24.4.1 An Authority should seek a collateral warranty (i.e. a direct contractual undertaking) from each of the Sub-Contractors and, usually, key members of the professional team (such as architects) or other key sub-contractors, giving direct claims and the ability to step-in to the relevant sub-contracts in some circumstances. This does not undermine the limited recourse nature of the Project, provided that the content of any undertakings requested dovetail with the overall approach to the Project structure. That is:
• they should not be used to increase levels of liability or impose obligations where none would otherwise exist (see Sections 24.3 (Indemnities) and 24.6 (Damages Claims)); and
• they should take into account rights of Senior Lenders (see Sections 24.5 (Financiers' Security) and 31.6 (Direct Agreement).
24.4.2 The Authority should consider the strength of the covenant of the counterparty in the light of the obligation in the warranty. It may be that the Sub-Contract warranties are required to be guaranteed by the parent companies (or other companies of substance within the group) of the relevant Sub-Contractors. Except in the case of rights that exist to protect the position of the Authority,418 the rights of the Authority to bring an action under these collateral warranties should, however, be exercisable only on an early termination.
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418 For example, liquidated damages under Section 4.2 (Liquidated Damages).