What term describes a contract between two parties that benefits a third party?

• A. Express contract
• B. Bilateral contract
• C. Third-Party beneficiary contract
• D. Adhesion contract

Answer: (C)

A contract that is formed between two parties with the explicit aim of benefiting a third person is a third-party beneficiary contract. The key idea is that the contract creates enforceable rights for someone not directly part of the agreement, because the promisor and the promisee intended to benefit that third party. The third party can usually sue to enforce the contract once those rights vest.

This fits best because the defining feature is the beneficiary outside of the two contracting parties. The other terms don’t specifically describe benefiting a third party: an express contract just means terms are stated; a bilateral contract involves mutual promises between two parties; an adhesion contract is a take-it-or-leave-it standard-form contract. If the third party is an intended beneficiary, they have rights; if they’re incidental, they generally do not.