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CHAPTER XIII: Of the Several Sorts of Contracts. - Francis Hutcheson, Philosophiae moralis institutio compendiaria with a Short Introduction to Moral Philosophy [1747]

Edition used:

Philosophiae moralis institutio compendiaria with a Short Introduction to Moral Philosophy, edited and with an Introduction by Luigi Turco (Indianapolis: Liberty Fund, 2007).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


CHAPTER XIII

Of the Several Sorts of Contracts.

I. Contracts are divided into the beneficent and onerous: in the former some advantage is gratuitously designed for one of the parties; in the later the interest of both is equally regarded, and the parties profess to transfer mutually things [good or labours] of equal value [price].

There are three species of beneficent contracts,{* } <mandate or> commission undertaken gratuitously, <commodatum or> gratuitous loan for use, and <deposit or> gratuitous custody of the goods of others <among which we may count mutuum gratuitum>.

<In mandate, that is> “in undertaking gratuitously to manage the business of others by their commission,” if they have prescribed a particular manner of executing it, we are obliged to follow their orders; or if we depart from them we are liable to compensate what damage thence arises. Where the matter is left to our prudence; we are deemed bound to use such care as a wise man uses in like matters of his own, nor are we liable for every accident which might possibly have been prevented by the utmost care; unless we have expressly undertaken for the utmost diligence, or the high nature of the business plainly required it; or we have obtruded ourselves officiously, when others more capable might have been obtained.1

We must observe this about all beneficent contracts, that he who intends a favour to others, is not deemed to undertake an higher obligation than he expressly consents to, or than the nature of the business commonly requires: but the person on whom the favour is conferred, out of gratitude should deem himself more strictly bound, and make good all losses occasioned by any {the lightest} fault of his; that none may have occasion to repent of their intended favours to him.

II. <Commodatum or gratuitous loan for use is a contract by which one gratuitously allows another the use of any of his goods. It> {The gratuitous loan for use where the very same goods are to be restored} binds the borrower (1) to the highest care and to make good all losses occasioned by any negligence of his: (2) nay also to make good such accidents as the goods had escaped had they remained with the lender, except he generously remit his claim: nor (3) can the borrower take any other use than the lender granted: and (4) he ought to restore them in good order at the time agreed, no further impaired than they must be by the use allowed. (5) Nay humanity would oblige to restore them sooner if the owner needs them; or {if we need them more and keep them,} to make good the loss he sustains by wanting them.

The gratuitous lender is to refund any expences made upon the goods lent, except such as are ordinarily requisite in the use of them; or at least to refund the value of any improvements made upon them as far as they are bettered for his purposes, and so he is inriched. The civilians distinguish between this contract and <mutuum gratuitum or> a loan for consumption, in which the same individual goods are not to be restored, but equal quantities, weights or measures <of goods of the same kind, called res fungibiles>.2

III. <Deposit, which is a sort of mandate, is “a contract, by which one undertakes gratuitously to keep the goods of another, by his commission.” It> {Depositing of goods for gratuitous custody,} obliges the keeper to such diligence as a wise man uses in keeping like goods of his own, and to make good any losses by any gross negligence of his. He ought to make no use of them without the owner’s consent, and restore them when demanded; except it be for such purposes [crimes] wherein he might have a right by force to resist the owner. And he justly insists to be indemnifyed as to all expences wisely employed for preservation of the goods.{* }

<In these contracts, as also in guardianship and in managing business, the primary objective is obtained by distinguishing between actiones directae, such as legal actions against the person undertaking a commission to get compensation for damages arising from his undertaking, or against the lender or the custodian for restoration of goods loaned or kept; and actiones contrariae for compensation for damages and expenses borne by mandatarius, lenders or keepers.>

IV. In the honorous contracts, or these for valuable consideration, the parties profess or undertake to transfer mutually goods <corporeal or uncorporeal things, as civilians say> or rights of equal value. And therefor honest men should conceal nothing, or give no false representations about the qualities estimable in such goods, or their defects: and when they inadvertently have departed from equality, according to the judgment of a wise arbiter, he who had less value than he gave, should have something further paid him till the contract be brought to equality; and this he has a perfect right to demand; tho’ no courts of justice could have time to give redress to every little iniquity in such matters.

Mutual donation is not to be reckoned among onerous contracts, as in it there is no regard had to equality between the things mutually given.

From what we said about the grounds of price, ’tis plain that in estimating the values of goods {in any place}, we are not only to compute the disbursment made in buying, importing, and keeping them safe, with the interest of money thus employed; but also the pains and care of the merchant; the value of which is to be estimated according to the reputable condition in which such men live, and to be added to the other charges upon the goods. This price of the merchant’s labour <and care> is the foundation of the ordinary profit of merchants. But as goods exported or imported are subject to many accidents, by which they may even perish altogether; this is a natural reason for advancing the price of such goods as are safe. And as merchants are liable to losses when the prices of such goods, as they are well stored with, by any unexpected plenty happen to fall; to make good such casual losses they have a right to take a larger profit, when the goods they are well stocked with happen by any accidental scarcity of them to rise in their prices.3

V. These are the principal onerous contracts.4 1. Barter or exchanging goods for goods. 2. Buying and selling <or exchanging goods for money>; the simplest form of which is at once paying the money and receiving the goods. If ’tis agreed that the goods are to be delivered on some future day, the price being previously paid, or such security given for it as the seller accepts; before the day fixed the seller must run the hazard of what accidents befal the goods; but after the day, if the seller was ready then to deliver them, he is only in the case [position]5 of one with whom they were deposited; as he would have been from the first if he was then ready to deliver them.{* }

<Many agreements and conditions may be added to buying and selling; such as addictio in diem or a provisional sale, in which payment is delayed until some future day; before the fixed day the buyer or the seller has the right to accept any better offer; if there is none, they are bound by the contract. Another is lex commissoria or the forfeiture clause, by which, if the price is not paid before the fixed day, the contract is void. Likewise lex item retractus or agreement about return6 is well known. Finally jus protimesios, by which if the buyer wishes to re-sell the good, the former owner has the precedence over other buyers at equal prices. Goods sold sub hasta or in auction are given to the best bidder among many>.

Sometimes men purchase no certain goods but an hazard, or some advantage upon a contingency [but an expectation of goods uncertain]. In such contracts <the necessary> equality may be preserved if the price is abated below the real value of the advantage in a just proportion to the hazard of our gaining no advantage at all.7

VI. In location, or setting to hire, for a certain price we allow one the use of our goods, or our labour. The setter should make the goods fit for use, and uphold them so; and the hirer is bound to use them as discreet men use like goods of their own, and to make good any losses occasioned by any gross negligence of his. If the goods perish without any fault of his, he is no longer liable for the price of the hire than he had the use of them: or if without his fault they become less fit for use, he may insist on an abatement of the price or rent. But as in lands all the profits of a plentiful year fall to the tenant, so he must bear the casual losses of a less fortunate one. Indeed the rarer cases of extraordinary calamities, such as of wars, inundations, pestilence, seem to be just exceptions; as the tenant cannot be presumed to have subjected himself to rents in such cases.{* } {And in most of contracts the agreements of parties alter the obligations.}

<One who has contracted for a piece of work and received another’s material, is bound to such diligence as a wise man uses in keeping like goods of his own, and to make good any losses by any gross negligence of his.> One who is hired for a certain piece of work, if he is hindered from it by any accident, has no claim for the hire. But when one hires a person by the year, or for a longer time, the hirer seems bound to bear the loss occasioned by any such short fits of sickness as the most firm constitutions are subject to, nor can he on that account make any deduction from the price agreed upon.

VII. In loans for consumption,{* } we don’t expect the same individual goods, but equal quantities by weight or measure.8 If the loan is not designed as a favour, there’s a right to demand interest. <Money is the most fungible thing.> {Nor is it necessary to make interest lawful that the goods lent be naturally fruitful: for} tho’ money {for instance} yields no natural increase; yet as by it one may purchase such goods as yield increase; nay by employing it in trade {or manufactures} may make a much higher gain; ’tis but natural [not unjust at all] that for such valuable advantages accruing to us by the loan, we should give the owner of the money some price or recompence proportioned to them. The prohibition of all loans for interest would be destructive to any trading nation, tho’ in a democracy of farmers, such as that of the Hebrews was, it might have been a very proper prohibition.

The just interest of money is to be determined according to the quantity of wealth employed in trade. Where there’s a small quantity of money in a nation, and consequently all goods very cheap, a great profit is made by any small sums employed in trade with foreigners. And therefor a great interest may well be paid. But where much money is employed in trade, a smaller profit is made on each sum thus employed, as the prime cost of goods is high; and therefor a smaller interest can be afforded for it. If civil laws settling interest don’t regard these natural causes, they will not have their effect.

The <rights and> obligations in the contracts of partnership are abundantly known by <the agreements of the partners and> the rules of arithmeticians.

VIII. We said above that contracts about hazards may maintain the just equality: and some of them are of great use in society, these particularly which ensure against shipwreck, robbery, or fire: as by their means many active industrious hands have their stocks preserved to them, which otherways had perished. These contracts seem of the same effect with a humane and salutary partnership among multitudes to share among them any losses may happen; since ’tis by the premiums paid by those whose goods are safe that the ensurers are enabled to make good the losses of the unfortunate.

Nor is there any thing blameable in this that a large number for diversion contribute to purchase any piece of goods, and then cast lots who shall have it: provided none of them expose to such hazards so large a portion of their goods that the loss of it would occasion any distress to themselves or families.

The same may be said of wagering, and of various games in which there’s hazard; which are not always blameable on the account of the hazard, or of any inequality. But then there is nothing more unworthy of a good man than, without necessity, to expose to uncertain hazard such a share of his goods, as the loss of it would distress his family; or to be catching at gain from the foolish rashness of others, so as to distress them. All such contracts therefor are to be condemned, unless they are about such trifles as men of wealth can afford to throw away upon their amusements. And besides, ’tis highly unbecoming a good man to give himself up entirely to diversions, or waste much time upon them; or so to enure himself to amusements, as {to contract habits of indolence and trifling,} making him less fit or inclined for serious business.9

As to these more publick projects of lottery in which great multitudes may be concerned; as they bring in no new wealth to a state, and only enrich some few of the citizens by the losses of others; and as men thro’ some vain opinions of their own good luck are generally very prone to them; they should be every where under the restraint of laws; lest that wealth, which were it employed in manufactures or commerce would be adding new strength to the state, should be turned into this useless and dishonourable channel, exposed too to innumerable frauds, and an insociable, foolish, and slothful avarice be encouraged among the citizens.

IX. In confirmation of contracts men often give bail or sureties, and pledges. The bail or surety is bound to make good what is due, in case the principal fails. And as the creditor frequently trusts more to the surety than to the principal, his obligation is equally sacred: nor may he use any evasive arts more than if the debt were wholly his own: nor can he justly even delay the payment; unless he finds a fraudulent collusion between the creditor and the principal to distress him.

The obligation of the surety may be stricter than that of the principal, if he has given either a pledge or an oath for performance; but as he is surety he cannot be bound in a different sum or different goods, or payable at a different time or place, or upon a different foundation. He may justly insist that a suit be first commenced and judgment given against the principal; and where more than one are sureties, each one may insist that the loss be divided either equally among them{, or in the proportion in which they bound themselves} <unless he renounced these benefits>.

Sureties were sometimes given in criminal actions <and called vades>. They may be justly liable to pay the fines. But it would be inhuman to allow them to be subjected to any corporal punishments for the crimes of others <unless they favoured crime>.

We formerly touched at the subject of pledges and mortgages.<* > If the things pledged yield increase, this is to be deducted annually from the interest or principal of the debt. The clause of forfeiture at the day fixed has no iniquity in it, provided any surplus of value in the pledge be restored to the debtor after the debt is thus discharged. The pledgee is bound to keep the pledge with such diligence as a discreet man keeps like goods of his own, and not answerable for any thing further; as this contract equally regards the utility of both parties.10 <A hypotheca or mortgage differs from a pledge as the good is not delivered to another but simply subject to the payment of debt>. Pledges and mortgages constitute real rights not to be defeated by any prior personal rights.

[* ]{There are no precise technical words in English to answer the three Latin words mandatum, commodatum and depositum. And therefor the formal definitions are omitted.}

[1. ]On the three gratuitous contracts see Pufendorf, De officio 1.15.5–7 and System 2.13.[1]–3, vol. II, pp. 64–68.

[2. ]Cf. System 2.13.2, vol. II, p. 65, footnotes.

[* ]{The Translator omits the next paragraph in the original, explaining the actiones directae et contrariae of the civilians.} [This paragraph has been translated. “Actio directa” and “actio contraria” are names still in use for actions in the civil law.]

[3. ]In System the paragraph parallel to this one is not in chapter 13, on contracts, but at the end of Chapter 12 on Value, vol. II, pp. 63–64.

[4. ]Also on the onorous contracts Hutcheson follows Pudendorf, De officio 1.15.9–15 (but omits § 12 on partnership). The same order and the same items are in System 2.13.4–10, vol. II, pp. 68–77.

[5. ]That is, the seller runs the same hazard as a keeper, as explained in paragraph iii above.

[* ]{The Translator here omits a paragraph explaining some terms of the Roman law not necessary to an English reader. Such as addictio in diem, lex commissoria, lex retractus, protimesios, &c.}

[6. ]On these additional agreements see Pufendorf, De officio 1.15.9 and Hutcheson, System 2, 13.5, vol. II, p. 70 and footnotes.

[7. ]Cf. Pufendorf, De offici, ibidem and De iure nat. 5.5.6. This is the case when fish or crops are purchased in advance. The whole section 5 runs parallel to Pufendorf, De officio 1.15.9. See also System 2.13.4, vol. II, pp. 68–70.

[* ]{A part also of the following section is omitted for the same reason, about the locatio operis and locatio operae.} [The part omitted by the translator, in angle brackets, is the case of locatio operis faciendi “when materials are given out to be manufactured or wrought by an artist at certain price” (System 2.13.5, vol. II, p. 70 and footnote), further evidence that the translator had a copy of Hutcheson’s System.]

[* ]{Mutuum.}

[8. ]Literally: Mutuum or loan for consumption is “a contract by which <res fungibilis>, a fungible thing, is given to another on the condition that at a time agreed upon equal quantities of a good of the same kind are returned” Cf. System 2.13.2, vol. II, pp. 65–66 and footnote.

[9. ]Hutcheson seems to share the opposition of Carmichael to gambling and public lotteries (Notes on Puf., p. 110, where Carmichael quotes Arnauld and Nicole in support)

[* ]<Chapter VII.4 of this book.>

[10. ]See above 2.7.4 p. 169 and footnote and Pufendorf, De officio 1.15.15.