Week 3 pre-requisities to contract Flashcards
(15 cards)
What is a contract
an agreement between two or more persons (the 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, impossible or illegal”
MacQueen and Thomson, para 1.10
Capacity for a contract
Age of Legal Capacity (Scotland) Act 1991
s.1 (a): a person under the age of 16 years shall, subject to section 2 below, have no legal capacity to enter into any transaction;
s1 (b) a person of or over the age of 16 years shall have legal capacity to enter into any transaction
s9 defines “transaction” as a transaction having legal effect (and includes unilateral obligations such as promise, as well as contract)
S2 sets out some exceptions to the general rule:
s2 (1) A person under the age of 16 years shall have legal capacity to enter into a transaction—
(a) of a kind commonly entered into by persons of his age and circumstances, and
(b) on terms which are not unreasonable.
‘Young person’ aged between 16 and 18 (ie. aged 16 or 17):
What happens if a young person enters a prejudicial transaction before 21
-Can get the court to cast aside the transaction
the court will use a test
)an adult, exercising reasonable prudence, would not have entered into in the circumstances of the applicant at the time of entering into the transaction, and
(b)has caused or is likely to cause substantial prejudice to the applicant.
However this cannot occur
if restutito integrum isnt possible
the young person lied about their age and will be barred from applying to the court
-Any of the parties to a transaction may apply to the court to have the transaction ‘ratified’ before the ‘young person’ turns 21! (s.4)
Pre-requsities to contract capacity
Insantiy
John Loudon & Co v Elder’s Curator Bonis 1923
Intoxication
Absolute intoxication taylor v provan the court will not bound them to the contract
however
a less partial state of intoxication while the person still retains mental faciltieis and reasoning is allowed and the contract wont be annuled
Taylor v PRovan under lord neaves
“Intoxication may produce two results – the one, inability to consent, the other…of facility… This last condition of mind, if it be followed by fraud, may be a ground not for holding a contract null, but for reducing it, when it has been followed by lesion.”
Effect of lack of capacity
they dont have capacity this is what happens
This means that it is treated as if it doesn’t exist and has never existed.
No contractual obligations created
Therefore parties cannot sue each other for breach of contract
If one party has already spent money or delivered something and wants to recover, their remedy would not be under the law of contract, but under the law of unjustified enrichment.
What case and how does the court assess whether their is intention to be bound
Morgan Utilities Limited v Scottish Water Solutions Limited
-Decide whether the parties showed an intention to be bound immediately “there and then”
-Use an objective approach: “what would reasonable and honest men in the position of the parties and having their shared knowledge of the surrounding circumstances have understood” from what the parties did and said? Where it is a commercial transaction,
what would have been the reasonable expectations of sensible businesspeople?;
-Court should look at not only the events as they unfolded, but also the behaviour of the parties after the agreement was allegedly completed (which may help contextualise their intentions at the time of completion);
-The court must take a neutral approach
Formalities of Contracts
General rule: no particular formalities required for creation of a contract
s1(1) of the Requirements of Writing (Scotland) Act 1995.
Exceptions to this general rule
Where the offer says that acceptance must be in a particular form (ie. in writing), then the acceptance has to meet that condition otherwise it will not have met the offer;
There are certain contracts which (if concluded on or after 1 August 1995) can only be constituted in writing, per s1(2) of the Requirements of Writing (Scotland) Act 1995 (writing must be signed (subscribed) by the parties.).
(a) Contracts or Unilateral Obligations for the creation, transfer, variation or extinction of an interest in land;
(b) Gratuitous unilateral obligations, otherwise than in the course of business [promise!]
Note – as well as traditional ‘wet ink’ signatures, digital electronic signatures can now be used to complete a written contract (s 9A to 9G of ROWSA 1995).
Where a contract which needs to meet the ROWSA 1995 writing requirements fails to do so, the contract is not validly formed.
gratutitous unilateral obligations
-Not defined in ROWSA 1995
Are ALL promises gratuitous, on the basis that only one party is bound by them (probably the more accepted view)
OR does a promise cease to be gratuitous if the Promisor receives some benefit from it, despite the promissee not being bound.
Safer to assume all promises gratuitous and therefore writing needed…
unless made in the conduct of business! (see e.g RBS v Carlyle
promises where the promissor obtains no benefit?
yes
only one party involved in creation,so unilateral
Only one party required to perform so gratutious
promises where the promissor obtains a benefit,
probably yes( and safer to assume yes)
Only one party involved in creation, so unilateral;
Only one party required to perform, so gratuitous (albeit there is at least an argument that the benefit obtained by the promissor renders it onerous).
Contracts where both parties have to perform an onerous obligation?
CDefinitely No!
Both parties involved in creation, so bilateral not unilateral
Both parties require to perform, so onerous not gratuitous.
personal bar in ROWSA 1995
even where a contract promise must be in writing under ROWSA 1995 and it is not in writing personal bar can nonetheless kick in to stop a party from denying the validity of the when all the following are satisfied
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