LPC NOTES
[Commercial Law]
(2019-2020)
,Commercial law Chapter 1 Introduction page 3
1.1 What is commercial law?
Commercial law is a dynamic and exciting area. It must be flexible in order to keep
pace with the rapid changes in business and with the globalisation of markets. At the
same time, it must deliver the certainty that business requires.
Commercial law is a subject that is difficult to define, and, unlike many jurisdictions,
there is no code in English law (although, as will be seen, there are codifying statutes
on particular aspects of commercial law). Commercial law could be defined very
broadly to encompass all aspects of commercial life and so include the law of contract,
property, trusts, company, agency, sale of goods, banking, intellectual property,
competition, taxation and insurance. This course does not seek to cover all of these
subjects. The object is to look at certain areas in order to acquire an understanding of
the main themes, principles and practices of commercial law.
This course is, therefore, organised around the contract of sale. In this it reflects the
view of one leading writer, Professor Sir Roy Goode, who remarked that commercial
law comprises ‘that branch of law which is concerned with rights and duties arising
from the supply of goods and services in the way of trade’ (Goode, p.8 – see 1.3.1
below). The syllabus comprises:
the law of agency
the law of sale of goods
the law of international sale of goods
the law relating to payment by documentary credits.† †
For a set of learning
At this stage, you might have reached the view that commercial law is not a separate outcomes relating to the
subject but a number of distinct areas of law that have been gathered together. syllabus, see 1.2 below.
Indeed, you might, with Professor Goode (p.1347), ask, ‘Does commercial law exist?’
Although the answer to that question must be evident for those of his readers who
have read through the preceding 1346 pages, it is a question that you should think
about while you are studying.
The roots of modern commercial law can be traced to the lex mercatoria or ‘law
merchant’ (see Sealy and Hooley, pp.14-19 – see 1.3.1 below). This was, broadly, the law
applied to mercantile transactions or by merchants in their own courts, and to some
extent these rules applied across national borders. Many of the rules developed in
these courts were incorporated into the common law, particularly by judges such
as Sir John Holt and Lord Mansfield in the seventeenth and eighteenth centuries. In
the late nineteenth century there were attempts to follow the practice of civil law
jurisdictions by codifying the principles generated by cases – the Bills of Exchange
Act 1882, the Sale of Goods Act 1893 (now 1979), the Marine Insurance Act 1906 and
the Partnership Act 1890, all of which either remain in force or continue to influence
current law. Since these statutes arose out of the decisions of the courts (even if they
did not always reproduce those decisions), they tended to reflect the fact that the bulk
of those decisions concerned disputes between merchants. This meant that, broadly
speaking, the legislation did not seek to interfere with the freedom of merchants to
make contracts and to organise their business as they saw fit.
Yet this view of contract law as not intervening can be taken too far. The Sale of Goods
Act 1893 imposed various obligations on sellers and buyers, including implied terms as
to description and quality (see Chapter 5). Moreover, even if non-intervention tended
to dominate the development of the law relating to contracts of sale, there had always
been an element of consumer protection through the criminal law, which had imposed
penalties for false measures and the adulteration of food and drink. By the second half
of the twentieth century there was pressure to improve protection for consumers, not
just through the criminal law but also through the strengthening of consumer rights. The
way in which commercial law had developed through litigation between merchants had
meant little consideration was given to the needs of private consumers. As a result of
the growth of the consumer movement legislation began to emerge to regulate various
aspects of the relationship between consumers and merchants. This included:
,page 4 University of London International Programmes
the contract itself (e.g. the Unfair Contract Terms Act 1977, Unfair Terms in
Consumer Contracts Regulations 1999)
the goods and services supplied (e.g. regulating the production of certain types of
goods to improve safety and quality)
the merchants who supplied particular goods and services (e.g. through licensing).
The aims were to provide consumers with additional rights to those enjoyed by
merchants, to prevent certain goods and services from reaching the marketplace, and
to control suppliers.
Study pack reading
‘Rule, practice, and pragmatism in transnational commercial law’ by Roy Goode.
The concerns and objectives of the law relating to transactions between merchants
(commercial law) differed from those relating to transactions between merchants and
consumers (consumer law). Unfortunately, this distinction between commercial law and
consumer law is not always clear. The tendency has been to combine in a single statute
the different rights and obligations relating to commercial (merchant-merchant)
transactions and to consumer (merchant-consumer) transactions. So, for instance,
these different types of transactions are mixed together in the Sale of Goods Act 1979
(see Chapters 4-6). There has been a good deal of debate over whether or not it might
be preferable to create separate codes of law for commercial sales and for consumer
sales (Bridge, M. ‘What Is To Be Done about Sale of Goods?’ (2003) 119 LQR 173). However,
it is important to state at the outset that this subject guide is concerned only with
commercial sales and, while many of the principles do also apply to consumer sales,
these two types of transactions also differ in important respects (see, for example, the
additional rights enjoyed by consumers under ss.48A-48F Sale of Goods Act 1979: Sealy
and Hooley, p.486).
The other problem is that the incorporation of the lex mercatoria into the common
law meant that it lost its international flavour. This has prompted a call for the
harmonisation of rules relating to international sales. Within the European Union
some strides towards such harmonisation have been made, although much of
the focus has been on consumer legislation. In addition, various international
treaties and conventions have been drawn up which seek to bring some unity to
international commercial law, either through adoption by states or by incorporation
into contracts by parties (e.g. the Uniform Customs and Practice for Documentary
Credits, see Chapter 8). It does not take much thought to recognise the difficulty
of drafting international agreements on such issues so that they can apply in
jurisdictions operating under quite different systems of law, or to understand the
problems domestic courts around the world may have in construing and applying
such agreements in such a way as to maintain consistency with courts in other
countries. More successful, perhaps, are the various standard-form contracts issued by
international trade organisations and adopted by merchants (see Chapter 7).
For further discussion of all of these issues, read Sealy and Hooley, pp.3-54. See also
Bradgate, pp.3-20. (See section 1.3.1 below.)
1.2 Learning outcomes for Commercial law
When you have finished studying this course, you should be able to demonstrate
that you have studied the following topics in depth: agency; sale of goods; aspects of
international trade; and payment through documentary credits. The learning outcomes,
and relevant chapters of the subject guide, for each of these topics are as follows.
a Agency (Chapters 2-3)
define the term ‘agent’
explain how an agency is created
discuss the scope of the agent’s authority
, Commercial law Chapter 1 Introduction page 5
explain the rights and obligations owed by the principal and by the agent to the
third party
explain the rights and obligations owed by the third party to the principal and to
the agent
explain the rights and obligations arising between the principal and the agent.
b Sale of goods (Chapters 4-6)
discuss the approach taken to interpretation of the Sale of Goods Act 1979
analyse the components of the definition of a contract of sale
explain the circumstances in which property in goods is passed
identify how risk is passed
understand the nemo dat rule
discuss and illustrate the exceptions to the nemo dat rule
explain the duties of the seller to deliver, and the buyer to accept, goods
discuss the implied terms in ss.12-15 of the Sale of Goods Act 1979
discuss the relationship between the different implied terms
outline the limits imposed on attempts by the seller to exclude or restrict liability
for breach of the implied terms
understand and discuss the rules on acceptance
explain the remedies available to the buyer and the seller where there is a breach
of the sale contract
explain the use of retention of title clauses and the limits of such clauses.
c International sale contracts (Chapter 7)
identify the key characteristics of cif and fob contracts
analyse the distinctions between cif and fob contracts
discuss the duties of the seller and buyer under cif and fob contracts
explain the remedies available to the seller and buyer under cif and fob contracts
understand the general issues involved in the use of electronic documentation and
the effect of international agreements on the terms of international sale contracts.
d Documentary credits (Chapter 8)
define and identify the characteristic features of a documentary credit
explain the significance of the Uniform Customs and Practice for Documentary
Credits (UCP)
identify the different types of documentary credit
explain the steps involved in the opening of a credit
analyse the various contractual relationships
discuss the strict compliance and autonomy of the credit rules
explain the rights and obligations of the parties.
1.3 Approaching your study
This guide is designed to direct you through your study of commercial law. You should
work through each chapter in turn. The guide has been written to enable you to build
up your knowledge. Each chapter is written on the assumption that you have read and
understood previous chapters. You should not, therefore, dip into the guide: your aim
[Commercial Law]
(2019-2020)
,Commercial law Chapter 1 Introduction page 3
1.1 What is commercial law?
Commercial law is a dynamic and exciting area. It must be flexible in order to keep
pace with the rapid changes in business and with the globalisation of markets. At the
same time, it must deliver the certainty that business requires.
Commercial law is a subject that is difficult to define, and, unlike many jurisdictions,
there is no code in English law (although, as will be seen, there are codifying statutes
on particular aspects of commercial law). Commercial law could be defined very
broadly to encompass all aspects of commercial life and so include the law of contract,
property, trusts, company, agency, sale of goods, banking, intellectual property,
competition, taxation and insurance. This course does not seek to cover all of these
subjects. The object is to look at certain areas in order to acquire an understanding of
the main themes, principles and practices of commercial law.
This course is, therefore, organised around the contract of sale. In this it reflects the
view of one leading writer, Professor Sir Roy Goode, who remarked that commercial
law comprises ‘that branch of law which is concerned with rights and duties arising
from the supply of goods and services in the way of trade’ (Goode, p.8 – see 1.3.1
below). The syllabus comprises:
the law of agency
the law of sale of goods
the law of international sale of goods
the law relating to payment by documentary credits.† †
For a set of learning
At this stage, you might have reached the view that commercial law is not a separate outcomes relating to the
subject but a number of distinct areas of law that have been gathered together. syllabus, see 1.2 below.
Indeed, you might, with Professor Goode (p.1347), ask, ‘Does commercial law exist?’
Although the answer to that question must be evident for those of his readers who
have read through the preceding 1346 pages, it is a question that you should think
about while you are studying.
The roots of modern commercial law can be traced to the lex mercatoria or ‘law
merchant’ (see Sealy and Hooley, pp.14-19 – see 1.3.1 below). This was, broadly, the law
applied to mercantile transactions or by merchants in their own courts, and to some
extent these rules applied across national borders. Many of the rules developed in
these courts were incorporated into the common law, particularly by judges such
as Sir John Holt and Lord Mansfield in the seventeenth and eighteenth centuries. In
the late nineteenth century there were attempts to follow the practice of civil law
jurisdictions by codifying the principles generated by cases – the Bills of Exchange
Act 1882, the Sale of Goods Act 1893 (now 1979), the Marine Insurance Act 1906 and
the Partnership Act 1890, all of which either remain in force or continue to influence
current law. Since these statutes arose out of the decisions of the courts (even if they
did not always reproduce those decisions), they tended to reflect the fact that the bulk
of those decisions concerned disputes between merchants. This meant that, broadly
speaking, the legislation did not seek to interfere with the freedom of merchants to
make contracts and to organise their business as they saw fit.
Yet this view of contract law as not intervening can be taken too far. The Sale of Goods
Act 1893 imposed various obligations on sellers and buyers, including implied terms as
to description and quality (see Chapter 5). Moreover, even if non-intervention tended
to dominate the development of the law relating to contracts of sale, there had always
been an element of consumer protection through the criminal law, which had imposed
penalties for false measures and the adulteration of food and drink. By the second half
of the twentieth century there was pressure to improve protection for consumers, not
just through the criminal law but also through the strengthening of consumer rights. The
way in which commercial law had developed through litigation between merchants had
meant little consideration was given to the needs of private consumers. As a result of
the growth of the consumer movement legislation began to emerge to regulate various
aspects of the relationship between consumers and merchants. This included:
,page 4 University of London International Programmes
the contract itself (e.g. the Unfair Contract Terms Act 1977, Unfair Terms in
Consumer Contracts Regulations 1999)
the goods and services supplied (e.g. regulating the production of certain types of
goods to improve safety and quality)
the merchants who supplied particular goods and services (e.g. through licensing).
The aims were to provide consumers with additional rights to those enjoyed by
merchants, to prevent certain goods and services from reaching the marketplace, and
to control suppliers.
Study pack reading
‘Rule, practice, and pragmatism in transnational commercial law’ by Roy Goode.
The concerns and objectives of the law relating to transactions between merchants
(commercial law) differed from those relating to transactions between merchants and
consumers (consumer law). Unfortunately, this distinction between commercial law and
consumer law is not always clear. The tendency has been to combine in a single statute
the different rights and obligations relating to commercial (merchant-merchant)
transactions and to consumer (merchant-consumer) transactions. So, for instance,
these different types of transactions are mixed together in the Sale of Goods Act 1979
(see Chapters 4-6). There has been a good deal of debate over whether or not it might
be preferable to create separate codes of law for commercial sales and for consumer
sales (Bridge, M. ‘What Is To Be Done about Sale of Goods?’ (2003) 119 LQR 173). However,
it is important to state at the outset that this subject guide is concerned only with
commercial sales and, while many of the principles do also apply to consumer sales,
these two types of transactions also differ in important respects (see, for example, the
additional rights enjoyed by consumers under ss.48A-48F Sale of Goods Act 1979: Sealy
and Hooley, p.486).
The other problem is that the incorporation of the lex mercatoria into the common
law meant that it lost its international flavour. This has prompted a call for the
harmonisation of rules relating to international sales. Within the European Union
some strides towards such harmonisation have been made, although much of
the focus has been on consumer legislation. In addition, various international
treaties and conventions have been drawn up which seek to bring some unity to
international commercial law, either through adoption by states or by incorporation
into contracts by parties (e.g. the Uniform Customs and Practice for Documentary
Credits, see Chapter 8). It does not take much thought to recognise the difficulty
of drafting international agreements on such issues so that they can apply in
jurisdictions operating under quite different systems of law, or to understand the
problems domestic courts around the world may have in construing and applying
such agreements in such a way as to maintain consistency with courts in other
countries. More successful, perhaps, are the various standard-form contracts issued by
international trade organisations and adopted by merchants (see Chapter 7).
For further discussion of all of these issues, read Sealy and Hooley, pp.3-54. See also
Bradgate, pp.3-20. (See section 1.3.1 below.)
1.2 Learning outcomes for Commercial law
When you have finished studying this course, you should be able to demonstrate
that you have studied the following topics in depth: agency; sale of goods; aspects of
international trade; and payment through documentary credits. The learning outcomes,
and relevant chapters of the subject guide, for each of these topics are as follows.
a Agency (Chapters 2-3)
define the term ‘agent’
explain how an agency is created
discuss the scope of the agent’s authority
, Commercial law Chapter 1 Introduction page 5
explain the rights and obligations owed by the principal and by the agent to the
third party
explain the rights and obligations owed by the third party to the principal and to
the agent
explain the rights and obligations arising between the principal and the agent.
b Sale of goods (Chapters 4-6)
discuss the approach taken to interpretation of the Sale of Goods Act 1979
analyse the components of the definition of a contract of sale
explain the circumstances in which property in goods is passed
identify how risk is passed
understand the nemo dat rule
discuss and illustrate the exceptions to the nemo dat rule
explain the duties of the seller to deliver, and the buyer to accept, goods
discuss the implied terms in ss.12-15 of the Sale of Goods Act 1979
discuss the relationship between the different implied terms
outline the limits imposed on attempts by the seller to exclude or restrict liability
for breach of the implied terms
understand and discuss the rules on acceptance
explain the remedies available to the buyer and the seller where there is a breach
of the sale contract
explain the use of retention of title clauses and the limits of such clauses.
c International sale contracts (Chapter 7)
identify the key characteristics of cif and fob contracts
analyse the distinctions between cif and fob contracts
discuss the duties of the seller and buyer under cif and fob contracts
explain the remedies available to the seller and buyer under cif and fob contracts
understand the general issues involved in the use of electronic documentation and
the effect of international agreements on the terms of international sale contracts.
d Documentary credits (Chapter 8)
define and identify the characteristic features of a documentary credit
explain the significance of the Uniform Customs and Practice for Documentary
Credits (UCP)
identify the different types of documentary credit
explain the steps involved in the opening of a credit
analyse the various contractual relationships
discuss the strict compliance and autonomy of the credit rules
explain the rights and obligations of the parties.
1.3 Approaching your study
This guide is designed to direct you through your study of commercial law. You should
work through each chapter in turn. The guide has been written to enable you to build
up your knowledge. Each chapter is written on the assumption that you have read and
understood previous chapters. You should not, therefore, dip into the guide: your aim
