There is no specific law called “commodities law” in English law; rather it is the combination of a number of laws and contractual provisions.
The most important area relates to the sale and purchase of commodities. The main legal provisions are contained in sale of goods legislation. In the UK the current law is the Sale of Goods Act 1979 as supplemented by the Sale and Supply of Goods Act 1994. Absent anything else this deals with how commodities are to be sold as well as the requirements relating to quality and other conditions of the commodity. This includes when title passes and when payment must be made.
In practice, many commodities are often sold by reference to terms and conditions created by organisations representing sellers and buyers of a particular commodity. Grain and Cocoa are included in this list. Oil is often sold using terms and conditions devised by key operators in that market. The most popular of these are the terms and conditions devised by BP. These are incorporated into a sales contract and apply unless the specific terms are contrary or exclude them. Thus, it is possible to have specific terms regarding date of delivery and price, whilst using standard terms and conditions to deal with the rest.
Commodities are often stored in warehouses before being sold and sometimes are sold in a warehouse. The law for any sale is invariably the law where the warehouse is situated. However, the position can be made clearer where the warehouse issues a warehouse receipt or warrant evidencing that the commodity is being stored. Even though this is often not a document of title, it is a useful way to show where commodities are and how they might be sold.
Where commodities are sold internationally they are, often delivered by sea, rail or air. There are international conventions which can apply to the sale and delivery of commodities in those circumstances. Additionally, the Incoterms 2010 rules are a standard set of trading terms which define the terms generally used about delivery of goods by whatever form of transportation is used. Terms such as ‘free on board’ then deal with matters including the transfer of risk in, transfer of, title to and payment for the commodity.
Commodities can be sold whilst being transported where they are represented by documents issued to evidence their transportation. Where commodities are transported by sea they are represented by a ‘bill of lading’ issued by the Master of the vessel. There are discussions as to whether this represents a document of title but it certainly is a means to transfer rights to the commodity. There are equivalent documents for transportation by air (the ‘waybill’) and by other forms of transport including rail and truck. Often a party undertakes the transportation across multiple means of transportation and will use some form of multi-model document. A freight forwarder will issue a document (receipt) called a Forwarder’s Certificate of Receipt (FCR) which evidences their transportation. Whilst these are not documents of title they enable parties to buy and sell commodities whilst being transported or to evidence transportation in order to obtain payment.
Where payment is made by a letter of credit or Bank Payment Obligation (BPO) the above documents can be key to payment.