When is a Guarantor a Third Party Beneficiary of Another Guaranty?

source I recently handled a case where a lender moved for for summary judgment on a guaranty. We opposed the motion there was a material dispute of fact as to whether the guarantors were third-party beneficiaries of a secondary guaranty from the SBA, and thus the liability of my clients and the amount due were not clear. Here is an exception from my brief:

Under New York law, the identity of a third-party beneficiary need not be set forth in the contract or, for that matter, even be known as of the time of its execution. MK W. St. Co. v. Meridien Hotels, Inc., 584 N.Y.S.2d 310, 311(1st Dept.1992).Whether a stranger to a contract qualifies as an intended third-party beneficiary is a matter of intent. MK West St. Co., 584 N.Y.S.2d at 313 . When a genuine issue exists as to the parties’ intention to benefit another, a triable issue of fact is presented which is not appropriate for summary disposition. MK West St. Co., 584 N.Y.S.2d at 313.

To establish a third-party beneficiary claim, the party must demonstrate that it is an intended beneficiary of the contract. The New York Court of Appeals has generally held that this requires proving that (1) there exists a valid contract between the contracting parties; (2) the contract was intended for the third party’s benefit; and (3) the benefit to the third party is clear and direct and not merely incidental.

 

go site If you have any legal questions or need help with guarantors and third-party beneficiary claims, please contact Attorney Scott Lanin at (212) 764-7250 x 201 or use the contact form in the right sidebar.

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