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

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

Answer: (C)

In contract law, the key idea is recognizing why a third party is intended to benefit from the contract. A donee beneficiary is someone who will receive the contract’s performance as a gift from the promisee, and this gift is intended by the parties. The promisee’s intent to confer a benefit to that third party as a gratuitous gift is what makes the third party a donee beneficiary, giving the donee the right to enforce the promise against the promisor.

Creditor beneficiary describes a situation where the promisee intends to satisfy a debt owed to a third party, not to give a gift. An incidental beneficiary is someone who benefits from the contract but was not intended to benefit and generally cannot sue. Novation is a separate arrangement where a new party replaces an original party, ending the old contract, not a third-party beneficiary scenario.