Letting and hiring

Part 18

Letting and hiring, as Caius has justly said, come nearest to selling and buying, and are regulated by the same principles.

For the price corresponds to the rent or hire, and the property of a thing to the liberty of using it. Wherefore as an owner must bear the loss of a thing that perishes, so a person hiring a thing or renting a farm must bear the loss of all ordinary accidents, as for instance, those of barrenness or any other cause, which may diminish his profits.32 Nor will the154 owner, on that account, be the less entitled to the stipulated price or rent, because he gave the other the right of enjoyment, which at that time was worth so much, unless it was then agreed that the value should depend upon such contingencies.

If an owner, when the first tenant has been prevented from using a thing, shall have let it to another, all the profits accruing from it are due to the first tenant, for it would not be equitable that the owner should be made richer by what belonged to another.

Part 19: The lawfulness of taking interest for the use of a consumable thing

The arguments brought against which appear by no means such as to command our assent.

For as to what is said of the loan of consumable property being a gratuitous act, and entitled to no return, the same reasoning may apply to the letting of inconsumable property for hire, requiring a recompence for the use of which is never deemed unlawful, though it gives the contract itself a different denomination.

Nor is there any more weight in the objection to taking interest for the use of money, which in its own nature is barren and unproductive. For the same may be said of houses and other things, which are unproductive and unprofitable without the industry of man.33

There is something more specious in the argument, which maintains, that, as one thing is here given in return for another, and the use and profits of a thing cannot155 be distinguished from the thing itself, when the very use of it depends upon its consumption, nothing more ought to be required in return for the use, than what is barely equivalent to the thing itself.

But it is necessary to remark, that when it is said the enjoyment of the profits of consumable things, whose property is transferred, in the use, to the borrower or trustee, was introduced by an act of the senate, this does not properly come under the notion of Usufruct, which certainly in its original signification answers to no such right. Yet it does not follow that such a right is of no value, but on the contrary money may be required for surrendering it to the proprietor. Thus also the right of not paying money or wine borrowed till after a certain time is a thing whose value may be ascertained, the delay being considered as some advantage. Therefore in a mortgage the profits of the land answer the use of money. But what Cato, Cicero, Plutarch and others allege against usury, applies not so much to the nature of the thing, as to the accidental circumstances and consequences with which it is commonly attended.34

Part 20

There are some kinds of interest, which are thought to wear the appearance of usury, and generally come under that denomination, but which in reality are contracts of a different nature.

The 5 shillings commission which a banker, for instance, charges upon every hundred pounds, is not so much an interest in addition to five per cent, as a compensation for his trouble, and156 for the risk and inconvenience he incurs, by the loan of his money, which he might have employed in some other lucrative way. In the same manner a person who lends money to many individuals, and, for that purpose, keeps certain sums of cash in his hands, ought to have some indemnity for the continual loss of interest upon those sums, which may be considered as so much dead stock. Nor can any recompence of this kind be branded with the name of usury. Demosthenes, in his speech against Pantaenetus, condemns it as an odious act of injustice, to charge with usury a man, who in order to keep his principal undiminished, or to assist another with money, lends out the savings of his industry and frugal habits, upon a moderate interest.

Part 21

Those human laws, which allow a compensation to be made for the use of money or any other thing, are neither repugnant to natural nor revealed law. Thus in Holland, where the rate of interest upon common loans was eight per cent, there was no injustice in requiring twelve per cent of merchants; because the hazard was greater. The justice and reasonableness indeed of all these regulations must be measured by the hazard or inconvenience of lending. For where the recompence exceeds this, it becomes an act of extortion or oppression.

Part 22

Contracts for guarding against danger, which are called insurances, will be deemed fraudulent and void, if the insurer knows beforehand that the thing insured is already safe, or has reached its place of destination, and the other party that it is already destroyed or lost. And that not so much on account of the equality naturally requisite in all contracts of exchange, as because the danger and uncertainty is the very essence of such contract. Now the premium upon all insurances must be regulated by common estimation.35

Part 23

In trading partnerships, where money is contributed by both parties; if the proportions be equal, the profits and the losses ought to be equal also. But if they be unequal, the profits and the losses must bear the same proportion, as Aristotle has shewn at the conclusion of the eighth book of his Ethics. And the same rule will hold good where equal or unequal proportions of labor are contributed. Labor may be given as a balance against money, or both labor and money may be given, according to the general maxim that one man’s labour is an equivalent for another man’s money.

But there are various ways of forming these agreements. If a man borrows money to employ his skill upon in trading for himself, whether he gains or loses the whole, he is answerable to the owner for the principal. But where a man unites his labor to the capital of another in partnership, there he becomes a partner in the principal, to a share of which he is entitled. In the first of these cases the principal is not compared as a balance against the labor, but it is lent upon terms proportioned to the risk of losing it, or the probable gains to be derived from it. In the other case, the price of labour is weighed, as it were, against the money, and the party who bestows it, is entitled to an equivalent share in the capital.

What has been said of labour may be applied to voyages, and all other hazardous undertakings.

For it is contrary to the very nature of partnerships for any one to share in the gain, and to be exempt from the losses. Yet it may be so settled without any degree of injustice. For there may be a mixed contract arising out of a contract of insurance in which due equality may be preserved, by allowing the person, who has taken upon himself the losses, to receive a greater share of the gain than he would otherwise have done. But it is a thing quite inadmissible that any one should be responsible for the losses without partaking of the gains; for a communion of interests is so natural to society that it cannot subsist without it.

What has been said by writers on the civil law, that the shares are understood to be equal where they are not expressly named, is true where equal quotas have158 been contributed. But in a GENERAL partnership the shares are not to be measured by what may arise from this or that article, but from the probable profits of the whole.

Part 24

In naval associations the common motive of utility is self-defence against pirates: though they may sometimes be formed from less worthy motives. In computing the losses to be sustained by each, it is usual to estimate the number of men, the number of ships, and the quantity of merchandise protected. And what has hitherto been said will be found conformable to natural justice.

Part 25

Nor does the voluntary36 law of nations appear to make any alteration here. However, there is one exception, which is, that where equal terms have been agreed upon, if no fraud has been used, nor any necessary information withheld, they shall be considered as equal in an external37 point of view. So that no action can be maintained in a court for such inequality. Which was the case in the civil law before Dioclesian’s constitution. So among those, who are bound by the law of nations alone, there can be no redress or constraint on such account.38

This is the meaning of what Pomponius says, that in a bargain and sale, one man may NATURALLY overreach another: an allowance which is not to be construed, as a right, but is only so far a permission, that no legal remedy can be used against the person, who is determined to insist upon the agreement.

In this place, as in many others, the word natural signifies nothing more than what is received by general custom. In this sense the Apostle Paul has said, that it is naturally disgraceful for a man to wear long hair; a thing, in which there is nothing repugnant to nature, but which is the general practice among some nations. Indeed many writers, both sacred and profane, give the name of NATURAL to what is only CUSTOMARY and HABITUAL.