Lloyd's Maritime and Commercial Law Quarterly
TRADE PRACTICES, CONTRACT DOCTRINE AND CONSUMER PROTECTION
Sandra Booysen*
Trade practices that are certain, notorious and reasonable will bind a contracting party who is ignorant of the practice. This article analyses these three criteria and reconciles them with contract doctrine. It argues that each of the criteria serves an important function in balancing the interests of contracting parties, and achieving an objectively fair outcome. The article critiques in particular the recognition of a trade practice in a banking case, Tidal Energy v Bank of Scotland, and argues that it failed to promote the consumer protection function of the criteria as evidenced by previous cases.
I. INTRODUCTION
Trade practices, namely “settled and established” understandings or ways of engaging in commercial activity,1 can have a significant influence on the legal effect of a contract. Practices develop in all industries to facilitate efficient operation, and some practices are eventually absorbed into law,2 through adoption by the courts or in legislation. For example, in Kum v Wah Tat Bank,3 Lord Devlin said that a proved practice “takes effect as part of the common law”, and in Goodwin v Robarts,4 Cockburn CJ stated that courts recognise the usages that attach to trade, such that what was once mere usage, becomes “engrafted upon, or incorporated into, the common law, and may thus be said to form part of it”.5 Legislative examples include the UK’s Bills of Exchange Act 1882, and the Sale of Goods Act 1893, which codified the common law which had been heavily influenced by the practices of merchants.
* Associate Professor, Faculty of Law, National University of Singapore. I thank Peter Ellinger, Ernest Lim and Helena Whalen-Bridge for their very helpful comments, and Lee Kay Han for research assistance. I am also grateful for feedback received from colleagues at a research seminar at the National University of Singapore in September 2019, and at the Melbourne Obligations Group Conference in December 2019.
1. See Postlethwaite v Freeland (1880) 5 App Cas 599, 616.
2. See Djakhongir Saidov, “Trade usages in international sales law”, ch.5 of D Saidov (ed), Research Handbook on International and Comparative Sale of Goods Law (Cheltenham, 2019), 97–98; MP Furmston, Cheshire, Fifoot & Furmston’s Law of Contract, 17th edn (Oxford, 2017), 186; RH Graveson, “Foreword” (v) and John Honnold, “The Influence of the Law of International Trade on the Development and Character of English and American Commercial Law”, ch.4 of Clive M Schmitthoff (ed), The Sources of the Law of International Trade (London, 1964).
3. [1971] 1 Lloyd’s Rep 439 (PC), 444.
4. Goodwin v Robarts (1875) LR 10 Ex 337; affd (1876) 1 App Cas 476.
5. (1875) LR 10 Ex 337, 346.
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