Commercial Law
Week 1 - Introduction: General principles, themes, and key issues
(ch 1)
Commercial Law = 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’
Commercial law = Body of law that governs commercial transactions
● What are commercial transactions?
○ According to Roy Goode, they are “Arrangements and
agreements between professionals for the provision and
acquisition of goods, services, and facilities in the way of
trade”
→ transactions between professionals (merchants, financiers, or
intermediaries)
→ excludes institutional law, consumer law, public law
→ a response to the practices and legitimate needs of merchants:
mercantile practice
The law of commercial contracts is about merchants, how they compete
and cooperate with each other, strangers or third parties
Transnational Commercial = a set of private law principles and rules, from whatever source, which
Law governs international commercial transactions and is common to legal
systems
→ the product of the convergence of national legal systems
lex mercatoria = phenomenon of uniform rules serving uniform needs of international
business and economic co-operation
= that part of transnational commercial law which consists of the unwritten
customs and usages of merchants, so far as these satisfy certain externally
set criteria for validation.
Why TCL?
Normally: reference to the relevant national legal system by rules of private international law of
the forum → this was too narrow an approach and that courts and arbitrators should be free to
draw on a wider range of sources when determining issues arising in connection with
cross-border transactions to which a given national law might not by itself be sufficiently
responsive
, ● arbitral tribunals are less constrained in their use of sources than national courts
● much greater freedom to determine the rules they will apply in the absence of party
choice
● number of legal systems now allow arbitrators to select their own conflicts rule or to
apply ‘rules of law’
Nature of commercial law
What drives commercial law?
● Commercial law derives from practices and needs of merchants to uphold transactions
● → as a result of survive business competition and to overcome trade impediments
● Transactions should be widespread; because they are so widespread high costs are
involved to invalidate them
Four key characteristics
Civil law: there is a Commercial Code → not in anglo-american
The laws belonging to that Code
Focus on Excluded from a commercial code
Transactions Law governing institutional structures e.g. Company
law or Partnership law → do not govern the
Examples of typical transaction of them
commercial transactions
● Carriage of goods
● Distributorship
● Warehousing
● Insurance
● Equipment leasing
● Receivables financing
Dealings between Consumer law → consumers are more vulnerable
merchants → due to lack of information in comparison to
professionals professional merchants
Centered upon contracts Legal obligations from non-contractual source
and use of market
, Large mass of Occasional transactions with no need of standard
transactions treatment
The historical development of TCL
→ Commercial law had a transnational nature historically!
I. Urbanisation:
A. Led to the growth of the merchant class
B. Creation of merchant and consular courts
II. Increased international trades
A. Opened trade routes between the East and the West
B. Merchant in search of new markets
III. Need for new commercial instruments to attract and boost international trade
IV. Formation and international recognition of trade practices
Characteristics of mediaeval law of merchant
● Qualities
○ Objectivity
■ From usage to defined customary law
○ Universality
■ Transnational in nature
○ Reciprocity of rights
■ Procedural and substantive fairness in exchange
○ Participatory adjudications
■ Merchants select judges
○ Coherence and integrated body of rules
■ Organic growth of commercial instruments and institutions
● Shortcomings
○ Not an organised body of law but a disparate assortment of customary rules
○ Varies from place to place
Nationalisation of commercial law
● Commercial law was born with an international nature
● Desire of central courts to expand jurisdiction
● Rise of modern nation state and elaboration of law codes → reason for nationalisation
period
○ Rise of national laws governing international trade (thus declining role of law of
merchant)
○ Narrowing of legal education
, ○ Growth of conflict-of-laws rules to determine cases with foreign elements →
could determine applicable law for their transactions
Return to internationalism and growth of transnational commercial law
● Second half of 19th century – beginning 20th century: parties recognise that international
transactions are different
● Growing recognition that international commercial transactions are different than
domestic ones
● Diversity and inadequacy of national legal systems give rise to uncertainty (Chapter 8)
○ Different laws, practices, and expectations about the parties over same
transactions and same concept can be different (e.g. good faith)
○ Conflict of laws rules do not solve these differences: allowing the parties to
choose applicable law does not resolve the issue since the differences are still
there
● Fundamental solution over the diversity: These differences gave rise to efforts of
harmonisation of commercial law → international Convention for international
transactions to leave the national laws to the national transactions
Benefits and problems with harmonisation
Benefits Problems
● The legal framework designed for ● Many international private law
international trade and transactions conventions remain unsuccessful
○ Disregards differences in
national laws
○ Neutral law
● Legal certainty
○ No need for forum shopping
○ Predictable outcome
● Reduced transaction costs
Sources of (transnational) commercial law
⇒ Customs and usages are sources of commercial law → no unless they are validated by the
court
A. Contracts: What about “contract makes law”?
● At the heart of commercial law in every developed legal system is contract → law of
contract underpins all commercial transactions
● founded on the principle of the autonomy of the parties’ will (the freedom of parties to
‘make their own law’ in the relations between themselves)
○ → in most cases yes due to party autonomy
○ Party autonomy: what the parties agree will be
■ Binding on them, and
Week 1 - Introduction: General principles, themes, and key issues
(ch 1)
Commercial Law = 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’
Commercial law = Body of law that governs commercial transactions
● What are commercial transactions?
○ According to Roy Goode, they are “Arrangements and
agreements between professionals for the provision and
acquisition of goods, services, and facilities in the way of
trade”
→ transactions between professionals (merchants, financiers, or
intermediaries)
→ excludes institutional law, consumer law, public law
→ a response to the practices and legitimate needs of merchants:
mercantile practice
The law of commercial contracts is about merchants, how they compete
and cooperate with each other, strangers or third parties
Transnational Commercial = a set of private law principles and rules, from whatever source, which
Law governs international commercial transactions and is common to legal
systems
→ the product of the convergence of national legal systems
lex mercatoria = phenomenon of uniform rules serving uniform needs of international
business and economic co-operation
= that part of transnational commercial law which consists of the unwritten
customs and usages of merchants, so far as these satisfy certain externally
set criteria for validation.
Why TCL?
Normally: reference to the relevant national legal system by rules of private international law of
the forum → this was too narrow an approach and that courts and arbitrators should be free to
draw on a wider range of sources when determining issues arising in connection with
cross-border transactions to which a given national law might not by itself be sufficiently
responsive
, ● arbitral tribunals are less constrained in their use of sources than national courts
● much greater freedom to determine the rules they will apply in the absence of party
choice
● number of legal systems now allow arbitrators to select their own conflicts rule or to
apply ‘rules of law’
Nature of commercial law
What drives commercial law?
● Commercial law derives from practices and needs of merchants to uphold transactions
● → as a result of survive business competition and to overcome trade impediments
● Transactions should be widespread; because they are so widespread high costs are
involved to invalidate them
Four key characteristics
Civil law: there is a Commercial Code → not in anglo-american
The laws belonging to that Code
Focus on Excluded from a commercial code
Transactions Law governing institutional structures e.g. Company
law or Partnership law → do not govern the
Examples of typical transaction of them
commercial transactions
● Carriage of goods
● Distributorship
● Warehousing
● Insurance
● Equipment leasing
● Receivables financing
Dealings between Consumer law → consumers are more vulnerable
merchants → due to lack of information in comparison to
professionals professional merchants
Centered upon contracts Legal obligations from non-contractual source
and use of market
, Large mass of Occasional transactions with no need of standard
transactions treatment
The historical development of TCL
→ Commercial law had a transnational nature historically!
I. Urbanisation:
A. Led to the growth of the merchant class
B. Creation of merchant and consular courts
II. Increased international trades
A. Opened trade routes between the East and the West
B. Merchant in search of new markets
III. Need for new commercial instruments to attract and boost international trade
IV. Formation and international recognition of trade practices
Characteristics of mediaeval law of merchant
● Qualities
○ Objectivity
■ From usage to defined customary law
○ Universality
■ Transnational in nature
○ Reciprocity of rights
■ Procedural and substantive fairness in exchange
○ Participatory adjudications
■ Merchants select judges
○ Coherence and integrated body of rules
■ Organic growth of commercial instruments and institutions
● Shortcomings
○ Not an organised body of law but a disparate assortment of customary rules
○ Varies from place to place
Nationalisation of commercial law
● Commercial law was born with an international nature
● Desire of central courts to expand jurisdiction
● Rise of modern nation state and elaboration of law codes → reason for nationalisation
period
○ Rise of national laws governing international trade (thus declining role of law of
merchant)
○ Narrowing of legal education
, ○ Growth of conflict-of-laws rules to determine cases with foreign elements →
could determine applicable law for their transactions
Return to internationalism and growth of transnational commercial law
● Second half of 19th century – beginning 20th century: parties recognise that international
transactions are different
● Growing recognition that international commercial transactions are different than
domestic ones
● Diversity and inadequacy of national legal systems give rise to uncertainty (Chapter 8)
○ Different laws, practices, and expectations about the parties over same
transactions and same concept can be different (e.g. good faith)
○ Conflict of laws rules do not solve these differences: allowing the parties to
choose applicable law does not resolve the issue since the differences are still
there
● Fundamental solution over the diversity: These differences gave rise to efforts of
harmonisation of commercial law → international Convention for international
transactions to leave the national laws to the national transactions
Benefits and problems with harmonisation
Benefits Problems
● The legal framework designed for ● Many international private law
international trade and transactions conventions remain unsuccessful
○ Disregards differences in
national laws
○ Neutral law
● Legal certainty
○ No need for forum shopping
○ Predictable outcome
● Reduced transaction costs
Sources of (transnational) commercial law
⇒ Customs and usages are sources of commercial law → no unless they are validated by the
court
A. Contracts: What about “contract makes law”?
● At the heart of commercial law in every developed legal system is contract → law of
contract underpins all commercial transactions
● founded on the principle of the autonomy of the parties’ will (the freedom of parties to
‘make their own law’ in the relations between themselves)
○ → in most cases yes due to party autonomy
○ Party autonomy: what the parties agree will be
■ Binding on them, and
