Introduction to Business Law
Introduction of Law
As a social being, man comes into contact with people in
different capacities. He comes into contact, for example, with a landlord as a tenant, with Government as a
taxpayer, with customers as a seller and with suppliers as a buyer. These contacts or associations are
the inevitable consequence of modern civilisation. In all these associations, he is expected
to observe a code of conduct or a set of rules. The object of these rules is to make human
associations possible
The word 'law' is a general term and has different connotations for different people, eg..
1. A citizen may think of law as a set of rules which he must obey.
2. A lawyer who practices law may think of law as a vocation.
3. A legislator may look at law as something created by him.
4. A judge may think of law as guiding principles to be applied in making
decisions.
In the legal sense 'law includes all the rules and principles which regulate our relations with other individuals and with the State.'
Definitions of Law
The State regulates the conduct of its people by a set of rules. It ordains, directly or indirectly, implicitly or explicitly, a general course of conduct to be followed by the people. Such rules of conduct, if recognised by the State and enforced by it on people, are termed as law. In this sense Holland, a jurist, defines 'law' as rules of external human action enforced by the sovereign political authority, i.e., the State
In the words of Salmond, "Law is the body of principles recognised and applied by the State in the administration of justice.”
Woodrow Wilson has defined law as "that portion of the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the government."
It represents a code of conduct which is established and enforced by the State. Law, in this sense, has a two- fold aspect: It is an abstract body of rules and also a social machinery for securing order in the community.
Mercantile (Business) Law
The term 'Mercantile Law' is used tp denote that branch of law which is concerned with such matters as are usually the subject of what may be called mercantile transactions, i.e., it deals with contractual situations and the right and obligations arising out of mercantile transactions between mercantile persons.
A mercantile person may be a single individual, a partnership, or a joint stock company. The term 'Mercantile Law' is also used to denote the aggregate body of those legal rules which are connected with trade, industry and commerce.
According to Slater, "The term commercial law is generally used to denote those portions of the law which deal with rights and obligations arising out of transactions between mercantile persons".
Sources of Mercantile Law
The bulk of the Indian Mercantile Law is based on, and follows, the English Mercantile Law. In the absence of any specific law, usage or custom on a particular point arising before a Court, rules of the English Law, i.e., of justice, equity and good conscience, are applied. The Courts in India are, however, selective in the application of the English Law.
The important sources of the Indian Mercantile Law are as follows:
1. English Mercantile Law.
This is the most important source of the Indian Mercantile Law. The principal source of the English Mercantile Law is the Common Law of England as modified and supplemented by Equity and Statute Law.
It refers to a system of law based upon English customs,
usages and traditions which were developed over centuries by the English Courts.
It is unwritten and its principles are applied whenever subsequent disputes of
similar nature arise. This practice came to be known as deciding cases by
following precedent.
(b) Equity:
It refers to that branch of the English Law which developed separately from the Common Law. It is based upon concepts of justice developed by the Judges whose decisions became precedents. These precedents now constitute Equity Law. It is also unwritten and it grew as a system of law supplementary to the Common Law. In a sense, Equity covered the deficiencies of the Common Law, especially where the Common Law worked harshly. The distinction between them was abolished by the Judicature Acts of 1873 and 1875, so that the Common Law and Equity are now applied to all cases.
(c) Statute Law:
The Statute Law refers to the law laid down in the Acts of
Parliament It is superior to and overrides any rule of the Common Law of Equity.
The other sources of the English Mercantile Law are:
(a) Law Merchant or Maritime Usages:
The Law Merchant was the forerunner of the English Mercantile Law. It was that branch of law which was based on customs and usages prevalent amongst merchants and traders. It developed during fourteenth and fifteenth centuries and was gradually recognised by the Common Law Courts. This source of Common Law rules is not closed, and as any new custom becomes generally recognised amongst merchants and is proved in the Courts, it becomes part of the Common Law.
(b) Roman Law:
A reference to Roman Law was made when custom and usages failed to afford solution to a particular case.
(c) Case Law:
This is also a very important source of the English Mercantile Law. It is built up on previous judicial decisions, i.e., on the principle that what has been decided in an earlier case is binding a similar future case, unless there is a change in the circumstances.
2. Statute Law.
The Contract Act,1872, The Sale of Goods Act,1930, The Partnership Act,1932, The Companies Act, 2013, are instances of the Statute Law. In India, bulk of Mercantile Law is Statute Law based largely on the English Law. The law-making power in India is vested in Parliament and the State Legislatures.
3. Judicial decisions or the system of precedents.
This is a source of law based upon previous judicial decisions which have to be followed in similar future cases. The system of precedents has been described as a system of law which applies in new combination of circumstances those rules which are derived from earlier judicial decisions.
4. Customs and usages.
Customs and usages established by long use and constantly
put into practice become binding on the parties entering into commercial
transactions. A custom in order to be binding on the parties must be ancient
reasonable, certain, definite, consistent with other customs, and uniformly
recognised in the ordinary course of business. When a custom is accepted by a
Court and is incorporated in a judicial decision, it becomes a legally
recognised custom.
Redrafted for Educational Purpose.
Deekshith Kumar,
Assistant Professor of Commerce
Book Reference:
1. Elements of Mercantile Law by N. D. Kapoor
2. Principles of Mercantile Law by Avtar Singh
3. A Textbook of Business Law by Dr. Umesh Maiya
4. Business Law by B.S. Raman
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