Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?

Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.

Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
A . Negligence
B. Indemnity
C. Collateral warranty deed
D. Insurance

View Answer

Answer: C

Explanation:

A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.

In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.

Reference:

– Collateral Warranties C an Overview

– CIPS study guide page 39-40

LO 1, AC 1.2