Civil Engineering Reference
In-Depth Information
and/or funders. The parties in whose favour such rights are to be granted require
to be set out in the Contract Particulars. The Contract Particulars further provide
that, if in relation to an identified person it is not stated whether third party rights
or collateral warranties will apply, then the former will apply. Compared to collateral
warranties, the use of third party rights schedules is a relatively recent innovation
and it remains to be seen whether in time these will replace collateral warranties as
the medium of choice for providing rights in favour of third parties.
The NEC3 makes provision for third party rights under secondary option clause
Y(UK)3. The terms capable of being enforced and the parties entitled to do so are to
be set out in the Contract Data. However, it should be noted that this clause is limited
to the exercise of rights under the Contracts (Rights of hird Parties) Act 1999, which
does not apply to Scotland. This means that if the contract is governed by Scots law
and the intention is to grant third party rights under the
jus quaesitum tertio
,then
either specific amendments will require to be made to Y(UK)3 or a separate Z clause
added.
13.5.2 Creation of the rights
To create third party rights in Scots law under the
jus quaesitum tertio
,thepartiesto
the contract need to show an intention to create such rights in favour of a particular
person or class of persons and to make those rights irrevocable. For a more detailed
discussion, see Section 11.7.2 and the cases mentioned therein.
13.5.3 Advantages
There are a number of perceived advantages to using third party rights schedules.
From the beneficiary's perspective, probably the most compelling benefit is that where
third party rights are properly conferred on a beneficiary, the parties to the primary
contract will (in the absence of an express right to do so) be unable to change the
primarycontractsoastointerferewiththethirdpartyrights.Intheabsenceofexpress
terms in a collateral warranty prohibiting them from doing so, it would be open to the
partiestotheprimarycontracttoadjustitinsuchawayasmayafecttherightsbeing
granted under the collateral warranty.
Third party rights schedules could reduce the requirement to prepare and complete
large numbers of collateral warranties in major projects. Instead the grantor would
agree to one third party rights schedule which will contain many of the general col-
lateral warranty clauses outlined above.
Third party rights can be prepared at the same time as the main contract and the
beneficiary can be identified as a specific legal entity or as a class of persons (e.g. ten-
ants). This means that third party rights can be made available for beneficiaries that
have not yet been identified or that are not in existence at the time the building con-
tract is entered into.
From the perspective of the grantor, third party rights may be more attractive than
a collateral warranty as such rights would not be a 'construction contract' under the
