Lucas offered to purchase Baker's snowmobile if he could arrange a loan with the bank for the funds. Lucas and Baker signed a written purchase agreement which did not mention the fact that Lucas did not have the necessary funds in his possession. If Baker claimed against Lucas for breach of the contract, Lucas could raise the agreement concerning the need for a bank loan as a collateral agreement, allowing him to avoid the contract.

Question

Quizplus · Accepted Answer

A collateral agreement must be consistent with the main contract and not contradict its terms. Since the written purchase agreement did not mention the need for a bank loan, Lucas cannot use it as a collateral agreement to avoid the contract.

Lucas Offered to Purchase Baker's Snowmobile If He Could Arrange