A contract third party beneficiary is a person or entity who is not a party to a contract but is intended to benefit from the contract in some way. This means that the parties to the contract have entered into the agreement with the understanding that the benefits or obligations under the contract will extend to someone else who is not a party to the agreement.
There are two types of third-party beneficiaries: incidental beneficiaries and intended beneficiaries. An incidental beneficiary is someone who may receive a benefit from the contract, but that benefit was not intended by the parties to the contract. An intended beneficiary is someone who was specifically named in the contract or who was clearly intended by the parties to the contract to benefit from it.
In order for a third party to be considered an intended beneficiary, the parties to the contract must have intended to create a legally enforceable obligation for the benefit of the third party. This can be done by expressly stating in the contract that the third party is an intended beneficiary or by using language that clearly shows that the parties intended to confer a benefit on the third party.
If a third party is an intended beneficiary of a contract and the parties to the contract fail to fulfill their obligations to the third party, the third party may have the right to sue the parties to the contract for breach of contract. However, if the third party is only an incidental beneficiary, they do not have this right.
