Collateral Warranty Agreement for a Contractor (B142)

Who can use this contractor collateral warranty?

This Collateral Warranty Agreement template is for use where a contractor enters into a direct agreement with a purchaser, tenant or funder of a development.

Please note that this collateral warranty agreement is one of three collateral warranties that we have published – the others being for a consultant and a subcontractor. All three are available in our discounted collateral warranty collection

What is this collateral warranty agreement  for?

A collateral warranty agreement creates a contractual link between the contractor on a building project and a third party that has an interest in the project – whether as a funder providing finance, a purchaser of the completed development, or company taking a long lease of the completed work.

The purpose of this agreement is to enable the funder or other beneficiary of the collateral warranty to bring a claim against the contractor if at some future date a defect is found in the in the contractor’s work.

Our template is a fairly balanced one and is likely to prove acceptable to a contractor as well as the beneficiary.  It is also in line with the forms regularly produced by specialist construction solicitors.

What are the main issues?

Duty of care.  The contractor gives a warranty to the beneficiary to exercise reasonable skill and care etc. in performing its contract, both with respect to any design as well as other work.

Copyright Licence.  The contractor gives the beneficiary a right to use designs and other documents prepared by it.   It is sensible for the document to say that the beneficiary must pay for copying costs if it actually asks for copies of those documents.

Insurance.    Because the contractor giving a collateral warranty will often have a design responsibility, the collateral warranty usually has a clause requiring the contractor to maintain professional indemnity insurance for up to 12 years following completion of the work. This is a useful safeguard for both the contractor and the beneficiary in the event of a claim.

Step in rights.    Sometimes the beneficiary will want the right to take over the building contract from the employer – for example if the employer becomes insolvent, a funder will want to keep the project going.  The “step in” clause in the collateral warranty agreement will set out the procedure to enable this to happen.

What detailed terms does the document contain?

The main points cover:

• definitions
• warranty
• deleterious materials
• copyright
• indemnity insurance
• assignment & third party rights
• notices
• law & jurisdiction
• step-in rights

You need this document if you are a contractor entering into a direct agreement with a purchaser, tenant or funder of a development.

For more information on each of these sections, see our Explanatory Notes below which you will also receive when you download the document from our website.

And if you want to use the Notes, let us know by using our contact form

For information on signing documents see our Contract Signing page

When I download the document, can I change it and/or use it more than once?

Yes, all ContractStore’s templates are in MS Word and you can use the contract on more than one project. For more information, watch the video on this page of our website or see our FAQs

Legal support

ContractStore supplies templates and is not a law firm.  But experienced lawyers write all our templates, so we can arrange legal assistance for customers who need special terms in one of our documents or a bespoke template. . For more information see our Legal Services page.  For more information see our Legal Services page.

Contract Author – Giles Dixon

And if you want to contact us see our Contacts page.