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PRIVITY OF CONTRACT
CONTRACTS FOR
THE BENEFIT OF
THIRD PARTIES
LAW COMMISSION
LAW COM No 242
The Law Commission zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
(LAW COM No 242) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
PRIVITY OF CONTRACT:
CONTRACTS FOR THE BENEFIT
OF THIRD PARTIES
Item 1 of the Sixth Programme of Law Reform:
The Law of Contract zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
.. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
Presented to Parliament by the Lord High Chancellor
by Command of zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAHer Majesty
July 1996 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
LONDON: HMSO zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
E18.20 - -
Cm 3329
The Law Commission was set up by section 1 of the Law Commissions Act 1965 for the purpose
of promoting the reform of the law.
The Commissioners are:
The Honourable Mrs zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAJustice Arden DBE, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAChairman
Professor Andrew Burrows
Miss Diana Faber
Mr Charles Harpum
Mr Stephen Silber QC
The Secretary of the Law Commission is Mr Michael Sayers and its offices are at Conquest House,
37-38 John Street, Theobalds Road, London, WClN 2BQ.
The terms of this report were agreed on 19 June 1996. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
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.. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
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THE LAW COMMISSION
PRIVITY OF CONTRACT:
CONTRACTS FOR THE BENEFIT OF
THIRD PARTIES
CONTENTS zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
Paragraph Page
SECTION A: BACKGROUND
PART I: INTRODUCTION 1
PART 11: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATHE PRESENT LAW AND CALLS FOR
REFORM
1. The Present Law 2.1 6
2.1 6
(1) A Brief Statement of the Third Party Rule in Contract
2.2 6
(2) Development of the Third Party Rule
(3) Existing Exceptions to, or Circumventions ofJ the Third Party Rule 2.8 9
Trust of the Promise 2.8 9
Covenants Concerning Land 2.10 10
Tort of Negligence 2.13 12
Agency 2.15 14
Assignment 2.16 15
Collateral Contracts 2.18 16
Techniques Used to Enable Third Parties to Take the
Benefit of Exclusion Clauses 2.19 16
Promisee’s Remedies Assisting the Third Party zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
2.36 25
(i) Damages 2.37 25
(ii) Specific Performance and a Stay of Action 2.47 29
Statutory Exceptions 2.52 31
(i) Life Insurance 2.53
31
(ii) Fire Insurance 2.54
31
(iii) Motor Insurance 2.55 31
(iv) Third Parties’ Rights Against Insurers 2.56
31
2.57 32
(v) Insurance by Those zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
with Limited Interests
(vi) Bills of Exchange 2.58 32
(vii) Bills of Lading 2.59
32
(viii)Law of Property Act 1925, Section 56(1) 2.60 33
(ix) Companies Act 1985, Section 14 2.61 34
(x) Package Travel, Package Holidays and Package
Tours Regulations 1992 2.62 34
2. Calls for Reform
2.63 35
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