NEC ECC: YUK3 - what do I need to know

Can someone in simple terms explain what the significance is if YUK3 has been included in an ECC contract? As a Contractor - what significance or risk is that to me??

Y(UK)3 is used to expressly provide organisations that are not a named party to the contract the ability to enforce parts of the contract. See the rights of third parties act 1999.

As a contractor you need to understand what rights are being made available to which organisations.

Thanks Dave - can you give me a practical example as to what that might be?

Generally speaking ‘privity of contract’ means that only a party to a contract can take benefit, or be subject to obligations, under a contract. Furthermore any action in Tort is also unlikely to succeed as it would be extremely difficult to establish a ‘duty of care’ (see D&F Estates Ltd v Church Commissioners for England and Wales [1989] AC 177; [1988] 2 All ER 992).

The Contracts (Rights of Third Parties) Act 1999 changed the position of ‘privity of contract’, however, whereby a third party could have rights under a contract where they comply with the requirements of s1 of the Act. This would mean being expressly identified by name (member, class or description) in the contract. For clarity it would also be beneficial to state what clauses this right(s) applies to and how they are to be applied.

If this is the intention then NEC Option Y(UK)3 would be appropriate to use as it infers 3rd party rights to a named beneficiary… Alternatively a collateral warranty may be used which would essentially infer the same rights as those under Y(UK)3, although this would have to be signed by all parties and executed as a deed for ‘consideration’.

If Y(UK)3 has been included, then the named ‘beneficiary’ would have certain rights under the contract, as stated. This would create a ‘primary relationship’ meaning that the beneficiary has the right to; enforce an obligation, take benefit from it or possibly even be entitled to some compensatory relief in the event of a breach or default. It probably won’t change what you have to actually do under the contract but you may incur additional liabilities to that named beneficiary.

As a Contractor, the Client may add 3rd party rights to a building’s occupier.