Summary
Chapter Two
Mercantile and Commercial Laws
Learning Objectives:
1. Understand the definition of Mercantile Law / Commercial Law / Business Law.
2. Objectives of Business Law.
3. Sources of Mercantile Law.
4. Mercantile Law – Scope and boundaries .
2.1. Definition of Mercantile Law
All the three terms i.e. Mercantile Law / Commercial Law / Business Law are one and the
same, or synonymous. Business Law is dealing with the rights and obligations of business
persons arising out of business transactions in respect of business operations or business
property. In a socialistic form of country like India, wealth should be adequately distributed to
bridge the gap between the rich and the poor. To achieve this objective, the law regulates various
transactions of business community.
2.2 Objectives of Business Law
2.2.1 To explain the framework within which business activities shall be carried out.
2.2.2 To raise an issue to various legal and semi-legal authorities against the government in
case the legal rights of the business have been violated.
2.2.3 Some business laws are made to encourage business persons to achieve their goals fast.
2.2.4 The Business Law also has social objectives to serve the society at large. The Anti-
competition laws, Pollution control laws etc. are a few examples. Recently, the control of
prices of generic medicines by law has also played a role of government in the interest of
the society
2.2.5 Business law tries to prevent the concentration of economic power to some extent and
helps in the fast settlement of claims of individuals against business houses.
2.3 Sources of Mercantile Law
2.3.1 The Indian Contract Act, 1872 is the basic mercantile law generated in India.
2.3.2 The other important sources of mercantile / business law in India are -
a) English Mercantile Law : The English Mercantile Law constitutes the foundation on
which the main structure of the Indian Mercantile Law has been constructed.
b) Judicial Decisions and Precedents : Judicial decisions are usually referred to as
precedents and are binding on all courts having jurisdiction lower to that of the court
which gave the judgment.
c) The Customs and Trade Usages : Customs or usage of a particular trade guides the
courts in deciding disputes arising out of mercantile transactions. Also, where a statute
specifically provides that the rules of law contained therein are subject to any well
recognized custom or usage of trade, then the custom may override the statute law.
d) The Statute Law : When a bill is passed by the parliament and signed by the President,
it becomes an „Act‟ or a „Statute‟. Many of the clauses and sub-clauses of Indian
Mercantile Law is termed as Statute Law
e) Justice, Equity and Good Conscience : The equitable principles of law developed by
the British courts are the guiding force behind most of the Indian statutes on business
laws. Also whenever required, the Indian courts make wide use of these principles of
equity in interpreting the Indian law.
2.4 Mercantile Law – Need, Scope and Boundaries
2.4.1 Need : Thorough knowledge of business laws is necessary for survival and profits of the
business houses.
2.4.2 Scope and Boundaries :
The Companies Act, 2013 : This Act controls all the registered companies. The Act is
important to be followed by the companies from their start to the end, and submit the
reports to government from time-to-time in the prescribed formats. This is the most
important Act amongst all the Mercantile Acts, and hence to be thoroughly studied.
The Indian Contract Act, 1872 : The oldest and widely referred Act of the Indian
Business Acts, this act helps people to bind and maintain legally enforceable relations
and conduct business and non-business transactions. It basically focuses on an offer and
acceptance in the legal transactions . The agency relationship between the principal and
the agent is also governed by this Act.
The Indian Sale of Goods Act, 1930 : This act governs all the transactions of sale and
purchase of a company. It divides the term of sale into conditions and warranty. The Act
proclaims the principle of caveat emptor which has possibly made many people in the
Indian business sales-oriented. It lays down rules for performances of the contract of sale.
The Contract of Partnership Act, 1932 : Majority of the firms in India are
Partnership firms, which are controlled by this Act, hence this is important Act in study
of the Mercantile Law. A contract of partnership is a special contract. The Act contains
74 sections and extends to the whole of India except the state of Jammu and Kashmir.
Section 4 of the Indian Partnership Act defines the term „partnership‟ as – “ Partnership is
the relation between persons who have agreed to share the profits of a business carried on
by all or any of them acting for all ”.
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