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Collateral Contracts Collateral Contracts Why require writing in the case of collateral contracts? And why make anexception in cases where the "leading object" rule applies?A collateral contract is defined as “one where the parties to one contract enter into or promise to enter into another contract. Thus, the two contracts are connected and it may be enforced even though it forms no constructive part of the original contract” (Law Teacher, 2012, par. 5). As the definition clearly indicates, the entry to another contract was based on a promise indicated in the first contract.
To ensure that it would therefore be binding and executory, a formal writing would be the most conclusive proof that the promise existed.An exception in cases where the “leading object” rule applies is made because, by virtue of defintion, a leading object rule means that “if a promise to guarantee anothers debt is made primarily for the promisors own benefit, then the statute of frauds does not apply and the promise does not have to be in writing” (US Legal, 2012, par. 1). As expressly deduced, the leading object rule is clearly indicative that a person who entered into a collateral contract actually gains a personal benefit from forging the collateral contract.
Therefore, this particular personal benefit provides sufficient proof of the collateral contract; and as such, no writing is required.ReferencesLaw Teacher. (2012). Collateral Contracts | Contract Law. Retrieved August 19, 2012, from lawteacher.net: http://www.lawteacher.net/contract-law/collateral-contracts.phpUS Legal. (2012). Leading Object Rule Law and Legal Definition. Retrieved August 19, 2012, from definitions.uslegal.com: http://definitions.uslegal.com/l/leading-object-rule/
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