Collateral Warranty

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Collateral Warranty

In real estate transactions, an assurance or guaranty of title made by the holder of the title to the person to whom the property is conveyed.

Such a Warranty is not the same as a Covenant running with the land, since it runs only to a particular convenantee who accepts the land from the holder of title and not to each successive owner of the land upon taking ownership of it.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

COLLATERAL WARRANTY, contracts, descent. Where the heir's title to the land neither was, nor could have been, derived from the warranting ancestor; and yet barred the heir from ever claiming the land, and also imposed upon him the same obligation of giving the warrantee other lands, in case of eviction, as if the warranty were lineal, provided the heir had assets. 4 Cruise, Real Prop. 436.
     2. The doctrine of collateral warranty, is, according to Justice Story, one of the most unjust, oppressive and indefensible, in the whole range of the common law. 1 Sumn. R. 262.
     3. By the statute of 4 & 5 Anne, c. 16, Sec. 21, all collateral warranties of any land to be made after a certain day, by any ancestor who has no estate of inheritance in possession in the same, were made void against the heir. This Statute has been reenacted in New. York; 4 Kent, Com. 460, 3d ed.; and in New Jersey. 3 Halst. R. 106. It has been adopted and is in force in Rhode Island; 1 Sumn. R. 235; and in Delaware. Harring. R. 50. In Kentucky and Virginia, it seems that collateral warranty binds the heir to the extent of assets descended. 1 Dana, R. 59. In Pennsylvania, collateral warranty of the ancestor, with sufficient real assets descending to the heirs, bars them from recovering the lands warranted. 4 Dall. R. 168; 2 Yeates, R. 509; 9 S. & R. 275. See 1 Sumn. 262; 3 Halst. 106; Harring. 50; 3 Rand. 549; 9 S. & R. 275; 4 Dall. 168; 2 Yeates, 509; 1 Dana, 50.

A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.
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Mrs Brewer brought a claim against Mr Mann alleging breach of collateral warranty. She asserted an oral warranty had been given by Mr Mann at a meeting with her in May 2007 that the Bentley was a genuine 1930 Speed Six containing an authentic Speed Six engine.
A collateral warranty is used as a supporting document to a primary contract, and contains obligations that affect the consultant or contractor, such as using materials of an appropriate quality or carrying out work in a professional, workmanlike manner.
Until recently if you had carried out a straw poll among those in the provision of collateral warranties asking the question, 'can you use a construction adjudication to enforce a collateral warranty?' you would have received a resounding 'NO', and I would have been one of those saying 'NO'.
Developers usually have agreed a contractual relationship with the contractor, but will require a collateral warranty if they have not.
Contractors, sub-contractors and professional consultants, such as architects and engineers, are often asked by parties with which they are not directly contractually linked, such as funders, purchasers or tenants of a new development, to provide a collateral warranty. A collateral warranty establishes a contractual chain of liability which extends protection to third parties.
A collateral warranty creates a direct contractual link between parties who would not otherwise have a contract, such as a tenant of a property and the architect who designed the project.
Developers usually have agreed contractual relationships with consultants and contractors, but anyone else who is adversely affected by poor design or workmanship will require a collateral warranty.
Developers usually have agreed contractual relationships with those it engages to design and carry out the development, but anyone else who is adversely affected by poor design or workmanship will require a collateral warranty.