PRINCIPLES OF MERCANTILE LAW

INTRODUCTION

The history of the law is an interesting subject worthy of detailed study, but outside the scope of this work, which is intended to provide a statement of the principles of Mercantile Law. It may be, however, of some value to the student to have a general idea of the growth of our volume of law, and of the present procedure in connection with legal proceedings.

In early times the law that existed was the result of custom that had been handed down orally from generation to generation, probably from the times of the early Britons, being added to gradually by the "law-givers" of each succeeding period. Usages of other races, for instance the Romans, were incorporated, and, after the Norman Conquest, the body of law common to the whole country, as distinct from local customs, was administered in the King's Courts and was designated the Common Law.

By degrees this Common Law became a mass of ill-digested and hide-bound tradition which could on no account be modified or made flexible to suit the more varying conditions of later times, and this entailed very great hardship on the trading community. Consequently, among traders there grew up various customs and usages which tended to simplify their intercourse with one another. Practices of foreign merchants were followed, and large numbers of rules from foreign codes and bodies of law were adopted by the merchants, in particular those rules which had reference to maritime matters, this country then, as now, carrying on considerable foreign trade and shipping. The English courts took no cognizance of this lex mercatoria, or law merchant, until comparatively recent times; but gradually it was recognized by the courts and, towards the middle of the eighteenth century, it became firmly established as part of the Common Law.

A direct outcome of the harshness and inflexibility of the earlier body of Common Law was the birth of what is known as Equity Jurisprudence, which originated in the inability of

the Common Law Courts to give a remedy where none existed at Common Law, or where that law gave insufficient relief. It became customary to petition the King, who directed the Chancellor to review the petitions and bring before him such matters as he thought proper. Edward III ordered the Chancellor to deal with these petitions himself; and in the reign of Richard II Parliamentary authority was given to the Chancellor's jurisdiction. In all such cases, equity was supposed to deal in matters of natural justice, as distinct from a purely legal right. As might have been expected, however, these two opposing bodies of jurisprudence frequently clashed, and there have been in the history of the law several celebrated deadlocks between the Courts of Common Law and those of equity, i.e., the Court of Chancery, in which neither the Lord Chief Justice on the one hand, nor the Lord Chancellor on the other, would give way. Finally, the rules of law and equity were fused by the Judicature Acts, 1873 and 1875, and it was therein laid down that, where the rules of law and equity clashed, those of equity should prevail.

In addition to this gradual growth of a system of jurisprudence, much has been added and much been altered by Acts of the Legislature-the King, the House of Lords and the House of Commons in Parliament assembled. These Acts are known as statutes, and the body of law thus created is referred to collectively as Statute Law. Statute Law is superior to, and overrides, all rules of both Common Law and equity. Of late years, attempts have been made to collect into one statute or series of statutes all the rules relating to one particular branch of the law; this is known as "consolidation" and "codification," e.g., the Companies (Consolidation) Act, 1908, the Partnership Act, 1890, the Sale of Goods Act, 1893.

Prior to the Judicature Acts, there were in existence several distinct courts, (1) The Courts of Common Law, comprising the Queen's Bench, the Court of Common Pleas, and the Court of Exchequer, and (2) the Court of Chancery. The Judicature Acts created the SUPREME COURT OF JUDICATURE, which consists of the HIGH COURT OF JUSTICE and the COURT OF APPEAL. The High Court is now divided into Divisions-viz., Chancery Division, King's Bench Division, and Probate, Divorce and Admiralty Division. Matters formerly the subject of cognizance in the separate courts are still commenced and carried on in the analogous divisions of the High Court, but if an action is brought in the wrong division it can be either transferred or retained there, without detriment to the parties concerned.

The Supreme Court of Judicature, together with the House of Lords, the Judicial Committee of the Privy Council, the Palatinate Courts, and the Railway and Canal Commission, are

classified as Superior Courts of Record. Inferior Courts of Record, so called because their proceedings are subject to the supervision of some superior court, include County Courts, the Mayor's Court of London, and Quarter Sessions.

Courts of Record are so called because a record is kept of the proceedings before them, and in fact was so kept in ancient days, and such records are conclusive evidence of what is contained therein.

The causes of action arising out of contract will be considered in the succeeding chapters, but a brief consideration of tort may not be out of place here. A tort has been defined as some wrongful act, consisting in the withholding or violating of some legal right, giving rise to an action for damages. It has two essentials : (1) A wrongful act committed by one party; (2) Damage to another party. Usually a tort arises otherwise than out of a contract, but it may be dependent on contract: so that actions. may be divided into three classes

(a) A tort founded on a contract-if the contract imposes a legal duty the neglect of that duty is a tort founded

on a contract, and the injured party may commence an action for breach of the contract or for tort: (b) A tort unconnected with any agreement, e.g., a person being run down on the highway by the negligence of a motorist. (c) A tort arising out of a contract, e.g., if a person other than a party to the contract maliciously induces one of the parties not to perform what he is legally required to perform under the agreement.

Actions may be founded on the infringement of a person's legal rights, that is, if a contract has been broken, or a tortious act committed, the other party to the contract or the person who has been injured by the tortious act has a right of action in respect thereof. He will be able to maintain an action even if he has suffered no substantial damage, if he has, in fact, suffered what in the eyes of the law is regarded as a legal injury-the legal maxim being that Injuria sine damno (an injury without actual harm) will entitle a person to maintain an action. This applies only where the injury is a legal injury and not merely, for instance, a moral wrong; and there are certain acts which are opposed to the law and yet which do not give a right of action without proof of actual damage. The above maxim is well exemplified in the leading case of Ashby v. White (1703), where a returning officer maliciously refused to receive the vote of the plaintiff at a parliamentary election. The candidates for whom plaintiff wished to vote were elected, so that actually he suffered no damage; but it was held that he had a legal right to vote and that that legal right had been infringed, so that he had a right of

action. As opposed to this, there are cases where a person has suffered damage but can obtain no redress because there has been no infringement of what the law regards as a legal right, the maxim here being that Damnum sine injuria (harm without legal injury) will not entitle the person to maintain an action. Thus, in Chasemore v. Richards (1859), it was held that a person may dig down in his land and so deprive his neighbour of water which would otherwise be available on his land. This would do great harm to the neighbour, but it is not the infringement of a legal right, and is therefore not sufficient to maintain an action. In this connection may be noted also the leading case of Allen v. Flood (1898). A shipbuilding firm employed many workmen, including the plaintiffs, and the plaintiffs had incurred the displeasure of a trade union. One of the officials of the union went to the firm and threatened that if the plaintiffs were not dismissed, the other workmen would be called out, and the firm yielded to the threat and terminated in a lawful manner the employment of the plaintiffs. On the plaintiffs suing the official of the trade union for damages, it was held that there was no cause of action as the harm suffered was damnum sine injuria. As a rule damnum and injuria combine to support an action, as otherwise the plaintiff would not receive substantial damages, and where they do combine there is always a good cause of action. The rule at Common Law is that if a person who has suffered injury should die before he enforces his claim the cause of action comes to an end on his death, the legal maxim being-Actio personalis moritur cum persona (a personal action dies with the person), but there are many exceptions to this rule; and, similarly, in some cases the death of the person who caused the injury deprives the injured party of his remedy. Ordinarily, the maxim applies to actions arising out of torts and not out of contracts, that is, in legal phraseology, to actions ex delicto and not ex contractu; but rights arising out of contracts will expire where the contract is personal, e.g., where an artist contracts to paint a picture and dies before completing the work. So that actually the distinction is not between actions out of torts and action arising out of contracts, but really between rights affecting persons and those affecting property.

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Actions on commercial matters would, as a rule, be taken in the King's Bench Division of the High Court, in which there is now a special court known as the Commercial Court for the trial of causes arising out of the ordinary transactions of merchants and traders, amongst others those relating to the construction of mercantile documents, export or import of merchandise, affreightment, insurance, banking, and mercantile agency and mercantile usages." Matters connected with shipping

would, as a rule, be commenced in the Admiralty Division, and those relating to partnership, patents, trade-marks, copyright, and the winding up of joint-stock companies in the Chancery Division.

An action in the King's Bench Division is commenced by a Writ of Summons, which commands the defendant to enter an appearance usually within eight days of service. On the writ are endorsed particulars of the plaintiff's claim; and, if the defendant should decide to contest the claim, he must enter an appearance within the stated time. If he does not appear, judgment may be entered against him, which will be final if the claim is for a liquidated amount that is an ascertained sum—but, if for an unliquidated amount, what is termed an interlocutory judgment is signed and a writ of inquiry is issued to assess the amount of damages. If the defendant enters an appearance, the plaintiff must take out a Summons for Directions within fourteen days of appearance, except in certain specified cases, and in these cases he may do so if he wishes. The Master then directs whether there shall be pleadings, orders further particulars, discovery, where and how the action shall be tried, and other matters. Pleadings are documents recording the precise facts on which parties intend to rely at the trial. They consist, principally, of :

(1) Statement of Claim made by plaintiff within 21 days after order.

(2) Statement of Defence made by defendant, as a rule within 10 days.

(3) Statement of Reply of the plaintiff, when specially ordered, within 10 days after delivery of defence.

(4) Rejoinder by the defendant within 4 days.

By what is known as procedure under Order 3, Rule 6, writs may be specially endorsed and the matter quickly disposed of where the action is for a liquidated sum under a contract, statute, or trust, and in certain other matters not within the purview of commercial law. The advantages of this procedure are that the special endorsement is equivalent to a statement of claim and no further statement of claim is permitted, and, even if defendant appears, an order may be made under Order XIV for plaintiff to have judgment, unless good cause be shown. There are other variations of procedure which are however somewhat outside the scope of this work and as, naturally, the commercial man would never contemplate taking legal proceedings without professional assistance, an intimate acquaintance with the details of procedure is not necessary to a knowledge of mercantile law.

As soon as issue is joined, that is, when the pleadings have