IHTM28291 - Liabilities: investigating liabilities: sums payable to third parties in England and Wales

Until the Contracts (Rights of Third Parties) Act 1999 the general rule was that where a debt was incurred by agreement the debt could only be enforced by the other party to the agreement. But this rule is does not apply where

• the person to whom payment was to be made (under the agreement) is the personal representative of the other party to the agreement, Beswick v Beswick [1968] AC 58
• If a deduction was claimed on death and the personal representatives or their professional agents give us an assurance that the sums in question had been paid in full, or will be so paid as they fall due. They must also state that they will tell us if and when any action is taken that leads to a different result. (If the taxpayers did not give this assurance or it was made clear that such an assurance could not be given, you should ask the precise reason for the non-payment), or
• the disposition under consideration is the payment to the third party.

The Act substantially reformed the rule of ‘privity of contract’ under which persons can only enforce a contract if they are a party to it. Section 1 sets out the circumstances in which a third party has the right to enforce a term of the contract. It is possible to exclude the Act by expressly stating that no third parties are to be conferred any rights under the contract. If this is done the Unfair Contract Terms 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 do not apply. The Act came into force on 11 November 1999 but does not apply to contracts entered into before 11 May 2000 unless the contract expressly provides that it does apply. You should refer any cases of doubt or where this legislation appears to be relevant to Technical.