Giving Rights to Third Parties: Topical Issues

Steven Walker QC and John Hughes-D'Aeth

May 2016

A paper based on a talk given to the Society of Construction Law at a meeting in London on 10th February 2015

The drafting and operation of provisions giving rights to third parties under construction contracts have been the subject of several recent court decisions. This paper examines some of the issues raised in these cases, including: the interaction of collateral warranties and third party rights with the adjudication provisions of the Construction Act (the Parkwood and Hurley Palmer Flatt cases); the legal status and effect of net contribution clauses (West v Ian Finlay & Associates); and the challenge of enforcing a contractual obligation to provide warranties (Liberty Mercian). It concludes by suggesting that these decisions may provide a further impetus for clients to adopt the mechanism in the Contracts (Rights of Third Parties) Act 1999 as an alternative to collateral warranties.

1. Introduction - 2. Parkwood v Laing O'Rourke - Background: the HGCRA - The HGCRA and collateral warranties - Parkwood: the facts - The arguments - The judge's reasoning - Reactions to Parkwood - Possible drafting fixes - 3. Retrospective effect? - Denial of right to adjudicate? - Avoid torrential drafting! - 4. The unresolved question: third party rights - The case for: they are supposed to do the same thing! - The case against: Hurley Palmer Flatt - 5. Net contribution - Overview - Construction of the NCC - Effect of the NCC - The TCC Regulations - UCTA - 6. The case in favour of NCCs - Striking a balance - 7. Liberty Mercian - Background and proceedings - 8. Conclusion: has the TPR moment arrived?

The authors:Steven Walker QC is a barrister practising from Atkins Chambers, London and John Hughes D'Aeth is a solicitor and partner of Berwin Leighton Paisner, solicitors, London.

Text: 23 pages