Defective Agreements Overview

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Questions and Answers

At what age do individuals in Scotland attain contractual capacity under the Age of Legal Capacity (Scotland) Act 1991?

  • 21
  • 16 (correct)
  • 14
  • 18

What is the legal status of contracts entered into by children under the age of 16?

  • Void ab initio (correct)
  • Valid until challenged
  • Enforceable with consent
  • Voidable

What should a person contracting with a 16-17 year old do to protect themselves in a prejudicial transaction?

  • Obtain approval from a guardian
  • Ratify the transaction (correct)
  • Notify the court
  • Submit a written agreement

What kind of adult is considered to lack capacity to enter contracts?

<p>Intoxicated adults (D)</p> Signup and view all the answers

What type of unlawful influence would make a contract void?

<p>Coercion through force or fear (D)</p> Signup and view all the answers

In the context of overcoming a person's will in contract law, what does the case 'Earl of Orkney v Vinfra' primarily address?

<p>Threat of violence (D)</p> Signup and view all the answers

What occurs when a benefit passes under a void agreement?

<p>It is recoverable via unjustified enrichment (A)</p> Signup and view all the answers

Which of the following is NOT a necessary element for establishing a case of facility and circumvention?

<p>Intention to deceive (A)</p> Signup and view all the answers

Which of the following grounds can negate consent in a contract?

<p>Lack of capacity of one party (A)</p> Signup and view all the answers

What is the outcome when a contract is successfully challenged on the basis of being void?

<p>No contractual rights are created (C)</p> Signup and view all the answers

Which condition must be met to avoid a voidable contract?

<p>Avoidance must occur without unreasonable delay (B)</p> Signup and view all the answers

What happens to third party rights when A sells to B under a void contract?

<p>A can recover the item from C (A)</p> Signup and view all the answers

In the case of Morrison v Robertson, what was the main issue regarding the contract?

<p>Error regarding the identity of the other party (C)</p> Signup and view all the answers

What is the main difference between a void contract and a voidable contract?

<p>A voidable contract remains enforceable until acted upon (A)</p> Signup and view all the answers

What does 'restitutio in integrum' refer to in the context of voidable contracts?

<p>Restoration to original position (D)</p> Signup and view all the answers

What was a significant outcome in the case of Macleod v Kerr?

<p>Resale of the car interrupted the possibility of restitution (D)</p> Signup and view all the answers

Which of the following correctly describes a void contract?

<p>It creates no rights or protection for third parties. (A)</p> Signup and view all the answers

What is one of the conditions for a contract to be considered voidable?

<p>Restitutio in integrum must be possible. (B)</p> Signup and view all the answers

In the context of contract law, what does 'undue influence' refer to?

<p>A relationship where one party exerts psychological pressure. (C)</p> Signup and view all the answers

Which statement is true regarding mistaken consent due to misrepresentation?

<p>The misrepresentation must be proven to have induced the mistake. (A)</p> Signup and view all the answers

What happens to the rights of third parties when A sells to B under a voidable contract with them?

<p>C acquires title if B sells to C before A voids. (B)</p> Signup and view all the answers

Under which circumstances can a voidable contract be avoided?

<p>The contract must not have been ratified. (C)</p> Signup and view all the answers

What legal status does a contract attain once a successful challenge is made based on lack of capacity?

<p>It is rendered void from the outset. (A)</p> Signup and view all the answers

What was established from the case of Morrison v Robertson?

<p>The identity of the parties involved is crucial to the contract's validity. (C)</p> Signup and view all the answers

What legal capacity do individuals under the age of 16 have in terms of entering contracts?

<p>They have no contractual capacity except as provided by law. (A)</p> Signup and view all the answers

Under which circumstances can individuals aged 16-17 protect themselves in case of prejudicial transactions?

<p>By obtaining ratification of the transaction. (A)</p> Signup and view all the answers

What determines if a contract is void due to facility and circumvention?

<p>A weakened state of mind, persuasion, and resultant loss. (B)</p> Signup and view all the answers

Which of the following groups lack the capacity to enter into contracts?

<p>Individuals intoxicated beyond ability to reason. (C)</p> Signup and view all the answers

What is the effect of a contract being affected by force and fear?

<p>The contract is considered void and has no legal effect. (A)</p> Signup and view all the answers

Which situation qualifies as a prejudicial transaction under the Age of Legal Capacity (Scotland) Act 1991?

<p>A 16-year-old borrowing money with high interest. (A)</p> Signup and view all the answers

What happens to benefits passed under a void contract?

<p>They may be recovered via unjustified enrichment. (B)</p> Signup and view all the answers

Which scenario does NOT contribute to establishing facility and circumvention?

<p>The use of threats to induce agreement. (A)</p> Signup and view all the answers

Flashcards

Void Agreement

A contract that is considered invalid from the very beginning and has no legal effect.

Voidable Agreement

A contract that is initially valid but can be made invalid by one of the parties later.

Lack of Capacity

A situation where one party lacks the legal ability to enter into a contract.

Unlawful Contract

A contract that involves activities that are against the law.

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Defective Consent

A situation where the agreement isn't truly voluntary due to factors like force, fear, undue influence, or misrepresentation.

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Restitutio in Integrum

The ability to return everything to the original condition before the contract.

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Third Party Rights

The rights of someone who is not a part of the original contract but is affected by it.

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Morrison v Robertson

Legal case showing that a mistaken identity invalidates the contract as it was void.

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Macleod v Kerr

Legal case illustrating that a voidable contract cannot be voided if it's impossible to return things to their original condition.

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Contract Ratification

The act of making a voidable contract valid again.

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Capacity to contract

The legal ability of a person to enter into a valid contract.

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General capacity rule

Generally, all adults have the legal capacity to enter into contracts.

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Exceptions to general capacity rule

Children, people with mental health issues, and intoxicated individuals may lack contractual capacity.

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Child's capacity

In Scotland, contractual capacity is generally achieved at 16, per the Age of Legal Capacity (Scotland) Act 1991.

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Void contract of a minor

A contract entered into by a person under 16 is void from the start.

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Prejudicial transaction

A transaction at a disadvantage for a (16-17 year old) that may warrant protection.

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Incapable adults

Adults lacking mental capacity due to illness or other reasons may have affairs managed by others.

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Force and Fear

Contracts entered into under duress (threat of violence) are void.

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Facility and Circumvention

A contract entered into by a person in a weakened state of mind, persuaded or pressured, resulting in loss.

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Unjustified enrichment

A legal principle allowing recovery of benefits given under a void contract.

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Grounds of Challenge

Reasons why a contract can be legally challenged and declared void or voidable.

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Contract Void

A contract that is invalid from the beginning. It creates no legal rights and offers no protection.

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Contract Voidable

A contract that is initially valid but can be made invalid by one of the parties later. It remains good until it is avoided.

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Error & Misrepresentation

This can be a reason for challenging a contract. It occurs when one party makes a mistake or is misled about key aspects of the agreement.

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Who can enter contracts?

Generally, all adults have the legal capacity to enter contracts. Exceptions include children, people with mental health issues, intoxicated individuals, and enemy aliens.

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At what age can someone enter a contract?

In Scotland, individuals attain full contractual capacity at age 16, according to the Age of Legal Capacity (Scotland) Act 1991.

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What happens if a minor enters a contract?

Any agreement entered into by a person under the age of 16 is considered void from the start.

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Can a 16-17 year old be protected?

The law provides some protection for individuals between 16 and 17 in cases of prejudicial transactions (contracts that are unfavorable to them).

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What if someone is under the influence?

Individuals who are intoxicated to the point of being unable to reason lack contractual capacity.

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What is force and fear?

Contracts entered into under duress or threat of violence are void. This means they are not legally valid due to the lack of free will.

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What is facility and circumvention?

When someone is easily taken advantage of due to a mental weakness, and someone else pressures them into a bad contract, resulting in a loss. This can lead to the agreement being deemed void.

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What if a benefit was already passed?

If a void contract has already been partially performed, legal principles like unjustified enrichment can be used to recover the benefits that were exchanged.

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Study Notes

Defective Agreements

  • Agreements can be challenged if there are defects in the consent given by one or both parties.
  • Grounds for challenge include:
    • Lack of capacity of one party: This negates consent.
    • Unlawful contract: A contract that is against the law. Refer to W&B 12-01 – 12-23 for details.
    • Defects in consent: Consent induced by force or fear.
    • Consent given while facile (easily influenced) or by circumvention.
    • Consent given under undue influence.
    • Mistaken consent: This includes errors and misrepresentations.

Effect of Successful Challenge

  • A successful challenge can result in a contract being either void or voidable.
    • A void contract is no longer valid and has no legal effect from its creation. This means no rights or duties are created or transferred. Additionally, there is no legal basis for third parties to act upon the agreement.
    • A voidable contract is valid until avoided. The contract must be avoided with appropriate conditions:
      • Restitution (putting things back to the original state) must be possible.
    • No unreasonable delay in seeking to avoid the contract.
      • The rights of any third parties must not be affected.
      • The contract must not have been ratified under relevant laws or affirmed by either party (ALCSA 1991 or RWSA 1995).

Third Party Rights

  • A sells something to B under a void contract. B then sells the same thing to C. C does not acquire ownership, and A can recover the item from C.
  • A sells something to B under a voidable contract. B sells the item to C before A avoids the original agreement. C acquires ownership. A cannot recover the item from C.
  • This assumes C purchased the item in good faith, without knowledge of the defect in A and B's agreement.

Third Party Rights (Case Examples)

  • Morrison v Robertson: M mistakenly assumed he was contracting with Wilson, not T. The contract with T was void due to a mistake in identity. M could recover the cows from R.
  • Macleod v Kerr: The contract between K and G was potentially voidable (not void), but could not be avoided as the car was resold, preventing restitution.

Capacity

  • General rule: All natural and legal persons have capacity to enter contracts.
  • Exceptions: Children, incapable adults, intoxicated, and enemy aliens lack capacity to enter contracts. Contracts entered into by these parties are void.

Capacity: Children

  • Age of Legal Capacity in Scotland (1991): contractual capacity attained at age 16 for most cases, however contracts entered into by those under 16 are generally void (initially void)
  • Law provides some protection to those aged 16 or 17 for prejudicial transactions.
  • Persons aged 16 or 17 who contract with someone from this age group may gain protection through ratification of the contract.

Capacity: Others

  • Incapable adults: Their affairs are managed by guardians or through power of attorney as determined by the Adults with Incapacity (Scotland) Act 2000.
  • Intoxicated persons: Lack capacity when beyond the ability to reason.

Benefit Passed under Void Agreement

  • Any benefit transferred under a void agreement can be recovered through unjustified enrichment. Cases showing this include "Morgan Guaranty Trust Co of New York v Lothian RC" and "Cantiere san Rocco SA v Clyde Shipbuilding & Engineering Co Ltd."

Force and Fear

  • A contract is void if affected by force or fear.
  • Force or fear must be sufficient to overcome the will of a reasonable person.
  • Earl of Orkney v Vinfra: Threat of immediate violence.
  • Hunter v Bradford Property Trust Ltd: Threat of lawful action.
  • Hislop v Dickson Motors: Other threats can also demonstrate force or fear.

Facility and Circumvention

  • A contract made when a party is in a weakened state of mind (facile) and influenced by others (circumvention) or coercion is voidable. This includes if they suffered loss due to entry into the contract.
  • McGilvary v Gilmartin: Example of facility and circumvention.

Undue Influence

  • A relationship of influence and trust between parties can lead to an inferred voidable contract if a benefit is given that unfairly affects one party
  • Gray v Binney: Undue influence.
  • Key elements:
    • Relationship of trust;
    • Unfair advantage taken.
    • Lack of independent advice from the weaker party;
    • Material benefit to stronger party.

Error and Misrepresentation

  • This is a separate area for further study.

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