Third-Party Beneficiary Contract

To learn more about third-party beneficiaries and their contractual rights, or for assistance in making a claim after a breach of contract, contact Brown & Charbonneau, LLP today to speak with our business and contract lawyers at 714-505-3000 or online to make an appointment. In addition to the fact that the contract becomes enforceable with the acquisition for the third party, the time of acquisition is important for another reason. Before the rights of the third party beneficiary are transferred, the original parties may modify their contract at their own discretion. Once the rights have been acquired, the original parties may not exercise or modify the contractual rights without the consent of the beneficiary to change the contractual rights. [8] 2) Receives the execution directly from the promisor; or circumstances that demonstrate that the promisor will grant the beneficiary the benefit of the contract. [6] The rights of a third party beneficiary are transferred when one of the following three things occurs:[9] In contract law, a third party beneficiary is a person who may have the right to continue a contract even if he or she was not originally an active party to the contract. This right, known as ius quaesitum tertio[1], arises when the third party (tertius or alteri) is the intended beneficiary of the contract, as opposed to a simple secondary beneficiary (penitus extraneus). It is vested if the third party relies on or consents to the relationship and gives the third party the right to sue either the promisor (the promittens or the performing party) or the promisors (stipulans or anchor part) of the contract, depending on the circumstances in which the relationship arose. This may be, for example, a person who receives an inheritance because it is mentioned in another person`s will. A person who receives a payment from another person`s insurance policy is also a beneficiary. In general, a target beneficiary is what he is[4]: third party beneficiaries exist only when a contract is concluded for the benefit of a person who is not an active party to this agreement.

A person who merely receives a side effect of a contract is not a third party beneficiary because the contract was not created for that person. For a third party beneficiary to have rights: The rights of a third party beneficiary are clearer if that person or company is specifically named in the contract. In such cases, a third-party beneficiary clause is added that identifies a person or company that expects to benefit from the agreement. This right is reinforced by law if the third party beneficiary is aware of the agreement and the expected benefit. Although contracts are of course normally binding on the parties performing the contract, in particular limited circumstances they may also be enforceable by third parties who have not performed the contract(s) (« third party »). In most cases, third parties cannot assert or defend a contractual obligation. They have no « privacy » towards the contract and, as such, have no rights or obligations, as these only apply to the parties who have performed the contracts. If the intended beneficiaries decide to sue, they must prove that they were indeed intended beneficiaries. In this case, the agreement must have intended to benefit them by including their name somewhere in the contract. Two specific situations often involve intended beneficiaries: a beneficiary and a creditor beneficiary. If a non-party to a contract directly benefits from the agreement, this is called an intentional beneficiary.

Essentially, this means that contracts only create rights, obligations and responsibilities with the parties who negotiated and signed the contract. The third party beneficiary must be mentioned or named in the contract and the intention to provide a benefit to this third party must be irrevocable. (A typical example: a father pays tuition and enrolls his son in a college, signing the enrollment forms because his son is out of the country in the military. The son is the one who is mentioned as a student, but the father is the one who pays and registers him. The father dies. The son returns. As a third-party beneficiary, the son can request access to the school.) An intended beneficiary is explicitly promised certain benefits in a contract, but is still not a party to the contract itself. But in certain circumstances, a natural or legal person who has not signed the contract may assert the obligations contained in the contract, and that is the purpose of this article. A third party beneficiary acquires a right of action to assert its performance only when he has accepted the service provided for in the contract. However, according to the South African interpretation, the third party beneficiary has only one expense or expectation before the benefit is formally accepted; in other words, he does not have the right to accept, but a simple competence. [3] Acceptance may also be a condition precedent in certain contracts […].