Contracts (Rights of Third Parties) Act 1999—practical illustrations and considerations
Contracts (Rights of Third Parties) Act 1999—practical illustrations and considerations

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

  • Contracts (Rights of Third Parties) Act 1999—practical illustrations and considerations
  • Rights and liabilities arising in contracts involving group structures
  • Defending a third party claim
  • No double recovery for third parties
  • Considerations of DR lawyers

This Practice provides some practical illustrations of the operation of the Contracts (Rights of Third Parties) Acts 1999, considering group liability and defences under the 1999 Act to third party claims. For detailed guidance on when and how the 1999 Act operates generally, see Practice Note: Third party rights—the Contracts (Rights of Third Parties) Act 1999.

Rights and liabilities arising in contracts involving group structures

For guidance on construing contracts to determine whether third party benefits have been conferred for the purposes of satisfying C(RTP)A 1999, s 1(1)(b), see Practice Note: Third party rights—the Contracts (Rights of Third Parties) Act 1999.

A fairly typical group supply structure may look like the following.

Parent Supplier (PS) agrees with Parent Customer (PC) that:

  1. PS will supply raw materials to PC

  2. PS will also supply raw materials to PC's subsidiary companies, C2 and C3

  3. PS will procure that its subsidiary companies, S2 and S3, also supply raw materials to PC

  4. PS will procure that S2 and S3 will also supply raw materials to C2 and C3

In the above scenario, only PS and PC are parties to the agreement. They can, therefore, limit their liability to one another in contract and tort under the contract. However, without more

  1. S2 and S3's potential exposure to C, and

  2. PS, S2 and S3's potential exposure to C2 and C3

will