Hansard

The Contract (Formation and Remedies) (Scotland) Bill is a Scottish Law Commission bill that implements a number of recommendations to reform the Scots law of contract.

I thank the Scottish Law Commission for reviewing the Scots law of contract, which was a substantial piece of work that involved four discussion papers and a report that took the best part of 10 years.

I also thank Professor Hector MacQueen, who was the lead Scottish law commissioner responsible for the project, for his work with the Scottish Law Commission in making these recommendations and for his continued engagement with the Scottish Government, as it has considered the SLC’s recommendations.

I also thank the Delegated Powers and Law Reform Committee convener and members for their scrutiny of the bill.

The bill is about the formation of contracts and the steps that can be taken when there is a breach of contract. Contract law is important because it affects various aspects of our everyday life, from buying a cup of coffee to significant financial transactions. Many contracts are formed and carried through by parties that have no professional assistance.

One of the bill’s principal purposes is to produce legal rules that are clear, certain and accessible, and it delivers on all of those. Currently, the bulk of the law on formation and remedies can be found in the common law. If enacted, this bill will put a number of important rules in a single accessible statute, written in clear English with helpful explanatory notes for laypersons and legal professionals alike.

At stage 1, stakeholders and the DPLR Committee asked me to consider preparing and publishing guidance on the bill’s provisions. I was pleased to write to the committee ahead of stage 2 to confirm my intention to do so. Together, the guidance and the bill will help individuals and small businesses more easily understand the law on contract formation and aspects of remedies, which will help them to be better protected in any contractual negotiations.

Given the variety of circumstances in which people may want to form a contract, one set of legislative rules that applies in all circumstances is unlikely to be flexible enough to cover every eventuality. Therefore, in order to ensure needed flexibility, the vast majority of the provisions in the bill are default. Parties can form a contract relying on these provisions or agree their own. This reflects the principle of party autonomy that was recognised as fundamentally important by stakeholders as well as by the lead committee.

Part 1 of the bill largely restates the current common law about contract formation. The main substantive reform 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. The SLC has, with stakeholder agreement, recommended the abolition of that rule for a long time, and I am pleased to be doing so in this bill.

Part 2 of the bill deals with some remedies for breach of contract. The bill will reform parts of the law on the steps that one party can take when the other party has breached their contractual obligations.

Part 2 is not a full statutory statement of the law on remedies for breach of contract, but it is focused on some key areas. First, it covers circumstances in which both parties have broken the terms of a contract. Secondly, it covers circumstances in which a party needs to return a benefit—for example, money or goods—after a contract has been terminated. Thirdly, the bill will bring certainty to the law by making it clear that contributory negligence is available as a defence to claims for damages that are based on breach of contract.

At stage 2, amendments were agreed to clarify and reform the law of contractual retention. That is a remedy that is designed to encourage performance of a contract without one party having to go to court to enforce it. I was pleased that the Delegated Powers and Law Reform Committee agreed to those amendments, which are the end point of work that was undertaken by the SLC and other stakeholders such as Lorna Richardson of the University of Edinburgh. Because of those provisions, the law will now be clearer and more certain, and it will help parties to resolve contractual problems without the need to resort to potentially costly and protracted litigation before the courts.

During earlier proceedings, questions were raised by members about protections for smaller, less legally well-informed parties. The concern seems to be that such parties would be forced to enter a bargain to their detriment. I would like to make it clear that the bill will not affect consumer protection law, nor will it make changes to the unfair contract terms regime for small businesses. I have committed to publishing guidance about the bill, which will also help to protect weaker parties by ensuring that they have clear and straightforward information about the law.

I turn to commencement and transitional provisions for the bill. Stakeholders and the committee raised a concern at stage 1 that the bill’s provisions, when commenced, will apply to contracts that have already been formed. That is not the intention of the bill. While my officials will consider that in detail for commencement regulations—which is normal—my view remains that the provisions should apply only to new contracts that are formed after commencement.

I am grateful to the Delegated Powers and Law Reform Committee members for the way in which they have constructively engaged with me as the bill has progressed through the Parliament, and also for the way in which they have engaged with me on the four other SLC bills that have progressed through the Parliament during this parliamentary session. As we now come to the end of the session, I thank members and the clerks for the time that they have spent on the bills and the careful attention that they have given to what can often be technical legal matters.

I also take this opportunity to note that the deputy convener, Bill Kidd, who is a long-time member of the committee, is standing down from the Parliament. I wish him all the very best.

I move,

That the Parliament agrees that the Contract (Formation and Remedies) (Scotland) Bill be passed.

15:48