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Commercial Lawcards Glossary

Click on the glossary term to see the definition

Chapter 1

Goods
see s.61 of Sale of Goods Act 1979. The definition of 'Goods' includes personal property but not: land, choses in action (i.e. cheques) nor money. Exceptionally a particular unit of money may be classified as a 'good' within the meaning of the Act rather than as a means of exchange (i.e. a Spanish Doubloon is today most likely to be viewed as a form of property capable of being a 'good' rather than as its original non-good classification as cash not capable of being a good).
Sale
A transfer of the property in goods, provided by the seller, in exchange for money, provided by the buyer. After a valid sale the buyer acquires the property sold by the seller (whatever this may be) and the seller acquires the money provided by the buyer. For more on the definition of 'a sale of goods' see s.2 of the 1979 Act.
Property in Goods
If the transaction falls under the Sale of Goods Act 1979 the property in goods appears to mean all and every aspect of the seller's title to the goods. It seems that it is incorrect to conceptualise such a transfer of property in goods as involving transfers of common law property and equitable property: that which is transferred UNDER THE 1979 ACT is ALL of the seller's property in the goods (thus there is no need to separate the titles into common law and equitable concepts as all is simultaneously transferred). NB it is possible for the seller to sell a limited title as long as he (or the circumstances) make it clear to the buyer in accordance with s.12 (3) Sale of Goods Act 1979 that the sale is only to comprise some lesser part of the property in the goods.

Chapter 2

Ownership
The legal rights which connect a person to a particular piece of property. Ownership usually indicates control over the said property which may, but need not, extend to include a right to: a) give or sell the property to another, b) exclude others from the enjoyment of the property, c) destroy the property.
Possession
The custody of property, whether lawful or unlawful, which may or may not also be owned by the possessor. If the possessor does not own the property it may be that s/he still has a lien (being some form of lawful reason to retain possession of the property) over the property which may prevent the true owner from recovering the property until the possessor's lien is discharged.
Generic Goods
Goods which are not currently identifiable, as a matter of evidence, from the information provided by the sale of goods contract. No property in goods under the 1979 Act can pass in purely generic and hence unidentified goods: s.16. Thus the goods comprised by '100 oranges' are not identifiable as there is currently no way of knowing which oranges are referred to. If more information is provided this may help the process of identification. Thus, '100 oranges from my warehouse' may be clear enough as long as there is only one warehouse and there are only 100 oranges present at that warehouse. If there are two warehouses and / or more (or less) than 100 oranges in each, more clarity is required before we know which oranges are the subject matter of the sale of goods contract and hence whether or not the seller can or has passed the property in those oranges to the buyer.

Chapter 3

Retention of Title Clause
A contractual term which attempts, in accordance with s 19 of the Sale of Goods Act 1979, to postpone the passing of title in the goods from the seller to the buyer until some later specified event, usually the payment of the price.
Insolvency
A company which can not pay its debts as they fall due is said to be insolvent. When this occurs, assuming no further funds are available, either the creditors or those who own the company will seek to recover as much as they may from the insolvent company. The manner and order in which such funds may be recovered after the necessary debts have been paid is strictly controlled by legislation. See the Insolvency Act 1986 (as amended).
Security Interest
A continuing interest in the property of another. It entitles the holder of that interest to a higher ranking in the statutory order of payment in the event of an insolvency. Security interests typically require registration in order to be effective. Importantly and technically a retention of title clause / Romalpa clause is NOT a security interest as the unpaid seller who attempts to use s 19 of the Sale of Goods Act 1979 only wishes to retain TITLE Ð not property Ð in the goods (and only wishes to do this until paid in full). Overly ambitious attempts at drafting retention of title clauses may fail if they actually create a security interest.
Registerable Charge
A security interest in the property which belongs to a company. The existence and ownership of this interest must be registered if it is to be binding upon anyone (e.g. liquidators / receivers / administrators) other than the parties which created it: s 860 Companies Act 2006. This requirement of registration is the ÒpriceÓ which the secured creditor pays to obtain a higher position in the statutory ranking imposed by the Insolvency Act 1986 (as amended) and allows others to form a more accurate picture of the borrowings and liabilities of the company in question by examining the publicly available register. A poorly drafted retention of title clause can malfunction and create such a registerable charge concerning the unpaid goods (see Re Bond Worth [1980]).
Book Debts
The money which a company expects to receive, but has yet to receive, from contracts to buy its products. For example, Marder Ltd makes lawnmowers. It concludes a contract with the large Tescburies supermarket chain under which Tescburies will buy its lawnmowers. The contract obliges Marder Ltd to make and deliver 500 lawnmowers per month for the next six months and Tescburies to pay for each monthly delivery on receipt of the lawnmowers. Marder Ltd, when it does its accounts, will record all the sums due from Tescburies over the next six months as book debts Ð that is money that Tescburies owes to Marder Ltd. As this contract is legally enforceable it will be possible for Marder Ltd to then go to a commercial lender and borrow money on the basis of the money which Marder Ltd is 'owed' by Tescburies. One way of immediately securing such a loan would be to sign over to the lender all of the money which will come in from Tescburies in advance. This is called an assignment of a book debt. The advantage for Marder Ltd is that it gets the money Ð minus borrowing costs Ð immediately. Such arrangements may be particular to one contract, as in the simple example above, or cover all of the monies which the company expects to receive from all of its contracts over a given period of time.

Chapter 4

Void
a contract (or term in a contract) which never could have legal effect. Such attempted contracts (or terms) are void and entirely ineffective from the beginning because they violate
Voidable
a contract (or term in a contract) which, though potentially lacking legal effect yet remains effective until the 'innocent' party decides to act to deprive it of its legal effect, i.e. by rescinding the contract. If the innocent party delays for too long, allows third parties to gain rights in relation to the property, or, having knowledge of the defect makes it clear to the other party to the contract that the defect is unobjectionable, the innocent party's right to rescind for that defect will be lost.
frustrated contract
A contract which is made but then becomes impossible to perform through no fault of the parties by reason of an unforeseen event which happens AFTER the contract was made. Frustrated contracts are discharged at the point at which the frustrating event occurs. NB1 If it is an action of a party to the contract which makes the performance impossible the contract is NOT frustrated. NB 2 If the contract contains a term which provided for the event in question the event is not 'unforeseen' and thus the contract can not be frustrated by its occurrence. NB 3 If the contract is possible to perform but is now more expensive it is NOT frustrated by reason of the increase in cost alone. NB 4 If the event which made the performance impossible happens BEFORE the contract was made, Frustration can not apply but Mistake may be applicable.

Chapter 5

Estoppel

A doctrine of the law of evidence which prevents 'A', who has made a representation to 'B', from denying that the representation was true and valid when 'B', who has acted in reliance upon the said representation, later tries to rely upon it in legal proceedings to defend a claim (or exceptionally to assert a right) against what would, but for 'A's' statement or act, be in accordance with 'A's' rights.

E.g. 'A' told his tenant, 'B', that for the duration of World War II war only one half of the rent due each month need be paid. 'B' acted in reliance on this unsupported statement and paid only half of the rent. After the war 'B' was confronted by a demand for back rent which covered some of the sums which 'A' had assured him he need not pay. 'B' could plead 'A's' statement to defend against the back rent claim and raise a promissory estoppel in his (B's) favour. 'A' was estopped from denying the truth and validity of his otherwise unsupported statement.

Factor(s) - used to refer to a person, i.e. 'a Factor'.
A person who by reason of being a Mercantile Agent may usually be expected to have possession of property and documents of title relating thereunto. As an Agent a Factor may have Authority relating to the sale of such goods sufficient to pass good title to a third party purchaser, despite the desire of Principal (the true owner) to retain that property. See Factors Act 1889.
Hire Purchase
A form of credit arrangement. There are many modern variations on this theme but at its simplest, property is hired to the hirer for a period of time during which rental payments are made: at the end of the period the hirer has an option to make a payment to own the property outright or to decline to do so and to return the property to the owner. NB If there is an obligation to buy (and so no option to refuse to finally buy) the contract is a conditional sales agreement and not a hire-purchase contract.

Chapter 6

Title
Within the context of Commercial Law 'Title' most usually refers to the ability of the transferor to transfer the property in the goods to the transferee. If the seller has no 'title' to the goods s/he can not transfer the property in those goods to the buyer. A seller who knowingly or unknowingly contracts to transfer property to a buyer to which he, the seller has no title, will commit a breach of contract at common law and also breach s.12 of the Sale of Goods Act 1979. This is so even if the seller gave the buyer possession and use of the goods in question.

Chapter 7

Misrepresentation
A false statement of fact made by one party - usually the seller - which induces the other party - usually the buyer - to enter into a contract with the other party.
Rescission
The termination of a contract and the consequent ending of further legal obligations under that contract. See 'Voidable' above under Chapter Three.
Common Law / Equitable remedies
Before 1873 there were two distinct court systems in England & Wales: The Common Law courts (which were then divided into three common law courts - Kings Bench, Common Pleas and Exchequer) and one Court of Equity. At the risk of oversimplification, each court system had its own system of remedies with their own particular rules. In the legislation which commenced in 1873 the two court systems were combined into the single system which we know today, however, the rules governing each system of remedies were not wholly integrated. Thus although all the rules and remedies are now administered by one judge in one court and at one time, there are still some differences between the legal and equitable remedies which depend upon the way in which the case is brought. The different rules and remedies are particularly visible in the area of Misrepresentation where both contractual and tortious claims uneasily interact with the Misrepresentation Act 1967.

Chapter 8

Express Terms
a term of the contract which has been expressed by at least one of the parties - either in writing or verbally - and accepted by the other.
Implied Terms
A term of the contract which has NOT been expressed by either of the parties but is nonetheless implied by the courts into the contract because either legislation (i.e. ss. 12 - 15 of the Sale of Goods Act 1979), custom, or business efficacy so directs.
Acceptance under s.35 Sale of Goods Act 1979
Normally, when there is a breach of a Condition in a Sale of Goods Act contract the buyer can reject the goods and also claim damages for the losses arising. Acceptance under s.35 of the 1979 Act is the statutory equivalent of Affirmation at common law and occurs when a buyer loses his / her right to reject the goods, despite a breach of 'Condition'. Once goods are 'Accepted' under s.35 of the 1979 Act the buyer may only sue the seller for damages to cover the breach(es) of contract and the goods may NOT be rejected.
Incorporation
(referring to a term or terms in the contract) The first step in establishing if the relevant term is actually part of the given contract. If the term is found not to be incorporated into the contract there is usually no need to consider it (the term) further. Terms will usually be incorporated into the contract (i.e. be part of it) if either: a) the term is contained in a document which was signed by the other party, b) if reasonable notice of the term was given before the contract was concluded, c) if there was a consistent course of dealing on such terms between the parties d) if legislation incorporates the term. NB even if the term is properly incorporated into the contract it may be that legislation (i.e. the Unfair Contract Terms Act 1977) either nullifies or otherwise modifies the effect of the term.
Interpretation
(referring to a term or terms in the contract) The second step in understanding the meaning of the contract (or a term of it) is to establish the meaning of the correctly incorporated and effective terms. Before the 1977 Unfair Contracts Terms Act and 1979 Sale of Goods Act, the English judiciary were often willing to creatively interpret the meaning of a contract so as to protect certain weaker parties (usually a consumer) from what would otherwise have been unreasonable terms imposed by the stronger commercial party. This willingness rarely extended to purely commercial contracts (i.e. those not involving 'consumers') which the courts usually treated as being made between equal parties. NB Since the passage of the legislation mentioned above the courts have usually been able to use the relevant acts to help those whom Parliament would protect and thus creative interpretation has been less necessary than was one the case. Accordingly it is now advisable not to assume that cases from the 1950's and 1960's are representative of the current judicial approach.

Chapter 8

Express Terms
a term of the contract which has been expressed by at least one of the parties - either in writing or verbally - and accepted by the other.

Chapter 9

Incorporation
(referring to a term or terms in the contract) The first step in establishing if the relevant term is actually part of the given contract. If the term is found not to be incorporated into the contract there is usually no need to consider it (the term) further. Terms will usually be incorporated into the contract (i.e. be part of it) if either: a) the term is contained in a document which was signed by the other party, b) if reasonable notice of the term was given before the contract was concluded, c) if there was a consistent course of dealing on such terms between the parties d) if legislation incorporates the term. NB even if the term is properly incorporated into the contract it may be that legislation (i.e. the Unfair Contract Terms Act 1977) either nullifies or otherwise modifies the effect of the term.
Interpretation
(referring to a term or terms in the contract) The second step in understanding the meaning of the contract (or a term of it) is to establish the meaning of the correctly incorporated and effective terms. Before the 1977 Unfair Contracts Terms Act and 1979 Sale of Goods Act, the English judiciary were often willing to creatively interpret the meaning of a contract so as to protect certain weaker parties (usually a consumer) from what would otherwise have been unreasonable terms imposed by the stronger commercial party. This willingness rarely extended to purely commercial contracts (i.e. those not involving 'consumers') which the courts usually treated as being made between equal parties. NB Since the passage of the legislation mentioned above the courts have usually been able to use the relevant acts to help those whom Parliament would protect and thus creative interpretation has been less necessary than was one the case. Accordingly it is now advisable not to assume that cases from the 1950's and 1960's are representative of the current judicial approach.

Chapter 10

Delivery
The handing over of control of the property in question, whether physically giving it to the buyer or giving the buyer the means of control (i.e. the keys) or giving control in purely legal terms (i.e. by telling your agent to stop holding it for you and to now hold it for the buyer).
Waiver
A release by the party owed a performance of his right to sue for the breach or failure of that performance. Thus if 'A' is due to deliver goods to 'B' on the 1st (but does not do so) after the 1st 'B' may either sue 'A' for breach of contract or waive the breach and allow 'A' to deliver on the 3rd (or at a later date). If 'B' allows the late delivery he may be said to have waived his right to sue for late delivery.

Chapter 11

Unpaid seller
A seller who has neither received nor been offered full payment for the goods by the time set for payment in the contract. Attempted payment via a cheque which is later dishonoured still leaves the seller technically unpaid.
real remedies of seller

The three self-help rights which an unpaid seller may be allowed by the Sale of Goods Act 1979 (potentially in addition to the possibility of suing the buyer either for the price or for breach of contract). Each real remedy is rendered ineffective if the buyer gains possession of the goods. The three rights are very important on a practical level as they do not require the seller to instruct a lawyer or to go to court: thus they are very commonly employed. The rights are:-

  1. A lien - see 'Possession' above - over the goods if they are still in the seller's possession: ss.39 - 43.
  2. The right to stop the transit of goods, and to recover their possession, from an independent carrier BEFORE they have been given into the custody of the buyer: s.44.
  3. The right to re-sell the goods to another buyer (and to pass good title whilst so doing) WITHOUT extinguishing the right to sue the non-paying first buyer for damages: s.48.

Chapter 11

Specific Performance
An alternative remedy to the usual remedy of Damages, Specific Performance sees the court order that a given contract actually be performed. In the context of Sale of Goods contracts see s.52 of the 1979 Act.

Chapter 12

Specific Performance
An alternative remedy to the usual remedy of Damages, Specific Performance sees the court order that a given contract actually be performed. In the context of Sale of Goods contracts see s.52 of the 1979 Act.

Chapter 13

Agent
A person who enters into contracts, or other legal acts, on behalf of another. An Agent has the ability to bind the person who authorised him / her to so act as long as the actions of the Agent fall within the authority given to the Agent by either the agency agreement or by the law.
Principal
A person who engages another to act on his / her behalf in the making of contracts, or other legal acts, which will bind the Principal in a relationship with a third party. E.g. Percy instructs Alice to enter into a contract on his behalf with Thomas. Percy is the Principal. Alice is the Agent. Thomas is the Third Party. Once the contract is completed it will be between Percy and Thomas - Alice plays no further part in the contract and is paid for her actions by Percy.
Authority
The power which an Agent has to act on behalf of his / her Principal as derived from either the agency agreement between the two or from the general law.

Chapter 14

FOB Contract
A Free On Board contract is one in which the seller agrees to get the goods to the ship nominated by the buyer and to load them onto that ship but nothing more. The buyer pays for the carriage of the goods and their insurance from this point onwards. The property and risk concerning FOB goods does not pass to the buyer until the goods are so loaded by the seller. NB if the buyer does not nominate a ship the property in the goods can not pass from the seller to the buyer (unless the contract provides otherwise) and thus the seller may not usually sue the buyer for the price but only for breach of contract.
CIF Contract
A Cost Insurance and Freight contract is one in which the Seller agrees not only to load the goods onto a ship nominated by the buyer, at the specified time, but also to pay for the carriage of those goods to the destination specified in the contract. The seller must also pay for the insurance of the goods and make the buyer the beneficiary of this insurance policy: risk in the goods therefore normally passes to the buyer once the goods pass the rail of the ship. NB. The importance of the delivery and acceptance of the documents concerning a CIF contract can hardly be overstated - strict compliance is required. A CIF contract obliges the seller to obtain and to transfer to the buyer the documents indicating that the seller has properly performed, i.e. the bill of lading (details concerning the arrangement of the contract of carriage), the insurance policy, and the seller's invoice (which asks the buyer to pay the price of the goods). Often the invoice is actually a Bill of Exchange - imagine an unsigned cheque from the buyer which is made out to the seller - by which the buyer may signify his acceptance and thus allow the seller to thereafter draw. The buyer MUST pay for the goods when the correct documents are presented. If the seller does not obtain and present the correct documents, the buyer need not pay for the goods.
Bill of Lading
The document which sets out the arrangements which the Seller has made concerning the carriage of the goods by sea in accordance with the terms of the contract. Once signed and delivered by the shippers it acts as a conclusive evidence of receipt of the goods and transfers title to its holder.
International Letter of Credit
A financial arrangement by which a buyer situated in one country instructs his bank to make payment to the seller's bank, situated in a different country, as soon as the seller presents the seller's bank with the shipping documents. The point of the international letter of credit is to give the seller some reassurance that payment in their own jurisdiction will be forthcoming: thus there are different types of international letters of credit offering greater or lesser forms of 'reassurance'.E.g. Jack, who is in the UK, is buying a consignment of Canadian nuts CIF from Cedric, who is in Canada for $100,000. Jack tells his UK Bank to pay Cedric's Canadian Bank the money as soon as Cedric presents the Canadian bank with the shipping documents. In rather oversimplified terms Cedric need thus not be concerned that he may have to come to the UK to 'get' his money.

Chapter 15

Credit
A right to defer the payment of an otherwise due debt. E.g. Simon sells a TV to Ruth, transferring the title to the TV by so doing, and allows her to take the property now but to pay for it - whether or not by instalments - at a later date. Most, though not all, credit arrangements involving Consumers are regulated by the Consumer Credit Act 1974 (as amended).
Simple hire
A contract concerning either goods or services. If concerning goods the contract allows the temporary use of property belonging to another but does not transfer the title in that property to the hirer and indeed obligates him/her to eventually return it to its owner. If concerning services the contract allows the hirer to benefit from the skills of the service provider for a specified length of time.
Exempt agreements
As indicated above (see entry concerning 'Credit') not all forms of credit are regulated by the Consumer Credit Act 1974 (as amended) and some are expressly exempted from its ambit.

Chapter 16

Finance House
In the event that the seller of the goods does not provide the credit to the borrower / debtor another party must do so: such a party is generally referred to as a Finance House. However, if a finance house is involved in the supply of goods on credit the transaction changes from a two party to a three party one. Commonly the seller will sell the ownership of the property to the finance house which thereafter will receive the debtor's payments. This change is significant as the debtor who later has a problem with either the goods themselves or complying with the credit agreement would, but for the Consumer Credit Act, have no contractual rights with the seller of the goods as the debtor's contract is with the finance house.

The remaining chapters (17 - 20) contain no terms which require further elucidation.