Rights for Third Parties - Scottish Construction Contracts - page 310

13.3.9 Intellectual property licence
Mostcollateralwarrantieswillcontainanon-exclusivelicencebythegrantorinfavour
of the beneficiary in respect of the use of intellectual property rights in the design doc-
umentationpreparedrelativeto thedevelopment.his may be particularlyimportant,
for example, to a purchaser who wishes to construct an extension to the property con-
sistent with the existing design. It should be noted in this context that most grantors of
collateral warranties would usually seek to carve out from the scope of the licence the
right to re-produce the original design in any extension, limiting the licence to use of
the drawings as a reference point for the original design only. Grantors, particularly
consultants, may seek to make the licence conditional upon all fees being paid, but
the well-advised beneficiary will strongly resist this.
13.3.10 No greater duties or liabilities
In Safeway Stores Ltd v. Interserve Project Services Ltd (2005, a collateral warranty
clause in the following terms was considered: 'The Contractor shall owe no duty or
have no liability under this deed which [is] greater or of longer duration than that
which it owes to the Developer under the Building Contract.'
Not surprisingly, it was decided that this clause permitted the contractor to set off
against claims made against it under the collateral warranty sums that were owed to it
under the primary building contract. For that reason, while the principle of this type
of clause is normally acceptable to beneficiaries, it is not uncommon for them to seek
to expressly exclude from the clause (and also from clauses of the type referred to in
Section 13.3.5) rights of retention, set-off and counter-claim. Grantors will of course
attempt to resist such exclusion.
13.3.11 Limitations
A grantor often wishes to restrict, either in quantum or nature, the losses for which it
may be liable under the collateral warranty. For example, it is common, particularly
in the standard forms of warranties (and is often demanded by professional indem-
nity insurers) that the grantor's liability be restricted to the reasonable cost of repair,
renewalor reinstatement of thedevelopment,to theextent attributableto thegrantor's
breach. Any liability, for example, for loss of use would therefore be excluded. How-
ever, to successfully restrict the grantor's liability, any such limitation must be clearly
expressed, see Glasgow Airport Ltd v. Kirkman & Bradford (2007).
13.4 Effects of the 1996 Act on collateral warranties
Arecollateralwarrantiesagreementsforthecarryingoutofconstructionoperationsin
terms of s.104(l)(a) of the Housing Grants, Construction and Regeneration Act 1996?