A third-party beneficiary is a person who is not a contracting party of a contract but can still receive the benefits from the performance of the contract. The privity of the contract is between the contracting parties - the promisor and promisee. A promisor is a party that makes promises to benefit the third-party beneficiary. A promisee is a party who pays consideration to obtain the promisor’s promise. For instance, a mother purchased medical insurance for her son from an insurance company; the mother is the promisee, the son is the third-party beneficiary and the company is the promisor. Show If a person is not the original party to a contract, they usually cannot enforce the contract or assert a claim of a breach of contract against any party; however, there is an exception. If the person is an intended third-party beneficiary and their rights of the contract are vested, then they have the same rights as the parties of the contract. Classifications:Intended third-party beneficiary
The Restatement of Contract §133 divides intended beneficiaries into two categories: Donee
Creditor
Incidental third-party beneficiary
Vesting:The contractual rights cannot be enforced by the third-party beneficiary until the rights are vested. Vesting occurs when the beneficiary:
Prior to vesting, contracting parties can rescind or modify the beneficiary’s contractual rights without the beneficiary's consent or knowledge. Once rights are vested, the contract cannot be changed or modified unless the third-party consent. Rights:
Contracting parties: promisor & promisee
[Last updated in June of 2022 by the Wex Definitions Team] Which of the following beneficiaries can enforce the underlying contract?The creditor beneficiary may enforce the contract between the promisor and the promisee if the promisor fails to fulfill his obligation to the contract.
Which of the following is an intended beneficiary to a contract quizlet?Intended beneficiary: A person who is not a party to a contract but who the contracting parties meant to benefit from the contract and has rights to sue if the contract is not performed.
What is an intended beneficiary of a contract who receives the benefits of the contract as a gift called?A donee beneficiary receives the benefit of a contract between two other parties as a gift from one of the parties to the contract. While donee beneficiaries stand to benefit from the fulfillment of a contract, they are not technically party to the contract.
Why type of thirdA creditor beneficiary is a third party who receives contractual rights from the promisee as satisfaction of a debt. When a promisor fails to perform under the subject contract, the creditor beneficiary can bring an action against the promisee, as the value of the consideration transferred is gone.
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