Legal Question in Business Law in Maryland

Re: 3rd party beneficiary

This is best answered by example.

You and your ex-spouse enter into an agreement whereby you each agree to put funds aside for the college education of the child you have in common.

The child is the third-party beneficiary of the contract, or "3pb". She's not a party to the contract; that's between you and your ex-spouse; however, she benefits from the contract because the funds will be used for her benefit for college education.

In another example, Company A agrees with Benefits Provider B to pay for life insurance for the employees of Company A. The contract is between Company A and Benefits Provider B, but the beneficiaries of the employees of Company A benefit from the contract. They (not the employees) are the 3pb.

How to determine the 3pb? Follow the money. Who benefits from the contract? If it is a party, then there is no 3pb; however, if someone who is NOT a party to the contract benefits, then that person is a 3pb.

Hope this helps. Good luck in your 1L contracts class.

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