In this blog post, Sunidhi, a student of the Rajiv Gandhi National University of Law, Patiala has written about Mercantile Law of India. The blog post highlights various sources of Indian Mercantile Law.



Mercantile law or commercial law is the law that regulates commercial activities of the economy. It is a very wide term and all the laws that regulate commercial transaction in India are covered under its ambit. The pre-requisite of such transaction is a valid agreement between the parties to the contract. It can either be express or implied.

It is concerned with the rights and obligations of traders arising out of the commercial transaction. The trader can be an individual, partnership firm or a company. All the Acts in India that govern trade or commerce are part of Mercantile Law of India. For example, Indian Contract Act, 1872; Sale of Goods Act, 1930; Companies Act, 2013;, etc.

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The Mercantile Law in India developed with the enactment of the Indian Contract Act, 1872. Before this, all the commercials transactions were governed by the personal laws of the party to contract. For example Hindu Law, Mohammedan Law, etc. The first attempt to codify Mercantile Law in India was made by the Britishers in 1872 by the enactment of Indian Contract Act. Since then, numerous laws have been enacted in India to regulate commercial transactions, such as Partnership Act, Negotiable Instruments Act, etc.


Sources Of Indian Mercantile Law

The Indian Mercantile Law has developed from many sources. The following are the main sources of Indian Mercantile Law:

  • English Mercantile Law:

The Indian Mercantile Law owes its origin to the English Mercantile Law. For a very long time, India was under the control of Britishers. Therefore, it has a direct influence on Indian law, and Indian Mercantile Law is no exception to it. The dependence of Indian Law on English Law is so high that, in the absence of any provision related to the issue in question, the direct recourse is to refer to the English Mercantile Law. The sources of English Mercantile Law are Common Law, Equity, Law Merchant, and Statute Law. The Common law of England or the judge made law is the preliminary source of Indian Law. It is the unwritten law of England that consists of judicial decisions and customs. With the passage of time, this law became rigid. This rigidity led to the development of Equity in England.

The remedy under Common Law was available by obtaining writs, but the writs were very specific and less than required. This led to dissatisfaction among people. And in many cases, the remedy under Common Law was not adequate. So, the people would appeal to the King. The King transferred the cases to the Chancellor, who would decide those cases by his common sense, natural justice, and conscience. This led to the development of Equity Courts. Law Merchant is the law that consists of the principles developed out of the principles of customs and usages. This ultimately became a part of Common Law of England.

Statute law is the written law of England enacted by the Parliament of England. This written law always overrides the unwritten law i.e. Common Law and Equity. It is one of the very vital sources of Mercantile Law of England. For example English Partnership Act, 1890, Sale of Goods Act, 2015, etc.

  • Acts enacted by Indian Legislature:

The greater part of Indian Mercantile law is Legislature enacted. The Acts enacted by the Indian Parliament are that source of law which makes it possible to bring uniformity in Indian Law. Changes can be brought in Indian Law effectively by legislative enactments.


  • Judicial Decisions:

Judges interpret the law and put life into the black and white letters of law for its effective implementation. The decision of judges is binding on all subsequent decisions unless overruled by a higher court or a larger bench. For example, the decision of a High Court is binding on all the lower courts under its jurisdiction, and the decision of a Supreme Court is binding on all the courts of India except for the Supreme Court itself. The decision of the Supreme Court has persuasive value for the same bench, but it has binding value in the case, a larger bench gave the earlier ruling.


The doctrine of the binding value of earlier judicial decisions i.e. the precedent is followed to maintain uniformity in delivering justice. Whenever the law is silent on a certain issue, then the judges interpret the law in such a way that the yawning gaps in the law are filled to ensure justice. The precedents have binding value to ensure that no two alike cases are decided on two different principles as this will result in injustice to some. This principle ensures justice for each and every individual along with a measure of certainty for the law itself.

Before independence, the decisions of Privy Council were binding on all the lower courts as it was the highest court of Appeal for Indians. At present, the Supreme Court of India is the highest court of Appeal, and its decisions are binding on all the courts of India. But even today, the decisions of Privy Council and House of Lords are referred to as precedents in deciding certain cases and in interpreting certain statutes in India.


  • Customs and Trade Usages:

Customs and Usages had played a very vital role in regulating the commercial transactions in India when there was no codified law. In fact, the codified law of India has given superseding powers to the customs and usages. For example, Section 1 of Indian Contract Act states, “Nothing herein contained shall affect any usage or custom of trade not inconsistent with the Act.”[1] A custom becomes binding when certain pre-requisites are fulfilled. For example, antique, reasonable, consistent with law, not against public policy. Then, the custom is recognized by courts, and it becomes a legal obligation. Hundi is the best example of this, and it has been recognized by the Negotiable Instruments Act as well.

The need for mercantile law is felt when a dispute arises between the two parties to the contract. Awareness about the law of the land is essential as ignorance of law is no excuse. Therefore, each and every individual should have knowledge of the mercantile law of their country. In the absence of knowledge, no rights can be enjoyed, and no obligations can be met.


[1] Section 1, Indian Contract Act, 1872.



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