Rescission and modification of a 3rd-party beneficiary contract: Who can rescind or modify until the TPB's rights vest?

• A. Promisor and promisee
• B. Third party beneficiary
• C. Promisee
• D. All parties

Answer: (A)

In a third-party beneficiary contract, two people make a promise with the intention of benefiting a third party. That third party doesn’t have enforceable rights yet, so until those rights vest, only the two who created the contract—the promisor and the promisee—can rescind or modify the agreement. They are the ones who formed the deal and can alter or cancel it before the TPB’s rights attach. Vesting happens when the TPB’s right to the promised performance becomes fixed and enforceable against the promisor. Once that happens, the TPB’s interests are protected, and later changes by the original parties are typically not allowed without considering the TPB’s vested rights.