Contracts for the Benefit of Third Parties

Contracts for the Benefit of Third Parties are agreements where someone outside the contract stands to benefit from its terms. Typically, only parties directly involved can enforce a contract, but in these cases, a third party can also claim benefits. For this to be valid, the contract must expressly state the intention to benefit the third party. This concept allows individuals or entities not part of the contract to receive advantages, such as compensation or services, based on the agreement made between the primary parties. Examples include insurance policies where a beneficiary receives payouts.