Commercial Practice and English Law - Literature review Example

Abstract The essay discusses commercial practice from the perspective of English law. The essay also analyses the ‘The authority of an agent to bind his principal’ as well as ‘Risk for lost or damaged goods where they are sold on FOB or CIF terms‘, from the standpoint of English Law. Commercial Practice and English Law Introduction It is generally considered that the commercial all of the united kingdom facilitates and encourages international trade, by having a set of simple rules which the English courts strictly follow And applied to aspects such as ‘Cost Insurance And Freight’ and ‘Free On Board’ contracts. These responses by the UK commercial law are to the needs of the global business community. The international trade terms are generally applied with respect to CIF and FOB contracts under the Hague-Visby Rules 1924, Carriage of Goods by Sea Act 1971, Sale of Goods Act 1979 and International Sale of Goods 1980. Regarding the United Kingdom’s Commercial Law and its relationship with international trade, there is a divided opinion. Some feel that the provisions and conventions assist in international trade while others are of the view that the UK law does not respond to the requirements of global business communities as much as some other countries do. The rules which generally applied to CIF and FOB contracts are also called ‘Legal Certainty and Predictability’. Robert Bradgate states: ‘A’s tortilla would be categorized under the following five headings: a) ‘actual’ authority where P consents in advance to A’s action, giving A actual authority to act in a certain manner and bind P. Actual authority maybe express or implied. b) Apparent authoriyty where A appears to T to have authority, whether he actually has it or not; his actions again bind P. c) ‘Usual’ or ‘customary’ what or to where A has authority which a person in his position usually, or customarily, has; this type of authorti can either expand the scope of A’s actual or apparent authority, or be seen as an independent head of authority. d) Authority by ratification where, although A does not have authority at the time when he acts on P’s behalf, P later rectifies or adopts A’s actions and is thus bound by them. e) Agency of necessity, where due to an emergency situation, A is vested, by operation of the law; with authority to act in a way not actually authorized by P.’ 1 Under international trade, there is a particular rule which is that the parties what are involved in a contract will be making a decision on which the law their contract would be governed by. In case there is a breach of contract, parties are clear which particular contract has been breached. For example, if the two parties in the contract make a decision that they’ll be governed by English law or in other words, the Carriage of Goods by Sea Act of 1992 and the Sales of Goods Act of 1979 would be applied. There is another important term called the ‘Bill Of Lading’ which is basically a receipt sent by the shipper which certifies the quantity and the condition of the goods which has been shipped. Free on board for FOB is term which is exclusively used for land waterway and sea transport only. The Free On Board means that the seller who is sending the goods through a ship fulfill this responsibility once the goods has been transported to the port and loaded onto the ship. Once goods are loaded onto the ship, the responsibility there lies on the buyer. Therefore if there is a loss or damage of goods from that spot, the loss needs to be borne by the buyer. On the other hand, CIF or ‘Cost Insurance And Freight’ means that the seller has the sole responsibility of Condition of the goods unless and until the goods can reach to the destination port, where it will be picked up by the by buyer. Hence, the center needs to make a contract of carriage with the shipper and specify its destination port where the goods will be delivered. In the United Kingdom, the seller might also have to make a contract with the insurance so as to cover the goods during the transit process. The relevant documents are then passed on by the seller to the buyer, documents such as a list of goods and the price, the bill of lading, the insurance policy and other relevant documents are handed over to the buyer. After the buyer receives the goods at the destination port, the risk of damage or loss is borne by the buyer. The Authority of An Agent To Bind His Principal There were a number of notable FOB cases in the United Kingdom, one of them being the famous Cowasjee v Thompson. In this particular case, the court ruled that the sellers would not be able to stop the Goods from sailing to their buyers, notwithstanding the fact that the buyers had become bankrupt at that time when the ship was sailing. Since the goods were over the ship’s rails, the sellers did not have the right to stop the goods from reaching the buyers. However the most important case pertaining to the FOB in the UK was the Pyrene Co. Ltd v Scindia Navigation Co. Ltd. Devlin J holding were the first to recognize that FOB contracts not that rigid but they can be used as flexible instruments. Hence, the parties in the contract could finalize different terms or terms which they found to be convenient. Devlin J further went on to state that FOB variants can be of three types. In the first variation of FOB, the buyer has the obligation of nominating the ship whereas the seller has the obligation of putting the goods on board on the buyers account and also submit the bill of lading which satisfies the term of contract. This type of FOB is called the classic type of FOB and this type of FOB was first established through the Wimble, Sons & Co. v Rosenberg & Sons case. In the second variation of FOB, have the seller maybe be requested to make the arrangements as well as take the bill of lading in the seller’s name, and get the payment against transfer. In the variation of the FOB, the buyer may use a forwarding agent of his own and ask the agent to procure the bill of lading from the port of loading. Robert Bradgate notes: ‘The principal/agent relationship is usually consensual and in the commercial context is commonly based on a contract. The relative rights and duties of the principal and agent are considered further in chapter seven. Although the agent is not privy to the contract he negotiates on behalf of the principal, he may, in certain circumstances, incur liability to the third party. Such liability is considered further in chapter 6. In this chapter we are concerned with the principal/ the party relationships and, in particular, the agent’s power to affect his principal’s legal position. Where the agent negotiates a contract on behalf of his principal, the effects is to create privity of contract between the principal and the third party.’ 2 Under the classic variation of the FOB, the seller requires performing duties which are very straightforward and they are closely monitored by the UK courts. The seller requires delivering the goods or the shipment to a particular port or in some cases, to a number of ports. However the description of the ports must be ascertainable. Boyd &Co. Ltd v Louca was relevant case wherein court decided that the parties in the contract have to rescue the destination port rather than put the port in grounds of uncertainty. The court also ruled that the buyer was the entities which were responsible for selecting the destination port for the shipment of goods and after the selection of the port was made, the seller was compelled to send the goods to that particular port. Another landmark decision was that of Modern Transport Ltd v Ternstorm & Roos. In this case, the court decided that the buyer did not have any right to make a demand to the seller to ship the goods at a port which was not agreed upon in the contract. The seller has another important duty which is to ensure that there is enough time for the loading of the shipment to be complete. There was one famous case involving All Russian Co-operatives Society Ltd. v Benjamin Smith & Sons, wherein the seller only had fifteen minutes to load the shipment before the shipment period expired. The court finally decided that the seller was breaching the contract the cause it did not ensure sufficient time for loading of shipment. Just as the duties of the seller is very straightforward, so is the duties of the buyer. In the UK, that by duties of the buyer can be broadly categorized into four rules. The first rule is that the buyer would be the sole decision maker regarding the date within which the goods needs to be loaded. One ideally example is the case of Bunge Corporation v Tradax Export SA where it was stated by Megaw L.J. “…It is an accepted principle in the English law that in mercantile contract for the sale of goods prima facie a stipulated time of delivery if of the essence" the second important to tee off the buyer is that for the buyer needs to have the vessel which would have enough space for carrying the goods or the shipment. One case where the court decided that the seller had the right to reject the vessel nominated by the buyer since the buyer considered the space of the vessel to be inadequate, was the case of Richco International v Bunge and Co. in the case, the vessel which was nominated did not comply properly with the load restrictions of the port. The third important rule of the buyer is to ensure that the seller gets enough time for bringing the shipment to the port by the issuance of a valid nomination of the ship or vessel. Additionally, buyer also has the provision of nominating a second vessel in case the first vessel is insufficient for loading of the shipment. However the seller should be given sufficient time and a prior notice about the nominated second vessel. The obligations of the buyer and the seller are very clear and easy to follow, hence the statement that commercial law in the united kingdom encourages international trade is true to a great extent, has far as the FOB contract in the UK is concerned. However the terms and the rules in the CIF Contract are not as straightforward as their FOB counterpart. Especially the bill of lading is often quite complicated; hence the statement that the UK is favorable to international trade is not always true. The UK courts have passed a number of bills to make sure that the fraud is that are related to the lading can be reduced to the minimum. It is the duty of the buyers to verify the contract, settle the custom duties, procure import licenses and take custody of the goods that is delivered. The fraudulent bill of lading bills existent in the nineteen century and still exists in the 21st century. This is primarily due to the fact that bill of lading is still viewed in the United Kingdom as a bill which is unchanged since the nineteenth century. One good example of forgery of the shipment date was the case of Kwei Tek Chao v British Traders and Shippers. This case, it was the the forwarding agent who was found guilty rather than the buyer or the seller. The United Kingdom courts have deployed a number of rules and programs to tackle the fraud bill of lading issue. One of the important programmes is the BOLERO. This program was started off by the International Chamber of Commerce. The seller has a duty of forwarding to the buyer or to the agent all the relevant shipping documents, which includes the bill of lading. Thus the contract is rendered by the seller, and the goods are sent to the buyer or delivered to the buyer’s agent according to the terms of contract. There are basically three types of FOB contracts as discussed earlier. The agents are basically the entities were appointed for the transaction of business and rendering of contracts. Hence agents are a third person, and the person who appoints the agents is called the principal. The nature of the contract between an agent and his principal can be viewed in two ways. Firstly, a contract between a principal and an agent is similar to that of the other terms of contract. Secondly, contract also implies that the principal is in the contractual relation with someone whom he doesn’t personally deal with, since the agent deals with that party. In the earlier times, the authority of an agent to bind this principle if through an independent contract was debatable, her since many states still followed the classical Roman law. Presently the power of the authority Is completely conceded in the countries which have retained the classical Roman law and also those countries which accepts the English common law. The principal is also chargeable with his agent’s representations, if those representations eventually created the contract. The principal is not bound by any special authorization, when those representations fall in the range of those duties with which agent has been charged. Furthermore, the principal is not bound by the representations which fall under the Res Gestae. Also, if the principal knows about the falsity of the false statement made by the agent ignorantly, principle will not be allowed to get a bargain based on that representation. An agent who is given the authority to sell has the right to do whatever for making that sale. However the agent does not have the authority to transfer the title of his principal without permission from its principal. He has the authority to collect debts, the confusion of bills, making maritime affairs management as and transacting business abroad on the behalf of his principal. The authority of an agent to bind his principal may cease to exist due to several reasons. First of all an expiration time may cease the contract, after the purpose has been accomplished, the contract may cease, if the principal wishes to revoke the contract, the contract may cease, if there is death of either of the principal or the agent, contract amy cease. Insanity is another cause for his contract be terminated, the principal’s bankruptcy may also be another reason for the termination of the contract. The relation between the agent and the principle is also guided by the language is used for creating the contract, the power for lease, the power to employ an attorney or to borrow money also important aspects in the relationship between the principal and the agent. Robert Bradgate notes: ‘There is some authority to that there may be a separate category of the usual authority which is neither actual more apparent, so that where A is appointed to the position, any acts he does which will be usual for a person in that position are binding on P. In Watteau v Fenwick(18930 1QB 346, A was appointed to manage a public house, which And he had previously owned. His name was still over the door as licencee.P expressedly limited his actual authority by forbidding him to purchase anything other than bottled beer and mineral water. In defiance of that prohibition he bought cigars. But he was held liable for their price.’ 3 Risk for Lost Or Damaged Goods Where They Are Sold On FOB Or CIF Terms Robert Bradgate notes: ‘If goods to be sold are lost, or are damaged or deteriorate so as to become no longer off satisfactory quality winced at the sellers risk, he will be unable to insist on a buyer accepting them under the contract and may have to repair or replace them. Where the contract is for specific goods, replacement is not possible without the buyers’ consent, so that the seller may be unable to perform the contract, and in any case the delay involved in arranging repair or replacement may put the seller in breach of contract. However, SoGA 1979, ss.6 and 7 contain rules broadly analogous to the general common law rules of frustration and mistake which may excuse the seller from liability if performance becomes impossible. When they apply the general common law rules on mistake and frustration are displaced.’4 Just like the old merchant traders had his share of problems, the new traders have their own problems as well. The security of the car was a primary concern for the seller, and the primary concerns of the buyer the receipts and the correct quantity of goods. In a The center would obviously be reluctant to pay for the goods which are damaged or lost during the shipment. That’s why the bill of the lading is created, as it minimizes the risk of a buyer in receiving damaged or lost goods. For making the correct identification of the claimant, the cargo attorneys need to be given shipping documents, especially the bill of lading and the contract of sale. Hence if the goods are insured through Lloyd’s of London, the risk for lost or damaged goods where they are sold on FOB or CIF terms depends on the terms laid by Lloyd’s of London. Robert Bradgate states: ‘If the property and risk a separated, difficulties may arise if the goods are damaged by the act or default of a third party. The only persons entitled to sue the third party in negligence for damaging the goods are their owner and the person with an immediate right to possession of them. A person who bears the risk of damage but does not have property may therefore be unable to recover damages from any third party by whom They are damaged; the owner, whole entitled to sue, will have no interest in doing so since the goods are not at his risk. However, the person at risk has sufficient interest in the goods to insure them and therefore should do so.’ 5 There are a number of representatives belonging to Lloyd’s of London, who are located in several ports around the world. The main functions of these representatives include inspecting all vessels, issuing of certificates, reporting of the arrival and the departure times of those vessels, and most importantly inspecting the cargo losses for the members of Lloyd’s of London. There is an extensive listing of the vessels containing data, names of vessels and major claims. There are different types of losses. Some of them include Actual Total Loss (Loss of the entire cargo shipment); Physical Destruction (Loss due to the fire); Irretrievable Deprivement (Goods being lost since they cannot be retrieved from a sunk ship) Loss of Specie (Changes in character of the goods), Compromised Total Loss(The negotiated loss settlement between the owner and the insurance company), Constructive Total Loss (The expected loss due to the excessive damage of a vessel), and Vessel Lost(A missing vessel). Robert Bradgate notes: ‘That is important to understand the consequences of this rule. If goods are damaged whilst at the sellers risk, the seller may not be able to require the buyer to accept them in performance of the contract of sale and may therefore have to repair them or find replacement goods in order perform his contract; such repair or replacement will be at his expense. If he is unable to do so within that time for performance of the contract, he made in incur liability for late or non-delivery, unless he is excused by the contract or on the grounds of impossibility. If the goods are damaged whilst at the buyers’ risk, the buyer must accept and pay for them under the contract of sale. The parties have as their risk of loss or damage to goods therefore bears the risk that they may have to be replaced or repaired and may wish to insure against that risk.’ 6 Biography Bradgate, Robert. Commercial Law (Oxford University Press, Oxford 2007) Vettori, S. The Employment Contract and the Changed World of Work (Ashgate Pub Co, Williston, 2007) Lockton, D. 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