Third Party Rights
Date: 27/02/2018 | Business & Professional Services
The Contract (Third Party Rights) (Scotland) Act 2017 came into force on 26 February 2018.
The 2017 Act provides some much needed reform of this area of Scots law, which has until now been based on the common law doctrine of jus quaesitum tertio, which enables rights to be conferred upon a third party even if that third party is not an original party to the contract. The law in this area has been considered for some time to be archaic, inflexible and in need of a revamp. Following a Scottish Law Commission consultation on the matter, the coming into force of the 2017 Act finally sees Scotland falling into line with the law in the rest of the UK, where the Contracts (Rights of Third Parties) Act 1999 has been in place for some time.
The 2017 Act introduces a number of changes to the law, including:-
- The abolition of the jus quaesitum tertio.
- Third party ability to enforce rights under a contract where (i) they were not an original party to the contract and/or (ii) they were not in existence at the date of the contract.
- Third party rights will be capable of modification/cancellation by the parties to the contract where the rights haven’t yet been conferred on a third party.
- Remedies equivalent to those available to a contracting party will be available to the third party in the event of breach of the third party rights.
- A contracting party will have available, in defence of a third party rights claim, all defences which it would have had against the other contracting party.
As the changes introduced by the 2017 Act are not retrospective the Act will not apply to any contracts entered into prior to its coming into force, but it will apply to all contracts entered into thereafter. In drafting contracts, consideration will now need to be given to whether it is desirous that the 2017 Act applies and if it is not to apply it will be necessary to exclude the operation of the Act in the contract. This is the approach commonly adopted in the rest of the UK to ensure that third party rights are not inadvertently created. So contracts that were agreed pre-26 February 2018, but have not yet signed, may now need another look……….