Commercial Law:

29th October 2025

Learning outcome:

 Understand the history, concepts, drivers, sources, and key debates related to

the central pillars of commercial law in England and Wales, as well as

internationally.

 Demonstrate a comprehensive knowledge of the law relating to the sale of

goods in England and Wales, as well as the significance of the Sale of Goods

Act 1979 to international sales transactions.

 Explain common types of international sales transactions (including

FOB contracts and CIF contracts) and assess the importance and nature

of documents in international sales transactions (including bills of

lading).

 Contrast the key provisions of the UN Convention on Contracts for the

International Sale of Goods (CISG) with relevant provisions of the

Sale of Goods Act 1979.

 Understand the legal framework for common methods of financing

international trade, including the documentary credit

Topics:

 An introduction to the law relating to the sale of goods

 The Sale of Goods Act 1979, the Consumer Rights Act 2015 and the

obligations of the parties

 Passing of property and risk under sale of goods contracts

 Sales by non-owners and the principle of nemo dat quod non habet;

 Remedies for breach of a contract of sale of goods

 International sales transactions

  UN Convention on Contracts for the International Sale of Goods (CISG).

Core text
You should refer to the following compulsory text. Specific reading references are
provided for this text in each topic:

 McKendrick, E. Goode and McKendrick on commercial law. (London: Penguin

Books, 2021) sixth edition [ISBN 9780141991887](available in VLeBooks).

Case book
Specific reading references are provided for the following case book:

 Fox, D., R. Munday, B. Soyer, A. Tettenborn and P. Turner Sealy and Hooley’s

commercial law: text, cases and materials. (Oxford: Oxford University Press,

2020) sixth edition [ISBN 9780198842149].

What is commercial law?

…the totality of the law’s response to the needs and practices of the mercantile
community.

Commercial law combines elements of property law, contract law, and more, drawing heavily
from the customs and practices of the business community, which predate formal
commercial law.

Commercial law encompasses various areas, including banking, finance, insurance, and the
sale of goods, all serving commercial functions. Roy Goode defines it as "the totality of law’s
response to the needs and practices of the mercantile community." This definition highlights
the complexity of Commercial Law, which spans multiple legal areas and is based on various
sources, primarily case law and statutes that clarify and codify existing practice.

So, what is the primary goal of commercial law? Is it to facilitate commerce or to regulate it?
In English commercial law, the emphasis is on facilitation rather than regulation. This means
creating legal rules that provide certainty for new commercial practices and applying them in
ways that support the objectives of transactions, even if it means deviating from existing
legal rules.

For instance, in Hillas v Arcos (1932), Lord Atkin emphasized that the agreement between
parties is more important than the surrounding legalities. Similarly, Lord Hoffman in BCCI no.
8 argued that courts should be cautious in declaring commercial practices impossible. Lord
Devlin in Kum v Wah Tat Bank stated that commercial law should enable businesspeople to
operate as they wish, highlighting its role in facilitating rather than regulating.

Lord Goff and Lord Irvine also reinforced this idea, asserting that commercial law exists to
serve and facilitate commerce.

Introduction:

Definition of contract law:

HC Guttridge in 1935:

Commercial law governs contracts for the sale of goods and related contracts like carriage,
insurance, and financing.

Professor Sir Roy Goode has described commercial law as ‘that branch of law which is
concerned with rights and duties arising from the supply of goods and services in the way of
trade.’

Commercial law encompasses the legal framework governing commercial transactions,

primarily involving parties engaged in business activities. The sale of goods is a key example
of such transactions, but commercial law also covers a wide range of other activities,
including contracts for carriage, insurance, financing, equipment leasing, and receivables
financing. The field is dynamic and adapts to the evolving practices of the business
community, particularly in response to technological advancements. As a result, it is
impractical to create a fixed definition or exhaustive list of commercial activities, as doing so
could hinder the law's ability to evolve alongside commercial practices.

Commercial Code.
What should go into a commercial code?

This definition highlights four key characteristics of commercial law:

1. Transaction-Based: It focuses on transactions rather than institutions.

2. Merchant-Centric: It primarily concerns dealings between professionals rather than

consumers.

3. Contractual Focus: It centers on contracts and market practices.

4. Repetitive Nature: It deals with a large volume of typical, repetitive transactions that can
be standardized.

A contemporary commercial code must also adapt to new technologies, particularly in the
areas of tele transmission of trade data and new financial transaction systems.

When determining what to include in a commercial code, two considerations are crucial:

1. Practicality: Commercial law should serve its users, who have varying needs based on
national practices and the sophistication of local business and financial institutions.
Countries should not blindly adopt models like the American Uniform Commercial Code,
which is tailored for a specific context.

2. Existing Codifications: If the business community has already established codified trade
usages (e.g., the Uniform Customs and Practice for documentary credits), further legislation
may be unnecessary.

Existing Codifications

The idea here is that if certain commercial practices or rules are already well-established and
codified by the business community, there may be little need for additional legislation. This
is particularly relevant in areas where standardized practices are already widely accepted
and used.

Key Points:
1. Codified Trade Usages: In some areas of commercial law, the business community has
already created standardized rules or practices that are widely recognized and followed. For
example, the Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules
that governs international documentary credit transactions. Since these rules are already in
place and accepted globally, there may be no need for a new law to regulate these
transactions.

2. Legislation May Be Unnecessary: If a well-established set of rules exists, introducing new

legislation could complicate matters rather than clarify them. The existing codifications are
often sufficient to govern the transactions effectively, and adding new laws might create
confusion or redundancy.

3. Practical Approach: The suggestion is that lawmakers should focus on areas where there is
a lack of clarity or standardization rather than duplicating what is already effectively
managed by existing practices. This approach ensures that the commercial code remains
relevant and useful to its users.
Development of commercial law

a. (a) The lex mercatoria, or law merchant, is the basis of modern commercial
law, emerging in the Middle Ages when merchants traded across Europe.
Disputes were resolved by local courts, often staffed by merchants,
emphasizing quick and fair resolutions. Key concepts developed during this
time include the bill of exchange, charterparty, bill of lading, assignability,
negotiability, stoppage in transit, and general average.

While it was once thought that the lex mercatoria was a universal law based
on common customs among merchants, Professor Emily Kadens argues that
this view is unsupported. She contends that the rules governing long-distance
trade primarily arose from contracts and legislation rather than widespread
customs, which were largely local.

b. In the fifteenth and sixteenth centuries, the Court of Admiralty took over
international trade disputes from merchant courts, embracing the lex
mercatoria. However, by the seventeenth century, common law courts gained
control of these cases as merchant courts disappeared. To keep this business,
common law courts adopted some lex mercatoria rules.

It wasn't until the late seventeenth and eighteenth centuries that lex
mercatoria was fully integrated into common law, thanks to Sir John Holt and
Lord Mansfield. Holt advanced laws on negotiable instruments and agency,
while Mansfield, known for his progressive approach, completed the
integration and earned the title of "founder of commercial law." His reforms
aimed to simplify commercial procedures and create a cohesive body of law
that benefited both merchants and lawyers.

Before World War II, consumer and commercial law were largely the same,
with no clear distinction, as seen in the Sale of Goods Act 1893. However, as
the welfare state developed and the need to address the power imbalance
between consumers and businesses became clear, this changed. Starting in
the 1960s, a series of consumer protection laws were enacted, including the
Trade Descriptions Act 1968, the Consumer Credit Act 1974, and the Unfair
Contract Terms Act 1977. This was later expanded by EU legislation, which is
now part of the Consumer Rights Act 2015 and the Consumer Protection
from Unfair Trading Regulations 2008.

Today, consumer law and commercial law are treated as separate areas. The
duties of sellers and unfair terms in consumer contracts are governed by the
Consumer Rights Act 2015, while commercial law topics are covered by the
Sale of Goods Act 1979 and the Unfair Contract Terms Act 1977.

In the second half of the twentieth century, efforts increased to harmonize

commercial law for international transactions, leading to what is now known
as transnational commercial law. This harmonization has been supported by
organizations like the Hague Conference, UNIDROIT, UNCITRAL, and the
International Chamber of Commerce, which work to align national laws on
various aspects of international trade, such as the sale of goods and
commercial arbitration.

Harmonization has occurred through conventions, model laws, and trade

practices. While some practices are not legally binding unless included in
contracts or recognized by national law, they still play a significant role in
business. As Professor Goode notes, these practices can be as influential as
formal law, as they rely on the business community's acceptance rather than
legal enforcement.

Additionally, there has been a trend of "judicial parallelism," where legal

systems in different countries, especially in Europe, influence each other.
Scholars have contributed to creating transnational commercial law through
initiatives like the UNIDROIT Principles and the Principles of European
Contract Law, both of which serve as "soft law" that can guide contracts but
do not have legal force.

Recent projects, such as the Draft Common Frame of Reference (DCFR) and
the proposed Common European Sales Law (CELS), aimed to create a more
unified legal framework for Europe but faced challenges and opposition. With
Brexit, the influence of such proposals in the UK is expected to diminish.

In the second half of the twentieth century, there was a push to harmonize
laws governing international transactions, known as transnational
commercial law. RM Goode outlines several advantages of this
harmonization:

1. **Fills Legal Gaps**: Provides rules where national laws are unclear or
absent.
2. **Simplifies Law**: Replaces multiple national laws with a single set of
rules, reducing conflicts and forum shopping.
3. **Accessibility**: Available in multiple languages, making it easier to
understand than some national laws.
4. **Saves Time and Money**: Easier to learn and apply, reducing legal costs.
5. **Neutrality**: Offers a common legal framework for parties from
different countries.
6. **International Focus**: Better suited for international transactions,
reflecting diverse legal systems.
7. **Judicial Recognition**: Recognized by courts in ratifying states, avoiding
the need for extensive expert testimony.
8. **Facilitates Trade**: Supports the creation of a common market.

Despite these benefits, many in the business community resist

harmonization. Common reasons include:

- **Familiarity with Domestic Law**: People often prefer known laws, even if
foreign laws might be better.
- **Perceived Inadequacy**: Some believe harmonization efforts, like the
Vienna Sales Convention, are too limited in scope.

Goode also notes a fundamental resistance to change, where people

advocate for change in others' systems but resist it in their own. This is
compounded by a lack of emphasis on comparative law in legal education and
a reluctance to engage with foreign languages.

To advance harmonization, law schools need to focus less on national laws

and more on the benefits of a global legal perspective. As the late Professor
René David stated, legal theory thrives in a cosmopolitan environment, and a
broader view is essential for the unification of law.

Sources of Commercial Law:

Contracts and their interpretation

### Contracts and Their Interpretation

**Overview of Contract Law:**

- Contract law is central to commercial law.
- Businesses often use standard form contracts to save time and money
instead of negotiating each term.

**Court's Approach to Standard Contracts: **

- Courts respect the freedom to contract and generally do not interfere with
standard contracts created by trade associations (e.g., insurance policies,
charterparties).
- These contracts have established meanings that facilitate trade.

**Key Principles of Contract Interpretation: **

1. **Contextual Interpretation**: Courts now interpret contracts based on
the overall context rather than a strict literal meaning.
2. **Lord Hoffmann's Guidelines**:
- **Meaning**: Understand what the document conveys to a reasonable
person with relevant background knowledge.
- **Background**: Includes all relevant information available to the parties,
except prior negotiations or subjective intentions.
- **Meaning vs. Words**: The document's meaning is not just about
dictionary definitions; it’s about what the parties intended in context.
- **Natural Meaning**: Words should be given their ordinary meaning, but
if the context suggests a mistake, the court can interpret it sensibly.
- **Iterative Process**: Interpretation involves checking meanings against
the entire document and considering commercial consequences.

**Key Questions in Contract Interpretation:**

1. **Exclusion of Pre-Contractual Negotiations**: Courts generally do not
allow evidence of negotiations to interpret contracts, focusing instead on the
final document to ensure certainty.
2. **Importance of Background Material**: The relevance of background
information varies; in some cases, like financial instruments, the wording of
the contract is more important than the background.
3. **Express Language vs. Commercial Common Sense**: Courts can
interpret contracts in a commercially sensible way, even if it contradicts the
literal wording, but they must not rewrite the agreement.

**Importance of Standard Terms**:

- Standard terms should be interpreted consistently to ensure fairness and
predictability in commercial transactions. This allows businesses to use these
terms without needing extensive negotiations.

### Summary
- Contract law is crucial in commerce, with courts favoring standard contracts.
- Interpretation focuses on context and reasonable understanding, guided by
established principles.
 - Courts avoid using prior negotiations, prioritize the contract's wording, and
ensure that interpretations align with commercial common sense while
respecting the parties' original agreement.

### Custom and Usage in Commercial Law

**Definitions:**
- **Custom**: A rule that has gained legal force in a specific area.
- **Usage**: A common practice within a particular trade or profession. Courts often use
these terms interchangeably.

**Role in Contracts:**
- Courts may recognize trade customs or usages to imply terms into commercial contracts.
For a custom or usage to be legally binding, it must be:
1. **Certain**: Clearly established.
2. **Notorious**: Well-known in the relevant market.
3. **Reasonable**: Fair and acceptable to reasonable people.

**Key Points:**
- The burden of proof lies with those claiming a usage exists.
- Parties are bound by applicable usages, even if they are not aware of them, as long as they
are certain, notorious, and reasonable.
- If a party knows of an unreasonable practice and agrees to it, they are still bound by it.

**Reasonableness of Custom or Usage:**

- A custom or usage is considered unreasonable if it conflicts with basic legal principles or is
not fair. For example, a practice that allows brokers to act for both parties in a transaction
was deemed unreasonable because it violates agency principles.

**Limitations:**
- A custom or usage cannot contradict the express or implied terms of the contract or the
nature of the contract itself.
- It must also be lawful; illegal customs or usages are not enforceable.

**Distinction from Market Practice:**

- Market practices, while common, do not have legal force unless recognized as binding
customs or usages. However, courts may consider market practices as relevant background
information when interpreting contracts.

**Incorporation into Contracts:**

- Customs and usages can be incorporated into contracts either explicitly or implicitly. Once
recognized by courts, they may be acknowledged in future cases, assuming the parties
intended to contract with reference to them.
### Summary
Customs and usages play a significant role in commercial law by providing implied terms in
contracts. For them to be enforceable, they must be clear, well-known, and reasonable.
Courts may consider market practices for context but only enforce recognized customs or
usages.

Certainly! Here’s a more detailed explanation of national legislation in commercial law,

tailored for a law student:

### National Legislation in Commercial Law

**Overview:**
National legislation plays a crucial role in regulating commercial transactions. It
encompasses both primary and secondary legislation, which together create a framework
for how businesses operate within a legal context.

**Types of Legislation:**
1. **Primary Legislation**: This refers to statutes enacted by the legislature (e.g.,
Parliament). These laws establish the fundamental legal principles governing commercial
activities.
2. **Secondary Legislation**: Also known as delegated or subordinate legislation, this
includes rules and regulations made by authorities under the authority of primary
legislation. It provides detailed provisions necessary for the implementation of the primary
laws.

**Historical Context:**
- The codifying statutes of the late 19th and early 20th centuries aimed to facilitate the free
will of parties in commercial transactions, promoting the free flow of trade. These laws were
designed to provide a clear legal framework that respected contractual autonomy.

**Recent Developments:**
- In contrast, more recent legislation has taken on a more interventionist character, reflecting
the state’s interest in regulating economic activities to promote social and economic policies.
This shift is evident in various areas, including:
- **Banking and Financial Services**: The Financial Services and Markets Act 2000 and
subsequent amendments post-global financial crisis (2007-2009) illustrate the government's
response to financial instability and the need for robust regulatory frameworks.
- **Competition Law**: Statutes like the Competition Act 1998 and the Enterprise Act 2002
regulate monopolistic practices, restrictive trade practices, and mergers to ensure fair
competition in the marketplace.

**Economic Law:**
- The late Professor Schmitthoff characterized this body of law as "economic law," which
encompasses the regulation of state interference in commerce, industry, and finance.
Economic law is distinct from commercial law in its fundamental approach:
- **Commercial Law**: Based on the principle of party autonomy, allowing parties to freely
negotiate and structure their agreements within the bounds of public policy.
- **Economic Law**: Reflects a more paternalistic approach, where the state may impose
restrictions on the autonomy of parties to protect public interests.

**Divisions of English Economic Law:**

1. **Financial Regulation**: Governs the conduct of financial institutions and markets.
2. **Competitive Economic Regulation**: Ensures fair competition and prevents
monopolistic practices.
3. **Prices and Incomes Regulation**: Addresses issues related to pricing and wage
controls.
4. **Consumer Protection Regulation**: Safeguards consumer rights and promotes fair
trading practices.

**Characteristics of English Economic Law:**

1. **Public Interest**: Economic law emphasizes the concept of public interest, which
justifies state regulation of private activities for the common good. This concept is broader
than public policy and does not carry negative connotations.
2. **Mandatory Nature**: Unlike commercial law, which often provides permissive
frameworks for parties to choose from, economic law is typically mandatory. It embodies
detailed government policy and imposes specific obligations on businesses.

### Conclusion
In summary, national legislation is integral to the regulation of commercial transactions,
evolving from a focus on party autonomy to a more interventionist approach aimed at
protecting public interests. Understanding the distinctions between commercial law and
economic law, as well as the various divisions of economic law, is essential for navigating the
complexities of modern commercial regulation.
:

### European Union Law and Commercial Transactions

**Background: **
- On June 23, 2016, people in the UK voted to leave the EU. Although the UK is in the process
of leaving, it’s likely that many EU laws will still affect UK law in the future.

**What is EU Law?**
- **Separate Legal System**: EU law is its own legal system, but it works closely with the
laws of the countries that are part of the EU.
- **Supremacy of EU Law**: If there’s a conflict between EU law and national law (like UK
laws), EU law wins. This was confirmed in a famous case called *R v Secretary of State for
Transport, ex p Factortame*.

**Impact on Commercial Law:**

- **Regulatory Influence**: EU law has mostly influenced regulations, especially in areas like
banking, where it has created rules that all EU countries must follow.
- **Limited Effect on Private Rights**: EU law hasn’t had much impact on the rights of
businesses in private commercial transactions (like contracts between companies).
According to Professor Goode, aside from a few general agreements, there haven’t been
many important EU laws affecting private business dealings.

**Key Points:**
- **Commercial Agency Directive**: One important law is the EU Directive on commercial
agents, which gives agents the right to compensation when their agency ends. This was a
new idea for English law.
- **Lack of Harmonization**: Overall, there hasn’t been much effort from the EU to create
uniform laws for private business dealings, which means that many rules are still different
across countries.

**Caution in EU Law Development:**

- Professor Goode believes the EU has been careful not to interfere too much in private
commercial law because there are other international organizations that focus on these
issues. For example, a proposal for a Common European Sales Law didn’t get much support
and is unlikely to move forward.

### Conclusion
In summary, EU law has had a significant impact on regulations in commercial law, especially
in areas like banking. However, its influence on private rights in business transactions has
been limited. As the UK continues to navigate its relationship with the EU, many EU laws will
likely still play a role in shaping the legal landscape for businesses. Understanding these laws
is important for anyone involved in commercial activities.

international conventions, model laws, uniform rules, and uniform trade terms:

### International Conventions, Model Laws, Uniform Rules, and Trade Terms

**What Are They?**

These are ways to make trade laws similar across different countries so that businesses can
operate more easily internationally.

#### 1. International Conventions

- **Definition**: These are agreements between countries that set common rules. However,
they only become law in the UK if the UK government decides to adopt them.
- **Examples**:
- **CISG (1980)**: A convention about contracts for selling goods internationally.
- **Geneva Convention (1983)**: Deals with agents in international sales.
- **Cape Town Convention (2001)**: Covers rules for mobile equipment like airplanes and
ships.
The UK has been slow to adopt many of these conventions, having only accepted the Cape
Town Convention in 2015.

#### 2. Criticism of International Conventions

Some legal experts think these conventions can be confusing and may not work as well as
existing UK laws. They argue that because these conventions are compromises between
different countries’ laws, they might create uncertainty. Others believe that adopting these
conventions can actually make laws clearer and more helpful for international trade.

#### 3. Model Laws

- **Definition**: Model laws are guidelines that countries can choose to follow. They don’t
automatically become law; a country has to decide to adopt them.
- **Examples**:
- **UNCITRAL Model Law on International Commercial Arbitration (1985)**: Influenced the
UK’s Arbitration Act 1996.
- **UNCITRAL Model Law on Cross-Border Insolvency (1997)**: This has been adopted in
the UK to help with company bankruptcies that happen in other countries.

#### 4. Uniform Rules and Trade Terms

- **Definition**: These are standardized rules that businesses can include in their contracts
to make things clearer and more consistent.
- **Examples**:
- **INCOTERMS (2020)**: Rules for shipping and delivery of goods.
- **Uniform Rules for Demand Guarantees (2010)**: Guidelines for guarantees in trade.
- **UCP 600**: Rules for letters of credit, which are used in international payments.

These uniform rules help businesses understand what to expect when trading with
companies from other countries.

### Conclusion
In short, international conventions, model laws, and uniform rules help make trade easier
between countries by creating common standards. While some experts have concerns about
these agreements, they can also provide clarity and support for international business.

Equity in Commercial Law

### Key Points from the Case and Commentary

1. **What is Common Law?**

- Common law is a strict set of rules based on past court decisions. It’s clear and
straightforward.

2. **What is Equity?**
 - Equity is about fairness and justice. It can be more flexible than common law and helps in
situations where strict rules might be unfair.

3. **The Debate**:
- In the past, many business lawyers thought equity should stay out of business because it
could make things complicated. They believed businesses needed clear and fast rules.
- Now, more people believe that equity can help in business, especially since business
practices have become more complex.

### Lord Browne-Wilkinson's View

- He warns that mixing equity with business law too much could create confusion and slow
things down. He recognizes that equity is becoming more accepted in business.

### Sir Peter Millett's Commentary

- **Changing Attitudes**: Equity was once seen as unnecessary in business, but now it is
often welcomed, sometimes too eagerly.
- **Fiduciary Duty**: This means one person must act in the best interest of another, like a
lawyer must do for their client.
- **Constructive Trust**: This is a legal idea where someone who unfairly benefits from
something must share it with the rightful owner.

### Key Takeaways

1. **Old Beliefs**: People used to think equity had no place in business because it could
create uncertainty.
2. **Modern Needs**: Today, many business transactions rely on trust, making equity
important. Professionals often have duties to act in their clients' best interests.
3. **High Standards**: Equity requires higher ethical standards, like loyalty and honesty,
which are important for trust in business.
4. **Legal Strategies**: Lawyers are increasingly using ideas of fiduciary duty in lawsuits,
which can complicate legal cases. This means they need to better understand these
concepts.

### Conclusion
In short, the discussion shows that while there are concerns about using equity in business,
many now see its importance for trust and fairness. The legal community is still figuring out
how to apply these ideas effectively in business situations.

If you have any specific questions or need more clarification, just let me know!

I understand! Let’s simplify it even more and focus on the main ideas without using complex
legal terms.

### Key Points Made Simple

1. **Why Claim Breach of Fiduciary Duty?**

 - **Flexible Rules**: If someone breaks a fiduciary duty, it can be easier to track and
recover money or assets.
- **Get Paid First**: If the other person goes bankrupt, you might be able to get your
money back before other creditors.
- **Easier to Get Compensation**: You might not have to prove as much to get paid for
your losses.
- **More Time to File Claims**: You often have longer to make your claim compared to
regular legal claims.

2. **Courts and Business Relationships**

- Courts are careful about saying that business partners owe each other fiduciary duties
because they expect each party to look out for their own interests.
- If two businesses make a deal, the courts usually won’t interfere unless there’s a special
relationship of trust.

3. **Caution in Applying Equity**

- Judges warn against mixing fairness rules (equity) with strict business rules because it can
create confusion.
- If both parties clearly want to create a trust or fiduciary duty, then the courts will
recognize it.

4. **Context Matters**
- The rules for traditional trusts (like family trusts) shouldn’t be applied directly to business
trusts. Each situation is different.

5. **Using Trusts in Business**

- Businesses often use trusts to protect their interests, especially in financial deals. For
example:
- In loans, a trustee holds the security for lenders.
- In bond issues, a trustee looks after the bondholders’ interests.
- The details of these trusts are usually outlined in contracts.

6. **Importance of Equity in Financial Transactions**

- Equity is important when money is lent or goods are paid for before delivery. If the other
party goes bankrupt, having a trust can help you get your money back.

7. **Proprietary Claims**
- People often rely on their ownership rights to make claims against someone else. Courts
generally want clear ownership rights before recognizing a trust.

8. **Constructive Notice in Business**

- Constructive notice means being aware of something without being directly told. Courts
usually don’t apply this idea in business because it could complicate things.
- Some believe that businesses should only need to check for issues based on common
practices, not as thoroughly as in land deals.

### Conclusion
In short, while fairness rules (equity) can help in business, courts are careful about applying
them. They respect the agreements made between businesses and only apply fairness rules
when it’s clear that both parties want that. Each situation is unique, and businesses often
use trusts to protect their interests in financial transactions.

Sure! Here’s a clearer and more concise summary of RM Goode's views on the codification
of commercial law:

### Summary of RM Goode on Commercial Law

1. **Nature of Commercial Law**:

- Commercial law is not just a collection of rules; it has a distinct philosophy and core
principles.

2. **Philosophy**:
- This philosophy is based on fairness and utility, which guide the law across its various
areas.

3. **Core Concepts**:
- These are specific legal principles that meet the needs of the business community,
primarily in commercial transactions but also applicable in other contexts.

4. **Importance of Coherence**:
- An effective commercial code should reflect this underlying philosophy and core
concepts, rather than simply listing rules.

### Conclusion
Goode argues that understanding the philosophy and principles of commercial law is crucial
for creating a coherent legal framework that effectively supports the business community.

If you need further clarification or details, feel free to ask!

Here’s a clear and concise summary of the philosophy of commercial law as outlined in your
text:

### Philosophy of Commercial Law

1. **Party Autonomy**:
- The principle of party autonomy asserts that businesses should have the freedom to
create their own contracts. A contract is binding, and parties are entitled to the benefits of
their agreements.
2. **Intervention by Courts**:
- Courts should only intervene in contracts when terms are excessively restrictive or
contrary to public interest. The general philosophy supports the sanctity of contracts.

3. **Freedom Under the Law**:

- Upholding contracts promotes freedom and security in business dealings, which is vital
for predictability in commercial transactions.

4. **Limitations on Freedom**:
- While freedom of contract is fundamental, it is not absolute. The Uniform Commercial
Code includes restrictions to ensure good faith, diligence, reasonableness, and care.

5. **Contextual Variability**:
- The extent of judicial or legislative interference in contracts varies based on societal
norms, judges' familiarity with business issues, and the jurisdiction's role in international
commerce.

6. **English Legal Perspective**:

- In England, the prevailing view is that businesses must be self-reliant. Contracts typically
take precedence over equitable considerations in disputes.

7. **International Maxims**:
- There is a tension between the principles of "pacta sunt servanda" (agreements must be
kept) and "rebus sic stantibus" (agreements may change with circumstances). English courts
are generally reluctant to modify long-term contracts based on changed circumstances.

### Conclusion
The philosophy of commercial law emphasizes the importance of party autonomy, the
sanctity of contracts, and the balance between freedom and necessary limitations, reflecting
the complexities of business life and the legal environment.

If you need further details or clarification, feel free to ask!

Here’s a clear and concise summary of the key points regarding predictability, flexibility,
good faith, and self-help in commercial law:

### Key Principles of Commercial Law

1. **Predictability**:
- The business world values predictability in judicial decisions, as it allows for effective
planning and transactions. Different jurisdictions weigh predictability against equity and
flexibility based on their business volume and dispute resolution goals. However, judicial
philosophies can shift over time, leading to changes in liability and legal interpretations.

2. **Flexibility**:
 - Businesses desire both predictability and flexibility to adapt to new practices. The
Uniform Commercial Code (UCC) incorporates flexible language to allow for the evolution of
commercial law while maintaining overarching principles. English courts are generally
responsive to business needs and recognize widely used commercial practices, balancing
innovation with established legal frameworks.

3. **Good Faith**:
- The common law's approach to good faith is inconsistent. Unlike civil law systems, where
good faith is a fundamental requirement in contracts and pre-contractual relationships,
English law does not universally impose a duty of good faith. Parties can act to terminate
contracts even without loss, highlighting a need for a general principle of good faith in
English law.

4. **Encouragement of Self-Help**:
- Common law permits self-help in commercial transactions, allowing parties to take
actions like terminating contracts or repossessing goods without court approval, provided
they do not breach the peace. This approach promotes efficiency and flexibility, which are
essential for smooth business operations.

### Conclusion
These principles reflect the balance that commercial law seeks to achieve between
predictability and flexibility, the role of good faith, and the encouragement of self-help, all of
which are vital for the effective functioning of the business environment.

If you need further details or clarification, feel free to ask!

Facilitation of Security Interests

Sure! Here are some examples to illustrate the key principles of commercial law we
discussed:

### 1. Facilitation of Security Interests

**Example**: **Secured Loan on Equipment**
- **Scenario**: A construction company wants to borrow $100,000 from a bank to buy new
machinery.
- **Security Interest**: The bank allows the loan by taking a security interest in the
machinery. This means if the construction company fails to repay the loan, the bank can take
possession of the machinery without going to court.
- **Outcome**: If the company goes bankrupt, the bank can sell the machinery to recover
its loan before any unsecured creditors (like suppliers who haven’t been paid) get anything.

### 2. Protection of Vested Rights

**Example**: **Ownership of a Car**
- **Scenario**: Alice owns a car and has the title to prove it. Bob, who has no legal claim to
the car, tries to sell it to Charlie.
- **Vested Rights**: Alice’s ownership rights are protected by law. If Charlie buys the car
from Bob, he cannot claim ownership because Bob had no right to sell it.
- **Outcome**: Alice can reclaim her car from Charlie, reinforcing the principle that
property owners should not lose their property without fault.

### 3. Protection of Innocent Third Parties

**Example**: **Buying Goods in Good Faith**
- **Scenario**: David buys a used laptop from a seller at a flea market, believing it to be
legitimate. Unbeknownst to David, the laptop was stolen from its original owner, Emma.
- **Innocent Buyer Protection**: Since David bought the laptop in good faith and had no
knowledge of it being stolen, he is protected under the law.
- **Outcome**: Even though Emma can claim her laptop back, David can keep it because he
purchased it without knowing about the theft. This encourages commerce by allowing
buyers to trust their purchases.

### Summary of Examples

- **Security Interests**: Creditors can secure loans with assets, allowing them to reclaim
those assets if the borrower defaults.
- **Vested Rights**: Property owners are protected from losing their property without a
valid reason.
- **Innocent Third Parties**: Buyers who purchase items in good faith are protected from
losing those items to previous owners who may have claims.

These examples illustrate how these principles work in real-life situations, helping to create a
fair and efficient commercial environment. If you have more questions or need further
clarification, feel free to ask!

What It Means: A market is not just a physical place where people buy and sell; it’s a system
where buyers and sellers interact, often through technology. Prices are determined by
supply and demand.

• Example: Online stock trading platforms like E*TRADE or Robinhood create a market where
investors buy and sell stocks. The prices fluctuate based on how many people want to buy or
sell a stock at any given time.

• Impact on Law: When parties enter contracts in a market, they are expected to follow the
market's customs. For instance, if a seller usually allows a small quantity shortfall in delivery,
that practice can become part of the contract terms.

(b) The Importance of Customs or Usages of a Trade or Locality

• What It Means: Courts recognize established practices within specific trades or regions,
even if they are not written in contracts.
• Example: In the construction industry, it might be customary for contractors to allow a
certain percentage of error in measurements. If a contractor builds a wall that is slightly off,
they might not be held liable if this practice is common in that locality.

• Impact on Law: If a dispute arises, the court may enforce the custom as part of the
contract, even if it wasn’t explicitly stated.

(c) The Importance of a Course of Dealing

• What It Means: When businesses regularly deal with each other, the terms they usually
use can be implied in new contracts.

• Example: If a supplier and a retailer have a history of doing business where late deliveries
are accepted without penalty, that understanding can be assumed in future contracts.

• Impact on Law: Courts may enforce these implied terms, making it easier for businesses to
operate without needing to renegotiate every detail.