Rights of third parties - Revision history

Designing Buildings at 10:08, 9 September 2020

2020-09-09T10:08:04Z

← Older revision		Revision as of 10:08, 9 September 2020
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	* [http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.		* [http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.

−	[[Category:~~Other_legislation~~]] [[Category:DCN_Legislation]] [[Category:Contracts_/_payment]]	+	[[Category:DCN_Case_Law]] [[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Legislation]] [[Category:Other_legislation]] [[Category:Contracts_/_payment]]

Editor at 17:31, 21 February 2019

2019-02-21T17:31:41Z

← Older revision		Revision as of 17:31, 21 February 2019
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−	[[File:Contract-ice.jpg]]	+	[[File:Contract-ice.jpg\|link=File:Contract-ice.jpg]]

	= The Contracts (Rights of Third Parties) Act =		= The Contracts (Rights of Third Parties) Act =
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	* Contract conditions.		* Contract conditions.
	* Defects.		* Defects.
		+	* Delay analysis.
	* Difference between collateral warranties and third party rights.		* Difference between collateral warranties and third party rights.
	* Privity of contract.		* Privity of contract.
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	* Step in rights.		* Step in rights.

−	=== External References ===	+	= External References =

	* [http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.		* [http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.

−	[[Category:Other_legislation]] [[Category:Contracts_/_payment]]	+	[[Category:Other_legislation]] [[Category:DCN_Legislation]] [[Category:Contracts_/_payment]]

Editor at 14:08, 2 October 2018

2018-10-02T14:08:11Z

← Older revision		Revision as of 14:08, 2 October 2018
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		+	[[File:Contract-ice.jpg]]
		+
	= The Contracts (Rights of Third Parties) Act =		= The Contracts (Rights of Third Parties) Act =

Editor at 14:07, 2 October 2018

2018-10-02T14:07:37Z

Editor at 17:15, 9 November 2017

2017-11-09T17:15:25Z

← Older revision		Revision as of 17:15, 9 November 2017
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	The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.		The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.

−	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.	+	NB: Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.

	= Case law =		= Case law =
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	* Contract conditions.		* Contract conditions.
	* Defects.		* Defects.
		+	* Difference between collateral warranties and third party rights.
	* Privity of contract.		* Privity of contract.
	* Recovery of third party losses.		* Recovery of third party losses.

Editor at 14:25, 28 July 2016

2016-07-28T14:25:35Z

← Older revision		Revision as of 14:25, 28 July 2016
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	* Caveat emptor (buyer beware).		* Caveat emptor (buyer beware).
	* Collateral warranties.		* Collateral warranties.
		+	* Common law.
	* Construction contract.		* Construction contract.
	* Contract conditions.		* Contract conditions.

Editor at 10:31, 3 March 2016

2016-03-03T10:31:22Z

← Older revision		Revision as of 10:31, 3 March 2016
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	'Subject to the provisions of this Act, a person who is not a party to a contract (a "third party") may in his own right enforce a term of the contract if –		'Subject to the provisions of this Act, a person who is not a party to a contract (a "third party") may in his own right enforce a term of the contract if –

−	(a) the contract expressly provides that he may, or~~<br />~~	+	(a) the contract expressly provides that he may, or
−	(b) subject to subsection (2), the term purports to confer a benefit on him.'	+
		+	(b) subject to subsection (2), the term purports to confer a benefit on him.'

	It is to be noted that the right created is to enforce a term of a contract, not the whole contract itself. For example, if a building contract contains a term that the contractor is required to use materials of good quality, then that term might be the subject of a third party enforcement right, subject to the other requirements for the existence of the right being met.		It is to be noted that the right created is to enforce a term of a contract, not the whole contract itself. For example, if a building contract contains a term that the contractor is required to use materials of good quality, then that term might be the subject of a third party enforcement right, subject to the other requirements for the existence of the right being met.
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	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.		NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.
		+
		+	= Case law =
		+
		+	=== Linden Gardens v Lanesta Sludge (1994) ===
		+
		+	* The purported assignment of the benefit of a large construction contract was ineffective.
		+	* The result was that the party entitled to enforce was not the party who had suffered the loss.
		+	* The House of Lords rejected a submission that the loss therefore disappeared into a ‘black hole’.
		+
		+	=== Darlington v Wiltshier (1995) ===
		+
		+	* The building owner faced a similar difficulty arising from using a separate financier to enter the building contract which was then to be assigned to the local authority.
		+	* There were defects in the work but the contractor contended that the loss was suffered prior to assignment.
		+	* The Court of Appeal held the plaintiff entitled to recover.
		+
		+	=== Alfred McAlpine v Panatown (2000) ===
		+
		+	* The building contract was with a nominee company within the same group of companies which owned the site.
		+	* The right of action appeared to be vested in a party other than the one that had suffered damage.
		+	* Held that the case did not fall into any of the exceptions of the common law privity rule.

	= Find out more =		= Find out more =

Editor at 10:28, 3 March 2016

2016-03-03T10:28:49Z

← Older revision		Revision as of 10:28, 3 March 2016
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−
	= The Contracts (Rights of Third Parties) Act =		= The Contracts (Rights of Third Parties) Act =

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	Section 1(1) of the Act provides:		Section 1(1) of the Act provides:

−	'Subject to the provisions of this Act, a person who is not a party to a contract (a "third party") may in his own right enforce a term of the contract if –	+	'Subject to the provisions of this Act, a person who is not a party to a contract (a "third party") may in his own right enforce a term of the contract if –

−	(a) the contract expressly provides that he may, or<br/>(b) subject to subsection (2), the term purports to confer a benefit on him.'	+	(a) the contract expressly provides that he may, or<br />
		+	(b) subject to subsection (2), the term purports to confer a benefit on him.'

	It is to be noted that the right created is to enforce a term of a contract, not the whole contract itself. For example, if a building contract contains a term that the contractor is required to use materials of good quality, then that term might be the subject of a third party enforcement right, subject to the other requirements for the existence of the right being met.		It is to be noted that the right created is to enforce a term of a contract, not the whole contract itself. For example, if a building contract contains a term that the contractor is required to use materials of good quality, then that term might be the subject of a third party enforcement right, subject to the other requirements for the existence of the right being met.

	There are two categories of potential third parties given this new right.		There are two categories of potential third parties given this new right.
−	*The first category, where the contract expressly confers the right, would permit, for example, the express selection of certain terms of the contract and make them enforceable by named third parties.	+
−	*The second category is where the term of the contract 'purports to confer a benefit' on the third party, but this is subject to the provisions of section 1(2) of the Act which states, 'Subsection 1(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.’	+	* The first category, where the contract expressly confers the right, would permit, for example, the express selection of certain terms of the contract and make them enforceable by named third parties.
		+	* The second category is where the term of the contract 'purports to confer a benefit' on the third party, but this is subject to the provisions of section 1(2) of the Act which states, 'Subsection 1(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.’

	In enforcing a term of the contract, the third party has available to them any remedy that would have been available in an action for breach of contract as if they had been a party to the contract.		In enforcing a term of the contract, the third party has available to them any remedy that would have been available in an action for breach of contract as if they had been a party to the contract.
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	The Act sets out that a third party must be expressly identified:		The Act sets out that a third party must be expressly identified:
−	*in the contract by name,	+
−	*as a member of a class, or,	+	* in the contract by name,
−	*as answering a particular description, but need not be in existence when the contract is entered into.	+	* as a member of a class, or,
		+	* as answering a particular description, but need not be in existence when the contract is entered into.

	It is clear that members of a class or answering to a particular description could create very wide categories of third parties in construction. For example, these categories could include purchasers (not limited to a first purchaser) and tenants (not limited to the first tenant or first assignee), even though the names of those parties were not known at the date of contract and even though they were not in existence at the date of contract.		It is clear that members of a class or answering to a particular description could create very wide categories of third parties in construction. For example, these categories could include purchasers (not limited to a first purchaser) and tenants (not limited to the first tenant or first assignee), even though the names of those parties were not known at the date of contract and even though they were not in existence at the date of contract.
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	The Act goes some way, once a third party right to enforce a term has arisen, to prevent the contracting parties agreeing to rescind or vary the contract in such a way as to extinguish or alter the rights of a third party, unless the third party consents in certain circumstances. Those circumstances are:		The Act goes some way, once a third party right to enforce a term has arisen, to prevent the contracting parties agreeing to rescind or vary the contract in such a way as to extinguish or alter the rights of a third party, unless the third party consents in certain circumstances. Those circumstances are:
−	*where the third party has communicated his assent to the term to the promisor	+
−	*the promisor is aware that the third party has relied on the term, or	+	* where the third party has communicated his assent to the term to the promisor
−	*the promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.	+	* the promisor is aware that the third party has relied on the term, or
		+	* the promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.

	Clearly, this provision requires careful consideration of the drafting of the contract from the outset. The use of clauses permitting the varying of the contract by the contracting parties without the consent of any third party might be considered but may well fall foul of this section of the Act. A safer alternative might be a contract provision that where a third party's consent is required under section 2 of the Act, then such third party shall not unreasonably withhold or delay his consent.		Clearly, this provision requires careful consideration of the drafting of the contract from the outset. The use of clauses permitting the varying of the contract by the contracting parties without the consent of any third party might be considered but may well fall foul of this section of the Act. A safer alternative might be a contract provision that where a third party's consent is required under section 2 of the Act, then such third party shall not unreasonably withhold or delay his consent.
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	The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.		The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.

−	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.~~<br/>~~	+	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.

	= Find out more =		= Find out more =

	=== Related articles on Designing Buildings Wiki ===		=== Related articles on Designing Buildings Wiki ===
−	*Alternative dispute resolution.	+
−	*Arbitration.	+	* Alternative dispute resolution.
−	*Assignment.	+	* Arbitration.
−	*Breach of contract.	+	* Assignment.
−	*Caveat emptor (buyer beware).	+	* Breach of contract.
−	*Collateral warranties.	+	* Caveat emptor (buyer beware).
−	*~~Contract conditions~~.	+	* Collateral warranties.
−	*~~Contracts~~.	+	* Construction contract.
−	*Defects.	+	* Contract conditions.
−	*Privity of contract.	+	* Defects.
−	*Recovery of third party losses.	+	* Privity of contract.
−	*Reliance letter.	+	* Recovery of third party losses.
−	*Step in rights.	+	* Reliance letter.
		+	* Step in rights.

	=== External References ===		=== External References ===
−	*[http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.

−	[[Category:Other_legislation]]	+	* [http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.
−	[[Category:Contracts_/_payment]]	+
		+	[[Category:Other_legislation]] [[Category:Contracts_/_payment]]

Designing Buildings at 09:17, 26 September 2014

2014-09-26T09:17:09Z

← Older revision		Revision as of 09:17, 26 September 2014
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	*Privity of contract.		*Privity of contract.
	*Recovery of third party losses.		*Recovery of third party losses.
		+	*Reliance letter.
	*Step in rights.		*Step in rights.

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	*[http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.		*[http://www.legislation.gov.uk/ukpga/1999/31/contents The Contracts (Rights of Third Parties) Act] in full.

−	~~[[Category:Contracts_/_payment]]~~
	[[Category:Other_legislation]]		[[Category:Other_legislation]]
		+	[[Category:Contracts_/_payment]]

Designing Buildings at 09:28, 7 July 2014

2014-07-07T09:28:44Z

← Older revision		Revision as of 09:28, 7 July 2014
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	The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.		The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.

−	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations. <br/>	+	NB Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.<br/>

	= Find out more =		= Find out more =
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	*Assignment.		*Assignment.
	*Breach of contract.		*Breach of contract.
		+	*Caveat emptor (buyer beware).
	*Collateral warranties.		*Collateral warranties.
	*Contract conditions.		*Contract conditions.

← Older revision		Revision as of 14:07, 2 October 2018
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	= The Contracts (Rights of Third Parties) Act =		= The Contracts (Rights of Third Parties) Act =

−	The Contracts (Rights of Third Parties) Act, 1999 enables third party rights to be created by a contract. This is seen by some to offer an alternative to collateral warranties.	+	The Contracts (Rights of Third Parties) Act 1999 enables third party rights to be created by a contract. This is seen by some to offer an alternative to collateral warranties.

	Section 1(1) of the Act provides:		Section 1(1) of the Act provides:
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	The Act sets out that a third party must be expressly identified:		The Act sets out that a third party must be expressly identified:

−	* in the contract by name,	+	* In the contract by name,
−	* as a member of a class, or,	+	* As a member of a class, or,
−	* as answering a particular description, but need not be in existence when the contract is entered into.	+	* As answering a particular description, but need not be in existence when the contract is entered into.

	It is clear that members of a class or answering to a particular description could create very wide categories of third parties in construction. For example, these categories could include purchasers (not limited to a first purchaser) and tenants (not limited to the first tenant or first assignee), even though the names of those parties were not known at the date of contract and even though they were not in existence at the date of contract.		It is clear that members of a class or answering to a particular description could create very wide categories of third parties in construction. For example, these categories could include purchasers (not limited to a first purchaser) and tenants (not limited to the first tenant or first assignee), even though the names of those parties were not known at the date of contract and even though they were not in existence at the date of contract.
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	The Act goes some way, once a third party right to enforce a term has arisen, to prevent the contracting parties agreeing to rescind or vary the contract in such a way as to extinguish or alter the rights of a third party, unless the third party consents in certain circumstances. Those circumstances are:		The Act goes some way, once a third party right to enforce a term has arisen, to prevent the contracting parties agreeing to rescind or vary the contract in such a way as to extinguish or alter the rights of a third party, unless the third party consents in certain circumstances. Those circumstances are:

−	* ~~where~~ the third party has communicated his assent to the term to the promisor	+	* Where the third party has communicated his assent to the term to the promisor
−	* ~~the~~ promisor is aware that the third party has relied on the term, or	+	* The promisor is aware that the third party has relied on the term, or
−	* ~~the~~ promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.	+	* The promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.

−	Clearly, this provision requires careful consideration of the drafting of the contract from the outset. The use of clauses permitting the varying of the contract by the contracting parties without the consent of any third party might be considered but may well fall foul of this section of the Act. A safer alternative might be a contract provision that where a third party's consent is required under section 2 of the Act, then such third party shall not unreasonably withhold or delay his consent.	+	Clearly this provision requires careful consideration of the drafting of the contract from the outset. The use of clauses permitting the varying of the contract by the contracting parties without the consent of any third party might be considered but may well fall foul of this section of the Act. A safer alternative might be a contract provision that where a third party's consent is required under section 2 of the Act, then such third party shall not unreasonably withhold or delay his consent.

	Another point arises in relation to variations and changes to the work under construction contracts, which is a common provision in construction contracts. Is that kind of provision caught by section 2 of the Act? The answer appears to be that such a variation is a variation in the work and not a variation to the contract. As such, it would appear that it is not subjected to the rules in section 2 of the Act.		Another point arises in relation to variations and changes to the work under construction contracts, which is a common provision in construction contracts. Is that kind of provision caught by section 2 of the Act? The answer appears to be that such a variation is a variation in the work and not a variation to the contract. As such, it would appear that it is not subjected to the rules in section 2 of the Act.
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	It is the case that many construction contracts contain arbitration agreements. When the Act was a Bill before Parliament the policy question arose as to how this should be dealt with in considering whether or not the third party should also be bound by the arbitration agreement in the contract when it seeks to enforce its third party rights.		It is the case that many construction contracts contain arbitration agreements. When the Act was a Bill before Parliament the policy question arose as to how this should be dealt with in considering whether or not the third party should also be bound by the arbitration agreement in the contract when it seeks to enforce its third party rights.

−	The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party. In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.	+	The Act deals with this at section 8. In essence it is in two parts. The first is to create the possibility of making a third party's right to intervene subject to the application of the arbitration agreement in the contract. Where that route has been chosen in the drafting of the contract, then the second part is to provide for third parties to be able to insist on arbitration if extra-contractual claims are brought against the third party.
		+
		+	In respect of both of these parts, the arbitration agreement has to be an agreement in writing for the purposes of the Arbitration Act. Otherwise, the remedies must be pursued in court, not in arbitration.

	NB: Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.		NB: Where step-in rights are included under third-party rights (which can only impose rights, not obligations) they must be conditional upon also accepting the associated obligations.
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	* Held that the case did not fall into any of the exceptions of the common law privity rule.		* Held that the case did not fall into any of the exceptions of the common law privity rule.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Alternative dispute resolution.		* Alternative dispute resolution.