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Rights of Promisors and Promisees in Contracts

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  • 0:06 Promisor and Promisee…
  • 1:16 Third Party Beneficiary
  • 2:03 Consideration
  • 4:20 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

There are two parties to a contract, a promisor and a promisee. Each holds a responsibility to the contract but in different ways. As each role indicates, one party makes a promise, and the other party benefits from the promises made.

Promisor and Promisee in Contracts

There are two parties to a contract, and each plays a distinct role in the performance, or actions that complete the terms of a contract. The promisor makes a promise, and the promisee, in turn, has been promised something.

Let's use an example to simplify this. Suppose Misty was planning her 30th birthday bash. She may call a caterer to plan the menu. Then, no party is complete without a dancing gorilla. So, she books him too! When Misty called Grody's Dancing Gorillas, Inc. to book the boogying beast, Grody quoted Misty a price and promised to send his most talented gorilla, Mongo, to her party.

Grody is the promisor because he promised to send Mongo to dance at the party. Misty is the promisee because she is on the benefiting end of the promise. That is the simplified explanation of how two parties become obligated to one another. However, when contract law uses the terms 'promisor' and 'promisee,' they may also be referring to contracts that include a third party to which a benefit of the contract is owed.

The Third Party Beneficiary Rights

A third party beneficiary to a contract is one who benefits from a contract, but is not a named party to the contract. The promisor and the promisee act as the parties to the contract, but the third party actually receives that which was promised in the contract.

Each party has certain duties and rights to the contract. The promisor has the duty to provide what he promised in the contract. He also has the right not to be sued by both the promisee and the third party beneficiary. This means, if the promisor does not follow through on his promise, one party or the other may sue for performance but not both. It's sort of like the double jeopardy rule in criminal cases.

The promisee has the duty to perform the promises he made as well, like satisfying the element of consideration, or exchanging money or other valuable things to the promisor. The right to sue for non-performance is also a right of the promisee if performance is not satisfied. A third party beneficiary probably is in the best position in this type of contract. This party has no duties, but benefits wholly from the terms of the contract and has a right to sue for non-performance. This party cannot be sued for non-performance of the promisee either! It's a win-win!

Confused? Don't be! It's fairly simple to understand. Misty's grandfather wants to do something special for her 30th birthday. So, after researching many different gift ideas, Granddad Milo came across a neat present. He can name a star after Misty. Milo contracted with Star Gazers International to have a star named after Misty. He sent the payment of $30 to the company and waited patiently for the paperwork to be sent to Misty.

Unable to keep a secret, Granddad Milo spilled the beans about the star. Weeks passed since the promised arrival of the paperwork. Misty called the company to inquire where in the sky her star is located. The company denied owing her a star.

Yikes, no star for Misty's birthday was crushing enough! But, knowing that Milo paid a premium for the twinkler, Misty wanted answers and Milo's money back as well. Even though Misty was not a party to the contract, meaning, she did not negotiate or sign anything, but because she is named as a party to receive something, she is a third party and has the right to sue the company for specific performance. This means, Misty can take Star Gazers to court to demand that the promise in the contract be fulfilled or restitution be made to recover from the loss.

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