Collateral Contract
A Collateral contract
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 maybe enforced even though it forms no constructive part of the original contract. According to Lord Denning MR in the case of Evans & Sons Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 a collateral contract is ‘When a person gives a promise, or an assurance to another, intending that he should act on it by entering into a contract, we hold that it is binding’. Thus, no term of the collateral contract is found in the original one, but nevertheless it is enforceable for the original one.
A collateral contract usually takes the form of a unilateral contract. A unilateral contract is where only one party to it makes a promise. This promise is usually in the form of doing something in return for something else. The offer and acceptance of the agreement is the original intention of the first contract that is in place. The consideration of the collateral contract is the promise to enter into the original agreement. Whereas in a three way agreement it can be used as a means to evade the notion of privity. A collateral contract was evidenced in the case of Shanklin Pier v Detel Products [1951] 2 KB 854. In this case the plaintiffs were owners of a pier and were promised by the paint manufacturers, who were the defendants, that their paint has a life span of seven years. This was said in the attempt to induce the plaintiff into buying the defendant’s paint.
Due to this representation the plaintiff instructed the decorators to purchase the paint and use it to decorate the pier. This was duly done, however the paint only lasted three months. During the inception of the case the plaintiff’s did not appear to have a remedy as they had not provided the defendants with any consideration for the promise. The only contract in force was between the defendant and the decorators for the purchasing of
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 maybe enforced even though it forms no constructive part of the original contract. According to Lord Denning MR in the case of Evans & Sons Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 a collateral contract is ‘When a person gives a promise, or an assurance to another, intending that he should act on it by entering into a contract, we hold that it is binding’. Thus, no term of the collateral contract is found in the original one, but nevertheless it is enforceable for the original one.
A collateral contract usually takes the form of a unilateral contract. A unilateral contract is where only one party to it makes a promise. This promise is usually in the form of doing something in return for something else. The offer and acceptance of the agreement is the original intention of the first contract that is in place. The consideration of the collateral contract is the promise to enter into the original agreement. Whereas in a three way agreement it can be used as a means to evade the notion of privity. A collateral contract was evidenced in the case of Shanklin Pier v Detel Products [1951] 2 KB 854. In this case the plaintiffs were owners of a pier and were promised by the paint manufacturers, who were the defendants, that their paint has a life span of seven years. This was said in the attempt to induce the plaintiff into buying the defendant’s paint.
Due to this representation the plaintiff instructed the decorators to purchase the paint and use it to decorate the pier. This was duly done, however the paint only lasted three months. During the inception of the case the plaintiff’s did not appear to have a remedy as they had not provided the defendants with any consideration for the promise. The only contract in force was between the defendant and the decorators for the purchasing of