contract-law england-and-wales
Meaning – relevant clauses contained a carve out in the event of fraud
<p><a href="https://www.uclan.ac.uk/staff_profiles/richard-taylor.php" rel="nofollow noreferrer">Richard</a> and <a href="https://www.slaughterandmay.com/who-we-are/partners/damian-taylor/" rel="nofollow noreferrer">Damian</a> Taylor. <a href="https://global.oup.com/academic/product/contract-law-directions-9780198836599?&amp;lang=en&amp;" rel="nofollow noreferrer"><em>Contract Law Directions</em> (2019 7 ed)</a>.  p 356.</p>
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<h3>Application [of <a href="http://www.legislation.gov.uk/ukpga/1999/31/contents" rel="nofollow noreferrer">Contracts (Rights of Third Parties) Act 1999</a>] to case law</h3>
<p>The first reported case on the Act, <a href="http://www.bailii.org/ew/cases/EWHC/Comm/2003/2602.html" rel="nofollow noreferrer"><em>Nisshin Shipping v Cleaves</em> (2003)</a> makes it clear that the onus
is on the contracting parties to make it clear that they do not intend the party benefited by a term
to be able to enforce it under the Act. If the contract is neutral on this point then the third party is
permitted to enforce the term. In that case, the charter contract between the shipowner defendant
and the charterer stated that the claimant brokers were entitled to a 1 per cent commission.
Coleman J held that the brokers were permitted to sue the shipowner for the commission due
even though the broker was not a party to the contract. Further, the broker was bound by s.8 of
the Act to bring its claim in arbitration as the right to commission fell within the arbitration clause
in the contract; see also <a href="https://www.bailii.org/ew/cases/EWCA/Civ/2013/367.html" rel="nofollow noreferrer"><em>Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund
LP</em> (2012)</a> which reaffirmed the principle that a third party takes the benefit of rights subject to any
arbitration clause in the contract, although in that case the court rejected the defendants’ attempt
to stay proceedings brought in the Commercial Court in favour of arbitration because the contract
conferred on them ‘defensive’ rights under an exclusion clause and, in any event, the defendants
had not pleaded such a defence (presumably because the <strong>relevant clauses contained a carve out
in the event of fraud</strong> (which formed the basis of the allegations against them)). The substantive
claims brought were therefore not ones which arose pursuant to the Act (unlike the claim for
commission in <em>Nisshin</em>) and so s.8 of the Act did not bite and the defendants were not entitled to
be treated as though they were parties to the arbitration agreement.</p>
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<p>I read the case, and the clauses cited by Coleman J cited  don't moot or use the noun 'fraud'. The judgment also doesn't contain the noun 'fraud'.</p>

<blockquote>
  <p>the defendants had not pleaded such a defence</p>
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<p>The author is opining that <em>if</em> the defendants had raised such a defence it would have collapsed because of the fraud exclusion. Since they didn’t, the judge didn’t have to deal with it.</p>
