Louis Amoako Mensah

Safety-oriented Forklift Operator knowledgeable about proper handling of heavy machinery, pallet jacks, cherry pickers and forklifts. Works well independently and as part of team. Excellent interpersonal communication skills.

• What is a Collateral Contract?, Generally, a collateral contract can be a verbal statement or a separate written statement to the main contract. Once established, it exists independently of the main contract. Therefore, if the main contract is illegal (and thus unenforceable), the collateral contract can still be valid and enforceable. Collateral Contracts are independent oral or written contracts that are made between two parties to a separate agreement or between one of the original parties and a third party. This type of contract is usually made before or simultaneously with the original contract. A collateral contract is a secondary agreement added to the original contract that is meant to ensure that the pre-contract promises are met. According to Heilbut, Symons & Co. v Buckleton [1913] AC. 30, 47 A collateral or unilateral contract is a contract which exist side by side another contract, the consideration for which is the entering into of that other contract.
• Examples of Collateral Contracts, Suppose you agree to rent an apartment. The lease agreement you sign with the landlord is the main contract. However, your landlord promises to fix the toilet drainage. Therefore, this is the collateral contract. Alternatively, let us assume you buy a car. The purchase agreement you signed with the car dealer will be the main contract between you and the car dealer. However, the promise to include thicker car mats may be a collateral contract. In summary, a collateral contract is essentially a promise that can be enforced but is not a term of the main contract.
• The principle of collateral contracts, Let us assume A and B have negotiated a contract, but have not yet concluded it. B says to A: I will not conclude the contract with you unless you give me an assurance of X. A gives B the assurance or promise in return for B's entering into the contract with him. Two contracts come into existence: (i) the main contract entered into between A and B; and (ii) a collateral or unilateral contract in which A gives B the assurance or promise X in exchange for B's entering into the main contract with A. Thus a collateral or unilateral contract comes into existence, in addition to the main contract entered into, such that if A docs not fulfil his promise X, B can sue on the collateral contract, even though the promise of X does not form part of the main contract entered into between them. The principle of collateral contracts was explained in the case of Heilbut, Symons & Co. v. Buckleton as follows: A tells B: "If you will make such and such contract. I will give you one hundred pounds". If B provides the consideration by entering into the specified contract, there comes into existence a unilateral (or collateral) contract with A. If that promise is not fulfilled, B can sue for breach of that collateral contract. This second contract is in every sense of the word a complete legal contract. It is collateral to the main contract, but each has an independent existence. A collateral contract is, therefore, one which exists side by side with the main contract made between the parties. In other words, it is collateral to the main contract. The principle of collateral contracts serves as a means of ensuring remedial flexibility in the law of contract. In De Lassale v. Guildford a tenant had declined to hand over his counterpart of a lease until he had the landlord's oral assurance that the drains were in good order. The lease did not contain any clause about the drains, which turned out not to be in good order. The court held that in addition to the contractual terms contained in the lease, there was a collateral contract under which the landlord promised that the drains were in good order and the tenant was entitled to damages for breach of that term or undertaking. The analysis is as follows: In consideration of A signing the lease or entering into the written contract, B had promised that the drains were in good order. Thus two contracts came into existence at the same time: (i) the bilateral contract contained in the written lease; and (ii) the collateral contract (unilateral contract) under which B promised that the drains were in good order in consideration of A signing the written lease. The establishment of the collateral contract helps to achieve a fair result and implements the true intentions of the parties. It must be noted that a collateral contract could be found to exist even if the collateral term directly contradicts the express terms of the main contract. In City and Westminster Properties Ltd v. Mudd. The contract was a lease, which contained a covenant not to use the premises for purposes other than trade. Under an earlier lease, the defendant had been in the habit, contrary to the lease, of sleeping on the premises. He insisted he would not sign the new lease unless the plaintiffs (landlords) agreed to his sleeping there. The landlord, who was unwilling to include a clause to that effect in the lease itself, orally assured the tenant that he could sleep there. Later the landlord brought an action against the tenant for forfeiture of the lease on the ground that the defendant was sleeping on the premises contrary to the express terms of the written lease. The action failed. Even though the collateral term, i.e., the term that the tenant could use the premises for residential purposes was in outright contradiction of the express terms of the written contract, the courts found that all the ingredients for the existence of a collateral contract existed and such a finding would implement the true intentions of the parties to the contract. The court stated: The defendant says that it was in reliance on this promise that he executed the lease and entered on the onerous obligations contained in it. He says, moreover, that but for the promise made he would not have executed the lease, but would have moved to other premises available to him at the time. If these be the facts, there was a clear contract acted upon by the defendant to his detriment and from which the plaintiffs cannot now be allowed to resile. The principle of collateral contract may be applied even where the party receiving the assurance or collateral promise is not a party to the main contract entered into. The principle of collateral contract still applies where A makes a promise to B in consideration of B arranging for A to enter into a contract not with B himself, but with C. When B arranges for C to enter into a contract with A, he (B) provides the consideration for A's promise and thereby concludes a (collateral) unilateral contract with A. B can therefore sue to enforce A's collateral promise even though the main contract is entered into between A and a third party, C. In Shanklin Pier Ltd v. Detel Products Ltd: The plaintiffs were the owners of a pier at Shanklin, in the Isle of Wright. They wished to paint the pier and consulted the defendants, a firm of paint manufacturers. The defendants told them that their paint was suitable for the purpose, and, acting on the faith of this statement, the plaintiffs caused to be inserted in their agreement with their contractors who were to paint the pier, a provision requiring them to use the defendants' paint. The paint proved to be unsuitable and the plaintiffs sued the defendants for breach of warranty based on a collateral contract. The court held that the plaintiffs were entitled to damages. Although the contract of sale was between the defendants and the contractors (and not the plaintiffs (owners), the plaintiffs were able to sue the defendants on the collateral contract because the plaintiffs had given the consideration required for the defendants' promise i.e. by requiring the contractors to purchase the defendants' paint for the job. The most significant extension of the application of the principle of collateral contract, however, can be seen in the case of Wells (Merstham) Ltd v. Buckland Sand And Silica Ltd. B, a chrysanthemum grower, visited A, a sand merchant. B was looking for sand suitable for growing chrysanthemums. A said that their BW sand would be suitable and produced an analysis showing that it had a low iron oxide content, which made it suitable. Subsequently, B entered into a contract with C to buy from C, BW sand which C had purchased from A. If B had bought the sand directly from A there would clearly have been a contractual undertaking by A that the sand was suitable for the purpose. It was not suitable and B's chrysanthemums died. The court held, per Edmunds J., that nevertheless a collateral contract arose between A and B since B had given consideration to A for A's promise by buying the sand from C. This decision goes further than all the other cases on collateral contracts, in that here there was no evidence that A requested B to enter into the contract with C or even contemplated the possibility that B might do so. However, the court held that it was sufficient that: (i) A's promise was one that B might reasonably regard as being contractual in nature; and (ii) that B had bought the sand in reliance on that promise. An unsuccessful attempt was made in the Ghanaian case of CAST. v. Nketia to rely on the principle of collateral contract. The facts of the case were as follows: By the terms of his employment, the plaintiff/respondent in the case could have his appointment terminated by three months' notice in writing. His employers terminated his appointment without notice, but paid him three months' salary in lieu of notice and other entitlements. He sued, relying on a letter written by the employers which stated inter alia that "members of regional staff are able to look forward to a career with the company which, subject to satisfactory service, should take them to retirement age", as amounting to a collateral contract. It was held on appeal that it was not open to the trial judge to find that the letter in question was evidence of another collateral contract of employment the terms of which were capable of derogating from the clear stipulations of the amended letter of employment.
• How Collateral Contracts Work, The main and collateral contracts are active at the same time, and in some cases, the provisions of the latter may override those of the former. For example, companies X and Y enter a construction contract with X as the client and Y as the builder. Y then enters a collateral contract with Z, a materials supplier. If the materials are found defective, X may be able to sue Z even though they do not have a contract with one another. Sometimes called a collateral warranty, this arrangement obligates all contracting parties to meet their accountability to all other associated parties. A collateral contract must: - Be consistent with the main contract - Be promissory - Follow the promise with a statement - Contain all elements of a contract
• Are Collateral Contracts Enforceable?, A second consideration should be used with a collateral contract to make sure that it is viable on its own. In commercial transactions, it's very common for parties to use side deals. In many cases, these deals are informal and can be used to bolster the original contract. Side deals can either be agreed to verbally or in a written document such as a letter.
• Collateral Contract Examples, Example #1 - Consider De Lassalle v. Guildford, a collateral contract case in which the latter party rented a home to the former. The landlord promised to fix the drain before the tenant moved in. This promise was considered a collateral contract by the court, allowing the tenant to sue when he found the drains had not been fixed as promised. Example #2 - A good example this type of contract is the Shanklin Pier v. Detel judgment. This case involved a group of people who owned a pier and purchased paint for their pier with the promise that the paint would last for seven years (a guarantee that was made specifically to entice the pier owners to purchase this paint). Based on the promise of durability, the pier owners purchased the paint and then used it on their pier. Unfortunately, the paint lasted for a three-month period, considerably less than the time span that was promised. Although the contract in place was for the purchase of the paint, it was ruled that the pier owners were able to pursue damages based on a collateral contract.
• Consequences for Breaching a Collateral Contract, Breach of a collateral contract can allow the injured party to seek financial compensation. As such, it is in your business’ interests to avoid unintentionally entering and breaching this agreement. However, the breach will not affect the main contract as it exists independently of the collateral contract.

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