Dolphin Maritime Aviation v Sveriges [2009] EWHC 716

Key point

  • For a term to ‘purport to confer a benefit’, benefiting the third party must be one of the purposes of the bargain and not merely incidental

Facts

  • A cargo of steel was damaged at sea
  • The insurer of the cargo took over the cargo owner’s right to sue and then assigned it to its agent (C)
  • The ship owner gave a contractual letter of undertaking (LOU) to the insurer promising that for non-arrest of the ship it would pay C
  • The owner paid the insurer instead

Issue

  • Could C sue on the contract for breach?

Held (High Court)

  • C’s claim is denied; the LOU did not purport to benefit C

Christopher Clarke J

“Purport to benefit”

  • A contract does not purport to confer a benefit on a third party under s1(1)(b) Contracts (Right of Third Parties) Act 1999 simply because the position of the third party will be improved if the contract is performed
  • Test: One of the purposes of the bargain of the parties, rather than one of its incidental effects, must be to benefit the third party
  • A provision for payment to an agent on his principal’s behalf is to be contrasted with an agreement by A and B that A will pay C (C not being A’s agent or trustee)

Current case

  • The LOU was merely the means by which the shipowner could discharge its obligation to the insurer, paying C was merely incidental
  • In any case under s1(2) neither the insurer nor the shipowner intended to give C a right to enforce