This is Part 2 of our series considering warranties in
construction contracts. In our last update, we considered the
nature of product and workmanship warranties as contractually
binding promises and what this means for construction contractors
In this next part, we consider the other essential feature of
warranties as risk-shifting mechanisms.
This is important where defects in warranted workmanship or
materials are found to have been caused by, for example, a
manufacturer, or another contractor who was subcontracted to the
warranting contractor: that is, where the party that gives the
warranty is not the party at fault for a defect covered by that
In such cases, the effect of the warranty will be to shift the
risk of being out of pocket as a result of the warranted defects
from the owner or head contractor that has commissioned the
defective works, to the contractor that has warranted the quality
of those works, during any argument about who is ultimately to
blame for those defects. The warranting contractor will generally
then be left to recover the losses that it suffers because of
enforcement of the warranty, from the party ultimately responsible
for the warranted defects.
Where an owner or head contractor calls upon a warranty in order
to shift losses and risks in this way, this may be seen as a sound
commercial strategy. Sometimes, though, seeking to enforce a
warranty may be more trouble than it is worth. For example, there
may be a dispute as to whether particular defects (the existence,
extent and/or nature of which may themselves be disputed) fall
within or outside the scope of the warranty sought to be enforced.
Another example would be a dispute about whether the steps taken by
the owner or head contractor to enforce the warranty were validly
taken within the warranty period.
In such cases, owners and head contractors may be well advised
to consider other options that the law may give them. Remember that
a warranty is a contractual promise which means that it is
enforceable under the contract between the contractor or supplier
and the owner/head contractor/purchaser. But there are other laws
that also protect purchasers of defective workmanship and
materials, some of which only apply in construction and some of
which apply more generally, including in construction.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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