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Contracts • Third Parties
K#175
Legal Definition
Intended beneficiaries are either donees or creditors (usually donees). Look to whether the third-party beneficiary was a creditor of the promisee before the contract.
Plain English Explanation
When you have identified an intended beneficiary to a contract, the next thing you need to figure out is whether or not the beneficiary is classified as a donee or a creditor. Why? Because their classification will affect what rights they have (which we discuss in later cards).
Hypothetical
Hypo 1: Bob's friend, Amy, is having a birthday soon. As a gift, Bob offers Sam $100 to paint Amy's house. Sam agrees. Result: Amy is a donee third-party beneficiary.
Hypo 2: Bob owes Amy a bicycle from a previous agreement they had. Unfortunately, Bob doesn't have a bicycle anymore. Instead, he asks Amy if she would accept her house being painted. Amy agrees. Bob offers Sam $100 to paint Amy's house. Sam agrees. Result: Amy is a creditor third-party beneficiary.
Hypo 2: Bob owes Amy a bicycle from a previous agreement they had. Unfortunately, Bob doesn't have a bicycle anymore. Instead, he asks Amy if she would accept her house being painted. Amy agrees. Bob offers Sam $100 to paint Amy's house. Sam agrees. Result: Amy is a creditor third-party beneficiary.
Visual Aids
Related Concepts
In a third-party beneficiary situation, who is the third-party beneificiary, who is the promisor, and who is the promisee?
What are the implied warranties of an assignor in an assignment for consideration?
What defenses may a promisor assert against a third-party beneficiary?
What duties are not delegable?
What is a delegatee?
What is a delegator, delegatee, and obligee?
What is an assignee?
What is an assignment?
What is an assignor?
What is an obligee?
What is an obligor?
What is a promisee?
What is a promisor?
What is the difference between an assignment and a delegation?
What is the difference between an incidental and intended beneficiary?
What is the effect of a clause prohibiting assignment?
What is the effect of a contract containing no language about assignment rights?
What is the effect of consideration on assignment rights?
What is the effect of invalidation language on assignment?
When are modification agreements between the obligor and assignor effective?
When can an assignee sue an obligor for payments to the assignor?
When do a third party's rights to enforce the contract vest?
When does delegation of duties occur?
Who can sue whom in a suit involving beneficiaries, promisees, and promisors?
Who can sue whom in a suit involving the assignment of rights?
Who can sue whom in a suit involving the delegation of duties?
Who prevails when the same rights have been assigned to multiple parties?
