Third Party Beneficiary To Contract

Intended vs. Incidental Beneficiary

• Intended– The promisee (Party A) has made an agreement to provide consideration to (Party B) the promisor. Party B/promisor must provide a product or service to the third party beneficiary stated in the contract. The promisee/Party A must intend for the third party beneficiary to receive a benefit from the contract.

• • Creditor Beneficiary- Example, Party A owes money to Party C (Third party beneficiary). Party A might provide a service to Party B in exchange for Party B promising to pay Party C.
  • Donee Beneficiary- Party A would like to give a gift to Party C so Party A provides Party B with consideration in exchange for Party B giving a gift to Party C.​

​Any effort by Party A or B to modify/rescind the contract would allow Party C to sue the promisee/promisor/or both for the third party’s contract rights.

• ​Incidental Beneficiary– Party who stands to benefit from a contract’s execution, however that was not the intention of either the promisee or the promisor. Example, if Party A wants Party B to detail his business’s company vehicles, Party B might want to hire a carpet cleaner (Party C). If Party A or B decide that they can clean the carpet without Party C, Party C would have no grounds to recover any rights in the contract because Party C was not an intended beneficiary. Party A or B can change their mind without having to provide anything to Party C.