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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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?
- 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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- 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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