Contract with open terms in Scotland: A comparative legal perspective

Abstract

The article focuses on contracts with open terms, that is, contracts in which the parties deliberately leave one or more terms open for future negotiations or unilateral supplementation by one of the parties (or a third party). In our paper, we refer to contracts with open terms in which an open term is subject to negotiations. Such contracts are not recognised by most jurisdictions (including as being too vague), but the Scottish legal system is sometimes argued to be an exception. In attempting to confirm this claim, it is found that the device called “a contract with open terms” is unknown to Scottish law, so a special comparative legal method is proposed to find an analogue on the Scottish “legal map”. This approach reveals that contracts with open terms in Scotland are concealed under several different names (most notably “agreement to agree”). It shows that although there is no uniform and consistent approach to such contracts, there are three tests which the courts use to answer the central question about such contracts, namely whether a contract with open terms is enforceable: the test for the essentiality of an open term, the test for whether an open term can be objectively implemented and the test for whether the parties have an intention to create legal relations. This analysis is accompanied by a comparative commentary describing how similar issues are dealt with in the UNIDROIT Principles and in another (besides Scotland) jurisdiction to which recognition of contracts with open terms is attributed, namely Russia. On the basis of the research carried out, a preferred order of application of the tests is proposed. The study of the topic is also preceded by a reference to the history and general characteristics of the Scottish legal system. In the course of this topic, we show that Scotland cannot be defined precisely enough through its generic characteristics as a mixed jurisdiction. In turning to the study of Scotland as an individual jurisdiction, it is noted that this system over time has begun to exhibit fewer and fewer of the attributes of a continental European family country.