Virtual Third Parties

Abstract:     
In virtual worlds, where 20 million people spend $200 million each year, rules of life are governed by contract, and three-party transactions are ubiquitous; every exchange of virtual cash, property, sound, pictures, and even conversation introduces a third party into the contractual relationship between user and virtual-world provider.

Whenever a contract affects a non-party, the third-party beneficiary ("TPB") doctrine might apply; to date, however, the practical and theoretical boundaries of this important doctrine's application to virtual worlds have yet to be explored, perhaps because of an overly narrow doctrinal conception.

Many states have loosened TPB requirements somewhat; most have adopted an approach similar to that of the Second Restatement of Contracts, which looks at the totality of circumstances to determine whether a third party can enforce the terms of a contract. As a result, third-party beneficiary rights are judicially cognizable claims that will impact virtual world contracting and interacting. Though its application is not universal, third-party beneficiary enforcement envisioned by the Restatement is an important, and in some cases the only, way to vindicate user rights in the hub and spoke contractual relationships between a virtual world provider and its many users.

This essay introduces the TPB concept to virtual worlds in three ways. First, it describes how third-party interactions permeate virtual worlds. Second, it provides a general framework for applying TPB doctrine to virtual world user agreements. Third, it applies that framework to particular recurring problems that virtual world users face.

Keywords: virtual worlds, third-party beneficiaries, contract, Restatement of Contracts

Accepted Paper Series