Bermuda: New Bermuda Legislation: Contracts (Rights Of Third Parties) Act, 2016

Last Updated: 1 April 2016
Article by Elizabeth Denman, David W.P. Cooke, Christopher Garrod and David J. Doyle

Most Read Contributor in Bermuda, July 2019

The Contracts (Rights of Third Parties) Act, 2016 (the "Act") was recently enacted by the Bermuda Legislature and is now fully operative. The Act is significant in that, subject to its terms, it permits parties to vary the common law doctrine of "privity of contract" which provides that only parties to a contract may enjoy the benefits and enforce the provisions of that contract.

Under the Act, persons not specifically party to a contract may now be entitled to benefit from and enforce the terms of the contract, subject to certain restrictions. The Act will be of significant interest to investment managers, investment funds, third party service providers and delegates who traditionally may not be parties to an agreement but may be impacted by its specific terms and provisions. In particular, the Act should assist in the area of indemnification and exculpation provisions of agreements intended to benefit a wider class of beneficiaries beyond just the contracting parties.

The Act is also of importance to Bermuda's insurance industry in that it removes all doubt as to the legal enforceability and effectiveness of so-called "cut-through" clauses or endorsements in insurance and reinsurance contracts. These clauses will typically provide the underlying insured with a direct right of action under the corresponding reinsurance contract entered into between an insurer and a reinsurer, thereby providing further security to the insured by enabling him to "cut through" to a reinsurer for payment of a claim, in the event the insurer becomes unable to meet its obligations.

The Act is similar to third party rights legislation enacted in the United Kingdom and several other common law jurisdictions.

Applications and Exceptions

While the doctrine of privity of contract may now be varied in Bermuda, it has not been abolished as contracting parties are required to "opt in" to the Act's provisions. In order for the Act to apply, the contracting parties must (within the body of their agreement) expressly identify the third party (either by name, as a member of a class or as answering a particular description) and agree that the third party may enforce the applicable terms of the agreement. The third party does not necessarily have to be in existence as of the date of the contract; all that is required is that they be clearly identified.

The Act generally applies to all contractual provisions, including indemnities and exculpations and other limits of liability, but there are certain contracts which are specifically excluded including bills of exchange, employment agreements, promissory notes and other negotiable instruments, rights conferred by a company's memorandum of association or bye-laws, contracts for the carriage of goods by sea or roads or for the carriage of cargo by air and letters of credit.

The Act does not have retroactive effect; however, where a contract is entered into prior to the Act and provides for third party rights in accordance with the Act, those rights will automatically become enforceable by the third party on the commencement date of the Act without further action by the parties. After commencement, parties may also of course amend the terms of their prior agreement to include third party rights.

Enforcement by Third Parties

Where the Act's requirements have been met, a third party can enforce the terms of the contract and can avail itself of any remedy that would be available to the contracting parties, including those related to breach of contract, damages, injunctions and specific performance. However, a third party will not have any better rights or remedies than those available to the contracting parties. Thus, if a contract limits recovery or otherwise limits a right of a contracting party, the third party will similarly be limited in terms of what actions or recoveries are available to it. There is protection against double liability so that where complete or partial recovery has been made by a contracting party, the Court may reduce any award to a third party by the amount recovered by the contracting party.


Where a right to enforce a term of a contract is subject to an arbitration agreement, the third party will be treated as being a party to the arbitration agreement with respect to disputes between itself and a contracting party relating to enforcement of the contractual term.

Variation of Contract and Assignments

Once rights have been extended to a third party, the contracting parties are restricted in their ability to vary such rights as between themselves and the third party where: (i) the third party communicated its assent to the term to the party against whom the term is enforceable (a "promisor"); (ii) the promisor is aware that the third party has relied on the term; or (iii) the promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it. In these situations the third party must consent to any variation or rescission of the contract unless it has contractually agreed otherwise.

Finally, the Act permits a third party to assign its third party rights under a contract to another person in the same way as a contracting party may assign its rights, unless the contract specifically provides otherwise or on a proper construction of the contract, the rights are personal to the third party


In sum, under this new Bermuda law, contracting parties may now extend rights to third parties where desired, thus reducing the burden of entering into multiple agreements to effect the same result. The Act further enhances Bermuda's commercial laws and again demonstrates the Island's responsive legislative framework for business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions