Post No.: 0968
Furrywisepuppy says:
Normally, in countries like the UK at least, whom you’ve made an agreement, pact or contract with is the party whom must deliver what they had promised. So if you, for instance, as a customer bought a radio from a retailer and then that radio turned out to be faulty, it’s not down to the manufacturer of that fuzzy radio to make things right for you – it’s the retailer.
The retailer will have an agreement with the manufacturer (or whomever sold or distributed the radios to that retailer) to be supplied with working radios, thus the retailer can bring the issue up with them to make things right – but it’s down to the retailer to make things right for its own customers.
The same applies when online orders fail to get delivered – it’s not down to the courier company to make things right for the customer but down to the online store themselves (unless the customer had made separate and direct arrangements with a courier company to handle delivery). The people you buy something from are the ones you have a contract with. And everyone should claim from the party they had dealt with and thus had a contract with.
It can be the case that the interests of a third-party are affected by a contract between two other parties, such as when there is a chain or series of contracts. For example, party A sells and hands over a car to party B, who now owes party A $900. Party B sells and hands over a motorcycle to party C, who now (coincidentally) owes party B $900. Party B assumes that it’s logical to get party C to promise to pay party A the $900 instead so that everyone should be happy, whilst party B can go away and no longer have to worry about taking the money from party C then passing it onto party A.
Now what if party C doesn’t pay the $900 to party A? Party B has a real bargain and contract with party C (a motorcycle for $900), but party C doesn’t have a real bargain with party A even though party C promised party B to pay $900 to party A. (Party C didn’t get anything from party A – they haven’t even yet met each other in this case.)
Well party C broke their promise to party B so party B can sue party C for $900 in damages. And party B broke their promise to party A so party A can sue party B for $900 in damages. And at the end of all that, everyone should have what they’re owed (minus legal costs and time).
But wouldn’t it have been more efficient if party A could’ve sued party C directly for the $900, and everyone would’ve reached the same result but for one lawsuit instead of two? Well nowadays we can! In this case, party C would be called the ‘promisor’ (the party who agrees to perform a contract that’ll benefit a third-party), party B would be called the ‘promisee’ (the party to whom the promise to benefit a third-party is made) concerning the second contract (getting party C to promise to pay party A $900), and party A would be called a ‘third-party beneficiary’ (the third-party who is not a party to the contract but to whom the contract will deliver a benefit) who can sue party C, the promisor, directly if the necessity arises.
If desired (e.g. if party C has disappeared abroad or has spent the money and is now broke hence the $900 cannot be recovered from them, or if complications emerge like the motorcycle doesn’t work or hasn’t been delivered and that’s why party C is withholding payment, which could mean party A would lose their lawsuit against party C), party A can still ultimately opt to sue party B for the money. Party B can still of course in turn sue party C for the $900 that party C had promised to give to party A on party B’s behalf.
In summation – if a promisor breaches a contract, the promisee may sue the promisor. A third-party beneficiary may also sue the promisor directly, but will retain the right to sue the promisee if that fails.
There can be particular complications however, such as gifts in a third-party context. For example, party B sells and hands over a motorcycle to party C, but instead of party C owing party B money for it, the deal is for party C to pay party A, whom party B wants to make a gift of $900 to. So here is a promise to make a gift – party A won’t be suffering any detrimental reliance on this promise of a gift but knows that party B wants to make a gift of $900 to them, as well as the arrangement that party C should be delivering it.
Here, if party C doesn’t give the $900 to party A, then party B can sue party C to recover and give the $900 to party A. Or even though party A is a third-party beneficiary of a gift, or ‘donee beneficiary’, party A could still directly sue party C for the $900 themselves even though party A had made no bargain and is only expecting a gift – and that’s because party C did make a bargain but failed to perform their side of that bargain.
But if, before party A receives the gift and before they’ve even been told about it, party B tells party C that they’d rather have the money themselves and is therefore withdrawing their gift to party A, for which party C accepts – then even if party A finds out about this later, party A cannot do anything about it this time because to party A, it was just a (withdrawn) promise of a gift (where no detrimental reliance was suffered by party A on it because it was withdrawn so early), and no one has broken a contract that concerns party A’s benefit this time.
So a third-party beneficiary of a gift may sue the promisor if the promisor breaches the contract – but if the promisee alters the contract so that the promisor no longer grants the third-party the benefit then the third-party may not sue the promisee or the promisor. Contracts can really branch out into highly complicated, but often useful, forms!
A third-party beneficiary is someone who’s not a party to the contract but to whom the contract will deliver a benefit. So if a lawyer does a poor job of drafting a will, then the intended (third-party) beneficiaries can sue that lawyer for damages according to the promises of the deceased (damages resulting from the lawyer breaching the representation agreement (to draft the will competently) between the lawyer and the deceased).
A cheque is essentially a contract – you put money into a bank, and in return they keep it safe and owe that money back to you, amongst other things; and with a cheque, you (the promisee) tell your bank (the promisor) to pay or ‘assign’ a portion of that money they owe to you to somebody else (a third-party beneficiary). Or if you owe money to a utility company and therefore have a contract with them, a cheque tells your bank to assign a part of their debt to you to the utility company – hence it’s like the example with the car and motorcycle i.e. it’s a series of contracts. You have a contract with the bank who, if you’re in credit, owes you what you have in credit, but a cheque says to the bank ‘don’t pay it back to me but to somebody else’.
If your cheque bounces because you don’t have enough funds in the account to cover it – this can create a whole host of problems and potential lawsuits. If you’ve paid a cheque to someone who was supposed to do something for you but they’ve done an unsatisfactory job and so you now want to stop that cheque – you can stop it but it can have complicated results.
Contracts can even branch out to fourth or fifth-parties – if somebody has a cheque written to them, then instead of cashing it, they could endorse the cheque (sign on the back) to give it to another party whom the cheque bearer owes money to or wants to send a gift to. The endorsement is essentially another contract in this series of contracts, which tells the bank to not pay the original cheque bearer but pay it to somebody else. Contracts therefore allow whole chains of productive exchanges between parties who may not know each other and may even live in different countries.
It doesn’t really matter who gives or takes the money directly from whom, as long as everybody is sorted and happy at the end of it all. Third-party or even fourth-party arrangements include the clever ‘paired kidney exchange’ system, whereby a recipient doesn’t really care whom they get a kidney from, as long as it’s compatible with their body; and a donor doesn’t really care whom gets one of their kidneys, as long as the person they wish to have a kidney gets one. Here, involving other parties helps to solve the kidney compatibility problem. For instance, donor A is friends with intended recipient A, and donor B is friends with intended recipient B, but the kidneys of these donors are incompatible with their respective friends – but it might work if donor A gives a kidney to recipient B, and donor B gives a kidney to recipient A. Woof!
Some cases can come out either way depending on the court. For example, if a local council had a contract with a water supplier to supply water to fire hydrants around the city, it’d be reasonable to expect that these fire hydrants are for the purpose of extinguishing fires if residential properties caught fire, thus if there was any failure on the water supplier’s part to supply that water to those hydrants if a fire breaks out, a resident of the city could sue that supplier as a third-party beneficiary (for a substantial amount of the monetary damage caused after the fire brigade arrived to find no water pressure there). Or they could alternatively sue the council for failing to supply working fire hydrants in return for paying their taxes. Such a resident could also sue for other incurred costs too (e.g. for temporarily relocating their family).
On another paw, it’s arguably unreasonable to assume that the water supplier and the council would imagine, at the time of making their pact, that the supplier could be made to answer lawsuits from private citizens should problems arise (a claim of surprise). Fur-thermore, forcing the supplier to answer those suits would likely only make obtaining water services more expensive around the country since water companies would probably increase their prices to offset the possibility of being sued by citizens if any hydrant malfunctions and a house burns completely down. This may well be a case where reasonable minds can differ.
What might also add further complications in the above case is if such a resident had home insurance that covers fires, thus making this insurance company another party in the mix. They would have a contract to indemnify the resident (otherwise be potentially sued by the resident), and in turn the insurance company could possibly try to recover their monetary losses from the water supplier or the council if so. And if the water supplier has their own business insurance too that covers these situations… well then it all gets even more complicated and everybody should probably hire a good lawyer!
Woof! Post No.: 0958 delved into enforcing contracts as promised. Of course, everything in these posts depends on your particular local laws – which is another good reason to consult a good lawyer.
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