The merchant law

Mercantile law, or “law merchant”, has been described as “Neither more nor less than the usages of merchants and traders … ratified by the decisions of the Courts of law which, upon such usages being proved before them, have adopted them as settled law” (Goodwin v. Robarts, 1875).

The law merchant in medieval times was applied in (a) maritime courts found in coastal towns, and (b) local courts found in certain market towns.

(a) The Maritime Courts applied the customary maritime law which operated generally in western Europe and which was derived from the Laws of Oleron, the Consolato del Mare, the Laws of Wisby, and other Mediterranean maritime laws.

Jurisdiction included such matters as the hiring of ships, charter-parties, carriage of goods by sea, marine insurance, piracy and crimes on the high seas.

As England became a trading and seafaring nation the jurisdiction of the maritime courts increased. In 1482 the Lord High Admiral of England appointed on behalf of the Crown a special judge to take over the jurisdiction of the local maritime courts and extended their jurisdiction to include prize matters. Prize jurisdiction determines whether a ship, with its cargo, captured during time by war by a belligerent is “prize”, and, if so, how it is to be disposed of.

(b) Local Courts administering mercantile or commercial law were of two kinds. In towns holding fairs at fixed times and places, courts were constituted on the spot and usually included the mayor assisted by one local trader and one foreign merchant. Justice was speedy and the unwritten law applied was based on the customs of merchants in buying, selling and delivering goods, bills of exchange, negotiable instruments and the like. The courts were sometimes called “Piepowder” courts, because the merchants attending them often came into court with dusty feet (pieds poudres).The second group were known as the Courts of the Staple and were set up in certain “staple” towns which had a monopoly in trading in such staple goods as wool and leather. These courts also applied the law merchant.

In both the local courts and the staple courts the law contained an international flavour. This was because the Crown, wishing to encourage Continental trade, gave the foreign merchants and traders the protection of the law which applied to men of their kind generally throughout Europe. Accordingly justice was administered on the spot by the special courts constituted by the mayor with one local and one foreign merchant, Merchants and traders moving from one fair to the next could not wait for the justice of either the ordinary English local courts or the royal courts. In any case the common law of England was inadequate to deal with the contractual disputes of the traders.

Gradually, however, the courts merchant declined in importance as the common law courts became more efficient and reliable and became centralized in London. Moreover, limitations were imposed by statute in 1477 on the jurisdiction of the local courts merchant.

By the middle of the eighteenth century the common law courts had absorbed nearly all the jurisdiction of the courts merchant, except for the maritime law and prize law applied in the maritime courts.

Lord Mansfield, Chief Justice in 1756, was notable for his work in regard to the law merchant. He established the principle that once a judgment had been given on a mercantile custom, that custom became judicially recognized and no further proof of it needed to be given in a similar case in the future. Specially selected juries of merchants ensured continuity in the administration of mercantile law. Mansfield's work was carried on by other judges and resulted in the absorption of this branch of the law into the common law of England.