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Modernising Contract Law in Scotland

As a Scottish Law Commissioner, Professor Hector MacQueen helped to modernise contract law in regards to execution in counterpart and third party rights in Scotland. His work led to the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 and the Contract (Third Party Rights) (Scotland) Act 2017, which have been strongly welcomed by Scottish legal practitioners.

Edinburgh skyline from Calton Hill

Execution in counterpart

Execution in counterpart – the process that allows remote parties to electronically sign and exchange contractual documents in order to execute a contract between them – was not previously accepted as valid in Scots law. This seriously affected the handling of modern commercial transactions, where parties rarely meet in person, and legal practitioners frequently advised clients not to contract under Scots law in order to circumvent these issues.

Following Professor MacQueen’s appointment as a Scottish Law Commissioner in 2009, he was charged with directing a major review of contract law reform. In 2012, he led on a consultative Discussion Paper on formation of contract that included execution in counterpart, but such was the pressure for reform from the legal profession that a separate Report on execution in counterpart alone, largely written by Professor MacQueen, was published with a draft Bill in 2014. Ultimately, the Scottish Government introduced and passed legislation based on the Scottish Law Commission’s draft to Parliament, becoming the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015. The Act affirmed the validity of counterpart execution and electronic transmission of documents.

These reforms were strongly welcomed by Scottish legal practitioners. Shepherd & Wedderburn LLP wrote in a blog post entitled “Vive le (counterpart) revolution” that the results of an internal survey conducted within the firm about the 2015 Act “show the warm welcome the 2015 Act has been given.” An informal Scottish Government survey of commercial law firms conducted in early 2017 and now held on the Scottish Law Commission website showed a similarly positive view, with the law firm Anderson Strathern commenting: “The legislation has enabled more efficient completion of transactions where not all parties are in Scotland. One respondent highlighted also how useful the legislation had been when the timescale for completion of a transaction was very short and parties were not nearby. In fact, the legislation enables completion where there is any degree of distance involved, whether international or not.”

Third party rights

Professor MacQueen also led on a Discussion Paper on third party rights (TPRs) that sought to find solutions to historical technical requirements that were frustrating contracting parties’ ability to establish TPRs under Scots law, such as irrevocability as a pre-requisite. The subsequent Report, again largely written by Hector MacQueen, was published with a draft Bill in 2016 and led to the final Contract (Third Party Rights) (Scotland) Act 2017. Notably, the Act removed the prohibition on the revocation or alteration of TPRs, allowing them to be conferred in a simpler and more flexible manner.

In regards to the 2017 Act, Anderson Strathern further commented in a blog post that, “The introduction of this Act adds a level of much needed flexibility and will help to ensure that Scotland remains an attractive and commercially sensible destination for large corporate groups.”