Legal Definitions - wadset

In Scots law, a wadset refers to a historical legal arrangement used to secure a debt. It functions in two primary ways:

• As a mortgage: This involves a borrower temporarily transferring ownership or rights over property (often land) to a lender as security for a loan. The understanding is that the property will be returned to the borrower once the debt is fully repaid.
• As a pledge or pawn: This involves a borrower giving valuable movable goods to a lender as security for a loan. The goods are held by the lender until the loan is repaid.

Here are some examples illustrating the concept of a wadset:

• Example 1 (Property Mortgage): Imagine a Scottish farmer in the 17th century who needed money to repair his farmhouse after a storm. He approached a local nobleman for a loan. To secure the funds, the farmer entered into a wadset agreement, temporarily transferring the title to a small parcel of his arable land to the nobleman. This meant the nobleman held the legal ownership of that land until the farmer repaid the loan in full. Once the debt was settled, the land's title would revert to the farmer.

  This example illustrates a wadset as a mortgage, where immovable property (land) is used as collateral, with its ownership temporarily transferred to the lender as security for a debt.

• Example 2 (Pledge of Movable Goods): Consider a merchant in Glasgow during the 18th century who needed immediate cash to purchase a new shipment of exotic spices. To secure a short-term loan from a moneylender, the merchant handed over a valuable silver tea set as a wadset. The tea set remained in the moneylender's possession until the merchant repaid the borrowed sum, at which point it was returned.

  Here, the wadset functions as a pledge or pawn, where a valuable movable item (the silver tea set) is given to the lender as security for a loan, to be returned upon repayment.

• Example 3 (Rights as Security): In the 16th century, a Scottish clan chief required funds to pay for legal representation in a land dispute. He entered into a wadset with a wealthy abbey, offering the abbey the right to collect rents from a specific village within his territory for a period of ten years as security for a substantial loan. The abbey would collect these rents until the loan was repaid or the ten-year period expired, after which the right to collect rents would revert to the clan chief.

  This example demonstrates a wadset where the "property" securing the debt is not just physical land, but the valuable rights associated with it (the right to collect rents), functioning as a form of mortgage or pledge for a defined period.