The Contracts (Rights of Third Parties) Act 1999 was heralded as a very welcome reform. Yet 20 years after that Act came into force, it continues to be excluded by commercial parties on a regular basis. Why has the Act not been more widely embraced? The fear of uncertain outcomes under new legislation is only one factor. Often overlooked, but equally significant, are appellate decisions which confirm that, as a result of the 1999 Act, enforceable rights may be conferred upon third parties when that was not the intention of the contracting parties. It therefore remains prudent for parties to exclude s 1(1)(b) of the 1999 Act in order to avoid such unexpected, and probably undesired, outcomes. Particularly problematic cases have arisen where parties have not excluded the Act due to the contract being relatively short and simple, such as under a letter of instruction or letter of understanding. Parties should consider excluding the operation of the 1999 Act even in such simple contracts …
Paul S Davies, ‘Excluding the Contracts (Rights of Third Parties) Act 1999’ (2021) 137 Law Quarterly Review (January) 101-112.