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

CURRENT WORK

This is a large project, on which we are producing papers on different topics.  Our primary focus is on the domestic law but, as explained more fully below, we are taking into consideration a number of recent European initiatives.  One of these has formed the subject of an advice given jointly with the Law Commission.

(i) SLC discussion papers

Our most recent discussion paper (DP 154, March 2012) discusses formation of contract. Comments are invited by 29 June 2012, using the electronic response form if possible. The paper includes an examination of the postal acceptance rule, the "battle of the forms", and the law and practice relating to "execution in counterpart".  The last of these issues, which relates to the way in which contracts agreed between parties may be signed other than at a traditional "all parties" signing session, is an area of law which - we are told - is currently unsatisfactory, especially in comparison with English law and practice.  In bringing forward law reform proposals in this area we seek to provide for electronic signatures as well as for traditional "wet ink" ones.   

Our earlier discussion paper (Discussion Paper  (DP 147), Feb 2011) is concerned with interpretation of contract.  We give a detailed exposition of the current Scots law on interpretation, suggesting that while the law has developed to some extent in the direction of recommendations made in an earlier Report by the SLC (Report on Interpretation in Private Law (Scot Law Com No 160, 1997), it is still uncertain and unsettled in important respects.  As interpretation is of crucial importance for legal practitioners, particularly in the commercial field, and plays a significant role in the Scottish economy, we suggest that the current law would benefit from review and reform.  The consultation period closed in May 2011.  Consideration is being given to when to prepare a Report.

We intend to publish further discussion papers, including one on remedies for breach of contract.  In this connection, there has been some relatively recent work on penalty clauses.  The Scottish Government consulted on a draft Penalty Clauses (Scotland) Bill in July 2010.  It is very closely based on the draft legislation appended to the Scottish Law Commission’s Report on Penalty Clauses (Scot Law Com No 171; 1999).  The Commission was included as a consultee and submitted a response to the Scottish Government.  In the light of all of the responses to the consultation the Government has decided that further work is needed.  The work which we have done in response to the consultation persuades us that there is still merit in pressing for reform.

(ii) Joint advice with the Law Commission on the proposed CESL (Common European Sales Law)

In May 2011 two UK government departments, the Ministry of Justice and the Department for Business, Innovation and Skills, instructed the Law Commission and us to provide advice on certain questions relating to the development of an optional European contract law (detail about the European Commission's work in this area is provided above under "DCFR").  The instruction letters from MoJ and DBIS set out the terms of reference.  Our joint advice was published on 10 November 2011, within a month of the publication by the European Commision of its proposed Regulation for a Common European Sales Law (CESL).  The joint advice contains a separate summary.  A list of links to the key documents and background materials referred to in the advice can be found here.  The UK Government has issued a consultation document on this topic (with the support of the Scottish Government) with comments invited by 21 May 2012.

REVIEW OF THE LAW OF CONTRACT WITHIN THE WORK OF THE COMMISSION

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)

The current review is included in our Eighth Programme of Law Reform as a long-term project. 

DCFR 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).  This sets out a contemporary statement of contract law, based on comparative research from across the European Union; it is written in clear English; and 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 described below).  There is more information on the DCFR in the opening paragraphs of our discussion paper on interpretation, which we mentioned above.

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).  As discussed above, in November 2011 we published advice with the Law Commission on these developments following a reference from the UK Government. 

For more information on the contract law project, please contact charles.garland@scotlawcom.gsi.gov.uk.