Third-Party Beneficiaries And Contractual Networks

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Faculty Scholarship

Third-Party Beneficiaries and Contractual Networks

Authors

Alan Schwartz, Yale Law School Robert E. Scott, Columbia Law SchoolFollow

Document Type

Article

Publication Date

2015

Abstract

An increasing trend of economic agents is to form productive associations such as networks, platforms, and other hybrids. Subsets of these agents contract with each other to further their network project and these contracts can create benefits for, or impose costs on, agents who are not contract parties. Contract law regulates third party claims against contract parties with the third-party beneficiary doctrine, which directs courts to ask whether the contracting parties "intended" to benefit a particular third party. We show here what courts do with third party claims when network members fail to perform for third parties and what the law's best responses to such breaches should be. Among our principal results are that courts honor third party claims when contract members likely can price them and when third parties incur substantial reliance losses, but protect third- party interests less frequently than they should and refuse relief when contract members can identify the potential beneficiary class but not every agent who is likely to be in it.

Disciplines

Business and Corporate Communications | Contracts | Law

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Recommended Citation

Alan Schwartz & Robert E. Scott, Third-Party Beneficiaries and Contractual Networks, 7 J. Legal Analysis 325 (2015). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/336

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