Commercial Notes - Summary of Intorduction to Commerical Law PDF

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Summary

Relevant materialsSale of Goods Act 1908 The contractual relationship in which goods are sold and bought Fair Trading Act 1986 Protection of consumers PPSA 1999 (Personal Property Security Act)Commercial law VS commercial practice Commercial practice is very different to theory Commercial law should...

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Relevant materials Sale of Goods Act 1908 -

The contractual relationship in which goods are sold and bought

Fair Trading Act 1986 -

Protection of consumers

PPSA 1999 (Personal Property Security Act) Commercial law VS commercial practice -

Commercial practice is very different to theory

Commercial law should be based on transaction -

Dealing with certain types of transaction, both commercial and non-commercial transactions

Commercial law is a response to the practice and legitimate needs of merchants Principles of commercial law -

The expectations of the business community in relations to commercial dealings  Predictability  Law must be clear  Law must be applied consistently  Flexibility  Law should react to evolving and novel commercial practices  Party autonomy  Commercial men should be able to conduct business in the way they want, as opposed to sticking to forms that they may consider to be outmoded. - Kum v Wat Tat Bank Ltd [1971]  Freedom / sanctity of contract – would be unwise to hender a businessman, it’s here to help. Make up a contract to how the relationship should be governed.  Sanctity of contract -

Efficient dispute resolution -

Minimise the nature of cases that need to go to court Quick and effective Availability of self-help remedies

History of commercial law -

Origins of the Lex Mercatoria (14th century)  Process of urbanization and the consequent growth of the merchant process  Development of international trade  Recognition of international affairs  Unifying role of the merchants

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Characteristics of the Lex Mercatoria  Objectivity  Universal set of rule  Reciprocity of rights  Participating adjudication  Integration  Commercial growth

Some say Lex Mercatoria has developed independently from the common law, but some say it is similar to equity in common law A lot of the law had been codified, this is to provide consistency Consumerism has driven the evolution of commercial law in the 20th century -

Aim is to protect consumers Donoghue v Stevenson

International Harmonization -

International cases should be dealt with using international commercial law to govern the case, because different countries have different laws and there needs to be consistency. Transnational law  Disadvantages  Domestic law limitations. i.e. trust law doesn’t exist in some places  Advantages  Facilitates International trade  Fills lacunae in International law  Limits recourse to private international law  Clarity of the law  Impetus for domestic law reform  Accessibility

sources of commercial law -

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Contracts  The transaction is governed by law that has been largely created by the parties themselves  Only certain key terms are freely and individually negotiated (e.g. price, date of performance, etc) Custom and usage  Relevance  Conflict with the express terms of the contract and “entire agreement” clause.  Recognized collections of customs and usage (i.e. uniform rules produced by the International Chamber of Commerce) Domestic legislation  Freedom / sanctity of contract vs social agenda Case law  Can be unsystematic and clustered around frauds and insolvencies

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 It is also constrained in certain areas by other sources of law Equity  Courts are usually reluctant to involve equity into commercial law International Law  EU law and the development of English law  International conventions (UNCITRAL & UNIDROIT)  Model laws Soft law  Rules which are not legally binding, but which in practice will normally be adhered to by those who subscribe to them  Trade associations promulgating the rules (i.e. ISDA & ICMA)

Commercial law is mainly concerned with dealing with personal property (tangible & intangible) and the types of dealing. -

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Real property  Land & interest in land, it expands beyond the physical material  Owner gets to go back onto their land and eject the wrongdoer Personal property  Any property that is not land or interest in land  A person who is wrongfully possessing any good, owner can only sue in conversion (tort) and that only get damages (wrongdoer gets to keep the property) The DIFFERENCE between real and personal property:  Remedies for wrongful disposition (recover of the land VS tort of conversion) Real & personal rights - Claim based distinction Types of personal properties

Types of personal property 1. Chattels real: leases of land (S23(e)(ii)PPSA) 2. Chattels personal (S16 (1) PPSA) Study Hard

a) Things in possession – a tangible object of property b) Things in action – intangible property, which consist of claims against another person, which consist of claims against another person  Documentary intangibles – document embodies the right  Documented intangible – S6 PPSA; i.e. share in a company Real rights can be asserted against third parties -

Survives bankruptcy form the person it is against

Proprietary rights and personal rights -

Proprietary rights – ownership possession and equitable charge Personal right – right to have the asset delivered or otherwise transferred Consequence in the case of bankruptcy of the person against whom proprietary / personal rights are asserted Equitable real rights and equities

Proprietary interests in goods -

Ownership: a collection of rights recognized by a legal system and exercisable against a person in respect of a particular thing  Right to use / own / sell / lease  For there to be ownership, the goods will have to be identifiable

Possession and bailment -

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Possession requires TWO elements 1. Exercise of control over the object 2. Animus possidendi – intention of possession Bailment: a relationship under which a person (the bailor) transfers possession of goods to another person (bailee) a) Proprietary interest of the bailee – limited possessory interest in the goods b) Duties of the bailee – duty to take reasonable care of the chattel

Dealing in things in action -

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Things in action can be dealt with by sale, gift or by way of security. Consensual transfers of things in action:  Pure intangibles – S50 of Property Law Act 2007  Documentary intangibles – delivery of the document (endorsed , if necessary) Conflicting claims a) Nemo dat quod no habet b) Sheltering c) A legal interest is to be preferred to equitable interest d) Where both interests are equitable the first in time prevails.

Sale of goods -

Business of sale

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Commercial contract

Historical developments in the sale of goods law -

Contract of sale were originally regulated by the common law The UK Sale of Goods Act 1893 was an act for codifying the law relating to the sale of goods The sale of the Sale of Goods act 1893 was adopted in NZ in 1895 and the regulation now in force is the Sale of Goods Act 1908 In NZ (numerous Acts have been repealed), Contract & Commercial Law Bill 2017 Relevance of the study of UK Sale of Goods Law in NZ The advents of the consumeristic legislation – The Consumers Guarantees Act 1993

Until the end of the 1960s, NZ courts tend to treat the UK law as binding Many rules in the Sale of Goods Act are already covered by Implied terms -

These rules reduces time and cost by not having to have the party negotiate over every single piece of rule  These rules can be contracted out of by the parties if they so wish

Sale of Goods Act and previous case law -

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Bank of England v Vaglian Brollers [1891]  Must look at the natural meaning of the statute  Only look at case law if the statute is un-clear Buyers right o rejecting the goods Fraudulent acts during the sale of goods At what point in time does the good transfer possession.

Boundaries of the Sale of Goods Act 1908 -

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What happens if there is a conflict in law and the Sale of Goods Act  Statutes overrides common law Sale of goods purchased for domestic consumption Subject matter – trade contracts Compulsory legal rules VS presumptions and implied terms (economic / legal rationale) SGA and contact aw S60(2) – the rules of the common law including the law merchant, save in so far they are inconsistent with the express provisions of this Act, and in particular the rules relating to the law of principal and agent, and the effect of fraud, misrepresentation, duress or coercion, mistake, or other invalidating cause shall continue to apply to contracts for the sale of goods. SS4(3), 6(2) and 14 of Contractual Remedies Act 1979 and SGA contracts

Contract of sale of goods – definition -

S3(1) – A contract of sale of goods is a contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a money consideration, called the price. S3(3) SGA – A contract of sale may be absolute or conditional

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S3(4) SGA – where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.

Contract of sale of goods – EXCEPTIONS to SGA -

Exchange of goods – Aldridge v Johnson [1857] Gift Hire purchase – Helby v Matthews [1895] Lease Trust Mortgage – S60(3)SGA the provisions of this Act relating to contacts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge, or other security.

Goods definition -

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S2(1) goods include – (a) all chattels personal other than money or choses in action; and (b) emblements, growing crops, and things attached to or forming part of the land that are agreed to be severed before sale or under the contract of sale; and (c) to avoid doubt, computer software S2(1) Specific goods – means goods identified and agreed on at the time a contract of sale is made Unascertained goods S7(1) future goods – the goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by the seller after the making of the contract of sale, in this Act called future goods.

The price -

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Ascertaining the price S10SGA (UK S8 SGA 1979):  The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties; (2) where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price; (3) what is a reasonable price is a question of fact, dependent on the circumstances of each particular case. Case law a) Foley v Classique Couches Ltd  Foley; gas station owner sold land next to it, a condition was they have to purchase all gas from Foley for as long as he can supply it  No indication of price in contract  Clause saying any conflict will be settled by arbitration  3 years later, buyer’s lawyer claimed because there is no stated price, contract is invalid and their party has started purchasing petrol from elsewhere  Foley sued, successful at first instance, then it was appealed

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 ISSUE: does the fact that there is no price quoted means the contract was void for uncertainty  HELD: An agreement to agree does not mean a contract  Wrongful repudiation of a contract by one party relieves the other party from the performance of any conditions of the contract  Past performance will indicate that a contract is binding (reliance interest) b) Reconciling May & Butcher v R [1934]  After the war there is a lot of stuff up for sale  An agreement to agree, the price of the sale of tents but there was no contract  No precise agreement  Butcher made a $1K pound security  Board changed, new bord refuse to let butcher inspect the tents  May & Butcher wanted to buy tents from Board  Board agreed to sell & May & Buthcehr agree to purchase  Price & dates for payment are yet to be agreed upon when goods become available  Delivery shall be taken as agreed b the parties  All disputes will be submitted to arbitration  May 7 Butcher made $1,000 deposits as security, verbal agreement took place for an extension of the agreement and conferred sale  Board changed ownership, new owenrs refuse to acknowledge contract  ISSUE: were the terms of the contract sufficient?  HELD:  Court cannot read terms into an incomplete contract  A crucial part of the contract – price & date were not determines, thus no valid contract.  S8 of SoGA recognises contract for one with a price set in the future but according to S9, that price has to be decided by a 3rd party.  PAGE 20 OF THE CASE c) Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of the words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement – RTS Flexible System ltd v Molkerei Alois Muller GmbH & CoKG [2010]. Capacity – formal requirements -

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S9(1) SGA  Capacity to buy and sell is regulated by the general law concerning capacity to contract, and to transfer and acquire property: provided that where necessaries are sold and delivered to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price therefor. No set requirement for a SoG contract to be in a particular form.

Statutory implied terms and statutory rights -

Caveat emptor and implied terms S16 SGA (UK S14 SGA 1979):

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Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. Condition and warranties  Breach of CONDITION: end contract or claim damages where appropriate  Breach of WARRANTY: damages only Breach of condition and acceptance of goods S13(3)SGA  Where a contract of sale is not severable, and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. 

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PAGE 168 Statutory implied terms and statutory rights. -

Caveat emptor and implied terms – S16 SGA Distinction between condition and warranties (depends on the construction of the contract – S13(2) SGA The consequences  While a breach of a condition may give rise to a right to treat the contract as repudiated, the breach of a warranty may give rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated – S13(2) SGA  The buyer may waive the condition, or may elect to treat the breach of such condition as a breach of warranty, and not as a ground for treating the contract as repudiated – S13(1) SGA  Where the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect -s13(3) SGA.

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Right to sell, encumbrance and quiet possession

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TEST 1) Has the seller ever had the right to sell the goods  Ownership and right to sell is different  A person may be acting under the instruction of the owner  S14A – seller doesn’t have to have ownership  Niblett v Cofectioners’ Material [1921] a seller who holds valid title to goods or who can transfer valid title in the goods to another, will not automatically have the right to sell those goods  Could not sell cans because logo is a breach of trademarks, have to take off logo and sell them as bare cans. Which will not make as much money  Buyer seeks to recover damages from the seller on the ground that goods delivered were not in accordance with contract  Parties entered in contact for 3,000 cases of milk. Contract was made at an interview, later written down.  $2,0000 delivered  $1,000 cases had label that was a trademark infringement  Buyer wants to rescind contract  HELD: o Buyer had no right to sell goods, thus seller did not obtain quiet right to possession o Seller prevented by an injunction, thus cannot sell even though he legally owned them o S13(b) – if seller can’t sell goods due to injunction, this will affect buyer’s quiet possession of the goods o Able to rescind contact o Injunction can interfere with quiet enjoyment of goods.  HELD: seller did not have a right to sell, thus buyer have a right to repudiate the contract.  Sued under SoGA Breach of S14(a)  Found a breach of S146 – buyer could nto get goods until logo removed 2) If so, did the seller have a right to sell it  When must the right to sell exist  “sale” or “agreement to sell”

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Sale of “specific goods” (s20 rule 1 SGA – the seller must have the right to sell the goods at the time the contract is made) or “unascertained goods” (S20 rule 5 SGA – when goods become ascertained and unconditionally appropriated to the contract by one of the parties with the assent of the other).  Rowland v Divall  D sold car to R  R drove the car and sold it again  Police forward that the car sold to D was stolen  R had to refund customer and sue D for the purchase, for failure of consideration  Argued that R is not entitle to full amount because they had used the car  On appeal it was decided that the seller was entitled to full amount and the defendant has used the car is irrelevant. 

Right to quiet possession -

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In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is… i.e. (an implied warranty that the buyer shall have and enjoy quiet possession of the goods – S14 (b) SGA). Breach of S14(b) SGA could also occur when a third party interferes with the buyer’s quiet possession of the goods – Microbeads Ag v Vinhurst Road Marking Ltd [1975]  Conditions and warranties, implied warranty for (quiet) enjoyment and there to be no defect in title when it’s passed.  The implied warranty for quiet possession of goods sold under the SoGA S12(2) looks to the future, and the title paramount which gives a right to interfere need not have existed at the date of sale. Between Jan & April 1970, sold 3 paving machines to D. X had applied for a patent for a similar machine in 1966, the specifications was published in Nov 1970 and patent granted in Feb 1972  D withheld payment for the machines because they were dissatisfied, D also contended P were in breach of the SoGAS12(1)&(2)  HELD:  No breach of S2(1) because seller had a right to sell when it was sold, BUT there is a breach of S12(2) since the buyer could not enjoy quiet possession of the goods.  THREE issues: 1. At what point in time will the term implied by S14 (b) SGA come into effect 2. What sort of conduct is required in order to breach the term implied under S14 (b) SGA 3. For how long following the delivery of the goods will the term implied by S14(b) SGA continue to operate  The term implied by S14 (b) SGA is a warranty (i.e. a breach will not entitle the buyer to repudiate the contract...