Defective Contracts Flashcards

Question

How to approach a misrepresentation question

Answer 1

Stage 1 - identify misrepresentation - 4 criteria Stage 2 - what type of misrepresentation

Answer 2

The Requirements of Writing (Scotland) Act 1995 s.1 – which transactions require writing s.2 – specifics of what is required (what form of writing is required Need to be familiar with these 2 sections

Answer 3

s.1(1) Subject to subsection (2) below and any other enactment, writing shall not be required for the constitution of a contract, unilateral obligation or trust

Answer 4

s.1(2) Subject to subsection (3) below, a written document complying with section 2 of this Act shall be required for (a) the constitution of – (i) a contract or unilateral obligation for the creation, transfer, variation or extinction of a real right in land; - (There is a distinction between real rights and personal rights. Personal rights are crated by obligations, they are enforceable only to the other party in the contract. Real rights are property rights, your right to hold your property. They are enforceable against anyone who interferes with your property. ) (ii) a gratuitous unilateral obligation except an obligation undertaken in the course of business;

Answer 5

s.1(7) “any real right in or over land, including any right to occupy or to use land or to restrict the occupation or use of land…”

Answer 6

s.2(1) “… no document required by s.1(2) of this Act shall be valid …. unless it is subscribed by the granter” “Writing” now includes electronic documents Traditionally paper and ink had to be used in order to “sign” a document. The 1995 Act has been amended to allow digital signatures – an electronic document can be signed digitally (it must meet the requirements set out in the Electronic Documents (Scotland) Regulations 2014 (SSI 2014/83). Scots law does not yet allow a mix of paper and electronic in the conclusion of a contract

Answer 7

s.7(1) “…a document is subscribed by a granter of it if it is signed by him at the end of the last page (excluding any annexations …)”

Answer 8

s1(3) - personal bar “Where a contract, [or] obligation mentioned in subsection (2)(a) above is not constituted in a written document complying with section 2 of this Act, but one of the parties to the contract… (“the first person”) has acted or refrained from acting in reliance on the contract [or] obligation with the knowledge and acquiescence of the other party to the contract [or] obligation… (“the second person”) – the second person shall not be entitled to withdraw from the contract, [or] obligation; and the contract, obligation or trust shall not be regarded as invalid, on the ground that it is not so constituted, if the condition set out in subsection (4) below is satisfied.”

Answer 9

4 conditions: A) prima facie valid obligation B) 1 party (the first person) has acted in reliance on that obligation (if a contract, either party can be first, if a promise, it is the person to whom the promise is owed) (they need to perform some act, or refrain to take some action) C) That act has taken place with the knowledge and acquiescence (this means they colluded with the action, they knew about it and let it go ahead) of the other party (the second person) (if a contract it is the other party, if a promise it is the debtor) D) The first person has been materially affected as a result and would be “adversely affected to a material extent” if the obligation was invalid. (usually financial effect)

Answer 10

Fraud Error Force and fear

Answer 11

“a discrepancy between reality and a party’s belief” (McBryde)

Answer 12

Error in expression - terms of contract do no match the agreement i.e. a drafting error. Rectification under the Law Reform (Misc Provs)(Scot) Act 1995 ss.8-9 Performance Error - contract exists, but performance of contract is affected by error Unjustified Enrichment - example someone has overpaid Mistaken payments, payment to wrong person etc Consensual error - most important

Answer 13

Bell’s Principles, s.11 Subject of the contract (the thing being sold) Identity of the debtor Price Quality of thing bargained for (the characteristics about the thing being sold) Nature of the contract (the type of the agreement being bargained for) Reaffirmed in Stewart v Kennedy 1890, which establishes that it is an exclusive list

Answer 14

It establishes that the courts take an objective approach, the courts must look at what the parties do or say, not what they think. The pursuer subjectively got the terms in the contract wrong, so the claim failed. Authority for the fact that error has to be induced by the other party, in order for recession to occur.

Answer 15

Menzies v Menzies - upholds the fact that error has to be induced in order for rescission to occur.

Answer 16

Common error Mutual error (dissensus) Unilateral error

Answer 17

When both parties are mistaken about the same thing, the contract will be void Hamilton v Western Bank (1861)

Answer 18

* Offer & acceptance do no coincide e.g. Mathieson Gee v Quigley (the mouldy pond) * dissensus * Parties at cross purposes

Answer 19

Misrepresentation (leads to a voidable contract)

Answer 20

Very little authority, could argue that Morrison v Robertson was induced essential error (identity), and that resulted in a void contract, rather than voidable. Can only use this argument with identity.

Answer 21

“error +” (McBryde)

Answer 22

Courts are very sympathetic, as there is a presumption against donation. Any uninduced unilateral error in a gratuitous contract is likely to be operative Hunter v Bradford Property Trust Ltd 1970

Answer 23

Steuart’s Trs v Hart (1875) - establishes that uninduced unilateral error is operative when the other party knows about the error and takes advantage of it in bad faith. This is an error plus factor. Angus v Bryden upholds Steuart's Trs v Hart as good law, while slightly narrowing it. It establishes that uninduced unilateral error will be operative if it is an: error of expression essential error known to and taken advantage by the other party

Answer 24

Stewart v Kennedy (1890) - establishes that unilateral error must be induced Spook Erection (Northern) Ltd v Kaye 1990 - uphold Stewart v Kennedy and establishes that the other party does not have a duty to inform the party making the error of it. Error plus knowledge seems not to be enough.

Answer 25

Uninduced unilateral error will only be operative where it is an: Error in expression Essential error Known to AND taken advantage by the other party. Essentially Angus v Bryden, lower because of the conflict, sensible to say there must be an obvious show of bad faith, obvious that the other party is taking advantage.

Answer 26

Fraud (dolus) Error Force and Fear (metus) (better named force of fear, only one element is required)

Answer 27

Hislop v Dickson Motors (Forres) Ltd - establishes that futile or empty threats are not enough, the threat must be unlawful. Trustee Savings Bank v Balloch 1983 - establishes that the force can come from a third party (example husband forcing wife to sign contract through fear), and can also be directed at third parties (example threatening children or family)

Answer 28

Hislop v Dickson Motors (Forres) Ltd - establishes that there is a subjective element to to establishing fear. This case establishes that the pressure must be such as would overpower the mind of a person of ordinary firmness. Hunter v Bradford Property Trust Ltd - establishes that the fear must not be 'vain or foolish'. Commercial pressure will not satisfy the criteria for this element.

Answer 29

Traditionally contract is void If fear prevents consent = void If consent is reluctantly given, but not annulled, may could be a different ground of challenge e.g. F&C, undue influence = voidable

Answer 30

Facility and Circumvention Undue Influence Abuse of Good Faith

Answer 31

* Abuse of one party’s “weakness” by the other * 3 requirements Facility - weakness or vulnerability Lesion (disadvantage) - disadvantage to weaker party Circumvention - taking advantage of other person's weakness

Answer 32

* Age (very young or very old) – may be incapacity - if it is incapacity, it would be a different challenge. Incapacity would lead to void contract, facility leads to voidable. * Physical weakness * Mental weakness * Other vulnerability e.g. bereavement (which is grief)

Answer 33

McGilvary v Gilmarton 1986 (Isle of Luing house case)

Answer 34

Usually financial Disadvantage to the weaker person Conversely, advantage to the stronger

Answer 35

Anderson v Beacon Fellowship 1992 establishes that actual deceit is not required, emphasis is on taking advantage of another's vulnerability. The case implies that even suggestion would amount to circumvention. It is about asking the question, would the vulnerable person do the act without the influence of the other party. Facts - man suffering from manic depression tricked into renouncing his possession, donating large amount of money to religious group. Held, it was facility and circumvention,

Answer 36

Again, ask the question, would the person have done the same thing with no pressure? Also the relationship is relevant, is it a relationship of trust? Mackay v Campbell 1967 is authority for the fact that the type of transaction is relevant. Commercial transaction far harder to prove deceit compared to a family transaction

Answer 37

Yes, the proportions operate inversely. The more facile a person is, the less circumvention is required. The more circumvention used, a lesser degree of facility is required.

Answer 38

Gray v Binny 1879 Establishes the ground of challenge of undue influence, which is the abuse of a relationship of influence or trust. It establishes that relevant factors include: the fact there was no legal advice the fact he was not encouraged to get legal advice the fact that the pursuer did not know the value of the inheritance

Answer 39

Must have fiduciary or quasi-fiduciary element * Parent/child, husband/wife * Lawyer/client, doctor/patient * Clergyman/parishioner * Think about – Counsellors? Therapists? Financial advisors? * Relationship does not automatically create a presumption, must be proved (McBryde) Honeyman’s Exrs v Sharp 1978 - example of an art dealer and widowed wife being sufficient for relationship of trust/influence Gaul v Deerey 2000 - example of a taxi driver and elderly woman being sufficient for a relationship of trust/influence Both of these cases involved the men talking about wills, and subsequently being put on the will. Does not have to be stereotypical mum/son etc, it is the trust element which is important

Answer 40

Actual deceit is not required, just need personal benefit gained through abuse of trust Forbes v Knox - authority for the fact a direct benefit is not required, can be a secondary benefit for a family member for example.

Answer 41

A cautionary obligation - which is a guarantee by a third party

Answer 42

Smith v Bank of Scotland 1997 - establishes that when cautionary obligations are entered into, the other party is under duty to act in good faith, and warn the party of the consequences

Answer 43

Royal Bank of Scotland v Wilson 2004 - establishes the restrictive approach Scots law has taken in regard to abuse of good faith and cautionary obligations. This case establishes that the bank will only have a duty of good faith if there has been an actionable wrong by the third party, more specifically, undue influence or misrepresentation.

Answer 44

Misrepresentation Facility and circumvention - advantage taken of weakness Undue influence - advantage taken of relationship of trust Abuse of good faith - cautionary obligations

Defective Contracts Flashcards

(68 cards)