Introduction

Sales Law. The law relating to the transfer of ownership of property from one person to another for value,
which is codified in Article 2 of the Uniform Commercial Code (UCC), a body of law governing mercantile
transactions adopted in whole or in part by the states

In ancient India, all sections of society followed Dharma-sastras2 (“Dharma”), which laid out social rules
and norms, and served as the guiding principle governing human relations. The principles of Dharma
were derived from Vedas.3 Vedas were considered the words of God, and law was said to have divine
origin which was transmitted to society through sages.4 Thus, Vedas were the primary sources of law in
India.5 C Journal of Texas Consumer Law 133 Many writers and commentators of the ancient period
documented the living conditions of the people through their innovative and divine writings, including
Smriti (tradition)6 and sruti (revelation),7 and also prescribed codes to guide the kings and rulers about
the method of ruling the State and its subjects. Consumer protection was also a major concern in their
writings. Among the Dharmas, the most authoritative texts are a) the Manu Smriti (800 B.C. to 600 B.C.);
b) the Yajnavalkya Smriti (300 B.C. to 100 B.C); c) the Narada Smriti (100 A.D to 200 A.D.); d) the
Bruhaspati Smriti (200A.D. to 400 A.D.); and e) the Katyayana Smriti (300 A.D. to 600 A.D). 8 Among
these, Manu Smriti9 was the most influential.

Manu Smriti

Manu Smriti describes the social, political and economic conditions of ancient society. Manu, the
ancient law giver, also wrote about ethical trade practices.10 He prescribed a code of conduct to traders
and specified punishments to those who committed certain crimes against buyers. For example, he
referred to the problem of adulteration and said “one commodity mixed with another must not be sold
(as pure), nor a bad one (as good) not less (than the property quantity or weight) nor anything that is at
hand or that is concealed.”11 The punishment “for adulterating unadulterated commodities and for
breaking gems or for improperly boring (them)” was the least harsh.12 Severe punishment was
prescribed for fraud in selling seed corn: “he who sells (for seed-corn that which is) not seed-corn, he
who takes up seed (already sown) and he who destroys a boundary (mark) shall be punished by
mutilation.”13 Interestingly, Manu also specified the rules of competency for parties to enter into a
contract. He said “a contract made by a person intoxicated or insane or grievously disordered (by
disease and so forth) or wholly dependent, by an infant or very aged man, or by an unauthorized (party)
is invalid.”14 During the ancient period, the king had the power to confiscate the entire property of a
trader in two instances: (1) when the king had a monopoly over the exported goods; and (2) when the
export of the goods was forbidden.15 There was also a mechanism to control prices and punish
wrongdoers. The king fixed the rates for the purchase and sale of all marketable goods.16 Manu said
“man who behaves dishonestly to honest customers or cheats in his prices shall be fined in the first or in
the middle most amercement.”17 There was a process to inspect all weights and measures every six
months, and the results of these inspections were duly noted. All these All these measures show how
effective ancient society was in regulating the many wrongs of the market place. These measures also
show how developed the system was in identifying the market strategies of traders. Thus, Manu Smriti
effectively dealt with various consumer matters, many of which remain of great concern in modern legal
system

Kautilya’s Arthasastra Written subsequent to Manu Smriti, Kautilya’s Arthasastra18 is considered to be a

treatise and a prominent source, describing various theories of statecraft and the rights and duties of
subjects in ancient society. Though its primary concern is with matters of practical
administration,consumer protection occupies a prominent place in Arthasastra. It describes the role of
the State in regulating trade and its duty to prevent crimes against consumers. Between 400 and 300
B.C., there was a director of trade whose primary responsibility was to monitor the market situations.
Additionally, the director of trade was made responsible for fair trade practices. The director of trade
was required to be “conversant with the differences in the prices of commodities of high value and of
low value and the popularity or unpopularity of goods of various kinds whether produced on land or in
water [and] whether they . . . arrived along land-routes or water-routes, [and] also [should know about]
suitable times for resorting to dispersal or concentration, purchase or sale.”21 The director of trade
advised to “Avoid even a big profit that would be injurious to the subjects. . . . He should not create a
restriction as to time or the evil of a glut in the market in the case of commodities constantly in
demand.”22 During this period, several measures were taken to maintain official standards of weights
and measures. Kautilya observed, “the superintendent of standardization should cause factories to be
established for the manufacture of standard weights and measures.”23 He further said “[the
superintendent] should cause a stamping [of the weights and measures] to be made every four months.
The penalty for unstamped [weights] is twenty seven panas and a quarter. [Traders] shall pay a stamping
fee amounting to one kakani every day to the superintendent of standardization.”24 According to
Kautilya, ‘the trade guilds were prohibited from taking recourse to black marketing and unfair trade
practice.”25 Severe punishments were prescribed for different types of cheating. For example, “for
cheating with false cowrieshells, dice, leather straps, ivory-cubes or by sleight of hand, [the punishment
shall be] cutting-off of one hand or a fine.”26 The rights of the traders were also well protected. Kautilya
said, “On the subject of the return of an article purchased or payment of price thereof, there was fixed
rule of time, after which an article could not be returned.”27 During Chandragupta’s period,28 in which
Kautilya lived, good trade practices were prevalent. For example, “Goods could not be sold at the place
of their origin, field or factory. They were to be carried to the appointed markets (panya sala) where the
dealer had to declare particulars as to the quantity, quality and the prices of his goods which were
examined and registered in the books.”29 Every trader was required to take a license to sell. A trader
from outside had to obtain permission. The superintendent of commerce fixed the whole-sale prices of
goods as they entered the Customs House. He allowed a margin of profit to fix retail prices. Speculation
and cornering to influence prices were prohibited. Thus, the State bore a heavy responsibility for
protecting the public against unfair prices and fraudulent transactions. There were severe punishments
for smuggling and adulteration of goods. For example, public health was guarded by punishing
adulteration of food products of all kinds, including grains, oils, alkalies, salts, scents and medicines.30
Also during Chandragupta’s period, easy access to justice for all, including consumers, was considered of
great importance. The king was the central power to render justice. According to Kautilya, “The king
should look to the complaints of the people [of the town and village] in the second part of the day. The
mobile and circuit courts worked at night, when necessity arose. They also must have worked on
holidays in urgent matters.”31 The king was required to pay full attention to the truth32 and he was
primarily responsible for administering justice. Everyone could approach the king’s court for justice.
However, standing was strictly followed. The king only entertained cases if the aggrieved presented a
valid complaint. The king was directe not to Between 400 and 300 B.C., there was a director of trade
whose primary responsibility was to monitor the market situations. 134 Journal of Texas Consumer Law
“foster litigation by starting an action without a complainant, and moreover, [the king was told that] no
complaint should be taken notice of when it proceeded from a person altogether unconnected with the
person aggrieved.”33 In addition to this, different set of courts were prevalent in ancient India. The
court system during Kautilya’s time was well organized. There were two different benches comprising
judges and magistrates to try civil and criminal cases. In civil matters, the judges themselves were
empowered to take cognizance of the cases of disadvantaged persons who could not approach the
court, for example, the cases concerning ascetics, women, and minors, old, sick and helpless people.34
Thus, rendering justice was regarded as one of the essential duties of the rulers, and care was taken to
ensure that justice was accessible to all. Indeed, this emphasis on justice for all remains a cornerstone of
India’s legal system.

YAJNAVALKYA DHARMASHAS POINTS ON TRADES

DOCUMENTS

Lekhyaprakaranam – Documents

Overview
The last prakarana is about written documents called लेख्य prakarana. All the transactions of the
king whether general or special, should have proper written documentation. The record has to be
written in the presence of a witness. The important aspects to be captured mandatorily in the
document are the year, the month, the thithi, the nakshatra, the day of the week, (i.e., panchaanga
which indicates the first aspects namely vaara, tithi, nakshatra, yoga, and karana, along with
samvatsara and sthaana) the place, and the day of the transaction and the personal details about
the borrower and the lender like the gotra, nakshatra, age, etc.

The document should not be spoiled by oil or turmeric. भिन्ने दग्धेऽथवा भिन्ने लेख्यं अन्यत्तु कारयेत्
॥२.९१॥ If it is torn or damaged or burnt, a new one has to be prepared in the presence of some
respectable witness. Both the parties should understand and sign it and both parties should have
the witness.

Yajnavalkya concludes his work saying that the king should resolve all the cases without
deviating from the dharmic principles. The verdict should be based on the code of conduct or the
injunctions of dharma.

[Side note: During Srinivasa Kalyana, when Kubera comes to collect his loan, he mentions that
the first witness was the Ashwatta Vruksha a
Important Points in लेख्य

 2 kinds shaasana [royal grant] and janapada [executed among citizens].

 Janapada is of 2 kinds, one written in one’s own handwriting and the other is written by
someone else.
 The second category of Janapada written by another person requires attestation.
 Monetary transaction agreed by mutual consent should be documented in a contract.
 The name of creditor, year, month, fortnight, day, etc, must be mentioned.
 The debtor shall sign at the bottom saying that he has agreed to the contract.
 Equal number of witnesses for both creditor and debtor shall witness it.
 If the document is written by the debtor then witness is optional.
 Debt repayable only till 3 generations.
 Pledge can be enjoyed by the creditor as long as it has not been paid off [even 4th or 5th gen]
 Debtor shall note down all the instalments that have been repaid on the backside of the
contract and it must be signed by the creditor. At the end of the contract a fresh document
may be prepared stating the expiry of the contract.
 The same witnesses should be present at the time of redemption


Rnaadanaprakaranam: Recovery of debts

Overview
ऋणादानप्रकरण is related to loans. When the loan is given for a specific interest, if the loan has
not been returned on time, if the interest has not been paid on time, etc., the necessary actions to
be taken are dealt in this prakarana.

The interest will vary from least to highest increasing in this order – Brahmana, Kshatriya,
Vaishya, Sudhra – वणणक्रम | Brahmana should give 2%. Kshatriya and Vaishya should give 3%
and 4% respectively. Rest will give 5%. If a person resides in forest and those who have risky
profession like wrestlers and those who do not have a permanent residence, then the interest will
be 10% due to the insecurity. If the person moves around in the sea, then the interest increases
further to 20%. सवे सवाण सु जाभतषु ॥ २.३८ ॥ The transactions are to be held as per the agreements
irrespective of the class whether the loan to the person is secure or not. Depending on the
pledged item, the interest will be 8 times for decayable material like the fluids (oil) and 4, 3 and
2 times for cloth, grains and gold respectively.

If the person is not able to repay, the sons and the relatives will have to repay. If any woman had
taken the loan, then the husband will have to repay. The son need not repay if the father’s loan
was taken for the purposes of his enjoyment – alcohol consumption, lust or gambling

Important Points in Rnaadaana

 Total 7 points. First 5 relating to the debtor [one who has taken the money]. Last 2 related to
creditor [lender].
 Debtor: kind of debt to be paid, kind of debt not to be paid, by whom to be paid, at what
particular time and in what way it is to be paid. [what, what not, whom, when and how]
 Creditor: mode of advancing a loan and mode of recovery.
 Interest against pledge 1/80th part of principal for a month.
 If moving through forests then 10%; If travelling overseas then 20% interest because of high risk.
 All debtors to pay agreed interest irrespective of the class.
 Four kinds of interests are mentioned in Naarada Smruti. Kaalika [monthly], Kaarita [fixed
according to an agreement], Kaayika [manual labour-slavery] and Chakravrddhi [compound
interest]
 In case of pledge of female animals, the progeny [santati] is the interest. The creditor enjoys the
milk and labor of the female animal in that period.
 Maximum interest is 8 times in case of fluids, 4 times for cloth, 3 times for grains and 2 times for
gold.
 5 methods for loan recovery are there according to Manu namely 1. Moral persuasion [dharma] 2.
Suit of law [vyvahara] 3. Deceit [chala] 4. Starvation [Acharitam- sitting in front of debtor’s
house in protest] 5. Force [bala]
 If the loan was taken for maintaining the family then the head of the family should repay. In case
of his absence [death, etc.,] then other members should repay.
 If the loan was taken for any other purpose then the wife is not liable to repay.
 If the loan was taken by the woman or was agreed by her when her husband received it, then she
is liable to pay.
 In case of loan, the guarantee given to the creditor is of 2 kinds. Pratibhu [surety] and Adhi
[pledge].
 Praatibhaavyam: law of surety-ship
 Surety [pratibhu] is a contract with another person to bring about confidence.
 3 types, for appearance [darshana], for assurance [pratyaya] and for payment [daana].
 If the surety person dies then his son is liable to pay in case of daana.
 When there are 2 or more sureties, the amount will be equally divided and paid.
 If the case wins, in return, the person who gave surety also receives money or some article from
the debtor.
 Aadhi : Law of pledges
 Pledge is hypothecation to the creditor by the debtor.
 There are 2 kinds namely the pledge with time limit [krtakala] and without time limit [akrtakala].
 Each has 2 more kinds – gopya [only custody] and bhogya [use and enjoyment].
 Expiry means the entire cessation of the debtor’s right of ownership, and the ownership of the
creditor becoming absolute.
 Krtakala pledges will expire at the end of the stipulated period and the pledged item will become
the Creditor’s own. For example, if the pledge is for one year, if the debtor does not redeem it by
making the necessary payment, the creditor will take the ownership after one year. This holds
good for both Gopya and Bhogya.
 Bhogya has no expiry date in the case of akrtakala, (since it has been already stated that krtakala
has a fixed period beyond which it expires). The creditor can use the pledge as long as the
amount is not paid back. But he cannot claim ownership of the pledge and he would have to
return the pledge whenever the amount is paid.
 In case of akrtakala-Gopya, the pledge is kept only for custody and the creditor is expected to get
separate interest from the debtor. Gopya will expire in the case of akrtakala when the lent amount
 has doubled. This means that if the unpaid interest also matches the principal, the debtor loses the
ownership over the pledged item.
 If the creditor does not return the property then he is considered as thief.
 Pledge is mainly for the interest component. So the debtor can pay the principal and take back the
pledge.
 If the pledge has gone beyond time limit and the profit has exceeded the interest, then the creditor
has to pay the excess amount to the debtor.
 If the interest component is not totally covered, then the debtor has to pay the remaining amount
along with the principal to get back the pledge.