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