1 Introduction
Contents 1.1
Commercial law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2
Learning outcomes for commercial law . . . . . . . . . . . . . . . . . . 9
1.3
Approaching your study . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4
The examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
page
University of London External Programme
Introduction
This subject guide provides a structure for your study of commercial law. It gives an overview of the various topics of which this course is comprised and is a guide to the essential and further reading materials. It is not a substitute for those reading materials. You should work through each chapter and the associated readings and you should undertake the activities as a means of deepening your understanding of the subject. At the end of each chapter, you should pause to consider whether you have achieved the learning outcomes. While commercial law is based in contract law, it also includes elements of tort, equity and property law. The resources on which a commercial lawyer draws include legislation, cases and international agreements. This course, therefore, builds on knowledge acquired through your study of law and it develops your skills of analysis and synthesis.
You need to open a notebook or ring binder for this subject. This will be for recording answers to activities and making working notes. It is not the same as your Skills portfolio, which should contain the evidence that you are acquiring learning and legal skills.
Please note that this syllabus has been revised from that originally published in 1999 (with subsequent updates). In those topics that have been retained, some issues are no longer covered (e.g. the discussion of the regime covering commercial agents has been almost entirely removed) or there has been a change of emphasis.
Learning outcomes By the end of this chapter and the relevant readings, you should be able to:
approach the study of commercial law in a systematic way
understand how this subject guide is organised and the various elements of which it is comprised
understand how to develop your learning skills
understand how to approach the examination.
For more help on studying successfully, and undertaking activities, see the Learning skills for law guide.
Commercial law 1 Introduction
page
1.1 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. It encompasses the law that applies to business and includes contract, company law, agency, sale of goods, banking, intellectual property, competition law, taxation law 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). 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. By this stage, you might have reached the view that commercial law is not a separate subject, but a number of distinct areas of law that have been gathered together. Indeed, you might, with Professor Goode (p.1203), ask, ‘Does commercial law exist?’ This is a question that you should think about while you are studying. Unlike many jurisdictions, there is no commercial code in English law. The roots of modern commercial law can be traced to the lex mercatoria or ‘law merchant’ (see Sealy and Hooley, Chapter 1, section 3, pp.14–19). This was, broadly, the law applied by merchants in their own courts. Those courts did not necessarily apply domestic law to international trade. 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. Attempts to codify this mass of case law in the late nineteenth century produced the Bills of Exchange Act 1882, the Sale of Goods Act 1893, 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 cannot be taken too far. The 1893 Sale of Goods Act placed 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 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. This led to legislation that sought to regulate various aspects of the relationship between consumers and merchants:
the contract itself (e.g. the Unfair Contract Terms Act 1977)
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 prevent certain goods and services from reaching the marketplace, and to control suppliers.
†
For a set of learning outcomes relating to the syllabus, see section 1.2.
page
University of London External Programme Clearly, the objectives of the law relating to transactions between merchants (commercial law) are likely to differ from those relating to transactions between merchants and consumers. Yet, there is no clear distinction between commercial law and consumer law. So, for instance, these different types of transactions are mixed together in the Sale of Goods Act 1979 (see Chapters 4–6). Many have, therefore, argued for the creation of separate codes of law for commercial sales and for consumer sales (Bridge (2003) 119 LQR 173). This subject guide is concerned only with commercial sales. 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 consumers). More broadly, various international treaties and conventions have been drawn up, which seek to bring some unity to international commercial law. It does not take much thought to recognise the difficulty of constructing international agreements on such issues and also the problems of domestic courts around the world in applying such agreements with any consistency. More successful, perhaps, are the various standard form contracts issued by international trade organisations and adopted by merchants (e.g. see Chapter 7). For further discussion of all of these issues, read Sealy and Hooley, pp.14–20, 33–34, 43–58. See also Bradgate, pp.3–20. On these texts, see section 1.2.1 below.
Go to your study pack and read ‘Rule, practice, and pragmatism in transnational commercial law’ by Roy Goode.
Commercial law 1 Introduction
page
1.2 Learning outcomes for commercial law When you have finished studying this module, you should be able to demonstrate that you have studied in depth agency, sale of goods, international trade and finance and principles of secured financing.† a Agency define the term ‘agent’ explain how an agency is created discuss the scope of the agent’s authority 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 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 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 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.
†
Note: Students will be expected to be familiar with the principles of bailment so far as is necessary for a complete understanding of the topics within the syllabus.
Moving from knowledge to understanding In studying for a qualifying law degree, such as the University of London’s LLB, you need to begin with knowledge and develop understanding and the deeper skills required of law graduates. A lawyer needs to know (or know where to find) the law. He or she also needs to analyse an infinite variety of real-life problems and apply the law critically to them. To do this you must:
understand the law have analytical and critical abilities. To be analytical and critical you need to develop:
autonomy and an ability to learn a reflective approach to your learning the ability to identify and retrieve legal information from paper and online sources. The learning outcomes and activities which we provide in our subject guides enable you to do develop these skills. There is a simple chart which expresses the process: Derived from the syllabus
Knowledge base
Learning outcomes are the basis of learning activities
Learning activities and sample examination questions develop skills and understanding and embed knowledge in your memory.
You demonstrate your understanding and skills in your answers to activities and sample examination questions written in your notebook or ring binder for the subject guide, and by entries in your Skillls portfolio.
d Payment define and identify the characteristic features of a documentary credit explain the significance of the Uniform Customs and Practice for Documentary Credits (UCP) identity 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.
This is assessed by portfolio assessment and examinations
page 10
University of London External Programme
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 is to understand the whole subject. This requires the ability to stand back and see the structure of commercial law. Indeed, you will find it much easier to understand and remember cases and statutes if you can see them as part of this larger structure rather than treating them as unconnected rules. Commercial law has its eccentricities, but, overall, it works because it has been built up in response to the needs and practices of business people. You should read each chapter carefully. In each chapter there are activities, which provide an opportunity to think about and learn to understand the material you have been covering. You should work through these activities before referring to the feedback at the end of each chapter. Next, you should read the essential reading, and then look at the cases and further reading. Make sure you understand each piece of reading and each case before moving on. If you do find a case or piece of reading difficult to understand, go back to the subject guide or move on and return to the piece of reading or case later. Reflect on whether you do understand each part fully. Ask yourself difficult questions. Finally, you should attempt the sample examination question at the end of each chapter. Commercial law is a rapidly developing area, so you must keep up to date. How you can do this is discussed below. Access to a good law library is, of course, very helpful, but for those who do not have such access the Internet provides a rich source of information, if it is used carefully.
1.3.1 Essential reading Commercial law textbooks fall into two broad groups: those books that seek to cover a wide area of the subject and those that focus on a particular topic, such as agency or sale.
Primary textbook
Sealy, L.S. and R.J.A. Hooley Commercial law: text, cases and materials. (London: LexisNexis Butterworths, 2003) third edition [ISBN 0406950032]. This book will be referred to throughout the guide. It resembles a portable library in that it contains extracts of leading cases, legislation, articles and editorial commentary. References to ‘Sealy and Hooley’ are references to this textbook. Throughout the book the authors ask questions, which you should attempt to answer. Much of your study will be devoted to the readings from this book, although at various points you will be directed to other materials. You should also try to read as many of the leading cases in their original form. Remember that, while this excellent book has been compiled by two of the leading commercial lawyers, it is only their particular view of what is important.
Other texts to consult There are various excellent books on the general area of commercial law to which reference will be made in this guide.
Goode, R. Commercial law. (London: Penguin Books, 2004) third edition [ISBN 9780140289631]. This is an important work by one of the leading commercial lawyers of the last thirty years. It will be referred to as ‘Goode’ throughout this guide.
Bradgate, R. Commercial law. (London: LexisNexis Butterworths, 2000) third edition [ISBN 9780406916039].
Brown, I. Commercial law. (London: LexisNexis Butterworths, 2001) [ISBN 9780406024340]. In addition, there are books that cover particular aspects of commercial law. These are referred to in the relevant chapters.
Commercial law 1 Introduction
page 11
Statute books Legislation is frequently amended, so it is important to refer to up-to-date versions of legislation. It is, therefore, convenient to have a statute book in addition to the other books.
Rose, F. Blackstone’s statutes: commercial & consumer law. (Oxford: Oxford University Press). A new edition is published each year.
Legal journals The subject guide and the textbooks refer to articles published in various journals in the UK and abroad. You should try to read those referred to in the subject guide, but you should also try to follow up references to journal articles cited in the textbooks where appropriate.
1.3.2 Web sites Used with care, the Internet is a valuable resource. Cases and legislation:
http://www.bailii.org/ The British and Irish Legal Information Institute: an excellent site that provides access to full texts of cases and legislation from Britain and Ireland. It also has links to sites for other jurisdictions. Recent UK legislation is also available through a government site:
http://www.opsi.gov.uk/legislation/about_legislation.htm Judgments of the House of Lords since 1996 are also available from:
http://www.publications.parliament.uk/pa/ld/ldjudgmt.htm
The skills required to become a graduate Learning skills are important, though mostly underemphasised. Please refer to the guide Learning skills for law. Needed: deep learning Many of the answers we receive in the assessment every year appear to reflect surface learning and not deep learning. Are you prepared to take on the challenge?
These are some of the ‘deep learning’ skills that we expect you to acquire. The ability:
to discern themes and patterns in large amounts of disparate information to scan large amounts of written materials to draw out argumentative threads to explain the different sides of a controversial issue to make, apply and criticise precise distinctions to separate rapidly the relevant from the irrelevant to think logically to think critically to research to plan to communicate, to argue fluently, concisely and persuasively, both orally and on paper
to concentrate, working with speed and stamina to work independently with initiative and self confidence to work co-operatively, to lead and to support with sensitivity. Self-reflective skills are also essential – the ability:
to learn from experience to gauge how the learning experience is working and to identify weaknesses to use the above skills to evaluate your knowledge to use those skills to analyse and solve problems. As you progress with your studies, you should be thinking about how you can develop these skills.
page 12
University of London External Programme
1.3.3 Use your Portfolio/Learning Journal Throughout this guide you will notice certain portfolio prompts. In the London programme we have a portfolio that any student who wishes to obtain a QLD for England and Wales must develop and present for assessment in their final year. This is to ‘demonstrate’ the subject specific and transferable skills students will attain. We are not saying that students who do not complete a portfolio do not have these skills but such students will not formally have demonstrated these skills in an assessed mode. From your second year you should use the online e-portfolio system to compile your evidence base and reflection on your evidence. However, by portfolio we also mean something more simple – a learning journal which would be a worthwhile experience, whether or not you are going to submit your Skills portfolio for assessment, to build. This can be as simple as a ring leaf folder, making entries in this will give the opportunity to reflect on your learning, to map out the process and gauge whether you are meeting the learning objective for the subject. The important aspect here is reflection: in the other first year subject guides you may find reflection prompts rather than portfolio prompts but what unites these is the belief that reflection is necessary for authentic self-understanding and learning processes that last. Throughout the guide we will give prompts, indicated by this symbol: At the end of each chapter (with the exception of this one) there is an opportunity for you to reflect on and review your understanding of the issues contained in that chapter. You are strongly advised to carry out this review and to go over any points which you still feel unsure about before proceeding to the next chapter.
Begin your portfolio or learning log by putting down some notes as to the main messages in this chapter. In distance learning the institution – here London – teaches through the learning resources. We try to communicate with you through the messages in this and the other texts and online materials we make available to you. What are the main messages in this chapter?
Commercial law 1 Introduction
page 13
1.4 The examination Important: the information and advice given in the following section is based on the examination structure used at the time this guide was written. However, the University can alter the format, style or requirements of an examination paper without notice. Because of this, it is essential for you to check the instructions on the paper you actually sit.
1.4.1 Preparation You need to start your examination preparation at the beginning of the course and not leave it until the period just before the examination starts. As you proceed through your studies you should try to summarise the key points in each section. The sample examination questions in this guide will give you some indication as to how to approach different types of examination questions, but there is no substitute for practice. You should, therefore, practice old LLB examination questions.† Put yourself under examination conditions. Give yourself only 45 minutes to answer each question, including reading of the question and planning time. Do this throughout your course to familiarise yourself with writing examination answers. You should plan out each week of study in advance using a diary allowing at least eight hours of study for commercial law each week. You should also allow time for a review of the week’s work and at the end of the month allow some time for a wider review of what you have achieved in the preceding month. At the same time, you need to balance your studies. You will not be able to study or to perform in the examination, unless you are physically and mentally well, so do not overwork. It is important that you take time away from your studies. Two months before the examination you should draw up a revision schedule. At this point you should have a good set of notes from which to revise. Students are often tempted to try to guess what questions will appear on the examination paper on the basis of previous years and limit their revision to those topics. This is always dangerous because you limit the choice of questions that you can do and because examiners can mix different topics into one question: e.g. an agency issue may be mixed in with a question on a sale contract. It is also dangerous to try to identify the format of future examination papers on the basis of past commercial law papers because, as has been mentioned, this guide introduces a slightly revised course.
1.4.2 On the day of the examination Try to make sure that you take the night before the examination off and do something relaxing. If you have to revise make sure you finish at a reasonable time, do something else and then get a good sleep. Remember that your brain can get tired, like your body. If you ran a marathon you would not expect to be able to repeat the exercise the next day. The same is true of the brain: if you exhaust yourself the day before, you are likely to find yourself unable to perform in the examination. On the morning of the examination go over your revision notes briefly then go to the examination without them. Make sure you give yourself plenty of time to travel to the examination. It is also advisable to eat and drink normally before an examination. When the examination starts read the whole paper question by question very carefully and then decide which questions to attempt. Take your time over this. Do not just pick your favourite topic: consider whether another question is easier to answer even though it might not be your favourite topic. Make sure that you attempt four questions. Before you begin to write your answers, make a brief plan about how you will answer each question. It is important to be strict with yourself about how much time you spend on each question. Do not make the mistake of giving yourself too little time to answer the last question. Allow 5–10 minutes to read the examination paper and then 40 minutes for each question, including 5 minutes for planning your answer. Do not go over this 40 minute time limit. Students often fail to realise that it is much harder to improve your mark on a question that you have been answering for 40 minutes than to score marks on a new question. At the end you will have about 10 minutes to go over your answers.
†
These are available from the Laws web site.
page 14
University of London External Programme
1.4.3 Answering the question It cannot be emphasised enough that you must answer the question that has been asked and not one that you hoped would have been asked. You may get no marks at all or seriously endanger your ability to pass a question if you do not observe this simple rule. You must ask yourself, ‘What is this question seeking to discover?’ It will be rare for you to be asked simply to describe an area of law or provide a list of rules. As a lawyer you are being tested on your ability to analyse and to argue. Lawyers do not provide unsubstantiated opinion, they reason from authority. They acknowledge the weaknesses and strengths in the arguments they present. They are also looking to see how the law might develop. In general you will encounter two types of questions, the problem and the essay. The sample examination questions at the end of each chapter in this guide provide illustrations of both types and in the feedback to those questions you will find guidance about the approach you should take in answering them. In problem questions you are required to apply the law to the facts of the question. Work through each word of the problem. Identify the issues and apply the relevant law to them. If you think there is absolutely nothing of interest in a sentence, you may well have missed the point. The other difficulty with problem questions is that the law may be uncertain or you may not be given quite enough facts. This requires you to discuss the various possibilities. Where appropriate, you can point out defects in existing rules. Finally, the question may ask you to advise a particular person identified in the problem. This simply means that you should answer the question by looking at it from the perspective of that person: do not, as some students do, write this person a letter. While problem questions lead you to the areas of law that the examiner wishes you to discuss, essay questions provide more scope for discussion. You need, therefore, to be careful to focus on the question being asked. You must identify what it is that the essay question is seeking. Often you are invited to discuss an assertion about the state of the law. Do not simply say to yourself, ‘Oh good! This is a question on the nemo dat rule and its exceptions’, and then set about a description of the rule and the exceptions. It is unlikely that this is what the question is asking you to do. (See Chapter 4 for the nemo dat rule and a sample examination question). Whether it is a problem or an essay question, you should constantly ask if you are answering the question that has been asked. Finally, a lawyer argues from authority (case, statute, academic writing, etc.) and you must cite the authorities on which you rely. You do not need to give the actual reference of the source as long as you make it clear which source you are using (e.g. providing the name of a case without giving its date or report reference is enough). Students often worry about how many cases, statutes, etc. they should cite. Studying commercial law does involve reading a lot of cases, but in the examination do not try to impress the examiner with a long list of case names. Often a point can be made through citing one or two cases. Remember that the examination primarily tests your understanding of the issues and not your ability to memorise dozens of case names.
Reminder of learning outcomes By this stage you should be able to:
approach the study of commercial law in a systematic way
understand how this subject guide is organised and the various elements of which it is comprised
understand how to develop your learning skills
understand how to approach the examination.
