RICS East Midlands CPD Day Collateral Warranties

Understanding Collateral Warranties and Third Party RightsSarah Fox, 500 Words Ltd

In this session:

Warranties and/or Third Party Rights

► Why should you use third party rights and avoid warranties ► Do you need them at all? ► Key clauses to focus on: limits and step-in rights ► Avoiding pitfalls from recent cases

Just another piece of paper

What are third party rights?

Last link in a contractual chain

What are collateral warranties?

Not really…

Do you need them?

Step-in rights Limits on liability

Key clauses

Recent cases

Avoiding pitfalls

LIMITS► Any limits only apply to claims by the recipient, not contribution

proceedings► Limits can cover negligence even if not expressly included► Limiting your liability to 1% of PI cover may not be reasonable► Net contribution clauses may/not include contractor► The limitation period starts at practical completion

Recent cases

Avoiding pitfalls

OTHER► Damages for negligence are measured in the same way as the equivalent

claim for breach of warranty (contractual)► A warranty can be a construction contract & adjudication can apply► A third party rights notice is not construction contract ► You can be forced by courts to sign a promised collateral warranty