Meeting of the Parliament 18 December 2025 [Draft]
The Contract (Formation and Remedies) (Scotland) Bill, which implements recommendations made by the Scottish Law Commission in 2018, is concerned with contract law—specifically, the formation of contracts and what happens in certain contexts if the terms of a contract are not met.
Contract law is important to our everyday economic life and in all types of transactions. It involves businesses and individuals alike. Many contracts are made and carried through and then become the subject of disputes between parties who have no professional assistance. One of the bill’s principal purposes is to produce legal rules that are clear, certain and accessible, and, like most of the witnesses that the Delegated Powers and Law Reform Committee heard from, I think that that aim has been achieved.
It is important to be clear at the outset that the majority of the provisions in the bill are default provisions—in other words, parties can continue to enter into contracts on their own agreed terms and do not have to follow the provisions in the bill if they do not fit with their circumstances. That reflects the principle of party autonomy, which witnesses and the committee recognised as vital. I should also say that the bill is not a complete codification of the law of contract formation; it largely restates the current law while clarifying doubts that have accumulated over the years.
The main reform in part 1 is the abolition of the postal acceptance rule. Under that rule, a contract may be concluded without one party ever having received communication to that effect. Abolition of that rule has been an SLC recommendation for a long time; indeed, it is a recommendation that has been made a number of times over the past 50 years, and I am pleased to bring forward a provision that will, finally, give effect to it.
Part 2 of the bill deals with some of the remedies for breach of contract. However, it is not a complete consolidation of the law on remedies. The SLC consulted on the issue, but it was clear from stakeholder opinion that there was no appetite for such a far-reaching reform of the law. Instead, the bill reforms parts of the law on the steps that one party can take when the other party has breached its contractual obligations.
I will move on to the law of retention, which is a remedy that is meant to be used by parties to encourage performance of a contract without having to go to court. I wrote to the committee in October to set out my intention to lodge amendments at stage 2 to reform that law, and it is the end result of a period of consultation building on the considered work of the SLC and Lorna Richardson of the University of Edinburgh over the past decade or so.
The law of retention is unclear, and we have an opportunity here to bring much-needed clarity. As there appears to be some doubt among stakeholders whether the retention provisions will be default, I make it clear that it is my intention that those provisions can be contracted out of. That is an important point, and it addresses a number of concerns that were raised by witnesses.