Wright, Johnston & Mackenzie Solicitors

When in Rome...

Since 1991 the choice of law rules in contract have been based on the Rome Convention. Recently the EU proposed an EU Regulation “Rome I” which made significant fundamental changes to the regime. The UK was unhappy with the proposals and decided not to opt in, as it was not in the interests of the UK jurisdictions. However in 2008, after the proposals were amended, the UK confirmed it would opt in to the proposals.

Scots contract law is respected and admired around the world for providing certainty, predictability and fairness. Contracts are the basic legal building blocks of national and international business transactions. The applicable law of a contract determines its meaning and enforceability. Recently changes were made on a European level to choice of law rules, Scots law was under pressure to implement them in order to continue Europe-wide uniformity and greater legal certainty.

On 17 December 2009 Scotland will implement EU Regulation “Rome I” when The Law Applicable to Contractual Obligations (Scotland) Regulations 2009 comes into force. The new regulations are aimed at establishing a uniform choice of law rules in the field of contractual obligations.

So where any case has a cross-border dimension, it will allow Scottish Courts to determine the national law that should apply. The regulations apply to all types of contracts with the exception of insurance contracts. In addition, they amend the Prescription and Limitation (Scotland) Act 1973 to make sure Scottish time limits on cases do not apply to any cases where “Rome I” would apply.

What about conflicts of laws between Scotland, England & Wales, Northern Ireland and Gibraltar? The new Regulations generally ensure that the application of “Rome I” will apply to choice of law disputes between UK jurisdictions with the exception of insurance contracts. It is arguably simpler and more efficient to have one set of rules than maintaining two sets.

A further benefit of the new regulations is that in the absence of choice of law, they restrict the ability for Courts to interpret the rules in different ways. For example currently Scottish and European Courts take the view that the “closest connection” test is subjected to various presumptions while the English Courts have placed greater weight on the “closest connection” test. The regulations should ensure greater uniformity.

However, in the vast majority of cases, a simple clause in the contract, for example, “this contract is subject to the law of Scotland and the exclusive jurisdiction of the Scottish Courts” will suffice to provide the necessary legal certainty and commercial confidence for the parties to contract exactly as before. However in certain contracts where there is doubt over the choice of law then the “Rome I” rules should enable parties to decide the applicable law, provide appropriate protection for weaker parties such as consumers and ensure legal certainty, which will reduce costs and litigation.

More information from Neil Morrison: .(JavaScript must be enabled to view this email address)

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A New Era for Scottish Arbitration

The Scottish Parliament passed the Arbitration (Scotland) Act last month and it is likely to come into force in early 2010. The legislation brings Scottish domestic and international arbitration up to date by replacing a series of old statutes and precedent. In addition practitioners can now find all the Scottish arbitration law in one place, which is both accessible and user-friendly.

The new legislation with accompanying Scottish Arbitration Rules is consistent with the most popular default arbitration law, the UNCITRAL Model Law and also complies with the New York Convention which governs the recognition and enforcement of foreign arbitral awards. The forthcoming Act allows Scottish Ministers to modify the Act by simple orders to ensure that Scottish arbitration can cope with any future changes to UNCITRAL or the New York Convention etc. The Act also importantly makes provision for damages, interest and expenses as the UNCITRAL Model Law is silent on these matters. 

It is hoped the legislation will make Scotland one of the top destinations for parties to resolve their differences quickly while benefiting from high quality, low cost Scottish legal services. Currently many European companies choose to undergo arbitration in London but with a new competitive rival centre of arbitration north of the Border, some of these companies may now choose Scotland as an alternative; bringing potentially a huge economic windfall to many Scottish commercial law firms able to offer a high quality arbitration service.

International arbitration is used by companies and individuals as an alternative to litigation. The main benefit of arbitration is privacy; it avoids the need to go to a public court to air the parties’ problems. Other benefits include: the ability to change the procedure, generally a more binding and enforceable judgement (known as an “award”) than a national court judgement, the ability to choose the arbitrator(s), the ability to choose how and where the hearings will be conducted and in what timeframe, and the general lack of formality i.e. no wigs, gowns or oppressive court rules.

Of course, international arbitration is not a flawless form of dispute resolution and it should be remembered that costs of an international arbitration can escalate. However it is worth noting that if the case management is skillfully and effectively controlled, the costs can be considerably reduced.

Also international arbitration can sometimes be delayed because the arbitrator’s powers are limited in comparison to a national court. For example, an arbitrator cannot compel a witness to attend a hearing or enforce an award by sequestration of assets; only the national courts have these powers and so the arbitral tribunal has to proceed indirectly through the machinery of the local courts in order to deal with the case before it.

However, the benefits of international arbitration certainly outweigh the costs and the main reasons for this are privacy, neutrality and enforcement. Parties have the opportunity to choose a “neutral” place for the resolution of their dispute and to choose a “neutral” tribunal behind closed doors. Also at the end of the arbitration, the arbitrator’s award will be binding and be directly enforceable by court action not just in Scotland but also around the world.

Scotland has many advantages to arbitration consumers: it has a distinctive independent legal system and brand, is English speaking (the international language of business), is viewed as a neutral nation and has some of the finest golf courses and whiskies in the world!

So perhaps in the future, Edinburgh will become synonymous as a world venue for international arbitration disputes in the same way as places such as London, Stockholm, Geneva, Paris and New York are currently viewed.

For more information: contact Neil Morrison, .(JavaScript must be enabled to view this email address).

The writer has recently completed a new postgraduate masters course on international commercial arbitration at the University of Edinburgh.

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Who you gonna call? Notaries Public!

What does a notary public do? It is a common question asked by many people because the exact purpose of a notary public has been shrouded in mystery for hundreds of years. However notaries have performed an important function in the legal life of the country from as far back as the 13th Century.  The main function of a notary public is to legally validate any document that requires an oath to be administered or the receipt of a sworn statement such as an affidavit. Many undefended divorces and residential sales require affidavits requiring notaries to administer the oaths in these cases.

Notaries are also required to certify documents, which are to be used in foreign jurisdictions, such as a translated Scottish Court order to be enforced in Spain. If someone needs to use Scottish documents abroad they will have to be “legalised” by the Foreign and Commonwealth Office (FCO). A notary public must certify the document stating it is the original document and normally stamp the document with their unique seal, it can then be sent to the FCO who will attach an approval form to the document called an “apostille”. Why does the document need an apostille? This is the European stamp of authenticity so that the other person you’re dealing with has complete confidence that the document is the genuine article.

If notaries are fluent in another language, they can both translate and certify documents if necessary. In order for notaries public to provide the certification service (not the translation), they need to be registered with the FCO. Regrettably, there are some Scottish notaries who are unaware of this requirement and only discover they are ineligible after some time has been spent processing the document, which can clearly cause inconvenience for clients.

Documents usually certified by notaries include: UK educational documents to be used abroad, UK Birth Certificates, legalise photocopy passport photo page, change of name by deed poll, Sheriff and County Court documents, Powers of Attorney, Wills, Certificates of Incorporation and other documents issued by Companies House, Export Certificates, documents from HMRC, signing on behalf of blind people, Disclosure Scotland documents, medical documents, and the Pet Travel Scheme.

It should be noted that as all notaries in Scotland are also solicitors, the same professional rules apply, so for example, a notary may not act where there is a conflict of interest. The notary should also explain the document to the deponent (person who is required to sign the document) to ensure that he or she understands what they are signing and its legal significance. Some documents may also demand that the deponent not only sign but also swear an oath on the Bible, Koran or an Atheist Affirmation before the notary.

If you need a document legalised then WJM have solicitors who are notaries that are also registered with the FCO to validate both Scottish and foreign (especially Spanish) documents.

For further information: contact Neil Morrison on 0131 225 5660

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Scottish Golf Clubs & Societies to become SALPs?

A recent report by the Scottish Law Commission (SLC) has recommended that unincorporated associations such as golf clubs, charitable organisations and societies be given legal personality if they meet certain conditions. Why do unincorporated associations need legal personality? The current law does not recognise the existence of such organisations as separate legal entities, which can cause legal problems for the associations.

Without legal personality, unincorporated associations cannot enter into contracts and so the contractual responsibilities and liabilities met by the individual office bearers. The lack of capacity to contract means that bizarrely when a social club member pays for a drink at the club bar, it is not being purchased from the club but instead the other club members are releasing the value of their share in the drink in exchange for his or her payment. In addition, the unincorporated associations cannot be held liable for wrongful acts committed by their representatives while acting on behalf of the association. Instead the association’s funds would have to meet the liability, and if the funds are insufficient then the remaining liability rests personally upon the individual office bearers and possibly the whole association membership.

Furthermore, if a golf club member is injured by a fellow member who was acting on behalf of the association then the injured member cannot sue for personal injury damages as this would amount to the injured member suing himself! A further problem is that an unincorporated association such as an adoption agency cannot own property so title must instead be taken in the name of individual members or office-bearers which can cause difficulties when a member or office-bearer dies or ceases to participate in the association’s activities.

The current law is also unsatisfactory in the field of employment law as where there is an employment dispute concerning an employee of a golf club for example, it is the golf club management committee which is held to be the employer and consequently liable for damages for breach of contract or redundancy payments.

The SLC has sought to solve these problems by recommending a change to Scots law which would mean that any unincorporated association with at least two members which also has a constitution set out in a document (including matters such as the name, purpose, criteria for membership etc) would automatically be treated as a legal entity separate from its members. The SLC has recommended that an unincorporated association that meets the criteria should be named “Scottish Association with Legal Personality” (SALP). However in order to be a valid SALP, the association must have an official address in Scotland and the majority of the management must be carried out in Scotland.

Some associations who meet the SALP criteria may, for various reasons, not wish to have legal personality. The SLC recommendations entitle association members to opt out of SALP recognition by a resolution, recorded in writing, to the effect that the association is not to have legal personality.

There are clearly many benefits to non-incorporated associations becoming SALPs. It can only be hoped that the Unincorporated Associations (Scotland) Bill will materialise soon and become legislation in the near future.

For more information: contact Neil Morrison on .(JavaScript must be enabled to view this email address)

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Reversing Unjustified Enrichment

It’s unfair isn’t it, you’ve done work for someone and they’ve turned around and said “eh thanks, but wasn’t exactly what we wanted so em, we’re not paying for it”. It’s frustrating for the party who has undertaken the work as they have done their best to complete the work, consequently enriching the other party and yet have received no remuneration for their troubles. Unfortunately this scenario happens often in business but thankfully there is a legal remedy, which can be used to recover the value of the seemingly fruitless work undertaken; the answer is the remedy of unjustified enrichment.

A person can be said to be unjustly enriched at another’s expense when he or she has obtained a benefit from the other’s actings or expenditure, without there being a legal ground to justify him or her retaining the benefit. Generally speaking the enrichment of a person is hugely significant as it instantly triggers the other person’s right to have the enrichment reversed.

The normal situations where unjustified enrichment arise are where one person has paid money or transferred property to another person in the expectation of receiving payment which does not subsequently materialise or where a person may have rendered services in the expectation they would be paid at a later date which again does not subsequently happen.

Once it has been established that a person has been unjustly enriched, the aggrieved person should then determine which specific remedy is to be used by the court to reverse the enriched person’s enrichment if the Sheriff decides in favour of the aggrieved person from the facts and circumstances of the case. The enrichment must be considered in order to determine the most appropriate remedy within the unjustified enrichment armoury of specific remedies to reverse the enrichment: repetition, restitution, reduction, and recompense.

If the enrichment concerns a payment of money without a reciprocal obligation being performed then the reversing weapon is repetition. On the other hand if the unjustified enrichment has occurred as a result of a transfer of moveable property, the enrichment can be reversed by restitution by ordering the property to be transferred back to the aggrieved person.

Furthermore if the matter concerns unjustified enrichment of heritable property via heritable title then the appropriate reversing weapon is reduction. In addition, if an enriched person has been unjustly enriched by having the benefit of the aggrieved person’s services then the reversing weapon is recompense.

Recompense is one of the most interesting reversing weapons as both the innocent party to a contract and the party in alleged or actual breach can utilise it. For example, a developer instructs an architect to prepare detailed drawings. A fee is negotiated and the plans are prepared but developer rejects them; the contract is terminated and another architect instructed by the developer. In such a scenario, if it were held that there was no reasonable cause to terminate the contract then the architect would be entitled to a reasonable remuneration, quantum meruit; which is the fancy latin way to say payment for the work already done. It is also easier to calculate and prove as the court doesn’t need to pull out its crystal ball to foresee what work would have been carried out in the future had the contract not been terminated.

A quantum meruit method of quantifying the recovery could be even more advantageous because the revaluing of the partly completed work may be deemed to much more than what the person would have received if he or she had completed the contract. However there are two other options available to quantify a recompense claim: payment by reference to the contractually agreed price and payment quantum lucratus, esoteric latin meaning the value of the advantage which the recipient has received.

The acclaimed Scottish legal author Gloag was of the view that recompense could only be quantified quantum lucratus. However more recent Scottish cases have suggested that an innocent party can have their claim valued quantum meruit but the party in breach is generally restricted to the enhanced value of the other party’s assets, quantum lucratus.

This area of the law is clearly quite complex and this briefing note is only able to provide readers with a brief overview of the issues. Unjustified enrichment is plainly ripe for law reform and it may be perhaps time for the Scottish Parliament to consider legislation via an Unjustified Enrichment (Scotland) Bill to provide greater legal certainty for both practitioners and clients.

For more information on Scots contract law: contact Neil Morrison by email .(JavaScript must be enabled to view this email address)

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Think twice before you comment on Facebook!

In April 2009, an article was published in The People newspaper with a headline stating: “My lot have murdered again. S happens.” The article reported that a serving police officer, John Hayter, had posted a message on Facebook about the death of Ian Tomlinson during the London G20 protest in April 2009. Mr Hayter’s message posted on a friend’s wall said: “I see my lot have murdered someone again. Oh well, sh*t happens”. A relative of Mr Hayter complained to the Press Complaints Commission (PCC) arguing that the article has invaded Mr Hayter’s privacy in breach of clause 3 of the PCC Code of Practice.

One of Mr Hayter’s “friends” on Facebook had noted his comment and proceeded to notify the newspaper. A newspaper journalist then requested to be Mr Hayter’s “friend” and he accepted her for around an hour before deleting her, giving her legitimate access to his comment. Facebook has often been called “a stalker or voyeur’s dream” and this case is a clear example of the dangers to personal privacy.

Many Facebook users are unfamiliar with the privacy settings and are unaware that their default setting is set to “open” so anyone can see their Facebook profile, view Facebook as a private space rather than public and trust other Facebook users despite sometimes not even knowing who they are communicating with. In addition, as illustrated in this case, many people will accept “friends” even though they do not know the person, simply to acquire more friends and seem more popular to others. However this phenomenon of acquiring friends for perceived popularity can have grave consequences as Mr Hayter found out by accepting a newspaper journalist as a friend.

The PCC has recently made clear that it can be acceptable in some circumstances for the press to publish information taken from social networking websites, even when the material is originally intended for a small group of friends and is not publicly accessible. However this will generally only be in cases where the public interest overrides the individual’s right to privacy. Unfortunately for Mr Hayter as he was a police officer any comment related to the death of Ian Tomlinson that showed police officers’ attitudes towards the incident would clearly be in the public interest and consequently any intrusion of privacy was justified.

The Data Protection Act 1998 provides protection where sensitive data such as political views, racial or ethnic origin etc is processed by a third party without obtaining explicit consent from the data subject (the person to whom the sensitive data relates). Arguably, the Act would place an obligation on Facebook to protect users’ privacy but there is an exception where the data subject has made their information public – which is exactly what Facebook users are doing when they disclose information on their or other users’ profile pages.

Clearly Facebook users have to think twice before posting comments on friend’s pages or their own profiles. If the comment relates to an issue of public interest then users should not rely on their Facebook “friends” not to divulge the information to third parties such as the national press. There is a growing trend to disclose as much information as possible on social networking sites such as Facebook but by doing so, users are exposing themselves to the possibility that other users and the media will use the information in a way that could have serious repercussions. 

For more information: contact Neil Morrison on .(JavaScript must be enabled to view this email address).

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When is a contract not a contract?

A man sells his property and the buyer misinterprets the deeds and thinks the property includes a garage when in fact it does not. The seller is aware of the buyer’s error but keeps stum. The parties sign the contract; there’s a contract right? Wrong. When there is no “meeting of the minds”, there is no contract even though on the face of it, there appears to be one.

As illustrated above, sometimes when parties contract, one party is under a mistaken assumption that a contractual provision exists to deal with an issue when in fact no such provision exists. Alternatively one of the parties may have contracted on the mistaken assumption that an important consideration of the contract exists, perhaps caused either by an oversight or a misreading of the clause.

If no agreement exists because one of the parties are acting under a misapprehension, then logically the contract cannot be rectified under Scots law The contracting party in error will no doubt want to have the contract declared void as it does not reflect their true intentions. If the other party to the contract has falsely stated that the important consideration exists or the contract protects the other party’s position when it does not then the party in error will have a remedy against the other party on grounds of misrepresentation.

There is no duty of disclosure in Scots law, to compel the other party to confess that something doesn’t exist. The Court is faced with a difficulty because although the other party is acting in bad faith it may not be apparent from their actions, especially if they have not made any false statements to the party in error. If there has been no misrepresentation and the other party is not aware of the error either prior to agreeing the contract and it is simply an error of fact by the party in error, then the old latin maxim of caveat emptor applies; buyer beware. The party in error will be stuck with the contract. 

The court has to view the overall conduct of the party who would gain from the error from an objective standpoint and decide whether there is sufficient evidence to establish that the other party knew of the fundamental error and took advantage of it. It may be possible to demonstrate the other party’s state of knowledge prior to signing the contract to show they were contracting in bad faith. The burden of proof in most cases will be formidable but it is certainly possible for a party in error to raise an action of unilateral error in order to have the erroneous contract reduced entitling the party in error to escape the unduly onerous contract.

There is conflicting case law in this area of Scots law and some legal authors such as Gloag have attacked the remedy of unilateral error. However relatively recent cases such as Lord Brodie’s Opinion in Parvaiz v Thresher Wines Acquisition Ltd suggest that rumours of unilateral error’s death have perhaps been greatly exaggerated and it is still a valuable contractual legal remedy when a party discovers their contract is not what they intended it to be.

For more information on contractual matters: contact Neil Morrison on .(JavaScript must be enabled to view this email address)

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You couldn’t make it up…

After the hard slog of reading our informative legal articles, time to sit back and let a wry smile spread across your face as you enjoy some funny news from the global legal community. This month’s news comes from India.

MAN SUES OVER LACK OF ‘LYNX EFFECT’

A luckless Indian romantic is suing Lynx after he failed to land a single girlfriend during seven years of using their products.
Vaibhav Bedi, 26, is seeking £26,000 from parent company Unilever for the “depression and psychological damage” caused by the lack of any “Lynx effect”.

Court officials in New Delhi have agreed to order forensic laboratory tests on dozens of his half-used Lynx body washes, shampoos, anti-perspirants and hair gels.

Lynx - marketed as Axe in India - is famous for its saucy ads showing barely clothed women throwing themselves at men.

But in a court petition, Bedi claimed: “The company cheated me because in its advertisements, it says women will be attracted to you if you use Axe. I used it for seven years but no girl came to me.”

Unilever declined to comment on the case.

But India’s leading compensation litigator Ram Jethmalani warned: “There is no data to substantiate the supposition that unattractive and unintelligent men don’t attract women.

“In fact some of the best looking women have been known to marry and date absolutely ghoulish guys. I’d suggest that the company settles this issue out of court.”

Wright, Johnston & Mackenzie would like to acknowledge the source of this news article, which was from Scottish Legal News.

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