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Chapter One: Understanding Commercial Law. Law Merchant:. Medieval Europe Evelved  Common usages. Origins :. Rules Merchants Common usages, Customs Civil law  not responsive A need for: effective, quick, comprehensible and acceptable System & specialised courts

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law merchant
Law Merchant:
  • Medieval
  • Europe
  • Evelved  Common usages
  • Rules
  • Merchants
  • Common usages, Customs
  • Civil law  not responsive
  • A need for: effective, quick, comprehensible and acceptable System & specialised courts
  • International commercial law today is affected (usages, customs..).. including  arbitration
the medieval law merchant
The Medieval Law Merchant:
  • Merchant courts  trade centres & routes.
  • Legal system developed and administered by Merchants
  • States or local authorities seldom Interference
  • Trade flourished
  • Increasing tax revenues
the need for quick and effective justice
The Need for Quick and Effective Justice:
  • customs and practices among traders
  • solve disputes rapidly least costs by most efficient means
  • Public courts  delay their business, and that meant losing money
  • Law Merchant 
    • quick and effective justice
    • informal proceedings
    • fair price, good commerce, and equity.
choice of judge
Choice of Judge:
  • commercial background
  • practical knowledge.
  • Their reputation
  • expertise in merchant trade
  • a “professional judiciary” developed through the merchant judges.
  • serve as important measures in the appointment of international commercial arbitrators today.
legal concepts introduced by the law merchant
Legal Concepts Introduced by the Law Merchant:
  • Based on: Less procedural formality
  • However, practical need  “writing obligatory”.
    • creditors could freely transfer the debts.
    • displace the need for more complex forms of proof,
  • party autonomy:
    • the parties free to take a case to court,
    • what evidence to submit
    • which law to apply.
the evolution of the law merchant
The Evolution of the Law Merchant:
  • Law Merchant  cosmopolitan - international
  • declined towards the end of medieval times
    • due to the adoption of national commercial law
    • increasing modification of local customs to protect the interests of local merchants.
  • The result  loss of autonomy of merchant tribunals to state courts.
  • The reason was  protection of state interests
codification and nationalisation of the law merchant
Codification and Nationalisation of the Law Merchant:
  • Nationalisation of the Law Merchant  did not neglect the practises of merchants
    • Some institutions continued to function,
    • state judges were appointed for their merchant expertise  as modern commercial arbitrators.
  • The law of the merchants was  simply codified. National codes built on:
    • the principles laid down by trade commercial practise
    • they embodied Law Merchant
the development under the common law
The Development under the Common Law:
  • English Courts applied  merchant customs if:
    • they were consistent with law
    • were proven before the court
  • In the US, Law Merchant prevailed in
    • general principles & doctrines of commercial jourisprudence.
international commercial law and arbitration
International Commercial Law and Arbitration:
  • Law Merchant was reaffirmed in new international mercantile law  directed at market effeciency.
  • Dispute resolutions have evolved
  • International commercial arbitration became available.
  • The principles of the medieval Law Merchant  are applied in arbitration
evaluation law merchant of the future
Evaluation, Law Merchant of the Future:
  • Medieval Law Merchant far from destroyed.
  • A modern variant of the Law Merchant is  the evolving law and dispute resolution in cyberspace.
    • Internet traders solve disputes online
    • seldom challenged before traditional courts of law.
    • Problem of enforceability.
  • Merchants are reluctant to surrender the efficiencies of merchant practice to state confinement
  • The numerous events of the past few years…attacks on the Twin Towers and London, the invasions of Afghanistan and Iraq.
  • interest in Islam, particularly in ‘Islamic revival’. One result is an awareness of the role and importance of law in the life of Muslims.
  • Islamic law covers all aspects of human behaviour from political to sale of real property, from hunting to the etiquette of dining,
  • It is much wider than the Western understanding of ‘law’, and governs every detail…including commercial transactions.
  • There is no Christian law of contract nor of property, whereas bodies of law dealing with such matters do exist in shari’a.
  • it would make no sense to refer to ‘Christian commercial law’, it is meaningful to speak of ‘Islamic Commercial Law’.
  • The shari’a… abandoned and substituted by Western law. However, as a result of the Islamic revival, the possibility of adapting the shari’a to the modern world has been considered recently.
the development of islamic commercial law
The Development of Islamic Commercial Law:
  • Muslim great deal of trading activity.
  • Economic environment…industry, manpower, free workers, goods production and export and large quantities of coins.
  • Developed a system … served the needs of participants well.
  • The Muslim world was overtaken by the West in technology, warfare and commercial techniques.
  • a long series of events, … conquest of Egypt by the French in 1798, the European domination of trade.
  • consequence was a wish to imitate and adopt those ideas and institutions which seemed to have given Europe the advantage.
  • The imitation movement led to the shari’a being ‘abandoned with astonishing speed in all areas except family law; shari’a commercial law disappeared from almost the entire region.

commentators argue about ‘why reformers looked to Europe rather than build on pre-existing shari’a

  • Napoleon brought with him to Egypt the French idea of separating commercial and non-commercial law… special courts were set up to deal with commercial disputes.
  • The adoption by the Ottoman Empire in 1850 of large parts of the French Commercial Code was made as part of a long and complex secularisation process
  • the following factors have played a part:
  • 1. European dominance of trade;
  • 2. The desire of European merchants to avoid local courts and local law;
  • 3. The perception that an obligation to use the shari’a disadvantaged local merchants as against their European counterparts, who could use Western law

4. European traders …using the French Commercial Code as a customary law to aid the resolution of their disputes;

  • 5. A familiarity with the idea and practice of secular legislation in certain fields;
  • 6. The influence of the Ottoman elite from trade with Europe, and the governmental desire to please them;
  • 7. A perception that commercial matters were of less religious significance … a perception which may have been influenced by the Egyptian experience.
  • what is certain is … major parts of the French Commercial Code 1807 were imported as the Ottoman Commercial Code 1850.
  • Subsequent developments in state law followed the pattern of a divide between commercial and non-commercial matters.
the significance of islamic commercial law today
The Significance of Islamic Commercial Law Today
  • Few people are interested in the Islamic commercial law
  • However, the Islamic revival has very significant changes. The most striking manifestation of the new situation is the growth in Islamic finance and insurance,
  • a growth has accelerated as a result of the steady and dramatic rise in oil and gas prices over the last decade.
  • The subject is also of considerable significance as a result of the islamisation of state-based law. Despite the fact that only non-commercial law is islamised,

It is not possible to achieve a total isolation of commercial law. e.g., in the UAE, the fundamental law is the Civil Code, based on the shari’a. The Commercial Code is a set of variations from, and additions to, the Civil Code. So the Commercial Code is subject to shari’a.

  • In addition, the Civil Code includes bodies of rules relevant to commercial matters, but drawn from the shari’a.
    • Examples include the general law of contract, the law of property, and the law relating to the transfer of rights. The commercial aspects of the shari’a cannot, therefore, be ignored.
islamic commercial law in modern world
Islamic Commercial Law in Modern World
  • The reasons for the adoption of Western law are not entirely clear. The justification given by the drafting committee of the Majalla (the Ottoman codification of the Hanafi school) for the enactment of the 1850 Commercial Code was that only Western law could deal with the complexities of modern commerce.
  • This notion dominated thinking until quite recently, and many lawyers still believe it.
  • However, shari’awas a legal regime with many of the elements considered essential for the proper functioning of a commercial law system, i.e. ‘certainty, flexibility and pragmatism’.

shari’a is more than adequate and have played a significant role in the facilitation of commerce, with a sophisticated law of sale, financial instruments, different kinds of partnership, and so on.

  • What matters were customs, where strict rules of the books of fiqh were abandoned ‘in favour of the merchants’ customs’,
  • a position justified by Prophetic Tradition:
    • ‘My community will not agree on an error’.
  • The possibility of adapting the shari’a to the modern world was not considered until very recently… as a result of the Islamic revival, there was a call for a return to the totality of the shari’a, including its commercial aspects.
definition of commercial law
Definition of Commercial Law:
  • Commercial law is vague! Derived from the practices of traders.
  • scholars define it as "body of legal rules that apply to commerce, commercial transactions, and organises merchants' profession."
  • It regulates relations arising from explicit business actions and behaviour.
  • Commercial law is the branch of private law, which applies to business transactions, and to a certain category of people, merchants.
    • Commercial transaction is the core of the legal rules governing business dealings.
    • The most common types of commercial transactions is sale of goods.
  • All commercial transactions have one thing in common: they serve to transmit economic values.
Commercial law have evolved from private law
    • General principles of private law were the essence of the general principles of the transactions of individuals.
  • This is due to:
    • the quality of activities or
    • the privacy of the profession and
    • the swift transaction between traders and haste process of business and commerce.
  • It is often considered to be a branch of civil law.
    • Many countries have adopted civil codes which contain comprehensive statements of their commercial law.
  • Accordingly, commercial law (business law) is “the body of law which governs business, commerce and consumer transactions.”
  • Business: in economics, is a legally recognised organisational entity (also refered as a firm)
    • designed to sell goods and/or services to consumers or other businesses in an effort to generate profit.
  • In capitalist economies (most businesses are privately owned) businesses are formed to earn profit and grow personal wealth of their owners.
    • The owners of a business aim to generate a financial return in exchange for their work and their acceptance of risk.
    • Exceptions to this rule include cooperative businesses and government institutions.
  • Socialistic systems, involves either government, public, or worker ownership of most sizable businesses.
The etymology of "business" relates to the state of being busy either as an individual or society   doing commercially viable and profitable work.
  • The term "business" has at least three usages:
    • the singular usage (above) to mean a particular company or corporation
    • the generalised usage to refer to a particular market sector, or
    • the broadest meaning to include all activities by the community of suppliers of goods & services.
  • However, the exact definition of business is a matter of debate.
  • Commerce: is a division of trade or production which deals with the exchange of goods and services from producer to final consumer.
  • It comprises the trading of something of economic value such as goods, services, information or money between two or more entities.
  • Commercialisation consists of the process of transforming something into a product, service or activity which one may then use in commerce.
modern concept of commercial law
Modern Concept of Commercial Law
  • Modern trends in commercial law  reconsider the provisions of commercial law.
  • Commercial law is the law of economic or business. This concept, would    cover all topics involve economic activities under commercial law
  • Rules of commercial law constant evolutionchanging rapidly
    • Progress in the field of industry, trade  new products, markets, tools  new legal versions
  • Commercial law evolves more rapidly than any other branches of law
New contracts: in France in recent years  sales through agency
    • Cars' factory with a distributor in an area
    • The owner of an oil company with the distributors in petrol stations
    • Working in mines (coal, iron and oil) is considered business activities
  • The concept of economic process is more important here
  • In this context, the rules of commercial law were developed from activities from civil law.
the distinction between commercial and civil acts
The Distinction between Commercial and Civil Acts:
  • The provisions of commercial law  business and commerce
  • Most contracts in the commercial law were quoted from civilian life  and have created special provisions
    • such as commercial contracts, commercial papers, and bankruptcy.
  • Scholars recognise that speed and trust in conducting business activities  important in commerce  recognised in commercial law.
Speed is a fundamental element  has an impact on the legal system  “freedom of proof”
  • Trust: business requires large numbers of transactions  entail trust
  • thus commercial law strengthen the credit/trust by:
    • increasing creditors' guarantees
    • imposing harsh sanctions on the failing debtors.
characteristics of commercial law
Characteristics of Commercial Law

The Features of commercial law are related to the business environment.

Providing legal tools  enable traders to conduct transactions smoothly  simpler than the civil law

  • First: Making Profit: result is established (purpose of commerce)  actors of commercial law are individuals, companies and businesses, have the ability to achieve that objective (making profit) through transactions
Second: Speed Business Transactions: (Time has great values in business transactions)
    • In the past, merchants used oral transactions
    • Today through rapid electronic processes
    • Hence, a need for rules  accustomed to the speed
    • justified by the principles of freedom of proof and the possibility of transmitting commercial rights
  • Third: Strengthening Credit/Trust:
    • In commercial transactions  deadlines or pledge to pay debts based on a combination of time and money  will bear the risk
    • legal rules to protect commercial players  to strengthen the system of interest on commercial debt
Fourth: Openness/Publicity of Commercial Activities:
    • Commercial activities must be exposed
    • merchants  register at the chamber of commerce
    • publishing sentences of bankruptcy
    • in order for the law to protect others
  • Fifth: Goodwill and Integrity of Business:
    • in contracts, negotiating them, conclusion, and implementation
    • Deals are carried out mostly orally  no proof or witnesses
    • It is based on the presumption of merchants' confidence