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Scots law reform relevant to transactions and disputes to be explored

A new programme of work to be undertaken by the Scottish Law Commission (SLC) can help provide businesses with clarity on legal issues relevant to commercial transactions and disputes, experts said.

Steven Blane and Fiona Alexander of Pinsent Masons were commenting after the SLC set out a programme of law reform spanning the next five years (24-page / 2.01MB PDF).

The work programme, subject to approval by Scottish ministers, includes projects that will consider the law in Scotland concerning the execution of documents, leases, and limitation – the term used to describe the time-bars on raising a claim before court after the underlying cause of action has taken place. The programme will be the basis for most of the SLC’s work from 2023 to 2027 and is expected to provide the basis for reform of the law in Scotland.

Blane said: “The Scottish Law Commission’s programme seeks to address some long standing and challenging issues that affect both transactions and disputes in Scotland. While we await the proposals from the Scottish Law Commission in due course, and subject to the necessary legislation being passed by the Scottish parliament, it is hoped that the output from their work on this programme of law reform will allow businesses in Scotland to have greater certainty on their rights and obligations in the areas being reviewed.”

The SLC said it would undertake a “general examination of limitation law” – a project it said had been prompted by “major concerns on the part of personal injury practitioners about the current law of limitation, whereby an injured person’s claim to damages may be time-barred”.

In relation to the execution of documents, the SLC is seeking to overhaul the Requirements of Writing (Scotland) Act 1995, together with the more recent Legal Writings (Counterparts and Delivery) (Scotland) Act 2015.

The SLC said: “A range of issues has been raised regarding the execution of documents, including the interaction between traditional (hard copy) and electronic execution in a single contract; what constitutes a signature; how bodies corporate can validly execute when signing in their capacity as director/secretary/member of another company or limited liability partnership (LLP), and how this signature can be self-proving; whether LLPs can appoint an attorney to execute on their behalf; whether subscription on the page containing the last operative clause should continue to be required; and whether two or more signatories signing on behalf of a single entity can execute in counterpart.”

“Ensuring that the method of signing and witnessing documents of all types is clear and effective is obviously an essential concern across personal and commercial life in Scotland. Given the number and spread of concerns raised, it seems clear that this is an area which would benefit from an holistic review, assessing how the 1995 Act has weathered the passage of time, and the efficacy of subsequent reforms relating to electronic signature and execution in counterpart,” it said.

Alexander said: “We welcome the Scottish Law Commission’s proposed review of the law relating to the execution of documents. A comprehensive review will hopefully ensure that Scotland has modern joined-up provisions for the execution of paper and electronic documents, which suit both current and future requirements and make it easier to carry out business in Scotland.”

The SLC’s project in relation to leases of land and buildings represents a continuation of previous work it has undertaken. At an earlier stage of the project, the SLC considered the law concerning the termination of leases and proposed reforms relating to termination of commercial property leases – specifically, a new code in place of the common law rules on the doctrine of ‘tacit relocation’, which currently provides for the automatic one year renewal of Scottish leases of a year or more upon the end of their term. It said, though, that there are “some elements” of the law on leases that still require to be modernised and that a further second stage of the project would then be commenced.

“One area will be a review of the Tenancy of Shops (Scotland) Act 1949,” the SLC said. “Another will be the clarification of the law of confusio, where a tenant acquires ownership of the let property (which need not be commercial property), and the closely related concept of renunciation (relinquishment).”

“In the second stage of the project we will focus on rules governing the creation of leases and identification of landlords’ obligations that run with the landlord’s interest under a lease irrespective of a change in landlord. The current rules are to be found, principally, in two dated statutes: the Leases Act 1449 which, while pioneering and historic in its day, has been encrusted with over 500 years of case law and might be thought unfit for modern society; and the Registration of Leases (Scotland) Act 1857. The common law is also relevant,” it said.

“The need for review, clarification and updating of the law in this area has been raised by consultees both in relation to this programme and previous ones. The current rules are of significant commercial importance as they determine for example, whether a tenant’s option to purchase is transferred. Further, given the fundamental importance of these Acts to all tenants’ security of tenure in the properties which they occupy, substantial work will be required; and this cannot be limited to commercial property. Consideration of the effect of leases on obligations of warrandice may also be appropriate,” the SLC said.

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