Persons entitled to benefit of agreement: Overview, definition, and example
What does "persons entitled to benefit of agreement" mean?
The term "persons entitled to the benefit of the agreement" refers to the individuals or entities that are legally entitled to enjoy or enforce the rights and benefits outlined in a contract, even if they are not a direct party to the agreement. This concept is often associated with third-party beneficiaries, who are individuals or groups intended to benefit from a contract but who are not necessarily a part of the agreement itself.
The clause specifying the persons entitled to benefit of the agreement often clarifies who can take legal action if the agreement’s terms are breached or enforced. It helps ensure that those who are meant to benefit from the agreement are clearly identified, and it outlines their rights and standing in relation to the contract.
Why are "persons entitled to the benefit of the agreement" important?
Persons entitled to the benefit of the agreement are important because they ensure that the intent of the parties involved in the contract is carried out. This is especially significant in situations where a contract is designed to provide a benefit to someone outside of the direct contractual relationship.
For example, in contracts for services, insurance policies, or construction projects, a third party may be named as a beneficiary of the agreement's provisions, such as a beneficiary of an insurance policy or an individual who will receive a benefit from a construction project. This provision helps ensure that the terms of the contract are enforced to the benefit of those individuals or entities, and that they have the right to seek remedies in the event of a breach.
Understanding "persons entitled to the benefit of the agreement" through an example
Imagine a company enters into a contract with a supplier to deliver products, with a clause that stipulates that certain products will be donated to a charity. The charity is not a party to the contract but is a person entitled to the benefit of the agreement because the contract provides for the donation of products for its benefit. If the supplier fails to make the donation as agreed, the charity, even though it is not a direct party to the agreement, could potentially enforce the contract to ensure it receives the benefit.
In another example, a life insurance policy may name the policyholder’s family members as the persons entitled to the benefit of the agreement. These family members are not directly involved in the contract but stand to receive the benefit of the policy upon the policyholder’s death.
An example of a "persons entitled to benefit of the agreement" clause
Here’s how a "persons entitled to the benefit of the agreement" clause might look in a contract:
“This Agreement is made for the benefit of the Parties and, to the extent specified herein, for the benefit of [Third-Party Beneficiary], who shall be entitled to enforce the provisions of this Agreement directly against the Parties as if they were an original signatory. Nothing in this Agreement shall confer any rights upon any person or entity other than the Parties and [Third-Party Beneficiary].”
Conclusion
The clause regarding persons entitled to the benefit of the agreement ensures that third-party beneficiaries are clearly identified and given the legal right to enforce or receive the benefits of the agreement. By specifying who can benefit from the contract, this provision clarifies the scope of the agreement’s protections and obligations, ensuring that the intentions of the parties involved are respected and enforceable. It is essential for creating transparency and ensuring that all those meant to benefit from the contract have the legal standing to do so.
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.