The English Commercial Law - the Sale of Goods Act - Research Paper Example

NATIONAL AND INTERNATIONAL SALE OF GOODS The English commercial law is unique among the legal systems around the world in the sense that its commercial rules are integrated into the general practice of the law, with business disputes heard in the same courts under the same judicial principles as other litigations. While this particular system appears problematic because it avoids stark distinctions among contracts – commercial, private and consumer contracts – it is highly regarded in the settlement of commercial disputes internationally. For example, in 2002, out of the seventy-two trials heard in the Commercial List in the High Court, forty-four involved foreign parties. (MacKay and Irvine 2003, p. 347) Background Mercantile law in Britain evolved differently than the other commercial laws in Continental Europe but the Law Merchant has been its foundation of both legal systems: there is an embodiment of the Law Merchant values within the domestic legal systems that were in line with state policy, national interests and domestic mores. The English law of sale of goods traces its roots from the lex mercatoria or ancient mercantile law and is predominantly based on principles developed by the law of contract. The law of sale of goods can be found in one statutory code. In 1893, the English Parliament passed the Sale of Goods Act, which was designed to codify the common law on sale of goods in order to state the effect of the decisions of the courts in a succinct and statutory form. This code has been amended several times and most of the cases herein, particularly those from the pre-1893 period, may not necessarily be referenced. In 1979, a new Sale of Goods Act was passed but that this was a consolidating measure which simply brought together in a tidy form the 1893 Act as it had been amended between 1893 and 1979 and made no changes in the law itself. (Furmston 2000, p. 2) Indeed, with only a couple of exceptions, the section numbers of the 1893 and 1979 Sale of Goods Acts are identical. Technically, the law of sale of goods is for the most part, an exposition of the effect of the Sale of Goods Act of 1979. The Act states that: The rules relating to the law of principal and agent and the effect of fraud, misrepresentations, duress or coercion, mistake or other invalidating cause, apply to contracts for the sale of goods. Lord Irvine cited four principal features that make the English commercial law significant in international trade: First, commercial law is clear and predictable, providing a firm body of rules on which traders can depend. Secondly, it contains a strong and positive law of contract to uphold trading agreements. Thirdly, the law has been shaped by the needs and expectations of merchants, and much business practice has been incorporated into law. Fourthly, Parliament and the courts have made genuine innovations to lead the market economy forward, building on business practice to provide strong frameworks for industry. (p. 347-348) Predictability and Certainty According, Lord Mansfield: 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. (cited in Beale, Bishop and Furmston 2007, p. 402) For this reason, when he became the Lord Chief Justice in 1756, he incorporated mercantile customs directly into common law. Here, when a merchant led evidence of a local custom, its content was evaluated by consulting businessmen and that if the custom was accepted, it became a binding law. It was through this process that Mansfield laid the foundation of the predictable modern English commercial system. The result – a predictable and enforceable commercial law system that sanctified contracts and punished fraud strictly. To demonstrate further the merit of the predictability and certainty of the commercial or the sales of goods law, we have Professor Goode, an imminent English commercial lawyer who argued: The predictability of the legal outcome of a case is more important than absolute justice. It is necessary in a commercial setting that businessmen at least should know where they stand… The last thing that we want to do is to drive business away by vague concepts of fairness which makes judicial decisions unpredictable, and if that means that the outcome of disputes is sometimes hard on a party we regard that as an acceptable price to pay in the interest of the great majority of business litigants. (Goode 1992, p. 7) The problem about the strictness of the English commercial law or the Sales of Goods Act is that there is a significant absence of good faith rules within that would allow for the law to dispense a greater degree of justice and ensure fairness. However, most English lawyers do not agree with the incorporation of such rules because it would “amount to an invitation to judges to give vent to personal values, to refer everything back to supposed universals, and to give up the time-tested tradition of going cautiously from this case or that case to the next case.” (Fleming, Cane and Stapleton 1998, p. 245) In 1997, for instance, the Privy Council refused to order specific performance of a contract for the sale of land to a purchaser who had paid the price 10 minutes too late, time having made expressly of the essence for the performer of the contract. One of the justices, Lord Hoffman, expressly rejected the civil law approach to good faith arguing that the predictability of the legal outcome of a case is more important than absolute justice. (cited in Šarčević and Volken 2001, p. 182) Strict Liability Contracts under the Sale of Goods Act are enforced strictly and usually benefit the buyer. The business seller is strictly liable to his immediate buyer and that Section 14(1) of the Sale of Goods Act, as modified by the Sale and Supply of Goods Act 1994, provides that goods sold by a professional must be of satisfactory quality. The preceding section outlines that goods are of satisfactory quality when they are of quality which a reasonable person would consider satisfactory, taking into account the price, the description of the goods and all other relevant circumstances. The English courts apply the law strictly under the principle of privity of contract. A case in point follows: Half a century ago, Mr. Daniels was a street trader and Mrs. Tarbard operated a pub in the South London neighborhood of Battersea. Mr. Daniels purchased a bottle of R. White’s lemonade from Mrs. Tarbard at her pub. Carbolic acid was in the lemonade, and Mr. And Mrs. Daniels suffered accordingly. Carbolic acid must have combined with the lemonade in R. White’s bottling plant, for the bottle remained sealed until used by Mr. And Mrs. Daniels. They sued the manufacturer of the lemonade as well as Mrs. Tarbard. (Feinberg, Coleman and Buchanan, p. 82) In the abovementioned case, the judge applied the negligence test for manufacturer’s liability, found that the evidence had not established negligence, and absolved the manufacturer from any legal liability whatsoever. However, the Sale of Goods Act made Mrs. Tarbard liable to Mr. Daniels for the reason that she sold him “goods of unmerchantable quality.” (Feinberg, Coleman and Buchanan, p. 82) While the judge acknowledged that Mrs. Tarbard was entirely innocent and blameless in the matter, he held her liable still for Mr. Daniel’s loss because the law mandated such judgment. As one could see the judged have expressed that the verdict was morally defensible although unfair to Mrs. Tarbard; that, there is a strict imposition of liability on retailers despite regrettable applications. This case tells us about the British commercial law and the Sales of Goods Act in general: the judicial decision is predictable and contribute to the certainty of the law by upholding it; by, as stressed by Neil MacCormick, applying known rules identified in accordance with the commonly shared and understood criteria of recognition. (cited in Lyons 1993, p. 129) As a consequence, the judges stay within their assigned place in the legal system, that is by remaining true to their role as the ones applying the established law rather than inventing new laws. Changes The strictness of the English commercial law as well as its insistence that undertakings in commercial agreements must be fully and punctually performed could be unattractive to some lawyers from other legal systems but it is the very characteristic of the English law: the very rigour of the common law of contract with its adherence to certainty over equity. As mentioned elsewhere in this paper, the English courts is one of the most preferred legal systems in settling commercial disputes around the world. And certainly, from the words of the British jurists, it is one of the features that sets the British legal system apart and so they cultivate it to attract business and not just commercial litigants. Indeed, there is very little body of literature that discusses a need for a revision in the strictness of the English commercial system. There is also very little public interest to the subject, nor political pressure for amendments simply because the commercial law works just fine as it is. The English commercial law has evolved over the course of the last century and that the trading forms have been refined in the light of the problems that have been thrown up in the course of litigation over the period. However, the main characteristics – certainty, predictability and strictness – remain as the cornerstones of the English commercial law. I would like to use the word “refining” instead of “amendment” to describe the changes that the Parliament has made in the English commercial law. Today, the English commercial law is moving towards an era when a great deal of strict and specific statute law is being replaced by discretions of one kind or another. According to P. S. Atiyah (1978), the proliferation of these discretions appeared to arise at least in part from the realization that legislation simply cannot anticipate and provide for the great variety of cases which are likely to arise, and that Parliament prefers to proceed in partnership with the judiciary. (cited in Fleming, Cane and Stapleton, p. 247) Changes were made these past years in the English commercial law, but they did not make any substantial changes to the general commercial regulations. The strength of the English commercial law as has been established in this paper is in its uniqueness – its system that places certainty over equity. Such body of laws has facilitated the growth of domestic and international business operating in Britain. However, the times are changing. As globalisation seizes the world, Britain cannot operate in the twenty-first century with commercial enacted in the nineteenth century and even earlier. This is not to say that changes must be made in terms of the principles of predictability, certainty and strictness. I would like to use B.S. Markesan’s’ (2002) idea about introducing an additional code covering a limited number of transactions such as sale of goods, security in movables, electronic fund transfers, investment securities and perhaps suretyship guarantees. (p. 23) This way the commercial would be abreast with the commercial developments which right now is only covered but only to some extent by the ingenuity of the courts. In addition, efforts must also be made to consolidate a commercial law that would include all of the British Isles. This paper is not advocating a revision of what the English commercial law stands for. Instead, it is for the refinement or updating of the code. Today, exclusive dependence on national law no longer serve the best interest of international business community always. There is now in existence a set of principles of transnational commercial law which span national boundaries and are designed to respond specifically to the distinctive needs of trans-national trade. Then, there’s the European Court of Justice to consider, the application of the United Nations Convention on Contracts for International Sale of Goods, as well. The bottom line is that the isolationist standpoint in the commercial law must eventually pave the way for a code that is responsive to the transnational commerce and commercial law. According to Markesinis, “the code should reflect the legitimate needs of the market, set out key principles clearly and succinctly, show its reason on its face, and, through an open texture and incorporation of reference to trade usage, provide its own internal mechanism for adjustment to change.” (p. 24) As I see it, the strictness, predictability and certainty variables would not necessarily hinder the achievement of such a code. References Atiyah, P.S. (1985). From Principles to Pragmatism. University of Michigan. Beale, H.G., Bishop, W.D., and Furmston, M.P. (2007). Contract: Cases and Materials. Oxford University Press. Feinberg, J., Coleman, J., and Buchanan, A. (1994). In Harm's Way: Essays in Honor of Joel Feinberg. Cambridge University Press. De Cruz, P. (1999). Comparative Law in a Changing World. London: Routledge. Fleming, J., Cane, P., and Stapleton, J. (1998). The Law of Obligations: Essays in Celebration of John Fleming. Oxford University Press. Furmston, M. (2000). Sale and Supply of Goods. London: Routledge. Goode. (1992). ‘The Concept of 'Good Faith' in English Law'. Saggi, Conferenze e Seminari, Centro di studi e ricerche di dirito comparato e straniero. Lyons, D. (1993). Moral aspects of legal theory: essays on law, justice, and political responsibility. Cambridge University Press. Mackay, Alexander and Irvine of Lairg. (2003). Human rights, constitutional law and the development of the English legal system: selected essays. Hart Publishing. Markesinis, B.S. (2002). The British Contribution to the Europe of the Twenty-First Century: British Academy Centenary Lectures. Hart Publishing. Šarčević, P. and Volken, P. (2001). The International Sale of Goods Revisited. Kluwer Law International. Thomas, W. (ed.). (1980). The Sale of Goods Act 1979. Taylor & Francis. Read More