Scottish Law Commission - contract law review report: consultation

Background

The SLC reported in March 2018 on a review of contract law dealing with the topics of: formation, interpretation, remedies for breach and penalty clauses. The report represented the final output from a general review of contract law which began in 2010^[6].

The general review itself built on a previous review carried out in the 1990s and takes account of developments in the law both domestically and internationally over the period since that earlier review.

As the SLC set out in the Business and Regulatory Impact Assessment (BRIA) which accompanied their Report "[c]ontract law impacts on day-to-day economic life in relation to all types of transactions and for businesses and individuals alike. It is therefore important economically and socially that the contract law regime in Scotland is fit for 21st century conditions^[7]".

The SLC's aim in reviewing this area of the law was to assess whether legal intervention was necessary to simplify and modernise the law as well as ensuring that it is clear and certain not only for professional advisers but for laypersons too. They did so by examining Scots law against international comparators.

Whilst the review examined a range of topics relating to the law of contract, its recommendations focussed on formation of contract and to a more limited extent, remedies for breach of contract.

The Report recommended a general statutory statement of the law relating to formation of contract. In addition, it recommended that the postal acceptance rule be abolished. Recommendations relating to remedies for breach of contract were focused on 3 topics. They are:

• the principle of mutuality;
• restitution following rescission; and
• contributory negligence.

A general statutory statement of the law on remedies was not recommended because of lukewarm support and the fact that substantively more time and work would have been needed to undertake a general statement.

No recommendations were made to reform the law on interpretation of contract, on the basis that recent case law seemed to have addressed uncertainties in the law in this area. Similarly, recent case law as well as lack of support for reform meant that no recommendations were made in relation to penalty clauses.