Lecture 2

Question 1

What are the two main types of obligations in contract law?

Answer 1

Obligations: Duties or responsibilities enforced by law.
Voluntary Obligations: Arising from choice or agreement (e.g., contracts).
Involuntary Obligations: Imposed by law (e.g., unjust enrichment, delict).

Question 2

What is a unilateral gratuitous obligation?

Answer 2

A promise made by one party that is legally enforceable if it is genuine, communicated, and provable (e.g., Gray v Johnson).

Question 3

Gray v Johnston

Answer 3

Facts of the Case:

Johnston told Gray that if Gray moved in with him and took care of him, Johnston would make Gray his heir. Gray agreed and looked after Johnston, but when Johnston died, he did not leave any of his property to Gray.

Court Decision:

The court ruled against Gray, finding that Johnston’s statements were merely expressions of intention, not a legally enforceable promise. There was no binding obligation because it was not clear or definitive enough to be seen as a genuine promise.

Key Point:

In Scots law, a promise can be legally binding even without acceptance, as long as it is clearly communicated and intended to create a legal obligation. In this case, the court found that Johnston’s words did not meet this standard, and therefore Gray’s claim was dismissed.

Question 4

Who has limited capacity to enter contracts in?

Answer 4

ScotlandMinors (under 16), persons of unsound mind, and enemy aliens during wartime.

Question 5

What are the key elements of contract formation?

Answer 5

Offer, acceptance, certainty of terms, and intention to create legal relations.

Question 6

What is the “postal rule” in contract law?

Answer 6

Acceptance is considered effective when it is posted, not when it is received.

Question 7

What is the privity of contract?

Answer 7

Only the parties involved in the contract have rights and obligations under it.

Question 8

What are void contracts?

Answer 8

A void contract is an agreement that is, from the outset, not legally enforceable. Void contracts lack one or more of the prerequisites that make an agreement a contract. You can’t enforce a void contract, and neither party has any legal obligations under it.

Question 9

Examples of void contract

Answer 9

Illegal activity - an agreement to smuggle goods is a void contract because it involves unlawful actions.

Lack of capacity - an agreement signed by someone who lacks mental capacity is a void contract.

Impossibility of performance - an agreement to sell a non-existent property is void.

Uncertain terms - if the agreement’s terms are too vague or ambiguous to understand, it’s void.

Question 9

what are voidable contracts?

Answer 9

A voidable contract is a legally valid agreement that can be enforced but may be canceled by one of the parties under specific legal reasons. It differs from a void contract, which is invalid from the start and cannot be enforced at all.

Question 10

Examples of Voidable Contracts

Answer 10

Misrepresentation: One party was given false information, which influenced their decision to enter the contract.
Undue Influence: Someone was pressured into agreeing to the terms unfairly.
Duress: The contract was signed due to threats or coercion.
Mistake: Both parties made a significant error regarding an important fact of the contract.

Question 11

When is a contract considered illegal?

Answer 11

When it involves actions that are criminal or against public policy.

Question 12

What are common remedies for breach of contract?

Answer 12

Specific Implement:
Court orders the breaching party to fulfill their contractual obligations.
Used when damages are inadequate, often for unique items or services.
Not applied if it’s impossible or involves personal services.
Rescission:
Cancels the contract, treating it as if it never existed.
Applied for serious breaches like fraud or misrepresentation.
Restores both parties to their original positions before the contract.
Damages:
Monetary compensation for losses caused by the breach.
Types include:
Compensatory Damages: Cover actual losses.
Consequential Damages: For foreseeable, indirect losses.
Liquidated Damages: Pre-set amounts for specific breaches.
Limited to foreseeable losses; the injured party must try to minimise damages

Question 13

What is the “close connection” test in agency law?

Answer 13

Employers can be held liable for an employee’s wrongful acts if they are closely related to the employee’s job duties.

Question 14

What is “frustration” in contract law?

Answer 14

A contract is terminated if performance becomes impossible due to unforeseen events.

Question 15

What are the exceptions to the rule of privity of contract?

Answer 15

Agency agreements and assignation (transfer of rights to third parties)

Question 16

What must be present for a contract to be legally binding?

Answer 16

Clear and definite terms, and a genuine intention to be legally bound.

Question 17

What is a material breach of contract?

Answer 17

A serious breach that allows the innocent party to terminate the contract and claim damages.

Question 18

What is the principle of “Freedom of Contract”?

Answer 18

It means people can choose who they want to make a contract with and what terms to include, as long as it’s done fairly.

Question 19

What is “Consensus in Idem”?

Answer 19

It means “meeting of the minds”; both parties must agree on the same terms for a contract to be valid.

Question 20

Does Scots law need “consideration” for a contract?

Answer 20

No, unlike English law, Scots law does not require giving something in return (consideration) for a contract to be valid.

Question 21

What is the “Postal Acceptance Rule”?

Answer 21

: Acceptance of an offer is complete and the paries are legallyt bound when the letter is posted, even if it hasn’t been received yet.

Question 22

What is “Intention to Create Legal Relations”?

Answer 22

It means the parties want their agreement to be legally binding, especially in business deals.

Question 23

What is “Misrepresentation”?

Answer 23

It’s when one party gives false information that leads the other party to agree to the contract.

Question 24

What are exceptions to the rule that only parties in a contract can enforce it?

Answer 24

Situations like agency agreements, transfer of rights, and specific laws that give rights to third parties.

Question 25

What does “Jus Quaesitum Tertio” (JQT) mean in Scots law?

Answer 25

It refers to a right given to a third party in a contract, allowing them to enforce benefits even though they are not a direct party to the agreement.

Question 26

What is a common example of Jus Quaesitum Tertio (JQT)?

Answer 26

A life insurance policy where the contract is between the insured and the insurer, but the payout goes to a family member (the ‘tertius’).

Question 27

What are the conditions needed for a valid JQT?

Answer 27

There must be an existing contract.
The contract must clearly show an intention to benefit the third party.
The third party must be clearly identified, even if not specifically named.

Question 28

What is a breach of contract?

Answer 28

It is the failure of a party to fulfill their obligations as agreed in the contract, and it is a common reason for legal disputes.

Question 29

How are most contract disputes typically resolved?

Answer 29

Most disputes are resolved through negotiation, mediation, or arbitration rather than litigation, especially in long-term commercial relationships.

Question 30

. Negotiation

Answer 30

Definition: A process where the parties involved in a dispute directly communicate to reach a mutually acceptable agreement.
Key Points:
It is informal and voluntary.
Both parties discuss their issues and try to find a compromise.
No third-party involvement.

Question 31

Mediation

Answer 31

Definition: A process where a neutral third party (mediator) helps the disputing parties to communicate and reach a settlement.
Key Points:
The mediator does not make decisions; they only facilitate dialogue.
It is voluntary and confidential.
Often used to maintain relationships, as it promotes collaboration.

Question 32

Arbitration

Answer 32

Definition: A process where a neutral third party (arbitrator) listens to both sides and makes a binding decision to resolve the dispute.
Key Points:
It is more formal than mediation but less formal than court.
The arbitrator’s decision is final and enforceable, similar to a court judgment.
Often chosen for commercial disputes because it is quicker and private.

Question 33

Litigation

Answer 33

Definition: Litigation is the process of resolving a dispute through the court system, where a judge (and sometimes a jury) makes a final decision.
Key Points:
It is formal and follows strict legal procedures.
Usually the last resort when negotiation, mediation, or arbitration fails.
It can be time-consuming and expensive.
The outcome is legally binding and enforceable.

Question 34

What are examples of breach of contract scenarios?

Answer 34

Failure to perform: Not showing up on the agreed date.
Anticipatory breach: Giving notice that obligations can’t be fulfilled in advance.
Defective performance: Completing the task poorly (e.g., system installed but can’t access server).
Partial performance: Only partially completing the task (e.g., only some staff can access the system).

Question 35

What is the difference between material and non-material breaches in Scots law?

Answer 35

A material breach is a significant failure affecting the contract’s core terms, while a non-material breach is minor and does not impact the main purpose of the contract.

Question 36

What is the significance of the “Requirements of Writing (Scotland) Act 1995”?

Answer 36

It states that most contracts do not need to be in writing to be valid, except for contracts involving land rights.

Question 37

What does “unjust enrichment” mean?

Answer 37

Unjust Enrichment refers to a situation where one party unfairly benefits at the expense of another without any legal basis or valid contract to justify it. In such cases, the law requires the enriched party to return or compensate the other party to prevent unjust gain.

Example: If someone mistakenly pays money to the wrong person (who had no legal right to receive it), the recipient is obligated to repay it because they were unjustly enriched by the error.

Question 38

Define “novation” in contract law.

Answer 38

ChatGPT
Novation in contract law is the process of replacing an existing contract with a new one, where a new party takes over the rights and obligations of one of the original parties. All involved parties must agree to the novation for it to be valid. The original contract is terminated, and the new agreement is created with the substituted party.

Example: If Company A owes money to Company B, and all parties agree that Company C will take over the debt from Company A, this is

Question 39

Define “Consensus in idem.”

Answer 39

Consensus in idem means “meeting of minds,” where all parties involved must agree on the same terms for a contract to be valid.

Question 40

What are examples of unenforceable contracts?

Answer 40

Examples include gambling agreements (historically), contracts to commit a crime, and contracts with enemy aliens in wartime.

Question 41

What is “facility and circumvention” in contract law?

Answer 41

It refers to contracts where one party was in a mentally weak state (facility) and was induced by the other party through unfair persuasion (circumvention), making the contract voidable.

Question 42

Define “undue influence” in contract law

Answer 42

Undue influence occurs when a stronger party in a trusted relationship takes unfair advantage of a weaker party to gain consent to a contract. The contract can be voidable if undue influence is proven.

Question 43

What is “force and fear” in the context of contracts?

Answer 43

A contract is considered void if one party was forced or threatened into agreeing, making the consent invalid.