VOLUME ONE

Introductory
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 and conducive to the
welfare of the State and its people.

WHAT IS LAW?
The word law' ls a general term and has different connotations for different people, e.g.,
(1) A citizen may think of law as a set of rules which he must obey.
(2) A lawyer who practises 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.

Thus a man's perspective infuences his notions about law and as such its meaning. It is,
therefore, not possible to give a single, accurate definition of law. It is often preceded by an adjective
to give it a more precise meaning, e.g., civil law, criminal law, mercantile law, industrial law,
international law. However, in the legal sense with which we are concerned in this book, law
includes all the rules and principles which regulate our relations with other individuals and with
the State.
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.

.Salmond on Jurisprudence. 12th ed n 36s

 INTRODUCTORY
Law is not static. As circumstances and conditions in a society change, laws are changed to fit
the requirements of the society. As such, law prevailing in a society at any point of time must be in
sentiments, customs and aspirations of its people. lt is a living
contormity with the general
phenomenon having a real existence in relation to the facts of human affairs.

Object of law
enabled to look ahead with
The object of law isorder, and the result of order is that men are
cannot be reduced to the uniformities
some sort of
security as to the future.(Although human actions
law something approaching to this
of nature, men have yet endeavoured to reproduce by
uniformity.1)
law is considered to be "to establish
In the context of emerging India, the main object of
new
in
socio-economic justice and remove the. existing
imbalance In the socio-economic structure. Law,
the various socio-economic goals
this context, has to play a special role In the task of achieving
enshrined in our Constitution.
as a harbinger of social
In a society like ours law has to serve as a vehicle of social change and
to bring about all-round welfare and improvement
Justice.)A great part of law is designed principally fromn
of the community and through welfare, well-being of the citizens individually and collectively
material, moral and spiritual standpoints.2
have a far greater need than they had before
With the attainment of freedom the people of India
with its content and purpose and with the
to know their law in the sense of being acquainted
es their requirements and regulates
their activities and their relations with
manner in which it ser them but by them
one another. This is because
it is now their law and Is made not merely for
through their representatives.3
concern of the government was limited to the
In the pre-independence era, the principal
But the situation has changed now and the
maintenance of law and order in the country.
Welfare State is being pursued by the Legislature
fundamental task of broadening the horizons of the
the entire gamut of social actfvity.
by enacting social welfare legislation covering

Need for the knowledge of law

not excusat' is familiar maxim. This means ignorance of law is no escuse.
a
Ignorantia juris
Although it is not possible for a layman to learn every branch ot law, yet it is to the advantage of
each member of the community to know something of rules and regulations by which he is governed
This
and as such he must acquaint himself with the general principles of the law of the country.
book willfariliarisehim with a branch law
of
as Law,
known Mercantile Commercial Business
or or
which is of particular importance to people engaged in economic and commercial activities.
The law now a days is a matter of great intricacy. As such no sound businessman would attempt
to salie important legal questions affecting his business interest without expert legal advice,
However, there are certain elements of law which stand out. as it were, like finger-posts, or rather,
like danger signals, and indicate where difficulty is likely to arise and where legal advice is ascribable.
A general knowledge of some of the more important, legal principles and how they apply to certain

1. Anson's Law of Contract.

2. Faulty Drafting of Laws by S.P. Sen-Verma, Journal Section, p. 99, A.I.R. Decemer 1975.
3. Everybody's Book of Law by Ramaswamy lyer, 2nd ed., 1961. p. 2.
INTRODUCTORY
3
problems will certainly help a businessman in avoiding conflict with the persons with whom he
comes into business contacts.

NATURE OF MERCANTILE LAW

The term Mercantile Law' is used to 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 deas with
contractual situations and the right and obligations arising out of mercantile transactfons
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.

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, Lusage 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
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. .
(a) Common 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 unuwritten and its
principles are applied whenever subsequent disputes of simiBar nature arise. This practice came to be
nown 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
gradual!) recognised by the Command 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.
ourts, It becomes part of the Common Law.
(b) Roman Law. A relerence to Roman Law was made when custom and usages failed to
afford solution to a particular case.
4 NTRODUCTORY
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 in a similar future case, unless there is a change in the circumstances
Statute Law. The Contract Act, 1872, the Sale of Goods Act, 1930, the Partnership Act,
1932, the Companies Act, 1956, 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
iament and the State Legislatures.
3/JudiciaB deacons 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
circumstarnces those rules which are derived from earlier judicial decisions.
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 (C.I. & B Syndicate v.
Ramachandra, A.l.R (1968) Mys. 133). When a custom is accepted by a Court and is incorporated
in a judicial decision, it becomes a legally recognised custom.

Test Questions
1. Define law'. What is the need for the knowledge of law?
2. What is the scope of 'Mercantile' or Commercial' Law?
3. What does the term 'Mercantile Law' include?
4. What are the sources of Indian 'Mercantile' or Commercial' Law?