Collateral warranties

In order for consultancies to allow their reports to be utilised by people other than their primary clients, it is not uncommon in the UK for consultants to enter into what is known as a collateral warranty . For example, a developer may wish to purchase a plot of land and utilise a consultant to identify any potential environmental issues. The consultant produces a report and on the basis of the report the developer purchases the land. Having developed the site the developer then wishes to sell the land to a third party, but the third party does not wish to have a survey of the site undertaken for his own benefit, but wishes to rely upon the developer s initial survey. In such circumstances the developer, the third party purchaser and the consultant enter into a collateral warranty, thereby allowing the third party purchaser rights to the consultant s report. It is often the case that the consultant s client will wish the warranty to impose additional liabilities on the consultant beyond those associated with normal levels of professional service. 

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