Commercial Law - Merchant Status, Commercial Acts and Instruments
Commercial law examines whether you can identify the commercial character of an act, apply commercial rules instead of civil ones, and handle negotiable instruments and insolvency.
Core rules
- A merchant is one who carries out commercial acts as a profession; commercial acts are objective (defined by the code) or subjective (connected to a merchant's business).
- Registration in the commercial register and use of a trade name create publicity and affect third-party protection.
- Commercial obligations: solidarity is presumed between co-debtors; interest is due for commercial debts; proof may be by any means, including presumptions.
- Commercial sale: the buyer must examine and give notice of defects promptly, or lose the warranty action.
- Agency and distribution agreements are interpreted according to commercial usage, good faith, and notice periods for termination.
- Cheques are abstract instruments: the obligation is independent of the underlying debt, and consideration defences are generally unavailable against a good-faith third-party holder.
- Insolvency begins with cessation of payments; clawback actions reach transactions concluded during the suspect period.
- Company law: limited liability is the rule; piercing occurs for fraud, commingling, or undercapitalisation.
Worked example
A buyer issues a cheque as security for goods; the bank dishonours it for insufficient funds. The holder sues the drawer. The cheque creates an autonomous obligation, so the drawer cannot plead the underlying sale dispute against a holder in good faith. The drawer is liable for the amount, and the dishonour may ground a criminal complaint and a protest. Recourse against endorsers requires a timely protest and notice; otherwise the holder loses the recourse action but keeps the action against the drawer.
Traps
Applying civil solidarity and proof rules to commercial acts; forgetting prompt notice of defects; missing protest and notice formalities on instruments; ignoring the suspect period in insolvency.