3 key things to remember when creating your own Scottish contracts

Navigating contractual principles to create legally enforceable business agreements can be daunting for entrepreneurs. Traditionally, only legal professionals drafted contracts, equipped with the knowledge of legal jargon and principles. However, at Docue, we’re working to change this by democratising legal services for all. When it comes to Scottish contracts, there are several key considerations to keep in mind when creating your own templates.

For a deeper dive into the differences between Scottish and English laws, check out this article.

From understanding key principles to implementing practical guidance, these insights aim to empower Scottish businesses to craft robust and enforceable legal agreements tailored to their specific needs. Let’s dive in!

1. Include a Scottish governing law and jurisdiction clause

Although this clause is often overlooked as it tends to be the final clause contained in a lot of commercial contracts, the governing law and jurisdiction clause is a fundamental building block to any contract.

What is a governing law and jurisdiction clause?

This clause specifies the legal system under which the contract will be interpreted and enforced, as well as the courts that have jurisdiction over any disputes that may arise. For contracts that will operate under Scots law, it is crucial that the governing law stated is the laws of Scotland.

Why is it important to include a governing law and jurisdiction clause in any commercial contract?

The governing law and jurisdiction clause serves several important purposes:

1. Clarity: By specifying Scottish law as the governing law, parties ensure clarity and predictability regarding the legal principles that will apply to the interpretation and enforcement of the contract. This reduces the potential for confusion or disagreement over which legal rules should govern the agreement.

2. Enforceability and compliance: Contracts drafted under Scots law must comply with the specific legal requirements and principles of Scots law to be enforceable. Specifying Scots law as the governing law ensures that the contract will be interpreted and enforced according to the laws of Scotland.

3. Location for dispute resolution: The clause also determines which courts have jurisdiction over any disputes arising from the contract. By designating Scottish courts, parties establish the forum for resolving disputes, providing clarity on the legal procedures and standards that will apply in case of litigation.

Practical tips when drafting this clause

When crafting a governing law and jurisdiction clause in a Scottish contract, its important to:

• Use clear language: Use clear and unambiguous language to specify Scots law as the governing law and Scottish courts as the forum for dispute resolution.

• Align language with the rest of the contract: Ensure that the governing law and jurisdiction clause is consistent and aligns with other provisions of the contract and any related agreements or documents.

Here’s an example of a governing law and jurisdiction clause that will be governed by the laws, and enforced by the courts, of Scotland:

This agreement is governed by the laws of Scotland. All disputes under this agreement will be subject to the exclusive jurisdiction of the courts of Scotland.

Including this clause in your Scottish contracts ensures that parties understand the legal principles that govern their agreement and establishes the appropriate forum for resolving disputes in accordance with Scottish law.

2. There's no need for consideration in Scottish contracts

It is important to remember when you are drafting a contract that Scots law does not require consideration for a contract to be valid.

What is consideration?

In English law, “consideration” is required for a contract to be legally-valid and enforceable. For there to be sufficient consideration in a contract, there must be an exchange of value that benefits each party. This could be money paid in exchange for goods or services, or it could be a promise to do (or not to do) something under the contract.

This means that businesses owners deciding to draft their own contracts can focus on the essential terms without needing to demonstrate an exchange of value, making it easier to:

• Create agreements quickly;

• Modify existing contracts without needing additional exchanges of value; and

• Focus on the key business terms rather than ensuring that consideration is present and adequate.

Real-life example

You may be asking, how could the lack of requirement of consideration in Scottish contracts impact me in the day-to-day running of my business? Well, here’s a real life example of where this may be beneficial to you:

Let’s say you have a service agreement that is coming to an end, but you have agreed with your client that it will be extended for another year. In this case, you will be amending the service agreement to extend the term without changing any of its other terms. Under Scottish law, this modification can be straightforwardly agreed upon without needing to provide additional consideration (e.g., extra payment, additional services or drafting the document as a deed which does not require consideration), as may be required to provide a contract is valid under English law.

This particular difference in Scots law provides a significant advantage for entrepreneurs by simplifying the contractual process and allowing greater flexibility in their commercial dealings. This can lead to more efficient business operations and reduced legal complexities. For more information about the difference between Scottish and English laws, read this guide.

3. Ensuring the execution clause is on the same page as the last operative clause

Finally, in Scottish law, one crucial formality for a contract to be valid is that the execution clause must be on the same page as the last operative clause of the contract. This requirement has significant implications for the validity and enforceability of the contract.

What is the last operative clause?

In the simplest terms, the last operative clause of a commercial contract is the final paragraph or section of the main body of the agreement before the signature blocks (this does not include schedules or annexed documents).

Importance of placement

The execution clause, where parties sign the contract, must be positioned on the same page as the last operative clause, as pictured below:

Practical tips when drafting this clause

To comply with this requirement:

• Drafting layout: Ensure that the last page of the contract includes both the final operative clause and the execution clause. Avoid extending the execution clause to a separate page unless it also contains operative clauses.

• Review and confirmation: Before finalising the contract, double-check that the execution clause is correctly positioned. This review should be a standard part of the contract preparation process.

• Also adhere to other execution formalities: Ensure that any other execution formalities required under Scottish laws have been complied with. You can find out more about Scottish signing formalities by reading this blog.

If the signing page is detached from the main body of the contract, it might not be considered legally binding under Scots law. Therefore, it is essential to comply to the requirement for the execution clause to be on same page as the last operative clause.

Why choose Docue to create Scottish contract templates?

Everything in one place: Once you've created your document, you can send it via the platform for electronic signing. Once signed, you can securely store the agreement within Docue's storage vault, Docue Drive, ensuring easy and quick access to all your contracts in one place.

Affordable: Docue's pricing is cost-effective and transparent, we don’t believe in hidden costs buried in the fine print! 

Compliant: Docue's Scottish contract templates have been drafted in compliance with Scottish laws.

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