A collateral agreement is a legal agreement that is made parallel to another agreement to secure a commitment made in the latter. In simpler terms, a collateral agreement is a pledge to secure a second agreement. These agreements are often seen in business transactions, especially in loan agreements.

However, what happens when a collateral agreement is made to secure an illegal agreement? In this case, it is referred to as a collateral agreement to an illegal agreement.

An illegal agreement is an agreement that is not enforceable by law. These agreements are usually void because they violate public policy or fall under illegal activities such as gambling or drug trafficking. Examples of illegal agreements include agreements to commit a crime or to engage in fraudulent activities.

When a collateral agreement is made to secure an illegal agreement, the collateral agreement is also considered void and unenforceable. This means that the parties involved cannot rely on the collateral agreement to enforce the underlying illegal agreement.

For example, if Person A and Person B make a loan agreement and a collateral agreement to secure the loan, but the loan was made to finance an illegal activity such as drug trafficking, the collateral agreement to the illegal agreement will be unenforceable in court.

It is essential to note that if the collateral agreement is made unknowingly to secure an illegal agreement, it may still be enforceable. This is because the collateral agreement is seen as a separate agreement from the underlying illegal agreement. However, this will depend on the circumstances surrounding the agreement, and a court of law will be the ultimate decider of whether the collateral agreement is enforceable or not.

In conclusion, collateral agreements are essential in securing commitments made in legal agreements. However, when a collateral agreement is made to secure an illegal agreement, it becomes unenforceable and void. It is crucial to ensure that all agreements made are legal and do not violate public policy. When in doubt, it is advisable to seek legal counsel to avoid any legal ramifications.