Clarifying contract law

A bill to reform contract law on third party rights has been introduced to Parliament.

The Contract (Third Party Rights) (Scotland) Bill will bring the law up-to-date and ensure it is flexible and fit for purpose.

This is the first time third party rights – a right a person has under a contract they are not the party to – will be provided for in legislation which applies generally to all types of contract.

Provisions include:

• Setting out when someone who is not party to a contract gets third party rights
• Providing third parties with the same remedies as a contracting party (subject to exceptions)
• Setting out when third party rights can be modified or cancelled
• Enabling third parties to access arbitration to resolve disputes in certain circumstances.

The bill implements recommendations from the Scottish Law Commission on this area of contract law, replacing the existing common law with a clearer and more usable statutory regime.

Minister for Legal Affairs Annabelle Ewing said:

“Contracts form part of everyday life and third party rights can provide important benefits or protections.

“This is an area of law that is ripe for reform and this bill will enable the creation of third party rights which may be beneficial to individuals and families as well as businesses.

“Reform will remove a practical barrier for commercial transactions, and keep Scots law fit for purpose by making sure it is flexible enough for modern day expectations.”

Background

The bill can be viewed here.

There are many reasons for third-party rights to be created and these apply to individuals as much as to business.

One example, in a case from 2014, involved the mother of the person who had booked the holiday. She claimed damages when she slipped in a Spanish hotel, and needed third party rights to make the claim, as she wasn’t the one who had booked the hotel.

The Scottish Law Commission provides further background on their website https://www.scotlawcom.gov.uk/law-reform/law-reform-projects/contract-law-light-draft-common-frame-reference-dcf/