No benefit to third parties: Overview, definition, and example
What is no benefit to third parties?
"No benefit to third parties" is a legal provision often included in contracts to clarify that only the parties involved in the agreement can enforce or benefit from its terms. It means that third parties—those who are not signatories to the contract—cannot claim rights or benefits under the contract, even if they are indirectly affected by it. This provision ensures that only the parties who have directly entered into the agreement have the legal standing to seek enforcement or take action based on the contract’s terms.
For example, if two companies enter into a contract for the supply of goods, a third party, such as a competitor, cannot enforce any clauses in the contract or claim any rights to the goods or terms unless they are a party to the contract.
Why is no benefit to third parties important?
The "no benefit to third parties" clause is important because it helps prevent unintended obligations or rights being conferred on individuals or entities who are not part of the contract. It ensures that the parties involved maintain control over the contract's execution and outcomes, limiting the potential for legal disputes from external parties who might feel they have a right to act under the contract.
For businesses, including this clause protects against unforeseen claims or legal actions from non-parties who might try to leverage the contract in their favor.
Understanding no benefit to third parties through an example
Imagine a company signs a contract with a vendor for the supply of materials to a construction project. The "no benefit to third parties" clause ensures that only the company and the vendor have rights under the contract. If a subcontractor working on the project is affected by delays in material delivery, they cannot use the contract to claim damages or enforce the terms between the company and the vendor, even though they are impacted by the situation.
In another example, a service agreement between a business and a client might include a "no benefit to third parties" provision to prevent third-party suppliers, partners, or competitors from gaining rights or obligations based on the agreement, even if their interests are indirectly involved.
An example of a no benefit to third parties clause
Here’s how a "no benefit to third parties" clause might look in a contract:
"This Agreement is intended solely for the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement shall confer any rights, remedies, or benefits to any third party, nor shall any third party have any legal standing to enforce any of its provisions."
Conclusion
The "no benefit to third parties" clause is an important provision in contracts to ensure that only the parties who have agreed to the terms of the contract can enforce or benefit from it. It helps prevent external parties from making claims or taking legal action based on the contract, maintaining control and clarity for the involved parties. This clause provides legal protection for businesses by limiting the scope of the contract’s impact to only those who are directly involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.