Third Party Contract Ordinance Hong Kong

Before making any changes to your contracts, you need to weigh them carefully. You can also insert model clauses to exclude the application of the Regulation as a whole. For parties who want to ensure that the rights of third parties do not arise, explicit identification of third parties in the contract should be avoided. In addition, an explicit clause may be included in the contract to exclude the rights of a third party in relation to a particular clause or the contract as a whole. A third party may assign a right under a contractual term enforceable by the third party to another person in the same way that a party to the contract may assign a right under the contract. This standard position can be changed by establishing an express clause in the contract to guarantee the opposite, or by formulating the right to be personal and insecible to the third party. The reference to a “clause” instead of a “contract” means that the regulation allows the parties to choose in the contract the clauses they wish to enforce on behalf of the third party and to distinguish them from the conditions that the parties only want to make enforceable between them. From 1 January 2016, contractual rights that are legally enforceable by third parties can be created. Alternatively, Contracting Parties may choose to withdraw from the Regulations and maintain the Doctrine of Privity.

The right of a third party to execute a contractual term does not affect the right of the promisor to execute a contractual term. However, a promisor is released from the obligations he owes to the promisor, to the extent that he has fulfilled the same obligations towards the third party. At the request of either party, the court may make an order waiving the consent of the third party if: (a) the other party agrees to terminate or modify the contract; and (b) the court considers that it is fair and practicable to make the order. The regulation strikes a balance between Hong Kong and other common law jurisdictions that have implemented similar reform of the doctrine of privilege, including England and Wales, Canada (New Brunswick), Australia (Western Australia, Northern Territory and Queensland), New Zealand and Singapore. The Regulation is based on the Contracts (Rights of Third Parties) Act 1999 of England and Wales. English law has not had a significant impact due to the application of the subcontracting provisions discussed below. The Chudley case reminds us of the importance of excluding the application of the regulation if the parties do not intend that the contract confers a direct advantage on third parties. However, the question of whether settlement should be excluded in a contract should be carefully considered in the light of the prevailing circumstances. The Regulation explicitly covers exclusion/restriction clauses. However, such a clause cannot exclude or limit liability in the event of death or personal injury and remains subject to the adequacy criterion laid down in the Regulation on the control of exception clauses (Cap 71) and the Regulation on the Provision of Services (implied conditions) (Cap 457). 4.2 Modification of the rights of third parties The Regulation protects third parties who can avail themselves of their rights as third parties under a contract by prohibiting the contracting parties from cancelling or modifying a contract that modifies the rights of the third party if the third party has accepted or invoked those rights.

In practice, the parties to the contract may design the contract in such a way as to retain the right to modify the terms of the contract by expressly pointing out that the requirement of the consent of a third party is not required. However, if you are a third party to the contract, you may wish to consider monitoring the exercise of this right. For example, if you are the purchaser of a completed project and you find that the terms of a construction contract give you a third-party right, but can be modified or cancelled without your consent, you can try to include an explicit clause in the purchase agreement with the developer that requires the developer to obtain your consent for changes to the construction contract that affect your rights as third parties. 5. WHAT SHOULD YOU DO? Given the recent entry into force of the regulation, you should consider re-evaluating your standard trading contracts. Careful drafting is essential to achieve the desired effect under the Regulation. The Chudley case provides useful guidance for interpreting and identifying an anonymous class of persons who may perform a contract that they have not entered into in accordance with the Regulations. Given that Articles 4(1) and (2) of the Regulation are essentially the same as the relevant Articles 1(1) and (3) of the English Law, it is likely that the Hong Kong courts would refer to HC`s dicta OBITER if similar questions arose in the future.

If the contract contains an exclusive jurisdiction clause, the third party is bound by the exclusive jurisdiction clause in all disputes between the third party and a contracting party concerning the performance of the clause, unless the third party is not intended to be bound by it if the contract is correctly interpreted (§ 13). “The liability of [the Contractor], its subcontractors and/or agents under or in connection with [the Design and Construction Agreement], regardless of how it arises, and including any liability for negligence, is limited to $1,000,000 for each individual claim. `The Regulation shall apply to contracts concluded on or after 1 January 2016. Contracts concluded before that date shall not be affected. The long-awaited Contracts (Rights of Third Parties) Regulation (the “Regulation”) came into force on January 1, 2016, almost 12 years after the first consultation paper in May 2004. This regulation reforms the previous treaty regime, which was characterized by the strict doctrine of the privacy of the contract (the “doctrine of the protection of privacy”), and allows persons who are not parties to a contract to assert their rights under a contract as if they were contracting parties. This brings Hong Kong law into line with countries such as the UK and Singapore, where similar laws have been enacted. In Europe and the United States, the rights of third parties are already widely recognised. However, it is possible to avoid the effect of the Regulation, which may be desirable in many cases, given that the potentially broad scope of the concept of `claim to grant an advantage` is possible in the context of the second part of the enforceability test. In England, where similar legislation has been in place since 1999, contracts generally contain clauses that exclude their operation, and this practice should be followed in Hong Kong. However, a general exclusion clause is not appropriate if the contracting parties wish to grant a third party the right to apply a contractual clause, for example.

B to grant compensation to a group company. In such cases, the contract must explicitly specify the third party and the specific clause(s) it may apply. The application of the Regulation may then be excluded from all other third parties. It will therefore be important to identify at the design stage whether the application of the Regulation should be completely excluded or maintained as regards certain conditions for certain third parties. The third party must appear expressly in the contract by name, as a member of a class (e.B. Subsequent owners) or in response to a specific description (e.B. The nominee of A).2 The third party does not need to exist at the time of conclusion of the contract (e.B a company not yet registered). It is not necessary to consider a third party to assert one`s rights.

If a third party has the right to enforce a contractual provision, the contracting parties may not agree to terminate the contract or modify it in such a way that the third party`s right under the clause is modified or extinguished without the consent of the third party. This limitation of modification and withdrawal does not apply until the rights of the third party have “crystallized”, which is the case if: In cases where the parties wish to preserve the doctrine of privacy and limit their liability to third parties, they must clearly and explicitly exclude all the provisions of the Regulation in the contract and in related contracts. contracts that contain an obligation of confidentiality that confers the benefit of secrecy on a third party, such as . B companies of a group of companies or other parties; The regulation makes significant changes to Hong Kong contract law that allow the parties to agree that third parties can enforce the terms of the contract. .

David West
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