Stuarts Humphries Banner Image

News & Insights

The Contracts (Rights of Third Parties) Act, 2014 comes into effect

The Contracts (Rights of Third Parties for the registration of a Director) Act (2014 Revision)  (the “Law”) came into effect on 21 May 2014.

The Law brings the Cayman Islands into line with the UK and the US in relation to the ability of a person to enforce rights which are conferred upon him pursuant to a contract to which he is not a party (“third party”), thereby overriding the common law principle that only parties to a contract are able to enforce its terms.

The Law applies to contracts which are made on, before or after 21 May 2014 if they already contain, or are amended to include, terms which comply with the Law provided however that a third party may only enforce a right which accrues on or after 21 May 2014.  The Law does not apply to certain types of contract such as bills of exchange, promissory notes and memoranda and articles of association.

The Law cures a frequently encountered problem whereby indemnity provisions in, for example, fund documentation, which are extended to cover third parties (such as an investment manager), were ineffective.  The drafting of such clauses must, however, comply with the Law by expressly identifying the relevant third parties by name, as a member of a class or as answering a particular description. 

Click here to read more and download information regarding The Contracts (Rights of Third Parties) Act, 2014.

This publication is for general guidance and is not intended to be a substitute for specific legal advice. Specialist advice should be sought about specific circumstances.