4 January 2016
The Contracts (Rights of Third Parties) Ordinance (Cap. 623) ("the Ordinance") came into force on 1 January 2016.
The new legislation applies to most types of contract, with very limited exceptions. It reforms the privity of contract rule that only a party to a contract may enforce it. The Ordinance enables someone who is not a party to a contract to have rights under it, if:
- The contract gives that person an express right to do so; or
- A contract term purports to confer a benefit on that person.
If this is not your intention, then action is required. Standard contract templates should be reviewed to check that appropriate safeguards, such as an exclusion (where third parties are not intended to have any enforceable rights) or a restriction (where third parties are intended to have some enforceable rights) of the Ordinance are in place. New variations of existing contracts should also be checked.
At Mayer Brown JSM, we have been active throughout 2015 in offering guidance on the Ordinance. We would be pleased to discuss your contracting arrangements as they may be affected by the new Ordinance.
Please see our earlier legal updates for further reference:
Intellectual Property and Technology, Media & Telecommunications