What is a subcontractor collateral warranty?
What is a subcontractor 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.
What is a collateral warranty used for?
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.
WHO issues a collateral warranty?
A collateral warranty is an additional contract between, commonly, a (1) contractor, consultant or subcontractor (warrantor) and (2) an interested third party (beneficiary) giving that third party the right to sue the warrantor.
Are Collateral warranties enforceable?
Once the building contract has been entered into, the building contractor may not be keen to extend its contractual obligations to more people and any obligation to provide a collateral warranty in a form to be agreed is unlikely to be enforceable.
How does a collateral warranty work?
Collateral warranties are agreements which are associated with another ‘primary’ contract. They provide for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract.
What do collateral warranties cover?
Do collateral warranties cost money?
There is no reason in law why the collateral warranty obligations should be given by a professional person or a contractor free of actual consideration in money. Although it is unusual to agree such a ‘signing fee’, the reality is that the developer, fund and tenant are gaining real benefits through a warranty.
What is a collateral warranty agreement for a contractor?
This collateral warranty agreement is one of three collateral warranties that we publish – the others being for a consultant and a [main] contractor. All three are available in our discounted collateral warranty collection What is this contract for?
Can a sub-contractor obtain a warranty from a main contractor?
There may also be a contractual requirement for parties to obtain further warranties, for example there may be an obligation for the main contractor to obtain collateral warranties from sub-contractors . Collateral warranties may include ‘step-in’ rights allowing the beneficiary to step-into the role of the client.
How are collateral warranties subject to greater scrutiny?
Collateral warranties will now be subject to greater scrutiny in the light of this case. We may now see a resistance among contractors and consultants to grant warranties and a desire to perhaps restrict the number and scope of warranties so that their application is limited to be retrospective only.
Are there any rights of Defence in a collateral warranty?
The collateral warranty included none of the express exclusions of liability that appeared in the sub-contract and did not contain any “equivalent rights of defence” or “no greater liability” clauses.