The Outer House of the Scottish Court of Session held that non compliance with data protection laws amounted to a material breach of contract. In the case of Soccer Savings (Scotland) Limited v Scottish Building Society, [2013] CSOH 51, the court decided that lack of proper registration and unlawful use of a customer database went to the heart of the contract, enabling the innocent party to rescind it.

In Soccer Savings, a Scottish Building Society (SBS) sought to defend its decision to rescind an unsatisfactory contract with a football affinity savings scheme promoter on the basis (among others) that the promoter was in breach by failing to comply with the Data Protection Act 1998 (DPA). The contract required both parties, as data controllers, to use reasonable endeavours to comply with statutory data protection requirements, and to take appropriate technical and organisational measures against unauthorised or unlawful processing of personal data. Meanwhile, the promoter failed to comply with the registration obligations under the DPA, and unlawfully used a customer database belonging to the previous scheme provider.

The court held that while the failure to register was not necessarily a material breach, the unlawful use of the database clearly went to the heart of the agreement. The promoter’s plan to fulfil its part of the contract depended on using the database. The constraints of the DPA and the failure of the promoter to have obtained appropriate consents materially contributed to the promoter’s ability to perform its contractual obligations. The material breach entitled the building society to terminate the contract. The decision was unaffected by the promoter’s claims that its use of the database was approved by its legal advisers. In fact, one football club refused to provide the data after taking legal advice.

The court found that an important component of the promoter’s performance under the contract involved it in a breach of the DPA, and that such illegality materially impaired its performance, thus amounting to a material breach of contract. The fact that the use of personal data was at the heart of the football affinity savings scheme, and that such data was obtained illegally, resulted in a material breach such that SBS was able to rescind the contract.