Reddy, Johnson Q & A, commercial law 2009–2010 2009-1

Q&A COMMERCIAL LAW 2009–2010

ss 38–54 ................................................................................................................... 112 ss 38–43 ............................................................................................................. 87, 113 s 38 ........................................................................................................................... 114 s 42 ........................................................................................................................... 114 ss 44–51 ................................................................................................................... 113 ss 52–4 ....................................................................................................................... 87 ss 52–5 ..................................................................................................................... 114 ss 55–8 ..................................................................................................................... 114 ss 59–61 ................................................................................................... 101, 115, 120 Sched 2 ............................................................................................................. 115, 120

Consumer Protection Act 1987 ......................................................... 11, 25, 27, 28, 49, 50 Pt 1 ....................................................................................................... 9, 25–7, 50, 125 s 2 ............................................................................................................................... 26 s 3 ............................................................................................................................... 26 s 4 ............................................................................................................................... 26 s 4(1)(f) ................................................................................................................. 26, 27 s 5(2) ........................................................................................................................... 27 s 6(4) ........................................................................................................................... 27

Contracts (Rights of Third Parties) Act 1999 ........................................................ 9, 11, 49

Enterprise Act 2002

Pt 8 ................................................................................................................. 7, 11, 115

Factors Act 1889

s 2(1) ................................................................................................................. 75–8, 86 s 8 ............................................................................................................................... 84 s 9 ................................................................................................................... 79–81, 85

Financial Services and Markets Act 2000 ....................................................... 112, 115, 120

Hire Purchase Act 1964 .................................................................................................. 82 Pt III ............................................................................................................. 79–81, 119 s 27 ............................................................................................................................. 81

Marine Insurance Act 1906

s 50(3) ....................................................................................................................... 222 Minors Contracts Act 1987

s 2 ............................................................................................................................. 108

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TABLE OF STATUTES

Misrepresentation Act 1967 ...................................................................................... 34, 38 s 2(1) ................................................................................................... 22, 32, 38, 91, 94 s 2(2) ........................................................................................................................... 32

Power of Attorney Act 1971

s 7 ............................................................................................................................. 146 Prevention of Corruption Act 1906 ............................................................................... 152 Prevention of Corruption Act 1916 ....................................................................... 138, 152

Sale and Supply of Goods Act 1994 ......................................................................... 48, 221 Sale of Goods Act 1893 ............................................................................... 6, 30, 198, 221 Sale of Goods Act 1979 ... 6, 15, 16, 21, 23, 24, 29, 37, 50, 60, 68, 82, 150, 152, 186, 191 s 1(2) ........................................................................................................................... 50 s 7 ......................................................................................................................... 68, 73 s 11(4) ................................................................................................................... 54, 56 s 12–15 ................................................................................................................... 7, 10 s 12 ........................................................................................................... 76, 78, 79, 82 ss 13–15 ..................................................................................................................... 45 s 13 ........................... 19–22, 34, 35, 45, 47, 54, 92, 195, 198, 203, 214, 215, 219, 221 s 13(3) ......................................................................................................................... 35 s 14 ............. 29, 32, 36, 41–3, 47, 51, 53, 124, 125, 150, 152, 188, 195, 198, 203, 215 s 14(1) ......................................................................................................................... 46 s 14(2) ................... 20–3, 29–32, 34, 36, 40, 41, 43, 125, 152, 153, 186, 192, 198, 203 s 14(2A)–(2F) ............................................................................................................ 125 s 14(2A) .......................................................................................................... 30, 36, 40 s 14(2B) ................................................................................................................ 30, 36 s 14(3) .................................................................... 10, 20–3, 31, 32, 34, 36, 37, 40, 41, 43, 152, 153, 186, 188, 192, 193, 198, 203 s 15A .............................. 14, 21, 46, 152, 153, 192, 197, 198, 203, 205, 219, 221, 225

ss 16–20 ..................................................................................................................... 70 ss 16–19 ............................................................................................................... 66, 70 s 16 ............................................................................................................... 64, 66, 233 s 17 ............................................................................................................................. 64 s 18 ........................................................................................................... 64, 66, 67, 70 s 20 ................................................................................................... 64, 66, 68–71, 232 s 20(1) ................................................................................................................... 60, 71 s 20(2) ............................................................................................................. 68, 70, 72 s 20(3) ......................................................................................................................... 70

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Q&A COMMERCIAL LAW 2009–2010

s 20A ................................................................................................ 65, 66, 69, 71, 233 s 20B ............................................................................................................ 69, 71, 233 s 22 ............................................................................................................................. 85 s 24 ......................................................................................................................... 84–6 s 25 ..................................................................................................... 79–81, 83, 85, 86 s 25(1) ......................................................................................................................... 61 s 28 ........................................................................................................................... 206 s 30 ............................................................................................................... 14, 48, 214 s 30(1) ................................................................................................... 54, 56, 216, 218 s 30(2) ......................................................................................................................... 48 s 30(2A) ............................................................................................................ 216, 218 s 30(3) ......................................................................................................................... 48 s 30(5) ......................................................................................................................... 48 s 32(2) ....................................................................................................................... 204 s 32(3) ....................................................... 181, 185, 196, 202, 204, 205, 209, 212, 226 s 34 ............................................................................................................................. 23 s 35 ......................................................................... 23, 33, 38, 44, 51, 53, 54, 186, 189 s 35(2) ....................................................................................................................... 211 s 35(4) ......................................................................................................................... 54 s 35(5) ......................................................................................................................... 33 s 35A .............................................................................................................. 46, 48, 56 s 35A(1)–(2) ................................................................................................................ 56 s 48A .................................................................................................................... 23, 24 s 48A(3) ...................................................................................................................... 24 s 49 ............................................................................................................................. 70 s 50 ........................................................................................................... 185, 208, 225 s 50(3) ............................................................................................... 187, 192, 194, 210 s 51 ............................................................................................................. 46, 208, 226 s 51(3) ............................................................................................................... 193, 220 s 53(3) ......................................................................................................................... 47 s 55 ............................................................................................................................... 6 s 61(1) ......................................................................................................................... 65

Sale of Goods (Amendment) Act 1995 .............................................................................. 4 Supply of Goods and Services Act 1982 ........................................................................... 52 s 4 ............................................................................................................. 50–2, 95, 130 Pt II ............................................................................................................................ 52 s 13 ............................................................................................................... 52, 80, 130

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TABLE OF STATUTES

Supply of Goods (Implied Terms) Act 1973

s 9 ............................................................................................................................... 92

Third Parties (Rights Against Insurers) Act 1930 ......................................................... 128 Torts (Interference with Goods) Act 1977 ....................................................................... 78

Unfair Contract Terms Act 1977 ....................... 3, 7, 8, 10, 11, 35, 39, 41, 42, 44, 80, 135 s 3 ............................................................................................................................... 42 s 6 ............................................................................................................................... 42 Sched 2 ....................................................................................................................... 42

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TABLE OF STATUTORY INSTRUMENTS

Commercial Agents (Council Directive) Regulations 1993,

SI 1993/3053 ...................................................... 133–5, 139–42, 144, 146, 152, 153 regs 2–3 .................................................................................................................... 152 reg 7 ................................................................................................................. 141, 152 reg 7(1)(b) ................................................................................................................. 141 reg 11 ............................................................................................................... 140, 141 reg 17 ....................................................................................................................... 152 reg 18 ....................................................................................................................... 152

Consumer Credit (Advertisements) Regulations 2004, SI 2004/1484 .............................. 98 Consumer Credit (Disclosure of Information) Regulations 2004, SI 2004/1481 ............... 98 Consumer Protection (Cancellation of Contracts Concluded away from Business

Premises) Regulations 1987, SI 1987/2117 ........................................................... 87, 89 Consumer Protection from Unfair Trading Regulations 2008, SI 2008/1277 ............ 87, 98 reg 2(2) ....................................................................................................................... 98 reg 5 ........................................................................................................................... 98 reg 6 ........................................................................................................................... 98 reg 9 ........................................................................................................................... 98

Sale and Supply of Goods to Consumers Regulations 2002,

SI 2002/3045 .................................................................................. 10, 29, 35, 43, 51 reg 15 ......................................................................................................................... 10

Unfair Terms in Consumer Contracts Regulations 1994, SI 1994/3159 ....................... 7, 10 Unfair Terms in Consumer Contracts Regulations 1999,

SI 1999/2083 ............................................................ 7, 8, 10, 11, 39, 41, 43, 44, 114 reg 4 ........................................................................................................................... 43

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TABLE OF EU LEGISLATION

DIRECTIVES

Consumer Guarantees Directive 1999 ....................................................................... 10, 29 Unfair Contract Terms Directive 1993 .............................................................................. 7

INTERNATIONAL TREATIES

Hague-Visby Rules ............................................................................................... 204, 222

Art I(c) ...................................................................................................................... 222

Art X) ....................................................................................................................... 222

Vienna Convention on Contracts for the International Sale of Goods 1980

(CISG) ...................................................................................................... 1, 11–17, 222 Art 6 ........................................................................................................................... 12 Art 16 ......................................................................................................................... 13 Art 19 ......................................................................................................................... 13 Art 25 ......................................................................................................................... 14 Art 34 ......................................................................................................................... 15 Art 37 ......................................................................................................................... 15 Art 46 ......................................................................................................................... 16 Art 48 ......................................................................................................................... 15 Art 50 ......................................................................................................................... 16 Art 51 ......................................................................................................................... 14 Art 52 ......................................................................................................................... 14 Art 62 ......................................................................................................................... 16 Art 67 ......................................................................................................................... 16 Art 69 ......................................................................................................................... 16 Art 72 ................................................................................................................... 14, 15 Art 74 ......................................................................................................................... 16 Art 79 ......................................................................................................................... 17

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CHAPTER 1

GENERAL QUESTIONS

INTRODUCTION

This chapter contains three questions which are not confined to one particular part of the syllabus but are broader. Such questions are often included in examinations in order to test your knowledge of recent developments in the subject or simply to give you an opportunity, which most questions in law papers do not, to demonstrate a joined-up, wide knowledge of the syllabus. The first question is a general question, such as one sometimes finds in examinations, which invites the examinee to take an overview of commercial law and its function in the business world. The second question requires a good knowledge of the whole area of sale of goods and related law. The third question is centred around the UN Convention on Contracts for the International Sale of Goods (the Vienna Convention 1980) which now plays, and will play, a very important role in regulating contracts for the international sale of goods.

Question 1

‘The fundamental purpose of commercial law is the facilitation of commercial transactions.’

Discuss. How does commercial law attempt to meet the needs of the commercial community?

Answer plan

This question is not an opportunity to discuss commercial law in a general way. A good answer requires you to identify what the needs of the commercial community are and then identify how the courts and legislature have responded to those needs. You need to illustrate these points by drawing from a range of areas of commercial law.

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Q&A COMMERCIAL LAW 2009–2010

Answer

Commercial law is essential to the operation of the business world. To facilitate commercial activity, the business community needs a legal system which is certain and predictable; will give effect to its transactions; will give legal recognition to trade customs and market practices; is flexible in order to accommodate new practices and development in business; and offers an efficient dispute resolution to deal with its problems.

Some of these needs overlap: for example, recognition of the customs and practices of the commercial community could be seen as an aspect for party autonomy. On the other hand, other needs appear to conflict: for example, flexibility in the law (which is necessary to respond to changes in market practice) tends to be achieved only at the expense of certainty. In other words, if rules are strict and clear, then this produces certainty but it may produce unfair results in individual cases, whereas flexibility and discretionary principles may produce justice in individual cases but tend to be less predictable.

Certainty and predictability

Many transactions (some of high value) are undertaken on the basis that courts will continue to follow the rules laid down in preceding cases. The commercial community values legal certainty because it allows for planning and anticipation of liability. Businesses need to know that courts will reliably and consistently interpret commercial transactions. The English courts have consistently promoted considerations of certainty of outcome over those of fairness and justice and offer the commercial community a reasonable degree of predictability.

In 1774, Lord Mansfield, then Lord Chief Justice, said in Vallejo v Wheeler (1774) at p 153:

‘In all mercantile transactions the great object should be certainty; and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other. Because speculators in trade then know what ground to go upon.’

In order for there to be certainty, the law should be clear and be capable of being applied in a predictable way. For example, if a rule gives the court discretion to find a contract unreasonable, this may be a clear rule because it can be described simply but its application in a particular case may be unpredictable. Another aspect of legal certainty is that settled legal rules should not be changed. Once a rule is established, parties will contract on that basis, so if the rule is then changed, settled contracts may be disturbed and commercial parties’ expectations are not fulfilled.

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GENERAL QUESTIONS

Party autonomy

Central to commercial law are the doctrines of freedom and sanctity of contract. Business people are free to make their contract and to insist on its strict performance. The goal is to enforce the true intention of the parties.

Lord Devlin in Kum v Wat Tat Bank Ltd (1971):

‘The function of the commercial law is to allow, so far as it can, commercial men to do business in the way they want to do it and not to require them to stick to forms that they may think to be outmoded. The common law is not bureaucratic.’

This non-interventionist approach is justified on the basis that it promotes certainty. Courts should only intervene if the contract terms are so restrictive or oppressive that it offends against the public interest.

Of course, freedom of contract cannot be absolute. The courts have tended to adopt a non-interventionist approach on the assumption that there is equality of bargaining power between the contracting parties. It is questionable whether this assumption is as valid today, particularly in the light of the increased use of standard terms of business and the rise of monopolies or markets in which dominance is shared by a few players. Nevertheless, to the extent that the law is not concerned with the fairness of outcome, commercial law reflects the principles of freedom of contract and the sanctity of contract.

Factors suggest that assumptions may be less than reliable today, at least as far as the consumer buyer is concerned. However, ‘pure’ commercial contracts are often excluded from such legislation, for example, the Consumer Credit Act 2006 has no application to contracts with companies, or where business lending to an individual exceeds £25,000, and the Unfair Contract Terms Act 1977 does not apply to, for example, international supply of goods nor insurance contracts.

Recognition of commercial practices

Courts have always recognised and given legal effect to the customs and practices of the commercial community,1 sometimes at the expense of stretching legal concepts. Courts do this by implying a term into the contract. For example, if the contracting parties are in a particular trade where there is settled custom or usage, a term giving effect to that custom or usage may be implied into their contract. In order for the custom or usage to be judicially recognised, it needs to be certain, that is, be well established, so the assumption is that parties contracted on the basis of it; and reasonable, so that reasonable, honest people would accept it.

1By judicial recognition, mercantile usage can become part of the common law, eg the bill of lading is recognised as a document of title to goods at common law.

3