The contractual matrix of commercial construction projects
commonly includes collateral warranties. Collateral
warranties typically grant a contractual cause of action to third
parties (such as tenants or end-users) with an interest in the
project who may not otherwise have a contract in place with parties
that are designing, constructing or providing professional advice
on the project. For the beneficiary, a collateral
warranty can therefore be invaluable.
Recently, for example, collateral warranties have proven to be
extremely useful for long leaseholders and tenants in private
residential developments where cladding and fire safety issues have
been discovered. Where such a warranty exists, leaseholders
(as the beneficiaries) have been able in some cases to rely upon
collateral warranties as a means of recovering losses, or
compelling the original contractors or designers to rectify those
fire safety defects in circumstances where the leaseholder was
