THE KEY COMMERCIAL LAW
PRINCIPLES
Contractsnotesfundamental part of commercial world. Sale and Purchase Agreement (SPA)notesa
legal contract describing he outcome of key commercial and pricing negotiations and when signed,
obligates a buyer to buy and a seller to sell a product/service. share purchase
agreementnotescontractual agreement to buy shares in a company how is a contract formed?notes1.
offer 2. acceptance 3. consideration 4. intention implied termsnotesa missing term that is not
expressly stated in an offer or a contract that can reasonably be implied by the law. e.g., 'the contract
is to be treated as including...'. express termsnotesterms in a contract that are specifically stated
allocation of risknotescan be allocated/mitigated by including warranties (statement of fact),
undertakings (promise to take certain action in future) and indemnities (promise to reimburse the
other party if certain costs arise). or via 'retention of title clauses' - clause in the agreement to supply
the products which could enable the supplier to retrieve those products if there is non-payment. or a
'force majeure' clause can protect the parties if something unexpected were to prevent either party
from fulfilling their obligations under the contract. retention of title clausenotesA clause in a contract
for the sale of goods that states that the property in the goods remains with the seller as long as the
buyer has not fufilled certain obligations e.g., payment. thus taking priority in liquidation scenario as
the ownership of the goods is conditional on payment being made by the buyer. Force Majeure
Clausenotespredetermines the allocation of risk and frees each party from liability if specified
circumstances beyond the control of the parties arise that prevent either party from fulfilling their
obligations. breach of contractnotesthe nonperformance of a contractual duty. placing injured party
in the position they would have been if the contract hadn't been breached. but it is not all about
contracts...notescommercial factors may influence how parties transact with eachother or how
parties may choose to act in the event of a breach. e.g., looking to maintain good commercial
relationships and/or maintaining a reputation for good customer service. securitynotesan essential
form of protection for lenders. when giving a loan, a lender may take 'security' over a borrower's
assets in order to increase its chances of receiving back its money in full if a borrower defaults on the
loan (failing to repay) thus making lenders feel more secure. why would a borrower offer
security?notes- persuade a lender to lend - persuade a lender to charge lower interest rates on the
loan (as lower risk of lender not receiving that money back) syndicated loannotesmultiple banks work
together to contribute funds in order to provide the required capital. the syndicate of banks share
both interest payments from the borrower and risk. what kind of assets can lenders take security
over?notes- cash borrower has in its company bank accounts - money borrower is owed but not yet
been paid 'book debts' - work in progress (products not yet fully manufactored) - borrower's IP rights -
shares the borrower owns in other companies e.g., its subsidiaries. mortgage/fixed charge
securitynotesgives the lender a legal right to claim and sell the asset over which the security is taken
'secured assets' in order to recover the funds loaned out, in instances where the loan hasn't been
repaid in accordance with the terms under which security was taken. NB: the borrower cannot sell
secured assets w/out the lender's consent so FC are not normally suitable for assets like stock (where
companies need to be able to sell to consumers in order to make a profit). floating chargenotesassets
in which the floating charge is taken can be freely sold unless the charge 'crystallises'. the parties can
agree in advance the circum in which the charge will 'crystallise' - normally the borrower becoming
insolvent. what assets are floating charges more suitable for?notesthose in which it would be
commercially impractical for the borrower to relinquish control to the lender e.g., stock or cash held
in a current account issue with floating charges?notesoffers less protection for lenders - other parties
are prioritised in the event of borrowers insolvency e.g., fixed charge holders, liquidator and unpaid
employees. subsequently there is often not much left for FC holders after borrowers become
insolvent. liquidatornotesa party often appointed when a company becomes bankrupt. functions
include: collecting money the (bankrupt) company is owed, collecting and selling that company's
assets, then distributing the proceeds to parties that are entitled to receive payment e.g., existing
lenders that have not been fully repaid. what can different types of security give
lenders?notesdiffering degrees of protection, through: (1) enabling lenders to exert differing degrees
of control over borrowers (2) giving lenders priority over borrowers' assets if those borrowers
PRINCIPLES
Contractsnotesfundamental part of commercial world. Sale and Purchase Agreement (SPA)notesa
legal contract describing he outcome of key commercial and pricing negotiations and when signed,
obligates a buyer to buy and a seller to sell a product/service. share purchase
agreementnotescontractual agreement to buy shares in a company how is a contract formed?notes1.
offer 2. acceptance 3. consideration 4. intention implied termsnotesa missing term that is not
expressly stated in an offer or a contract that can reasonably be implied by the law. e.g., 'the contract
is to be treated as including...'. express termsnotesterms in a contract that are specifically stated
allocation of risknotescan be allocated/mitigated by including warranties (statement of fact),
undertakings (promise to take certain action in future) and indemnities (promise to reimburse the
other party if certain costs arise). or via 'retention of title clauses' - clause in the agreement to supply
the products which could enable the supplier to retrieve those products if there is non-payment. or a
'force majeure' clause can protect the parties if something unexpected were to prevent either party
from fulfilling their obligations under the contract. retention of title clausenotesA clause in a contract
for the sale of goods that states that the property in the goods remains with the seller as long as the
buyer has not fufilled certain obligations e.g., payment. thus taking priority in liquidation scenario as
the ownership of the goods is conditional on payment being made by the buyer. Force Majeure
Clausenotespredetermines the allocation of risk and frees each party from liability if specified
circumstances beyond the control of the parties arise that prevent either party from fulfilling their
obligations. breach of contractnotesthe nonperformance of a contractual duty. placing injured party
in the position they would have been if the contract hadn't been breached. but it is not all about
contracts...notescommercial factors may influence how parties transact with eachother or how
parties may choose to act in the event of a breach. e.g., looking to maintain good commercial
relationships and/or maintaining a reputation for good customer service. securitynotesan essential
form of protection for lenders. when giving a loan, a lender may take 'security' over a borrower's
assets in order to increase its chances of receiving back its money in full if a borrower defaults on the
loan (failing to repay) thus making lenders feel more secure. why would a borrower offer
security?notes- persuade a lender to lend - persuade a lender to charge lower interest rates on the
loan (as lower risk of lender not receiving that money back) syndicated loannotesmultiple banks work
together to contribute funds in order to provide the required capital. the syndicate of banks share
both interest payments from the borrower and risk. what kind of assets can lenders take security
over?notes- cash borrower has in its company bank accounts - money borrower is owed but not yet
been paid 'book debts' - work in progress (products not yet fully manufactored) - borrower's IP rights -
shares the borrower owns in other companies e.g., its subsidiaries. mortgage/fixed charge
securitynotesgives the lender a legal right to claim and sell the asset over which the security is taken
'secured assets' in order to recover the funds loaned out, in instances where the loan hasn't been
repaid in accordance with the terms under which security was taken. NB: the borrower cannot sell
secured assets w/out the lender's consent so FC are not normally suitable for assets like stock (where
companies need to be able to sell to consumers in order to make a profit). floating chargenotesassets
in which the floating charge is taken can be freely sold unless the charge 'crystallises'. the parties can
agree in advance the circum in which the charge will 'crystallise' - normally the borrower becoming
insolvent. what assets are floating charges more suitable for?notesthose in which it would be
commercially impractical for the borrower to relinquish control to the lender e.g., stock or cash held
in a current account issue with floating charges?notesoffers less protection for lenders - other parties
are prioritised in the event of borrowers insolvency e.g., fixed charge holders, liquidator and unpaid
employees. subsequently there is often not much left for FC holders after borrowers become
insolvent. liquidatornotesa party often appointed when a company becomes bankrupt. functions
include: collecting money the (bankrupt) company is owed, collecting and selling that company's
assets, then distributing the proceeds to parties that are entitled to receive payment e.g., existing
lenders that have not been fully repaid. what can different types of security give
lenders?notesdiffering degrees of protection, through: (1) enabling lenders to exert differing degrees
of control over borrowers (2) giving lenders priority over borrowers' assets if those borrowers
