Third Party Rights

Regarding Third Party Rights Schedules, although they look much better (i.e. quicker, cheaper and more environmentally friendly) than the traditional collateral warranty route, there are some issues for third party beneficiaries to be watch out for. For example, the 1999 Third Party Rights Act imposes certain limitations on the rights a beneficiary can enjoy, and if you don’t expressly “contract out” of these limitations in your schedule, then these limitations will apply. For example, Section 5 of the Act allows the court to reduce an award to a third party if the employer has already recovered damages for the cost of repairing the same defect. The courts will consider this reduction even if both the employer and the third party are able to show that they’ve each suffered a loss caused by the defect. So, as a third party, if you don’t you want Section 5 to apply, you need to specifically say so in your Third Party Rights Schedule.

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