Trading vagaries for complexities — considering the Contract (Formation and Remedies) (Scotland) Act 2026

Lisa Cowan reflects on the newly passed Contract (Formation and Remedies) (Scotland) Act 2026.

Introduction

The latest in a series of efforts to clarify and modernise Scots law is a foray into the realm of contract law. On 3 March 2026, the Contract (Formation and Remedies) (Scotland) Bill was passed by the Scottish Parliament following its Stage 3 reading. On 14 April it received royal assent and became an Act. The legislation follows recommendations for reform of Scots contract law made by the Scottish Law Commission (SLC) in a 2018 report.

That report acknowledges the confused state of the common law in this area, arising out of both gaps and a multitude of conflicting views as to what the law actually is. While, historically, the law of contract has developed through case law, the SLC noted that a relatively small jurisdiction may not produce sufficient case law for Scots law to keep up with the realities of the modern world.¹ [LH1] By contrast, a “plethora of decisions” producing conflicting commentary which “cannot be reconciled” are similarly unhelpful.² As such, with one eye on international standards, the proposed reforms aimed to simplify and modernise, making the law of contract as “useful and useable” as possible.³

To that end, the 2026 Act lays out 30 sections to help parties answer the questions: when do I have a contract, and what can I do to enforce it? This new legislative framework introduces some notable changes. The Act bids a fond farewell to the postal acceptance rule and embraces a statutory framework that acknowledges the prevalence of email. It also updates the right of retention, replacing the often-nebulous common law principle of ‘mutuality’ with statutory guidance. The Act has yet to be brought into force by statutory instrument.

In many ways, the Act marks a victory for common sense. Undergraduate law students all over Scotland are surely heaving sighs of relief at the sight of the refreshingly brief Act (although the common law will continue to apply to contracts concluded prior to the Act’s commencement, as well as to niche situations not provided for by the statute). Early reception of the new framework among legal practitioners seems to be largely positive. Still, concerns were raised during consultation and during the legislative process by the Law Society of Scotland and the Faculty of Advocates, as well as academic and parliamentary commentators, as to whether this hybrid system will deliver the certainty it promises. This article addresses such concerns, and the likely effects of the new Act on the law of contract going forward.

Discussion

Partial codification

The Act represents a partial codification of Scots contract law. While it tackles formation and certain remedies, the Act deliberately omits interpretation, third-party rights and the ‘battle of the forms’. The SLC report justifies these decisions well. Its primary rationale for excluding interpretation from the statute was the relatively recent emergence of new case law on that point. At the time of drafting the SLC report, the UK Supreme Court had very recently attempted clarification on interpretation of contracts in Arnold v Britton [2015], followed by a relevant passage in Wood v Capita Investments [2017].⁴ Rather than risk muddying the waters anew, the SLC preferred to allow the law to develop further based on this new judicial guidance.⁵ Third-party rights have recently been dealt with separately, by way of the Contract (Third Party Rights) (Scotland) Act 2017, which abolished the common law doctrine of jus quaesitum tertio in favour of a simplified statutory regime. Finally, during consultation, respondents expressed the belief that any attempt to regulate battle of the forms with specific rules would simply replace old confusion with new.⁶

Nevertheless, the result is fragmentation. Rather than the civilian dream of a single, elegant code, practitioners are left with one eye on a brand-new statute and the other in centuries of common law precedent. That being so, does the Act actually make the law more accessible for a small business owner?

As the Law Society of Scotland noted in its Stage 3 Briefing, there is a real need for a “cautious approach” as courts figure out how new statutory provisions interact with existing precedent. Judicial interpretation is sure to offer guidance. However, the task of navigating multiple sources of law is one familiar to firms and judges alike, particularly in a jurisdiction with mixed legal heritage. The Act’s brevity and simple language are certainly more accessible to laymen. It is for the courts, then, to harmonise this new legislation with the surviving principles of the common law without creating a decade of litigation. The legal community will be watching on closely.

When does a message ‘reach’ you?

The Faculty of Advocates and other stakeholders pointed to potential issues around notification. The 2026 Act abolishes the postal rule in favour of a “reaching” rule, according to which a communication is effective when it reaches the recipient. Section 13(3) provides that a communication is deemed to have “reached” its recipient when it is “made available” so as to enable “access […] without undue delay”. Section 13(4) helpfully lists certain examples of circumstances in which physical and digital communications can be considered to have “reached” their recipient. It is likely the latter which creates the greyest areas. For instance, does an email “reach” its recipient if it lands in a spam folder?  

Such technical ambiguities will inevitably lead to the Outer House potentially replacing the idiosyncrasies of the post with those of the server log (in the short term). As such, during the transitional period, it may be prudent to take certain steps to minimise uncertainty and reduce exposure. In the critical stages of contract formation, astute parties might copy communications to multiple recipients or request a digital delivery receipt – indicating that the email has been saved to disk at the recipient’s end. Whether the recipient subsequently takes the time to actually read the communication is a matter of self-interest or professional conduct!

Retention

The right to withhold performance when the other party breaches was a late addition to the reform process, spurred by recent case law that moved faster than the original SLC report. Critics argue that trying to capture this rapidly evolving judicial area in a rigid statutory formula is risky. As noted in recent legal commentary, the “mutuality” of contract is a delicate ecosystem.⁷ The Act lowers the threshold for withholding performance from “material breach” to effectively any breach, provided that the retention is not “clearly disproportionate” (Section 22). Service providers, such as construction firms, may be wary of this change, lest it encourage clients to withhold large payments over minor defects. The requirement for proportionality aims to discourage such situations. Alternatively, nothing in the wording of the Act prevents parties from excluding the remedy altogether.

Nevertheless, the provision simplifies the law, eliminating the headache of defining “materiality” and “reciprocity” in each specific case. Legal commentators have suggested that, by lowering the bar for the remedy, parties might avoid the time and costs associated with litigation.⁸ It may be some years before a critical mass of contracts are governed by the Act, so only time will tell.

Conclusion

The general consensus from the legal community seems to be that the new Act is a positive development.⁹ On paper, at least, the Act achieves its goals of simplifying and updating the law. It does not, as some might have hoped, provide ultimate legal certainty on the topics it covers. Then again, which law does?

At least temporarily, it is probable that we have traded the vagaries of centuries-old case law for new complexities of statutory interpretation. Still, visible hurdles are easier to navigate than hidden ones. This is surely a short-term inconvenience for ease and simplicity in the long term.

Lisa Cowan is a Teaching Fellow in Legal History at the University of Edinburgh.

Footnotes

1. Scottish Law Commission (2018) Report 252: Review of Contract: Formation, Interpretation, Remedies for Breach, and Penalty Clauses, 1.8; 1.12.

2. Ibid, 1.15.

3. Ibid, 1.6.

4. Arnold v Britton [2015] UKSC 36; Wood v Capita Investments [2017] UKSC 24, discussed in Scottish Law Commission (2018) Report 252, 2.13 and 2.14.

5. Ibid, 2.9.

6. Although the new Act might tackle the issue in a roundabout way, in that, if a court finds that parties have reached sufficient agreement, there may be a contract, notwithstanding differences on other matters.

7. CMS (2025) ‘Upcoming contract law reforms in Scotland – the Contract (Formation and remedies) (Scotland) Bill’.

8. Fiona McGeachy (2026) ‘Overview of the Contract (Formation and Remedies) (Scotland) Act 2026’, Harper Macleod LLP.

9. Emma Wills (2026) ‘Scotland’s new contract Act’, Scottish Legal News; Pinsent Masons (2026) ‘Scots contract law changes await royal assent after clearing Holyrood hurdle’.