IHTM28292 - Liabilities: investigating liabilities: sums payable to third parties in Scotland

You should not disallow a deduction for any sum that the transferor has agreed to pay just because the person they were due to was not a party to the agreement. But any sums payable must be legally enforceable, and you need to bear in mind the extent of consideration (IHTM28293).

Usually, where a contract is made under Scots Law between two parties, only they acquire rights and incur liabilities under the contract. A third party does not acquire either rights or liabilities under the contract.

But, if a contract between two parties is drawn up to benefit a third party or a class or group of people who are identified in the contract, it is said to confer a ‘jus quaesitum tertio’ on the third party. It must be clear from the wording of the contract that both contracting parties intended to confer a benefit on the third party, who would then be entitled to enforce performance of the contract according to its terms or to recover damages for non-performance.

To be enforceable, it is said that a jus quaesitum tertio must be irrevocable (Carmichael v Carmichael’s Executrix 1920 SC (HL) 195, 2 SLT 285). This is established by

• delivery of the contractual document to the third party
• registration for publication in the Books of Council & Session
• intimation to the third party
• the third party coming under onerous undertakings on the faith of having a jus quaesitum, or
• by evidence that the third party knew of the provision intended for their benefit.