Collateral Contract Overview

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Questions and Answers

In the case of Tan Swee Hoe v Ali Hussain Brothers, what was the primary legal issue regarding the occupancy of the premises?

  • Whether the notice to quit was valid despite the oral agreement. (correct)
  • Whether R could stay indefinitely without a written contract.
  • Whether a written tenancy agreement overrides an oral agreement. (correct)
  • Whether the payment of tea money established tenancy rights.

What was the ruling in Tan Chong and Sons Motor Co v Alan McKnight regarding the car's compliance with regulations?

  • The buyer must provide evidence of damages to claim a warranty.
  • The salesman’s statement about compliance must be upheld over the written conditions. (correct)
  • The written agreement provided no warranties, so the statement was irrelevant.
  • The buyer was not entitled to any remedies for the salesman’s incorrect statement.

In Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Construction Sdn Bhd, what did D rely on to return the excavators?

  • An implied warranty based on industry standards.
  • An oral collateral warranty stating the excavators could be returned without penalty. (correct)
  • A written warranty specifying return conditions.
  • A verbal agreement with no formal backing.

What limitation exists regarding collateral contracts in relation to main contracts?

<p>Collateral contracts cannot negate the main contract’s terms. (D)</p> Signup and view all the answers

What role does a warranty play in the context of contracts discussed?

<p>A warranty may serve as a statement of fact within a contract. (C)</p> Signup and view all the answers

What does the Parol Evidence Rule primarily aim to protect?

<p>The integrity of written contracts (B)</p> Signup and view all the answers

Under which section can an oral agreement that constitutes a condition precedent be admitted?

<p>S.92(c) (B)</p> Signup and view all the answers

Which of the following is NOT an exception to the Parol Evidence Rule?

<p>Oral contracts without conditions (C)</p> Signup and view all the answers

What is a characteristic of a collateral contract?

<p>It can exist independently from the main contract. (A)</p> Signup and view all the answers

Which section allows any fact that would invalidate a document to be proved?

<p>S.92(a) (A)</p> Signup and view all the answers

A collateral contract is defined as what?

<p>A separate oral agreement related to a main written agreement (B)</p> Signup and view all the answers

What are the elements required to establish the presence of a collateral contract?

<p>A statement made with intention to be acted upon and reliance on it. (D)</p> Signup and view all the answers

What does S.92(b) state regarding separate oral agreements?

<p>They are admissible if not inconsistent with the written contract. (D)</p> Signup and view all the answers

Which statement best describes the term 'warranty' in the context of collateral contracts?

<p>It may serve as a legally binding guarantee linked to the main contract. (B)</p> Signup and view all the answers

In the event of conflicting terms, which has precedence?

<p>The collateral contract takes precedence over the written contract. (C)</p> Signup and view all the answers

Which of the following is a reason that the Parol Evidence Rule was established?

<p>To prevent the modification of written contracts by oral testimony (A)</p> Signup and view all the answers

What does the parol evidence rule state in relation to collateral contracts?

<p>Collateral contracts are exceptions to the parol evidence rule. (C)</p> Signup and view all the answers

In the context of the Parol Evidence Rule, what does 'want of consideration' refer to?

<p>The deficiency in something of value exchanged (C)</p> Signup and view all the answers

Which of the following describes how a collateral contract affects a main contract?

<p>It can exist alongside the main contract without destroying it. (B)</p> Signup and view all the answers

Why might oral terms be considered valid despite the Parol Evidence Rule?

<p>They are part of a collateral contract. (C)</p> Signup and view all the answers

What is an important factor for a statement to be valid as a collateral contract?

<p>The speaker must intend for the statement to be relied upon. (B)</p> Signup and view all the answers

Which of the following scenarios would most likely result in the creation of a collateral contract?

<p>One party promises additional benefits contingent upon signing the main contract. (B)</p> Signup and view all the answers

What condition must be met for a party to withdraw a promise under promissory estoppel?

<p>The promisor must give reasonable notice. (C)</p> Signup and view all the answers

Which of the following statements about promissory estoppel is true?

<p>It prevents temporary enforcement of a contract under certain conditions. (D)</p> Signup and view all the answers

In the case of Chuan Hong Petrol Station Pte Ltd v Shell Singapore Pte Ltd, what was established regarding the parol evidence rule?

<p>It operates alongside the doctrine of promissory estoppel. (A)</p> Signup and view all the answers

What is one prerequisite for the application of promissory estoppel?

<p>The parties must be in an existing contractual relationship. (B)</p> Signup and view all the answers

What does the doctrine of promissory estoppel primarily focus on?

<p>Preventing a party from taking advantage of another's reliance on a promise. (C)</p> Signup and view all the answers

Which of the following is NOT a condition required for enforcing a promise under promissory estoppel?

<p>The promise must be communicated verbally. (A)</p> Signup and view all the answers

What is the main effect of the parol evidence rule?

<p>It acknowledges the importance of written contracts over verbal agreements. (A)</p> Signup and view all the answers

How does the doctrine of promissory estoppel differ from the parol evidence rule?

<p>Promissory estoppel aims to enforce promises made, while the parol evidence rule focuses on written contracts. (B)</p> Signup and view all the answers

Flashcards

Collateral Contract

A promise made during negotiations that can create a legally binding obligation, even if it's separate from the main contract.

Statement of Intention

A statement made with the intention of being relied upon by the other party.

Inducement

The statement must have caused the other party to enter the main contract.

Warranty

A guarantee within a contract, promising a certain outcome or performance.

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Oral Contract

An agreement made orally (spoken words), not in writing.

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Separate Existence

When a collateral contract exists alongside the main contract, but is independent from it.

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Priority of Collateral Contract

If the terms of the collateral contract conflict, the collateral contract takes priority over the main contract, but it CANNOT void the main contract.

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Exception to Parol Evidence Rule

The rule that prevents using oral evidence to modify or contradict a written contract doesn't apply to collateral contracts.

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Parol evidence rule

The rule that says written contracts cannot be contradicted by prior oral agreements.

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Exception to the parol evidence rule - collateral contract

An exception to the parol evidence rule, where a collateral contract (side agreement) can be used to override a written contract term.

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Collateral contract vs. main contract

The contract is the main agreement, and the collateral contract is something else.

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Promissory Estoppel

When a party makes a promise to another party to relieve them of a previous obligation within an existing contractual relationship.

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Pre-Contractual Representation

A legally binding statement made before the main contract is signed, that induces the other party to enter the contract.

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Promissory Statement

A statement made by one party that the other party relies upon, causing them to change their position.

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Temporary Enforcement Bar

Promissory estoppel doesn't add to or alter the terms of a contract, it simply prevents one party from enforcing it temporarily.

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Conditions for Promissory Estoppel

The conditions for promissory estoppel include: being in a contractual relationship, a promise being made, reliance and change of position, and the ability to withdraw the promise with reasonable notice.

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Chuan Hong Petrol Station Pte Ltd v Shell Singapore (Pte) Ltd

The case that confirmed promissory estoppel can operate despite the parol evidence rule. It doesn't contradict the contract, it just temporarily prevents enforcement.

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Purpose of Parol Evidence Rule

The main purpose of this rule is to prevent parties from bringing in oral terms that might change a written contract.

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Section 91 of the Evidence Act 1950

When a contract's terms are put into a document, only the document itself can be used as evidence.

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Section 92 of the Evidence Act 1950

Once the terms of a contract have been established through the document, no oral evidence can be used to contradict, vary, add to, or subtract from those terms.

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Exception to Parol Evidence Rule: Section 92(a)

Evidence of fraud, intimidation, illegality, or mistakes are allowed to invalidate a contract, even if it contradicts the written terms.

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Exception to Parol Evidence Rule: Section 92(b)

This exception allows evidence of separate oral agreements, as long as they don't contradict the written contract and are not covered by the written document.

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Exception to Parol Evidence Rule: Section 92(c)

This exception allows evidence of a separate oral agreement that is a condition for any obligation under the contract.

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Tan Swee Hoe Co Ltd v Ali Hussain Brothers

The oral promise is not imported into the main agreement, so using a collateral contract doesn't violate the parol evidence rule.

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Parol Evidence Rule: Oral Contracts?

The parol evidence rule only applies to written contracts. For oral contracts, the exceptions under s.92(a)-(c) and collateral contract come into play.

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Study Notes

Collateral Contract

  • A collateral contract is a separate contract existing alongside a main contract.
  • It's a supplementary agreement, created when one party agrees to a condition to induce the other party to enter a contract.
  • This intention to be bound must be demonstrable.
  • A collateral contract is separate from the main agreement, but is often linked to it.

Elements of a Collateral Contract

  • It's an oral contract.

  • It exists alongside (side-by-side), although it is independent of, the main contract.

  • If the terms of the two contracts contradict each other, the collateral contract takes precedence but cannot invalidate the main agreement.

  • An exception to the parole evidence rule, where oral statements are considered.

  • A third party can still create a collateral contract.

  • A statement with intent to be relied on and that induces the contract signing constitutes a collateral contract.

  • The statement must function as a warranty.

Establishing a Collateral Contract

  • The defendant made a statement with the intent for it to be relied on;
  • The statement induced the signing of the contract;
  • The statement operates as a warranty.

Warranty as a Collateral Contract

  • A warranty is one meaning of warranty; it's a guarantee of the legally binding quality of the subsidiary main contract.
  • Another meaning of warranty is as an unimportant term of a contract—a clause or condition.

Contradiction/Overrides

  • A pre-contractual statement made by one party can supersede or contradict the terms of the main written contract.
  • This can override the printed stipulations of a contract.
  • An overruling statement overrides the printed or written terms of a contract.

Parol Evidence Rule

  • Section 91 and 92 of the Evidence Act 1950 prohibits the oral amendment of a written contract.
  • The rule prevents the addition or subtraction of terms from a written contract.
  • It protects the integrity of written contracts.
  • Section 91 states that when the terms of a contract are set out in a document by agreement, no outside evidence can verify those terms.
  • Section 92 states that no oral statements can be admitted as evidence in a contractual dispute to contradict, alter, or add to an existing agreement.

Exceptions to the Parol Evidence Rule

  • Collateral contract
  • Promissory estoppel

Collateral Contract (Exceptions to the Parol Evidence Rule)

  • The collateral contract is a separate agreement that stands alongside the main written contract.

Promissory Estoppel

  • Promissory estoppel occurs when one party in a pre-existing contractual relationship makes a promise or statement to the other party, and that other party relies upon this as modification to the original contract.
  • It is to prevent a party from going back on the premise.
  • Conditions include:
    • Parties are in a pre-existing contractual relationship;
    • A promise or statement is made that alters the original contract terms;
    • One party relies on the promise, changing their position;
    • The promisor should give reasonable notice that the promise is to be revoked.

Evidence Act Exceptions

  • Specific factors such as fraud, illegality, lack of capacity, or errors in creation of the contract can invalidate a written agreement.
  • A separate oral agreement, silent on the matter in the contract and not contradictory to the written terms, can still be valid.
  • A separate oral agreement that acts as a condition precedent to any contractual obligation is still valid.

Case Studies of Collateral Contract

  • Tan Swee Hoe v Ali Hussain Brothers: A party relied on an oral side-agreement, despite the main written contract not mentioning it.
  • Tan Chong & Sons Motor Co v Alan McKnight: A car salesman's oral statement about car compliance overrode the printed contract's disclaimer of warranty.
  • Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Construction Sdn Bhd: A party returned unsuitable excavators relying on an oral assurance.

Summary of Collateral Contract

  • A collateral contract is separate from but linked to the main contract.
  • It has specific elements, including the intent and reliance on statements.
  • It's an exception to the parole evidence rule, allowing oral promises to override written stipulations.
  • Cases illustrate the practical applications of collateral contracts in various scenarios.

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