Commercial Law or Mercantile Law Explained! Learn about its definition, scope and sources.


The laws of a country relate to many subjects e.g., inheritance and transfer of property, relationship between persons, crimes and their punishment, as well as matters relating to industry, trade and commerce. The term Commercial Law or Mercantile Law is used to include only the last of the aforesaid subjects, viz. rules relating to industry, trade, and commerce.

Corporate and Business Law

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Commercial Suit


A suit between merchants, bankers, and traders, relating to mercantile transactions is a commercial suit. It follows that all laws while must be referred to in order to decide such suits come within the scope of commercial law. Commercial law or mercantile law may therefore be defined as that part of law which regulates the transactions of the mercantile community.


The scope of commercial law is large. It includes the laws relating to contract, partnership, negotiable instruments, sale of goods, companies etc.

It must be noted that there is no fixed line of division between commercial law and other branches of law, nor is there any conflict or contradiction between them. The law of contract, which is very important part of commercial law, is applicable not only to merchants and bankers but also to other persons. When a merchant files a suit in a court of law the procedure is not materially different from that of other suits. When a trader commits an offence he is punishable under the criminal law exactly in the same way as any other person. The subjects’ studies under the heading of commercial law do not from a comprehensive code dealing with all aspects of mercantile activity. Commercial law deals with only those parts of law which are of special importance to the mercantile community. The same laws are applicable to other citizens under appropriate circumstances.

Sources of Indian Commercial Law

The commercial law of India is based upon statues of the Indian legislature, English mercantile law and Indian mercantile usages, modified and adapted by judicial decision.


The sources from which the rules of Commercial Law of India have been derived are given below.

1. Statutes of Indian Legislatures

The legislature is the main source of law in modern times. In India, the Central and the State legislatures posses law making powers and have exercised their powers extensively. The greater part of Indian commercial law is statutory.


2. English Mercantile Law

Many rules of English mercantile Law have been incorporated into Indian Law through statues and judicial decision. English Mercantile Law is a mixture of diverse elements. It contains rules originating form the following sources:

(i) Maritime usages which developed during the 14th and the 15th centuries among merchants trading in the European ports. These usages are known as Lex Mercantoria.

(ii) Rules which developed by custom in England and which constitute what is called the English Common Law

(iii) Rules of Roman law.

(iv) Rules of Equity, i.e. rules which were applied by English Courts of Equity in cases where the common law rules were considered harsh and oppressive.

(v) Statues of the British Parliament.

3. Judicial Decision or Precedents

Judges interpret and explain statues. Rules of equity and good conscience are incorporated into law through judicial decisions. Whenever the law is silent on a point, the judge has to decide the case according to his idea of what is equitable. Prior to 1947, the Judicial Committee of the Privy Council of Great Britain was the final court of appeal for Indian cases and its decisions were binding on Indian courts. After, independence, the Supreme Court of India is the final court of appeal. But decision of the superior English courts like the Courts of Appeal, Privy Council, and the House of Lords, are frequently referred to as precedents which might b followed interpreting Indian statues and as rules of equity and good conscience.

4. Custom and Usage

A customary rule is binding where it is ancient, reasonable, and not opposed to any statutory rule. A custom becomes legally recognized when it is accepted by a court and is incorporated in a judicial decision.

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