Contract Glossary
Third-Party Beneficiary
Definition
A third-party beneficiary is someone who benefits from a contract even though they didn't sign it or negotiate its terms. If two parties specifically intend for a third person to receive a benefit, that person may have legal standing to enforce the contract.
In Practice
A construction company contracts with a developer to build a residential complex with fire suppression systems. Future homeowners are third-party beneficiaries of that clause. Life insurance is the most familiar example: you contract with the insurer, but your spouse can enforce payment.
Common in these contract types
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Frequently asked questions about third-party beneficiary
Intended beneficiaries are specifically meant to benefit — they can enforce the contract. Incidental beneficiaries just happen to benefit by coincidence and cannot sue.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.