MBA 104: Legal and Business Environment:
Module I: Introduction to Business Laws…
Commencing a business journey isn‟t a straightforward job as it attracts heaps
of legal compliances. Thus, it is pertinent for entrepreneurs to get a better
understanding of legalities before laying the foundation of new business.
Knowing Legal Aspect of Business could help start-ups, prevent barrier,
irrelevant expenditure and save time.
Business:
A business is defined as an organization or enterprising entity
engaged in commercial, industrial, or professional activities.
Society:
A society is an organized group of persons associated together for religious,
benevolent, cultural, scientific, political, patriotic, or other purposes.
State :
A state is a community formed by people and exercising
permanent power within a specified territory.
Law:
„Law‟ in simple term means „rule‟. Rule of conduct enforced by the
state.
Law includes all the rules and principles which regulate our
relations with other individuals and with the state.
Law is defined by Austin as: “A law is a rule of conduct imposed
and enforced by the Sovereign.”
Defined by Salmond as: ”Law is the body of principles recognized
and applied by the State in the administration of justice.”
Objective of Law:
The objective of law is to bring order in the society with a view to
enable its members to progress and develop with some sort of
security regarding the future.
Law or definitive rules are made to ensure the peace and
progress of a society.
Need for the knowledge of Law:
Knowledge of law is to the advantage of each member of the
community to know something of rules and regulations which he
is governed and as such he must acquaint himself with the
general principles of the law of the country.
Some knowledge of legal principles and how they apply to
certain problems will certainly help a businessman in avoiding
conflict with persons with whom he comes into business contacts.
The knowledge of Mercantile or Commercial or Business Law,
which is of particular importance to people engaged in economic
and commercial activities.
It is important for those who work in the field of commerce to understand
mercantile law.
By understanding the laws and regulations, you can avoid conflicts with those
with whom you are doing business, in any capacity.
Essential Characteristics of law:
There are 3 essential characteristics of law-
1. Law is a rule relating to the actions of human beings.
2. Law attempts to regulate the external actions of human beings.
3. Law is enforced by the state.
Rule of Law:
The concept of equality of all persons before law is the basis of
what is called the Rule of Law.
Three (3) rules of Law:
1) No citizen can be arrested or imprisoned/punished, unless he
violates specifically any law of the country in force and is accused
of a charge by the court.
2) No person is above law. Equality before the law, The citizen has
to face trial in the same law courts, irrespective of his status or
position in the society.
3) Rule of law is the result of statues and judicial decisions
determining the rights of private persons.
Enforceability of Law
Enforceability means that an agreement consists of the
necessary components in order to be able to be imposed under
law.
Depending on the type of agreement, these components can
vary.
If only one vital part is missing or wrongly written, the
agreement may not hold up in court. This can have negative
consequences for either party in an agreement.
Mercantile Law/Commercial Law:
The term „mercantile‟, ‟commercial‟ and „business‟ are
synonymous.
Mercantile law may be defined as that branch of law which
consists of laws relating to trade, industry and commerce.
Mercantile Law governs the commercial activities of the
economy.
Mercantile law is a body of law or a legal code that deals with
international commerce, business transactions and operations
like agreements, contracts, copyrights, franchising, insurance,
licensing, patents, shipping, transport, trademarks, etc.
Business Law controls the rules and regulations associated
with the business. It specifies the codes related to business deals,
the conduct of people associated with the industry, and laws
related to any organization's rights, order, and dispute settlement.
Scope of Mercantile Law:
Mercantile law relates to the obligations and rights of individuals, partners or
other parties, such as joint stock companies, involved in commercial
transactions.
This area of law deals with a large variety of case types. It can include laws
related to:
• Carriage of goods-through carriers act.
• Contracts-contract act.
• Insurance-Insurance act.
• Partnerships-Partnership act.
• Insolvency-Insolvency act.
• Companies-Companies act.
• Negotiable instruments-Negotiable Instruments act
• The sale of goods-Sale of Goods act.
• Other related topics
It is important for those who work in the field of commerce to understand
mercantile law.
By understanding the laws and regulations, you can avoid conflicts with those
with whom you are doing business, in any capacity.
Sources of Indian Commercial Law:
The commercial law of India is based upon-
1) Statutes of the Indian legislature: The legislature (Central and
State) is the main source of Indian law.
2) English mercantile law: Many rules of English Mercantile Law
have been incorporated into Indian law.
3) Judicial Decisions or Precedents: Indian mercantile usages,
modified and adapted by judicial decisions.
4) Custom and Usage: A customs becomes legally recognized when it is accepted
by a court and is incorporated in a judicial decision.
Structure of the Indian Judicial System:
The judiciary system of India regulates the interpretation of the acts and codes,
and dispute resolution, and promotes fairness among the citizens of the land.
In the hierarchy of courts, the Supreme Court is at the top, followed by the High
Courts and district courts.
Supreme Court:
The Supreme Court is the apex body of the judiciary.
High court:
The highest court of appeal in each state and union territory is the High Court.
District courts:
District Courts regulate matters of justice in a particular area or district chaired
by a District judge.
Model Questions:
1. What do you mean by business?
2. How do you define law?
3. How do you explain the rules of law?
4. How would you explain mercantile law?
5. Evaluate the importance of mercantile law.
6. What do you mean by Enforceability of Law?
7. Explain the sources of commercial law in india.
8. Describe the scope of mercantile law.
[Link] the structure of the Indian legal system.
Ref Book (NDK):
1. Define law.
2. What is the need for knowledge of law?
3. What is the scope of „Mercantile „or Commercial law?
4. What are the term „Mercantile law‟ include?
5. What are the sources of Indian „Mercantile‟ or „Commercial‟ Law?