The Cayman Islands government has launched a consultation seeking feedback on the proposed introduction of new legislation, the Third Party Rights Bill, which would give third parties the ability to enforce rights that have been conferred to them in a contractual agreement.

Currently in the Cayman Islands, a key principle of contract law is ‘privity of contract’, which allows only those persons who are direct contractual parties to enforce rights. However, issues arise when natural persons, acting for companies or other forms of ‘legal persons’, cannot enforce rights given to the ‘legal persons’. The bill seeks to give effect to third-party rights, where parties expressly agree that it should apply. Such changes will modernise legislation and encourage a more competitive business environment, the government says.

An example of third-party rights would be in the context of a real estate contract to buy property. In the contract, the purchaser agrees to pay, in part, the commission for the sale. But although the real estate agent is likely to have a separate contract with the seller, he is unlikely to have a contract with the purchaser. With the introduction of this law and an explicit reference in the contract to the right of the agent to claim such commission from the purchaser, the agent could enforce third-party rights.

Consideration in particular is being given as to whether this law should be restricted to exempted companies and exempted limited partnerships, or should be applied generally to all businesses.

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