Third-Party Payment Agreement

A third-party payment agreement is an agreement between two people that includes a third party responsible for payments set forth as terms of the agreement.

A third party is typically an individual who, although he has no connection in an agreement, is affected by the terms of it. When two parties arrange an agreement that contains another person responsible for making the payments, this person is considered the third party. The third party has no legal rights in the agreement, unless specified, but is responsible for upholding the agreement.

Any agreement made where one party must pay another party could contain a third party. This third party is sometimes considered the co-signor if the agreement is a loan. The co-signor owns no rights to the agreement but must pay the agreement if the borrower defaults. These are also used in other cases such as bills for schooling. A student might sign an agreement to take classes, but the parent signs a third party payment agreement which states the parent agrees to pay all bills incurred.

For third-party payment agreements to work, the third party must be willing to agree to the arrangement. The third party must sign the agreement taking responsibility for payments to the maker of the agreement.