Who is a "third-party beneficiary" in contract law?

A third-party beneficiary in contract law is defined as a person or entity that stands to benefit from a contract made between two other parties. This concept is significant because it establishes that not all parties involved in a contract need to directly participate in or negotiate the terms to have rights under that contract. In effect, a third-party beneficiary can enforce the contract if it was intended to confer a benefit upon them.

In cases involving third-party beneficiaries, courts often look to the intent of the original contracting parties to determine whether the beneficiary has rights to enforce the agreement. This situation can arise in various contexts, such as insurance contracts, where the insured party benefits the designated beneficiary.

The other options describe roles that do not align with the definition of a third-party beneficiary. The first choice refers to a party actively involved in the negotiation, which does not capture the essence of someone receiving benefit from a contract to which they are not a direct party. Providing legal advice during contract formation is a supportive role and does not indicate that the advisor is a beneficiary of the contract itself. Lastly, a government agency regulating contracts pertains more to oversight and enforcement rather than benefiting from a contractual agreement.