- The Indian statutes on mercantile law
- English/ Foreign law
- Precedents(previous judgments of the courts.)
- Customs and usage
Most of the Indian Mercantile Law is contained in the statutes. The prime legislation is the Indian Contract Act 1872 but it is not exhaustive to deal with all kinds of contracts. In addition to this there are the Sale of Goods Act, 1930, The Indian Partnership Act 1932, The Negotiable Instruments Act 1881 etc. wherever the Indian Contract Act is silent, the Indian courts may apply the principles of the English Common Law.
It is interesting to know that in England there is no English Contract Act in the form of a statute. It has been derived from common law, the usage of merchants and traders in different spheres of trade, substantiated or ratified by decisions in the court of law. The judicial precedents are an important source of law. Sometimes, there is no provision, which can answer a particular question of law. In such cases the court will look into the previous decisions on similar matters to find the relevant law.
Custom and usage of a trade play an important role in business dealings of that trade. To have a binding force, the custom or usage must be certain, reasonable and well known. Now it is more than a century that that the mercantile laws are governing trade and commerce. The law of contract is the foundation upon which the superstructure of modern business is built. It is common knowledge that in business transactions quite often promises are made at one time and the performance follows later. In such a situation if either of the parties were free to go back on its promise without incurring any liability, there would be endless complications and it would be impossible to carry on trade and commerce. Hence the law of contract was enacted which lays down the legal rules relating to promises, their formation, their performance, and their enforceability. Explaining the object of the law of contract Sir William Anson observes:
“The law of contract is intended to ensure that what a man has been led to expect shall come to pass, that what has been promised to him shall be performed”.
The law of contract is applicable not only to the business community but also to others. Every one of us enters into a number of contracts almost everyday, and most of the time we do so without even realizing what we are doing from the point of law. A person seldom realizes that when he entrusts his scooter to the mechanic for repairs, he is entering into a contract of bailment; or when he buys a packet of cigarettes, he is making a contract of the sale of good; or again when he goes to the cinema to see a movie, he is making yet another contract; and so on.
Besides, the law of contract furnishes the basis for the other branches of mercantile law. The enactments relating to sale of goods, negotiable instruments, insurance, partnership and
insolvency are all founded upon the general principles of contract law. That is why the study of the law of contract precedes the study of all other sub-division of mercantile law.
The Indian contract act was enacted from the 1st day of September; 1872.it is applicable to the whole of India except the state of Jammu and Kashmir. There may be some occasions where
Indian law disagrees with the English laws. In such cases, the Indian law will prevail.