Breach of Contract Rules
People can be unreliable; hence the existence of contracts. Contract law exists so that the parties who enter into agreement with one another can count on the performances promised, and do not find themselves in a lurch because of a defaulting promisor. Modern business would be virtually impossible without the legally binding force of contracts on which people can rely. Consider a butcher who contracts in advance to take delivery of and pay for a specific quantity of meat to satisfy the demand of consumers for Fourth of July barbecues. If the supplier does not make good on the delivery, the butcher cannot conduct his business.
While the butcher and supplier above have clearly recognizable obligations and benefits from the agreement, parties who have no part of the formation of a contract can later arise to demand performance. Third parties to contracts can play a role in agreements to which they never agreed at the time of formation, never knew existed at the time of formation, and who were not even born at the time the contract was formed. The most common type of entity who is a non-party to a contract but who retains the right to enforce it is a known as a third party beneficiary.
Third Party Beneficiary
A party can contract with another for the benefit for a third party. For example, a consumer can contract with a painter to paint his father’s house. If payment is made, but performance in never rendered by the painter, the father of the consumer can enforce the contract if his son the consumer becomes unable to do the same, through circumstances such as incapacity or death.
The third party stands in the shoes of the one executing the contract, and enjoys the same rights to enforce. To qualify as a third party beneficiary and therefore be able to enforce a contract, there must be some relationship between the third party and the promisor (the party who pays for services who is then owed the services) such as father and son. Also, the beneficiary must be an intended beneficiary, and not merely an incidental beneficiary.
Extend the above example to involve a supplier of paint who is specified in the contract only for purposes of price, payment, and quality of product. If the painter fails to perform, the paint distributor, who is deriving benefit from the contract in the form of profits from the sale of paint, cannot enforce the contract despite his obvious benefit. This is because he is merely an incidental beneficiary and not an intended beneficiary. In other words the father is an intended beneficiary since his benefit constitutes the spirit of the contract, whereas the benefit of the paint distributor is not a goal of the contract.
Get Legal Assistance
Contracts can be difficult to enforce on one’s own. Third party rights to contractual obligations can be even more so. If you or a loved is involved in a dispute involving non-parties to a contract, ensure that the intentions of the ones who initially entered into agreement are enforced. Contact the office of Neustrom & Associates at (785) 825-1505 for a free and confidential initial consultation.