COLLATERAL CONTRACTS
In the preceding section, we distinguished between
terms and representations. A further possibility is that a precontractual
statement may not be a term of the main contract, but may itself be a
collateral contract (that is, collateral to the main contract). In the event that
such a collateral is a breached, the plaintiff could sue for damages. In the
wake of statutory reforms to the law of
misrepresentation it has become unusual for a plaintiff
to try to establish that the oral statement was a collateral contract because
it is easier to prove that the statement constitutes
misleading or deceptive conduct.
For a statement to constitute a collateral
contract, the following three preconditions must be met:
1. The statement
must have been promissory. The parties must have intended the statement to be a
contractual promise, rather than a mere representation or statement of
opinion.
2. The statement
must not contradict the main contract. The courts will not
characterise a pre – contractual statement as a collateral contract if its
terms contradict what is provided for in the main contract.
3. As with any
contract, consideration must be provided by the promisee in exchange for the
promise. Usually, the promisee provides consideration for the collateral
promise by entering into the main
contract.
Adapted and Posted By:
Appe Hamonangan Hutauruk, SH., MH.
Lecturer, Advocate and Legal Consultant
Handphone: 0818964919, 085959597919, 081213502002
