Who is a creditor beneficiary in a contract?

A creditor beneficiary is defined as a person who derives a benefit from a contract to which they are not a party, specifically because the contract was made to satisfy a debt or obligation owed to them. In this context, the first choice accurately describes this concept, as it identifies a party who receives a benefit from the contract even though they did not participate in the agreement itself.

For example, if a borrower enters into a contract with a lender to pay off a debt, and a third party (the creditor beneficiary) is the one meant to receive the payment, that third party benefits from the arrangement without having been part of the original contract negotiations or terms. This creates a distinct legal relationship where the creditor can potentially enforce the contract if necessary.

This understanding differentiates the creditor beneficiary from other roles in the contractual scenario. The individuals who are obligated to fulfill the contract terms are either the parties to the contract (not beneficiaries). Third parties who pay a contract price are not necessarily beneficiaries in the same sense as a creditor beneficiary because they are not the ones the contract intends to benefit. Finally, a person who negotiates the contract terms is typically one of the actual parties involved in the contract and does not fit the definition of a beneficiary. Thus, the identification of