Contract (Third Party Rights) (Scotland) Act 2017

6 Protection of third party’s entitlement after undertaking relied on

(1) Subsection (2) applies (subject to subsections (3) and (4)) where—

(a) a person has a third-party right to enforce or otherwise invoke an undertaking contained in a contract,

(b) the person has done something, or refrained from doing something, in reliance on the undertaking,

(c) doing or (as the case may be) refraining from doing the thing has affected the person’s position to a material extent,

(d) either—

(i) the contracting parties acquiesced in the person doing or (as the case may be) refraining from doing the thing, or

(ii) the person’s doing or (as the case may be) refraining from doing the thing in reliance on the undertaking could reasonably have been foreseen by the contracting parties, and

(e) subsequent to the person doing or (as the case may be) refraining from doing the thing mentioned in paragraph (b), the undertaking has been cancelled or modified.

(2) Where the person is enforcing or otherwise invoking the undertaking by virtue of having the third-party right, no account is to be taken of the cancellation or modification of the undertaking if the person’s position would be adversely affected to a material extent were the undertaking treated as having been cancelled or (as the case may be) modified.

(3) Subsection (2) does not apply in relation to the cancellation or modification of the undertaking if—

(a) the contract provides—

(i) that the contracting parties are entitled to cancel or (as the case may be) modify the undertaking, and

(ii) that their entitlement to do so will not be affected by the person doing, or refraining from doing, something in reliance on the undertaking, and

(b) the person knew or ought to have known about that provision of the contract before the person did, or refrained from doing, the thing mentioned in subsection (1)(b).

(4) Subsection (2) does not apply in relation to the cancellation or modification of the undertaking if the person has given assent to it.

(5) In legal proceedings, a person seeking to enforce or otherwise invoke an undertaking by virtue of having a third-party right to do so may not plead that a contracting party—

(a) is personally barred from cancelling or modifying the undertaking, or

(b) has waived any right to cancel or modify the undertaking.