Contracts (Rights of Third Parties) Act 1999
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| Long title | An Act to make provision for the enforcement of contractual terms by third parties. |
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| Citation | 1999 c. 31 |
| Introduced by | Lord Chancellor, Lord Irvine of Lairg |
| Territorial extent | England and Wales and Northern Ireland |
| Dates | |
| Royal assent | 11 November 1999 |
| Commencement | 11 November 1999 |
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Status: Current legislation
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| Text of statute as originally enacted | |
| Text of the Contracts (Rights of Third Parties) Act 1999 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk | |
The Contracts (Rights of Third Parties) Act 1999 (c 31) is an Act of the Parliament of the United Kingdom that significantly reformed the common law Doctrine of Privity and "thereby [removed] one of the most universally disliked and criticised blots on the legal landscape". The second rule of the Doctrine of Privity, that a third party could not enforce a contract for which he had not provided consideration, had been widely criticised by lawyers, academics and members of the judiciary. Proposals for reform via an Act of Parliament were first made in 1937 by the Law Revision Committee in their Sixth Interim Report. No further action was taken by the government until the 1990s, when the Law Commission proposed a new draft bill in 1991, and presented their final report in 1996. The bill was introduced to the House of Lords in December 1998, and moved to the House of Commons on 14 June 1999. It received the Royal Assent on 11 November 1999, coming into force immediately as the Contracts (Rights of Third Parties) Act 1999.
The Act allows third parties to enforce terms of contracts that benefit them in some way, or which the contract allows them to enforce. It also grants them access to a range of remedies if the terms are breached. The Act also limits the ways in which a contract can be changed without the permission of an involved third party. At the same time, it provides protection for the promisor and promisee in situations where there is a dispute with the third party, and allows parties to a contract to specifically exclude the protection afforded by the Act if they want to limit the involvement of third parties.
The historical doctrine of privity consisted of two rules – the first was that a third party may not have obligations imposed by the terms of a contract, and second was that a third party may not enforce a contract for which he has not provided consideration. The first rule was not contested, while the second was described as "one of the most universally disliked and criticised blots on the legal landscape". Originally, the second rule was not held to be valid. In the 17th century, a third party was allowed to enforce terms of a contract that benefited him, as shown in Provender v Wood [1627] Hetley 30, where the judgement stated that "the party to whom the benefit of a promise accrews, may bring his action." The first reversal of this law in Bourne v Mason [1669] 1 Vent., where the Court of King's Bench found that a third party had no rights to enforce a contract that benefited him. This ruling was quickly reversed, and decisions immediately after used the original rule.
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