Bringing someone else into the deal: naming, promising for another, or in their favour

It is Chapter V of Title I of Book Five of the Civil Code of 2020, Articles 1250 to 1252. It gathers the three figures by which someone who did not sign the contract ends up inside it: taking a party’s place, being the one who must perform, or being the one who collects.

Any contracting party who reserves designating a third party, promises a third party’s act, or stipulates in favour of a determined or determinable third party. The reservation in Article 1250 does not lie where one may not contract through a representative nor where determining the subjects is mandatory at the time of contracting.

• Reserving the power to designate the third party at the time of contracting, not afterwards.Verified against the official source
• Designating within the period the parties set or, failing that, within thirty (30) days, and communicating it to the other contracting party.Verified against the official source
• For the third-party beneficiary to demand performance, that they communicate their acceptance to all the parties.Verified against the official source

• The record of the reservation in the contract and of the communication of the designation, because the third party being bound and the stipulator released depends on the latter.
• The record of the beneficiary’s acceptance communicated to all the parties, if there is a stipulation in their favour.

1. 1

   Step 1: Signing today and saying later who takes your place

   Article 1250 allows it: one or both parties may reserve on contracting the power to later designate a third party to assume their position in the contract. With two exceptions: cases where one may not contract through a representative, and those where determining the subjects is mandatory at the time of contracting.

2. 2

   Step 2: Thirty days if no other period was agreed

   The same article sets a clock: once designated, within the period the parties set or, failing that, within thirty days, if the third party assumes the contractual position, the stipulator must communicate it to the other contracting party. The agreed period governs; the thirty days are the fallback.

3. 3

   Step 3: The communication is what changes everything

   The third paragraph settles it: the contract produces effects between the original parties until the communication is made, and from then, retroactively, the third party is bound and the stipulator released. Until it is communicated, whoever signed remains the one bound.

4. 4

   Step 4: Promising that a third party will do something

   Article 1251 defines the figure: the contract on a third party’s act is that by which one party binds themselves to carry out the activity necessary for the third party to perform the promised performance. What is promised, by default, is the effort: the obligation consists in employing the adequate means, unless the result is guaranteed.

5. 5

   Step 5: And when the promisor is released

   The same article closes it in five words: the third party’s performance releases the promisor. If the third party performs, whoever promised owes nothing further.

6. 6

   Step 6: Agreeing in favour of someone who did not sign

   Article 1252 allows it and sets the condition: if the contract contains a stipulation in favour of a determined or determinable third party, that party may demand its performance if they communicate their acceptance to all the parties. And subsection (a) specifies that only the third party may accept the benefit, that it passes directly from the promisor to the accepting beneficiary, and that it reverts to the stipulator if the third party does not accept or if it is revoked.

7. 7

   Step 7: Until when the benefit may be revoked

   Subsection (b) draws the line: the stipulator may revoke the benefit before the beneficiary communicates acceptance, and may also modify it if they reserved that power in the contract. On breach they may demand performance in the beneficiary’s name or rescind the contract; and if they revoked the benefit or the third party did not accept it, they may sue for performance to their own benefit or rescind.

8. 8

   Step 8: The three rules that close the article

   Subsection (c): the promisor may raise against the third party the same defences arising from the contract that they have against the stipulator. (d): the third party’s power to accept and the stipulator’s power to revoke are not transmitted to heirs or creditors. And (e), in four words: the stipulation must be interpreted restrictively.

All of this happens between the parties and the third party, with no counter. If it is disputed whether the designation was communicated in time, whether the beneficiary accepted, or whether rescission lies, the Court of First Instance decides. The Code names no agency here.

• Wanting to designate a third party without having reserved that power on contracting.
• Trying it in a case where determining the subjects is mandatory at the time of contracting.
• Designating within the period and not communicating it: until the communication, the contract produces effects between the original parties.
• Counting on more than thirty days where the contract set no period.
• Promising a third party’s act and believing the result is owed: by default the adequate means are owed.
• Treating as accepted a benefit the third party did not communicate to all the parties.
• Revoking the benefit after the beneficiary already communicated acceptance.
• Counting on the power to accept or revoke passing to heirs or creditors: subsection (d) says it does not.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov