FYLSX FYLSX - Baby Bar Third Party Contract Rights 1 — Questions and Answers
Question 1: A third-party beneficiary who has 'vested' rights under a contract may enforce the contract against the promisor. When do a donee beneficiary's rights vest under the majority rule?
- When the beneficiary learns of the contract and assents to it (Correct answer)
- At the moment the contract between the promisor and promisee is formed
- Only after the promisor begins performance
- When the promisee notifies the promisor of the beneficiary's identity
Correct answer: When the beneficiary learns of the contract and assents to it
Under the majority rule, a donee beneficiary's rights vest when the beneficiary learns of the contract and manifests assent to it.
Question 2: Paula contracts with Dave for Dave to mow her elderly mother's lawn all summer. Dave fails to perform. Who has standing to sue Dave?
- Only Paula, as she is the promisee
- Only Paula's mother, as she is the intended beneficiary
- Both Paula and Paula's mother (Correct answer)
- Neither, because the contract lacks consideration
Correct answer: Both Paula and Paula's mother
Both the promisee (Paula) and the intended third-party beneficiary (Paula's mother) have standing to enforce the contract against the promisor.
Question 3: Which type of third-party beneficiary acquires NO enforceable rights under a contract?
- Creditor beneficiary
- Donee beneficiary
- Incidental beneficiary (Correct answer)
- Intended beneficiary
Correct answer: Incidental beneficiary
An incidental beneficiary — one whose benefit was not a primary purpose of the contract — acquires no enforceable rights.
Question 4: A city contracts with a construction company to repair a road. A nearby shop owner benefits from the improved road traffic. The shop owner is best classified as:
- A creditor beneficiary with vested rights
- An intended donee beneficiary
- An incidental beneficiary (Correct answer)
- A third-party promisee
Correct answer: An incidental beneficiary
Because the city and contractor did not intend to benefit the shop owner, the shop owner is an incidental beneficiary with no enforcement rights.
Question 5: After a third-party beneficiary's rights vest, can the original promisor and promisee modify the contract to eliminate the benefit?
- Yes, always, because they are the contracting parties
- No, once rights vest the beneficiary's consent is required for modification that impairs those rights (Correct answer)
- Yes, but only if they give the beneficiary written notice
- No modification is ever permitted after formation
Correct answer: No, once rights vest the beneficiary's consent is required for modification that impairs those rights
Once a third-party beneficiary's rights have vested, the promisor and promisee cannot modify or rescind the contract to defeat those rights without the beneficiary's consent.
Question 6: A creditor beneficiary differs from a donee beneficiary primarily in that a creditor beneficiary:
- Has no rights against the promisor
- Is owed a pre-existing obligation by the promisee that the contract is meant to satisfy (Correct answer)
- Must provide consideration to the promisor
- Is always an incidental beneficiary
Correct answer: Is owed a pre-existing obligation by the promisee that the contract is meant to satisfy
A creditor beneficiary is one to whom the promisee owes a pre-existing debt or duty, and the contract is formed to discharge that obligation.
FYLSX FYLSX - Baby Bar Third Party Contract Rights 1
A third-party beneficiary who has 'vested' rights under a contract may enforce the contract against the promisor.
When do a donee beneficiary's rights vest under the majority rule?