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Author: Subject: Collateral warranty
Simon

posted on 2/6/13 at 08:06 PM Reply With Quote
Collateral warranty

Folks

We are doing a job for our client (sculptor) who has been commissioned by a building firm, on behalf of a local council to do a sculpture, which we will then cast into bronze, finish and install.

The "local council" is insisting on a "collateral warranty" which I've never heard of. The work is actually finished and paid for and just needs installing. We have told them that we agree to finish to our usual high standards, and will repair any fault arising (and caused by us) for a reasonable time, and that any public liability is down to them (we have no insurable interest after it's installed - it being owned by the council).

Have any of you dealt with this sort of thing before - any points of view/info gladly received

Cheers

ATB

Simon

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snapper

posted on 2/6/13 at 08:16 PM Reply With Quote
If this was not a requirement on commision I don't honk itwill stand





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jacko

posted on 2/6/13 at 08:21 PM Reply With Quote
http://www.out-law.com/en/topics/projects--construction/construction-contracts/why-are-collateral-warranties-necessary/
Try a Google
Jacko

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Simon

posted on 2/6/13 at 08:46 PM Reply With Quote
Tried a google, was after personal experience of them, hence the post

ATB

Simon

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jacko

posted on 2/6/13 at 08:49 PM Reply With Quote
OK
Jacko

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big-vee-twin

posted on 2/6/13 at 08:50 PM Reply With Quote
Collateral warranty ties you to the builder, the idea being if the sculptor goes bust there is a contractual arrangement between you and the builder.

Generally the builder is looking for a way to claim from you if the sculptor goes bust and something goes wrong.

A collateral warranty will make you responsible for 12 years post completion and can be transferred by the builder to other third parties.

Builders usually refuse to settle your account until you have signed.

If you are fully paid up then I would simply refuse.

Done this myself last week. Ask yourself a simple question - what benefit is the warranty to me- the answer will be nothing.

Do not sign.





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Simon

posted on 2/6/13 at 09:15 PM Reply With Quote
My thoughts too. We've only had a draft and it looks like a crock of shite conjured up by a bored solicitor and typed by a really bored secretary.

I've said all along (and in writing to them), that we'll do our usual good job, fix any defects that are our fault within a reasonable timeframe but won't be liable for any probs as a result of vandalism/frost etc etc etc. Also said that any expenses we hadn't budgeted for (like legal) would be subject to surcharge.

I think that in the best part of 40 years of trading, this is the first time we've been asked for this kind of stuff. They also want us to have Method Statement (for installation), confirmation of our H&S policy (yep, right), PL insurance in case someone impales themself (on an ear for eg - it's a horse). Basically told them to dream on.

Cheers for info

ATB

Simon

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big-vee-twin

posted on 2/6/13 at 09:23 PM Reply With Quote
I get asked for them all the time, and quite happily sign them as it is part of the process but I charge £1250-1500 to sign one as the insurer's have to comment and company lawyer gets involved.

However, if someone tries to get me to sign one in retrospect- 'well why would I do that where's the benefit for me in doing so'- stock answer!

Don't see the point for what you do.





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Theshed

posted on 3/6/13 at 07:31 AM Reply With Quote
I am a little confused about your comment that you would not have an "insurable interest" for PL insurance. Do you not have product liability insurance against death/PI etc? The ownership of the sculpture will not affect that liability.

What are they asking you to warrant? Usually the third party will be looking for the benefit of the implied term as to quality. Without the warranty if the goods fail the quality test the Council will sue the Artist and He will sue you (unless he/she is insolvent).

I agree that if the contracts have already been formed and completed there is no great incentive to give a warranty.

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Simon

posted on 3/6/13 at 05:15 PM Reply With Quote
quote:
Originally posted by Theshed
I am a little confused about your comment that you would not have an "insurable interest" for PL insurance. Do you not have product liability insurance against death/PI etc? The ownership of the sculpture will not affect that liability.

What are they asking you to warrant? Usually the third party will be looking for the benefit of the implied term as to quality. Without the warranty if the goods fail the quality test the Council will sue the Artist and He will sue you (unless he/she is insolvent).

I agree that if the contracts have already been formed and completed there is no great incentive to give a warranty.


Of course ownership affects liability, otherwise you wouldn't be insuring your car, the manufacturer would. But yes, we do have insurance, but the building firm is under the impression it's for them!

We should be installing next week, so hopefully, that'll be the end of it, but like I said, we are happy to fix anything that was caused by us, but it might be nice to tie them in with a maintenance contract.

ATB

Simon

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Theshed

posted on 4/6/13 at 04:56 PM Reply With Quote
Errm - you are wrong! The manufacturer of an article does owe a duty of care to any person that it might foreseeably injure by reason of defects. Obviously a car manufacturer does not insure against the subsequent purchaser's negligent driving but they most certainly can and almost certainly do have product liability insurance.

The expression "insurable interest" is used where goods are insured for their value. Once sold the seller has no insurable interest and cannot claim on any insurance property in respect of theft or damage.

You are mixing up all sorts of concepts. I hope the transaction goes smoothly for you.

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Padstar

posted on 4/6/13 at 06:00 PM Reply With Quote
Collateral Warranty documents are unfortunately one of the items i have to deal with on an almost daily basis. I am not sure of the value of your work but;

They grant a 3rd party step in rights to a primary contract in the instance that a party of the primary contract defaults on the initial agreement (normally if they go bust).

They are normally but not exclusively used in instances where design is involved - hence the 12 year tie in (you are obliged to maintain Profesional Indemnity insurance for 12 years after completion of any project if you have design input).

An example i completed today - We (Main Contractor) have a Building Contract with An Other (The Client). We employ Joe Bloggs (The Sub Contractor/Consultant) to complete the installation of the windows. They sign a Co Wa so that in the instance we go out of business the Client can step in and gain all the contractual rights we have over the Sub Contractor as if he were us.

I have done them in the past where they only cover the workmanship but this is very rare and wouldnt require a 12 year comitment.

Generally they are of minimal risk as they are offering very little rights other than this you would have under your contract with your Client.

As other have said if i were asked to sign one afer i had completed the works and it had no contractual restriction on my payment then i would either refuse or demand payment for it. It does tie you in to obligations so most reasonable people will accept that a Co Wa attracts a cost.

Be carefull of how many beneficiaries you are required to honour. Try and limit it to one as otherwise you will have every tom dick and harry with a vested interest in the work asking you to sign further documents and it can become a pain for little if any gain.

Just my 2 pence worth.

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Padstar

posted on 4/6/13 at 06:54 PM Reply With Quote
Also people seem to be getting confused with the shorthand of "PL". This can be Products Liability or Public Liability. Completely different things. In this instance I guess they are asking for Public Liability insurance which in my opinion is a completely reasonable request.

This would be used if for instance you dropped the sculpture when installing and it injured a passer by. They would then claim on your policy. Once the install is complete you would not be liable. Unless you had to provide Products Liability or Profesional Indemnity insurance.

Public Liability costs very little and is a common requirement now days other than for "private jobs". We insist on everyone having Public Liability. One of my sites has over 500 individuals on and each has this insurance from labourer, machine driver or manager. Whilst we also carry insurance it acts as damage limitation. If for instance someone dropped a hammer from the scaffold and it hit someone their policy would be the first point of call.

The more insurance policies in place the better in my opinion.

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Simon

posted on 4/6/13 at 08:00 PM Reply With Quote
quote:
Originally posted by Padstar
This would be used if for instance you dropped the sculpture when installing and it injured a passer by. They would then claim on your policy. Once the install is complete you would not be liable. Unless you had to provide Products Liability or Profesional Indemnity insurance.



My thoughts exactly.

As for the design, it's a sculpture, we had no design input, we magically take the clients clay sculpture and make it bronze. It's the client's design and was approved by his buyer.

ATB

Simon

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Padstar

posted on 4/6/13 at 09:11 PM Reply With Quote
As such you should only be expected to to carry Public Liability insurance to cover any potential instances during install. The design of the sculpture itself and the fixings used to hold it in place would lay with the designer (architect or structural engineer) who should then whiteness your install and approve it - thus being covered by their Profesional Indemnity insurance in case of design failure or the fabricators Product Liability insurance in case of product failure.

Sounds like the council either don't know what they are talking about (as usual) or are trying to pull a fast one to get you to sign up to a 3rd party agreement and in turn reducing their risk. Can't blame them for trying but can't see why they would insist on you signing a Co Wa. If you find it's a case you are being forced to sign for payment etc I don't mind passing my eye over it and commenting.

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Simon

posted on 4/6/13 at 09:56 PM Reply With Quote
I've emailed the building firm explaining our position and that we didn't price in for any of this legal bull they are coming up with. If the council are insistent on going down that route, then they will be responsible for all our legal fees and incurred costs - they were told this some months back. I've suggested they agree to a maintenance contract instead.

Thanks for the offer. Fortunately they've only sent a draft which looks like a pile of cack. Will see what their response is to my comments first.

May be approaching the FSB to see if it's something we can get looked at for free under their legal scheme.

Cheers again

ATB

Simon

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Theshed

posted on 5/6/13 at 09:14 AM Reply With Quote
quote:
Originally posted by Simon
quote:
Originally posted by Padstar
This would be used if for instance you dropped the sculpture when installing and it injured a passer by. They would then claim on your policy. Once the install is complete you would not be liable. Unless you had to provide Products Liability or Profesional Indemnity insurance.



My thoughts exactly.

As for the design, it's a sculpture, we had no design input, we magically take the clients clay sculpture and make it bronze. It's the client's design and was approved by his buyer.

ATB

Simon


Sorry folks but that is just not right. I mean the "one the install is complete" bit. You most certainly can be liable - for death or injury - for anything you supply. This does not depend on any contractual relationship but arises in tort. For that reason anybody who makes and sells anything would be well advised to have product liability insurance. Just think about it if for example the casting was full of voids, in breach of the design, and little tommy falls when a bit breaks off - that is just the sort of situation where you need insurance. It would not matter whether that happened before during or after installation. Ok Ok I know it is unlikely but that is not the point.

Sorry about the legal bull - that's the day job!

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