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Legal news, views and insight from LexisNexis Hong Kong

 

The Contracts (Rights of Third Parties) Ordinance (Cap 623) (“Ordinance”) came into operation on 1 January 2016. According to the Ordinance, a third party may enforce a contractual term if the contract expressly provides that the third party may do so or the term purports to confer a benefit on the third party. However, the Ordinance is silent on how to decide whether a contract has sufficiently identified the third party. The Hong Kong courts also have not decided on this issue yet.

The Ordinance is modelled on the Contracts (Right of Third Parties) Act 1999 of the UK (“Act”). In construing the provisions of the Ordinance, the courts would follow the way the English courts have interpreted and applied the equivalent provisions of the Act, there being no circumstances relevant to the two different jurisdictions which might indicate that our courts could or should come to a different conclusion, when the same words are being construed.

Recently, the English High Court has provided useful guidance on the identification of third parties that may enforce contractual rights under the Act in Chudley v Clydesdale Bank plc (t/a Yorkshire Bank) 2017 EWHC 2177. One of the issues before the court was whether under the Act, the requirement that the third party be expressly identified in the contract could be achieved by a process of construction. The court stated in obiter that for the purposes of the Act, it was possible to identify an unnamed class or persons who could enforce their rights under a contract by construction of the relevant express terms of the contract. The term can be relied on both to show that third parties were intended to benefit from a contract and to identify expressly a category of third parties intended to so benefit. If Hong Kong ever come across similar issues in the future, it is likely that the Hong Kong courts would make reference to Chudley.

Find out more in:

  1. Annotated Ordinances of Hong Kong on Cap. 623
  2. Lexis PSL – Commercial
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