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Editing Contracts/Collateral contract
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It can also be | A '''collateral contract''' is usually a single term [[contract]], made in [[consideration]] of the party for whose benefit the contract operates agreeing to enter into the principal or main contract, which sets out additional terms relating to the same subject matter as the main contract.<ref>Aherns Lawyers, [http://www.ahernslawyers.com.au/latest-news/contracts-collateral-inconsistent/ Contracts Collateral & Inconsistent]</ref> The collateral contract co-exists side by side with the main contract. For example, a collateral contract is formed when one party pays the other party a certain sum for entry into another contract. A collateral contract may be between one of the parties and a third party. | ||
It can also be explained as: a collateral contract is one that induces a person to enter into the main contract. For example, if X agrees to buy goods from Y that will, accordingly, be manufactured by Z, and does so on the strength of Z's assurance as to the high quality of the goods, X and Z may be held to have made a collateral contract consisting of Z's promise of quality given in consideration of X's promise to enter into the main contract with Y. | |||
== Elements of a valid collateral contract == | == Elements of a valid collateral contract == | ||
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=== Promissory in nature === | === Promissory in nature === | ||
A collateral contract is one where the parties to one contract enter into or promise to enter into another contract. Thus, the two contracts are connected and it may be enforced even though it forms no constructive part of the original contract.<ref name=":0" /> In ''[[JJ Savage and Sons Pty Ltd v Blakney]]'' a mere expression of opinion was held insufficient to be satisfied as a promise. In ''[[Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd]]'' a statement by a landlord made to intending tenants when negotiating a lease that they would be “looked after | A collateral contract is one where the parties to one contract enter into or promise to enter into another contract. Thus, the two contracts are connected and it may be enforced even though it forms no constructive part of the original contract.<ref name=":0" /> In ''[[JJ Savage and Sons Pty Ltd v Blakney]]'' a mere expression of opinion was held insufficient to be satisfied as a promise. In ''[[Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd]]'' a statement by a landlord made to intending tenants when negotiating a lease that they would be “looked after at renewal time”, would not bind the landlord to offer a further five year lease.<ref>Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26.</ref> | ||
=== Intention to induce === | === Intention to induce === | ||
The promisor must have expressly or impliedly requested about the main contract and his promissory statement must have intended to induce the entry of the other party into the main contract. | The promisor must have expressly or impliedly requested about the main contract and his promissory statement must have intended to induce the entry of the other party into the main contract. According to [[Alfred Denning, Baron Denning|Lord Denning MR]], a collateral contract is held binding "when a person gives a promise, or an assurance to another, intending that he should act on it by entering into a contract'.<ref>Evans & Sons Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078.</ref> | ||
=== Consistency === | === Consistency === |