Third party contract rights in Scotland to get statutory force

The Contract (Third Party Rights) (Scotland) Bill would give effect to recommendations from the Scottish Law Commission, which had called for the existing rules to be replaced with a clearer and more useable statutory regime. Although third parties have rights under some contracts to which they are not a part in some circumstances, these rights have been established through case law.

Commercial law expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that the current law on third party rights in Scotland was generally seen as "too rigid, confusing and outdated".

"The modern commercial world is awash with instances where third parties have rights under contracts and whilst Scots law has long recognised an ability to create such rights, the inflexibility of the rules for so doing and the consequent uncertainty over enforcement here has led an increasing number to defer to English law for determination," he said.

"In England, the 1999 Contracts (Rights of Third Parties) Act modernised and clarified the law, making for far greater certainty over, for example, group company rights. The decision to bring the law in line with commercial reality here is to be welcomed," he said.

Both businesses and individuals need to be granted rights under contracts to which they are not the party in all sorts of circumstances. As an example, the Scottish Government cited a 2014 case, in which the mother of a person who had booked a holiday brought a claim against a Spanish hotel, after she slipped and was injured. As she was not the one who had booked the hotel, she needed third party rights in order to be able to do so.

The new bill sets out the circumstances in which someone who is not a party to a contract gets third party rights, and sets out when such rights can be modified or cancelled. It also extends the same remedies to the third party as to the contracting parties, subject to some exceptions. Third parties would also be able to access arbitration to resolve disputes in certain circumstances once the legislation comes into force.

Annabelle Ewing, the Scottish Government's minister for legal affairs, said that clarifying the law around third party rights would "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".

Craig Connal said that the fact that the current law governing third party rights in Scotland was usually referred to by its Latin name, 'ius quaesitum tertio', could be said to show "just how badly the law needs modernising for the digital age".

"On the other hand, that a concept has survived that long without being on the lips of every law reformer might suggest that it has stood the test of time," he said.

"Not everyone will feel that statutory drafting is necessarily of such quality and clarity that it will inevitably be an improvement," he said. "New issues will no doubt arise – but it will be interesting to see whether the proposed new law stands without difficulty for as long as the old," he said.