Don't fall out: Commission's aim in dealing with contract breach

Trying to keep contracting parties working together is the focus of a discussion paper on remedies for breach of contract, published today by the Scottish Law Commission.

In the final phase of its review of contract law, the Commission considers the tools available when a contract is not carried out as agreed, comparing them with those available in other European legal systems. The focus is on performing the contract as agreed, and as much as possible keeping the parties working together for solutions to disputes, rather than going to court or terminating their contract altogether.

The paper looks at ways in which this area of the law could be made clearer and more comprehensible, particularly by reforming outdated language so that individuals and businesses better understand their options. For remedies designed to be used without going to court, it is especially important that they are accessible and easy to understand.

It also suggests ways of removing practical doubts and difficulties that have arisen in Scots law, and invites views on whether new remedies should be introduced in some areas to address perceived gaps and difficulties in the present law, such as the problem of transferred loss, the so-called “black hole” in the Scots law of contract damages.

Topics covered include:

• suspension or withholding of performance as a temporary measure in response to a breach, and what level of breach might justify this;
• whether termination should be allowed as a response to an anticipated breach of contract, before the time for performance has arrived;
• whether a statutory ultimatum procedure should be introduced for non-material breach of contract;
• what self help remedies should be permitted, such as price reduction, or right to carry out a cure;
• whether courts should be given a broad discretionary power to make orders intended to secure performance of an obligation;
• whether there should be a restatement of the principles for calculating damages, and if so in what form;
• how to calculate gain-based damages;
• when claims for transferred loss might be available;
• whether a defence of contributory negligence should be available; and
• the extent to which any general restatement should preserve parties' freedom pf contract.

Professor Hector MacQueen, the commissioner leading the contract law review, commented: “Our objective here is the simplification and modernisation of the law so that it is readily understood and as easily applied as possible, whether by contracting parties themselves, their legal advisers, or the courts. We look forward to receiving views on our suggestions from a wide range of stakeholders in order to develop final proposals for publication in 2018.”

Click here to view the discussion paper. Consultation closes on 6 October 2017, and the Commission hopes to report on the subject in early 2018.