A random beneficiary is a party that can benefit from the performance of the contract, although this is not the intention of either party. For example, if Andrew hires Bethany to renovate his house and insists that she use a certain house painter, Charlie, because he has an excellent reputation, then Charlie is an occasional beneficiary. Neither Andrew nor Bethany enter into the contract with the particular intention of using Charlie. Andrew just wants his house to be properly renovated; Bethany just wants to get paid for the renovation. If the contract is breached by either party in a way that causes Charlie never to be hired for the job, Charlie still has no right to get anything out of the contract. If Andrew promised to buy a Cadillac from Bethany and later reneged on that promise, General Motors would have no reason to recoup the lost sale. Certain standards must be met for the third party beneficiary to have the right to perform a contract or participate in the product. In particular, the benefit to the third party must be intentional and not accidental. There are four ways of determining whether the rights of the third-party beneficiary are forfeited: “(c) a random beneficiary if neither the facts referred to in subparagraph (a) nor those referred to in subparagraph (b) exist”.
Suppose a parent has signed a lease and deposited a deposit for a rented apartment where a child can live while attending university. The student arrives in the city and is denied access to the apartment. To further aggravate the injury, the apartment was rented to someone else. The student and parent have the right to claim compensation for the landlord`s failure to comply with the terms of the contract. Can the owner of the café claim compensation from the large company for the loss of business resulting from a breach of contract with another party? As a third-party beneficiary, the owner of the café may or may not have a case. The fundamental problem with third-party beneficiaries is: can a person who is not a party to a contract take legal action to enforce its terms? According to the Reformatement (First) of Contracts § 133 (1932), there are three categories of third party beneficiaries: beneficiaries and beneficiary creditors may assert their contractual rights, but to do so both must be intended beneficiaries. The designated beneficiary of a life insurance policy (the person who is to receive the death benefit upon the death of the insured) is a classic example of a beneficiary provided under the life insurance contract. Because contract law can be complex, it may be in your best interest to consult an expert in the field so that you fully understand the terms you agree to before signing a contract.
The parties may assign (transfer) their rights under a contract, although the right to assign may be limited by the contract itself. So, if you are required to provide me with Product X at price Y and there is no limitation on assignment in the Contract, I can assign that right to another company and that company will put itself in my place and can enforce the Contract if necessary. As can be seen below, this is not the same as being a third party beneficiary of a contract. 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 some contracts. Under Scottish law, acceptance is not necessary to obtain a right of action, but is necessary to be liable. However, before acceptance, the ius quaesitum tertio is poor, so the acceptance of an advantage does not create a right, but consolidates that right. In both cases, the contracting parties may derogate from the contract or withdraw from the contract until acceptance or confidence. [4] There are two types of third-party beneficiaries: a “deliberate or intentional” beneficiary and an “accidental” beneficiary.
An example of the third scenario would be if Sandy paid Joan to mow Jane`s lawn. When Jane hears about the deal, she calls her usual landscaping company and tells them she won`t need her services for the next two weeks. Since Jane has relied on Joan`s promise to Sandy to her detriment, she is used as a beneficiary. Sandy can`t let Joan out of the deal without Jane`s consent. A third-party beneficiary clause determines whether a non-contractual party has the right to enforce the terms of the contract. Sometimes beneficiaries are named, and sometimes they receive rewards by chance. The distinction that creates a intended recipient is that one party – the “promised” – enters into an agreement to provide a product or service to a second party – the “promisor” – in exchange for the donor`s consent to provide a product or service to the third-party beneficiary named in the contract. The promisor must intend to benefit the third party (although this requirement has an unusual meaning under the law). Although it is believed that the provocateur intends to promote the interests of the third party in this way, if Andrew enters into a contract with Bethany for the delivery of a thousand killer bees to the home of Andrew`s worst enemy, Charlie, then Charlie is still considered the intended beneficiary of this contract. .