Download this Paper Open PDF in Browser

Third Party Beneficiaries and Contractual Networks

67 Pages Posted: 16 Jan 2015 Last revised: 17 Jun 2015

Alan Schwartz

Yale Law School

Robert E. Scott

Columbia University - Law School

Date Written: January 9, 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.

Suggested Citation

Schwartz, Alan and Scott, Robert E., Third Party Beneficiaries and Contractual Networks (January 9, 2015). The Journal of Legal Analysis, Forthcoming; Yale Law & Economics Research Paper No. 523. Available at SSRN: https://ssrn.com/abstract=2550436 or http://dx.doi.org/10.2139/ssrn.2550436

Alan Schwartz

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-4030 (Phone)
203-432-8260 (Fax)

Robert E. Scott (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-0072 (Phone)

Paper statistics

Downloads
228
Rank
112,094
Abstract Views
1,140