A collateral warranty is a contract, that is associated with another contract (such as a construction contract, a sub-contract, or design consultant appointment), and is entered into between the person employed under the contract to provide works or services (the contractor, subcontractor or design consultant) and a third party who either has or acquires an interest in the project to which the contract relates.
A collateral warranty is therefore a form of security against the risk that any of the party(ies) between the beneficiary and the specialist contractor becomes insolvent.
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