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Legal Memorandum: Third-party Beneficiaries of a Contract

Issue: When is a party a third-party beneficiary of a contract under the laws of the Virgin Islands?

Area of Law: Business Organizations & Contracts
Keywords: Third-party beneficiaries; Contract
Jurisdiction: Federal, Virgin Islands
Cited Cases: 70 A.D.2d 145; 583 A.2d 1378; 438 So. 2d 102; 994 F. Supp. 634; 115 So. 94; 420 N.Y.S.2d 26; 584 A.2d 531
Cited Statutes: Restatement (Second) of Contracts § 302
Date: 05/01/2006

  The leading case in the Virgin Islands on the issue of third-party beneficiaries is Kmart Corp. v. Balfour Beatty, Inc., 994 F. Supp. 634, 38 V.I. 251 (D.V.I. 1998).  See also E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187 (3d Cir. 2001).

“[A] third-party beneficiary’s right to enforce a contract cannot ‘rise higher than the rights of the contracting parties through whom he claims.'”  Md. Cas. Co. v. Dep’t of Gen. Servs., 489 So. 2d 54 (Fla. Dist. Ct. App. 1986) (quoting Crabtree v. Aetna Cas. & Sur. Co., 438 So. 2d 102, 105 (Fla. Dist. Ct. App. 1983)).  Third-party beneficiaries must take their contracts as they find them—the good with the bad.  The rights of a third-party beneficiary are inflicted “with all of the infirmities of the agreement as between the parties thereto.”  Meyerson v. New Idea Hosiery Co., 115 So. 94 (1927).  See 13 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 37:23 (2000).  Thus, “to the same extent that third parties can take advantage of beneficial and favorable terms of the contract, they are also bound by any inadequacies of the contract.”  Id. § 37:23 at 149-50.

Under Restatement (Second) of Contracts § 302,[1] an intended third-party beneficiary must receive a direct benefit from the performance of the agreement. 

In Rhone Poulenc, the Third Circuit Court of […]

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