The Puzzle of the Beneficiary's Bargain
51 Pages Posted: 6 Apr 2015
Date Written: April 4, 2015
This Article describes a jurisprudential puzzle — what I call the puzzle of the beneficiary’s bargain — and contends that adequately resolving this puzzle will require significant revisions to basic premises of contract law. The puzzle arises when one party enters into two contracts requiring the same performance, and the promisee of the second contract is the third-party beneficiary of the first. For example, a taxi driver contracts with a woman to transport her parents from the airport next week, and then the driver separately enters a contract with the parents to transport them when the time comes. Is the second contract valid and enforceable, or does it fail for lack of consideration? This specific question — on which courts have split — implicates several important contract law doctrines. Moreover, it highlights a deep tension in our modern understanding of contractual obligation. This Article argues that adequately resolving the puzzle necessitates a general reconsideration of the relationship between rights and liability in contract law. Surprisingly, the best solution requires abandoning the foundational understanding that contract liability arises out of breach of a promisee’s right to performance. The puzzle thus offers a lens through which to examine — and even revise — the central concepts of modern contract law.
Keywords: contract law, intended beneficiary, consideration, private law theory, legal theory, jurisprudence
JEL Classification: K00, K12
Suggested Citation: Suggested Citation