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The Law of War and Peace (1625)

by Hugo Grotius

BOOK 2, CHAPTER 12
On Contracts

I.     The division of men’s acts which are advantageous to other men; first, into simple acts and acts of a mixed character.
Of the acts of men which are advantageous to other men, some are simple, others of a mixed character.

II.     The division of simple acts into those that are merely acts of kindness and those that involve a mutual obligation.
Some simple acts are merely kind, others are reciprocal.” The kindnesses either are unmixed or involve a kind of mutual obligation. Unmixed kindnesses are either fulfilled in the present, or are directed to the future. A useful deed is accomplished in the present, and in regard to this it is not necessary to speak; while it is advantageous, to be sure, it has no legal effect. Of the same character is a donation by which ownership of property is transferred, and that topic we treated above, when the matter of acquiring ownership was under consideration. Not only promises to give but also promises to perform are directed toward the future; these also we have already treated.

Advantageous acts which involve a mutual obligation are those which dispose of property without alienation, or accomplish a deed in such a way that some effect remains. Such in regard to things is the permission to use, which is called a gratuitous bailment; and in regard to deeds the undertaking of a costly service, or one implying obligations, which is called a mandate; one form of the mandate is the deposit in trust, which involves the expenditure of labor in guarding and keeping a thing. Similar to such acts, again, are promises to act, except that, as we have said, the latter are directed toward the future; and this we wish to have understood also concerning the acts which are now to be discussed.

III.     Also into reciprocal acts, which sometimes separate the parties.
1.   Reciprocal acts either separate the parties or produce a community of interests. Those acts which are separative the Roman jurists rightly divide into these classes: I give that you may give; I do that you may do; I do that you may give. On these classes see the jurist Paul in the Digest, XIX. v. 5.

2.   But from this classification the Romans omitted certain contracts, which they themselves called specified contracts, not so much for the reason that they have a special name (for reciprocation, which they exclude from the specified contracts, has this characteristic) as for the reason that such contracts had received a certain force and character from their more frequent use,’ so that that could be understood from their name alone, even if nothing had been specified in particular. For this reason also certain formulas of action had been established in relation to such contracts, while in the other and less usual contracts only that was included which had been stated; in consequence no common and customary formula was given to them,, but one appropriate to the act, which was therefore called a formula in prescribed words.

By reason of more frequent use in specified agreements, if certain required conditions were present (as in a sale, if the price had been agreed upon), the necessity of carrying out the agreement was imposed, even if the matter was still fresh, that is, before anything had been done by either of the parties. But in those less common contracts, while the matter was still fresh there was granted liberty to withdraw, that is exemption from penalty, because the civil law withdrew its compelling force from such agreements, so that they were based on the good faith of the contracting parties alone.

3.   But the law of nature ignores these distinctions; and indeed the contracts, which are called unspecified by the jurists, are neither less natural nor less ancient. In fact the exchanging of commodities, which is reckoned among the unspecified contracts, is both simpler and more ancient than purchase.” And Eustathius in his comment on Homer’s Iliad (Book X), in treating of a public contest for which a prize had been offered, explains the Greek word for ‘seek to gain’ in Homer as ‘take in exchange,’ adding that ‘this and other such matters are a sort of contract ‘; and in fact it is of the class’ I do that you may give.’ Therefore, in accordance with nature we shall refer all those separative contracts to the three classes which we have mentioned, without making any distinction of the specified and unspecified.

4.   We shall say, then, that in the agreement to give that there may be giving in return a person gives a thing directly for a thing, as in that form which is particularly called exchange of commodities, and is, without doubt, the most ancient form of commerce; or money is given for money,’ which merchants in ancient Greece called money-changing and we today call exchange; or a thing is given for money, as in buying and selling; or the use of one thing for another thing, or the use of one thing for the use of another, or the use of a thing for money; this last is called letting and hiring. But under the term ‘use’ we here understand not only the bare use but the use which is joined with the enjoyment of the income, whether this is temporary, or restricted to a person, or hereditary, or restricted in any other manner whatsoever; an example among the Jews is the contract which lasted till the year of jubilee.

One gives as a loan, however, in order that, after an intervening time, the same amount, and that of the same kind, may be given back; and this is applicable to those things which are reckoned by weight, number, or measure, to other things as well as to money.

5.   The exchanging of an act for an act may have innumerable forms, according to the diversity of the acts. But I do that you may give. In the one case, I do that you may give money; this in acts of daily service is called letting and hiring, and in the act of guaranteeing indemnity against chance losses it is called a guarding against risk, or, in everyday speech, insurance, a form of contract which was formerly scarcely known, but is now very common. In other cases [I do] that you may give a thing or the use of a thing.

IV.     Reciprocal acts that sometimes contribute to a community of interests.
Acts which contribute to a community of interests bring about a sharing in activities or in things, and turn these to the common advantage; all such acts come under the head of joint undertakings. In this class is included also an association for purposes of war, as among us the frequent union of privately owned vessels against pirates

or other assailants, which is now commonly called an admiral’s force, and by the Greeks was named ‘a sailing together’ or ‘a joint sailing.’

V.     That acts of mixed character may be mixed in respect to their main elements.
Acts are of a mixed character, either in their essential elements or through the association of another act. Thus if I knowingly buy a thing at a price higher than it is worth, and give the excess in price to the seller, the act will be partly gift, partly purchase. If I promise money to a jeweler for making rings for me out of his own gold, the transaction will be partly purchase, partly hiring. So in a partnership it happens that one party contributes services and money, the other money only.

In a feudal contract the granting of the fief is a kindness, but the agreement to render military service in return for protection is a contract, of the form I do that you may do.’ If, furthermore, the burden of a yearly payment is added, the transaction to that extent is blended with leasing. Also a loan on things at sea is a mixed contract, which consists of a contract for a loan and an insurance against loss.

VI.     Or such acts may be of mixed character only by reason of an additional act.
An act becomes of mixed character by the addition of another act, as in giving security, or in putting up a pledge. For the giving of security, if you look at the transaction as between the surety and the principal debtor, is in the main a mandate; as between the creditor and the surety, who receives nothing, it seems merely an act of generosity, but because the giving of security is added to burdensome contracts it is customarily judged a part of the same act. So the giving of a pledge seems in itself an act of generosity, by which the retention of a thing is granted; but this also derives its nature from the contract, for which it furnishes security.

VII.     What acts are called contracts.
Now all acts of benefit to others, except mere acts of kindness, are called contracts.

VIII.     That equality is required in contracts; and first, equality as regards preceding acts.
The law of nature enjoins that there be equality in contracts, and in such a way that the party who receives less acquires a right of action from the inequality.

This equality is required both in the acts and in the matter with which the transaction is concerned; and in respect to the acts it covers the preceding as well as the principal acts.

IX.     That equality is required in contracts as regards knowledge of the facts.
1.   To the preceding acts consideration pertains that the person who is making a contract with any one ought to point out to him the faults of the thing concerned in the transaction which are known to himself.’ This is not only prevailingly established by the civil laws but is also consistent with the nature of the act. For between the contracting parties there is a closer union than ordinarily obtains in human society. In this way an answer is made to what Diogenes of Babylon said in treating of this question, that all things which are not mentioned are not concealed, and that it is not necessary for me to say everything which it is useful for you to know, as in the case of the heavenly bodies.

The nature of a contract which was devised for the sake of mutual advantage in fact demands something more intimately related. Ambrose well said:

In contracts it is ordered that the faults in things which are sold be made known; and if the seller has not declared these the contracts are held void by action for fraud, even if the property has passed into the possession of the purchaser.

Lactantius had said:

    The man who, having in view only his own gain and advantage, has not called attention to the mistake of the seller, in order that he may buy a piece of gold at a cheap price, or does not declare the truth about a runaway slave or a fever-infected house that he is selling, is not a wise man, as Carneades would have him seem, but a shrewd and clever rogue.

2.   The same thing, however, should not be said in regard to circumstances which have no direct connection with the thing contracted for; as if any one should know that many ships were in route bringing grain. The giving of such information is, in fact, a part of one’s duty, and praiseworthy, so that often it cannot be omitted without violating the rule of love. Yet such omission is not unjust, that is, it is not inconsistent with the right of the one with whom the contract is made. That, then, is in point here, which the same Diogenes, as quoted by Cicero, aptly said: ‘I have brought my goods, I have displayed them for sale; I am selling my own at no higher price than others, perhaps even at a lower price, since I have a greater amount. Whom do I injure?’

In general, therefore, it is not necessary to follow the statement of the same Cicero, that you practice concealment when, for the sake of your own gain, you wish that those, whose interest it is to know, shall be in ignorance of what you know. This is applicable only when those facts are considered which are intimately connected with the subject of the transaction, as in the case of a house which is infected with pestilence, or which the magistrates have ordered to be pulled down; examples which you may find in the same passage of Cicero.

3.   But it is not necessary that faults known to the person with whom you are dealing should be mentioned, as the servitude attached to the house which Marcus Marius Gratidianus sold to Gaius Sergius Orata, after having previously bought it of him. Equal knowledge on both sides, in fact, puts the contracting parties on an equal footing.’ Horace says:

      Scot free the man will take his price, I think;
      Forewarned you bought a faulty thing.

This point was noted also by Plato in the eleventh book of the Laws.

X. That equality is required in contracts as regards freedom of choice.
Not only in the knowledge of facts but also in the freedom of choice there ought to be a kind of equality between the contracting parties. Not indeed that any preceding fear, if justly inspired, ought to be removed, for that is outside of the contract; but that no fear should be unjustly inspired for the sake of making the contract, or, if such fear has been inspired, that it should be removed.

With this point in view the Lacedaemonians annulled the purchase of land which the Eleans had forced the owners to sell by reason of fear, ‘thinking that it was no more just to extort property from weaker persons under the semblance of purchase than through fear alone,’ as Xenophon says. Yet, in the proper place, we shall see what exception there is to this rule, according to the law of nations.

XI.     Secondly, that equality is required in the act of making a contract, if it be a contract requiring an exchange.
1.   The equality demanded in the principal act of a contract is, that no more be exacted than is just. This is hardly applicable in the case of contracts involving beneficence. For if any one should make a bargain for something as a slight reward in return for a loan, or for service rendered in executing a commission, or in looking after a deposit in trust, he will not act wrongfully, but he will be mixing the contract, that is, he will make it in part a contract of exchange instead of being wholly beneficent.

In all contracts with exchange of considerations, however, the rule should be carefully observed. And there is no reason why one should say that whatever either party has promised in excess should be considered a donation. Such is not ordinarily the intention of persons making contracts of this kind, and such an intention ought not to be assumed unless it is apparent. Whatever, in fact, the parties promise or give, they should be believed to promise or give as on an equality with the thing which is about to be received, and due by reason of that equality.

2.   John Chrysostom says: ‘In making contracts, and in buying or selling anything, whenever we strive and toil in every way to pay less than a fair price, is there not a kind of thievery in the act?’ The author of the life of Isidore in Photius relates that when Hermias wished to buy anything which was offered at less than a fair price he added whatever was lacking so as to pay the proper price, because he thought that to act otherwise was a form of injustice, and injustice of a sort to escape the notice of most persons. Also the Jewish scholars in this way interpret the law found in Leviticus 25:4. and 7 [25:14 and 17].

XII.     Thirdly, there should be equality in the subject of the contract; explanation thereof.
1.   There remains equality in the subject of the contract, consisting in this, that although nothing has been concealed which ought to have been said, and no more has been exacted than was considered due, nevertheless if an inequality has been detected in the transaction, although without the fault of either party because, for example, the fault was hidden, or because there was a mistake in the price this inequality should be made good, and something should be taken from the one who has more and given to the one who has less; for in the contract it was proposed, or ought to have been proposed, on both sides, that each should receive the same amount.

2.   The Roman law did not establish this rule to apply to every inequality, for it does not follow up trivial differences, since it judged that a multitude of lawsuits would result; but the rule is applicable in sufficiently important differences, as those which exceed one-half of the just price. Beyond doubt, as Cicero says, the laws deal with injustices so far as these can be laid hold of, but the philosophers deal with injustices so far as they can be distinguished by reason and intelligence. Those persons, in fact, who are not subject to the civil laws ought to follow the same rule, which right reason tells them is fair. Furthermore, this rule should be observed even by those who are subject to laws whenever the transaction involves what is morally right and blameless, even if the laws do not grant or take away a right, but merely for certain reasons refuse to lend their aid to what is right.

XIII.     What equality ought to obtain in acts that are wholly acts of kindness, or partly acts of kindness.
1.   But it is to be noted that a kind of equality is to be maintained also in contracts of beneficence, not indeed of the same degree as in contracts requiring an exchange but in accordance with the supportive character of the transaction, in order that a person may not suffer loss from his own generosity. Therefore a mandatary ought to be indemnified for expenses incurred and for loss which he has suffered in consequence of the mandate. A bailee, too, is bound to make good a thing lost, because he is under obligation to the owner not merely on account of the thing, that is, by reason of the force of ownership, by which, as we stated above, a temporary possessor would be bound, but also by reason of the acceptance of a favor.

This rule holds good except in case the thing would have completely perished also in the possession of the owner; for in such a case the owner would have lost nothing through the bailment. The acceptor of a gratuitous deposit, on the contrary, receives nothing beyond confidence in his good faith, and so, if the thing is lost, he will not be held liable, either in respect to the thing, because it does not exist and he is not made richer by it, or by reason of the acceptance of the thing, since in accepting he did not receive a favor but conferred it. In the case of a pledge, as also of a thing that has been hired, an intermediate course ought to be followed, in order that the receiver may not be made liable for any and every mishap, as a borrower is. And yet he ought to exhibit more diligent care than one who accepts a deposit; for the acceptance of a pledge is usually without profit, but is ordinarily associated with a burdensome contract.

2.   Now all these rules are in truth in conformity with Roman law. Yet they did not have their origin in the Roman law, but in natural justice, and therefore the same legal provisions will be found among other nations also. Thus among other writers they are found in the Guide of the Perplexed (Book III, chapter xliii) by the Jew Moses Maimonides. Seneca had reference to this rule when he said that some are under obligation to exhibit fidelity, others to furnish protection. In accordance with this rule judgement must be passed on other contracts also.

Having now discussed the general subject at sufficient length for our purposes, let us run over some special questions in regard to contracts.

XIV.     In what way the price of an object ought to be estimated in a sale, and for what reasons it may justly increase or decrease.
1.   The most natural measure of the value of each thing is the need of it, as Aristotle has rightly shown. This becomes the paramount consideration in the exchange of objects among barbarous peoples. Nevertheless this is not the only measure. For the desire of men, which controls the price of things, covets many things more than their need requires.’ Luxury,’ says Pliny, ‘set the price for pearls.’ In his argument Against Verres, Cicero says of statues: ‘The limit of value in these things is the same as the limit of our desire for them.’

On the contrary, it happens that the most necessary things are of less value because of their abundance. Seneca has made this plain by many examples in his On Benefits, Book VI, chapter xv, where he adds also the statement: ‘The price of everything depends upon circumstances. Though you have praised those things highly, they are worth only as much as they can be sold for.’ Paul the jurist says: ‘The prices of things are not fixed by the desire or the use of individuals, but by common estimation’; that is, as he elsewhere explains, the value which all put upon them. Hence it comes about that a thing is valued at the price commonly offered or given for it; and that price is not so limited that it may not have a range of variation within which more or less may be given or asked, except in cases in which the law has established a definite price ‘at a fixed point,’ as Aristotle says.

2.   Moreover, with respect to the current price, account is ordinarily taken of the labors and expenditure of the dealers. The price, again, is wont to change suddenly according to the abundance or scarcity of buyers, of money, and of commodities. Also circumstances may by accident arise, on account of which a commodity may lawfully be bought or sold above or below its normal price; such, for example, as an expected loss, absence of profit, personal fancy, or sale or purchase, as a favor to another, of that which would not otherwise have been bought or sold. Such exceptional circumstances should be made known to the person with whom we are dealing. Also, we can take into account the loss or absence of gain which arises from deferred or anticipated payments.

XV.     When according to the law of nature a sale is completed, and when ownership is transferred.
1.   It must also be noted that in selling and purchasing the ownership may be transferred without delivery from the very moment of the contract, and that this is the most simple form. So in the opinion of Seneca a sale ‘is an alienation and a transfer to another both of one’s property and of one’s right ‘; for that is also the method used in an exchange of commodities. But if it has been agreed that ownership shall not pass immediately the seller will be under obligation to give possession according to contract, and in the meantime both gain and loss in the commodity will fall to the seller.

These, then, are fictions of the civil law not universally recognized, that sale and purchase consist in guaranteeing that one may have the property and right of recovery if dispossessed; also that the property shall be at the risk of the purchaser and that the income from it shall belong to him even before ownership passes. On the contrary many lawgivers have enacted that up to the time of delivery the seller should have the profit of the commodity, as well as the risk, as Theophrastus noted in a passage found in Stobaeus; in the same passage you may find also many other rules concerning the formalities of sale, of payment to bind the bargain, and of retraction, all very different from the Roman law. Thus also among the people of Rhodes, as Dio of Prusa noted in his Rhodian Oration, a sale and some other contracts were commonly completed by entry in the public records.

2.   This rule also should be known, that if an object has been sold twice, of the two sales that will be effective which has included in itself immediate transfer of ownership, either by delivery or in some other way. For by this act the essential control over the object passes from the seller, a result which is not brought about by a promise alone.

XVI.     What monopolies are contrary to the law of nature or the law of love.
Not all monopolies are contrary to the law of nature. Sometimes, in fact, monopolies may be permitted by the sovereign power for a just cause and with a fixed price. The history of Joseph, when he ruled Egypt as royal governor, furnishes us a notable example of such a case. So also under the Romans the Alexandrians had ‘monopoly’ of Indian and Ethiopic wares, as Strabo relates.

A monopoly can also be established by private persons, if only with a fair price. But those who make a compact, as did the oil merchants in the Velabrum, that goods may be sold at a higher price than the current range of prices, or by violence or fraud hinder a larger supply from being imported, or buy up all the goods in such a way that they sell at a price which is unfair at the time of sale, are committing a wrong, and are bound to make good the loss. If in any other way they hinder the importation of merchandise, or so buy it up that they may sell it at a price which is higher, but under the circumstances not unfair, they are violating the rule of love, as Ambrose shows by many proofs in his third book On Duties; but, properly speaking, they do not violate the rights of another.

XVII.     How money serves as the medium of exchange.
As regards money, we should know that it acquires its function naturally, not by reason of its material alone, nor by reason of a special name or form, but because it has a more general character by which it is compared either with all things, or with the things that are most necessary. Its value, if not otherwise agreed upon, must be fixed according to the time and place of payment. Michael of Ephesus, in his commentary On the Nicomachean Ethics, Book V, says:

It is possible in the case of coined money to see the same thing which happens as a result of need. For as our need is not always the same, and what others have is not always equally necessary for us, so coined money does not always have the same value but varies; while formerly it had a greater value, later it has had less or none. Nevertheless, in general, the value of coined money is more stable, and on that account we are accustomed to use it as a measure of other things, which are compared with it.

The meaning of the passage is, that whatever is employed as a measure of value for other things ought to be of such a character that in itself it shall vary as little as possible. Such, moreover, in the class of things possessed of value, are gold, silver, and copper. For in themselves these metals have almost the same value everywhere, and always. But just as other things of which men are in need are plentiful or rare, so likewise money made of the same material and of the same weight has now a greater value, now a less.

XVIII.     By the law of nature nothing should be deducted from the price of rent on account of unfruitfulness or similar misfortunes; also what rule holds if the first renter is hindered from using a thing and it has been rented by another.
‘Renting and hiring,’ as Gaius rightly said, ‘is very near to selling and buying, and is subject to the same rules.’ The price, in fact, corresponds to the rent or hire, and the ownership of the thing to the right of user. Therefore, as the loss of the property itself falls upon the owner, so by the law of nature, in the case of unfruitfulness and other misfortunes which hinder the use, the loss is borne by the renter; and the person letting the property will not on that account have less right to the promised rental, for the reason that he himself transferred the right to use, which had that value at the time.

This rule, however, can be changed both by laws and by agreement. Nevertheless if the landlord has rented the land to another tenant while the first renter was hindered from working it, whatever he has thereby gained he will repay to the first renter, in order that he may not become richer at another’s expense.

XIX.     How a just payment for services may be increased or diminished.
In regard to a sale I said that a thing can be sold at a higher price or bought at a lower one if it is sold or bought as a favor to the other party, when it would not otherwise have been sold or bought. The same rule should be understood in regard to the renting or hiring of property or service. If one service can be useful to more than one person, as for the undertaking of a journey, and if the contractor has bound himself firmly to several individuals, in case the law interposes no hindrance, he will be able to demand from each the payment which he would have exacted from the one. The fact that the service will be useful to a second person also is outside the contract which was entered into with the first party, and it does not in any degree diminish the value of the service in respect to the first party.

XX. By what right interest is forbidden.
1.   In connection with a mutuum the question is commonly raised, by what right is interest forbidden?

Although it is the more generally accepted opinion that interest is forbidden by the law of nature, yet Abulensis holds the opposite view. And the arguments advanced on the other side do not seem to be such as to require assent. For what is said of a mutuum, namely, that it is without charge, may be said also of a commodate. And yet, although it is not unlawful to demand a price for the use of a thing, such a demand may cause the contract to pass under another name.

The argument is not more convincing, that money is by its own nature unproductive. For houses and other things naturally unfruitful’ are rendered productive by the industry of men. This is more plausible, that in the case under consideration the thing is returned for the thing; that the use of the thing cannot be distinguished from the thing when the use of the thing consists in using it up; and that, therefore, nothing ought to be demanded for such use.

2.   But it is to be noted that although the usufruct of things which perish in use, or are transferred to the ownership of another, is said to have been introduced by a decree of the Senate, nevertheless it was not thereby brought about that there should be a usufruct properly speaking; but the word usufruct was dealt with, and certainly according to its proper interpretation this word does not accord with such a law. Yet from this it does not follow that there is no such right, or that it is not capable of evaluation, since on the contrary it is certain that if any one should yield such a right to the owner money could be demanded on that account. So also the right of repaying money or wine only after a certain time is something capable of being evaluated; for he pays less who pays later. And so’ in reciprocal usage’ the use of money is compensated for by the fruits of an estate. What is said against interest by Cato, Cicero, Plutarch, and others,’ has in view not so much its intrinsic nature as its usual accompaniments and results.

3.   Whatever may be thought of this matter, for us the law given by God to the Jews, which forbids Jews to loan money on interest to Jews, ought to suffice. For the substance of this law, if not necessary, is at any rate honorable from the point of view of morals; and for this reason it is added to other specially moral precepts in the Psalm which is numbered fifteenth in the Jewish Bible and fourteenth in the Latin, and also in the eighteenth chapter of Ezekiel.

Moreover, precepts of this kind are binding also upon Christians, since they are called upon to give loftier examples of the virtues; and the duties, which at that time the Jews and other circumcised persons, being of equal condition, were ordered to perform, ought now to be performed by every person, since the Gospel has removed all distinctions between peoples, and a broader meaning has been given to the word neighbor. Besides other passages, this is shown by the noteworthy parable of Christ concerning the Samaritan. And so Lactantius, treating of the duties of a Christian, says: ‘He will not lend money on interest, for this is to seek gain from another’s misfortunes.’ Says Ambrose: ‘To assist the one in need is an act of humanity, but it is harshness to extort more than you have given.’ Augustus Caesar himself branded with disgrace certain persons because they had borrowed money at a low rate of interest and lent it at a higher rate.

XXI.     What advantages do not come under the head of interest.
Nevertheless the observation should be made that there are certain advantages which approach the character of interest, and commonly seem to be interest, although they are agreements of another kind; such are agreements for making good the loss which one who lends money suffers because he misses the use of the money for a long time; and likewise for the loss of gain on account of a loan, with a deduction, of course, in view of the uncertainty of expectations and of the effort which it would have been necessary to put forth. So again, it is not, in fact, usury if something is demanded for the expenses of the man who lends to many and keeps cash on hand for this purpose, as well as for the danger of losing the principal, in case proper security is not taken.

In his oration Against Pantaenetus, Demosthenes declares that it is not right to burden with the name of usurer a man who lends at a moderate interest money which he has made by trade or honorable labor, partly in order that he may preserve his property, and partly that he may do a favor to another.

XXII.     What the force of the civil laws is in this matter.
There are, in fact, human laws which allow that a return may be agreed on for the use of money, or of anything else. Thus in Holland it has long been lawful for other persons to collect 8 per cent.’ per annum, but for merchants to exact 12 per cent. If such laws truly keep within the natural limit of compensation for that which is, or can be, out of one’s possession, they are not inconsistent with natural or divine law; but if they exceed that limit they may grant impunity, but they cannot give a right.

XXIII.     What valuation ought to be put on a contract for securing against loss or insuring.
A contract for securing against risk, which is called insurance,’ will be null and void if either of the contracting parties knew that the property in question had either arrived at its destination in safety, or had been lost. This rule is valid not only by reason of that fairness which the nature of contracts for exchange requires, but also because the particular substance of the contract is the uncertainty of the loss. Moreover, the price of such insurance against risk ought to be fixed in accordance with common estimation.

XXIV.     What rule applies in the case of a partnership; wherein many kinds of partnerships are explained.
1.   In a business partnership, where the capital is made up from payments of funds, if the investments are equal then the partners ought to have equal shares in the loss and gain; but if the investments are unequal the division should be made proportionately. The principle was set forth by Aristotle at the end of the eighth book of the Nicomachean Ethics in these words: ‘In an association with capital those receive more who contributed more.’

The same will hold true if equal or unequal shares of work were contributed. But also money can be associated with work, or with money and work, as in the common saying:

      Like to like gives recompense, when work and funds are joined.

2.   But this joint contribution is not made merely in one way; for either the work is united with the bare use of the money, in which case the loss of capital falls upon the owner, and the capital, if saved, belongs to the owner; or the work is associated with the ownership of the money, in which case the one who contributes his work becomes a sharer in the capital.

In the first case there is joined with the capital, not the work, but the danger of loss of the capital and of the gain which might reasonably be expected from it. In the second case the value of the work is considered as if added to the capital; and according to the value of it the one who furnishes work has a share in the capital. What we have said about work ought to be understood as applicable to the work and peril of voyages and similar undertakings.

3.   Moreover, it is contrary to the nature of a partnership that one of the partners should share in the gain, when he has immunity from loss. Nevertheless, an agreement with this end in view can be made without injustice. Under such conditions the agreement will become a mixed contract of partnership and insurance against loss, in which equality will be preserved if the one who has taken upon himself the risk of loss shall receive an equivalent increase in profit over what he would otherwise have received. In such a case, however, the risk of loss without the chance of gain ought not to be permitted, because the sharing in advantages is so essential to partnerships that a partnership cannot exist without it.

The statement of the jurist, that when the shares in a partnership are not designated they are understood to be equal, must be considered as true only in case the amounts contributed to the capital are equal. In a partnership covering all the possessions of the partners it will be necessary to compare not the profit which has arisen from this or that share, but that which could reasonably have been expected.

XXV.     Concerning joint undertakings for maritime operations.
In a joint undertaking of ships the common advantage is defense against pirates; sometimes also booty. Ordinarily a valuation is placed on the ships and on their cargoes, and from this the total is reckoned, so that the losses which occur, in which the care of the wounded is included, may be borne by the owners of the ships and cargoes in proportion to the shares of the whole which they possess.’

What we have said up to this point is in accordance with the law of nature.

XXVI.     According to the law of nations, so far as external acts are concerned, no consideration is given to an inequality in terms which has been agreed to; in what sense this may be said to be consistent with the law of nature.
1.   In these matters no change seems to have been made by the volitional law of nations, with the one exception that, when there has been no falsehood or concealment of what ought to have been said, an inequality in terms is considered an equality as regards external acts; consequently, as no action at law was allowed against such an inequality by the civil law before the constitution of Diocletian, so among those who base their association on the law of nations alone no demand or collection on that account is allowed.

This, in fact, is the same point that Pomponius maintains, that by the law of nature it is permissible for men to cheat one another in the price of sale and purchase; but here’ permissible’ is used not in the sense of morally right, but with the meaning that no remedy exists against the man who in such a case chooses to defend himself on the basis of the agreement.

2.   In this passage, and elsewhere at times, the law of nature has been used to designate that which is everywhere the accepted custom.’ So in the writings of the Apostle Paul nature herself is said to teach that it is disgraceful for a man to wear long hair, though, nevertheless this is not repugnant to nature, and has been customary. among many nations. So the writer of the Book of Wisdom calls N” men, meaning only the worshiper of idols, ‘vain by nature,’ and the Apostle Paul alluded to those who are’ by nature the children of wrath,’ although he spoke not so much in his own person as in that of the Romans, with whom he was then living. Evenus, the ancient poet, says:

    That which you long think o’er will lasting be, O friend,
    And this I think is nature’s law for mortal men.

An ancient saying with the same meaning is found in Galen. ‘Habit is a second and acquired nature.’ With similar meaning Thucydides says: ‘Human nature is superior to laws.’ So the Greeks; call both virtues and vices ‘naturalized’ after they have become firmly rooted. In Diodorus Siculus we read: ‘Since necessity, that is, strength of mind, conquered nature.’ Thus when the jurist Pomponius had said that the Roman law did not allow a civilian to die both testate and intestate, he added that these things were by nature opposed to each other, though that rule is dependent on Roman customs alone and has no place among other peoples; and even among the Romans themselves it does not apply in the case of soldiers’ wills.

3.   However, the advantage of introducing the rules which I have mentioned is manifest for the termination of disputes which would be without number; which, furthermore, would be interminable on account of the uncertain price of things among persons who have no common judge, and which would be unavoidable if men were allowed to withdraw from agreements on account of inequality of terms. ‘This is the substance of purchase and sale,’ say the emperors – meaning by the word ‘substance” the lasting custom ‘that since the buyer desires to purchase at a cheaper price and the seller to sell at a higher price, they reach this agreement; and with difficulty after much bargaining, while the seller gradually lowers the sum which he had asked, and the buyer adds to his offer, they finally agree on a definite price.’

In accordance with this principle Seneca says: ‘What difference does it make how much they are worth, after the price has been agreed upon between the buyer and the seller? He who has gotten a good bargain owes nothing to the seller.’ Andronicus of Rhodes says, to the same effect: ‘A gain, which is made with the consent of the contracting parties, is neither unjust nor subject to suit. In pact, the law has granted permission for such transactions.’

4.   The writer of the life of Isidore, whom I mentioned further back, says that buying at less than a fair price or selling at more than a fair price is an injustice, which is permitted indeed by law, but which in fact destroys justice.

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