Wednesday, December 25, 2013

Olson v. Etheridge case brief

Olson v. Etheridge case brief summary
686 N.E.2d 563 (1997)

Defendant delegee sought reversal of the decision of the appellate court (Illinois), which affirmed summary judgment to plaintiff third-party beneficiaries of a note assumed by the delegee under an agreement with the original maker that was later changed. The appellate court applied the existing rule that the beneficiaries' rights had vested upon execution of the assumption agreement, and the agreement could not be changed without their consent.

The delegee assumed the obligation of a note maker to pay the beneficiaries. The delegee later discharged his obligation to the maker under a modification to the agreement. The maker defaulted on the note and the beneficiaries sued the delegee and were granted summary judgment. The lower appellate court affirmed under existing law.


  • On appeal, the court held that once a third-party beneficiary's rights vested, the contracting parties could not modify or discharge those rights without the beneficiary's assent. 
  • The court then overruled its existing rule that the beneficiaries' rights vested upon execution of an assumption agreement. 
  • The court held that in the absence of language in a contract making the rights of a third-party beneficiary irrevocable, the parties to the contract retained power to discharge or modify the duty by subsequent agreement, without the third-party beneficiary's assent. 
  • The power remained at any time until the third-party beneficiary, without notice of discharge or modification, materially changed position in justifiable reliance on the promise, brought an action on the promise, or manifested assent to the promise at the request of the promisor or promisee.
The court reversed the lower appellate court's affirmance of the trial court's grant of summary judgment in favor of the third-party beneficiaries. The court remanded the beneficiaries' claim to the trial court for reconsideration of the summary judgment motion in light of the adoption of the modern vesting rule. The court affirmed the remainder of the lower court rulings.

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