Common Law Accountabilities Flashcards
What is a contract?
What are features of a contract?
Give example of contracts in the finance industry.
A contract is an agreement that can be enforced by law. It features:
- Parties must intend to be legally bound
- an element of bargainging between the parties
- Some value of consideration between the parties: something given/promised by one of the parties for completion of the goods/services
- 2 or more parties agreeing to something
Examples include: depositers with a current account, bank shareholders, savers with a BSoc, customer borrowing money
What are express and implied terms?
Give examples of implied terms.
Express terms: usually written down and binding on both parties
Implied terms: not explicitely agreed but considered to be normal terms of agreement. E.g.
- Banks should act with due care and skill when processing customer transactions
- Customers should take reasonable steps to keep PINS, cheques, bank cards etc. secure
There is an implied term that a banker owes a duty of secrecy to its customer. When is disclosure acceptable?
What are these disclosures known as?
The Tournier Principles:
- Where there is a duty to disclose by law
- Where there is a public duty to disclose – e.g. info given to the police to protect the public from a crime
- Where it’s in the interests of the bank to disclose such as where the bank is suing to recover a debt, or claiming against a guarantor
- Where there is the express or implied consent of the customer
When does the Unfair Contract Terms Act 1977 apply?
What is the test of resonableness?
What is the Unfair Terms in Consumer Contract Regulations 1999?
How does it differ?
Applies to consumer-business and business-business contracts
The test of reasonableness considers:
- Relative strength of bargaining power
- Did the purchaser receive an inducement?
- Consider trade customs and previous dealings
- Was the good adapted or a special order?
The UTCCR 1999 is secondary legislation resulting from an EU directive. It applies to consumer-business relationships only.
They require the terms in the consumer contract to be fair and reasonable. A term is unfair if:
- It’s contrary to good faith;
- It’s harmful to the consumer;
- It causes a significant imbalance in the rights and obligations of the parties
- It hasn’t been individually negotiated, i.e. it’s a standard term that the seller has included without the consumer’s input.
How is a contract breached?
What are the legal remedies for a breach of contract?
A contract breach is when one or both parties to the contract fail to abide by its terms.
The following legal remedies are available:
- Corporate loans: loans to limited companies are often secured by debentures. On liquidation, all fixed charges rank ahead of floating charges. Floating charges permit the debtor to deal freely with the asset until an event of default arises.
- Mortgages: where a customer cannot repay their mortgage, the usual remedy is to take possession of the property and sell it to repay the loan. Once all monies owed are repaid, any surplus belongs to the borrower. However the bank must sell it at a reasonable price, and in selling it on behalf of the borrower, the lender has a duty of care to the borrower.
- Damages: this is monetary compensation for failure to abide by the terms of contract. Its purpose is to put the injured party in a position that would have applied if the contract had been performed. Sometimes the sum payable by way of damages is specified in the contract and is referred to as liquidation damages. Damages can even include hard to define quantities such as fun e.g. a holiday advertised as fun, wasn’t.
What is a fixed and floating charge?
Give examples.
A fixed charge is a charge or mortgage secured on particular property, e.g. land and buildings, a ship, piece of machinery, shares, intellectual property such as copyrights, patents, trade marks, etc.
A floating charge is useful for many companies, allowing them to borrow even though they have no specific assets, such as freehold premises, which they can use as security. A floating charge allows all the company’s assets, such as stock in trade, plant and machinery, vehicles, etc., to be charged.
What are the main non-contractual obligations?
- Libel: writing or publishing lies about a person
- Slander: speaking lies about another person
- Defamation: insinuating information that damages the integrity of another person in the eyes of others
- Trespass against goods: holding onto goods that belong to others
- Trespass against property: unlawfully occupying or crossing private land
- Misrepresentation: making statements that others may rely upon when subsequently entering a contract
- Passing off: passing goods to a buyer of a different brand to that requested
What is negligence?
Occurs when a company or individual causes loss by failure to take reasonable care when it’s generally recognised that they had a duty to do so
Is intent necessary for negligence to occur?
What are the tests for negligence?
No
- Did the defendent owe the claimant a duty of care?
- As a direct result, did the claimant suffer injury, damage of financial loss?
- Was there a breach of that duty of care?
What is a duty of care?
In tort (delict in Scotland) law a duty of care (DoC) is a legal obligation imposed on individuals requiring adherence to a standard of reasonable care while performing acts that could foreseeably harm others.
No contractual relationship needs to exist.
It is the first element that must be established to proceed with an action in negligence.
How can a duty of care be mitigated?
Through warnings and dislaimers
What are the limits to a duty of care?
- persons are not liable for acts under 3rd parties unless they’re under their control
- Employers take vicarious responsibility for persons acting in the normal course of their employment
- Certain people (e.g. judges) are absolved by virtue of their position
What should the standards of care for professional firms consider?
- What are the accepted standards of other professionals?
- How great is the risk to the claimant if the defendant breaches his duty of care?
- To what extent did the individual understand the risk, assess it and take steps to mitigate it?
How can a breach of DoC be established?
- The facts speak for themselves
- Positive confirmation can be obtained from the facts presented
How may a negligence claim fail?
Consequential Harm: For a negligence case to succeed, damage or loss must be proven. The harm must be sufficiently proximate to the breach. Therefore a claim fails when:
- The plaintiff followed a course of action regardless of the defendants actions
- The harm was caused by a 3rd party
- The series of events was sufficiently complex to make it impossible to attribute the true cause of harm
- An intervening act breaks the chain of events
When might damages from a negligence claim be reduced?
When there’s been contributory negligence:
If by their own actions a person suffers greater loss or damages, any award of damages will be reduced
What legislation governs the directors general power of management?
Companies Act 2006
Under the Companies Act 2006, what are is a directors general powers of management?
- Statutory
- Common Law
- Fiduciary: A fiduciary is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person.
How should directors powers be exercised?
For the best interests of the company, their powers should be exercised by:
- Acting in a bona fide manner/in the best interests of the company
- exercising their powers for a proper purpose
- avoiding any conflicts of interest
