On 27 May 2015, the Secretary of Justice of Hong Kong gazetted the coming into operation of the Contracts (Rights of Third Parties) Ordinance on 1 January 2016. The Contracts (Rights of Third Parties) Ordinance applies only to contracts entered into on or after that date.
The Contracts (Rights of Third Parties) Ordinance (3rd Parties Ordinance) is based on the current Contracts (Rights of Third Parties) Act 1999, an Act of the UK parliament which extends to England, Wales and Northern Ireland (UK Act) (which is due to be amended in other respects). The 3rd Parties Ordinance will give identified third parties (including those identified by class or description) the benefits (but not the burden) under a contract. In other words, the 3rd Parties Ordinance will provide an exception to the generally applicable doctrine of privity of contract. The rationale behind the new legislation is to avoid potential injustice to third parties and to give effect to the intention of contracting parties wishing to benefit third parties. Sections 6 and 7 therefore restrict variation or rescission of a contract to which the 3rd Parties Ordinance applies without the consent of the third parties concerned or an Order of the Court.
Like the UK Act, the 3rd Parties Ordinance allows parties to contract out. This has been widely done in insurance policies governed by English law by way of clauses that might read, for example: “Unless this policy otherwise provides [the UK Act] is excluded.” (There are, of course, longer versions of this type of exclusion clause.) It is expected that the 3rd Parties Ordinance will also be widely excluded in Hong Kong insurance policies.