CHAPTER II The Merchant

Author:Martin Wolff

7. A merchant is a person who ' exercises a commercial profession ' (wer ein Ilandelsgewerbe betreibt), sect. I HGB. It is not necessary that he exercises his profession personally; he may have an agent who acts on his behalf, or, if he is a minor or a lunatic, he may be represented by a guardian. A commercial company has a general manager and other 'organs' (a German notion not known in English law) who act in the name of the company.

In such cases it is not the agent or manager or guardian who is the merchant, but the principal. Thus a new-born child, by succeeding to his deceased father, may become a ' merchant' by birth. If a partnership exercises a commercial profession-the partnership not being a legal person-each of the partners is a merchant, though the business is not carried on on his behalf alone, but on behalf of all the partners in common. If a merchant is designated as a person having a commercial profession, this does not necessarily mean that it is his only or even his main profession.

8. The problem therefore arises: What kinds of enterprise are to be regarded as of a 'commercial' or 'mercantile' character? (a) They must be enterprises conducted with the intention of making profit or at least with a manifestation of such intention. It is not necessary that a man actually makes profit out of his enterprise, nor is it indispensable that he should truly intend to do so. It is sufficient that he behaves as if he had that intention. If, on the other hand, his intention to make money has not been made manifest, but remains secret, he has no commercial enterprise and is not a merchant, as e.g. in the case of the speculator who for years has lived on what he gains by buying and selling on the stock exchange, but does not want anybody (except his broker) to know it.

(b) Two kinds of enterprise must be sharply distinguished from each other:

(aa) An enterprise may be commercial simply through the nature of its business, without any further requirements, see on this section V below, or (bb) an enterprise may become commercial when its business-name has been entered in the commercial register, See on this section VI below.

9. There are nine types of enterprises which are commercial merely through the nature of the business. The persons in whose name they are carried on are merchants even if they are not registered as such. These are the following:

(a) The purchase and re-sale (alienation) of commodities or securities such as bonds, shares, bills of exchange. Purchase means acquisition from another person, notably on the basis of a contract of sale. The peasant who sells the produce of his farm, the hunter, the fisherman, etc. are not merchants, even if they keep commercial books. Re-sale or alienation of goods acquired by purchase does not require the goods thus purchased to be re-sold without alteration. The industrialist who sells goods after having bought raw materials and transformed them into mercantile goods in his factory, is a merchant in the sense of the law. So is the shoemaker, if he buys leather and sells the shoes manufactured by him; so are the tailor, the baker, the butcher, etc. They are merchants even if their enterprise is very small, for example, if they work without help. Where, on the other hand, a man buys goods not in order to sell them, but intending to make money *by lending them, he has (according to German law) no commercial enterprise, and is not a merchant.

EXAMPLE: a buyer of horses who intends to use them in his riding institute or to hire them out.

The purchase and re-sale must concern commodities, that is movables.

Commerce in land or houses is not commerce in the strict sense of the word.

It is, however, not necessary for the things purchased to be movable at the time of purchase. The person who buys apples on the tree or agricultural products,before the harvest, and who sells them after their separation from the ground or tree, the man who buys houses and demolishes them in order to sell the stones or other materials, is a merchant. The converse of enterprises which 'mobilise ' immovables are those concerned with what might be called ' immobilisation of movables ', i.e. purchasing materials for building and then selling houses. They are not commercial in character, and the person engaging in them is not a merchant.

(b) Enterprises where an independent party undertakes to do work on material (or goods) supplied by the other party. In this case he possesses the material not as an owner but as a bailee, either to manufacture it, to transform it into a new thing, or to alter it. Such an enterprise is commercial unless it is merely a handicraftsman's profession. A large laundry enterprise, a dye-house, a spinning mill, a large bookbinding establishment, are commercial enterprises, while a bookbinder who works alone or with a few assistants or apprentices, a single laundress, a little tailor who only carries out repairs, are not merchants.

(c) Insurance against premium makes the insurer a merchant. Insurance on reciprocity (mutual insurance) does not, since there is no gainful intent.

(d) Banking and money-changing is of course commercial in character. In the German language the term 'banker' is more comprehensive than in English-it includes stockbrokers and jobbers. The various types of contract pertaining to the banking profession will be described in sections XXXIX, XL, XLI below, paras. 192-208.

(e) Enterprises concerned with the transport of goods or persons at sea, on rivers or lakes, or on land. Only small enterprises, such as those of cab drivers are excluded.

(f) The transactions of persons buying or selling commodities or securities on account of their customers (Kommissionare), forwarding agents (Spediteure) and warehouse-keepers.

(g) The transactions of commercial agents and brokers.

(h) The book-selling trade and trade in works of art.

(i) Printing enterprises except those carried on in a small way by handicraft.

10. Side by side with these nine types of enterprise, where the mere existence of the enterprise makes it commercial and therefore its owner a ' merchant ', there exists a group of enterprises which become commercial only through the entry of the trader's commercial name in a commercial register. These are enterprises 'which as regards kind and extent require a business organised in a commercial way' (section 2 HGB). The code, when referring to a commercial organisation, thinks particularly of the keeping of commercial books, the use of a mercantile name, and the filing of correspondence. It depends on circumstances, notably on the extent of the business, whether or not it requires a commercial organization. Mining enterprises, brickworks, sugar factories, and other businesses where the producer uses material which he has not bought but produced himself, belong to this group. Further:

information offices, patent agencies, cinema enterprises, speculation in land, the buying and re-selling of houses, mortgage brokerages, and other professions dealing with immovables. The extent of the business, however, is not the only noteworthy point. There are enterprises which, even if very large and conducted in a highly mercantile style, cannot, owing to their nature, become commercial enterprises. Advocates, physicians, dentists, swimming and dancing instructors etc. are not merchants.

11. Enterprises which require a commercial organization become commercial through the registration of their business name in a ' register of commerce' (see section XI), kept at the local District court (Amtsgericht). It may happen that a person has had his business name registered, although his enterprise does not require a commercial organization. Should this occur, his name must be removed from the register, but until it is cancelled the enterprise is treated as if it were a commercial business, and its owner as if he were a merchant; section 5 HGB.

12. A businessman whose business demands a commercial organization is not only allowed to have his business registered, but is bound to do so.

This duty can be enforced by the imposition of fines. Thus, though he is not a merchant, he is obliged to become one (section 2 HGB).

13. The reason for this wide extension of the concept of merchant-an extension unknown to any other legal system-is to be found in the legislator's wish to subject vast groups of businessmen to the publicity duties which the law has established for merchants and to the sanctions imposed in case of insolvency on an unscrupulous trader. There are however two interesting exceptions to the rule of section 2 HGB. First, no obligation to register is imposed on the German Reich, the Lander and the public communes (section 36). They are merchants without registration if they carry on a business of one of the nine types of sect. 1; e.g. the former printing enterprise

of the Reich (Reichsdruckerei) or the Bavarian State Brewery (Hofbriiuhaus).

Where however their activity falls under section 2 HGB (example: a mining enterprise), they are allowed, but not obliged to register and may therefore be merchants or not at their own discretion. Secondly, no obligation to register exists in the case of agriculture and forestry. The agriculturist or forester as such is never a merchant. But if he has an ancillary enterprise in which he makes use of the raw products gathered in his main work as a peasant or forester, e.g. a distillery or soapworks or a horticultural establishment, a mill, or a cheese dairy, he may at his free choice become a merchant by registering or remain outside the mercantile circle-a curious privilege which German law, contrary to all other legal systems, grants to farmers and foresters; section 3 HGB.

14. Finally, there is one group of persons...

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