1. Contracts Rights in Third Parties
Third Party Beneficiary Rights
Historically disfavored – problems with privity of contract, lack of consideration by third party claimant.
Courts began to recognize 3d party enforceable rights, starting with creditor/beneficiary cases (e.g., “You owe me, but pay my niece instead, please.”), then truly intended beneficiaries (e.g. for life insurance contracts, where the intent is to benefit the third party directly, not incidentally), and in a few other cases including where the alleged right is in a family member, etc.
Modern thinking tends to break enforcement rights down into those for intended beneficiaries (more likely to recover) and incidental ones (less likely to recover). The law is still in a state of flux, so check your state.
For be a third party beneficiary to have enforceable rights: 1) proper, clear intent for this person to benefit in the original contract; 2) breach of the relevant obligation; and 3) actual damages for the breach.
This relates to third parties that are in contemplation of the contracting parties as the contract is being formed – unlike for assignment/delegation which brings them in post-formation.
This can be a complicated area of law – simple slides can be deceiving – work to have factual scenarios/cases addressed and understood.
Grants of these rights are revocable, unless “vested” (several forms).*
Comparison of Restatement (First) Contracts provisions to Restatement (Second) ones demonstrates the changing nature of this area of law (including the remedy or damage…).
*Revocation/vesting is a potentially tricky area, and highly relevant to common practice – the rules on vesting, which should be contrasted to vesting rules on assignments, may be identified (and memorized) by reviewing the relevant Restatement (Second) Contracts provisions.
© 2018 Paul J. Carrier, Paul J Carrier, LLC Blue – Category Recognition; White – Specific Category; Yellow – “Black Letter” Rules (to be memorized); Green – Main Factual Issues – Analysis; Red – Upper-Level, Integrated Comprehension