In New York, it is considered “old law” that a non-party to a contract may sue to enforce the contract if it was made for its benefit.1 To establish a third-party beneficiary claim, the party must demonstrate that it is an intended beneficiary of the contract. The New York Court of Appeals has generally held that this requires proving that (1) there exists a valid contract between the contracting parties; (2) the contract was intended for the third party’s benefit; and (3) the benefit to the third party is clear and direct and not merely incidental.2 If the third party fails to prove one or more of these elements, it is at best an incidental beneficiary of the contract and cannot sue to enforce it.3

While “[i]t is ancient law in New York that to succeed on a third-party beneficiary theory, a non-party must be the intended beneficiary of the contract,”4 recent Commercial Division cases reveal some difficulty in identifying which third parties qualify as intended beneficiaries. By drawing various factual distinctions, emphasizing distinct parts of the legal standard, and relying on divergent precedent from the Appellate Division, the Commercial Division has demonstrated not only that clearer guidance is required from the Court of Appeals on third-party beneficiary law, but also that at times only a very special type of plaintiff will qualify as an intended beneficiary of a contract.

New York Precedent

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