Developments in the Scots Law of Contract, 23 April 2026

[1] It is an honour to have been invited to deliver this lecture in memory of Donald Macfadyen, who was a great judge and whose untimely death deprived Scotland of a good citizen with a very distinguished legal mind. He played a vital role in establishing the reputation of the Commercial Roll in the Court of Session, which continues to provide an important service to commercial life in Scotland.

[2] It is also a great pleasure to have the opportunity to address you here in Edinburgh, a city which I love, and to see many friends within the audience.

[3] My talk this evening is concerned with contract law, which provides an essential framework for our domestic lives, whether in the supermarket, the newsagent, the clothes shop or the furniture store, or in online purchases, and which underpins the buying and selling of our homes and commercial activity both in Scotland and more widely in the United Kingdom.

[4] The points which I will seek to make are as follows:

• First, that it is very important to our economic prosperity that our commercial law is kept up to date and that we do our utmost to make it user friendly to facilitate honest commercial transactions;
• Secondly, that, because we are a relatively small jurisdiction with only a limited number of relevant cases coming for determination in our senior courts, the task of improving and keeping up to date our commercial law requires the co-operation of several players, who are principally the courts ( in Scotland and London), the Scottish Law Commission and the Scottish Parliament;
• Thirdly, there has been a significant number of important appeals relating to contract law since the creation of the UK Supreme Court in 2009. While most of those cases relate to English law, the judgments have repercussions in the Scots law of contract because many will be highly persuasive authority; and
• Finally, it is very important to the efficiency of our commercial sector that our legal rules are accessible to those who are used to transacting in other legal systems, because trans-border and transnational transactions are a very significant part of our commercial life since so many companies no longer have their headquarters in Scotland.

The importance of contract law

[5] The buying and selling of goods and other property, family holidays at home or abroad, and the commercial activity which drives our economy depend upon effective contractual arrangements which reduce the uncertainty inherent in dealing with and relying upon other people to achieve a desired result.

[6] There are at least three benefits from an effective system of contract law:

• Contract law enables arrangements which involve voluntarily undertaken obligations. Each side to a contract has to decide what he or she is prepared to undertake to do and on what terms, in the knowledge that one cannot unilaterally walk away from such an undertaking once made.
• Secondly, and crucially, these obligations are enforceable in a court of law. In my time in the UK Supreme Court, I have come to recognise the international significance and reach of English law, which governs so many commercial contracts between entities which have no connection with these shores. The attraction of English law is partly the result of history, as many standard trade contracts were created at a time when the United Kingdom was the leading economy in the world; it is partly the result of the continuing commercial power of London as the second-largest global financial centre; and it is also the result of the certainty offered by English contract law and the reputation of its legal system for fair and efficient adjudication of commercial disputes. I have been struck by the fact that many countries that wish to encourage inward investment have established common-law courts as a means of reassuring investors that their contracts will be enforced.
• Thirdly, contract law provides rules by which the contractual relations of parties can be regulated; freedom of contract has never been an absolute. In the 12 years or so in which I served in the Supreme Court there have been important decisions on the legal regulation of contracts, including judgments on penalty clauses, economic duress, illegality, severability and force majeure. When Alan Rodger was appointed to the Supreme Court, he expressed some concern to his friends that he would suffer an unrelenting diet of public law cases at the expense of private law, which he loved. He discovered that that was not the case. I also have had the pleasure of sitting in many private law cases, including cases on contract law.

The need to clarify and update the law

[7] Lord Goff of Chieveley, in a famous extrajudicial writing, stated that the law should facilitate honest commercial transactions and that judges were not there to “put a spanner in the works or even grit in the oil”.[1] Clarity is a central value in contract law as, in the words of the great Scotsman Lord Mansfield, who, more than any other, developed English commercial law in the middle of the 18th century, “In all mercantile transactions the great object should be certainty.”[2] Legal certainty makes business more efficient by reducing the cost of transacting.

[8] As well as clarifying the law, it is the role of judges in common-law systems to update the law to take account of social, economic and technological change. Judges cannot act alone, because the needed changes frequently go beyond what is legitimately within their recognised role, either because they raise questions of social or economic policy which need to be addressed by those with a democratic mandate, or because wholesale legal reform exceeds the role of judges in developing the law interstitially. In a small jurisdiction such as ours there is the added difficulty of limited opportunities to develop the law because of the paucity of case law. I am concerned that there is now a relative dearth of appeals in the Inner House on areas of private law. Without such appellate work it is more difficult for a jurisdiction to clarify and develop its private law, and particularly its commercial law.

[9] In Scotland in recent years, the legislature has stepped in to carry out piecemeal reforms to the law of contract, and I welcome those initiatives. Laying my cards on the table, I am not, as some are, a supporter of statutory codification of our contract law. Codified legal systems have often found it more difficult to adapt the law to economic and technological changes than is the case with judge-made law. This is, I think, because judges are duty bound to attach much more weight to the precise wording of a formulation of the law in a parliamentary statute or code than to the words used in a judgment. In the latter case, judges usually look at the reasoning of the authoritative court in the context of the facts of the case in which the judicial decision was made in order to derive the legal principle which is being applied rather than parse the precise judicial formulation. Judicial formulae do not have the standing of statute. It is one of the apparent puzzles of the common law that it is promoted both for its embracing of legal certainty in commercial transactions and for its flexibility in adapting to changed circumstances. While at first blush this seems an unlikely combination, experience has taught me that it is not an unreasonable assertion that judge-made common law achieves both.

[10] Therefore, while I welcome statutory intervention where the inadequacies of our law are identified and there is no prospect of a judicial remedy soon, I would be reluctant to support a codification of our contract law.

Statutory reform of contract law

[11] In recent years, there have been four principal legislative interventions in contract law:

• First, now some time ago, the Contract (Scotland) Act 1997 allowed the court to admit extrinsic evidence to rebut a presumption that a document comprised all the express terms of a contract. Such evidence is excluded if the document contains a term to the effect that the contract covers all its terms. The Act (in section 2) also established a general rule that a deed purportedly in implement of a contract did not supersede an unimplemented term of the contract—a doctrine that I remember well from my early days at the Bar. Section 3 of the Act removed the rule that a buyer in a contract of sale of property had to reject the property and rescind before he or she could claim damages for breach of contract from the seller.
• More recently, three statutes have been passed by the Scottish Parliament in response to recommendations by the Scottish Law Commission in its reports.
• The first, the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015, addresses changes in commercial practice and technological developments by allowing for the execution of documents in counterpart (that is, where each party signs a separate document and provision is made for the delivery of such signed documents) and, secondly, by providing for the delivery of traditional documents by electronic means.
• Then, in 2017, the Contracts (Third Party Rights) (Scotland) Act replaced the common-law rule of ius quaesitum tertio, which you may recall was the not entirely straightforward rule by which a person who was not a party to a contract acquired a right to enforce or invoke the contract’s terms. Now there are statutory provisions enabling the creation of a third-party right.
• The recently enacted Contract (Formation and Remedies) (Scotland) Act 2026 is the residual product of a substantial body of work undertaken by the Scottish Law Commission in the 1990s and since 2010. In its “Report on Review of Contract Law” in 2018[3] the Commission recorded that the aim of the exercise was to conduct a health check for the Scots law of contract in the light of international comparators, and in particular the Draft Common Frame of Reference (“DCFR”), and recent developments in other jurisdictions, including, not least, England and Wales.

I welcome the recognition of the need to avoid making the Scots law of contract unnecessarily divergent from English law, and in particular to avoid rules that impose costly extra steps in commercial transactions which do not exist in the law of our neighbour. In so saying I am not calling for full alignment with the English law of contract. Rather, I advocate an awareness of the commercial benefits to Scotland if our law is readily accessible to the many enterprises, whether British or overseas, which conduct business across the jurisdictional borders of the United Kingdom.

The Scottish Law Commission rightly sought to make the rules of contract law as clear and certain as they can be made in a form that is comparatively accessible to both lawyers and lay people.

The 2026 Act focuses on two areas of contract law: the formation of contract, and remedies for breach of contract. Part 1 of the Act deals with formation of contract and sets out clear rules on how a contract is formed, including general rules as to the parties’ intention that the agreement should have legal effect and the sufficiency of its content, and rules relating to offer and acceptance of contract. Part 2 of the Act sets out default rules where both parties are in breach of contract, for the return of benefits received on rescission for breach of contract, and for contractual retention (the temporary withholding or suspension of performance of an obligation) on the other party’s breach or anticipatory breach of a counterpart obligation.

Finally, section 22 of the 2026 Act amends the Law Reform (Contributory Negligence) Act 1945 by including within the concept of “fault” a person’s breach of contract. It will be interesting to see how the courts will interpret this extension of the 1945 Act. Chapter 10 of the Scottish Law Commission’s 2018 Report[4] reveals an intention that the 1945 Act should apply to any breach of contract, whether or not the contractual breach mirrors a delictual obligation or breach of statutory duty. If that is the correct interpretation, Scots law has adopted a default rule in contract which differs from English law as analogously set out by the Judicial Committee of the Privy Council in 2023 in Primeo Fund v Bank of Bermuda (Cayman) Ltd, [5] but is similar in its effect to the formulation in the DCFR.

Judicial development of contract law

[12] The common law depends for its accessibility to non-lawyers, such as business people, in part on the clarity of our case law. Judges should aim to write judgments which an intelligent non-expert lawyer can explain with ease to an intelligent lay client. I have sought to do so, sometimes successfully and sometimes less so.

[13] The accessibility of the law depends also on the writings of academic jurists who produce textbooks and summaries of the law. When I started out in the law, the only substantial textbook on contract in Scotland was Professor Gloag’s work which was published almost fifty years before, in 1929. Now there are several accessible textbooks available which present the law in varying degrees of detail. I have also had the privilege of being involved in a minor way in assisting Professor Martin Hogg to prepare his forthcoming “Restatement of Scots Contract Law”, which I understand is likely to be published later this year.[6]

[14] In this part of my talk I will discuss developments in case law on contract.

Interpretation

[15] The Supreme Court has relatively recently sought to give general guidance on the interpretation of contract in three cases: Rainy Sky v Kookmin Bank,[7] Arnold v Britton[8] and Wood v Capita Insurance Services Ltd.[9]

[16] There has, in my view, been a high degree of continuity in the approach to the interpretation of contracts both in Scotland and in England since the seminal House of Lords cases of Prenn v Simmonds[10] and Reardon Smith Line[11] in the 1970s: the court is concerned to identify the intention of the parties objectively, by reference to what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language in the contract to mean.[12]

[17] The idea that one looks exclusively at the words in the relevant clause and has regard only to their natural meaning has not been part of the Scots law of contract or, for that matter, the equivalent English law.[13] The court assesses the meaning of the relevant words by looking at the natural and ordinary meaning of the clause and any other relevant provisions of the contract; it has regard to the overall purpose of the clause and the facts and circumstances known or assumed by the parties at the time the contract was executed; and it has regard to commercial common sense.

[18] Back in 1998, Lord Hoffmann, in Investors Compensation Scheme Ltd v West Bromwich Building Society,[14] famously emphasised the importance of context in the understanding of the meaning of words. He emphasised the importance of the contract or other document as a whole, and the relevant background known to the parties, as tools in interpretation which might cause the court to conclude that something must have gone wrong with the language of the document. But he also warned that we do not readily accept that people have made linguistic mistakes, particularly in formal documents.[15]

[19] Many lawyers forgot that warning and took Lord Hoffmann’s words as a revolution in contractual interpretation, giving a licence to put undue emphasis on the court’s own assessment of business common sense and to give less weight to the words which the parties had chosen as the expression of their agreement, even where they could not point to a linguistic mistake. In a lecture at the inauguration of the Edinburgh Centre for Commercial Law in 2008, called “A new thing under the sun?”, Lord Bingham argued against the view that Lord Hoffmann had conducted a revolution[16] and, in my view, he was correct to do so.

[20] The long-established approach to contractual interpretation was discussed by Lord Clarke of Stone-cum-Ebony, who, sadly, passed away very recently, in Rainy Sky SA v Kookmin Bank[17] in 2011, in a judgment in which he reviewed recent authorities.[18]

[21] In 2015, in the case of Arnold v Britton,[19] the Supreme Court had to tackle an unfortunate circumstance concerning 99-year leases of chalets, most of which had been entered into between the early 1970s and 1991. The earlier leases were granted at a time of very high inflation and the later leases in a period when inflation was considerably greater than it has been in recent years. The leases contained clauses requiring the lessees to pay an initial service charge of £90 for the provision of services to the park where the chalets were located and, unfortunately, stipulated for that charge to be increased by ten per cent every three years, which is roughly the equivalent of a compound rate of three per cent per annum. Some leases were even more onerous, providing for an annual increase of 10 per cent per year after the first three years. Having regard to the long period from the 1990s in which inflationary pressures on the economy were mild, and incomes did not rise at the rates seen in the 1970s and afterwards, the outcome was that the tenants at first blush would become liable over time to pay vast and uneconomic service charges out of all proportion to the cost which the landlord incurred in providing those services.

[22] This outcome was very unfortunate and was not a common-sense outcome when viewed at the date when the courts considered the leases, many years after their execution. But the difficulties for the majority in solving the problem were, first, that it was not clear that there was any mistake in the drafting which provided expressly for triennial or annual percentage increases, and, secondly, that it was not clear how the leases could be construed or a term implied to avert the mischievous result without contradicting the express terms. Lord Carnwath was the sole dissenter; he proposed that the court should read into the clauses the words “limited to” or “up to” before the quantified percentage increase, thus replacing a fixed percentage with a flexible one which could reflect the actual cost of the services to the landlord but subject to a cap.

[23] Between paragraphs 15 and 23 of the leading judgment, Lord Neuberger set out the majority’s understanding of the task of interpretation and emphasised seven factors. Those factors included the need not to use commercial common sense to undervalue the importance of the language of the provision to be construed, particularly where the natural meaning of the language was clear. While it has been suggested in an Inner House judgment that the seven factors which Lord Neuberger listed were specific to the facts of that appeal rather than a general statement of the law,[20] I do not think that that was Lord Neuberger’s intention. In my view, he, with the support of the majority of the court, was making a general statement of the law, pushing back against an overly expansive interpretation of what Lord Hoffmann had been saying in Investors Compensation Scheme.

[24] At that time, the Supreme Court was faced with numerous applications to appeal in which counsel sought to reformulate the general rules on the interpretation of documents. When the court heard the appeal in Wood v Capita Insurance Services Ltd,[21] Lord Neuberger invited me to write a judgment with the aim of discouraging repeated applications to appeal in which counsel attempted to fine-tune the general rules of contractual interpretation. Whether that judgment has succeeded in doing so is for others to decide.

[25] In Wood, the court discussed the general principles of contractual interpretation in four paragraphs. I will not repeat what is said there but, reflecting on the text several years later, I seek to draw attention to several points.

• First, the task is to ascertain the objective meaning of the language which the parties have chosen to use. I would add the obvious point that contracts are the means by which people choose to regulate their legal relationship to give a degree of certainty to that relationship rather than rely on general rules, if any, contained in statute or in the common law. The language they use matters, analysed, as it must be, in the context of the contract as a whole.
• Secondly, the weight given to elements of the wider context should vary depending on the nature, formality and quality of the drafting of the contract. The words of the relevant clause or clauses, the contract as a whole, and its purpose, which is apparent from its terms, will always bear some weight.
• Thirdly, the weight to be attached to external factors of which the parties were or are assumed to be aware (which are often called the “factual matrix”) will vary depending upon the circumstances, such as the quality and sophistication of the drafting, whether the parties were assisted by skilled professionals in that exercise, and the extent to which the terms of the contract are to be understood against the backdrop of trade customs and practice.
• Fourthly, the court must be aware of the possibility that the parties have not produced a coherent text because of such things as deadlines and have been forced to agree a compromise text in order to secure the agreement. The court must also be aware of the possibility that the parties have made a mistake, but, as Lord Hoffmann said, one should not readily accept that there are linguistic mistakes in sophisticated contractual documents.
• Fifthly, interpretation is “an iterative process” by which the court considers both the language of the contract, the factual background and the implications of rival constructions in reaching a view on the objective meaning of the parties’ language.[22]

[26] I do not seek to qualify anything which I wrote in those paragraphs in my attempt to summarise the law. But I have read again the opening words of paragraph 13, which state: “textualism and contextualism are not competing paradigms in a battle for exclusive occupation of the field of contractual interpretation”. Those words now remind me of the sage advice to a judge to go through the draft judgment carefully and delete all passages of which he or she is most proud. Too late. The point should have been made more simply: there are a range of factors to be considered in contractual interpretation and the weight to be attached to those factors will vary with the circumstances of the case.

[27] More recently, in the Lehane Memorial Lecture in Sydney, Australia, Lord Hamblen described the summary in Wood as “a compromise approach”.[23] It is in the sense that it is a middle way—a via media—between excessive and narrowly focused literalism on the one hand and an intemperate enthusiasm to reach what a judge considers to be a common-sense result. It is not otherwise a compromise but an attempt at a workable summary of where the law now stands.

[28] Back in 2011, the Scottish Law Commission consulted on reforming the law on the interpretation of contract.[24] In its Report of 2018, to which I have referred, the Commission reported on the consultation, recorded the developing case law since 2011, and, in the light of those developments and the absence of consensus among consultees, decided against recommending statutory reform.[25] I welcome that decision. Any statutory statement would be likely, over time, to give rise to unnecessary differences in approach to the interpretation of contracts and other documents between Scots law and English law. I cannot imagine that business people and commercial law firms would relish an outcome where the same words were given different meaning depending on which jurisdiction they were in within these islands.

[29] Construing a contract is not always a simple task. It sometimes occurs that there is an obvious omission of words in a contract, for example where the parties have made a mistake when they have cut and pasted from a standard clause. That occurred in the case of The Starsin.[26] There are cases where a clause contains an obvious drafting mistake which the court corrects by construction, as in Macdonald Estates plc v Regenesis.[27] Those are straightforward. There are more difficult cases like Multi-Link Leisure Developments Ltd v North Lanarkshire Council,[28] in which the court, in the judgments of Lord Hope and Lord Rodger, had to decide to prioritise some words in a badly drafted clause over other words in the same clause. Another example of a difficult case was Lloyds TSB Foundation for Scotland,[29] in which a contextual and strongly purposive approach gave expression to the parties’ intention when an unforeseen change in UK accounting practice radically altered a party’s liability in a way which the parties could not have intended. Similarly, in Aberdeen City Council v Stewart Milne Group Ltd,[30] the Supreme Court took a robust approach to construction, at the expense of the precise words, to give effect to the parties’ intention which it inferred, I think absolutely correctly, from the surrounding provisions. Whether, after Arnold v Britton, that result would now more readily be achieved by the implication of terms is a matter for debate.

[30] I detect in recent Court of Session decisions a continuing debate about the correct approach to construction of contracts, and I am aware of academic criticism of some decisions.[31] In some cases, such as Grove Investments,[32] Hoe International[33] and Ashtead Plant Hire,[34] the Inner House has given considerable weight to commercial common sense in reaching what it regarded as a fair result. You can see that approach in the more recent decision of in the Commercial Court in Glenfiddich Wind Ltd.[35] In others, the Inner House has focused strongly on the relevant words in the contract. See, for example, @SIPP Pension Trustees v Insight Travel Services Ltd,[36] Paterson v Angelline (Scotland) Ltd[37] and Lagan Construction Group.[38]

[31] It is probably not appropriate that I should comment in a public lecture on individual judgments which have not come before the Supreme Court. I will say only this. The iterative process of which judges have spoken requires the court to weigh up different factors against each other. The tools of interpretation are horses for courses, and different problems may call for different approaches. But I would, for the same reason as I have given in opposing a statutory statement on interpretation, counsel against any judicial attempt to create principles of interpretation of contracts governed by Scots law which depart from the general guidance given in Rainy Sky, Arnold and Wood.

Implication of terms

[32] Because I have agreed to take questions, time does not permit me to address the implication of terms in any detail. Suffice it to say that the UK Supreme Court, in Marks and Spencer plc v BNP Paribas[39] in 2015, pushed back upon an interpretation which some had given to a Privy Council judgment by Lord Hoffmann in Attorney General of Belize.[40] The court perceived that Lord Hoffmann’s words carried the risk that they would be interpreted as suggesting, first, that the implication of a term was simply part of the process of construction of a document rather than a separate step and, secondly, that the test for implication was simply whether the term was reasonable. The court explained that the interpretation of the words which the parties had used in a contract preceded a consideration of whether any term needed to be implied, and it reasserted the business efficacy test. Lord Neuberger, who wrote the leading judgment, explained that a term can only be implied “if, without the term, the contract would lack commercial or practical coherence”.

The regulation of contracts by the courts

[33] In the final part of this talk, which I will have to canter through, I will identify appeals in which the Supreme Court or the Privy Council has discussed rules that regulate contracts in cases which may be persuasive authority in Scots law.

[34] The approach to penalty clauses, in my view, illustrates the collaborative nature of law reform and the judicial process. The long-established “genuine pre-estimate of loss” test in Dunlop Pneumatic Tyre Co,[41] which itself was based on the Scots case of Clydebank Engineering, which set out helpful guidance when addressing liquidated damages clauses, had come to be viewed in many English cases as if it were a statutory formula and had been applied in contexts for which it was not designed. In Cavendish Square Holding BV v El Makdessi,[42] the court restated the law on penalties in a way which covers a much wider range of clauses than clauses for liquidated damages. Now the approach is that a court applying the rule asks whether the contractually stipulated remedy for a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract. The Scottish Law Commission had been critical of the prior law on penalty clauses but, after the Cavendish Square judgment was handed down, decided against recommending statutory intervention and was content to see how courts developed the law thereafter.[43]

[35] Another example of the close links between the work of the courts and that of a law commission—in this case, the Law Commission in London—can be seen in the illegality defence, about which I learned many years ago at university under the Roman maxim ex turpi causa non oritur action or some variance of that. This defence is not, of course, confined to the law of contract. The case law which we have had to deal with in recent years has addressed claims arising out of delict, the commission of a crime, or even the killing of a person without committing a crime, as well as claims in contract.

[36] We have all become wearily aware of price inflation and perhaps also academic grade inflation in our lifetime. The law of illegality temporarily created the phenomenon of panel-size inflation in the Supreme Court as the correct approach was considered initially by panels of five, then by a panel of seven and finally by a panel of nine Justices.

[37] In Hounga v Allen,[44] a panel of five Justices addressed a claim for the statutory tort of unlawful discrimination by a young illegal immigrant whom Mrs Allen employed, unpaid, to look after her children. The Allen family physically abused and then dismissed and evicted the young woman from their home. Lord Wilson, giving the lead judgment, held that the defence of illegality rested on the foundation of public policy and it was therefore necessary to ask, first, what aspect of public policy founds the defence and, secondly, whether there is another aspect of public policy to which the defence would run counter. The concern to uphold the integrity of the legal system by not enforcing an illegal contract was wholly outweighed in that case by the fact that Miss Hounga was the victim of trafficking at the hands of the Allen family.

[38] Shortly thereafter—within a couple of months—in Les Laboratoires Servier v Apotex Inc,[45] a different panel of five Justices addressed the question of what amounted to turpitude which could support the defence of illegality in the context of a dispute about patents. Lord Sumption, in the lead judgment, reasserted the reliance test set out by the House of Lords back in the 1990s in Tinsley v Milligan.[46] Lord Toulson concurred in the result but indicated a sympathy for the approach taken in Hounga and suggested that it might be necessary to reassess Tinsley v Milligan in the light of the criticisms of that decision by, among others, the Law Commission in London.

[39] The question arose again in a seven-Justice appeal in Jetivia SA v Bilta (UK) Ltd,[47] which was about a VAT carousel fraud. In that case, Lord Sumption adhered to the reliance test while Lord Toulson and I, in a joint judgment, advocated a balancing of public policy considerations. The other Justices did not think that the case was an appropriate vehicle for deciding the proper approach to the defence of illegality as the matter could be decided based on attribution, and the question was held over for another day.

[40] That day came quite soon thereafter, because Lord Neuberger convened a nine-Justice panel in Patel v Mirza[48] to resolve the issue authoritatively. That case concerned the investment of funds by Mr Patel in Mr Mirza, who claimed that he was going to get insider information concerning Royal Bank of Scotland shares which would enable them to make a handsome profit. In the event, the insider information was not forthcoming and Mr Patel wanted his money back. Lord Toulson’s approach prevailed by a majority of 5:3, with the President, Lord Neuberger, also supporting Lord Toulson’s approach as reliable guidance but not tipping himself fully into the majority camp. Lord Toulson explained the doctrine which now applies thus:

“The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality … ).”

[41] He said that the assessment of the public interest involved three considerations:

• the underlying purpose of the prohibition and whether that purpose will be enhanced by denial of the claim,
• any other relevant public policy on which the denial of the claim may have an impact, and
• whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts.[49]

Lord Toulson’s trio of considerations, which draws on the work of the Law Commission of England and Wales, is now the established template.

Conclusion

[42] There are several other cases, concerning matters such as economic duress,[50] force majeure,[51] severability[52] and remoteness of damage,[53] which I could have discussed if time had permitted, but it does not.

[43] I hope, however, that I have illustrated the themes with which I began this lecture. In particular, I emphasise the importance to the development of Scots commercial law of the continued co-operation of the courts, in London as well as Edinburgh, the Scottish Law Commission and its London counterpart, and the Scottish Parliament. The work of academic jurists also plays an important role in making our law both coherent and accessible by placing case law and statutory provisions in a wider context of legal principle. As we are a small jurisdiction, we must continue that co-operation.

[44] In my view, the maintenance of an accessible and up-to-date commercial law is not only a legal desideratum but an important underpinning of our future economic prosperity.

 

 

[1] Lord Goff of Chieveley, “Commercial Contracts and the Commercial Court” [1984] LMCLQ 382, 391.

[2] Vallejo v Wheeler [1774] 1 Cowp 143, 153.

[3] Scot Law Com No 252.

[4] Paras 10.28–10.54.

[5] [2023] UKPC 40, [2024] AC 727.

[6] I understand that the Restatement, which is modelled on Professor (now Lord) Burrows’ “Restatement of the English Law of Contract” 2nd edn (2020), is scheduled to be published later this year.

[7] [2011] UKSC 50, [2011] 1 WLR 2900.

[8] [2015] UKSC36, [2015] AC 1619.

[9] [2017] UKSC 24, [2017] AC 1173.

[10] [1971] 1 WLR 1381, 1384–1386.

[11] [1976] 1 WLR 989, 995-997.

[12] See also Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14.

[13] See, eg, Inglis v Buttery & Co 1878 5 R (HL) 87, 103 per Lord Blackburn; Bank of Scotland v Stewart (1891) 18 R 957, 960 per Lord President Inglis.

[14] [1998] 1 WLR 896.

[15] Ibid, para 5.

[16] “A new thing under the sun? The interpretation of contracts and the ICS decision” (2008) 12(3) Edin LR 374–390.

[17] [2011] UKSC 50, [2011] 1 WLR 2900.

[18] Ibid, paras 21–30.

[19] [2015] UKSC36, [2015] AC 1619.

[20] See, eg, Lord Drummond Young giving the judgment of the Inner House in Hoe International Ltd v Andersen [2017] CSIH 9, 2017 SC 313, at para 20.

[21] [2017] UKSC 24, [2017] AC 117.

[22] Sigma Finance Corporation [2010] 1 All ER 571, para 12, per Lord Mance.

[23] Lord Hamblen’s Lehane Lecture 2024: “Contractual Interpretation–An Anglo-Australian Journey”.

[24] Scottish Law Commission Discussion Paper on Interpretation of Contract (DP No 147).

[25] 2018 Report (n 3 above), chs 7 and 8.

[26] [2003] UKHL 12, [2004] 1 AC 715.

[27] Macdonald Estates plc v Regenesis (2005) Dunfermline Ltd 2007 SLT 791.

[28] [2010] UKSC 47, 2011 SC (UKSC) 53.

[29] Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] UKSC 3, 2013 SC (UKSC) 169.

[30] [2011] UKSC 56, 2012 SC (UKSC) 240.

[31] See, eg, Laura McGregor in (2015) 19(3) Edin LR 378, and Lorna Richardson in (2017) 21(3) Edin LR 423–429 and (2021) 25(1) Edin LR 89–94.

[32] Grove Investments Ltd v Cape Building Products Ltd [2014] CSIH 43, 2014 Hous LR 35.

[33] Hoe International Ltd v Anderson [2017] CSIH 9, 2017 SC 313.

[34] Ashtead Plant Hire Ltd v Granton Central Developments Ltd [2020] CSIH 2, 2020 SC 244.

[35] Glenfiddich Wind Ltd v Dorenell Windfarm Ltd [2025] CSOH 62.

[36] [2015] CSIH 91, 2016 SC 243.

[37] [2022] CSIH 33, 2022 SC 240.

[38] 2023 CSIH 28, 2024 SC 12. See also Trustees of the Roxburghe Second Discretionary Trust v Batchelor [2023] CSIH 41, 2023 SLT 1378; and FES Ltd v HFD Construction Group Ltd [2024] CSIH 37, 2015 SLT 134.

[39] [2015] UKSC 62, [2016] AC 742.

[40] Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988.

[41] [1915] AC 79.

[42] [2015] UKSC 67, [2016] AC 1172.

[43] 2018 Report (n 3 above), ch 19.

[44] [2014] UKSC 47, [2014] 1 WLR 2889.

[45] [2014] UKSC 55, [2015] AC 430.

[46] [1994] 1 AC 240.

[47] [2015] UKSC 23, [2016] AC 1, sub nom Bilta (UK) Ltd v Nazir.

[48] [2016] UKSC 42, [2017] AC 467.

[49] Ibid, para 120.

[50] Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40, [2023] AC 101; and Law Debenture Trust Corporation plc v Ukraine [2023] UKSC 11, [2024] AC 411.

[51] RTI Ltd v MUR Shipping BV [2024] UKSC 18, [2025] AC 675.

[52] Egon Zehnder Ltd v Tillman [2019] UKSC 32, [2020] AC 154.

[53] Attorney General of the Virgin Islands v Global Water Associates [2020] UKPC 40, [2021] AC 23.