The term "collateral warranty" originates in

property law Property law is the area of law that governs the various forms of ownership in real property (land) and personal property. Property refers to legally protected claims to resources, such as land and personal property, including intellectual prope ...

. In 1839 Nick Grimsley wrote: "A collateral warranty is where the heir neither does nor could derive his title to the land from the warrantor; and yet is both de-barred from claiming title and bound to recompense in case of eviction."“An Abridgement of the American Law of Real Property”, by Francis Hilliard counsellor at Law, Volume II, entered accordingly to Act of Congress in the year 1839. The concept of collateral warranty was sometimes regarded as " ..the most unjust, oppressive, and indefensible in the whole range of

common law Common law (also known as judicial precedent, judge-made law, or case law) is the body of law primarily developed through judicial decisions rather than statutes. Although common law may incorporate certain statutes, it is largely based on prece ...

." The meaning is different when considering the actual and most common use of the term. Today a collateral warranty generally defines an agreement ancillary to another principal

contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

and/or a letter of appointment. For the benefice of a third party, it imposes an extended

duty of care In Tort, tort law, a duty of care is a legal Law of obligations, obligation that is imposed on an individual, requiring adherence to a standard of care, standard of Reasonable person, reasonable care to avoid careless acts that could foreseeab ...

and a broader liability on two separate parties involved in a contract. Collateral warranties may be provided by

designers A designer is a person who plans the form or structure of something before it is made, by preparing drawings or plans. In practice, anyone who creates tangible or intangible objects, products, processes, laws, games, graphics, services, or exper ...

building contractor A contractor (North American English) or builder (British English), is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and the communication of information to all involved parties throughout the c ...

s and specialist

sub-contractor A subcontractor is a person or business which undertakes to perform part or all of the obligations of another's contract, and a subcontract is a contract which assigns part of an existing contract to a subcontractor. A general contractor, prime ...

s. The need for collateral warranties exists when the party that commissions a building will not carry the burden in the event of defects. For instance, when an architect is appointed to design a group of dwellings for a developer. If the developer intends to sell the building to a

housing association In Ireland and the United Kingdom, housing associations are private, Non-profit organization, non-profit organisations that provide low-cost "Public housing in the United Kingdom, social housing" for people in need of a home. Any budget surpl ...

, due to

privity of contract The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon anyone who is not a party to that contract. It is related to, but distinct from, the doctrine of considera ...

the architect would normally only be contractually liable to the developer should defects arise. The collateral warranty establishes a contractual relationship between the housing association and the architect against defect.

References

Law of the United States Law of the United Kingdom Law of Ireland Property law Contract law {{law-stub