LawMeaning

Third-Party Beneficiary

In one sentence

Someone who benefits from a contract even though they didn't sign it.

Plain English

A third-party beneficiary is a person who wasn't part of making a contract but has the legal right to enforce it or collect its benefits. This happens when two people make a deal specifically intending to benefit someone else. For instance, if you buy life insurance naming your child as the beneficiary, your child can collect the payout even though they never signed the policy. Not everyone who happens to benefit from a contract is a third-party beneficiary—the parties must have intended to benefit them.

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Example

A father buys a college savings plan naming his daughter as the beneficiary. The daughter can enforce the contract and claim the funds even though she never signed it, because the father and the financial company intended to benefit her.

Used in a sentence

“As a third-party beneficiary of the construction contract, the homeowner could sue the contractor for defective work.”

Related terms

Assignment
Transferring your contract rights to someone else.
Delegation
Handing off your contract duties to someone else to perform.
Enforceability
The legal ability to compel someone to follow through on a contract's terms in court.
Material Fact
A fact that significantly affects a party's rights, obligations, or decision-making in a contract.
Objective Theory of Contracts
The legal rule that contract meaning is based on what a reasonable person would understand, not secret thoughts.
Remedy
A legal action or payment a court awards to fix a harm or enforce a right after a breach.
Offer
A proposal to enter into a binding agreement on specific terms.
Acceptance
Agreeing to the exact terms of an offer, creating a binding contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.