Published: 22 Feb 2023
Every project is covered by a contract and often a collateral warranty too, but how well do you understand your contracts and warranties – and what happens when something goes wrong?
What is a contract?
While you are used to signing contracts before starting a new project, do you take the time to understand what you are signing? In its simplest form, a contract is an agreement between two or more parties which has a binding nature and is legally enforceable. It sets out the duties and obligations of the parties involved in a project. This is important to safeguard both the contractor and the surveyor and ensure they both understand the scope of works and what is trying to be achieved.
What is a collateral warranty?
A collateral warranty is a further contract that sits alongside the underlying contract, such as a building contract or consultant appointment. It grants rights to a third party – usually the ultimate client, when the original contract is between a contractor and surveyor – which can be used following the completion of a project if anything subsequently goes wrong. It is generally much shorter than the overall contract, as it takes the contents of that into account. However, it provides the end customer with a warranty that you have performed your duties and obligations in accordance with the main contract.
Contracts and collateral warranties often contain terms that are not covered by Professional Indemnity Insurance policies.
Why is it important to understand these?
Most surveyors are unaware of the difference between contracts and collateral warranties until something goes wrong – at which point it is too late. It is important that you understand what you are liable for. The Survey Association is committed to helping its members develop a greater understanding of the wider business implications, and has arranged a webinar with Nick Raines, Contract Review Manager at Lockton to explain these documents in more detail and identify how to minimise your risk of uninsured loss. The Professions team at Lockton is the UK’s leader in Professional Indemnity Insurance for Land Survey professionals. TSA has been working with Lockton for decades, and over that time, the company has successfully supported TSA members via its PI Insurance Scheme.
The session will explain the purpose of contracts and collateral warranties, key things to look out for, and how to negotiate your contracts and collateral warranties in order to minimise your risk of uninsured loss. It will also discuss how they work, what they are used for, and the extent to which they are covered by professional indemnity insurance. By the end you will better understand the risks and the key issues, gaps between insurance coverage and contractual terms, and ultimately how this affects your liability should anything go wrong.
For further information, visit www.tsa-uk.org.uk
