USA

CHAPTER 14 - CONTRACT BENEFICIARIES

302 Intended and Incidental Beneficiaries

1. Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either

• the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
• the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

An incidental beneficiary is a beneficiary who is not an intended beneficiary.

303 Conditional Promises; Promises Under Seal

The statements in this Chapter are applicable to both conditional and unconditional promises and to sealed and unsealed promises.

304 Creation of Duty to Beneficiary

A promise in a contract creates a duty in the promisor to any intended beneficiary to perform the promise, and the intended beneficiary may enforce the duty.

305 Overlapping Duties to Beneficiary and Promisee

1. A promise in a contract creates a duty in the promisor to the promisee to perform the promise even though he also has a similar duty to an intended beneficiary.

2. Whole or partial satisfaction of the promisor's duty to the beneficiary satisfies to that extent the promisor's duty to the promisee.

306 Disclaimer by a Beneficiary

A beneficiary who has not previously assented to the promise for his benefit may in a reasonable time after learning of its existence and terms render any duty to himself inoperative from the beginning by disclaimer.

307 Remedy of Specific Performance

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.

308 Identification of Beneficiaries

It is not essential to the creation of a right in an intended beneficiary that he be identified when a contract containing the promise is made.

309 Defenses Against the Beneficiary

1. A promise creates no duty to a beneficiary unless a contract is formed between the promisor and the promisee; and if a contract is voidable or unenforceable at the time of its formation the right of any beneficiary is subject to the infirmity.

2. If a contract ceases to be binding in whole or in part because of impracticability, public policy, non-occurrence of a condition, or present or prospective failure of performance, the right of any beneficiary is to that extent discharged or modified.

3. Except as stated in Subsections (1) and (2) and in § 311 or as provided by the contract, the right of any beneficiary against the promisor is not subject to the promisor's claims or defenses against the promisee or to the promisee's claims or defenses against the beneficiary.

4. A beneficiary's right against the promisor is subject to any claim or defense arising from his own conduct or agreement.

310 Remedies of the Beneficiary of a Promise to Pay the Promisee's Debt; Reimbursement of Promisee

1. Where an intended beneficiary has an enforceable claim against the promisee, he can obtain a judgment or judgments against either the promisee or the promisor or both based on their respective duties to him. Satisfaction in whole or in part of either of these duties, or of a judgment thereon, satisfies to that extent the other duty or judgment, subject to the promisee's right of subrogation.

2. To the extent that the claim of an intended beneficiary is satisfied from assets of the promisee, the promisee has a right of reimbursement from the promisor, which may be enforced directly and also, if the beneficiary's claim is fully satisfied, by subrogation to the claim of the beneficiary against the promisor, and to any judgment thereon and to any security therefor.

311 Variation of a Duty to a Beneficiary

1. Discharge or modification of a duty to an intended beneficiary by conduct of the promisee or by a subsequent agreement between promisor and promisee is ineffective if a term of the promise creating the duty so provides.

2. In the absence of such a term, the promisor and promisee retain power to discharge or modify the duty by subsequent agreement.

3. Such a power terminates when the beneficiary, before he receives notification of the discharge or modification, materially changes his position in justifiable reliance on the promise or brings suit on it or manifests assent to it at the request of the promisor or promisee.

4. If the promisee receives consideration for an attempted discharge or modification of the promisor's duty which is ineffective against the beneficiary, the beneficiary can assert a right to the consideration so received. The promisor's duty is discharged to the extent of the amount received by the beneficiary.

312 Mistake as to Duty to Beneficiary

The effect of an erroneous belief of the promisor or promisee as to the existence or extent of a duty owed to an intended beneficiary is determined by the rules making contracts voidable for mistake.

313 Government Contracts

1. The rules stated in this Chapter apply to contracts with a government or governmental agency except to the extent that application would contravene the policy of the law authorizing the contract or prescribing remedies for its breach.

2. In particular, a promisor who contracts with a government or governmental agency to do an act for or render a service to the public is not subject to contractual liability to a member of the public for consequential damages resulting from performance or failure to perform unless

• the terms of the promise provide for such liability; or
• the promisee is subject to liability to the member of the public for the damages and a direct action against the promisor is consistent with the terms of the contract and with the policy of the law authorizing the contract and prescribing remedies for its breach.

314 Suretyship Defenses

An intended beneficiary who has an enforceable claim against the promisee is affected by the incidents of the suretyship of the promisee from the time he has knowledge of it.

315 Effect of a Promise of Incidental Benefit

An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee.