Counterparty

In a contract, counterparty is the party to whom one has contracted to provide a service or product. The term is used in business, finance, and law. In business, a company’s counterparty is the other company with which it has a business relationship. For example, if Company A sells products to Company B, then Company B is Company A’s counterparty. In finance, a counterparty is the risk associated with the other party in a transaction. For example, when one buys insurance, the insurance company becomes the buyer’s counterparty. In law, a person who is not a party to a contract but who may be affected by it is called a third-party beneficiary or stranger to the contract.