Collateral warranties

In the UK construction industry, collateral warranties are an essential part of the project documentation that needs to be put in place for construction projects. Despite the introduction of the Contracts (Rights of Third Parties) Act 1999, collateral warranties are still widely used and are still preferred by many parties, in particular funders. For more information on collateral warranties and third party rights, and a range of other performance security documents that can be provided on a construction project, see Practice Note: Performance security in construction.

What is a collateral warranty?

A collateral warranty is a contract which is collateral to (ie sits alongside) an underlying a contract. See Practice Note: What are collateral warranties?

In construction, a collateral warranty is typically collateral to either a building contract, sub-contract or a consultant's appointment. The warranty creates a contractual link where there otherwise would not be one, thereby enabling a third party, such as a purchaser or tenant occupying or buying recently completed buildings, to have a direct contractual relationship with a construction team member. That third party can then rely upon the undertakings or covenants contained

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