Farewell Jus Quaesitum Tertio, Hello Third Party Rights

Contractual third party rights, one of Scotland's most antiquated and inflexible laws is about to get the 21st Century treatment as a new bill was introduced last week in the Scottish Parliament.

The Contract (Third Party Rights) (Scotland) Bill aims to majorly reform this area of law and provide third party rights with a statutory footing.

Current Third Party Rights

Scots law currently allows for some contractual rights (but not duties) to be conferred on a person, even if they were not a party to that contract, in some limited circumstances. This is based on the common law doctrine (helpfully still referred to in latin) of jus quaesitum tertio ("JQT"). JQTs can even be conferred on a party which did not exist when a contract was entered into.

Despite being potentially commercially useful, common law third party rights are used in practice very infrequently. This is because the law on JQTs, in its current form, can be very problematic.

In order for a JQT to be created currently, a contract must:

Identify the third party; Show the contracting parties' intention to create third party rights; Confer a benefit which the contracting parties cannot revoke or alter. A result of the requirement that the third party right cannot be cancelled or altered is that JQTs are often seen as too inflexible for modern day purposes and are a barrier for commercial transactions. As such there have been numerous calls to modernise this area of law.

Scottish Law Commission

As part of a review of Scots contract law, the Scottish Law Commission ("SLC") produced a discussion paper on third party rights in 2014. The SLC proposed that the current law should be updated and brought in line with English law on third party rights.

Following a consultation period in early 2016, the SLC have prepared a report on third party rights, setting out sensible recommendations. A draft bill was also produced and this has now been presented to the Scottish Parliament as part of the expedited parliamentary procedure for SLC bills.

Third Party Rights Bill

The key...