COLATERAL CONTRACT
Collateral contract is a concept which has gradually evolved since its inception. However, collateral contract has been applied in a limited fashion in Australia, compared to other jurisdictions.
In this essay, I will argue that collateral contract has outlived it usefulness and currency in legal practice in Australia. To remain current, the broadening of its application is essential.
To support my argument, I will discuss:
?-The concept of collateral contract;
?-When collateral contract may be argued; and
?-The limitations upon the likelihood of its success in the Australian courts.
COLLATERAL CONTRACT DEFINED
The concept of collateral contract may be defined as ?a contract where the consideration is entry into another contract, and co-exists side by side with the main contract'. A promise that was not included in the principal contract may be enforced as a collateral contract, as clearly illustrated by Lord Moulton in Helibut, Symonds & Co v Buckleton:
?It is evident, both on principle and on authority, that there may be a contract, the consideration for which is the making of some other contract. "If you will make such and such a contract, I will give you one hundred pounds," is in every sense of the word a complete legal contract. It is collateral to the main contract, but each has an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract.'
Collateral means "by the side of". This was an important innovation used to evade:
?-The parol evidence rule (e.g., City of Westminster Properties v Mudd) ;
?-The formerly limited remedies for misrepresentation (e.g., Esso Petroleum v Mardon) ; and
?-Privi ...