Collateral and Subsequent Agreements
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| In the construction industry, collateral and subsequent agreements may be entered into either contemporaneously or after the parties enter into the prime contract. The parol evidence rule does not hamper the admittance of evidence of either a collateral or subsequent agreement. However, if such agreements are not in writing, proving their existence can be a laborious undertaking.
A collateral agreement is one whose content is beyond the scope of the prime agreement, yet still related to it. For example, consider the contract between the owner and a landscape contractor. The prime contract may call for the contractor to completely install shrubs, trees, plants, grass, fountains, and a rock walking path all pursuant to the landscape design submitted by the contractor. The parties may also enter into a collateral agreement for the monthly maintenance of the contractor's original work on the project. The collateral agreement for maintenance, though related to the prime contract, is not essential for the operation of the prime contract or the parties' duties thereunder.
Subsequent agreements follow the prime agreement and may actually supplant a term or provision contained in the prime contract. It is very common with respect to construction contracts for the parties to enter into subsequent agreements. A frequent form of subsequent agreement takes the form of a written change order. Consider the contract between a general contractor and a subcontractor for the completion of roofing work on ten homes in a twenty-home residential development. Later, the general contractor learns that another roofing subcontractor who was supposed to perform roofing work on the remainder of the homes in the development will not be able to perform. The subcontractor and general contractor may then execute a change order to expand the scope of work for the subcontractor to include all twenty homes in the development. Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |