What is the test for determining whether a third party is an intended beneficiary of a contract?

California, United States of America


The following excerpt is from Newport Harbor Offices & Marina, LLC v. Evangelism, G050243 (Cal. App. 2016):

agreement made by others are classified as either intended or incidental beneficiaries." (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1022.) Intended beneficiaries may demand enforcement of the contract; incidental beneficiaries may not. (Ibid.) A third party is an intended beneficiary if the contract expresses an intent to benefit the third party. (Ibid.) It is not enough that the third party would benefit incidentally from contract performance. (Ibid.) "'The contracting parties must have intended to confer a benefit on the third party.'" (Ibid.) The third person need not be named or identified in the contract to qualify as an intended beneficiary. (Id. at p. 1023.) It is not necessary that both contracting parties intended the third party to benefit from the contract: "'[I]t is sufficient that the promisor must have understood that the promisee had such intent.'" (Ibid.) The determination whether a third party is an intended beneficiary of a contract ultimately turns on the manifestation of intent to confer a benefit. (Ibid.) "'Ascertaining this intent is a question of ordinary contract interpretation.'" (Ibid.)

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