Non-parties can enforce your contract
The old rule of privity said only the parties to a contract could enforce it. The Contracts (Rights of Third Parties) Act 1999 changed that. A third party can enforce a term in two situations: where the contract expressly provides that they may (section 1(1)(a)), or where the term purports to confer a benefit on them and, on a proper construction, the parties intended it to be enforceable by them (section 1(1)(b)).
That second route is the one that catches people out, because it does not need the word enforce or even the third party's name - only a term that looks intended to benefit them.
The 2024 Supreme Court ruling: a strong presumption
In Secretary of State for the Department for Environment, Food and Rural Affairs v Public and Commercial Services Union [2024] UKSC 41, the Supreme Court held that sections 1(1)(b) and 1(3) create a strong but rebuttable presumption that a term purporting to confer a benefit on a third party is enforceable by that party.
To rebut it, the party resisting enforcement must show the contracting parties had a positive common intention that the term should not be enforceable by the third party, assessed on the usual objective approach to interpretation. In short: identify and benefit a third party, and they can probably enforce the term unless you have excluded the Act.
How third parties get identified: the Chudley warning
A third party does not need to be named, and need not even know the contract exists. In Chudley v Clydesdale Bank Plc [2019] EWCA Civ 344, a reference in a letter of instruction to a "segregated client account" was enough for a class of investors to be sufficiently identified to enforce under the Act, even though they were unaware of the contract at the time.
That is why loose drafting is dangerous. Phrases like "Company X and its affiliates", "Supplier and its subcontractors", "Party A and any member of its group", or references to "client accounts" or "customers" can identify and benefit people you never meant to give enforcement rights.
Rights you cannot easily take back
Once a third party has communicated assent to the term, or has relied on it in circumstances you know about, the contracting parties can no longer rescind or vary the contract to remove the third party's right without that party's consent. Courts can dispense with consent only in narrow situations, for example where the third party cannot be found or is mentally incapable.
The practical effect is that an unintended right can harden quickly, and become something you need a stranger's permission to change.
Third parties can also rely on your exclusions
The Act runs both ways. A third party can take the benefit of an exclusion or limitation clause, not just enforce a positive right. If a contract between A and B limits liability towards B's "agents or subcontractors", those agents and subcontractors can rely on that limit even though they did not sign.
This is used deliberately in construction (subcontractor chains), shipping (Himalaya clauses protecting stevedores), and IT and software (limiting liability towards end users). Used on purpose it is useful; left to chance it is a trap.
Exclude the Act unless you mean it
Most commercial contracts should exclude the Act where third-party enforcement is not intended. A standard clause reads: "A person who is not a party to this Agreement shall have no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement. This does not affect any right or remedy of a third party which exists or is available apart from that Act."
Then carve back in any third party you do intend to benefit - a guarantor, a group company, an end user. In review, the combination to watch is a broad "affiliates / group / customers" reference plus a missing or deleted exclusion clause: together they can create enforcement rights nobody negotiated.
Use at the desk
Practical checklist
- Decide deliberately whether any third party should be able to enforce, then draft to match.
- Exclude the Act by default where third-party enforcement is not intended, and carve back in anyone you do mean to benefit.
- Avoid loose "affiliates / group / subcontractors / customers" wording that can identify and benefit third parties (Chudley v Clydesdale Bank Plc [2019] EWCA Civ 344).
- Remember the 2024 Supreme Court ruling: an identified, benefited third party is presumed able to enforce (Secretary of State for DEFRA v Public and Commercial Services Union [2024] UKSC 41).
- Act early - once a third party assents or relies, you may need their consent to vary or remove the right.
- Check exclusion and limitation clauses too - third parties can rely on those as well as enforce positive rights.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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