Shepherd and Wedderburn backs new Contracts Bill

Shepherd and Wedderburn is particularly pleased to welcome the introduction to the Scottish Parliament of a Bill that will allow businesses and individuals to create effective contracts and finalise agreements and other documents more speedily, having played a central role in its conception, and its content.

The Bill provides 21st century solutions to signing and delivery of documents by permitting:

9th June 2014

Shepherd and Wedderburn is particularly pleased to welcome the introduction to the Scottish Parliament of a Bill that will allow businesses and individuals to create effective contracts and finalise agreements and other documents more speedily, having played a central role in its conception, and its content.

The Bill provides 21st century solutions to signing and delivery of documents by permitting:

  • the execution of documents in counterpart (that is, in two or more duplicate, interchangeable parts); and
  • delivery of traditional documents by electronic means.

The Legal Writings (Counterparts and Delivery) (Scotland) Bill, introduced to the Parliament on 15 May 2014, is sponsored by the Scottish Law Commission, and arises from the Commission's wide ranging (and ongoing) review of Contract Law in Scotland.  The suggestion that the Commission should consider introducing a law allowing "execution in counterpart" – a technique effectively unknown in Scotland, although widely used in England and Wales – came from Shepherd and Wedderburn's Paul Hally, who brought this practice to the attention of the Commission.  Paul highlighted the difficulties that are often encountered in commercial transactions in Scotland, where the inability to complete transactions by way of simultaneous remote all-party signings can result in a protracted and time consuming signing process, creating inconvenience and delay.

Counterpart signing

When the Bill becomes law, which is expected to be in early 2015, parties to dealings will be able to complete the signing formalities using two or more separate, but identical, parts of the documents required.  No single counterpart will be signed by all parties, but, once execution is completed, the counterparts together will be regarded as a single, contractually binding document.  Each party has to sign sufficient numbers of counterparts to be able to deliver one to each of the other parties.  As this could become procedurally complex where there are multiple signatories, one person can be nominated to take delivery of one or more of the counterparts for the benefit of some or all of the parties in the dealing.  Arrangements can be flexible to suit the requirements of the parties.

Both traditional and electronic documents can be executed in counterpart.

Delivery of traditional documents

Since the original proposals drafted by the Commission for counterpart execution authorised effective delivery by electronic means, Shepherd and Wedderburn, who were shown an early draft of the Bill for comment, made a further suggestion that the Bill could apply electronic delivery to other types of traditional document as well.  This would transform practice in Scotland, since the present law requires that for a contract to be binding, actual physical delivery of the documents must take place.  Where parties or their agents are physically located in different places, this can present difficulties of timing, especially in situations where the actual moment of creation of contract is crucial, for tax or other financial reasons, or to avoid the effect of intervening third party rights.

And so the Bill also provides for electronic delivery – by fax or as a PDF or similar digital format – of the traditional document, traditionally signed with a "wet" signature.

The Bill is very short – only seven sections – but its provisions have the potential to revolutionise commercial and domestic legal practice in Scotland. This Bill is a key component in the modernisation of Scottish commercial practices.  Shepherd and Wedderburn are proud to have been so closely involved in its genesis.