BUS311_chapter_06

As a creditor beneficiary bigger bank can not only

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Unformatted text preview: ge, the insurance proceeds will go to Bigger to pay the balance of James’s loan. As a creditor beneficiary, Bigger Bank can not only sue Acme if the insurance company breaches, but Bigger can also prevent Acme and James from making any changes to the policy without Bigger’s consent. If a husband takes out a life insurance policy naming his wife the beneficiary, she is not a party to the contract, but nonetheless as an intended beneficiary she could sue for breach if her husband dies and the insurance company does not pay her the benefit. iStockphoto/Thinkstock While intended beneficiaries have rights on the contract, incidental beneficiaries do not. For example, suppose James dies and the insurance company refuses to pay Francesca. However, Francesca is so grieved at James’s death, she isn’t thinking about lawsuits; she’s crying a lot and drinking heavily. But Francesca’s son from her first marriage, Brady, who is unemployed and has moved back in with his mom, is furious about the insurance money. He wants to sue Acme for breach, reasoning that if the household got $100,000, they could afford premium cable, which would be a big benefit to him. But clearly James had no intent to benefit Brady with the insurance policy, or James would have named him a beneficiary. Thus Brady only incidentally benefits, and has no rights on the contract. Consider the following: Example 6.3. The Bright Boutique contracts with Renovators, Inc. for a $500,000 remodel on Bright’s Main Street location. Before Renovators begins the project, Bright suffers a sharp downturn in business and announces that the renovation is canceled. Antique Shoppe, which has the location next to Bright, is very disappointed, since Bright’s renovation would have resulted in Antique’s property value increasing. Could Antique sue successfully to enforce the contract? The answer is clearly no. Antique Shoppe is an incidental beneficiary with no rights. Only Renovators, Inc. would have the ability to enforce the contr...
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