What Is The Nature Of Commercial Law Law Commercial Essay



This coursework illustrates and analyses the nature and function of commercial law. Firstly, this paper will show and discuss some different definitions of commercial law by using sources. Secondly, evaluate of the function of commercial law in the modern economy. Furthermore, the role of commercial law in commercial transaction will be discussed. In addition, this coursework will demonstrate the role of equity in commercial law. Finally, the conclusion of this coursework which will conclude all main points of the body.

What is the Nature of Commercial Law ?

Commercial law is a crucial part of life. It can be difficult to hold a terse definition of commercial law. According to the systems of common law, there is no difference drawn between commercial law and civil law. Commercial law is a part of civil law in the common law system. [1] It is clear that commercial law is one of the important part of civil law as Disney defined ‘commercial law is an expression incapable of strict definition, but is used to comprehend all that portion of the law of England which is more especially concerned with commerce, trade and business’. [2] Commercial law consist a wide area which includes an agent and principal, carriage of goods by sea and by land and merchant shipping etc. It can be seen in this definition. ‘The object of commercial law is to deal in mercantile and, if we adopt this criterion, commercial law can be defined as the special rules which apply to contract of the sales of goods and to such contracts as are ancillary thereto, namely contracts for the carriage and insurance of goods and contracts the main purpose of which is to finance the carrying out of contracts of sale’. [3] Commercial law is a branch of law and determines the rights and duties of all parties when doing in trade and commerce and govern disputes arising out of the ordinary transactions of buyers and sellers. It is very essential to know the commercial law to operate a business successfully. Professor Roy Goode has described commercial law as ‘is a branch of law which is concerned with rights and duties arising from the supply of goods and services in the way of trade’. [4] 

What is the Function of Commercial Law?

‘The function of commercial law is to allow, so far as it can, commercial men to do business in the way they want to do it and not to require them to stick to forms that they may think to do outmoded. The commercial law is not bureaucratic’. [5] This expression is obvious about the purposes of commercial law. The purposes of commercial law to help businessmen and to make easier of commercial transactions and contract between parties. Commercial law helps the businessmen in solving complex issues related to dispute transactions and also help businesses and consumers alike to protect their commercial interests. It can be seen the function of commercial law in the case involving commercial disputes. Lord Goff analysed the object of judges in his article when interpreting commercial contract. ‘ Our only desire is to give sensible commercial effect to the transaction. We are there to help businessmen, not to hinder them: we are there to give effect to their transaction, not to frustrate them: we are there to oil the wheels of commerce, not to put a spanner in the works, or even grit in the oil’. [6] This statement is much clear that the judges want to solve commercial disputes and solve the problem for businessmen and encourage them to do business.

As has mentioned at the beginning commercial men do business but they have special needs. Firstly, they want to uphold their agreement. According to two basic principles of commercial law (freedom and sanctity of contract) the judges hold non-intervention to respect the commercial contract. The parties are free to enter into a contract. ‘The basis of commercial law is the contractual principle of autonomy of the parties will. Subject to the ultimate reservation of public policy, the parties are free to arrange their affairs as they like’. [7] The concept of sanctity and freedom of contract is usually confused together but sometimes in some area they are linked together. ‘It is merely another facet of freedom of contract, but the two concepts cover. To some extent, different ground. The sanctity of contractual obligations means that once a contract is freely and voluntarily entered into, it should be held sacred and be enforced by the courts, if it is broken’. [8] 

The second point is ‘predictability of legal decision on commercial issues’. [9] The most important thing at that point is a certainty. [10] In the case of Vallejo v Wheeler Lord Mansfield commented that ‘in all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule be certain, then whether the rule is established one way or the other, because speculator in trade then know what ground to go upon’. [11] Certainty must have in all decisions and should not ignore or forget it, because Lord Salmon in case of Mardorf Peach & Co Ltd v Attica Sea Carriers Corp of Liberia strongly mentioned that ‘certainty is of primary importance in all commercial transactions’. [12] It is clear to find the principle of certainty in the case of Photo Production Ltd v Securicor Transport Ltd. [13] In this case the court stressed the concept of non – interventionist approach in the commercial context. Legal uncertainty is a harmful in the area of human activity such as, commercial transactions. However it makes a problem instead of facilitate commerce. [14] 

Thirdly, another important need for businessmen is flexibility. ‘Flexibility to accommodate new commercial practice’. Courts rely ‘custom and usage’ when interpreting commercial contracts. Sometimes, parliament interferes to remedy the situation if the courts could not take account of mercantile practice, because a lot of principles of commercial law have been derived from mercantile custom and usage such as, the legal status of the bill of exchange as well as bill of lading. This is advised that the law should be changed in conjunction with any change made to the custom. [15] 

Finally, quick and cheap are an alternative for dispute resolution. ‘The commercial court has jurisdiction to try commercial claims’. There are a difference between a Commercial Court and the Queen’s Bench Division of the High Court because Commercial Court has a staff and they have an experience of commercial disputes. There are a lot of reasons for parties in commercial disputes to choice arbitration, for instance arbitration is quicker and cheaper and more flexible than litigation for dispute resolution. However, the arbitration’s staff has personal experience of the trade which in the dispute has arisen. [16] 

The Role of Equity in Commercial Law

‘A branch of English law which developed hundreds of years ago when litigants would go to the King and complain of harsh or inflexible rules of common law which prevented "justice" from prevailing’. [17] Equity is the system and developed to reduce the problems of the common law. Businessmen and their lawyer often say that equity should not have an important role in commercial law because the intervention of equity is a harmful for predictability and predictability is very important to commercial life but they are focusing on equitable duties. Equity has a significant role to developed system of ‘commercial security’ in the world. It is a little unthankfull to take all the benefits of equity ‘without assuming some of the responsibilities it imposes in return. [18] ‘Equity plays an essential role in ensuring procedural fairness in contract bargaining and in requiring loyalty, good faith … part of fiduciaries’. [19] Another important role of equity is that ‘where money is lent’ or pay money for goods before delivery, received goods before payment. There are several examples of parties to financial and commercial transactions want to apply ‘the doctrines and equity of trusts’. [20] In numerous cases the parties want to obtain the benefit of one especial aspect of the trust. [21] 


This coursework has evaluated the nature and function of commercial law in the modern economy. In the first place, it has focused on different definitions of commercial law. Commercial law is a branch of civil law and determines the rights and duties of the parties. Commercial law is concerned with dealings relating to commercial transactions. In addition, it has mentioned, the purpose of commercial law is to help individuals who do business with, solving commercial disputes and protect their commercial interests. Businessmen have special needs. This coursework mentioned their needs. The first needs which mentioned is they want to uphold their agreement. Secondly, predictability of legal decision. The main point of this is a certainty. Certainty is an important and should not be forgotten and ignored by the courts. Another special need is flexibility. Custom and usage are the key point because many principles of commercial law have been derived from them. Finally, quick and cheap are alternative for dispute resolution. This work answered why the parties prefer to choose arbitration instead of litigation. This coursework has illustrated the role of equity in commercial law. Equity plays a significant role in commerce.