Question

In: Finance

A contract formed by two parties with the intent to benefit another party is called: A)...

A contract formed by two parties with the intent to benefit another party is called:

A) A three-way contract.

B) A three party contract.

C) A third party beneficiary contract.

D) Invalid.

Solutions

Expert Solution

Hello

THE CORRECT ANSWER IS OPTION C : A Third Party Beneficairy Contract

(i) A three-way contract is a contract in which three parties to the contract are liable to each other in some or other way. For e.g. A contract of guarantee where the parties involved are Principal Debtor, Guarantor and Creditor

(ii) A three party contract is a contract between three parties and beneficiary can be anyone of those. For e.g. A contract between three partners of a firm.

(iii) A third party beneficiary contract is a contract between two or more parties to benefit some other party(who is not a party to the contract). The beneficiary has the right to sue the parties to the contract and this right is called ius quaesitum tertio. Example: When A owes some debt to B and A agrees to pay the amount to C, as B owed the amount to C. C is not a party to contract but the beneficiary.

I hope this solves your doubt.

Do give a thumbs up if you find this helpful.

jeff jeffy answered 2 years ago
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