Incidental Beneficiary Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Incidental Beneficiary, written in plain English, along with examples of how it is used.

What is Incidental Beneficiary?

It refers to the party or person (say A) who is benefited by the execution of a contract between the parties (Say B and C) other than himself but who will have no rights to claim anything from anyone if the contract does not get execute or is breached. So if B gets into a contract with to contruct a house with contructor C and B wants a particular Architect A to design the house, A is being benefitted by the contract of B and C even though it was not the intention to get into the contract. But A wll have no rights if B and C breaches contract or contract does not execute.

History and Meaning of Incidental Beneficiary

Incidental beneficiaries are those who may receive some benefits but are not a party to a contract. In other words, such individuals have no right to sue for damages in case the contract between two parties is not executed. To understand more about the term, it is necessary to know about the intention of the parties to the contract.

An incidental beneficiary can have a positive or negative impact on the contract, but they are only recognized by courts in specific circumstances. They are not considered “parties” to the contract in the same way that the primary parties to the contract are.

Examples of Incidental Beneficiary

  1. A couple entered into a contract with an architect to design and oversee construction of their house. Later, the couple gets divorced, and the house is never built. The architect is an incidental beneficiary of the contract – even though the house wasn't built, the project agreement was to hire the architect, and as such, he should still be paid.

  2. A local government hires a construction company to build a bridge. A nearby resident has a better view of the area after the bridge is built, and as such, their property value increases. The resident is an incidental beneficiary of the contract.

  3. A father takes out a life insurance policy naming his family as beneficiaries. His adult child, who is not named, is an incidental beneficiary.

Legal Terms Similar to Incidental Beneficiary

  1. Third-Party Beneficiary: This is a person who a contract is intended to benefit directly.

  2. Privity of Contract: Refers to the legal relationship between parties who formed the contract.

  3. Assignment of Rights: A legal contract that allows one party to transfer rights to another party.