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Scottish contract law - there are differences in the detail

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Posted by Christine Jackson on 24 May 2012

Christine Jackson Partner

Do you have customers north of the border and if so are any of your contracts subject to Scottish law? If the answer is “yes” to both questions then read on Macduff as there’s one or two risks you might not be aware of.

The broad principles of Scots and English contract law are similar. However, as ever, there are differences in the detail. It is beyond the scope of this article to provide a detailed analysis but here are two significant points to bear in mind when Scots law applies.

Scottish injunctions – “interdicts”

Whilst the law as regards injunctive/interdict relief is broadly the same, applications for an interim interdict will be held without the respondent being present unless the respondent has previously lodged a "caveat" with the court concerned.  

The caveat system is unique to Scotland and offers protection in the event that a third party attempts to seek an interdict against the party in whose name the caveat is lodged. If a caveat has been lodged then the court must first contact the agents of the person who lodged the caveat to allow them the opportunity to state their case at the hearing. This is significant as it is generally easier to stop an interim order being granted than seek to have it lifted.  

Caveat protection can be secured at a relatively modest annual cost and can be generic in nature; that is you do not have to specify any particular contract or third party.

Registration for preservation and execution

Under Scottish law it is possible to register contracts in the Books of Council and Session either for preservation only, or for preservation and execution.

Preservation: If a contract is registered for preservation then this acts as a safe deposit and it is open to public inspection.

Execution: If a contract is also registered for execution, then it gives a party owed sums under the contract an alternative and advantageous way of recovering those sums (called "summary diligence").  

Under summary diligence, if sums are owed under a registered contract then the party seeking payment can simply certify the sum outstanding and then instruct officers of the court to serve a charge for payment on the debtor. As the registered contract is treated as equivalent to a court decree, there is no need to have recourse to the court, or to first establish in a court that the sums in question are in fact due. If the debtor then wishes to dispute that the sum owed it would then need to apply to court and obtain an interdict to prevent further enforcement action.  

In contrast, if the contract was not registered for execution, the party claiming the sum would not be able to take enforcement action until it had first obtained a court order.

Conclusion

Scottish law has material differences to English law and pitfalls for the unwary. As is the case when faced with any contract subject to a foreign law it is well worth taking advice from local lawyers and Wright Hassall has contacts in many jurisdictions.

About the author

Christine helps clients manage risk and financial exposure in their day to day business dealings.

Christine Jackson

Christine helps clients manage risk and financial exposure in their day to day business dealings.

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