Introduction

Commercial activities range from the simple buying and selling of goods in the most basic of contexts to the complex of situations involving multinational investment contracts. Commercial activities contribute not only to the lives of those who actively take part in trade but also the society and to a wide respect the state. Like any sector of society, trade and commerce in general is subject to some form of regulation. Thus, commercial law seeks to fill this niche. Commercial law has no singular definition. The term itself is slippery and capable of a vast number of definitions and interpretations mainly dependent on the legal and societal backgrounds. However, many scholars tend to agree with Henry Disney’s definition. According to Henry Disney, the term commercial law is the term associated with the rules that regulate the sale of goods and services and all other supplementary agreements thereunder.

The definition of commercial law adopted by other legal publicists varies slightly from the above. In that respect, commercial law is hence the branch of law that seeks to regulate how such activities are carried out in the conduct of trade and commerce. These rules and regulations are further supplemented in their application by principles. Accordingly, Goode argues that based on this assertion, commercial law is a set of rules and regulations that seeks t meet the needs of the mercantile community. Others tend to have a somewhat similar definition and this is heavily ted to the historical account of the formation of commercial law.

Principles of commercial law, unlike the rules have a different framework for development and application and seek to guide the application of the commercial law rules. To better assess the veracity of this statement it important to interrogate the historical development of commercial law and assess how principles play a part in the development of commercial law. This paper seeks to first detail the historical background of commercial law rules. The paper shall then identify and discuss the unifying principles of commercial law and highlight its importance. 

Historical development and background of commercial law

Commercial law emerged out of a system of practice and common trade. Its development was almost spontaneous. Hence, a clear exact date for its formation cannot be narrowed down on. However, commercial law can be traced to times as early as the beginning of trading transactions. In the past, people would transact on various goods and commodities. The commercial transactions were rudimentary and would most of the times involve barter trade where currency was yet to be introduced. This was mainly after the growth of agriculture and more so agriculture as an economic activity and not as a merely for subsistence. 

Thus, in or around early civilizations, the sale and purchase of agricultural produce was booming. Furthermore, the primitive advancements in early industry, there was also the sale of farm implements and metal ores. There were also commercial activities in parts of Africa particularly long-distance trade around costal states with travelers from the East and Europe. Such commercial activities led to the establishment of early cities and empires such as Persia and the Mali. These activities also contributed heavily to ventures by the Spanish and Portuguese in the search for spices leading to the discovery of new lands and people.

The developments in trade became more advanced. It developed from small interpersonal interactions between two or more people into a vast network of traders. New players were introduced as the great distances made it impossible for one trader to do all that pertained to trade. Therefore, middlemen were introduced. Brokers, transporters and even agents became new players in the early trade scene. It is these merchants who spearheaded the development of commercial law. 

However, human interactions rarely go without the occasional brushing of shoulders. Disputes would emerge over a variety of issues. For instance, with the promises or arrangements for supply of certain products, fulfilment of such pacts would have disputes especially when a party is alleged to be in breach of the pact. Furthermore, there were issues around enforcing pacts and agreements. With the introduction of currency, there were disputes as to the rates and as to payment of consideration. 

There was hence a need to introduce a form of regulation on the activities carried out by traders. These rules were invented by merchants in various markets but bore unform precepts and features. They were referred to as the Laws of Merchants or lex mercatoria. These rules as can be seen from their name were laws made by merchants and for the conduct of commerce. These laws governed trade and such can be seen from the historical accounts dating back to the eleventh century. The lex mercatoria gained prominence out of practice. The laws themselves revolved around common practices by the merchants themselves. What was regulated was not something foreign but something they had been carrying out for a sustained period of time. It simply sought to embody these laws into a uniform set of laws to guide the trade and establish them in some binding form. 

It is hence arguable that the lex mercatoria were a binding set of rules arising out of custom and common practice. Therefore, what was practised was considered good and hence the lex mercatoria recognised such activities as law. Those activities not practiced were frowned upon and as a result the law did not provide or punished such practices. This led to certain innovations into the lex mercatoria. Such developments include the introduction of documentation such as bill of lading in marine transactions and transport. Introduction of contracts for supply and purchase. Bills of sale and generally a great deal of accounting. To enforce such agreements and deal with disputes the Courts of Admiralty recognised the need to resolve merchant disputes and applied the lex mercatoria in the resolution of disputes as the guiding and binding law.  

Based on the constant practise in the courts and by the merchants, lex mercatoria became fully established as a source of law in the common law by the eighteenth century and was more established. It became more binding in the nineteenth and twentieth century where the laws and rules formerly part of lex mercatoria were now part of the legislation in form of the Bill of Sale Act (1873), Sale of Goods Act (1893), Contract Law Act (1990), Marine Insurance Act (1906) and the Customs and Excise Management Act (1979). Innovations have been made as to the current commercial law and further developments are being made to meet the demands of the everchanging society.

Unifying Principles of Commercial law.

As earlier stated, Commercial law is a blanket term for a variety of mercantile transactions. Each transaction has the respective rules and subrules that govern it. As a result, these transactions cannot be summed into one singular regulation or law but there will be an emergence of laws and rules with norms and principles to regulate the various transactions. However, the various transactions bear certain similarities as certain principles are adhered to. These unifying principles guide the application of commercial law and seek to embody the practice of commerce in a uniform and predictable manner. Be it a marine transit of goods to the sale of services in an office set up, these principles are hence unifying considerations made for the conduct of commerce.

The principles include:

• Concept of the Market

The concept of the market is the most basic principle as it goes to the very heart of commercial law discourse. The market is simply the name attached to the point at which the prospective buyer meets the prospective seller. It need not be a physical place as online shopping clearly illustrates that online web pages can be used for business transactions. The concept of the market is made more relevant when looking into the transactions and dealing therein, as they involve the dealing between merchants whose primary mode of interaction is in a market sort of set up.

The concept of the market plays a key part in the conduct of mercantile transactions as it determines the customs and usages of the community of merchants thereunder. The market serves as the community under which the mercantile agents are in. Therefore whatever customs the group of merchants are subject to is dependent on the market they transact in. For instance, the market in a fish trading centre will be different to that in the securities market and each will have differing customs in this regard.

Also, from a legal point of view, the market serves as a reference point in various transactions. In cases of pricing for instance, parties will seek to reach a decision as to the rate applicable that favours both sides. Thus, the market price in their respective market can be taken to be the price as it serves as a fair and equitable middle ground. Such was adopted in the case of Gebruder Metal Mann GmbH & Co v NBR (London), where the market price was adopted as the reference price in a contract where the stipulation as to price was unclear.

• The Principle Customs and Usage in Locality

As earlier alluded to, the practice of commerce and commercial law in general is a creature of customs and usage. Therefore, commercial laws will recognise the customs in the respective markets. Furthermore, commercial courts will uphold customs and usage in a specific or locality. This was evident first in the case of Cropper v Crook where the claimant was an agent in the London stock exchange. In this case the custom was for the agent to purchase the shares in his own name then inform the principal about the transaction. The court upheld this as the custom and hence there was nothing unreasonable about this transaction.

Further in the case of Sweeting v Pearce the court held that where a party acts against an established custom, in this case the custom of underwriting in the Insurance market, that action will be unreasonable. Customs are applicable especially where there is no contract, the contract is vague or ambiguous and/or the law is silent. Customs hence fill lacunas in the transactions and contractual obligations. However, usage and customs are subject to considerations as to whether such customs are reasonable and whether there is knowledge of both customs by the parties to the transactions.

• Course of Dealing

Course of dealing is an important concept in commercial law. Course of dealing applies whether or not the contractual provisions are noted down in writing or not. As such, there is need to usual terms in the conduct of business apply. Therefore, certain activities and concepts such as the concept of due diligence will apply in the case of commercial transactions. For instance, in the case of Garnac Grain v H M Faure & Fairclough, The court held that earlier words and terms could show evidence of course of dealing.

Therefore, what is needed is that their proof that there is some sort of activities reasonably expected in the course of conducting a business activity failure of which there is an unreasonable deviation from the normal conduct of business. The course of dealing helps in the commercial law by providing a somewhat, predictable outcome to various business transactions. So, course of dealing helps in general gap filling and guides both contract formation and enforcement. Hence, such practices are read into the contract and provide more weight on the mercantile duties. 

• Principle of Good Faith.

In the case of Cadbury Schweppes, the court held that there is an overriding objective in commercial law to act in good faith. Such a duty goes above and beyond other duties. From this it is clear that the duty to act in good faith is not only important in commercial law but it forms a key principle without which commercial law contracts will be rendered meaningless. There is no single definition to the term “good faith” however, few have endeavoured to define the principle into a concise definition, ut many seek to define what acts would amount to actions of good faith. For instance, Rimer J in the Re Tack case, held that the requirement of an agent to act in integrity and transparency would amount to good faith. In the case of Clark, the court held that acting in due diligence in carrying out one’s duties was good faith. 

Furthermore, the failure to act in a certain manner would imply that one has failed to act in good faith. For instance, the failure to give notice to the other party and failure to undertake some sort of investigation as to the validity of contracts. There is hence an implied duty for one to act in good faith that supersedes other requirements and obligations. This also goes into the negotiation and deliberations as to contractual agreements and considerations as to the party’s duties.

• Principle of the Sanctity of the Agreement

The law of contracts and commercial law are tied at the hip. Therefore, there is an implied obligation that where an agreement is made between two or more parties, these parties having duly agreed and accepted to the clauses therein, both parties should fulfil their end of the bargain. Accordingly, each party is to fulfil its end of the agreement within the stipulated time and on the standard and threshold agreed on. 

Thus, in a contract for the supply of logs to a paper factory for instance, if the contract stipulates a drop of for the lumber at 6:00pm on Saturday and subsequent payment via wire transfer on the following day, both parties are under a duty to transport the lumber in or on time and pay the consideration. Issues of breach or non-performance will taint the sanctity of the contract. Consequently, parties will be free to contract, accept the terms or back out of the contract.  There should be an agreement and not a situation of one party strong arming the other into submission. 

Therefore, it forms the basis for contract concepts such as duress, undue influence and unconscionability as such threaten the bargaining power and independent reason of parties to an agreement. Moreover, it will go against the principle of sanctity of agreement where the agreement attaches liability and responsibility on a person who is not privy to the contract.

• The Principle of negotiability.

This principle/concept s closely tied to the principle of sanctity of contract and draws back to the historical creation of commercial law. As such, negotiability implies that commercial law embodies a wide range of transactions which entitle the participants the freedom to choose whether or not to participate. Moreover, these transactions involve back and forth discussions seeking to find a middle ground. Hence, in most of these transactions and activities parties will end up negotiating and bargaining. The principle of negotiability imply tries to create borders for a fair bargaining process that is both fair and beneficial. It also recognises that anything is negotiable and parties can go back to the drawing board where a certain fact or issue is not acting in their best interest.

Conclusion

Commercial law seeks to deal in commerce and trade. It seeks to establish boundaries, to regulate transactions and to provide some sort of order. It seeks to enforce and punish breach of duty. The laws also seek to develop and improve the state of trade by promoting equity in bargains. In the application of these laws, the policies and principles play a key role as to the integrity and reliability of the laws and provide for an important avenue in the interpretation and construction of legislation and contractual stipulations. As a result, they form not only an important part of commercial law but are generally in place to unify the different laws governing specific commercial transactions. 

Bibliography

Books and Articles

Havenga, Peter, and Michele Kyra Havenga. General principles of commercial law. (Juta and Company Ltd, 2007).

Farnsworth, Allan. ‘Good faith performance and commercial reasonableness under the Uniform Commercial Code’ (1962) 30 U. Chi. L. Rev. 666.

Mackin Gerald. ‘Commercial Law-Course of Dealing and Usage of Trade Affect Express Terms’ (1973) Wis. L. Rev. 934.

Goode, Roy, Herbert Kronke, and Ewan McKendrick. Transnational commercial law: text, cases, and materials. (Oxford University Press, 2015).

Goode, Roy, ‘The codification of commercial law’, (1998) Monash UL Rev. 14, 135.

Clarke, Malcolm Alistair, et al. Commercial law: Text, cases, and materials. (Oxford University Press, 2017).

Devlin, Patrick. ‘The relation between commercial law and commercial practice’ (1951) Mod. L. Rev. 14, 249.

Disney, Henry William. The Elements of Commercial Law. (Macdonald and Evans, 1908).

Ryder, Nicholas, Margaret Griffiths, and Lachmi Singh. Commercial law: Principles and policy. (Cambridge University Press, 2012).

Rogers, James Steven. The early history of the law of bills and notes: a study of the origins of Anglo-American commercial law. (Cambridge University Press, 2004).

Weber, Max. The history of commercial partnerships in the Middle Ages. (Rowman & Littlefield, 2003).

Lowengart, Oded. ‘Reference price conceptualisations: An integrative framework of analysis’ (2002) Journal of Marketing Management 18, 171.

Petres Zoltan. ‘Behind Every Mask… Is Another Mask-Structural Considerations on Trade Usages in International Commercial Law-Dissolving Some Confusions’ (2020) Juridical Trib. 10, 289.

Gilmore, Grant. ‘On the Difficulties of Codifying Commercial Law.’ (1947) Yale LJ 57, 1341.

Hadfield, Gillian ‘Privatizing commercial law’ (2001) Regulation 24, 40.

Aleka Mandaraka-Sheppard Modern Admiralty Law; With Risk Management Aspects, (Cavendish Publishing Limited, London 2001).

Table of cases

OBG Ltd v. Allan [2007] UKHL 21

Phillips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472

Re Megevand ex parte Delhasse [1878] 26 WR 338 

Paragon Finance Ltd v Nash [2001] EWCA 1466

Clarke v Clarke’s Trustees (1925) SC 693.

Gebruder Metal Mann GmbH & Co v NBR (London) [1984] 1 Lloyd’s Rep 614

Garnac Grain v H M Faure & Fairclough [1967] 3 WLR 143.

Re Tack case [2000] BPIR 164.

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