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

Issue: Under the law of the Virgin Islands, who is a third-party beneficiary of a contract?

Area of Law: Business Organizations & Contracts
Keywords: Contract; Third-party beneficiary
Jurisdiction: Federal, Virgin Islands
Cited Cases: 70 A.D.2d 145; 485 N.E.2d 208; 270 P.2d 1086; 534 A.2d 257; 583 A.2d 1378
Cited Statutes: Restatement (Second) of Contracts § 311; Restatement (Second) of Contracts § 302
Date: 05/01/2004

Under Restatement § 302,*FN1 a third-party beneficiary is someone who receives a direct benefit from the performance of a contract. 

In DuPont deNemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001), the Third Circuit stated the test for determining third-party beneficiary status under Delaware law as follows:

[T]o qualify as a third party beneficiary of a contract, (a) the contracting parties must have intended that the third party beneficiary benefit from the contract, (b) the benefit must have been intended as a gift or in satisfaction of a pre- existing obligation to that person, and (c) the intent to benefit the third party must be a material part of the parties’ purpose in entering into the contract.

Dupont, 269 F.3d at 196 (emphasis added) (citing Guardian Constr. Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378, 1386 (Del. Super. Ct. 1990)).  Delaware courts, like Virgin Islands courts, cite to and rely on the Restatement (Second) of Contracts in deciding third-party status.  See, e.g., Guardian Constr. Co., 583 A.2d at 1387 (citing Restatement (Second) of Contracts § 311 to determine which types of third parties have legal rights to enforce a contract); Madison Realty Partners 7, LLC v. Ag ISA, LLC, No. CIV. A. 18094, 2001 WL 406268 at *5 (Del. Ch. Apr. 7, 2001) (relying on Restatement (Second) of Contracts § 302 in determining whether third-party beneficiary status exists); Delmar News, […]