- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 03 Dec 2013
Future purchasers and tenants
To help develop this article, click 'Edit this article' above.
The original developer and often the first purchaser or tenant of a property will have an opportunity to enter into direct contractual arrangements to protect themselves against latent defects. It is unlikely that subsequent purchasers or tenants will have such an opportunity, unless they fall within the scope of the Contracts (Rights of Third Parties) Act 1999, and they will be (adopting the terminology of the rule of privity of contract) strangers to the original contractual arrangements with no remedies in contract against the parties responsible for the design and construction of the building.
The courts have often said in such circumstances that the law of contract provides for a chain of indemnity connecting the ultimate user with the original producer: for example D is the ultimate user or consumer who purchased from C the retailer, C having purchased from B the wholesaler and B having purchased from A the manufacturer. D can sue C for breach of contract but not B or A. However, if C is sued by D, then C will have a right of indemnity against B who in turn has a right of indemnity against A, creating 'the chain of indemnity' that links the manufacturer to the ultimate user.
Unfortunately, the strength of a chain of indemnity is only as great as its weakest link. If C the retailer becomes insolvent a critical link in the chain between D and A will have been broken. Further, a purchaser of a freehold building is faced with the difficulty of the principle of ‘caveat emptor’ (buyer beware) and the tenant of a leasehold building with the difficulty of full repairing covenants in the lease.
The future purchaser or tenant must rely on derivative contractual rights. Such rights arise by assignment, which is a unilateral act, or by novation that is synallagmatic (each party is bound to provide something to the other party – see Essentials of a contract).
 Find out more
 Related articles on Designing Buildings Wiki
Featured articles and news
A quick introduction to a very complicated subject.
CIOB suggests the economic reach of construction is double the official figures.
The first US building to achieve BREEAM Outstanding In-Use.
70 buildings from 70 years of Concrete Quarterly. Book review.
Conserving the iron roof at the Albert Dock.
Delivering an infrastructure revolution.
The admissibility of evidence.
How many can you name? 37 anyone?
CIOB respond to the points-based system.
When is the weather considered 'exceptionally adverse'?
ECA backs call for a rolling programme of rail electrification.