Should the law on donation be bigger or smaller?

The question is prompted by a workshop on the law of donation held on 1st December under the auspices of the Edinburgh Centre for Private Law. Laura Macgregor, chairing the meeting, explained that its purpose was partly to bring property lawyers and obligations lawyers together on this issue and partly to respond to practical concerns raised by those who had encountered problems in the lower courts. Martin Hogg and Hector MacQueen gave presentations from the point of view of the law of obligations. George Gretton gave a property law perspective and Lars van Vliet gave a comparative perspective.

Scotland currently has a very small body of law on donations inter vivos. There is a presumption against donation. There is a rule (not confined to donations) which makes it easier to set aside a transaction for uninduced unilateral error if it is a gratuitous transaction. There is a requirement of writing (again not confined to donations) for the constitution of a gratuitous unilateral obligation other than one undertaken in the course of business. There is an interpretative guideline (again not confined to donations) that, if there is a choice between two possible interpretations, a provision imposing an obligation should be interpreted in the way less burdensome to the debtor. There is an old rule, of no importance in practice, that the donor has an obligation not to do anything to defeat the donee’s right in future (“simple warrandice”). And that is about it. As George Gretton explained, there is no point in including donation in a law of property course because the general rules on the transfer of property apply: it is sale of goods which is by statute an exception. So far as the law on obligations is concerned the law is equally light. An obligation to donate can be created by contract or unilateral promise and the normal rules on formation apply. No special formalities are required (other than the  limited requirement of writing noted above) and, once the donation has been made, no continuing obligations are imposed by law on either donor or donee (other than the simple warrandice noted above). Obligations resulting from a contract or promise to donate are subject to the normal rules on performance and non-performance and the normal remedies are available. Donations are now irrevocable, although in the time of Stair (17th century) they were revocable for ingratitude and until 1920 gifts between husband and wife were revocable.

Many systems have more extensive laws on donation. We can see an example of such a bigger law in Book IV.H. of the Draft Common Frame of Reference (DCFR). This deals primarily with contracts for the donation of goods but applies “with appropriate adaptations” to contracts for the donation of money and certain other intangible assets (but not immovable property or rights in it). It also applies “with appropriate adaptations” to unilateral promises to donate and to cases where the donor immediately transfers ownership to the done without there being any prior obligation to donate. Cases of this latter type probably account for the vast majority of donations in ordinary life – Christmas presents, birthday presents, donations of unwanted goods to charity shops and recycling outlets, small monetary donations to charity collectors in the street or at the door, coffees bought for friends, etc.

The length of the provisions in the DCFR is explained by two sets of rules. One is on the obligations and remedies of the parties and the other is on revocability for ingratitude of the donee, impoverishment of the donor or, subject to strict limitations, material change of circumstances.

I suspect that there would be little if any demand in Scotland for the re-introduction of rules allowing donations to be revoked. The view that the security of donees should be protected was an important reason for the UK’s opposition to the “clawback” provisions in the EU Succession Regulation and hence for the failure of the UK to opt in to a law which could otherwise have been of benefit to some of its citizens.

The DCFR’s rules on the obligations and remedies of donor and donee are another matter. The basic approach is to impose much lighter obligations on donors than on sellers and to give donees more restricted remedies than buyers. For example, if the goods do not conform to contract the donee cannot require replacement or repair, and the measure of damages for non-performance is based on the reliance interest rather than the expectation interest.  At first reading these rules seem reasonable enough. But I suspect that most Scottish lawyers would consider that it is even more reasonable to impose no obligations on donors other than those voluntarily assumed by contract or promise and to allow the normal remedies for non-performance of those obligations which have been voluntarily assumed. It would seem to be highly anomalous and unjustifiable to restrict remedies against those undertaking an obligation to donate but not to restrict remedies against those undertaking other gratuitous obligations, such as one to provide services or to lend something free of charge.

In short there seems to be no convincing reason to make the Scottish law on donations bigger. Should it be smaller? In particular, should the presumption against donation be abolished? It seems to be this presumption which is causing difficulties in practice. Lars van Vliet explained in his presentation that in Dutch, German and French law the presumption against donation disappeared early in the 19th century. Abolishing the presumption would simplify the law and might discourage some donors from trying to reclaim what had been given by alleging that it was a loan or was transferred to be held in trust for the transferor but would probably not make much difference to outcomes. It must be a rare case which is decided solely on the basis of the presumption. If a tie-breaker turned out to be indispensable the answer would be that it is up to the claimant to establish his or her claim.

Those who are interested in reading more about the Scottish law on donation will find an excellent article by Hector MacQueen and Martin Hogg in the Juridical Review (2012 at page 1) and a comparative survey (covering the law of Scotland, Louisiana, South Africa, France, Germany and England) by Martin Hogg in the Tulane European and Civil Law Forum (2011 at page 171).

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *