Our previous note on the Contract (Third Party Rights) (Scotland) Bill set out what third party rights are and how they are created under the current common law of jus quaesitum tertio.
What does the new Act provide?
The key provisions of the Act provide that:
Jus quaesitum tertio be abolished;
Contracting parties are permitted to grant third party rights;
There is a requirement that the third party be identified;
The contracting parties must intend (either expressly or impliedly) to confer a right on that third party;
Contracting parties are entitled to cancel or modify the third party right; and
There are restrictions on whether any such cancellation or modification is ignored for third parties who rely on a third party right to their detriment.
It is important to note that whilst the Act has received Royal Assent, it hasn't yet come into force. This will be done by regulations which are expected to be brought in during the course of 2018.
What impact will it have?
The Scottish Parliament debates on the bill provide a good indication of just how necessary and useful this change to the law is. Throughout there was a lot of agreement amongst the MSPs as to the benefits the bill would bring and ultimately it was passed by unanimous vote.
Annabelle Ewing MSP, who motioned for the bill to be passed, provided the following in her speech during the final debate:
The law as it stands is simply not working well for most people, if at all.
A clear, positive and readily accessible statement of the law in a short statute will improve the standing and value of Scots law domestically - and internationally…
…the bill strikes the right balance by providing an effective legal framework for third-party rights that does not cut across party autonomy.
…it is important that the law meets expectations and is fit for purpose, and I believe these reforms will achieve that aim.
The Contract (Third Party Rights) (Scotland) Act 2017 will modernise the law in Scotland and bring it in line with many other jurisdictions, including England.
As noted above, the new rules provide that third party rights may be implied. Accordingly many organisations may wish to review their standard Scottish contracts now to ensure that they adequately deal with third party rights before the Act comes in to force.
The full Act can be viewed here.