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Third Party Beneficiary Definition 

What is a Third Party Beneficiary?

A third-party beneficiary is not a party to a contract but someone who benefits from it. They are usually not named in the agreement, but they receive some benefit from it. Sometimes, this type of beneficiary can sue if they do not receive the help they should receive under the contract.

Types of Beneficiaries

There are three types of third-party beneficiaries: direct, incidental, and intended.

Direct beneficiaries are the ones who receive the benefits outlined in the contract. Incidental beneficiaries are those who indirectly benefit from the agreement. These beneficiaries don’t appear in the contract, but they receive some benefit from it. Finally, intended beneficiaries are those who don’t appear in the original contract as beneficiaries but receive some benefit from it.

What type of third-party beneficiaries can enforce contracts?

All types of third-party beneficiaries have the right to enforce contracts. 

Can a contract be enforced?

Yes, a contract could be against a third-party beneficiary. However, this beneficiary must be a direct, incidental, or intended beneficiary to enforce the agreement.

What’s the difference between a third-party beneficiary and an incidental beneficiary?

The main difference between these two is that the third party has no legal rights under the contract. Meanwhile, an incidental beneficiary is a third party who benefits from an agreement between two other parties but wasn’t originally intended to receive the benefit.

About Valur

We built a platform to give everyone access to the tax and wealth-building tools of the ultra-rich like Mark Zuckerberg and Phil Knight. We make it simple and seamless for our customers to take advantage of these hard-to-access tax-advantaged structures so you can build your wealth more efficiently at less than half the cost of competitors. From picking the best strategy to taking care of all the setup and ongoing overhead, we make it easy and have helped create more than $500m in wealth for our customers.