Collateral Warranties Pack A Punch

In a recent Scottish appeal case, the Inner House of the Court of Session has endorsed the earlier decision of the Outer House, and in so doing has given further support to the effectiveness of collateral warranties in commercial projects.

Background

The facts surrounding the case of Scottish Widows Services Ltd v. Kershaw Mechanical Services Ltd and Building Design Partnership Ltd are complicated as a result of complex contractual arrangements between the parties.  In summary, the action concerned defects that were found in the design and construction of the head office of Scottish Widows at Fountainbridge, Edinburgh.  Building Design Partnership (BDP) were engaged as architects for that project and agreed to give collateral warranties to certain third parties.  Scottish Widows Services (SWS) occupied the building and were assignees of both the interest under a sub-lease and the full benefit of rights and interests under a collateral warranty granted to the