Donee Beneficiary

Definition

The term donee beneficiary refers to an entity that is not a party to a contract, but receives a benefit if the contract is fulfilled. Donee beneficiaries can also be third party beneficiaries.

Explanation

Oftentimes, when a contract is created between two parties a third party can also benefit from the arrangement.  Donee beneficiaries receive a benefit when a donor fulfills their promise to the intended beneficiary, or donee.  If the donee beneficiary does not know a contract between two parties exists, they have no right to file for damages if the contract is not fulfilled.  However, a donee beneficiary can file for damages if they have been engaged, and the donor does not fulfill their promise.

Example

Bill (the donor) has promised to buy a new car for his daughter Haley (the donee).  Bill has ordered the car from the Cars-R-Us dealership (the donee beneficiary) across town.  Unfortunately, Haley received several speeding tickets that led to the suspension of her driver's license.  Displeased with his daughter's driving record, Bill decides to cancel the order with Cars-R-Us.  In this example, the donee beneficiary has the right to file for damages, even though they were not directly involved in the agreement between the donor and the donee.

Related Terms

code of ethics, street name, safekeeping, custodian, blind trust, trustee, trustor