The Law: An Engine for Trade

Published date01 May 2001
Date01 May 2001
Volume 64 No 3May 2001
The Law: An Engine for Trade
The Right Honourable The Lord Irvine of Lairg*
The lecture traces the process of commercialisation in English law from its early
stages to the present day. Until the mid-eighteenth century the law was in a
process of integration, overcoming a judicial preoccupation with technicalities
and procedures to form a body of rules which merchants could trust. From that
point on the law has assumed a proactive role as an engine for trade. The
nineteenth century is marked by legal facilitation, where new institutions were
fashioned as a robust commercial framework for the Industrial Revolution. From
the end of that century to the present day business law has served to regulate,
building a sensitive framework for commercial development that balances the
needs of commerce with the needs of society as a whole.
My subject is commercial law and its role as an engine for trade. English law is
practically unique among the legal systems of the world because its commercial
rules are entirely integrated into the general practice of the law, with business
disputes heard in the same courts, using the same principles, as other litigation.
This sets commercial principles in context. It avoids stark distinctions between
commercial contracts, private contracts and consumer contracts and stands in the
way of overclassification. The explanation for separate commercial systems
elsewhere is that they should reduce legal burdens on business, whilst an integrated
system may not provide the fast and sensitive procedures traders require.1
English law, however, is highly regarded in the international commercial
community. Out of seventy-two trials heard in the Commercial List in the High
Court during the last year, forty-four involved foreign parties.
Let us consider the four principal ways in which commercial law serves our free
market economy. First, commercial law is clear and predictable, providing a firm
body of rules on which traders can depend. Secondly, it contains a strong and
positive law of contract to uphold trading agreements. Thirdly, the law has been
shaped by the needs and expectations of merchants, and much business practice has
been incorporated into law. Fourthly, Parliament and the courts have made genuine
innovations to lead the market economy forward, building on business practice to
provide strong frameworks for industry.
ßThe Modern Law Review Limited 2001 (MLR 64:3, May). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA. 333
* A lecture delivered to the British Academy on Wednesday 22 November 2000. I acknowledge my
indebtedness to Neil Beresford, Barrister-at-law, for his invaluable assistance in the preparation of this
1 In France, for example, commercial contracts are an exception to the strict rule, contained in Civil
Code, Art 1341, that contracts must be proved by signed documents. Art 109 of the Commercial Code
allows commercial contracts to be evidenced par tous moyens. The limitation period is also shorter
(being 10 years) than the 30-year period applicable to general contractual transactions: Commercial
Code Art 189
Legal predictability
The very first need of the business community is legal predictability. An
unpredictable legal climate is unacceptable to business, forcing traders into
necessary legal advice and insurance cover to secure against the risk of their deals
being defeated. In 1774, Lord Mansfield said:
In all mercantile transactions the great object should be certainty; and therefore, it is of more
consequence that a rule should be certain, than whether the rule is established one way or the
other. Because speculators in trade then know what ground to go upon.
The commercialisation of the common law
Before 1750, commerce was hindered by a division between the law merchant and
the common law.2Common law was the unified law of the land,3yet it was slow to
innovate in commerce, since it had become preoccupied with its own technicalities
and procedures rather than the requirements of business.4A misplaced word in a
property transfer would often defeat entire transactions.5Businessmen had to have
some reprieve from these stern rules, and the solution was to let merchants rely on
their own customs as exceptions to the common law. If a transaction accorded with
a practice recognised in the mercantile community, its validity could be assessed
by reference to that practice rather than the insensitive common law.6
The solution was an obvious compromise, the price of which was legal
certainty.7Litigating businessmen invariably put evidence of local customs before
their judge,8and the success or failure of commercial transactions then came to
depend on the judge’s acceptance of this factual evidence.9
It was not until Lord Mansfield became Lord Chief Justice in 1756 that positive
measures were taken to combat the uncertainty permeating commercial litigation.
Mansfield’s approach was to incorporate mercantile customs directly into the
common law. When a merchant led evidence of a local custom, Mansfield
evaluated its content by consulting businessmen
and applying his renowned
expertise in foreign systems.
If the custom was accepted, it would become
2 Maitland, ‘Select Pleas in Manorial Courts’ (1889) 2 Selden Soc 132.
3 J. Holden, The History of Negotiable Instruments in English Law (London: University of London,
Athlone Press, 1955) 27–36, M. Postan, Medieval Trade and Finance (Cambridge: Cambridge
University Press, 1973) ch 2. For a different perspective on the nature of lex mercatoria (but a similar
conclusion on the question of incorporation) see J. Baker, ‘The Law Merchant and the Common Law
Before 1700’ [1979] CLJ 295.
4 P.S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford: Oxford University Press, 1979) ch
5 J. Powell, Essay upon the Law of Contracts and Agreements (1790) I, 152–160.
6 If he did not adduce such evidence, the merchant would be ‘stuck’ in the common law doctrine of
assumpsit, and the custom would only be relevant to ‘explain the assumpsit’, that is to justify the
implication of a liability: Oaste vTaylor (1612) Cro Jac 306.
7 See the complaints of Buller J in Lickbarrow vMason (1793) 2 TR 73.
8 This in fact appears to be what the majority of business litigants did: Death vSerwonters (1685) Lutw
9 It was eventually settled that merchants wishing to rely on trade customs were obliged to meet two
heavy burdens of proof: that the custom had immemorial antiquity and limited geographical
application: Brown vLondon (1669) 1 Lev 298.
10 See, for example, his evaluation of the rules of contract in Loveacres d Mudge vBlight (1775) 1 Cowp
11 In the leading case of Lewis vRucker (1761) 2 Burr 1167, Lord Mansfield determined the method of
quantifying an insurer’s liability for partial loss by first ‘conversing with some gentlemen of
experience in adjustments’.
The Modern Law Review [Vol. 64
334 ßThe Modern Law Review Limited 2001

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