Legal Definitions - donee beneficiary

A donee beneficiary is a third party who is intended to receive a gift or benefit from a contract made between two other parties. Although not directly involved in creating the contract, the donee beneficiary has legal rights to enforce its terms because one of the contracting parties specifically intended to bestow a gift upon them through that agreement.

Key characteristics of a donee beneficiary include:

• They are not a party to the original contract.
• One of the contracting parties (the "promisee") intends to make a gift to the donee beneficiary through the performance of the contract.
• The donee beneficiary can legally enforce the contract against the party obligated to perform (the "promisor"), even though the donee beneficiary did not provide any consideration (something of value exchanged in the contract).
• The donee beneficiary's rights typically arise as soon as the contract is formed, regardless of whether they are aware of the contract at that moment.

Here are some examples to illustrate the concept of a donee beneficiary:

• Example 1: A Grandparent's Educational Trust

  A grandparent establishes a trust with a financial institution, instructing the institution to manage a sum of money and use the proceeds to pay for their grandchild's college tuition directly to the university. The contract is between the grandparent and the financial institution. The grandchild, who is not a party to this trust agreement, is the donee beneficiary. The grandparent intended to provide a gift (educational funding) to the grandchild through the financial institution's services. If the financial institution fails to make the tuition payments as specified, the grandchild could legally enforce the terms of the trust against the institution.

• Example 2: A Charitable Pledge for a Community Project

  A wealthy philanthropist enters into a contract with a construction company to build a new public library for a specific town. The philanthropist agrees to pay the construction company, and the company agrees to build the library according to certain specifications. The contract is between the philanthropist and the construction company. The residents of the town, who will benefit from the new library, are the donee beneficiaries. The philanthropist's intention was to gift a public amenity to the community. If the construction company fails to complete the library or deviates significantly from the agreed plans, the town's residents (or a representative on their behalf) could potentially enforce the contract against the construction company.

• Example 3: A Pet Care Agreement

  An elderly individual, concerned about their beloved pet's future, enters into a contract with a professional pet care service. The individual pays the service a lump sum, and in return, the service agrees to provide lifelong care for their pet after the individual's passing. The contract is between the individual and the pet care service. The pet, while not a legal person, is the intended recipient of the benefit, and for practical purposes, a designated animal welfare organization or a trusted friend might be named as a representative to act as the donee beneficiary on the pet's behalf. The individual's intent was to gift ongoing care to their pet. If the pet care service fails to uphold its end of the agreement, the designated representative could enforce the contract to ensure the pet receives the promised care.