Collateral Contracts

Question 1

When will a collateral contract analysis generally be adopted?

Answer 1

Where technical limitations would otherwise prevent the courts giving full effect to parties’ intentions, the court may adopt a collateral contract analysis -

a) Requirement of form w/ which statement does not comply
b) Privity
c) Parol evidence rule

Question 2

Name two situations where a collateral contract analysis would be inappropriate.

Answer 2

1. Where commercial parties had ample opportunity to contract but deliberately chose not to (Fuji Seal) or
2. Where further negotiations occurred indicating the parties’ clear intention that the alleged term not be adopted (Deanwater Estates)

Question 3

What is the r/s between collateral contract analyses and entire agreement clauses?

Answer 3

Entire agreement clauses have the effect of ruling out arguments about collateral contracts, but they may be caught by UCTA S.3(2)b and its requirement of reasonableness.