What is a Third Party Beneficiary?

A third-party beneficiary is not a party to a contract but someone who benefits from it. They are usually not named in the agreement, but they receive some benefit from it. Sometimes, this type of beneficiary can sue if they do not receive the help they should receive under the contract.

Types of Beneficiaries

There are three types of third-party beneficiaries: direct, incidental, and intended.

Direct beneficiaries are the ones who receive the benefits outlined in the contract. Incidental beneficiaries are those who indirectly benefit from the agreement. These beneficiaries don’t appear in the contract, but they receive some benefit from it. Finally, intended beneficiaries are those who don’t appear in the original contract as beneficiaries but receive some benefit from it.

What type of third-party beneficiaries can enforce contracts?

All types of third-party beneficiaries have the right to enforce contracts. 

Can a contract be enforced?

Yes, a contract could be against a third-party beneficiary. However, this beneficiary must be a direct, incidental, or intended beneficiary to enforce the agreement.

What’s the difference between a third-party beneficiary and an incidental beneficiary?

The main difference between these two is that the third party has no legal rights under the contract. Meanwhile, an incidental beneficiary is a third party who benefits from an agreement between two other parties but wasn’t originally intended to receive the benefit.

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