Why collateral warranties are caught in the Act

摘要

Collateral warranties are commonly used where an agreement needs to be put in place with a third party such as a funder, tenant or purchaser of the property. The contractor or subcontractor warrants to the third party that it has fulfilled or will fulfil its obligations under a construction contract. Usually, the collateral warranty specifies that disputes are to be resolved by the courts. In a judgement last month in the case of Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd, Mr Justice Akenhead was asked to consider whether a collateral warranty fell within the scope of the Construction Act. If it did, either party could refer any disputes under it to adjudication.