Contracts (Rights of Third Parties) Ordinance

by Legislative Council of Hong Kong

Layout 2

Contracts (Rights of Third Parties) Ordinance

Contents

Section

Page

1.	Short title and commencement ............................................................................................................................................................................................................................................................................................................	A1659
2.	Interpretation ............................................................................................................................................................................................................................................................................................................	A1659
3.	Application ............................................................................................................................................................................................................................................................................................................	A1661
4.	Third party’s right to enforce contractual term ............................................................................................................................................................................................................................................................................................................	A1663
5.	Remedy available to third party ............................................................................................................................................................................................................................................................................................................	A1665
6.	Rescission and variation of contract ............................................................................................................................................................................................................................................................................................................	A1665
7.	Power of court to dispense with third party’s consent to rescind or vary contract ............................................................................................................................................................................................................................................................................................................	A1667
8.	Proceedings brought by third party ............................................................................................................................................................................................................................................................................................................	A1669
9.	Proceedings brought against third party ............................................................................................................................................................................................................................................................................................................	A1671
10.	Enforcement of contract by promisee ............................................................................................................................................................................................................................................................................................................	A1671
11.	Protection of promisor from double liability ............................................................................................................................................................................................................................................................................................................	A1671
12.	Arbitration agreement ............................................................................................................................................................................................................................................................................................................	A1673
13.	Exclusive jurisdiction clause ............................................................................................................................................................................................................................................................................................................	A1675
14.	Assignment of third party right ............................................................................................................................................................................................................................................................................................................	A1677
15.	Third party not to be treated as party to contract ............................................................................................................................................................................................................................................................................................................	A1677
16.	Application of Limitation Ordinance ............................................................................................................................................................................................................................................................................................................	A1677

HONG KONG SPECIAL ADMINISTRATIVE REGION

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Ordinance No. 17 of 2014

An Ordinance to provide for the enforcement of contractual terms by third parties and for related matters.

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Enacted by the Legislative Council.

1. Short title and commencement

(1) This Ordinance may be cited as the Contracts (Rights of Third Parties) Ordinance.

(2) This Ordinance comes into operation on a day to be appointed by the Secretary for Justice by notice published in the Gazette.

2. Interpretation

In this Ordinance—

promisee (受諾人), in relation to a term of a contract enforceable by a third party under section 4, means a party to the contract who may enforce the term against the promisor;

promisor (許諾人), in relation to a term of a contract enforceable by a third party under section 4, means a party to the contract against whom a third party may enforce the term;

third party (第三者), in relation to a contract, means a person who is not a party to the contract.

3. Application

(1) This Ordinance applies to a contract entered into on or after the date on which this Ordinance comes into operation.

(2) This Ordinance does not apply to any of the following—

(a) a bill of exchange, a promissory note or any other negotiable instrument;

(b) a deed of mutual covenant as defined by section 2 of the Building Management Ordinance (Cap. 344);

(c) a covenant relating to land;

(d) subject to subsection (3), a contract of carriage within the meaning of the Bills of Lading and Analogous Shipping Documents Ordinance (Cap. 440);

(e) a contract for the carriage of goods by air governed by the Carriage by Air Ordinance (Cap. 500);

(f) a letter of credit;

(g) a company’s articles having effect as a contract under seal under section 86 of the Companies Ordinance (Cap. 622).

(3) A third party may invoke section 4 to enforce a term of a contract referred to in subsection (2)(d) that excludes or limits liability.

(4) This Ordinance does not confer a right on a third party to enforce a term of a contract of employment against an employee.

(5) In this section—

bill of exchange (匯票) means a bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap. 19);

contract of employment (僱傭合約) has the meaning given by section 2(1) of the Employment Ordinance (Cap. 57);

negotiable instrument (可流轉票據) includes any instrument embodying a monetary obligation and transferable by delivery, or by delivery and indorsement, whether or not the instrument is capable of being transferred free from equities;

promissory note (承付票) means a promissory note within the meaning of section 89 of the Bills of Exchange Ordinance (Cap. 19).

4. Third party’s right to enforce contractual term

(1) A third party may enforce a term of a contract (including a term that excludes or limits liability) if—

(a) the contract expressly provides that the third party may do so; or

(b) the term purports to confer a benefit on the third party.

(2) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description.

(3) Subsection (1)(b) does not apply if, on a proper construction of the contract, the term is not intended to be enforceable by the third party.

(4) The enforcement of the term by a third party under this section is subject to any other term of the contract relevant to the term.

(5) Subsection (1) applies whether or not the third party has given consideration for the term.

(6) Subsection (1) applies to a third party even if the third party was not in existence when the contract was entered into.

5. Remedy available to third party

(1) There is available to a third party who enforces a term of a contract under section 4 a remedy that would have been available to the third party in an action for breach of contract if the third party had been a party to the contract.

(2) Any law relating to the remedy applies accordingly.

(3) To avoid doubt, the remedies available to a third party under this section include a remedy under the rules of equity.

(4) This Ordinance does not affect a right or remedy of a third party that exists or is available apart from this Ordinance.

6. Rescission and variation of contract

(1) If a third party may enforce a term of a contract under section 4, the parties to the contract may not, without the third party’s consent—

(a) by agreement, rescind the contract; or

(b) by agreement, vary the contract so that the third party’s right under the term is altered or extinguished.

(2) Subsection (1) applies only if—

(a) the third party has assented to the term and the promisor has received notice of the assent (whether the assent and the notice are in writing or otherwise); or

(b) the third party has relied on the term and—

(i) the promisor is aware of the reliance; or

(ii) the promisor can reasonably be expected to have foreseen that the third party would rely on the term.

(3) In addition, an express term of the contract prevails over subsection (1) if the term provides to the effect that—

(a) one or more parties to the contract may rescind or vary the contract without the third party’s consent; or

(b) the third party’s consent to rescind or vary the contract is required in circumstances specified in the contract instead of those set out in subsection (2)(a) and (b).

(4) Subsection (3) applies only if, before the circumstances set out in subsection (2)(a) or (b) occur—

(a) the third party is aware of the term referred to in subsection (3); or

(b) one or more parties to the contract have taken reasonable steps to make the third party aware of the term.

7. Power of court to dispense with third party’s consent to rescind or vary contract

(1) This section applies if a third party’s consent is required to rescind or vary a contract under section 6(1) or (3)(b).

(2) A party to the contract may apply to the court to make an order dispensing with the third party’s consent.

(3) The court may make the order if—

(a) the other party or each other party to the contract agrees to rescind or vary the contract; and

(b) the court thinks it just and practicable to make the order.

(4) The order may be made subject to any condition that the court thinks fit, including a condition requiring that the third party be compensated.

8. Proceedings brought by third party

(1) Subsections (2), (3) and (4) apply if a third party brings proceedings to enforce a term of a contract under section 4.

(2) The promisor may raise one or more of the following matters by way of defence or set-off—

(a) a matter that—

(i) arises from or in connection with the contract and is relevant to the term; and

(ii) would have been available to the promisor by way of defence or set-off if the proceedings had been brought by the promisee;

(b) a matter in respect of which the following conditions are met—

(i) an express term of the contract provides for the matter to be available to the promisor by way of defence or set-off in proceedings brought by the third party; and

(ii) the matter would have been available to the promisor by way of defence or set-off if the proceedings had been brought by the promisee;

(c) a matter that would have been available to the promisor by way of defence or set-off if the third party had been a party to the contract.

(3) The promisor may raise, by way of counterclaim, a matter not arising from the contract that would have been available to the promisor by way of counterclaim against the third party if the third party had been a party to the contract.

(4) Subsections (2)(a) and (c) and (3) are subject to any express term of the contract specifying matters not available to the promisor by way of defence, set-off or counterclaim.

9. Proceedings brought against third party

(1) In any proceedings brought against a third party, the third party may not seek to enforce under section 4 a term of a contract (including a term purporting to exclude or limit liability) if the third party could not have enforced the term had the third party been a party to the contract.

(2) Subsection (1) applies whether the third party could not have enforced the term because of particular circumstances relating to the third party or otherwise.

10. Enforcement of contract by promisee

Section 4 does not affect the promisee’s right to enforce a term of the contract.

11. Protection of promisor from double liability

(1) Subsection (2) applies if—

(a) a third party may enforce a term of a contract under section 4; and

(b) the promisor has wholly or partly performed the promisor’s obligations to the third party under the term.

(2) The promisor is discharged from the obligations owed by the promisor to the promisee to the extent of having performed the same obligations to the third party.

(3) Subsection (4) applies if—

(a) a third party may enforce a term of a contract under section 4; and

(b) the promisee has recovered from the promisor a sum for—

(i) the third party’s loss in relation to the term; or

(ii) the expense to the promisee of making good to the third party the default of the promisor in relation to the term.

(4) In any proceedings brought under section 4 before a court or arbitral tribunal by the third party, the court or arbitral tribunal must reduce any award to the third party to the extent to which it thinks appropriate to take account of the sum.

12. Arbitration agreement

(1) Subsection (2) applies if a third party’s right to enforce a term of a contract under section 4 is subject to an arbitration agreement.

(2) As regards a dispute between the third party and the promisor relating to the enforcement of the term by the third party, the third party is treated as a party to the arbitration agreement for the purposes of the Arbitration Ordinance (Cap. 609).

(3) Subsection (2) does not apply if, on a proper construction of the contract, the third party is not intended to be so treated.

(4) Subsections (5) and (6) apply if—

(a) a third party may enforce a term of a contract under section 4;

(b) the term—

(i) provides that one or more descriptions of dispute between the third party and the promisor is to be submitted to arbitration; and

(ii) constitutes an arbitration agreement; and

(c) subsection (2) does not apply in relation to the arbitration agreement.

(5) If the third party enforces the arbitration agreement under section 4, then, as regards the dispute for which the arbitration agreement is enforced, the third party is treated as a party to the arbitration agreement for the purposes of the Arbitration Ordinance (Cap. 609).

(6) The third party is so treated immediately before the third party exercises the right to enforce the arbitration agreement under section 4.

(7) In this section—

arbitration agreement (仲裁協議) has the meaning given by section 2(1) of the Arbitration Ordinance (Cap. 609).

13. Exclusive jurisdiction clause

(1) This section applies if a contract contains—

(a) a term enforceable by a third party under section 4; and

(b) an exclusive jurisdiction clause.

(2) The third party is bound by the exclusive jurisdiction clause as regards a dispute between the third party and the promisor relating to the enforcement of the term by the third party.

(3) This section does not apply if, on a proper construction of the contract, the third party is not intended to be so bound.

(4) In this section—

exclusive jurisdiction clause (專有司法管轄權條款) means a clause requiring that a dispute relating to the term enforceable by the third party under section 4 be resolved only in a particular jurisdiction.

14. Assignment of third party right

(1) A third party may assign to another person a right under a term of a contract enforceable by the third party under section 4 in the same way as a party to the contract may assign a right under the contract.

(2) Subsection (1) does not apply if—

(a) the contract expressly provides otherwise; or

(b) on a proper construction of the contract, the right is personal to the third party and is not assignable.

15. Third party not to be treated as party to contract

Despite sections 5(1), 8(2)(c) and (3) and 9(1), a third party is not to be treated as a party to the contract for the purposes of any enactment or any instrument made under the enactment.

16. Application of Limitation Ordinance

(1) In section 4(1)(a) of the Limitation Ordinance (Cap. 347), the reference to actions founded on simple contract includes an action relating to a simple contract brought under section 4.

(2) In section 4(3) of the Limitation Ordinance (Cap. 347), the reference to an action upon a specialty includes an action relating to a specialty brought under section 4.