Jurisdiction clause binds third party when enforcing third-party rights
- William Kanaan
- Oct 7
- 2 min read
The High Court has held that a claim made pursuant to the Contracts (Rights of Third Parties) Act 1999 (CRTPA) under a sale and purchase agreement (Agreement) was within the scope of its exclusive English jurisdiction clause.
The Agreement entitled the claimant to benefit from release of liability promises for the purposes of the CRTPA. When the claimant sought to enforce its third-party rights, the defendant (based abroad) applied to the court to set aside service outside the jurisdiction without permission. The court had to determine if the claimant was entitled to rely on the Agreement's jurisdiction clause, either as a matter of contract construction or because the CRTPA required it.
The court found that, as a matter of construction, the scope of the jurisdiction clause and the language used, including the words "any dispute which may arise out of or in connection with this deed", extended to disputes involving third parties and the claimant could rely on it.
While the starting position is that jurisdiction clauses only bind contracting parties unless there is express wording to the contrary, this can be modified by the terms of the contract as a whole and the nature of the relations between parties and non-parties.
Section 1(4) of the CRTPA provides that a third party has no right to enforce a contractual term other than "in accordance with any other relevant terms of the contract". The court made a non-binding determination that if the jurisdiction clause is wide enough to cover disputes from third parties, then it will generally be a "relevant term" for the purposes of section 1(4) and that the intention of the parties as to the scope of the jurisdiction clause is irrelevant. Applying this to the facts, the Agreement's jurisdiction clause was clearly a "relevant term" for these purposes and, as such, the claimant was statutorily bound by it when enforcing its third-party rights.
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