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2010-09-01

Document Cited authorities 10 Cited in Related
Vincent
AuthorMartin Hogg,Daniel J Carr,J K Mason,Cormac Mac Amhlaigh,Andrew J M Steven,Peter Duff,Hector MacQueen,Malcolm M Combe,Fiona Leverick,Graeme Laurie,Chris Himsworth,Findlay Stark,Claire McDiarmid
Published date01 September 2010
Pages451-497
DOI10.3366/elr.2010.0305
Date01 September 2010
<p>Unlike other legal systems, Scots law has a fairly narrow and underdeveloped concept of pre-contractual liability. This reflects the fact that, traditionally, a “bright line” approach has been taken to the question of liability in contract, the bright line lying at the moment of contract formation. Before that point, the parties are deemed to be at arms' length, and there is said to be no possibility of either party incurring duties in contract to the other; after contract formation, the duties imposed under the contract can give rise to liability in appropriate circumstances. The only recognised exception to this bright-line approach (setting aside possible liabilities in delict or unjustified enrichment between negotiating parties) has been the availability of a limited remedy for wasted pre-contractual expenditure based upon the line of cases beginning with <italic>Walker v Milne</italic>,<xref ref-type="fn" rid="fn1-1"><sup>1</sup></xref><fn id="fn1-1"><label>1</label><p>(1823) 2 S 379.</p></fn> and dubbed “Melville Monument liability” as a result of the subject-matter of the not-quite-contract in that case. That limited remedy, so it was said by Lord Cullen in the Outer House in <italic>Dawson International plc v Coats Paton</italic>,<xref ref-type="fn" rid="fn1-2"><sup>2</sup></xref><fn id="fn1-2"><label>2</label><p><a href="https://vlex.co.uk/vid/dawson-international-plc-v-805539101">1988 SLT 854</a>.</p></fn> arises when one of the parties has acted in reliance on an implied assurance by the other that a binding contract exists between them, when in fact there is no more than an agreement falling short of a binding contract. Furthermore, before the remedy can be claimed, no other remedy (such as a claim for misrepresentation) must be available to the pursuer.<xref ref-type="fn" rid="fn1-3"><sup>3</sup></xref><fn id="fn1-3"><label>3</label><p>Or so it is suggested in <italic>Bank of Scotland v 3i plc</italic> <a href="https://vlex.co.uk/vid/bank-of-scotland-v-807304909">1990 SC 215</a>. The concept of subsidiarity upon which this is based is however a slippery one at best, based on a distinction between legal and equitable remedies which is itself based upon a misunderstanding of the relationship of law and equity in Scotland. Space does not allow development of this point here, but see H L MacQueen, “Unjustified enrichment, subsidiarity and contract”, in V V Palmer and E C Reid (eds), <italic>Mixed Jurisdictions Compared: Private Law in Louisiana and Scotland</italic> (2009) 322 at 339-341, 343-345 and 350-353.</p></fn> While the type of liability established in <italic>Walker v Milne</italic> is clearly of very limited scope, it has not hitherto been judicially suggested that it may no longer exist. Such a suggestion was however made by an Extra Division of the Court of Session in <italic>Khaliq v Londis</italic>.<xref ref-type="fn" rid="fn1-4"><sup>4</sup></xref><fn id="fn1-4"><label>4</label><p><a href="https://vlex.co.uk/vid/khaliq-v-londis-holdings-804527481">[2010] CSIH 13</a>, 2010 GWD 13-237.</p></fn></p> THE DECISION IN <italic>KHALIQ v LONDIS</italic>

The facts of the case concerned the negotiation of an intended contractual relationship between the pursuer, a shopkeeper, and the defender, a commercial enterprise, under which the pursuer was to be granted a franchise to operate a Londis branded grocery store. Mr Khaliq owned two neighbouring shops in Glasgow, from one of which (Unit 1) he operated a fast-food outlet, the other of which (Unit 2) he had leased to a third party, though the lease was about to come to an end. Mr Khaliq obtained information from Londis about its franchising operation, including an application form to become a member of the Londis trading group. Thereafter the local Londis representative visited Mr Khaliq and advised him to switch the fast-food outlet to Unit 2 and to refurbish Unit 1 in order that he could operate a Londis store from it. He was advised to use a shop refitting company (Swallow) recommended by Londis. Mr Khaliq signed and submitted a Londis membership application form, together with a cheque for the Londis membership fee. Londis cashed the cheque and subsequently approved Mr Khaliq's...

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