Upcoming contract law reforms in Scotland – the Contract (Formation and Remedies) (Scotland) Bill

Key points

The Contract (Formation and Remedies) (Scotland) Bill (the Bill) was introduced to the Scottish Parliament on 2 October 2025.

• The Bill proposes a number of important, targeted changes to two areas of Scots contract law: formation of contracts and aspects of contract remedies.
• The chief policy aims of the Bill are to provide more certainty and clarity in relation to these key areas of contract practice and to make the law as accessible as possible to non-lawyers.
• The Bill recognises the primary importance of party autonomy in contract law by providing for parties to be able to contract-out of many of the new provisions if they prefer.
• Once the Bill is passed, contract parties will require a good understanding of the new provisions and their practical application both when entering into contractual arrangements and when dealing with contract disputes.

Below we provide some background to the Bill and a high-level summary of the key points it covers. Over the course of the Bill’s parliamentary journey, we will explore these issues, and their practical implications for commercial contracts, in more detail.

Background

The reforms in the Bill have been in the works for a number of years, having originally been the subject of recommendations by the Scottish Law Commission (SLC) in 2018. These recommendations followed a wide-ranging review of Scots contract law.

No action was taken on those recommendations until July 2024, when the Scottish Government launched a consultation seeking views on whether they should now be taken forward. Given the lapse in time since the SLC report had been published, this was to ascertain whether the recommendations still had broad support or if there had been any material changes since then that may have changed views. 

The majority of responses confirmed there was still broad support for the SLC’s recommendations. There was, however, one area where there had been a change. This was in relation to retention, a self-help contractual remedy, on which the SLC had originally recommended no action. The Scottish Government noted there had been further case law on this topic since the 2018 recommendations which may change views on whether action was required. A separate consultation was therefore launched on this discrete issue in March 2025. The analysis of responses to that consultation, which was published on 3 October (the day after the Bill was introduced) concluded that provisions on retention should also be included in the Bill. This means that, unusually, the Bill as introduced will be the subject of amendment to insert additional provisions on retention during its parliamentary journey.

Summary of the key provisions

General approach

Before coming on to the specific areas covered in the Bill, it’s worth noting two points that underpin the general approach taken in order to achieve the policy aims of the Bill.

The first point is the explicit recognition in the Bill’s policy memorandum that contract law has largely developed through the common law (case law) rather than statute. This can make it less accessible to non-lawyers and create difficulties where the case law gives rise to uncertainty or ambiguity. One way of addressing this problem is by restating and/or clarifying aspects of the common law in legislation, thereby reducing uncertainty and improving accessibility.

The second point to note, which is also referred to in the policy memorandum, is the fundamental importance of party autonomy (freedom of contract) in contract law. In recognition of the importance of this principle, the Bill has been drafted so as to allow parties to contract-out of most of the new provisions if they wish. This is achieved by framing many of the provisions as default rules that will apply unless the parties to a contract provide otherwise.

Formation of Contract

Part I of the Bill deals with formation of contract. It begins by restating much of the current law on formation of contract, providing that a contract is concluded when parties come to an agreement which they intend to have legal effect, and which has the necessary content (as set out in the Bill) for it to be given legal effect.

There then follows a number of detailed provisions in the Bill dealing with:

• offers and acceptances;
• revocation, lapse, rejection and acceptance of offers;
• withdrawal of offers or acceptances; and
• time limits for acceptance.

The Bill also contains provisions on when communications in relation to formation of contract are to take effect. In particular, it proposes the abolition of the longstanding ‘postal acceptance rule’ (which parties commonly contract out of) and sets out a general rule that ‘notifications’ in relation to formation of contract will take effect when they reach the person they are addressed to. The Bill sets out an illustrative list of when ‘reaching’ occurs in particular circumstances, including  notifications by electronic communication.

We will look at these provisions in more detail in our next article.

Remedies

Part II of the Bill then focuses on four aspects of the law in relation to remedies:

1. Mutuality of contract, in particular, the extent to which parties in breach may assert rights and remedies;
2. Restitution after recission i.e. what should be done in relation to benefits already received when a contract is brought to an end following a party’s material breach;
3. The availability of contributory negligence as a defence in contract disputes; and
4. How the remedy of retention should operate.

As noted above, the last of these is not yet included in the text of the Bill but these will be amended in as the Bill progresses.

The provisions on contractual remedies will provide useful clarity in relation to a number of areas of the law which are currently uncertain and can be difficult to apply in practice, particularly in the early stages of contract disputes. These issues will be the subject of future articles. 

What’s next?

The next Holyrood election is due to take place on 7^th May 2026 and the Scottish Parliament will be dissolved around five weeks before that date to allow for campaigning. Any bills that have not been passed by then will automatically fall. The Bill will therefore need to make swift progress through the necessary stages if it is to become law in this parliamentary session.

The Bill is currently at Stage 1. It has been passed to the lead committee, the Delegated Powers and Law Reform Committee, for consideration. The committee had opened a call for views on the bill which closed on 2 November. The next stage in the Bill's progress will be when it comes before the Scottish Parliament for a debate on the general principles of the Bill.

We will be writing further on the implications of the Bill as it progresses and will provide updates on its parliamentary journey in those articles.