Third Party Rights Flashcards
What is the Contracts (Rights of Third Parties) Act 1999?
Legislation that reforms the principle of privity of contract.
What legislation should be considered for the rights of third parties?
Contracts (Rights of Third Parties) Act 1999
What year did the Contracts (Rights of Third Parties) Act come into effect?
1999
Why was the Contracts (Rights of Third Parties) Act 1999 introduced?
The doctrine of privity of contract led to the proliferation of collateral warranties which included
significant expense and legal paperwork. This legislation aims to avoid that.
What is the JCT position on the Contracts (Rights of Third Parties) Act 1999?
The JCT default position is that the legislation will not apply.
This act can be opted out of if the contract states so
If the employer wanted to make use of the Contracts (Rights of Third Parties) Act 1999, what information would he need to provide?
The employer would need to enter the name, class and description of the beneficiary, i.e. purchaser, tenant or funder within the contract particulars.
What’s a ‘collateral warranty’?
Give an example,,,
It’s a mechanism which creates a legal relationship between parties where otherwise one would
not exist. They opporate allongside another agreement.
Example: Contractor and future tenants, Subby and employer
Can a collateral warrenty be assigned?
Yes, but only up to a maximum of two times without the contractor’s consent.
Under JCT, what ways can benefits be transfered?
a) Collateral warranties
b) Third party rights
c) Assignment
Why are collateral warrenties used?
- Due to the principle of privity of contract, the rights and obligations under a contract can only be enforced by a party to that contract
- Collateral warranties give remedies to parties that due to privity of contract would not otherwise have them
When should an employer inform a contractor they need collateral warranties?
At tender stage - they change the risk profile of the project
What are some common clauses in a collateral warranty?
- The obligations of the collateral warranties should mirror that of the main agreement
- Therefore if a party is in breach of the main agreement they would also be in breach of the warranty
a) Limitation of liability
b) Reasonable skill and care v fitness for purppse
c) Requirements for PI insurance
d) Assignment rights
e) Novation rights
Why might third party rights be used instead of collateral warranties?
- TPR are cheaper and simpler (usefull when lots required)
- Avoid risk of double liability
- Potentially more reliable as bassed on legislation
Why would you use collateral warrernties over third party rights?
- CW’s are more familiure
- CW’s are more flexable
- CW’s can be easier to insert step in rights
What are step in rights?
Step-in rights are rights that allow one party in a construction project to take over the role and obligations of another party in certain circumstances, such as insolvency or default. For example, a funder may have step-in rights to take over the employer’s position in a contract with a contractor, if the employer fails to pay or becomes insolvent.
