Collateral Promise: Everything You Need To Know

A collateral promise is one that is established by statute. A promise established aside from the legal statute is referred to as original.3 min read

A collateral promise is one that is established by statute. A promise established aside from the legal statute is referred to as original. These terms have been introduced by case law to ease contract interpretation. The original promise creates debt because it establishes a quid pro quo relationship. On the other hand, a collateral promise can be a binding contract but does not create debt.

Distinguishing Original and Collateral Promises

Although these terms are not clearly defined in legal terms, they were initially adopted to indicate which cases fall outside or inside a statute as intended by Parliament. Remembering this distinction can help you discern that an original promise does not necessarily constitute priority and a collateral promise is not necessarily conditional.

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