In Scots law (as in many legal systems) there are two main categories of rights. There are rights in things. And there are rights enforceable against persons. Rights in things are known as real rights. Rights enforceable against persons are known as personal rights.
Understanding these two terms is crucial to understanding how a legal system works, and each will be considered in turn.
We turn firstly to real rights. These are rights directly in a thing.
For example Ernie owns a car. The car is the thing. The right is Ernie’s ownership of the thing. Legally, we could say Ernie has a real right of ownership in a car. He has a real right in a thing.
Or, alternatively consider Bert. Bert is a creditor, and he has been given Ernie’s car until Ernie repays the debt due to Bert. THis sort of arrangement, where a creditor has possession of an asset in security for payment of a debt, is known in law as a pledge (that’s what pawnbrokers get if you borrow money from them). So Bert has a pledge of Ernie’s car. Again, the car is the thing. The right is Bert’s right of pledge, his security over the car. Legally, we can analyse this situation and say Bert has a real right of pledge – a real right in security – in the car. Bert has a real right in a thing.
The real rights can be contrasted with personal rights – rights enforceable against persons. These personal rights, the relationship between persons, are not generally the subject of property law. Property law focuses on real rights. Personal rights are the province of the law of obligations.
Thus, Ernie owes Bert £1,000. Ernie is under an obligation to make payment to Bert. He has a debt. However, the law of obligations involves two perspectives. While Ernie has a debt of £1,000, an obligation to pay £1,000; Bert has a right to receive payment. Bert’s right to payment is a personal right – enforceable only against Ernie. Bert’s right is correlative to Ernie’s obligation.
Now, Bert’s right may have arisen in a number of different ways. Ernie may have incurred the liability in delict. Ernie may have hit Bert with a frying pan, to Bert’s injury. Ernie may have incurred the liability in contract. For example, Bert may have sold Ernie his signed first edition of Trainspotting and some cookies for £1,000; or Bert may have loaned Ernie £1,000 to buy cookies.
In each case there is a debt. The debt is due from Ernie to Bert. In each case Bert, the creditor has a personal right.
Every personal right has a correlative obligation. If somebody has a personal right to something, then another party is under an obligation.
A personal right can only be enforced against a specific person or a discernible category of persons. So, how does this differ from a real right?
A real right is a right enforceable against the world. This means, that if anyone attempts to interfere with a real right, action can be taken against them. The right to enforce for infringement is not limited to enforcement against certain specific individuals, but it is possible to enforce against any party.
Thus, if Ernie owns a book he has the real right of ownership of the book. Ernie can enforce (or vindicate – technical term!) his real right of ownership against any party that interferes with his real right of ownership.
Kermit could infringe the real right by claiming that he actually owns it. Ernie can sue Kermit and vindicate his real right of ownership.
If Bert infringes the real right of ownership by claiming that he has a security over the book, for example a pledge, then Ernie can sue Bert and vindicate his real right of ownership.
If Scooter infringes the real right of ownership by taking possession of the book, Ernie can sue Scooter, recovering possession, and vindicating his real right of ownership.
In each case the party infringing (Scooter, Bert, Kermit) is denying the whole import of Ernie, the owner’s, real right.
So, in distinguishing between real and personal rights there is a difference in the nature of enforcement.
A personal right is enforceable only against specific individuals, or a discernible category of persons.
A real right is enforceable and can be asserted against the world.
So, having made the distinction between real and personal rights, does it matter? Why is the difference important?
An example will clarify things, and will illustrate the difference in enforceability.
Edward owns a shop, a local shop. Tubs wishes to buy the shop. Edward and Tubs enter a contract of sale. For a sale of land or buildings this contract is known as the “missives of sale”.
Now, when the contract is formed Tubs has a personal right. It is a personal right to have ownership of the local shop transferred to Tubs. This personal right is enforceable against Edward. Edward is under an obligation to transfer the ownership of the shop. The obligation to transfer means that Edward must deliver a conveyance of the property to Tubs.
However, that is simply the position in relation to the contract. In relation to the thing, the shop, the position is that Edward has the real right of ownership. The real right of ownership will not transfer until Tubs has registered the conveyance. (I refer to previous HIghland Titles based blog posts to confirm this – but the position is made clear in Scotland under the Land registration (Scotland) ACt 2012, re-enacting law that has been in place in various places since 1617)
So, the personal right regulates the relationship between persons. The real right regulates the relationship between a person and a thing.
Now, Edward may default in transferring the land. He may refuse to make the transfer. Tubs has a personal right to sue Edward for delivery of the property. She can exercise her personal right.
Now suppose Edward defaults because he goes bankrupt. What can Tubs do?
If Edward is bankrupt Tubs may not be able to obtain the shop because Edward’s trustee in sequestration, the person administering his bankruptcy, may have completed his own title to the land, transferring the real right of ownership to the trustee in sequestration.
Tubs has only a personal right against Edward. She can sue him for breach of contract. But she cannot make the trustee in sequestration transfer ownership to her. He is under no obligation to transfer ownership to her. The obligation was incurred by Edward, not the trustee in sequestration.
Tubs has only a personal right against Edward. She cannot simply sue anyone. She can only raise an action against Edward, and as he no longer has the local shop her remedy will be damages for breach of contract. However, what she really wants is the local shop for local people. Further suing for damages is virtually worthless in this case because Edward is bankrupt. Because Tubs has only a personal right she bears the loss.
Now, if Edward defaulted because he transferred ownership of the property to someone else the position would be similar. Tubs has a contract to buy from Edward. However, Edward, the rogue, has also entered a contract to sell to Benjamin, an innocent third party. In implement of this second contract a conveyance is delivered to Benjamin. Benjamin registers it. This transfers the real right of ownership of the local shop from Edward to Benjamin.
What can Tubs do? She may want the local shop but she cannot obtain it. Her personal right is only against Edward. She has no right to sue Benjamin. She has no right to make Benjamin transfer ownership to her. Benjamin is under no obligation to her.
Again Tubs sole remedy would be to sue Edward for breach of contract. And, because he no longer has the shop, the sole remedy would be damages. That’s all well and good but Tubs would not receive what she really wanted – the shop.
Personal rights are weaker than real rights. And personal rights do not confer ownership.
As a variant on this second case assume Edward had delivered a conveyance to Tubs, and Tubs had registered it. This would transfer the real right of ownership from Edward to Tubs. In this case Benjamin suffers. He would have only a personal right against only Edward. He could not obtain the shop from Tubs. He has no personal right to sue her. He has no right to make Tubs transfer ownership to him. She is under no obligation to transfer ownership to Benjamin. Accordingly, Benjamin would have to rely on his personal right against Edward. Benjamin could not obtain the property. He would only have a right to sue Edward for damages for breach of contract. He would not get what he wanted, the shop.
Now, these examples show that a real right is stronger than a personal right.
A personal right is only enforceable against a specific person.
Contrast the experiences of Tubs and Benjamin, with the experience of Ernie earlier. Ernie had a real right. He could sue whoever infringed it. When their personal rights were infringed Tubs and Benjamin could only sue the specific person directly under the obligation, Edward.
This is because a real right is a right in a thing. As former Scottish Law Commissioner Professor Kenneth Reid writes at paragraph 3 of The Law of Property, “things are more reliable than persons.” A thing will not con you by entering two contracts of sale.
So, real rights are rights in things, and are good against the world. Personal rights, are only enforceable against specific persons.