OTHER COMMERCIAL CONTRACTS

INTRODUCTION

• a plaintiff is not always free to choose. Sometimes a buyer

of defective or damaged goods sues in negligence strict
liability in tort rather than for breach of warranty or
breach of contract, in order to secure grater recovery, or
to avoid defences such as lack of privity, failure to give
notice, disclaimers, or remedy limitations, etc.
• On the other hand, “economic loss” usually cannot be
recovered in tort. If the buyer is to recover at all, this can
be on a warranty or a breach of contract theory.
• Economic loss has been defined as “damages for
inadequate value, costs of repair and replacement of the
defective product, or consequent loss of”.
• At the outset, one should understand how a warranty
lawsuit looks to a plaintiff’s lawyer and how it differs from
a suit against an “insurer” on the one hand and an
allegedly negligent defendant on the other.
• If an insurance company insures against the loss of an
arm, all claimant need do is show the bloody stump. If the
same claimant wishes to recover in warranty from the seller
of the offending chainsaw, he has a much tougher case to
prove.
First, he must prove that the defendant made a warranty,
express or implied, under 2-313, 2-314, or 2-315. Second,
he must prove that the goods did not comply with the
warranty, that is, that they were defective at the time of the
sale. Third, he must prove that his injury was caused,
proximately and in fact, by the defective nature of the
goods (and not, for example, by his carless use of the saw).
Fourth, he must prove his damages. Finally, the warranty
plaintiff must fight off all sorts of affirmative defences such
as disclaimers, statute of limitations, privity, lack of notice,
and assumption of the risk.
• one should distinguish between warranty (Particularly express
warranty) and fraud or misrepresentation. Typically, only a naughty
seller is guilty of misrepresentation or fraud, but a seller can be
Simon pure in his sold goods, (completely genuine, authentic, or
honest) and yet break an express warranty.
• By its own terms, Article (2) applies only to “transactions in goods”.
Code Warranty provisions do not govern contracts which are purely
for services.
• Judges and litigants frequently face difficulty and uncertainty in
determining whether the code applies to such hybrid transactions.
Areas of continuous dispute include construction contracts, repairs
and installations (particularly on real estate), and medical
treatments.
• Some Courts have insisted on separating the goods and services
components of a contract and have applied the Uniform
Commercial Code (UCC) only to the goods portion of the
transaction.
• Contractual language also may provide a clue to determining the
predominant thrust. The terms used in an agreement or receipts,
such as “purchase”, “seller”, and “merchandise”, will often indicate
a contract which is primarily for goods.
• For the most part buyers seek Article 2 coverage because they wish
to assert breach of the Code’s warranty of merchantability.

• An example, a plaintiff recovered in warranty even through services

predominated; the plaintiff was injured when he slipped and fell from
the defectively-positioned diving board of his new backyard
swimming pool. After reasoning that the diving board still retained its
character as “goods” after being installed, the court allowed UCC
warranties to be applied against the defendant who had designed
and built both the pool and diving board.
• A substantial number of courts have declined to bring the sale of
real estate under the scope of the UCC. Other courts which arguably
apply the Code to real estate transactions, do so primarily in sales of
mobile or modular homes.
• A modular home is attached to the real estate, it may well pass with
a deed and not be merely a fixture but actually a part of the real
estate, so UCC will not be applied in this case. On the other hand, the
sale of a modular home before installation and while it is resting in a
truck bed is clearly a sale of goods, so UCC will be applied in this
case.
Comparison among the Commercial Pawn Contract, the Holding
Pawn, and the Formal Pawn:
a) The formal pawn:
The formal pawn is related to the real property. We can call the
formal pawn as the realty pawn. This pawn must be registered in
the real estate agency as it belongs to the immoveable property as
a rule, and some specific transported properties as an exceptional
to the rule. The Egyptian Law gives a definition to the formal pawn
contract as; “The contract which gives the creditor the concrete and
superior right to receive the value of his loan from the pledged
property before the ordinary creditor and before any hand that
controls the pledged property”.
Yet, there are two main defects in using the formal pawn as a guarantee
for the bank’s loans:

1) There are many obstacles for the creditor banks in using their pawned
property, as the debtors have the right to hold and utilize it as they are still
having their possession on it. So, the banks can’t exploit or use the pawned
property in any investment.

2) It is true that there are privileges in performing the formal pawn contract
officially, as it protects the public and private interests of the people, but
in the same time, the formalities have negative effects on the bank’s
credits. This may lead to many complicated obstacles, which may retard
the banking work, especially in the credit field.
b) The holding pawn:
• The holding pawn is distinguished by the concept of moving the control of
the transported pawn from the debtor to the bank or the creditor in the any
kind of credits.
Yet, there are some defects in using the holding pawn as a
guarantee for the banking credits:
1) Banks are committed to preserve and guard the pawned
assets, as they are holding them, so that they may spend a
lot of money to protect these assets.
2) Banks also are committed to manage the pawned assets
by spending time and money to achieve the profit from
these assets and keep them doing their roles.
3) Banks are committed to send back the pawned assets at
the end of the pledged contract, so they have to spend lots
of money and exert many efforts in carrying out this task.
c) The commercial pawn:

• Rarely, the trader gives real property as a commercial

pawn. Mostly, he pledges transferred bonds or drafts or
assets, because pledging real property must be registered
in the real estate agency. So, it is spread out in the market,
and has bad impact on the trader’s reputation. But the
commercial pawn becomes more advanced nowadays after
the enlargement of the market. So, many traders turn to use
the commercial pawn, in order to obtain bank loans to
develop and improve their business.
There are two main advantages in using the commercial pawn as
a guarantee for the creditors (banking) credits:
1) The trader is committed to submit the pawned bond, draft,
asset…etc., to the bank in order to demonstrate the commercial
pawn to the others, so no one can’t make a deal on the pawned
property.

2) The Egyptian legislator facilitates the procedures of selling the

pawned property in case the trader didn’t settle his loan to the bank
or any creditor in general. This is due of course to the main two
fundamental characteristics of the trade, which we mentioned many
times, that are; speed and credit.
The defects of using the commercial pawn as a
guarantee for obtaining the (creditor) bank’s credit:
1) As the bank (creditor) holds the pawned property, it must
protect and guard it from any risk.
2) As in some times, the debtor doesn’t submit the pawned
property to the bank (creditor), the preceding of tracking
rights is absent, as it depends on possessing the pawned
property.

The Egyptian law stipulates articles for organizing the

pledging of the trader’s stores or firms, so as not to
deprive him from possessing his business firm or shop.
- The Contract Agency:
• He is authorized by the principal customs, contracts and laws,
and he is usually a commercial professional or industrial
establishment, to conclude contracts in the name and for the
account of his client (principal), or his mission is limited to
receiving offers and sending them to the commercial
establishment, likewise; the contract may be concluded between
the third party and the client (principal) directly.
The difference between the commission agent and the
contracts agent:
is that the former works in his own name and becomes the
debtor or creditor in the contract he concludes with a third
party, and no direct relationship arises between this third
party and the client, while the contracts agent works in
the name of his client and is not considered a party to the
contract concluded by him. Rather, his mission is merely to
represent the client and act on his behalf in concluding the
contract. In addition, the contract agent represents the
company, the financial house, or the factory in the same
way.
• The nature of the agency contract is to continue and conclude
contracts without receiving a special order from his manager
(client or principal) regarding each deal he concludes, in contrast
of the case of a commission agent.

• As for Egypt, the Trade Law promulgated by Law No. 17

of 1999 stipulated this for the first time in Article (188) of
it: “1- Contract agency is concluded for the mutual benefit
of both parties…”.
There are conditions that must be met even if the special
nature of the contract agency is present, which are
summarized as follows:

First: An agency: Article (177) promulgated by Law No. 17

of 1999 stipulates the standard of full representation for the
contract agent, as he concludes deals in the name and for
the client's account in exchange for a fee.
Second: The condition of dominating: Article (179) of the
aforementioned Trade Law allows the two parties to agree
to realize their common interest
Third: The agent and client (principal) share the project’s profits
and losses.
- Overview of International Sales Transactions and
Contracts:
- The Sales Contract:
(1) General Considerations: In analyzing an international
sales transaction, it is important to begin as with any
other transaction with the question whether the parties
have concluded an enforceable contract.
(2) in choosing applicable law, it is important to bear in
mind that in some countries special rules apply to
international sales transactions. In late 1986, The Unites
States ratified the Vienna (called the United Nations
Convention on Contracts for the International Sale of
Goods, which entered into force on January 1, 1988).
(3) A CIF contract is often framed as a contract for the
delivery of documents rather than one for the delivery
of goods.
 A Case

In a leading case applying the predominant factor test -that we

mention in our lecture- Bonebrake v. Cox(1), the court held that the
UCC was applicable to a contract for the sale and installation of
bowling equipment in a bowling alley. In order to replace
equipment destroyed when a fire swept through their bowling alley,
the Cox brothers contracted for the purchase and installation of
used lane beds, ball returns, chairs, a bubble-ball cleaning
machine, lockers, house balls, storage racks, shoes and foundation
materials. The court noted that the language of the contract which
warranted the laned and equipment to be free from defects in
workmanship and materials was language peculiar to sale of
goods, not to sale of services.