Introduction
Unlike English law, Scots law was open to the Continental European ius commune (common law). The elements of this law were significantly infested by the canon law or universal law of church and the Roman law, which was taught in most Continental Universities where many lawmakers underwent their first legal education. These and more impacts were experienced when Scots lawmakers and practitioners wrote treaties on their law since they applied the concepts and systematically learned from the Continental European laws, which reinforced its ius commune elements. Even though the civilian law’s doctrines weakened after the 1707 Union, primarily from the Victorian period, Scottish laws are significantly different compared to English law, with many effects from the Roman law.
The exceptio non adimpleti contractus provide contractual exceptions for the performance of an action that involves mutual obligations or duties. In other words, the plaintiff may not seek legal enforcement of an obligation that has not been performed. It is a remedy found under the Continental and Scots contract law, which grants the Principle rights to withhold contractual performance until the other contractual party performs. The primary purpose of this paper is to assess the impacts of the Roman law’s exceptio non adimpleti contractus on obligations of the contractual parties and how the concept shaped the development of Modern Scots law of contracts, specifically on the remedy of retention. It looks at the impact of Roman law on shaping the obligation of partners after the dissolution of partnerships. The study assesses how the modern Scottish statutory law, which governs partnerships, interact with the principles of Roman law.
Mutuality
The contractual parties are supposed to render their respective performance of obligations simultaneously unless they have an agreement on various circumstances or situations indicating different performance order. In Scots contract law, mutuality is one of the most important concepts that permeates all aspects of contractual breach of obligation. Mutuality is found under the civilian system, which is derived from the Roman law’s exceptio non adimpleti contractus, as a defense for unperformed contracts (McNeill v Aberdeen City Council, 2013). According to Wilson (2015), assessing the work of Erskine (1773), the Scottish Institutional writer, provides that:
No party in a mutual contract, where the obligations of the parties are the causes of one another, can demand performance from the other if he himself either cannot or will not perform the counterpart: for the mutual obligations are considered as conditional (Wilson, 2015).
Therefore, if one party’s performance of obligations is dependent upon the other party’s performance of different obligations from the same contract, the parties are in a mutual contract, and every party in such a contract may withhold performance until the other party performs its obligations (Cazanel, 2018). The Roman Law synallagmatic contract results in interdependent and reciprocal obligations incumbent upon the parties in the contract. As a result, under the Roman doctrine of exceptio non adimpleti contractus, the performance actions subject to contractual parties’ obligations in synallagmatic contracts should be executed simultaneously (Malecki, 1999). When the claimants asserting the exception to non-performance of obligations, they do not seek to break/terminate the contractual relationships. Instead, they seek to suspend the performance of their obligations, provided the co-contractors fail to perform their due obligations.
The Remedy of Retention
The retention remedy of contractual obligation performance depends on the broad concepts of mutuality. The remedy is found in both Continental and Scots contract law in Article 9:201 of the Principles (Bank of East Asia v. Scottish Enterprise, 1997). According to Treitel (1988), conventional obligations were considered to be exigible based on good faith requirement, where each contractual party was required to engage the trust of the other party, and no action in either party defeated the expectations in good faith by the other could be reasonable or fair. The issue was not only the availability of the remedy for implementation of specific rights but also crucial on the Scottish version of the exceptio non adimpleti contractus, the retention rights, and mutuality doctrine, as a way of forcing or pressuring the contractual party intending to break the covenant into the proper performance of obligations (MacQueen, 1997). When claimants are awarded damages resulting from a breach of contract instead of order to implement, the damages amount is based on expectation or performance interest (Macgregor, 1996).
Lord Drummond-Young stated that mutuality dictates that “the obligations of one party are regarded as the counterparts of the obligations of the other, and if one party fails to perform his obligations, the other is relieved from his obligations to perform” (McNeill v Aberdeen City Council, 2013). The retention of performance remedy allows a contractual party faced with a breach of contract to retain or perhaps when expressed better, to temporarily suspend its obligations to perform, with the aims of encouraging the other party in a contract to perform (McBryde, 2007). The remedy originated from the Roman exceptio non adimpleti contractus and appeared to be popular in Scots law of contract based on a large number of decided cases. The aim of the Roman law’s remedy of retention was to avoid the need for litigation, mainly in long-term contracts, or where the parties involved repeatedly engage in a contractual relationship with another. The Roman law exceptio non adimpleti contractus encouraged parties to negotiate their disputes in a ‘low key’ manner, which minimized the impact of non-performance in their commercial relationship and led to less damaging compared to other options available such as rescission or damages.
Similar to Scots contract law, the retention of performance remedy in Roman law operates only where the parties’ contractual obligations are counterparts of other parties’ obligations. Scots contract law adopted the test under the Roman law of contracts for determining when these obligations are counterparts of one another, although this has been historically unclear. However, clarification of the test was achieved following the Scottish appeal to the Supreme Court back in 2010. In this case, Lord Hope confirmed that all “obligations on the one side of a contract are presumed to be the counterparts of all the obligations on the other side” (Inveresk plc v Tullis Russell Papermakers Ltd, 2010). In Inveresk Plc, Lord Hope relied on McBryde’s analysis on paragraph 20-70. He noted that any party seeking to prove that retention remedy is not applicable or available “bears the onus of proving that the obligations in question are not counterparts of one another” (Inveresk Plc v Tullis Russell Papermakers Ltd, 2010). The concept applied in this case was adopted from the Roman law exceptio non adimpleti contractus, meaning that it played significant roles towards the development of modern remedy of retention under the Scots law of contracts.
However, some more recent decisions have differed from the Supreme Court’s authoritative statement in the above judgment. Lord Drummond-Young, in two Inner House judgments, has eschewed the idea of a presumption when determining whether the party’s obligations for performance under the contract were counterparts of one another. Lord Drummond-Young suggested that a new category of contractual obligations exists, which he named “substantive” or “fundamental” obligations (McNeill v Aberdeen City Council, 2013). As a result, these are the only obligations that can be considered to be counterparts of one another, and the aggrieved party can retain them in the event of a contractual breach. Therefore, it follows that in the case of ancillary or incidental breach of obligation, retention remedy may not be available. The classification tends to be entirely novel since it has never appeared in Scots contract law before McNeill case.
The dicta of obligation classification in McNeill typically conflicts with the Supreme Court authority. As a result, they would not be considered to be binding in any court in Scotland considering this issue in a future case. The Courts will continue applying the Roman law remedy of retention and the test stipulated by the Supreme Court, making it significantly uncertain in the Scots contract law at present. Also, in the Inner House case, which was decided back in 2018, the questions at issue were compounded when the Court, although agreed on the case’s disposal, markedly differed in its analysis about retention of remedy (JH & W Lamont of Healthfield Farm v Chattisham, 2018). Richardson (2018) persuasively criticized Chattisham’s decision on the scope and limits of the contractual parties’ right to retain performance. Although some cases tend to differ with the Supreme Court’s clarifications on the rights to retain performance, clarity needs to be achieved.
The right to retain performance or the retention remedy in Scots contract law is derived from the Roman law exceptio non adimpleti contractus (McBryde, 2007). The traces of the party’s rights to retain performance under the Roman law exceptio non adimpleti contractus rule in Scots law exists from the 13th century (McBryde, 1996). The retention remedy is based on the doctrine of mutuality in the contract as stated by Erskine that no “party in a mutual contract, where the obligations of the parties are the causes of one another, can demand performance from the other, if he himself either cannot or will not perform the counterpart, for the mutual obligations are considered as conditional” (Erskine’s Institute IV.iii.86.). Therefore, the right to retain performance under Roman law exceptio non adimpleti contractus shaped the development of modern Scots remedy of retention under the law of contract. It also shaped and formed the fundamental ground of the modern Scots rescission remedy (McNeill v Aberdeen City Council, 2013, para. 23). Historically, most scholars have thought that the principle exerts a ‘barring’ effect, primarily because of the concept limit or prevent a party in breach of contract from enforcing performance of obligations that are due to be performed by its contractual partner or counter-party (Mcbryde, 2007).
Obligations of Partners after Dissolution of Partnership
Under Roman law, a partnership was considered to be a contract between two or more parties who had agreed to cooperate and reach a specific, common goal. Partners had obligations to contribute to labour, money and goods/assets to the company. They sought a profit based on a proportion that could vary from one partner to another. Section 351 of Bell Principles provides that Roman law treated partnership as a “consensual contract,” where the Scottish Institutional writers referred to it as an association or contract (Erskine Institutes iii.3, 18). In this respect, the Roman law and Scots law, differ markedly to the common law.
Societas is one of the consensual contracts that was recognized under the classical Roman law. Societas was ‘not a corporate body, a legal person in its own right” (Zimmermann, 1996). It differed markedly with the conception of the partnership by Hansmann and Kraakman, with the primary focus on the obligations and rights of the partners inter se, and economic benefits of the partnership’s business operations were allocated internally amongst the partners (Thomas, 1976). The ability of managers to bind the partnership or Agency was lacking and partners could not bind the societas in a contract with the third party (Thomas, 1976). Any contract created by the partners with third parties was considered to only bind the individual partners, primarily based on the Roman law’s attitude to the agency, instead of a partnership (Zimmerman, 1996).
As a result, it did not have any idea of direct representation which could enable the partners to bind partnerships in legal relationships with the third parties or the outside world. Instead of direct representation by partners, multiple concepts were applied to achieve same outcomes, for instance, the paterfamilias’ capabilities at the head of the family to operate in business activities through slaves and sons (Gordon, 2007). The Roman concept lacked both components of entity shielding, meaning that there was no difference between the assets and obligation of the societas and those of its partners or members (Buckland, 1921). The law recognised ‘non-human right and duty-bearing entities,’ which were known as corpus or universitas (Thomas, 1976). Even though they were not persons, they were treated as persons. Under the Roman jurisdictions, universitas was ‘a group which has been recognised by the law to be a group and either made capable or recognised to be capable as such of rights and duties’ (Duff, 1938). In Roman law, the universitas personarum was considered similar to a person, or a corporation and had the legal capacity and capability to change with membership changes (Popovici, 2013).
The Roman law ordinarily provided the action pro socio only in cases of partnership dissolution, but with exception to special cases. A recent English case in Boghani v Nathoo (2011) provides the difference between English and Scots partnership law. Scottish firms have separate legal personalities, while firms under the English common law do not base on Section 38 of the Partnership Act 1890. According to Section 38 of the Partnership Act, it provides that:
After the dissolution of a partnership the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.
Unlike modern jurisdictions applying civil law, no difference is drawn between commercial and civil partnership in Roman law due to the influence of English common law (Shingadia Brothers v Shingadia, 1958). As mentioned above, the ordinary action where one partner may sue another is when it seeks to enforce the actio pro socio, as expressed by a South African decision in Shingadia Brothers v Shingadia (1958). The Roman law principle of actio pro socio typically lies only after the dissolution of the partnership, but the partner may also seek manente societate, most notably with the aims of enforcing a partner’s obligation to contribute to the partnership.
The Roman law material and language shaped the partner’s obligation after the partnership is dissolved. According to Section 33(1) of the Partnership Act 1890 provides that:
Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner (Gordon v Thomson Partnership, 1985).
Such agreements are found in most partnership contracts, which may either be implied or expressed from the general contract terms (Gordon v Thomson Partnership, 1985). However, when it comes to leasing in a partnership, the House of Lords formulated a general rule in Inland Revenue v Graham’s Trustees (1971). The House of Lord argued that partnership dissolution terminates the lease, primarily because under Section 4(2) of the Partnership Act 1890, firm is considered to have a separate legal personality from its partners and this ‘person’ or entity ends with partnership dissolution (Inland Revenue v Graham’s Trustees, 1971).
In Boghani, the Chancellor reviewed precedent case laws and authorities, concluding that in Scotland, the obligations of a partner to the third parties continue notwithstanding the dissolution of partnership because the partnership has separate legal personality. The principle was shaped by Roman law, where the doctrine provides the persona ficta theory of corporate bodies. Under Mayer & Co. v Farber [1923] 2 Ch 421, Scots law recognized the partnership as a separate legal entity. However, in 2003, the Law Commission and the Scottish Law Commission proposed amendment in the law to classify partnerships as legal entities separated from its the aggregate of their partners (Cahn & Donald, 2018).
In Balmer v HM Advocate (2008), the question at issue focused on the issue of extinction of the partnership’s legal personality upon dissolution. The Court did not provide explicit consideration to various situations where the legal personality of partnerships could be considered to be extinct, particularly on the issue whether the legal personality ends upon a change in partnerships’ membership. However, in the Joint Report, the Commission noted that:
In Scots law, in which a partnership has separate legal personality, there is uncertainty as to whether a change in membership terminates the personality of the “old” partnership and brings into being a “new” partnership entity (Scottish Law Consultation, 2011).
The Scottish partnership, being one of the jurisdiction influenced by common-law tradition, has a separate legal entity. The Scottish partnerships’ historical development is known to originate from the Roman-Dutch civil law, a Roman-inspired type of societas, a contract-based on the duties and rights of partners inter se. The modern partnership statutory sources interact with the ongoing influence of Roman doctrines to come up with a modern business that can contract with third parties under its name. According to Macgregor (2019), the Scots law supports Kraakman and Hansmann’s perspective that attributes of legal personality are “secured by organisational law rather than contract law.” The primary root of the continued issue in Scots partnership law is the adherence to Roman law principle of delectus personae, which dictates the choice of each partner in partnership implies the exclusion of other partners (McBryde, 2007). The emphasis of delectus personae in Roman law significantly affected the Roman partnership due to lack of continuity.
The emphasis of personal relationships, which was appropriate under Roman law, seems to be inappropriate for modern Scots law, specifically where the number of partners is unlimited, and partnerships operate all over the world. Even though they rendered it ‘rather vulnerable and inherently unstable,’ the impact was interfered by the application of extended members of the family as partners in a partnership (Broekaert, 2012). Given the fact that Scots law has failed to progress from its Roman-inspired origins, the issue tends to be more than a ‘mere inconvenience.’
Conclusion
The Roman law exceptio non adimpleti contractus has a significant impact on the modern Scots law of contract, primarily on the obligations of the contractual parties. The exceptio non adimpleti contractus provide contractual exceptions for the performance of an action that involve mutual obligations or duties. In other words, the plaintiff may not seek legal enforcement of an obligation that has not been performed. The contractual parties are supposed to render their respective performance of obligations simultaneously unless they have an agreement on various circumstances or situations indicating different performance order. In Scots contract law, mutuality is one of the most important concepts that permeates all aspects of contractual breach of obligation. Mutuality is found under the civilian system, which is derived from the Roman law’s exceptio non adimpleti contractus, as a defence for unperformed contracts. The retention remedy of contractual obligation performance depends on the broad concepts of mutuality. The remedy is found in both Continental and Scots contract law in Article 9:201 of the Bell’s Principles. The right to retain performance or the retention remedy in Scots contract law is derived from the Roman law exceptio non adimpleti contractus. In Scotland, the obligations of a partner to the third parties continue notwithstanding the dissolution of partnership because the partnership has separate legal personality. The principle was shaped by Roman law, where the doctrine provides the persona ficta theory of corporate bodies. The Scottish partnerships’ historical development is known to originate from the Roman-Dutch civil law, a Roman-inspired type of societas, a contract-based on the duties and rights of partners inter se. The modern partnership statutory sources interact with the ongoing influence of Roman doctrines to come up with a modern business that can contract with third parties under its name.
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