California Bar Practice Exam

In contract law, a third-party beneficiary is someone who is not a party to the contract but stands to benefit from its execution. For an individual to be designated as a third-party beneficiary, they must be the intended beneficiary at the time the contract is made. This means that the parties to the contract specifically intended for the third party to receive a benefit or an advantage from the contract.

This designation is important because it determines whether the third party has legal rights to enforce the contract. If a third party is merely incidental, meaning that they benefit from the contract by chance but were not intended to be a beneficiary, they typically do not have the standing to enforce the contract in court.

For instance, if two businesses enter into a contract in which one business agrees to provide services that will benefit a specific charity, the charity is the intended third-party beneficiary because it was contemplated by the parties at the time of contracting. Therefore, the charity can enforce the contract if the terms are not met.

Other roles, such as those who are involved in negotiations or those performing duties under the contract, do not need to be designated as third-party beneficiaries. Their roles do not create the same enforceable rights as those given to intended beneficiaries. Thus, the correct choice emphasizes