prerequisites to contract Flashcards
What does the Age of Legal Capacity (Scotland) Act 1991 say about capacity?
Under the Act, persons under 16 have no legal capacity to enter into transactions, while those 16 or older have full legal capacity, with some exceptions for minors.
How does insanity affect a contract?
A contract made by an insane person is valid only if the person was capable of understanding the contract at the time it was made. If not, the contract is void (John Loudon & Co v Elder’s Curator Bonis 1923 S.L.T. 226).
What is the effect of intoxication on a contract?
A person in a state of extreme intoxication is incapable of entering a contract, while less intoxication may not nullify the contract but could impact its validity (Taylor v Provan 1864, 2 M. 1226).
What happens if someone enters into a contract without capacity?
If one party lacks capacity, the contract is void, meaning it has no legal effect, and no contractual obligations are created. Remedies would be sought under unjustified enrichment, not breach of contract.
How does the court assess whether the parties intended to create legally binding obligations?
The court applies four criteria from Morgan Utilities Limited v Scottish Water Solutions Limited (2011) to assess intention.
What are Lord Hodge’s four criteria from Morgan Utilities Limited v Scottish Water Solutions Limited to determine intention?
Whether the parties showed an intention to be bound immediately.
An objective approach to understanding the parties’ actions and statements.
Consideration of the parties’ behavior after the agreement.
The court must take a neutral approach.
What is the presumption in commercial arrangements regarding the intention to create legal obligations?
The court presumes parties intend to create legally binding obligations, especially when both parties are acting in the course of business, or one party is a business (e.g., Carlyle v Royal Bank of Scotland [2015] UKSC 13).
What will rebut the presumption of intent to create legal obligations in commercial arrangements?
An express statement that the parties do not intend to be legally bound (e.g., “binding in honour only”) will rebut the presumption, as seen in Woods v Co-operative Insurance Society 1924 SC 692.
Does the phrase “subject to contract” automatically rebut the presumption of intent to create legal obligations?
No, “subject to contract” does not automatically rebut the presumption, but a clear intention not to be bound until the contract is written will rebut it, as seen in Karioulias SA v The Drambuie Liqueur Co Ltd 2005 SLT 813.
What is the presumption in family arrangements regarding the intention to create legal obligations?
The court presumes that in family arrangements, the parties do not intend to create legally binding obligations (e.g., Balfour v Balfour [1919] 2 K.B. 571).
What is the presumption in social arrangements regarding the intention to create legal obligations?
The court presumes that in social arrangements (e.g., agreements to attend a dinner or play golf), the parties do not intend to create legally binding obligations (e.g., Robertson v Anderson 2003 S.L.T. 235).
Are “agreements to agree” legally binding?
No, agreements to agree are not generally binding because they require further negotiation to determine precise obligations, making them unenforceable (e.g., Courtney & Fairbairn v Tolaini [1975]).
What is the meaning of pacta illicita?
Pacta illicita refers to agreements to perform actions that are impossible or illegal, and these agreements are unenforceable as a matter of law.
What happens if an obligation becomes impossible to perform after it is created?
If supervening events make performance impossible, the obligation is terminated through a concept called “frustration”
What is the general rule for creating a contract in Scotland?
No particular formalities are required for the creation of a contract, as per s1(1) of the Requirements of Writing (Scotland) Act 1995.
What does s1(2) of the Requirements of Writing (Scotland) Act 1995 specify?
It specifies that certain contracts (e.g., contracts involving land or gratuitous unilateral obligations) must be constituted in writing and signed by the parties.
What types of contracts must be in writing under the Requirements of Writing (Scotland) Act 1995?
Contracts or unilateral obligations involving the creation, transfer, variation, or extinction of an interest in land.
Gratuitous unilateral obligations, other than in the course of business.
Can digital signatures be used to fulfill writing requirements under ROWSA 1995?
Yes, digital electronic signatures can now be used to complete a written contract under s9A to 9G of the Requirements of Writing (Scotland) Act 1995.
Are ‘gratuitous unilateral obligations’ defined in the Requirements of Writing (Scotland) Act 1995?
No, ‘gratuitous unilateral obligations’ are not defined in the Requirements of Writing (Scotland) Act 1995, and the courts have not provided clear guidance on what constitutes them.
Which obligations are considered ‘gratuitous unilateral obligations’ and require writing under ROWSA?
Promises with no benefit to the promisor: Require writing.
Promises with a benefit to the promisor: Likely require writing.
Contracts with mutual onerous obligations: Do not require writing.
Contracts with one substantive obligation: Do not require writing.
What are the consequences of personal bar under ROWSA 1995?
Party B cannot withdraw from the contract.
The contract is not invalid despite lacking the required written formalities.
Does personal bar apply to successors of the original parties?
No, personal bar applies only to the original parties to the contract (The Advice Centre for Mortgages v McNicoll 2006).
What happens when key terms are not finalized in a contract?
Personal bar does not apply if the key terms are not finalized, even if a party relied on the contract (Aisling Developments Ltd v Persimmon Homes Ltd 2009).
What is ‘execution in counterpart’ in Scots law?
‘Execution in counterpart’ allows a document to be signed by different parties on separate copies, and it is valid in Scots law (Smith v Duke of Gordon, 1701).
