Contract (Third Party
Rights) (Scotland) Act
2017
2017 asp 5
Explanatory Notes have been produced to assist in the
understanding of this Act and are available separately
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Contract (Third Party Rights) (Scotland) Act
2017
2017 asp 5
CONTENTS
Section
1 Creation of a third-party right
2 Creation: further provision
3 Contracting parties’ freedom to alter third party’s entitlement
4 Protection of third party’s entitlement from retroactive change
5 Protection of third party’s entitlement after notice given
6 Protection of third party’s entitlement after undertaking relied on
7 Remedies available to third party
8 Defences available against third party
9 Arbitration
10 Prescription
11 Abolition of common-law rule: jus quaesitum tertio
12 Application
13 Commencement
14 Short title
Contract (Third Party Rights) (Scotland) Act 2017 (asp 5) 1
Contract (Third Party Rights) (Scotland) Act
2017
2017 asp 5
The Bill for this Act of the Scottish Parliament was passed by the Parliament on 21st September
2017 and received Royal Assent on 30th October 2017
An Act of the Scottish Parliament to make provision about the enforcement of contractual terms
by third parties.
1 Creation of a third-party right
(1) A person who is not a party to a contract acquires a third-party right under it where—
(a) the contract contains an undertaking that one or more of the contracting parties
will do, or not do, something for the person’s benefit, and
(b) at the relevant time it was the intention of the contracting parties that the person
should be legally entitled to enforce or otherwise invoke the undertaking.
(2) The third-party right is the right to enforce or otherwise invoke the undertaking.
(3) The person who is to acquire a third-party right under a contract must be identifiable
from the contract by being either named or described in it.
(4) A third-party right may be acquired by a person despite the fact that at the relevant time
the person—
(a) was not in existence, or
(b) did not fall within the description of persons (if any) whom the contracting parties
intended should benefit from, and be legally entitled to enforce or otherwise
invoke, the undertaking.
(5) In subsections (1)(b) and (4), “the relevant time” means—
(a) the time when the contract was constituted, or
(b) if the undertaking was added to the contract by a modification of its terms, the
time when the modification was made.
2 Creation: further provision
(1) This section makes provision elaborating on section 1.
2 Contract (Third Party Rights) (Scotland) Act 2017 (asp 5)
(2) The undertaking referred to in section 1(1)(a) may be one which depends on something
happening or not happening (whether or not it is certain that that thing will or will not
happen).
(3) The intention of the contracting parties referred to in section 1(1)(b) may be express or
implied.
despite the fact that—
(a) the undertaking may be cancelled or modified,
(b) there has been no delivery, intimation or communication of the undertaking to the
person.
(5) The reference in section 1(1)(a) to an undertaking to do something includes an
undertaking to indemnify a person.
(6) The reference in section 1(1)(a) to an undertaking not to do something includes an
undertaking—
(a) not to hold a person liable in a matter,
(b) not to enforce, or not to enforce in full, a person’s liability in a matter.
(7) This Act is without prejudice to any other enactment, or rule of law, that imposes
requirements which must be fulfilled if an enforceable obligation is to be created.
3 Contracting parties’ freedom to alter third party’s entitlement
(1) An undertaking contained in a contract which has given rise to a third-party right may
be cancelled or modified by the contracting parties.
(2) Nothing in this Act precludes a contract from providing that an undertaking, which is
contained in the contract and in relation to which a third-party right has arisen, will not
be cancelled or modified by the contracting parties.
(3) Subsection (1) is subject to sections 4 to 6.
4 Protection of third party’s entitlement from retroactive change
(1) No account is to be taken of the cancellation or modification of an undertaking
contained in a contract where and in so far as the undertaking is being enforced or
otherwise invoked—
(a) by virtue of a person’s third-party right to do so, and
(b) in consequence of something happening or not happening prior to the undertaking
being cancelled or (as the case may be) the modification being made.
(2) Subsection (1) does not apply in relation to a cancellation or modification if the contract
provided that it may be made with retroactive effect.
5 Protection of third party’s entitlement after notice given
(1) Subsection (2) applies (subject to subsections (3) and (4)) where—
(a) a person who has a third-party right arising from an undertaking contained in a
contract is given notice of the undertaking by a contracting party, and
(b) the undertaking is subsequently cancelled or modified.
Contract (Third Party Rights) (Scotland) Act 2017 (asp 5) 3
(2) No account is to be taken of the cancellation or (as the case may be) modification of the
undertaking when it is being enforced or otherwise invoked by virtue of the third-party
right.
(3) Subsection (2) does not apply if—
(a) the undertaking is one which depends on something happening or not happening,
and
(b) it remained uncertain whether that thing would happen or not at the time when the
notice mentioned in subsection (1)(a) was given.
(4) Subsection (2) does not apply in relation to the cancellation or modification of the
undertaking if—
(a) at the time when the notice mentioned in subsection (1)(a) was given, the person
given the notice was told by the contracting party that the undertaking may be
cancelled or (as the case may be) that the modification may be made, or
(b) the person who has the third-party right has given assent to the cancellation or (as
the case may be) modification of the undertaking.
6 Protection of third party’s entitlement after undertaking relied on
(1) Subsection (2) applies (subject to subsections (3) and (4)) where—
contained in a contract,
(b) the person has done something, or refrained from doing something, in reliance on
the undertaking,
(c) doing or (as the case may be) refraining from doing the thing has affected the
person’s position to a material extent,
(d) either—
(i) the contracting parties acquiesced in the person doing or (as the case may
be) refraining from doing the thing, or
(ii) the person’s doing or (as the case may be) refraining from doing the thing in
reliance on the undertaking could reasonably have been foreseen by the
contracting parties, and
(e) subsequent to the person doing or (as the case may be) refraining from doing the
thing mentioned in paragraph (b), the undertaking has been cancelled or modified.
(2) Where the person is enforcing or otherwise invoking the undertaking by virtue of having
the third-party right, no account is to be taken of the cancellation or modification of the
undertaking if the person’s position would be adversely affected to a material extent
were the undertaking treated as having been cancelled or (as the case may be) modified.
(3) Subsection (2) does not apply in relation to the cancellation or modification of the
undertaking if—
(a) the contract provides—
(i) that the contracting parties are entitled to cancel or (as the case may be)
modify the undertaking, and
(ii) that their entitlement to do so will not be affected by the person doing, or
refraining from doing, something in reliance on the undertaking, and
4 Contract (Third Party Rights) (Scotland) Act 2017 (asp 5)
(b) the person knew or ought to have known about that provision of the contract
before the person did, or refrained from doing, the thing mentioned in subsection
(1)(b).
(4) Subsection (2) does not apply in relation to the cancellation or modification of the
undertaking if the person has given assent to it.
(5) In legal proceedings, a person seeking to enforce or otherwise invoke an undertaking by
virtue of having a third-party right to do so may not plead that a contracting party—
(a) is personally barred from cancelling or modifying the undertaking, or
(b) has waived any right to cancel or modify the undertaking.
7 Remedies available to third party
invoke an undertaking contained in a contract.
(2) The person has available, as a remedy for breach of the undertaking, any remedy for
breach which a contracting party would be entitled to were the undertaking one in
favour of the contracting party.
(3) Subsection (2) is subject to any contrary provision made in the contract.
8 Defences available against third party
invoke an undertaking contained in a contract.
(2) A contracting party has available, as a defence against a claim by the person that the
undertaking has been breached, any defence which is both—
(a) a defence that a contracting party would have against any other contracting party,
and
(b) relevant to the undertaking.
(3) Subsection (2) is subject to any contrary provision made in the contract.
9 Arbitration
(1) In relation to a dispute to which subsection (2) or (3) applies, the person who has the
third-party right mentioned in subsection (2) or (as the case may be) (3) is to be regarded
as a party to the arbitration agreement mentioned in that subsection.
(2) This subsection applies to a dispute if—
(a) the dispute concerns an undertaking being enforced or otherwise invoked by
virtue of a person’s third-party right to do so, and
(b) an arbitration agreement provides for a dispute on the matter under dispute to be
resolved by arbitration.
(3) This subsection applies to a dispute if—
(a) subsection (2) does not apply to the dispute,
(b) an arbitration agreement provides for a dispute on the matter under dispute to be
resolved by arbitration,
Contract (Third Party Rights) (Scotland) Act 2017 (asp 5) 5
resolve a dispute on the matter by arbitration under the agreement, and
(d) the person who has the third-party right has—
(i) submitted the dispute to arbitration, or
(ii) sought a sist of legal proceedings concerning the matter under dispute on
the basis that an arbitration agreement provides for a dispute on the matter
to be resolved by arbitration.
(4) For the purpose of subsection (3)(d)(i), the person who has the third-party right is to be
regarded as having submitted the dispute to arbitration if the person has done whatever a
party to the agreement would need to do in order to submit the dispute to arbitration.
(5) A person is not to be regarded as having renounced a third-party right to enforce or
otherwise invoke an undertaking to resolve a dispute by arbitration by bringing legal
proceedings in relation to the dispute.
(6) In this section—
“arbitration agreement” has the meaning given by section 4 of the Arbitration
(Scotland) Act 2010, and
“dispute” is to be construed in accordance with section 2(1) of that Act.
10 Prescription
(1) An undertaking contained in a contract which is capable of being enforced or otherwise
invoked by virtue of a third-party right is an obligation arising from the contract for the
purposes of the Prescription and Limitation (Scotland) Act 1973.
(2) In subsection (1), “third-party right” means a right which has arisen by virtue of either—
(a) section 1, or
(b) the rule of law mentioned in section 11.
11 Abolition of common-law rule: jus quaesitum tertio
(1) The rule of law by which a person who is not a party to a contract may acquire a right to
enforce or otherwise invoke the contract’s terms does not apply in relation to contracts
constituted on or after the day this section comes into force.
(2) If a contract constituted before this section comes into force is modified so that an
undertaking it contains gives rise to a third-party right under section 1, a person who
may enforce or otherwise invoke the undertaking by virtue of that right may not do so
by virtue of any right acquired by operation of the rule of law mentioned in subsection
(1).
(3) A right rendered unenforceable by subsection (2) remains incapable of being enforced or
invoked notwithstanding—
(a) its transfer to another person, or
(b) the third-party right under section 1 referred to in that subsection being
relinquished (whether by transfer, waiver or otherwise).
6 Contract (Third Party Rights) (Scotland) Act 2017 (asp 5)
12 Application
Nothing in sections 1 to 9 applies in relation to an undertaking constituted before the
day on which section 1 comes into force, unless the contract containing the undertaking
provides otherwise.
13 Commencement
(1) This section and sections 12 and 14 come into force on the day after Royal Assent.
(2) The other provisions of this Act come into force on such day as the Scottish Ministers
may by regulations appoint.
14 Short title
The short title of this Act is the Contract (Third Party Rights) (Scotland) Act 2017.
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