MBE Rules · Contracts
Third-Party Rights Vesting
Restatement §311
The rule
The promisor and promisee may modify or rescind until the beneficiary's rights vest — by assent at a party's request, suit, or detrimental reliance; after vesting, changes require the beneficiary's consent.
In plain English
In contract law, a third-party beneficiary's rights to enforce a contract become vested when they either agree to the contract, take legal action based on it, or rely on it to their detriment. Before these rights vest, the original parties can change or cancel the contract without needing the beneficiary's approval. Once the rights have vested, however, any modifications require the beneficiary's consent.
Worked example
A contractor agrees to build a house for a homeowner, with the understanding that the homeowner's friend will receive a portion of the payment as a gift. The friend learns of this agreement and starts making plans based on it. Before the contractor and homeowner finalize the contract, they decide to change the terms without consulting the friend. Since the friend has not yet vested their rights, the change is valid.
Memory hook
Third-party rights vest, and then they can't be messed with!
The trap
Exams often present scenarios where students must determine if the beneficiary's rights have vested, leading them to overlook the timing of actions taken by the beneficiary. Students may mistakenly think a beneficiary's mere knowledge of the contract is enough for vesting.
How examiners test it
Questions typically involve a scenario where a third-party beneficiary is either attempting to enforce a contract or is affected by changes made by the original parties, testing the timing of vesting and the need for consent.
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