Why collateral warranties aren’t construction contracts

By Stuart Pemble

It’s fair to say that Akenhead J’s recent decision in Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd that a collateral warranty was caught by the Construction Act — so that Parkwood (the warranty beneficiary) was able to commence adjudication proceedings against Laing O’Rourke — has caught the attention of construction lawyers.

Many — and I am one of them — think that the decision is wrong. Central to the judge’s finding were the facts that the warranty: was granted before completion of the relevant works (a swimming pool in Cardiff); and contained wording (‘warrants, acknowledges and undertakes that…’) that the judge (especially relying on the word ‘undertakes’) took to mean that the warranty was an obligation to complete pool and therefore a contract for the ‘carrying out of construction operations’ within the ambit of the act.

And, although the judge was quick to emphasise that his decision rested on the particular facts of the case, it is still open to criticism…

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