Impact of the Contracts (Rights of Third Parties) Bill on the
insurance industry in Hong Kong
'Privity of contract' is a well-established common law
doctrine establishing that a person cannot acquire or enforce
rights under a contract to which he is not a party. The strict
application of the doctrine may, however, give rise to absurdity or
even unfairness. By way of example, A promises B to pay a sum of
money to C. If A fails to pay as agreed, under the privity of
contract doctrine, C cannot enforce the contract between A and B.
While B can sue A, it may be difficult for B to prove loss as the
contract is to confer benefit to C and not B. Legislators in Hong
Kong are considering the Contracts (Rights of Third Parties) Bill
(the Bill), which is intended to address such possible absurdity.
The Bill has gone through its first reading and the date for second
reading has yet to be fixed.
