Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Memorandum of Advice
October 2010

Client: Alan Brodie

Acting Solicitor: 1001243

Particulars: The law of contract as it applies to dealings with Land Co Ltd

in March 2011

Business Law
[MZXU]
Semester 1, 2010

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Part 1 The Existence of a Valid Contract

1.1 Formation

In accordance with the law of contract, there are numerous circumstantial

requirements that must be satisfied before a Court will construe the dealing
between Alan and Land Co Ltd as legally binding.

1.1.1 Intention to Create Legal Relations

At the outset, it is clear that the correspondence regarding the sale of property
by Land Co Ltd (an incorporated property trader) to Alan is of a commercial
nature. In this context, the law will assume that both parties intended for any
agreement reached to be legally binding in the absence of strong evidence to
the contrary. Whilst this presumption is rebuttable, there is nothing in the facts
to suggest such contrary intention nor any written provisions in the agreement
analogous to Rose and Frank1.

1.1.2 Agreement

In accordance with Muirhead2, the requisite specificity of agreement essentials

are ascertained objectively. On this point Lord President Dunedin articulated that
“...commercial contracts cannot be arranged by what people think in their inmost
minds. Commercial contracts are made according to what people say”3. Given
the subject of the letters sent by both parties is plainly expressed as the sale of
122 Smart Street for £100,000, consensus in idem has been achieved4.

1.1.3 Offer

The succinctly articulated letter sent by George and Ken will be legally
considered an offer as it has been communicated to Alan and contemplates
acceptance. In this regard, the specification of the sale, property, price and
offeree (Alan) in conjunction with the use of the term ‘offer’ requires only
unqualified acceptance to form a contract without the need for further
negotiation. The directors have evidenced an intention to be bound5 by an
unqualified acceptance and have thus extended an effective to Alan subject to
an effective revocation.

1.1.4 Acceptance and Revocation

1
Rose and Frank Company v J.R. Crompton and Brothers Limited [1925] A.C. 445.
2
Muirhead and Turnbull v Dickson (1905) 7 F. 606.
3
Id per Lord President Dunedin.
4
As distinguished for example from Mathieson Gee (Ayrshire) Ltd v Quigley 1952 S.L.T.
239.
5
Carlill v Carbolic Smoke Ball Company [1893] 1 Q.B. 256.

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Alan’s written response is a legally satisfactory “final unqualified assent by the

offeree to the terms stipulated in [Land Co Ltd’s] offer”6. The language used by
Alan undoubtedly coincides with the initial offer and as it does not seek to
introduce any supplementary terms it is neither a qualified acceptance nor a
counter-offer7.

As with offers, acceptances must be communicated in order to take effect. Whilst

Lord Denning in Entores Limited8 espoused the general principle that
acceptances must be received by the offeror to be regarded as communicated,
the exception regarding postal contracts is of critical importance in this case.
The well established ‘postal acceptance rule’9 governs that where an offer
contemplates the use of the postal system to communicate acceptance, the
posting of such an acceptance constitutes a validly communicated acceptance of
the offer. This policy-grounded principle of common law will apply to the
situation at hand as the use of the postal system by the offerors implicitly
contemplates the reciprocal use of the same medium for acceptance.
Resultantly, Alan’s unqualified acceptance to Land Co Ltd’s offer is “effective on
dispatch”, completing the formation of the contract at 16:00 on the 3rd of March
2011.

The purported revocation of the original offer, whilst dispatched prior to the
deemed acceptance, is only effective once communicated and not benefited by
the protection afforded to postal acceptances. Consequently the contract is
legally binding prior to the revocation being communicated. In contrast to the
assertions of Elspeth, the revocation letter has no effect on the contractual
obligations of either party after the valid acceptance of Alan.

1.2 Formality

1.2.1 Requirement of Writing Generally

In Scots law generally, writing is not required for the constitution of a contract,
unilateral obligation or trust10. In the present case however, the contract for the
sale of 122 Smart Street is for the ‘creation, transfer, variation or extinction of a
real right in land’11 and must comply with the formal statutory requirements of
Section 2 of the RWSA.

1.2.2 Written Document

6
H. MacQueen and J. Thomson, Contract Law in Scotland, 2nd edn (Tottel), with revisions
2005, para.2.23.
7
As distinguished from Wolf and Wolf v Forgar Potato Co Ltd 1984 S.L.T. 100.
8
Entores Limited v Miles Far East Corporation [1955] 2 Q.B. 327.
9
Dunlop v Higgins (1848) 6 Bell’s App. 195.
10
The Requirements of Writing (Scotland) Act 1995 s1(1), hereafter “RWSA”.
11
Id, s1(2)(a)(i).

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Subsection 1(2) of the RWSA mandates that for contracts relating to land to be
constituted they must be embodied in a ‘written document’12. Whilst the sale
agreement for 122 Smart Street is in fact the collective of separate offer and
acceptance letters, subsection 2(2) expressly legislates that land contracts in
this form shall be ‘regarded as constituted’13 so long as ‘each document is
subscribed by the granter or granters thereof’14.

1.2.3 Valid Subscription

In accordance with the RWSA, a document is subscribed by a granter of it if it is

signed by him at the end of the last page15 with his surname, preceded by at
least one forename16. In relation Alan’s acceptance, ‘Alan Brodie’ has been
affixed in hand writing at the end of the letter and is plainly sufficient to render
the document subscribed for the purposes of the legislation.

The facts indicate that the offer letter has similarly been subscribed by both
George and Ken with the handwritten affixation of their respective surnames,
preceded by at least one of their forenames17. Despite Elspeth incorrectly
asserting that subscription depends on the signatures of all three directors, the
acceptance has in fact been validly signed (and hence subscribed) on behalf of
Land Co Ltd. This is the result of the application of schedule 218 to the RWSA,
which provides that ‘where a granter of a document is a company, the document
is signed by the company if it is signed on its behalf by a director of the
company’19. The signature of two directors ‘for and on behalf of Land Co Ltd’ is
more than enough to render the offer letter subscribed, irrespective of Elspeth’s
lack of sanction.

1.2.4 Probativity

As Elspeth correctly points out, neither the subscription of the offer letter or the
acceptance has been witnessed. However, it is not, as a matter of law, necessary
for the subscription to be witnessed in order for it to be valid under section 220.
Rather, the lack of witness to the various subscriptions merely excludes them
from receiving the benefit of the statutory presumption of authenticity
(probativity) conferred by section 321.

12
Id, s1(2).
13
Id, s2(2).
14
Ibid.
15
Id, s7(1).
16
Id, s 7(2)(b).
17
Ibid.
18
Id, Schedule 2 Subscription and Signing: Special Cases.
19
Id, para 3.
20
Id, s2(1).
21
Id, 3(1).

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Subject to being probative, the question of authenticity of George, Ken and

Alan’s respective signatures will be a question of fact determined in light of
evidence adduced by the parties. Whilst Elspeth is strictly correct in asserting
that Alan “can’t prove that George and Ken signed the first letter”, all that must
be shown is that they did so on the balance of probabilities. This will be a matter
for the Court but given the physical evidence of the letter, the panicked letter of
revocation, the phone call to Elspeth and the total absence of evidence to the
contrary it is highly likely that such a balance of probabilities will be easy to
demonstrate.

1.3 Unfairness

At law there are two major pieces of legislation dealing with unfair contractual
terms in Scotland: the Unfair Contract Terms Act 197722, and the Unfair Terms in
Consumer Contracts Regulations 199923. The UTCCR, which was the UK
implementation of a Europe Directive, applies only to consumer contracts24 and
offers no protection to Land Co Ltd against obligations in the course of its
business. Furthermore, whilst the UCTA purportedly applies to all types of
contracts, it only covers a narrow range of terms25, and is not applicable to
contracts conferring rights ‘amounting to an estate or interest in land’26.

In light of the above, Elspeth’s assertion that the sale price in the contract is
‘unfair’ is not only manifestly unreasonable, but of no legal significance. It is
worth noting however that there has been sustained pressure for reform of this
area of law to offer greater protection for small businesses27.

1.4 Conclusion

With regards to the considerations articulated above, it appears that a valid,

legally binding contract exists for the sale of 122 Smart Street by Land Co Ltd
(vendor) to Alan (purchaser) for £100,000.

22
The Unfair Contract Terms Act 1977, hereafter “UCTA”.
23
The Unfair Terms in Consumer Contracts Regulations 1999, hereafter “UTCCR”.
24
Id, reg. 4(1).
25
Exclusion and restriction clauses per UCTA, ss15 and 16.
26
UCTA, above note 22 s15(2)(e).
27
For instance the report ‘Unfair Terms in Contracts’ published jointly by the Law
Commission and the Scottish Law Commission on the 14th February 2005. The report is
available at: http://www.lawcom.gov.uk/docs/lc292(1).pdf

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

Part 2 Remedies for Breach of Contract

As concluded in Part 1 of this memorandum, Land Co Ltd is contractually obliged
to sell 122 Smart Street to Alan for £100,000. Depending on the agreed timing of
these obligations (on which there is no information), it must be made clear at the
outset that there has been no breach of the contract as yet. Alan is entitled to
wait until the time in question elapses in the hope of either discharging the
contract by unilateral performance, or taking action for breach when the
property is not sold at such a time.

However, given the relatively pressing deadlines and costs associated with
arrangements made to open his shop, the option to wait and assess remedies at
a later stage is not a satisfactory one. The follow instead should be considered:

2.1 Retention

The ‘self-help’ remedy of retention entitles Alan to withhold payment of the

purchase price under the contract as Land Co Ltd’s failure to transfer ownership
of the property is clearly a ‘material breach’28. Again, this remedy is very
unsatisfactory for Alan as it does not result in the ownership of 122 Smart Street
and would put him in a position requiring an outlay of substantially more than
£100,000 to obtain a suitable alternative from which to conduct business.

2.2 Anticipatory Breach

2.2.1 Repudiation

The actions and declarations of the directors on behalf of Land Co Ltd indicate a
very real intention to withhold from selling 122 Smart Street as agreed in the
contract. This non-performance is unquestionably material as it goes to the very
“root of the contract”29 and entitles Alan to accept the anticipatory breach which
acts as an immediate rescission of the contract in its entirety.

2.2.2 Rescission

In order to effectively accept Land Co Ltd’s anticipatory breach and rescind the
contract, Alan must declare the repudiating company in material breach of
contract and exercise rescission by giving notice to the directors. Rescission
immediately extinguishes all obligations under the contract, with only accrued
rights30 and residual actions for damages remaining.

28
Inveresk plc v Tullis Russell Papermakers Limited [2010] UKSC 19.
29
Wade v Waldon 1909 SC 571.
30
Graham v United Turkey Red Co 1922 SC 533.

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 Memorandum of Advice

Re: Alan Brodie

Glaswegian GUID:
Solicitors October 2010 1001243

2.2.3 Damages

In conjunction with rescission (and the extinguishment of his £100,000 obligation

under the contract), Alan will have a judicial action for damages to compensate
for the loss incurred as a result of Land Co Ltd’s decision not to discharge their
obligations in selling 122 Smart Street. The quantity of this loss will be the
excess over £100,000 that Alan will be required to pay for the cheapest31
suitable alternative. This suffered loss is not too remote as it is “fairly and
reasonably considered as arising naturally from the breach of the contract
itself”32.

2.3 Specific Implement

As an alternative to rescission and an action for damages as a result of the

anticipatory breach, Alan may raise a court action for specific implement
compelling the sale of 122 Smart Street by Land Co Ltd for the contracted price
of £100,000. Whilst this remedy is a satisfactory result for Alan, the exercise of
specific implement is at the Courts discretion and will not be awarded where
(amongst other things) damages would provide adequate compensation. Despite
land being unique and often the subject of orders of specific implement, as there
are other suitable properties for Alan’s purposes, an action for compensatory
damages would be an adequate alternative and reason enough to avoid this
judicial action.

2.4 Conclusion

The most satisfactory remedy available to Alan for Land Co Ltd’s failure to
discharge its contractual obligations under the contract is to accept the
anticipatory breach, exercise rescission of the contract and bring a judicial action
for damages for any excess loss suffered.

31
The duty to mitigate loss, espoused in White and Carter (Councils) Ltd v McGregor
1962 S.C. (HL) 1.
32
Hadley v Baxendale (1854) 9 Exch. 341.

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