Arbitration and the Contracts (Rights of Third Parties) Act 1999
Arbitration and the Contracts (Rights of Third Parties) Act 1999

The following Arbitration guidance note provides comprehensive and up to date legal information covering:

  • Arbitration and the Contracts (Rights of Third Parties) Act 1999
  • The Contracts (Rights of Third Parties) Act 1999
  • Relationship between the Contracts (Rights of Third Parties) Act 1999 and the Arbitration Act 1996
  • The Contract (Rights of Third Parties) Act 1999, s 8(1)—enforceable right subject to arbitration agreement
  • The Contract (Rights of Third Parties) Act 1999, s 8(2)—conditional benefit principle inapplicable
  • How could those drafting arbitration agreements best deal with the issue of third party rights?

Under English contract law, the established rules on privity of contract dictate that only parties to the contract can acquire rights under it and only parties to the contract can be subject to liabilities arising out of the contract. As an arbitration agreement is a contract, it follows that only those parties who are party to the arbitration agreement can be bound by it or can be entitled to invoke it.

The Contracts (Rights of Third Parties) Act 1999

The Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999) creates an exception to the general rule of privity that only those who are party to a contract can enforce rights under it. Under C(RTP)A 1999, s 1, a third party to the contract may enforce a term of the contract if:

  1. the contract expressly provides that he may, or

  2. if the term purports to confer a benefit upon him. This does not apply if it appears on a proper construction of the contract that the parties did not intend the term to be enforceable by the third party

C(RTP)A 1999, s 1(6) states that:

‘[W]here 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