Official Report 308KB pdf
The next item of business is a debate on motion S6M-20943, in the name of Siobhian Brown, on the Contract (Formation and Remedies) (Scotland) Bill at stage 3. I invite members who wish to speak in the debate to press their request-to-speak button, and I call Siobhian Brown to speak to and move the motion.
15:41
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
It gives me pleasure to speak in the Parliament for stage 3 of the Contracts (Formation and Remedies) (Scotland) Bill on behalf of the Scottish Conservatives. We will be supporting the bill at decision time.
I often wonder if we truly take advantage of the powers that we have in this Parliament to make substantive law that actually takes steps toward helping the people that the legislation is meant to help. We have a vast range of powers in the Scottish Parliament and I am not always sure that we produce good law. However, in this instance, I can whole-heartedly state that this Scottish Law Commission bill will do exactly what it says on the tin for the people who will need it most.
As I mentioned in the stage 1 debate on the bill, I have not previously had the pleasure of working on a bill that was supported by pretty much everybody who gave evidence. I again take the opportunity to thank everyone who participated in the evidence sessions, and my additional thanks go to the clerks and staff for their hard work.
It has been a pleasure to work on the bill with the minister, who has been, as she stated, constructive and accommodating all the way through the process. It has been a joy.
As we have already heard from the minister, the bill will make provision regarding the formation of contracts and remedies for breach of contract.
Many stakeholders have found the legal framework around contract law difficult to navigate, and the Scottish Law Commission’s work leading up to the introduction of the bill concluded that some parts of contract law are unclear, difficult to find and in need of modernisation. The bill rectifies that.
As I said, the bill is universally supported. Business wants it. The Federation of Small Businesses supported the bill’s overall aims, with Colin Borland stating,
“As a general principle, anything that is done to codify, simplify or clarify the law and to make it easier for us as laypeople to understand has to be a good thing”.—[Official Report, Delegated Powers and Law Reform Committee, 25 November 2025; c 7.]
We cannot argue with that, surely.
Academics want it. Professor Stephen Bogle and Professor Tom Johnson from the University of Glasgow supported the proposed reforms. They said:
“Considering the landscape of contemporary litigation in Scotland, it is increasingly evident that reform is needed”.
Furthermore, lawyers want it. The Law Society of Scotland supported the proposed reforms when it stated:
“it is clear that a new statutory regime has the potential to offer benefits to certain parties by offering users a means to form agreements without a detailed understanding of case law or wider academic and institutional writings.”
In layman’s terms, the bill makes it easier to understand the legalities around contacts, understand the implications of them and, if needed, provides the ability to contract out.
Too many times, there is an inequality in contracts, in which one party is favoured over the other. In certain cases, might is not always right. Given the red tape surrounding business today and the many difficulties that businesses have to cope with in order to survive, anything that we can do in this place to minimise bureaucracy has to a good thing.
I do not have too much to add in the time remaining. If I had to note any small negative in relation to the bill, it is the time that it has taken it to come before us. I mentioned that in the stage 1 debate and I am mentioning it again, as the issue has not really been highlighted. The Scottish Law Commission had been looking at issues related to contract law since its inception in 1965, and it made its recommendations in 2018. We are now in 2026. Before the bill becomes an act, I must ask, especially as it was such a non-contentious bill, why the heck did it take so long?
15:52
I am pleased to speak in the debate on behalf of Scottish Labour. As a member of the Delegated Powers and Law Reform Committee, I was involved in the bill’s scrutiny. I thank my colleagues on the committee for their work throughout the process and the stakeholders who engaged with us during our evidence sessions.
The bill seeks to modernise Scots contract law by introducing a statutory set of default rules on contract formation and remedies for breach. Its provisions came in response to recommendations from the Scottish Law Commission, which concluded that certain parts of the current regime may be unclear for many people in that no single piece of legislation covers the topic.
The bill aims to improve certainty and accessibility in this area of law, and it is hoped that there will be no unintended consequences. As has been mentioned by those who have spoken so far, the vast majority of those who have given evidence, supported the bill on the grounds that it would make things simpler for laypeople.
Among the bill’s provisions is the abolition of the postal acceptance rule, which provides that a contract is formed when an acceptance of an offer is put in the post, as opposed to when it is received. When I spoke in support of the bill at stage 1, I welcomed that this change would allow the law to reflect the role that current communication technologies play. However, I must also say that—the committee discussed this—we simply cannot rely on the Royal Mail as perhaps we once could in previous decades, particularly before it was privatised.
The bill also allows far greater flexibility by allowing parties to contract out of the proposed rules that are set out in it. The bill does not represent a radical departure from, or a total transformation of, the current common law regime. It simply aims to codify what is believed to be the current law.
The bill does not deal with various aspects of contract law, including the law on the interpretation of contracts or the law on penalty clauses.
At stage 1, I highlighted that there had been a great deal of consensus on the bill’s provisions, and its proposals continue to receive broad support from legal academics and business groups. As has been said, the Law Society of Scotland has welcomed the bill and believes that it will improve the law’s accessibility for a range of users. The reforms are expected to improve access to justice by enabling users who might lack a high degree of familiarity with contractual agreements to set terms that are best suited to their needs with relative ease and without reference to case law or commentary. It was also said in the discussion around the bill that it might mean that Scots law is more attractive internationally.
The main substantive amendment to the bill at stage 2 was the insertion of a section on contractual retention, which clarified when and on what terms a party to a contract can utilise retention as a remedy. The bill as amended confirms that a party to a contract can
“temporarily withhold or suspend performance of an obligation that is due to be performed under the contract”
in the event of a breach by the other party, in anticipation of such a breach or
“in relation to an obligation subsisting when the contract is ended ... as a result of”
either a
“breach or an anticipatory breach.”
We welcome that change to the bill, as we believe that it serves to make general provisions of the law more accessible to individuals and small businesses. As the Law Society of Scotland has stated, such a remedy should be
“available in a flexible manner to facilitate more complex transactions and contractual arrangements that Scottish financial institutions (and other large Scottish business entities) are routinely party to.”
Scottish Labour will support the bill at stage 3, as we believe that it represents a careful, considered and proportionate step towards modernising Scots contract law. We hope that the Scottish Government will work closely with legal practitioners, businesses and advice services to ensure that the new statutory framework is well understood and smoothly implemented, with clear guidance, effective communications and on-going review. I thank everybody who has been involved in what has been a very uncontroversial piece of legislation, which I hope is successful in passing today.
I call Lorna Slater to speak on behalf of the Scottish Greens.
15:56
Although this is a technical bill, its implications are far reaching. Contracts underpin everyday life, from employment to housing to business. The bill seeks to modernise Scots contract law by clarifying how contracts are formed and what remedies apply when obligations are not met.
Scots contract law is historically based on common-law principles, which are scattered across case law and are often hard to access. The Scottish Law Commission identified in its 2018 report that parts of the law were unclear, outdated and difficult to find, creating uncertainty for businesses and individuals.
The reforms in the bill follow the Scottish Law Commission’s recommendations and aim to provide greater certainty and accessibility. The bill introduces statutory rules on offers, acceptance, withdrawal and lapse. It also codifies remedies for breach, including restitution and valuation of benefits where no price is agreed. Those changes are intended to make the law clearer and more predictable.
There are questions about how the rules will interact with existing consumer protection frameworks. Consumers will still need to exercise caution when entering into contracts and read the small print. The bill allows parties to contract out of statutory provisions. Although that respects commercial freedom, some consumer advocates fear that it could weaken protections for individuals in asymmetric relationships. For example, if a consumer pays for a service that never occurs but the contract says that there are no refunds under any circumstances, under the bill, that policy might be enforceable if the consumer agreed to the contract, even though the default law would allow recovery.
A welcome change in the bill is the clarity on the right of retention. The bill confirms the right of a party to withhold payment when the other party is in breach. That means that you can withhold the payment if someone does not do what they said they were going to do and in doing so, you would not be in breach of contract law. That was always the case, but the bill has made it clearer. There are conditions and limits to that, of course. Retention only applies where obligations are reciprocal, and withholding must be proportionate to the breach. By clarifying that, the bill aims to reduce the need for court intervention, giving parties a clear legal basis for resolving disputes themselves.
The Scottish Law Commission has publicly welcomed the bill as a legislative implementation of its proposed reforms. The Scottish Greens are content to support the bill at stage 3 today.
15:59
I thank everybody who has contributed to the debate. I have listened to what has been said and I am pleased with the recognition of the importance of the bill and the valuable work that the Scottish Law Commission has done in keeping our law up to date.
I want to touch on Roz McCall’s point about why the process has taken so long. I cannot speak to the reasons why Governments back in the 1970s and 1990s did not take forward contract law reform proposals. However, since 2013, there has been a lot of work involving the DPLR Committee and its predecessors, the Scottish Parliament and the Scottish Government to create a framework for quickly implementing Scottish Law Commission recommendations for law reform. Since 2013, 10 such bills have gone through. In this session alone, we have passed the Trusts and Succession (Scotland) Act and the Judicial Factors (Scotland) Act, and I hope that this bill on contract law will be passed, too. To my mind, the only older Scottish Law Commission report that remains unimplemented is that on section 53 of the Title Conditions (Scotland) Act 2003, so we are making progress with the Law Commission’s recommendations.
Contract law is fundamentally important to our everyday life. The bill will modernise important parts of Scots law of contract while clearing up doubts that have arisen over the years. The bill largely restates the common law on formation of contract to improve accessibility of the law, and it makes important reforms to clarify and modernise the law. The provisions are a result of a significant law reform project that was undertaken by the Scottish Law Commission, which included four discussion papers on different areas of contract law. The overwhelming majority of consultees agreed that the law needed reform.
On contract formation, the principal reform is the abolition of the postal acceptance rule, which has been a repeated recommendation by the SLC for more than 50 years. As Professor Hector MacQueen told the committee, to abolish the postal acceptance rule without partial codification of the law on contract formation would likely lead to less clarity.
Part 2 of the bill deals with remedies for breaches. Notably, the bill now includes the provision on the law of contractual retention. In 2018, the Scottish Law Commission said that, although the law of retention needed clarification, it should be left to the courts to do so. However, by 2024, stakeholders thought that legislation was needed to bring clarity to the law. We consulted on a scheme for reform of retention, which a majority of respondents agreed with. That came through clearly at stage 1, and amendments were lodged at stage 2 and agreed to by the committee.
I again thank the Scottish Law Commission and Professor MacQueen for the significant and comprehensive work that has been undertaken to review the Scots law of contract and for the Law Commission’s recommendations, to which the bill gives effect. The Scottish Law Commission serves a valuable function in reviewing our laws and making sure that they are fit for a modern Scotland. I thank it for the work that it has undertaken on the four other SLC bills that have been introduced in this session of Parliament and for its continued engagement with the Scottish Government in taking them forward. I commend the motion in my name.
That concludes the debate on the Contract (Formation and Remedies) (Scotland) Bill.