Introduction to the Scottish Law of Obligations

What is the Law of Obligations?

The Law of Obligations together with Property are both parts of the Private law of Scotland. Private law can be defined as the laws which can be enforced by one individual against another. This is separate from public law which describes the laws regulating the relationship between individuals and the state. Although the Law of Property and the Law of Obligations are within the single category of private law, the nature of the rights enforceable under these areas are very different.

Property Law regulates the relationships between people and things. A typical example of such a right is that of ownership. This right, like every other property right, is potentially enforceable against any other person. Thus, the identity of a thief who steals something that you own does not affect the property law claim which you have against that person. Due to their wide range of enforceability, the rights which arise under the law of property are also referred to as 'real rights'.

The law of obligations regulates the rights and duties arising between individuals. The specific rights and duties within this area of the law can themselves be referred to as obligations. Although obligations may be about items of property, they have nothing to do with the distinct property rights that a person may have in a thing. Generally, an obligation will be that a particular person will do, or will avoid doing a specified act. Obligations also differ from real rights as they only relate to specific relationships. This means that certain individuals – usually those within that relationship – can only enforce them. Furthermore, these rights may only be enforced against other specific persons. For this reason the rights enforceable under the law of obligations are also known as 'personal rights'. In all cases the person to whom an obligation is owed is known as the obligee or creditor, whereas the person who must perform the obligation can be referred to as the obligant or debtor.

The Internal Distinctions within the Law of Obligations

Although the law of obligations exists as a category, there are a number of different forms that an obligation may take. Generally obligations are classified with relation to the event which causes the obligation to come into existence. The different methods of creation of obligations can be referred to as the internal classifications of the law of obligations.

The present internal classification in the law of obligations can be traced to the seventeenth century jurist Viscount Stair. Stair relied heavily upon Roman Law for his distinctions. Indeed, much of the technical terminology within modern the law of obligations derives from the Roman Law. Viscount Stair classified obligations as being either 'conventional' - arising due to the will of the parties to the obligation, or 'obediential' - imposed by law regardless of the intentions of the parties.

Although it is not always the case, modern textbooks generally retain this internal distinction. However, referring to such categories as conventional and obediential obligations has become outdated. It is now far more common that the obligations arising due to the will of the parties are referred to as 'voluntary obligations' and obligations which are imposed by law are referred to as 'involuntary obligations'. Indeed, this modern terminology will be adopted throughout the remainder of this paper.

Within the distinctions of voluntary and involuntary obligations, the events giving rise to obligations may be further distinguished into specified categories. Scots law has developed distinct bodies of law in relation to each of these categories which specify when an obligation has come into existence and the rights and duties of each party to the obligation. These bodies of law can be extremely complex and are often studied as distinct areas of the law.

Types of Obligations

Obligations are duties which are owed by one person to another. Corresponding to such duties are rights of the one to whom the duty is owed to ensure that the obligation is complied with. Thus, the class of individuals against whom an obligation may be enforced, and who indeed may enforce the obligation, is generally limited. For this reason, obligations are also referred to as ‘personal rights’.

There are various ways in which an obligation may be created. However, all obligations may be broadly categorised in one of two ways, depending upon the method of their formation. Thus, obligations may be classified as being either voluntary or involuntary.

Obligations are regarded as voluntary where the parties to the obligation have exercised their will for its formation. Examples of voluntary obligations recognised by Scots law are that of contacts and promises. Alternatively, involuntary obligations do not consider the intentions of the parties, but are created by the operation of the law. Such obligations are also occasionally referred to as being obediential. Examples of this category include the laws of delict and that of unjustified enrichment.

Voluntary Obligations

The Law of Contract

Like almost every legal system, Scots law recognises the law of contract. Under Scots law, a contract can be defined as a legally binding agreement, voluntarily entered into, which is enforceable by the parties to it. The notion of personal freedom is central to this area of the law. This means that it is generally considered that parties are capable of entering into any agreement that they think fit. Nevertheless, it should be noted that not all agreements are capable of being contracts. In particular Scots law refuses to enforce contracts where the subject matter is either illegal or immoral.

Scots contract law revolves around what are known as reciprocal obligations. This means that the rights and duties of the parties to the contract correspond with each other. Thus, in Scots law where a contract comes into existence, there is an obligation of at least one individual to perform under the contract. This obligation is reciprocated by the right other party to the contract to enforce this performance.

Sources of Scots Contract Law

The vast majority of Scots Contract Law emanates from the common law. This means that a number of the most important aspects within this area have arisen due to judicial decisions and are not found in any statute. It should be noted, however, that in recent times, there have been a number of statutes passed which relate in some way to contract law.

Formation of Contract

There are a number of elements, each with their own specific rules, which must exist for a contract to be formed.

Agreement

The most important element for the formation of a contract under Scots law is that the parties have reached agreement as to all essential contractual matters. Where this is the case, the parties are said to have achieved consensus in idem. Where there is no agreement, there can be no contract.

An objective test is used to determine whether the parties have reached agreement. This means that a court will ask whether a ‘reasonable person’ having taken into account all the words and actions of the parties would believe that they had reached agreement. Thus, it is entirely possible that parties may believe that they have reached agreement, but for it to be ruled that this was not the case. A common such situation is a supposed contract for the sale of goods where the parties may think that they are both referring to the same goods where this, in fact, is not the case.

Method of Agreement

For a contract to be formed, Scots law stipulates that an agreement must take a specified form. Thus, a contract is formed immediately upon the acceptance of an offer.

Specific rules have developed regarding how offers should be made and how they can be accepted. Most notably, offers and acceptances may be either express or implied. An express offer or acceptance is where either written or spoken words are used to indicate the intention of the party. An implied offer or acceptance is indicated by a party’s conduct.

Parties to a Contract

There must be at least two parties to a contract. Generally, however, there is no maximum number.

Gratuitous Contracts

Scots contract law differs from a number of other legal systems to the extent that there is no need for a party to receive consideration for their performance. This means that it is perfectly legitimate for a contract to compel an individual to perform and to receive nothing in return. Such agreements are known as gratuitous contracts. This rule also explains the existence of the law of promises as a branch of the law of obligations.

Legal Capacity

A party to any contract is required to have legal capacity to enter contracts of this sort. Generally, Scots law ensures that parties who are unable to fully understand the nature of a contract will not have the capacity to enter into it. Thus, insane individuals do not have capacity to enter into any contracts, whereas children under the age of 16 years can only enter into certain specific contacts.

An Intention to Create Legal Obligations

A contract will not be formed unless objectively the parties intended to create legal obligations. This explains why under Scots law ‘social arrangements’, such as an agreement to meet for coffee, will not lead to an enforceable contract.

Performance of the Contract

Under every contract, at least one individual is obliged to either do or refrain from doing something. A contract is considered terminated where the parties to the contract have fulfilled all such obligations. However, where any party fails to perform their obligations, they are regarded as being in breach of contract. This is the case regardless of the fault of that party.

Remedies for Breach of Contract

Scots law permits a number of different remedies following a breach of contract. All such remedies can be classified into one of two categories. Judicial remedies require a claimant to go to court, whereas self-help remedies can be implemented without judicial intervention.

Enforcement of the Contract

The general principle of Scots law is that only the contracting parties are entitled to enforce the contract. This is also known as the doctrine of ‘privity of contract’.

However, there is one rare but notable exception to this rule. This is known as a jus quaesitum tertio - commonly shortened to JQT. A valid JQT entitles a third party, in specified circumstances, to enforce a contract which has been made for their benefit.

 

The Law of Promises

Scots law recognises the law of promises as a distinct branch of voluntary obligations. Broadly, a promise can be defined as a legally binding undertaking by one individual to perform or refrain from performing a specific act for the benefit of another individual. There is no need for the individual who will benefit from the promise to do anything in return.

The main difference between promises and contracts is that there is no need for the parties to reach agreement for the formation of a promise. It will be remembered that agreement or consensus is essential to the formation of a contract.

 

Involuntary Obligations

Delict

Delict is the area of the law which governs the obligation to refrain from wrongful conduct which may harm the interests of another, and the duty to compensate one who is harmed as a result of your wrongful conduct. The term ‘delict’ can also be used to refer to specific forms of action arising under this area of the law. Where there is a duty for an individual to compensate another (also known as the duty to make reparation) the one compelled to make payment is referred to as being delictually liable.

Elements of the Law of Delict

There are two elements to every delictual claim:

 

Harm

Every delict requires some form of harm to an individual. Such harm can be classified with relation to the damage caused to the different types of personal interest. Thus, harm may relate to an individual’s physical integrity, their property, their finances or their reputation. However, it should be noted that the law, depending upon circumstance, may offer varying levels of protection to the different types of interest. For example, the law will always regard ones physical integrity as worthy of protection, whilst there is generally less protection of an individual’s financial affairs.

Wrongful Conduct

For a successful delictual action, any harm suffered by an individual must be as the result of wrongful conduct. This means that there must not be any legal justification for the harm to have occurred. An example of legally justified harm to the interests of an other would be where one individual sues another in damages for breach of contract. This action will clearly will cause financial harm to the individual who is sued, but legal policy considers such actions justified for the protection of contracting parties.

Internal Categorisation of the Law of Delict

Delicts can be categorised within a number of headings, depending upon how the harm arises. Thus, delicts can be categorised as being either ‘intentional’, ‘unintentional’ or ‘strict liability’. Each such category has developed distinct and specific rules regarding the creation of delictual liability.

Intentional Delicts

Intentional delicts arise where one individual intentionally harms the interests of another. Such delicts tend to have specific names can be further subdivided with relation to the type of harm suffered. Thus, for example, the delict named ‘assault’ exists within the category of intentional delict relating exclusively to harm caused to the physical integrity of individuals.

Unintentional Delicts

Unintentional delicts occur where unintended but careless conduct results in harm to another individual. Such careless acts may also be referred to as ‘negligent’ with this area of delict also commonly referred to as ‘the law of negligence’.

Unlike intentional delicts, where a delictual act relates to a single individual, there is potential for a careless act to cause harm to a wide range of individuals. To prevent such unlimited liability, this area of the law has developed a number of tests which must be fulfilled for delictual liability to arise. The most notable of these is the requirement that there must have been a pre-existing ‘duty of care’ owed by one who acts negligently to the individual who is harmed. The law has developed specific tests to determine the existence of a duty of care. However, it should be noted that such tests differ with relation to the existence of a duty of care for negligently caused pure economic loss compared to other forms of negligently caused harm.

Strict Liability

Strict liability delicts arise where the harming of the interests of an individual are sufficient for the existence of delictual liability, regardless of the intentions or the negligence of the individual who causes the harm. The concept of strict liability delict is relatively rare and is exclusively imposed by statute.

Remedies following Delict

The remedy following a delict is a claim for damages. Such a claim can only be ordered by a court and is sum of money paid by the one who has committed the delict to the individual who has been harmed.

 

Unjustified Enrichment

The area of unjustified enrichment is one which has considerably developed in recent years following a number of high profile cases. It should be noted that, in Scots law, the area of the law know as unjustified enrichment can also be referred to by a number of other terms, such as ‘unjust enrichment’, ‘restitution’ or ‘quasi-delict’. Broadly, unjustified enrichment can be defined as the obligation of one who is enriched, without lawful cause, at the expense of another, to return the enrichment. In practice, the law of unjustified enrichment can be internally subdivided to include specific remedies relating to the form and cause of the particular enrichment.

Although a distinct category of the law of obligations, the remedy of unjustified enrichment is a subsidiary remedy. This means that such a claim may only be raised where the party who has suffered loss has no other remedy available.

Negotiorum gestio

The obligation of negotiorum gestio can be defined as the duty to repay an individual who has managed your affairs where you have been unable. The classic example of such a claim is that of an individual who has incurred expense extinguishing a fire in a neighbouring property where the owner of that property was on holiday. This obligation is, however, one which is rarely the subject of claims in the Scottish courts.