686 N.E.2d 563 (1997)
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.
Suggested law school study materials
Shop Amazon for the best prices on Law School Course Materials.