Commercial Law or Business Law :

Commercial law or Mercantile law or Business law is a body of rules relating to trade and
commerce and also to the matters relating to industry. That is, commercial law is a body of rules
that are applied in the conduct and control of the various transactions relating to industry, trade
and commerce. Again the law that is applicable in the commercial suits is also called
Commercial, Mercantile or Business law. Commercial suits are those suits which exist between
merchants, bankers and traders and relate to mercantile or commercial transactions. The scope
of commercial law is very wide because it includes laws relating to contract, sale of goods,
partnership, company, carriage of goods, negotiable instruments, insurance, banking, etc.

Sources of Commercial Law in Bangladesh :

The following are the sources of commercial law in our country:
1. Parliamentary Laws : These are the laws that are passed by the parliament on the basis of
the English law. Examples are - contract law, law relating to sale of goods, partnership law,
company law. etc.
2. English Common Law : In the cases where there is no reference of the English Law, the
courts in Bangladesh take the help of English Law.
3. Customs and Usages : Local customs and usages of ancient origin and which are not
opposed to any statutory rule are recognized by the courts and are used in commercial
transactions. Examples are, Laws relating to hundies, etc.
4. Equity : Where it is not possible to try cases by laws, the judges, in that case, can try- cases.
by applying rules of equity and can incorporate these rules into law through judicial decisions.

What is contract?
An agreement enforceable by law is a contract. Therefore in a contract there must be –
1. an agreement.
2. the agreement must be enforceable by law.
There some agreements like an agreement to play cards or to go to a cinema, which cannot be
enforced through the courts of law, are not contract. So an agreement, which can be enforced
through the courts of law, is called a contract.
What are the elements of a contract?
An agreement becomes enforceable by law when it fulfills certain conditions. These conditions,
which may be called the essential elements of a contract, are explained hereunder:
1. Offer and acceptance.
2. Intention to create legal relationship.
3. Lawful consideration.
4. Capacity of the parties.
5. Free consent.
6. Legality of the object.
7. Certainty.
8. Possibility of performance.
9. Void agreement.
10. Writing, registration and legal formalities.

Essentials of a contract; All contracts are agreements, but all

agreements are not contracts :

There cannot be a contract excepting mutual assent to the terms. In order to make an
agreement a valid contract certain important elements or conditions must be fulfilled. These
essentials are discussed as under:

(1) Proposal and Acceptance. Among the two parties of an agreement one party has to make a
lawful proposal and the other party must have to accept the proposal lawfully. The word 'lawful'
implies that proposal and acceptance must be done in accordance with the rules laid down in
the Contract Act as adopted in Bangladesh.

(2) Legal Relationship. The parties in a contract must have intention for establishing lawful
relationship among them. For example, an agreement for taking a dinner at friends house is
not an agreement intended to establish lawful relationship and as such it is not a contract. But
an agreement for buying and selling goods Is an agreement to create a legal relationship and,
therefore, it Is a contract.

(3) Lawful consideration. Consideration means some right, interest, profit, or benefit accruing to
one party, or some forbearance, detriment, loss, or responsibility given, "suffered, or so, or
undertaken by the other'. Again something given or obtained is called consideration. A
consideration may be past, present or future. It may be valid when it is lawful.

(4) Lawful object. An indispensable element of contract is that the object of an agreement must
always be lawful and can not be Immortal or opposed to public policy.
(5) Capacity to contract. It is necessary that persons entering into agreement must be lawfully
capable of entering into the contract failing which the agreement cannot be enforceable by law
persons suffering from minority, drunkenness, idiocy, lunacy or insanity, etc. cannot be parties
to the agreement and therefore they cannot perform a contract. If they do so, the contract will
not be lawfully acceptable.

(6) Free consent. When an agreement is consented by all the parties to the agreement, it Is
then enforced by law. Agreement persuaded by coersion, undue influence, fraud, etc. does not
become enforceable by law.

(7) Certainty. The agreement must be unambiguous so that its meaning can be certain and
ascertainable. A vague agreement cannot be enforceable by law.

(8) Possibility of performance. It is necessary that agreement shall have to be performable. Any
agreement that is impossible to be performed, cannot be enforced by law.

(9) Written and Registered. There may be oral, written or registered agreements. An oral
agreement can be lawfully acceptable, if in the law there is no provision that it must be written
or registered. But if It Is required by law that agreement must be written or registered, In that
case an agreement not being written or registered' cannot be enforceable by law. Example,
agreement concerning sale of immovable property.
In conclusion, it is found that an agreement, in which al the essential elements discussed above
are not present cannot be enforceable by law and as such the agreement cannot be acceptable
as a contract. It can, therefore, be said that "All contracts are agreements, but all agreements
are not contracts".

Offer : (Definition) :
An offer requires the necessity of making a "proposal". According to the contract Act, a proposal
is defined as follows, "When a person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining the assert of that other to such an act or
abstinence, he is said to make a proposal, Section 2(a). Virtually there is no distinction between
an offer and a proposal. A proposal is also called an offer.
When the person to whom the proposal is made Indicates his consent or concurrence to the
proposal, it is said to be accepted. When the proposal is accepted, it then becomes a promise,
Section 2(b).
The person making the proposal is called the "promisor" and the person who accepts it
(proposal) is called the promisee, Section 2(c).
To be effective, offer and acceptance together shall have to be considered because separately
they are not active and cannot lead to the formation of a contract.
Rules regarding offer :

The Contract Act contains various rules regarding offer or proposal. They can be summed up as
follows:
1. An offer may be express or Implied from the circumstances, when an offer is made in
words, spoken or written, it is called an Express offer. But when an offer is implied from the
conduct of a person, it is called Implied offer. In so far as the proposal or acceptance of any
promise is made in words, the promise is said to be express. In so far as such proposal or
acceptance is made otherwise than in words, the promise is said to be implied promise,
Section9.
2. An offer may be constructed to a definite person or to some certain class of person or
to all people. An offer made to a definite individual or to a class of individuals, it is called
specific offer, but when it is made to all the people (or the world at large) , it is called general
offer.
3. Legal relationship is required. The offer must be one which is capable of creating a legal
relationship. A social party or an invitation to play cards is not a legal relationship. Therefore, an
offer to such an affair does not lead to a binding contract.
4.. The terms of the offer must be certain, definite, not ambiguous and not vague. X says
to Y, "I will give some money if you marry Z". This is not an offer which can be accepted
because the amount of money to be paid is not certain.
5. A mere declaration of intention or statement is not an offer. Because mere expression of
intention and also an invitation for an offer cannot be considered as an offer. For example an
advertisement for a tender, vacancy price-lists, etc. cannot be considered as an offer.
6. An Offer may be conditional. An offer may be subject to conditions. In such cases, the
conditions of an offer must be clearly communicated to the offeree. In case a person accepts an
offer without clear knowledge about the conditions, then the person making the offer (that is,
offeror) cannot demand for the accomplishment of the conditions of the offer.
7. An offer must be communicated to the offeree, The offer must be communicated to the
person (offeree) for whom it is Intended, Because if the offeree does not know about the
existence of the offer, he cannot accept the offer and as such the offer cannot be considered as
an offer. Therefore an offer must be communicated to the offeree, otherwise It will not become
complete. Moreover in the absence of such communication, the offer is of no effect so far as the
offeree is concerned.
Example, If prize is declared through an advertisement for the receipt of lost articles, the person
who , does not know about this announcement, therefore, cannot claim the prize.
Acceptance : Definition :
Section 2(b) of the contract Act defines Acceptance as follows, "When the person to whom the
proposal is made signifies his assent to the proposal is said to be accepted."

Rules concerning acceptance :

The following rules shall have to be satisfied in the acceptance of an offer, In order to make the
acceptance legally effective or enforceable.

(1) According to section 7(1) of the contract Act, an acceptance must always be unqualified and
absolute. Acceptance to all the conditions given in an offer, is considered as an acceptance. But
an acceptance with a little modification of the conditions prescribed In an offer, is not considered
as an acceptance: It then simply becomes a counter, offer or proposal. Example, an offer to sell
a machine for 1000/- taka will not be considered as accepted if the offeree agrees to buy it for
700/- taka.

(2) It is essential that an acceptance must be in usual and reasonable manner. That is, if there
is no indication of special manner of giving acceptance to an offer, in that case acceptance can
be given in the usual or reasonable manner. Section. 7(2). In the usual manner acceptance may
be given-by word of mouth, telephone, or by post.
Acceptance to an offer can be given by conduct also. According to section 8 of the contract Act,
performance of conditions of a proposal or the acceptance of any consideration for a reciprocal
promise which may be offered with a proposal its an acceptance of the proposal.

(3) Acceptance must be made in the manner as indicated by the offer. If the offerer indicates in
his offer that the offeree must accept it by making telegram. In this case, the acceptance by the
offeree must have to be done by making telegram to the offerer, otherwise, the acceptance in
any other manner will not be accepted by law.

(4) It is essential that acceptance of an offer must be made within the time prescribed by the
offerer in his offer. Acceptance beyond the prescribed time will not be accepted. In the absence
of mention of time in the offer, the acceptance shall have to be given In the reasonable time.
(5) Mental acceptance or uncommunicated assent will not be legally accepted. If some one gets
agreed to an offer but he keeps it into his mind and does not communicate to the offerer, in that
case the acceptance will not be accepted. It is therefore, essential that the news of acceptance
must be communicated to the offerer.
(6) If the communication of an acceptance of an offer is not complete, the acceptance cannot be
legally accepted. In the case of an offerer, the communication of acceptance is complete when it
is put in a course of transmission to him and in the case of an accepter the communication of an
acceptance will be complete when it is brought to the knowledge of the proposer. Thus a mere
mental acceptance not evidenced by words or conduct is in the eye of law no acceptance.
Consideration : Definition :
In English law consideration has been defined as "Some right, interest, profit, or benefit
accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered,
or undertaken by the other". In the contract Act consideration has been defined as "when at the
desire of the promisor, the promisee or any other person has done or abstained from doing,
does or abstains from doing, or promises to do or to abstain from doing something, such act or
abstinence or promise is called a consideration for the promise. Section 2 (d).
•Example :
Hossain agrees to sell his car for 5,00,000/- taka to Hassan, For Hossain's promise, the
consideration is 5,00,000/- taka. For Hassan's promise, the consideration Is the car only.

Classification of consideration :
It may be classified into the following types,
(1) Past : A past consideration is one when the consideration was given before the date of the
promise.
(2) Present : When consideration goes along with the promise, this is called present
consideration. This is also called executed consideration. Example, Rahim purchases a 'watch
from a shop and pays the price immediately. The consideration, therefore, moving from 'Rahim'
it a present or executed consideration.
(3) Future : Future consideration is one when consideration moves at a future date, This is also
called executory consideration. Example, A agrees to sell his house to B. B's consideration here
is executory if he is to pay the money at a future date.

Rules (or Essential Factors) of consideration :

Following are the rules for consideration:
(1) It is necessary that consideration should be according to the desire of the promiser. No
one should do or not do an act according to his own wishes or according to the wishes of other
person. If some one does so, It will not be treated as a consideration. An act done without the
desire of consideration will be voluntary act and as such will not be within the definition of
consideration.
Example - Karim's house caught fire. Rahim saw It and helped to put out the fire. Karim did not
request for Rahim's help. As such Rahim cannot claim for payment for his job.
(2) According to the Contract Act promisee or any other person can give consideration. But
there is no mention in the Act about giving consideration to the promisee.
(3) Consideration must be real. Consideration must have some value in the eye of law. It
cannot be false, uncertain, impossible or fictitious.
Example-Hassan promises to give Hossain 500/- taka on condition that there will be no
consideration for that. This is not a real contract and as such no consideration.

(4) Consideration need not be adequate, It is not possible for the court to decide the
adequacy of the consideration. The parties to the contract will decide the amount of
consideration. The court will only enforce an agreement, if consent was freely given to the
agreement. Section 25, explanation 2 of the contract Act lays down that, "An agreement to
which the consent of the party is freely given is not void merely because the consideration Is
inadequate; but inadequacy of the consideration may be taken into by the court in determining
the questions whether the consent of the promiser was freely given."

(5) Consideration must be legal and not immoral or opposed to public policy, If the object
or consideration of an agreement is illegal, it cannot be enforceable by law. If the consideration
is illegal, immoral or opposed to public policy, in that case no contract based on that will be
enforceable by law.

(6) Consideration may be past, present or future, According to the definition of consideration
given in the contract Act for any act or abstinence of the past, present or future, promise is
treated as consideration.

Exceptions to the Rules of consideration,

A contract must be established on consideration for its validity. But there are exceptions to this.
The exceptions are discussed below:
(1) An agreement made without consideration is treated as valid if it is in writing and registered
and if it is made for natural and affection. Section 25 (1)
(2) A promise made without consideration is treated as valid, if it Is a promise to compensate
wholly or in part, a person voluntarily doing something for the promisor. Section 25(7).
(3) A promise to pay a time, barred debt under law of limitation can be enforced. The condition
being that the promise has to be signed by the debtor and is in writing. Section 25(3).
Definitions of Agreements :

(1) Voidable agreement : According to section 2(1) of the contract Act, "An agreement which is
not enforceable by law at the option of one or more of the parties thereto, but not at the option of
the other or others, is voidable agreement."

(2) Void agreement : "An agreement not enforceable by law is said to be void"., Section 2(g). A
void agreement has no lawful effect and it does not confer any right to the parties to it.
Example, An agreement entered into by minor, agreement made without consideration,
agreement made against public policy. etc.

(3) Unenforceable agreement : Agreements which cannot be enforceable in a court of law

because of technical defects are called unenforceable agreements. Examples, Agreements
made without registration or non-payment of necessary stamp duty.

(4) Illegal Agreement : Agreements made against the law In force In Bangladesh, are called
illegal agreements.
Example, An agreement made for performing a murder or robbery, is an Illegal agreement.
(5) Valid contract : An agreement that fulfils the essential elements of a contract and becomes
lawfully enforceable, is called a valid contract. Parties to a valid contract violating obligation
become subject to legal actions.

Void Agreements :
Under section 2(g) of the Bangladesh Contract Act it has been stated that the agreements which
cannot be enforced by law will be declared as void. Some-ones In here think that void
agreements are void contracts. But the fact that the question of void contract cannot arise if the
agreement is voidable initlo. In the contract Act the undermentioned agreements are declared
as void and the contracts established on such agreements will also be treated as void :
(1) Agreements made by mistake.
(2) Agreements with illegal objects and considerations.
(3) Agreements without competency to contract.
(4) Agreements in restraint of marriage.
(5) Agreements in restraint of Trade.
According to section 27 of the contract Act "Every agreement by which anyone is restrained
from exercising a law profession trade or business of any kind is to that extent void."
Liabilities of Partners :

Liabilities of partners may be described in the following categories,

(1) Liability of a partner for Acts of the Firm, "Every partner is liable, jointly with all the other
partners and also severally for all acts of the firm done while he is a partner." Section 25.
It Is found that the liability of a partner is unlimited for the acts of the firm. The third party, if he
so wishes, may realize all his money due to him from any one partner. The partner in this case
may realize from the other partners after deducting his own share according to lawful
proportions (rates). The debt can also be realized according to the rates based on the terms of
the contract. The third parties shall have the same right against all the sleeping or dormant
partners. The dormant partners also are liable to an unlimited extent for all debts of the firm.

(2) Liability of the firm for wrongful acts of a partner, Where, by the wrongful act or omission of
a partner acting in the ordinary course of the business of the firm, or with the authority of his
partners, loss or injury is caused to any third party, or any penalty Is incurred the firm is liable to
the same extent as the partner. Section 26.

(3) Liability of firm for misapplication by partners, Where a partner acting within his apparent
authority receives money or property from a third party and misapplies it' or a firm in the course
of Its business receives money or property from a third party, and the money or property is mis-
applied by any of the partners while it is in the custody of the firm, the firm is liable to make good
the loss. Section 27.

Doctrine of Caveat Emptor :

The general custom of business is that the seller is not bound to disclose to the buyer the fact
that the goods are defective. It is the duty of the buyer to buy the goods after satisfying himself
of their quality and fitness. The buyer should do this for his own interest. It is because in the
case of buying and selling of general nature the buyer cannot return the goods even if defects
are detected in the goods after their sale. The buyer cannot even claim compensation from the
seller. For these reasons the buyer must always buy goods cautiously. This is called the
doctrine of Caveat Emptor. The term 'Caveat Emptor' is a Latin expression meaning
"buyers beware". Probably in ancient times the rule originated when goods were mostly sold in
open market and the buyer had every opportunity to examine by himself about the quality of the
goods and their fitness. But presently the processes of buying and selling became complicated
and as a result some exceptions to the rule are noticed. In Bangladesh under section 16 of the
sale of goods Act, the rules of the principle (Caveat Emptor) have been laid down. Where the
buyer is purchasing goods by applying his skill and judgement, only In such cases. Caveat
Emptor principle will be applicable. It has been stated in the exceptions as laid down under
section 16 that only in the following cases the Caveat Emptor Principle will not be applicable.
That is, in the following cases implied condition will prevail as to the quality and fitness of the
goods :
(1) Where the buyer of other goods except patents relied, on the seller's judgment and has
intimated the seller about the object of the goods.
(2) Where according to the prevailing custom of business an implied condition as to the quality
or fitness of goods is annexed.
(3) Where the goods are purchased by description and the seller deals in such goods.
(4) Where the seller sells goods by fraud or misrepresentation.