Collateral warranties and third party rights

This Practice Note offers guidance on subrogation in the insurance context. It sets out the legal basis, purpose and practical operation of subrogation, and indicates how to tell rights of subrogation apart from other mechanisms such as assignment or contribution. It also considers common situations, including subrogation against co-insureds, the use of express subrogation clauses and waivers of subrogation. In addition, it covers how recoveries are allocated and the insured’s duty to co-operate with insurers. What is the right of subrogation? In insurance and reinsurance, the right of subrogation allows an insurer or reinsurer, once it has indemnified the (re)insured, to step into that party’s position and bring proceedings in the (re)insured’s name. For this Practice Note, ‘insurer’ should be read as ‘(re)insurer’ and ‘insured’ as ‘(re)insured’. The insurer may then exercise any of the insured’s rights or remedies against third parties arising from the...

What is insurable interest? This Practice Note examines insurable interest, including its role in construction and liability insurance. It also addresses insurable interest in subrogation, co-insurance and double insurance, and the Insurable Interest Bill. It is a doctrine of insurance contract law that requires the insured to have a legally recognised relationship with the insured subject-matter. Broadly, only those who have some connection to the subject-matter of the insurance contract, by which they would be prejudiced by its loss, or may incur liability in respect of it, can insure that subject-matter. Conversely, a person who lacks such a relationship has no insurable interest and therefore cannot take out insurance on that subject-matter. The burden lies on the insured to establish that an insurable interest exists. The rationales for requiring an insurable interest are that: it is the characteristic of an insurable interest that...

Appointing a receiver offers creditors and certain other parties a means to safeguard their interests in a company’s assets. This note outlines the available forms of receivership and the key consequences of a receiver being appointed. For access to materials within the Receivership subtopic, refer to: Receiverships—overview. The following features apply across all receivership types: A company does not have to be insolvent to enter receivership Other creditors may still pursue claims despite a receiver being appointed During the receivership, the company’s dealings with property covered by the appointment are curtailed Receivership does not automatically lead to liquidation (the winding up of its affairs) Further points specific to particular receivership forms are outlined below. Law of Property Act ( LPA)/fixed charge receiver Under the Law of Property Act 1925 ( LPA 1925), a mortgagee may appoint an LPA...

What is insurance law? Insurance law divides into three strands: insurance contract law, setting the rules of the bargain between policyholders and insurers the law of intermediaries, governing insurance arranged via agents (as with the majority of placements) insurance company law, addressing prudential soundness, integrity and the supervision of insurers This Practice Note focuses chiefly on insurance contract law. For wider regulatory material, see our ‘regulation of insurance’ subtopic, including Insurance & Reinsurance—regulatory framework—overview and Insurance & Reinsurance— Regulated activities—overview. Reform of the insurance sector In January 2006, the Law Commission and the Scottish Law Commission (together, the Law Commissions) began consulting on modernising insurance contract law. Their programme was then separated into three streams: consumer insurance law reform: pre-contract disclosure and misrepresentation insurance contract law reform: business disclosure, warranties, insurers’ remedies for fraudulent claims, and late payment insurance contract law...

This Practice Note outlines the principal distinctions between mediation and litigation in England and Wales, alongside their likely benefits and drawbacks. What is mediation? Mediation is one of the most familiar and widely used forms of alternative dispute resolution ( ADR). It is a confidential procedure in which an impartial third party (the mediator) helps the parties work towards an agreed outcome to settle their dispute. For a summary of the process, see: Mediation—overview. In July 2021, the Ministry of Justice issued a ‘guide to a civil mediation’ explaining the advantages of civil mediation and how to identify a suitable mediator. Why consider mediation? There are many grounds for seeking a negotiated resolution, including: Preserving the commercial relationship between the parties Minimising the cost and duration of court proceedings Keeping the dispute confidential For general guidance on settling disputes, see Practice Note: Settling...

Many contracts include provisions on resolving disputes. At times these are simple terms stipulating litigation or possibly arbitration, sometimes also spelling out jurisdiction and the governing law. Yet a clause can instead prescribe other routes of alternative dispute resolution ( ADR) to be pursued should a dispute arise, offering an alternative to litigation or arbitration. Such provisions are often labelled ADR clauses. Parties have a number of options open to them (see below), and it is vital to appreciate the consequences of the drafting choices you make. This Practice Note reviews several clause formulations and evaluates the issues that may arise in relation to each category. The types of dispute resolution clause considered in this Practice Note are: litigation only clauses mediation clauses multi-tier clauses (escalation clauses) hybrid clauses carve-out clauses For guidance on the principal questions around the...

What is novation? Novation describes the passing of a contracting party’s rights and duties to a third party. In effect, one party to the agreement (the ‘outgoing party’) is replaced by another (the ‘incoming party’); in legal terms, the original agreement is discharged, amounting to the extinguishing of that contract and the creation of a new contract under which the same obligations must still be performed, albeit by different participants. Novation is not the same as assignment: an assignment transfers only the benefits of a contract, whereas novation moves both the benefit and the burden to the incoming third party. Contractual benefits cover the right to have the contract performed; burdens comprise obligations such as carrying out the duties and making payments due under the contract. In practice, the incoming party takes over performance in place of the outgoing party. See Practice Notes:...

A no loss defence frequently emerges from the contractual matrix that surrounds construction projects. By way of illustration, an agreement might be novated, the employer may lack ownership of the land where the works are carried out, or the development could be sold after completion before any defects come to light. Such situations (among others) can each trigger a no loss defence from a contractor or consultant said to be in breach of contract. What is the no loss defence? Damages for breach of contract are compensatory, aiming to place the claimant in the position it would have occupied had the contract been performed as intended. If a breach results in no loss, no damages—or at most only nominal damages—will be awarded. See Practice Note: Contractual damages—general principles. Where a breach does cause loss, but that loss is suffered by a third party, the...

What is an assignment An assignment involves passing a right or interest held by one party (the assignor) to another (the assignee), such as transferring an employer’s rights under a building contract to the buyer of the finished works. In this Practice Note, the party required to perform the contractual obligations is called the 'obligor'. A properly effected assignment allows the assignee to require performance of contractual duties—for instance, to request rectification of defects and/or to commence proceedings. This Practice Note explores the various mechanisms available by which parties may implement an assignment within construction documentation (eg construction contracts, appointments and collateral warranties), together with the consequences of doing so. It also clarifies the practical impact of each method for parties seeking to secure or enforce rights effectively......

Introduction to the Insurance Act 2015 The Insurance Act 2015 ( IA 2015) was granted Royal Assent on 12 February 2015 and, save for Part 6, commenced on 12 August 2016. It marks the most far-reaching overhaul of the statutory framework of English insurance contract law since the Marine Insurance Act 1906 ( MIA 1906). This Practice Note examines the principal provisions of IA 2015 and the ways in which they reform the law. It also reviews reforms introduced by the Enterprise Act 2016 ( EA 2016), with relevant sections taking effect in May 2017. This Practice Note addresses IA 2015 provisions relating to: the duty of fair presentation remedies for a breach of that duty warranties and other terms fraudulent claims amendments to the Third Parties ( Rights Against Insurers) Act 2010 ( TP( RAI) A 2010) ...

The Building Act 1984 ( BA 1984) BA 1984 authorises the Secretary of State or Welsh Ministers to create building regulations for multiple aims, among them safeguarding the health and safety of people in or around buildings. It creates criminal liability for contraventions of those regulations. It further allows practical guidance on the requirements of the building regulations to be set out in Approved Documents. The Building Regulations 2010, SI 2010/2214 ( Building Regulations), are issued under BA 1984 as its enabling statute......

The Building Act 1984 ( BA 1984) authorises the Secretary of State and the Welsh Ministers to make Building Regulations for a range of purposes, including protecting the health and safety of people in or around buildings. It creates criminal liability for contraventions of those regulations and confers enforcement powers on local authorities. This Practice Note outlines guidance on the enforcement of Building Regulations. See Practice Note: Obtaining building regulations approval for guidance on when approval is required and how Building Regulations approval is secured. General power of local authorities to enforce Building Regulations and exemptions from enforcement BA 1984, s 91(2) states that enforcing the Building Regulations within their area is a function of local authorities. This is subject to situations where BA 1984, ss 91ZA or 91ZB provide that the Building Safety Regulator ( BSR) is the building control...

An assignment is the passing of a right or interest held by one party (the assignor) to another (the assignee), e.g. transferring the employer’s rights under a construction contract to the buyer of the finished works. For this Practice Note, the counterparty to the contract in which rights are being assigned is termed the 'obligor'. For more on what an assignment is, why it occurs in construction, how it functions and the steps required to implement effective assignments, see Practice Note: Assignment in construction contracts. See also Practice Note: Legal and equitable assignment in construction contracts for guidance on the alternative methods by which parties may give effect to an assignment on construction projects (at law or in equity) and the prerequisites for each. Where a construction document, such as a building contract, collateral warranty or consultant appointment, says nothing about...

This Practice Note This Practice Note reviews the standard form novation agreements issued by the City of London Law Society ( CLLS) and the Construction Industry Council ( CIC). Novation is now widespread on construction schemes. It arises in various contexts and has, in particular, become routine on design and build procurements. For more on novation generally, see Practice Note: Novation in construction projects. Parties often adopt their own bespoke novation agreements, so numerous versions circulate. In 2004, two standard forms appeared—one from the CLLS construction committee and one from the CIC. The CIC later released an ‘ab initio’ form in November 2018, and a second edition of the ‘switch’ form in July 2021. Each agreement is a brief, straightforward document that avoids unnecessary provisions, though they adopt different approaches to novating the consultant. They do, however, each tackle the key issues arising from Blyth &...

Introduction Breakthroughs in energy storage, coupled with falling technology costs, are reshaping the global power market, putting storage firmly in the industry spotlight. This note centres on UK battery storage schemes, especially the market-specific construction considerations that arise, and are debated, when preparing and negotiating construction contracts for such schemes from a developer and funder viewpoint. For a broader primer on energy storage projects, see Practice Notes: Scaling up energy storage: revenue opportunities in Great Britain and Energy storage technologies in the UK. For planning matters linked to energy storage, consult Practice Note: The planning regime for energy storage in England and Wales. For regulatory and licensing topics affecting energy storage, refer to Practice Note: Energy storage—the evolving regulatory regime and renewable subsidy position. For further detail on regulatory hurdles and prospects for storage projects, see also the textbook: Energy Storage: Legal and Regulatory Challenges and...

Lenders and other financiers commonly obtain an assignment of the benefit of the suite of construction documents in respect of a development as an extra element of the security package supporting their loan to fund the project. See Practice Notes: Assignment in construction contracts and Legal and equitable assignment in construction contracts for further guidance and practical context. This Practice Note also examines the various approaches used for such an assignment and highlights some of the risks involved. For convenience in this note, all funders are called ‘banks’. Why does a bank wish to take an assignment? It should be noted that assigning the construction documents is only one of a number of security measures that a bank will hold. It will also probably register a charge against the employer itself and will also benefit from a suite of collateral warranties from the...

This Practice Note explores why the assignment of rights matters in construction and identifies when parties may need to transfer their rights. It contrasts assignment with novation and outlines the steps required to complete a valid assignment. It also examines the consequences of an assignment and the matters parties ought to note when pursuing claims after an assignment. The implications of the Business Contract Terms ( Assignment of Receivables) Regulations 2018 are also highlighted. When assessing assignment provisions in a construction contract, see: Assignment of construction documents—checklist for the key points to review. For guidance on restrictions on assignments in construction, see Practice Note: Restrictions on the assignment of rights in construction contracts... What is an assignment? This Practice Note concentrates on how assignment operates in the sphere of construction contracts, but the legal principles are relevant across multiple sectors, including banking and finance (see...

An increasing cohort of developers is reporting that co-located battery storage schemes have secured project finance. This marks significant progress, given that as recently as 2018 grid-scale batteries were treated as an emerging asset class, with many funders having written them off as unsuitable for project finance. This Practice Note sets out key considerations for both lenders and developers looking to project finance co-located battery storage projects. For more information on: construction considerations for co-located battery storage projects, see Practice Note: Energy storage—construction issues property aspects regarding co-located battery storage projects, see Practice Note: Battery storage projects—property issues planning matters, including in relation to co-located battery storage, see Practice Note: The planning regime for energy storage in England and Wales battery storage projects more broadly, see Practice Notes: Scaling up energy storage—revenue opportunities in Great Britain and Energy storage...

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...