Private Law 3

Question 1

What are the 7 grounds of challenge of a contract?

Answer 1

1. Lack of capacity of one party negates consent
2. Contract is unlawful
3. Defects in consent
4. Consent induced by force and fear
5. Consent given while facile and through circumvention
6. Consent given under undue influence
7. Mistaken consent: error and misrepresentation

Question 2

What does it mean for a contract to be declared void?

Answer 2

1. The contract has never existed and has no legal effect
2. No rights are created or transferred
3. Void ab initio (Void from the beginning)
4. No Contractual basis for legal action
5. No protection of third parties

Question 3

What does it mean for a contract to be declared voidable?

Answer 3

1. Contract remains valid until voided
2. One of the parties must declare the contract void due to any ground of challenge

Question 4

How to avoid a voidable contract?

Answer 4

1. Restitutio in integrum (restoration back to pre-contractual position) must be possible
2. No unreasonable delay
3. The rights of third parties must not be affected
4. Contract must not have been ratified under any Acts (Age)

Question 5

Which case is void due to fraudulent misrepresentation and the lack of protection of third-party rights?

Answer 5

Morrison v Robertson

A dairyman sold two cows to someone falsely identifying as someone he is not.

Issue with error = Crucial (Void)

Question 6

Which case is voidable due to fraudulent misrepresentation?

Answer 6

Macleod v Kerr

A car was sold to an individual who signed a check under a false name. However, this misrepresentation was not found to be an induced essential error as there was no issue with identity.

The contract was voidable, but still remained as restitutio in integrum was not possible as the car had been sold to a third party.

Question 7

What is the general rule for capacity?

Answer 7

1. Contracts entered into by persons lacking capacity are void.
2. The general rule is that all persons, natural and legal, have capacity to enter contracts.
3. However, children, incapable adults, the intoxicated; enemy aliens all lack capacity to enter contracts.

Question 8

What is the general rule for children and capacity?

Answer 8

1. According to the Age of Legal Capacity (Scotland) Act 1991, contractual capacity is attained at age 16.
2. The only exception is if an under 16 enters into a common contract which other people under 16 would enter on an everyday basis.
3. The law also offers protection for some 16-17 year olds in regards to prejudicial transactions (A transaction which an adult in the same circumstances may not have entered into).

Question 9

How can incapable adults enter into contracts?

Answer 9

Their affairs are administered by others either exercising
a power of attorney or as guardian under Adults with
Incapacity (Scotland) Act 2000 Part 6.

Question 10

Why is it so difficult to declare persons intoxicated beyond ability to reason lack capacity?

Answer 10

Different people are affected by different levels of alcohol differently. Therefore, the degree of classification of lacking capacity can be hard to determine.

Question 11

How can a benefit which has been passed in a void agreement be recovered?

Answer 11

Unjustified Enrichment

Question 12

What case covers payments which were recovered under unjustified enrichment?

Answer 12

Morgan Guaranty Trust Co of New York v Lothian Regional Council (Interest rate and currency exchange).

Void agreement payments were recovered via unjustified enrichment.

Question 13

Which case establishes a void agreement affected by force and fear?

Answer 13

Earl of Orkney v Vinfra (2000 merks + threats to kill).

Void contract due to duress.

Question 14

Which case establishes force and fear in relation to a cashier stealing money and receiving threats from her colleagues?

Answer 14

Hislop v Dickson Motors (Cashier had another secret bank account + manager threatened to phone police if she did not deposit another check).

Void contract due to duress.

Question 15

What are the 3 necessary elements for Facility and Circumvention?

Answer 15

1. Facility (Vulnerability)
2. Circumvention (Pressure)
3. Lesion (Loss suffered)

Question 16

What case establishes a bereaved wife who was forced into signing a contract by her daughter for the transfer of ownership of a house?

Answer 16

McGilvary v Gilmartin.

Void due to Facility and Circumvention.

Question 17

What is Undue Influence?

Answer 17

Where there is a relationship between the grantor and grantee of a deed which creates a dominant and ascendant influence where confidence and trust arises from that relationship.

Question 18

Which case involves Undue Influence and a voidable contract?

Answer 18

Gray v Binney.

Mrs Gray’s solicitor used her relationship with her son to sign into an agreement which represented a much lower value than his true interest in the family estate.

The contract was voidable and Mrs Gray’s son declared it void.