The Contract (Formation and Remedies) (Scotland) Act 2026

On 14 April 2026, the Contract (Formation and Remedies) (Scotland) Act 2026 received Royal Assent. The Act builds on, and seeks to implement, recommendations made by the Scottish Law Commission in a report from 2018. It does not seek to radically overhaul the law of contract in Scotland. While certain provisions of the Act do depart from established practice, many of the provisions simply seek to clarify, and centralise, existing rules which have been developed by the Scottish Courts.

Crucially, the rules set out in the Act are subject to any contrary agreement between the parties. Organisations are still free to agree terms which conflict with the provisions of the Act. Where they do so, the provisions of the contract will prevail. However, the Act provides guidance on how issues of contractual formation and remedies will be dealt with when the parties have not agreed conflicting contractual provisions.

Some of the key provisions are summarised below.

Contract formation

A contract will be formed when the parties have come to an agreement intended to have legal effect which has the essential characteristics of a contract. A contract could come into force even if the parties are still negotiating certain points relevant to the contract, provided that sufficient agreement has been reached on key content.

Postal acceptance rule

The Act does away with the postal acceptance rule. This rule meant that an acceptance of an offer sent by post would be effective at the time that it was posted, even if such acceptance never reached the other party or delivery was delayed. Under the new rules, any notification related to the formation of a contract, such as a notice issuing an offer or an acceptance, will only take effect from the moment it “reaches” the other party.

Mutuality of contract

Where parties are in mutual breach of a contract, each party may exercise any right or pursue any remedy it may have against the other party. This does not, however, entitle a party to demand performance of the contract after the contract has been rescinded.

Retention

A party to a contract may temporarily withhold or suspend performance of its obligations in response to a breach or anticipated breach by the other party. It does not matter whether the original breach is material, but the retention must not be disproportionate to the harm suffered.

Recission for breach

If a contract is rescinded due to a material breach, each party must return any unreciprocated benefit received from the other party. This may mean returning amounts paid in advance, returning goods provided by the other party, or, where it is not possible to return the benefit, making payment to the other party for the value of the benefit received.

Contributory negligence

The Act amends the provisions of the Law Reform (Contributory Negligence) Act 1945 to allow contributory negligence to be pled as a defence to a claim for breach of contract.

What this means in practice

The substantive provisions of the Act are not yet in force. Commencement regulations will need to be passed before the Act takes full effect. In the interim, issues of contract formation and remedies will continue to be dealt with in accordance with the existing legal framework.

However, organisations should begin to consider and plan for the impact of these changes now. Where organisations do not wish to be bound by the updated rules set out in the Act, they should seek to include express provisions in their contracts dealing with the matters covered by the Act.

If this article raises any questions for you, or if you need any assistance with commercial contracts, please get in touch with a member of our commercial contracts team or your usual Shepherd and Wedderburn contact.

Contributors: