Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 (HL)

Facts

  • Kreglinger, the appellant, entered into a loan agreement with New Patagonia Meat and Cold Storage Co Ltd, the respondent, secured by a floating charge over the respondent's assets.
  • As part of the broader arrangement, the respondent granted Kreglinger an option to buy sheepskins at a fixed price for five years.
  • After the loan was repaid, Kreglinger sought to exercise the purchase option, treating it as a collateral agreement independent of the main loan contract.
  • The respondent argued the option was an essential part of the loan agreement and therefore ceased with repayment.
  • The dispute centered on whether the option was a truly independent collateral contract or merely an ancillary term of the main loan agreement.

Issues

  1. Whether the option to purchase sheepskins constituted a collateral agreement independent of the main loan contract.
  2. Whether such a collateral agreement can remain enforceable after the discharge of the primary contract.
  3. What conditions must be satisfied for a collateral agreement to be considered independent and enforceable.

Decision

  • The House of Lords held that the option agreement was an independent collateral contract, not extinguished by repayment of the loan.
  • It was determined that the option was supported by separate consideration: Kreglinger’s forbearance from demanding immediate loan repayment.
  • The ruling clarified that collateral agreements are enforceable if not contingent upon the main contract and supported by distinct consideration.

Legal Principles

  • A collateral agreement is only enforceable as independent if it is not contingent upon the performance or existence of the primary contract.
  • Independent consideration distinct from that arising under the main contract is required to support a collateral agreement.
  • Collateral agreements may remain binding after the discharge of the main contract when these conditions are fulfilled.
  • The case established a precedent distinguishing ancillary contract terms from truly independent collateral agreements.

Conclusion

The House of Lords affirmed that a collateral agreement with genuinely independent consideration can survive and be enforced after the primary contract has ended. Clarity in drafting and recognition of independent obligations are critical for contractual enforceability, with the principles established in this case remaining central to the law of collateral contracts.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal