Contracts & ExecutionQuestion 874 of 1632

An 'incidental beneficiary' of a contract differs from an intended beneficiary in that an incidental beneficiary:

a.Is always the owner of the property that is being improved on
b.Benefits only indirectly and cannot enforce the contract
c.Has exactly the same right to sue on the contract as a party
d.Must approve every change order before that order takes effect

Explanation

Civil Code §1559 gives a contract 'made expressly for the benefit of a third person' the right to be enforced by that person — 'expressly' is the word doing the work. A third party who merely gains because the contract exists is incidental and has no claim: the neighbour whose property value rises when you remodel, the supplier who expects more orders if the job goes ahead. (c) describes the INTENDED beneficiary, the contrast this question turns on; a subcontractor named as a payee, or an owner named in a subcontract, can sue on it. (a) is wrong twice over — the owner is usually a party to the prime contract and an intended beneficiary of the subcontracts. (d) invents a consent right; no beneficiary, intended or incidental, controls the parties' changes.

Law Reference: Civil Code §1559

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