Donee beneficiary is a third party beneficiary who is the beneficiary of a contract between two other parties which the donee beneficiary is not a party to. For example, if a parent buys a life insurance contract with proceeds from such contract going to their child, the child would be a donee beneficiary as they are not party to the contract but will be the beneficiary of the contract.
A donee beneficiary may legally enforce the performance of the contract against the performing party, even though the beneficiary gave no consideration in the agreement. Also, the rights of the donee beneficiary arise as soon as the contract is made, whether or not the donor beneficiary is aware of the contract. Also, once the agreement is made, the contracting parties may need approval by the donee beneficiary to change the terms of the contract. This is in contrast to other types of third party beneficiaries that may only have rights to enforce the contract when made aware of the agreement.
[Last updated in November of 2022 by the Wex Definitions Team]
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