Hello, welcome to the tricks of your trade podcast. I'm your host Michelle Cirson, construction adjudicator, lawyer and director of tricks of your trade.
In this podcast I will talk to you guys about supplier warranty deeds. Now if you're supplying anything under your sub contract, this is going to be an issue for you. It's become really popular for lawyers, for principals to require builders to get subcontractors to get suppliers to sign a supplier warranty deed. So let me just repeat that because we're talking about 14 of the contractual chain here. We're talking about the head contract having a requirement for the builder to get the subcontractor to have the subcontractors suppliers sign a supplier warranty deed, the supply warranty deed will be in favour of the principal and or the builder. So in most instances, it could even be in favour of both the principal and the builder.
So the reason this is important for you, if you're somebody that supplies, is that there's a good chance your supplier is not going to sign this big, scary deed and it's causing really big disputes at the moment. Amongst the construction industry. Where the subbie gets rid of the job and the filter starts saying Hey, where's your supplier warranty deed? And the sub then goes to the supplier and the supplier says, Well, I never agreed to sign this thing. And this thing goes above and beyond what our normal warranty terms and conditions.
So let me give you an example. If your supplier has a product, say for example something like a colour bond or anything at all and that that supply item has a warranty lifetime of 20 to 50 years. Now, if you have a provision in your contract that requires you to get the supplier to sign the warranty deed, you're going to need to get them to sign the warranty deed. But the warranty deed won't be the same terms and conditions that say for example colorbond has their terms and conditions, cause I'm just using California This an example I have to be upfront and say I have not read cold ones, terms and conditions of warranty. So please don't hold me to this. This is just an example. But it would apply to anything it could apply to something like mechanical equipment. If you were an air conditioning Selby it could apply to dishwashers if you're for some reason supplying and installing dishwashers. So this is just an example. But where it gets really tricky is subby gets into a stalemate between the supplier and the build up because the builder will be saying you have a contract that requires you to get this deed signed.
How you are supposed to get your supplier to sign that deed after the fact. They're just going to say no. And what inevitably will happen is you won't be able to get practical completion on the contract until you hand over this magical little deed. So this usually plays out a few different ways. Unfortunately, the first way we see a play out is full blown dispute, and everybody spends bucket loads of money on legal fees, and nobody really gets a good outcome. Sometimes these disputes can go on for so long, that the supplier will no longer honour a warranty with the principal or even on their own paperwork, because they have not triggered or affected or done the paperwork to get the warranty signed in a reasonable amount of time after the goods were installed. So if there's too much of a delay between supply and installation, and then the triggering of the warranty, as you all know, you deal with your suppliers day in and day out. They will not honour that warranty and sometimes the timeframes for those warranties will start running once you install the product at the project, but the principal will want that warranty to run from when the handover of the project takes place over the head contract. So there's this big disconnect in expectations in the different levels of the contractual chain.
Now the second way we see this play out if this is done right and this is the way we recommend you approach this is you need to check your contracts first. And if there is a supplier warranty deed in your contract you need to before you sign the contract, underline before you sign the contract, need to go back to the builder and say hey, listen, our suppliers simply will not sign these warranty deeds. We understand that you've probably got some provision in the head contract that requires you to get assigned. But unfortunately, suppliers don't work that way. Particularly if you're someone who likes waterproofing using a membrane product that comes in buckets. They're just not going to sign it for you.
So you need to go back to the builder before you sign the contract and say look, we can help make this happen. But this is how it needs to go. The architect for the principle or the person who's actually specified the products so you've got some kind of really expensive specific cladding material or a facade material or some kind of you know, it could be anything at all like some kind of specified flooring that comes from a particular supplier.
The best time for you to encourage a supplier to sign a warranty deed with the principal is before you actually buy their product. Because by the time you buy their product, they don't really care about the after paperwork. They're just going to go, sorry to transact. It's very interesting because we agreed on a signature on this date. But if the architects can apply pressure to the supplier to say, Hey look, we understand you have your own warranty documentation but our principal or our special projects require something a bit more.
These are the terms that you're going to be asked to sign to whoever you supply this product to. Would you consider pre agreeing to sign directly with us so you can take it out of the hands of the subcontractor because let's be honest, the subject is usually the hardest to coordinate with these types of things. We're not sophisticated people, we're not out there wheeling and dealing with lawyers in our back pocket day in and day out. And the principal clearly is because that's how they got one of these whiz bang deeds in their contract in the first place. So that's the first tip is if the architect has any way of leveraging the supplier to get the D deal done directly between the principal and the supplier at a direct contractual level that would be ideal. Now the other way that this typically plays out is if after the fact that somebody's already signed the contract the jobs are already done, but the builder and the principal have enough common sense to avoid a full blown dispute.
What they'll do is the subcontractor can sometimes convince them that hey, I can help you guys get this warranty. But we need to do this paperwork. So I was speaking with a client the other day who said to me Look, Michelle, what happens is we get a token from the supplier and we log into our portal and we activate this warranty and then the principal has to click on the link that we send them. And the principal clicks on the link to fill in their details, and then that ties up the rest of the warranty. And so from a procedural perspective, it will depend on the way that your supplier operates. If you've got somebody who's supplying a complicated architectural system of some kind in a building, it may be the case that it's not a simple, you know, colorbond warranty, secret link or something like that.
But in essence, what you want to do is be able to offer a practical solution to the principle so that they can rest assured that they have got a warranty directly with the supplier. Now what's gonna happen if you can't do this is that the builder and the principal will lean on you to sign this deed on behalf of the supplier because that's their next best thing if they can't get the supplier to sign their life away to say that they warranty these things. Then they will lean on you the subbie to sign on behalf of the supplier. And you might think Yeah, right. Oh, well, I have to warranty workmanship anyway. But in most states and territories, the most that you would ever have to warranty your work would be seven years in Australia, for workmanship, even for structural defects. So why would you want to take on a 2050 supplier warranty on a proprietary product that seems to say if for the next 20 to 50 years, there's a problem or a failure with that particular product? You're gonna have to go back and the builder is not going to pay you a variation or any extra money to deal with the ancillary work involved in fixing out that product. So you need to be very aware that if you're not on the front foot with this, then you could end up at a stalemate at the end of the job. And if you can't get one of these deeds signed, what effectively happens is you can't reach practical completion of the contract. So that dispute whenever eventually comes will be you're not a PC for every day that you can't give us the supplier warranty deed we're going to apply liquidated damages that right and the contract and if you haven't done your contract review upfront, then you will find that you might be up for an exorbitant amount of buildings per day. Will you try to apply pressure to a supplier?
Now the other commercial consideration here is that all of what I've already said isn't enough of an encouragement for you to look in your contracts for one of these days. Is that you want to be picky in the middle between your two customers. So your suppliers you're gonna want to have a really good relationship with your supplier because you want to be getting their preference on supplier you want to be getting a price if there's ever rationing you want to be looked after. You might be getting rebates, you guys might get free stuff. I know how it works with guys, you really want to have a good relationship with your supplier. So this will strain that relationship. And likewise, you want to have a good relationship with your builder. But you're going to have to push back to the builder and say, Guys, I can't do this for you. You're asking for the impossible. So this is something that you really need to manage before this all plays out. And the other thing I want to flag for you as well is that if you read through these deeds, the things that they ask the supplier to do and the Selby to do is over and above anything that will be in any kind of manufacturer's proprietary warranty document documentation. So it'll be things like the supplier indemnifies, the principal for any consequential costs, so for any demolition, any ancillary work, all the things that you would need to pay the variation to do to fix a problem with a product. They will indemnify the principal for things like that. It could well be that if the building can't be used in its intended use for that period, then you could end up having to indemnify the principal for consequential loss as well. So these are things that are super important. They're certainly things that will not be covered under your standard insurance policies. So even with your contracts works insurance, which will end basically when you're practically complete, you will end up in hot water with this if you are uninsured for it, you've signed a deed if you end up signing with it on behalf of the supplier. My goodness, you're going to have a big obligation to fulfil and look there's an element of Russian roulette with this as well because a lot of you'll be thinking yeah, but how often do products that well, have you heard of the cladding issue with the combustible cladding? I know that wasn't technically a failure thing, but it was the compliance aspect of fire rating. Then there's, you know, we discovered asbestos in or we've discovered that asbestos was harmful and it had been commonly used in building products for years and years. Then there's silica. So, you know, guys, this stuff does go wrong. You don't necessarily know what is in your materials. And also when you're doing operations and maintenance manuals, and you have to give them over to the builder to give to the principal, you need to be very specific about the maintenance and care requirements for particular products and materials that you're supplying. So you want to make sure that you give them all the information that they need to make sure they can uphold those warranties. And there are people who can help you with that. So if you're, if you're thinking that sounds like a really overwhelming job, maybe just drop me an email and I can put you in contact with some people who will help you with that sort of stuff.
So that concludes my episode for now on supplier warranty deeds, but this is a topic that I'm going to cover in more detail potentially early next year. I'll do a webinar on it. We've got a full bill of webinars booked up for this year already. So I don't want to go and complicate things by bringing things into LA but this is an issue that is coming up again and again. And it seems like the lawyers for the principal are trying very hard to do the very best for their client. And I completely agree if I'm acting for a principle, warranties are up there with one of the biggest requirements that your client has. contractually, but this is asking for the impossible. So there's actually always the risk when lawyers get involved that they will set the parties up to fail by overcomplicating things or overloading things and I firmly believe that that is the case of the supplier warranty deed. So hope you enjoyed this episode. Please feel free to drop me any questions you have questions at tricks of your trade.com delight you and
I look forward to having you on the next one.
