Legal Definitions - creditor beneficiary

A creditor beneficiary is a type of third-party beneficiary in a contract who is owed a debt that is to be paid by another party's performance under the contract. In simpler terms, it means that someone who is owed money can benefit from a contract between two other parties.

Let's say that John owes Jane $1,000, but he doesn't have the money to pay her back. However, John has a contract with Bob to paint his house for $1,000. In this case, Jane is a creditor beneficiary because she can benefit from the contract between John and Bob. When Bob completes the painting job, Jane can receive the $1,000 that John owes her.

This example illustrates how a creditor beneficiary can benefit from a contract between two other parties. It shows that a third party can have a legal right to receive payment from a contract even though they are not a party to the contract.