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5 Cards in this Set
- Front
- Back
Third-party Beneficiary Right
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Depends on classification:
(First Restatement - FL) 1. Creditor beneficiary: --When a promisee seeks a performance from the promisor that will satisfy an obligation to a third party. 2. Donee beneficiary: --When a promisee seeks a performance from a promisor in order to make a gift of that performance to a third party. 3. Incidental beneficiary: --Third parties who will benefit from a promisor performance as a practical matter but are not donee or creditor beneficiaries. Second Restatement: -Only divides into intended and incidental beneficiaries. -key factor: intent to benefit test |
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Rights of Parties to Enforce Contract
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Incidental beneficiary does not have a right to seek contract enforcement.
Third party's rights against promisor: -if not incidental, then can secure enforcement of an agreement from breaching promisor Third party's rights against promisee: -no rights in connection with the promised performance under the contract, BUT rights based on prior obligation between promisee and third-party beneficiary |
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Vesting of Right to Sue
(intended beneficiary) |
Only vests in four situations:
1. beneficiary brings suit 2. beneficiary changes position in justifiable reliance 3. beneficiary manifests assent to the contract at one of party's requests 4. rights the beneficiary vested under express terms |
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Promisor's Defenses against Third Party Beneficiary
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Any valid defenses the promisor has against the promisee are also applicable against third-party beneficiaries.
Cannot assert defenses based on separate transactions against promisee. |
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Promisee's Rights Against Promisor
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1. breach of contracts
2. if donee beneficiary: if promisor's performance is intended to benefit a donee beneficiary, then no loss for promisee so cannot recover damages (unless specific performance). 3. if creditor beneficiary: can get specific performance for promisor's obligation --might be double liability if promisee get economic benefits (because third-party beneficiary can then ask for same)--as a result, sometimes promisee cannot recover damages against promisor UNLESS promisee has already paid beneficiary to cover a default |