Contract and Unjustified Enrichment Flashcards
1
Q
What is Public Law?
A
Public Law is law about the state and about its relations with people within the state and with other states.
2
Q
What are some examples of Public Law branches?
A
Criminal, constitutional, administrative, tax, immigration.
3
Q
What is Private Law?
A
The law about the relationships between people (including non-human persons) within the state.
4
Q
What are some examples of Private Law branches?
A
Persons (principal players) - can be natural beings and artificial ‘persons’ such as companies.
Property – can be moveable or heritable
Actions – evidence and procedure
Obligations (mainly concerned with things) – delict and UE.
5
Q
What is an obligation?
A
Debtor’s duty to pay or perform, with creditor’s corresponding right to demand payment or performance, using court action if necessary.
6
Q
What are some examples of voluntary obligations?
A
Contract and Promise.
7
Q
What are some examples of involuntary obligations?
A
UE and delict.
8
Q
What is an example of a unilateral obligation?
A
Promise.
9
Q
What is a contract?
A
A contract is an agreement between two parties having the capacity to make it, in the form demanded by law, to perform on one side or both, acts which are not trifling, indeterminate, impossible or illegal, creating an obligation enforceable in a court of law.
10
Q
What does ‘negotiorum gestio’ mean?
A
Negotiorum gestio is defined circumstances where someone can intervene in another’s affairs.
11
Q
Do contracts have to be in writing?
A
Not all contracts have to be in writing - contract can be shown by the way parties behave and/or verbal exchange.
12
Q
What does a contract involving inactivity mean?
A
An agreement NOT to do something.
13
Q
What are the THREE things necessary for a contract to form?
A
- Objectivity
- Certainty
- Offer and acceptance
14
Q
What is offer and acceptance?
A
A proposal from one party for a transaction/agreement/deal that is accepted by the other side.
The buyer produces a letter (a missive) stating his terms. There is then a missive response from the other party who confirms they accept the terms (property sales).
15
Q
What does objectivity in a contract mean?
A
The ‘outside world’ should be able to understand the contract in the same way as the parties involved meant it.
16
Q
What are TWO cases concerning objectivity?
A
Mathieson Gee v Quigley
Muirhead and Turnbull v Dickson
17
Q
What are the THREE crucial aspects of the proposed contract that there must be certainty on?
A
- Who the parties are
- What is the contract about (subject matter)
- The price (could be determined later, but must agree that the price will be determined in some way)
18
Q
What is a case involving certainty?
A
Avintair v Ryder Airline Services
19
Q
What is a case involving intention to create legal relations?
A
W S Karoulias v Drambuie Liquer Co Ltd
20
Q
What is intention to create legal relations?
A
Before a promise or agreement will create legal obligations, the promisor or the parties to the agreement must intend to enter into obligations which are to be legally binding.
21
Q
What is a case involving Freedom and Sanctity of Contract?
A
Sir George Jessel MR in Printing and Numerical Registering Co v Simpson (1875) LR 19 Eq 462-
“If there is one thing more than another which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty in contracting and that their contracts, when entered into freely and voluntarily, shall be held sacred and shall be enforced by Courts of Justice.”
22
Q
What is discrimination and refusal to contract?
A
While in general people are free NOT to contract, there are many exceptions in modern legislation which forbids refusal to contract in certain situations on the grounds of sex, race, disability, or age of the other party.
- Equality Act 2010: forbids refusal to contract on grounds of sex, race, disability, age etc. Private clubs may discriminate.
23
Q
What is extortion and equality of bargaining power?
A
It may be that without being able to point to anything specific at the time of contracting, one party may allege that the contract should not be enforceable because its terms are grossly unfair.
There is some early authority to the effect that such bargains are reducible.
eg. Erskine.
24
Q
What is good faith and fair dealing?
A
Good faith might involve cooperation, honesty and disclosure and gap-filling (where the contract fails to provide what is to happen).
25
What is an offer?
A proposal for a contract.
26
What does a house purchase offer require?
House purchase offer requires: parties, subject matter, price, date of entry.
27
What is it called if an 'offer' falls outwith its requirements?
An invitation to treat (at best)
28
What is an example of a case relating to offer-acceptance?
Harvey v Facey
29
Is an offer binding?
NO.
eg. A shop display is held as NOT being an offer, they are invitations to treat. It is the customer who makes the offer, who can withdraw at any time.
30
What is an example of a case involving offer?
Carlill v Carbolic Smokeball co. (English case)
31
When does the offer become effective?
When the offer is communicated to the offeree - part of the objectivity test.
32
How must offers be distinguished from other pre-contractual statements?
They must invite acceptance and be capable of resulting in a contract.
33
How can the intention of the person making the statement be deduced?
From the words used in the statement and the context.
34
What can termination of an offer involve?
- Withdrawal of the offer by the offeror before acceptance.
This must be communicated to the offer to be effective - communication is assessed objectively.
- Rejection by offeree
- Effluxion of time
- Death of either party
35
What is the requirement for acceptance?
- Any form of statement or conduct by the offeree is an acceptance if it indicates assent to the offer.
- Silence or inactivity does not in itself amount to acceptance.
36
What is an example of a case involving qualified acceptance?
Wolf and Wolf v Forfar Potato Co.
37
What does the law regard qualified acceptance as?
A counter offer.
38
What is a key exam question?
Analysing statements amounting to qualified acceptance?
39
Is a request for clarification a rejection of an offer?
No.
40
What is an example of a case involving request for clarification?
Stevenson v McLean
41
What is an example of a case involving cross-offers?
Tinn v Hoffman & co.
42
When may un-communicated conduct constitute acceptance?
In exceptional circumstances, eg. Carlill v Carbolic Smokeball co.
43
When is acceptance effective in the postal acceptance rule?
Contract is concluded the moment it is submitted to the mail.
So the other person has no knowledge that the acceptance has been, yet they are still bound by the contract as soon as acceptance is posted.
44
What are examples of TWO cases involving the postal acceptance rule?
Thomson v James
| Countess of Dunmore v Alexander
45
What is the purpose of the postal acceptance rule?
Postal acceptance rule is there to protect the offeree against the offeror.
46
What are the Scottish Law Commission's thoughts on the postal acceptance rule?
Scottish Law Commission has proposed repeal of the postal acceptance rule in a Discussion Paper published in 2012, to bring Scots law into line with the general European position.
47
What is a promise?
A form of voluntary obligation distinct from contract.
A promise is about one party creating rights and duties for themselves.
A party commits itself unilaterally to an obligation by making a statement of intent to do something for another.
Scots law holds that promises are gratuitous but binding.
(In English law, a voluntary obligation is only enforceable if the creditor has provided what is called ‘consideration’ – major difference between Scots and English law of voluntary obligations.)
48
What are the 3 possibilities in law when a person addresses another with the creation of an obligation in mind?
- Completely non-obligatory (invitation to treat)
- Potentially obligatory (offer – still needs acceptance)
- Obligatory without more (promise – no need for creditor action)
49
What 3 steps does the objectivity test involve?
- Does the statement enclose an intention to be bound straight away?
- Does it have enough certainty about what the rights of the statement are going to be?
- Does it have the intention to create legal relations?
50
What are the main points of contrast between promise and offers?
- A promise creates an obligation. It is irrevocable whereas an offer can be revoked prior to its acceptance unless it declares otherwise.
- A promise binds the promisor even where the promise was ignorant of its existence.
- In cases of doubt, there is a presumption in favour of contract.
- From 1 August 1995, promise must be in signed writing unless in course of business (Requirements of Writing (Scotland) Act 1995, s 1 – see handout).
51
What can promises be found inside?
Promises may be found INSIDE offers.
A firm offer contains a promise.
Promises can be found inside invitations to treat.
52
What is classed as 'writing' in law?
“... representing or reproducing words in a visible form” – Interpretation Act 1978
53
What obligations must be in writing?
- Contracts relating to transfer of land, including the purchase and sale of land and leases for more than 1 year. Cannot be an aural deal, or communicated by email exchange.
- Gratuitous Obligations of a private nature.
54
What is formal validity?
Contracts that must be in writing simply require the granter’s subscription (signature), either handwritten or electronic.
55
What is probativity?
A self-proving statement.
56
How may writing acquire for the status of probavity by virue of attestation?
- The granter’s subscription
- The signature of one witness to the above subscription
- Statement of the name and address of each witness (testing clause)
No document has to be probative in this sense - no requirement of probavity in the context of contract.
57
What is personal bar?
If there are actings following on from an agreement which is not in formal writing where formal writing is required, these actings may lead to there being a contract, despite lack of formality.
A party who has a right/entitlement of some kind would normally be entitled to say no contract (writer entitlement). But if they have behaved in such a way that they have regarded the informal contract, they can be barred.
Function of personal bar is to provide some form of protection.
58
Do emails amount to formal writing?
No, but they do give evidence that an agreement was made.
59
What does acquiescence mean?
The obligee’s position has to be affected to a material extent.
Eg. Obligee spending money on their new house – could only occur with acquiescence of the seller.
60
What is an example of a case involving acquiescence?
Smith v Oliver (arose before 1995 act)
61
How can un-negotiated written terms be brought into a contract and why?
Written terms may be brought into a contract without direct negotiation by means of signature (which may include “clicking” on a website form), notice/reference at the time of contracting, or course of dealing between the parties. These techniques are commonly used to ensure that a set of standard terms is incorporated without detailed (or any) discussion of them. Common examples are contracts of carriage (bus, train, plane), car parking, software licences, e-commerce provider’s “terms and conditions”.
62
What does 'contracting out' mean?
Parties agreeing that certain terms won’t apply, or by having agreed express terms which are inconsistent with the law’s implied terms.
63
What are 'terms implied in law'?
Default rules that apply unless parties agree and state otherwise.
64
What are some examples of 'terms implied in law'?
- Statute implied terms: eg. Sale of Goods Act 1979, s14.
- Common law implied terms: the duty of care that skilled professionals owe to their client/patient etc.
In theory the client can agree with the professional that the duty of care, which would otherwise arise as an implied term in the contract can be dropped or upped.
- Custom implied terms: Local custom can have the force of law provided that the parties have clearly implicitly agreed to its application in contract (if custom well-known, notorious and reasonable).
- Contract implied terms: good faith is a legal duty that cannot be contracted or excluded from a contract by contrary agreement.
65
What are terms implied in fact?
Judges imply a term from what would have been agreed by the parties; if it is necessary to make the contract work/give it business efficacy; and will be clear, certain and obvious.
- Must be something that comes out of the contract as the only possible solution.
66
What are two contrasting statements involving terms implied in fact?
Contrast Liverpool City Council v Irwin with Thomson v Thomas Muir (Waste Management) Ltd
67
In the Sale of Goods, does the “business” have to be a business selling the type of goods sold in the particular case?
Does it imply that the seller’s business is an ongoing one? Buchanan-Jardine v Hamilink.
Eg. Ebay – most sellers are not doing so in the course of a business.
68
What is meant by satisfactory quality?
- Fitness for all purposes for which goods of the kind in question are commonly supplied
- Appearance and finish
- Freedom from minor defects
- Safety
- Durability
69
What is a case involving fitness for purpose in the sale of goods?
M/S Aswan Engineering v Lupdine
70
What is a case involving appearance and finish in the sale of goods?
Rogers v Parish
71
What is a case involving freedom from minor defects in the sale of goods?
Millars of Falkirk Ltd v Turpie
| see also Rogers v Parish
72
What is a case involving safety in the sale of goods?
Wormell v RHM Agriculture Ltd.
73
What is a case involving durability in the sale of goods?
Thain v Anniesland Trade Centre
74
What are the remedies in sales contracts?
In the case of material breach, rescission of the contract and rejection of the goods (along with return of the price, if paid), but NOT repair or replacement.
Damages may be sough for losses caused by breach, with or without rescission.
75
What is an example of a case involving remedies in sales contracts?
MacDonald v Pollocks
76
What are the remedies in consumer contracts?
Buyer’s PRIMARY remedies are repair or replacement (buyer’s choice) of the goods, in which event seller has a reasonable time to effect this.
SECONDARY remedies – if repair or replacement is impossible or disproportionate to other remedies or if it has been requested but not effected in reasonable time, the buyer may require a reduction in the purchase price, or to rescind the contract.
77
What is an example of a case involving remedies in consumer contracts?
Douglas v Glenvarigill motors
78
What does the Consumer Rights Bill 2014 state?
Consumer remedies include ‘short-term right to reject”, exercisable within 30 days after ownership/possession transferred to consumer
AND goods delivered
AND trader has installed or taken any other action required in relation to goods (clause 22).
79
What is a successful challenge to an apparently valid contract?
A successful challenge to an apparently valid contract is to render it either void or voidable, or unenforceable or illegal.
80
What is the result of a void (null contract)?
A void (null) contract is a complete nullity and should be treated as though it never existed.
Usually void for lack of consent.
No need to have a court decree that it is void.
No one can acquire rights under such a contract.
Court may impose an equitable solution between parties, such as UE.
81
What is the result of a voidable contract?
```
A voidable (annullable) contract is good and effective until annulled.
Occurs when a party consents but the consent is tainted by the way it was obtained by the other party.
Annulment can be effected by intimation to the other party to the contract or by judicial decree.
```
82
What are the requirements for annulment of a voidable contract?
- Restitutio in integrum
- Contract has not been affirmed by homologation
- No unnecessary delay in taking action to annul
83
What is the conduct following a void contract?
Law of unjustified enrichment comes into play (different to restutio in integrum).
Eg. Cows bought under void contract, but were killed. This is unjustified enrichment rather than restutio in integrum as cannot return the cows to the seller.
84
The differences between a void and voidable contract can be illustrated by contrasting what two cases?
Morrisson v Robertson
| MacLeod v Kerr
85
What can grounds of validity do to a contract?
Generally makes the resultant contract voidable, but can make it wholly void.
86
What are the FIVE main grounds of invalidity?
- Force and fear
- Fraud
- Facility and circumvention
- Undue influence
- Error
87
What is force and fear?
This is the clearest case of invalidity.
In the case of a woman/child, the degree of pressure or force required is less.
Some forms of pressure are legitimate, however.
It is a question of evidence.
88
What is an example of a case involving force and fear?
Hislop v Dickson motors
89
What court has exclusive jurisdiction in actions for the reduction of a contract or other juridical act?
Currently the Court of Session, but that position will change when the Courts Reform (Scotland) Act 2014, s 39(2)(g), comes into force, under which the sheriff court will also have jurisdiction in such cases.
90
What is fraud?
Deliberately misleading statements by party to another to induce the latter to enter a contract with the former.
91
What is an example of a case involving fraud?
Boyd & Forest v Glasgow & S W Railway Co
92
What is facility and circumvention and what are the 3 elements for a successful challenge that need to be proven by the party?
A contract is reducible for this when a facile (weak-minded) party has been imposed upon unfairly and misleadingly.
3 elements for a successful challenge that need to be proven by the party:
- Weakness and facility (but not insanity which would be a question of capacity)
- Circumvention (falling short of fraud which involves intent to deceive)
- Lesion (loss)
The greater the lesion and facility, the less circumvention required.
The closer the circumvention comes to fraud, the less facility is required.
93
What is an example of a case involving facility and circumvention?
Anderson v The Beacon Fellowship
94
What is undue influence?
A contract obtained by the exercise of undue influence by a person in a position of authority or trust – reducible.
The other party needs to have a relationship of dependency on this party.
Eg. Solicitor and client.
95
What is an example of a case involving undue influence?
Honeyman’s Exrs v Sharp – widow and art advisor.
96
What is error?
Must be about having the wrong facts as opposed to mis-predictions.
Must be ‘error plus’, and something can be pinpointed in addition to their error.
The law’s requirements are meant to make it tough to get out of a contract, otherwise the stability of contracts would be undermined.
97
What is an example of authority regarding error?
Stair institutional writings: “Those who err in the substantials of what is done, contract not.” (Inst I 10 3)
98
Error can be on the grounds of what FIVE things?
- Subject matter (what is being contracted on)
- Identity (who is contracting with who)
- Price
- Quality of goods
- Nature of contract
99
What is common/shared error?
A mistaken, shared assumption about the state of affairs on which the contract is based.
eg. In the contract for sale of a painting, both parties think the painting is in existence whereas it has been destroyed.
100
What is an example of a case involving common error?
Couturier v Hastie
101
What is an example of a case involving common error where one of the parties is dead?
Scott v Coulson
102
What is an example of a case involving common error where both parties misunderstand what is owned by the seller?
Hamilton v Western Bank
103
In common error situations, when is the contract not void?
When the existence of the subject matter or the right was a risk which the parties were speculating about.
104
What is mutual error?
Misapprehension as to each other's intention resulting in parties being at cross purposes - two clashing assumptions rather than one shared assumption.
There is dissensus rather than consensus.
105
When do mutual error situations afford a remedy (including case references)?
Normally only where there is some irresolvable latent ambiguity.
eg. Raffles v Wichelhaus
Stuart v Kennedy
Otherwise the error is usually treated as irrelevant.
If objectively the court can determine the meaning of the contract (as in Muirhead & Turnbull v Dickson), that meaning will be enforced.
106
What is unilateral error?
One party only is mistaken as to some element of the contract, and the other party is aware of the mistake.
107
What will happen to the contract in the case of unilateral error?
In general, it will not lead to reduction of the contract.
Error plus approach requires the error to result from a MISREPRESENTATION by the other party (either innocent or fraudulent).
- Lord Watson in Stewart v Kennedy
Misrepresentation must have induced the erring party to enter into the contract - contract is therefore voidable.
108
What is an example of a case involving unilateral error?
Steel v Bradley Homes (Scotland) Ltd
109
What is an example of a case involving unilateral error where the contract was reduced WITHOUT misrepresentation?
Steuart's Trs v Hart
HOWEVER:
Gloag on unilateral error without misrepresentation -
. When a book is exposed for sale in a bookstall it is generally supposed that a collector may buy it at the price asked, though he knows that it is rare and valuable, and must know that the bookseller is unaware of its value, and yet, in all essential points, such a case is on all fours with Steuart’s Trs v Hart.”
110
What is error in transaction?
Error in transaction is about the meaning/effect of a contract term, and arises when the contractual declaration of a party fails to correspond with its true intention, through misunderstanding of the words used or where a court subsequently gave the words a meaning different from that subjectively intended by the party.
111
What is an example of a case involving error in transaction?
Anderson v Lambie
112
What is error in motive?
A party's intention is accurately reflected in the contractual declaration, but the intention was based upon a mistaken appreciation of the real state of facts when the declaration was made.
113
What are the TWO main differences between cases involving error in motive and cases involving error in transaction?
1. Error in motive cases usually require misrepresentation by the other party before any ensuing contract can be struck down, whereas error in transaction cases do not.
2. Errors in transaction must normally be in the substantials of the contract, but with errors in motive the question is simply whether or not the deceived party would have entered the contract with knowledge of those facts.
114
What are the defined circumstances in which errors in transaction lead to reduction?
VOID:
- Error is common to the parties
- Error as to identity of the other contracting party where that identity is in effect a term of the contract
VOIDABLE:
- Error of one is known to but not corrected by the other.
115
What is a case where there was error in transaction and in the substantials of the contract, but the contract could not be reduced?
Angus v Bryden (error as to subject matter)
Contrast with:
Spook Erection (Northern) Ltd v Kaye (error as to quality of thing engaged for)
116
What are a couple of situations where the parties think there case is about error, but it is actually about something different?
- Parties' communications do not show a concluded consensus (Mathieson Gee v Quigley) - formation issue
- Parties' words betray an irresoluble latent ambiguity (Stuart v Kennedy) - really about an arrangement being too uncertain to be enforceable as a contract.
117
What is a misrepresentation?
- The statement must be material in the sense that it induces a party to contract having been made in the course of pre-contractual negotiations (Menzies v Menzies)
- It must be an inaccurate statement of fact and not an expression of mere opinion or statement of intention (Bisset v Wilkinson) BUT a false statement of one's intention is a representation of fact, and a false statement of opinion is a representation of fact.
- Normally there is no duty of disclosure in contract, so silence cannot constitute a misrepresentation (there are exceptions)
118
When may silence amount to misrepresentation?
- In contracts of utmost good faith (Eg. insurance), where there is a duty to disclose all material facts.
- Where the parties are in a fiduciary relationship (eg. parent and child, solicitor and client etc)
- Where there is a half-truth that has not been completed
- Where a statement, true when made, is falsified by circumstances
- Where the very appearance of goods exposed for sale is likely to mislead, the seller is bound to reveal the true nature of the goods (Patterson v Landsberg)
119
How do fraudulent, innocent and negligent misrepresentation link?
- Fraudulent misrepresentation (contract and delict)
- Innocent misrepresentation (contract)
- Negligent misrepresentation (delict) is a category of innocent misrepresentation.
120
Why may the law decline to enforce an agreement?
- Because it is directly prohibited
- Because it is contrary to morality or public policy
- Because its mode of performance is unlawful
121
Case illustrating the different between negligent and innocent misrepresentation?
RBS v O'Donnell
122
What is the feature of all 'Pacta illicita' contracts?
They cannot be directly enforced by action (neither party can enforce or claim damages for breach of such an agreement)
The contract is unenforceable rather than void.
123
When can error in motive lead to to reduction of a contract even without misrepresentation?
When the transaction is gratuitous.
124
When are contracts objectionable on moral grounds?
- Contracts to commit a crime or a delict
(Laughland v Millar Laughland & Co)
- Contracts promoting sexual immorality
(Hamilton v Main)
(Pearce v Brooks)
- Contracts which interfere with freedom of marriage
- Contracts which interfere with parental relations
- Contracts which induce breach of trust
125
What are contracts contrary to public policy?
This is a wide field for judicial intervention covering:
- Contracts prejudicial to the impartial administration of justice
- Contracts to promote corruption in public life.
126
What are two examples of cases that were contrary to public policy?
Parkinson v College of Ambulance
| Quantum Claims Compensation Specialists Ltd v Powell
127
What are examples of restrictive covenants?
- Contracts where the seller of a business undertakes not to compete which the purchaser
- Contracts where an employee agrees with his employer not to join a rival business or not to set up a similar business in competition with the employer when he leaves his employer.
- Contracts of partnership
- Contracts whereby manufacturers restrict the trading of a distributor (solus agreements)
128
What is an example of a restrictive covenant case between the seller and purchaser of a business?
Nordenfelt v Maxim Nordenfelt Guns & Ammunition co.
129
What is an example of a restrictive covenant case between an employ and his employer?
Bluebell Apparel Ltd v Dickinson
130
What is an example of a restrictive covenant case of partnership?
Anthony v Rennie
131
What is an example of a restrictive covenant case between manufacturer and distributor?
Esso Petroleum v Harpers Garage
132
What is the enforceability test for restrictive covenants?
One of reasonableness:
- Spatial area over which restriction is to operate
- Duration of time for which restriction is to operate
- Nature of restriction imposed
133
What does unlawfulness under statute mean?
Many statutes affect the validity of particular contracts but because the parliamentary draftsmen have not adhered to a strict nomenclature, many different words and phrases are used.
134
What are the consequences of unlawfulness?
- 'ex turpi causa non oritur actio' (no action arises out of an immoral situation)
- 'in turpi causa melior est conditio possidentis (in an immoral situation the position of the possessor is the better one)
135
What is the general principle of privity of contract?
In a contract between two parties, no third party can acquire rights under it (there are some exceptions)
136
What is assignation?
Assignation is simply the transfer of existing contractual rights to a third party. The transferor is known as the assignor and the transferee is known as the assignee.
Intimation to the other party is essential in perfecting the assignee's right of exercising his cedent.
137
What is an example of a case involving assignation?
Scottish Widows’ Fund v Buist
138
In assignation, can one party assign without the consent of the other party?
If there is a clause in the contract prohibiting assignment, then no.
Otherwise the issue depends on whether delectus personae exists in relation to the contract. This will not normally be the case in relation to an assignation of contractual rights. However, where it is sought to transfer duties (delegation), delectus personae will often be present.
139
What is the legal effect of death or bankruptcy in assignation?
Note that to a great extent the legal effect of death or bankruptcy is to transfer all assignable rights and duties automatically to the executor or trustee in bankruptcy.
140
What is jus quaesitum tertio?
The right acquired by a third party.
141
Who are the three parties in jus quaesitum tertio?
1. Stipulator = contracting party
2. Debtor = other contracting party who performs to the -
3. Tertius/third party
142
What are the pre-requisites for a jus quaesitum tertio?
1. There must be a contract between A and B
2. A and B must intend to confer a benefit upon a third party C (incidental benefit is not sufficient)
3. A copy of the contract must be delivered to C, or some other equivalent act must occur.
143
What case emphasises the requirement of a copy of the contract being delivered to C?
Carmichael v Carmichael’s Exx
144
How can it be demonstrated that the contracting parties intended the agreement to be irrevocable?
(1) by the nature of the original contract
(2) by the whole circumstances of the case (Carmichael, above)
(3) by intimation or delivery of the contract to the third party
(4) by registration of the contract in a public register such as the Books of Council and Session
145
How can breach of contract occur?
* Total or partial failure to perform, e.g. non-delivery of goods, delivery of less than contractual quantity, (or refusal to perform including indication of refusal before performance actually due)
* Defective performance – performance rendered but unsatisfactory, e.g. goods unfit for purpose
* Failure to perform on time set by contract, late delivery
146
How can contracts be enforced?
By raising actions in court or by self-help remedies.
147
What remedies are available to the innocent party?
```
Self help (retention and recession)
Judicial (implement, interdict and damages)
```
148
What does it mean if remedies are cumulative?
More than one can be used by the innocent party, so long as they are not inconsistent with each other.
149
What is mutuality?
Contracts will be about one party supplying goods or services and the other party paying (exchange of obligations).
Obligations on one side given in exchange for obligation on other side.
150
What is retention?
Retention is to withhold or suspend one's own performance in response to breach on the other side as a way of bringing pressure to bear on the other side to perform.
THE CLAIMS ON BOTH SIDES MUST BE CONTEMPORANEOUS.
eg. withhold rent and landlord makes repairs.
151
What is an example of a case involving retention?
Bank of East Asia Ltd v Scottish Enterprise
152
What is an example of a controversial case involving contemporaneity?
Macari v Celtic FC
153
What is rescission?
“Rescission” is the rightful act of the aggrieved party indicating that, as a result of the other’s material breach, the aggrieved party is no longer required to fulfil contractual obligations, ie, effectively treat duties under the contract as at an end, for the future. Intimation of this fact is essential.
Breach HAS to be material and go to the root of the contract.
154
What are three cases where parties did not follow instructions relating to rescission of contract?
Wade v Waldon
Blyth v Scottish Liberal Club
Macari v Celtic FC
155
What is the primary right for breach in the sale of goods?
Rejection of the goods.
156
What is an irritancy clause in a contract?
A clause which entitles one party to terminate the contract in the event of specified breaches of misconduct of the other party (common in leases)
157
What is repudiation/anticipatory breach?
This is a wrongful act by one of the parties to the contract indicating an unequivocal refusal to fulfil contractual obligations in the future.
It takes effect as breach upon 'acceptance' by the innocent party.
Only has effect if innocent party accepts the breach - they may elect to perform his side of the bargain and claim contract price.
158
What is an example of a case where accrued rights survive after termination of contract?
Photo Production Ltd v Securior Transport Ltd
159
What are TWO examples of cases where recession entails restitution but does not affect accrued rights?
Graham v United Turkey Red Co Ltd
| Connelly v Simpson
160
Is it breach to say today that you won't perform tomorrow?
Law takes the pragmatic view that this kind of anticaptory refusal can be treated as breach by party straightway.
161
What is an example of a case where there is anticipatory breach but one of the parties performs their obligations?
White & Carter (Councils) Ltd v McGregor
162
What is action for debt?
A judicial remedy of the simple action for payment of money. The contract price is sought, whether for goods sold and delivered, or for services rendered.
163
What is specific implement?
A positive judicial remedy to try to secure performance.
Failure to obey such a decree is contempt of court punishable by up to 6 months imprisonment.
The primary remedy to which the innocent party is entitled.
164
When will specific implement NOT be granted by the court?
- To enforce an obligation to pay money (because otherwise it would result in imprisonment for civil debt)
- To enforce a contract involving a personal relationship (because this would be undue restraint on personal liberty)
- Where decree unenforceable or performance impossible
- Where the subject matter is of no special significance in itself and money compensation would be adequate
165
What is prima facie?
A fact presumed to be true unless shown otherwise.
166
What are TWO important cases regarding specific implement?
Highland & Universal Properties Ltd v Safeway Properties Ltd (2000) (Scottish example)
[Retail Parks Investments Ltd v Royal Bank of Scotland plc (1996) (Scottish example)]
Co-operative insurance society ltd v Argyll Stores (Holdings) Ltd (1998) (English example)
167
What is the difference between interim interdict and perpetual interdict?
Interim (temporary) interdict requires a prima facie title and a prima facie case and the balance of convenience in favour of the order.
168
What are damages?
A monetary substitute for performance, representing the losses suffered by the innocent party as a result of breach of contract.
169
What must a pursuer prove before they can claim damages for losses caused by breach of contract?
1. The losses were CAUSED by the breach of contract
2. The damages claimed are not too REMOTE
3. The pursuer has MITIGATED any losses suffered
170
What is the PURPOSE of damages?
To place the injured party in the SAME position he would have been in if there had been no breach.
171
What can interdicts be used for?
To prevent an anticipated breach of any kind.
172
What is an example of a case demonstrating how, in loss, damages are measured by the loss to the innocent party, not gain to the guilty party?
Teacher v Calder
173
What is an example of a case demonstrating how some English cases have begun to establish a concept of “gain based” as distinct from compensatory damages?
Attorney General v Blake
174
What is loss?
Generally an economic concept in contract cases - e.g. lost profit on re-sale, extra cost of replacement performance, cost of curing defective performance, wasted expenditure.
175
When can damages be claimed?
Every breach in contract gives rise to a claim for damages, even if only for inconvenience
Even where someone claims for specific implement, there will be an alternate back-up claim for damages.
BUT
More recent cases have put doubt on this principle – arguing that there has to be loss before there can be damages.
176
What are TWO difficult cases involving loss?
Anglia TV v Reed
| Ruxley Electronics and Construction Ltd v Forsyth
177
Case examples where damages were available on the basis that the purpose of the contract was either to provide pleasure or enjoyment, or to alleviate mental distress:
Diesen v Samson
Jarvis v Swan Tours
Ruxley Electronics & Construction Ltd v Forsyth
178
What is a case involving 'stigma' damages?
Malik v BCCI
179
What does causation involve?
* Show that this loss is linked to the breach
* The test of whether a breached cause by a loss is to ask whether “but for” the breach the loss would have occurred.
* It’s not necessary that the breach be the solo cause – so long as it’s linked.
180
What is an example of a case involving causation?
A/B Karlshamns Oljefabriker v Monarch Steamship Co
181
What does remoteness of damage mean?
• In general, a defender is not liable for loss which is too “remote”
Is the loss so remote that it was not foreseeable?
I.e. did the loss arise from usual circumstances, or unusual circumstances.
• A general test – less concerned with conduct, but more with the fact that there must be an end to liability.
182
What is the formula for remoteness of damage set out in Hadley v Baxendale?
A loss that occurs naturally (i.e. ordinary losses). It’s in the ordinary course of events that the loss is likely to happen E.g. a contact of sale where goods aren’t delivered.
The second limb is where the loss that occurs is not loss of the usual kind. For a party to be liable under this, the circumstances giving rise to that unusual loss must be made known to the party who is later in breach and finds the question of liability being put to him later on.
183
What is mitigation?
The idea that the party who is faced with breach of contract can’t allow that breach of contract thereafter to protect it against all ensuing losses it suffers – has to take steps to minimise loss, otherwise his damages may be reduced.
eg. buyer of consumer goods who is faced with non-delivery, can’t just sit back and allow losses to accumulate, buyer expected to get replacement good from market and recover loss readily measured.
184
What are the TWO main cases relating to remoteness?
Hadley v Baxendale
| Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)
185
What is remoteness dependent on?
The parties' agreement.
Were the parties contracting on the basis that one would be liable for the consequences of a breach? What would they have reasonably considered as the extent of the liability being undertaken? This means that foreseeability of a loss as a not unlikely consequence of breach is neither necessary nor sufficient to make a loss recoverable.
186
What is agreed damages for?
Compensates for the uncertainty of other remedies.
• Parties try to make their liabilities less predictable by accounting for it in provisions in a contract stipulating that a fixed sum will be payable on breach.
• Courts will uphold such a clause if it is a genuine pre-estimate of loss (liquid damage) as opposed to a penalty clause
• Penalty clause = if the clause penalises or is intended to pressurise the party in breach then it will be treated as invalid and is not enforceable
• Another solution is to say that there should be no damages at all
187
What is the leading case for agreed damages?
Dunlop Pneumatic Tyre Co v New Garage & Motor Co
188
What are acceleration clauses?
Acceleration clauses: where, if one instalment is not paid, the whole price is immediately payable.
Forfeiture clauses: on breach, the injured party forfeits deposit.
Indemnity clases
Retention clauses
Termination clauses
189
How can the rules on penalty clauses be evaded?
By ensuring that the penal effect follows from something that the party to be penalised is entitled to do under the contract.
eg. Allow party to terminate contract, but only if penal payment made.
Allow party to overdraw bank account but only at penal interest rates.
190
How may a party negate or limit his liability under a contract?
Exclusion/exemption clauses
Limitation clause
Indemnity clause
191
What did the Unfair contract terms act 1977 give courts the power to do?
To declare terms unfair and unreasonable.
| And also simply declare that clauses excluding liability for death and personal injury were simply void.
192
What will new legislation relating to unfair contract terms say?
Terms in such standard form contracts which create a significant imbalance between parties contrary to requirements of good faith may be struck down by courts.
- Much wider than 1977 act that applied primarily to exclusion policies
193
What was the bank charges case relating to consolidation and reform of unfair contract terms?
Office of Fair Trading v Abbey National plc
194
What is unjustified enrichment?
The general principle that anyone made richer by the loss of another must restore or pay for the benefit received is obviously too wide to give rise in every case to an obligation to restore. Every legal system recognising the principle has to find some way of confining it.
- Obligations in UE are involuntary
- The enrichment should be reversed if its retention is not supported by legal ground
195
What are four ways unjustified enrichment occurs?
* Addition of a new asset to a person’s wealth;
* Adding value to a person’s already existing asset;
* Preserving another’s asset which would otherwise have been lost or reduced in value, saving that other the expense involved;
* Performing an obligation lying upon another, saving that other the expense of performance.
196
What is an example of an UE case involving Receipt or acquisition of money?
Morgan Guaranty Trust Co of New York v Lothian Regional Council
(Enrichment by transfer)
197
What is an example of an UE case involving receipt or acquisition of other property?
Findlay v Munro
| Enrichment by transfer
198
What is an example of an UE case involving improvement of another's property?
Newton v Newton
| Enrichment by imposition
199
What is an example of an UE case involving unauthorised use of another's property?
Jarvis v Manson
| Enrichment by taking
200
What is repetition, restitution and recompense?
```
Repetition = repayment of money
Restitution = restoration of property
Recompense = payment for the service or other enrichment rendered
```
201
What is enrichment by transfer?
The impoverished party voluntarily transfers something (land, goods, money) to the enriched.
- You cannot get this back if the transfer was the result of performing a valid contract or making a gift.
- Otherwise, you can show that one of the condictiones is applicable so the enrichment can be reversed.
202
What is enrichment by imposition?
The impoverished party imposes enrichment, (eg. improves another's property) upon the enriched, without the latter's authorisation.
203
What is enrichment by taking?
The enriched party takes something from the impoverished (Eg. uses their property) without authority of consent.
204
What are the condictiones in enrichment by transfer?
Condictio indebti - 'action for the recovery of an undue transfer'
205
What is a typical condictio indebti situation?
Where the transferor has made the undue transfer in question as the result of an error that it was due by the transferor because of some legal obligation owed to the transferee.
Error may be in fact or in law.
Transferor's error need not be excusable.
206
What is an example of a case involving condictio indebti?
Morgan Guaranty v Lothian Regional Council
207
What is condictio causa data causa non secuta?
Action for the recovery of something transferred for a future purpose which failed to materialise.
eg. Transfers in anticipation of marriage
208
What are two examples of cases involving condictio causa data causa non secuta?
Shilliday v Smith
| Cantiere San Rocco SA v Clude Shipbuilding & Engineering Co
209
What is the classic case of imposed enrichment?
Unauthorised improvement of another's property (Newton v Newton)
210
What are the rules regarding imposed enrichment?
* The impoverished person in good faith possession of property while carrying out the improvement, that is, without knowledge of his lack of right to have possession;
* The impoverished person worked under error, usually that the property being improved belonged to him.
* Recovery without error if some other ground making the enrichment unjustified is present
211
What happens in situations of imposed enrichment where there is performance of another's obligations?
Where a party (P) pays or performs to a creditor (C) the debt or obligation owed to C by a debtor (D), without P having the authority of D to do so. If D’s obligation to C is discharged by P’s action, then D is enriched by the saving in no longer having to pay or perform to C. This enrichment is at P’s expense: P thus has an enrichment claim against D.
In case of payment of money, P can still recover from D even though he paid C deliberately and with full knowledge of all the relevant facts. If the debt is discharged, as C will generally treat it as being, then D is liable. D would have had to pay anyway, under the now discharged obligation; the fact that D is now having to pay P rather than C makes little or no difference to his basic position. There is no real need to add in further protections for D against unwanted intervention in his affairs.
212
What is an example of a case where someone performs someone else's obligations?
Lawrence Building Co. v Lanarkshire Country Council
213
What are cases demonstrating the pursuer recovering full value of the property (restitution) and not just defender's gain?
Shetland Islands Council v BP Petroleum Development Ltd
Faulds v Townsend
Oliver & Boyd v The Matt Typefounding Co Ltd
International Banking Corporation v Ferguson, Shaw & Sons
214
What is a type of defence in UE?
Change of position/loss of enrichment
215
What is a case example of change of position?
Royal Bank of Scotland v Watt
216
What are usually the remedies in transfer cases?
Either repetition or restitution, depending on the nature of what was transferred.
217
What is usually the remedy in imposition and takings cases?
Recompense.
218
What are Bell's 5 Substantials?
```
Identity
Subject Matter
Price
Quality
Nature of contract
```
219
What is a firm offer? Can they be withdrawn?
Where the offeror states an offer is open for a certain length of time.
They cannot be withdrawn within stated length of time.
220
Exception to the postal acceptance rule?
Burnley v Alford.
Postal acceptance not applicable because the withdrawal was not communicated through the fault of B, A did all they could to communicate their withdrawl before the acceptance was posted.
221
When does a promise NOT have to be in writing?
When it is made in the course of business in a commercial transaction.
222
Why can firm offers not be withdrawn (unless they are declined)?
The courts hold that this is because there is a promise within the offer – there is a promise to keep the offer open for a declared length of time.
223
Is the John Lewis Price Promise enforceable in Scots Law?
YES because it was a promise made by John Lewis in the course of their business.
Even though it is not subscribed.
224
How do missives have to be signed by?
The party issuing it.
225
What must probativity contain?
The granter’s subscription, the signature of one witness to the subscription, and the name and address of each witness (to ensure that they are real people).
226
When do the requirements of writing not apply?
1. If the obligee (claimant) has acted (or refrained from acting)in reliance on the contract or obligation to the knowledge of the obligor, with the result that his position has been affected to a material extent.
2. If the interests of the obligee would be adversely affected to a material extent if the other party were allowed to withdraw on the ground of lack or writing.
• Smith v Oliver
227
Is good faith an implied term?
No, it is a legal rule.
228
Liverpool City Council v Erwin (ENG)
Is the term implied in fact necessary to make the contract work or to give the contract business efficiency?
English HOL case yet perfectly applicable to Scotland.
This is not a commercial contract – this was a contract of lease between the city council and a tenant of the council houses. The tenants were living in a set of tower blocks, they were of bad condition. The lifts didn’t work. The rubbish chutes didn’t work, they were blocked. The lights on the stairs and passages didn’t work. The council was doing nothing about this.
The council put all of its anti-social tenants into these blocks in order to keep the rest of Liverpool safe.
Tenants brought an action against the council for breach of contract. On looking at the actual contract, the council had no duty to maintain the flats – there were only obligations for the tenants, it was almost entirely one sided.
The English courts held that terms needed to be implied in order to create a balance between the two sides of this contract.
Ultimately decided that you could not impose an absolute obligation on the council because it had resources issues (other people in the council area needed money spent on them too), but the council should use “reasonable endeavours” to ensure that the flats were reasonably maintained.
229
Buchanan Jardine v Hamilink
Implied terms of quality in the course of a business:
This concerns the sale of livestock at closing of business in the course of that business. Buchanan (B) sold their farm and all of its livestock to Hamilink (H).
The seller of a farm and its dead livestock then raised an action against the purchasers (H) for the unpaid balance of the price.
H counterclaimed on the basis that shortly before they took entry to the farm, a cow belonging to B which was not being sold under the contract had been found to be a positive tuberculosis reactor. This prevented the resale of the animals. H argued that the livestock were not of “merchantable quality”.
B countered this by arguing that he could not be said to have been selling “in the course of a business” where he had sold the business to H already by this point. B also argued that the goods sold were of merchantable quality, as the cow with the positive tuberculosis reaction was not sold under the contract.
Courts held that, because the wording of the Sale of Goods Act is “in the course of a business” as opposed to “in the course of business”, the fact that B had already sold H the business was irrelevant – so that a displenishing sale, while it might be the last act in the business, was nonetheless a sale in the course of a business.
Courts also held that the words “merchantable quality” referred to the physical quality of the goods themselves, and NOT to external circumstances (i.e. the sick cow). H’s counterclaim was dismissed on this basis.
230
A voidable contract can only be set aside if...?
1. Restitutio in intergrum is possible.
2. There has been no unnecessary delay in taking the action to court.
3. The rights of the third parties have not been affected.
4. The contract must not have been affirmed under the Age of Legal Capacity (S) Act 1991, nor through the operation of a personal bar under the Requirements of Writing (S) Act 1995.
231
When can unilateral error reduce a contract?
1. IF the other party knew of the error and took unfair advantage of the situation.
2. In relation to a gratuitous transaction.
As the recipient in a gratuitious transaction is receiving something for nothing, it is thought equitable to allow the obligator to be relieved of his obligations if he can prove that he has made a mistake.
232
What needs to be proven before unilateral error can be pleaded?
Misrepresentation on the other side.
233
When is there a duty of disclosure?
1. in contracts of utmost good faith there is a duty to disclose all material facts
2. where the parties are in a fiduciary relationship e.g. parent and child
3. where there is a half-truth that has not been completed
4. where a statement, true when made, is falsified by circumstances
5. where the very appearance of goods exposed for sale is likely to mislead, the seller is bound to reveal the true nature of the goods
234
What is the alternative to reduction of contract in a case where there has been innocent misrepresentation?
There is an option of suing for breach of contract as an alternative to reduction where the statement that forms the basis of the misrepresentation has been incorporated as a term of the contract.
This would often be done where the money provided from the breach in contract would be considerably more than the money that would be returned via unjustified enrichment had the contract been reduced.
235
What are some examples of contracts contrary to public policy?
Interfere with the court of Justice (e.g. bribing witnesses)
Deceive public authorities
Oust the jurisdiction of the courts
Attempt to purchase honours
Involve trading with the enemy
Involve doing an illegal act in a foreign country
236
What is the difference between illegality in public law and illegality under statute?
Under law is more flexible.
237
What does 'ex turpi causa non oritur actio' mean?
No action arises out of an immoral situation.
| i.e the courts will refuse to implement the contract or allow an action for damages for breach of contract.
238
What does 'in parli dilictio' mean?
Both parties are equally at fault.
239
What does 'as in turpi causa melior est conditio possidentis' mean?
In an immoral situation the position of the possessor is the better one.
240
A voidable contract can only be set aside if...?
1. Restitutio in intergrum is possible.
2. There has been no unnecessary delay in taking the action to court.
3. The rights of the third parties have not been affected.
4. The contract must not have been affirmed under the Age of Legal Capacity (S) Act 1991, nor through the operation of a personal bar under the Requirements of Writing (S) Act 1995.
241
When can unilateral error reduce a contract?
1. IF the other party knew of the error and took unfair advantage of the situation.
2. In relation to a gratuitous transaction.
As the recipient in a gratuitious transaction is receiving something for nothing, it is thought equitable to allow the obligator to be relieved of his obligations if he can prove that he has made a mistake.
242
What needs to be proven before unilateral error can be pleaded?
Misrepresentation on the other side.
243
When is there a duty of disclosure?
1. in contracts of utmost good faith there is a duty to disclose all material facts
2. where the parties are in a fiduciary relationship e.g. parent and child
3. where there is a half-truth that has not been completed
4. where a statement, true when made, is falsified by circumstances
5. where the very appearance of goods exposed for sale is likely to mislead, the seller is bound to reveal the true nature of the goods
244
What is the alternative to reduction of contract in a case where there has been innocent misrepresentation?
There is an option of suing for breach of contract as an alternative to reduction where the statement that forms the basis of the misrepresentation has been incorporated as a term of the contract.
This would often be done where the money provided from the breach in contract would be considerably more than the money that would be returned via unjustified enrichment had the contract been reduced.
245
What are some examples of contracts contrary to public policy?
Interfere with the court of Justice (e.g. bribing witnesses)
Deceive public authorities
Oust the jurisdiction of the courts
Attempt to purchase honours
Involve trading with the enemy
Involve doing an illegal act in a foreign country
246
What is the difference between illegality in public law and illegality under statute?
Under law is more flexible.
247
What does 'ex turpi causa non oritur actio' mean?
No action arises out of an immoral situation.
| i.e the courts will refuse to implement the contract or allow an action for damages for breach of contract.
248
What does 'in parli dilictio' mean?
Both parties are equally at fault.
249
What does 'as in turpi causa melior est conditio possidentis' mean?
In an immoral situation the position of the possessor is the better one.
