Contract Law – Review of Retention: consultation

Background

1. The Scottish Government consulted on the Scottish Law Commission (SLC) Report on Review of Contract Law in July 2024^[1]. The aim of the consultation was to establish whether the landscape around this area of the law has changed since the Report^[2] was published in March 2018 and if so whether the changes are material to the recommendations contained in that Report. It also sought to confirm that the view of consultees received by the SLC are still broadly held.

2. One of the issues tested in the consultation was the need for reforms around the principle of mutuality and, particularly, retention. While retention is the legal term by which the remedy is known, it is the temporary withholding or suspending of performance of contractual obligations that are due to be performed. The relevant extract from the consultation is attached at Annex A.

3. In short, some of the responses indicated that in the light of case law subsequent to the SLC’s Report, the law in relation to retention of performance is now less clear than when the SLC published its Report and that the law would benefit from clarification. This paper seeks further views on what any reform should look like.