Contract (Formation and Remedies) (Scotland) Bill: business and regulatory impact assessment

Benefits

Option 1 - Do nothing

66. Option 1 would not produce any benefits, given that the present uncertainties and lack of clarity stemming from the current state of the law of formation of contract and remedies for breach of contract (mutuality, restitution after rescission, and contributory negligence) would continue. Further, the law in relation to the postal acceptance rule would remain in place, although outdated and out of step with contemporary conditions. There would also be no clear rules on the effectiveness of electronic communications in contract negotiations.

Option 2 - Introduce the Bill

67. The Bill if introduced and implemented would bring the following benefits:

Increased certainty and clarity

68. The Bill provisions would clarify and simplify the law both in relation to formation of contract and remedies for breach of contract. The resultant increased clarity and simplification as a result of the statutory statement of the law of formation, abolition of the postal acceptance rule and the reforms of aspects of remedies for breach should reduce the number of disputes and consequential litigation, in comparison with the position without the Bill.

Accessibility of the law

69. The Bill would make the law more accessible to lawyer and layperson alike. It would enable professional advisers such as solicitors and advocates to advise their clients more clearly on the law in these areas and it would also assist those parties who make contracts without professional assistance. As noted above, for such parties it is even more important that the law be clear so that it is relatively readily understood by lawyer and non-lawyer alike.

70. Part 1 of the Bill will enable any party wishing to enter a contract to know what steps Scots law requires for a contract to exist. One desirable effect of that might be the encouragement of parties otherwise unconnected to the system to contract under Scots law. A comprehensive statutory statement might go some way towards resolving that particular difficulty.

Modernisation and simplification of the law

71. Abolition of the postal acceptance rule will have the benefit of modernising and simplifying an area of law which currently causes uncertainty, confusion and difficulties. It will simplify the law as it will bring it into line with existing business practice generally, while a “pitfall” for businesses unaware of the rule will cease to exist. The rule is considered to be a particular obstacle to the smooth conduct of trade in an electronic age, so reform will help to modernise the law in this respect. There was unanimity amongst consultees that there is no need to retain the postal acceptance exception in modern conditions.

Potential Savings

72. The Bill’s contributory negligence provision might result in a saving both in terms of court time and preparation time for litigation in contributory negligence cases (and consequently a saving in terms of instructing costs both in relation to solicitors and advocates). This is because a contract-breaker would no longer have to establish its own breach was negligent in order to raise the question of the other party’s contributory negligence (as it is assumed is required under the present law). Further, the provision itself might also promote the settlement of disputes between parties in this area.^[23]