BESA Guide to Collateral Warranties

A brief Guide to Collateral Warranties; what they are, when are they used and; do you need one?

Published: May 2019
Pages: 4
BESA Product Code: LC 2

Historically the common principle of contract law is that only a person who is a party to a contract can bring a claim under that contract. This is known as the ‘doctrine of privity of contract’1. In the absence of any other direct contractual relationship, a contractor or a consultant will not typically owe a contractual duty of care to any person other than its direct client. A collateral warranty is a contract which goes alongside an underlying construction contract and allows a third parties such as a purchaser, tenant or a funder, to have a direct contractual relationship with a construction team member. With the collateral warranty in place, that third party can
rely upon the obligations contained in the warranty in order to bring an action in contract against the warrantor (if there has been a breach).

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