A Contract between the Designing Sub-Contractor and Employer or another Beneficiary.
To sue to recover damages for losses suffered, the completed buildings owners, tenants or financiers may want a Collateral Warranty, so they can sue under contract. The obligations, risks and potential costs should be made clear to the (sub) contractor before he prices the works, so he can price the extra liabilities being asked of him.
Why are Collateral Warranties used?
A third party has to rely on the tort of negligence, to sue to recover losses he may suffer as a result of deficient design and/or installation works. To widen the potential for loss recovery and to create a link by which the legal process of recovery can easily be pursued, employers, tenants and financiers often insist that the providers of key building works, provide a collateral warranty. This is especially prevalent where the design has been subcontracted to the constructor.
A Collateral Warranty is a Contract
The ECA welcomes the opportunity to comment on the Warranty provisions that Members encounter.