Change is in the air. The Scots law approach to the interpretation of contracts is being re-examined in the light of European proposals and comments are invited. It is anticipated that some wide-ranging updates and amendments to Scots contract law will result.

The reason we enter into any written contract is to document the intention of the parties and to ensure that each side is bound to carry out its obligations whilst having the ability to enforce its rights. The job of a commercial contracts lawyer is to identify the specific, agreed intentions of the parties and to express those intentions in a well written, easy to read contract.

Unfortunately, this ideal is not always achieved. Often, this is a consequence of poor drafting by the lawyers, and sometimes it is a result of a lack of clarity on what the parties’ intentions actually are – resulting in a fudged contract term or a lack of necessary detail.

The resulting confusion over what a contract term actually means can often lead to disputes. When these disputes occur it is up to the courts to interpret the terms of the contract. The rules and methods used by the courts to interpret contracts vary from country to country and even in a country like Scotland, the rules of interpretation have developed in an ad-hoc fashion leaving significant uncertainties hanging over some important areas of the law.

In this age of global business the world is becoming a smaller place and any attempt to facilitate a more uniform approach to cross-border business is a useful endeavour.

An encouraging development coming from Scotland is the Scottish Law Commission’s (SLC) discussion paper on contract interpretation published on 23 February 2011 as part of its new project reviewing contract law.

The discussion paper represents an opportunity to provide the current Scots law of contract interpretation with a “health check” in light of the publication in 2009 of the Draft Common Frame of Reference: Principles, Definitions and Model Rules of European Private Law (the DCFR).

The DCFR is written in plain English and, according to the SLC, sets itself out to be “a modern or contemporary statement of the best rules of contract law for use in the EU, and is based upon extensive comparative research and intensive collaboration by an international team of contract law experts”.

Given the available research already being undertaken under the DCFR, the SLC has decided it would be a good time to compare, refresh and update its own thinking on the interpretation of contracts in Scotland, and its initial proposals have found their way into the discussion paper. The lead Commissioner, Professor Hector MacQueen, has recommended the proposals on the basis that they would “lead to a clear and up-to-date law in line with developments in other parts of the world.”

A previous SLC consideration and report on interpretation in Scots law went unimplemented in 1997 and it is to be hoped that the latest discussion paper, with the added momentum resulting from the concurrently progressing DCFR, will lead to real action being taken to clarify this important area of law.

The proposals can be found in the discussion paper here and comments on the proposals are sought by 20 May 2011.