(1) The parties (the “promisor” and the “promisee”) may confer by express or implied agreement a right on a third party (the “beneficiary”).
(2) The existence and content of the beneficiary’s right against the promisor are determined by the agreement of the parties and are subject to any conditions or other limitations under the agreement.
COMMENT
Usually contracts are intended by the parties to create rights and obligations between themselves. In such cases only the parties will acquire rights and duties under the contract. The mere fact that a third party will benefit from the performance of the contract does not in itself give that third party any rights under the contract.
Illustration
1. Professor A makes a contract with the University of country X under which he agrees to give forty one-hour lectures comparing the laws of contract of countries X and Y. A only appears for twenty lectures and does not mention the law of country Y in the lectures. T, a student, does not acquire rights under the contract between A and the University.
However, third parties are not always left without rights. The underlying principle is that of the autonomy of the parties, who, if they wish to create rights in a third party, should be free to do so. The parties may state expressly that this is their intention, but this is not essential since the intention to benefit the third party may be implicit in the contract. In cases where implied intention is alleged, the decision will turn on all the terms of the contract and the circumstances of the case.
The following are illustrations of implied intention.
Illustrations
2. A takes out a policy of insurance on its fleet of lorries which are regularly driven by its employees. The contract provides that the insurance company will cover anyone driving a lorry with A’s consent. An employee, T, has an accident while driving the lorry. T is covered in respect of its liability for the accident.
3. A sells his business to B on the terms that B will pay A GBP 1,000 a month for the rest of his life and will pay A’s wife, T, GBP 500 a month if A predeceases her. A dies. B refuses to pay T anything. T is entitled to the GBP 500 a month.
4. A, the International World University, wishes to build a new law library on land owned by the University. For legitimate tax reasons the contract for the erection of the library is made by B, a company wholly owned by the University, although the contractor well knows that when completed the library will be occupied and used by A. The building has been badly built and it will cost USD 5,000,000 to complete it satisfactorily. A can recover the cost of the remedial work.
5. A, the developer of a shopping mall, concludes a contract with B, a security firm, to provide security at the mall. Both A and B know that the shops will be operated by tenants of A. These tenants are told that one of the major attractions of the mall will be the high level of security provided by B. It is a term of the contract between A and B that all employees of B working at the mall will be ex-policemen personally selected by B’s chief executive. In fact, selection is delegated to a consultancy firm which recruits many unsuitable people. There are many thefts at the shops. Tenants who suffer losses will have contractual claims against B.
The following are illustrations where there is no such implied intention unless the circumstances clearly indicate otherwise.
Illustrations
6. A goes to an expensive furrier and selects and buys a coat. A tells the assistant (truthfully) that it is for T, the wife of a visiting head of State. By the side of the coat is a prominent card saying “It looks like mink, it feels like mink but is guaranteed man made.” A gives the coat to T. In fact, owing to a mistake by the furrier, the coat is a real mink coat and T is subjected to violent and hostile criticism by animal lovers in her country. T has no enforceable contract right.
7. A, a company with a large factory, concludes a contract with a company operating the local sewage system. Under the contract, A is entitled to discharge its waste into the sewer but undertakes not to discharge certain types of waste. In breach of this undertaking, A discharges waste which blocks the sewer and causes damage to T, another user of the sewer. T has no enforceable contract right.
8. A, a company from country X, sells materials to B, a company from country Y. A knows that B plans to resell the materials to T, a pharmaceutical company from country Z, which will use the materials for the manufacture of a new drug under a contract which will effectively limit B’s liability to T to USD 1,000,000. The materials are defective and T’s losses greatly exceed USD 1,000,000. T has no enforceable contract right against A.
The application of this Article will often come up in the context of an associated claim in tort. This possibility is outside the scope of the Principles.
It follows from the scheme of this Article that an express statement that the parties do not intend to create rights in a third party will be effective. It also follows that the promisor and promisee enjoy broad powers to shape the rights created in favour of the beneficiary. In this context the word “rights” should be interpreted liberally. In principle, a third party beneficiary will have the full range of contractual remedies including the right to performance and damages.
The beneficiary must be identifiable with adequate certainty by the contract but need not be in existence at the time the contract is made.
COMMENT
The parties may well wish to make a contract in which the identity of the third party is not known at the time the contract is made, but a mechanism is provided by which it will become known by the time performance is due. This might be by providing that the parties, or one of them, can identify the beneficiary at a later date, or by choosing a definition of the beneficiary, of which later circumstances will serve to make the identity clear.
Illustrations
1. A, a married man with children but no grandchildren, makes a contract with the XYZ insurance company under which A pays GBP 10 a month to the insurance company and they promise to pay GBP 10,000 to each of his grandchildren on his death. Grandchildren born after the date of the contract but before A’s death are entitled to GBP 10,000.
2. Company A launches a takeover bid for company B, a public company the shares of which are traded on leading stock exchanges. B engages C, a leading firm of accountants, to prepare a report on B for distribution to shareholders. The contract between B and C requires C to produce an honest, thorough and competent report. Owing to incompetence C produces a report that is much too favourable to B. As a result the majority of shareholders vote to reject A’s offer. Some shareholders show copies of the report to friends who buy shares in B. The old shareholders can acquire rights under the contract between B and C but the new shareholders cannot.
The conferment of rights in the beneficiary includes the right to invoke a clause in the contract which excludes or limits the liability of the beneficiary.
COMMENT
Contractual provisions limiting or excluding liability of those who are not parties to the contract are very common, particularly in contracts of carriage, where they often form part of a settled pattern of insurance. Perhaps the best known example is the so-called Himalaya clause, which in some form is frequently to be found in bills of lading. In general the autonomy of the parties should be respected in this area too.
Illustration
A, the owner of goods, makes a contract with a sea carrier to carry them from country X to country Y. The bill of lading is subject to the Hague-Visby Rules and purports to exclude the liability of (a) the master and crew; (b) stevedores employed in loading and unloading the cargo; and (c) the owners of ships onto which the goods may be transhipped. These exclusions will be effective.
Another situation which would be covered by this Article arises where the promisor and promisee agree that the beneficiary shall be released from an obligation which it owed the promisor.
The promisor may assert against the beneficiary all defences which the promisor could assert against the promisee.
COMMENT
Under Article 5.2.1 the content of the beneficiary’s right may be made subject to any conditions or limitations devised by the parties. The promisor and promisee may devise a contract in which the position of the beneficiary is significantly different from that of the promisee. The parties’ autonomy is in principle unlimited but they may well not provide expressly for all possibilities. The normal default rule will therefore be as stated in this Article.
Illustrations
1. A takes out a policy of life insurance with insurance company B in favour of C. The contract provides for the payment of premiums for 25 years but after 5 years A stops paying premiums. The position of C will be modelled on that of A if the policy had been in A’s favour. Such policies do not usually deny all return on the premiums paid. If, however, the policy had been liable to be set aside by the insurance company, for instance because A had not made material disclosure, then B would normally be entitled to raise this defence against C.
2. Company A takes out a policy of fidelity insurance with insurance company B to cover dishonest employees. The insurance policy provides that B will indemnify in full customers who are defrauded by employees of A and that it will indemnify A only if A has not been negligent in the selection or supervision of the employees. Clearly in such a contract B will have defences against A which it cannot raise against the customers.
The parties may modify or revoke the rights conferred by the contract on the beneficiary until the beneficiary has accepted them or reasonably acted in reliance on them.
COMMENT
It might be the rule that the promisor and promisee are free to revoke the third party’s rights at any time or, contrariwise, that the third party’s rights are immutable once the contract is concluded. It appears that few systems adopt either of these extreme positions. The solution adopted is that the third party’s rights become irrevocable once the third party has either accepted the rights or has reasonably acted in reliance on them. It will, of course, be open to the parties to provide for a different regime in the contract either by making the beneficiary’s rights irrevocable sooner, or by preserving a right of revocation even after the beneficiary has acted in reliance on the rights. There may well be situations where a right of revocation is given only to one party. For example, in a contract of life insurance it might be provided that the insured can change the beneficiary. There might be relevant usages which limit the possibility of revocation.
Illustration
A, the main contractor on a major construction contract, takes out a policy of insurance with insurance company B to cover damage to the work in progress. The policy is expressed to cover the interests of all sub-contractors involved in the contract and the sub-contractors are all told of the policy. C, a sub-contractor, does not take out any insurance itself, but does not tell A or B. Absent clear words to the contrary, C’s reliance makes the contract between A and B irrevocable.
The beneficiary may renounce a right conferred on it.
COMMENT
The scheme of this Section assumes that, absent contrary provision, the contract between promisor and promisee creates rights in the beneficiary at once, without any need for acceptance by the beneficiary.
Although the third party will usually welcome the benefit which the parties have conferred upon it, it cannot be forced to accept it. It follows that the third party may expressly or impliedly renounce the benefit.
However, once the beneficiary has done something that amounts to acceptance, it should not normally be entitled to renounce.
Illustration
On the facts given in the Illustration to Article 5.2.5, C, a sub-contractor, may not wish to take advantage of the insurance taken out by the main contractor because it already has relevant insurance in place (and it knows that there will be difficulties if there are two insurances covering the same risk). C is entitled to renounce.
Professor Iacopo Donati is the UNIDROIT/Bank of Italy Chair Holder and is mainly responsible for assisting in the Bank Insolvency project. He is Professor of Corporate and Insolvency Law at the University of Siena, and coordinates the research project ‘Pro.Re.Ba.’ (Proportionating rules on bank crisis prevention and management to the case of retail banks), which has received funding from the Italian Ministry of University. He has previously taught corporate law at the University of Venice ‘Ca’ Foscari’, at the University of Florence and at the University of Rome ‘Tor Vergata’.
Professor Donati is the author of several publications on corporate law, restructuring, insolvency law, and bank crisis management. On the same topics, he has been invited as a speaker to various international and national conferences and participated in some high-impact international, European, and national research projects. Professor Donati’s education includes a Ph.D. in Corporate Law (University of Rome ‘La Sapienza’), an LLM in Corporate Governance (Stanford Law School), and a Law Degree with honors (University of Florence). He is qualified as an attorney in Italy and in the State of New York (USA).
Ms Olga Fonotova is an Associate Professor of the Faculty of Law (Department of Legal Regulation of Business) at the Russian National Research University “Higher School of Economics” in Moscow. She holds a PhD degree cum laude in private law / private international law from the Lomonosov Moscow State University (2006). Her academic and teaching interests cover private international law, international and national commercial law, with a focus on unified and non-state legal regulation of cross-border commerce.
Olga is a Russian law qualified practicing lawyer in the sphere of national and international commercial and corporate law with 20+ years’ experience in leading law firms. As part of her legal practice, she has advised multinational corporations on the setting up of multi-jurisdictional commercial relations, on the formation / termination of international joint ventures, restructuring of assets, and financing / refinancing of projects. For her work on commercial and corporate legal matters she was included in the international rating of leading lawyers “The Best Lawyers® in Russia” (2018 – 2022).
She is a UNIDROIT alumna (2011) and a Correspondent of UNIDROIT in Russia (2023 – 2025). From 2016 to 2021 Olga was a member of the ICC Commission on Commercial Law and Practice (ICC CLP) and a member of the Association of European Business (AEB) in Moscow.
Allan M. Mukuki, PhD Candidate (Navarra, Spain), LLM (Groningen, Netherlands), PGDip (KSL), LLB (Hons) (UoN), ACIArb (London), Advocate of the High Court of Kenya.
Allan Mukuki is an Advocate of the High Court of Kenya as well as a Commissioner for Oaths. He is presently a PhD Candidate at the University of Navarra in Spain. He is also a holder of an LL.M in International Law and the Law of International Organizations, from the University of Groningen in the Netherlands. He has an LL. B (Hons) from the University of Nairobi, he is a Member of the Cha
rtered Institute of Arbitrators (London). He further holds a post-graduate diploma in law from the Kenya School of Law. Allan is also a scholar from the Hague Academy of International Law.
Some of his many roles in the legal profession include Director of International Partnerships; a Doctoral Fellow; member of the Management Committee and moot court coordinator, all for Strathmore Law School; Research Fellow for the African Region (Kenya), for the European Research Council Grant Project on the interpretation of customary international law; and Acting Director for the Strathmore Institute of Advanced Studies in International Criminal Justice (SIASIC)
Allan has previously worked at A.F Gross Advocate; in various legal institutes; in governmental agencies and in the Judiciary of Kenya. He was also a Legal researcher in the Office of the Solicitor General, Kenya, for the Maritime Delimitation in the Indian Ocean (Somalia v. Kenya), a case that was before the International Court of Justice. His main areas of specialization include Public International Law, The Law of International Organizations, International Humanitarian Law, International and Regional (EAC) Refugee Law and Legal Policy Development.
Further, Allan has been involved in various national and international legal consultancies and projects; he has published several peer reviewed legal articles, a legal monograph and presented several legal papers in international conferences around the world. He has also developed several policy documents for Strathmore University as well as (currently operational) manuals and laws for the operation of the Judiciary as well as governmental agencies and regional agencies such as IGAD.
ANDREA SANTACOLOMA
Director
PROFESSIONAL PRACTICE
Andrea Santacoloma is a Panamanian lawyer that focuses her practice on international commercial arbitration.
Prior to joining Adell & Merizalde, Andrea was the Deputy Director for Latin America of the ICC International Court of Arbitration for 5 years. In this role, she gained vast experience in the internal functioning of the ICC’s Secretariat and Court and saw first-hand the work of hundreds of arbitrators and ICC Court Members in the region. Andrea was also in charge of identifying new opportunities and potential users of the ICC Dispute Resolution Services (ICC DRS) in Latin America, in liaison with the ICC National Committees and other institutions in the region. She also worked as a lawyer advising local and international clients on business and corporate law and M&A in 3 Panamanian law firms.
She is currently the Executive Director of the Latin American Arbitration Association (ALARB), one of Latin America’s leading associations gathering practitioners and arbitrators, which seeks to encourage the use of arbitration and foster initiatives for the development of international arbitration in the region.
In July 2022, the G
overning Council of the International Institute for the Unification of Private Law (UNIDROIT) appointed Andrea as a Correspondent for Latin America. Namely, Andrea was appointed as a Correspondent for the Republic of Panama for the period 2022-2025.
EDUCATION
• American University Washington College of Law, LL.M. in International Arbitration and Business Law
• International Training Centre of the International Labor Organization (ILO) jointly with the United Nations Commission on International Trade Law (UNCITRAL), Università degli Studi di Torino, and University Institute of European Studies (IUSE), LL.M. in International Trade Law & Dispute Resolution
• Universidad Católica Santa María La Antigua, LL.M. in Corporate Law
• Universidad Católica Santa María La Antigua, Degree in Law and Political Science
• Centro de Estudios Regionales de Panamá, Diploma in Entrepreneurship and Management of Small and Medium Enterprises
Bar admissions
Republic of Panama
Languages
Spanish, English, Italian (intermediate)
asantacoloma@adellmerizalde.com
+507 370 4155
NAME: PROF. DR. HERNANY VEYTIA (LL.M. YALE)
AFFILIATION DIRECTOR BNM-CAMBRIDGE STUDY CENTRE ON SUSTAINABLE INVESTMENTS
PRESENTATION
Professor of law, international strategic consultant, arbitrator, and entrepreneur. Hernany Veytia is very comfortable with complex, high-profile and confidential transactions. Her consulting experience as partner of BNM and Deloitte enables her to focus on and add value to the sustainable and commercial aspects of each deal. Frequently she leads transdisciplinary teams to deliver fact findings and legal opinions, feasibility studies and turn-key projects for banks, governments, international organisations, and corporations willing to expand or withdraw operations in other jurisdictions.
In Prof Veytia’s experience UNIDROIT works have been very useful to understand not only the foreign law, but also to recognise the cultural, political, and economic factors at play, and the way national and international regulators operate-and cooperate. In her opinion, UNIDROIT instruments have been of utmost importance for the legal strategies she designed for:
• DANPREIT (Dispute Analytics Platform for Real Estate Investment Trusts in the Agriculture, Construction and Mining industries).
• TELEKAIROS, innovative methodology that incorporates the use of space assets.
• Corporate art collections, restitutions, including donations, sponsorships, and loans to museums.
• Contracts used by a German waterworks company willing to grow in all the Caribbean and Central American countries.
• Liquidation of commercial and investment banks
• IPOs and reverse mergers for companies in the extraction industries (Canadian stock exchange), ILS listed in Bermuda and African sovereign funds listed in London.
• Franchising and other commercial contracts in the food & drinks, health, aero-space, and automotive industries.
In the last three decades Prof. Veytia has lived, and successfully completed investments and disinvestments in more than forty countries in the five Continents. She is frequently appointed as arbitrator and invited as speaker on risk transfers at international industry conferences in fields of her expertise: energy (both renewable and traditional), artificial intelligence, infrastructure, mining, real estate, agriculture, rail, space, automotive, and franchising. She sits in the board of directors of companies in Europe including the United Kingdom.
Anna Veneziano is the Deputy Secretary General of the International Institute for the Unification of Private Law (UNIDROIT). She is a Professor of Comparative Law at the University of Teramo, Italy, where she was formerly the Director of the Department of Private Law. She has also formerly been a tenured Professor of European Property Law at the University of Amsterdam (UvA). Her education includes a Law Degree with honours from the University of Rome La Sapienza, an LL.M degree from the Yale Law School funded by a Fulbright scholarship, and a PhD degree from the University of Florence (Italy).
Her main research and publication areas are on secured transactions as well as international, comparative, and European contract and sales law. Before joining UNIDROIT she was a member of the Italian delegation with respect to the Cape Town Convention on International Interests on Mobile Equipment and its Aircraft Protocol as well as its Space Protocol. She was also a member of the Study Group on a European Civil Code and of the Compilation and Redaction Group on a Draft Common Frame of Reference on European Private Law (DCFR), and of the restricted Expert Group set up by the European Commission on a common European law on sales.
P
rofessor Ignacio Tirado was appointed Secretary-General by the Governing Council at its 97th session, and officially took office on 27 August 2018. A national of Spain, Professor Tirado (Commercial, Corporate and Insolvency Law, Universidad Autónoma of Madrid, Spain) holds a PhD from the Universities of Bologna and Autónoma de Madrid and an LLM from the University of London. Professor Tirado has been a Senior Legal Consultant at the World Bank’s Legal Vice-Presidency and Financial Sector Practice for more than nine years, having also consulted for the IMF on insolvency related matters as well as for the Asian Development Bank on commercial legal reform.
Amongst other accolades to his professional experience, Professor Tirado is a founding member of the European Banking Institute, an International Fellow of the American College of Bankruptcy and has been Director and Academic Co-Chair of the International Insolvency Institute.
A Swedish national, Ms Lena Peters grew up in Italy where she attended an English school. In 1978 she took her Juris Kandidatexamen at Stockholm University followed by a Master of Laws from King’s College, London (1979). Since 1985 she has been with UNIDROIT, first as Research Officer, lastly as Principal Legal Officer, her main duties being Secretary to the Working Group for the Preparation of Principles of International Commercial Contracts, Secretary to the Study Group on Franchising, Secretary to the Committee of Governmental Experts on Franchising.She also collaborated on the project for the preparation of the ELI-Unidroit Model European Rules of Civil Procedure. She is currently Managing Editor of the Uniform Law Review and responsible for publications at UNIDROIT.
Marina Schneider is Principal Legal Officer and Treaty Depositary at UNIDROIT. She studied law at the University of Strasbourg (France) and Paris I – Panthéon Sorbonne. She joined the UNIDROIT in 1987 and was involved in the elaboration and French versions of most UNIDROIT instruments since. She is in charge of the 1995 UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects and of the UNESCO-UNIDROIT Model Provisions on State Ownership of Undiscovered Cultural Objects. She is the author of the Explanatory Report of the 1995 Convention and many articles on the Convention and other international instruments in the field. Ms Schneider is also responsible for the project on private collections and for the UNIDROIT Convention Academic Project (UCAP). She is member of the Board of the International Society for Research on Art and Cultural Heritage Law (ISCHAL).
Professor of Commercial Law, Carlos III University of Madrid. Currently, Sir Roy Goode Scholar at UNIDROIT, Rome, 2021-2022. Chair of Excellence 2017-2018 at University of Oxford (Uc3m- Santander Program), affiliated to Harris Manchester College. Previously Distinguished Visiting Professor and fellow of a number of Academic Institutions. Arbitrator of Madrid Court of Arbitration. Member of ELI (European Law Institute) Council and Executive Committee. Member of the Expert Group of the European Commission on Liability and New Technologies and member of the Expert Group of the European Observatory of Platform Economy; the International Academy of Commercial and Consumer Law; the expert group of the Inclusive Global Legal Innovation Platform for Online Dispute Resolution – UNCITRAL and Hong Kong Department of Justice. Expert of the UNIDROIT Study Group on the MAC Protocol of the Cape Town Convention on International Interests. Delegate of Spain to UNIDROIT for the adoption of the Protocol, delegate of Spain in Working Group VI of UNCITRAL on secured transactions and in Working Group IV on Electronic Commerce. Member of UNIDROIT Working Groups on Enforcement and Warehouse Receipts.
William Brydie-Watson is an Australian lawyer who specialises in secured transactions law and private international law. Before joining UNIDROIT, William was a government lawyer in the Private International Law and International Arbitration section of the Australian Attorney-General’s Department, where he worked primarily on treaty negotiation and the implementation of private international law treaties in Australia. At UNIDROIT, he is primarily responsible for the implementation of the Mining, Agriculture and Construction (MAC Protocol) to the 2001 Cape Town Convention on International Interests in Mobile Equipment and the development of a Model Law on Factoring. William also serves as UNIDROIT’s liaison with the Asia Pacific Economic Cooperation (APEC) forum and as manager of the Institute’s Scholarship and Internship Programme. Admitted to practice in New South Wales and the High Court of Australia, he has a Bachelor of Arts (honours), a Bachelor of Laws and a Master of Laws from the Australian National University. William also lectures on International Secured Transactions Law at the Eotvos Lorand Faculty of Law in Budapest.
