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Category: Commercial law

Error in the Law of Contract: Shaping a Doctrine Fit for the 21st Century

Error in the Law of Contract: Shaping a Doctrine Fit for the 21st Century

Published 21st July 2025

by Lorna Richardson, Senior Lecturer in Commercial Law, University of Edinburgh

Introduction

Error is often described as one of the most complex parts of the law of contract. The reason for this is the clash between two opposing interests. On the one hand, a will-based theory of contract focuses on the parties being bound by having, of their own will, chosen to enter into the contract. As such, subjective will is significant. If, due to an error, a party entered into a contract believing something about the contract to be true which was not, she did not intend to be bound to the contract she ultimately entered into. On a will-based approach then, the party in error should not be bound by the contract. On the other hand, however, is the need to uphold contracts that have objectively been entered into. This is important for reasons of certainty. Parties need to be able to arrange their affairs on the basis of what the contract seems to require. It also protects the interests of the party who was not in error in entering into the contract. In framing and shaping the rules on error a legal system must thus seek to balance both positions and to adequately protect the interests of both parties.

In most legal systems it is not any error that can be used as a basis to challenge the validity of a contract. The error must generally relate to something important in relation to the contract. [1] For instance, the DCFR provides for avoidance where, but for the mistake, the mistaken party would not have concluded the contract, or would have done so only on fundamentally different terms (Art II-7:201). Many legal systems provide that an error by one party is not of itself enough to challenge the contract and they require something more, such as the mistake being shared or caused by the other party to the contract.[2] In order to protect the interests of both parties some systems, such as Germany and Greece, allow a party in error to avoid the contract but require her to pay damages to the other for losses caused due to the latter’s reliance on the contract.[3] There is therefore a spectrum between requiring full subjective consent to a contract for it to be upheld, on the one hand, and upholding all contracts objectively entered into, on the other.

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The Need for More (And Better) Private Law in Digital Asset Marketsbinary code

The Need for More (And Better) Private Law in Digital Asset Markets

Published 13th September 2023

By Christopher K. Odinet, Josephine R. Witte Professor of Law, University of Iowa; MacCormick Fellow (2023), University of Edinburgh.

For years now, the law around digital asset transactions has been very much up for debate, with some jurisdictions being more active than others in setting the legal parameters around these novel arrangements.  For example, the Singapore International Commercial Court ruled in B2C2 Ltd v Quoine Pte Ltd (2019)[1] that crypto assets can be viewed as property, similar to the English court’s decision in AA v. Persons Unknown involving Bitcoin[2] and the New Zealand High Court’s ruling in Ruscoe and Moore v. Cryptopia Limited (In Liquidation) which held that cryptocurrencies constituted “a species of intangible personal property.”[3] In contrast, in the United States, the law surrounding digital assets has been slow to take shape. Both federal and state courts have approached this area timidly and amendments to statutory commercial laws have started to be considered only recently—specifically, the 2022 amendments to the Uniform Commercial Code.[4]

But, as written elsewhere,[5] the stagnation enveloping this area of the law in the United States appears to be at an end. Following the pattern seen in other jurisdictions, U.S. bankruptcy courts find themselves on the frontlines, confronting a multitude of private law matters stemming from novel transactions involving digital assets. FTX, the world’s third-largest cryptocurrency exchange, declared bankruptcy on November 14, 2022. In July 2022, the crypto lending platform Celsius also sought bankruptcy protection. Additional crypto company insolvencies involving Three Arrow Capital and Voyager Holdings also occurred that summer.

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What evidence can be taken into account in interpreting a contract? Prohibiting reference to pre-contractual negotiations and the effect of an entire agreement clause

What evidence can be taken into account in interpreting a contract? Prohibiting reference to pre-contractual negotiations and the effect of an entire agreement clause

Published 16th January 2023

by Ms Lorna Richardson, Senior Lecturer in Commercial Law

Scots law, like English law, generally prohibits the use of pre-contractual negotiations when interpreting a contract. This is in contrast to the position in many civilian systems where such negotiations are taken into account in determining what a contract means. The DCFR also permits reference to pre-contractual negotiations, as part of the circumstances in which the contract was entered into, when interpreting a contract (Art II-8:102(1)). The exclusion of such evidence in Scots law is not however absolute and it can be referred to in certain circumstances, for instance, to show that a fact was known to both parties at the time of contract formation, such fact forming part of the “factual matrix” against which the words of the contract must be considered.

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Apparent authority: striking an appropriate balance?   

Apparent authority: striking an appropriate balance?   

Published 5th July 2022

by Laura Macgregor, Professor of Scots Law, University of Edinburgh.

Introduction

Apparent authority is a key concept in agency law, acting to protect third parties negatively impacted by the activities of agents acting without authority. In relevant cases, the law seeks to strike a balance between the interests of the principal and those of the third party. London & Quadrant Housing Trust v Stokes, a decision by Mr Justice Martin Spencer, sitting in the English High Court, Queen’s Bench Division in March of this year ([2022] EWHC 1120 (QB)) is a case which nicely illustrates the difficulties of achieving such a balance.

Criteria for application of apparent authority

The third party must prove that the principal has made an erroneous representation of the agent’s authority, which representation has been relied on by the third party to his or her detriment (for more detailed analysis, see Laura J Macgregor, The Law of Agency in Scotland (2013) paras 11-01 – 11.26). The principal’s representation can be by words or conduct, and recent cases have extended the meaning of a representation significantly. Famously, in First Energy (UK) Ltd v Hungarian International Bank Ltd ([1993] 2 Lloyd’s Rep 194) an agent was considered authorised to communicate information on behalf of his principal, which information could include the extent of his own authority. This comes very close to recognising the idea of a self-authorising agent.

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