The trouble with collateral warranties (CWs) is that they aren’t very interesting. Construction lawyers typically overdose on them as trainees and have had enough of them by the time they qualify. A brief foray into the world of third party rights and they are ready to move on to higher things, leaving the following cohort of trainees to pick up the next wave of CWs.
Some sections of the industry tend to pooh-pooh them as well. A vocal corner of the insurance world, with no vested interest to declare (other than a desire to sell latent defects insurance), persists in declaring that CWs “aren’t worth the paper they are written on”. (Like oral agreements, as some wag once said.) Decisions such as Parkwood, which I have previously blogged about, don’t exactly help to enhance their reputation. And the ritual pinhead dancing around net contribution and “no greater liability” clauses only reinforces the notion that CWs are little more than exercises in futility, designed to occupy the time of junior construction lawyers while their more glamourous corporate and finance colleagues get on with “real” work. Continue reading