In a contract with an intended third-party beneficiary, who is liable if the promisor breaches?

In a contract with an intended third-party beneficiary, who is liable if the promisor breaches?

• A. Promisor is liable to intended TPB
• B. Promisor is liable to promisee
• C. Third party beneficiary has no recourse
• D. TPB can sue promisee directly

Answer: (A)

When a contract is made for the benefit of an intended third party, that promisor owes a duty directly to the third party. If the promisor breaches, the liability is to the intended beneficiary, not to the promisee. The third-party beneficiary may sue the promisor directly to recover for the breach, since the promisor’s promise was intended to benefit them. The promisee isn’t typically liable to the beneficiary for the breach, and the beneficiary isn’t suing the promisee in this scenario.

When a contract is made for the benefit of an intended third party, that promisor owes a duty directly to the third party. If the promisor breaches, the liability is to the intended beneficiary, not to the promisee. The third-party beneficiary may sue the promisor directly to recover for the breach, since the promisor’s promise was intended to benefit them. The promisee isn’t typically liable to the beneficiary for the breach, and the beneficiary isn’t suing the promisee in this scenario.