Third Party Beneficiary- Person who is not a member of a contract between two parties but stands to benefit from the contract's execution. The third party may legally enforce the contract if he can prove that his rights to the contract are justifiable. 

Intended vs. Incidental Beneficiary
  • Intended- The promisee (Party A) has made an agreement to provide consideration to (Party B) the promisor. Party B/promisor must provide a product or service to the third party beneficiary stated in the contract. The promisee/Party A must intend for the third party beneficiary to receive a benefit from the contract. 
    • Creditor Beneficiary- Example, Party A owes money to Party C (Third party beneficiary). Party A might provide a service to Party B in exchange for Party B promising to pay Party C. 
    • Donee Beneficiary- Party A would like to give a gift to Party C so Party A provides Party B with consideration in exchange for Party B giving a gift to Party C.​

​Any effort by Party A or B to modify/rescind the contract would allow Party C to sue the promisee/promisor/or both for the third party's contract rights. 

  • Incidental Beneficiary- Party who stands to benefit from a contract's execution, however that was not the intention of either the promisee or the promisor. Example, if Party A wants Party B to detail his business's company vehicles, Party B might want to hire a carpet cleaner (Party C). If Party A or B decide that they can clean the carpet without Party C, Party C would have no grounds to recover any rights in the contract because Party C was not an intended beneficiary. Party A or B can change their mind without having to provide anything to Party C.
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