The aim of this paper is to analyze a case study on a third-party contract. The paper’s analytical focus will be on an intended beneficiary and their legal rights.
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Under contract law, a third-party beneficiary is a person who benefits when two parties to a contract fulfill their obligations (Stone & Devenney, 2017). Within the framework of the classical theory of contract, there is the doctrine of privity, which precludes third parties to a contract from suing of being sued (Stone & Devenney, 2017). However, not all courts affirm the doctrine; therefore, its status has been challenged multiple times (Stone & Devenney, 2017).
It has to do with the fact that the application of the principle of autonomy presupposes that two parties to a contract are free to make any binding promises. In the case of a third-party beneficiary, a binding promise is to confer certain benefits upon an individual who is not a party to the contract (Tepper, 2014).
Having established who can be considered a third-party beneficiary to a contract, it is necessary to determine who is entitled to benefit from a binding agreement between two parties (Tepper, 2014). The contract law recognizes two types of third party beneficiaries: intended and incidental. Unlike individuals in the latter category, intended beneficiaries have a right to enforce a contract. It is clear that in the case under discussion, a third-party beneficiary is Rosita. However, it has to be established whether the woman can be recognized as an intended beneficiary. To this end, it is necessary to consider whether Harry and Oscar clearly intended her to benefit from the contract.
It has to be borne in mind that for the purposes of enforcing the contract it is sufficient to prove that Harry who was a promisee in the contract had an intention to offer Rosita a gift. It means that in order to have a legal claim to the money, the woman would have to show that when negotiating the agreement, the two parties had an intent to make a legal obligation to her. Rosita’s status as a third-party beneficiary closely resembles that of Sarah Schauer who sued a jewelry company for breach of contract in Schauer v. Mandarin Gems of California, Inc.
The plaintiff argued that the defendant falsely represented the actual worth of a diamond, which she had obtained as an engagement gift from her fiancé. A court held that the “plaintiff has standing as a third party beneficiary of the sales contract” (Schauer v. Mandarin, 2005, p. 2).
It is clear that Oscar’s Fine Diamonds (the promisor) must have understood that Rosita’s fiancé purchased the ring with an intention to present it to the beneficiary. Therefore, if the woman becomes a pleading party, she will be able to enforce the contract in court. Taking into consideration the fact that the purchase of the engagement ring in the jewelry establishment cannot be construed other than as a contract that is expressly beneficial for a third party, Rosita can sue Oscar’s Fine Diamonds for breach of contract. Harry clearly intended to make the contract inure to the benefit of the woman; therefore, his cooperation would not be needed if she wanted to obtain a refund from the jewelry establishment.
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The paper has analyzed the case study on the third-party contract. It has been argued that Rosita is a third-party beneficiary who has a right to sue Oscar for breach of contract.
Schauer v. Mandarin, 4 D., 3 D. U.S. (Cal. 2005).
Stone, R., & Devenney, J. (2017). The modern law of contract. New York, NY: Taylor & Francis.
Tepper, P. (2014). The law of contracts and the uniform commercial code. Boston, MA: Cengage Learning.