Monday, July 14, 2008

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.


Ashish said...

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?


David Haimes said...


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..

Nagamohan said...

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 :)

David Haimes said...


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

cm_icc said...

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).

Frankie P. said...


6th grade English, David >.>