Bermuda enacts Contracts (Rights of Third Parties) Act 2016

Bermuda’s Parliament recently enacted the Contracts (Rights of Third Parties) Act 2016.

The Bermuda legislation is largely modelled on similar legislation already in force in the United Kingdom, the Cayman Islands, Hong Kong, and Singapore, although with a few local differences.

The legislation is significant in that, subject to its terms and subject to the terms of any particular contract, the legislation allows (but it does not mandate) contracting parties to vary the common law doctrine of “privity of contract”, with a view to enabling third parties (i.e. non-contracting parties) to benefit from, and seek to enforce, the terms of the contract, in appropriate circumstances.

For further discussion, see:

https://www.conyersdill.com/publications/view/new-bermuda-legislation-contracts-rights-of-third-parties-act-2016?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original

The Contracts (Rights of Third Parties) Act 2016

Readers may be interested to note that the UK legislation (which first came into force in 1999) has been the subject of scrutiny by the English Courts in the past few years. For example:

A third party claim for damages for breach of a settlement agreement was upheld, in Starlight Shipping Company v Allianz Marine And Aviation Versicherungs AG & Ors[2014] EWHC 3068 (Comm) (26 September 2014): http://www.bailii.org/ew/cases/EWHC/Comm/2014/3068.html.

The English Court has held that third party rights enforceable under the UK’s 1999 Act do not extend so far as to be enforceable by way of statutory adjudication (as opposed to arbitration or litigation): Hurley Palmer Flatt Ltd v Barclays Bank Plc [2014] EWHC 3042 (TCC) (23 September 2014), http://www.bailii.org/ew/cases/EWHC/TCC/2014/3042.html 

The Hurley Flatt case contains quite a helpful discussion of arbitration-related issues, and the various authorities on that topic, such as Nisshin Shipping Co Limited v Cleaves and Company Limited [2003] EWHC 2602 (Comm) and Fortress Value Recovery Fund 1 LLC v Blue Skye Special Opportunities Fund LLP [2013] EWCA Civ 367. These cases were also considered in passing in some other recent decisions, such as Rochester Resources Ltd & Ors v Lebedev & Anor [2014] EWHC 2926 (Comm) (09 September 2014): http://www.bailii.org/ew/cases/EWHC/Comm/2014/2926.html; and Cavanagh & Ors v Secretary of State for Work and Pensions [2016] EWHC 1136 (QB) (13 May 2016):  http://www.bailii.org/ew/cases/EWHC/QB/2016/1136.html

In the future, contracting parties entering into contracts governed by Bermuda law, or made in Bermuda, will want to consider whether or not those contracts are intended to include, or exclude, third party rights, with a view to addressing the issue expressly in their contracts.

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