We will be employing a main contractor to carryout approx. £800k of civils works for a hydroelectric scheme and employing a named specialist sub-contractor to supply and install a turbine (approx. value £250k). The main contractor will commission the named sub-contractor under a NEC4 sub-contract form and as the client we are considering requesting a warranty from the main contractor for the services of the sub-contractor in the event the main contractor ceases trading. However, before we make a decision I wonder whether using Y(UK) 3 was a less complex viable alternative?
The answer ‘in theory’ is ‘Yes’, because you don’t need to go through the rigmarole of getting Collateral Warranties agreed and signed in order to be able to go direct to the 3rd party - the turbine Subcontractor - in case of fault with the turbine. And that was why The Contract (Rights of Third Parties) Act 1999 was initiated.
- lawyers are much more comfortable with Collateral Warranties because they are much more established and hence case law on them and can be fine tuned to the specific requirement (but which involves negotiation etc.), so they would argue you get more protection through them.
- in your case, where you have a large value turbine, for me, my gut feel would be the benefits of a specific Collateral Warranty would outweigh using Y(UK)3 in this case.