Collateral Contract Is One in Essay

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However, it is bad business practice to make promises without putting that promise in writing. From the perspective of the party relying on the collateral, it may not legally be required that the collateral contract be in writing but it is highly recommended as there may be little legal recourse should the third party fail to live up to the terms of an oral contract.

There is tremendous inconsistency in this area of law, however, as evidence by the Wintersport v. Millionaire.com case. White was to receive benefit from his guarantee by virtue of his share ownership. Without his guarantee, Millionaire's second issue could not have been published. The company would earn no revenue without that guarantee, so White would have received benefit as the result of his guarantee. Yet the court ruled that this was not the case. That his guarantee was oral should not have mattered because the leading rule should have applied to that guarantee.

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However, the court due to an apparent lack of understanding of the concept of share ownership -- apparently thinking stock ownership is a form of altruism rather than a direct investment in the assets of the firm - reversed the decision against White. The result was that White's use of an oral guarantee instead of a written one allowed him to have the decision reversed. Had the guarantee been in writing, this would not have been the case.

The lesson to be taken from Wintersport v. Millionaire.com is that if one does not intend to follow through on the guarantee and is thus intending to defraud the other party, then it is best not to make the promise in writing......

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