Contractor and sub-contractor collateral warranties and third party rights

Abstract

There is a general common law rule, known as the ‘privity rule’ or ‘privity of contract’, that a contract may only be enforced by the parties to that contract. These problems can, however, be surmounted: a collateral warranty and the Contracts Act 1999 are the principal means of overcoming the privity rule. These are generally encountered by architects in two scenarios: first, architects are frequently asked to provide collateral warranties/third party rights in relation to their own professional services. Second, architects may be expected to advise their clients and ensure that all necessary collateral warranties/third party rights are obtained from other professionals, contractors, and sub-contractors. Collateral warranties in favour of third parties, such as funders, purchasers, and tenants, tend to be bespoke, usually to suit the requirements of particular employers. As a result, purchasers will often require collateral warranties to ensure that they are protected.