Traditionally, English contract law has always been subject to the concept of privity of contract. This means that only the parties who agree to enter into the contract can either sue or be sued on it. Generally speaking, a person who is not a party to the contract can never bring a claim based on that contract. This reflects the common-sense assumption that, generally speaking, I should not be able to enter into a contract that effects someone else who is not a party to it.
A simple example would be where you buy a sweater from a shop and give it to your nephew as a present. If your nephew noticed a snag or fault with the sweater, it would be you, rather than your nephew, who had a claim against the shop because the contract was between you and the shop - and only you could bring a claim under the doctrine of privity of contract. Likewise, if you buy a Ford car from a dealership, your contract and therefore your remedy is, generally, with the dealership who you bought it from and not with Ford themselves.
However, under the Contracts (Rights of Third Parties) Act 1999 (CRoTPA), a person who is not party to the contract (your nephew in the above example) can now enforce that contract as if they were a party, but only in certain circumstances. These are generally when the third party is either mentioned by name in the contract or is one of a class of people mentioned or described in a particular manner (So in our example the shopkeeper would have had to agree that he would honour any claim brought by your nephew, for example by saying, when asked, “yes, of course he can bring it back”). In these circumstances, the third party (your nephew) may be able to enforce the contract as if he were a party to it. Although you may not realise it, when you have such conversations with a shopkeeper, they are legally binding (albeit verbal so perhaps tricky to prove).
In a recent case the High Court looked at the scope of the CRoTPA, particularly the ability of a third party to enforce a contract term where the contract expressly gives it the right to do so, despite the term not conferring a benefit on the third party.
In this case the defendant (D) took out a loan agreement with an unnamed lender, who was acting via the claimant (it’s agent, C). C was not a party to the agreement and received no benefit under it. However, the judge decided that, on looking at the agreement closely, it was drafted with the CRoTPA in mind and with intention of giving C the same rights to the unnamed lender's which enabled it to enforce obligations owed to and benefitting the unnamed lender.
This judgment does confirm the general principle that the courts should, wherever possible, give effect to the contractual provisions agreed between the parties. However, it also potentially widens the scope of third-party claims under the CRoTPA, however, permission to appeal has been granted. Again the key take-away from this case is not only to be extremely careful with regard to what is and is not put in the contract, but also to specifically think about what third parties (if any) might be impacted by the contract, and to deal with these third parties accordingly, either by clearly including or excluding their rights within the agreement itself.