An Incidental Third-Party Beneficiary of a Contract

An incidental third-party beneficiary of a contract is someone who benefits from a contract between two other parties, even though they were not named in the contract as a beneficiary. This often happens in business contracts, where one party agrees to provide goods or services to another party, and someone else benefits from the transaction.

For example, let`s say that John owns a small business that provides accounting services to Jane`s company. John and Jane have a contract that specifies the terms of their agreement, such as the services that John will provide, the payment that Jane will make, and the timeline for the project. However, Jane`s employees also benefit from the accounting services that John provides, even though they are not party to the contract. They are an incidental third-party beneficiary.

While incidental third-party beneficiaries can benefit from a contract, they do not have any legal rights or obligations under the contract itself. This means that they cannot sue to enforce the terms of the contract, nor can they be held liable for any breaches of the contract. Only the parties named in the contract have rights and obligations under the agreement.

However, if a party to the contract intentionally includes an incidental third-party beneficiary in the agreement, that person may be considered an intended third-party beneficiary. This means that they have legal rights and can sue to enforce the terms of the contract if they are not fulfilled. For example, if John and Jane`s contract specifically states that Jane`s employees are intended beneficiaries of the accounting services, they would have legal standing to sue John if he did not provide the agreed-upon services.

In conclusion, an incidental third-party beneficiary of a contract is someone who benefits from a business transaction between two other parties, even though they were not named in the contract as a beneficiary. While they do not have legal rights or obligations under the contract, an intended third-party beneficiary may have the ability to enforce the terms of the agreement. As a professional, it is important to understand legal terminology in order to effectively communicate complex concepts to readers.