commercial Law discus about rules of business and how u communicate with people and behavior of the business.

1. Chapter One:Chapter One:
UnderstandingUnderstanding
Commercial LawCommercial Law
11

2. Law MerchantLaw Merchant::
 MedievalMedieval
 EuropeEurope
 EvelvedEvelved  Common usagesCommon usages
22

3. OriginsOrigins::
 RulesRules
 MerchantsMerchants
 Common usages, CustomsCommon usages, Customs
 Civil lawCivil law  not responsivenot responsive
 A need for: effective, quick,A need for: effective, quick,
comprehensible and acceptable System &comprehensible and acceptable System &
specialised courtsspecialised courts
 International commercial law today isInternational commercial law today is
affected (affected (usages, customs..)usages, customs..).. including.. including 
arbitrationarbitration
33

4. The Medieval Law MerchantThe Medieval Law Merchant::
 Merchant courtsMerchant courts  tradetrade centres &centres &
routesroutes..
 Legal system developed andLegal system developed and
administered by Merchantsadministered by Merchants
 States or local authorities seldomStates or local authorities seldom
InterferenceInterference
 Trade flourishedTrade flourished
 Increasing tax revenuesIncreasing tax revenues
44

5. The Need for Quick and EffectiveThe Need for Quick and Effective
JusticeJustice::
 customs and practices among traderscustoms and practices among traders
 solve disputes rapidlysolve disputes rapidly least costs byleast costs by
most efficient meansmost efficient means
 Public courtsPublic courts  delay their business, anddelay their business, and
that meant losing moneythat meant losing money
 Law MerchantLaw Merchant 
quick and effective justicequick and effective justice
informal proceedingsinformal proceedings
fair price, good commerce, and equity.fair price, good commerce, and equity.
55

6. Choice of JudgeChoice of Judge::
 commercial backgroundcommercial background
 practical knowledge.practical knowledge.
 Their reputationTheir reputation
 expertise in merchant tradeexpertise in merchant trade
 a “a “professional judiciaryprofessional judiciary” developed” developed
through the merchant judges.through the merchant judges.
 serve as important measures in theserve as important measures in the
appointment of internationalappointment of international
commercial arbitratorscommercial arbitrators todaytoday..
66

7. Legal Concepts Introduced byLegal Concepts Introduced by
the Law Merchantthe Law Merchant::
 Based on: Less procedural formalityBased on: Less procedural formality
 However, practical needHowever, practical need  “writing“writing
obligatory”.obligatory”.
 creditors could freely transfer the debts.creditors could freely transfer the debts.
 displace the need for more complexdisplace the need for more complex
forms of proof,forms of proof,
 party autonomy:party autonomy:
 the parties free to take a case to court,the parties free to take a case to court,
 what evidence to submitwhat evidence to submit
 which law to apply.which law to apply. 77

8. The Evolution of the LawThe Evolution of the Law
MerchantMerchant::
 Law MerchantLaw Merchant  cosmopolitan -cosmopolitan -
internationalinternational
 declined towards the end of medieval timesdeclined towards the end of medieval times
 due to the adoption of nationaldue to the adoption of national
commercial lawcommercial law
 increasing modification of local customsincreasing modification of local customs
to protect the interests of localto protect the interests of local
merchants.merchants.
 The resultThe result  loss of autonomy of merchantloss of autonomy of merchant
tribunals to state courts.tribunals to state courts.
 The reason wasThe reason was  protection of stateprotection of state
interestsinterests 88

9. Codification andCodification and NationalisationNationalisation
of the Law Merchantof the Law Merchant::
 NationalisationNationalisation of the Law Merchantof the Law Merchant  diddid
not neglect thenot neglect the practisespractises of merchantsof merchants
 Some institutions continued toSome institutions continued to
function,function,
 state judges were appointed for theirstate judges were appointed for their
merchant expertisemerchant expertise  as modernas modern
commercial arbitrators.commercial arbitrators.
 The law of the merchants wasThe law of the merchants was  simplysimply
codified. National codes built on:codified. National codes built on:
 the principles laid down by tradethe principles laid down by trade
commercialcommercial practisepractise
 they embodied Law Merchantthey embodied Law Merchant
99

10. The Development underThe Development under
the Common Lawthe Common Law::
 English Courts appliedEnglish Courts applied  merchantmerchant
customscustoms if:if:
they were consistent with lawthey were consistent with law
were proven before the courtwere proven before the court
 In the US, Law Merchant prevailed inIn the US, Law Merchant prevailed in
general principles & doctrines ofgeneral principles & doctrines of
commercial jourisprudencecommercial jourisprudence..
1010

11. International CommercialInternational Commercial
Law and ArbitrationLaw and Arbitration::
 Law Merchant was reaffirmed in newLaw Merchant was reaffirmed in new
international mercantile lawinternational mercantile law  directeddirected
at market effeciency.at market effeciency.
 Dispute resolutions have evolvedDispute resolutions have evolved
 International commercial arbitrationInternational commercial arbitration
became available.became available.
 The principles of the medieval LawThe principles of the medieval Law
MerchantMerchant  are applied in arbitrationare applied in arbitration
1111

12. Evaluation, Law MerchantEvaluation, Law Merchant
of the Futureof the Future::
 Medieval Law MerchantMedieval Law Merchant  far fromfar from
destroyed.destroyed.
 AA modernmodern variant of the Law Merchant isvariant of the Law Merchant is 
the evolving law and dispute resolution inthe evolving law and dispute resolution in
cyberspacecyberspace..
 Internet traders solve disputes onlineInternet traders solve disputes online
 seldom challenged before traditionalseldom challenged before traditional
courts of law.courts of law.
 Problem of enforceability.Problem of enforceability.
 Merchants are reluctant to surrender theMerchants are reluctant to surrender the
efficiencies of merchant practice to stateefficiencies of merchant practice to state
confinementconfinement 1212

13. Islamic CommercialIslamic Commercial
LawLaw
1313

14. IntroductionIntroduction
 The numerousThe numerous eventsevents of the past few years…attacks on the Twinof the past few years…attacks on the Twin
Towers and London, the invasions of Afghanistan and Iraq.Towers and London, the invasions of Afghanistan and Iraq.
 interest in Islaminterest in Islam, particularly in ‘Islamic revival’. One result is an, particularly in ‘Islamic revival’. One result is an
awareness of the role and importance of law in the life of Muslims.awareness of the role and importance of law in the life of Muslims.
 Islamic lawIslamic law covers all aspectscovers all aspects of human behaviour from political toof human behaviour from political to
sale of real property, from hunting to the etiquette of dining,sale of real property, from hunting to the etiquette of dining,
 It is much wider than the Western understanding of ‘law’, andIt is much wider than the Western understanding of ‘law’, and
governs every detail…including commercial transactions.governs every detail…including commercial transactions.
 There isThere is no Christianno Christian law of contract nor of property, whereaslaw of contract nor of property, whereas
bodies of law dealing with such matters do exist in shari’a.bodies of law dealing with such matters do exist in shari’a.
 it would make no sense to refer to ‘Christian commercial law’, it isit would make no sense to refer to ‘Christian commercial law’, it is
meaningful to speak of ‘Islamic Commercial Law’.meaningful to speak of ‘Islamic Commercial Law’.
 The shari’a… abandoned and substituted by Western law. However,The shari’a… abandoned and substituted by Western law. However,
as a result of theas a result of the Islamic revivalIslamic revival, the possibility of adapting the, the possibility of adapting the
shari’a to the modern world has been considered recently.shari’a to the modern world has been considered recently.
1414

15. The Development of IslamicThe Development of Islamic
Commercial LawCommercial Law::
 Muslim great deal ofMuslim great deal of tradingtrading activity.activity.
 EconomicEconomic environment…industry, manpower, free workers,environment…industry, manpower, free workers,
goods production and export and large quantities of coins.goods production and export and large quantities of coins.
 Developed aDeveloped a systemsystem … served the needs of participants well.… served the needs of participants well.
 The Muslim world wasThe Muslim world was overtakenovertaken by theby the WestWest in technology,in technology,
warfare and commercial techniques.warfare and commercial techniques.
 a long series ofa long series of eventsevents, … conquest of Egypt by the French, … conquest of Egypt by the French
in 1798, the European domination of trade.in 1798, the European domination of trade.
 consequence was a wish toconsequence was a wish to imitateimitate and adopt those ideasand adopt those ideas
and institutions which seemed to have given Europe theand institutions which seemed to have given Europe the
advantage.advantage.
 The imitation movement led to the shari’a being ‘The imitation movement led to the shari’a being ‘abandonedabandoned
with astonishing speed in all areas except family law; shari’awith astonishing speed in all areas except family law; shari’a
commercial law disappeared from almost the entire region.commercial law disappeared from almost the entire region.
1515

16.  commentatorscommentators argue about ‘why reformers looked toargue about ‘why reformers looked to
Europe rather than build on pre-existing shari’aEurope rather than build on pre-existing shari’a
 NapoleonNapoleon brought with him to Egypt the French idea ofbrought with him to Egypt the French idea of
separating commercial and non-commercial law… specialseparating commercial and non-commercial law… special
courts were set up to deal with commercial disputes.courts were set up to deal with commercial disputes.
 The adoption by the Ottoman Empire in 1850 of largeThe adoption by the Ottoman Empire in 1850 of large
parts of the French Commercial Code was made as partparts of the French Commercial Code was made as part
of a long and complexof a long and complex secularisationsecularisation processprocess
 the following factors have played a partthe following factors have played a part::
 1. European dominance of trade;1. European dominance of trade;
 2. The desire of European merchants to avoid2. The desire of European merchants to avoid locallocal
courtscourts and local law;and local law;
 3. The perception that an obligation to use the shari’a3. The perception that an obligation to use the shari’a
disadvantaged local merchants asdisadvantaged local merchants as against their Europeanagainst their European
counterparts, who could use Western lawcounterparts, who could use Western law
1616

17.  4.4. European tradersEuropean traders …using the French Commercial Code…using the French Commercial Code
as a customary law to aid the resolution of theiras a customary law to aid the resolution of their
disputes;disputes;
 5. A familiarity with the idea and practice of secular5. A familiarity with the idea and practice of secular
legislation in certain fields;legislation in certain fields;
 6. The influence of the6. The influence of the Ottoman eliteOttoman elite from trade withfrom trade with
Europe, and the governmental desire to please them;Europe, and the governmental desire to please them;
 7. A perception that commercial matters were of7. A perception that commercial matters were of lessless
religious significancereligious significance … a perception which may have… a perception which may have
been influenced by the Egyptian experience.been influenced by the Egyptian experience.
 what is certain is … major parts of the Frenchwhat is certain is … major parts of the French
Commercial Code 1807 were imported as the OttomanCommercial Code 1807 were imported as the Ottoman
Commercial CodeCommercial Code 18501850..
 SubsequentSubsequent developments in state lawdevelopments in state law followed thefollowed the
pattern of a divide between commercial and non-pattern of a divide between commercial and non-
commercial matters.commercial matters.
1717

18. The Significance of IslamicThe Significance of Islamic
Commercial Law TodayCommercial Law Today
 Few people are interested in the Islamic commercialFew people are interested in the Islamic commercial
lawlaw
 However, theHowever, the Islamic revivalIslamic revival has very significanthas very significant
changes. The most striking manifestation of the newchanges. The most striking manifestation of the new
situation is the growth insituation is the growth in Islamic financeIslamic finance andand
insurance,insurance,
 a growth has accelerated as a result of the steadya growth has accelerated as a result of the steady
and dramatic rise inand dramatic rise in oil and gas pricesoil and gas prices over the lastover the last
decade.decade.
 The subject is also of considerable significance as aThe subject is also of considerable significance as a
result of theresult of the islamisationislamisation of state-based law. Despiteof state-based law. Despite
the fact that only non-commercial law is islamised,the fact that only non-commercial law is islamised,
1818

19.  It is not possible to achieve aIt is not possible to achieve a total isolationtotal isolation ofof
commercial law. e.g., in the UAE, the fundamentalcommercial law. e.g., in the UAE, the fundamental
law is the Civil Code, based on the shari’a. Thelaw is the Civil Code, based on the shari’a. The
Commercial Code is a set of variations from, andCommercial Code is a set of variations from, and
additions to, the Civil Code. So the Commercialadditions to, the Civil Code. So the Commercial
Code is subject to shari’a.Code is subject to shari’a.
 In addition, theIn addition, the Civil CodeCivil Code includes bodies of rulesincludes bodies of rules
relevant to commercial matters, but drawn from therelevant to commercial matters, but drawn from the
shari’ashari’a..
 Examples include the general law of contract, theExamples include the general law of contract, the
law of property, and the law relating to thelaw of property, and the law relating to the
transfer of rights. The commercial aspects of thetransfer of rights. The commercial aspects of the
shari’a cannot, therefore, be ignored.shari’a cannot, therefore, be ignored.
1919

20. Islamic Commercial Law inIslamic Commercial Law in
Modern WorldModern World
 The reasons for theThe reasons for the adoption of Western lawadoption of Western law are notare not
entirely clear. The justification given by the draftingentirely clear. The justification given by the drafting
committee of thecommittee of the MajallaMajalla ((the Ottoman codificationthe Ottoman codification
of the Hanafi schoolof the Hanafi school) for the enactment of the 1850) for the enactment of the 1850
Commercial Code was that only Western law couldCommercial Code was that only Western law could
deal with thedeal with the complexitiescomplexities of modern commerce.of modern commerce.
 This notion dominated thinking until quite recently,This notion dominated thinking until quite recently,
and many lawyers still believe it.and many lawyers still believe it.
 However,However, shari’ashari’a was a legal regime with many of thewas a legal regime with many of the
elements considered essential for the properelements considered essential for the proper
functioning of a commercial law system, i.e.functioning of a commercial law system, i.e.
‘certainty, flexibility and pragmatism’.‘certainty, flexibility and pragmatism’.
2020

21.  shari’ashari’a is more than adequate and have played ais more than adequate and have played a
significant role in the facilitation of commerce, with asignificant role in the facilitation of commerce, with a
sophisticated law of sale, financial instruments,sophisticated law of sale, financial instruments,
different kinds of partnership, and so on.different kinds of partnership, and so on.
 What matters wereWhat matters were customscustoms, where strict rules of the, where strict rules of the
books of fiqh were abandoned ‘inbooks of fiqh were abandoned ‘in favourfavour of theof the
merchants’ customs’,merchants’ customs’,
 a position justified bya position justified by Prophetic TraditionProphetic Tradition::
 ‘‘My community will not agree on an error’.My community will not agree on an error’.
 The possibility of adapting the shari’a to the modernThe possibility of adapting the shari’a to the modern
world was not considered until very recently… as aworld was not considered until very recently… as a
result of theresult of the Islamic revivalIslamic revival, there was a call for a, there was a call for a
return to thereturn to the totality of the shari’atotality of the shari’a, including its, including its
commercial aspects.commercial aspects.
2121

22. Commercial LawCommercial Law
2222

23. Definition of Commercial LawDefinition of Commercial Law::
 Commercial law is vague!Commercial law is vague! Derived from theDerived from the
practices of traders.practices of traders.
 scholars define it as "scholars define it as "body of legal rules that applybody of legal rules that apply
to commerce, commercial transactions, andto commerce, commercial transactions, and
organises merchants' professionorganises merchants' profession."."
 It regulates relations arising from explicitIt regulates relations arising from explicit businessbusiness
actions and behaviour.actions and behaviour.
 Commercial law is the branch of private law, whichCommercial law is the branch of private law, which
applies toapplies to business transactionsbusiness transactions, and to a certain, and to a certain
category of people,category of people, merchantsmerchants..
 Commercial transactionCommercial transaction is the core of the legalis the core of the legal
rules governingrules governing business dealingsbusiness dealings..
 The most common types of commercialThe most common types of commercial
transactions istransactions is salesale of goods.of goods.
 All commercial transactions have one thing inAll commercial transactions have one thing in
common: they serve to transmitcommon: they serve to transmit economic valueseconomic values..
2323

24.  Commercial law haveCommercial law have evolved from private lawevolved from private law
 General principles of private law were the essenceGeneral principles of private law were the essence
of the general principles of the transactions ofof the general principles of the transactions of
individuals.individuals.
 This is due to:This is due to:
 the quality of activities orthe quality of activities or
 the privacy of the profession andthe privacy of the profession and
 the swift transaction between traders and hastethe swift transaction between traders and haste
process of business and commerce.process of business and commerce.
 It is often considered to be aIt is often considered to be a branch of civil lawbranch of civil law..
 Many countries have adopted civil codes whichMany countries have adopted civil codes which
contain comprehensive statements of theircontain comprehensive statements of their
commercial law.commercial law.
 Accordingly,Accordingly, commercial law (business law) iscommercial law (business law) is “the“the
body of law which governsbody of law which governs businessbusiness,, commercecommerce andand
consumer transactionsconsumer transactions.”.”
2424

25. BusinessBusiness
 BusinessBusiness: in economics, is a legally recognised: in economics, is a legally recognised
organisationalorganisational entity (also refered as a firm)entity (also refered as a firm)
 designed to selldesigned to sell goodsgoods and/orand/or servicesservices toto
consumers or other businessesconsumers or other businesses in an effort toin an effort to
generategenerate profitprofit..
 InIn capitalistcapitalist economies (most businesses areeconomies (most businesses are
privately owned) businesses are formed to earnprivately owned) businesses are formed to earn
profit and grow personal wealth of their owners.profit and grow personal wealth of their owners.
 The owners of a business aim to generate aThe owners of a business aim to generate a
financial return in exchange for their work andfinancial return in exchange for their work and
their acceptance of risk.their acceptance of risk.
 Exceptions to this rule include cooperativeExceptions to this rule include cooperative
businesses and government institutions.businesses and government institutions.
 SocialisticSocialistic systems, involves either government,systems, involves either government,
public, or worker ownership of mostpublic, or worker ownership of most sizablesizable
businesses.businesses.
2525

26.  TheThe etymologyetymology of "business" relates to the state ofof "business" relates to the state of
being busy either as an individual or societybeing busy either as an individual or society  
doing commercially viable and profitable work.doing commercially viable and profitable work.
 The term "business" has at leastThe term "business" has at least three usagesthree usages::
1.1. the singular usage (above) to mean a particularthe singular usage (above) to mean a particular
company or corporationcompany or corporation
2.2. the generalised usage to refer to a particularthe generalised usage to refer to a particular
market sector, ormarket sector, or
3.3. the broadest meaning to include all activities bythe broadest meaning to include all activities by
the community of suppliers of goods & services.the community of suppliers of goods & services.
 However, the exact definition of business is aHowever, the exact definition of business is a
matter of debate.matter of debate.
2626

27. CommerceCommerce
 CommerceCommerce: is a: is a divisiondivision of trade orof trade or
production which deals with theproduction which deals with the
exchangeexchange of goods and services fromof goods and services from
producer to final consumer.producer to final consumer.
 It comprises theIt comprises the tradingtrading of something ofof something of
economic valueeconomic value such as goods, services,such as goods, services,
information or money between two orinformation or money between two or
more entities.more entities.
 CommercialisationCommercialisation consists of theconsists of the
processprocess of transforming something into aof transforming something into a
product, service or activity which oneproduct, service or activity which one
may then use in commerce.may then use in commerce.
2727

28. Modern Concept ofModern Concept of
Commercial LawCommercial Law
 Modern trends in commercial lawModern trends in commercial law  reconsiderreconsider
thethe provisionsprovisions of commercial law.of commercial law.
 Commercial law is the law ofCommercial law is the law of economiceconomic oror
business. This concept, wouldbusiness. This concept, would    cover allcover all
topics involve economic activities undertopics involve economic activities under
commercial lawcommercial law
 Rules of commercial lawRules of commercial law  constant evolutionconstant evolution
changing rapidlyrapidly
 Progress in the field of industry, tradeProgress in the field of industry, trade  newnew
products, markets, toolsproducts, markets, tools  new legalnew legal
versionsversions
 Commercial law evolves more rapidly than anyCommercial law evolves more rapidly than any
other branches of lawother branches of law
2828

29.  New contractsNew contracts: in France in recent years: in France in recent years 
sales through agencysales through agency
 Cars' factory with a distributor in an areaCars' factory with a distributor in an area
 The owner of an oil company with theThe owner of an oil company with the
distributors in petrol stationsdistributors in petrol stations
 Working in mines (coal, iron and oil) isWorking in mines (coal, iron and oil) is
considered business activitiesconsidered business activities
 The concept ofThe concept of economiceconomic process is moreprocess is more
important hereimportant here
 In this context, the rules of commercial lawIn this context, the rules of commercial law
werewere developed fromdeveloped from activities fromactivities from civil lawcivil law..
2929

30. The Distinction betweenThe Distinction between
Commercial and Civil ActsCommercial and Civil Acts::
 TheThe provisionsprovisions of commercial lawof commercial law 
business and commercebusiness and commerce
 Most contracts in the commercial lawMost contracts in the commercial law
were quoted from civilian lifewere quoted from civilian life  andand
have created special provisionshave created special provisions
such as commercial contracts,such as commercial contracts,
commercial papers, and bankruptcy.commercial papers, and bankruptcy.
 Scholars recognise thatScholars recognise that speedspeed andand trusttrust
in conducting business activitiesin conducting business activities 
important in commerceimportant in commerce  recognised inrecognised in
commercial law.commercial law.
3030

31.  SpeedSpeed is a fundamental elementis a fundamental element  hashas
an impact on the legal systeman impact on the legal system 
“freedom of proof”“freedom of proof”
 TrustTrust: business requires large numbers of: business requires large numbers of
transactionstransactions  entail trustentail trust
 thus commercial law strengthen thethus commercial law strengthen the
credit/trust by:credit/trust by:
increasing creditors' guaranteesincreasing creditors' guarantees
imposing harsh sanctions on theimposing harsh sanctions on the
failing debtors.failing debtors.
3131

32. Characteristics ofCharacteristics of
Commercial LawCommercial Law
The Features of commercial law are related toThe Features of commercial law are related to
the business environment.the business environment.
Providing legal toolsProviding legal tools  enable traders toenable traders to
conduct transactions smoothlyconduct transactions smoothly  simplersimpler
than the civil lawthan the civil law
 First:First: Making ProfitMaking Profit: result is established: result is established
(purpose of commerce)(purpose of commerce)  actorsactors ofof
commercial law are individuals, companiescommercial law are individuals, companies
and businesses, have the ability to achieveand businesses, have the ability to achieve
that objective (making profit) throughthat objective (making profit) through
transactionstransactions
3232

33.  Second:Second: Speed Business TransactionsSpeed Business Transactions: (Time: (Time
has great values in business transactions)has great values in business transactions)
 In the past, merchants used oral transactionsIn the past, merchants used oral transactions
 Today through rapid electronic processesToday through rapid electronic processes
 Hence, a need for rulesHence, a need for rules  accustomed toaccustomed to
the speedthe speed
 justified by the principles of freedom ofjustified by the principles of freedom of proofproof
and the possibility ofand the possibility of transmittingtransmitting
commercial rightscommercial rights
 Third:Third: Strengthening Credit/TrustStrengthening Credit/Trust::
 In commercial transactionsIn commercial transactions  deadlinesdeadlines oror
pledge to pay debts based on a combinationpledge to pay debts based on a combination
of time and moneyof time and money  will bear the riskwill bear the risk
 legallegal rulesrules to protect commercial playersto protect commercial players 
to strengthen the system of interest onto strengthen the system of interest on
commercial debtcommercial debt 3333

34.  Fourth:Fourth: Openness/Publicity of CommercialOpenness/Publicity of Commercial
ActivitiesActivities::
 Commercial activities must be exposedCommercial activities must be exposed
 merchantsmerchants  register at the chamber ofregister at the chamber of
commercecommerce
 publishing sentences of bankruptcypublishing sentences of bankruptcy
 in order for the law to protect othersin order for the law to protect others
 Fifth:Fifth: Goodwill and Integrity of BusinessGoodwill and Integrity of Business::
 in contracts, negotiating them, conclusion,in contracts, negotiating them, conclusion,
and implementationand implementation
 DealsDeals are carried out mostly orallyare carried out mostly orally  nono
proof or witnessesproof or witnesses
 It is based on the presumption of merchants'It is based on the presumption of merchants'
confidenceconfidence
3434