Banking & Finance

To get our blog off to a start I thought it would be useful to address the 5 most frequently asked questions by our clients. Over the course of the following weeks, we then will look at each of these in more detail.

1.Q – Why do all parties need to sign the same document?

A –The current practice which has developed under Scots law (stemming from the Requirements of Writing (Scotland) Act 1995) is for all parties to sign the same physical copy of a document. This is soon to change as we are currently awaiting the Scottish government passing the Legal Writings (Counterparts and Delivery) (Scotland) Bill to allow execution in counterpart, as is the case in England.

2.Q – Why do we see documents referring to the Contracts (Rights of Third Parties) Act 1999?

A – The Contracts (Rights of Third Parties) Act 1999 is an English Act and has no effect in Scotland. References sometimes appear in documents which have been drafted using an English pro forma template or in Scottish documents drafted, or revised, by English lawyers. In Scotland, we have the common law principle of jus quaesitum tertio, which allows a person, legal or natural, who is not a written party to a contract to enforce rights under the contract. There are, however, certain criteria which a person must meet in order to enforce these rights.

3.Q – Why do we need to put the date and place of signature at the signing block? Why not just date the document at the front?

A – Unlike in England & Wales, documents governed by Scots law cannot be dated by common agreement. Instead, the signature is to be dated on the date when the signatory physically signs, hence why we cannot date documents on the front page. Adding the place of signing isn’t strictly required, however, it is standard practice to do so because this allows a document to be self-proving or “probative”. Documents which are not probative can be open to challenge.

4.Q – What actually happens once the security documents are signed?

A –The next stage is for the security to be registered against the granting company’s mortgage index at Companies House. Depending on the type of security, there are different formalities to follow, additional perfection requirements and additional registers which the security may need to be registered on.

5.Q – Can an English law debenture cover Scottish assets?

A – Yes, relevant drafting can be included within an English law debenture to ensure that the floating charge contained within the debenture is extended to cover assets held by the granter located in Scotland.

Banking and Finance