Commercial Law
Professor Wangerin – Spring 2008
Introduction and Background
A. Commerce – Comes from Latin/Early French
1. Com: Come together (com-bine)
2. Come together in connection with merchandise
B. Transaction – to drive through or complete (trans-port)
C. Commercial Transactions – taking care of business
1. Money makes the world go around & commercial transactions – of various kinds – are the principal way people and businesses make money
D. Background Ideas
a. Capitalist Systems – Commercial Transactions in Capitalist Economic Systems (II)
b. Agreement/Predicted Agreement (gap filling rules); some limits on agreement
c. Bankruptcy
d. Subject matters of commercial transaction – liens, services, possession
e. Conflicting claims to the same property – when several businesses claim the same property
E. Multi-Party Transactions
a. Superpower transferees – exclude transferees of payment rights (most important kind of outsiders)
b. Agents
c. Assignees of rights – other than payment rights
d. 3rd party beneficiaries to K’s
e. Sureties
F. Specific Kinds of Commercial Transactions
1. K’s (Common law and UCC Article 2)
2. Payments for K’s (Almost Exclusively about UCC Art. 3 Payment Instructions)
3. Security for Future Payments
a. Sureties – primarily liable for paying another’s debt. Receives no compensation for assuming liability.
b. Interests (a.k.a. Liens)
1. Mortgages (mostly Common Law)
2. Secured Transactions (UCC Article 9)
G. Three Principal Components of Most Commercial Transactions (all likely to happen as part of the same transaction)
1. Contracts
2. Payments for Contracts
3. Security for Payments if the Payments are to be Made in the Future
I. Contracts – Comes From Latin: To Pull Together
A. Promises to make FUTURE exchanges
1. Exchange (or at least part of the exchange) is going to happen in the future
i. Differentiate from IMMEDIATE exchange, which is not a K.
B. Usually involve transfers of:
1. Title to property (transferring property titles is usually called a sale)
2. Interests in property (liens in property)
3. Possession of Property
4. Services
C. Payments for Contracts
1. One party provides a good
2. Other side has to pay
D. Most Common Methods of Payments
1. Cash (rare if amounts are significant)
2. EFT’s (Increasingly important – but highly specialized rules)
3. Credit Cards (not very important in commercial settings)
4. Payment Instruments – Most Important
i. A Specialized kind of K
ii. Includes checks, drafts, promissory notes and letters of credit.
5. Security (for Future Payments)
i. Buy now, pay later. If payments are to be made in future, payee (party who is going to receive payment) wants security for payments.
6. Kinds of Security
i. Insurance (Principally the idea of Suretyship)
ii. Interests (Liens) in Property.
a. Most common kinds of interests are mortgages and security interests (same thing, just involve different kinds of payments
7. Swirling Mass of Transactions: Three Distinct but closely related parts
1. K for purchase or services of goods
2. Payment for K’s – someone has to pay
3. Security for payments (if the payments are to be made in the future)
II. Capitalism: The C Word –Slide with Ariel
1. The Capitalist System (a.k.a.) The Free Enterprise system allows private people and entities (rather than the G) to:
a. Own property and to control their own ability to provide services to others.
b. Make transactions with others regarding property and services subject on
1. Transparency
a. Transactions must be “transparent” – both sides can see all the important details of the transaction.
2. Free Choice
a. Both parties must freely choose to make the transaction. The transaction cannot be forced upon one or the other party.
3. Summary: So people in a capitalist society can basically do what they want with these two caveats in connection with capitalism
C. Capitalism and Commercial Transactions
1. For good or ill, the USA economic system is a capitalist system.
2. For good or ill, the USA economic system will reflect capitalist principles.
3. For good or ill, if transactions are:
a. Transparent
b. Freely Made
The law of commercial transactions will allow the “invisible hand” to sort out most things.
4. This is why lawyers really are not involved all that much in commercial transactions, either for litigation or transactional work
D. Everything is Better, Under the “C”
E. Capitalism – Recap:
1. Generally, in capitalist systems (which, for good or ill, is what we have in the U.S.) people and businesses are allowed to agree to just about whatever they want in connection with commercial transactions.
a. The invisible hand sorts these things out in capitalist economic systems.
2. If an agreement is missing, or incomplete, or, if agreement must be set aside for positive law reasons, courts look to “predicted agreement” – what the parties probably would have agreed to under the circumstances.
a. Much of the UCC & R2d is predictions about agreement.
3. A tiny number of positive law restrictions say that people / businesses cannot do this or must do that.
