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Legal Memorandum: Third-party Beneficiary of a Contract in VI

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

Area of Law: Business Organizations & Contracts
Keywords: Contract; Third-party beneficiary
Jurisdiction: Virgin Islands
Cited Cases: 489 So. 2d 54; 70 A.D.2d 145; 534 A.2d 257; 583 A.2d 1378; 438 So. 2d 102; 994 F. Supp. 634; 115 So. 94; 420 N.Y.S.2d 26; 269 F.3d 187; 584 A.2d 531; 346 So. 2d 1133
Cited Statutes: Restatement (Second) of Contracts § 302; Restatement (Second) of Contracts § 311;
Date: 11/01/2004

 

The leading case in the Virgin Islands on the question of third-party beneficiaries is Kmart Corp. v. Balfour Beatty, Inc., 994 F. Supp. 634, 38 V.I. 251 (D.V.I. 1998). 

The general rule on the rights of a third-party beneficiary is that “a third-party beneficiary’s right to enforce a contract cannot ‘rise higher than the rights of the contracting parties through whom he claims.'”  Maryland Cas. Co. v. Dep’t of Gen. Servs., 489 So. 2d 54 (Fla. 1st  Dist. Ct. App. 1986) (quoting Crabtree v. Aetna Cas. & Sur. Co., 438 So. 2d 102, 105 (Fla. Dist. Ct. App. 1983)).  This means that 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 contract.  In E.I. DuPont de Nemours & Co. v. Rhone […]

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