Collateral Warranty

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A Collateral Warranty is a form of contract that runs alongside, and is usually supplemental to, another contract. Essentially in the building industry collateral warranties are used to provide a guarantee against defect between an architect and a Third party other than the client, usually for a fixed period after construction has ceased.

For instance, an architect is appointed to design a block of flats for a developer. That developer intends to sell the block of flats to a Housing association. Due to Privity of contract the architect would normally only be contractually liable to the client should defects arise. The collateral warranty establishes a contractual relationship between the Housing association and the architect against defect.