Contracts and Exchangeby Hugo Grotius
In all contracts, natural justice requires that there should be an equality of terms.
The aggrieved party can have an action against the other for overreaching him.
This equality consists:
- partly in the performance
- partly in the profits of the contract
This applies to all the previous arrangements, and to the essential consequences of the agreement.
Part 9: The equality of terms previous to the contract
A seller is bound to discover to a purchaser any defects in a thing offered for sale. This rule is established by civil laws and is conformable to natural justice.
This is because the agreement between contracting parties are even stronger than the agreement on which society is founded.
This is why Diogenes the Babylonian said, it is not every degree of silence, which amounts to concealment; nor is one person bound to disclose every thing, which may be of service to another.
Thus for instance, a man of science is not strictly bound to communicate to another that knowledge, which might redound to his advantage.
For contracts, which were invented to promote a beneficial intercourse among mankind, require some closer and more intimate connection than bare good-will to enforce their obligation. Upon which Ambrose has justly remarked, “that, in contracts, the faults of things exposed to sale ought to be made known, of which unless the seller has given intimation, though he may have transferred the right of property by sale, yet he is liable to an action of fraud.”
148 But the same cannot be said of things not coming under the nature of contracts. Thus if any one should sell his corn at a high price, when he knows that many ships laden with grain are bound for that place, though it would be an act of kindness in him to communicate such intelligence to the purchasers, and though no advantage could be derived to him, from withholding the communication, but at the expence of charity, yet there is nothing unjust in it, or contrary to the general rules of dealing. The practice is vindicated by Diogenes in the passage of Cicero alluded to, he says, “I carried my commodities and offered them to sale, in selling them I demanded no greater price than others did; if the supply had been greater I would have sold them for less, and where is the wrong done to any one?” The maxim of Cicero therefore cannot generally be admitted, that, knowing a thing yourself, to wish another, whose interest it is to know it also, to remain ignorant of it, merely for the sake of your own advantage, amounts to a fraudulent concealment.
By no means; for that only is a fraudulent concealment which immediately affects the nature of the contract: as for instance, in selling a house, to conceal the circumstance of its being infected with the plague, or having been ordered by public authority to be pulled down. But it is unnecessary to mention, that the person, with whom a seller treats, ought to be apprised of every circumstance attending the thing offered for sale; if it be lands, whether the tenure be subject to a rent-charge, or service of any kind, or be entirely free.
Nor is the equality that has been explained confined solely to the communication of all the circumstances of the case to the contracting parties, but it includes also an entire freedom of consent in both.
In the principal act itself, the proper equality requires that no more should be demanded either party than what is just. Which can scarce have a place in gratuitous acts. To stipulate for a recompence in return for a loan, or for the service of labour or commission is doing no wrong, but constitutes a kind of mixed contract, partaking of the nature of a gratuitous act, and an act of exchange.
In all acts of exchange, this equality is to be punctually observed. Nor can it be said that if one party promises more, it is to be looked upon as a gift.
For men never enter into contracts with such intentions,149 nor ought the existence of such intentions ever be presumed, unless they evidently appear. For all promises or gifts, in these cases, are made with an expectation of receiving an equivalent in return. “When, in the words of Chrysostom, in all bargains and contracts, we are anxious to receive MORE and give LESS than is due, what is this but a species of fraud or robbery?”
The writer of the life of Isidorus in Photius, relates of Hermias, that when any thing, which he wished to purchase was valued at too low a rate, he made up the deficiency of the price, thinking that to act otherwise was a species of injustice, though it might escape the observation of others. And in this sense, may be interpreted the law of the Hebrews.
Sometimes, nothing is concealed in a contract.
Yet there may be some inequality without any fault in either of the parties.
For instance, there might be some unknown defect in the thing, or there might be some mistake in the price.
Yet, in such cases, to preserve that equality, which is an essential requisite in all contracts, the party suffering by such defect or mistake, ought to be indemnified by the other. For in all engagements it either is, or ought to be a standing rule, that both parties should have equal and just advantages.
It was not in every kind of equality that the Roman law established this rule, passing over slight occasions, in order to discourage frequent and frivolous litigation. It only interposed its judicial authority in weighty matters, where the price exceeded the just value by one half.
Laws indeed, as Cicero has said, have power to compel, or restrain men, whereas philosophers can only appeal to their reason or understanding. Yet those, who are not subject to the power of civil laws ought to comply with whatever reason points out to them to be just: So too ought they, who are subject to the power of human laws, to perform whatever natural and divine justice requires, even in cases, where the laws neither give nor take away the right, but only forbear to enforce it for particular reasons.
There is a certain degree of equality, too, in beneficial or gratuitous acts, not indeed like that prevailing150 in contracts of exchange, but proceeding upon a supposition of the hardship, that any one should receive detriment from voluntary services, which he bestows. For which reason a voluntary agent ought to be indemnified for the expence or inconvenience, which he incurs, by undertaking the business of another.
A borrower too is bound to repair a thing that has been damaged or destroyed. Because he is bound to the owner not only for the thing itself, by virtue of the property which he retains in it, but he owes a debt of gratitude also for the favour of the loan; unless it appears that the thing so lent would have perished, had it even remained in possession of the owner himself.
In this case, the owner loses nothing by the loan. On the other hand, the depositary has received nothing but a trust. If the thing therefore is destroyed, he cannot be bound to restore what is no longer in existence, nor can he be required to make a recompence, where he has derived no advantage; for in taking the trust he did not receive a favour, but conferred one.
In a pawn, the same as in a thing let out for hire, a middle way of deciding the obligation may be pursued, so that the person taking it is not answerable, like a borrower, for every accident, and yet he is obliged to use greater care, than a bare depositary, in keeping it safe. For though taking a pledge is a gratuitous acceptance, it is followed by some of the conditions of a contract.
All these cases are conformable to the Roman law, though not originally derived from thence, but from natural equity. Rules, all of which may be found among other nations. And, among other works, we may refer to the third book and forty-second chapter of the Guide for doubtful cases, written by Moses Maimonides, a Jewish writer.
Upon the same principles the nature of all other contracts may be explained; but the leading features in those of certain descriptions seemed sufficient for a treatise like the present.