Should I name third-party beneficiaries?

Nov 14, 2017Contract Tips

Q: Does my risk increase if I name third-party beneficiaries in my contract?

A:  Naming third-parties as beneficiaries in your contract may allow those parties the right to bring claims directly against you. Since those parties might not otherwise have that right, by including them, you may have significantly increased your risk on the project, and this may also pose issues related to insurability.

What is the third-party beneficiary principle?

A: According to the International Risk Management Institute, the third-party beneficiary principle allows a third party to sue to enforce a contract if the contracting parties intended to benefit the third party at the time the contract was executed.

Even though you have not named the third party beneficiary in your contract, they still may have rights to sue.