Commercial Law All Notes PDF

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Commercial Law NotesBackgroundLex mercatoria – law of merchants - Definition: law concerned with the rights and duties arising from sale/supply of goods and services by trade - Developed as trade was international – in fairs and markets - International disputes were decided in English courts – juror...

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Commercial Law Notes Background Lex mercatoria – law of merchants - Definition: law concerned with the rights and duties arising from sale/supply of goods and services by trade - Developed as trade was international – in fairs and markets - International disputes were decided in English courts – jurors were merchants from across the world - Fast and fair adjudication - BUT E Kadens has contended that it was never international, rather was merely local and regional Historical Developments 17th century – all was under common law courts 18th century – commercial law developed into a coherent body by Holt and Mansfield - Came to represent the intention of the parties 19th century – SGA 1893 – synthesis pf English CL and lex mercatoria - Edward Cooke transferred the commercial disputes into common law - Mansfield created a conciliatory version of commercial law and rejected the lex mercatoria 20th century – UNCITAL – integrated agencies – harmonised private law regionally and globally 21st century – 60% of cases in commercial courts are international disputes - Competency of the judiciary - Further harmonisation under EU law o Fills gaps o Simplifies dealings o Neutral law for international commerce o Law more appropriate for cross border deals o Common market facilitation o BUT some contend that the law is already understood, and harmonisation would be unnecessary - LM still applies under s62(2) Freedom of Contract The theory insists that the unrestricted exercise of freedom of contract between parties who possess equal bargaining power, equal skill, and perfect knowledge of relevant market conditions maximizes individual welfare and promotes the most efficient allocation of resources in the marketplace

Principles Sanctity of contract – entitled to bargain + strict performance - CCA 1974 and UCTA 1977 – intervention to protect weaker parties Good faith – not recognised under English law (Walford v Miles) but common in US Facilitation of security interests – debtor and creditor - Allows businesses to grow using credit Conveyancing principles - Security of property – first in time rule at law – nemo dat – Phillips v Phillips – transferor disposes of only that to which he is entitled - Good faith purchasers - Estoppel – representation made by owner to the disponee that the non-owner may make a disposition Dearle v Hall – an assignee of debt takes priority if giving notice to the debtor first Equitable v Legal assignee – Arbuthnot Factors Ltd - The tabula in naufragio doctrine – plank in wreck – a right to property can be overreached by the transferor of a legal title to a good faith purchaser for value without notice Variation of priority rules by agreement - Claims may be ranked by the parties by waiver or subordination of debts Negotiability principle – the ability to be passed Inalienability principle – not able to be taken away by the possessor Usages and customs – courts may recognise established customs or trade usages – implied terms Market principle – basis for determination of customs, usages and prices – damages for breach Bailment – transfer of possession rather than ownership Goode argues that the concepts of commercial law are an aggregation of different rules - Fairness and utility – competing interests - Party autonomy, predictability, flexibility, good-faith, self-help, security aspects, vested rights protection and protection of innocent 3rd parties

Sources of Commercial Law -

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Contract – express and implied terms – standard terms, boiler plate clauses etc. Interpretation of such contracts – common sense v semantic analysis – Re Sigma Finance Corp Uncodified customs and usages – entrenched usages Codified custom of usages – ICC o Require express or implied inclusion Domestic legislation – traditionally in the UK, the law has been laissez faire – 1893 SGA allowed exclusion of customs and liability BUT UCTA 1977 has outlawed exclusion in some circumstances AND FSMA has added regulations o Lord Devlin contents that it ‘allows commercial men to do business in the way that they want to do it’ – gives a ‘seal of approval’ o BUT – Hazell v Hammersmith – public law trumps commercial law o Autonomy is the key principle – Belmont Park case o UCTA – introduced unreasonableness terms  Enforced in Finney lock Seeds  BUT acceptance of an unreasonable term by a party may prevent court deeming a term unreasonable EU law – Part 2 CRA 2015 International conventions – 1980 Vienna convention on Contracts EFTA – European Free Trade Area – ICC Chamber of Commerce UNCITRAL and UNIDROIT EU law – Brexit affects this Transnational commercial law – 1981 H of L decided to abandon sovereign immunity from jurisdiction – new lex mercatoria Soft law – fear of adverse legislation if rules not observed – voluntary codes of practice – ombudsmen Equity – Westdeutsche Landesbank – warned against wholesale transfer of equity into commercial law to ensure orderly business o Equity can be more harm than good – long examination of the contract is detrimental to the free flow of business o Equity requires higher standards than those of the marketplace o Fiduciary relationships require selflessness – not possible in business o Equity would require good faith

Problems with law: - Language is ambiguous

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o Literal v liberal interpretations o Newtons of Wembley Ltd Limitations of judicial precedent

Financing Direct sale on credit Sale to finance house, then sold on credit Sale directly and apportionment of credit Hire purchase and loan Assignment of Benefit Under Contract A party to a contract can assign the rights but not the burden of a contract without the consent of the other party Assignment: existing contract transferred Novation: new contract formed – consideration in release from contract Sub-participation: lead bank agrees to pay 3rd party a percentage of the money from debtor, but no contract between 3rd party and debtor Securitisation Non-marketable assets are securitised to tradeable assets Creditor sells them to a SPV which issues bonds to investors under trust – trustee is engaged to hold security on behalf of investors – SPV pays purchase price to originator and repays funding loan to investors from proceeds of repayment – original creditor purchases credit protection and releases regulatory capital Codification of Commercial Law Professor Goods contends that there is no common thread between principles in sectors within commercial law – they are all thus distinct subjects - Comprehensive codification like the UCC would simplify, improve accessibility, modernise and reduce ambiguity Opponents argue that it is unnecessary, inflexible, contrary to common law traditions that respect changing business practices, stifle law made from bench, expensive, time, and burdening legislature - Professor Cheshire has highlighted that legislative intervention is a paralysing hand - Arden highlights the deem seated fears of common lawyers – slow legislative process – want judges to make faster updates - Goff has highlighted the fallacy of an instant and complete solution - Rodger argues that codes are often out of date - Rodger: ‘Temptation of elegance’ ‘temptation to tinker’ - Non-lawyers and commercial parties are unlikely to go digging – no need to improve accessibility - Markesinis – ‘quest for utopia’

Lord Herschel had wanted the SGA 1893 to only apply in England – motivation to codify died in 1900 with the South African War International codification – new lex mercatoria - Compact package deal - Certain principles that would be required for all transactions - Clarification of telecommunications and unit of accounts - Unification under UNCITRAL Practical difficulties with the differences in legal systems between England and Scotland Commercial law seen as a good place to start when harmonising English and Scottish law Spear headed by Dave Wilson in the 19th century 21st Century Challenges Tech development: - Payment methods adopting to new tech – EU pioneering this - Fraud and system failures - Jurisdiction of transactions Resolution of disputes - Drift towards ADR not litigation - Less successful – suited to commercial landscape? - Procedures for ADR Present state - Show legislation but fast courts - Review required veery 25 years Brexit - Expected to have little impact on the UK commercial law due to limited competence of the EU withdrawal - Concepts of English law continue to attract jurisdiction choice Legislative Sources The Sale of Goods Act 1979: - Only applies to goods and sales NOT HIRE PURCHASE - Codified the common law – amended by statute, statutory instruments and EU legislation - S1 – applies to contracts for the sale of goods made after 1 January 1894 - S61 – interpretation section – agreement to sell in the future AND contemporary sales - S2(1) contract for sale includes sale and agreement for sale o Transfers the property in goods for a money consideration known as price  If not defined, there is no contract – May v Butcher BUT Arcos – depends on the circumstances – confirmed in Foley v Classique Coaches – RECENTLY – Tolani Bros – agree to agree not recognised BUT arbitration clauses may intervene – Sudbrook Trading – court will attempt to use any contractual machinery to determine a price and force specific performance – RTS Trading – court will attempt to give

effect to intention of parties unless there is a total absence of intention Factors Act 1889 UCTA 1977 UCTR 1999 CRA 2015: - Only applies to consumer sales Interpretation: - Bank of England case (STATUTES): o Language to be given their natural meaning o Language also intended not to alter the common law o Limited value to implied terms o PROBLEMS with such an interpretation – sometimes the interpretation is not valid if the statute intended to depart from the common law - Ashington Piggeries (CONTRACTS): o Ought not to be construed narrowly to direct from the intention of the parties - Re Wait – SGA has merely added to the common law, rather than replaced it, and has changed some aspects - Vagliano Bros – natural meaning of statute first (Lord Herschel) – BUT judges have departed partly from this view – Ashington Piggeries and PST Energy – courts have treated the statute as part of the common law The Sale of Goods Act SGA applies to dealings between businesses and also businesses and consumers BUT CRA 2015 also applicable When SGA passed, contractual obligations were considered merely conditions and warranties and rules regulating representations Basic Concepts Ownership/property – risk passes, buyer can sue in tort if 3rd party damages the goods – if the seller is insolvent, the buyer will have good title Possession – actual physical control over goods – constructive possession (control over the goods in the hands of a 3rd party) A contract for sale under SGA: - S1 – a contract o Voluntary or consensual process of bargaining, negotiation and offer and acceptance o Buy or sell goods o Pfizer v Ministry of Health – statutory right to receive drug does not constitute a contract as It is not voluntary – held not a contract o Norweb v Dixon – Electricity Act 1989 – electricity is not a good, therefore, no contract for the sale of goods – not covered under SGA o Beth David Hospital – blood given to patient was merely incidental in the course of treatment so there was no contract of sale

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o Absolute or conditional – s2(3) – passage of property there and then without conditions OR passage of property subject to conditions for sale and transfer of title which all must be met S2(1) – the seller transfers or agrees to transfer the property o Not a hire purchase agreement as there is no obligation to buy, even if the buyer intends to – is instead a contract for hire/bailment coupled with an option to purchase  Helby v Matthews – HP piano – pledged to pawnshop by fraudster – pawnshop owner did not receive good title as property had not passed S61 – in goods o Meaning of goods – all personal chattels other than things in action or money NOT shares and IP etc. o If goods need to be severed from the land, they are still goods o Morgan v Russell – slag and cinders on land – because no definite quantity, s61 did not apply – was merely the sale of an interest in the land o Difference between goods and services – whether the substance of the contract is the exercise of skill and labour, of which product is subsidiary OR whether the supply of the finished product by way of sale  If bulk of materials of a manufacturing process are provided by A and B merely manipulates them, contract of service, otherwise contract for sale  Clay v Yates – work or material at the essence of the contract – book printing  Lee v Griffin – any sale of a chattel was the sale of goods – dentures  Robinson v Graves – return to Clay v Yates – exercise of skill was the amin essence of the contract – painting of a portrait o Existing and future goods s5 SGA  Goods owned or possessed  Goods to be manufactured or acquired by the seller o Specific and unascertained goods s61 SGA  Unascertained – not identified goods – sold by description – must be ascertained before property can pass – Re Wait  Goods can be ascertained from a specific bulk – quasi-specific – Howell v Coupland – failure to deliver enough potatoes due to failed harvest – B took delivery and sued for the failure to deliver balance – failure excused due to quasi-specific goods and impossibility – frustration of part of contract  Re Wait – 5000 tonnes out of 10000 tonnes bulk was deemed not a sale of specific or ascertained goods as they could not be identified  Specific – no further selection required – s16 part of a specific or identified bulk o Software is unresolved – but covered in the CRA 2015  Adobe Systems  St Albans City v International Computers – disk is goods, software is not

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Harm caused by defective software can be substantial Rather than relying on the medium of carriage of the software, should be whether software is mass produced  Argument that software is merely used but not owned – could be a bailment/licence Price – money consideration o If trading goods for goods plus money, distinction will be made over the substantial majority of either the goods or money as consideration o If purely goods for goods – governed by the SGSA 1982 – similar to SGA o Gifts are not covered o Free gifts are treated as collateral contracts – Esso Petroleum v CCE o Aldridge v Johnson – balance between the exchange of goods was supplemented with cash – held as each consignment of goods had been valued separately and then set off against each other, a sale was made under the SGA 1979 o Re Charge Card Services – credit cards can transfer money to allow price prerequisite for SGA to have effect o Price provisions – s8-9 SGA  Valuation by a 3rd party  Fixed by mechanism under the contract or course of dealings  Fixed by contract  May v Butcher – agreement to buy tentage when it became available – held as the price had not been agreed, no sale had occurred  Foley v Classique Coaches – land sold on consideration that purchaser would buy petrol from the seller – on terms to be confirmed from time-to-time – held that the term could be implied into ascertain a reasonable price – contract had already been substantially relied upon  Sudbrook Trading  Gilatt v Sky TV

Property v Title McClure, Stebbings and Goldberg: - "property' is something which, if it is to be transferred from the seller to the buyer, must have been the seller's in the first place, while "title' is something which need not have been the seller's but which, if not, can be constituted in the buyer by his transaction with the seller, provided the transaction be given that effect by the law as embodied in [sections 21 to 26 of the Sale of Goods Act 1979]. Thus, while "title' appertains especially to the law, "property' pertains especially to the parties - Title being a concept separate from property, one may have property without title, and since it is seen that property in an interest is merely a quality of that interest, which, if present, makes that interest ours, we can perceive further that, even though we have the property in an interest, in other words, are the owners of it, so that our transfer of that interest will render the transferee its owner in his turn, yet that *J.B.L. 4 transfer may give the transferee nothing which a court will recognize - One may be the owner of an interest in goods without having a title to that interest, so that the interest is purely possessory as a legal cause of his possessing it

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‘to be a contract of sale, the contract must involve a transfer to the buyer of the seller's claim to all or the residuary rights over the goods. The strength of the seller's claim to those rights is implied [citing section 12(1) of the Sale of Goods Act], but a contract can still be a contract of sale even though the buyer knows that the seller does not have an absolute title to the goods [as where the buyer is told by the seller that the goods were found by him] and even though the seller does not promise that his title is absolute [which is likely to be the case in sheriffs' and pawnbrokers' sales’

Battersby and Preston: - Contend that property is "a title to the absolute legal interest in the goods sold' [citing (1972) 35 M.L.R. 268 at 288], property cannot be regarded as having passed to the buyer until he has acquired a title to that absolute interest. -

Satisfactory Quality Test Rogers v Parish – only need to look at the words of the statute Bailment Goods delivered by one party to another on terms of holding but for later redelivery to original party/follow their directions – possession transferred not ownership If bailee uses goods in manufacture – bailor may have property rights over product Agreement to Sell If part of property passed, will be treated as an agreement to sell What is an agreement to sell? - Executory - Rights in personam - Remedy is damages for non-delivery - Remedy is damages for non-acceptance - Seller can sell goods on if in possession and pass good title whereas the buyer can only agree to sell - Prima facie, risk on seller - Frustration if goods perish - Insolvency, seller can claim back goods even after delivery – Romalpa clause - Seller’s insolvency, buyer has no right to goods but can recover price + losses suffered – Re Wait - Any profits belong to the seller Unascertained goods identified following agreement to sell can be ascertained subsequently - S16 – no property passes until goods are ascertained

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S20 – property doesn’t pass until ascertainment, but section allows buyer a coownership status in the bulk pending delivery to him + a right to withdraw without liability Healy v Howleyy and Sons – mackerel delivery from bulk – ordered 20 boxes, seller sent bulk of 190 boxes with instrictions for distribution by carrier – delay and buyer rejected due to unmerchantable quality – seller sued for price – held couldn’t – property hadn’t passed as goods had not been ascertained for each contract, thus the risk hadn’t passed

Future goods – not yet owned and possessed by the seller - Either due to manufacture or not yet purchased Sale or return – property passes on acceptance or retention of goods Sale What is a sale? - Executed - Rights in rem - B’s remedy is damages for breach AND tort - S’s remedies for breach are damages for non-acceptance AND for the contract price - Seller cannot pass title, but buyer can - Risk of loss on buyer prima facie unless requisitioned – compensation payable to buyer - Not frustrated if perishing of goods - S’s insolvency, B can claim goods – RE Blyth Shipbuilding - B’s insolvency, seller cannot claim goods but may recover the price + losses - Any profits are the buyers Leigh v Aliakmon: steel coils agreed to be purchased – damaged by carrier’s alleged negligence – at time at buyer’s risk, but contract stated property not passed – H of L said goods were not buyer’s property at time therefore only economic loss claimable but no duty of care owed - Injustice remedied by Carriage of Goods by Sea Act Buyer in Possession If delivered before pr...