Collateral Matters: Definition, Example and Related Terms
What are Collateral Matters ?
Collateral matters refer to the auxiliary or secondary matters that are directly related to the main subject of a contract but are not the primary focus. They are important because they often have an impact on the primary subject of the contract. For instance, in a business deal, the main contract could be the sale of a company's product, and the collateral matters could be the delivery terms, payment terms, or product warranties. These are not the primary focus of the contract (which is the sale of the product), but they are directly related and can affect the outcome of the main contract.
Example(s)
Scenario Description A company signs a contract to supply software to another company. The main contract is the supply of the software. However, the contract also includes collateral matters such as the provision of technical support, software updates, and training for the other company's employees on how to use the software. In this scenario, the supply of the software is the main contract, and the provision of technical support, software updates, and training are the collateral matters. They are not the primary focus of the contract, but they are directly related and can affect the outcome of the main contract. If the supplier fails to provide adequate technical support or software updates, the other company may not be able to use the software effectively, which could lead to a breach of contract. A business enters into a contract with a manufacturer to produce a new product. The main contract is the production of the product. However, the contract also includes collateral matters such as the quality control measures, the timeline for production, and the terms for product returns. In this scenario, the production of the product is the main contract, and the quality control measures, the timeline for production, and the terms for product returns are the collateral matters. They are not the primary focus of the contract, but they are directly related and can affect the outcome of the main contract. If the manufacturer fails to meet the agreed quality control measures or production timeline, or if they do not honor the terms for product returns, it could lead to a breach of contract.