R2d § 302
Intended and Incidental Beneficiaries
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.
Professor's notes
Elements: (1) a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties AND either (a) the performance will satisfy an obligation of the promisee to pay money to the beneficiary (creditor beneficiary), OR (b) the circumstances indicate the promisee intends to give the beneficiary the benefit of the promised performance (donee beneficiary); (2) an incidental beneficiary is a beneficiary who is not an intended beneficiary.
Sovereign Bank v. BJ's operationalizes: interbank network agreements; downstream merchants and banks as intended or incidental beneficiaries.
Common misunderstanding: students confuse intended with incidental. Only intended beneficiaries can sue. The test is the parties' intent to give the beneficiary the BENEFIT of performance: not merely that the beneficiary will profit from it. Most people who happen to gain from a contract are incidental, with no standing.
Cases that operationalize this rule
Text
R2d § 302. Intended and Incidental Beneficiaries.
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.
[VERIFICATION REQUIRED: subsection text drafted from memory; cite-check against ALI Restatement (Second) of Contracts official text before publication]