Scottish construction sector now has a choice: third party rights or collateral warranties?

The Scottish Parliament has passed the Contract (Third Party Rights) (Scotland) Bill. A date has not yet been fixed for it to come into force but it is likely to be early in 2018.

Parties to a construction contract now have a clear choice. They can continue with the traditional approach of using Collateral Warranties to create rights in favour of third parties; or they can use this new legislation to give enforceable rights to those third parties without the need for separate contracts. Which route is adopted will depend on the circumstances of each project. Either way, the existence of a choice is welcomed.

As a lawyer who has just obtained the 188th Collateral Warranty on a Scottish construction project (with more still to procure!), I can appreciate the attraction of such a choice in future projects. Much will depend on the attitude of those who will be relying on the rights created to protect their interests in a construction project. However, the new legislation provides a framework for an alternative where there is still room for contractual flexibility, with the added possibility, indeed probability, of attractive time and cost savings.

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