An incidental beneficiary is a term used in contract law to refer to a third party who benefits from a contract between two other parties, but is not intended to benefit. In other words, the contract between the two parties is not made for the purpose of benefiting the third party. Therefore, the third party does not have any legal rights under the contract and cannot sue to enforce its terms.
An example of an incidental beneficiary would be a construction company hired by a property owner to build a new house. If the construction company hires a subcontractor to provide the necessary materials, the subcontractor is an incidental beneficiary of the contract between the property owner and the construction company. Although the subcontractor benefits from the contract, the contract is not intended to benefit the subcontractor.
The concept of incidental beneficiaries is important because it affects the legal rights of third parties who may be affected by a contract. In general, only parties who have entered into a contract have legal rights and obligations under that contract. Incidental beneficiaries, however, do not have any legal rights because they are not intended to benefit from the contract.
[Last updated in March of 2023 by the Wex Definitions Team]