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Identifying Third Parties to Contracts

A third party is a person who’s not a party to the contract. Common law recognizes three significant third parties:

  • Third-party beneficiary: If the parties to the contract intend a third party to be able to sue for enforcement of a promise made in the contract, then that that person is a third-party beneficiary.

  • Assignee: If a party transfers a right under the contract to a third party, that person is an assignee. The assignor (the one who assigned the rights) drops out of the picture and the obligor (the one who is obligated to perform) must perform for the assignee.

  • Delegate: If a party delegates a duty under the contract to a third party, that person is a delegate. The delegate must now perform the contract, but the delegator (the one who was obligated under the contract to perform) remains liable for performance and breach.

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