Collateral
warranties
We understand that dealing with collateral warranties is time-consuming and often frustrating.
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Collateral warranties are used as a supporting document to a primary contract where an agreement needs to be put in place with a third party outside of the primary contract. Sometimes an architect, contractor, or sub-contractor will need to warrant to a funder, tenant or purchaser that it has fulfilled its duties under a building contract.
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What is a collateral warranty?
On a construction or engineering project, a collateral warranty is a contract under which a professional consultant (such as an architect), a building contractor or a sub-contractor warrants to a third party (such as a funder) that it has complied with its professional appointment, building contract or sub-contract. (See Practice note, Collateral warranties on construction projects. However, some (weaker) forms of collateral warranty only refer to a “duty of care” or selected obligations under the professional appointment, building contract or sub-contract.
A third party right is the right of a person who is not a party to a contract (a third party) to enforce the benefit of a term of that contract.
For example, that could include a right for a funder to enforce a term of:
- A professional appointment entered into between the employer and its architect, engineer or quantity surveyor.
- A building contract entered into between the employer and its contractor.
Why are collateral warranties and third party rights needed?
A construction or engineering project needs collateral warranties or third party rights for three main reasons:
- Privity of contract prevents third parties relying on other people’s contracts. Unless you are a party to a contract or section 1(1) of the Third Party Rights Act 1999 applies, you cannot enforce a term of a contract.
- They provide construction security. If something goes wrong on a project, a funder does not want to be out of pocket; it wants to be able to claim its losses directly from the person who caused the loss, such as an architect or a contractor. Without a collateral warranty or third party rights, a funder may be unable to make an effective claim.
- A claim in tort is unlikely to succeed. The law of tort in England and Wales does not generally allow a claim for pure economic loss, such as damage caused to a building by a defect in that building; you need a contract.
Our process
1
Listening
Understand the situation circumstances and problem at hand
Development
Efforts, energies and resources in developing evidence-based and comprehensive application
Progression
We always remain in regular contact with the client to inform them about the progress
Assistance
On request, we can provide legal assistance in the court if there is a hearing or any requirements
Our process
Listening
Understand the situation circumstances and problem at handDevelopment
Efforts, energies and resources in developing evidence-based and comprehensive applicationProgression
We always remain in regular contact with the client to inform them about the progressAssistance
On request, we can provide legal assistance in the court if there is a hearing or any requirements
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