Third-party Rights

Question 1

Are there any acts which govern third party rights?

Answer 1

Contracts (Rights of Third Parties) Act 1999

Question 2

What is the overarching purpose of the Contracts (Rights of Third Parties) Act 1999?

Answer 2

• Act allows parties to enforce terms of contracts that they are not party to, but which benefit them in some way, or which the contract allows them to enforce.
• It gives parties access to various remedies if those contract terms are breached.

Question 3

What are the advantages of third-party rights?

Answer 3

Time and cost
- Since a collateral warranty is not being entered into, using the Act saves time and cost associated with warranties being drawn up.

Subcontractors
- Can be extended into subcontracts so that an employer can confer third party rights unilaterally.

Question 4

What are the disadvantages of third-party rights?

Answer 4

Lack of Flexibility
- Once the schedule being conferred has been agreed, there is limited room for negotiation.

Required careful drafting
- Drafting provisions relating to the enforcement of third-party rights must be clear and unambiguous.

Question 5

Why might third-party rights be used instead of collateral warranties?

Answer 5

• If a lot of warrnaties are required, it can involve a lot of administration and cost.
• Easier to get in place because there is no separate document required.