What do collateral warranties provide in a contractual context?

Collateral warranties serve an important function in contract law by providing assurance to third parties regarding the terms of the contract. These warranties are essentially agreements that enable a third party to rely on the obligations set out in the original contract, which is particularly relevant in situations where the third party might have a vested interest in the performance of that contract.

For instance, in construction projects, a collateral warranty may be granted to a tenant or future property owner, ensuring that they have certain rights and protections under the obligations agreed upon between the primary parties to the contract. This establishes a direct line of accountability, giving the third party recourse should the terms of the contract not be fulfilled properly.

Other choices such as protection against price increases, refund policies for services rendered, and certificates for quality assurance don't align with the purpose of collateral warranties, which fundamentally focus on clarifying and securing rights for those not directly involved in the initial contractual relationship.