Modernising Scotland's contract law

4 Mar 2026 01:59 AM

Clearer rules for how contracts are made and what happens when they are broken.

Scotland's contract law will be modernised under legislation backed by MSPs, providing clearer rules for individuals and businesses on how legally binding agreements are formed and some of the remedies available when they are breached.

The Contract (Formation and Remedies) (Scotland) Bill was passed in a final Stage 3 vote in the Scottish Parliament.

Contracts are a fundamental part of everyday life – from business transactions to personal agreements – and the Bill ensures the legal framework governing them is fit for the modern day. It builds on recommendations made by the Scottish Law Commission and introduces targeted reforms to update and clarify Scots law on contract formation and remedies for breach of contract. It sets out rules on when a contract comes into force – including in situations where parties are still negotiating some terms – and allows parties to claim back what they have provided if a contract breaks down due to a serious failure by the other party. The Bill also makes it clearer when a party can withhold payment, goods or services if the other side fails to hold up their end of the agreement.

Minister for Victims and Community Safety Siobhian Brown yesterday said:

“Contract law is important to our everyday life and this Bill will modernise important parts of the Scots law of contract while clearing up doubts that have arisen over the years, making the law more accessible and fit for purpose.

“By providing clearer default rules for how contracts are formed and what happens when they break down, we are making the law work better for everyone, including small businesses who may not have the legal expertise to navigate uncertainty in the current rules.”

Background

Contract (Formation and Remedies) (Scotland) Bill | Scottish Parliament

The Bill follows recommendations made by the Scottish Law Commission in its 2018 Report on Review of Contract Law, which concluded that parts of Scotland's contract law were unclear, difficult to find and in need of modernisation. Proposals for reform have a long history – a comprehensive review of contract law has been on the reform agenda since 1965, and the abolition of the outdated “postal acceptance rule” was first recommended as far back as 1977.

The Bill was amended at Stage 2 following feedback from stakeholders including the Law Society of Scotland, Dumfries and Galloway Council, the Royal Incorporation of Architects in Scotland, and leading academics. Amendments were made to improve consistency of terminology, simplify drafting and to ensure the new provisions on retention reflect the needs of different types of transaction.

Work to prepare for the implementation of the provisions will get underway following Royal Assent.