Third-Party Beneficiaries

There are two main differences between creditor beneficiaries and donee beneficiaries. The first is based on the reason the third-party beneficiary contract was created, and the second distinction occurs when an intended beneficiary can enforce his or her rights under a contract. This activity will discuss the differences among donee beneficiaries, creditor beneficiaries, and incidental beneficiaries.

Another way third parties may obtain rights or duties to a contract is through being a beneficiary to the contract. A third-party beneficiary is created when two parties enter into a contract with the purpose of benefiting a third party, called the intended beneficiary.

Read the case and answer the questions that follow.

Brenda and Billy will have been married for 10 years this February. Brenda's father wishes to give Brenda $1,000 as an anniversary present. Brenda's father enters into a contract to sell a flat screen television set for $1,000 to a purchaser, who promises to pay Brenda the $1,000 directly. Thus, Brenda is an intended beneficiary of a contract.

Suppose instead of the situation above, a situation arises where Brenda becomes a creditor beneficiary. Whom could Brenda take legal action against if she were a creditor beneficiary?