Alan Cameron | Partner

Breach of contract or “unexcused non-performance”?

The UK’s impending exit from the EU has only heightened the need to ensure that scots law is kept up to date and in line with international standards. Contract law is particularly significant and 18 years after the last review, the Scottish Law Commission has this month published a discussion paper on legal remedies available to parties when a contract is not carried out as agreed. (See Discussion Paper).

The Discussion Paper considers the tools available to parties when a contract goes awry and what can be done to ensure parties work continue to work together to find a resolution, rather that storming off to court or simply walking away. There is undoubtedly a need to make this area of law clearer, and one of the first thing the paper targets is the current terminology. The hope is that by reforming outdated language individuals and businesses better understand what can be done when a contract is not fulfilled.

There are two generally available self-help remedies: retention and rescission for material breach. Retention is where one party withholds performance of their obligations in response to the other party’s breach. It is temporary in nature, i.e. It doesn’t terminate the contract but that is not clear from the language. The suggestion from the Law Commission is that the word ‘retention’ is replaced with ‘suspension’ which makes the consequences clearer. Recession involves one party declaring that it is no longer bound by a contract and therefore does not have to carry out its contractual obligations. The suggestion in this case is that the word ‘termination’ is a more suitable alternative.

When parties have to go to court to enforce performance they can do this one of two ways: by specific implement or an action for payment. The latter is self-explanatory but the former involves some Latin! Specific implement or an order ad factum praestandum is a remedy used to compel one party to perform their non- monetary obligations under the contract. The Law Commission is of the view that it would be more attractive simply to call this remedy a ‘performance order’ as it more readily captures the essence of what the court is being asked to do. In contrast, it was found that the term ‘damages’ is well understood by non-lawyers as being the monetary substitute for performance not made by one party.

The discussion paper also asks if completely new remedies should be introduced but recognises that these should be simplified and self-explanatory. The overall aim is to modernise terminology as well as substance in order to make Scotland a more attractive place to do business and improve the accessibility of legal services.

The consultation closes on 6 October 2017 with the commission’s report due in early 2018.

At Jackson Boyd our dispute resolution team have experience in dealing with contract disputes. If you are involved in a dispute and are seeking advice please contact us online by clicking here or speak to a member of our specialist team on 0333 222 1855.

Alan Cameron

Alan Cameron

Dispute Resolution Team

“My motto is: ‘First they ignore you, then they ridicule you, then they fight you, and then you win.’”

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