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Lord Renton: My Lords, I was not proposing to intervene on the amendment, but the noble Lord, Lord Hacking, has provoked me. My view of the amendment is that it does no harm but that it is not necessary. The word "damages" would need to be construed by the courts in the ordinary way, which is very broad and includes any matter of remoteness or mitigation. I venture to suggest that it is a harmless amendment but an unnecessary one.

Lord Meston: My Lords, I venture to suggest that the noble Lord, Lord Renton, is right, but perhaps in fact there is some harm. As he said, surely the rules relating to damages, which is the expression used in the Bill, include the rules relating to remoteness and to mitigation. Therefore, I wonder whether the amendment may be unduly restrictive and whether later readers of the Act, if it is amended as the amendment suggests, may speculate why Parliament confined the reference to damages simply to the rules relating to mitigation and remoteness.

From reading the textbooks, it is also possible to argue that there is some debate about what is or ought to be covered by the concept of remoteness. To avoid that problem, I suggest that the Bill as presently drafted is preferable to what the noble Lord, Lord Hacking, suggests in his amendment.

Lord Wilberforce: My Lords, I endorse entirely what the noble Lord, Lord Meston, said, having been

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provoked, too, by the noble Lord, Lord Renton, who intimated that in his view the amendment does no harm. I believe it does some harm simply under the application of the rule expressio unius est exclusio alterius. Expressing two particular aspects of the law of damages must convey an implication that other aspects of the law of damages are not covered by the clause. There are all kinds of other rules of damages--nominal damages, economic loss, punitive damages and aggravated damages. Lord McGregor wrote a whole book on damages which dealt comprehensively with many other aspects. Therefore, I respectfully disagree with the noble Lord, Lord Renton. I think that the amendment may do damage and in any case it is not necessary in order to achieve the results which the noble Lord, Lord Hacking, wishes to achieve.

Lord Renton: My Lords, the noble and learned Lord, Lord Wilberforce, is absolutely right. I concede that this is subject to the rule expressio unius est exclusio alterius and could do some harm after all. He is quite right.

The Lord Chancellor: My Lords, I agree with what has just been said. I do not believe that the amendment is necessary and I also believe that it could do some harm. Plainly, damages cannot be awarded without the rule as to remoteness and mitigation being applicable. But I agree that if the clause were amended so as to mention those two rules it would be necessary to provide a comprehensive list of all the rules which might apply in any claim for damages. The noble and learned Lord, Lord Wilberforce, gave examples. I could add others. We could go through, as he said, the textbooks on damages. I could add the rules about possession, contributory negligence or mental distress. We could go on all day and we might forget one. A comprehensive listing is not necessary and it would be inconsistent with our aim which is for the Bill to set out the principles of fundamental change which it makes to the law but not to descend to this level of unnecessary detail.

Lord Hacking: My Lords, I shall be careful not to provoke any of your Lordships to speak at all. I exclude the noble and learned Lord the Lord Chancellor as he is bound to reply. I was anxious for us to focus on what remedy in damages the third party has. I am grateful therefore to all noble Lords, who seem quite happy that the Bill as drafted includes the two matters to which I drew your Lordships' attention--the rule of remoteness of damage and the rule to mitigate loss. On that basis, and as gracefully as I can, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

Lord Hacking moved Amendment No. 7:

Page 1, line 27, at end insert--
("( ) The third party is bound, in the same manner as the parties to the contract, to any dispute resolution clause contained in it.")

Then noble Lord said: My Lords, I have not quite reached the comfort of an oasis--the water that the noble and learned Lord is going to offer me--in this

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rather long and arid journey through the desert. This is an important provision. I would ask your Lordships and the noble and learned Lord to focus on what are the consequences of the Bill as drafted.

As your Lordships know, it is the duty of the court when considering the right of a third party to enforce a term of a contract to look at all other relevant terms of the contract. But, in bringing in any relevant terms of the contract, can the court apply its mind to the dispute resolution clause? That can take a variety of forms. It can be an arbitration clause; it can be a mediation clause; it can be a conciliation clause; and so on. If the court is empowered under subsection (4) of Clause 1 to bring in a dispute resolution clause on the basis that it is a relevant term of the contract, all well and good. But if it does not--for example, if there is an arbitration clause or a mediation clause as between the promisor and the promisee and a dispute arises between all three parties--the promisor and promisee would be bound by the arbitration clause which has precedence over any right to litigation. On the other hand, in a dispute between the third party and the two parties to the contract this could only be adjudicated upon by the courts. That would be highly unsatisfactory. For that reason I hope to find some support, somewhere, from your Lordships. I beg to move.

The Lord Chancellor: My Lords, the effect of this amendment would be to make the third party's rights subject to any dispute resolution clause in the contract. We would have no objection, of course, to a third party having to make use of alternative dispute resolution procedures where that is consistent with the contracting parties' intentions. However, the amendment, as drafted, would not allow contracting parties to provide expressly for certain dispute resolution clauses to apply only to either themselves or to the third party. This would be contrary to our intention that the third party's rights should be independent of the promisee's rights. It would also contradict the policy of allowing the contracting parties to determine the shape and ambit of the third party's rights.

If the amendment is simply intended to state explicitly that a third party's right to enforce a term may be made conditional on his doing so by way of arbitration or some specified alternative dispute resolution procedure, it is not necessary. Clause 1(4) enables the parties to make the third party's rights subject to other terms of the contract, and these would include, of course, clauses on dispute resolution, if the parties so chose.

Therefore, I cannot offer my noble friend Lord Hacking the much looked-for comfort that he seeks, but he should be encouraged when we come to Amendment No. 7a.

Lord Hacking: My Lords, I am grateful to my noble and learned friend for his comments. He has encapsulated an important point. If I heard him correctly, he said that if, under the terms of the contract, the third party was given a benefit under the contract, subject to any disputes being resolved by arbitration or some other means, the third party would be bound by that. He could therefore only bring his proceedings

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within the ambit of the dispute resolution procedures agreed in the contract. On the other hand, if the contract was silent on that point, and just dealt with dispute resolution between the promisor and the promisee, we would have, as I have described, unnecessary complexity of proceedings. However, as I feel that I am getting close to the oasis which I hope will contain fresh water, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 [Variation and cancellation of contract]:

The Deputy Speaker (Baroness Serota): My Lords, in calling this amendment I should point out that if it is agreed to, I cannot call Amendment No. 9.

The Lord Chancellor moved Amendment No. 7A:

Page 2, line 9, leave out from ("not") to ("if") in line 10 and insert (", by agreement, rescind the contract, or vary it in such a way as to extinguish or alter his entitlement under that right, without his consent")

The noble and learned Lord said: My Lords, I have considered Amendment No. 9 tabled by my noble friend Lord Hacking, and I am convinced by the argument that lies behind it. The Bill currently uses the term "cancel". "Cancel", however, is not a legal term of art. It could be construed to cover one party's acceptance of the other's repudiation, because the effect of such an acceptance is to terminate the contract. We would not want a contracting party to be prevented from accepting a repudiation because of the interests of the third party.

The wording of Amendment No. 7A makes it clear that recision in this context is recision by agreement of the parties, and also that variation is by agreement as well. Amendment No. 9 did not make the latter point. However, I am grateful to my noble friend Lord Hacking for intimating to me that he will not move it. I can therefore commend Amendment 7A to your Lordships.

I also urge your Lordships to accept Amendment No. 10A, which is consequential upon Amendment No. 7A, in place of Amendment No. 11 tabled by my noble friend Lord Hacking, which was consequential upon his Amendment No. 9. Amendment No. 10A puts it beyond doubt that recision or variation is by agreement. I commend the amendment to the House. I beg to move.

12:15 p.m.

Lord Hacking: My Lords, I am grateful to my noble and learned friend the Lord Chancellor for his remarks, I have now reached the oasis with fresh water, and I am pleased that my noble and learned friend has accepted the principle behind my amendment. I am happy with his drafting. He, like me, has been well-educated in English law, and in the concepts of repudiation, recision and so forth. He therefore knows and recognises that "cancel" is not a term established in English law. On that basis, I am more than happy not to move Amendments Nos. 9 and 11 and to support and thank my noble and learned friend for his Amendments Nos. 7A and 10A.

On Question, amendment agreed to.

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[Amendment No. 8 had been withdrawn from the Marshalled List.]

[Amendment No. 9 not moved.]

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