Commercial Law
What this domain tests
Commercial law tests transactions and instruments used in trade: sale of goods, agency, partnership, negotiable instruments, insurance and consumer/competition regulation.
Core rules
- Sale of Goods Act implied terms include title, compliance with description, fitness for purpose and merchantable quality where the seller deals in goods of that kind. Exclusion clauses are construed strictly.
- Property and risk may pass separately. Risk generally passes with property unless the contract provides otherwise. The nemo dat rule protects owners against sellers without title, subject to exceptions.
- A bill of exchange is an unconditional written order to pay; a cheque is a bill drawn on a bank payable on demand. A holder in due course takes free of certain defects.
- Agency may arise by express or implied authority, apparent authority or ratification. The principal is bound by acts within authority.
- Partners are jointly liable for partnership debts. Insurance requires insurable interest and disclosure of material facts.
Worked example
A dealer sells a car described as suitable for road use. The engine fails because it was not fit for that purpose. The buyer may rely on the implied term of fitness for purpose and merchantable quality. If the dealer's contract contains a broad exclusion clause, the court will ask whether it was incorporated, whether it covers the defect and whether it is reasonable or lawful.
Traps
Do not merge property and risk. Do not assume every exclusion clause works. Do not treat an agent's apparent authority as unlimited. Do not ignore the Bills of Exchange Act's formal requirements for negotiable instruments.