How is a "collateral contract" defined?

A collateral contract is best defined as a secondary agreement that supports the main contract. This kind of contract is typically made alongside the main contract and exists to enhance or clarify certain aspects of it. For example, a collateral contract might provide specific terms or assurances that are not explicitly included in the main agreement, ensuring that the parties have a clear understanding regarding their obligations or rights.

The function of a collateral contract is to provide additional context or assurance to the parties involved, while still being related to the primary agreement. It does not replace or supersede the main contract, but rather complements it, which further highlights the importance of its supporting role in the contractual relationship.

In contrast, the other options misrepresent the nature of collateral contracts. Some may imply that collateral contracts either replace the primary agreement or are unconditional, which is not accurate. Additionally, suggesting that they are exclusively electronic diminishes the broad applicability of collateral contracts across various forms of agreements.