Intended Beneficiary Law and Legal Definition

Intended Beneficiary refers to a third-party beneficiary. Intended beneficiary benefits from a contract by acquiring rights under the contract. Intended beneficiary also has the ability to enforce the contract once those rights have vested. Intended beneficiary is also known as direct beneficiary.

An intended beneficiary is justified in relying on a promise. It is immaterial whether s/he learns of the promise from a promisor, a promissee, or a third party, and when the promise is one to satisfy the promisee's duty or is a gift promise or is neither. If there is a material change in position in justifiable reliance on the promise, the change of position precludes discharge or modification of the contract without the beneficiary's consent. Even though there is no novation and no change of position by the beneficiary, the power of the promisor and the promissee to vary the promisor's duty to an intended beneficiary is terminated when the beneficiary manifests assent to the promise in a manner invited by the promisor or promisee. [COMMERCE UNION BANK OF LAWRENCE CTY. v. BREWER-MARSTON FORD, INC., 1985 Tenn. App. LEXIS 2647 (Tenn. Ct. App. Jan. 31, 1985)].