Contract law in light of the Draft Common Frame of Reference (DCFR)

[Project now completed]

Commissioner

Professor Hector MacQueen

Team members

Lorraine Stirling, Project Manager
Lucy Reville, Legal Assistant

Latest news

We have published a Report on Review of Contract Law: Formation, Interpretation, Remedies for Breach, and Penalty Clauses on 29 March 2018, to which is appended a draft Bill which would give effect to our various recommendations.  The Report marks the culmination of a general review of Scots contract law carried out by the Commission over a number of years.

A business and regulatory impact assessment and news release are also available.

Here is a link to a Youtube video of Professor MacQueen talking about the Report.

The Scottish Government gave their initial response on 4 February 2019 to the Report.

Timing

The review of contract law in light of the DCFR was included in our Eighth Programme of Law Reform as a long-term project, it was then carried forward to our Ninth Programme of Law Reform (2015–2017), and it was carried forward to Item No 1 of the Commission’s Tenth Programme of Law Reform (2018-2022).

Background to Report and published project papers

We developed and decided on policy for the Report in light of responses to the Discussion Papers on Formation, Interpretation, Remedies for Breach and Penalty Clauses and our further work on each subject.  We recently consulted on a working draft of Part 1 of the Contract (Scotland) Bill based on our policy intentions in relation to formation (consultation closed 31 August 2017).  The papers relating to that consultation are the following:

Part of the general review of contract law also resulted in our recommended reform of third-party rights in contract (following our Report on Third Party Rights (Scot Law Com No 245, 2016)), which led to the Contract (Third Party Rights) (Scotland) Act 2017 and execution in counterpart, which led to the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 following our Report on Formation of Contract: Execution and Counterpart (Scot Law Com No 231, 2013).

The Scottish Government carried out a survey of the impact of the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 (which came into force on 1st July 2015) on the use of Scots law in this area. The solicitors surveyed were asked among other things whether they were now completing transactions, involving execution of documents under Scots law and whether the legislation had enabled more efficient completion of transactions with international parties.  Here are the responses to this survey:

• Anderson Strathern
• Brodies
• Brymer Legal
• Burness Paull
• Law Society of Scotland
• Pinsent Masons
• Registers of Scotland
• Shepherd & Wedderburn.

Previous reviews of the law of contract by the SLC

The Commission has previously carried out a number of reviews of contract law.  Most recently, a number of (unimplemented) Reports were published in the 1990s:

• Formation of Contract: Scottish Law and the United Nations Convention on Contracts for the International Sale of Goods (Scot Law Com No 144, 1993)
• Report on Interpretation in Private Law (Scot Law Com No 160, 1997)
• Report on Remedies for Breach of Contract (Scot Law Com No 174, 1999)

SLC publications

So far we have published five discussion papers and two reports:

• Discussion Paper on Interpretation of Contract (DP No 147), 2011
• Discussion Paper on Formation of Contract (DP No 154), 2012
• Report and draft bill on Execution in Counterpart (Scot Law Com No 231), 2013 (and accompanying Business and Regulatory Impact Assessment)
• Discussion Paper on Third Party Rights in Contract (DP No 157), 2014 
• Report and draft bill on Third Party Rights (Scot Law Com No 245), 2016 (and accompanying Business and Regulatory Impact Assessment)
• Discussion Paper on Penalty Clauses (DP No 162), 2016
• Discussion Paper on Remedies for Breach of Contract (DP No 163), 2017

DCFR, CESL and other European initiatives 

A stimulus for our review of the law of contract is the publication in 2009 of the Draft Common Frame of Reference (DCFR).  The DCFR sets out a contemporary statement of contract law in clear English and is based on comparative research from across the European Union.  It offers a new and valuable opportunity to review some of the topics on which we have already worked and to examine the law in other related areas (as we describe below).  There is more information on the DCFR in chapter 1 of each of our recent Discussion Papers.

Much work has continued on European contract law since the DCFR's publication in 2009.  Notable developments include the following:

1.  In July 2010 the European Commission published a Green Paper on policy options for progress towards a European contract law for consumers and business.  This led to a call for evidence put out by the UK Ministry of Justice.  The Scottish Government joined the call for evidence; the Scottish Law Commission’s response was sent on 19 November 2010.  We also responded directly to the European Commission's Green Paper consultation on 27 January 2011.  After this response was sent, we learned of the Ministry of Justice's response which takes a somewhat different approach (and barely recognises the existence of Scots law).

2.  In May 2011 the European Commission published a Feasibility Study proposing draft rules for a European contract law, on which background information is available at the European Commission's website.  Comments were invited (with a deadline of 1 July 2011) to a number of specific questions.  Our response is here. A final set of draft rules were published by the European Commission in September 2011.

3. In October 2011 the European Commission published its proposals for a Regulation to which is annexed a Common European Sales Law (or CESL).  In anticipation of this, the UK Government instructed the Law Commission and us in May 2011 to provide joint advice.  The instruction letters from MoJ and DBIS set out the terms of reference.  Our joint advice (with summary) was published on 10 November 2011.  (A list of links to the key documents and background materials referred to in the advice can be found here.)  With the support of the Scottish Government the UK Government issued a consultation document on this topic; the UK response is available via the same link along with an Impact Assessment.  More recently, in September 2013 the Legal Affairs Committee (JURI) of the European Parliament passed a number of amendments to the proposed CESL, the broad thrust of which was to make the instrument apply only to cross-border distance and online sales contracts and supplies of digital content rather than to such sales and supplies in general; on 26 February 2014 the European Parliament adopted a legislative resolution on the CESL.  Unfortunately, the project was withdrawn in early 2015 (see information at http://www.epln.law.ed.ac.uk/) but there may yet be a future proposal drawing on the CESL.  In the middle of 2015 there was a public consultation on contract rules for online purchases of digital content and tangible goods.  More recently, there has been a communication on digital contracts (9/12/2015) and proposals for two directives, one on certain aspects concerning contracts for the supply of digital content, and another on certain aspects concerning contracts for the online and other distance sales of goods.

Contact

For further information or if there are matters you wish to raise with us, please contact

info@scotlawcom.gov.uk.