April 8, 2024

The assurance of quality – A guide to contractual warranties

Satisfactory completion of a construction project is rooted in trust and security between all parties, which begins with the assurances provided by contractual agreements.

Contractual warranties play a critical role in these contracts, providing a legally binding declaration that certain conditions will be met.

There are standard warranties which are found in the majority of construction contracts, but they can also be amended and tailored to specific projects to avoid disputes and ensure compliance with project requirements.

In addition, even if these standard warranties are not specifically referenced in the contract, they can be implied by virtue of various legislations such as the Supply of Goods and Services Act 1982 to name but one.

These warranties are crucial for establishing the relationship between parties including contractors, subcontractors, and the project owner – the cornerstone of a successful project.

Understanding contractual warranties

A contractual warranty is a guarantee provided by one party to another within the contract that certain conditions will be met.

In construction law, these conditions typically relate to the quality of a project, sourcing of materials or the timeline.

If the warranty is breached, the aggrieved party is entitled to claim damages, though the contract itself remains in effect.

Warranties ensure that standards of work, materials, and performance meet specified criteria and provide a mechanism for recourse if these are not met.

Types of contractual warranties

There are a number of different warranties which may be included in a construction contract or which can be implied into a contract by legislative provisions contained in a variety of acts of parliament including:

  • Good workmanship – This assures that the work will meet the required standards and be free from defects. It is fundamental to ensuring the durability and safety of the constructed building or infrastructure.
  • Materials – This guarantees that the materials used in the construction project are of good quality, suitable for the purpose intended, and, unless otherwise specified, new. Some projects may also require materials be sourced sustainably.
  • Fitness for purpose – This applies when the contractor knows the intended purpose of the work or when the project requires the contractor’s unique skills. This warranty ensures the completed project will be suitable for the specific purpose for which it was undertaken.
  • Compliance with laws and regulations – This assures the project owner that the work performed will comply with all relevant laws, regulations, and building requirements in effect at the time of construction.

Standard warranties can be adapted to achieve the goals of a specific project, such as a low-carbon project using recycled materials or sustainable working practices.

What happens when a warranty is breached?

When a contractual warranty is breached, the non-breaching party can seek remedies, typically in the form of damages.

In some cases, specific rectification may also be sought in the form of further works or repairs, especially if monetary compensation is not sufficient to remedy the breach – such as if the work causes significant structural issues.

The idea behind warranties is to enforce good working practices and penalise those parties that don’t adhere to them.

Understanding the scope of contractual warranties is vital for all parties involved in a construction project.

Contractors and subcontractors need to be aware of the warranties they are providing and ensure they can meet these obligations, or they may face significant penalties and reputational damage.

Similarly, project owners should understand the protections these warranties offer and the steps they can take if warranties are breached.

We can advise parties entering into contractual warranty agreements to help ensure that all obligations are met. Contact our specialist Construction Law team today to find out more.