If you are looking for advice on ‘collateral warranty construction’, our specialist team of construction solicitors and barristers is perfectly placed to provide the support and guidance you need. We combine legal skill with commercial acumen, working closely with our clients to identify swift, workable solutions to their collateral warranty issues.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.

 

What is a Collateral Warranty in Construction?

In general contracts, a warranty is a contractual promise made by one party to another. In the construction industry, the term warranty often refers to a ‘collateral warranty’. A collateral warranty is an agreement pursuant to which an entity involved in the construction project, such as a contractor, consultant, or subcontractor, makes a promise to a third party, such as a purchaser, funder, or tenant, that they have fulfilled their obligations under the main contract.

A collateral warranty in construction essentially creates a direct contractual relationship between an entity involved in a construction project and one with an interest in its outcome. It allows the beneficiary to make a legal claim against the entity that gave the warranty if they subsequently breach the warranty. Without a collateral warranty, parties such as funders, purchasers, or tenants would be unable to bring a claim directly against those responsible for design or construction defects, because contractual obligations can generally only be enforced by the parties to the contract.

A collateral warranty in construction usually includes a number of key elements. They include the following:

 

  • An assurance that the warrantor has, or will, fulfil its obligations under the underlying contract
  • An assurance that the warrantor has, or will, carry out their duties under the main contract with reasonable skill and care.
  • An assurance that the warrantor has, or will, use materials of an appropriate quality and standard.
  • An agreement that the warrantor will maintain professional indemnity insurance cover for an agreed period. This ensures that they have the means to pay any damages due to the beneficiary of the warranty should they breach it.
  • An agreement that the warrantor will not amend the main contract without the beneficiary’s written consent.

 

How can we help with a Collateral Warranty in Construction?

If you are a warrantor facing a breach of contract claim for an alleged breach of collateral warranty or a beneficiary of a collateral warranty who has suffered loss as a result of someone else’s breach, we can help.

It is our firm policy to avoid litigation wherever possible. Court proceedings are lengthy, expensive, and inherently uncertain. There are a number of other dispute resolution methods that are quicker and more cost-efficient than litigation, and are more likely to preserve important commercial relationships. These dispute resolution methods can produce excellent results in collateral warranty cases between parties in the construction industry. They include the following:

  • Mediation

 Mediation is a type of alternative dispute resolution that involves an impartial third party assisting the parties in reaching a mutually agreeable resolution of their issue. Mediation is voluntary, and the parties remain in control of the process throughout. For example, they can decide who should act as the mediator, and when the mediation should take place. If the parties reach an agreement through mediation, they can make that agreement binding by way of an agreement or a court order.

 

  • Adjudication

Adjudication is another type of alternative dispute resolution. It is a fast-track procedure whereby an independent adjudicator is appointed to decide a dispute between parties to a construction contract. An adjudicator’s decision is binding on the parties, and there is a very limited right of appeal. That said, it is a temporary measure, and the parties can subsequently litigate the issue through the courts if they wish. The key aim of adjudication is to prevent disputes from stalling construction projects and disrupting the parties’ cash flow.

Parties to a construction contract have a statutory right to refer a contractual dispute to adjudication. However, the Supreme Court has recently clarified that a collateral warranty in construction is not generally a construction contract, which means that the parties do not have an automatic right to adjudicate their issue. As a result, adjudication is only available if the parties have explicitly given themselves the right to use the adjudication regime in the terms of the collateral warranty.

Collateral warranty disputes can be incredibly complex, and they require careful handling to avoid them escalating and becoming extremely expensive. At Altion Law, our expert construction solicitors and barristers possess the expertise and experience you need to successfully navigate your collateral warranty issue and secure the outcome you desire.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.