Business Law 150
Homework #9
1.
Joe owes Barry 100,000. Joe enters into an agreement with Citibank to borrow
100,000. Joe intends to use the loan proceeds to repay Barry. Citibank has does not
know that Joe planned to pay Barry with the proceeds. Citibank agrees to make the
loan but Citibank breaches its contract with Joe and does not lend him the money.
Joe defaults on his loan to Barry, so Barry sues Citibank because they breached their
contract with Joe. Barry argues that he is a third party beneficiary of Joe’s and
Citibank’s contract. What is the outcome of Joe’s suit?
Barry is not a third party beneficiary because the contract did not include him.
Meaning that citi bank was not made aware that the the contract would benefit
Barry. If the contract explicitly states that Barry is entitled to the proceeds or
benefits, Barry may have a valid legal claim against Citibank for breaching the
contract. However, that’s not the case. As for joe, if he decides to sue citi bank he
would win because they breached the contract.
2.
Martha sells goods to James for $25,000. Martha assigns her right to receive the
$25,000 to XYZ Finance James refuses to pay XYZ the $25,000. James makes two
arguments for not paying. First James claims that XYZ has no privity of contract and
that XYZ is not a third-party beneficiary of its contract with Martha. Second – James
claims that the goods were worthless. Assume that the goods were worthless. You
are the judge. Who wins and why? Address both arguments that James makes.
The concept of third-party beneficiaries allows for certain individuals or entities not
party to the original contract to have enforceable rights if they are intended to
benefit from the contract. Therefore, , if Martha's assignment of her right to XYZ
Finance was valid and the contract explicitly allows for such actions, then XYZ
Finance could enforce the contract so then XYZ Finance have the right to sue James
for the $25,000and they would win. Seeing that the good are worthless james may
not have to pay the full price or nothing if he can prove that the goods were not up to
the quality they were made out to be.
