For example, if X agrees to buy goods from Y that will, accordingly, be manufactured by Z, and does so on the strength of Z's assurance as to the high quality of the goods, X and Z may be held to have made a collateral contract consisting of Z's promise of quality given in consideration of X's promise to enter into the main contract with Y.
[2] In JJ Savage and Sons Pty Ltd v Blakney a mere expression of opinion was held insufficient to be satisfied as a promise.
In Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd a statement by a landlord made to intending tenants when negotiating a lease that they would be “looked after at renewal time”, would not bind the landlord to offer a further five year lease.
There are in fact three different entities participating in the letter of credit transaction: the seller, the buyer, and the banker.
[12] In the English case of Barry v Davies, it was held that an auctioneer and a buyer had formed a collateral contract.