Contracts (Rights of Third Parties) Act 2001

Link to law: https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2001/2001-0002/ContractsRightsofThirdPartiesAct2001_1.pdf
Published: 2012-09-01

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Contracts (Rights of Third Parties) Act 2001

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AT 2 of 2001

CONTRACTS (RIGHTS OF THIRD

PARTIES) ACT 2001

Contracts (Rights of Third Parties) Act 2001 Index


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CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 2001

Index Section Page

1 Right of third party to enforce contractual term ........................................................ 5
2 Variation and rescission of contract ............................................................................. 6
3 Defences etc available to promisor ............................................................................... 7
4 Enforcement of contract by promisee .......................................................................... 7
5 Protection of promisor from double liability .............................................................. 8
6 Exceptions ........................................................................................................................ 8
7 Supplementary provisions relating to third party ..................................................... 9
8 Short title and commencement ................................................................................... 10
ENDNOTES 11

TABLE OF LEGISLATION HISTORY 11
TABLE OF RENUMBERED PROVISIONS 11
TABLE OF ENDNOTE REFERENCES 11

Contracts (Rights of Third Parties) Act 2001 Section 1


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CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 2001

Received Royal Assent: 20 February 2001
Passed: 20 February 2001
Commenced: 20 February 2001
AN ACT
to make provision for the enforcement of contractual terms by third
parties.
1 Right of third party to enforce contractual term

(1) Subject to the provisions of this Act, a person who is not a party to a
contract (a ‘third party’) may in his own right enforce a term of the
contract if —
(a) the contract expressly provides that he may, or
(b) subject to subsection (2), the term purports to confer a benefit on
him.
(2) Subsection (1)(b) does not apply if on a proper construction of the
contract it appears that the parties did not intend the term to be
enforceable by the third party.
(3) The third party must be expressly identified in the contract by name, as a
member of a class or as answering a particular description but need not
be in existence when the contract is entered into.
(4) This section does not confer a right on a third party to enforce a term of a
contract otherwise than subject to and in accordance with any other
relevant terms of the contract.
(5) For the purpose of exercising his right to enforce a term of the contract,
there shall be available to the third party any remedy that would have
been available to him in an action for breach of contract if he had been a
party to the contract (and the rules relating to damages, injunctions,
specific performance and other relief shall apply accordingly).
(6) Where a term of a contract excludes or limits liability in relation to any
matter references in this Act to the third party enforcing the term shall be
construed as references to his availing himself of the exclusion or
limitation.
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(7) In this Act, in relation to a term of a contract which is enforceable by a
third party —
“the promisor
” means the party to the contract against whom the term is
enforceable by the third party, and
“the promisee
” means the party to the contract by whom the term is
enforceable against the promisor.
2 Variation and rescission of contract

(1) Subject to the provisions of this section, where a third party has a right
under section 1 to enforce a term of the contract, the parties to the
contract may not, by agreement, rescind the contract, or vary it in such a
way as to extinguish or alter his entitlement under that right, without his
consent if —
(a) the third party has communicated his assent to the term to the
promisor,
(b) the promisor is aware that the third party has relied on the term,
or
(c) the promisor can reasonably be expected to have foreseen that the
third party would rely on the term and the third party has in fact
relied on it.
(2) The assent referred to in subsection (1)(a) —
(a) may be by words or conduct, and
(b) if sent to the promisor by post or other means, shall not be
regarded as communicated to the promisor until received by him.
(3) Subsection (1) is subject to any express term of the contract under
which —
(a) the parties to the contract may by agreement rescind or vary the
contract without the consent of the third party, or
(b) the consent of the third party is required in circumstances
specified in the contract instead of those set out in subsection
(1)(a) to (c).
(4) Where the consent of a third party is required under subsection (1) or (3),
the court or arbitrator may, on the application of the parties to the
contract, dispense with his consent if satisfied —
(a) that his consent cannot be obtained because his whereabouts
cannot reasonably be ascertained, or
(b) that he is mentally incapable of giving his consent.
(5) The court or arbitrator may, on the application of the parties to a
contract, dispense with any consent that may be required under
subsection (1)(c) if satisfied that it cannot reasonably be ascertained
whether or not the third party has in fact relied on the term.
Contracts (Rights of Third Parties) Act 2001 Section 3


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(6) If the court or arbitrator dispenses with a third party’s consent, it or he
may impose such conditions as it or he thinks fit, including a condition
requiring the payment of compensation to the third party.
3 Defences etc available to promisor

(1) Subsections (2) to (5) apply where, in reliance on section 1, proceedings
for the enforcement of a term of a contract are brought by a third party.
(2) The promisor shall have available to him by way of defence or set-off any
matter that —
(a) arises from or in connection with the contract and is relevant to
the term, and
(b) would have been available to him by way of defence or set-off if
the proceedings had been brought by the promisee.
(3) The promisor shall also have available to him by way of defence or set-
off any matter if —
(a) an express term of the contract provides for it to be available to
him in proceedings brought by the third party, and
(b) it would have been available to him by way of defence or set-off if
the proceedings had been brought by the promisee.
(4) The promisor shall also have available to him —
(a) by way of defence or set-off any matter, and
(b) by way of counterclaim any matter not arising from the contract,
that would have been available to him by way of defence or set-off or, as
the case may be, by way of counterclaim against the third party if the
third party had been a party to the contract.
(5) Subsections (2) and (4) are subject to any express term of the contract as
to the matters that are not to be available to the promisor by way of
defence, set-off or counterclaim.
(6) Where in any proceedings brought against him a third party seeks in
reliance on section 1 to enforce a term of a contract (including, in
particular, a term purporting to exclude or limit liability), he may not do
so if he could not have done so (whether by reason of any particular
circumstances relating to him or otherwise) had he been a party to the
contract.
4 Enforcement of contract by promisee

Section 1 does not affect any right of the promisee to enforce any term of the
contract.
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5 Protection of promisor from double liability

Where under section 1 a term of a contract is enforceable by a third party, and
the promisee has recovered from the promisor a sum in respect of —
(a) the third party’s loss in respect of the term, or
(b) the expense to the promisee of making good to the third party the
default of the promisor,
then, in any proceedings brought in reliance on that section by the third party,
the court or arbitrator shall reduce any award to the third party to such extent
as it or he thinks appropriate to take account of the sum recovered by the
promisee.
6 Exceptions

(1) Section 1 confers no rights on a third party in the case of a contract on a
bill of exchange, promissory note or other negotiable instrument.
(2) Section 1 confers no rights on a third party in the case of any contract
binding on a company and its members under —
(a) section 20 of the Companies Act 1931; or
(b) section 7 of the Companies Act 2006.1

(3) Section 1 confers no right on a third party to enforce —
(a) any term of a contract of employment against an employee,
(b) any term of any other work contract against the worker.
(4) In subsection (3) —
“contract of employment” includes a contract of apprenticeship;
“work contract” means any other contract, whether express or implied and (if
express) whether oral or in writing, whereby an individual (‘the worker’)
undertakes to do or perform personally any work or services for another
party to the contract whose status is not by virtue of the contract that of a
client or customer of any profession or business undertaking carried on
by the worker.
(5) Section 1 confers no rights on a third party in the case of —
(a) a contract for the carriage of goods by sea, or
(b) a contract for the carriage of goods by road, or for the carriage of
cargo by air, which is subject to the rules of the appropriate
international transport convention,
except that a third party may in reliance on that section avail himself of
an exclusion or limitation of liability in such a contract.
(6) In subsection (5) “contract for the carriage of goods by sea” means a
contract of carriage —
Contracts (Rights of Third Parties) Act 2001 Section 7


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(a) contained in or evidenced by a bill of lading, sea waybill or a
corresponding electronic transaction, or
(b) under or for the purposes of which there is given an undertaking
which is contained in a ship’s delivery order or a corresponding
electronic transaction.
(7) For the purposes of subsection (6) —
(a) “bill of lading”, “sea waybill” and “ship’s delivery order” have
the same meanings as in Part 1 of the Merchant Shipping
(Miscellaneous Provisions) Act 1996, and
(b) a corresponding electronic transaction is a transaction within
section 1(5) of that Act which corresponds to the issue,
indorsement, delivery or transfer of a bill of lading, sea waybill or
ship’s delivery order.
(8) In subsection (5) “the appropriate international transport convention”
means —
(a) in relation to a contract for the carriage of goods by road, the
Convention which has the force of law in the Island under section
1 of the Carriage of Goods by Road Act 1965 (an Act of
Parliament), as it has effect in the Island, and
(b) in relation to a contract for the carriage of cargo by air —
(i) the Convention which has the force of law in the Island
under section 1 of the Carriage by Air Act 1961 (an Act of
Parliament), as it has effect in the Island, or
(ii) the Convention which has the force of law under section 1
of the Carriage by Air (Supplementary Provisions) Act
1962 (an Act of Parliament), as it has effect in the Island, or
(iii) either of the amended Conventions set out in Part B of
Schedule 2 or 3 to the Carriage by Air Acts (Application of
Provisions) Order 1967, as it has effect in the Island.
7 Supplementary provisions relating to third party

(1) Section 1 does not affect any right or remedy of a third party that exists
or is available apart from this Act.
(2) Section 5(2) of the Misrepresentation and Unfair Contract Terms Act 1980
(restriction on exclusion etc. of liability for negligence) shall not apply
where the negligence consists of the breach of an obligation arising from
a term of a contract and the person seeking to enforce it is a third party
acting in reliance on section 1.
(3) In sections 5 and 8 of the Limitation Act 1984 the references to an action
founded on a simple contract and an action upon a specialty shall
respectively include references to an action brought in reliance on section
Section 8 Contracts (Rights of Third Parties) Act 2001


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1 relating to a simple contract and an action brought in reliance on that
section relating to a specialty.
(4) A third party shall not, by virtue of section 1(5) or 3(4) or (6), be treated
as a party to the contract for the purposes of any other Act.
8 Short title and commencement

(1) This Act may be cited as the Contracts (Rights of Third Parties) Act 2001.
(2) Subject to subsection (3), this Act does not apply in relation to a contract
entered into before the end of the period of 6 months beginning with the
day on which this Act is passed.
(3) Subsection (2) does not apply in relation to a contract which —
(a) is entered into on or after the day on which this Act is passed, and
(b) expressly provides for the application to it of this Act.
Contracts (Rights of Third Parties) Act 2001 Endnotes


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ENDNOTES

Table of Legislation History

Legislation Year and No Commencement






Table of Renumbered Provisions

Original Current






Table of Endnote References

1
Subs (2) substituted by Companies (Amendment) Act 2009 s 33.