Third-Party Beneficiary Agreement

A third-party beneficiary agreement is a legal document that confers certain rights, benefits, or protections to a person or entity who is not a direct party to the contract. In construction, a third-party beneficiary agreement may be used when the owner or contractor wants to extend the warranties, indemnities, or other contractual provisions to a future owner, tenant, or user of the property. The agreement typically includes the identification of the third-party beneficiary, the specific rights or benefits granted, the conditions or limitations of the grant, and the consent of the contracting parties. The purpose of a third-party beneficiary agreement is to provide additional assurances and remedies to the third party, enhance the value and marketability of the property, and create a direct contractual relationship between the third party and the contracting parties. A third-party beneficiary agreement should be carefully drafted to ensure that it is consistent with the underlying contract, complies with the applicable laws and regulations, and does not create unintended liabilities or conflicts.