Commercial Law
Roy Goode, Herbert Kronke and Ewan McKendrick, Transnational Commercial Law (2nd edn, OUP 2015).
This summary contains the information from the lecture slides, lecture notes, combined with the weekly mandatory
reading. In the footnotes are the page numbers of the book, as well as reference to other sources used by the book, so
that you will no longer have to look up the information in the book during the exam.
The dark blue text means that these are lecture notes or notes from the lecture slides.
Course Content
Commercial law occupies a cornerstone in globalization. A vast part of the economy depends on international
transactions, taking place in a globalized market. An understanding of the rules governing international commercial
transactions and the markets is a fundamental tool for a global lawyer, as well as policy maker, judge or businessperson.
This course offers an in-depth introduction to the regulation of international commercial transactions and the regulation
of the global commercial and financial markets.
Commercial law raises the kind of conceptual issues that students of global law need to master in order to understand
current developments in global trade. From a theoretical point of view, the course examines key commercial law topics
from a transnational perspective, which helps students to both understand better their own legal systems, and think “out
of the box.” From a practical point of view, students learn to understand the legal underpinnings of commercial
transactions and the markets.
The topics covered in this course can be primarily divided into two camps. One the one hand, it focuses on international
sales of goods and services, examining in particular the Convention on the International Sales of Goods, carriage of
goods by sea, document sales, agency and distributorship agreements, as well as international insolvency law
principles. One the other hand, business transactions take place in international, globalized financial markets. Trade
needs finance and international business transactions need advanced financing techniques. Therefore, this part of the
course will cover the legal rules in which the financial side of the business transactions are embedded, such as bank
payment undertakings, receivables financing and factoring, securitization, and also international securities regulations.
A theme that connects all of the covered topics, is the harmonization of commercial law at an international level. As
such, we will teach the students what drives commercial law, the reasons for and challenges to harmonization, the
institutions involved, the various ways in which transnational commercial law is created, and finally the major problems
and policy issues that have to be confronted. We will open the course with these issues, and summarize them after all
the substantive topics are covered.
1
,Commercial law week 1. General principles, themes, and
key issues of transnational commercial law.
The nature of commercial law
Commercial law is the body of law that governs commercial transactions.
Commercial law can be seen as the totality of the law’s response to mercantile disputes, encompassing ‘all those
principles, rules and statutory provisions, of whatever kind and from whatever source, which bear on the private law
rights and obligations of parties to commercial transactions’. 1
In this context, commercial law is concerned with transactions between professionals.
This definition of commercial law excludes
• Institutional law, such as the law of corporations and partnerships and the law governing the establishment and
capital adequacy of financial enterprises.
• Consumer law (since one party is not a professional)
• Public law.
Commercial transactions are Arrangements and agreements between professionals for the provision and acquisition
of goods, services, and facilities in the way of trade.
“Commercial law can be defined as the special rules which apply to contracts for the sale of goods, and such contracts
that are ancillary to contracts for the carriage and insurance of goods, and contracts for which the main purpose to
finance the carrying out of contracts of sale” 2
1 Roy Goode, Herbert Kronke and Ewan McKendrick, Transnational Commercial Law (2nd edn, OUP 2015) 4.
2 H.C. Gutteridge, slides lecture 1.
2
,Characteristics of Commercial transactions
Focus on Excluded from a commercial code
Transactions Law governing institutional structures
Dealing between merchants Consumer law
Centered upon contracts and use of market Legal obligations from non-contractual source
Large mass of transactions Occasional transactions with no need of standard
treatment
This distinction is important because, most jurisdictions do not have a commercial law code (e.g. Supernational
jurisdictions such as in the EU).
The modern commercial law evolved from the Medieval law, more formally known as “Lex Mercatoria”.
Transnational commercial law
Transnational commercial law is that set of private law principles and rules, from whatever source, which governs
international commercial transactions and is common to legal systems generally or to a significant number of legal
systems.
Commercial law & the Law of the Merchants
Lex Mercatoria or Law of the Merchants, existed (as early as the 10 - 13th century) to address commercial matters
directly related to merchants.
• It was derived from European origin and resonated in broader trade contexts.
• It was enforced by Merchant courts which were established by merchant communities. These courts adjudicated
disputes based on the prevalent customs and principles of the Law of Merchants.
• It was predominantly customary, with rules often unwritten, making it adaptable.
• The law was neutral, was not subject to the laws of a specific nation, and disputes were often resolved through
arbitration, ensuring fairness and impartiality
Characteristics of the Medieval Law Merchants / the Medieval Lex Mercatoria
The Medieval Lex Mercatoria was administered by merchant courts and recognized and applied by central courts.
The Medieval Lex Mercatoria fulfilled the function of responding to commercial needs and practices. 3
Qualities of the Medieval law Merchant / the Medieval Lex Mercatoria4
1) Objectivity
• ‘… a movement away from mere custom in the sense of usage (patterns of behaviour) to a more carefully
defined customary law (norms of behaviour).’
• Thus: from usage to defined customary law.
2) Universality
• That is, the law merchant was cosmopolitan and transnational in character.
• Remember: Transnational in nature.
3) Reciprocity of rights
• Procedural and substantive fairness in entry into an exchange
4) Participatory adjudication
• The judges were elected from among the merchants themselves
• Thus: merchants select judges.
5) Integration
• A coherent and integrated body of rules governing the rights of parties to transactions, particularly after
reduction to writing.
• Thus: coherence and integrated body of rules.
6) Growth
• The organic growth of commercial instruments and institutions.
3 P. 15.
4 P. 14-15.
3
, Shortcomings of the Medieval Law Merchant / the Medieval Lex Mercatoria5
• The medieval Lex Mercatoria, was not an organized body of law. Rather, it was a disparate assortment of
customary rules.
• This disparate assortment of customary rules varied from place to place.
The evolution of the medieval law of the merchant 6
Formation and
international
recognition of trade
Need for new
practices
commercial
instruments to
Increased
attract and boost
international trades
international trade
Urbanization • Opened trade routes
between the East and the
• Led to the growth of the West
merchant class • Merchants in search of
• Creation of merchant new markets
and consular courts
Urbanization
The medieval law of the merchant evolved because of urbanization and the consequent growth of the merchant class,
the creation of merchant and consular courts, and the need for new commercial instruments in international trade.
Increased international trades
European rulers, anxious to attract international trade to their countries, enacted special laws for the protection of
merchants, and recognition of their customs and the jurisdiction of their courts. Furthermore, the trade routes between
the East and West were opened up in the constant search for new markets.
Need for new commercial instruments to attract and boost international trade
The international trade could only flourish if it was underpinned by rules and practices which themselves enjoyed
international recognition.
Formation and international recognition of trade practices
Nationalization of commercial law 7
The international character of the medieval Lex Mercatoria was eroded (gradually destroyed) in England, as the central
courts had the desire to expand their jurisdiction.
In Continental Europe, the international character of the medieval Lex Mercatoria was eroded (gradually destroyed)
through the rise of the modern nation state and the elaboration of civil and commercial codes which fragmented
European law and substantially reduced the influence of the ius commune.
There was an increase of national laws governing international trades, and thereby declining the role of the Lex
Mercatoria.
This had 4 consequences:
• The narrowing of university legal education
• The development of separate national laws for international trade
• The decline of the law of the merchant
• The growth of private international law as a branch of national law to determine, in cases involving a foreign
element, questions of jurisdiction, the applicable law and the recognition and enforcement of foreign
judgements.
o Thus: growth of conflict of law rules to determine cases with foreign elements.
By the end of the 18th century, commercial law had lost much of its international character and coherence.
5 P. 15.
6 P. 12
7 P. 17
4
