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UNIVERSITY

OF CALIFORNIA

LOS ANGELES



SCHOOL OF LAW
LIBRARY



THE COMMERCIAL LAW OF SCOTLAND.



A POPULAR HANDBOOK

OF

THE COMMERCIAL LAW
OF SCOTLAND.



BY

W. D. ESSLEMONT, M.A., B.L.,

iii

ADVOCATE IN ABERDEEN,

Assistant Professor of Law in the University of Aberdeen.



SECOND EDITION.



EDINBURGH AND GLASGOW:
WILLIAM HODGE AND COMPANY.

1915.



T



PRINTED BY

WILLIAM HODGE AND COMPANY

GLASGOW AND EDINBURGH

1915

First Edition, 1911



T



V,



PREFACE.

THE present edition preserves the original plan, but in
re-writing the book most of the chapters have been
amplified and a fuller reference has been made to leading
cases. A chapter has been added on Arbitration. While
the book is intended primarily for students, it is hoped
that members of the legal profession may find its
pages convenient for reference on many points likely to
arise in everyday practice. W. D. E.

ABERDEEN, November, 1915.



INTRODUCTORY NOTE.

THE law of Scotland (including that branch of it with
which this handbook deals) consists partly of common
law and partly of statute law. The common law arises
from the customs of the people and includes the law
merchant, which was the name given to the law founded
on the usages of merchants and traders in different
departments of trade. These usages and customs having
been recognised and enforced by our Courts of law in
the interests of traders and the public, have come to be
adopted as part of the settled law of the land. Statute
or statutory law, on the other hand, is law made by Act
of Parliament, which may supersede any rule of common
law.



ABBREVIATIONS.



A.C.
B. & Aid.

Bell's Ap.

Bell on Arbitration

Bell's Princ.

Ch.l).

Ch. preceded by a year

D.

Ersk. lust.

Ex. D.
F.

F. (H.L.)
H. and C.

M.

M. (preceded by a numeral)
O.H.

Q.B.
R.

R. (H.L.)
S.

S. A pp.

S.C.

S.C. (H.L.)

S.L.R.
S.L.T.
Sh.Ct.Rep.
Taunt.



Appeal Cases (English Law Reports), 1875
Barnewall & Alderson's King's Bench

Reports, 5 Vols., 1817-22.
Bell's House of Lords (Scots) Reports, 7

Vols., 1843-52.
John Montgomerie Bell on the Law of

Arbitration in Scotland, 2nd Ed.
Principles of the Law of Scotland by George

Joseph Bell, 10th Ed., by William Guthrie.
Chancery Division (Law Reports), 1875-90.
Law Reports Chancery Division, 1891
Dunlop's Court of Session Reports (the 2nd

Series), 24 Vols., 1838-62.
Erskine's Institute of the Law of Scotland,

by J. B. Nicolson, 1871.
Exchequer Division (Law Reports), 1875-80.
Eraser's Court of Session Reports (the 5th

Series), 1898-1906.

Eraser's Reports House of Lords, 1898-1906.
Hurlstou and Coltman's Exchequer Reports,

4 Vols., 1862-6.
Morison's Dictionary of Decisions in the

Court of Session, 27 Vols., 1532-1816.
Macpherson's Court of Session Reports (the

3rd Series), 11 Vols., 1862-73.
Outer House of Court of Session (indicating

that decision is given by Lord Ordinary).
Law Reports, Queen's Bench Division.
Rettie's Court of Session Reports (the 4th

Series), 1873-98.

Rettie's Reports (House of Lords), 1873-98.
Shaw's Court of Session Reports (the 1st

Series), 16 Vols., 1822-38.
Shaw's House of Lords Reports, 2 Vols.,

1821-4.
Session Cases (Court of Session Reports),

1907
Session Cases (House of Lords Reports),

1907

Scottish Law Reporter, 1865
Scots Law Times Reports, 1893
Sheriff Court Reports, 1885
Taunton's Common Plea Reports, 8 Vols.,

1807-19.



CONTENTS.

PAGE

PREFACE, - 5

INTRODUCTORY NOTE, 7

ABBREVIATIONS, - 9

CHAPTER

I. CONTRACTS, 13

II. SALE OP GOODS, 61

III. CARRIAGE, 82

IV. MERCHANT SHIPPING, 93
V. PATENTS AND DESIGNS, 98

VI. TRADE MARKS AND TRADE NAMES, 108

VII. LIFE ASSURANCE, 113

VIII. FIRE INSURANCE, . 117

IX. MARINE INSURANCE, - 124

^4 X. BILLS OF EXCHANGE, CHEQUES AND NOTES, 129

XL BONDS, 162

XII. CAUTIONARY OBLIGATIONS OR GUARANTEES, 165

ij XIII. AGENCY, - 174

XIV. PARTNERSHIP, 183

?4 - 6 4 XV. COMPANIES, 196*

bit - 7^ XVI. BANKRUPTCY, 225

XVII. ARBITRATION, 249

INDEX, * - 259



THE COMMERCIAL LAW OF SCOTLAND.



CHAPTER I.

CONTRACTS.

I. The Formation of a Contract.

DEFINITION. A contract may be defined as an agree-
ment which is intended to create a legal obligation. All
contracts are agreements, but, strictly speaking, an
agreement is not necessarily a contract. Two friends
might agree to play golf on the morrow, but, if one of
them fails to keep his promise, the other has no action
at law against him. It is not an agreement which the
law will enforce. There was no intention in such an
agreement to create a legal obligation. Business, on the
other hand, would be paralysed if men were not compelled
to keep their promises and act up to their undertakings.

It requires two or more persons to make a contract.
Between these persons there must be one intention, one
mind, definite and clear agreement on every point. A
contract may be of the simplest kind or of the greatest
complexity. "I offer you 20 for this horse"; "done,"
constitutes a contract. On the other hand, a contract
may consist of several pages of printed matter. However
simple or complex the contract, the mind of all parties
must be one and their intention identical. This is what
lawyers call consensus in idem.

OFFER AND ACCEPTANCE. It is by offer and acceptance
that the parties communicate or declare their intention.
The offer must be definite and the acceptance unqualified.



14 THE COMMERCIAL LAW OF SCOTLAND.

The acceptance must exactly meet the offer. To make a
fresh condition in an acceptance is really to make a fresh
offer, which again has to be accepted without qualification
before a completed contract is formed. During a long
correspondence both parties alternately become offerers
until the agreement is finally concluded.

An offer is sometimes made by advertisement or circular
addressed to the public, and may be accepted by any one
who fulfils the conditions mentioned in it. Common
examples are the advertisement of a reward offered for
the capture of a criminal, or for finding a pet dog, or the
time-table issued by a railway company. The following
is an interesting advertising case: The Caibolic Smoke
Ball Company advertised that they would pay a reward
of 100 to any person who contracted influenza after
using one of their smoke balls according to printed direc-
tions supplied to all purchasers. A lady who purchased
these balls, and duly conformed to the directions given,
in spite of all took influenza. She accordingly sued the
company for the 100, and was successful, on the ground
that the advertisement was an offer to contract which she
had accepted by the performance of the conditions
contained in it (Carlill v. Carbolic Smoke Ball Company,
1893, 1 Q.B. 256).

MEANS OF COMMUNICATION AND DELAY IN TRANSMISSION.
It is important to keep in view that, if the offerer
specifies a particular mode of reply which the acceptor
adopts, there is a valid contract. A wholesale dealer
writes to a customer inquiring if he will buy a quantity
of sugar at a certain figure, adding, " Please wire reply
immediately on receipt of this letter." To clinch the bar-
gain effectually, the customer must telegraph immediately
on receipt of the letter. If he does so the seller is
absolutely bound. If instead the customer writes in
reply, the seller is not bound by his offer. To take an
illustration Lindsell wrote to Adams, " I will supply



CONTRACTS. 15

you with 800 toddes of wether fleeces at a price of
35s. 6d. per todde, receiving your answer by return of
post." Adams' address was, " Bromsgrove, Worcester-
shire," but the letter had been by mistake addressed,
" Bromsgrove, Leicestershire." The letter ought to have
reached Adams on 3rd September, but owing to the wrong
address he did not get it till the 5th two days later.
Adams, as soon as he received it, wrote by return of
post accepting the offer. Meantime Lindsell, not having
heard from Adams, had sold the wool to another pur-
chaser. Adams was successful in an action of damages
against Lindsell for breach of contract (Adams v. Lindsell,
1818, 1 B. & Aid. 681).

As a general rule, the acceptor is not responsible for
any delay in delivery of the acceptance, if he has posted
it in the ordinary course of business. This is not very
satisfactory for the offerer, but it has been so decided by
the House of Lords in Higgins v. Dunlop, 1847, 9 D.
140T; affd. 1848, 6 Bell's Ap. 195. In that case a Liver-
pool firm received on 30th January a letter from a
Glasgow firm offering a quantity of iron for sale at a
certain price, and posted a letter of acceptance the same
evening. This letter through delay in the post office did
not reach the Glasgow firm till the afternoon of 1st
February. The offerers refused to implement the bargain
on the ground of undue delay in acceptance, but the
acceptors were held not to be responsible for the delay,
and were awarded damages for breach of contract.

In England it is held that the offerer is bound though
the acceptance miscarried and never reached the offerer
(Household Fire Insurance Company v. Grant, 1879,
4 Ex.D. 216). This decision was arrived at in England
by overriding a previous decision. It has not been
accepted in Scotland, and has been expressly disapproved
of by an eminent Scotch judge (Lord Shand in Mason v.
Benhar Coal Company, 1882, 9 E. at p. 890). But no
general principle has been laid down in Scots law as to



16 THE COMMERCIAL LAW OF SCOTLAND.

how long an offerer is bound in the case of delay in trans-
mission of a duly posted acceptance.

It is obvious that to avoid the risk of post office blunders
(which fortunately are now so rare) and such clerical
errors as in the case of Adams v. Lindsell above quoted,
a safe course for the offerer to adopt is to calculate the
ordinary time when an answer ought to reach him and
say, " For reply here not later than Thursday, 30th curt.,
at 10 a.m.," or " For reply by wire not later than 12 noon
to-morrow," or " For reply by return of post, subject to
goods being unsold."

RECALL OF OFFER OR ACCEPTANCE. As a general rule,
an offer may be recalled any time before it has been
accepted. There is an exception to this rule, where the
offerer agrees to give the other party time to consider.
If in offering goods he says, " I will give you three days
to consider," he is bound to do so. But in England he
is not so bound, and under English law he can withdraw
his offer even before the three days are up. The reason
is a technicality in English law that this obligation to
give time for deliberation, not being for consideration or
value, does not bind the offerer. If, on the other hand,
the other party had given to the offerer a consideration
(say, 5s.) to allow the matter to lie over for three days,
he would be barred even in England from withdrawing
his offer within that time.

In other cases the power of recalling an offer sub-
sists until actual acceptance, but actual acceptance, i.e.,
a delivered acceptance, ends it. In contracts by post it
has already been pointed out that, as a general rule, the
mere posting of the acceptance is held to be equivalent
to delivery. Thus, the offer cannot be recalled after the
posting of the acceptance. That has been authoritatively
decided in a number of cases. For instance in Thomson
v. James, 1855, 18 D. 1, an offer of purchase was made
by letter; a few days afterwards the seller posted an



CONTRACTS. 17

acceptance, and on the same day the offerer posted a
withdrawal of his offer, both letters being delivered the
following day ; a contract of sale was held to be completed
and the withdrawal of the offer to be too late. As
against the offerer, therefore, the acceptance is complete
when it is put in course of transmission to him and is out
of the power of the acceptor.

On the other hand, the opinion has been frequently
expressed 'by text -writers in Scots law that an acceptor
may recall his acceptance by a communication which
reaches the offerer before or simultaneously with it.
Thus, if a letter of acceptance is posted and a telegram
revoking it is subsequently despatched, and is delivered
to the offerer before the letter, the acceptance would,
according to such a view, be effectually recalled. The
authority quoted to support this view is the case of the
Countess of Dunmore v. Alexander, 1830, 9 S. 190. The
Countess wrote to Lady Agnew requesting her to engage
on her behalf a servant named Alexander at wages pre-
viously mentioned. The next day, having changed her
mind, she wrote to Lady Agnew that she did not require
Alexander's services. Lady Agnew had posted a letter to
Alexander engaging her, but immediately, on the receipt
of the second letter from the Countess, she despatched it
by express, and both letters were delivered simultaneously
to Alexander. It was held that there had been no com-
pleted contract. It may be pointed out that the decision
in Dunmore v. Alexander was given prior to the decision
of the House of Lords in Higgiris v. Dunlop above quoted,
and seems at variance with the view therein expressed
that a contract is completed by the despatch of the
acceptance.

TIMEOUS ACCEPTANCE. If a time for acceptance is pre-
scribed by the offerer, an acceptance posted on the last
day is in time. In Jacobsen, Sons Sf Co. v. Underwood Sf
Son, 1894, 21 R. 654, an offer bearing " This for reply



18 THE COMMERCIAL LAW OF SCOTLAND.

by Monday, 6th inst.," was held to be accepted by a letter
posted on Monday evening and reaching the offerer on
Tuesday.

Where no time is fixed by the offerer, acceptance must
be made within a reasonable time. What is a reasonable
time depends upon circumstances. Where prices are
subject to fluctuation, acceptance by return post may be
necessary. Acceptance of a tender for mason work after
eleven days has been held to be timeous (Murray v. Rennie
Sf Angus, 1897, 24 B. 965) ; while delays of five weeks
in accepting an offer to execute iron work and of thirty-
nine days in accepting an offer to supply steam coal,
during which periods the prices of the iron and the coal
had risen considerably, have been deemed fatal, accept-
ance in both cases being held to be too late (Wylie Sf
Lochhead v. M'Elroy 8f Sons, 1873, 1 E. 41, and Glasgow,
Sfc,, Steam Fishing Company v. Watson, 1873, 1 R. 189).

II. Substance of a Contract.
1. VOID AND VOIDABLE.

Although apparently correct in point of form, there
may be serious defects with regard to the substance of
a contract. The parties may be legally incapable of
consenting. There may be no real consent owing to
ignorance, error, misrepresentation, or fraud. It may
be impossible to perform the contract, or it may be illegal
or immoral, and consequently unenforceable by law.
Because of such defects a contract may be void or voidable.
There is an important distinction between these two
classes. A void contract is one which from the first has
no legal effect whatever. A voidable contract takes full
legal effect up to the time when it is set aside or challenged
by some person who is entitled to challenge it. If a
contract is void, no third party can acquire any rights
in it as it never had any legal effect, but in a voidable



CONTRACTS. 19

contract independent third parties may acquire rights
before it is challenged.



2. CAPACITY TO CONTRACT.

To make a binding contract it is necessary that the
parties should be legally capable of giving consent.

PUPILS. A pupil, being a boy under fourteen or a girl
under twelve, has no power to contract. A contract
purporting to be made by a pupil is, as a rule, void. If,
however, it is for the pupil's advantage (in rem versuni),
and he acts upon it, the other party is held bound to
perform, and where necessaries are sold to a pupil a
reasonable price must be paid for them.

Contracts are made on behalf of pupils by their
guardians or tutors. A father is the natural guardian or
tutor of his pupil child; but if his acts are endangering
the pupil's estate, or if he has an opposing interest, the
Court will appoint a factor loco tutoris to take his place.
The Guardianship of Infants Act, 1886, provides that,
on the father's death, the mother, if surviving, shall be
tutor or guardian either alone or jointly with any tutor
appointed by the father. That Act also makes various
provisions as to appointment of tutors by will of the father
or mother and by the Court.

Contracts made on behalf of pupils by their tutors can
be reduced during the quadriennium utile the four years
after attaining majority on proof of lesion, i.e., loss
and injury (see infra under Minors],

MINORS. A minor is a male above fourteen or female
above twelve, who has not attained majority the age of
twenty-one. Minors have a limited capacity to contract.

The father during his life is a guardian or curator of his
minor child, and he has the power to nominate curators
to act after his death. If he fails to do so, the minor mav



20 THE COMMERCIAL LAW OF SCOTLAND.

choose curators under the Act of 1555, c. 35, or a curator
bonis may be appointed under the Pupils Protection Act,
1849.

If a minor has curators, the general rule is that all
contracts made by him without their consent are null.
To this rule there are the following exceptions: (1) If
a minor enters into a profession, trade, or business, the
contracts made by him in the ordinary course thereof,
and without the consent of his curators, are binding on
him. There is a presumption that bonds, bills of exchange,
and such documents granted by a minor engaged in busi-
ness are granted for the purposes of the business. (2) If
a minor holds himself out as of full age, so as to deceive
parties with whom he deals, the contract is likewise
binding on him. (3) Contracts to the minor's advantage
are also valid without his curator's consent, and he must
pay a reasonable price for necessaries sold to him.

If a minor has no curators, he can himself enter into
contracts. There is a doubt, however, as to how far a
minor without curators can give a valid discharge, and
recently the Court has drawn a distinction between capital
and other sums in this matter. In Jack v. North British
Railway Company, 1886, 14 E,. 263, the Court held that
a minor child could grant a valid discharge for a sum of
50 of damages as being of the nature of an alimentary
payment and not a capital sum for investment. To grant
a valid discharge of a capital sum, the appointment of a
curator would appear to be necessary, and it is usual
in such circumstances to obtain the appointment of a
curator bonis in order that the discharge may be granted
and the sum properly administered.

Contracts validly made by a minor with consent of his
curators or by a minor himself, if he has no curators, can
be reduced during the quadriennium utile, i.e., within
four years of the attainment of majority, on the grounds
of minority and lesion. The loss must not be trifling. It
must be a positive loss of considerable amount. The



CONTRACTS. 21

agreement must also be considered in view of the circum-
stances at the time it was made, and there can be no
lesion to ground a reduction if it was a proper and reason-
able agreement for the minor at its date. It is beside
the question to consider whether the bargain has turned
out well for the minor. The case of Robertson v.
Henderson $ Sons, Limited, 1905, 7 F. 776, clearly illus-
trates this principle in a workmen's compensation case,
where a minor, with consent of his father and under
legal advice, had discharged all claims against his em-
ployers on payment of a lump sum, and attempted unsuc-
cessfully to reduce the discharge on the ground of
minority and lesion. Cautionary obligations and dona-
tions would fall to be reduced on the ground of lesion.
Lesion would also be presumed in a bond granted for
borrowed money, which is reducible except so far as the
lender is able to prove that the money had been applied
for the benefit (in rem versum) of the minor.

When a contract is reduced on the ground of minority
and lesion it is set aside from the beginning, and not
from the date of the action. The minor cannot reduce
the contract, unless he restores to the other party all
benefit he has derived. The object of the reduction and
restitution is to restore the cause and parties to the same
position as before the contract.

Pupils and minors are specially protected against
moneylenders by the Betting and Loans (Infants) Act,
1892, and the Moneylenders Act, 1900.

MARRIED WOMEN. Formerly a woman's whole move-
able estate, with the exception of paraphernalia (con-
sisting of wearing apparel, personal ornaments, and the
receptacles in which these are kept) passed to her husband
on her marriage. Moveable estate, which was acquired
during the subsistence of the marriage, also passed to the
husband. The rents of heritage as they fell due were
included in the estate thus falling to the husband. The



22 THE COMMERCIAL LAW OF SCOTLAND.

husband was said to take the wife's moveable estates in
virtue of his jus mariti, and such estate became the
absolute property of the husband. The husband's jus
mariti might be renounced by an ante-nuptial marriage
contract, i.e., a contract executed by the husband and
wife before marriage, or it might be excluded by the
granter of property to the wife as regards such property.
But if the jus mariti had not been so renounced or
excluded, the husband, according to the common law,
became proprietor of the whole moveable estate of the
wife, and could deal with it as absolute owner. He also
became liable for the wife's debts contracted) before
marriage. As will be seen later, the jus mariti has been
well-nigh abolished by statute.

Besides the jus mariti, the husband has what is called
the right of administration, i.e., a right to control the
management of the wife's estate. The right of adminis-
tration puts the husband in the position of curator to his
wife. Unless that right is renounced or excluded by
deed or statute, the husband's consent is necessary to
validate her deeds, and without his consent she cannot
deal with her heritage or with moveablevs from which
his jus mariti is excluded.

The husband's rights have been much curtailed by
statute

(1) Under the Conjugal Rights Amendment Act, 1861,
where a wife has obtained a decree of judicial separation
against her husband, or where a deserted wife has
obtained a protection order, all property which the wife
may acquire after such decree of judicial separation or
protection order becomes her own property, from which
the jus mariti and right of administration of the husband
are excluded, and she may deal with it in every respect
as if she were unmarried.

(2) The 1861 Act further provides that, where a
married woman succeeds to property, or acquires right to
it otherwise than by her own industry, it does not fall



CONTEACTS. 23

under the jus mariti or right of administration, unless
the husband makes a reasonable provision for her support
and maintenance, if such a claim be made on her behalf.

(3) The Married Women's Property (Scotland) Act,
1877, excludes the jus mariti and right of administration
of the husband from the wages and earnings of a married
woman, in any employment, occupation, or trade in
which she is engaged or in any business which she carries
on under her own name, and from any money or property
acquired by her through the exercise of any literary,
artistic, or scientific skill. The earnings and property
so acquired and all investments thereof are deemed to be
settled to her sole and separate use, and her receipts
are a good discharge. This Act also limits the liability
of the husband for his wife's ante-nuptial debts to the
value of the property which he has received through
her.

(4) The Married Women's Property (Scotland) Act,
1881, provides that when a marriage is contracted after
18th July, 1881, and the husband is domiciled in Scotland
at the time of the marriage, the whole moveable or per-
sonal estate of the wife, whether acquired before or during
the marriage, is her separate estate, and not subject to
the jus mariti. The income of such estate is payable to
the wife on her individual receipt. But she is not
entitled to assign the prospective income of it, or, unless
with the husband's consent, to dispose of such estate.
The rents of her heritable property in Scotland are
declared to be no longer subject to the jus mariti and
right of administration of her husband. The 1881 Act,
thus, in marriages after 18th July, 1881, abolishes the jus
mariti entirely, and also abolishes the right of adminis-


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