It has been long recognised in Scotland that party A and party B may agree that party C have rights under any contract entered into by A+B. This is not an unusual scenario and something that we are all likely to have entered into or benefitted from during our lifetime ie family holiday or preparing a Will.
Prior to the 2017 Act coming into force Scotland had been operating under a common law of jus quaesitum tertio. Arguably the common law position was unclear and many found it difficult to understand or apply so this led for a call to consider what if any changes required to be implemented. In March 2014, the Scottish Law Commission published a discussion paper on third party rights in contract and its report on matters in May 2016. Thereafter following various discussions and consultations the 2017 Act was born receiving the royal assent on 30 October last year and came into force this year on 22nd February.
This Act states that party C acquires the third-party right where:-
(a)the contract contains an undertaking that one or more of the contracting parties will do, or not do, something for the person’s benefit, and
(b) at the relevant time it was the intention of the contracting parties that the person should be legally entitled to enforce or otherwise invoke the undertaking.
Of interest the person who is to acquire a third-party right under a contract must be identifiable from the contract by being either named or described in it. However it should be noted that this party does not have to be in existence at the time of the granting. An example of this would be your children if at the time of writing they had not been born.
It should also be noted that the act does not imply any duty onto Party C and simply exists to provide the right. That is to say Party C does not need to do something to achieve the right. The act continues to codify matters so that all parties are aware of what they need to do or how to alter any right provided to Party C.
Fortunately for trainees and solicitors S.11 now means that we no longer require to try to say the phrase jus quaesitum tertio in court and we can simply now refer to it as third party rights!
This is a very difficult area in which we would be happy to navigate any issues you may have. For more information click here to contact us online or call 0333 222 1855 to speak to a member of our specialist team.