Principles of
Commercial Law
Second Edition
C
P
Cavendish
Publishing
Limited
London • Sydney
EDITORIAL ADVISORY BOARD
PRINCIPLES OF LAW SERIES
PROFESSOR PAUL DOBSON
Visiting Professor at Anglia Polytechnic University
PROFESSOR NIGEL GRAVELLS
Professor of English Law, Nottingham University
PROFESSOR PHILLIP KENNY
Professor and Head of the Law School, Northumbria University
PROFESSOR RICHARD KIDNER
Professor at the Law Department, University of Wales, Aberystwyth
In order to ensure that the material presented by each title maintains the necessary balance between thoroughness in content and accessibility in arrangement, each title in the series has been read and approved by an independent specialist under the aegis of the Editorial Board. The Editorial Board oversees the development of the series as a whole, ensuring a conformity in all these vital aspects.
Principles of
Commercial Law
Second Edition
Professor Michael Furmston
TD, MA, BCL, LLM, Barrister
Bencher of Gray’s Inn
Emeritus Professor of Law and Senior Research Fellow
The University of Bristol
C
P
Cavendish
Publishing
Limited
London • Sydney
Second edition first published in Great Britain 2001 by Cavendish Publishing Limited, The Glass House, Wharton Street, London WC1X 9PX, United Kingdom
Telephone: + 44 (0)20 7278 8000 |
Facsimile: + 44 (0)20 7278 8080 |
Email: info@cavendishpublishing.com
Website: www.cavendishpublishing.com
This title was previously published under the Lecture Notes series
© Furmston, MP |
2001 |
First edition |
1995 |
Second edition |
2001 |
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE, UK, without the permission in writing of the publisher.
Furmston, MP (Michael Philip)
Principles of Commercial Law – 2nd ed
1 Commercial law – England 2 Commercial law – Wales
I Title II Commercial law
346.4'2'07
ISBN 1 85941 463 X
Printed and bound in Great Britain
PREFACE
The first edition of this book formed part of the Lecture Notes series, which was intended to help students by giving them a clear outline of the material to be covered in the course, so as to enable them to concentrate on the lectures and other reading within a framework which was easy to assimilate and understand. The second edition has been written with the same purpose in view although the Lecture Notes series itself is no more.
Apart from bringing the text up to date, there are two more substantial changes. The first is the disappearance of the discussion of consumer credit. If commercial law is about the relations between merchants, then the law of consumer credit, important and complex as it is, is not part of commercial law. This doctrinal consideration is reinforced by the fact that examination shows that nowadays relatively few universities include this material in courses entitled Commercial Law or something similar. I am very grateful indeed to Peter Shears for undertaking this formidable labour in the first edition. At a relatively late stage in preparation of the text, it was decided that a rather fuller treatment of agency was appropriate. My other commitments did not permit me to do this myself within the desired time frame and I am extremely grateful to Professor Richard Stone, who has not only done this, but done it better than I could have done myself.
There is a strong case for a general expansion of the whole work so that it could fit in to the Cavendish Principles series. This would present a formidable but exciting challenge but it is one which will have to be postponed until the third edition.
Michael Furmston
April 2001
v
|
CONTENTS |
|
Preface |
v |
|
Table of Cases |
xiii |
|
Table of Statutes |
xxix |
|
Table of Other Legislation |
xxxiii |
|
|
PART I – SALE OF GOODS |
|
1 |
INTRODUCTION TO SALE OF GOODS |
3 |
1.1 |
NATURE OF THE SUBJECT |
3 |
1.2 |
IS THE SALE OF GOODS ACT A COMPLETE CODE? |
4 |
1.3 |
DOMESTIC AND INTERNATIONAL SALES |
5 |
1.4 |
COMMERCIAL AND CONSUMER SALES |
5 |
1.5 |
TYPES OF TRANSACTION |
6 |
1.6 |
MEANING AND TYPES OF GOODS |
11 |
SUMMARY OF CHAPTER 1 |
15 |
|
2 |
THE PRICE |
17 |
2.1 |
INTRODUCTION |
17 |
2.2 |
THE PARTIES SAY NOTHING ABOUT THE PRICE |
17 |
2.3 |
THE PARTIES FIX THE PRICE IN THE CONTRACT |
18 |
2.4THE PRICE IS LEFT TO BE FIXED IN A MANNER
AGREED BY THE CONTRACT |
18 |
2.5 FIXING THE PRICE BY THIRD PARTY VALUATION |
19 |
SUMMARY OF CHAPTER 2 |
21 |
3 |
PAYMENT, DELIVERY AND ACCEPTANCE |
23 |
3.1 |
INTRODUCTION |
23 |
3.2 |
PAYMENT |
23 |
3.3 |
DELIVERY |
24 |
3.4 |
ACCEPTANCE |
31 |
SUMMARY OF CHAPTER 3 |
37 |
|
vii
Principles of Commercial Law
4 |
OWNERSHIP |
39 |
4.1 |
INTRODUCTION |
39 |
4.2THE SELLER’S DUTIES AS TO THE TRANSFER
OF OWNERSHIP |
39 |
4.3 MEANING OF ‘RIGHT TO SELL’ |
40 |
4.4TO WHAT REMEDY IS THE BUYER ENTITLED IF THE SELLER BREAKS HIS OBLIGATION
|
UNDER S 12(1)? |
40 |
4.5 |
SCOPE OF ROWLAND V DIVALL |
41 |
4.6 |
SUBSIDIARY OBLIGATIONS |
42 |
4.7CAN THE SELLER EXCLUDE HIS OR HER
|
LIABILITY UNDER S 12? |
42 |
4.8 |
THE PASSING OF PROPERTY |
43 |
4.9 |
RETENTION OF TITLE CLAUSES |
50 |
4.10TRANSFER OF TITLE WHERE THE SELLER IS
NOT THE OWNER |
54 |
SUMMARY OF CHAPTER 4 |
65 |
5 NON-EXISTENT GOODS, RISK AND |
|
|
|
FRUSTRATION |
67 |
5.1 |
NON-EXISTENT GOODS |
67 |
5.2 |
THE DOCTRINE OF RISK |
68 |
5.3 |
THE DOCTRINE OF FRUSTRATION |
71 |
SUMMARY OF CHAPTER 5 |
75 |
|
6 |
DEFECTIVE GOODS |
77 |
6.1 |
INTRODUCTION |
77 |
6.2 |
LIABILITY IN CONTRACT: EXPRESS TERMS |
77 |
6.3 |
LIABILITY FOR MISREPRESENTATION |
78 |
6.4 |
IMPLIED TERMS |
81 |
6.5 |
LIABILITY IN TORT |
94 |
6.6 |
CRIMINAL LIABILITY |
99 |
SUMMARY OF CHAPTER 6 |
99 |
|
viii
Contents
7 |
EXEMPTION AND LIMITATION CLAUSES |
101 |
7.1 |
INTRODUCTION |
101 |
7.2 |
THE POSITION AT COMMON LAW |
102 |
7.3STATUTORY CONTROL OF EXEMPTION AND
LIMITATION CLAUSES |
104 |
7.4 EUROPEAN STATUTORY CONTROL |
110 |
SUMMARY OF CHAPTER 7 |
117 |
8 |
REMEDIES |
119 |
8.1 |
GENERAL PRINCIPLES |
119 |
8.2WITHHOLDING PERFORMANCE, TERMINATION
|
AND THE BUYER’S RIGHT TO REJECT |
120 |
8.3 |
SPECIFIC ENFORCEMENT |
126 |
8.4 |
ACTIONS FOR DAMAGES |
128 |
8.5 |
PARTY PROVIDED REMEDIES |
132 |
8.6 |
SELLERS’ REMEDIES AGAINST THE GOODS |
134 |
SUMMARY OF CHAPTER 8 |
135 |
|
|
PART II – LAW OF AGENCY |
|
9 |
INTRODUCTION TO THE LAW OF AGENCY |
139 |
9.1 |
DEFINING AN AGENCY |
139 |
9.2 |
TYPES OF AGENCY |
142 |
9.3 |
CREATION OF AGENCY |
144 |
9.4 |
RATIFICATION |
145 |
9.5 |
AGENCY BY OPERATION OF LAW |
148 |
9.6 |
TERMINATING THE AGENCY |
150 |
SUMMARY OF CHAPTER 9 |
153 |
|
ix
Principles of Commercial Law
10 |
THE EXTERNAL RELATIONSHIP |
155 |
10.1 |
AUTHORITY |
155 |
10.2 |
DISCLOSED AND UNDISCLOSED PRINCIPALS |
161 |
10.3 |
CASES WHERE A IS LIABLE TO BE SUED |
165 |
10.4 |
CASES WHERE A IS ENTITLED TO SUE |
167 |
SUMMARY OF CHAPTER 10 |
169 |
|
11 |
THE INTERNAL RELATIONSHIP |
171 |
11.1 |
DUTIES OF AGENT TOWARDS PRINCIPAL |
171 |
11.2 |
RIGHTS OF AGENT AGAINST PRINCIPAL |
176 |
SUMMARY OF CHAPTER 11 |
181 |
|
|
PART III – CARRIAGE OF GOODS BY SEA |
|
12 |
INTRODUCTION TO CARRIAGE OF |
|
|
GOODS BY SEA |
185 |
12.1 |
NATURE OF THE SUBJECT |
185 |
13 |
BILLS OF LADING |
179 |
13.1 |
WHAT IS A BILL OF LADING? |
179 |
13.2 |
DOCUMENT OF TITLE |
192 |
13.3 |
THE BILL OF LADING AS A TRANSFERABLE CONTRACT |
193 |
13.4 |
OTHER DOCUMENTS USED FOR SEA CARRIAGE |
195 |
SUMMARY OF CHAPTER 13 |
199 |
|
14 |
CHARTERPARTIES |
201 |
14.1 |
TYPES OF CHARTERPARTY |
201 |
14.2 |
VOYAGE CHARTERPARTIES |
203 |
14.3 |
TIME CHARTERPARTIES |
211 |
14.4BILL OF LADING FOR GOODS IN
CHARTERED SHIP |
213 |
SUMMARY OF CHAPTER 14 |
205 |
x
Contents
15 THE HAGUE AND HAGUE-VISBY RULES |
219 |
15.1 ORIGIN OF THE HAGUE RULES: THE HARTER ACT |
219 |
15.2THE BRUSSELS CONVENTION OF 1924:
|
THE HAGUE RULES |
219 |
15.3 |
APPLICATION OF THE RULES |
219 |
15.4 |
PROVISIONS OF THE RULES |
220 |
15.5 |
THE HAGUE-VISBY RULES |
221 |
SUMMARY OF CHAPTER 15 |
223 |
|
16 |
FREIGHT |
225 |
16.1 |
INTRODUCTION |
225 |
16.2 |
FREIGHT PAYABLE ON DELIVERY |
225 |
16.3 |
LUMP SUM FREIGHT |
225 |
16.4 |
PRO RATA FREIGHT |
225 |
16.5 |
ADVANCE FREIGHT |
225 |
16.6 |
BACK FREIGHT |
226 |
16.7 |
DEAD FREIGHT |
226 |
16.8 |
SET-OFF |
226 |
16.9 |
WHO IS LIABLE FOR FREIGHT? |
226 |
|
PART IV – INTERNATIONAL SALES |
|
17 |
GENERAL PROBLEMS |
231 |
17.1 |
CONFLICT OF LAWS |
231 |
17.2 |
THE SALE OF GOODS ACT |
232 |
17.3 |
FINANCE |
232 |
17.4 |
EXPORT AND IMPORT LICENCES |
236 |
17.5 |
INSURANCE |
237 |
17.6 |
THE BILL OF LADING |
238 |
SUMMARY OF CHAPTER 17 |
239 |
|
xi
Principles of Commercial Law
18 |
CIF CONTRACTS |
241 |
18.1 |
DEFINITION |
241 |
18.2 |
DUTIES OF SELLER |
241 |
18.3 |
DUTIES OF BUYER |
242 |
18.4 |
PASSING OF PROPERTY |
242 |
18.5 |
PASSING OF RISK |
243 |
18.6 |
REMEDIES OF THE SELLER |
243 |
18.7 |
REMEDIES OF THE BUYER |
244 |
SUMMARY OF CHAPTER 18 |
247 |
|
19 |
FOB AND OTHER CONTRACTS |
249 |
19.1 |
DEFINITION AND CLASSIFICATION |
249 |
19.2 |
DUTIES OF THE SELLER |
250 |
19.3 |
DUTIES OF THE BUYER |
250 |
19.4 |
PASSING OF PROPERTY |
250 |
19.5 |
PASSING OF RISK |
251 |
19.6 |
REMEDIES OF THE BUYER |
251 |
19.7 |
REMEDIES OF THE SELLER |
252 |
19.8 |
OTHER CONTRACTS |
253 |
SUMMARY OF CHAPTER 19 |
255 |
|
Index |
|
257 |
xii