Richard and Damian Taylor. Contract Law Directions (2019 7 ed). p 356.

Application [of Contracts (Rights of Third Parties) Act 1999] to case law

The first reported case on the Act, Nisshin Shipping v Cleaves (2003) makes it clear that the onus is on the contracting parties to make it clear that they do not intend the party benefited by a term to be able to enforce it under the Act. If the contract is neutral on this point then the third party is permitted to enforce the term. In that case, the charter contract between the shipowner defendant and the charterer stated that the claimant brokers were entitled to a 1 per cent commission. Coleman J held that the brokers were permitted to sue the shipowner for the commission due even though the broker was not a party to the contract. Further, the broker was bound by s.8 of the Act to bring its claim in arbitration as the right to commission fell within the arbitration clause in the contract; see also Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP (2012) which reaffirmed the principle that a third party takes the benefit of rights subject to any arbitration clause in the contract, although in that case the court rejected the defendants’ attempt to stay proceedings brought in the Commercial Court in favour of arbitration because the contract conferred on them ‘defensive’ rights under an exclusion clause and, in any event, the defendants had not pleaded such a defence (presumably because the relevant clauses contained a carve out in the event of fraud (which formed the basis of the allegations against them)). The substantive claims brought were therefore not ones which arose pursuant to the Act (unlike the claim for commission in Nisshin) and so s.8 of the Act did not bite and the defendants were not entitled to be treated as though they were parties to the arbitration agreement.

I read the case, and the clauses cited by Coleman J cited don't moot or use the noun 'fraud'. The judgment also doesn't contain the noun 'fraud'.

1 Answer 1


the defendants had not pleaded such a defence

The author is opining that if the defendants had raised such a defence it would have collapsed because of the fraud exclusion. Since they didn’t, the judge didn’t have to deal with it.

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