New Bermuda Legislation: Contracts (Rights Of Third Parties) Act, 2016

The Contracts (Rights of Third Parties) Act, 2016 (the "Act") was recently enacted by the Bermuda Legislature and is now fully operative. The Act is significant in that, subject to its terms, it permits parties to vary the common law doctrine of "privity of contract" which provides that only parties to a contract may enjoy the benefits and enforce the provisions of that contract.

Under the Act, persons not specifically party to a contract may now be entitled to benefit from and enforce the terms of the contract, subject to certain restrictions. The Act will be of significant interest to investment managers, investment funds, third party service providers and delegates who traditionally may not be parties to an agreement but may be impacted by its specific terms and provisions. In particular, the Act should assist in the area of indemnification and exculpation provisions of agreements intended to benefit a wider class of beneficiaries beyond just the contracting