The German Jordanian University (GJU)

2017-2018
MGT 315
 Trade law in Jordan may be defined as:

a group of legal rules that govern and regulate the merchants,

commercial activities, commercial contracts (such as commercial
mortgage, carriage of goods and passengers, commercial agency,
brokerage), Negotiable instruments (commercial papers such as
cheques, promissory notes and bill of exchange) and finally the rules
of bankruptcy.
 The Jordanian Trade Law No.(12) 1966

Clause (2) sub-clause (1 ) of The Jordanian Trade Law No. (12) of states that: If Trade
Law doesnt cover the matter on hand, the civil law will be applied instead. Clauses (3)
and (4) of the Trade Law also address the sources of the trade law.

It is important to note that when examining commercial activities, there are several laws
which supplement Trade Law and which tackle commercial activities. These Include, and
are not limited to:

i- Companies Law No. (22) for the year 1997

ii- Maritime Commercial Law No. (12) of 1972
iii- Trade Mark law No. (33) of 1952
Iv- Commercial Names Law No. (9) for the year 2006
V- Several other laws.
 Why is it Important to Distinguish between Commercial
Activities (transactions) and Civil Activities?

Traders and commercial activities are governed by

commercial law principles, while non-traders and civil
activities are governed by civil law principles. Accordingly, if a
certain activity is designated by law as civil rather than
commercial, then the rules applied to civil activities shall
apply to it. If in contrast an activity is considered as
commercial , then the rules that apply to commercial
activities shall apply on such transaction. The rules applied
to commercial activities are usually tailored to reflect
traders needs (i.e. trade is established on, and requires,
efficiency, speed, trust and making profit).
 Certain principles of law would be applied differently on a certain activity depending
on whether the activity is civil or whether it is commercial. Therefore, it is
important to distinguish between a commercial activity and a civil one. Below are
some of the legal principles which apply differently on a certain activity depending
on whether the activity is civil or whether it is commercial :
i. Presumption of joint liability in commercial activities: Joint Liability is presumed in
commercial activities or contracts while liability is assumed to be severable in civil
contracts. Joint Liability means that the persons whom liability is joint are all
responsible to perform all the obligations. Thus, if two persons are jointly liable to a
company (e.g., owe JD 500 to the company), then the company can sue any or both
persons for such liability (e.g. paying back the JD 500). Severable liability on the
other hand means that each party is only liable to its part of the obligation. Thus, if
two persons owe (on a servable bases) an amount of money to a company, each
person will only be liable to its share of that amount.
ii. Bankruptcy: when a trader (merchant) becomes and is declared bankrupt (unable to
pay back his debts), legal consequences follow in that he may not be able to conduct
certain political rights, also certain mandatory rules on appointing an administrator
on the traders moneys may apply, as well as, compulsory liquidation of assets
applies. The rules of bankruptcy of ordinary individual are different and are seen as
more lenient than those applied on merchants.
iii. Proof of commercial activities: contracts entered into between businessmen (traders)
can be proven by all available means recognized by law: which are means to prove
rights. They are as follows: 1. writing 2. testimony 3. presumptions 4. Inspection and
Expertise 5. Admission 6. Oath. On the other hand, contracts concluded by non-
traders (non-merchants) may, in certain circumstances, be unable to be proven
through testimony.
iv. Grace period granted by courts to debtors: As examined earlier, a
contractual obligation should be performed when due in
accordance with the contracts terms. If a debtor cannot perform its
obligation towards the creditor, the creditor can request
performance via courts. In civil contracts, the court can, in certain
circumstances, grant a grace period to debtor in order to perform
his obligation. In commercial contracts, it is only in exceptional
cases that the court grants such grace period to debtors who
delays in performing their obligations.
v. Period of limitation: periods of limitation in civil contracts are
much longer than in commercial contracts. The longest period of
limitation to claim a right under a civil contract is (15) years from
the date of when the right was due, while the longest limitation
period to make a claim before a court in relation to a commercial
right is (10) years.
vi. Other rules on interest, courts jurisdiction, non-assumption of
charitable conduct in commercial activities also make it important
to distinguish between civil and commercial activities.
 The Jordanian Trade Law sets down activities that shall be deemed
to be inland commercial activities by their nature regardless of
whether the person providing them is a merchant or not. These
activities are as follows:
i. Purchase of movable materials with the intention of re-selling them
at profit; selling them either in the same condition or after
manufacturing or processing them.
ii. Purchase of movable materials with the intention of renting them
out or renting movable materials with the intention of re-hiring
them out.
iii. stock exchange and banking operations.
iv. Supply of materials.
v. Industrial activities whether or not they are linked to an agricultural
investment, unless the conversion of the materials in the agricultural
field is made by simple manual conversion.
vi. Carriage of goods or persons by land, air and sea.
vii. Agency and Brokerage.
viii. Insurance in all kinds.
ix. Public exhibitions.
x. Printing Press (printing, publishing, photography,
recording, advertising, and transmitting activities).
xi. Public warehousing.
xii. Mining and petrol.
xiii. Real estates activities.
xiv. Purchase real estates with the intention of selling them at a
profit.
xv. Business agencies.

Any other activity similar in its characteristics or purposes

to the above activities shall also be deemed an inland
commercial activity.
 Clause (7) of the Jordanian Trade Law sets down activities related
to maritime that shall be deemed to be commercial activities
which include:

i. Any project for construction or purchase of ships for the purpose

of utilizing them commercially or reselling them, non-
withstanding if the intention of construction, purchase, sale is for
internal navigation (coastal navigation) or external navigation
(navigation on the high sea).

ii. Maritime dispatches and activities related to maritime dispatches

such as supplies of food, fuel, tools and all materials which the
vessel may need for its dispatch/navigation shall be deemed
commercial activities.
iii. Maritime chartering

iv. All Contracts addressing or specialized in maritime trade. Indeed

many of the most important and commonly used sale contracts
used in international trade are related to goods carried by sea.
These contracts includes the following types of contract: f.o.b.,
f.a.s., c.i.f., and EX-Works sales. These are considered
commercial activities and are considered below.
 An F.O.B sale is one by which the sold item is delivered by the seller
at the port of shipping on board of the vessel designated by the
buyer. Delivery by the seller of the goods to the vessel designated by
the buyer should occur on the agreed date of shipment or within an
agreed period.

The buyer in the F.O.B sale shall arrange the transportation contract,
and notify the seller within reasonable time of the name of the
vessel designated for the transport of the goods, as well as the
venue and date set for shipping. Consequently, the seller is not
responsible for any damage to the goods which occurs after the
moment of delivering the goods on board of the ship.

The seller is only responsible up until the goods are loaded on the
ship nominated by the buyer.

The Buyer obtains the documents to allow him to take control of the
goods from the moment the goods are on board the ship (such
documents include the bill of lading, insurances, etc.).
 Loading the goods on the Ship is the duty of the seller. It is
widely accepted in many jurisdictions that, the risk of loss of,
or damage to, the goods passes when the goods are on board
the vessel (or when goods pass the ship's rail), and the buyer
bears all costs from that moment onwards.

Variation of terms, duties and risks in this type of contract

can be negotiated and agreed upon between the parties.

Rights of rejection in this type of contract are two: right to

reject the goods and right to reject the documents. Both
rights are separate and independent and do not affect each
other. These rights will be studied when examining C.I.F.
contracts.
 C.I.F sale contract is the most important contract of carriage of the goods by sea. The
seller in this type of sale undertakes to conclude transpiration (freight) of the goods and
payment of relevant fees, also, arrangement of the maritime insurance and paying the
relevant charges at the port of shipment.
The Seller does not undertake that the goods will arrive to the Buyer. Rather, his duty is
over when he sends the relevant conforming documents to the buyer. Apparently, the
seller shall conclude a transportation contract for the goods with a reputable carrier, and
shall choose a suitable vessel to carry goods. The seller shall buy an insurance policy for
the sold items from a reputable insurer appropriately covering the risks of transport and
shall assume all the costs and expenses required thereof. Thus, the documents required
under a C.I.F. contract, unless otherwise agreed, shall comprise of:
i. Bill of lading showing shipment at the contractual port of shipment.
ii. Appropriate Policy of insurance covering the goods during their transit at sea.
iii. Commercial invoice relating to goods

Where goods are damaged or lost in transit the buyers remedy (if any) may be against
the carrier pursuant to the carriage contract or the insurer pursuant to the insurance
contract taken by the seller and transferred to the buyer. For this reason C.I.F. sale
contract has been described as being a contract for sale of documents.

We will study this type of contract in more detail in the forthcoming Chapters.
 The essence of C.I.F. contracts is the bill of lading.

A bill of lading is a document issued by a carrier to a shipper, acknowledging that

specified goods have been received on board as cargo for conveyance (transferring
property from person to another) to a named place for delivery to the consignee who is
usually identified in the bill of lading.

A bill of lading can be used itself as a traded object. The standard short form bill of
lading is evidence of the contract of carriage of goods and it serves a number of
purposes:

i. It is evidence that a valid contract of carriage has been reached (a chartering contract
exists) and shows details of shipment (i.e. when the goods where shipped, the port of
shipment and where the goods will be shipped to);

ii. It is a receipt signed by the carrier confirming whether the goods have been received in
apparent good condition (a bill will be described as clean if the goods have been
received on board in apparent good condition and stowed (filled by packing tightly)
ready for transport); and

iii. It is also a document of title to the goods. Being freely transferable but not a negotiable
instrument, the holder of the bill of lading is the party entitled to receive (claim) the
goods at the port of destination.
 F.A.S. Sale (Free Alongside Ship).

F.A.S sale contracts have many common characteristics with F.O.B sale
contracts. The seller delivers the goods alongside the ship nominated by the
buyer at the shipment port. The buyer has to bear all costs & risks of loss or
damage to the goods from that moment. Thus, the responsibility for loading
the goods on the ship and the expense of doing so are on the buyer.

C. and F. Sale (Coast and Freight)

Cost and Freight means that the seller delivers the goods on board the
vessel. The risk of loss of, or damage to, the goods passes when the goods
are on board the vessel. The seller must contract for, and pay, the costs and
freight necessary to bring the goods to the named port of destination.
Ex-Works Sales

"Ex works" means that the seller fulfils his obligation to deliver when he has
made the goods available at his premises (i.e. works, factory, warehouse, etc) to
the buyer. In particular, he is not responsible for loading the goods on the
vehicle provided by the buyer or for clearing the goods for export, unless
otherwise agreed. The buyer bears all costs and risks involved in taking the
goods from the seller's premises to the desired destination.
 The Jordanian Trade Law sets down the commercial activities
under three groups:

i. Inland Commercial activities (Clause 6 of the Jordanian Trade

Law ).
ii. Marine (or Maritime) Commercial Activities (Clause 7 of the
Jordanian Trade Law ).
iii. Activities conducted by merchant for commercial purpose
(Clause 8 of the Jordanian Trade Law ).
 Clause (8) of the Jordanian Trade Law considers that an
activity shall be considered commercial if carried out by a
merchant for a commercial purposes. For Example: A is a
merchant who rents a store to keep his commercial goods,
such activity is deemed to be commercial because it is carried
out for the purpose of the business. But if the trader rents a
store to keep some un-needed furniture which he had home,
such activity is not considered to be a commercial activity
since it is not related to his business.

Thus, the above establishes that for this category of activities

to be commercial, they should occur from a merchant in his
perusal of trade/business.
 Where a buyer of a commercial activity is a civilian and is
entering into the transaction not as a trader but as a
consumer, then there may be some un-clarity on whether
the transaction should be considered as a civil activity on
him and commercial activity on the seller or whether the
activity is considered commercial on both parties entering
into the transaction. The dominant view argues that in these
circumstances, the commercial activity shall be deemed civil
on the buyer/consumer, while it will be considered
commercial on the party (selling) the commercial activity.
 The Jordanian Trade Law No. 12 of 1966, clause (9) defines merchants as:

i. Individuals/natural persons whose profession is to conduct commercial

activities;
ii. Companies whose purpose is commercial.

For individuals/natural persons conducting commercial activities to be

recognized as merchants (traders) three requirements should be present:
i. The individual practices the professional pursuit of trade.
ii. The individual carries out the commercial activities in his own name and
for his own account.
iii. The individual has the proper capacity for trading.

Those three requirements will be discussed in turn.

 The first requirement in order for a natural person to be classified as a
merchant is that he has to carry out commercial activities as a profession.
Thus, an individual/natural persons who conducts a commercial activity
during in one year and makes certain profits out of it but does not
conduct commercial activities on a regular basis and as a profession shall
not be considered a merchant.
 The fact that an individual/natural person carries out trade
as a profession is not itself enough to consider that
individual/natural person as a trader. He should also
execute commercial activities in his own name and for his
own account. Consequently, individuals/natural persons
such as employees or workers who work in stores (and are
employed by companies or employers) are not considered
traders just because they sell in the store, this is since
employees in these circumstances work to the benefit of
their employers. In actual fact, the employees are subject
to the employers instructions and supervision and cannot
be held as merchants just because they work in the store.
The Jordanian Trade Law does not provide any statutory
provisions in relation to the capacity for trading, but clause 15
provides that the capacity for trading for individual/natural
persons shall be governed by the Jordanian civil code. Clause
(43) of the Civil Code provides the general rules:

The age of majority shall be eighteen full solar years.

Exceptions to this general rule exist if certain conditions are met, but
it is beyond the scope this course to examine them.
 The Jordanian Trade Law imposes specific legal obligations on any
person that acquires the capacity of a merchant, (whether such
merchant is an individual or a company). These obligations are as
follows:

i. Keeping Specific Commercial Books.

ii. Holding a Commercial Address.
iii. Publicity by way of registration in the Commercial Registry.
iv. Registration in the Chamber of Commerce.
v. Prohibition of Unfair Competition.

The following paragraphs will discuss obligation number one.

 The advantages of keeping commercial books

i. Keeping commercial books shows the exact financial position of

the trader and it enables the trader to know the rights and
liabilities related to his trade.
ii. Keeping commercial books is necessary in case of bankruptcy
where the competent court may investigate the financial entries
entered in the commercial books to decide whether the trader is
the causative factor of bankruptcy or not (and whether the trader
is committing any fraud by being declared bankrupt).
iii. Keeping of commercial books is necessary for taxation purposes,
commercial books allow proper recording of traders income and
expenses and thus accurate determination of income tax due on
the trader.
iv. Organized books may be of evidentiary value that assists a trader
in his claim in court, especially if the claim is against another
trader who does not keep organized books.
 The Jordanian Commercial Law provides that a merchant (whether
an individual or a Commercial Company) shall keep specific
commercial books.

There are two types of commercial books:

i. Compulsory Books
ii. Voluntary (additional) Books; these are any additional books
relevant to a merchants business and which the merchant
voluntarily decides to hold.

Clause (16) of the Jordanian Trade Law No.(12) 1966 provides that
each merchant shall keep at least the following three books:
i. Day-book.
ii. Correspondence Book.
iii. Inventory Book.
 The Jordanian trade Law shows the mode of keeping compulsory
commercial books only without providing information on organizing
voluntary books. Clause (17) of Jordanian Trade Law provides that
the compulsory commercial books shall be kept in chronological
order, without any blank, and without writings in the margins,
erasure, crossing out, scraping, or insertion between the lines. The
reason behind that is to prevent the trader from changing the
entries. Clause (18) of the Law stipulates also that the pages of
daybook, correspondence book and inventory book shall be
numbered, signed and stamped by the Commercial Registrar.

Regarding the duration of keeping the commercial books, Clause

(19) of the Jordanian Trade Law provides that a trader shall keep
these books for a period of ten years from the date they are closed.
 Businessmen may not want to carry huge amounts of money in their
pockets when doing their business. As a result, businessmen
adopted a new method for payment for their transactions by using
commercial papers (or negotiable instrument) and these papers or
instruments function practically as substitutes for money.

The term commercial papers may be defined as instruments that

are written according to forms determined by the law, representing a
right for specific sum of money payable on mere sight or after a
definite or determined time. The Jordanian Trade Law No. 12 of
1966 discusses the Commercial Papers under Clauses (123- 289).
According the Jordanian Trade Law, the main commercial papers are
as follows:
1-Bill of Exchange: it can be defined as a written instrument according to forms
determined by the law, which contains an unconditional order by one party (called a
drawer) to a second party (called a drawee) to pay a third party (called a payee)
or the holder (bearer) of the instrument, a specific sum of money at mere sight or at
a definite time or determinable future time.
2- Promissory Note: it can be defined as a written instrument according to forms
determined by the law, whereby its maker promises to pay a specific sum of money,
at mere sight or at a definite time or determinable future time, to the order of
another person called the beneficiary or the holder (bearer) of the instrument.
3- Cheque: it can be defined as a written instrument according to forms determined
by the law, which contains an order issued by a person who is the drawer to another
person who is usually a bank (the drawee), to pay a third person or to his order or to
the holder of the cheque (the beneficiary) a specific sum of money at mere sight such
amount to be drawn (paid) from the drawers account with the drawee.
A distinctive feature of a cheque as a commercial paper is that if there is no balance
(enough money) in the account of the drawer with the drawee and as a result
payment is not made to the holder of the cheque, then the drawer faces criminal
liability which is punishable with imprisonment under criminal law.

Commercial papers are commercial by virtue of their nature non-withstanding

whether or not they are issued by a trader or non-trader, and regardless whether the
issuing of the commercial papers is related to a commercial activity or a civil one.
Accordingly, the rules applicable to the above commercial papers are unaffected by
the fact that their holder or issuer or any related party is a merchant or not or
whether they are used in connection to a commercial transaction or not.