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.

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