Who are considered "third-party beneficiaries" in contract law?

In contract law, third-party beneficiaries are defined as individuals or entities that are not direct parties to a contract but who may still derive benefits from its execution. This concept is crucial for understanding how contracts can extend beyond the immediate participants involved in the agreement.

When a contract is formed, the primary parties are typically the ones who negotiate and sign it. However, third-party beneficiaries are important because they can be intended or incidental beneficiaries who stand to gain advantages or rights as a result of the contract's terms. For instance, if a contract between two parties specifies that one party must provide a service or payment to a third party, that third party is considered a beneficiary of the contract, even though they did not participate in its formation.

This is in contrast to the other options, which involve either the parties signing the contract or those involved in its negotiation. Witnesses to the signing do not have a stake or entitlement in the contract, and those directly contracted are only the signatories without considering the broader implications for third parties who may be addressed in the contract. Understanding the role of third-party beneficiaries helps clarify their rights and potential claims under the contract even if they were not directly involved in the contractual relationship.