First Class Commercial Law Notes detailing the following: Legislation, Basic Concepts, the scope of the Sale of Goods Act 1979 (1) and (2) and the scope of the Consumer Rights Act 2015, Delivery and Payment, Meaning and Significance of Property and Risk, Non-Existent Goods at the Date of Contract, ...
Commercial Law
LECTURE 1: INTRODUCTION TO COMMERCIAL LAW.......................................................................................1
LECTURES 2-3: LEGISLATION, BASIC CONCEPTS, THE SCOPE OF THE SALE OF GOODS ACT 1979 (1) AND (2)
AND THE SCOPE OF THE CONSUMER RIGHTS ACT 2015..................................................................................5
LECTURE 3..................................................................................................................................................... 9
LECTURE 4: DELIVERY AND PAYMENT.......................................................................................................... 16
LECTURE 5: MEANING AND SIGNIFICANCE OF PROPERTY AND RISK.............................................................22
LECTURE 6: NON-EXISTENT GOODS AT THE DATE OF CONTRACT..................................................................28
LECTURE 7: THE LEGISLATURE...................................................................................................................... 33
LECTURES 8 AND 9: THE PASSING OF PROPERTY.......................................................................................... 38
LECTURE 10: NEMO DAT QUOD NON HABET AND THE EXCEPTIONS TO THAT PRINCIPLE..............................49
LECTURE 11: NEMO DAT QUOD NON HABET AND THE EXCEPTIONS TO THAT PRINCIPLE (2).........................53
LECTURE 12: NEMO DAT QUOD NON HABET AND ITS EXCEPTIONS (3)..........................................................57
LECTURE 13: ‘NEMO DAT QUOD NON HABET’ AND ITS EXCEPTIONS (4)........................................................60
LECTURE 14: TERMS IMPLIED BY THE SGA 1979/CRA 2015: THE RIGHT TO SELL............................................63
LECTURE 15: TERMS IMPLIED BY THE SGA 1979/CRA 2015: SALE OF GOODS BY DESCRIPTION......................67
LECTURE 16: TERMS IMPLIED BY THE SGA 1979/CRA 2015: SATISFACTORY QUALITY & FITNESS FOR PURPOSE
................................................................................................................................................................... 73
LECTURE 17................................................................................................................................................. 82
LECTURE 18: EXCLUSION AND LIMITATION CLAUSES....................................................................................84
LECTURE 19: REMEDIES OF THE BUYER........................................................................................................ 99
LECTURE 20: REMEDIES OF THE SELLER...................................................................................................... 105
Lecture 1: Introduction to Commercial Law
Essential Reading
Fox et al, Sealy and Hooley’s Commercial Law: Text, Cases and Materials, chapter 1
OR
McKendrick, Goode and McKendrick on Commercial Law, chapter 1 (and chapter 4 only if you are
particularly interested in different types of commercial and non-commercial contracts but beware this
is hard going!)
Optional Reading
D.M. Arden, ‘Time for an English Commercial Code’ (1997) 56(3) CLJ 516.M.
Bridge ‘What is to be done about sale of goods.’ (2003) 119 LQR 173.
Lord Irvine, ‘The Law: An Engine for Trade’ (2001) 64 MLR 333
M. Clarke ‘Doubts from the dark side: the case against codes’ (2001) JBL 605.
M. Bridge, ‘The Future of English private transactional law’ Current Legal Problems (2002) 191
, S. Weatherill & S. Vogenauer, ‘The European Community’s Competence for a Comprehensive
Harmonisation of Contract Law – An Empirical Analysis’ (2005) Euro LR 30(6) 821.
A. Rodger, ‘The codification of commercial law in Victorian Britain’ (1992) 108 LQR 570
R. Goode, ‘The Codification of Commercial Law’ 14 Monash U. L. Rev. 135 (1988)
R. Goode, 'Insularity or Leadership? The Role of the United Kingdom in the Harmonisation of
Commercial Law' (2001) 50 ICLQ 751
G. Gilmore, ‘On the Difficulties of Codifying Commercial Law’ 57 Yale L. J. 1341 (1948)
J.S. Hobhouse, "International Conventions and Commercial Law: The Pursuit of Uniformity", 106 LQR
539 (1990)
Introduction
This first lecture looks at the historical development and the conceptual framework of English commercial law.
We will be analysing lex mercatoria and the general principles of commercial law.
What is commercial law?
1. What is it?
• A set of rules and principles that apply between merchants for contracts and relationships
that are purely commercial in nature. Companies and business on various scales entering a
trade with one another.
• It deals with the rights and duties arising from the supply of goods and services in the way of
trade.
• For example, if a merchant purchases a TV for his household use, it is a consumer
transaction.
2. Does it only encompass sale of goods?
• No, it also encompasses commercial agency, negotiable instruments (bills of exchange, bills of lading,
cheques, promissory notes etc.), secured financing (security interests, fixed and floating charges etc.),
conditional sale, hire-purchase, leasing, guarantees, factoring, carriage of goods by sea, rail or air,
conflict of laws, international sales, arbitration.
3. Why is it important?
Lex Mercatoria and English Commercial Law
Lex mercatoria is the law of the merchants. It resulted from the customary dealings of merchants throughout
Europe. Disputes between merchants from different towns, cities and countries were adjudicated in special
courts in which judge and jury were also merchants.
There was lex mercatoria because the trade was international and conducted during the fairs and markets
which developed compatible laws throughout europe.
Principles of lex mercatoria were different from those of general common law.
– Consider the following: the bills of lading and bills of exchange (an order by one person to
another to pay money) derived from lex mercatoria and was incorporated by Holt and
Mansfield JJ. On the other hand, the rule that consideration for a promise should not be
past consideration did not derive from lex mercatoria - it is a common law principle.
17th century law reforms brought all law under the jurisdiction of common law courts and they did not adopt
lex mercatoria.
17th and 18th centuries: Lord Chief Justices Holt and Mansfield’s efforts in developing a coherent body of
commercial law – liaison between law and commerce by creating special juries of merchants. Customs and
trade usages became part of the law. Mercantile usage accepted as evidence. Customs, trade usages and
mercantile usage became an aspect of the contract. They became to represent the intention of parties.
,In the 19th century customs, trade usages and mercantile usage became an aspect of the contract. They came
to represent the intention of the parties.
The synthesis of English Common Law and Lex Mercatoria was completed at the end of 19 th century and the
Sale of Goods Act 1893 is a product of this synthesis. This is also reflected in the SGA 1979 (see s. 62(2)).
20th century lex mercatoria: UNCITRAL, Unidroit and other international agencies’ conventions and principles.
There have been studies to harmonise private law both regionally and globally (English common law has an
international dimension to it). For example, supranational bodies which monitor commercial law:
• Convention on Contracts for the International Sale of Goods (Vienna Sales Convention)
• Principles of European Contract Law (PECL)
• Unidroit Principles of International Commercial Contracts
Definition and scope of commercial law
Commercial law is a dynamic area. Principles should adopt a transactional rather than a bilateral contractual
approach. There is no commercial code in England as there is in other countries and there is no separate body
of commercial law. There are no hard and fast rules about what constitutes commercial law and instead we
identify it by the subject-matter and themes we see running through the legislation and case law in this area.
Principles of Commercial Law
Commercial law focuses on the commercial sense and awareness and the parties to a commercial contract.
Thus, the rules and principles reflect the needs of the business community (concerned about business needs
and business transactions). Some of these principle (which you need to bear in mind as you go through this
course) are set out below. These principles inform the rules and application of those rules that you will
become familiar with and knowledge of these principles should assist you in determining and understanding
the approach of both the courts and the legislature to commercial law.
More than a bilateral contract – supply chain.
The sanctity of contract
A party to a commercial contract should be entitled to the benefit of his bargain and to the strict performance
of conditions of the contract (you get what you bargained for).
The Consumer Credit Act 1974 and Unfair Contract Terms Act 1977 are pieces of legislation where
intervention is encouraged to ensure protection for the contracting parties but they do not apply in a purely
commercial context (some things you cannot contract/bargain – unfair – limits):
– Cf. Consumer Credit Act 1974, Unfair Contract Terms Act 1977 – contractual terms may not be
strictly enforced if the contract contains unfair terms.
– Privity of contract prevents enforcement of a benefit by a 3 rd party beneficiary but it is inconsistent
with financial leasing for example. So, it is now possible for parties to insert a simple clause into the
contract giving the 3rd party a right of action.
Good faith
Mainly a civil law concept which is not often found in common law jurisdictions. However, it is also to be
found in the Uniform Commercial Code in the United States (‘good faith’, ‘commercial reasonableness’,
‘Unconscionability’). This Code was first published in 1952 and is one of a number of Uniform Acts in the US
that have been established with the goal of harmonising sales law and other commercial transactions across
the US.
We also see the concept of good faith in the exceptions to the nemo dat rule that you will cover in detail later
on in this course (lectures 10-13 inclusive).
, Facilitation of the creation of security interests
Rules on the creation of security interests over the assets of the borrower (debtor) need to be clear. This is
beneficial for both the lenders (creditors) and borrowers (debtors).
Secured credit expands the credit available to the debtor (banks lend to businesses). Debtors may be able to
use this credit to expand the business – this is good for commerce.
The conveyancing principles and ordering of priorities
Three principles prevail between competing claimants: security of property, good faith purchase, and estoppel
(ostensible ownership). You need to be aware that these exist but you do not need to know them in detail at
this stage. These are also concepts that we will come back to in detail later in the course.
Security of property
First in time rule at law (Nemo dat quod non habet) has an equitable partner that is qui prior est tempore
potior est jure.
Phillips v Phillips (1861) 4 De G F & J208, at 215 indicates that the transferor disposes of only that to which he
is justly entitled.
The good faith purchaser
Statutory exceptions to the nemo dat rule (e.g. dispositions by a mercantile agent and by a seller or buyer in
possession).
This is an area that you will cover in detail later on in the course when the topic of nemo dat and the
exceptions to this rule is covered in detail (lecture 10-13 inclusive).
Estoppel
This is a representation made by the owner to the disponee that the non-owner may lawfully make the
disposition in question. The non-owner is acting within his authority as agent. (s. 21 SGA 1979).
Again we will look at this in more detail when dealing with the nemo dat rule and the exceptions to it.
Usages or customs
Commercial courts will often recognise established customs and trade usages among businesses. Continuous
course of dealings between the parties to a transaction may supply implied terms in the relevant contract
between the parties.
Market principle
Market concept provides a basis for the determination of established customs and usages, price (market price
– to determine damages for breach, or in the case of an established market, rules requiring mitigation of
damages).
There are other principles you will see referred to in your reading such as the rule in
Dearle v Hall, the tabulo in naufragio doctrine, variation of priority rules by agreement
and the negotiability principle but you do not need to know about these.
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