FIDIC / Legal Reference: Not a FIDIC concept — common law and UK construction practice
A direct contractual agreement between a construction professional or contractor and a third party who is not a party to the original contract — most commonly a funder, tenant, or future purchaser. The collateral warranty gives the third party the right to sue the contractor or consultant directly for defects.
What it means in practice
Without a collateral warranty, a third party who suffers loss from construction defects generally has no direct contractual claim against the contractor or consultant. A collateral warranty bridges this gap by creating a direct contractual relationship.
Collateral warranties are commonly required by: funders (who want security over the construction team if the developer defaults), tenants (who need recourse against the contractor for defects in their premises), and purchasers of completed buildings.
Where disputes arise
Disputes involving collateral warranties typically arise from defects claims brought by funders or tenants years after project completion. The warranty period is typically 6 or 12 years from practical completion.
UAE Context
Collateral warranties are increasingly requested in UAE commercial developments, particularly where international funders or institutional investors are involved. UAE law does not have an equivalent statutory assignment mechanism, so collateral warranties must be carefully drafted.
Related terms
Collateral warranty disputes and third-party defects claims require specialist contractual and technical expertise. e-Basel provides advisory and expert witness services for these disputes in the UAE.
FIDIC Expert Witness Dubai →Search terms: collateral warranty construction UAE · third party construction warranty · funder warranty construction · collateral warranty defects UAE · construction warranty UAE