Change is in the air. The Scots law approach to the interpretation of contracts is being re-examined in the light of European proposals and comments are invited. It is anticipated that some wide-ranging updates and amendments to Scots contract law will result.
The reason we enter into any written contract is to document the
intention of the parties and to ensure that each side is bound to
carry out its obligations whilst having the ability to enforce its
rights. The job of a commercial contracts lawyer is to identify the
specific, agreed intentions of the parties and to express those
intentions in a well written, easy to read contract.
Unfortunately, this ideal is not always achieved. Often, this
is a consequence of poor drafting by the lawyers, and sometimes it
is a result of a lack of clarity on what the parties'
intentions actually are – resulting in a fudged contract
term or a lack of necessary detail.
The resulting confusion over what a contract term actually means
can often lead to disputes. When these disputes occur it is
up to the courts to interpret the terms of the contract. The rules
and methods used by the courts to interpret contracts vary from
country to country and even in a country like Scotland, the rules
of interpretation have developed in an ad-hoc fashion leaving
significant uncertainties hanging over some important areas of the
law.
In this age of global business the world is becoming a smaller
place and any attempt to facilitate a more uniform approach to
cross-border business is a useful endeavour.
An encouraging development coming from Scotland is the Scottish Law
Commission's (SLC) discussion paper on contract interpretation
published on 23 February 2011 as part of its new project reviewing
contract law.
The discussion paper represents an opportunity to provide the
current Scots law of contract interpretation with a "health
check" in light of the publication in 2009 of the Draft Common
Frame of Reference: Principles, Definitions and Model Rules of
European Private Law (the DCFR).
The DCFR is written in plain English and, according to the SLC,
sets itself out to be "a modern or contemporary statement of
the best rules of contract law for use in the EU, and is based upon
extensive comparative research and intensive collaboration by an
international team of contract law experts".
Given the available research already being undertaken under the DCFR, the SLC has decided it would be a good time to compare, refresh and update its own thinking on the interpretation of contracts in Scotland, and its initial proposals have found their way into the discussion paper. The lead Commissioner, Professor Hector MacQueen, has recommended the proposals on the basis that they would "lead to a clear and up-to-date law in line with developments in other parts of the world."
A previous SLC consideration and report on interpretation in Scots law went unimplemented in 1997 and it is to be hoped that the latest discussion paper, with the added momentum resulting from the concurrently progressing DCFR, will lead to real action being taken to clarify this important area of law.
The proposals can be found in the discussion paper here and comments on the proposals are sought by 20 May 2011.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 22/03/2011.
