?What Is a Commercial Contract
The commercial contract is[1] in modern times the contract concluded between professionals in their business dealings. It assumes parties habitually entering into such contracts with others who are similarly knowledgeable in their trade or similar business with the aim of making some profit doing so. Professionals in this sense are likely to be only companies or similar legal entities, not individuals, and certainly not consumers. Furthermore, their business is likely to be on some scale while the interests to be promoted or defended are considerable. Another feature is that these contracts increasingly operate in the international sphere and are embedded in a globalized environment that co-determines their structure and operation even if on the occasion the transaction is still purely domestic. Although in all situations where distinctions are made there are borderline cases and especially with respect to small and medium-sized enterprises (SMEs), there may be justified doubts, this should not distract.
An older distinction is the one between dealings among merchants.2 This was apt in a time when corporate activity and legal personality remained underdeveloped, which was largely the case till the latter part of the nineteenth century. In countries like Germany and France considerable authority and a set of rules developed to distinguish this connection between merchants and non-merchants (Germany) or merchant and non-merchant activity (France). These distinctions proved problematic partly because non-merchants could engage in what was considered merchant activity, notably in signing cheques, whilst merchants would engage in such activity that was not considered typically mercantile at all. The consequence was that neither the concept of merchant nor the concept of commercial activity could comfortably be defined exclusively in terms of the other. Hence the confusion. This was borne out in countries like Germany and France, where separate commercial codes existed but most of the commercial activity remained covered by the civil codes. The commercial codes thus had
limited coverage, markedly different even between Germany and France, and served in any event merely as lex specialis to the general system of the civil codes in the identified areas, although when corporation law and bankruptcy were included (bankruptcy only applying to merchants) or transportation and insurance were also covered, there was a fuller system, but there was never clear separation or clarity in the cover-age. In countries like The Netherlands, Brazil, and earlier Switzerland, the distinction was abandoned altogether and there were no more commercial codes. That was one way of resolving the difficulties, but as we shall see, the consequence was that all private law acquired the consumer ethos inherent in the civil codes.
The distinction remained, however, more especially important in countries like France which still had and have a special commercial jurisdiction in commercial courts and this added a procedural relevance to it. As to the nature of this law to the extent it could still be separated, a particular aspect of commercial law both in France and Germany was and is the absence of any particular reference to the status and impact of custom and industry practices. This is entirely in line with civil law codification thinking that is suspicious of, and uncomfortable with extra-statutory sources of law. It is supported by its system thinking, but this attitude was always curious in commerce and became a considerable weakness in the codification approach. It is notably not followed in the Uniform Commercial Code in the US (Sec. 1-103) which does not seek to monopolize the law creation function in commerce and finance. It recognizes many more sources of commercial law and is ¬therefore not a codification in the civil law sense at all.3 The law in England may now have more difficulty with custom also too, but courts at least remain pragmatic.
The discussion regarding the commercial contract should not get lost in these older distinctions, one reason why it is better simply to refer to the professional contract, which as we have seen at the beginning, has a different connotation. In common law, there was never a clear commerciality notion in this regard and there was never a single overriding criterion, not in the UCC either. Traditionally, commercial law covers the sale of goods, transportation, and insurance; this is historical, a matter of its origin and development. It implies another key difference: when it covers these areas it covers them in principle in full, it was never lexed specialis to a bigger system. Arguably there is no system in common law at all. It is important to acknowledge that the common law of contract derives from commercial law in this undefined fashion, therefore from a business setting and this has clear consequences till this day as we shall see. So it is in the law of movable property. Even though in the eighteenth-century commercial law was incorporated into the common law, it always retained some independence4 and it remains, in particular, more sensitive to custom as an autonomous source of law.5 No less important was in modern times the additions that derived from the law of equity; one may think of the rescission remedies in contract law and the notion of specific performance, but also of trusts, floating charges, and finance sales in movable property law. Assignments and the law of set-off derive their force mainly from equity also whereas in business one sees the largest differences with the civil law.
In more modern times, the distinction between the commercial or professional contract and other contracts often derives from distinguishing consumer dealings which are then more specifically defined or at least described. It follows that the rest are professional dealings. That was notably the approach in the 1980 Vienna Convention on the International Sale of Goods (CISG), Article 2(a). It covers only professional sales but does do so indirectly by excluding consumer sales. Whilst in modern codifications, the distinction between commercial and non-commercial dealings is often abandoned in civil law countries—as we have seen—increasingly civil codes incorporate special rules not for business dealings but for consumers. Although a similar distinction thus results in principle like under the Vienna Convention, the danger is that in the absence of what may be called proper relation-ship thinking, which fundamentally distinguished between types of parties and is much more engrained in common law,6 in civil law the consumer protection we see especially in contract law wafts over per type of contract (which is the civil law emphasis rather than a type of relationship) to the professional sphere. That has become a great weakness of the civil law in commerce and finance and is, as we shall see, much less likely to happen under the common law of contract. In truth, civil law has become consumer law, it always was and its codes have morphed into consumer law codifications. This is connected with the fact that they have their origin in anthropomorphic nineteenth-century thinking in which there was little room for corporates and business. Here a can of milk was bought for consumption, not to trade or to convert into other products. That remains in essence so till today and there is no proper distinction. It is different from the common law and this has a fundamental impact on contract law (and even on movable property law).
[1] – The Future of the Commercial Contract in Scholarship and Law Reform – Maren Heidemann • Joseph Lee- What Does the Transnationalisation of the Commercial Contract Mean? Is There a New Model and Are There Minimum Standards? Is There a Law and Economics Perspective?
