Which term describes a third-party beneficiary who has no contractual rights but benefits from a contract though that is not the intent of the parties?

Which term describes a third-party beneficiary who has no contractual rights but benefits from a contract though that is not the intent of the parties?

• A. Incidental beneficiary
• B. Creditor beneficiary
• C. Donee beneficiary
• D. Novation

Answer: (A)

The idea being tested is the difference between incidental beneficiaries and intended beneficiaries in contract law. An incidental beneficiary is a third party who benefits from a contract, but the parties did not intend for them to gain enforceable rights from that contract. Because there’s no intent to confer a right on them, they have no contractual rights and typically cannot sue to enforce the contract. This is what sets incidental beneficiaries apart from others. A donee beneficiary is one the contract is intended to benefit as a gift, so they do have enforceable rights. A creditor beneficiary is someone intended to receive a payment to satisfy a debt, and they also have enforceable rights. Novation, on the other hand, is about substituting a new contract or new party for the old one, not about who benefits from the contract as a third party. So, the term that fits the description is incidental beneficiary.

The idea being tested is the difference between incidental beneficiaries and intended beneficiaries in contract law. An incidental beneficiary is a third party who benefits from a contract, but the parties did not intend for them to gain enforceable rights from that contract. Because there’s no intent to confer a right on them, they have no contractual rights and typically cannot sue to enforce the contract.

This is what sets incidental beneficiaries apart from others. A donee beneficiary is one the contract is intended to benefit as a gift, so they do have enforceable rights. A creditor beneficiary is someone intended to receive a payment to satisfy a debt, and they also have enforceable rights. Novation, on the other hand, is about substituting a new contract or new party for the old one, not about who benefits from the contract as a third party.

So, the term that fits the description is incidental beneficiary.