P age |1
CHAPTER- 1
CONCEPT OF LAW AND INDIAN CONTRACT ACT
Definition and Meaning of Law:
According to Salmond "Law is the body of principles recognized and applied by the state in
the administration of justice". In the words of Austin "A law is a rule of conduct imposed and
enforced by the sovereign" In simple words law is a code of conduct recognized and enforced
by the state in order to maintain peace in the society.
Essential features of Law:
1. Law is a bundle of rules and principles.
2. Law relates to external actions of the humans.
3. Law is made and enforced by the sovereign authority i.e., the State (government)
4. Law is exercised on the people.
5. Law applies to all without discrimination.
6. Law always remains supreme.
Need for Law
Man lives in society. While so living he comes into contact with others in different capacities
like purchaser, lender, borrower, seller, land lord tenant, employer and so on. In all his
contacts and relationship with others, he is expected to observe a code of conduct or a set of
rules for peaceful living in the society
According to Aristotle "Man when perfected is the best of animals, but when he is separated
from law and justice ,he is worst of all". The existence of law is necessary for maintenance of
peace and order in the society. It may be noted that, not only there is the need for law for
regulating the conduct of the people, but it is also necessary for every man to have knowledge
of the general principles of the law of the country in which he lives. There is well known maxim
that “Ignorantia juris non excusat" which means that ignorance of law is no excuse. A person
cannot escape from liability on the ground of ignorance of law. This doesn't mean that every
member of society must learn every branch of law. The requirement is that he must know
something about rules and regulations by which he is governed and the general principles of
the law of land. Knowledge of the general principles of the law of the country will certainly
help a person in protecting himself against others, when he is brought into legal relationships
with others, knowingly or unknowingly.
BUSINESS LAW CHAPTER 1- INTRODUCTION
, P age |2
Branches of law:
There are several branches of law which can be divided into:
1. Civil law: Civil law is the law of the state or law of the land. Civil law consists of general
commands issued by the state to its subjects and enforced if necessary, by the physical power
of the state. Any disputes that does not relating to criminal proceedings or criminal wrongs
fall under the category of civil law.
2. Criminal law: Criminal law is concerned with criminal proceedings; criminal wrongs or
crimes. The object of criminal law is to punish criminal wrongs or crimes.
3.Constitutional law: Constitutional law is the body of legal rules or principles which
determine the constitution of India Constitution law deals with the structure, powers and
functions of the supreme power in the state together with those of the subordinate
departments of the government.
4. International law: International law is the body of rules which governs sovereign states in
their relation and conduct towards each other. The primary objective of international law is
to regulate the conduct and relations of independent states.
5. Mercantile law: Mercantile law is that branch of law which governs, regulates trade,
industry and commerce. It deals with the rights and obligations arising out of business
transaction between businessmen. It is also known as commercial law or business law.
Sources of Mercantile Law:
Indian Mercantile Law is largely based on the English Mercantile Law. However, necessary
modifications have been made to provide for the local customs or usages of trade as
necessitated by the peculiar conditions prevailing in India. It is important to note that in the
absence of any specific law or custom or usage on a particular point, the rules of English
Common Law are still applied by the courts in India. The important sources of Mercantile Law
in India may be discussed under the following heads:
1. English Mercantile Law: Indian Mercantile Law is largely based on the English Mercantile
Law. In order to trace the origin of legal principles governing commercial transactions in India,
it becomes necessary to know the sources of English Mercantile Law. These sources are:
a. Law Merchant or Lex Mercatoria: one of the most important sources of English Mercantile
Law is the Law Merchant or Lex Mercatoria based on customs and usages that prevailed
among the merchants trading in European ports during 14th and 15th centuries. Initially, it was
not recognized by common law courts. But later on, in the beginning of the
17th century, the Common Law Courts began to recognize the rules of law merchant, which
then became a part of common law. The law merchant was developed with the progress of
trade and commerce in England.
BUSINESS LAW CHAPTER 1- INTRODUCTION
CHAPTER- 1
CONCEPT OF LAW AND INDIAN CONTRACT ACT
Definition and Meaning of Law:
According to Salmond "Law is the body of principles recognized and applied by the state in
the administration of justice". In the words of Austin "A law is a rule of conduct imposed and
enforced by the sovereign" In simple words law is a code of conduct recognized and enforced
by the state in order to maintain peace in the society.
Essential features of Law:
1. Law is a bundle of rules and principles.
2. Law relates to external actions of the humans.
3. Law is made and enforced by the sovereign authority i.e., the State (government)
4. Law is exercised on the people.
5. Law applies to all without discrimination.
6. Law always remains supreme.
Need for Law
Man lives in society. While so living he comes into contact with others in different capacities
like purchaser, lender, borrower, seller, land lord tenant, employer and so on. In all his
contacts and relationship with others, he is expected to observe a code of conduct or a set of
rules for peaceful living in the society
According to Aristotle "Man when perfected is the best of animals, but when he is separated
from law and justice ,he is worst of all". The existence of law is necessary for maintenance of
peace and order in the society. It may be noted that, not only there is the need for law for
regulating the conduct of the people, but it is also necessary for every man to have knowledge
of the general principles of the law of the country in which he lives. There is well known maxim
that “Ignorantia juris non excusat" which means that ignorance of law is no excuse. A person
cannot escape from liability on the ground of ignorance of law. This doesn't mean that every
member of society must learn every branch of law. The requirement is that he must know
something about rules and regulations by which he is governed and the general principles of
the law of land. Knowledge of the general principles of the law of the country will certainly
help a person in protecting himself against others, when he is brought into legal relationships
with others, knowingly or unknowingly.
BUSINESS LAW CHAPTER 1- INTRODUCTION
, P age |2
Branches of law:
There are several branches of law which can be divided into:
1. Civil law: Civil law is the law of the state or law of the land. Civil law consists of general
commands issued by the state to its subjects and enforced if necessary, by the physical power
of the state. Any disputes that does not relating to criminal proceedings or criminal wrongs
fall under the category of civil law.
2. Criminal law: Criminal law is concerned with criminal proceedings; criminal wrongs or
crimes. The object of criminal law is to punish criminal wrongs or crimes.
3.Constitutional law: Constitutional law is the body of legal rules or principles which
determine the constitution of India Constitution law deals with the structure, powers and
functions of the supreme power in the state together with those of the subordinate
departments of the government.
4. International law: International law is the body of rules which governs sovereign states in
their relation and conduct towards each other. The primary objective of international law is
to regulate the conduct and relations of independent states.
5. Mercantile law: Mercantile law is that branch of law which governs, regulates trade,
industry and commerce. It deals with the rights and obligations arising out of business
transaction between businessmen. It is also known as commercial law or business law.
Sources of Mercantile Law:
Indian Mercantile Law is largely based on the English Mercantile Law. However, necessary
modifications have been made to provide for the local customs or usages of trade as
necessitated by the peculiar conditions prevailing in India. It is important to note that in the
absence of any specific law or custom or usage on a particular point, the rules of English
Common Law are still applied by the courts in India. The important sources of Mercantile Law
in India may be discussed under the following heads:
1. English Mercantile Law: Indian Mercantile Law is largely based on the English Mercantile
Law. In order to trace the origin of legal principles governing commercial transactions in India,
it becomes necessary to know the sources of English Mercantile Law. These sources are:
a. Law Merchant or Lex Mercatoria: one of the most important sources of English Mercantile
Law is the Law Merchant or Lex Mercatoria based on customs and usages that prevailed
among the merchants trading in European ports during 14th and 15th centuries. Initially, it was
not recognized by common law courts. But later on, in the beginning of the
17th century, the Common Law Courts began to recognize the rules of law merchant, which
then became a part of common law. The law merchant was developed with the progress of
trade and commerce in England.
BUSINESS LAW CHAPTER 1- INTRODUCTION
