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Cayman Islands: the Contracts (Rights of Third Parties) Law 2014

The Contracts (Rights of Third Parties) Law 2014 was published in the Cayman Islands Gazette on 21 May 2014 and comes into force with immediate effect. Subject to certain exceptions, the law allows for the enforcement of contractual rights by a third party. Accordingly, the law permits a variation of the pre-existing position under Cayman Islands law based upon the common law doctrine of privity of contract. The law is similar to the UK’s Contracts (Rights of Third Parties) Act and to legislation enacted in several other common law jurisdictions.

The doctrine of privity of contract provides that a person (a ‘third party’) may not acquire and enforce rights or have obligations imposed upon it by a contract to which it is not a party (even where it is the parties’ clear intention that a contractual right should benefit a third party, including, for example, indemnification/exculpation provisions).

Pursuant to the law, a third party may in its own right enforce a term of a contract if: the third party is expressly identified in the contract by name, as a member of a class or as answering a particular description (and a third party may include a person not in existence when the contract is entered into); and the contract expressly provides in writing that the relevant third party may enforce the relevant term…

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