23. What amount, if any, is the homeowner obligated to pay the bank?

A is correct. The bank is an intended beneficiary of the contract between the carpenter and the homeowner. An intended beneficiary can enforce a contract to which it is not a party because the parties intended the contract to benefit that beneficiary. Restatement (Second) of Contracts § 302. However, one party to the contract can assert against the beneficiary claims for breach by the other party to the contract. Here, the homeowner, as promisee of the carpenter's promise to perform the work, can assert a $2,000 claim for breach of that promise against the bank, due to the costs incurred to correct the contractor's work. Restatement (Second) of Contracts § 309(2). Thus, the homeowner is obligated to pay the bank $20,000.

B is incorrect. The homeowner must pay $20,000 of the contracted amount, as promisee of the carpenter's promise to do the work. It can assert the $2,000 claim for damages, but against the bank as the intended beneficiary of the contract, not against the carpenter who performed the service as the bank stands in for the carpenter in the contract.

C is incorrect. The bank is not an incidental beneficiary. An incidental beneficiary is one who may benefit from the contract, but that benefit is not the primary purpose of the contract. Here, the bank is an intended beneficiary that can enforce a contract to which it is not a party because the parties intended the contract to benefit that beneficiary. Restatement (Second) of Contracts § 302.

D is incorrect. As an intended beneficiary, the bank can assert the carpenter's rights under the contract. Here, the carpenter's breach was not material, so the homeowner's obligation was not discharged. Even if the carpenter's breach was material, the bank could recover the value of the work done for the homeowner as restitution. Restatement (Second) of Contracts § 374.