Week Three Flashcards
What are the grounds for challenging a transaction?
Lack of capacity of one party negates consent.
Contract is unlawful.
Defects in consent, such as:
Induced by force and fear.
Given while facile and through
circumvention.
Given under undue influence.
Mistaken consent: error and
misrepresentation.
What is void ab initio?
Void from the beginning
What are the outcomes of a void contract?
Void ab initio.
No rights created or transferred.
No contractual basis for legal action.
No protection for third parties.
What are the outcomes of a voidable contract?
Remain valid until avoided.
Conditions for avoidance:
Possible restitutio in integrum.
No unreasonable delay. Rights of third parties unaffected. Not ratified under s.4 ALCSA 1991 or affirmed under s.1(3) RWSA 1995.
What happens if A sells to B under a void contract, and B sells to C?
C does not acquire title. A can recover from C.
What happens if A sells to B under a voidable contract, and B sells to C before A avoids the original contract?
C acquires title if C purchased in good faith unaware of the defect. A cannot recover from C.
Which cases are relevant to third party rights in void and voidable contracts?
Morrison v Robertson and Macleod v Kerr.
What was the issue in Morrison v Robertson?
M believed he was contracting with Wilson, not T. The contract with T was void due to error in the identity of the other party, induced by misrepresentation (essential error). M was entitled to recover cows from R.
What was the issue in Macleod v Kerr?
There was no error in identity. The contract between K and G was voidable, not void. Misrepresentation did not induce essential error. The contract could only be avoided if restitutio was possible, but it was not due to resale.
What is the general rule regarding capacity to enter contracts?
All persons, both natural and legal, have the capacity to enter contracts.
What are the exceptions to the general rule of capacity?
Children, incapable adults, intoxicated persons, and enemy aliens. Contracts by individuals lacking capacity are void.
Who are considered incapable adults in terms of legal capacity?
Incapable adults are those who lack the capacity to manage their own affairs.
How are the affairs of incapable adults handled?
Through Power of Attorney and Guardianship under the Adults with Incapacity (Scotland) Act 2000, Part 6.
How is capacity affected by intoxication?
Individuals intoxicated beyond the ability to reason are considered to lack capacity.
What are the references for intoxication and capacity?
Erskine, 1, 3,16 (W&B 5-05)
X v BBC [2005] CSOH 80 (W&B 5-05)
What is unjustified enrichment in the context of void agreements?
Any benefit passed under a void agreement may be recoverable.
What are the key cases related to unjustified enrichment?
Morgan Guaranty Trust Co of New York v Lothian RC 1995 SC 151
Cantiere san Rocco SA v Clyde Shipbuilding & Engineering Co Ltd [1924] AC 226
When are contracts affected by force and fear considered void?
When influenced by force or fear sufficient to overcome the will of an ordinary person.
What are the requirements for a contract to be void due to force and fear, with reference?
Threat of immediate violence: Earl of Orkney v Vinfra (1606) Mor 16481 (W&B 6-04)
Threat of lawful action does not justify a claim: Hunter v Bradford Property Trust Ltd 1977 SLT (Notes) 33 (W&B 6-05)
Other threats: Hislop v Dickson Motors (Forres) Ltd 1978 SLT (Notes) 73 (W&B 6-06)
What are voidable contracts in the context of facility and circumvention?
Contracts where a person in a weakened state of mind is persuaded or pressured into a contract and suffers loss.
What are the necessary elements for a contract to be voidable due to facility and circumvention?
Facility
Circumvention
Lesion
What is the case reference for facility and circumvention?
McGilvary v Gilmartin 1986 SLT 89
What is undue influence in legal terms?
Exists where a relationship creates dominant influence, leading to a material and gratuitous benefit to the prejudice of the grantor without independent advice.
What did Lord Shand say about undue influence?
“Exists where a relationship creates dominant influence, leading to a material and gratuitous benefit to the prejudice of the grantor without independent advice.” (Gray v Binney (1879) 7 R 332, 347 (W&B 6-10))
When are contracts voidable under undue influence?
Advantage is taken of a relationship of trust.
There are dominant and subordinate parties.
A material and gratuitous benefit is given to the stronger party.
The weaker party lacks independent advice.
