collateral contract

Quick Reference

A subsidiary contract that induces a person to enter into a main contract. For example, if X agrees to buy from Y goods made by Z, and does so on the strength of Z's assurance as to the high quality of the goods, X and Z may be held to have made a collateral contract consisting of Z's promise as to quality given in consideration of X's promise to enter into the main contract with Y.

Subjects: Law.

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