Professor Otto Kahn-Freund once remarked that it was no more possible to ascertain commercial practice and understanding from the law reports than it was to deduce human anatomy from the exclusive study of cases of abnormal pathology. We have particular cause to be grateful that Professor Ross Cranston's magisterial study of the relationship between commercial law and practice, over the near-century and a half of Britain's commercial rise and fall, extends its sights far beyond the litigation dissection table. In addition to cases and legal texts, Professor Cranston's sources embrace the archives of a number of prominent businesses and banks, organised markets and trading associations, manuals and primers of preferred industry practice, the trade press and contemporary fiction ranging from Arnold Bennett to Jules Verne.
The 1970 terminus of the study reflects not only the decline in Britain's importance as a centre for manufacture and industry, but also the point at which the archives on which Professor Cranston drew began to peter out. The start-point of 1830 places the study firmly in Britain's industrial age. As a result, the law merchant, which synthesised commercial law and practice, and had a continuing influence on many of those responsible for formulating commercial law in the nineteenth and early twentieth centuries (in particular in the importance it attached to outward appearances and possession), falls outside its scope, as does the role of the law in facilitating, or impeding, the industrial revolution (cf. Professor Morton Horwitz, who credited the nineteenth-century US judiciary with moulding the law to promote emerging mercantile interests at the expense of weaker groups and with effecting a major redistribution of power and wealth in the process in The Transformation of American Law, 1780–1860 (Cambridge 1977)).
After an introductory chapter which sets the commercial and legal context, Chapter 2 addresses the key commodity markets of London and Liverpool. Chapter 3 explores the role of the various classes of intermediary who facilitated imperial and international trade. A particularly interesting feature of the chapter is the difficulties which the court had in reconciling those varying classes of intermediary, some of whom were expected to bear principal risk, with the rather limited categories and responsibilities of “agents” recognised in legal doctrine. Chapter 4 considers the sale of manufactured goods, together with associated transactions which allowed such goods to be acquired on credit, while securing the interests of those bearing the credit risk. It explains the role played by the market for railway wagons in originating the market for asset finance. Chapter 5 addresses international commodity transactions, looking at the important role played in that context by trade associations and commodity auctions. The final chapter looks at the role of bankers, both as sources of trade finance, and of working capital for commercial concerns.
The study does not include contracts for the carriage of goods by sea, even though these were a key component of the international sale contracts addressed in Chapter 5. Given the impressive scale of the work, this can be no cause for criticism. However, the doctrinal significance of contracts of carriage for English contract law generally (which led Karl Llewellyn to criticise the “blue water” tinge to judicial decisions on contract law), and the fact that it was shipping law which saw the first significant statutory interventions to address freedom of contract failures in the form of the Harter Act in the US and the Hague Rules, offers fertile ground for a future scholar seeking to build on Professor Cranston's work.
Another fascinating feature of the work, which would have been a worthy subject of study in its own right but is comprehensively addressed here, is the manner in which English commercial law was adapted and applied to the idiosyncrasies of imperial and international trade. A particularly compelling example is the application of the doctrines of agency to the compradors of China, up-country Indian agents dealing on cutcha adatia terms, and trading house banyans. The hybrid law of “colonial” agency which resulted, in which common law principles were adapted to local conditions and customs, is testament to the readiness of English judges to ensure commercial law acted as the servant rather than the master of commerce.
Professor Cranston concludes that commercial law played a limited, and essentially facilitative, role in relation to commercial practice, one in which legal doctrine was applied largely on a laissez-faire basis. Commercial actors were given the freedom to establish commercial norms and standards, which they did, to which the courts gave effect. To a significant extent it was the “private law makers” of the commodity and money markets, the trade associations and supportive structures, such as the commodity and bank clearing houses, which set the rules, acting with limited input from lawyers who were “on tap” but never “on top”. In due course, those rules and practices were formalised in the standard form contracts and association rules, their private legislative status reflected in documents with appropriately legalistic titles such as “The Constitution, Law and Usages of the Liverpool Cotton Brokers Association”. These private lawmaking bodies even went so far as to formulate their own loss distribution and compensation mechanisms when insolvent members defaulted on their debts.
The rules and practices shaped by the commercial parties were, by and large, given effect by the courts through findings of custom (which had the effect of treating the commercial practice as a default rule to be contracted out of), as the basis for implied terms, or as aids to interpretation. Professor Cranston concludes that “a familiar pattern when matters occasionally reached court was of the common law incorporating a commercial practice as a rule, reshaping existing rules in its shadow or at the very least conferring its blessing on how things were being done” (p. xvii). The judicial blessing may not have been uninfluenced by the fact that many of those commercial practices were already long-established by the time they came before the courts, meaning that a judicial decision that they were not effective would have had far-reaching consequences. In those cases when the market expectation was not reflected in a judicial decision, the standard form would be redrafted – for example, the decision in Cooke & Sons v Eshelby (1887) LR 12 App Cas 271 as to the ability to set-off a debt due from an agent acting for an unknown principal. The sanctions for breach of those rules were also largely market rather than state instruments – the refusal to transact future business or grant credit, contractual “fines” or stop notices, or expulsion from the relevant market association.
Professor Cranston's work identifies many of the deficiencies in this “private lawmaking” model, although an exploration of this topic is not one of the work's major themes. The standard form contracts which began life as a codification of what relevant market practitioners regarded as a reasonable “default” bargain became, in the hands of some operators, a means of exploiting inequality of bargaining power. The drafter's ability to amend around unhelpful court precedents reinforced the bargaining power of the repeat over the occasional contractor (a phenomenon of which Karl Llewellyn observed, “The committed bargainer, defeated once and again, recurs to the attack. After each case he can redraft and fight again” (“What Price Contract?” (1931) 40 Yale L.J. 704, 733)). Commercial customs became ossified in the form of implied terns, which remained legal norms even when the commercial norms they were intended to give effect to changed, and as the associations between contracting parties became more diffuse, the idea of binding one of them to a deemed knowledge of the intricate workings of a particular port, warehouse or market became harder to justify. As a result, as Professor Cranston notes, by the end of his study “the prerequisites to establish custom and usage had hardened and were almost impossible to satisfy” (p. 51). By 1951, Lord Devlin noted that “custom had ceased to be a revivifying source of commercial law” (“The Relation between Commercial Law and Commercial Practice” (1951) 14 M.L.R. 249, 264–65). The internal market sanctions came to be used not merely to promote the efficiency of market transactions, but as anti-competitive means of controlling access to the market in question. The book rightly observes that the courts’ response to these challenges to the “laissez-faire” model was generally inadequate.
The study of “private lawmaking” in this book is ground-breaking, the extensive archival work undertaken to unearth the mechanisms for its creation and amendment from the minutes, circulars and standard forms of specialist markets and trade associations hugely impressive, its geographical reach equally so. It may come as something of a blow to the commercial judiciary to find that, far from being the principal cog of the commercial engine, we have not even been a flywheel on this complex apparatus, but rather a lubricant of intermittent efficiency. The contrary argument is that Professor Cranston's conclusion that the role of “public lawmaking” was simply to set default rules which parties could vary understates the normative intent and effect of those default rules, which seek to channel the parties’ agreement into judicially approved “standardised solutions” which the market standard forms were originally intended to capture but ceased to serve (see e.g. David Foxton, “The Status of the Special Rules of Construction of Exemption Clauses in Commercial Contracts” [2021] J.B.L. 205). But the overall thrust of Professor Cranston's thesis – that commercial parties largely make their own law through their practice, and the role of the courts in those disputes that reached them was essentially to give effect to that practice as best they could– is compelling.
This is an important work, which is essential reading not just for legal and economic historians, but for commercial lawyers who will gain valuable insights into how the principles they apply daily came to be formulated, and of the continuing importance of informing themselves of the commercial context in which their clients operate.
