The Contract (Formation and Remedies) (Scotland) Act 2026 received Royal Assent on 14 April 2026, modernising default rules on how contracts are formed and setting out targeted remedies for breach. Stage 3 concluded on 3 March 2026 with the Bill passed without opposition. Today, sections 15, 22, 24 and 26 take effect, with the remainder to be commenced by Scottish Ministers. (parliament.scot)
The Act adopts a “default rules unless agreed otherwise” model. For contract formation, sections 2 to 13 apply except where the offer or counter‑offer provides otherwise, or where the parties have already agreed different rules for forming their contract. Parties may also modify how those provisions operate in their agreement. (parliament.scot)
A contract is formed when parties agree on terms they intend to have legal effect and which have the essential characteristics and sufficient content for that type of contract. Agreement may be reached even if one or more matters are left open, unless a party has expressly required consensus on a specified matter. Agreement can be inferred from statements or conduct. (parliament.scot)
The Act recognises formation by unnotified acts where the offer provides for it, a practice exists between the parties, or a relevant usage applies; in such cases the contract is formed when the offeree begins performance. This is subject to the time‑limit rules in section 11. (parliament.scot)
Offers are defined by an objective test: the offeree must have reasonable grounds to think the offer is intended to result in a contract if accepted, and it must be legally capable of taking effect. Offers may be addressed to a person, a class, the public, or persons in general. Revocation is permitted only until acceptance, agreement by conduct, or the start of qualifying performance; for general offers, revocation must use the same means (or any method specified in the offer). An offer lapses on a fundamental change of circumstances such as death or legal incapacity, but not on insolvency; Ministers may update insolvency triggers by affirmative regulations. (parliament.scot)
Acceptance is any statement or conduct showing unqualified assent; silence or inactivity alone does not suffice. A qualified acceptance both rejects the original offer and makes a counter‑offer. Rejection causes the offer to lapse. (parliament.scot)
Withdrawal rules are codified. An offer, even if expressed to be irrevocable, may be withdrawn if the withdrawal takes effect before or at the same time as the offer’s notification takes effect; likewise, an acceptance may be withdrawn if its withdrawal is notified before or at the same time as the acceptance takes effect. Where no response period is specified, acceptance must be notified within a reasonable time. (parliament.scot)
Notification is now aligned to a receipt‑based standard. A notification of an offer, acceptance, counter‑offer, withdrawal, rejection, revocation or declaration takes effect when it “reaches” the recipient-meaning it is made available in circumstances where they can access it without undue delay, including when an electronic message becomes available to be accessed. The longstanding postal acceptance rule is abolished. (parliament.scot)
On remedies, the Act preserves party autonomy while clarifying mutuality. Where both parties are in breach, one party may still exercise rights arising from the other’s breach provided that breach occurs before lawful rescission for their own breach; however, there is no right to demand performance falling due after rescission, or performance lawfully withheld for the other’s breach. (parliament.scot)
If a contract is lawfully rescinded for breach, a structured return‑of‑benefits scheme applies. Money paid must be repaid. Non‑monetary benefits must be transferred if practicable; failing that, their value must be paid. Where non‑transferable, the recipient pays the value (or, if disposed of for more than value, the higher amount). The scheme includes the fruits of the benefit. (parliament.scot)
Valuation is fixed at the time of the other party’s performance. If there was an agreed price, the value is the proportion that actual performance bears to promised performance; otherwise it is the reasonable sum a willing provider and recipient would have agreed. Liability is reduced where the recipient, without compensation, had to dispose of the benefit or incur disadvantage to preserve it due to the other party’s non‑performance. Recipients must compensate for any reduction in value on return, subject to carve‑outs where the change results from the other party’s non‑performance or a reasonable but mistaken belief that performance conformed. A recipient may recover for improvements if readily realisable by the other party, unless the improvement itself breached the contract or was made when return was (or ought to have been) known. (parliament.scot)
Contractual retention is codified. A party may temporarily withhold or suspend performance following breach, for an anticipatory (material) breach, or in relation to obligations subsisting when the contract is ended for breach. Counterpart obligations are presumed, and may span separate contracts forming one transaction. Any retention must not be clearly disproportionate; parties may retain part only to stay proportionate, and retention continues until performance or damages in lieu are provided. (parliament.scot)
Where retention is exercised for an anticipatory breach, the retaining party must notify the other before it begins or as soon as reasonably practicable thereafter; notice may be oral or written. In any dispute, the challenger bears the burden of showing the retention is clearly disproportionate. It is a defence to a breach claim to show the failure to perform was contractual retention. Existing doctrines-including lien, set‑off, netting and equitable/special retention-are preserved, and courts may refuse retention where it would be inequitable. (parliament.scot)
The Act interfaces with contributory fault. Parties may agree to disregard the Law Reform (Contributory Negligence) Act 1945 when assessing reductions of damages for breach. Separately, the 1945 Act is amended to confirm that “fault” includes breach of contract for the purposes of apportionment. (parliament.scot)
Key guardrails remain. The statute leaves untouched rules requiring writing, prescribed form, essential validity, unfair terms control and protections for particular categories of contracting person. Ministers may make ancillary and consequential provision, including modifying enactments; text‑modifying regulations attract the affirmative procedure, others the negative. Commencement is staged: sections 15, 22, 24 and 26 are in force from 15 April 2026, with the rest to be appointed by regulations. (parliament.scot)
Analysis: For contracting authorities, in‑house counsel and SMEs, immediate priorities include updating terms on acceptance and electronic communications to reflect the “reaches” test, reviewing standard notices for general offers and revocation, aligning project controls to the new proportionality test for contractual retention, and mapping restitution exposure if terminating for breach. The Scottish Government’s Stage 3 briefing and press notice underline the policy intent of clarity and accessibility, which should reduce disputes over timing and notification. (gov.scot)