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Contract Update

Contract Update. Hector MacQueen. 1. Contract formation: ‘battle of the forms’ 2. Implied contract 3. Payment for services provided with no subsisting contract 4. Promise: letters of comfort 5. Promises, assurances, and collateral warranties

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Contract Update

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  1. Contract Update Hector MacQueen

  2. 1. Contract formation: ‘battle of the forms’ 2. Implied contract 3. Payment for services provided with no subsisting contract 4. Promise: letters of comfort 5. Promises, assurances, and collateral warranties 6. Contract interpretation: change of circumstances 7. Contract interpretation and rectification 8. Error and misrepresentation 9. Good faith 10. Breach of contract: anticipatory breach and repudiation 11. Execution in Counterpart etc (Scotland) Bill 2013

  3. Battle of the Forms (1) • Specialist Insulation Ltd v Pro-Duct (Fife) Ltd [2012] CSOH 79 • Contract on basis of ‘first’ rather than ‘second shot’ • ‘Second shot’ manifestly inconsistent with proposed transaction • ‘Over-riding’ clause in ‘first shot’ • ‘Second shot’ required signature and there was none

  4. Battle of the forms (2) • Grafton Merchandising GB Ltd t/a Buildbase v Sundial Properties (Gilmerton) Ltd, Edinburgh Sheriff Court, 30 January 2013 • More orthodox offer-acceptance approach, although proof before answer ordered • First shot over-ride clause didn’t work • Supply of goods = acceptance of second shot

  5. Implied Contract • Grant Estates (Ltd) (in liquidation) v Royal Bank of Scotland plc [2012] CSOH 133 • Written contract of loan saying bank provided no advice service • Advice service contract implied from conduct? • No – inconsistent with written contract • Implication only on grounds of necessity – confusion with implied terms test?

  6. Payment for services with no subsisting contract • Benedetti v Sawiris [2013] UKSC 50 contrasted with • Avintair Ltd v Ryder Airline Services Ltd 1994 SC 270 • When would enrichment claim be better than implied contract? • ‘Subjective revaluation’ (i.e. recipient placed higher than market value on service) rejected.

  7. Promise: letters of comfort • Regus (Maxim) Ltd v Bank of Scotland plc [2013] CSIH 12 • Landlord’s bankers issue letter to tenants confirming funding available for fit-out costs • Held not a promise to pay • Nor a letter of comfort • Bank liability only to its client

  8. Promises, assurances and collateral warranties • Royal Bank of Scotland plc v Carlyle [2013] CSIH 75 • Bank phone call on funding sought by developer – “It’s all approved – going for it” • Held not a collateral warranty • Not a promise either • Communication of an internal, in-principle decision of bank only.

  9. Contract interpretation: change of circumstances • Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] UKSC 3 • No doctrine of equitable adjustment of contract following major change of circumstances • Contract interpreted to reach “sensible” result accommodating changed circumstances

  10. Contract interpretation and rectification • Paterson’s of Greenoakhill Ltd v Biffa Waste Services Ltd [2013] CSOH 18 • Drawing the line between interpretation and rectification • Use of evidence of pre-contractual negotiations • Irrelevance of post-contract conduct • Rectification to be on basis of parties’ common intention as objectively manifested

  11. Error and misrepresentation • Wills v Strategic Procurement (UK) Ltd [2013] CSOH 26 • Unilateral error of one party known to other party and takes advantage relevant for reduction • Lyon & Turnbull v Sabine [2012] CSOH 178 • No misrepresentation from appearance of goods in absence of fraud

  12. Good faith • Yam Sang Pte v International Trade Corporation Ltd [2013] EWHC 111 (QB) • Implied term of good faith in contracts? • Distributorship overseas but principal also selling in distributor’s markets at lower prices • Held contrary to good faith implied term • Leggatt J: Traditional English hostility to good faith misplaced

  13. Anticipatory breach and repudiation • AMA (New Town) Ltd v Law [2013] CSIH 61 • Buyer of house for which seller prepared to grant disposition and entry ordered to pay price; seller not obliged to accept repudiation • White & Carter (Councils) v McGregor (1962) • Note also SocieteGenerale, London Branch v Geys [2012] UKSC 63 • No automatic termination of employment contract by employer’s repudiatory dismissal of employee

  14. What is execution in counterpart? "Signing in counterparts is when a party signs a separate physical copy of a document to the physical copy signed by the other party (or parties) to the contract. This is in contrast to where the same physical document is signed by all parties." (Clifford Chance website)

  15. Execution in counterpart CONTRACT This is a contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of One Hundred Pounds Sterling in cash. (signed)Charles Garland 1 April 2013 CONTRACT This is a contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of One Hundred Pounds Sterling in cash. (signed) Hector MacQueen 1 April 2013

  16. Counterpart execution at common law • Smith v Duke of Gordon (1701) Mor 16987 (doctor’s bills under contract by doubles, each signed by one of the parties and delivered). • See alsoSinclair of Ossory in Caithness (untraced) andCubbison v Cubbison(1716) Mor 16988. • Wilson v Fenton Bros (Glasgow) Ltd 1957 SLT (Sh Ct) 3 (patent licence)

  17. For the removal of all doubt Scottish Law Commission Review of Contract Law Report on Formation of Contract: Execution in Counterpart Scot Law Com No 231, April 2013 To be implemented as Conclusion of Contracts etc (S) Bill

  18. Execution in two or more counterparts • An agreement may be executed in two or more counterparts (that is to say, in two or more duplicate interchangeable parts) where no part subscribed by both or all parties [section 1(1)]. • But a document so executed is not effective until each counterpart is delivered to the party (or parties) who did not sign the counterpart in question, and any other step required by law has been taken [section 1(4),(6)].

  19. Holding a counterpart as undelivered • Section 1(8)-(10) • A counterpart may be handed over with the • instruction that the recipient is to hold it as • undelivered • The counterpart is to be so held until the • sender indicates that it is to treated as • delivered • The time need not be specified at the time of • the original instruction to hold the • counterpart as undelivered.

  20. Delivery to a nominee • This may stand in for mutual delivery between all parties [sections 1(5), 2(1)] • The nominee may be a party, an agent or none of these things [section 2(2)] • The nominee’s duty is to hold and preserve delivered counterparts unless parties come to alternative arrangement [section 2(3)] • Non-compliance leaves document’s validity unaffected [section 2(4)]

  21. Delivery of a traditional document Section 3(1) - For the purposes of section 1, a traditional document, whether or not executed in counterpart, may be delivered by electronic means. Not just counterparts.

  22. Electronic delivery Section 3(3) - Without prejudice to the generality of subsection (1), in that subsection “by electronic means” includes— • by means of an electronic communications network (for example as an attachment to an e-mail), • as a facsimile transmission (that is to say, as a fax), • stored electronically on a device such as a compact disc or a memory stick, or • by other means but in a form which requires the use of electronic apparatus by the recipient to render it intelligible.

  23. Form of electronic delivery Section 3(4) - The delivery must be by a means, and what is received by that means must be in a form, which— • the intended recipient has expressed willingness to accept, or • in all the circumstances, it is reasonable for the intended recipient to accept.

  24. Execution in counterpart CONTRACT This is a 100-page contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of One Hundred Pounds Sterling in cash. (signed)Charles Garland 1 April 2013 CONTRACT This is a 100-page contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of One Hundred Pounds Sterling in cash. (signed) Hector MacQueen 1 April 2013

  25. Electronic delivery of component part only Section 3(5) - Delivery may be of part only of traditional document provided – • that part sufficient in all the circumstances to show that it is a part; • includes page on which sender has subscribed document

  26. Transmitted copy only proves delivery Section 3(6) - Although delivery by electronic means constitutes effective delivery of the traditional document, what is received by that means is not otherwise to be treated as being the traditional document itself.

  27. Position of sender after electronic delivery of traditional document Section 3(7) Where a traditional document is delivered by electronic means, the sender must, after that, hold the document in accordance with parties’ arrangements.

  28. Execution in counterpart: probativity (self-proving) CONTRACT This is a contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of one Hundred Pounds Sterling in cash. [TESTING CLAUSE/EQUIVALENT] Afson BarekatCharles Garland Witness 1 April 2013 CONTRACT This is a contract between Hector MacQueen, 1 Acacia Avenue, Glasburgh, and Charles Garland, 11 Lime Trees Walk, Inverdee. Under this contract Hector MacQueen will deliver goods and services to Charles Garland at the said 11 Lime Trees Walk, Inverdee, on 10 May 2013. On receipt of the said goods and services Charles Garland will pay to Hector MacQueen the Sum of one Hundred Pounds Sterling in cash. [TESTING CLAUSE/EQUIVALENT] Lorna MacFarlane Hector MacQueen Witness 1 April 2013

  29. Probativity and the single document • Sections 1(2) and (3) – the deemed single document = either • all the signed counterparts; or • one of them collated with completed subscription pages of other counterparts • If the subscriptions are in self-proving form, then the document can be registered (e.g. Books of Council and Session), or prove itself in court. • Note, this is different from a conformed or certified copy.

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