Collateral Warranty Agreement (Subcontractor) (B144)

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[English law edition]

Who can use this contract?

This Collateral Warranty Agreement template is for use where a developer or third party purchaser or lender wants a direct agreement with a subcontractor to the main contractor on the project. The subcontractor will probably have an important design responsibility

This collateral warranty agreement is one of three collateral warranties 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 contract for?

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

The purpose of this agreement is to enable the beneficiary of the warranty to bring a claim against the contractor if, at some future date, a defect is found in the 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 and take over the subcontract if the main contract is terminated or the main contractor becomes insolvent.

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

What are the main issues?

The subcontractor collateral warranty agreement contains a warranty from the subcontractor in favour of the beneficiary that they have exercised skill and care in regard to their work on the project.  From the subcontractor’s point of view, the duties in the collateral warranty should not be greater than those in the subcontract with the main contractor.   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 that explain the background and purpose of collateral warranties as well as dealing with individual clauses in the document.

You need this document if you are a subcontractor 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.

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.

 

 

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Explanatory Notes

 

When you buy and download this collateral warranty, you will also receive detailed explanatory notes.  But as we have three forms of collateral warranty which are very similar, we do not have them on this page. So, if you need more information before you buy, please go to the Explanatory Notes on our Collateral Warranty Collection page.