Which statement is true about third-party beneficiary contracts?

Which statement is true about third-party beneficiary contracts?

• A. The intended beneficiary may sue on the contract unless enforcement would materially increase the promisor's duty or risk; incidental beneficiaries cannot sue.
• B. Only the promisee can sue the promisor.
• C. The promisor can never raise defenses against the beneficiary.
• D. A third-party beneficiary can sue regardless of the contract's purpose.

Answer: (A)

In third-party beneficiary contracts, the ability to sue on the contract rests with whether the third party is an intended beneficiary or merely an incidental one. An intended beneficiary has the right to sue the promisor directly to enforce the promise, because the contract was made for their benefit. An incidental beneficiary, who gains only as a byproduct, has no standing to sue the promisor. The statement in question captures that distinction, correctly saying the intended beneficiary may sue on the contract, while incidental beneficiaries cannot. It also notes that enforcement would only be limited if applying the contract would add duties or risks to the promisor beyond what the contract contemplates, which aligns with how courts think about enforceability limitations in the third-party context. The other options conflict with the core idea: a promisee is not the sole possessor of enforceable rights; the promisor can raise defenses against a third party just as against the promisee; and the third party’s right to sue depends on being an intended beneficiary, not merely a general ability to sue regardless of the contract’s purpose.

In third-party beneficiary contracts, the ability to sue on the contract rests with whether the third party is an intended beneficiary or merely an incidental one. An intended beneficiary has the right to sue the promisor directly to enforce the promise, because the contract was made for their benefit. An incidental beneficiary, who gains only as a byproduct, has no standing to sue the promisor.

The statement in question captures that distinction, correctly saying the intended beneficiary may sue on the contract, while incidental beneficiaries cannot. It also notes that enforcement would only be limited if applying the contract would add duties or risks to the promisor beyond what the contract contemplates, which aligns with how courts think about enforceability limitations in the third-party context.

The other options conflict with the core idea: a promisee is not the sole possessor of enforceable rights; the promisor can raise defenses against a third party just as against the promisee; and the third party’s right to sue depends on being an intended beneficiary, not merely a general ability to sue regardless of the contract’s purpose.