Q&As

Can a collateral warranty, issued 18 years ago, be assigned to a subsequent purchaser in order to permit them to bring a claim for defects which have been discovered recently?

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Published on LexisPSL on 08/08/2016

The following Construction Q&A provides comprehensive and up to date legal information covering:

  • Can a collateral warranty, issued 18 years ago, be assigned to a subsequent purchaser in order to permit them to bring a claim for defects which have been discovered recently?
  • Knowledge of defects prior to assignment
  • No loss argument
  • Limitation periods

Can a warranty'>collateral warranty, issued 18 years ago, be assigned to a subsequent purchaser in order to permit them to bring a claim for defects which have been discovered recently?

A collateral warranty is a contract which is collateral to an underlying or primary contract, such as a construction contract. The warranty creates a contractual link where there would not normally be one, thereby enabling a third party, such as a purchaser, to have a direct contractual relationship with the contractor, and to rely upon the undertakings or covenants contained in the warranty in order to bring an action in contract against the contractor if there has been a breach. For more information, see Practice Note: What are collateral warranties?

When a contract, such as a collateral warranty, is silent on the issue of assignment, this means that the benefit of the contract can be assigned without limit or without requiring the consent of the other party. However, most collateral warranties contain express clauses which restrict or qualify the rights of assignment, such as limiting the number of times an assignment can be made. It is important to review the relevant provisions to determine whether there are any procedural requirements that must be followed, for example written notice, or any limitations on the rights being assigned, such as a prohibition on the assignment of past causes

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