Ch1. Introduction to Commercial Law — Merchants, Commercial Acts & the Legal Framework

What Is Commercial Law?

Commercial Law:
A body of private law that governs business and commercial relationships.

Key characteristics:
① Special law over general civil law: commercial rules apply first;
   civil/common law fills gaps
② Profit orientation: governs profit-seeking activity
③ Volume & repetition: designed for high-volume, recurring transactions
④ Speed & reliability: protects the pace and trust of commerce

Major sources of US commercial law:
Uniform Commercial Code (UCC) · Corporate law · Securities regulation
· Insurance law · Bankruptcy law · Maritime law

Merchants

Merchants by Trade vs. Deemed Merchants

Merchant (UCC § 2-104):
A person who deals in goods of the kind, or holds themselves out
as having special knowledge or skill in the relevant practice.

Deemed merchant:
A party who, by their occupation, represents that they have
merchant-level knowledge of the goods or practices involved.
→ e.g., a sole-proprietor restaurant owner, a small manufacturer

Small / micro business:
A sole proprietor operating below applicable small-business thresholds
→ May be exempt from certain UCC formality requirements

When Merchant Status Attaches

Individual merchant: upon the first commercial transaction in that trade
Business entity:     upon formation and registration with the state

Commercial Acts

Per Se Commercial Acts (UCC Article 2 & analogous state statutes):
Acts that are commercial regardless of who performs them:
e.g., speculative sales, transportation, banking, insurance,
      publishing, advertising, franchising

Acts Done in the Course of Business:
Any act a merchant performs as part of their regular business,
including ancillary acts (buying office supplies, etc.)

Ancillary Commercial Acts:
Acts performed to support a merchant's business operations
e.g., a retailer purchasing display fixtures → treated as a commercial act

Two-party vs. one-party commercial transactions:
Both parties are merchants: full UCC merchant rules apply to both
Only one party is a merchant: UCC merchant rules apply only to
that merchant (non-merchant party retains consumer protections)

Business Registration

Business Registration (Secretary of State / State Business Registry):
A public record disclosing the legal status and key facts
of a business entity.

Effect:
After registration: enforceable against third parties (constructive notice)
Before registration: generally not enforceable against bona fide
third parties without actual notice

Typical registered information:
Trade name · Principal address · Business purpose · Officers/Directors

Amendment obligation:
Material changes must be filed within the time period required
by state law (commonly within 30–90 days of the change)

Trade Names

Trade Name (DBA — "Doing Business As"):
The name under which a merchant conducts business.

Freedom of trade name:
A merchant may choose any trade name, provided it does not
infringe an existing registered mark or mislead the public.
(Most states prohibit identical names in the same industry within the state.)

Trade name registration:
Not mandatory in all states, but registration confers:
→ Exclusive right to use in the jurisdiction
→ Right to bring an infringement action against unauthorized users

Successor liability for trade name:
An acquirer who continues to operate under the seller's trade name
may be held jointly liable for the seller's pre-existing debts
(product liability successor liability doctrine)

Trade name cancellation:
Upon cessation of business, the registered trade name should be
formally cancelled / withdrawn with the state registry.

Hierarchy of Commercial Law Sources

Order of authority in a commercial dispute:
① Express contract terms (freedom of contract)
② UCC / applicable commercial statute (special law)
③ General common law / Restatement of Contracts (general law)
④ Course of dealing, usage of trade, course of performance
⑤ Gap-fillers and equitable principles

Note:
Where the UCC is silent → apply common law
Where common law is silent → apply trade usage / equity

Key Concept Cards

UCC as Special Commercial Law ★★★★★ : The UCC displaces general common law for covered transactions. Common law fills gaps where the UCC is silent. Memory hook: UCC first → common law second

Trade Name Successor Liability ★★★★☆ : A buyer who continues using the seller’s trade name may inherit the seller’s prior debts, particularly in product liability contexts. Memory hook: same name = potential same liability

Registration = Constructive Notice ★★★★★ : Once a business is registered, all third parties are deemed to have notice of the registered facts, regardless of actual knowledge. Memory hook: registration → public record → notice

Practice Questions

Q. Why does the UCC take priority over the common law of contracts?

The UCC is a specialized statute enacted to create uniform rules for commercial transactions. Under the principle that specific statutes govern over general law, the UCC controls for covered transactions (primarily the sale of goods). If the UCC does not address a particular issue, common law contract principles fill the gap.

Q. If a company changes its CEO but has not yet updated its state registration, can it enforce that change against a third party who contracted with the old CEO?

Generally no. Until the amendment is filed and becomes effective, third parties who dealt in good faith with the previously registered officer are protected. The company bears the risk of delay in updating its public filings.

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