Monday, January 7, 2019

Third-Party Contractual Rights

The Oman Civil Transactions Law, Royal Decree 29/2013 (the “Civil Code”), provides that “a contract shall be made by virtue solely of the confluence of offer and acceptance, subject to the specific provisions laid down for the conclusion of the contract.”

This is consistent with the common law doctrine of privity, or third-party rule - anyone not “privy” or party to a contract could not sue or be sued under it.  In English law, the rule derives from Tweddle v Atkinson [1861] EWHC QB J57, and was applied by the House of Lords in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1.  This state of the law was criticised as unfairly preventing non-parties from enforcing contracts made for their benefit.

The Oman Civil Code contains provisions granting rights to third parties allowing them to enforce the terms of a contract to which they are not party.  The provisions in the Civil Code are similar to the provisions of the English law statute on this subject (Contracts (Rights of Third Parties) Act, 1999).

If the terms of a contract require either party to such contract to ensure the performance of certain obligations under said contract by a third party, such third party cannot be held liable for failure to perform those obligations unless the third party itself had previously consented to perform such obligations.

The Civil Code provides that a contract to which a third party is not a signatory cannot impose obligations on such third parties.  However, certain rights may be granted to third parties.  If a right has been granted to a third party in a contract, then the third party has the ability to enforce the terms of the contract against the party/parties who had granted this right.  The Civil Code further clarifies that the rights granted to a third party may be revoked or amended by the party granting those rights at any time prior to the third party informing the parties to the contract of its intention to benefit from the rights granted to it.

However, the parties to a contract can specifically provide in the contract that the third parties mentioned in the contract will not acquire any rights to enforce the terms of the contract against any of the parties.  In the absence of such a specific exclusion to the rights of a third party, all third parties that are mentioned in a contract will have a right to enforce the terms of the contract against one or more of the parties.