Question;
A victim, injured by a driver in an auto accident, employed an attorney to represent him in the matter. The victim was chronically insolvent and expressed doubt whether he could promptly get necessary medical treatment. Accordingly, the attorney wrote into their contract his promise to the victim "to pay from any settlement with the driver compensation to any physician who provides professional services for the victim's injuries." The contract also provided that the attorney's duties were "non-assignable." The attorney immediately filed suit against the driver. The victim then sought and received medical treatment, reasonably valued at $1,000, from the doctor, but failed to inform the doctor of the attorney's promise.
After receiving a bill from the doctor for $1,000, the victim immediately wrote the doctor explaining that he was unable to pay and enclosing a copy of his contract with the attorney.
The victim then asked the attorney about payment of this bill, but the attorney requested a release from their employment contract, stating that he would like to refer the victim's claim to a colleague and that the colleague was willing to represent the victim in the pending lawsuit. The victim wrote a letter to the attorney releasing him from their contract and agreeing to the colleague's representation. A copy of this letter was sent to the doctor. The colleague subsequently promised the attorney to represent the victim and soon negotiated a settlement of the victim's claim against the driver which netted $1,000, all of which was paid by the victim to creditors other than the doctor. The victim remains insolvent.
In an action by the doctor against the colleague, the colleague is most likely to argue on these facts that
A. the colleague made only a gratuitous promise to the attorney.
B. at the time the colleague promised to represent the victim, the doctor was only a member of an unidentified class of beneficiaries.
C. there is insufficient evidence to support a finding that the doctor was either a creditor or donee beneficiary of the colleague's promise to the attorney.
D. there is insufficient evidence to support a finding that the doctor substantially changed his position in reliance on the colleague's promise.
In tough questions you are best to eliminate obviously wrong answers and make your best guess possible.
This question is asking what is the most likely argument i.e. the best argument which the physician, a third-party beneficiary, can make in a case in which it is likely that physician will not prevail on any argument. However, determining which of several losing arguments is the strongest is particularly tricky, even though it is obvious the physician will not prevail. So you must use the process of elimination.
Answer Choice A:
A gratuitous promise is one in which there is no consideration. Consideration is the exchange of value, ("value for value received") whether as an act or forbearance. Consideration is a necessary element of any contract, without which no contract comes into being. The law does not inquire into the adequacy of consideration, and only inquires whether consideration obtains. However, a promise without consideration is "empty" i.e. gratuitous: Such a promise is unenforcable at law. It may however be enforced at equity through promissory estoppel. Furthermore, a gratuitous promise might be part of a property transaction such as donation or dedication i.e. a "gift". Thus, answer choice A is very weak: the promise here is not gratuitous in the sense of there being no consideration: there is consideration to support this promise's enforceability. This is not a donation of any kind: it is a covenenant (clause) in a contract, not a property transaction and thus is not a gratuitous promise in any sense. This promise was clearly not empty: the lawyer has promised services in exchange for payement; incidental to their contract for services is the promise to cover the costs of medical care during litigation, as necessary to attain the purpose of the contract. This is not an incidental third party beneficiary case because the attorney and client are the principal parties to the contract: the beneficiary here is intended, not incidental.
Answer choice A is clearly incorrect, a very weak argument, because this is not a gratuitous promise.
Answer Choice B:
Answer choice B looks good because indeed the particular doctor to be employed is not identified. The language "identified class of beneficiaries" sounds good -- but that term is relevant in cases of trusts, where the class of trust beneficiaries must be at least determinable, if not determined, i.e. closed. In cases of contracts, just as we may makea contractual offer to anyone in the entire world we may also have as a third party beneficiary anyone in the world. Had either contracting party intended only a certain doctor or class of doctors to enforce then they could have so specified. Apparently they did not, at least on the facts given, and so any doctor employed pursuant to the contract may enforce their rights thereunder. Choice B is thus quite wrong.
Answers A and B are fairly obviously wrong. Choices C and D are also wrong - but less wrong than A or B. Which is least wrong? This will require an extended discussion of 1) third party beneficiary law and 2)the facts of this question.
1) Third Party Beneficiary Law: (Rules)
Contracts normally create rights and duties only among the parties thereto. Exceptionally, third parties may acquire enforceable rights under a contract. These third party beneficiaries are either "donee beneficiaries", whose rights vest immediately as a matter of property law (donation) or "creditor beneficiaries" whose rights vest as a matter of contract, and said contractmust be executed prior to their rights thereunder vesting. Consequently, a donee beneficiary's rights vest even where they are unaware of the existence of their right! In contrast, a creditor beneficiary must know that the contract exists creates rights to be enjoyed by the third party on execution of the contract for the third party's right to vest, i.e. to be enforceable. Creditor beneficiary rights are created to fulfill a pre-existing legal duty owed to the creditor beneficiary, unlike the donee beneficiary. The rights created in the donee beneficiary are gratuitous and not in fulfillment of any prior legal obligation. Because donee rights vest immediately, the contracting parties cannot change the rights of the third party without the third party's consent, unless that power was expressly reserved in the contract, regardless of whether the donee knows about the contract. Since the creditor beneficiary rights only vest where the creditor beneficiary knows of the contract and their rights under it the parties may freely alter the third party creditor beneficiary's rights at least until the point that the creditor beneficiary becomes aware of their rights under the contract.
Third party beneficiaries are either intended beneficiaries or incidental beneficiaries. Intended beneficiaries may enforce their rights under the contract, even where they are not a party to the contract. Incidental beneficiaries may not enforce rights under the contract. Whether a beneficiary is intended or incidental depends on the contract's terms, which express the will of the parties under law.
2) The Facts of this Question: (Application)
In this question an attorney and a client make a contract, wherein the attorney agrees to pay the medical costs of the client to a third party. That third party is an intended third party beneficiary, and may be able to enforce rights arising out of that contract. However, the parties to the contract then released the attorney from their duties under the contract, and the client formed a new contract with a different attorney. This is either a reformation of one contract or the rescission of one contract and the formation of a second contract. The better view is to see it as a rescision of one contract, which is cancelled (rescinded), and the formation of a new contract. This case is better seen as two contracts, and not the reformation of one contract for the following reasons: The problem expressly states "release", i.e. termination of all contracted duties. Note also that a new contracting party enters the picture, namely, the colleague. This is not mere change of quantity, price, or date of delivery in sales of goods, the modification of an existing contract; a new party enters into a contract and a prior party drops out, which coheres logically to seeing two contracts here, one of which was rescinded. Furthermore, the contract is for personal services, not fungible goods. All that argues in favor of seeing this as two contracts. Any unvested contractual rights of the physician were terminated by the rescision of the contract and formation of a new contract. That leaves the physician only with equitable remedies, which are discretionary exceptional and only offered as a corrective in the face of rigid unfair operation of law.
Third party rights under the initial contract were either vested, and thus enforceable, as in the case of a gratuitious gift or property transfer, or were merely executory, as in the case of a contract and not immediately enforceable. Here, whatever rights existed on behalf of the third party beneficiary were merely executory because they were contractual, and were not yet vested or proprietary and thus are unenforceable.
Thus, the doctor has no contractual rights here, and consequently no legal remedies. The claiming physician's best claim then is not contractual (an action in law) but equitable (an action at equity). This is true moreover since the claiming physician's contractual rights, if any, were those of a third party beneficiary.
Equitable remedies might be for quasi-contract or promissory estoppel. Replevin or restitution do not seem to be relevant remedies here.
Quasi-contracts are not contracts but are nonetheless sometimes referred to as "contracts implied in law". In this question there is a contract with a potential third party. This contract is however terminated and a new contract formed after the release. Thus, rights or duties under the initial contract are unenforceable by any party.
Answer choice D:
The question asks not "will they prevail" but "what is their best argument". At equity, the physician may claim for quasi-contract or promissory estoppel (which is also called an action for detrimental reliance). Detrimental reliance is however unavailable here since the doctor did not rely at all on the contract in making their decision to treat the patient. Thus, answer choice D is wrong: there is no possibility here for an action based on a claim of promissory estoppel / detrimental reliance because there was no reliance on these facts. No answer choice indicates "quasi contract"/"contract implied in law" as an option. The doctor did not rely on the statements in the contract to his detriment.
Answer choice C:
Thus, choice c is by default the best argument of the treating physician. Were an answer choice to have indicated quasi-contract that would have been the best argument the physician might have made, but even that is weak and uncertain, but nonetheless would have been a stronger argument than answer choice c. The colleagues best argument is that there were two contracts; a choice not given here. The colleagues second best argument is that the doctor was not an intended third party beneficiary. Though worded craftily, choice C does in fact correspond to the argument that the doctor was not an intended third party beneficiary and thus has no remedy.
A victim, injured by a driver in an auto accident, employed an attorney to represent him in the matter. The victim was chronically insolvent and expressed doubt whether he could promptly get necessary medical treatment. Accordingly, the attorney wrote into their contract his promise to the victim "to pay from any settlement with the driver compensation to any physician who provides professional services for the victim's injuries." The contract also provided that the attorney's duties were "non-assignable." The attorney immediately filed suit against the driver. The victim then sought and received medical treatment, reasonably valued at $1,000, from the doctor, but failed to inform the doctor of the attorney's promise.
After receiving a bill from the doctor for $1,000, the victim immediately wrote the doctor explaining that he was unable to pay and enclosing a copy of his contract with the attorney.
The victim then asked the attorney about payment of this bill, but the attorney requested a release from their employment contract, stating that he would like to refer the victim's claim to a colleague and that the colleague was willing to represent the victim in the pending lawsuit. The victim wrote a letter to the attorney releasing him from their contract and agreeing to the colleague's representation. A copy of this letter was sent to the doctor. The colleague subsequently promised the attorney to represent the victim and soon negotiated a settlement of the victim's claim against the driver which netted $1,000, all of which was paid by the victim to creditors other than the doctor. The victim remains insolvent.
In an action by the doctor against the colleague, the colleague is most likely to argue on these facts that
A. the colleague made only a gratuitous promise to the attorney.
B. at the time the colleague promised to represent the victim, the doctor was only a member of an unidentified class of beneficiaries.
C. there is insufficient evidence to support a finding that the doctor was either a creditor or donee beneficiary of the colleague's promise to the attorney.
D. there is insufficient evidence to support a finding that the doctor substantially changed his position in reliance on the colleague's promise.
In tough questions you are best to eliminate obviously wrong answers and make your best guess possible.
This question is asking what is the most likely argument i.e. the best argument which the physician, a third-party beneficiary, can make in a case in which it is likely that physician will not prevail on any argument. However, determining which of several losing arguments is the strongest is particularly tricky, even though it is obvious the physician will not prevail. So you must use the process of elimination.
Answer Choice A:
A gratuitous promise is one in which there is no consideration. Consideration is the exchange of value, ("value for value received") whether as an act or forbearance. Consideration is a necessary element of any contract, without which no contract comes into being. The law does not inquire into the adequacy of consideration, and only inquires whether consideration obtains. However, a promise without consideration is "empty" i.e. gratuitous: Such a promise is unenforcable at law. It may however be enforced at equity through promissory estoppel. Furthermore, a gratuitous promise might be part of a property transaction such as donation or dedication i.e. a "gift". Thus, answer choice A is very weak: the promise here is not gratuitous in the sense of there being no consideration: there is consideration to support this promise's enforceability. This is not a donation of any kind: it is a covenenant (clause) in a contract, not a property transaction and thus is not a gratuitous promise in any sense. This promise was clearly not empty: the lawyer has promised services in exchange for payement; incidental to their contract for services is the promise to cover the costs of medical care during litigation, as necessary to attain the purpose of the contract. This is not an incidental third party beneficiary case because the attorney and client are the principal parties to the contract: the beneficiary here is intended, not incidental.
Answer choice A is clearly incorrect, a very weak argument, because this is not a gratuitous promise.
Answer Choice B:
Answer choice B looks good because indeed the particular doctor to be employed is not identified. The language "identified class of beneficiaries" sounds good -- but that term is relevant in cases of trusts, where the class of trust beneficiaries must be at least determinable, if not determined, i.e. closed. In cases of contracts, just as we may makea contractual offer to anyone in the entire world we may also have as a third party beneficiary anyone in the world. Had either contracting party intended only a certain doctor or class of doctors to enforce then they could have so specified. Apparently they did not, at least on the facts given, and so any doctor employed pursuant to the contract may enforce their rights thereunder. Choice B is thus quite wrong.
Answers A and B are fairly obviously wrong. Choices C and D are also wrong - but less wrong than A or B. Which is least wrong? This will require an extended discussion of 1) third party beneficiary law and 2)the facts of this question.
1) Third Party Beneficiary Law: (Rules)
Contracts normally create rights and duties only among the parties thereto. Exceptionally, third parties may acquire enforceable rights under a contract. These third party beneficiaries are either "donee beneficiaries", whose rights vest immediately as a matter of property law (donation) or "creditor beneficiaries" whose rights vest as a matter of contract, and said contractmust be executed prior to their rights thereunder vesting. Consequently, a donee beneficiary's rights vest even where they are unaware of the existence of their right! In contrast, a creditor beneficiary must know that the contract exists creates rights to be enjoyed by the third party on execution of the contract for the third party's right to vest, i.e. to be enforceable. Creditor beneficiary rights are created to fulfill a pre-existing legal duty owed to the creditor beneficiary, unlike the donee beneficiary. The rights created in the donee beneficiary are gratuitous and not in fulfillment of any prior legal obligation. Because donee rights vest immediately, the contracting parties cannot change the rights of the third party without the third party's consent, unless that power was expressly reserved in the contract, regardless of whether the donee knows about the contract. Since the creditor beneficiary rights only vest where the creditor beneficiary knows of the contract and their rights under it the parties may freely alter the third party creditor beneficiary's rights at least until the point that the creditor beneficiary becomes aware of their rights under the contract.
Third party beneficiaries are either intended beneficiaries or incidental beneficiaries. Intended beneficiaries may enforce their rights under the contract, even where they are not a party to the contract. Incidental beneficiaries may not enforce rights under the contract. Whether a beneficiary is intended or incidental depends on the contract's terms, which express the will of the parties under law.
2) The Facts of this Question: (Application)
In this question an attorney and a client make a contract, wherein the attorney agrees to pay the medical costs of the client to a third party. That third party is an intended third party beneficiary, and may be able to enforce rights arising out of that contract. However, the parties to the contract then released the attorney from their duties under the contract, and the client formed a new contract with a different attorney. This is either a reformation of one contract or the rescission of one contract and the formation of a second contract. The better view is to see it as a rescision of one contract, which is cancelled (rescinded), and the formation of a new contract. This case is better seen as two contracts, and not the reformation of one contract for the following reasons: The problem expressly states "release", i.e. termination of all contracted duties. Note also that a new contracting party enters the picture, namely, the colleague. This is not mere change of quantity, price, or date of delivery in sales of goods, the modification of an existing contract; a new party enters into a contract and a prior party drops out, which coheres logically to seeing two contracts here, one of which was rescinded. Furthermore, the contract is for personal services, not fungible goods. All that argues in favor of seeing this as two contracts. Any unvested contractual rights of the physician were terminated by the rescision of the contract and formation of a new contract. That leaves the physician only with equitable remedies, which are discretionary exceptional and only offered as a corrective in the face of rigid unfair operation of law.
Third party rights under the initial contract were either vested, and thus enforceable, as in the case of a gratuitious gift or property transfer, or were merely executory, as in the case of a contract and not immediately enforceable. Here, whatever rights existed on behalf of the third party beneficiary were merely executory because they were contractual, and were not yet vested or proprietary and thus are unenforceable.
Thus, the doctor has no contractual rights here, and consequently no legal remedies. The claiming physician's best claim then is not contractual (an action in law) but equitable (an action at equity). This is true moreover since the claiming physician's contractual rights, if any, were those of a third party beneficiary.
Equitable remedies might be for quasi-contract or promissory estoppel. Replevin or restitution do not seem to be relevant remedies here.
Quasi-contracts are not contracts but are nonetheless sometimes referred to as "contracts implied in law". In this question there is a contract with a potential third party. This contract is however terminated and a new contract formed after the release. Thus, rights or duties under the initial contract are unenforceable by any party.
Answer choice D:
The question asks not "will they prevail" but "what is their best argument". At equity, the physician may claim for quasi-contract or promissory estoppel (which is also called an action for detrimental reliance). Detrimental reliance is however unavailable here since the doctor did not rely at all on the contract in making their decision to treat the patient. Thus, answer choice D is wrong: there is no possibility here for an action based on a claim of promissory estoppel / detrimental reliance because there was no reliance on these facts. No answer choice indicates "quasi contract"/"contract implied in law" as an option. The doctor did not rely on the statements in the contract to his detriment.
Answer choice C:
Thus, choice c is by default the best argument of the treating physician. Were an answer choice to have indicated quasi-contract that would have been the best argument the physician might have made, but even that is weak and uncertain, but nonetheless would have been a stronger argument than answer choice c. The colleagues best argument is that there were two contracts; a choice not given here. The colleagues second best argument is that the doctor was not an intended third party beneficiary. Though worded craftily, choice C does in fact correspond to the argument that the doctor was not an intended third party beneficiary and thus has no remedy.
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