Collateral Warranties Flashcards
What is a collateral warranty?
A CW is formal contractural argeement which runs alongside the main building contract, its purpose is to create a contractual agreement between two companies where one would not previously exist.
Can you give me an example of how you used CW’s for WHBG?
It was written into the NEC contract (as X clause X8 Undertakings of work to to others) that the contractor was to provide collateral warranties for consultants/subcontractors that carried design responsibility) For example, the architect that the contractor appointed or the joinery subcontractor.
Can you give me an example of works/package that would not typically require a CW
Decorations subcontractor
Why would the client want a CW?
The employer may want a CW with suppliers or subcontractors/consultants as if the contractor was to go into liquidation, then the client/employer would have no contractual link to those listed, so they cant get them to come back to rectify defective workmanship etc
Whats the difference between a bond and a CW
A bond is a financial commitment backed up by a third party (either bank or insurance comp) whereas a collateral warranty passes on contractual obligations
Whats an alternative to a collateral warranty?
an alternative method to confer such rights is provided by the Contracts (Rights of Third Parties) Act 1999, which allows parties to obtain benefits from contracts which they have no contractual link with.
