Indeed, sir.
Thank you very much, ladies and gentlemen. I should indicate at the outset that the faculty perhaps deals with far fewer large international transactions than some of the larger commercial firms, particularly those cross-border English firms that have taken over Scottish ones. Our involvement in the making of contracts tends to be with contracts to settle litigations. As they are formed on the floor of Parliament House, and everyone is present, the problems at which the bill is directed of necessity do not exist.
However, we see litigation with regard to a number of contracts that are made in Scotland. They are perhaps among the larger contracts that are made in Scotland, such as large building contracts, private finance initiative contracts—if I dare mention them—commercial shipping contracts and sales of company contracts. In a number of such contracts, one sometimes sees unhappy consequences.
We rather fear that a danger is lurking in the bill. That is not necessarily a reason for rejecting it, but the committee perhaps ought to contemplate matters that are in danger of being overlooked, in view of the desire that has been expressed, particularly by a number of the larger commercial firms, that what is proposed should go through pretty much as proposed.
The faculty’s main concern is the risk that the proposed form of execution in counterpart, as opposed to a situation in which everyone executes the same document, can lead to opportunities for fraud and, more probably, given how much more common they are, downright error and mistakes. If enough people sign enough different copies, the copies might not be identical and someone might think that some of the contract either is in or has been deleted. A computer glitch might lead someone to think that something is there, while the other side thinks that it is not there. Only later, when the matter comes before the courts—which is where we tend to see these things—will it be discovered that people did not sign up to the same things or others maintain that they did not sign up to the same things.
That is why we have reservations. If one permits execution by the exchange of the back pages of a contract, each signed by a particular party, plus the front page, it is all too easy for the rogue or fraudster to amend the critical stuff in the middle of the sandwich. Once upon a time, one was required to execute or at least initial every page. Our forefathers were not stupid; there was a reason why one had to do that, and we suggest that human nature has not changed so much in the intervening years that that risk has gone away entirely.
There might, of course, be countervailing advantages. We freely concede that we can see some advantages in the bill. It might save a degree of cost, although we confess that we are inclined to be sceptical as to just how much it will save. Most of the contracts that are made under Scots law are smaller-scale contracts, which are made not in Glasgow, Edinburgh or Aberdeen but in small towns around Scotland. In such cases, we suspect that the saving of cost and the convenience that are envisaged as a result of the electronic execution and exchange of counterparts, instead of simply having people come into the office to do all that, will be limited.
We also invite the committee to question the number of contracts governed by Scots law—those to which the bill will apply—that, as has been mentioned in discussions, involve eight or half a dozen parties in as many parts of the world. I venture to suggest that not too many contracts governed by Scots law involve American banks in New York, Japanese banks in Tokyo, underwriters in London and a seller and purchaser in Edinburgh and, say, Berlin.
We suspect that it is unlikely that the bill will bring to Scotland any increase in legal business. It will not make a great difference to people’s decisions about whether to make their contracts subject to the law of Scotland rather than the law of England—or anywhere else, for that matter. As a general rule, people decide on the contract-governing law on the basis of its effects on the substantive matters in the contract instead of the ease or convenience of execution.
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We venture to suggest that if the case is big enough, if it involves a very big transaction of many millions of pounds and if all the people involved are in different places, the savings in cost and convenience that would be achieved by the bill might be so infinitesimal in comparison with the size of the contractual sums at issue that the parties would likely have their great big settlement meeting—or their two settlement meetings—in any event because the relative increase in cost would no longer be worth the consideration. For those reasons—but primarily because of our big concern about error and fraud—we suggest that the bill might usefully be subject to your consideration.
If execution in counterpart and delivery are to proceed as proposed, one possibility is that the bill could provide for only the entire document to be exchanged, which would avoid or at least reduce the risk of people slipping things into the middle of it or the risk of finding that, through error—which, as we have suggested, will much more commonly be the case—parties have not agreed to the same thing or do not realise that they have not agreed to the same thing. One would not wish an increase in the number of cases in which parties come to court asking for their documents to be rectified. In such instances, the first problem is finding out what they have agreed to, never mind what they were supposed to have agreed to.
We suggest that those issues have to be weighed against the undoubted increase in convenience in a number of cases and some degree of cost saving, although there is a question mark over how much cost saving there might be, how many cases the bill will make any material difference to and whether there will be any great advantage through the business that it will bring in. At best, it might partly slow the flow of business away from Scots law cases.
I hope, sir, that that has put in a nutshell what we have said elsewhere at rather greater length.