Collateral Warranty Agreement (Subcontractor) (B144)

Who can use this subcontractor collateral warranty ?

A developer of a project  may want a collateral warranty agreement with the subcontractor, especially if  the subcontract includes design services.

Please note that this collateral warranty is one of three  that we publish – the others being for a consultant and a [main] contractor. All three are available in our discounted collateral warranty collection

What is this collateral warranty for?

This collateral warranty agreement creates a contractual link between the subcontractor on a construction project and a third party the beneficiary) that has an interest in the project – this could be the developer,  a funder, or a purchaser or tenant of the completed development.

This means the beneficiary will be able to bring a claim against the subcontractor if, at some future date, there is a defect in  the subcontractor’s work.

Also, a developer may want the agreement with key subcontractors so that it can exercise ‘step-in’ rights under the agreement. In other words the developer can  take over the subcontract if it terminates the main contract or the main contractor becomes insolvent.

Our template is a fairly balanced one. So, it is likely to prove acceptable to a subcontractor as well as the beneficiary.

What are the main issues?

The subcontractor gives a warranty to the beneficiary that it has exercised skill and care in regard to their work on the project and any design services.

But the subcontractor will not  have any more liability to the beneficiary than it does to the main contractor under its subcontract.    If the beneficiary is the developer/employer under the main contract, there is a ‘step-in’ clause, as mentioned above.

Fairly standard wording for collateral warranty agreements has been developed over the years and there is more detail in our Explanatory Notes below.

What detailed terms does the contract contain?

The main points cover:

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

The contract is accompanied by Explanatory Notes. They explain the background and purpose of collateral warranties as well as dealing with individual clauses in the document.

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

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

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