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Welcome to my Law blog specifically intended as an aid to law students. I will post comments and white papers, from time to time, and I am happy to carry on conversations with students who are in need of help in law school.


I am most conservative and appropriate in my approach so if you comment and/or have questions to ask, please do so with an equal degree of appropriateness.



I am a Professor of Law at Concord Law School, an Internet Law School located in Los Angeles, though I live, teach and otherwise work out of Lakewood, Colorado, resting up against the foothills just west of Denver.

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Friday, May 14, 2010

1 - Third Party Beneficiaries (Introduction: The Template)

1 - Third Party Beneficiaries (Introduction: The Template)

PLEASE NOTE THAT THE FOLLOWING IS TAKEN FROM SOME OF MY CLASS NOTES, SOME OF WHICH IS MY OWN PERSONAL WORK AND SOME OF WHICH BELONGS TO CONCORD LAW SCHOOL.  IT IS POSTED TO HELP MY IL STUDENTS IN PARTICULAR.  IT CANNOT BE DISSEMINATED WITHOUT EXPRESS, WRITTEN PERMISSION.

We have finished Performance and now we move into a new area for other Contract issues. This one is Third Party Beneficiary Contracts. I know this is confusing for students, but I think I can de-mystify it for you. Here’s the template.

Third Party Beneficiary Defined: A party (other than the original promisor and promisee) expressly contemplated as receiving performance under the contract or where performance actually runs directly to that third party.

The key: Timing--the existence of a third party must be expressly contemplated by the promisor and promisee at the time contract is entered into.

The precise name of the 3PB need not be identified at the time of the contract...so long as the parties expressly intend that the benefit of a promise runs directly to a 3rd party who will be identifiable when performance is due.

Step One – Labeling:

I. Intended v. incidental
     A. Intended Beneficiaries have rights in the TBP Contract. An intended beneficiary is one expressly intended to benefit from the contract by both parties.
     B. Incidental Beneficiaries do NOT have rights in the TPB Contract. An incidental beneficiary is one not expressly intended to benefit from the contract by both parties.
II. Creditor v. Donee
     A. An intended creditor beneficiary can sue both promisor (insurance company) and promise (me) if the promise is not fulfilled.
     B. The donee beneficiary only has rights against the promisor.

Step Two – Vesting

I. The Importance of Vesting: It means that the promisor and promisee cannot mutually agree to modify or rescind the contract in a manner that will eliminate or diminish the 3PB’s rights.
II. How do TPB Rights Vest?:
When the TPB:
     1. Learns of and assents to the benefit in manner requested by the promisor and promisee or
     2. Detrimentally relies on the promise, or
     3. Brings suit to enforce his/her rights.

Professor Doug Holden
© 2010. Douglas S. Holden. All rights reserved.

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