Also known as: intended third party beneficiary · intended third-party beneficiaries · intended beneficiary · third-party beneficiary
Written by attorneys · grounded in primary & secondary sources — see below
A person who is not a party to a contract but who is entitled to enforce performance of a promise because recognition of that right is appropriate to effectuate the intention of the promisor and promisee. The beneficiary qualifies when the performance will satisfy an obligation of the promisee to pay money or when the circumstances indicate that the promisee intends to give the beneficiary the benefit of the performance.
Andrew purchased a key-person life insurance policy from Black Assurance naming Federal Surety as sole beneficiary and directing proceeds to pay Andrew's outstanding loan. After Andrew died, Federal Surety demanded payment from Black Assurance. Federal Surety may enforce the policy directly because the arrangement satisfies an obligation of the promisee to pay money to the beneficiary.
Island Manufacturing contracted with Insight Consulting to construct a specialized facility, promising that the completed building would be transferred to Integrity Partners upon payment. When Insight Consulting refused to perform, Integrity Partners sued for specific performance. Integrity Partners may maintain the suit because specific performance is an appropriate remedy for a duty owed to an intended beneficiary.
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Inertia Dynamics agreed with Idina Iverson to fund a scholarship program for future employees of a new division. At the time of contracting, no specific employees had been hired. When Israel Irving later joined the division and qualified, he could enforce the promise even though he was not identified when the contract was made.
A testator retained an attorney to draft a will leaving property to Ivy Ibarra. The attorney negligently omitted language that would have carried out the testator's intent. Ibarra may recover as an intended beneficiary of the attorney-client contract because the main purpose was to transfer the estate to the named beneficiary.
A manufacturer sold an automobile to a dealer with an express warranty. The dealer resold the car to Isabelle Inman. When the car proved defective, Inman could enforce the warranty against the manufacturer because the warranty was intended to benefit the ultimate consumer.
An employer required employees to sign an arbitration agreement as a condition of employment. The agreement contained provisions limiting remedies for statutory claims. Employees could challenge the agreement's enforceability because they were intended beneficiaries of the employment contract containing the arbitration clause.
A court examines whether recognition of a right to performance in the third party is appropriate to effectuate the intention of the contracting parties and whether the performance will satisfy an obligation of the promisee to pay money or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
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Yes. Where specific performance is otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a suit for specific enforcement of a duty owed to an intended beneficiary.
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No. It is not essential to the creation of a right in an intended beneficiary that the beneficiary be identified when a contract containing the promise is made.
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An intended beneficiary may obtain judgment against either the promisee or the promisor or both, subject to satisfaction of only one duty to the extent of any recovery.
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…of theories. Some courts hold that the warranty runs with the article like a covenant running with land; others recognize a third-party beneficiary thesis; still others rest their decision on the ground that public policy requires recognition of a warranty made directly to the consumer. Welter v. Bowman Dairy Co. , 318 Ill. App.…