Contractual Intention under Section 1(1)(b) and 1(2) of the Contracts (Rights of Third Parties) Act 1999

DOIhttp://doi.org/10.1111/1468-2230.00299
Date01 November 2000
Published date01 November 2000
Contractual Intention under Section 1(1)(b) and 1(2) of
Thomas Roe*
Unlike section 1(1)(a), section 1(1)(b) of the Contracts (Rights of Third Parties) Act
1999
1
is not dependent upon the contracting parties expressly giving a third party a
right of action. Rather, it renders enforceable by a third party any term of a contract
which ‘purports to confer a benefit’ on the third party. But it is subject to subsection
(2), which provides that subsection (1)(b) ‘does not apply if on a proper construction
of the contract it appears that the parties did not intend the term to be enforceable by
the third party.’ The determination of whether a term which purports to confer a
benefit should be given effect under section 1(1)(b), or denied it under section 1(2), is
likely to be a source of litigation in many cases. This note considers the interrelation
of subsections (1)(b) and (2). In particular: (i) who needs to prove what when the
court is considering whether a contractual term which purportedly benefits a third
party should be given effect; (ii) how should the court go about determining the
statutory question, whether on the proper construction of the contract it appears that
the parties did not intend the contract to be enforceable by a third party?
Who needs to prove what under subsections (1)(b) and (2)?
In practice, the incidence of the burden of proof is rarely decisive in a case. But
it is important nonetheless for the way in which it frames the structure of the
court’s enquiry. A court faced with a contract which apparently confers a benefit
on a third party ought, if invited to do so, to look for material which suggests that
an enforceable benefit was not intended to be conferred, rather than material
which suggests that it was so intended: this follows from the fact that section
1(1)(b) is disapplied by section 1(2) where it appears that the parties did not
intend to confer a benefit, rather than applied where it appears that they did. But
this does not answer the practical question of which party must raise the issue,
and how it will be resolved. The legislation itself provides no guidance beyond
the provisions already cited. The Law Commission’s Report,
2
on which the
legislation is based, states the Commission’s intentions in various different
ways. Where the contract purports to confer a benefit, there is a ‘rebuttable
presumption’ in favour of a third party right.
3
(This is the way in which the
effect of the provisions is commonly described.
4
) The ‘onus of proof’ is on the
person who contends that the contracting parties did not intend the term to be
ßThe Modern Law Review Limited 2000 (MLR 63:6, November). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA. 887
* 3 Hare Court, Temple.
1 On the Act generally see C. Macmillan ‘A Birthday Present for Lord Denning: The Contracts (Rights
of Third Parties) Act 1999’ (2000) 63 MLR 721.
2 Law Commission, Privity of Contract: Contracts for the Benefit of Third Parties, Report No 242 Cm
3329 (1996) (Report).
3ibid para 7.17.
4 eg M. Dean [2000] Journal of Business Law 143, 147; M. Furmston, The Law of Contract (London:
Butterworths, 1999) 944.

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