Contracts--14

Front 1

What is the general QUESTION for Third party beneficiaries?

Back 1

(1) Whether that third person, who was not a party to the contract and gave no consideration for the promise, may enforce the promise that was made for her benefit.

Front 2

What is the common law approach to third party beneficiaries?

Back 2

(1) The common law rule was that the third party could not enforce the promise since she was not in privity of contract.

Front 3

What was the modern law approach to third party beneficiaries?

Back 3

(1) The modern rule is that the third party may normally enforce the promise made for her benefit.

Front 4

In order to enforce the promise, the third party involved must be more than a mere “_____”?

Back 4

(1) “Incidental beneficiary”

Front 5

What is the GENERAL PRINCIPLE/test to see if someone is a “Incidental Beneficiary”?

Back 5

(1) It must appear that a major purpose (although to the only one) of the contract was to benefit the third party. (2) Unless the contract is made primarily for the benefit of the third party, she is only an incidental beneficiary and cannot enforce the contract.

Front 6

What are some of the FACTORS considered to determine if someone is a “incidental beneficiary”?

Back 6

(1) Is performance to be rendered directly to the third party? (2) Do express provisions of the contract purport to create rights in third parties? (3) Are third parties specifically named in the contract? (4) Is there a close relationship between the promise and the third parties”?

Front 7

What is the test to see if someone is a DONEE BENEFICIARY?

Back 7

(1) Whether the promisee intended to CONFER a gift on a third party

Front 8

What is the test to see if someone is a CREDITOR BENEFICIARY?

Back 8

(1) Whether the promisee intended to DISCHARGE some obligation owed to the third party.

Front 9

What is the OLDER rule concerning CREDITOR BENEFICIARIES?

Back 9

(1) There actually had to be a debt owing to the third party

Front 10

What is the MODERN view concerning CREDITOR BENEFICIARIES?

Back 10

(1) The test is whether the promisee intended to satisfy an obligation that he believed was owed to the third party (even though there might not actually be such a debt).

Front 11

How does the restatement second deal with creditor and donee beneficiaries?

Back 11

(1) They substitute “Intended Beneficiary” for both creditor and donee beneficiary.

Front 12

May a third party beneficiary enforce the contract of which he is the beneficiary but not a party? [Creditor beneficiary—Lawrence v. Fox]

Back 12

(1) Yes (2) The consideration was P’s promise to pay D’s loan to D.

Front 13

May a third party to whom a gift was intended enforce the contracting party’s obligation to make the gift? [Donee beneficiary—Seaver v. Ransom]

Back 13

(1) Yes. (2) Early cases involving donee beneficiaries required some family relationship between the donee and the beneficiary, but later cases removed this restriction.

Front 14

May the intended beneficiary of a gift that the donor’s attorney fails to include in testamentary documents sue the attorney as a third-party beneficiary? [Intended beneficiary of will—Hale v. Groce]

Back 14

(1) Yes (2) California permits recovery in such a case, but other states do not.

Front 15

May the specific class of persons whom a particular government program was intended to benefit bring suit against private contractors who failed to performance the government contract and thereby deprived the class of intended advantages? [Recipients of government aid—Martinez v. Socoma Companies, Inc]

Back 15

(1) No (2) The government owed it no legal duty to provide the benefits specified in the contracts.

Front 16

Can a third party donee or creditor beneficiary enforce a contract before her rights are vested?

Back 16

(1) No.

Front 17

What is the traditional view of when vesting occurs?

Back 17

(1) The older cases held that vesting occurred whenever the third party acquired knowledge of the contract for her benefit and assented thereto.

Front 18

What is the minority view of when vesting occurs?

Back 18

(1) Some states hold that the vesting occurs when eh third party changes her position in detrimental reliance on the contract and then only to the extent of his reliance. (or when the third party brings suit to enforce the contract.

Front 19

How does the first restatement and some courts hold that vesting occurs for creditor and donee beneficiaries?

Back 19

(1) A donee beneficiary’s rights vest on making of the contract (2) A creditor beneficiary’s rights vest when she has detrimentally relied or ha brought suit on the contract.

Front 20

How does the restatement second hold that vesting occurs? The rights of any third party beneficiary vest when the beneficiary:

Back 20

(1) Manifests her assent to the promise (2) Bring suit (3) OR materially changes her position in reliance thereon

Front 21

Can two parties make a contract in which the promisor assumes the debt of the promsee and then rescinds the contract before the creditor of the promisee expresses his assent? [Recission before beneficiary’s assent—Copeland v. Beard]

Back 21

(1) Yes (2) The creditor beneficiary ‘s right is a derivative one, and the parties can rescind the contract before the creditor assents to it.

Front 22

Do the rights of a donee beneficiary vest as of the time the contract was executed? Where promisee retains control—Salesky v. Hat corp. of America]

Back 22

(1) No (2) The law in the area is unsettled; although it appears that no rights vest in a donee beneficiary at execution where the promisee continues to exercise complete control over the subject matter of the gift.

Front 23

Once the beneficiary’s rights have vested, can he sued the promiseor on the contract for failure to perform?

Back 23

(1) Yes.

Front 24

What are the defenses of the promisor when the promsor refuses to perform?

Back 24

(1) The beneficiary takes subject to the defines of the promisor assertible against the promisee (2) The third party beneficiary is not subject to defend that only the promisee can assert against him.

Front 25

If the promisor has rendered the performance to the beneficiary, can he force the beneficiary to repay it even if the discovers that he had a right to rescind the contract with the promsee?

Back 25

(1) NO. (2) Unless the beneficiary had notice at the time of performance of the facts allowing the promisor to rescind.

Front 26

May a promisor who has undertaken to pay a debtor of a promisee assert against the promisee’s creditor (P) any defense he could have asserted against the promisee? [Defenses available against promisee’s creditor—Rouse v. United States]

Back 26

(1) Yes (2) My assert against that a creditor any defense that eh could have asserted against the promisee. (3) D cannot assert the faulty installation of associated against P. (4) This does NOT stand for the proposition that the promisor may not assert against the creditor any defense that the promisee could have asserted against the creditor.