CACI 301 Third-Party Beneficiary

New September 2003; Revised November 2019

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The right of a third-party beneficiary to enforce a contract might not be a question for the jury to decide. Third-party beneficiary status may be determined as a question of law if there is no conflicting extrinsic evidence. (See, e.g., Kalmanovitz v. Bitting (1996) 43 Cal.App.4th 311, 315 [50 Cal.Rptr.2d 332].)

Among the elements that the court must consider in deciding whether to allow a case to go forward is whether the third party would in fact benefit from the contract. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 829–830 [243 Cal.Rptr.3d 299, 434 P.3d 124].) If the court decides that this determination depends on resolution of a question of fact, add this element as a second element that the plaintiff must prove in addition to motivating purpose.

•Contract for Benefit of Third Person. Civil Code section 1559.

•“While it is not necessary that a third party be specifically named, the contracting parties must clearly manifest their intent to benefit the third party. ‘The fact that [a third party] is incidentally named in the contract, or that the contract, if carried out according to its terms, would inure to his benefit, is not sufficient to entitle him to demand its fulfillment. It must appear to have been the intention of the parties to secure to him personally the benefit of its provisions.’ ” (Kalmanovitz, supra, 43 Cal.App.4th at p. 314, original italics, internal citation omitted.)

•“ ‘It is sufficient if the claimant belongs to a class of persons for whose benefit it was made. [Citation.] A third party may qualify as a contract beneficiary where the contracting parties must have intended to benefit that individual, an intent which must appear in the terms of the agreement. [Citation.]’ ” (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 558 [90 Cal.Rptr.2d 469].)

•“Insofar as intent to benefit a third person is important in determining his right to bring an action under a contract, it is sufficient that the promisor must have understood that the promisee had such intent. No specific manifestation by the promisor of an intent to benefit the third person is required.” (Lucas v. Hamm (1961) 56 Cal.2d 583, 591 [15 Cal.Rptr. 821, 364 P.2d 685].)

•“[A] review of this court’s third party beneficiary decisions reveals that our court has carefully examined the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party action to go forward.” (Goonewardene, supra, 6 Cal.5th at pp. 829–830.)

•“Because of the ambiguous and potentially confusing nature of the term ‘intent’, this opinion uses the term ‘motivating purpose’ in its iteration of this element to clarify that the contracting parties must have a motivating purpose to benefit the third party, and not simply knowledge that a benefit to the third party may follow from the contract.” (Goonewardene, supra, 6 Cal.5th at p. 830, internal citation omitted.)

•“[The third] element calls for a judgment regarding the potential effect that permitting third party enforcement would have on the parties’ contracting goals, rather than a determination whether the parties actually anticipated third party enforcement at the time the contract was entered into.” (Goonewardene, supra, 6 Cal.5th at p. 831.)

•“Section 1559 of the Civil Code, which provides for enforcement by a third person of a contract made ‘expressly’ for his benefit, does not preclude this result. The effect of the section is to exclude enforcement by persons who are only incidentally or remotely benefited.” (Lucas, supra, 56 Cal.2d at p. 590.)

•“Whether a third party is an intended beneficiary or merely an incidental beneficiary to the contract involves construction of the parties’ intent, gleaned from reading the contract as a whole in light of the circumstances under which it was entered. [Citation.]” (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1725 [33 Cal.Rptr.2d 291].)

•“[A] third party’s rights under the third party beneficiary doctrine may arise under an oral as well as a written contract … .” (Goonewardene, supra, 6 Cal.5th at p. 833.)

•“In place of former section 133, the Second Restatement inserted section 302: ‘(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either [para. ] (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or [para. ] (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. [para. ] (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.’ ” (Outdoor Servs. v. Pabagold (1986) 185 Cal.App.3d 676, 684 [230 Cal.Rptr. 73].)

•“[T]he burden is upon [plaintiff] to prove that the performance he seeks was actually promised. This is largely a question of interpretation of the written contract.” (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 436 [204 Cal.Rptr. 435, 682 P.2d 1100].)