Thanks to the Contract (Rights of Third Parties) Act 1999 a contract can expressly and effectively declare that it is enforceable by one or more third parties. Such a party can also sue on the contract if it “purports” to confer a benefit on him — a useful provision, but one that may, in due course, give rise to finely balanced disputes over what was intended. You treat some friends to a restaurant dinner. One of them feels that he is entitled to complain. Could the answer depend on whether the waiter took all the orders from you, or fussed over each diner in turn?
Property lawyers, being the cautious souls that they are, have, not surprisingly (as allowed by section 1(6)) largely adopted the practice of excluding the application of the Act from their documentation.
As pointed out by solicitors Susan Johnson, Stuart Nash and Ann Krieger in
But caution should not dissuade the practitioner from taking advantage of the Act where the intention is to give a right of enforcement to an identifiable class of beneficiary. Instances given by the authors include a subletting giving such a right to the superior landlord, and a scheme for a retail park, allowing tenants to take direct action for breaches of a non-competition or keep-open covenant.
The authors also demonstrate how the Act will, at the very least, affect the negotiation of a building contract when it gets to the thorny topic of collateral warranties.
Thanks to the Contract (Rights of Third Parties) Act 1999 a contract can expressly and effectively declare that it is enforceable by one or more third parties. Such a party can also sue on the contract if it “purports” to confer a benefit on him — a useful provision, but one that may, in due course, give rise to finely balanced disputes over what was intended. You treat some friends to a restaurant dinner. One of them feels that he is entitled to complain. Could the answer depend on whether the waiter took all the orders from you, or fussed over each diner in turn?
Property lawyers, being the cautious souls that they are, have, not surprisingly (as allowed by section 1(6)) largely adopted the practice of excluding the application of the Act from their documentation.
As pointed out by solicitors Susan Johnson, Stuart Nash and Ann Krieger in Limitations of the Act Estates Gazette 11 November 2000, p172, it would be particularly unwise to leave the Act to its own devices where the contract in question calls for a local improvement under section 106 of the Town and Country Planning Act 1990. The incautious developer could find himself unable to vary the terms without obtaining the consent of all the intended beneficiaries.
But caution should not dissuade the practitioner from taking advantage of the Act where the intention is to give a right of enforcement to an identifiable class of beneficiary. Instances given by the authors include a subletting giving such a right to the superior landlord, and a scheme for a retail park, allowing tenants to take direct action for breaches of a non-competition or keep-open covenant.
The authors also demonstrate how the Act will, at the very least, affect the negotiation of a building contract when it gets to the thorny topic of collateral warranties.
