Third Party

Definition of 'Third Party'


An individual or entity that is involved in a transaction but is not one of the principals. The third party often has a lesser interest in the transaction than the principals.

Investopedia explains 'Third Party'


An example of a third party would be the escrow company in a real estate transaction. The first two parties, the principals, are the buyer and seller. The escrow company acts as a neutral agent to collect the documents and money that the buyer and seller need to exchange to complete the transaction. While the escrow company receives a fee for performing its services, this fee is its only interest in the real estate transaction.

As another example, if a debtor owes a creditor a sum of money and hasn't been making the scheduled payments, the creditor is likely to hire a third party, a collection agency, to ensure that the debtor honors his agreement. The collection agency has an interest in the transaction because it gets paid for collecting debts, but it is arguably the two principals, the debtor and the creditor, that have the greatest interest in the transaction.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  2. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  3. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  4. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  5. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  6. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
Trading Center