[156] CHAPTER XII

Of Contracts.

I. OF human acts which tend to the utility of others, some are simple, some are compound.

II. Of simple acts, some are gratuitously beneficial, others are of the nature of exchange of one act for another, permutatorial. Beneficial acts are either merely so, or with some mutual obligation. Mere beneficial acts are either discharged in the present time, or stand over for the future. A useful good office is performed in the present time, and of this it is not necessary to speak, since it produces advantage indeed by the recipient, but no effect as of right: so also a donation, by which ownership is transferred, of which we treated above, when we spoke of acquisitions of ownership. As acts standing over for the future, we reckon promises both of giving and of doing; concerning which we have already spoken.

Beneficial acts with a mutual obligation, are those which dispose of any thing without alienation, or so dispose of an act that some effect survives. Such is a concession of the use of a thing, which is called a Loan; and of acts, the undertaking of an office expensive or obligatory, which we may call a Commission; of which kind is a Deposit, namely, the office of keeping a thing in custody. Similar to these acts are the promises of acts, except that, as we have said, these stand over for the future; which also we desire to have understood of the acts now to be explained.

III. 1 Permutatorial acts either separate the parties or produce a community between them. Those acts which separate, diremtorial acts, the Roman jurists rightly divide into these: do ut des: facio ut facias: facio ut des. See Paulus and the Digests. [Dig. xix. 5]

157 2 But the Romans except from this division certain contracts which they call nominate contracts^*; not so much because they have proper names, (for permutation or exchange, which they exclude from nominate contracts, has also a proper name,) as because, from their more frequent use, they have received a certain force and nature, which may be sufficiently understood by the name, although nothing be said specially. Whence also with regard to them there were certain established formulæ of actions. While in other contracts, which are less frequent, that only was implied which was expressed; and therefore there was not any common and usual form of action, but a form accommodated to the fact, which was therefore called a form in prescript words.

For the same reason, of a more frequent use in the nominate contracts, if certain requisites were present, the necessity of fulfilling the contract was held as the rule; as in sale, if the price had been agreed upon, the contract was good, even re integrâ, that is, though nothing had been performed on either aide: while in the rarer contracts, re integrâ, there was allowed the liberty of retracting, that is, impunity, because the Civil Law withheld coactive force from those contracts, leaving them to stand on the good faith of the contracting parties only.

3 Natural Law does not recognize these distinctions: for the contracts which are called by men innominate, are neither less natural nor less ancient than the nominate. Nay Exchange, which is reckoned among the innominate, is both older and simpler than Buying. Eustathius, where in the Iliad (B. x.) a public contest is mentioned with a prize appointed, which in Homer is said to be earned, interprets it, taken in exchange, adding, for it is a sort of contract; namely, facio ut des, I work that you may pay. We therefore, following nature, shall refer all diremtory contracts to the three kinds which we have mentioned, making no distinction of nominate and innominate.

4 Hence we shall say that do ut des, I give that you may give, either one thing for another, which is specially called Permutation or Exchange, and is doubtless the oldest kind of commerce: or money for money, to which the merchants give the technical name of Exchange: (Cambium:) or a thing for money, as in Buying and Selling: or the use of a thing for a thing: or the use of a thing for the use of a thing: or the use of a thing for money, which is Letting and Hiring. By use, we here mean both the naked use, and that which is combined with the enjoyment of the produce, whether temporary, or personal, or hereditary, or circumscribed in any other way; as that which among the Hebrews continued to the year of the Jubilee. In a Loan, the thing is given, in order that after the lapse of a certain time, the same in quantity and kind may be returned, of things which 158are estimated in weight, measure, and number, both other things and money.

5 The exchange of act for act may have innumerable kinds according to the diversity of the acts. But facio ut des, is, I act that you may give, either money, (and this includes Letting and Hiring, and Assurance against risk, a contract formerly hardly known, now among the most common,) or that you may give a thing, or the use of a thing.

IV. Acts communicatory, either establish a community of acts, or of property, or property on the one side, acts on the other for the common utility; all which are called Partnership. In which class are included associations for the mutual Protection of ships in time of war, against pirates or other enemies, which is called an Admiralty.

V. Acts are mixed (or compound, § 1 [[apparently, I is meant]]) either as principal, or by the accession of another act. [First as principal.] Thus if I knowingly buy a thing for more than it is worth, and give the seller the excess of price, it is partly buying, partly donation. If I promise money to a goldsmith for making rings for me of his own gold, it is partly buying (of material), partly hire (of labour). So in Partnerships it happens that one person contributes acts and money, another money only. And in the Feudal Contract, the concession of the fief is a benefice, but the pact of military service for protection is facio ut facias. And if the fief be burthened with an annual payment, it is, so far, a letting for a money­-rent. So money lent to shipowners is partly a Loan and partly Insurance.

VI. Acts are mixed by the accession of another act, as in giving security, and in pledge. For suretiship, if you regard the business which takes place between the surety-giver and the principal debtor, is for the most part a commission: if you regard the business between the creditor and the surety-giver, who receives nothing, it is an act merely liberal: but because this liberal act is added to an onerose contract, it is reckoned with such contracts. So the giving of a pledge seems to be a liberal act, by which the detention of a thing is conceded; but this also takes its nature from the contract which is thus supplied with a security.

VII. All acts useful to others, with the exception of merely beneficial acts, are called Contracts.

VIII. In Contracts, nature requires equality, and in such a way that, from inequality, he who has the worse share, acquires a right. This equality consists partly in the act, partly in the matter concerning which the act is, and in the acts both precedent and principal.

IX. 1 It belongs to the preceding acts, that he who makes a contract about any thing, ought to make known the faults of the thing so far as he knows them, which is not only the usual rule of Civil Laws, but also agreeable to the nature of the act. For between the contracting parties, there is a connexion closer than the 159common society of mankind And in this way we answer the argument of Diogenes of Babylon on this subject, who says that all that is untold is not therefore concealed: and that it is not necessary for me to say all that it is useful for you to hear: thus I need not tell you how the heavens move. For the nature of Contract, having for its object common utility, requires some closer union. So Ambrose and Lactantius. [See.]

2 The same does not apply to circumstances which do not affect the thing itself: as if any one know that there are many ships on their way bringing corn. To tell this is kind and laudable; often so far, that it cannot be omitted without violating the rule of charity: but the omission is not unjust; that is, it is not repugnant to the right of him with whom I deal: so that here that may hold which the same Diogenes said, as Cicero reports^*, I bring my wares to market: I offer them for sale: I sell what is my own: not dearer than others; perhaps cheaper, as I have a larger stock. Whom do I wrong? Therefore we are not in general to follow the rule which Cicero lays down, that it is concealment, if those whose interest it is to know anything, you would have ignorant of it for the sake of your gain. That holds with regard only to points which affect the thing itself: as if a house which is to be sold is unhealthy; if it has been ordered by the magistrate to be pulled down: where see the examples which he gives.

3 The faults which are known to the person with whom you deal, need not be mentioned; as the servitude to which the house was subject which Gratidianus sold to Oratas, having bought it of him before: for both parties, having equal knowledge, are on an equality. So Horace; Plato.

X. Nor is it only in the understanding with respect to the matter, but also in the use of the will, that there ought to be a certain equality between the contracting parties: not indeed that if there have gone before any fear justly impressed, that must be removed, for that is extrinsic to the contract: but that no fear is to be unjustly impressed with a view to the contract; or if it be impressed, that it be put away. Looking at this rule, the Lacedæmonians rescinded the purchase of the land which the Thebans had extorted from the possessors by fear. See Xenophon. What exception there is to this in the Law of Nations, we shall see in its own place.

XI. 1 In the principal act of a contract this equality is required, that more be not demanded than is equitable. Which, in beneficial contracts, can hardly have place. For if any one demands some payment for a loan, or for executing a commission, or keeping a deposit, he does no wrong, but he alters the nature of the contract, and makes it, from being gratuitous, become semipermutatory. But in all permutatory contracts this is carefully to be observed. Nor is it enough for any one to say that what the other party has promised 160more than equality, is to be regarded as a donation. For such is not the intention of contracting parties, and is not to be presumed so, except it appear. For what they promise or give, they are to be supposed to promise or give as equivalent to what they are to receive, and as what is done on the ground of such equivalence.

2 Authorities of Chrysostom, Hermias, Levit. xxv. 14 and 17.

XII. 1 There remains to be considered, equality in the thing itself, consisting in this, that though nothing was concealed which ought to have been told, nor more exacted than was thought to be due; yet if there be an inequality in the thing itself, though without any fault of the parties; if for instance there was some latent defect, or some error about the price, that also is to be made good, and the difference paid to him who suffers by it; because, in a contract, there was intended, or ought to have been, that each party should have the same value.

2 The Roman law appointed this as the rule, not in every inequality, (for the law does not follow matters to their smallest dimensions, and also wishes to obviate the multitude of lawsuits,) but in a grave inequality, as for instance, one which exceeds the half of the fair price. In fact, laws, as Cicero says, remove what is not equitable, in cases when you can take hold of it with your hand; the philosophers, so far as you can grasp it by reason and intelligence. But those who are not subject to Civil Laws ought to follow that which right reason dictates to them as equitable; and even those who are subject to laws, whenever the question is what is right and pious; since the laws do not create or destroy right, but only deny their support to some rights for certain causes.

XIII. 1 It is to be noted that a certain equality of matter is to be regarded even in beneficial contracts; not a complete equality, as in commutatorial, but one according to the nature of the transaction: so that a person may not be damaged by a benefit which he bestows: for which reason a commissioner or agent is to be indemnified for the expense and loss which he incurs by his agency: and a loanee is bound to make good the thing lent if it be destroyed; because he is bound to the owner, not in respect to the thing alone, that is, by virtue of ownership, as any possessor of it would be bound, (as above said,) but also in virtue of the benefit received: which holds true, except the thing would have perished also, if it had remained with the owner. For in this case, the owner loses nothing by the loan. On the other hand, a depositary receives nothing but a reliance on his good faith: therefore if the thing perish he is not bound; not by reason of the thing, for it no longer exists, and he is no better off for it; nor by reason of his having accepted it, for by accepting it, he bestowed, not received, a benefit. In a pledge, and in a thing hired, a middle way is to be followed: so that he who has accepted the thing is not bound to make it good like a loanee, and yet is bound to use more diligence than a depositary: because the acceptance of 161a pledge is gratuitous indeed, but is usually an accompaniment of an onerose contract.

2 All which rules agree indeed with the Roman Laws, but appear not to come originally from them, but from natural equity. And hence the same rules are to be found also among other nations. So Maimonides, Seneca. And according to these principles we must judge also of other contracts. But having finished the general discussion so far as our purpose requires it, let us run over certain special questions of contracts.

XIV. 1 The most natural measure of the value of any thing is the need for it, as Aristotle rightly shows: which is seen most clearly in the exchange of things amongst barbarians. Yet this is not the only measure. For the will of men, which is the master of things, desires many things more than are necessary. Pearls, says Pliny, derive their value from luxury. And so Cicero of pictures: the measure of man’s desires in these things is the measure of value. And, on the other hand, it comes to pass that the most necessary things are of small value for their abundance. So Seneca shews by many examples, and adds, The price of any thing is a temporary accident: however much good you may say of them, they are worth just so much as they will fetch when sold. So Paulus, The prices of things are not from the opinion or utility of individuals, but are a common function; that is, as he explains elsewhere, what they would be worth to people in general. Hence it comes to pass that a thing is supposed to be of such value as is given or offered for it commonly; which cannot help having a certain latitude, within which more or less may be given or asked, except when the law has appointed a certain point of price for things, as Aristotle speaks.

2 For that common price, account is commonly taken of the labour and expense of the sellers, and it undergoes sudden changes according to the excess or defect of buyers, money, and wares. There may also be certain accidents of the things, capable of an estimation, on account of which the things may be lawfully bought or sold above or below the common price; suppose, on account of loss to be incurred, cessation of gain, particular tastes, or if they are bought or sold to oblige a person, being otherwise not to be bought or sold. Also account may be taken of the loss or cessation of gain which arises from the payment deferred or anticipated.

XV. 1 With regard to Buying and Selling, it is to be noted that the ownership may be transferred at the moment of contract, without delivery, and that this is the simplest process. So Seneca says, that selling is the alienation of the thing, and the transfer of one’s property and one’s right to another: as exchange also is. And if this be the case, if the ownership be not to pass immediately, the seller is obliged to give the ownership [at an appointed time]. And in the meanwhile, the thing is in the possession and at the risk of the seller. 162Wherefore that selling and buying consist in giving the means of having the thing sold, and remedy if the title to it prove bad, and that the thing is necessarily forthwith at the risk of the buyer, and also that the produce belongs to the buyer even before the ownership passes, are all fictions of the Civil Law, and are not everywhere observed. Indeed most legislators have provided that up to delivery the possession and risk are the seller’s, as Theophrastus holds: and as we find in Stobæus, where you find many other rules about the formalities of sale, about earnest of sale, about retraction, very different from the Roman Law: as also that among the Rhodians sale was to be completed, as well as some other contracts, by public registry, as Dio Prusæensis notes.

2 This also is to be observed, that if a thing be sold twice over, that sale of the two is valid which included a present transfer of the ownership either by delivery or otherwise. For by this means the jural claim passes from the seller, which it does not by a mere promise.

XVI. It is not all monopolies which are at variance with Natural Law. Monopolies may sometimes be permitted by the government for just cause, and at a settled price; of which we have a remarkable example in the account of Joseph’s administration of Egypt. So under the Romans the Alexandrians had the monopoly of Indian and Ethiopian wares. Monopolies may also be established by private persons, provided they be on equitable terms. But if persons, like the Velabrian oil-merchants, enter into a combination to raise the price above the common price, or prevent by fraud or force the importation of a larger quantity, that they may buy up the article and sell it at a price which at the time of sale is unreasonable, they are guilty of a wrong, and are bound to repair it. If in any other way they prevent the importation of wares, in order to sell them at a higher price, though in the state of the market not an unreasonable one, they offend against the law of charity; as Ambrose shews; but they do not properly violate the rights of others.

XVII. Concerning Money, it is to be noted that it naturally operates functionally, that is, one portion of it may do the office of another; end this, not only as to the material [gold for silver and reciprocally], nor in its special appellation and form [crowns for dollars], but in a more general sense, in its relation to all other things, or at least to the most necessary; and the estimation of this relation, if no other agreement is made, is to be made with reference to the time and place of payment. So Michael Ephesius says that money, though not in itself immutable, is the measure of all other things: the sense of which is this: that whatever is taken in order to be the measure of other things ought to be such that of itself it is least subject to change: and of this kind are gold, silver, brass: for their value is nearly the same at all times and everywhere: and as 163other things which men need are plentiful or scarce, the same money of the same material and weight, is sometimes worth more of those things, sometimes less.

XVIII. Letting and Hiring, as Caius rightly says, come nearest to selling and buying, and are governed by the same rules; the price corresponds to the rent or wages, and the ownership to the use of the thing hired or service rendered. Wherefore as, when a thing is destroyed, the loss falls on the owner, so by Natural Law barrenness of land hired, and other accidents which impede the use, are at the loss of the Hirer; and nevertheless the Letter has a right to the rent promised, because he gave up the power of using the thing himself, which at the time of letting was worth so much; though this may be changed by laws and covenants. But if the Letter, when the first Hirer is prevented making use of the thing, lets it to another, whatever be receives from that bargain he must pay to the first Hirer, that he may not become richer by what belongs to another.

XIX. And what we said above of Selling, that a thing may be bought or sold for more or less if it be done to gratify a person, being otherwise not open to be bought or sold, is to be understood also of a thing or of service let and hired. Or if one service may be useful to many persona, as, for instance, a journey undertaken by an agent, and if the latter (the agent) have engaged himself to several persons jointly, he may demand from each the payment which he would require from one, if the law do not forbid. For the same labour being useful to a second person as well as to the first, is something extrinsic to the contract entered into with the first, and does not diminish the value of his services to the first.

XX. 1 As to Lending Money, it is commonly made a question by what kind of law usury is forbidden. And although the more received opinion is that it is forbidden by Natural Law, Abulensis is of a contrary opinion. And in truth the arguments on the other side are not such as compel assent. For when it is said (1) That money lent is a gratuitous benefit, the same may be said of any other thing lent, and yet it is not unlawful to demand payment for the loan of a thing; this only makes the contract take another name, letting instead of lending.

Nor is it more convincing to say (2) That money is barren by its nature; for houses and other things which produce no fruits by nature, the industry of man makes fruitful.

The other arguments are more specious, (3) That here, a thing of the same kind is repaid for a thing, and that the use of the thing, money, cannot be distinguished from the thing itself, since it consists in abusu, in getting rid of it: and therefore nothing ought to be demanded for it.

2 (4) It is said in the decree of the Senate^*, That though there cannot be properly usufruct of a thing which perishes in the using, 164yet there may be quasi usufruct of such a thing, but that it does not thereby become the property of the tenant. But this merely defines the word usufruct. Certainly that word does not properly agree with the right of usury. But it does not follow that there is no such right: since, on the contrary, it is certain that if any one were to grant a proprietor such a right, money might be paid for it.

And the right of not having to repay anything, whether money or wine, till after a certain time, is something which has an estimable value. For he who pays later, pays less. And therefore, in the way of exchange the use of money may be paid for by the use of land.

As to what Cato, Cicero, Plutarch, and others say against usury, it does not touch its intrinsic nature, but its ordinary accompaniments and consequences.

3 But whatever may be our opinion of such arguments, it ought to suffice for us that there was a law given by God to the Hebrews, which forbad Hebrew to lend Hebrew money on usury. For the matter of this law, if not necessary, is certainly morally good; and so is assumed in Ps. xv. 5. Ezek. xviii. 8. And precepts of this kind bind Christians also, as being called to higher pitches of virtue than others; and what was then the duty towards a Jew, is now a duty to all men, the separation being taken away by the Gospel, and the term neighbour more widely extended. So Lactantius and Ambrosius condemn usury. And Augustus noted for rebuke some who borrowed money at low interest and lent it at high.

XXI. It is to be observed, however, that there are some things which approach to the nature of usury, and commonly are held to be usury, which are pacts of another kind: as pacts for making good the loss which he suffers who lends money, by being kept out of his money so long: and on account of the gain which the money-lender loses by lending, deducting what corresponds to the uncertainty of his hopes, and the labour he would have had to undergo. And again, if anything be demanded on account of expenses incurred by him who lends money to many, and has it ready for that purpose; and for the danger of losing the principal, where due security is not taken; this is not usury. So Demosthenes in his oration against Pantænetus, denies that he is to be stigmatized as an usurer because, what money he gained by commerce or manufacture, he lent out at moderate interest, partly to keep the capital, partly to gratify another.

XXII. Human Laws which allow something to be covenanted for the use of money, if the rate lie within a due compensation, are not opposed to Natural or Divine Laws, as in Holland it has long been granted to persons in general to require 8 per cent. per annum, and to Merchants 12. If they exceed that standard, laws may afford impunity, but they cannot give a right.

XXIII. Contracts for averting risk, which are called Insurance, are void if either of the contracting parties know that the thing 165insured has either reached its destination safely, or is lost: not only on account of the parity which the nature of permutatorial contracts requires, but also because the proper matter of this contract is loss uncertain. The value of such danger is to be sought in common estimation.

XXIV. 1 In Partnerships in trade, where money and money are contributed by the parties, if the sums are equal, the gain and loss ought to be equally shared: if unequal, proportionally to the shares: Aristotle’s rule. The same will hold if equal or unequal shares of labour are contributed. But money may be compared with labour, and labour with money. See Plautus.

2 But this joint contribution may be made in various ways: for either labour may be supplied by one party and the use of money (annual payment) by the other: in which case if the money-share be lost, the loss is the owner’s, and if it be saved the gain is his: or labour and the ownership of money (capital) are the relative contributions; in which case he who supplies the labour partakes in the money-share. In the first case that which is compared with the labour is not the money-share, but the risk of losing it, and the gain which might be expected from it. In the other case the value of the labour is considered as something added to the money-share, and according to such value, he who supplies the labour has a share in the capital. What we have said of labour is also to be understood of the labour and risk of navigation, and the like.

3 That any one of the partners shall share the profit and not suffer by the loss, is against the nature of partnership; but such an agreement may be made without wrong. For then the contract will be a mixture of Partnership and Insurance; and the equality will be preserved, if he who in case of loss has taken the risk of loss, receives more of the profits in proportion. But that any one should bear the loss without profit, is not to be admitted, because in partnerships the community of interests is so natural, that without it partnership cannot subsist. What the Jurists say, that when the shares are not mentioned they must be understood to be equal, is true only if the contributions are equal. And in the common undertakings of good men, we must compare, not what happens here or there, but what may be probably hoped.

XXV. In associations of shipowners for mutual protection against pirates, the common utility aimed at is the protection; sometimes also the taking of prizes (privateering). The custom is to value the ships and cargo and to make up a sum in this way, and to apportion the losses which take place, among which are the expenses of the wounded men, among the owners of the ships and cargoes according to their proportion of that sum. And what we have hitherto said on this subject is agreeable to Natural Law.

XXVI. 1 Nor in these matters is anything changed by the instituted Law of Nations; excepting this only, that if an inequality of the 166contributions be agreed upon, this, where there is neither false declaration nor reticence of what ought to have been said, is in exterior actions held for equality. And thus, as by the Civil Law before Diocletian there was no action before a court of law for such inequality, so now among those who are connected only by the Law of Nations, there is no demand or compulsion allowed on that account. This agrees with what Pomponius says, that in the price of selling and buying, it is naturally allowed to men to circumvent one another where allowed means, not that it is right, but that there is such permission that no remedy exists against him who offers such a defense.

2 Naturally, in this place, as in some others, is put for what is everywhere a received custom: as St Paul says that nature herself teaches us that it is shameful for a man to have long hair; though it is not repugnant to nature, and is the usage among many peoples. (1 Cor. xi. 14.) So the Author of the Book of Wisdom calls the worshippers of idols (not all men) vain by nature (xiii. 1), and St Paul, by nature the children of wrath (Eph. ii. 3), not speaking so much in his own character, as in that of the Romans, among whom he was then living. So Euenus, Galen, Thucydides, Diodorus: and so the Greeks spoke of naturalized virtues and vices. So Pomponius, when he says that a civilian could not die both testate and intestate, adds that the two things are naturally at variance: although that rule depends solely on the customs of the Romans, and has no place among other peoples, and not even among the Romans in soldiers’ testaments.

3 The utility of introducing such rules as I have mentioned is evident, in order to obviate infinite controversies, which could not have been put on clear grounds in consequence of the uncertain prices of things among those who have no common judge, and which would have occurred if it had been reckoned lawful to depart from pacts on account of the inequality of conditions. So the Imperial Laws recognize Buying and Selling as being the result of long haggling and final agreement. So Seneca, and Andronicus Rhodius.

4 The writer of the life of Isidore calls this, injustice allowed by law.