Third-Party Beneficiary

DEFINITION of 'Third-Party Beneficiary'

An individual who can sue parties in a contract despite not being a party listed in the original contract document. The third-party beneficiaries right to sue, called ius quaesitum tertio, comes from a party in the contract intending to involve the third-party, such as through the delivery of an item or some equivalent.

BREAKING DOWN 'Third-Party Beneficiary'

Parties able to sue for breach of contract must have been set to receive some benefit from the completion of the contract. For example, a child's parents pay a cemetery a down payment to cover the cost of a burial plot. If, upon death, the cemetery refuses to provide the child with the land, the child may sue the cemetery for non-performance even though he was not named in the original contract. The child was to benefit from the contract in that some of the burial costs were to be covered.

Trading Center