Which term describes a third-party beneficiary who has no contractual rights but benefits from a contract though that is not the intent of the parties?

• A. Incidental beneficiary
• B. Creditor beneficiary
• C. Donee beneficiary
• D. Novation

Answer: (A)

The idea being tested is the difference between incidental beneficiaries and intended beneficiaries in contract law. An incidental beneficiary is a third party who benefits from a contract, but the parties did not intend for them to gain enforceable rights from that contract. Because there’s no intent to confer a right on them, they have no contractual rights and typically cannot sue to enforce the contract.

This is what sets incidental beneficiaries apart from others. A donee beneficiary is one the contract is intended to benefit as a gift, so they do have enforceable rights. A creditor beneficiary is someone intended to receive a payment to satisfy a debt, and they also have enforceable rights. Novation, on the other hand, is about substituting a new contract or new party for the old one, not about who benefits from the contract as a third party.

So, the term that fits the description is incidental beneficiary.