Beneficiaries of collateral warranties may now be able to enforce them more easily
Contrary to the view of the industry, the Technology and Construction Court has recently held that in certain circumstances a collateral warranty may be a ‘construction contract’ that brings with it the requirements and benefits of the Construction Act. This article will explain the benefit of this decision to those who have the benefit of collateral warranties.
By way of reminder, a ‘construction contract’ is one for any of the following: the carrying out of or arranging the carrying out of construction operations and/or providing labour for construction operations. ‘Construction operations’ is widely defined and covers professional services including architecture and surveying. Some construction operations are excluded from the remit of the Construction Act and these include, among others, engineering works and the manufacture of goods to be used in construction.
If a contract is properly classified a ‘construction contract’, the act requires that it must contain an adequate mechanism for payment and statutory adjudication will apply for dispute resolution…
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