Reference no: EM133812180

Question

Vesting of Rights: Generally speaking, the contracting parties can rescind the contract until the rights of the third party vest. Vesting occurs the moment the third party reasonably relies on the contract. o Let's continue the above example with Mark and Barry and Jesus. Imagine Mark and Barry form the contract and then Mark leaves his house to go tell Jesus the good news. But on the way, Barry calls Mark and wants out. Mark agrees. The parties have rescinded the contract. Because Jesus does not even know the contract exists, he has not relied on it and cannot sue to enforce it. But imagine if Mark and Barry form the contract in front of Jesus, and then Jesus calls his regular lawn caretaker and cancels his usual appointment (reasonable reliance). In this case, Jesus's rights have vested and he can sue Barry to enforce the contract. • Legal Parlance: You may see the following names thrown around by your professor: o Donee-Beneficiary: This is the type of third-party beneficiary we have been discussing. Jesus is the donee-beneficiary. o Donor-Promisor: This is the original contracting party who owes the third-party some benefit under the contract. Barry is the donor-promisor, because he is obligated under his contract with Mark to mow Jesus's lawn. If he fails to do so, Jesus can sue him to enforce the contract. Donor-Promisee: This is the other original contracting party. In example, Mark is the donor-promisee. Jesus cannot enforce contract.