Evergreen Landscapers, Inc., owes Friendly Finance Company $5,000. Evergreen enters into a contract with Suburban Office Park under which Evergreen promises to maintain the landscaping on Suburban's property. Under the contract, Suburban promises to pay Friendly Finance the amount that will be due Evergreen until Evergreen's debt to Friendly Finance is paid. Evergreen performs as promised, but Suburban does not pay Friendly Finance. Can Friendly Finance succeed in a suit against Suburban? Why or why not?
What will be an ideal response?
Friendly Finance could succeed in a suit against Suburban. When a party promises to perform under a contract with the express intent that the other party's payment benefit a third party, the third party is a creditor beneficiary. Assuming a contract is otherwise enforceable, a creditor beneficiary can successfully sue to enforce the contract to which he or she is a third party. The contract between Evergreen and Suburban expressly states that Suburban's payment for Evergreen's performance is to go directly to Friendly Finance. Thus, it is a third party beneficiary contract. Friendly Finance, the third party beneficiary, is, under the terms of the contract, a creditor beneficiary. As such, Friendly Finance can successfully sue Suburban to enforce Suburban's promise to pay Evergreen's debt.
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