Collateral warranty: definition and example
A separate contract in which you promise a third party, such as a funder or a tenant, that you have met your subcontract duties.
By Jack Butler-Kettle · Updated
Guidance for England and Wales. Check the contract, amendments and facts that apply to your job.
What it means in practice
A collateral warranty creates a contractual relationship with someone outside the original subcontract, such as a tenant or funder. It may cover design or workmanship duties, assignment and other rights. Its wording can affect the duration and extent of exposure, so it should be read with the subcontract.
Check consistency, liability limits and insurance with appropriate advisers. A pre-signing contract review can identify commercial differences requiring specialist legal attention.
Worked example
The facts
A roofing specialist is asked to give a warranty to the building's future tenant.
What happens
It compares the proposed promises with its existing subcontract duties.
It raises any wider obligation or unfamiliar assignment provision before signing.
What this shows
The warranty is assessed as a separate commitment, not treated as routine paperwork with no additional consequences.