Statutory change in contract law

The requirement for consideration and the principle of privity of contract are of course fundamental to English contract law. Derived from these rules is the principle with which these cases are concerned - that a contracting party can only claims the losses that he has suffered as a result of a breach of contract, not anyone else’s.

These rules make English law somewhat different from other legal systems. They have led to considerable criticism over the years. If a contract between two parties says expressly that it is for the benefit of another named person, why should that person not be able to sue under the contract if obligations are not performed?

The Law Commission suggested new legislation, a central element of which would be that a third party would have a right to enforce a contract where the contract expressly states that the third party is to be able to do so. The recommendations of the Law Commission were incorporated into English law by way of the Contracts (Rights of Third Parties) Act 1999. It applies to all contracts entered into after 11May 2000.

It is interesting to consider how St Martins Investment, Darlington and Unex would have fared if they had brought their claims under this law if enacted - they would have LOST. This is because the proposed new law requires that the contract expressly mentions the third party. In none of the building contracts was the subsequent owner or occupier expressly identified.