Contract (Formation and Remedies) (Scotland) Bill: islands communities impact assessment

Contract (Formation and Remedies) (Scotland) Bill - Islands Communities Impact Assessment (ICIA)

What are the objectives of the policy, strategy or service?

The Contract (Formation and Remedies) (Scotland) Bill implements recommendations of the Scottish Law Commission (SLC) published in its Report on Review of Contract Law: Formation, Interpretation, Remedies for Breach, and Penalty Clauses.^[1] Contract law impacts on day to day economic life in relation to all types of transactions and for businesses and individuals alike. Many contracts are made, carried through, and become the subject of disputes between parties who have no professional assistance. The Scots law of contract has largely developed as a matter of common law which limits the law’s accessibility to those without legal training. It is therefore important economically and socially that the contract law regime in Scotland is fit for 21^st century conditions. The Bill restates and reforms aspects of the law of formation of contract and three aspects of the law of remedies for breach of contract. The overall policy aim is to produce rules that are clear, certain and accessible as possible.

Part 1 of the Bill comprises a comprehensive statement of the law on formation of contract, including a number of specific reforms. In a number of areas the law of formation of contract is uncertain because there is no direct Scottish authority in point. A comprehensive statutory scheme ensures there are authoritative answers and improves the law’s accessibility to all types of users, within and without the legal profession by bringing as much as possible of the law of formation of contract into one place.

Part 2 of the Bill contains provisions which reform the law of remedies in distinct areas: mutuality; restitution after rescission; retention; and, contributory negligence.

Part 3 of the Bill contains some general provisions.

Do you need to consult?

No. The Scottish Law Commission (“the SLC”) published 4 Discussion Papers as part of its reform project. These were on interpretation of contract (published 2011),^[2] formation of contract (published 2012)^[3], penalty clauses (published 2016),^[4] and remedies for breach of contract (published 2017).^[5] Each discussion paper suggested either restatement and reform of the law (formation and remedies) or reform of the law only (interpretation and penalties). A consultation on a draft of what is now Part 1 of this Bill, on formation of contract, took place from 1 September to 3 November 2017.^[6]

The aim of the reform project was to assess the existing Scots law of contract against international comparators, in particular the Draft Common Frame of Reference (DCFR).^[7] The SLC’s Report on Review of Contract Law: Formation, Interpretation, Remedies for Breach, and Penalty Clauses (“the Report”) was published in 2018 and set out its recommendations for reform, which this Bill takes forward in full.

In July 2024, the Scottish Government published a consultation seeking general views on the Report. In line with the process that Scottish Ministers set out to the Scottish Parliament in respect of potential Bills implementing older SLC recommendations, the consultation sought to establish: whether the landscape around this area of the law had changed since the Report was published and, if so, whether the changes are material to the recommendations contained in the Report; and, that the consultation views received by the SLC were still broadly held.^[8]

Analysis of the responses found that the majority of respondents expressed continued support for the recommendations of the SLC and were not aware of material developments in the law or practice that require those recommendations to be revisited. The exception was the law of retention which respondents felt was less clear now than when the SLC made its recommendations. The Scottish Government consulted on a statutory scheme for the law of contractual retention in March 2025.^[9]

How are islands identified for the purpose of the policy, strategy or service?

The islands have not been specifically identified for the policy and we do not anticipate that the Bill provisions will affect differently those who live on the islands compared to those who live on the mainland.

What are the intended impacts/outcomes and how do these potentially differ in the islands?

The Bill restates and reforms aspects of the law of formation of contract and three aspects of the law of remedies for breach of contract. The overall policy aim is to produce rules that are as clear, certain and accessible. Overall, the Scottish Government does not expect the Bill to impact differently persons residing in the islands measured against persons living on the mainland.

Is the policy, strategy or service new?

No. The Scots law of contract is well-established. The Bill aims to make changes to improve, simplify and update aspects of the law including formation of contract and certain remedies for breach of contract.

Step two – Gather your data and identify your stakeholders

What data is available about the current situation in the islands?

It has not been possible to find any data about the types of contract entered into by those who live on an island but our assumption is that these would not materially differ from the types of contracts entered into by those who live on the mainland.

Do you need to consult?

No. Given the nature of the reforms and the fact that these would apply to all contracts regardless of where they are entered into there is no need to consult further than we have already done so.

How does any existing data differ between islands?

N/A

Are there any existing design features or mitigations in place?

The policy impact will be no different between the island community and mainland Scotland and, as a consequence, there is no need for mitigations.

Step three - Consultation

Who do you need to consult with?

N/A

How will you carry out your consultation and in what timescales?

N/A

What questions will you ask when considering how to address island realities?

N/A

What information has already been gathered through consultations?

N/A

What concerns have been raised previously by island communities?

N/A

Is your consultation robust and meaningful and sufficient to comply with the Section 7 duty?

N/A

Step four - Assessment

Does your assessment identify any unique impacts on island communities?

No. It is not anticipated that the impact of the Bill on island communities will be different from that of communities on the mainland.

Does your assessment identify any potential barriers or wider impacts?

The Scottish Government does not consider there to be any potential barriers.

How will you address these?

N/A

Given the foregoing, it is considered that this Bill will not have an effect on an island community which is significantly different from its effect on other communities (including other island communities).

In preparing the ICIA, I have formed an opinion that our policy, strategy or service is not likely to have an effect on an island community which is significantly different from its effect on other communities (including other island communities).

ICIA Completed by: Michael Paparakis

Position: Policy and Bill Programme Manager, Private Law Unit

Signature: Michael Paparakis

Date Completed: 5 September 2025

ICIA Authorised by: Ryan McRobert

Position: Deputy Director, Civil Law and Legal System

Signature: Ryan McRobert

Date Completed: 10 September 2025