When is a contract created for the benefit of a third party enforceable by that third party?

When is a contract created for the benefit of a third party enforceable by that third party?

• A. If the contract is in writing.
• B. If the parties intended to confer a benefit on the third party or the third party is an intended beneficiary; incidental beneficiaries have no rights.
• C. Only if the third party is an incidental beneficiary.
• D. Only if the third party signs the contract.

Answer: (B)

A contract can be enforced by a third party only if the contract was made for the benefit of that third party and the third party is an intended beneficiary, not merely someone who might benefit as a side effect. The crucial distinction is between intended beneficiaries and incidental beneficiaries. If the promisor and promisee clearly intend to confer a specific benefit on the third party (for example, a promise to pay the third party or to confer a benefit directly to them), the third party can sue to enforce that promise. On the other hand, if the third party is incidental—someone who will benefit only indirectly or as a result of the contract’s general effect—they have no enforceable rights. So, the correct view is that enforceability hinges on intent to confer a benefit on the third party or on the third party being an intended beneficiary. Incidental beneficiaries have no rights. This is why having a contract in writing isn’t required for third-party enforceability, and the third party does not need to sign the contract to sue if they are the intended beneficiary.

A contract can be enforced by a third party only if the contract was made for the benefit of that third party and the third party is an intended beneficiary, not merely someone who might benefit as a side effect. The crucial distinction is between intended beneficiaries and incidental beneficiaries. If the promisor and promisee clearly intend to confer a specific benefit on the third party (for example, a promise to pay the third party or to confer a benefit directly to them), the third party can sue to enforce that promise. On the other hand, if the third party is incidental—someone who will benefit only indirectly or as a result of the contract’s general effect—they have no enforceable rights.

So, the correct view is that enforceability hinges on intent to confer a benefit on the third party or on the third party being an intended beneficiary. Incidental beneficiaries have no rights. This is why having a contract in writing isn’t required for third-party enforceability, and the third party does not need to sign the contract to sue if they are the intended beneficiary.