When do the TPB's rights vest?

When do the TPB's rights vest?

• A. The contract is signed by the TPB
• B. The TPB learns of the contract and relies on it
• C. The TPB is given consideration
• D. The TPB files a lawsuit

Answer: (B)

The important idea here is when a third-party beneficiary actually gains the right to sue the promisor. Those rights vest when the third party learns of the contract and relies on it. That reliance shows the parties’ intent to benefit the third party and the third party’s change in position based on the promise. Merely having the potential to benefit the third party—such as the contract being signed by or involving the third party—or giving the third party something in exchange does not by itself vest those rights. Filing a lawsuit is something that happens after vesting, not the moment of vesting itself. So knowing about the contract and acting on it gives the TPB enforceable rights against the promisor.

The important idea here is when a third-party beneficiary actually gains the right to sue the promisor. Those rights vest when the third party learns of the contract and relies on it. That reliance shows the parties’ intent to benefit the third party and the third party’s change in position based on the promise. Merely having the potential to benefit the third party—such as the contract being signed by or involving the third party—or giving the third party something in exchange does not by itself vest those rights. Filing a lawsuit is something that happens after vesting, not the moment of vesting itself. So knowing about the contract and acting on it gives the TPB enforceable rights against the promisor.