Italy: How To Negotiate A Warranty Bond

Last Updated: 2 October 2017
Article by Elisabetta Ventrella

The Warranty Bond is a guarantee which secures the Employer in the case the Contractor will not remedy the defects, if any, which may occur during the warranty period of the works.

It is often issued by an insurance company or (especially in mid size international projects) by a bank and it provides the payment of a sum of money if the Contractor will not perform any remedial work as provided in the contract, a sum which will be used by the Employer to have the remedial works carried out by a third party.

Among the other bonds in international construction contracts the Warranty Bond is rather frequent in the construction of production plants or in complex infrastructure works.

Such bond is issued generally together with the Advance Payment Bond and the Performance Bond.

A. How it works

Upon the occurrence of a defect, usually, the Employer and the Contractor start lengthy discussions on technical points and on the attributability of the defects to the Contractor.

Said discussions should be aimed at ascertaining whether the works have been carried out correctly or if the defects are attributable to the materials used by the Contractor. In reality, the Employer does not intend to be involved in detailed discussions and seeks only to have the defects remedied while the Contractor seeks to demonstrate either that the defects are minor issues or that they are not attributable to his activity.

If the parties do not reach an agreement on the remedial works or if the Contractor does not carry out any remedial work, the Employer would be virtually entitled to call the warranty bond.

The entitlement and the manner for calling the bond will depend on the type of guarantee that the Contractor has issued and, if it is an on-demand bond, the Employer will be entitled to simply request from the guarantor the payment of the warranty bond without the need to prove the breach and default of the Contractor.

This is due to the specific nature of the on-demand bonds and if you wish to know more on them you can read our note:

On demand bond how it works

B. 6 Tips to reduce the risks as Contractor

If you are a Contractor, you can consider the following 6 tips to reduce the risks involved in a warranty bond:

  • ASCERTAIN first if the Warranty Bond is a separate and independent guarantee from the Performance Bond or if instead, the Performance Bond secures also the defects that will occur during the warranty period. Often, in fact, the Employer prefers to receive one single bond which will change its 'scope' after the takeover of the works. In such a case, the Performance Bond will secure the due execution of the works up to the takeover and afterward, it will secure the execution of the remedial works. It is generally preferable for a Contractor to issue two separate bonds so to have two different guarantees;
  • ASCERTAIN if the bond is in the form of an on-demand bond;
  • NEGOTIATE the bond so that the Employer will be entitled to call it only upon presentation, at least, of a declaration of a third party (for example from a technician appointed in advance by the parties) who will ascertain the occurrence of a defect attributable to the Contractor;
  • NEGOTIATE, in the alternative, the bond so that the Employer shall be under the obligation to detail the alleged defects of the works and therefore the breach of the Contractor (said indications shall be of the utmost importance in case the bond is on-demand and in case of unlawful calling of the bond);
  • NEGOTIATE the bond so that the Employer shall have to provide a documented quantification of the costs for the remedial works that he will carry out with the proceeds of the bond;
  • OBTAIN from your subcontractor or suppliers warranty bonds substantially in line with the one issued in favour of the Employer so that if the defects are attributable to a supplier or a subcontractor, you will be in the position to recover the amount paid to the Employer.

C. Conclusions

The Warranty Bond represents a normal protection for the Employer who will obtain in such a way a security in case the Contractor will not remedy defective works if any.

If the Warranty Bond is issued in the form of an on-demand bond it could be a powerful tool and may be open to abuse by Employers in case, for instance, the defects are not actually attributable to the Contractors and the Employer is fully aware of that.

A fair compromise between the interest of the parties is often difficult to be reached but a careful negotiation will at least reduce the risks for the Contractors.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions