Third Party Rights in Settlement Agreements

Often in settlement agreements, reference is made to third party rights.  Typical wording would be “Except as expressly provided elsewhere in this agreement, no person other than the Employee and the Company  shall have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement. “ Have you ever wondered what does this actually mean? Under the Contract “Right of Third Parties” Act 1999, third parties have the right to enforce contractual terms in certain circumstances. A standard clause can be inserted to prevent any third party from being able to enforce the terms of the agreement, and in this way, ensure it remains an agreement between the employer and the employee. This may however be amended to allow a third party to enforce the agreement. A common example would be to ensure that a group company can enforce the terms of the settlement including any restrictive covenants which bring their own brand of issues. More on that next time!