Introduction
The Contracts (Rights of Third Parties) Ordinance (Cap. 623) (the “Ordinance”) will come into force on 1 January 2016 (the “Commencement date”), which will govern contracts entered on or after that date. As the Ordinance has been discussed in detail in previous publications, this article will refresh your memory by pointing to the key points of the Ordinance.

What you should be aware

Complete opt-out of the Ordinance
When the parties are negotiating the contractual terms, they should check whether there is any contractual term that may confer a benefit on a third party. Any term, which expressly provides a third party a right to enforce or purports to confer a benefit on such third party, and such third party is expressly identified in the contract (i.e. by name, as a member of a class, or as answering a particular description), could be enforced by such third party. If the parties do not intend to give the third party a right to enforce the contractual term, the contracting parties can completely opt out of the Ordinance by inserting an express opt-out clause.

Selective application of the Ordinance
When the parties intend to make the contract enforceable by the third party, the parties may consider which clause(s) the Ordinance should apply to and set out an express term to this effect in the contract.

Rescission and variation of contract
If the parties consider that they may need to vary or rescind the contract, the parties should incorporate an express term in the contract (i) stating that the parties could vary or rescind the contract without the consent of the third party; or (ii) setting out other circumstances upon which the third party’s rights would crystalise. To effectuate the foregoing term, the third party must be aware of the foregoing term before his or her rights have crystalised or the parties have taken reasonable steps to make the third party aware of it.

Conclusion
To negotiate contractual terms after the commencement date, the road map set out below can be a guide to follow:-

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.