Collateral contract

Collateral contract

Concept of collateral contract

The concept of Collateral contract has been gradually evolving since the time it was initiated. Australia in contrast to other jurisdictions has been applying this concept in a limited fashion. A collateral contract is between one of the 2 parties that are in the original contract and a third party. It is a sort of contract where the deliberation is the entry into another contract while co existing along with the main contract. For instance, such a contract occurs when one of the sides provides a certain amount for entrance in another contract to another party. This contract could be between one of the party or also third party. A party to this contract may try to prove that a collateral contract is in place in caser their claim for breach of contract fails in case the statement they were relying on was not held to be the term of the main contract. For this to be termed successful, it is imperative that the statement needs to be promissory in nature.

The elements of contract are many and it is not simple as writing down an agreement between two parties. It goes on to suggest many complications that arise when cases involving collateral contract are brought to court. It is not just one or two, but there are sex elements of a collateral contract which are all essential. They need to be studied in depth and understood if the concepts of a collateral contract are to be accepted. Many cases in courts not just in the Australian courts but also in the English courts have identified the difficulties involving these cases. This is because the Australian laws have been basically derived from the English laws, and their difficulties in being implemented not just in the Australian courts, but also in the English courts underline that this problem exists in true essence with the terminologies and implementations of the law.

There are 6 main aspects that are necessary for the contract formation to be legally binding. They are:

an agreement (which should be offer and acceptance)

consideration (this implies that generally, the supply services, property or money, will be regarded as being money or a pledge for undertaking or not undertaking a certain act)

The Capacity for entering legal relations.

Formalities: In most of the jurisdictions, contracts necessarily need not be represented in writing but some exceptions do apply

Certainty.

The founding of the legal relation is termed as contact. It involves the agreement of the parties. Consideration is an important aspect that needs to be there as without it an agreement cannot be a contract. A contract needs to be supported by consideration. The agreement needs to be adequately certain and also needs to be completed if it is to be enforced in the courts. The parties need to intent their agreement to be a contract. If any of these elements is absent, then this will be implying that either no agreement exists in law or the agreement will not be ...