The Contracts (Rights of Third Parties) Bill (the “Bill”) has been introduced to the Legislative Council. If passed, Hong Kong will join a number of common law jurisdictions in reforming the age-old common law doctrine of “privity of contract”.

Is this good news or bad news for employers? In our view, it is a mixed bag. There are some aspects of the Bill that employers can certainly take advantage of, but there are also pitfalls to look out for.

In this legal update, we consider the key changes and the risks from an employment perspective under the proposed new law anticipated by the Bill. To manage the risks, it is possible for the contracting parties to opt out of the application of the new law. We will set out how to do this in a later update.

The Legislative Council is debating the Bill and we do not expect much movement until after October 2014.

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