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CHAPTER 11 Collateral warranties

Law of Construction Disputes, The

Page 283


Collateral warranties

Collateral warranties

Over the years the courts have started to show a readiness to award damages for the negligence of designers and/or contractors, even if the claimant did not have a direct contract with the contractor, i.e. was not in privity of contract, thus expanding the area of negligence claims beyond the original employer. However, in the late 1980s the courts took a more stringent position, finding that it was not possible to recover damages for negligence in relation to defects in buildings as such damages were economic losses, which are not recoverable in tort. The two key decisions in this regard were the House of Lords’ decisions in D&F Estates v Church Commissioners 1 and Murphy v Brentwood District Council.2 After these two cases it was clear that owners and those occupying buildings, such as tenants, needed a contractual method to claim damages against the designers and/or the contractors. Such claims had to be based in a breach of contract and, as they had no privity of contract with either the designer or contractor, such claims would fail. This problem extended not just to subsequent owners and occupiers but also to those providing the funds, other purchasers, and those who had any other interest in the building or project. The development of collateral warranties created the contractual relationship needed.

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