third party beneficiary
Definition
A third party beneficiary is someone who benefits from a contract even though they were not one of the people who signed or negotiated it. When two parties write a contract specifically intending to benefit someone else, that outside person can sometimes legally enforce the contract if something goes wrong.
Example
If you hire a caterer for your client's retirement party and the caterer no-shows, your client might actually have the right to sue the caterer directly because the contract was clearly made for their benefit.
Watch Out
When you sign contracts with vendors or service providers, think carefully about who else might gain the legal right to sue you or your contractor if the deal falls apart, because that list of potential claimants can be larger than you expect.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.