Collateral Contract

In J N Hipwell & Son v Szurek [2018] EWCA Civ 674 at [20], the Court of Appeal observed that treating a party's true pre-contractual understanding as giving rise to a fresh obligation was 'more akin to a collateral warranty or contract', noting the tension with the parol evidence rule, under which 'evidence is ordinarily inadmissible to vary or contradict the terms of a written contract'. A collateral contract is the doctrinal route by which a court can give a pre-contractual statement independent contractual force - as a separate contract, supported by the consideration of entering the main contract - rather than treating it as an implied term of the main written document, which the parol evidence rule and any entire agreement clause would otherwise exclude.

Because a collateral contract is legally distinct from the main contract, it can in principle survive an entire agreement clause aimed only at the main agreement's terms - though a clause can be drafted to catch collateral warranties too. The Court in Hipwell v Szurek recorded, quoting Lightman J in The Inntrepreneur Pub Company v East Crown Ltd, that the purpose of an entire agreement clause is to ensure that 'any promises or assurances made in the course of negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force'. The Court also noted (at [22]) that 'the Law Commission, as long ago as 1986, recommended that an entire agreement clause, though of very strong persuasive effect', should not be treated as conclusive - and recorded, at [56], an unresolved argument that 'the undisputed understandings between the parties established a collateral contract, independent but contemporaneous with the Lease, which was not excluded by the parol evidence rule'.