KNOWLEDGE

Changes to how Scottish contracts are executed

PUBLISHED:
19 May 2015
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It is 20 years since the last major changes in the provisions for executing Scottish legal documents, and I am wondering how many of you remember what the words "adopted as holograph" mean. I suspect not many. In another 20 years' time, will we struggle to remember paper documents in the same way?

This year we will see two changes to the way in which Scottish documents can be executed - to permit counterpart execution (or signing), akin to England and Wales, and to allow electronic signature of legal documents. And we will also see a confirmation about emails being a valid way to conclude a paper based contract.

Electronic execution of documents

Since 2014, regulations have been in place in Scotland to allow electronic execution of documents. Over the course of this year, Scottish solicitors will be issued with a smartcard that incorporates the facility that is needed for the application of an advanced electronic signature in terms of these regulations.

We now therefore have the ability to conclude contracts wholly in an electronic format. So far, I've not seen this done. No doubt practice will gradually change for some types of transaction. We shall have to wait and see.

Executing contracts in counterpart

The other major change being brought in is counterpart execution of documents - to be facilitated by the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015. Its provisions have not yet been brought into force - the latest information is that this may happen in June 2015. Once it is in force, the 2015 Act will permit parties to sign different copies of the same document and for the parts then to form the contract. Such signing can be of paper copies or can be done electronically.

Unlike England and Wales, Scotland does not have a history around this form of execution and as such does have not the required protocols between solicitors actually to make it sensible to use this for routine transactions. I think as such its use might initially be confined to cross border transactions and corporate documents where there is an English element.

There is also not quite the same need for counterparts in Scots Law, as parties can undertake unilateral obligations and there is not the same requirement for consideration to be apparent as in English Property law.

Exchanging or concluding signed paper contracts by email

There is a further welcome provision in the 2015 Act, once it is brought into force, and that is the confirmation that a contract can be treated as concluded by an exchange of emails which have copies of the signed paper contracts attached.

Many contracts are "concluded" in this way at the moment - but there has always been uncertainty as to whether you had to wait for the actual hard copy principal signed document to arrive before you could be sure that the deal had been done.

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