Collateral Contract Essay

Pages: 2 (663 words)  ·  Bibliography Sources: 2  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business - Law

Collateral contract is one in which a party agrees to enter into a contract with another party, contingent on a third party's performance. The consideration in a collateral contract is the promise to enter into the second contract. If the third party fails to deliver on his or her performance, then the collateral contract is voidable -- the party is not bound to the second contract because the terms of the collateral contract are upheld. It is important to get the collateral contract in writing so that all parties understand the terms of the collateral contract, and that it is a collateral contract. The collateral contract need not be in writing under the terms of the law, but failure to put the collateral contract in writing leave the possibility of legal action if the plaintiff can demonstrate that an oral collateral contract exists. Putting it in writing is therefore the best way to protect oneself. It is more definite, and can be used as evidence in a court.

The collateral contract may take the form of a guarantee. For example, a enters into a contract with B, but only if C. makes a guarantee on behalf of B. Without the collateral contract, a and B. would not have a contract. But by virtue of C. entering into the collateral contract, a and B. are able to form their contract. Another form of collateral contract can be with respect to performance. A could enter into a contract with B. For the purchase of a good so long as C. delivers that good to B. under certain conditions. If C. fails to meet these conditions, then there is no contract between a and B. If C. meets the conditions, then a and B. do have a valid and enforceable contract. The guarantor case is the most typical of collateral contracts.Buy full Download Microsoft Word File paper
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Essay on Collateral Contract Is One in Which a Assignment

2. I would not make an exception for leading rule cases. Technically, under the main purpose rule the promise to pay the debt… [END OF PREVIEW] . . . READ MORE

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"Collateral Contract."  Essaytown.com.  May 14, 2010.  Accessed August 5, 2020.
https://www.essaytown.com/subjects/paper/collateral-contract-one/9508.