Incidental Third Party Beneficiary
An incidental third party beneficiary is that party who benefits from a contract between two other parties but in most cases, it is not intended that the party benefit from the contract, therefore, the party lacks the legal rights under the contract (Cheeseman, 2009). An example of this is when a person A hires a person B to build his house, and then person A insists that person B uses person C as the architect because person C is well experienced, then the architect is the incidental beneficiary since neither person A nor B is entering into the contract with a motive to benefit person C. The main aim of person A is to get his house well designed and person B just wants to get paid for building the house. In the instance where there is a breach of contract and person C is not hired as the architect, then person C has no rights to recover anything under the contract.
Among the reason that makes an incidental third-party beneficiary lack the rights to recover the losses that may arise from the breach of contract by the two parties involved in a contract is that there was nonperformance of the contract between the two partners involved in the contract (Miles et al., 2012). This is because of the basic rule of a contract state that there must be a performance by the two parties involved in a contract as specified in the contract unless there is an agreement between the two parties to change the terms of the contract (Cheeseman, 2009).
Another exception of the performance of the contract by the two parties is when the actions of the party who walks away from the terms of the contract are ratified by the non-action or action by the other party. Therefore, when there is nonperformance, it means that no contract activity took place meaning the incidental third party who was to benefit from the start of the contract could not benefit and since he was not a party to the contract he can neither sue or claim any compensation in case of a breach of contract between the two parties (Cheeseman, 2009).
Lack of consensus ad idem or the mutual agreement or mutual assent in the contract with the incidental third party beneficiary makes him lack the main intentions of the parties forming the contract (Cheeseman, 2009). Since the incidental third-party beneficiary only benefits from the contract upon agreement between the two parties, he was not involved in the mutual agreement that he would benefit from the contract. Therefore, in the case of a contract breach, the incidental third party cannot claim any losses since he had no common understanding with the other parties in the formation of the contract (Miles et al., 2012).
The third reason why an incidental third-party beneficiary cannot claim any loss in case there is a breach of contract is because he was not involved in the agreement (Cheeseman, 2009). The third party beneficiary came to be included in the contract upon proposal by a party that he should be involved in some bits of the contract without his knowledge. Therefore, lack of knowledge about the contract disqualifies him from claiming anything from the contract in case those that signed the agreement breach the contract (Miles et al., 2012).
The last reason why the third party beneficiary cannot claim his losses in case of a breach of contract is because he is not frustrated by the breach of contract because the unforeseen event never rendered his contractual obligations impossible since he was not directly linked to the contract (Cheeseman, 2009). Since the third party beneficiary was not in the contract there was no radical change in the contract that affected his principal purpose of entering into the contract.
Cheeseman, H. R. (2009). Contemporary business and online commerce law: Legal, internet, ethical, and global environments. Upper Saddle River, N.J: Pearson Prentice Hall.
Miles, C., & Dowler, W. J. (2012). A guide to business law. Pyrmont, N.S.W: Thomson Reuters (Professional) Australia Limited.