Image source -

This article was written by Harman Juneja, from Dr. B.R. Ambedkar National Law University, Rai, Sonepat. The article talks about commercial law and how it sets a framework for businesses.


Commercial law is one of the most significant legal areas. This area of law deals with business-to-business and consumer-to-business transactions, as well as employee contracts, business contracts, financial transactions, and other topics. Commercial law, also referred to as mercantile law or trade law, is the body of law that governs the rights, relationships, and actions of people and businesses involved in commerce, merchandising trade, and sales. It is frequently seen as a branch of civil law that deals with both private and public law issues. The article talks about how this body of law helps in regulating businesses and how they do their work around frameworks set by this law.

Commercial law : its meaning and nature

Before attempting to define commercial law, it is necessary to consider its content or the aspect of the legal reality that it governs. To begin, we can remark that commercial law deals with legal relationships between individuals, which is why it is classified as private law. 

However, distinguishing between civil and commercial issues is difficult, particularly since certain legal organizations and contracts, such as purchase, society, deposit, and so on, are governed by both codes. This means that the content of each code can not be utilized to distinguish between civil and commercial matters. To make this distinction, we must first examine the historical development of commercial law to determine which aspects of legal reality it now governs.

The nature of commercial law

What is the definition of commercial law? In the absence of a well-established legal definition of commercial law, several definitions have been proposed by writers on the subject. The following are some of them:

  • As HW Disney noted in his book, the Elements of Commercial Law (1931), commercial law is a term that is difficult to define precisely, but it is used to refer to all of the parts of English law that are concerned with commerce, trade, and business.
  • In the book, Contract and Commercial Law, HC Gutteridge said that the goal of commerce is to transact in products, and commercial law can be described as the particular laws that apply to contracts for the sale of things if we use this criterion.

The mercantile nature of the subject runs through all of these different definitions of commercial law. The law of commerce is known as commercial law. It is concerned with commercial transactions, that is, transactions in which both parties deal with each other for the purpose of doing business.

Many diverse areas of commercial activity are covered by commercial law. An exhaustive list of the subject’s contents is neither possible nor desirable. Commercial law is a practical and relevant subject that aims to make the corporate community’s commercial procedures easier. As those practices alter and evolve, typically to accommodate new technologies, so may the content of business law. A strict description of the subject’s scope will only stifle this process.

Historical development of Commercial law

The middle ages

Modern business law has its origins in the middle ages’ lex mercatoria (merchant law). During that time, merchants would travel across Europe with their wares to fairs and markets. Special local courts, such as the courts of the fairs and boroughs, and the staple courts, where the judge and jury would be merchants themselves, would decide their conflicts. These merchant courts would make decisions fast, apply flexible evidence and procedural rules, and preserve good faith and fairness standards. A readiness to recognize innovative mercantile methods was also present. Some of the most fundamental characteristics of current commercial law were formed during this time period, including the bill of exchange, charter party, and bill of lading, assignability and negotiability, stoppage in transit acceptance, and general average.

The common law age

The Court of Admiralty, which continued to recognize the lex mercatoria, took over most of the business of the merchant courts in the fifteenth and sixteenth centuries. However, in the seventeenth century, the Naval Court’s commercial competence was taken over by common law courts. As the merchant courts had ceased to exist by that time, the common law courts took over the majority of the nation’s mercantile litigation. In order to preserve that business, common law courts embraced some of the lex mercatoria’s requirements. The lex mercatoria was not fully absorbed into the common law until the late seventeenth and eighteenth centuries.

The rise of consumerism

After World War II, the establishment of the welfare state ushered in the next major era of transformation. During this time, there was a shift away from the Victorian ideas of freedom and contract sanctity (and the laissez-faire economics on which those values were based) and toward those of social responsibility and the protection of the economically weaker against the economically stronger.

20th century 

Commercial Law returned to its old subjective conception at the turn of the twentieth century. It was once again deemed a law that restricted the activities of specific people. We used to talk about merchants in the Middle Ages, but in the twentieth century, the term merchant was gradually superseded by the concepts of enterprise and entrepreneur.

Sources of Commercial law


Contract law is the foundation of commercial law. Goods and services are provided in the world of commerce according to the conditions of contracts negotiated between businessmen. Each contract term may have been individually negotiated by the parties in some cases. However, beyond the terms relating to subject matter and price, there would have been little or no negotiation on the specific terms of the agreement in many circumstances. In such circumstances, the parties prefer to employ standard form contracts to enact their agreement, saving time and money that would have been spent negotiating each phrase individually.

The courts are unwilling to interfere with the concepts of contract freedom and sanctity as long as the standard form contract is made between businessmen and not between an ordinary person and a company provider of goods and services. This is especially true of standard form contracts developed by trade groups and adopted by their members, such as bills of lading, charter parties, insurance policies, and commodity market contracts of sale.


The customs of merchants have long been a productive source of legislation in the sphere of commercial law. A custom is a regulation that has become law in a specific location, whereas a usage is the established practice of a certain trade or profession. In fact, courts frequently disregard the technical distinctions between custom and use, conflating the two categories. To insinuate a term into a commercial contract, a court may accept proof of a trade tradition or usage. The custom or usage must be one that the court will recognise for these purposes because only then will the custom or usage become a legally binding obligation.

Common law

When a specific commercial law does not have a norm to apply or when there is no tradition, common law can be used to control commercial issues. Prior court judgements set the precedent for common law. In other words, no hard and fast rules apply to common law rulings. Furthermore, judgements may differ from one court to the next or from one state to the next.

Commercial laws in India

The important business or commercial laws of India are-

The Indian Contract Act, 1872

It is the most well-known business law in our country. It went into force on September 1, 1872, and it applied to the whole country of India, except for Jammu and Kashmir. It consists of 266 sections. The fundamentals are defined by numerous rulings in the Indian judiciary under the Indian Contract Act, 1872. Specific requirements for legitimate contracts include free consent, consideration, competency, eligibility, and so on. A Legitimate contract must follow these rules or else it is ruled null and void.

The Sale of Goods Act, 1930

The Sale of Goods Act of 1930 governs contracts and agreements involving the sale of goods and services. Commodity sales are one of the most important sorts of transactions under Indian law. India is one of the world’s greatest economies and a magnificent country. As such, it has enough checks and safeguards in place to ensure the safety and prosperity of its business and commerce communities. The Sale of Goods Act of 1930, which defines and declares terminology relating to the sale of goods and the exchange of commodities, is explained in this section.

The Indian Partnership Act, 1932

According to the Indian Partnership Act of 1932, a partnership is a relationship between two or more parties who agree to share the earnings of a business, either all or merely one or more persons acting for them all. A Partnership is a legally binding agreement. A partnership, as defined, is an association of two or more people. A partnership is formed as a result of a contract or agreement between two or more people. A partnership is not formed by the operation of the law. It also can not be inherited. It must be a mutually agreed-upon voluntary arrangement between couples. A partnership agreement can be either written or oral in nature. Sometimes, the partner’s continuous actions and mutual understanding imply such an arrangement.

The Limited Liability Partnership Act, 2008

The Limited Liability Partnership Act, 2008 covers the scope of limited liability partnerships. The definition of a limited liability partnership is an alternative corporate company form that provides the partners with the benefits of restricted liability while incurring low compliance costs. It also allows the partners to organize their internal structure in the same way that a typical partnership would. A limited liability partnership is a legal entity that is accountable for the entire amount of its assets. The partners’ responsibility, on the other hand, is limited. As a result, an LLP is a crossover between a corporation and a partnership. It is not the same thing as a limited liability company.

Companies Act, 2013

With the domestic and international economic landscape changing at an unprecedented rate, India’s government chose to replace the Companies Act, 1956, with the new legislation. The Companies Act, 2013, aims to bring company legislation in India up to date. The Act looks at the definition and characteristics of a company. The Companies Act, 2013, fundamentally transformed India’s corporate regulations by introducing several previously unknown ideas. The introduction of the “One Person Company” concept was one such game-changer.

Arbitration and Conciliation Act, 1996

In India, arbitration is now controlled by arbitration law, which is primarily set down in the Arbitration and Conciliation Act, 1996. The objective of this Act was to consolidate and reform the law governing domestic arbitration, international commercial arbitration, and foreign award enforcement, as well as defining the law relating to conciliation.


All commercial transactions, operations, and interactions between and among all business entities, regulatory bodies, business support agencies, modes of transportation, and customers are governed by commercial law. As a result, commercial law is critical for the smooth, fair, and lucrative operation of enterprises in every sector of commerce and the economy. Commercial law has evolved significantly over time, but in general, it is intended to provide business owners with the ability to manage their operations within legal constraints. There are various commercial laws in India that must be followed by every business.


LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.


Please enter your comment!
Please enter your name here