Commercial Law: An Overview

Session 1: Introduction to Commercial Law

• Applies to wider economic, political, social, and technological developments.
• Land law developed first in agricultural economies.

Medieval Merchant Law (Lex Mercatoria)

• Distinct source of rights involving maritime trade.
• Administered by courts where merchants were judges.
• Laws are based on customs and usages of merchants.
• Before statutes, merchant law was incorporated into or replaced by common law.

18th-19th Century Developments

• Shift from agricultural economies to manufacturing and international trade led to the development of personal property law.
• Development of two categories of personal property.
  • Goods or chattels can be controlled by physical possession.
  • Intangibles (in action): Pure intangibles have no proprietary relation with any physical item, while documentary intangibles have value embedded in a document.

Nature of Commercial Law

• Branch of law concerned with rights and duties arising from the supply of goods and services in trade.
• Scope is not clearly defined, existing as a distinct field or an agglomeration of different subjects.
• Common themes exist in the legal treatment of commercial transactions.
  • Free flow of trade and legitimacy of parties who acquire interests in commercial property.
  • Transactions based in contract.
• Contextual subject that lacks a particular legal concept.
• Collection of rules and principles that apply to dealings between parties in business.
• Distinguishable from other contexts like family, private, and tort law.

Scope of Commercial Law

• Broad category applicable to a wide range of transactions.
  • Includes manufacturing, trade of goods, commercial real estate, construction, infrastructure, energy, natural resources, supply of services, digital technology, insurance, intellectual property maritime, and aviation.

Sources of Commercial Law

• Statute law builds upon case law in commercial law, an area of private law.
• Statutes counter common law and codify commercial law for market participants.
• Distinctive feature as responsiveness to commercial practice, making it a source of commercial law.

Academic Principles and the Essence of Commercial Law

• Advances in commercial law respond to the demands of commerciality.
• Judicial objective in commercial law is to facilitate business transactions, not hinder them.
• Primary goal is to give effect to these transactions by improving business interactions.

Definition and Key Attributes of Commercial Law

• Body of commercial law is complex, with rules from different sources.
• Lacks a self-contained code, or integrated body of principles.
• Can be viewed as a group of statutes with shifting case law.
• Alternative: Seen as how law responds to business needs and practices, it becomes defined.
• Constantly adapts to new business procedures, instruments, demands, and technologies.
• Incorporates rules, usages, and documents from the business world.
• Streamlines legitimate commercial development.
• Commercial parties trade in property, services, and credit (money or money's worth).
• Commercial law contains rules governing when and how a person can bargain with another.
• Rules exist with the goal of creating interests in assets, or disposing of them.

Risks in Commercial Dealings

• Transactions typically involve exchanging money for performance.
• Encompasses two basic risks:
  • Performance and credit risk.
• General risks include legal, reputational, personnel (health and safety), environmental, and market risks.
• Specific or inherent risks are tied to aspects like the property's nature, the parties involved, intended use, the field/industry, the legal context (regulation), and the social, political, and economic context.
• Commercial parties manage risks primarily through contracts.

Fundamental Legal Concepts

• Commercial Law builds on legal concepts from specific types of law
  • Property law: proprietary rights are rights that the individual has against property
  • Law of obligations: rights that individuals have against each other (can be consensual or imposed by law)

Role of Contracts

• Contracts as the most important type of consensual obligation:
• Agreement as the foundation on which commercial law rests.
• A large part of contract law is commercial law, therefore most historical case law involves commercial parties.

Other Consensual and Legal Obligations

• Commercial dealings involve non-reciprocal consensual obligations
• Promises lacking in reciprocity can be enforced in the form of a deed.
• Legal obligations also arise in tort, equity, or statute.

Session 2: Law of Agency: Introduction

• Commercial activity is conducted by legal persons
  • Natural persons
  • Artificial legal persons
• Law creates/regulates legal forms (business vehicles) through which people engage in business.
• Categories for conducting commercial activity.
  • Unincorporated entities.
  • Incorporated entities are created by statute and are legal persons separate from those who conduct the business, granting separate legal personality.

Unincorporated Entities: Sole Traders

• Minimal regulatory requirements.
  • Tax registration is required
  • No need to register documents, or trading name.
  • Income is treated as personal and may see a high tax rate
  • Debts are met with sole and personal liability.
• Legal forms for commercial activity and vary by:
  • Business management.
  • Debt liability.
  • Tax treatment.
  • Income handling.
  • Regulatory demands.
  • A sole trader operates a business in their own name, is the owner and manager of the business.
• Sole traders have unlimited personal liability for business debts. Business income is treated as personal taxable income.

Understanding Agency

• Doctrine of privity of contract
  • Only the parties involved in a contract have rights and obligations. In construction, the landowner can't sue subcontractors due to privity.
• Doctrine of Agency solves this challenge and provides an exception:
  • Allows one person to make contracts on behalf of another (principal).
  • Principal is bound by the contract and parties under agency law.
  • Agent merely acts on behalf of the principal.

Defining and Establishing Agency

• Agent defined as someone who acts for and is subject to another person's control (principal).
• Agents may be natural/artificial legal persons
• An agency relationship arises in two ways
  • Created by Contract: Agency terms are agreed on
  • Implied by Law: Agency circumstances even without intent (ex: business partners, company directors, employees,)

Disclosed and Undisclosed Principals: Agents and Their Principals

• Agent may act for a Disclosed principal: a third party knows that the agent is acting for another
• Agent may act for an Undisclosed principal: third party is unaware the act is for another person.

Legal Implications in Court Depending on Circumstances

• Undisclosed Principal Circumstances
  • Principal can sue and be sued under that contract.
  • Agent may also be sued or be subject to lawsuit by contracted third party under jurisdiction
• Disclosed Principal circumstances
  • The agent is unable to be sued or make a legal suit since their actions are acting for/on behalf of another person.

Commercial Agency Relationships: Examples

• Commercial or Mercantile Agent: buys/sells goods for a principal (e.g., local agent for a foreign exporter).
• Broker: arranges sales/transactions (e.g., stockbroker, customs broker).
• Auctioneer: Sells property for a principal.
• Company Director: Acts on behalf of a company.
• Employee: Acts on behalf of their employer.

Legal Foundation of Agency Law

• Primarily found in case law.
• Very little statute law, with some such as the Factors Act 1889.

Creation of Agency Relationships

• Basic ways to create agency: by agreement, through ratification, under apparent authority and necessity.

Express Agency - Direct Agreement

• Express agreement commonly involves a formal contract, such as an agency agreement, or it may be implied by the parties' conduct.
• In implied authority: when a person is routinely authorized to act on behalf of the principal can validate authorization in many business situations.

Agency by Ratification and Ostensible Authority

• Ratification:

  • Approval of action from a non-agent retrospectively validate the contract, legally obligating the principal.
  • Agent's authority to act outside agreed relationships if unvalidated will turn into personal liability for those contracts.

• Ostensible Authority:

  • A person misleads third-party into assigning authority, in which the Principal by words and actions cause to exist an agent or relationship, it still takes responsibility as if acting with the full agent approval, and is bound by its contracts.

Court Judgements for the principle of Estoppel

• Representation is one of fact, and must relate to circumstances that could reasonably prove the agents authority
• Representation rests with all facts from the people in the circumstances, not purely law.
• The Principal's actions must be made and directly seen/taken as so by a third party. Rests most in situations that establish this representation, and cannot be taken to court without that situation arising.

Agency Established by Necessity

• Limited category: it is necessary for a person to make contracts for another's benefit, even without having the authority of the individual.

Termination and Agent Authority

• Agency may stop by
  • Agreement
  • Death/dissolution
  • Transfer
  • Bankruptcy.
• Authority of Agent
  • Agents must work within their Principal's set authority
    • Actions inside are legally binding, actions outside make Agents liable and able to be subsequentially ratifying the process.
  • Agent Authority is known by what a principle knows.
    • Made available expressly by principal, writing, or impliedly from the given circumstances.

Express and Implied Authority

• Express Authority:* If an agreements is made, it is given as explicit, like those agreements of a written agent or salesman.
• Implied Authority:* Actions or conduct made to make a action in agreement with circumstantial agreement.

Apparent Authority and Agent Duties

• Apparent Authority:* Actions based or similar in implied likeness, but more related to a common law or general practice between agent and agreement.
• Law Common Duties Obligation:* Common duties of a principal for their agents includes renumeration with their work, protect from liability that the agent might reasonably suffer.

Agents Duties

Contractual duties:

1. A principle acts in contractual specifications, agreements laid out in the contract.
2. Act according to loyalty and honesty in conduct.

Session 3: Partnerships-Unincorporated Business Formations

• Unincorporated Business Organizations are businesses that are not individual/separate from their owner's.
  • Risks of operating the business are held by the parties that hold them.
  • Personal assets of individuals are at as much risk as business that is in operation.
• One of the simplest examples as an individual: a single person runs the entire operation acting on their own/under a specific registered trading name
  • They manage the business, receive all income and are held to the liability/claims depending on circumstances.
• Agency's partnership between legal persons, and at law.
  • An agent is one who a Principle authorizes to act on their, subject to their direct control.
  • Principle as a person, natural, or artificial.
  • Agreements for this form can be both written implicitly; at a case of legal authority and by necessity.

Partnership Types

• Section 1 Partnership Act 1980, between two or more people in a relationship.
• General Partnerships as standard and common.
• Smaller but larger partnerships.

3 Types of Partnership

• Ordinary/general
• Limited partnership
• Liability partnership - (LLP).
• No legal requirements (except for good business practice agreements/documentation).
• Business venture must start showing all partners making a profit.
• Deembing the establishment exists if that is the stated goal.

General Partnership: Models and Assets

General Partnership Model

• Unless specified, Sect. 24 Partnership Act 1890 Sets the Partner rights and responsibilities to each member
  • Capitals and assets/profits.
• Two Types of Assets* a) contribute and share capital (money or other asset)
  • investors or those whom manage business b) silent and investors Equity and Dormant partners usually share profits, full/ part time worker take regular income.
• Partnership Assets. Property* a) firm assets, used to pay partnership debts/liabilities. b) personal property, personal not related as creditor claims.

Existence of and the Liability of General Partnerships and Evidence

• Includes*
• contributions to partnership capital
• contribution to partnership property
• entitlements to share profits (even as salary)
• Base of liability*: the obligations that the contract makes the parties in it in
• contractual obligations partnership agreement
• agency law
• general law.

Contractual Liability and Agency

• Agreements made that adhere and determine such as contributions, distribution, allocation/Indemnity and what those parties agree to with them.
• Agents act with other partners and with agency to make such things and contracts.

Authority of Agents

• Actual authority is specified agreement with partner agreed, while Implied shows a 3rd party's assumption to act as and with.

Law and partnership Mercantile Credit

Parties agreed to selling/repairing cars, restricted partnership to sales specifically, agreement sold car sold for claimant.

• Held*: authority normal to be accepted with agreements sold, and with restrictions it could show the agreement.

Legal Rights and Liability With Duties Section 24

• General partnerships have no legal personality: not separate from Individual partners by liability under law.
• 3rd parties are contracting all the partners as individuals, and is liable for the partnership's business. - Ex. Assets at stake when the business can pay.
• Personal actions of the debt made. Jointly with other partners when it is liable under debt and liabilities.

Duty to each agreement, Section 5 Legal Contract

• Agency of the law means for law loyal/honest and with best intentional skill/care as that is in partnership.
• Agreement contains clauses for action from disclose, compete, benefit and company connections.

Partnership Departure

• Section 17 Act: Liability remains for debts and obligation on the day of.
• Section 25 Act*: The right exists to expel writing.

Section 32-34 Automated Agreement

• the following a. A set deadline from the expiry b. Particular of creation c. Notice of all. d. Death/bankruptcy - illegality.

The Law Limited Partnership

• Limited partnership is*

• the act, with one or more that is authorized for limited liabilities.

• One person acts with unlimited liability - if that person acts with unlimited the 2nd is authorized.

• Partnership Liability that is limited with partnership*: Funds that cannot withdraw if needed, has lack of opportunity.

Otherwise it is unlimitable, incurred and necessary to follow those guidelines. Must follow any debts or payments with it.

Limited Liability and the Act

• House register and general partnerships also exist.

Limited Liability Partnerships (LLP)

• Introduction* A different set from those, that more aligned under structure

Section1, associated with the purpose and view that if profitable under Companies Act. A body corporate for an existing company, and does not affect existence after joining the company.

Has rights as either with contracts, property, or sued. Need for registers exist. Undergo liability with assets. If 1 months exists. General/duties and rights. Have extra. Responds to change, shares or transfer, act-law agents ect.

Session 4: Companies-Key Features and Introduction

• Companies Overview and Definition*
• Legal Personality Doctrine* the law sees and recognizes the company as a legal and as so creates the legal person. Compared. A Trader has most legal liability. Ordinary and debts. Personal other parties, partners that can see profit as well as be legally obligated . Capital owned by shareholders.