CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm); [2004] 1 Lloyd’s Rep 38

The Contracts (Rights of Third Parties) Act 1999 has been a source of considerable controversy in the construction industry. The attitude displayed by the industry to the Act has been one of hostility. Many standard forms continue simply to exclude the operation of the Act. This may be something of an over-reaction because there may be circumstances in which the parties could usefully confer a right to enforce a term of the contract on a third party. But it remains useful advice in so far as it emphasises the need to make clear that the parties have agreed to exclude the operation of the Act. A failure to make that intention clear may lead a court to conclude that a third party does in fact have a claim under the Act. An example of this phenomenon is provided by Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm); [2004] 1 Lloyd’s Rep 38, which is the first reported decision to give extended consideration to the Act.