Third Party Beneficiary

Filed Under:
Dictionary Says

Definition of 'Third Party Beneficiary'


A person who will benefit from a contract made between two other parties. This third party beneficiary was not a party to the contract itself, but if the contract is fulfilled, the third party stands to realize a benefit. Under certain circumstances, the third party has legal rights to enforce the contract or share in its proceeds. For example, if they can prove that they were an intended beneficiary and not an incidental beneficiary.
Investopedia Says

Investopedia explains 'Third Party Beneficiary'


There are certain standards that need to be met for the third party beneficiary to have legal rights to enforce a contract or to share in the proceeds. For example, Mary agrees to buy a car as a gift for Katie. If the dealer (Bob) is notified and orders the car, but Marry refuses to go through with the contract, the dealer can sue for the damages. This is because Bob would be financially hurt, even though he is not a party of the contract. In terms of insurance policies, when an individual buys an insurance policy, a contract is formed between this individual and the insurance company, but a third party will receive the insurance payments. If the individual who bought the policy and whose name the policy is under passes away, the third party beneficiary has legal right to receive the insurance benefits and to sue either party if the insurance contract is not upheld.
comments powered by Disqus
Hot Definitions
  1. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  2. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  3. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  4. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  5. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  6. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
Trading Center