Collateral Warranties As 'Construction Contracts'

The decision has given rise to a certain amount of negative comment, with many commentators expressing surprise, or even suggesting that the case was wrongly decided.

The case is of immediate interest for anyone who has the benefit of a collateral warranty, or has given one, or was contemplating granting a collateral warranty to a third party such as a tenant, lender, or an employing party further up the contractual chain.

The practical consequence is that collateral warranties, at least those made in similar or equivalent terms to those considered in Parkwood, import the right to adjudicate contained in section 108 of the 1996 Act. The beneficiary of such a warranty, as Parkwood, can commence adjudication proceedings in order to recover damages for defective work rather than being limited to court or arbitration proceedings.