Which term describes a third-party beneficiary who received the benefit of a contract's performance as a gift from the promisee, with the intent of the contracting parties?

• A. Creditor beneficiary
• B. Novation
• C. Incidental beneficiary
• D. Donee beneficiary

Answer: (D)

Third-party beneficiaries and the intent of the promisor and promisee determine who can enforce a contract. A donee beneficiary is created when the promisee intends to confer the contract’s benefit to a third party as a gift. Because the promisee intends to give the result of the contract as a gift, the third party gains enforceable rights against the promisor and can sue to obtain that promised performance. This distinguishes donee beneficiaries from creditor beneficiaries, who are meant to satisfy a debt owed to the third party, and from incidental beneficiaries, who benefit without the parties’ intention and have no enforceable rights. Novation, on the other hand, involves substituting a new party in the contract, not creating beneficiary rights. Therefore, the described scenario fits a donee beneficiary.