Bill of Rights?

Q5. Explain what is meant by “Holder in due course” – Bills of exchange act 1882

Holder in due course. ( Statue book) *

Only holders of a bill may negotiate it. S2 1882 act directs that a “holder” means the payee or indorsee of a bill who is a possessor of it or the bearer of the bill. The act makes a presumption that every holder is a holder in due course s30 1882

(1)A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions; namely,

(a)That he became the holder of it before it was overdue, and without notice that it had been previously dishonoured, if such was the fact:

(b)That he took the bill in good faith and for value, and that at the time the bill was negotiated to him he had no notice of any defect in the title of the person who negotiated it.

(2)In particular the title of a person who negotiates a bill is defective within the meaning of this Act when he obtained the bill, or the acceptance thereof, by fraud, duress, or force and fear, or other unlawful means, or an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud.

(3)A holder (whether for value or not), who derives his title to a bill through a holder in due course, and who is not himself a party to any fraud or illegality affecting it, has all the rights of that holder in due course as regards the acceptor and all parties to the bill prior to that holder. *

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Cautionary in Scots Law

Q3. Explain the function of a cautionary in Scots law and detail the rights of the cautioner as well as the extent of their liability?

http://www.legislation.gov.uk/ukpga/2015/15/contents/enacted

Cautionary obligations

  • It may give lenders comfort
  • It is a personal obligation given by a third party in respect of an obligation of a principal debtor
  • It is therefore an accessory obligation
  • May be debt or may be obligation ad factum praestandum
  • May be gratuitous
  • Parent guaranteeing child’s obligations
  • May be onerous
  • Bank guaranteeing developes obligations under building contract
  • No special form

Writing – Generally, cautionary obligations do not require to be committed to writing in order to be validly constituted, but there are important exceptions to that rule. S1 (2) (a) (ii) of the Requirements of Writing (scot) Act 1995 stipulates that writing is required for the proper constitution of a cautionary obligation where it is a gratuitous unilateral obligation not undertaken in the course of business.

Where a cautionary obligation amounts to a security or guarantee for a regulated agreement under the Consumer credit act 1974 s105 states it MUST be in writing and executed by the cautioner.

Accessory obligation – A cautionary obligation is accessory in nature. Therefore, it is not an independent principle which stands on its own and it cannot exist without linkage to an independent principle obligation between a debtor and creditor. If you are looking for notary work experience, visit the site

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Consumer Insurance Question

  1. The Consumer Insurance (disclosure and representation) act 2012. Explain the principles which apply to a business applying to entering into a contract of insurance in relation to disclosure of information.

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The contract of insurance is described as a contract uberrimae fidei, or involving the utmost good faith in relation to consumer insurance contracts.

Like the duty of good faith, the duty of disclosure is mutual, although few cases exist that explore the duty as it applies to the insurer. The duty of good faith is wider in ambit than the duty of disclosure. Good faith applies at all times during the insurance contract: during negotiations; the currency of the insurance contract; and the date when a claim is made.

By contrast, the duty of disclosure applies during negotiations, but only up until a binding insurance contract is formed. It revives when the insured renews the contact. Usually annually. There is, however, no obligation on the insured to disclose factors increasing the risk during the course of the insurance contract.

There are three elements of good faith

  • Duty of disclosure of all facts which are material to the risks insured in the insurance policy;
  • Duty not to misrepresent facts
  • Duty not to make a fraudulent claim on the policy.

There are two important issues to consider in the context of disclosure;

  • The state of knowledge or belief of the insurer about the relevance of certain facts to the risk insured; and
  • The test of what is “material” fact to the risks insured in terms of the insurance contract.

The first issue concerns the thorny problem of how the law treats the situation where the insured did not disclose a material fact but was unaware of the fact at the formation of the contract. In such cases it is important to distinguish between a consumer insurance and commercial insurance.

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Lien Question

Consumer Law past papers 2012

  1. Lien question ?

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Intro to Q –

  • Arises by operation of law, without agreement of parties
  • Sometimes referred to as a ‘self help’ remedy as no court order is required
  • Creditor in possession of debtor’s property may retain it as security for payment
  • SOGA s.39(1)(a)
  • Possession is the essence of lien
  • Possession must be distinguished from custody
  • Can use lien to force payment but can also apply to court for warrant to sell property

Special Lien

  • Means that creditor can only retain property relating to that particular transaction for payment in relation to that particular transaction.
  • Also, cannot retain property unconnected with that transaction to force payment
  • Special Lien
  • Special Lien is based on the simple premise that, if A carries out work for B on particular goods entrusted to him by B, he Is entitled to retain those goods until he is paid for his services.

National Homecare ltd v Belling 1994

  • Manufacturers of domestic electrical appliances employed another company under an agreement. The other company was to deliver and instal items of equipment from the manufacturers’ products held at the installers’ regional centres. The stock remained the property of the manufacturers. The obligation on the manufacturers was to pay the installers, on receipt of an invoice, for each supply made from the stocks and to replace stocks in the regional centres when requisitioned by the installers.
  • Held, that (1) special lien depended upon and was part of the law of mutual contract; and (2) since the installers had been holding goods as a means to performing their part of the contract, they were entitled to rely on special lien; and manufacturers’ pleas

Asset security itself divides into two types. In the first place, the asset may remain vested in the debtor, with the creditor having a limited right in the property. There are thus two proprietary rights in the same property. An example of this is the standard security. The debtor remains the owner of the property in question, notwithstanding the grant of the standard security. The security, on being registered, confers on the lender a real right in the land, but it is a limited or subordinate right, a right in something of which the right of ownership is vested in another person. The same happens if goods are pledged with a pawnbroker.

The most common form of special lien is that of a person who repairs goods, but it would also extend to anyone who does any work on goods as in the case of  Chase v westome 1816

https://www.gov.uk/consumer-protection-rights
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