Also known as: incidental beneficiary
Written by attorneys · grounded in primary & secondary sources — see below
A third party to a contract who receives a benefit from performance but is not an intended beneficiary under the parties' manifested intention. Recognition of enforcement rights in such a beneficiary is not appropriate to effectuate the parties' intention. An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee.
Integrity Partners contracted with Ironwood Capital to build a new headquarters on Ironwood's land. The project raised property values for nearby parcels owned by Isabelle Inman. Inman sued Ironwood Capital for breach when construction delays occurred. Inman holds no right to enforce the contract because her benefit arises only as a byproduct of the agreement between the contracting parties.
Insight Consulting hired Infinity Bank to finance a software upgrade for Insight's internal systems. The upgrade required payments to a software vendor. The vendor later claimed rights under the financing agreement when payments were withheld. The vendor acquires no right against either Insight Consulting or Infinity Bank because its benefit is incidental to the financing contract.
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A beneficiary is incidental if recognition of a right to performance is not appropriate to effectuate the intention of the parties and the beneficiary does not meet the criteria in subsection (1)(a) or (1)(b) of § 302. Incidental status means the third party benefits only as a byproduct of the contract.
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An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee. Direct suit for breach is unavailable regardless of the benefit received.
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No. Performance of a contract will often benefit a third person, but unless the third person is an intended beneficiary, no duty to that person is created. Mere economic or practical advantage is insufficient.
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No. Because incidental beneficiaries hold no enforceable rights, they may not obtain specific performance or damages from either contracting party even when the contract concerns unique subject matter.
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