The Courts Role

Is To Help Business Men Not Hinder Them, We Are There To Give Effect
To Their Transactions, Not To Frustrate Them, We Are There To Oil The
Wheels Of Commerce, Not To Put A Spanner In The Works, Or Even Grit
In The Oil
[Goff]
Introduction
The main purpose of the existence of the commercial law is to facilitate the
commercial activity from several jurisprudence sectors1. Essential subject of the
commercial law is the contract for the sale of goods that binding the seller and the
buyer. However for commercial contract, sales is not the only aspect to be considered,
things such as finance issue, defective product, the fairness of the trading itself,
property, tort, and negligence also takes part2. The commercial practice become
constantly changing from time to time, finding its new forms3. The commercial law is
more sensible by looking to its common principle than to describe it. Through the
purpose of the commercial law, various principles also can be verified like certainty
and predictability; party autonomy; recognition of the customs and practice of the
mercantile community; and flexibility in order to accommodate changing parties4.
In commercial law, the judges have to look through the former deals on particular
dispute, shaping his statement of principle to reach the right conclusion on a specific
new dispute which sometimes leads them to initiate a new principle or to modify an
existing one5 and all of this principle leads back to the main purpose which is
facilitating the trade6. According to Lord Goff statement, to some extent, I agree that
in commercial law the objective approaches from English judge to some particular
case might become substantial. The objective of the judge on Commercial Court is
exist to help the commercial people so they might be able to enjoy the certainty
1

Robert Bradgate, Commercial Law, (3rd edn, Butterworths 2000), 4

Ewan McKendrick, Goode on Commercial Law, (4th edn, Lexis Nexis 2009), 10-11
3
Ibid, p. 21
4
Bradgate (n 1), 4
5
McKendrick (n 2), 21
6
Bradgate (n 1), 5
2

principle of law and the party autonomy in commercial activities7; to give an effect
over the business activities by recognising the commercial practices and being
responsive for commercial needs8; therefore the economic wheels might run well
continuously. However, those roles of English judges also rely on their willingness to
extent their objective view from previous case which allows him to do the free
manoeuvre even when different judges might give diverse standpoint of view9 which
sometimes makes the objectives of judges become the grit in the oil for commercial
community.

The Commercial Court Objective To Help The Commercial People Through Certainty
And Party Autonomy
The commercial people needs for a law that capable to serve them swiftly with clear
solution upon their commercial issue, devoid the costly and time-consuming
litigation. The law also expected to be clear and certain, because when the law is
certain, it can be applied in a predictable way and earn a predictable result over a
dispute without resort to litigation10. To provide settled legal rules for commercial
community so the rules not easily changed become the commercial court objective, in
this way the party might deal with the commercial contract based on specific rules11.
Lord Denning emphasized this certainty principles with says that once the commercial
court establish a standard form of commercial documents, all of the commercial
player have to act according to it through all ensuant case12.
The important principles in commercial law also being codified into statutory form in
order to provide the certainty law for commercial community. However, unlike the
other law jurisdiction, these commercial law principles are not made into one single
code but incarnate into individual statutes in individual areas such as Bills of
Exchange Act 1882, Partnership Act 1890, Sale of Goods Act 1893 and Marine
Insurance Act 190613. Lord Lloyd even went further on certainty principle by stating
7

Ibid, 5-6
Ibid, 7
9
McKendrick (n 2), 22
10
Ibid, p.5
11
Ibid
12
The Annefield v Owners of Cargo Lately Laden on Board the Annefield [1971] 1 All ER 394
13
Bradgate (n 1), 10
8

that he refused to interfere with specific business course until his being convinced that
it was incorrect14.
As far as certainty is concerned in the law of contract, another objectives of the
commercial court are to give freedom of contract for commercial players and respect
the party autonomy by refuse to question or interfere the commercial contract15 even
for a "fair specification"16 or the inequality of bargaining power17 the court refuse to
consider it as reason to interfere the contract. The justification for Commercial Court
for this act is on the ground of the main purpose of the commercial law itself which is
to facilitates the conduct of trade18. However, the Court might interpose into a
contract under the ground of "undue influence"19.

This respect for freedom of

contract does not always justified, nowadays, the commercial court has been
encouraged to step in particular categories of contract on a specific terms like exclude
liability based on The Unfair Contract Terms Act 197720 and The Unfair Terms in
Consumer Contracts Regulations 199421.

The Commercial Court Objective To Give Effect Over The Business Activities By
Recognising The Commercial Practices And Responsiveness For Commercial Needs
For many years, the commercial court has been acknowledge on providing legal effect
to commercial activity, and in some case also have to extend the legal concepts or
even further, denying the basic principles for all kind of legal magic can be worked
by mercantile usage22. The commercial law have to be able to adapt and to provide
any change of commercial practice, like Atkin J said in Groom V Barber that the
courts should accept the new interpretation of an old form if it is clearly that in fact
there is a change23. The commercial practise began from a common practise or a
commercial custom that being implied into a contract. In order to make this common
14

The Effort Shipping Company Limited v. Linden Management SA and Others [1998] All ER 495
Bradgate (n 1), 6
16
WN Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
17
Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616
18
Bradgate (n 1), 6
19
National Westminster Bank plc v Morgan [1985] 1 AC 686
20
Bradgate (n 1), 77
21
Ibid, 88
22
Roy Goode (1988) 14 Monash University LR 135 at 155
23
[1915] 1 KB 316
15

practise receive judicial recognition, it requires the custom to have a certainty,

reasonable and also being well established24. This flexibility of the commercial court
is needed in a way to adapt such changes in commercial law practice although
sometimes it might come to against the certainty principle itself. Nevertheless, the
need for flexibility in adapting to the changes should be made with cautiously and
prudent. Against to the doctrine of conceptual impossibility that was being pointed
by Millett J.25, Lord Hoffman give an highlight on this flexibility of law by saying that
the court should be very careful in stating that a practice on a commercial activity to
be conceptually impossible

26

. In a way to accomodate the needs of commercial

community, the commercial law basically is pragmatic. Lord Goff says on one of a
retention title clause case that the court not supposed to be focus on the concept of
term in commercial law only, but also need to look beyond it on how the business
player do commercial activity with it27.
Another role of commercial court to meet the commercial community needs is to
interpreting a commercial contract by objectively assessed the intention of the
contractual party.28 There are several approach by the commercial court on
interpretation of a contract. The old approach or known as literral approach have a
very strict rules, they only look to the ordinary meaning of the contract, look within
the contract without considering the background or external factors that might affect
to the contract itself29.
Moving forward from the old approach, as Lord Wilberforce mention in Prenn v
Simmonds30 that the contract all of this time has been trap in the matrix of fact, the
commercial court now willing to look beyond the contract and even look beyond the
purpose of the contract itself and this is arguably the new approach. This new
approach objectivity are to interpret the contract in a common way so it might
contribute effect to commercial purpose from the business player31 also to let the

24

Bradgate (n 1), 7
In Re Charge Card Services Ltd [1987] Ch 150
26
Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214
27
Clough Mill Ltd v Martin [1984] 3 All ER 982
28
Bradgate (n 1), 69
29
Janet OSullivan & Jonathan Hilliard, The Law of Contract, (6th edn, OUP 2014), 182
30
[1971] 3 All ER 237
31
Bradgate (n 1), 69
25

commercial background become a consideration on interpreting an ambiguous words

in contract32.
Lord Hoffman extend this factual matrix by set up five principles33 in order to
interpret a contract, which are :
a. To ensure the meaning of the contract as it would come along in the sense of a
reasonablle man;
b. Redefined the factual matrix by saying that absolutely anything that affected the
way in which the language of the document woud have been understood by
reasonable man; this absolutely anything subsequently explained as no limitation
concept as a background on commercial contract34;
c. Excluding the previous negotiations of contractual parties and their personal
intention from the Law;
d. To pay attention on the differences meaning on documents, which one is express
the reasonable meaning and which one is saying the real meaning of the words;
e. Focus on the next step to take when there is ambiguous on the words35.
The other strong opinion on this new approach is come from Lord Reid which
basically saying that the court had to be reasonable and set eyes at what the parties
might intended, the more unlikely and unreasonable the interpretation the less
likely the parties intended the interpretation to be36. However, it is not the court
duty to search for ambiguity or even to create an ambiguity if it is not there, the
starting point is to observe the words used to find out whether they are clear and
unambiguous. If it is a clear ambiguities, then the court will hold fast to the
interpretation of the words, but if there more than one reasonable interpreting and
comes a disputes on those interpretation then the court might step in and looking
at the ordinary meaning without taking concern at parties mission37. The Court
power to step in only when there is an ambiguity, not when its non-ambiguous,
even if the words seems to be completely unreasonable, the court still have to
follow the one and only sensible interpretation of it. But also if there is ambiguity

32

OSullivan & Hilliard (n 29) 183

Investors Compensations Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98
34
Bank of Credit and Commerce International SA (in liquidation) v Ali [2001] 1
35
OSullivan & Hilliard (n 29) 183-186
36
Schuler v Wickman Machine Tool Sales Ltd [1974] AC 235
37
Hayward v Norwich Union Insurance Ltd [2001] 1 All ER (Comm) 545
33

and there is a choice, the court should choose the one that most consistence with
the business common sense38.
In addition, Lord Staughton also put critics to this new approach especially the
factual matrix concept by saying that the counsel could have to different idea
about the factual matrix and what contain in it. He prefer to a limited concept of
surrounding circumstances which the parties must have in mind in a way to
assessed the true intention of the parties39.

The Commercial Court Objective Might Become The Grit In The Oil For Commercial
Community
Contrary to the positive feedback of the objectives of court as mention above, this
willingness to facilitate the commercial needs also can be obstacle in the commercial
community itself. In order to it, the House of Lords put a hand inside the commercial
contract to interpret the ambiguous term of commercial contract. In the same time,
this act of interpreting also brought the uncertainty principles inside the commercial
community.
An example for this action carries out by Lord Hoffman in the Investors
Compensations Scheme Ltd v West Bromwich Building Society40. He mentions in that
case one from five of his principles to interpret ambiguous term is to exclude the
previous negotiations parties and the subjective intention from the case. This
proposition statement of Lord Hoffman also being re-verified by House of Lord
through the Chartbrook Ltd v Persimmon Homes Ltd41 where there is two different
interpretation between the owner and the developers. The House of Lord decide to
take a side on the developers interpretation based on the language of the contract as a
whole in commercial context in a way so there no need to question about the parties
prior negotiations42. However, apparently the Lordship did take a pre-negotiation into
consideration upon this. As Baroness Hale said that his awareness upon the agreement

38

Rainy Sky SA and others v Kookmin Bank - [2012] 1 All ER 1137

OSullivan & Hilliard (n 29) 183
40
[1997] UKHL 28
41
[2009] AC 1101
42
OSullivan & Hilliard (n 29) 184
39

of the parties bargains during the negotiation that makes him see through the cases
clearly43.
This proposition to exclude the pre-contractual negotiation has been questionable by
several Lords. Namely Lord Nicholls, he was argue to the inconsistency of this
proposition that force the judge to vanish from their mind when interpreting the
contract, all of the prior negotiation evidence that brought the formal contract to be
exist44.

Conclusion
The Court through their decisions holds significant roles to establish the fundamental
principles of commercial law in order to support the growth of commercial
community. Their decision will also have direct influence to the business player and
how the business player will trade in commercial community. Although once in a
while, there are some grit that comes along with several decision of the Court, but this
inevitable connection between the Court and the business player will remain the same.
It is also possible for this inevitable connection to be better if the business player
being allowed to have a direct and easy access to the Court decision that already
created by generation through generation of judges. This might help the businessman
to be aware and generally understand about the rules, the principles, the exception and
the qualification that play along through the specific course of their business in this
commercial community45. This acknowledgment would be a nice way to stimulate the
economic wheels to run smoothly continuous.

43
44
45

Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101

OSullivan & Hilliard (n 29) 185
McKendrick (n 2), 1351

BIBLIOGRAPHY
Primary Sources
Cases:
The Annefield v Owners of Cargo Lately Laden on Board the Annefield [1971] 1 All ER 394
The Effort Shipping Company Limited v Linden Management SA and Others [1998] All ER 495
WN Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616
National Westminster Bank plc v Morgan [1985] 1 AC 686
Groom v Barber[1915] 1 KB 316
In Re Charge Card Services Ltd [1987] Ch 150
Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214
Clough Mill Ltd v Martin [1984] 3 All ER 982
Prenn v Simmons [1971] 3 All ER 237
Investors Compensations Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98
Bank of Credit and Commerce International SA (in liquidation) v Ali [2001] 1
Schuler v Wickman Machine Tool Sales Ltd [1974] AC 235
Hayward v Norwich Union Insurance Ltd [2001] 1 All ER (Comm) 545
Rainy Sky SA and others v Kookmin Bank - [2012] 1 All ER 1137
Investors Compensations Scheme Ltd v West Bromwich Building Society [1997] UKHL 28
Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101

Legislation:
The Unfair Contract Terms Act 1977
The Unfair Terms in Consumer Contracts Regulations 1994

Secondary Sources
Books
Bradgate R, Commercial Law (3rd edn, Butterworths 2000)
McKendrick E, Goode on Commercial Law (4th edn, Lexis Nexis 2009)
OSullivan Janet & Hilliard Jonathan, The Law of Contract (6th edn, OUP 2014)

Journal Articles
Goode R, The Codification of Commercial Law [1988] Mon LR 135