In basic terms, 3 parties are involved in collateral warranties:
- A contractor
- A beneficiary (third party)
- An employer
Collateral warranties provide a contractual link between a third party (the beneficiary) and a contractor which has carried out certain works or provided certain services for the employer.
So when is it appropriate to use one?
It is often appropriate to expect collateral warranties when:
- A first purchaser acquires a new build development
- The employer is the developer and sells the completed site to