Under s.1 of the 1999 Act a third party can enforce a contractual term where (inter alia) the term purports to confer a benefit on them unless, 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 third party must be expressly identified by name, class or description.
The Supreme Court has now for the first time considered these provisions.
In a judgment out last week, overturning the Court of Appeal, the Supreme Court held that: (i) where the term purports to confer a benefit on an expressly identified third party the presumption of enforceability is strong; (ii) the party seeking to rebut that presumption has to show that the parties to the contract had a positive common intention that the obligation should not be enforceable by the third party; (iii) whether there was such an intention must be assessed applying the usual objective approach to interpretation of contracts and implication of terms, including only taking into account such factual matrix as is usually admissible in respect of the same; (iv) where there is no express term providing that the term is not enforceable, the party seeking to deny enforceability will have to persuade the court that there was an implied term that the parties did not intend enforceability; (v) the test for implying a term where the contract is silent is a demanding one: – SoS for DEFRA v PCSU [2024] UKSC 41.
The case is therefore a powerful shot in the arm for the 1999 Act.
(Interestingly for law geeks, one of the Justices hearing the appeal was Lord Burrows who, 28 years ago as Professor Andrew Burrows, was the Law Commissioner with primary responsibility for the report which gave rise to the 1999 Act.)
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