Loss Prevention Loss Prevention Alerts

LPA 05 – Contracts (Rights of Third Parties) Act 1999

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Published in February 2000

The Contracts (Rights of Third Parties) Act may alter the practice with respect to the use of collateral warranties.  Collateral warranties are contracts which stand alongside the client contract and generate obligations with respect to the quality of the work to various interested parties such as purchasers of a site, tenants or funders.  The Act provides that a person who is not party to a client contract may in his own right enforce a term of the contract.  Collateral warranties are a perennial concern but, in the short term, they may be preferable to obligations which might be generated by the Act.