McGee
1661:Implied warranty
1365:
1347:
1340:
1333:
1324:
1318:
1317:
1315:
1313:
1302:
1296:
1295:
1293:
1291:
1285:UPenn Law Review
1276:
1270:
1263:
1257:
1250:
1244:
1233:
1227:
1226:
1224:
1223:
1212:
1134:Seaver v. Ransom
1122:preexisting debt
741:
734:
727:
569:China (mainland)
538:Conflict of laws
401:Efficient breach
396:Exclusion clause
196:Illusory promise
179:Impracticability
41:
27:
21:
2012:
2011:
2007:
2006:
2005:
2003:
2002:
2001:
1987:
1986:
1985:
1976:
1956:
1922:
1917:Smith v. Bolles
1881:
1856:
1818:
1791:
1759:
1707:
1655:
1626:
1603:
1577:Angel v. Murray
1556:Hamer v. Sidway
1541:
1449:
1429:
1411:
1356:
1351:
1321:
1311:
1309:
1304:
1303:
1299:
1289:
1287:
1279:Crane, Judson.
1278:
1277:
1273:
1264:
1260:
1251:
1247:
1234:
1230:
1221:
1219:
1214:
1213:
1209:
1205:
1178:
1166:Lawrence v. Fox
1163:
1150:
1085:
1051:
1000:
983:
967:
942:
910:
881:
844:
745:
716:
588:United Kingdom
551:By jurisdiction
23:
22:
15:
12:
11:
5:
2010:
2008:
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1999:
1989:
1988:
1982:
1981:
1978:
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1944:
1935:
1932:Quasi-contract
1928:
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1906:
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1855:
1854:
1847:
1839:
1837:
1828:
1824:
1823:
1820:
1819:
1817:
1816:
1809:
1801:
1799:
1797:Unconscionable
1793:
1792:
1790:
1789:
1786:Foman v. Davis
1782:
1774:
1772:
1769:Parol evidence
1761:
1760:
1758:
1757:
1750:
1743:
1736:
1728:
1726:
1717:
1713:
1712:
1709:
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1657:
1656:
1654:
1653:
1646:
1640:
1638:
1628:
1627:
1625:
1624:
1619:
1617:Lucy v. Zehmer
1613:
1611:
1605:
1604:
1602:
1601:
1594:
1587:
1580:
1573:
1566:
1559:
1551:
1549:
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1511:
1504:
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1428:
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1413:
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1409:
1402:
1395:
1388:
1381:
1373:
1371:
1362:
1358:
1357:
1352:
1350:
1349:
1342:
1335:
1327:
1320:
1319:
1297:
1271:
1258:
1245:
1228:
1206:
1204:
1201:
1200:
1199:
1194:
1189:
1187:Pay it forward
1184:
1177:
1174:
1162:
1159:
1149:
1146:
1084:
1081:
1080:
1079:
1076:
1073:
1070:
1050:
1047:
1046:
1045:
1031:
999:
996:
992:General Motors
982:
979:
966:
963:
941:
938:
937:
936:
933:
927:
924:
921:
909:
908:Irrevocability
906:
905:
904:
901:
898:life insurance
894:
891:
888:
880:
877:
860:
859:
856:
843:
838:
747:
746:
744:
743:
736:
729:
721:
718:
717:
715:
714:
704:
699:6 Specific to
697:
690:
679:
676:
673:
668:1 Specific to
665:
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661:
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586:
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543:Commercial law
540:
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525:
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522:
511:
502:
501:
497:
496:
495:
494:
487:
482:
477:
474:Quantum meruit
470:
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461:
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447:
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24:
14:
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1004:consideration
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604:United States
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451:
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213:Unclean hands
211:
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180:
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174:Impossibility
172:
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164:Force majeure
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145:public policy
142:
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94:Consideration
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36:
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32:
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19:
1997:Contract law
1969:
1949:
1915:
1908:
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1894:
1874:
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1849:
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1527:
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1471:
1442:
1435:Mailbox rule
1404:
1397:
1390:
1383:
1376:
1310:. Retrieved
1300:
1288:. Retrieved
1284:
1274:
1266:
1261:
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1231:
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1210:
1165:
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1132:
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1126:
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629:Property law
584:Saudi Arabia
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1636:3rd parties
1013:killer bees
826:English law
485:Restitution
296:Arbitration
1934:obligation
1861:Illegality
1465:agreements
1463:Browsewrap
1455:Shrinkwrap
1222:2014-09-12
1092:, lack of
1042:common law
940:Acceptance
830:common-law
802:common law
791:promittens
687:pandectist
670:common law
450:Rescission
358:Delegation
353:Assignment
141:Illegality
89:Firm offer
1459:Clickwrap
1192:Assumpsit
954:Scots law
795:stipulans
761:contracts
755:, in the
689:tradition
559:Australia
406:Deviation
313:Mediation
46:Formation
1991:Category
1176:See also
1161:Case law
1090:capacity
988:Cadillac
828:. Other
652:Evidence
624:Tort law
597:Scotland
420:Remedies
363:Novation
186:Hardship
113:Defences
54:Capacity
1835:Mistake
1632:Privity
1197:Vesting
1117:recover
774:tertius
642:estates
574:Ireland
191:Set-off
132:Threats
127:Mistake
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640:, and
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564:Canada
1312:9 May
1203:Notes
814:privy
787:vests
765:party
660:Notes
634:Wills
616:areas
579:India
441:, or
391:Cover
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1292:2022
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