What does third-party beneficiary mean in contract law?

In contract law, a third-party beneficiary refers to an individual or entity that benefits from a contract made between two other parties, even though they are not directly involved in the contract themselves. This concept recognizes that certain contracts can grant benefits to people who are not signatories to the agreement, allowing them to enforce certain rights under specific circumstances.

In many jurisdictions, a third-party beneficiary can sue to enforce the contract or claim benefits under it if the contract was intended to benefit them. This legal recognition helps ensure that parties who are intended to receive benefits from contractual agreements can pursue those benefits, thereby fostering a sense of fairness and accountability.

The other options do not accurately represent the concept of a third-party beneficiary. An individual who is a party to the contract does not fall under the definition since they are involved directly. A group that has no rights to enforce the contract contradicts the essence of a third-party beneficiary, who does have certain enforceable rights. Lastly, a party that breaches the contract is not relevant to the concept of a third-party beneficiary, as this focuses solely on those who benefit rather than on the parties involved in a violation of the agreement.