Hong Kong Contract Rights of Third Parties: An Overview
In Hong Kong, contracts are governed by common law principles and the Contract Law (Cap. 23) Ordinance. One important aspect of contract law is the rights of third parties in a contract. In this article, we will discuss the basic principles and limitations of Hong Kong contract rights of third parties.
What are Contract Rights of Third Parties?
Contract rights of third parties refer to the legal rights that a third party can acquire under a contract between two other parties. In other words, it means that if two parties enter into a contract that includes a provision benefiting a third party, that third party can enforce that provision in court.
However, in Hong Kong, the doctrine of privity of contract applies, which means that only parties to a contract can enforce it. This means that if a contract does not explicitly provide for third party rights, a third party cannot enforce the contract. This is the general rule, but there are some exceptions to this rule.
Exception 1: Common Intention of the Parties
If it can be shown that the parties to a contract intended to confer a benefit on a third party and that the third party relied on that intention to their detriment, then the third party may be able to enforce the contract.
For example, if a father enters into a contract to purchase a house for his son’s family and the contract specifies that he will pay for the house and the son will repay him over time, the son may have a right to enforce the contract if he can show that his father intended to confer a benefit on him.
Exception 2: Statutory Rights
There are also some statutory exceptions to the privity rule in Hong Kong. For example, the Sale of Goods Ordinance (Cap. 26) allows buyers of goods to sue manufacturers if the goods are defective, even if there is no direct contractual relationship between them.
Additionally, the Contracts (Rights of Third Parties) Ordinance (Cap. 623) allows third parties to enforce a contract if it expressly provides for that third party’s rights. The Ordinance applies to contracts entered into on or after January 1, 2000.
Limitations of Third Party Rights
Even if a third party has a right to enforce a contract, there are some limitations to their rights. For example, the third party cannot enforce any terms of the contract that are not beneficial to them. Additionally, if the contract is terminated, the third party’s rights under the contract are also terminated.
In conclusion, Hong Kong contract law generally follows the doctrine of privity of contract, which means that only parties to a contract can enforce it. However, there are some exceptions to this rule, such as the common intention of the parties, statutory rights, and the Contracts (Rights of Third Parties) Ordinance. It is important to understand the limitations of third party rights when drafting a contract that includes third party provisions.