Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Collateral definition

What does Collateral mean? Collateral describes the assets or rights a borrower (or a third party) provides to a lender to create a security interest securing repayment or performance. If the borrower defaults, the secured creditor can enforce against the collateral to satisfy the debt. The term is a descriptive commercial expression rather than a single statutory definition. However, “financial collateral” is defined in the Financial Collateral Arrangements (No. 2) Regulations 2003 (UK) and the European Communities (Financial Collateral Arrangements) Regulations 2010 (Ireland). Collateral commonly includes land, plant and machinery, shares, bank accounts, receivables, intellectual property and cash. Security is typically taken by mortgage...

Collateral warranties in construction: scope, parties, key provisions (PII, step-in, assignment, limitations), standard forms, and current law on HGCRA 1996 adjudication and construction contract status

Published by a LexisNexis Construction expert

Practice notes

Practice Note

This Practice Note explores the nature of a collateral warranty, identifies which stakeholders on a construction project commonly require such warranties, and explains their rationale. It sets out the typical categories of beneficiaries and the rights they gain against the warrantor in respect of the building contract, a consultant’s appointment, or a sub-contract. As a core rule of contract law, only a party to a contract may sue on it, a principle referred to as privity of contract. Consequently, absent another direct contractual nexus, a contractor or consultant will usually owe no contractual duty of care to anyone other than its immediate client. (That position has been adjusted by the Contracts (Rights of Third Parties) Act 1999 which, in specified situations, enables a third party to enforce terms in a contract made by others for its benefit. For more detail see Practice Note: The Contracts (Rights of Third Parties) Act 1999 in construction contracts). Numerous defects in buildings arise or come to light after completion of the works, once the contractor has left site, which underpins the need for collateral warranties to extend recourse beyond the original contracting parties...

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Web page updated on 21/05/2026

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