First Party? Third Party? Which Party am I?

Written by David Haimes

This is from an email sent to me by Amazon


The following items have been shipped to you by
Qty      Item                           Price  Shipped  Subtotal
--------------------------------------------------------------------- items (Sold by, LLC):
1     Seventh Generation Chlorin...   $42.99      1   $42.99


It tells me the Legal Entity that I have a contract with, if those Diapers don’t arrive as advertised I know it is, LLC that I need to drag through the Legal System, it will also tell me something about what taxes they are going to apply if I look up where that Legal Entity is registered.

In this transaction I am the first Party and Amazon is the third Party. If I used an ERP system I’d be entering this transaction into my Payables system, David Haimes would be the first party LE and, LLC are the Supplier also known as the Third Party LE.

In Amazon’s ERP system, they used Receivables to generate the Invoice above and when they entered the Customer they entered David Haimes, he is the Third Party LE and they would also have, LLC as the First Party.

The interaction between myself and Oracle generates two transactions in two ERP systems and the same party is the First Party and the Third Party depending on where you are looking at it from. Still with me? It gets more confusing when we’re dealing with Intercompany (as usual) because we both of those transactions will be in the same ERP system, both the payables and the receivables transaction are present and the the same entity is a First Party LE (in Oracle defined in the Legal Entity Configurator) and a Third Party LE (defined as a Customer and Supplier).

So the only thing remaining is to work out who is the second party and why are they never involved, I have no idea on that one – if you do please let me know in the comments section.

12 Responses

  1. Nice article David!

    In my view “third party” simply refers to the “other party”, or the “outside party”. Since there is a transaction between two transacting parties, between oneself and an outside party, the terms first party and third party make complete sense.

    Perhaps the terms have something to do with the “first person” and “third person” narrative styles in English?



  2. Ashish,

    Yes Third Party is the other party, first party is me.

    I think it does come from the English 1st and 3rd person, at school I always wondered who the second person was and why they were never mentioned..


  3. David,
    On the lighter side, second party is none other than first party representing or expressing itself in third party tone. So there is no way we can have a second party in the transaction :)


  4. Nagamohan,

    Thansk for that – I don’t think I was attentive enough in English classes at school! Now I can relax and know we just have 1st and 3rd parties – that’s more than enough to worry about on a transaction I think


  5. the second party is the observer.

    i was the second party while reading this thread.

    i am the first party while entering this post to the original poster (third party in relation to my first party).


  6. Sorry but you all have it wrong. There are typically two parties involved in a transaction, you being the first party and the other being the second. When someone else gets involved they are known as a third party. For instance, you by an Apple iPhone. You are the first party and Apple is the second. When you install Joe Blows application onto your iPhone, Joe becomes the third party, and you are said to have installed a third party application on your phone.

    Hope this helps, Jimmy.


  7. No, David.
    Actually Jimmy got it close.
    Here’s how it is (and it’s the same in literature, conversation, transaction, or application/ software/ hardware. Trust me, I used to teach English):
    First party –> I/ me (in this reply, first party is Tom)
    (in your perspective, first party is David)
    Second party –> you (in this reply, second party is David)
    (in your perspective, second party is Tom)
    Third party –> everyone else not directly involved/ not I nor you
    (third party is Jimmy and everyone else who got it all wrong)

    This explains why “second party” is very rarely, if ever, mentioned in a conversation/ application/ transaction, because to me I’m the first and you’re the second, but to you it’s vice versa; however, we both agree that everyone else is “third party”.

    If you ever read EULA (End User License Agreement), the first party is ALWAYS the manufacturer/ producer, and the user is ALWAYS the second party, because it’s made from their perspective.

    Hope this helps all of you out there :)



  8. what about internet third parties?


  9. What are computer Cookies (not the ones you eat)?


  10. Could someone answer her?


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