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chapter 11: Contracts and Quasi Contracts 1 - Gershom Carmichael, Natural Rights on the Threshold of the Scottish Enlightenment: The Writings of Gershom Carmichael 
Natural Rights on the Threshold of the Scottish Enlightenment: The Writings of Gershom Carmichael, ed. James Moore and Michael Silverthorne (Indianapolis: Liberty Fund, 2002).
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Contracts and Quasi Contracts1
[At p. 107 below, Carmichael rejects the distinction which Pufendorf offers between “agreements” (pacta) and “contracts” (contractus) according to which “contracts” are agreements which “deal with things and actions of commercial significance and which consequently rest on a presupposition of ownership and value in things” (Pufendorf, On the Duty of Man and Citizen, I.15.1, p. 97). Carmichael therefore merely makes some incidental remarks on value before proceeding to discuss contracts in detail. In discussing contracts he follows the order of exposition which was usual in accounts of this branch of Roman law, while amending specific doctrines in the light of natural law.]
For a thing to have value, the first requisite is this suitability, either real or imaginary [“to make a direct or indirect contribution to the needs of human life and to render it fuller and more agreeable” (Pufendorf)]; however the justification of the value is not the same as the reason for the suitability, as the author himself properly points out later. In general it can be said here that the value of things rests on two grounds, scarcity and difficulty of acquisition. And scarcity is estimated on the basis of two factors, the number of competitors for an object or service and its suitability to contribute to the use or pleasure of human life. See Grotius, II.XII.14. [I.14.3.i]
This method of defining value [“by men’s common valuation and assessment, or by the usage of the market together with the consent of those who are dealing with each other” (Pufendorf)] holds no less in the natural state than in the civil state, i.e., in both cases the value of things is determined on the one hand directly by an agreement between contracting individuals, on the other hand, unless a law of the commonwealth forbids it, by the usage of the marketplace. [I.14.5.i]
Agreements and contracts
[Pufendorf says: “In its general sense an agreement (pactum) is the consent and concurrence of two or more men to the same intent (placitum).” Carmichael comments:]
On this definition of Ulpian’s we have said enough on p. 80, where we have also pointed out that the term agreement (pactum) is usually used in the stricter sense for an act which consists of mutual consent and is obligatory on at least one side. We have also noted (at p. 81) that the same term is there taken in the strictest sense for an act which is obligatory on both sides, or at least for an act which is obligatory on at least one party and transfers some right from both parties. It is in this last mentioned sense that the term agreement should be taken, so that, in the division of the mutual obligatory act, it is directly opposed to free promise; here too it is most aptly taken in this sense. [I.15.1.i]
[Carmichael rejects Pufendorf’s distinction “between simple agreements and contracts.”]
The author could safely have omitted this distinction since, as it is understood by the jurists, it arises from a superfluous subtlety of Roman law, and (as Titius says) it obviously smells of the notary’s art.2 The author evidently felt this and does not explain the difference between these two things according to the maxims of Roman jurisprudence but rather by natural reason, though he seems to think that they come to more or less the same thing. But even as explained by the author the distinction is not of much use in itself, and does not square properly with the accepted application of these terms among the Roman jurists (for there may be innumerable agreements about things or actions occurring in commerce, which would not be called contracts by the nomenclature of the Romans, for example exchange of things by consent alone). Thus it seems more satisfactory to drop the distinction between bare agreements and contracts from natural jurisprudence altogether; under the influence of equity, the distinction has been eliminated in our day from the moral systems of most nations. [I.15.1.ii]
[Pufendorf classifies contracts as “gratuitous” and “onerous.”]
The author rightly expounds the differences between contracts as they are founded in nature, and drops the [Roman] distinctions of nominate and innominate contracts, as well as of contracts which are made by things, by words, by writing, and by consent alone.3 Once one removes the contrast between bare agreements and contracts, all these finicky distinctions converge of their own accord. Compare Grotius, II.XII.1–13. [I.15.2.i]
Remarks on specific contracts
[Carmichael comments on one type of “gratuitous contract,” namely, “loan for use,” typically going behind the legal technicalities to the principles of natural law:]
In accordance with the various definitions of the term various views are taken as to whether a loan for use (commodatum) should be said to be contracted only by the actual delivery of the object loaned or by the promise to deliver it; in either case this implies the obligation to return the object of the loan undamaged, and also involves the question whether a loan for use is a real or a consensual contract. We wish to apply the same question to the other contracts which the jurists call real contracts.4 It is in any case certain that by natural law mere consent, even without delivery, strictly binds the party giving the service to make the first performance, not only in the case of loans for use but also in the case of deposits and loans for consumption, i.e., it obligates the lender for use and the lender for consumption to deliver the object, and binds the depositee to accept the deposit. But mere consent produces no obligation to make subsequent performances, unless the other party shall have got the promised benefit, i.e., where the party taking the object for use or the borrower for consumption has accepted the object, or the depositor has delivered it. We are assuming here that the parties are entering into beneficial contracts properly so-called; the non-interest-bearing loan (mutuum) is usually of this kind, though the author applies this term indiscriminately also to the onerous kind of loan.5 For on the other hand, if the advantage of both parties is in view from the beginning, as in the case in which there is an agreement in the loan about paying interest, or if, as sometimes happens, it is a mixed transaction, of loan for use and deposit, or of loan for consumption and irregular deposit,6 both of the contracting parties can be obligated by mere consent. [I.15.6.i]
[“If the object loaned should be destroyed while in the hands of the borrower,” Pufendorf says, “it seems fair that the borrower should pay the value of the thing.” Carmichael characteristically broadens the scope of the issue:]
This seems rather fairer than that the whole risk arising from pure chance of the object loaned should lie with the owner (as the civil laws hold, Institutes, III.15.2).7 For we should not readily assume that the owner intended his kindness to involve him in loss beyond what the nature of the contract requires. We must in any case reject the view of the celebrated Wernher, who argues, in his Elements of the Law of Nature and of Nations,8 that this question does not belong to natural law, and that many other questions about cases which occur frequently in human life and can easily happen in places where they are defined neither by positive laws nor by conventions, do not belong to the law of nature. For one may not believe that where men are in a state of nature with each other, God has not given them a rule by which disputes of this kind may be settled, but has left them to be decided by force of arms on both sides. We admit however that most questions of this kind about the interpretation of contracts, where it is not satisfactorily defined either by positive law or by accepted custom, are most suitably met by the contracting parties themselves by means of an explicit agreement on those articles. [I.15.6.iii]
Legitimate chance and gambling
[Pufendorf: “there are several contracts which involve chance.” Carmichael comments:]
These too are usually “onerous.” Some of them yield certain expectations and some uncertain expectations; the latter may be brought closer to the former so that they will not deserve the reproach of unfairness.
But it is for other reasons, I think, that we should condemn contracts in which the only effect is to make something which was not previously an object of doubtful dispute dependent on the simple hazard of chance. For above all they bring no benefit to mankind and daily give rise to many evils, and take men away from more honorable methods of increasing their estate which would be more useful to the country and less risky for themselves. And of course, as it is vile and dishonorable to set out to enrich oneself at others’ expense without deserving it, so the ingenious author of the Art of Thinking, IV.16, has rightly noted how deceptive and vain is the hope that entices men into making contracts of this kind.9 It is proper therefore that gambling (and all games in which the contest is for a stake) should be moderate, so that the stake is proportionate to the ability of the parties to pay, and the object of the bet is such that the outcome may be directed, or at least foreseen with probability, on the basis of the strength or skill of the contestants. [I.15.13.i]
Debt in natural law and theology
[In this section on one man’s standing as surety for another man’s borrowing, Pufendorf says that the surety is “more strictly bound than the principal debtor.” Carmichael illustrates this:]
A surety, for example, may be held to the pledges he has given in the court of the land or by his oath in the court of heaven, even though the principal debtor may perhaps not be bound in either way. But insofar as he owes more than the principal debtor either in amount or time or place or cause, he is not properly a surety. Hence I cannot agree with the note of the celebrated Barbeyrac on this passage.10 [I.15.14.i]
Among theologians who have crossed the boundaries of jurisprudence and among jurists who have returned the favor to theology, the question has been much debated, whether, before the price of redemption had been paid, Christ our Lord had the position simply of a surety (fidejussor) or whether it was actually that of a substitute debtor (expromissor).11 The second alternative has been proved by most lucid arguments to be correct by, among many others, the celebrated Ulrich Huber, much missed in the world of learning, in his golden treatise On the Rights of Civil Society.12 [I.15.14.ii]
The standards of care
[Pufendorf says that a creditor must treat a pledge with “no less care than he gives to his own property.” Carmichael takes the opportunity to expound a standard topic of Roman law:]
That is, no less than he owes to his own property. The creditor is therefore bound to look after the object pledged in the manner of a good and diligent head of a household. He should do so in accordance with the rule affirmed by natural no less than civil law: where a contract, by force of which a thing is in the custody, or natural possession, of another person, is for the advantage of both parties, as in rental and pledge, moderate care is required of the kind which any diligent head of a household is accustomed to bestow on his own property, and the corresponding light fault is applicable. Where a contract is for the advantage only of the possessor, as in loan for consumption, the most scrupulous diligence is required, and consequently in this case lightest fault, which corresponds to that degree of diligence, should be applied. Where finally, a contract is for the advantage not of the possessor but of the other party, as in deposit, a less strict diligence is adequate, provided it is as great as the possessor is accustomed to give to his own similar property, or (as the civil jurists have determined, because this definition has difficulties) as much diligence as sensible people are accustomed to show to their own property; and here therefore, apart from fraud which is applicable in every contract, only gross fault needs to be applied; gross fault corresponds to the lowest degree of diligence and is equivalent to fraud. [I.15.15.iii]
ii. On quasi contracts13
[There is a brief treatment of the Roman doctrine of quasi contracts at Justinian, Institutes, III.27. Quasi contracts are essentially situations in which one party has an obligation to another party not on the ground of a prior agreement. In Roman law such an obligation would arise, for example, if a person incurred expense in protecting another’s property in an emergency without his knowledge; the obligation to compensate him was said to be quasi ex contractu. Another kind of case was the obligation to return something if it was paid to you by someone who mistakenly believed that he owed it to you. Quasi contract was a restricted category in Roman law of miscellaneous cases, where there was obviously an obligation but which did not rise from a contract: it was “like a contract,” though not actually a contract. Carmichael’s treatment follows the restricted Roman understanding of quasi contracts and distinguishes them carefully from tacit contracts. There is another kind of obligation which some Romanists and natural law writers seem to have included in quasi contract in early modern times, namely the obligation to make compensation or even pay a penalty for delictual activity, where the compensation or penalty is seen as payment of a debt incurred by the wrongdoer. Carmichael does not give quasi contracts such a wide scope.]
1. In the note at pp. 77–80 above, we said that the particularly natural mode of contracting obligations, or, what is the same thing, of creating personal rights, is the mutual consent of the person who is obligated and of the person by whom the corresponding personal right is acquired. But this is not the only means by which obligations and their corresponding rights are created. This is clear from what was said above on compensation for loss (pp. 73–74), which comes to be due simply by the infliction of damage; on the right of harming unjust aggressors and those who oppose the satisfaction of our right (pp. 69–71), which is founded in the continuing wrong itself; on the obligation to return an object, which arises from present possession of another person’s property, and the obligation to restore residual benefits, which arises from past possession of another’s property.
2. In addition to these, there are also other acts by which, without the concurrent consent of both parties, obligations can be and are commonly made. These are obligations which are founded in an obvious equity which it is presumed that the parties who benefit do not repudiate or at least would not repudiate, if they were aware of the situation. They are usually classified by jurists as quasi contracts. Quasi contracts must not be confused with tacit contracts. In tacit contracts consent is argued to have occurred in actual fact on the basis of some action or nonaction; but in quasi contracts consent is pretended for the sake of equity.14
3. Obligations of this kind can pretty well be reduced to two classes: they are contracted either by involving oneself in someone else’s affairs as such or in affairs which involve obligation to another in some way, or by obtaining some substantial benefit at someone else’s expense which was neither given nor agreed.
4. In the former class, if a man has managed the property of someone who is absent and unaware of his action or of someone who is present but by some defect of judgment incapable of giving consent, he incurs the obligation to give an account to the owner of what he has done, and to restore any property of his that he holds, and also to compensate for loss inflicted by his own fault (which will be differently estimated according to the circumstances); the relevant actions in civil law are the direct actions for management of affairs and guardianship.
5. To the same class belongs the obligation by which an heir, after entering explicitly or implicitly upon his inheritance, is bound to satisfy the creditors and legatees of the deceased, to the extent of the inherited estate. It is no objection that the civil jurists include only the obligation of the heir toward the legatees under quasi contract, considering that the heir with respect to the creditors is the same person with the deceased. This, I say, is no objection to what has been said, so long as the heir, because he maintains the person of the deceased, is bound to fulfill his obligations from the estate; i.e., the creditors gain no right against the heir from any other source than from his entering upon the inheritance.
6. In the latter class we include the obligation by which, when someone has incurred necessary expenses for preserving in their proper condition the property or rights of a person who is absent or unable to consent because of defect of judgment, that person is bound to give full reimbursement to the other of those expenses. (These expenses naturally include losses suffered in his own property for this reason.) And the other party must really possess those things or use those rights, for whose preservation the expenses were incurred. He is also obliged to refund expenses usefully spent by another on his property, to the extent that he has become richer by it. The counteractions of administration of affairs and of guardianship are available for enforcing this obligation (which has been applied in different cases, variously enlarged or restricted, as the interest of society has been thought to require). In the case of guardianship, this obligation is based not only on the common consideration of equity, which is equally applicable in administration of affairs, but also in the explicit or presumed will of the person who passed the property to the ward, in which the ward seems to acquiesce when he becomes an adult by entering into possession of the property. The ward is also obliged to indemnify others with whom the guardian has contracted in the ward’s name, at least indirectly, insofar as he is bound to indemnify the guardian for anything that he has done which is useful. Moreover the ward is obligated to the guardian not only for what he has properly and prudently spent on his property, but also for his outlays on his person, i.e., expenses incurred in feeding the ward and giving him a suitable education. This applies also to retarded or insane persons with respect to their caregivers for the cost of their maintenance and, I would add, their supervision.
7. But what obligation shall we say is due from a dependent15 to the person who raised him, from whom he received sustenance and a suitable education in his early years when he had nothing of his own. I find that this obligation has up to now been very differently regarded in different cases in both positive law and custom. In the case of free-born persons it has almost no effect, except that children (for we count children, when brought up by their parents, as alumni) are commanded by the civil laws to look after destitute parents. On the other hand it is quite wrong to extend this obligation to the case of slaves born in the household, to keep them in perpetual servitude; for it will be made clear below (pp. 143–45) that this is the only ground that can plausibly serve as a pretext for perpetual hereditary servitude. Subject to the opinion of wiser men, I think that this obligation (perfect by natural law) is based on the ground of refunding the necessary expenses of maintaining an alumnus through his early years and of educating him to be a fit member of human society. I say necessary, since exaggerated expenditure, made for reasons of rank or show, should not be included. Thus on the one hand it is quite out of line with the love and duty expected of parents to enter into a strict calculation of accounts with their children, unless they were utterly ungrateful, since, as well as giving them a suitable education, they should do what parents normally do and establish their fortunes as far as their resources allow, and bequeath to them, as their nearest and dearest, what remains to them of their property when they die (unless there is a special reason not to). But at the same time I would think that even when children receive no other patrimony from their parents, it is still a kind of free and unselfish gift that they are not required to refund the expenses which had to be made for their upbringing and education. In the case of slaves born in the household the obligation to refund expenses extends no further, as I shall make clear below (pp. 143– 45), and does not provide a foundation for perpetual servitude.
8. The obligation of someone who has used the privilege of necessity in the case of another man’s property also belongs to this same second class (which our author discusses at On the Duty of Man and Citizen, I.5.23 and 24). So does the obligation of someone who has accepted something which was not owed as if it were owed, or (which is the same thing by natural law) has accepted something on the basis of an agreement to which a legitimate counterclaim could be opposed, or finally, has accepted something on condition of his paying a thing or doing a service which he did not subsequently honor. Thus all of these are equally obligated to make restitution.
9. Where the property of several persons has been made common without a contract, mutual obligations arise from the fact that one person alone has managed the common property or alone incurred necessary expenses on it. The obligation of this man toward the others seems to belong to the former of the two classes mentioned above, while the obligation of the rest toward him seem to belong to the latter class. But the obligation to accept a division, which arises by itself from the actual holding in common of a thing which is really not suited to be held in common, seems to have its own rather different character.
10. Finally, obligations which bind someone other than the person through whom they were contracted (which are discussed at Justinian, Institutes, IV.7) so far as they are part of natural law, are to be resolved either into a true contract, if someone has made a contract by the order of and in the name of another, or, if not, into a case of management of affairs. There are exceptions in certain cases in which the obligations should rather be said to concern the party with whom the other has contracted only indirectly, insofar as the person who is ultimately obligated is bound on the basis of mandate or of management of affairs16 to restore the losses of the other party through whom the obligation was contracted.17
[1.] From the notes to bk. I, ch. 14, “On Value”; and bk. I, ch. 15, “On Contracts Which Presuppose Value in Things and on the Duties They Involve”; also Supplement IV, “On Quasi Contracts.”
[2.] Titius, Observationes, no. 354.
[3.] For these distinctions see Justinian, Institutes, III.13 ff; and Pufendorf, Of the Law of Nature and Nations, V.II.6–7, pp. 473–74.
[4.] The four so-called real contracts are loans for use, for consumption, for deposit, and for pledge.
[5.] A mutuum is a “loan for consumption” (e.g., an apple), as distinct from a commodatum,“loan for use” (e.g., a tool). Both are essentially noninterest bearing.
[6.] An “irregular” deposit is a deposit in which the depositee has the right to make use of the object.
[7.] Apparently a reference to Justinian, Institutes, II.14.2.
[8.] J. B. von Wernher, Elementa Iuris Naturae et Gentium.
[9.] A. Arnauld and P. Nicole, La Logique ou l’art de penser. See part IV, ch. XVI.
[10.] Devoirs, pp. 373–74, and Pufendorf, Of the Law of Nature and Nations, V.X.10– 11. Barbeyrac contended that the principal debtor remained obliged to repay his debt; that the surety remained such even if he had contracted to pay more than the debtor; for the creditor might not have agreed to the contract without this assurance. Both Barbeyrac and Carmichael were reacting, on grounds of natural law, against those Roman jurists who held that if the surety had contracted for a sum larger than the amount of the principal debt, the obligation of the surety might be voided (Pufendorf, Of the Law of Nature and Nations, V.X.9, n. 9).
[11.] A surety (fidejussor) guarantees the debt of a debtor; a substitute debtor (expromissor) takes the debt upon himself, thus releasing the original debtor from obligation toward the creditor.
[12.] Huber, De Jure Civitatis, I.IV.6, pp. 127–38, argued that if Christ were merely surety (fidejussor) for the debt owed to God, he would not be God; as substitute debtor (expromissor), he has himself made the promise (of redemption) and thus reveals himself to be God. See Moore and Silverthorne, “Protestant Theologies,” p. 185.
[13.] Supplement IV.
[14.] In contrast to Carmichael, Barbeyrac found no place at all for quasi contracts in his jurisprudence: “This sort of Consent is of no use nor necessity in Civil Life; and the lawyers invented it only to found certain Obligations upon, for which they could not see any true Principles” (Pufendorf, Of the Law of Nature and Nations, III.VI.2, n. 3 [1717 edition], cited in Birks and McLeod, “Implied Contract Theory of Quasi-Contract,” p. 67).
[15.] “Dependent” represents alumnus, which is used by Carmichael here for a child, whether slave or free, who is being raised by an adult, who may or may not be his biological parent.
[16.] Mandate (mandatum) was an actual contract, not a quasi contract: it was “a consensual contract, by which one party gratuitously undertook a commission for the other”; however, “management of affairs” (negotiorum gestio) was a quasi contract.
[17.] Carmichael’s Supplement on quasi contracts was taken up by later philosophers of the Scottish enlightenment in a variety of contexts. Francis Hutcheson employed this idea to expand upon the obligations of children to their parents, of orphans to their adoptive parents, and of later generations of citizens to the original contract of government entered into by their ancestors (Hutcheson, A Short Introduction, II.14, pp. 223–27; III.2, pp. 269–70, and III.5, pp. 286–87). Thomas Reid used the notion of implied contract to explain a wide range of social obligations, including the relationship which ought to prevail between citizens and governments (Practical Ethics, pp. 70 ff., 237–46, 401–8).