Front Page Titles (by Subject) PART V.: COMMERCIAL LAW - Select Essays in Anglo-American Legal History, vol. 3
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PART V.: COMMERCIAL LAW - Committee of the Association of American Law Schools, Select Essays in Anglo-American Legal History, vol. 3 
Select Essays in Anglo-American Legal History, by various authors, compiled and edited by a committee of the Association of American Law Schools, in three volumes (Boston: Little, Brown, and Company, 1909). Vol. 3.
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Other References on the Subjects of this Part are as Follows:
In Select Essays:
Roman Law Influence in the Law Merchant, by T. E. Scrutton (No. 7, Vol. I).
The Development of the Law Merchant, by W. S. Holdsworth (No. 9, Vol. I).
The History of Admiralty Jurisdiction, by T. L. Mears (No. 30, Vol. II).
In Other Series and Journals:
The Early History of the Law Merchant, by A. T. Carter (Law Quarterly Review, XVII, 232; 1901).
The History of Marine Insurance, by F. Martin (1876).
The History of the Liability of Ship-Owners at Common Law, by E. L. de Hart (Law Quarterly Review, V, 15; 1889).
The History of the Water-Carrier and his Responsibility, by J. B. C. Stephen (Law Quarterly Review, XII, 116, 1896).
Trust and Corporation, by F. W. Maitland (Zeitschrift fuer das Privat—und Oeffentliches Recht der Gegenwart, ed. Gruenhut, Vienna, XXIII, 1; 1904).
The Corporation Sole, by F. W. Maitland (Law Quarterly Review, XVI, 335; 1900).
History of Admiralty Jurisdiction in the United States Supreme Court, Anon. (American Law Review, V, 581; 1871).
History of Joint Stock Companies, by T. B. Napier (Ch. XII in “A Century of Law Reform,” 1901).
The Genesis of a Corporation, by R. L. Raymond (Harvard Law Review, XIX, 350; 1906).
History of the Common-Law Conception of a Corporation, by E. B. Seymour (American Law Register, New Series, XLII, 529; 1902).
Carriers and the Common Law, by O. W. Holmes (American Law Review, XIII, 609; 1879).
The Court of Piepowder, by C. Gross (Quarterly Journal of Economics, XX, 231; 1906).
Legislative History of Corporations in New York, by A. B. Johnson (Hunt’s Merchants’ Magazine, XX, 610; 1850).
Borough Customs, Introduction by Mary Bateson (Selden Society Publications, vols. XVIII, XXI, 1904-6).
Beverly Town Documents, Introduction by A. F. Leach (Selden Society Publications, vol. XIV; 1900).
Select Pleas of the Jewish Exchequer, Introduction by J. M. Rigg (Selden Society Publications, vol. XV; 1901).
The Leet Jurisdiction of Norwich, Introduction by W. Hudson (Selden Society Publications, vol. V; 1891).
The Law Merchant, NA, Introduction by C. Gross (Selden Society Publications, vol. XXIII; 1908).
Leet Jurisdiction in England, by F. J. C. Hearnshaw (Southampton Record Society, 1908).
The Internal Organization of the Merchant Adventurers of England, by W. E. Lingelbach (Phila. 1903).
The Evolution of the English Joint-Stock Trading Company, by F. Evans (Columbia Law Review, VIII, 339, 461; 1908).
GENERAL SURVEY OF THE HISTORY OF THE LAW MERCHANT1
IF you read the law reports of the seventeenth century you will be struck with one very remarkable fact; either Englishmen of that day did not engage in commerce, or they appear not to have been litigious people in commercial matters, each of which alternatives appears improbable. But it is a curious fact that one finds in the reports of that century, two hundred years ago, hardly any commercial cases. If one looks up the Law of Bills of Exchange, “the cases on the subject are comparatively few and unimportant till the time of Lord Mansfield.”3 If you turn to Policies of Insurance, and to the work of Mr. Justice Park on the subject published at the beginning of this century, you find him saying: “I am sure I rather go beyond bounds if I assert that in all our reports from the reign of Queen Elizabeth to the year 1756, when Lord Mansfield became Chief Justice of the King’s Bench, there are sixty cases upon matters of insurance.”4 If you come to Charter Parties and Bills of Lading, which have always been productive of litigation, you find Sir John Davies in the seventeenth century saying that “until he understood the difference between the Law of Merchants and the Common Law of England, he did not a little marvel what should be the cause that in the books of the Common Law of England there should be found so few cases concerning merchants and ships, but now the reason was apparent, for that the Common Law did leave these cases to be ruled by another law, the Law Merchant, which is a branch of the Law of Nations.”1
The reason why there were hardly any cases dealing with commercial matters in the Reports of the Common Law Courts is that such cases were dealt with by special Courts and under a special law. That law was an old-established law and largely based on mercantile customs. Gerard Malynes, who wrote the first work on the Merchant Law in England, called his book, published in 1622, “Consuetudo vel Lex Mercatoria,” or the Ancient Law Merchant; and he said in his preface: “I have entituled the book according to the ancient name of Lex Mercatoria, and not Jus Mercatorum, because it is a customary law approved by the authority of all kingdoms and commonweales, and not a law established by the sovereignty of any prince.” And Blackstone, in the middle of the last century, says: “The affairs of commerce are regulated by a law of their own called the Law Merchant or Lex Mercatoria, which all nations agree in and take notice of, and it is particularly held to be part of the law of England which decides the causes of merchants by the general rules which obtain in all commercial countries, and that often even in matters relating to domestic trade, as for instance, in the drawing, the acceptance, and the transfer of Bills of Exchange.”2 Later than Blackstone, Lord Mansfield lays down that “Mercantile Law is not the law of a particular country, but the law of all nations”;3 while so recently as 1883 you find Lord Blackburn saying in the House of Lords that “the general Law Merchant for many years has in all countries caused Bills of Exchange to be negotiable; there are in some cases differences and peculiarities which by the municipal law of each country are grafted on it, but the general rules of the Law Merchant are the same in all countries.”1
Now if we follow the growth of this Law Merchant or Mercantile Law, which was two hundred years ago so distinct from the Common Law, we find it in England going through three stages of development.2 The first stage may be fixed as ending at the appointment of Coke as Lord Chief Justice in the year 1606, and before that time you will find the Law Merchant as a special law administered by special Courts for a special class of people.
In the first place as to the special Courts. The greater part of the foreign trade of England, and indeed of the whole of Europe at that time, was conducted in the great fairs, held at fixed places and fixed times in each year, to which merchants of all countries came; fairs very similar to those which meet every year at the present time at Novgorod in Russia, and at other places in the East. In England, also, there were then the great fairs of Winchester and Stourbridge, and the fairs of Besançon and Lyons in France, and in each of those fairs a Court sat to administer speedy justice by the Law Merchant to the merchants who congregated in the fairs, and in case of doubt and difficulty to have that law declared on the basis of mercantile customs by the merchants who were present. You will find this Court mentioned in the old English law books as the Court Pepoudrous, so called because justice was administered “while the dust fell from the feet,” so quick were the Courts supposed to be. “This Court is incident to every fair and market because that for contracts and injuries done concerning the fair or market there shall be as speedy justice done for advancement of trade and traffic as the dust can fall from the feet, the proceeding there being de hora in horam.”3 Indeed, so far back as Bracton in the thirteenth century, it had been recognized that there were certain classes of people “who ought to have swift justice, such as merchants, to whom justice is given in the Court Pepoudrous.”1 The records of these Courts are few, for obviously in Courts for rapid business law reporters were rather at a discount. As a consequence, “there is no part of the history of English law more obscure than that connected with the maxim that the Law Merchant is part of the law of the land.”2 We are, however, fortunate enough to have one or two records of the Courts of the Fairs. The Selden Society has succeeded in unearthing the Abbot’s roll of the fair of St. Ives held in 1275 and 1291,3 containing a series of cases which show how the merchants administered the Law Merchant in the Courts of the fair, and why such cases did not come into the King’s Court. For instance:—“Thomas, of Wells, complains of Adam Garsop that he unjustly detains and deforces from him a coffer which the said Adam sold to him on Wednesday next after Mid Lent last past for sixpence, whereof he paid to the said Adam twopence and a drink in advance” — (it appears to have been a very good mercantile custom, still existing, to “wet a bargain,” and the drink was a matter to which great importance was attached by the merchants present); “and on the Octave of Easter came and would have paid the rest, but the said Adam would not receive it nor answer for the said coffer, but detained it unconditionally to his damage and dishonour, 2s., and he produces suit. The said Adam is present and does not defend. Therefore let him make satisfaction to the said Thomas and be in mercy for the unjust detainer; fine 6d.; pledge his overcoat.” The next defendant was not so fortunate as to have an overcoat. “Reginald Picard of Stamford came and confessed by his own mouth that he sold to Peter Redhood of London a ring of brass for 5½d., saying that the said ring was of the purest gold, and that he and a one-eyed man found it on the last Sunday in the churchyard of St. Ives, near the cross.” (One fancies one has heard that tale about the brass ring before.) “Therefore it is considered that the said Reginald do make satisfaction to the said Peter for the 5½d. and be in mercy for the trespass; he is poor; pledge his body.” The next case introduces the Law Merchant. “Nicolas Legge complains of Nicolas of Mildenhall for that unjustly he impedes him from having, according to the usage of merchants, part in a certain ox which Nicolas of Mildenhall bought in his presence in the village of St. Ives on Monday last past to his damage 2s., whereas he was ready to pay half the price, which price was 2s. 6d. And Nicolas of Mildenhall defends, and says that the Law Merchant does well allow that every merchant may participate in a bargain in the butcher’s trade if he claim a part thereof at the time of the sale; but to prove that the said Nicolas Legge was not present at the time of the purchase nor claimed a part thereof he is ready to make law.” Then they went to the proof. The custom of the Law Merchant relied on admitted any merchant standing by to claim a share in any bargain on paying a share of the price. The defence is, “You were not there, so you cannot claim.” The next and last case is one which puzzled the Court, and therefore I omit the details, but it is recited in the Abbot’s roll: “And the case is respited till it shall be more thoroughly discussed by the merchants. And the merchants of the various commonalties and others being convoked in full Court it is considered”—and then they go on to discuss it. There you see the Merchants’ Court at work, giving quick justice in all mercantile disputes, and in cases of doubt calling upon the merchants present to declare what the Law Merchant is. So much for the fairs.
In most seaport towns also you would find a similar Court dealing with cases arising out of ships. In the Domesday Book of Ipswich1 it is stated, “The pleas between strange folk that men call ‘pypoudrous’ should be pleaded from day to day. The pleas in time of fair between stranger and passer should be pleaded from hour to hour, as well in the forenoon as in the afternoon, and that is to wit of plaints begun in the same time of fair, and the pleas given to the law marine for strange mariners passing, and for them that abide not but their tide, should be pleaded from tide to tide.” Any ship coming into the port of Ipswich with a dispute about its Charter Party or Bill of Lading may get summary justice at once from this Court at Ipswich between tide and tide. Stress may be laid on the fact that the Courts sat in the afternoon, because at that time the King’s Courts only sat from eight in the morning till eleven and then adjourned for the rest of the day. “For in the afternoons these Courts are not holden. But the suitors then resort to the perusing of their writings, and elsewhere consulting with the serjeants-at-law and other their counsellors,”1 so that the time taken up in consultation by the Courts in London was taken up by the Courts at Ipswich in dealing summarily with cases, and letting the strange mariners go who were only waiting for their tide.
There were special Courts by statute, of which a number of “grave and discreet merchants” were necessary members, in order that the Mercantile Law founded on the custom of merchants might be duly applied to the case before them.2 The law which these Courts administered was what was called by merchants the Law Merchant and Law of the Sea, and it was common to nearly every European country. Much of it was to be found in a series of codes of Sea Laws, such as the Laws of Oleron and Wisbury, and the Consolato del Mare, embodying the customs and practices of merchants of different countries, and it was not the Common Law of England. Further, it was only for a particular class. You had to show yourself to be a merchant before you got into the Mercantile Court; and until about two hundred years ago it was still necessary to show yourself to be a merchant in the Common Law Courts before you could get the benefit of the Law Merchant.3
Now the second stage of development of the Law Merchant may be dated from Lord Coke’s taking office in 1606, and lasts until the time when Lord Mansfield became Chief Justice in 1756, and during that time the peculiarity of its development is this: that the special Courts die out, and the Law Merchant is administered by the King’s Courts of Common Law, but it is administered as a custom and not as law, and at first the custom only applies if the plaintiff or defendant is proved to be a merchant. In every action on a Bill of Exchange it was necessary formally to plead “secundum usum et consuetudinem Mercatorum”—according to the use and custom of merchants;1 and it was sometimes pleaded that the plaintiff was not a merchant but a gentleman.2 And as the Law Merchant was considered as custom, it was the habit to leave the custom and the facts to the jury without any directions in point of law, with a result that cases were rarely reported as laying down any particular rule, because it was almost impossible to separate the custom from the facts; as a result little was done towards building up any system of Mercantile Law in England. The construction of that system began with accession of Lord Mansfield to the Chief Justiceship of the King’s Bench in 1756, and the result of his administration of the law in the Court for thirty years was to build up a system of law as part of the Common Law, embodying and giving form to the existing customs of merchants. When he retired, after his thirty years of office, Mr. Justice Buller paid a great tribute to the service that he had done. In giving judgment in Lickbarrow v. Mason,3 he said: “Thus the matter stood till within these thirty years. Since that time the Commercial Law of this country has taken a very different turn from what it did before. Lord Hardwicke himself was proceeding with great caution, not establishing any general principle, but decreeing on all the circumstances put together. Before that period we find in Courts of Law all the evidence in mercantile cases was thrown together; they were left generally to the jury, and they produced no established principle. From that time we all know the great study has been to find some certain general principle, not only to rule the particular case under consideration, but to serve as a guide for the future. Most of us have heard those principles stated, reasoned upon, enlarged, and explained till we have been lost in admiration at the strength and stretch of the human understanding, and I should be sorry to find myself under the necessity of differing from Lord Mansfield, who may truly be said to be the founder of the Commercial Law of this country.” Lord Mansfield, with a Scotch training, was not too favourable to the Common Law of England, and he derived many of the principles of Mercantile Law, that he laid down, from the writings of foreign jurists, as embodying the custom of merchants all over Europe. For instance, in his great judgment in Luke v. Lyde,1 which raised a question of the freight due for goods lost at sea, he cited the Roman Pandects, the Consolato del Mare, laws of Wisbury and Oleron, two English and two foreign mercantile writers, and the French Ordonnances, and deduced from them the principle which has since been part of the Law of England.2 While he obtained his legal principles from those sources, he took his customs of trade and his facts from Mercantile Special Juries, whom he very carefully directed on the law; and Lord Campbell, in his life of Lord Mansfield, has left an account of Lord Mansfield’s procedure. He says:3 “Lord Mansfield reared a body of special jurymen at Guildhall, who were generally returned on all commercial cases to be tried there. He was on terms of the most familiar intercourse with them, not only conversing freely with them in Court, but inviting them to dine with him. From them he learned the usages of trade, and in return he took great pains in explaining to them the principles of jurisprudence by which they were to be guided. Several of these gentlemen survived when I began to attend Guildhall as a student, and were designated and honoured as ‘Lord Mansfield’s jurymen.’ One in particular I remember, Mr. Edward Vaux, who always wore a cocked hat, and had almost as much authority as the Lord Chief Justice himself.”
Since the time of Lord Mansfield other judges have carried on the work that he began, notably Abbott, Lord Chief Justice, afterwards Lord Tenterden, the author of “Abbott on Shipping,” Mr. Justice Lawrence, and the late Mr. Justice Willes; and as the result of their labours the English Law is now provided with a fairly complete code of mercantile rules, and is consequently inclined to disregard the practice of other countries. In Lord Mansfield’s time it would have been a strong argument to urge that all other countries had adopted a particular rule; at the present time English Courts are not alarmed by the fact that the law they administer differs from the law of other countries.
THE MERCHANTS OF THE STAPLE1
‘CENTURY after century,’ says Dr. Le Bon in his Psychology of Peoples, ‘our departed ancestors have fashioned our ideas and sentiments, and in consequence all the motives of our conduct. The generations that have passed away do not bequeath us their physical constitution merely; they also bequeath us their thoughts. We bear the burden of their mistakes, we reap the reward of their virtues.’ The good as well as the evil that men do lives after them to the advantage or detriment of thousands of whom they never thought, and who, as likely as not, have never heard of them. A legal code, a method of legal procedure, may affect interests separated by centuries of time from those which in the first instance they were intended to serve. The civil law of Rome, embodied in the codes of Theodosius and Justinian in the fifth and sixth centuries, has been the guide and model for most of the legal systems of Europe, the common law of England and the Code Napoléon of France bearing eloquent testimony to the abilities of the great jurists who lived and laboured under the Roman Empire.
The staple system,3 long since dead and gone, but once a most important element in moulding and directing the commercial activities of this country, is an instance on a smaller scale of how an organization, which has for practical purposes completely vanished, may yet exert a modifying influence over some detail intimately connected with a people’s well-being. . . .1 The connexion between the merchants of the staple and bearer debentures is perhaps not very obvious at first sight. Nevertheless there is a connexion, and a not unimportant one. The law merchant in former days was not, as now, a part of the common law administered by the judges of the Queen’s Bench; it had officials of its own, who exercised jurisdiction in the staple courts. Had it always been part and parcel of the common law, it is highly probable that cases connected with bills of exchange would appear in the law books earlier than the time of James I, seeing that they were probably well known in England at least three centuries previously. Owing to the fact that no mention of them occurs at an earlier date, it has been argued that the custom of treating bills of exchange as negotiable did not date from time immemorial (the reign of Richard I), and that if, in spite of that fact, these instruments have been recognized as being rendered negotiable through the instrumentality of the law merchant, there is no reason why debentures to bearer should not likewise be acknowledged as negotiable instruments without the intervention of a statute, although they are avowedly of comparatively recent origin. Now, if it could be shown that bills of exchange were dealt with in the courts of the staple as early as the reign of Richard I, this argument would obviously fall to the ground. It is, however, improbable that any records were kept of proceedings in these courts, and even if such records did exist, it would certainly be difficult to carry them back as far as the end of the twelfth century, if the instruments themselves were, as tradition relates, introduced by the Venetians in the thirteenth. It is a possible, if not a very probable, hypothesis that some of the Assyrian contract-tablets in the British Museum are bills of exchange in a rudimentary form; but, so far as concerns the decision of the question whether the debentures to bearer called into existence for the mercantile convenience of the nineteenth century are or are not negotiable instruments, any inquiry on the point is hardly likely to be fruitful of important results. But the mere fact that greater light on the peculiar law by which the mercantile community was governed in the early phases of our history might effectually modify the commercial relations of to-day, proves that the institutions of our remote ancestors are occasionally of more immediate concern to us than the ‘practical’ man is apt to believe.
Involved in obscurity as the precise origin of the staple system is, it is not difficult to understand how it came into existence. Until almost the end of the reign of Edward III the policy of the English Government tended rather to discourage than to encourage trading abroad by its subjects. That may not have been the intention, but it was the effect of the regulations imposed. At that comparatively late period English merchants were practically excluded from foreign commerce, and their struggles against aliens were chiefly waged around the internal trade of the country. In the twenty-seventh year of Edward III we find it enacted that denizens and aliens alike may purchase wools, &c., in the counties, and convey them to the ports of embarkation, but that the process of exporting shall be exclusively in the hands of the foreigners, and that no subject of the realm shall export wools for himself in the name of an alien, nor have any agent abroad for that purpose, nor receive payment for the same abroad. Naturally enough such regulations as these caused a feeling of intense jealousy against the foreign merchants, particularly when they settled in this country and interfered with Englishmen, who, with some justification, considered that, as compensation for the disabilities they were under as regarded foreign commerce, they should at least be allowed a free hand in the country’s internal trade. The citizens of London had long since formulated regulations of their own under which aliens should trade. Unfortunately, however, they found themselves unable to enforce their rules, and when they complained to Edward I that they, who bore the common burdens of the town, were impoverished by the competition of foreigners, whose stay was now unlimited instead of, as formerly, restricted to forty days, that monarch refused to assist them. Edward was inclined to favour the merchants of Gascony and Flanders, and such confederations as the Hanseatic League, to which he gave a charter of incorporation and a special place of residence in the style-haus. One reason of the favour shown to them probably was that it proved easier to squeeze foreigners bringing their wares into the kingdom than subjects of the realm taking merchandise to the Continent. The latter were always apt to kick against what they believed to be undue exactions, while the former, needing the king’s protection against the hostility of his English subjects, were ready to submit to the payment of tolls which might under other circumstances have struck them as exorbitant.
For another thing, Edward, in favouring the foreigner at the expense of the Englishman, was continuing the policy of his predecessors, and was also giving effect to the generally recognized principle that the foreigners’ visits were to the advantage of the country. They imported wine and manufactured commodities, they exported the raw English products; and it is quite possible that, had it not been for them, England would in the early centuries have been without a foreign trade at all. It is highly probable that the policy was extended, as many a policy has been, beyond the period when it was desirable in a strictly economical view of this country’s interests; but the clauses of the Great Charter had granted freedom of trade to the foreigner, and the towns, in their municipal regulations as well as by their representatives at Acton Burnel, had acquiesced in his encouragement. Aliens were, indeed, forced to pay customs at a higher rate than subjects, but this does not seem to have had any serious effect in counteracting the privileges they enjoyed. At any rate, the English shipowners appear to have been at a disadvantage during the greater part of the reign of Edward III, and it was not until the Navigation Act of Richard II aimed a blow at the Gascon merchants that the Englishmen were able to thoroughly establish their footing in foreign trade. It was then, indeed, that the export trade of the country was beginning to be organized in the hands of the Merchant Adventurers and the Staplers.1
We must not, however, suppose that English activities were entirely confined to English soil; that would be to presume that a change has taken place in English character for which six centuries, howsoever eventful, would be quite inadequate to account. The end of the thirteenth and the beginning of the fourteenth centuries may be taken as the culminating point of a long period of steady and solid progress. The towns, which were the centres of commercial life, were in a highly prosperous condition, and the circumstances of the time were generally favourable to a rapid industrial advance. It was, therefore, only to be expected that, however Englishmen as a body might be hampered by governmental restrictions in forming commercial connexions abroad, a natural pushfulness would carry an individual here and there over all the obstacles set in his way. That this expectation is not unfounded is proved by the fact that an old writer mentions a mayor of the English merchants trading in Flanders as having been sent to settle certain disputes in the year 1313.2 Such an official could only have belonged to some kind of recognized association, and it may accordingly be fairly assumed that English traders were by no means unknown on the Continent in the early years of Edward II, while it is highly probable that they frequented various marts in Brabant, Flanders, and Antwerp at a considerably earlier date.
However that may be, the institution which was subsequently to give the impetus to and exert a powerful influence over England’s foreign trade became a distinct political organism in the reign of Edward III. It had long been the custom to hold fairs at all places of any importance throughout the kingdom. Thither the country folk would bring their produce for sale, and there, until the time of Edward III, the greater part of the wholesale trade of the country was transacted, aliens being free to frequent them.1 The policy of the fourteenth century, however, was to draw trade into a few selected towns in which were established continuous markets or staples, and not to be content with the occasional opportunities for trade which the intermittent fairs afforded. The same policy seems to have been pursued in Norway where Bergen was the staple for the Iceland trade, and in France where Philip did his utmost in 1314 to induce the English to frequent the staple at St. Omer instead of the fair at Lille.2 That it was not always easy to give effect to the policy is evident from the proceedings relating to the royal staple at Bergen. The English persisted in trading direct with Iceland, and set at naught the regulations which governed transactions at the staple. The King of Norway thereupon confiscated the goods of English merchants throughout his dominions, a step which caused general consternation, since there were no Danish merchants trading with England against whom reprisals could be made. The contraband trade with Iceland, however, continued to be carried on in spite of these endeavours to put it down, until in 1476 the ravaging of the island and the slaughter of the royal bailiff was met by the prompt exclusion of the English from Bergen and the triumph for the time of the Hanseatic League.3
Still, in spite of constant violations, the staple system grew and throve. It is possible that the majority of merchants preferred to have one or more marts assigned, where English produce might regularly be supplied, so that those who wished to purchase it could frequent that recognized place of sale. In early times, when the stream of commerce was too feeble to permeate constantly to all parts of the country, the concentration of trade at certain staple towns was probably advantageous to its growth; particularly as the merchants assembling there might obtain a grant of political and judicial privileges, which they could not hope for unless they undertook to frequent the town and pay the dues regularly. Jurisdiction to enforce bargains must in particular have been a highly valued privilege at a time when the execution of contracts generally was not easily compellable by legal process, and was probably well worth the sacrifice of the freedom of trade which the staple regulations entailed. And although there were some traders who preferred to trade at other ports than the staple, and were willing to pay for royal licenses to do so, we may assume that the system met, on the whole, with the approval of the commercial classes. At any rate we find that the merchants of Scotland considered it desirable to fix a staple at Campfer in 1586 and not to have an open trade, and if the system had not possessed substantial advantages it would certainly not have met with so generally favourable a reception as it did. The objects of the staple system were fourfold:
Primarily it was a fiscal provision, its object being to facilitate the collection of the royal customs; and it is easy to see how much more simple a matter this collection would become if exportation were confined to a dozen English ports and one foreign centre, than if permitted at the absolute discretion of the producer or the merchant. To the king it was a matter of personal interest that the duties should be fully paid, since his private expenditure depended in those days upon the customs, and he was accordingly willing to confer such privileges as would be likely to entice traders to comply with the regulations of the system.
In the second place, the staple system fulfilled a useful function by ensuring the quality of exported goods. Commercial morality was none too high in those days, and the average trader fully appreciated the maxim caveat emptor. He had not the ingenuity of his nineteenth-century successor, but such tricks as he knew for the undoing of the consumer he too often practised with energy and perseverance. The staple checked his activities in this direction by providing a machinery for viewing and marking merchandise at the staple towns and places of export.1 The statute 27 Edward III enacted that all wool for export should be brought to fifteen staple towns named therein, and that the weight should be certified by the mayor of the staple under his seal. When the staple town and the place of export were not identical (the port for York, for instance, was Hull; of Lincoln, St. Botolf; of Norwich, Yarmouth; of Westminster, London; of Canterbury, Sandwich; and of Winchester, Southampton), the wool was weighed a second time on reaching the port; but where the staple town was itself a seaport, as were Newcastle, Bristol, and Dublin, a single weighing sufficed. An indenture was then made between the mayor of the staple and the ‘customers,’ and the tolls were paid by the merchant, these being considerably heavier in the case of aliens than denizens.
Even when raw materials only were exported this precaution seems to have been desirable to prevent adulteration, and it no doubt became additionally so as merchandise manufactured in England began to be sold abroad. When the staple system began to decay and the precautions against fraudulent dealing were relaxed, the quality of goods quickly deteriorated. In a Dialogue or Confabulation between Two Travellers, written about the year 1580, we are introduced at a meeting consisting of a ‘Cittye clothyer,’ a ‘contrye clothyer,’ a husbandman and a merchant, at which a discussion takes place as to the causes of the deterioration of English-made clothing. It is generally agreed that the fault lies chiefly with the careless and inefficient methods of examining and marking woollen goods now in vogue, and the husbandman quaintly points out the difference between the good old times and the present. ‘In times paste,’ says he, ‘we had clothes made that woold contynue a man’s lyfe, where now yf yt be worne two or thre yeares yt is so thryd bare as a lowse can have no coverte.’
Thirdly, the system seems at one time to have been employed to replenish the stock of gold in this country. The idea was that the English merchants trading at Calais should refuse to take payment for their wares except in the precious metals, thus enticing the coin of other countries into England; and an old writer complains bitterly that, on a standard rate of exchange being established at Calais, the former practice was given up to the detriment of the kingdom. Adventurers, he tells us, have brought strange merchandise out of Flanders to destroy the manufactures in England, with the result that the king and his lords are in difficulties for money. ‘The whole wealth of the realm,’ he says, ‘is for all our rich commodities to get out of all other realms therefor ready money; and after the money is brought into the whole realm, so shall all people in the realm be made rich therewith. And after it is in the realm, better it were to pay 6d. for anything made in the realm than to pay but 4d. for a thing made out of the realm, for that 6d. is also spent in the realm and the 4d. spent out of the realm is lost and not ours.’1
Edward III, it is true, allowed payment to be made indifferently in gold, silver, or merchandise, so long as the payment took place in this country, and not more money was taken out of the kingdom than was brought in.2 Richard II, however, provided that foreigners were to receive at least half the value of the wares they brought into the kingdom in English merchandise,3 which, whatever may have been the intention, certainly had the effect of keeping coin in the country as well as pushing English goods abroad. Henry VI, after stating that the mint at Calais was ‘like to be void, desolated, and destroyed,’4 provided that the whole payment for wool, woolfels, and tin should be made in gold and silver without collusion, and that the bullion should be brought to the Calais mint. No part of the price was to be left outstanding on goods sold, in order that ‘the same money may be brought within the realm without subtilty or fraud.’5 In the third year of Edward IV, again, we find a petition from the Commons asking that all coin and bullion received at the staple should be brought to the mint at Calais and thence returned to England, showing that Parliament regarded the system as a method of replenishing the gold stocks of the kingdom. The means adopted may not accord with the economic principles of modern times, but there was possibly some justification for them in an age when there was not a constant flow of gold to our shores from Africa, America, and Australia.
Fourthly, the system provided a special tribunal designed ‘to give courage to merchant strangers to come with their wares and merchandise into the realm.’1 The provision of a satisfactory machinery for the recovery of debts was, by the end of the thirteenth century, becoming a prime necessity of the growth of commerce, and the staple system afforded a convenient basis on which to build up a judicial procedure. Wherever a market or fair was held it had been customary from a very remote period that, when disputes arose as to the terms of a bargain, the questions at issue should be decided by four or five of the merchants present on the spot, who were expected to apply the principles and customs recognized as obtaining generally among the trading classes. This practice is referred to in a charter of Henry III as having prevailed for many years previously,2 and it was this informal judicial procedure upon which was now conferred the sanction of parliamentary authority. Justice, it was ordained, was to be done to the foreigner from day to day and hour to hour, according to the law of the staple or the law merchant, and not according to the common law or particular burghal usages.3 Alien merchants were to be impleaded before no tribunal but that of the mayor and constables of the staple.4 These officials were to be elected annually in every staple town by the commonalty of the merchants, aliens as well as denizens. They were empowered to keep the peace, and to arrest offenders for trespass, debt, or breach of contract. The mayor was, further, to have recognizances of debts, a seal being provided for the purpose.5
The court of the staple had no cognizance of criminal offences, unless when the avenger of blood chose to prosecute at his own peril.6 Speaking of the court of the staple at Calais, Mr. Hall says7 that it was a tribunal analogous in many respects to the local councils of the north and west of England under Tudor sovereigns. Its main object was to draw all civil actions in which staplers were in any wise concerned within its jurisdiction, in order to expedite the course of justice and to lessen the expenses incident thereto. In addition to trying civil actions there appears to have been, in that instance, a general jurisdiction to deal with all matters concerning the well-being of the mercantile community; for we find that the mayor, in a full court of all the merchants, was to assign to each merchant lodgings suitable for his entertainment, which he must frequent unless he could show good cause to the contrary. But this extended jurisdiction was granted, no doubt, after the staplers of Calais had been incorporated, and had reference only to the members of the corporation.
It was further enacted, by the statute already referred to, that the mayors, sheriffs, and bailiffs of the towns where the staples were held, should aid the mayors and constables of the staples in the execution of their duties.1 This must be read as referring to those cases only in which these offices were not combined, or, perhaps, as relating to a time before municipal economy had seen the advantage of combination. For we find, in Toulmin Smith’s English Gilds,2 that at the annual induction of the mayor of Bristol ‘there was to be redde the Maires Commission of the Staple with the dedimus potestatem, and upon the same the Maire there to take his othe, after the fforme and effect of a Cedule enclosid withyn the seide dedimus potestatem yf it be then y-come.’ And on the same day the mayor was to call before him his sergeants to be bound with their sureties for the proper execution of their offices during the year ‘as wele in the Staple court as otherwyse.’ This record was written by Robert Ricart, who became Town Clerk of Bristol in 1497. He tells us that he received instructions from one Spencer, the mayor for that year, ‘to devise, ordaigne, and make this present boke for a remembratif evir hereafter, to be called and named the Maire of Bristowe is Register, or ellis the Maire is Kalendar.’ Now, by a charter granted to Bristol in the forty-seventh year of Edward III (1373), jurisdiction was given to the mayor and sheriffs, to hear and determine all suits relating to all contracts, covenants, accounts, debts, trespasses, pleas, and plaints arising within the town of Bristol, its precincts and suburbs, with the exception of those cases only in which a writ of error should lie to the justices in eyre, or of gaol delivery, and also of ‘inquisitions and determinations of customs and subsidies of wool, leather, skins, felts, and other customs and subsidies of us and our heirs by cocket1 or otherwise belonging to us or our heirs from the grant of our faithful people and subjects.’2 These words would seem to show that the officials of the staple and of the borough were not identical in 1373. On the other hand, since Ricart writes as if there were nothing unusual or new in the execution of the duties of the staple by the mayor of the borough, we must conclude that the amalgamation of the staple and the ordinary jurisdictions took place in this instance nearer to 1373 than to 1479. Indeed, the mayor of the staple town, where there was one, would seem to be a most fit and proper person to execute the duties attaching to the staple, since 27 Edward III specifically required one who was well versed in the law merchant to fill the office of mayor of the staple, and no one was more likely to possess the necessary qualification than the man chosen by the burgesses as their representative and head. It would not be safe to conclude that it became at any time a general practice for the mayor of the borough to discharge the duties of mayor of the staple, since we find that at Drogheda the mayor and sheriffs of the borough one year became mayor and constables of the staple in the following year, and master and wardens of the Gild of Merchants in their third year. But as the mayor and sheriffs of Waterford were, by virtue of their office, mayor and constables of the staple at the same time,3 it is probable that such a combination was not unusual.
The foreign merchant was, it appears, not compellable originally (whatever may have been the case at a later date) to bring his case in the staple court: he might, if he so preferred, sue in the courts of common law, and have the law of the land applied instead of the law merchant.1 And although the justices in eyre, of assise, and of the Marshalsea, were not to intervene in matters of which the mayor of the staple had cognizance,2 there was an appeal to the Chancellor and the King’s Council, if the mayor had unduly favoured either party.3 It would seem probable, also, that the Chancellor had an original as well as an appellate jurisdiction; for in the thirteenth year of Edward IV we find that official stating, in a suit brought before him in the Star Chamber by a foreign merchant, that the plaintiff was not bound to sue in the ordinary courts, ‘but he ought to sue here, and it shall be determined by the law of nature in Chancery.’ The administration of justice in the case of foreigners was, he said, to be ‘secundum legem naturae, which is called by some the law merchant, which is the law universal of the world.’ In the case in question the justices certified that, since the plaintiff was an alien, his goods were not forfeited to the Crown as a waif, though they would have been had he been a subject.4 We may, however, surmise that proceedings in the Star Chamber were exceptional, and were possibly only resorted to when the dispute concerned property of more than usual value. Under ordinary conditions the courts of the staple would be the most expeditious and satisfactory means of settling those differences of opinion which were as certain to arise in the course of mercantile transactions in the fourteenth and fifteenth centuries as they are to-day.
If an inquest was held to try the truth of any question in the staple courts, the jury was to consist wholly of denizens, when both parties to the suit were subjects; wholly of aliens, when both of the parties were aliens; and half of denizens and half of aliens, when one of the parties was a subject and the other a foreigner.
The statute staple—the recognizance ‘in the nature of a statute staple’ afterwards became a usual form of security in the ordinary courts—was introduced in the staple courts. It was a bond of record acknowledged before the mayor of the staple, in the presence of one or all the constables. To all obligations made on recognizances so acknowledged it was required that a seal should be affixed, and this seal of the staple was all that was necessary to attest the contract. The seal belonging to the staple court of Poole is still in existence, and bears the words ‘Sijill: Staple in Portu de Pole.’1
With the object of giving effect to the staple regulations a number of the most considerable towns in the kingdom were named as staple towns.2 To these centres the principal raw commodities of the kingdom—such as wool, woolfels, leather, tin, and lead—were brought for sale and exportation, and were in consequence known as the ‘staple’ wares of England, though the term came in time to be applied almost exclusively to wool. In speaking of the growth of duties on exports and imports Blackstone says:—
‘These (i. e. the customs on wool, skins, and leather) were formerly called the hereditary customs of the Crown, and were due on the exportation only of the said three commodities, and of none other: which men styled the staple commodities of the kingdom, because they were obliged to be brought to those ports where the King’s staple was, in order to be there first rated and then exported.’3
The staple was sometimes situated abroad, as at Bruges or Calais, and less frequently at Antwerp, St. Omer, or Middleburgh; sometimes at a number of English towns. Its history is involved in considerable obscurity until the reign of Edward III, but it appears to have been generally maintained in one of the wealthy cities of Flanders, no doubt because most of the English wool went thither to be made into cloth. It is true that we find Edward III, when attempting in the second year of his reign to establish freedom of trade according to the tenor of the Great Charter, declaring that ‘the staples beyond the sea and on this side, ordained by kings in times past,’ should cease.1 But in the seventeenth year of the same reign the merchants petitioned that the staple of wools might be removed to England, whereby would arise the following benefits: the price of wool would be enhanced; less merchandise would be lost at sea by English merchants; less bad money would be introduced into the kingdom; the king would have 40s. from every sack at the expense of aliens only; and the petitioners might receive an assignment of one half the customs paid by aliens in discharge of the debts due to them from the Crown. And, again, in the following year, it is stated ‘that the staple is ill-situate at Bruges. Formerly Italian and Spanish buyers were numerous; now the great cities of Flanders will not open the staple to strangers beyond Flanders.’2 It would, therefore, appear probable that such English staples as did exist were of little importance until the great Statute of Staple of 13543 temporarily abolished their foreign rivals and brought them into prominence. With some subsequent minor alterations, this enactment provided for the regulation of the system so long as it continued an active force in English history. . . .4 Even in the reign of Henry VII, the Merchants of the Staple were a body of no small importance, although the system had been falling into decay during the reigns of several of the first Tudor’s predecessors. The process of disintegration had commenced with the very considerable growth of the English cloth manufacture in the reign of Henry IV. In 1464 a statute of the fourth year of Edward IV recites that ‘owing to subtil bargains made in buying wools before that the sheep, that bear the same, be shorn,’ the clothmakers of the realm can obtain none, ‘to the great grief of them which have been accustomed to have their living by the mean of the making of cloth,’ and consequently forbids such bargains for the future. Many other Acts of the same reign show a solicitude for the growth of the home manufacture, and it is clear that the policy which in 1338 had forbidden the wearing of cloth made out of England, except to the royal family, and had invited, with the assurance of protection and privileges, ‘all cloth-workers of strange lands of whatsoever country they might be,’ had resulted in making England the principal centre of the cloth trade by the middle of the fifteenth century. The proverb that ‘riches follow the staple’ was ceasing to be appropriate. In Henry VI’s reign the revenue from staple commodities had fallen to £12,000 from £60,000, which accrued from the same source in the time of Edward III. This led to an enactment revoking all licenses to trade elsewhere than to Calais saving those granted to the Queen, the Duke of Suffolk, the Prior of Bridlington, and three others, and with the exception also, it would seem, of merchants passing the ‘Streyhts of Marrock,’ no doubt Gibraltar. These prohibitions, however, were apparently ineffectual, and by the close of the reign the Merchants of the Staple had reached a low ebb of prosperity. The seas were unsafe; disbanded captains received their rewards at the expense of the stapler’s monopoly; while the Merchant Adventurers had come upon the scene, and, trading under more favourable auspices than their rivals of the staple, promised to outstrip them in the race for commercial supremacy.1
During the reign of Henry VIII the Merchants of the Staple presented a petition to the Crown setting out their grievances. They pointed out that they had from time immemorial enjoyed a monopoly of traffic in the staple commodities of the kingdom, and reminded Cardinal Wolsey that they had exercised the privilege to the complete satisfaction of the Government. During the Wars of the Roses the garrison of Calais, their pay being eight years in arrear, had risen and compelled the merchants to satisfy their claims. Later had come bad seasons; a murrain had broken out among the flocks; wool was in consequence scarce, and production limited to wealthy graziers, who held back for advanced prices. The war had prevented foreign buyers from coming to Calais, the French, who formerly took 2,000 sacks of wool yearly, now accepting only 400. A continual loss had been suffered on exchange, so that ‘there has not been so little loste as £100,000.’ The consequence was that the members were falling off, and the fellowship was in process of decay.1 The sad condition of the Staplers seems to have met with little sympathy from the Government, although we do find that by a statute of the fifth year of Edward VI only Merchants of the Staple at Calais and their apprentices were to be allowed to buy wool, and that the Merchants of the Staple as well as the Merchant Adventurers were exempted from Elizabeth’s Navigation Act.2
The truth was that the system had by this time outlived the purposes of its creation. The principal feature of the economic history of England from the accession of the Plantagenets for some two centuries and a half was the export trade in wool, and the staple system was a useful, almost a necessary, machinery for the direction of that trade. Gradually, as the manufacture of cloth sprang up, and a trade in that commodity began to take the place formerly held by raw wool, the usefulness of the system declined; and the Staplers, with their anxiety to maintain their monopoly on the lines of the most rigid conservatism, ended by being a clog on the foreign trade of England, with which the ideas of the time were out of harmony. The loss of Calais in 1558 must practically have given the Merchants of the Staple their deathblow; but if anything further was required to complete the downfall, it was administered by an Act of 1660, which totally prohibited the export of wool, thereby producing such a glut of the material in the English markets that it had to be followed by the curious enactment which for nearly 150 years compelled every one to be buried in a woollen shroud.
Perhaps as compensation for this blow Charles II, in 1669, granted a charter of incorporation and a common seal to the Staplers under the title of ‘The Mayor, Constables, and Company of Merchants of the Staple of England.’ Since the conferment of this dignity the company has withdrawn itself from the fierce glare of public life, although it emerged therefrom in the year 1887, and successfully maintained an action against the Bank of England.1 The only other vestige of its former prosperity is Staple Inn in Holborn, near to which, tradition has it, was once the Wool Market of London, and at which the dealers in wool had their quarters. More fortunate than they, the Society of Merchant Adventurers were, we notice, represented by their Master upon the Queen’s visit to Bristol in November last. Yet they, too, are now little but a voice, for the merchant princes of the Tudor age have fallen from their high estate, and their place knoweth them no more.
CONTRIBUTIONS OF THE LAW MERCHANT TO THE COMMON LAW1
IN a recent book of unusual originality, we find the following statement: “The phrase ‘law merchant,’ like many another, is uncritically employed in handy explication of seeming anomalies. As objections to the Mosaic cosmogony, presented by the existence of fossils, were allayed by convenient reference to omnipotence, so perplexing questions relating to negotiable instruments are waived by unthinking allusion to the ‘law merchant.’ Omnipotence and law merchant work their arbitrary will, and are irreducible and distracting.”3 A little later in the volume, the author writes: “As a matter of fact, and not merely of phrase, may we not even ask whether there is a law of merchants, in any other sense than there is a law of financiers or a law of tailors? Frequent use of the word has almost produced the impression that as there was a civil law and a canon law, so also there was somewhere a ‘law merchant,’ of very peculiar authority and sanctity; about which, however, it is now quite futile to inquire and presumptuous to argue.”
Mr. Ewart does not claim that these views accord with the opinions which pervade judicial decisions and standard treatises. On the contrary, he frankly admits that judges and writers of the greatest eminence and learning have held views diametrically opposed to his. The object of the present article is to inquire whether The Law Merchant ought to be dismissed as a mere phrase.
Law Merchant Procedure
It is quite certain that, as early as the middle of the thirteenth century, cases between merchants were conducted according to a procedure quite unlike that of common law courts. Bracton tells us that the summons in such cases need not be served fifteen days before the defendant was bound to answer, as it had to be in common law actions. His language is: “Likewise, on account of persons who ought to have speedy justice, such as merchants, to whom speedy justice is administered in courts of pepoudrous, . . . the time of summons is reduced.”1 Again, in actions against merchants “the solemn order of attachments ought not to be observed,” Bracton declares, “on account of the privilege and favor of merchants.”2 Nor are these the only respects in which the procedure of the ancient law merchant differed from that of the common law. In an action of debt, the common law permitted the defendant to wage his law, that is to deny the debt by his own oath, and by the oaths of eleven neighbors, or compurgators, who swore that they believed his denial was the truth.3 This was not allowed, however, by the law merchant, in case the plaintiff supported his claim by a tally and two or more witnesses,4 or in case the action was upon a contract between merchant and merchant beyond the seas.5
The very name of the earliest courts in which mercantile cases were tried indicates the character of their procedure. They are called “pepoudrous,” says Coke, “because that for contracts and injuries done concerning the fair or market, there shall be as speedy justice done for the advancement of trade and traffick, as the dust can fall from the foot, the proceedings there being de hora in horam.”1 And Blackstone declares: “The reason of their original institution seems to have been to do justice expeditiously among the variety of persons that resort from distant places to a fair or market; since it is probable that no inferior court might be able to serve its process, or execute its judgments, on both, or perhaps either, of the parties; and therefore, unless these courts had been erected, the complainant must have resorted, even in the first instance, to some superior judicature.”2
The expedition of these courts was in striking contrast with the slow and stately procedure of the common law tribunals, which were not always open to suitors. Their proceedings, even during term time, were not from hour to hour throughout the day. They took plenty of time to deliberate. Sir John Fortescue, writing about the middle of the fifteenth century, gives this account of them: “You are to know further, that the judges of England do not sit in the King’s courts above three hours in the day, that is from eight in the morning till eleven. The courts are not open in the afternoon. The suitors of the court betake themselves to the pervise, and other places, to advise with the Sergeants at Law, and other their counsel, about their affairs. The judges when they have taken their refreshments spend the rest of the day in the study of the laws, reading the Holy Scriptures, and other innocent amusements at their pleasure. It seems rather a life of contemplation than of action.”3
Merchants were men of action, and the contemplative habit of English common law judges did not fall in well with their necessities. They insisted upon having not only justice but speedy justice. This was secured to them in a measure, as we have seen, by the institution of a court pepoudrous as an incident of every fair and market throughout England. The statute of the Staple1 provided additional courts for the relief of merchants. One of its chief objects was declared to be, “to give courage to merchant strangers to come with their wares and merchandise into the realm.”2 It recognized the fact “that merchants may not often long tarry in one place for levying of their merchandises,” and accordingly promised “that speedy right be to them done from day to day, and from hour to hour, according to the laws used in such staples before this time holden elsewhere at all times.”3 It provided for the election of a mayor and constable of the staple, by the merchants of each staple town, and gave to such mayor complete jurisdiction over all mercantile transactions.4 In order to secure these mercantile courts from encroachments on the part of the common law tribunals, the statute declared that, “In case our bench or common bench, or justices in eyre or justices of assize, or the place of the marshalsea, or any other justices come to the places where the said staples be, the said justices nor stewards, nor marshals, nor of other the said place shall have any cognizance there of that thing, which pertaineth to the cognizance of the mayor and ministers of the staple.”1
That the procedure in these statutory courts of the staple towns was not that of the common law, but was that of the law merchant, is expressly stated in the statute. Chapter 21 required the mayor of the staple to have “knowledge of the law merchant,” and “to do right to every man after the law aforesaid.” Chapter 8 provided “that all merchants coming to the staple shall be ruled by the law merchant, of all things touching the staple, and not by the common law of the land, nor by the usage of cities, boroughs or other towns;” although it gave merchants the right to sue before the justices of the common law if they preferred to do so. The language of chapter 20 is very significant: “Item, because we have taken all merchants strangers in our said realm and lands into our special protection, and moreover granted to do them speedy remedy of their grievances, if any be to them done, we have ordained and established, That if any outrage or grievance be done to them in the country out of the staple, the justices of the place where such outrages shall be done shall do speedy justice to them after the law merchant from day to day and from hour to hour, without sparing any man or to drive them to sue at the common law.”
The procedure, then, in the statutory courts of the staple was that of the law merchant, and was very different from that of the common law. It was a procedure with which merchants were familiar. The statute does not describe it, but assumes that its peculiarities are a matter of common knowledge. It was the procedure which was then in use in such staples, or markets, “holden elsewhere.”2 It was summary, swift and sure. It was the procedure of courts pepoudrous. It was the procedure of “the Law Merchant which prevailed in similar form throughout Christendom.”3 Whenever a merchant was a suitor in one of these courts, an ancient writer assures us, he was “in loco proprio, as the fish in the water, where he understandeth himself by the custom of merchants, according to which merchants’ questions and controversies are determined.”1
The Substantive Law Merchant
But the ancient law merchant was something more than a system of procedure, devised to secure the speedy settlement of merchants’ controversies. It was a body of substantive law. It is referred to as such in several of the extracts given above from the statute of the staple. In chapter eight, as we have seen, it is contrasted with “the common law of the land,” and it was provided that pleas concerning mercantile matters should be sued “before the justices of the staple by the law of the staple,” (which had previously been defined as the law merchant,) while “pleas of land and of freehold shall be at the common law.”2 It was recognized as a distinct body of substantive law in a charter of Henry III,3 which recites that “pleas of merchandise are wont to be decided by law merchant in the boroughs and fairs.” Fortescue contrasts it with the common law, when he declares that “in the courts of certain liberties in England, where they proceed by the law merchant, touching contracts between merchant and merchant beyond seas, the proof is by witnesses only.”4
Coke repeatedly refers to the lex mercatoria as a body of substantive law. In his notes to § 3, of the First Institute, he says, “There be divers laws within the realm of England,” which he proceeds to name. The fourth class of these laws is “The common law of England,” while the twelfth is “Lex Mercatoria, merchant, &c.” In the fourth institute, he writes: “The Court of the Mayor of the Staple is guided by the law merchant, which is the law of the staple. . . . This Court (though it was far more ancient) is strengthened and warranted by act of parliament.5 . . . It was oftentimes kept at Callice, and sometimes at Bridges in Flanders, and at Antwerpe, Middleburgh, &c., and therefore it was necessary that this Court should be governed by the law merchant.”1
Malynes, in his “Lex Mercatoria or Ancient Law Merchant,”2 writes for the man of business rather than for the lawyer, but he has much to say of the law merchant. In his “Epistle Dedicatory” to King James, he declares the “Law Merchant hath always been found semper eadem; that is, constant and permanent, without abrogation, according to the most ancient customs, concurring with the Law of Nations in all Countreys.” He informs “The Courteous Reader,” in his preface, that he “intitled the book according to the ancient name of Lex Mercatoria, and not Jus Mercatorium; because it is a customary law, approved by the authority of all kingdoms & commonwealths, and not a law established by the soveraignty of any Prince, either in the first foundation, or by continuance of time.” Earlier in the preface, he writes, “Reason requireth a law not too cruel in her frowns, nor too partial in her favors. Neither of these defects are incident to the Law Merchant, because the same doth properly consist of the custom of merchants, in the course of traffick, and is approved by all Nations, according to the definition of Cicero, Vera lex est recta Ratio Natura congruens, diffusa in omnes constans sempiterna.” Later, he refers to the Lex Mercatoria as “made and framed of the Merchants’ Customs and the Sea Laws.” Several chapters of the book are devoted to an account (rather desultory it must be admitted) of the various methods for the determination of merchants’ causes and controversies. Seafaring causes, as he styles them, are determined in the Admiralty Court. Other controversies may be decided either by arbitrators chosen by the parties, or by merchants’ courts, or by the chancery, or by the common law courts. Even when actions are brought in the courts of common law by merchants, he declares, “That the Law Merchant is predominant and over-ruling, for all Nations do frame and direct their judgments thereafter, giving place to the antiquity of Merchants’ Customs, which maketh properly their Law, now by me methodically described in this Book.”1
Of the common law, in its specific sense, that is of the system of legal rules and procedure administered in the common law courts, the author seems to have had a poor opinion. Among other flings at it is this: “In chancery every man is able by the light of nature to foresee the end of his cause, and to give himself a reason therefor, and is therefore termed a cause; whereas at the common law, the Clyent’s matter is termed a case, according to the word Casus, which is accidental; for the Party doth hardly know a reason why it is by Law adjudged with or against him.” After thus paying his compliments to the technical, dilatory and uncertain common law, he proceeds: “Merchants’ causes are properly to be determined by the Chancery, and ought to be done with great expedition; . . . for the customs of merchants are preserved chiefly by the said court, and above all things Merchants’ affairs in controversie ought with all brevity to be determined, to avoid interruption of traffick, which is the cause that the Mayor of the Staple is authorized by several acts of parliament to end the same, and detain the same before him, without dismission of the common law.”2 In a later chapter on “The Ancient Government of the Staple,” the author says that “the laws and ordinances made by the said merchants” in the staple towns “were called staple laws,”3 which, as we have seen, is but another name for the law merchant.
The controversy between the admiralty and the common law courts for jurisdiction, which culminated during the chief justiceship of Lord Coke, elicited several publications in which the law merchant plays a prominent part. Perhaps, the most important of these works are Godolphin’s “View of Admiralty Jurisdiction,”4 Zouch’s “Jurisdiction of the Admiralty,”5 and Prynne’s “Animadversions.”6
Godolphin quotes with approval the statement of Sir John Davies1 that the Law Merchant as a branch of the general law of Nations has “been ever admitted, had, received by the Kings and people of England, in causes concerning merchants and merchandizes and so is become the law of the land in these cases.” He looks upon the law merchant as “a law of England, though not the law of England.” Upon this point, he agrees with Lord Coke and treats the common law as well as the law merchant as two distinct but constituent elements of English jurisprudence.
Zouch calls attention to the fact that “Sir Edward Coke, in his comment upon Littleton, mentions the Law Merchant as a Law distinct from the Common Law of England,” adding, “And so doth Mr. Selden mention it in his Notes upon Fortescue.” He then quotes at length from Sir John Davies’ “Manuscript Tract touching Impositions,”2 laying especial stress upon the writer’s views, probably because of his eminence as a common lawyer and of the friendly personal relations which he had sustained with Coke. According to the writer, “Both the common law and Statute laws of England take notice of the law merchant, and do leave the causes of merchants to be decided by the rules of that law; which Law Merchant, as it is a part of the Law of Nature and Nations, is universal, and one and the same in all countries of the world.” “Whereby,” remarks Dr. Zouch,3 “It is manifest that the causes concerning merchants are not now to be decided by the peculiar and ordinary laws of every country, but by the general laws of Nature and Nations.” Sir John Davies is quoted further as saying: “That until he understood the difference betwixt the Law Merchant and the Common Law of England, he did not a little marvel, that England, entertaining traffick with all nations of the world, having so many ports and so much good shipping, the King of England being also Lord of the Sea, what should be the cause that, in the books of the Common Law of England there are to be found so few cases concerning merchants or ships: But now the reason thereof was apparent, for that the Common Law of the Land did leave those Cases to be ruled by another Law, namely, the Law Merchant, which is a branch of the Law of Nations.”
Prynne points to this absence of “precedents of suits between merchants and mariners in the common law courts” as conclusive evidence that those courts had not formerly claimed jurisdiction of them, and declares that actions for breach of maritime contracts had always been “brought in the Admiral’s Court, and there tried, judged in a summary way, according to the laws of merchants and Oleron, not in the King’s Courts at Westminster, who proceeded only by the rules of the Common Law.”1
The Law of Merchants a True Body of Law
It is apparent, we submit, from the foregoing authorities, that for several centuries there was a true body of law in England which was known as the law merchant. It was as distinct from the law administered by the common law courts, as was the civil or the canon law. It was a part of the unwritten law of the realm, although its existence and its enforcement had been recognized and provided for by statutes. Until the Seventeenth Century, it was rarely referred to in common law tribunals. Courts pepoudrous, staple courts or courts of merchants, the admiral’s court and the Chancery dealt with the cases which were subject to its rules. During the seventeenth century staple courts expired2 with the decay of the staple trade; and the courts pepoudrous3 lost much of their importance. Their decisions were subject to review by common law judges, who did not hesitate to pursue towards them the policy which they had adopted towards the admiralty, of limiting their jurisdiction within the narrowest bounds, and of enticing or coercing their suitors into the courts of common law.
While the staple courts and kindred tribunals were dying out, mercantile cases were necessarily finding their way into the common law courts. How should the common law judges deal with them? These judges were not selected, as the mayors of the staple had been chosen, because of their knowledge of the law merchant. Nor were the common law jurors taken from the commonalty of merchants. It became necessary, therefore, in a case involving the law merchant, to prove what the rule of that law applicable to the case was, unless, indeed, the rule were one of such common application, that the judge would take judicial cognizance of it. In other words, the law merchant “was proved as foreign law now is. It was a question of fact. Merchants spoke to the existence of their customs as foreign lawyers speak to the existence of laws abroad. When so proved, a custom was part of the law of the land.”1 This condition of things existed for about a century and a half—from the appointment of Coke as Lord Chief Justice in 1606 to the accession of Lord Mansfield in 1756.2
The Law Merchant a Body of Trade Customs
During this second period in the development of the law merchant, the term loses much of the definiteness which characterized it during the first period. It is not employed to designate a well-known body of legal rules which are administered in certain courts, but rather those trade usages whose existence had been established to the satisfaction of the regular tribunals, and which those tribunals were willing to enforce in cases growing out of mercantile disputes. Of this period Mr. Scrutton says:1 “And as the Law Merchant was considered as custom, it was the habit to leave the custom and the facts to the jury without any directions in point of law, with a result that cases were rarely reported as laying down any particular rule, because it was almost impossible to separate the custom from the facts;2 as a result little was done towards building up any system of Mercantile Law in England.”
The Law Merchant as the Law of All Nations
Lord Mansfield was dissatisfied with this condition of the law and devoted his great abilities to its improvement. He was not an intense partisan of the common law like Coke, nor did he show Holt’s hostility to the innovations of Lombard Street. On the other hand, he was a thorough student of the civil law, was familiar with the writings of foreign jurists and was in hearty sympathy with the desire of merchants and bankers for the judicial recognition of their customs and usages. We are told3 that “he reared a body of special jurymen at Guildhall, who were generally retained in all commercial cases to be tried there. He was on terms of familiar intercourse with them, not only conversing freely with them, but inviting them to dine with him. From them he learned the usages of trade, and in return he took great pains in explaining to them the principles of jurisprudence by which they were to be guided.”4
He discovered that the usages and customs of merchants were in the main the same throughout Europe. When a mercantile case came before him, he sought to discover not only the mercantile usage which was involved, but the legal principle underlying it. It was this habit which called forth the oft-quoted eulogium of his disciple and colleague, Mr. Justice Buller: “The great study has been to find some certain general principle, not only to rule the particular case under consideration, but to serve as a guide for the future. Most of us have heard those principles stated reasoned upon, enlarged, and explained till we have been lost in admiration of the strength and stretch of the human understanding.”
Lord Mansfield’s methods are admirably illustrated, as Mr. Scrutton has pointed out, in the leading case of Luke v. Lyde.1 The question at issue was, what freight must be paid by a shipper, in case of loss. Lord Mansfield felt quite certain, at the trial, of the proper answer to be given, but “he was desirous to have a case made of it, in order to settle the point more deliberately, solemnly and notoriously; as it was of so extensive a nature; and especially, as the maritime law is not the law of a particular country, but the general law of nations: ‘non erit alia Romæ, alia Athenis; alia nunc, alia posthac: sed et apud omnes gentes et omni tempore, una eademque lex obtinebit.’ ” After thus stating his reasons for reserving the case for the formal opinion of the court, he proceeds to lay down the legal principles which must rule the case. The chief sources of these principles are the Rhodian laws, the consolato del Mare, the laws of Oleron and Wisby, the Ordinances of Louis XIV. and various treatises on the law merchant, and the usages and customs of the sea. It was from such sources, and from the current usages of merchants, that he undertook to develop a body of legal rules, which should be free from the technicalities of the common law, and whose principles should be so broad and sound and just, as to commend themselves to all courts in all countries. This conception of the law merchant, as a branch of the jus gentium, was not original with Lord Mansfield. It had found frequent expression, in former centuries, as the extracts which we have given above clearly disclose. The important fact is that the chief justice of the King’s Bench—the official head of the common law bench and bar—should devote his great energies to the development of a body of legal rules which should rest not on common law principles, but upon the principles “which commercial convenience, public policy and the customs and usages of” merchants had “contributed to establish, with slight local differences, over all Europe.”1 It is this cosmopolitan character of the law merchant, to which Lord Blackburn referred in the following passage, taken from one of his great opinions: “There are in some cases, differences and peculiarities which by the municipal law of each country are grafted on it, but the general rules of the law merchant are the same in all countries. . . . We constantly in English courts, upon the question what is the general law, cite Pothier, and we cite Scotch cases when they happen to be in point; and so in a Scotch case you would cite English decisions and cite Pothier or any foreign jurist, provided they bore upon the point.”2
The Law Merchant of To-Day
Lord Mansfield’s habit, of applying the principles of the law merchant to the decision of cases, brought in the common law courts, has been followed for a century and a half by English and American judges. The result has been an extensive amalgamation of the rules of the law merchant with those of the common law. These two bodies of rules no longer stand apart, as they did three centuries ago. Each has been modified by the other and, to a great extent, has lost its separate identity. And yet it is not difficult to point out rule after rule, which has come into English jurisprudence from the law merchant, and which retains the characteristic features which it possessed, when, centuries ago, it was unknown to common law tribunals and was enforced only in merchants’ courts—the courts pepoudrous, the staple courts and the like—or in the court of chancery.
Let us consider very briefly three of these. The first two are stated by Sir John Davies, in his work On Impositions, from which we have made several quotations. After declaring that the law merchant and the laws of the sea “admit of divers things not agreeable to the common law of the realm,” he gives these instances: “First, If two merchants be joint owners, or partners of merchandizes, which they have acquired by a joint contract, the one shall have an action of account against the other, Secundum Legem Mercatoriam, but by the rule of the common law, if two men be jointly seized of other goods, the one shall not call the other to account for the same.”1 The distinction between the rights and powers of partners over firm property on the one hand, and the rights and powers of tenants in common on the other, is still due to the fact, that the former have their origin in the ancient law merchant, the latter in the equally ancient common law.2 “Second, If two merchants have a joint interest in merchandizes, if one die, the survivor shall not have all, but the executor of the party deceased, shall by the Law-merchant call the survivor to an account for the moiety, whereas by the rule of the common law, if there be two joint tenants of other goods, the survivor per jus accrescendi shall have all.” This doctrine of non-survivorship among partners has been referred to, at times, as resting on a rule of equity,3 but there is abundant proof of its origin in the law-merchant. In a note to a case decided by the Common Pleas in the year 1611, it is said: “It was agreed by all the justices that by the Law of Merchants, if two Merchants join in trade, that of the increase of that, if one die, the others shall not have the benefit by survivour.”4 A similar statement was made by Lord Keeper North, in a chancery case decided in 1683: “The custom of merchants is extended to all traders to exclude survivorship.”1 If any doubt remains as to the origin of this doctrine it ought to be dispelled by the following extract from the Laws of Oleron: “If two vessels go a fishing in partnership, as of mackerels, herrings or the like, and do set their nets, and lay their lines for that purpose, . . . and, if it happen, that one of the said vessels perish with her fishing instruments, and the other escaping, arrive in safety, the surviving relations or heirs of those that perished, may require of the other to have their part of the gain, and likewise of their fish and fishing instruments, upon the oaths of those that are escaped.”2
The third rule, to which we would refer, is that relating to the right of stoppage in transitu. How much doubt formerly surrounded the origin of this rule, is apparent from the following language of Lord Abinger, Chief Baron of the Exchequer: “In courts of equity it has been a received opinion that it was founded on some principle of common law. In courts of law it is just as much the practice to call it a principle of equity, which the common law has adopted.”3 The learned judge then traces the course of judicial decision upon this topic, and reaches the conclusion that the earliest reported cases were based neither on principles of equity nor of common law, but on the usages of merchants. This conclusion has been approved by Lord Blackburn,4 and by Lord Justices Brett and Bowen. “The doctrine as to stoppage in transitu,” said Lord Justice Brett, “is not founded on any contract between the parties; it is not founded on any ethical principle; but it is founded upon the custom of merchants. The right to stop in transitu was originally proved in evidence as a part of the custom of merchants; but it has afterwards been adopted as a matter of principle, both at law and in equity.”5 In the same case, Lord Justice Bowen expressed himself as follows: “The right of stoppage in transitu is founded upon mercantile rules, and is borrowed from the custom of merchants; from that custom it has been engrafted upon the law of England. . . . This doctrine was adopted by the Court of Chancery, and afterwards adopted by the Courts of Common Law.”1
The Law Merchant and the Court of Chancery
It is not strange that the doctrine of stoppage in transitu and the doctrine of non-survivorship among partners make their first appearance, as far as reported cases are concerned, in the Court of Chancery. We have seen that Malynes, writing early in the Seventeenth Century, declared that “merchants’ causes are properly to be determined in the chancery . . . for the customs of merchants are preserved chiefly by the said Court.”2 While the various forms of merchants’ courts were in active operation, merchants rarely needed to resort to the regular tribunals of the realm. But as those courts died out, during the latter part of the sixteenth and the early part of the seventeenth century, mercantile disputes had to be brought either in the common law courts or the court of chancery. After Lord Bacon’s victory over Lord Coke, the jurisdiction of chancery became very extensive, and merchants were able to bring many of their disputes before that tribunal for adjudication. All the traditions of this court favored the recognition of the law merchant. As early as 1473 the chancellor had declared that alien merchants could come before him for relief, and there have their suits determined “by the law of nature in chancery . . . which is called by some the law merchant, which is the law universal of the world.”3
Naturally, therefore, many of the rules of the law merchant have come into English jurisprudence through the Court of Chancery. Not a few of them are looked upon as the creatures of equity, when in fact they are the offspring of the law merchant, which chancery has deliberately adopted.
THE EARLY HISTORY OF NEGOTIABLE INSTRUMENTS1
THERE is, upon some subjects, a touching absence of curiosity among English lawyers. Institutions which are the very heart of modern business life, the fountain-heads of not ungrateful streams of litigation, are accepted as though, like the image of Ephesus, they fell direct from heaven for the benefit of a deserving profession. The legal questions to which they give rise are studied with minute care, the legal relationships which they create are made the occasion of microscopic analysis. But the subject itself, the really interesting and important matter, is left untouched.
No example better than negotiable paper. Bills of Exchange, with their kindred documents, have rendered international commerce possible. They are familiar to the business man, the lawyer, the impecunious—a category somewhat comprehensive. They have been the occasion of scores of statutes and thousands of reported decisions. Without them modern life would be impossible or unrecognizable. Yet it is hardly going too far to say that, in England, we have as yet no serious attempt to trace the origin of negotiable instruments. Some of the writers who profess to deal with the law of Bills of Exchange make no allusion whatever to it. Others devote a page or two of discursive remarks to the historical side of the subject,3 as a sort of concession to decency; and occasionally a learned judge drops a remark in the same direction.1 But the net result of these efforts cannot be said to be gratifying. We are favoured with the stock quotations from Cicero and the Pandects (which it is agreed have nothing to do with the matter), with the dicta of Pothier and Heineccius.2 We are told that the first statutory reference to the subject in England is of the year 1379,3 and the first reported decision of 1601.4 For the earliest English treatise we are referred to Malynes, and in the same breath told that Malynes was probably wrong in his most elementary statements.5
Naturally enough, the Germans have not contented themselves with this empirical method. While their study of the Dogmatik of the subject is perpetually bringing out new points of interest, while they watch keenly the abundant legislation, not only of the Continent but also of England, in the hope of establishing something like a logical theory of negotiable instruments, they are equally alive to the historical aspects of the matter. Ever since the establishment of the Zeitschrift für das gesammte Handelsrecht in the year 1858, the writers in that review have been adding to our knowledge of the early history of the Law of Exchange (Wechselrecht), though it must be admitted that anything like unanimity, even upon important points, has not yet been attained. The articles in the Zeitschrift für Handelsrecht are then rather stores of material for the careful elaboration of hypotheses, than authoritative expositions of truth. The same admission must also be made with regard to the more permanent works of Martens,6 Biener,7 Endemann,8 and other writers who have attempted to account for the introduction of negotiable instruments. Subject, however, to this important reservation, it may be possible to put together a few facts of interest to English readers.
The existence of bills of exchange in something like their present form was unquestionably known to the merchants of the fourteenth century. A Piacenza Ordinance of the year 13911 compels campsores to give written acknowledgments of moneys deposited with them, and provides for a special and speedy remedy on such documents. Unfortunately, nothing is said about transferability. But an almost contemporary Ordinance by the magistrates of Barcelona, dated 18th of March, 1394,2 leaves the matter beyond doubt. The Ordinance is concerned with the weights to be used by the silk merchants, and with the form of the acceptance of letters of exchange (y sobre la forma de la aceptacion de las letras de cambio). It is expressly provided that any one to whom a letter of exchange is presented must answer within twenty-four hours whether he will accept (complira) or no, and must further indorse on the letter the decision to which he comes, together with the exact date of the presentation. If he fails to comply with this rule, he is to be deemed to have accepted (que lo dit cambi li vage per atorgat).
Half a century later, an Ordinance of the French King Louis XI,3 creating or renewing4 a quarterly fair in the town of Lyons, refers to the use of lectres de change as an established institution for merchants whose business compels them to frequent fairs. The whole Ordinance gives us a curious glimpse into the political economy of the Middle Ages. During the fair-days foreign moneys may be used, the fiscal regulations as to the export of coin and precious metals are suspended, the trade of money-changer may be exercised by persons of all nations, except noz ennemis ançiens, the English. But it is more for our present purpose to know that, during the fairs, money may be remitted in all directions by lectres de change, so long as it does not find its way either to Rome or England, and that a special court is to sit for summary process against defaulters on such letters, en faisant aucune protestation, ainsi qu’ont accoustumé faire marchands frequentans foires. Unfortunately, the precise nature of this summary process is described neither here nor in the Piacenza Ordinance, though the latter states that it is to be sine aliquâ petitione seu libello.
The work of Pegoletti of Florence, Practica della Mercatura, attributed by Martens1 to the commencement of the fourteenth century, contains unmistakable references to scritti di cambio, and indeed makes use of several of the technical terms so familiar at the present day. Further back than the fourteenth century, however, it does not seem possible to trace the existence of negotiable instruments in their modern form; in fact there is some slight negative evidence against their existence prior to the middle of the thirteenth century. Salvetti, the author of the Antiquitates Florentinae, mentions a Corpus Artis Cambii Sanctionum of the year 1259, which dealt largely with the art of weighing and testing coin, but did not recognise the existence of literas cambii. Ex iistandem (says Salvetti) eruitur Florentinorum fuisse literarum cambii utilissimum inventum.2
Our enquiry into the earlier history of negotiable paper will, therefore, be of a purely biological character. We shall have to trace in the clauses of early medieval documents the germs from which the limbs of the negotiable instrument, so startlingly different from the orthodox forms of legal anatomy, were developed. For we may be quite sure that negotiable instruments were not an invention, but a development.
But before turning to this biological enquiry, let us satisfy ourselves that the legislators and writers of the fourteenth and early fifteenth centuries were dealing with facts, not with fictions. Hitherto we have only had references to imaginary instruments. We want to see concrete examples.
The oldest known to me is a bill of exchange of the 5th October, 1339. It is drawn by Barna of Lucca on Bartalo Casini and company of Pisa, payable to Landuccio Busdraghi and company of Lucca in favour of Tancredi Bonaguinta and company. It reads thus:—
Al nome di Dio amen. Bartalo e compagni: Barna da Lucha e compagni salute. Di Vignone. Pagherete per questa lettera a di xx di novembre 339 a Landuccio Busdraghi e compagni da Luca fiorini trecento dodici e tre quarti d’ oro per cambio di fiorini trecento d’ oro, che questo di della fatta n’avemo da Tancredi Bonaguinta e compagni, a raxione di IIII e quarto per C alloro vantaggio, e ponete a nostro conto e ragione. Fatta di V d’ ottobre 339.—Francesco Falconetti ci a mandate a paghare per voi a gli Acciaiuoli scudi CCXXX d’ oro.
The letter is addressed—Bartalo Casini e compagni in Pisa. It bears also a trade-mark, near to which is the word Prima.1
Another example, though sixty years younger, is of interest for our purpose, for it is contained in a reference sent by the magistrates of Bruges to the magistrates of Barcelona, whose exchange-ordinance we have already noticed. Inasmuch as there was no political connection between Barcelona and Bruges at the beginning of the fifteenth century, the reference must have been occasioned by one of two facts—the residence of the drawee at Barcelona, or some special reputation possessed by the Catalonian city in exchange matters. In either case the fact is interesting. Of course the practice of ‘stating a case’ for the opinion of a specialist or learned body was extremely familiar to the courts of the later Middle Ages; Henry VIII’s divorce question affording a conspicuous example. Here, however, is the document:—
Al nome di Dio amen. A di 18 Maggiore, 1404. Pagate per questa prima di cambio ad usanza à Piero Gilberto et à Pièro di Scorpo scuti mille de Felippo à soldi 10 Barcelonesi per scuto, i quali scuti mille sono per cambio, che (. . .) con Giovanni Colombo à grossi 22 di 9. scuto; et pagate ànostro conto et Christo vi guardi.—Antonio Quarti Sal. de Bruggias.
The letter is addressed—Francisco de Prato et Comp. à Barsalona.1
Here then we have two bills or letters of exchange, one upwards of 500 years old, the other only half a century younger, which would (unquestionably) be perfectly intelligible to any English merchant at the present day. Three points of difference may, however, be briefly noted.
1. Each bill has four parties, instead of, according to modern practice, three. In addition to the drawer, drawee, and payee, there is a presenter, or recipient on behalf of the payee. We shall see that this is the common practice, and we may be able to offer a suggestion as to its meaning.
2. The name of the drawee is indorsed. In the first bill it appears also on the face, in the second it does not. This fact will come in usefully hereafter.
3. The second bill is written in Italian, though none of the parties to it have (apparently) an Italian domicile, nor does there seem to be any essential reason for the choice of language. This fact seems to point to an early Italian influence in bills of exchange.
Can we now go a step further, and vivify our notions of early negotiable instruments by observing them as subjects of actual litigation? Fortunately we can; and the glimpse will not be without interest, as it can only be obtained through the medium of fragmentary publications.
On the establishment of the Belgian kingdom in 1837, the new Government, in the ardour of patriotism, undertook the issue of a Récueil des anciennes Coutumes de la Belgique. Two of the most important publications of the Royal Commission are the Coutumes d’Anvers2 and de Bruges respectively. But it pleased the wisdom of the Government to forbid the publication in the latter compilation of ‘le texte des sentences ou décisions particulières et les matiêres commerciales.’ Whereby, certain most interesting matter would have been lost to students of this generation, had not the distinguished German jurist Brunner appealed in the name of learning to the editor of the Coutumes de Bruges, Dr. Gilliodts van Severen, to save at least some fragments from the general fate. Dr. Van Severen, in reply, forwarded to Professor Brunner several manuscript copies of protocols recorded in connection with proceedings before the Town Council, or Schöffengericht,1 of Bruges, in the middle of the fifteenth century. These reports, long extracts from which have been published by Brunner in the Zeitschrift für Handelsrecht, are thus almost contemporaneous with the Lyons charter of Louis XI, and with the important Bolognese Ordinance of 1454,2 to be hereafter alluded to. The cases quoted by Brunner are interesting in all kinds of ways, but space forbids the quotation of more than one example.
Spinula v. Camby. Judgment of 29th March, 1448. Bernard and Matthias Ricy, at Avignon, on the 3rd June, 1439, gave a letter of exchange (fist ung change) to Cerruche, of Bardiz, for 450 florins. The bill was drawn on one Marian Rau, and was payable at Bruges to Bernard Camby (the defendant) and another. Marian Rau paid the defendant in full soon after the arrival of the bill at Bruges, but the defendant nevertheless ‘protested’ it for non-payment, and sent it back with the protest to Avignon. Thereupon the Ricys were compelled to pay the amount (presumably to Cerruche). Marian’s rights in the matter seem to have passed, in some unexplained way, to her brother Odo, who transferred them by a formal instrument (produced before the Court) to the plaintiff, Spinula. The latter brought his action against Camby to recover the amount paid him by Marian.
The defendant pleaded, first, that before the assignment to the plaintiff, Odo Rau had become bankrupt (estoit faillj), and that his goods and debts, therefore, belonged to his creditors rateably; second, that he had never had any dealings with Odo Rau, but that if the plaintiff would bring his action in the name of Marian, he would account as a good merchant should.
The court deputed certain of its members to consider the matter, and also took the advice of two merchants, one from Lucca, the other from Pisa, whom the parties had chosen as arbitrators. In its judgment it nonsuited the plaintiff, on the express ground that the attempted transfer to him of the rights of the Raus was worthless.1
The case is startlingly modern in some of its aspects. We have the modern bill of exchange, with presentation and payment. Evidently also the ‘protest’ was a fully recognised proceeding, for on its arrival at Avignon the Ricys acted upon it without any suspicion of the trick which had been played.2 And the recourse of the payee against the drawer, familiar also to modern law, is clearly admitted. The medieval aspects of the case are, of course, the refusal to recognise a written transfer of a chose in action, or, as the report puts it, droit et action, the existence (as in the earlier examples) of the four parties to the bill, and the reference to the Italian merchants.
Enough then has been said to prove the existence and legal recognition of bills or letters of exchange at the beginning of the fifteenth century. Minor points can be dealt with afterwards. We must now make an attempt to trace the biological development of the negotiable instrument.
It will hardly be disputed that the negotiable instrument of to-day still retains one of the most marked features of early law. It is one of the very few surviving instances of the formal contract. In spite of all modern legislation, in spite of the Zeitgeist and its dislike of formalism, it is still extremely dangerous to depart from the letter of precedent in negotiable paper. A glance at the examples of the fourteenth and fifteenth centuries is sufficient to show how slight are the changes in the form of a bill of exchange which the revolution of five centuries has produced.
But if in this one respect the negotiable instrument smacks of antiquity, in its more essential qualities it is wholly opposed to the spirit of early law. The alienability of rights in personam (to say nothing of proprietary rights) by simple endorsement or handing over of a document of title, the improvement of title by transfer, are very modern notions. It will be sufficient if we follow up the track suggested by the first of these qualities.
Choses in action are inalienable in early law for two reasons. In the first place the tribunals do not allow representation; or, in other words, the transferee is unable to enforce his claim because he is regarded by the court as a stranger to the proceedings. In the second, a chose in action does not permit of that corporeal and formal transfer which is essential to the legality of early conveyances. These two considerations give us the key to the history of negotiable instruments.
Primitive tribunals do not admit of representation. This is a rule with which every student of law is familiar. We need here only point out the extreme tenacity with which German Law held to the maxim.1 Even so late as the twelfth century, the clumsy Roman method of adstipulatio2 was used by the contracting party who wished to provide for the enforcement of his rights by a third person.
But there arrives a period in the history of every progressive people when this rule becomes a grievous nuisance, and all kinds of evasions are then attempted. According to the great authority of Brunner, modern Europe is indebted for the earliest successful efforts of this character neither to what we now call Germany,3 nor to France,4 but to the genius of the Lombard jurists, whose ideas, Teutonic in the main, differed in many important respects from those of the Transalpine Germans. Whether these differences, especially conspicuous in legal matters, were due to the geographical connection of the Lombards with the native soil of Roman Law, or to some race-peculiarity of the Lombard stock, is too great a question to be mooted here. Only it is of importance for English students never to forget the close affinity between the Anglo-Saxon and the Lombard, an affinity which shews itself in politics1 and law2 as well as in speech.
It is not, of course, to be expected that the earliest steps of a reform such as we are seeking should be found in legislation. Primitive legislators do not trouble themselves much about commercial convenience; they are even apt to look upon the rapid circulation of capital with grave suspicion. The art of the conveyancer, in which the Lombards were specially distinguished, is the origin of the reform.
Two great collections of early Lombard documents have recently been rendered accessible to the ordinary student. The first of these is the Memorie e Documenti per servire all’ istoria del Ducato de Lucca, the fifth volume of which contains a reprint of the cathedral documents of the 7th, 8th, 9th, and 10th centuries. During this period Lucca formed part of the princedom or duchy of Tuscany, itself a part of the Lombard Kingdom of Italy. Towards the close of the eighth century it became, of course, subject to the overlordship of the Frank empire; but the respect with which the conquerors treated Lombard institutions is well known.
The second collection is the recently edited Codex Cavensis, the reprint of the original deeds contained in the archives of the Cluniac monastery at La Cava, near Salerno, founded by Alferius Pappacarbone in the year 1011.3 Salerno, which had previously formed part of the Lombard principality of Beneventum, became in the year 843 (the year of the Treaty of Verdun), with the approval of its Frankish overlord, Ludwig the German, a separate duchy, and so remained until its conquest by Roger Guiscard in 1077. The only fact which makes against the character of the Codex as an exposition of pure Lombard practice, is the admittedly successful inroads of the Saracens into Southern Italy during the pre-Carolingian period. But it is unlikely that the Lombard lawyers would be seriously affected by Saracenic influence. Of course the bulk of the documents in both collections come long before the revival of the study of Roman Law in Italy.
Brunner arranges under four heads those clauses of the Lombard documents which aim at evading the strictness of the early law of transfer. But, as it is always an advantage to simplify classification where possible, we may be allowed to absorb his four classes into two, basing our arrangement rather on the nature of the object aimed at, than on the form of words by which that object is attained. Let it be understood that our examples are taken from all kinds of documents—gifts, sales, leases, bonds, and even wills.
Class I. Here the object of the conveyances is to provide specially for the enforcement of a right in personam, on behalf indeed of the grantee, but through the agency of a third person. This attempt gives rise to the two forms which Brunner has named (a) Exactionsklausel, and (b) Stellvertretungsklausel. The former runs thus:—per se aut per illum hominem cui ipse hanc cartulam dederit ad exigendum. It is found so far back as the year 771, in a curious document in which a monk makes over to a church (amongst other things) the right to avenge his death if he shall be murdered—i. e. (doubtless) the right to recover his wergild.1 A Lucchese document of the year 819 has a significant variation—aut ad illum homine(m) cui tu hanc pagina(m) pro animâ tuâ ad exigendumet dispensandumdederis.2 The et dispensandum, which appears again in a will of the year 836,3 refers to the dispensator, or clerical official who disposed of the deceased’s goods for the benefit of his soul. He forms an important link in the history of testamentary capacity. The Stellvertretungsklausel differs from the Exactionsklausel only in form. It runs—vel cui istum breve in manu paruerit invice nostra, and is to be found in numerous examples of the La Cava documents, from the early ninth century onwards.1 The important point to notice about both these variations is that they treat the transferee as the agent of the original grantee, not as an independent acquirer.
Class II. Here we come upon a different plan, which evidently contemplates an actual transfer of the beneficial right. This group of clauses is named by Brunner the Inhaberklauseln, and is subdivided by him into alternative and pure. His meaning will be apparent in a moment if we take an example of each subdivision. The alternative Inhaberklausel reads thus—tibi aut eidem homini qui hunc scriptum pro manibus abuerit,2 or, mihi seu ad hominem illum, apud quem brebem iste in manu paruerit.3 It is found in the middle of the ninth century. The reine Inhaberklausel is not quite so old. The earliest example quoted by Brunner is under the year 962. It runs thus—(ad componendum) ad hominem aput quem iste scribtus paruerit,4 and it is noteworthy that the earliest examples are nearly all concerned with wills, or at least mortuary gifts.5 The transition from the alternative to the pure Inhaberklausel simply consists in omitting the name of the original stipulator, and the step is easily explained by the hypothesis that the latter form was first used in cases which, in the nature of things, the stipulator could not expect to enforce his own claim.
The first class of clauses, which we may call, for brevity’s sake, the ‘representative’ clauses, seem rarely to have been found north of the Alps. The Bolognese Ordinance of 1454 shows distinct traces of their influence in Italy when it says:—Et quod liceat cuicunque, cuius intersit, per se, vel alium legitime intervenientem dictas Scripturas Librorum (deposit receipts) petereexecutioni mandaricontra Scribentem.6 And in the Stralsunder Stadtbuch for the years 1287-8 we get this interesting entry:—Ludekinus de Fonte dabit infesto beati Michaelis vel Gerardo dicto Repereuel suo nuntio cuicunque,dummodo apportaverit literam creditivam 10 mrc.1 But, with the greatest possible deference, it can hardly be said that the German phrase—wer diesen Brief mit ihrem Willen inne hat—conveys the full force of its alleged Latin equivalent—cui ipse hanc cartulam dederit ad exigendum. And of his alleged Stellvertretungsklausel—oder wer diesen Brief von ihretwegen inne hat2 —Brunner quotes no example, though the Stralsund entry may perhaps be said to give us a German instance of the Stellvertretungsklausel.
Moreover, of the pure Inhaberklausel, which seems to possess no special advantage over the alternative form, there appear to be but few early examples either in France3 or Germany.4 The alternative Inhaberklausel, on the other hand, had established itself firmly in western and central Europe by the end of the thirteenth century. Sometimes it is in a Latin form—quos dabunt praedicto Radolfo vel alicui de concivibus nostris qui presentem literam presentavit coram nobis.5 But it soon acquires a vernacular familiarity—joft den ghenen die dese lettren bringhen sal,6oder behelder des briefs,7ou à celui qui cette lettre portera.8
Perhaps the most curious point about the Inhaber clauses is that there seems to have been no necessity for the transferee of the claim to prove his title. We are, of course, familiar with the presumption of modern law in favour of the holder of negotiable instruments. But it is a little startling to find, so early as the eleventh century, the guardianship of a widow passing from hand to hand with a document. Yet in the year 1036 a certain ‘comes Petrus’ by his will left the guardianship of his wife, and all belonging thereto, to his germani Malfred and John or illi viro cuiscriptum in manu paruerit. Thirty years later, a certain clerk John appeared in court as guardian of the widow, and was accepted as such without a question on production of the document—in cuius manu, ut supra scriptum est, praedictum scriptum paruit.1 With regard to debts, we have an actual decision ad hoc in the fifteenth century, by the council of the famous city of Lübeck, the head of the Hanseatic League, and, by virtue of its appellate jurisdiction, the greatest authority on commercial law in Germany.
‘Herman Ziderdissen, burgher of Köln on the Rhine, appearing before the honourable Council at Lübeck, arrests Johan Cleitzen, burgher of the same, asserts and claims of him 100 Rhenish gulden, which the same Johan Cleitzen owed to Frank Greverôde, burgher of Köln, his heirs or holder of the letter (sînen erven ofte hebbern des brêves), and which the same John with his own hand, so he openly acknowledged and admitted, underwrote and with his signet sealed, which before the council at Lübeck was read, yet he refuses to pay the debt in arrear. Thereto Johan Cleitzen answers that Herman should shew his authority (macht) from Frank Greverôde. Thereupon the aforesaid Council at Lübeck decided that he has no right to it: As the letter contains the words “hebbere des brêves,” and he admitted that he had underwritten it, so must he answer thereto; if he has any objection to make, let it be brought forward as right is.’2
Here then is a clear recognition of the transferability of a bond with the alternative Inhaberklausel, at the end of the fifteenth century. Later on we shall see that there came a reaction in France which was not without its results. The English practice of the period seems to have been to make the bond payable to the original creditor vel suo certo attornato,1 and, to enforce this clause, Letters of Attorney, of which examples are given by Madox,2 were doubtless necessary. But it is time that we turn to the other side of the difficulty.
All early systems of law require for the transfer of rights a formal investiture or corporeal handling in the presence of the assembled community. Long after this corporeal transfer has become a mere form, symbolized by such survivals as the turf, clod, twig, knife, staff, &c., it continues to exercise a practical influence on conveyancing law. To the conservative force with which medieval Germany held to the Auflassung, a ceremony at first very real and practical, afterwards merely formal, modern Germany probably owes her important Grundbuch system.
It is, therefore, of great interest to notice that, while the other Teutonic races retained their symbolic investiture at least until the eleventh century, the Lombards, and their kindred Anglo-Saxons, had adopted the simpler and more modern form of traditio per cartam at a much earlier date. The Anglo-Saxon conveyance by boc or charter is found as early as the ninth century.3 In a Lombard document of the eighth century, to which we have previously referred, the donor of an advowson not merely transfers it by traditio cartae, but recites that he obtained his title in the same way.4 Perhaps the clearest evidence of the distinction is to be found in the directions to conveyancers contained in the Cartularium Langobardicum of the eleventh century.5 The imaginary pupil is directed to tradere per hanc pergamenam cartam venditionis (such and such land) ad Johannem, quod dehinc in antea a presenti die proprietario nomine faciat ipse et suiheredes aut cui ipse dederint. The same practice is to hold in the case of a Roman. But if the conveying party be a Salian, a Ripuarian, a Frank, a Goth, or an Alamman, the charter is to be placed on the ground, and upon it laid the knife, notched stick, clod, twig, &c.1 The purchaser then takes up the charter (levat cartam).
In some obscure way this peculiar difference appears to have connected itself with the early Lombard law of contract. Whatever may be the philosophical explanation of the appearance of the contract as a legal phenomenon, it is pretty certain that it represents historically a compromise between litigants, secured by oath, pledges, and (generally) hostages. The promisor is under no direct liability to the promisee; the latter must enforce his security either against the wadia or the fidejussores.2 The course of the Lombard law seems to have been this. Being familiar with the traditio per cartam in conveyances, it allowed the bond or document to act as the wadium in contracts. Naturally the particulars of the transaction are transcribed into the document, but the early cautio is not (according to the English dictum) the contract itself, nor even evidence of the contract, but, literally, the security for the contract.3 Two points illustrate this truth forcibly, and one of them is of direct interest for the history of negotiable instruments.
In the first place it will be observed that nearly all the early examples of cautio are penal stipulations. The Cartularium Langobardicum says expressly—Et in omnium fine traditionis adde: et insuper mitte poenam stipulationis nomine que est, &c.4 But we need not rely on dicta. The collections of Lucca and Salerno are full of eighth and ninth century examples.5 In fact we might almost lay it down that no transaction was completed at that time without a penal stipulation.
The other point to notice is the extreme care with which many early cautiones stipulate for the return of the document on payment. Of course this clause only occurs in actual bonds for the payment of money, not in conveyances containing merely penal stipulations. But as early as the time of the Angevin and Marculfian Formularies (seventh and early eighth centuries) we find the clause et caucionem meam recipere faciam,1 or even, cautionem absque ulla evacuario intercedente recipiamus.2 The evacuaria or Todbrief was a formal document cancelling a bond alleged by the person claiming on it to have been lost. There is an example so late as the fourteenth century,3 and as it was issued by the Duke of Austria himself (though he was only concerned in the matter as protector of the Jew creditor) we may gather that great importance was attached to the procedure. But, historically speaking, the stress laid upon the production of the cautio is easily demonstrable, and quite natural. Several of the Lombard documents of the ninth century make the express condition—et eam (paginam) nobis in judicio ostiderit,4 or, simply, et eam mihi ostenderit.5 If the creditor could not produce the pledge, the presumption was that he had realized on it; and, as the debtor was under no personal obligation to pay him, he naturally declined to do so except in return for his wadium.
It is hardly going too far to say that this is at least a plausible explanation of the doctrine of presentation. The necessity for the production of a bond (the profert of English law) had become established before the appearance of bills of exchange. Qui presentem literampresentaverit,6joft den ghenen die dese lettren bringhen sal.7 Thus the existence of the fourth or presenting party, who appeared in our first examples,1 is amply accounted for. The praesenteerder and the meister van den brieff continue as separate persons in the Netherlands till the beginning of the seventeenth century.2
We have seen already that, by the end of the fifteenth century, presentation of Inhaberpapier was held to be sufficient without further proof of title. This had, probably, always been the Lombard rule, but the northern Germans had long held to the necessity for a special Willebrief, or documentary transfer. There was indeed a theory that this document must have three seals, that of the transferor and those of two witnesses.3 But the Lombard rule ultimately prevailed.
We have now arrived at the point at which biology passes into history. The mercantile world is familiar, in the middle of the thirteenth century, with bonds or acknowledgments of debts which, though given originally to A, can be enforced by B, upon his production of the original document, with or without document of transfer. In the middle of the fourteenth century the mercantile world is familiar with bills of exchange in the modern sense. How was the intermediate step taken?
Without professing any detailed knowledge of the transition process, it is possible for us to lay our hands on instruments which are clearly in the transition-stage. Let us read this document, dated 124⅞, from the archives of Marseilles:—
Ego W. de sancto Siro, civis Massilie, confiteor et recognosco vobis Guidaloto Guidi et Rainerio Rollandi, Senensibus, me habuisse et recepisse ex causapermutacionis seu cambha vobis £216 13s. 4d., pisanorum in Pisis, renuncians,4&c.; pro quibus £216 13s. 4d., dicte monete promicto vobis per stipulationem dare et solvere vobis vel Dono de Piloso vel Raimacho de Balchi consociis vestrisvel cui mandaveritis 100l. turonensium apud Parisius in medio mense aprilis et omnes depensas et dampna et gravamina quae pro dictodebito petendo feceritis vel incurreritis ultra terminum supradictum credendo inde vobis et vestris vestro simplici verbo absque testibus et alia probatione; obligans, &c. Actum Massiliaejuxta tabulas campsorum.Testes (4). Factum fuit indepublicum instrumentum.1
Thirty years later comes the following document from the archives of Köln:—
Walleramus dictus de Juliaco viris prudentibus et amicis suis carissimis, judicibus, scabinis, magistris civium et universis civibus Coloniensibus quicquid potest dilectionis et honoris. Significo vobis presentibus, quod ratum et gratum habeo, quod vos detis et assignetis centum marcas, quas michi solvere tenemini in festo beato Martini hiemalis nunc futuro, Friderico dicto Schechtere civi Coloniensi, et vos clamo per praesentes quitos et absolutos de solutione dictarum centum marcarum in dicto termine facienda. In cuius rei testimonium sigillum meum duxi praesentibus apponendum. Datum Colonie 6 kalendas Maii, anno Domini, 1279.2
Viris discretis dominis Hermanno et Thidemanno de Warendorp, consulibus Lubicensibus, Hinricus de Lon necnon Johannes Pape salutem in omni bono. Comparavimus et emimus de Henrico Longo, fratre Johannis Longi, 10 libras grossorum. Promittimus sibi solvere pro quilibet librum 9 marcas et 12 denarios in 14 diepost visionem presentis.Petimus ut dictam pecuniam solvatis nomine praedicti Hinrici Johanni fratri suo. Valete semper. Datum in cena domini. Petimus, ut hiis et aliis bene persolvatur.3
This last example is of the year 1341, two years later than the first true Bill of Exchange quoted above.4 The Marseilles document is by far the most valuable, as it shows us, almost beyond a doubt, the nature of the process which was going on. The purchasers of the bill do not wish merely to change their money from Pisan to French coin; they wish also to have it remitted to Paris. W. de St. Cyr is a professional campsor or dealer in money, possibly with the actual right of coinage. He receives from Guidi and his partners a sum of Pisan money, and gives them, as we should say, a bill on Paris payable to order. The bill is attested by witnesses and becomes a public document (publicum instrumentum). The whole transaction is in striking accordance with the Piacenza Ordinance of 1391,1 which compels campsores to give a written acknowledgment to their depositors confessing that they have received the money deposited with them, and declaring that the acknowledgment, as well as the entries in the books of the campsores, shall be evidence in favour of the creditors, sicut crederetur et fides daretur si dicta scriptura et dicti libri essent solemnepublicum instrumentum. Nothing could, in fact, be more tempting, and nothing more dangerous, than to treat the Bill of Exchange as the counterpart of the old Roman literal contract.
Of the endless points which present themselves with regard to the law of negotiable instruments in the Middle Ages, only one can be touched upon here. We have seen that, by the end of the fifteenth century, the holder of a bond or bill, containing the Inhaberklausel, was not obliged to show his title. Against this rather advanced doctrine the French writers of the sixteenth century protested, with remarkable success.2 Founding themselves on the maxim—un simple transport ne saisit point—and carefully cutting out the following words—sans apprehension—they succeeded in compelling the transferee of a bill of exchange to produce evidence of his title.3 This reactionary step seems to have led, in the first place, to the introduction of bills drawn in blank (promesses en blanc), which were used for the concealment of usurious transactions,4 and were on that account forbidden by various Parliamentary arrêtes of the early seventeenth century. Then recourse seems to have been had to the old French form of order or mandat—à son command, à son command certain,5 &c.—of which examples are found in the thirteenth century. Naturally this form required some evidence of title, but the practice of indorsement had fully established itself by the middle of the seventeenth century. The great Ordonnance de Commerce of 16731 distinguishes carefully between (a) endossement, the mere signature of the payee, which only made the holder an agent, and (b) ordre, containing the date and the name of the purchaser (qui a payé la valeur en argent, marchandise, ou autrement), which made the indorsee full owner, sans qu’il ait besoin de transport, ni de signification. How the practice of indorsement was introduced it is difficult to prove; but it is easy to see that the persistent use of the terms brief, lettre, might keep alive the idea of the original form of the document, and thus a writing which was, in effect, an address to a new holder, would come naturally where the address of a letter usually came—i. e. on the back. We have seen already, that in the earliest examples of bills of exchange the name of the drawee was indorsed.
This paper merely attempts to put together a few incidents in the early history of the negotiable instrument. It does not pretend to ascertain its origin. Claims have been made, with much plausibility,2 for a Jewish parentage; and Oriental evidence must certainly be examined with care before it is rejected. But such a task requires scholarship.
PROMISSORY NOTES BEFORE AND AFTER LORD HOLT1
THE question of liability of a remote indorser of a promissory note, in Virginia, came before the court below, about a year before their decision in the present case. It was in the case of Dunlop v. Silver and others, argued at July term 1801, in Alexandria. The court took the vacation to consider the case, and examine the law, and, at the succeeding term, judgment was rendered for the plaintiff by Kilty, Chief Judge, and Cranch, Assistant Judge, contrary to the opinion of Judge Marshall. . . .
The plea was non assumpsit, and a verdict was taken for the plaintiff subject to the opinion of the court, upon the point, whether the holder could maintain an action against the remote indorser of a promissory note.
The statute 3 & 4 Ann. c. 9, respecting promissory notes, is not in force in Virginia; but there is an act of assembly, 1786, c. 29, by which it is enacted, that “an action of debt may be maintained upon a note or writing, by which the person signing the same shall promise or oblige himself to pay a sum of money, or quantity of tobacco, to another;” and that “assignments of bonds, bills and promissory notes, and other writings obligatory, for payment of money or tobacco, shall be valid; and an assignee of any such may, thereupon, maintain an action of debt in his own name; but shall allow all just discounts, not only against himself, but against the assignor, before notice of the assignment was given to the defendant.”
It will be observed, that this act gives no action against the indorser or assignor, nor does it make any distinction between notes payable to order, and those payable only to the payee. Hence, perhaps, it may be inferred, that it left such instruments as the parties themselves, by the original contract, had made (or intended to make) negotiable, to be governed by such principles of law as may be applicable to those instruments. At any rate, it seemed to be admitted, that the act did not affect the present case.
The principal question, then, is, whether this action could have been supported in England, before the statute of Anne.
I. In order to ascertain how the law stood before that statute, it may be necessary to examine how far the custom of merchants, or the lex mercatoria, was recognised by the courts of justice, and by what means the common-law forms of judicial proceedings were adapted to its principles. . . .
The custom of merchants is mentioned in 34 Hen. VIII., cited in Bro. Abr., tit. Customs, pl. 59, where it was pleaded, as a custom between merchants throughout the whole realm, and the plea was adjudged bad, because a custom throughout the whole realm was the common law. And for a long time, it was thought necessary to plead it as a custom between merchants of particular places, viz., as a custom among merchants residing in London and merchants in Hamburg, &c. By degrees, however, the courts began to consider it as a general custom. Co. Litt. 182; 2 Inst. 404. . . .
But after this, in the year 1640, in Eaglechild’s Case, reported in Hetly 167, and Litt. 363, 6 Car. I., it was said to have been ruled (in B. R.), “that upon a bill of exchange between party and party, who were not merchants, there cannot be a declaration upon the law-merchant; but there may be a declaration upon assumpsit, and give the acceptance of the bill in evidence.” This decision seemed to confine the operation of the law-merchant, not to contracts of a certain description, but to the persons of merchants: whereas, the custom of merchants is nothing more than a rule of construction of certain contracts. Jac. Law Dict. (Toml. edit.) tit. Custom of Merchants. Eaglechild’s Case, however, was overruled in the 18 Car. II., B. R. (1666), in the case of Woodward v. Rowe, 2 Keb. 105, 132, which was an action by the indorsee against the drawer of a bill of exchange. . . . It was afterwards moved again, that this “is only a particular custom among merchants, and not common law; but, per curiam, the law of merchants is the law of the land; and the custom is good enough, generally, for any man, without naming him merchant; judgment pro plaintiff, per totam curiam, and they will intend that he, of whom the value is said to be received by the defendant, was the plaintiff’s servant.” . . .
In the year 1760 (1 Geo. III.), in the case of Edie v. The East India Company, 2 Burr. 1226, Mr. Justice Foster said, “Much has been said about the custom of merchants; but the custom of merchants, or law of merchants, is the law of the kingdom, and is part of the common law. People do not sufficiently distinguish between customs of different sorts. The true distinction is, between general customs (which are part of the common law) and local customs (which are not so). This custom of merchants is the general law of the kingdom, part of the common law, and, therefore, ought not to have been left to the jury, after it has been already settled by judicial determinations.” . . . In the case of Pillans & Rose v. Van Mierop & Hopkins, 3 Burr. 1669, Lord Mansfield says, “the law of merchants and the law of the land is the same; a witness cannot be admitted to prove the law of merchants; we must consider it as a point of law.” . . .
This chronological list of authorities tends to elucidate the manner in which the custom of merchants gained an establishment in the courts of law, as part of the common or general law of the land; and shows that it ought not to be considered as a system contrary to the common law, but as an essential constituent part of it, and that it always was of co-equal authority so far as subjects existed for it to act upon. The reason why it was not recognised by the courts, and reduced to a regular system, as soon as the laws relating to real estate, and the pleas of the crown, seems to be, that in ancient times, the questions of a mercantile nature, in the courts of justice, bore no proportion to those relating to the former subjects. . . .
Another reason, perhaps, why we see so much tardiness in the courts in admitting the principles of commercial law in practice, has been the obstinacy of judicial forms of process, and the difficulty of adapting them to those principles which were not judicially established, until after those forms had acquired a kind of sanctity from their long use. Much of the stability of the English jurisprudence is certainly to be attributed to the permanency of those forms; and although it is right, that established forms should be respected, yet it must be acknowledged, that they have, in some measure, obstructed that gradual amelioration of the jurisprudence of the country, which the progressive improvement of the state of civil society demanded. It required the transcendent talents, and the confidence in those talents, which were possessed by Lord Mansfield to remove those obstructions. When he ascended the bench, he found justice fettered in the forms of law. It was his task to burst those fetters, and to transform the chains into instruments of substantial justice. From that time, a new æra commenced in the history of English jurisprudence. His sagacity discovered those intermediate terms, those minor propositions, which seemed wanting to connect the newly-developed principles of commercial law with the ancient doctrines of the common law, and to adapt the accustomed forms to the great and important purposes of substantial justice, in mercantile transactions.
II. Forms of pleading often tend to elucidate the law. By observing the forms of declarations, which have, from time to time, been adapted, in actions upon bills of exchange, we may, perhaps, discover the steps by which the courts allowed actions to be brought upon them, as substantive causes of action, without alleging any consideration for the making or accepting them. The first forms which were used, take no notice of the custom of merchants, as creating a liability distinct from that which arises at common law; but by making use of several fictions, bring the case within the general principles of actions of assumpsit. The oldest form which is recollected, is to be found in Rastell’s Entries, fol. 10,(a) under the head “Action on the Case upon promise to pay money.” Rastell finished his book, as appears by his preface, on the 28th of March 1564, and gathered his forms from four old books of precedents, then existing. This declaration sets forth that
A. complains of B. &c., for that whereas, the said A., by a certain I. C., his sufficient attorney, factor and deputy in this behalf, on such a day and year, at L., at the special instance and request of the said B., had delivered to the said B., by the hand of the said I. C., to the proper use of the said B., 110l. 8s. 4d. lawful money of England; for which said 110l. 8s. 4d., so to the said B. delivered, he, the said B., then and there, to the said I. C. (then being the sufficient attorney, factor and deputy of the said A. in this behalf) faithfully promised and undertook, that a certain John of G. well and faithfully would content and pay to Reginald S. (on such a day and year, and always afterwards, hitherto the sufficient deputy, factor and attorney of the said A. in this behalf), 443 2-3 ducats, on a certain day in the declaration mentioned. And if the aforesaid John of G. should not pay and content the said Reginald S. the said 443 2-3 ducats, at the time above limited, that then the said B. would well and faithfully pay and content the said A. 110l. 8s. 4d., lawful money of England, with all damages and interest thereof, whenever he should be thereunto by the said A. requested. It then avers, that the said 443 2-3 ducats were of the value of 110l. 8s. 4d., lawful money of England, that John of G. had not paid the ducats to Reginald S., and that if he had paid them “to the said R., I. B., and associates, or to either of them, then the said 443 2-3 ducats would have come to the benefit and profit of the said A. Yet the said B., contriving, the aforesaid A., of the said 110l. 8s. 4d. and of the damages and interest thereof, falsely and subtly to deceive and defraud, the same, or any part thereof, to the said A., although often thereunto required, according to his promise and undertaking aforesaid, had not paid, or in any manner contented, whereby the said A., not only the profit and gain which he, the said A., with the said 110l. 8s. 4d., in lawfully bargaining and carrying on commerce might have acquired, hath lost; but also the said A., in his credit towards diverse subjects of our lord the king (especially towards R. H. and I. A., to whom the said A. was indebted in the sum of 110l. 8s. 4d., and to whom the said A. had promised to pay the same 110l. 8s. 4d., at a day now past, in the hope of a faithful performance of the promise and undertaking aforesaid), is much injured, to his damage,” &c.
This declaration seems to have been by the indorsee of a bill of exchange, against the drawer. For although nothing is said of a bill of exchange, or of the custom of merchants, yet the facts stated will apply to no other transaction. It appears, that ducats were to be given for pounds sterling; this was in fact an exchange. Again, the defendant promised to repay the original money advanced, with all damages and interest; this is the precise obligation of the drawer of a bill of exchange, according to the law-merchant. . . .
In the oldest books extant in the English language on the subject of the law-merchant, viz., Malynes’ Lex Mercatoria, written in 1622, and Marius’s Advice, which appeared in 1651, it is said, that regularly there are four persons concerned in the negotiating a bill of exchange. A., a merchant in Hamburg, wanting to remit money to D., in England, pays his money to B., a banker in Hamburg, who draws a bill on C., his correspondent or factor in England, payable to D., in England, for value received of A. But in the declaration above recited, there are five persons concerned; and if, as is supposed, that transaction was upon a bill of exchange, the fifth person must have been an indorsee, or assignee of the bill. Another reason for supposing this to be the case, is, that Rastell has no other form of a declaration by an indorsee, although he has two by the payee, viz., one against an acceptor and one against a drawer. . . .
These are the greater part of the precedents of declarations on bills of exchange, to be found in the printed books, before the statute of Anne; and in all of them, those facts are stated which bring the case within the principles which were considered as necessary to support the action of assumpsit, in general cases, at common law. In the more modern forms, the liability of the defendant, under the custom, is considered as a sufficient consideration to raise an assumpsit, without averring those intermediate steps which may be considered as the links of the chain of privity which connects the plaintiff with the defendant. The reason of this change of form was, probably, the consideration that those intermediate links were only fictions, or presumptions of law, which were never necessary to be stated. . . .
III. Having thus seen how the law-merchant was understood, at the time of the statute of Anne, and the manner in which it was applied to the forms of judicial process, it will now be necessary to inquire, at what time the law-merchant was considered as applicable to inland bills, and what was the law respecting such bills and promissory notes, prior to the statutes of 9 & 10 Wm. III., c. 17, and 3 & 4 Ann., c. 9.
It is not ascertained exactly at what time inland bills first came into use in England, or at what period they were first considered as entitled to the privileges of bills of exchange, under the law-merchant. But there was a time, when the law-merchant was considered as “confined to cases where one of the parties was a merchant stranger,” 3 Woodeson, 109; and when those bills of exchange only were entitled to its privileges, one of the parties to which was a foreign merchant. This seems to have been the case, at the time  when Malynes wrote his Lex Mercatoria, in the 4th page of which, he says, “He that continually dealeth in buying and selling of commodities, or by way of permutation of wares, both at home and abroad in foreign parts, is a merchant.” It may be observed also, that Malynes takes no notice of inland bills; hence, we may presume, that they were not in use in his time. . . . In the case of Bromwich v. Loyd, 2 Lutw. 1585 (Hil., 8 Wm. III., C. B.) Chief Justice Treby said, “that bills of exchange at first were extended only to merchant strangers, trading with English merchants; and afterwards, to inland bills between merchants trading one with another here in England; and after that, to all traders and dealers, and of late, to all persons, trading or not.” And in Buller v. Crips, 6 Mod. 29 (2 Ann.), Lord Chief Justice Holt said, he remembered “when actions upon inland bills of exchange first began.”
Perhaps Lord Holt might have been correct as to the time when actions upon inland bills first began, or rather when the first notice was taken of a difference between inland and foreign bills; but it appears probable, that inland bills were in use much before Lord Holt’s remembrance. Marius first published his Advice concerning Bills of Exchange, in 1651, half a century before Lord Holt sat in the case of Buller v. Crips, as appears by Marius’s preface to his second edition; and he there says, he has been twenty-four years a notary-public, and in the practice of protesting “inland instruments and outland instruments.” In p. 2, speaking of a bill between merchants in England, he says, it is “in all things as effectual and binding as any bill of exchange made beyond seas, and payable here in England, which we used to call an outland bill, and the other an inland bill.” If we go back twenty-four years from 1651, the time when Marius first published his Advice, it will bring us to the year 1627; but if we go back twenty-four years from 1670, the probable date of his 2d edition (which was probably his meaning), it will give us the year 1646, as the earliest date to which we can trace them. As Malynes, in his Lex Mercatoria, of 1622, does not notice them, and as Marius mentions them as existing in 1646, it seems probable, that they began to be in use between those two periods. . . .
It is certain, that promissory notes were in use upon the continent, in those commercial cities and towns with which England carried on the greatest trade, long before that period; and were negotiable under the custom of merchants, in the countries from whence England adopted the greater part of her commercial law. They were called bills obligatory, or bills of debt, and are described with great accuracy by Malynes, in his Lex Mercatoria, p. 71, 72, &c., where he gives the form of such a bill, which is copied by Molloy, in p. 447 (7th edition, London, 1722), and will be found in substance exactly like a modern promissory note.
“I, A. B., merchant of Amsterdam, do, by these presents, acknowledge to be indebted to the honest C. D., English merchant, dwelling at Middleborough, in the sum of 500l. current money, for merchandise, which is for commodities received of him to my content; which sum of 500l. as aforesaid, I do hereby promise to pay unto the said C. D. (or the bringer hereof), within six months after the date of these presents. In witness whereof. I have subscribed the same, at Amsterdam, this — day of July, —.”
This is nothing more than a verbose promissory note, which, stripped of its redundancies, is simply this: For value received, I promise to pay to C. D., or bearer, 500l. in six months after date. . . .
As Malynes says nothing of inland bills, and yet is so very particular respecting promissory notes, the probability is, that the antiquity of the latter is greater than that of the former, and that they were more certainly within the custom of merchants. Indeed, there is a case prior to any in the books upon inland bills, which is believed to have brought upon such a promissory note, or bill obligatory, as is described by Malynes. It is in Godbolt 49 (Mich., 28 & 29 Eliz., Anno 1586),
“An action of debt was brought upon a concessit solvere, according to the law-merchant, and the custom of the city of Bristow, and an exception was taken, because the plaintiff did not make mention in the declaration of the custom; but because in the end of his plea he said ‘protestando, se sequi querelam secundum consuetudinem civitatis Bristow,’ the same was awarded to be good; and the exception disallowed.”
Lord Ch. Baron Comyns, in his Digest, tit. Merchant, F. 1, F. 2, in abridging the substance of what Malynes had said upon the subject of bills of debt, or bills obligatory, does not hesitate to state the law to be, that “payment by a merchant shall be made in money or by bill. Payment by bill, is by bill of debt, bill of credit or bill of exchange. A bill of debt, or bill obligatory is, when a merchant by his writing acknowledges himself in debt to another in such a sum, to be paid at such a day, and subscribes it, at a day and place certain. Sometimes, a seal is put to it. But such bill binds by the custom of merchants, without seal, witness or delivery. So it may be made payable to bearer, and upon demand. So, it is sufficient, if it be made and subscribed by the merchant’s servant. So, a bill of debt may be assigned to another toties quoties. And now by the stat. 3 & 4 Anne, c. 9, all notes in writing, made and signed by any person, or the servant or agent,” &c. (reciting the terms of the statute). By thus arranging his quotations from Malynes under the same head with the statute of Anne respecting promissory notes, it is to be inferred, that he considered the custom of merchants, respecting bills of debt, as stated by Malynes, to be the cause or origin of the statute respecting promissory notes; and by connecting the former with the latter by the conjunction “and,” it seems to be strongly implied, that he considered the statute only as a confirmation of what was law before. That he was correct in this opinion, and that the foreign custom of merchants respecting promissory notes, mentioned by Malynes, was gradually and imperceptibly engrafted into the English law-merchant, at the same time, and under the same sanction with inland bills, and that that custom was acknowledged repeatedly by solemn legal adjudications in the English courts, before the statute of Anne, will probably be admitted when the authorities are examined, which will be presented in the following pages. A greater degree of weight will be attached to the opinion of Comyns, when it is recollected, that he was either at the bar or on the bench, during the reigns of King William III., Queen Anne, Geo. I. and Geo. II., and must, therefore, have known how the law stood before the statute, what motives produced it, and what was the true intent of the parliament in passing it. . . .
The time when inland bills and promissory notes began to be in general use in England, was probably about the year 1645 or 1646; and their general use at that time may be accounted for by the facts stated in Anderson’s Hist. of Commerce, vol. 1, p. 386, 402, 484, 492, 493, 519 and 520. In the year 1638 or 1640, King Charles forcibly borrowed 200,000l. of the merchants of London, “who had lodged their money in the king’s mint, in the tower, which place, before banking with goldsmiths came into use, in London, was made a kind of bank or repository for merchants therein safely to lodge their money; but which, after this compulsory loan, was never trusted in that way any more. Afterwards, they generally trusted their cash with their servants, until the civil war broke out, when it was very customary for their apprentices and clerks to leave their masters, and go into the army. Whereupon, the merchants began, about the year 1645, to lodge their cash in goldsmiths’ hands, both to receive and pay for them; until which time, the whole and proper business of London goldsmiths was, to buy and sell plate and foreign coins of gold and silver,” &c.
“This account,” says Anderson, “we have from a scarce and most curious small pamphlet, printed in 1676, entitled ‘The mystery of the new-fashioned goldsmiths or bankers discovered, in eight quarto pages,’ from which he extracts the following passage: ‘Such merchants’ servants as still kept their masters’ running cash, had fallen into a way of clandestinely lending it to the goldsmiths at four pence per cent. per diem; who, by these and such like means, were enabled to lend out great quantities of cash to necessitous merchants and others, weekly or monthly, at high interest; and also began to discount the merchants’ bills, at the like or a higher rate of interest. That much about this time, they (the goldsmiths or new-fashioned bankers) began to receive the rents of gentlemen’s estates remitted to town, and to allow them and others, who put cash into their hands, some interest for it, if it remained a single month in their hands, or even a lesser time. This was a great allurement for people to put their money into their hands, which would bear interest until the day they wanted it; and they could also draw it out by 100l. or 50l. &c., at a time, as they wanted it, with infinitely less trouble than if they had lent it out on either real or personal security. The consequence was, that it quickly brought a great quantity of cash into their hands; so that the chief or greater part of them were now enabled to supply Cromwell with money, in advance on the revenues, as his occasions required, upon great advantage to themselves.’
“After the restoration, King Charles being in want of money, they took ten per cent. of him barefacedly; and by private contract on many bills, orders, tallies and debts of that king, they got twenty, sometimes thirty per cent. to the great dishonor of the government. This great gain induced the goldsmiths to become more and more lenders to the king; to anticipate all the revenue; to take every grant of parliament into pawn, as soon as it was given; also to outvie each other in buying and taking to pawn, bills, orders and tallies; so that in effect all the revenue passed through their hands. And so they went on, till the fatal shutting of the exchequer, in the year 1672. . . .”
This short history of the goldsmiths will account for the sudden increase of paper credit, after the year 1645, and renders it extremely probable, that inland bills and promissory notes were in very general use and circulation. Indeed, we know that to be the fact, from the cases in the books; upon examining which, we shall find, that there was no distinction made between inland bills of exchange and promissory notes; they were both called bills; they were both called notes; sometimes, they were called “bills or notes.” Neither the word “inland,” nor the word “promissory,” was at this time in use, as applied to distinguish the one species of paper from the other. The term “promissory note” does not seem to have obtained a general use, until after the statute. There was no distinction made, either by the bench, by the bar, or by merchants, between a promissory note and an inland bill, and this is the cause of that obscurity in the reports of mercantile cases during the reigns of Charles II., James II., and King William, of which Lord Mansfield complained so much in the case of Grant v. Vaughan, 3 Burr. 1525, and 1 W. Bl. 488; where he says, that in all the cases in King William’s time “there is great confusion; for without searching the record, one cannot tell whether they arose upon promissory notes, or inland bills of exchange. For the reporters do not express themselves with sufficient precision, but use the words ‘note’ and ‘bill’ promiscuously.” This want of precision is apparent enough to us, who now (since the decision of Lord Holt in the case of Clerk v. Martin) read the cases decided by him before that time; but at the time of reporting them, there was no want of precision in the reporter, for there was not, in fact, and never had been suggested, a difference in law between a promissory note and an inland bill. They both came into use at the same time, were of equal benefit to commerce, depended upon the same principles, and were supported by the same law.
IV. The case of Edgar v. Chut, or Chat v. Edgar, reported in 1 Keb. 592, 636 (Mich. 15 Car. II., Anno 1663), seems to be the first in the books which appears clearly to be upon an inland bill of exchange. Without doubt, many had preceded it, and passed sub silentio. The case was this: A butcher had bought cattle of a grazier, but not having the money to pay for them, and knowing that the parson of the parish had money in London, he obtained (by promising to pay for it) the parson’s order or bill on his correspondent, a merchant in London, in favor of the grazier. The parson having doubts of the credit of the butcher, wrote secretly to his correspondent, not to pay the money to the grazier, until the butcher had paid the parson. In consequence of which, the London merchant did not pay the draft, and the grazier brought his suit against the parson, and declared on the custom of merchants. It was moved in arrest of judgment, that neither the drawer nor the payee was a merchant; but it was held to be sufficient, that the drawee was a merchant. . . .
The case of Shelden v. Hentley, 2 Show. 161 (33 Car. II., B. R., Anno 1680), was
“upon a note under seal, whereby the defendant promised to pay to the bearer thereof, upon delivery of the note, 100l., and avers that it was delivered to him (meaning the defendant), by the bearer thereof, and that he (the plaintiff) was so.” It was objected, that this was no deed, because there was no person named in the deed to take by it. But it was answered, that it was not a deed until delivered, and then it was a deed to the plaintiff. Court. “The person seems sufficiently described, at the time that ’tis made a deed, which is at its delivery: and suppose, a bond were now made to the Lord Mayor of London, and the party seals it, and after this man’s mayoralty is out, he delivers the bond to the subsequent mayor, this is good; et traditio facit chartam loqui. And by the delivery, he expounds the person before meant; as when a merchant promises to pay to the bearer of the note, anyone that brings the note shall be paid. But Mr. Justice Jones said, it was the custom of merchants that made that good.”
Here, it will be observed, that the court, in order to elucidate the subject before them, refer to principles of law more certain and better known, viz., that a promissory note payable to bearer is good, and that promissory notes were within the custom of merchants. . . .
If any doubt could remain, that the case of Hill v. Lewis had fully settled the law, that promissory notes were within the custom of merchants, that doubt must have been completely removed by the case of Williams v. Williams, decided at the next term in the same year, in the king’s bench (viz., Pasch., 5 W. & M., Anno 1692), Carth. 269.
The plaintiff, Thomas Williams, being a goldsmith in Lombard street, brought an action on the case against Joseph Williams, the projector of the diving engine, and declared upon a note drawn by one John Pullin, by which he promised to pay 12l. 10s. to the said Joseph Williams, on a day certain; and he indorsed the note to one Daniel Foe, who indorsed it to the plaintiff, for like value received. And now, the plaintiff, as second indorsee, declared in this manner, viz., “that the city of London is an ancient city, and that there is, and from the time to the contrary whereof the memory of man doth not exist, there hath been, a certain ancient and laudable custom among merchants, and other persons residing and exercising commerce, within this realm of England, used and approved, viz., &c. So sets forth the custom of merchants concerning notes so drawn and indorsed ut supra, by which the first indorser is made liable, as well as the second, upon failure of the drawer, and then sets forth the fact thus, viz.: And whereas also, a certain John Pullin, who had commerce by way of merchandising, &c., on such a day, at London aforesaid, to wit, in the parish of St. Mary le Bow, in the ward of Cheap, according to the usage and custom of merchants, made a certain bill or note in writing, subscribed with his name, bearing date, &c., and by the said bill or note, promised to pay, &c., setting forth the note; and further, that it was indorsed by the defendant to Foe, and by Foe to the plaintiff, according to the usage and custom of merchants; and that the drawer having notice thereof, refused to pay the money, whereby the defendant, according to the usage and custom of merchants, became liable to the plaintiff, and in consideration thereof, promised to pay it, &c., alleging that they were all persons who traded by way of merchandise, &c.
“To this, the defendant pleaded a frivolous plea, and the plaintiff demurred; and upon the first opening of the matter, had judgment in B. R. And now, the defendant brought a writ of error in the exchequer chamber, and the only error insisted on was, that the plaintiff had not declared on the custom of merchants in London, or any other particular place (as the usual way is), but had declared on a custom through all England, and if so, it is the common law, and then it ought not to be set out by way of custom; and if it is a custom, then it ought to be laid in some particular place, from whence a venue might arise to try it. To which it was answered, that this custom of merchants concerning bills of exchange is part of the common law, of which the judges will take notice ex officio, as it was resolved in the case of Carter v. Downish, and therefore, it is needless to set forth the custom specially in the declaration, for it is sufficient to say, that such a person, according to the usage and custom of merchants, drew the bill; therefore, all the matter in the declaration concerning the special custom was merely surplusage, and the declaration good without it. The judgment was affirmed.”
There cannot be a stronger case than this. On demurrer, judgment was rendered for the plaintiff in the king’s bench, which judgment was affirmed, upon argument, upon a writ of error in the exchequer chamber, on the very point of the custom; so that here was the unanimous concurrence of all the judges of England. This case, it is believed, has never been denied to be law, either before or since the statute of Anne. A short note of this case is to be found in 3 Salk. 68, by the name of Williams v. Field, in these words, “Ruled, that where a bill is drawn payable to W. R., or order, and he indorses it to B., who indorses it to C., and he indorses it to B., the last indorsee may bring an action against any of the indorsers, because every indorsement is a new bill, and implies a warranty by the indorser, that the money shall be paid.” . . .
Hawkins v. Cardy, in the next year (Mich., 10 Wm. III., B. R.), 1 Ld. Raym. 360; 1 Salk. 65; Carth. 466, was also upon a promissory note.
“The plaintiff brought an action on the case, upon a bill of exchange” (says the reporter), “against the defendant, and declared upon the custom of merchants, which he showed to be thus: that if any merchant subscribes a bill, by which he promises to pay a sum of money to another man, or his order, and afterwards, the person to whom the bill was made payable, indorses the said bill, for the payment of the whole sum therein contained, or any part thereof, to another man, the first drawer is obliged to pay the sum so indorsed to the person to whom it is indorsed payable; and then the plaintiff shows that the defendant being a merchant, subscribed a bill of 46l. 19s. payable to Blackman, or order; that Blackman indorsed 43l. 4s. of it, payable to the plaintiff,” &c. On demurrer, the declaration was adjudged ill; “for a man cannot apportion such personal contract; for he cannot make a man liable to two actions, where by the contract he is liable but to one.” “But if the plaintiff had acknowledged the receipt of the 3l. 15s. the declaration had been good.” And Holt, Chief Justice, said, “that this is not a particular local custom, but the common custom of merchants, of which the law takes notice.” Salkeld, in reporting this case, begins thus: “A. having a bill of exchange upon B., indorses part of it to I. S., who brings an action for his part,” &c.
This, compared with Lord Raymond’s report of the case, shows what has been already so often mentioned, that no difference had yet been discovered between the law respecting promissory notes, and that concerning inland bills of exchange. Even Lord Raymond states it first to be a bill of exchange, and immediately shows it to have been a promissory note. So glaring a contradiction could not have passed uncorrected, if a promissory note and an inland bill of exchange had not been considered as the same thing. In this case, it will be remarked, that upon demurrer, the court said, that this declaration, upon the custom of merchants, on a promissory note, by the indorsee against the maker, would have been good, if the receipt of the 3l. 15s. had been acknowledged. . . .
We have now examined all the reported cases upon promissory notes, from the time of the first introduction of inland bills, to the time of Lord Holt’s decision in the case of Clerke v. Martin. At least, if any others are to be found, they have escaped a diligent search. They form a series of decisions for a period of more than thirty years, in which we discover an uncommon degree of unanimity as well as of uniformity. We find the law clearly established to be the same upon promissory notes as upon inland bills; and we find no evidence that the latter were in use before the former. There is not a contradictory case, or even dictum, unless we consider as such the doubt expressed in the case of Butcher v. Swift, cited by Comyns; but that case is not reported, and therefore, it is impossible to say, upon what ground the doubt was suggested. The cases upon promissory notes and inland bills go to establish not only their likeness in every respect, but even their identity; for the former are almost uniformly called inland bills.
V. Upon examining the printed books of precedents, during the above period, we shall find that the common usage was, to declare upon a promissory note, as upon an inland bill of exchange.
The first precedent of a declaration upon a promissory note is that in Brownlow, Latine Redivivum, p. 74, which is prior  to any of the declarations upon inland bills of exchange. It is, in substance, as follows, that there is, and was, from time immemorial, a custom among merchants at the city of Exeter, and merchants at Crozict, that if any merchant at Crozict should make any bill of exchange, and by the said bill should acknowledge himself to be indebted to another merchant, in any sum of money, to be paid to such other merchant, or his order, and such merchant to whom the same should be payable, should order such sum to be paid to another merchant, and such merchant to whom the same was payable, should request the merchant who acknowledged himself so as aforesaid to be indebted, to pay such sum to such other merchant to whom he had ordered the money to be paid; and if, upon such request, the merchant who acknowledged himself to be indebted in the sum in such bill and indorsement mentioned, should accept thereof, then he would become chargeable to pay the said sum to the person to whom it was by the said bill and indorsement directed to be paid, at the time in the said bill mentioned, according to the tenor thereof. It then avers, that on the 8th May 1678, the defendant, according to the custom aforesaid, acknowledged himself to be indebted to one M. M. in 52s., which he obliged himself and his assigns (this is probably misprinted) to pay to the said M. M., who, by indorsement on the same bill of exchange, on —, at —, ordered the money to be paid to the plaintiff, which bill of exchange afterwards, to wit, on —, at —, the defendant saw and accepted, by which acceptance, and by the usage aforesaid, the defendant became liable, &c., and in consideration thereof, promised to pay, &c. There is, in the same book, p. 77, a declaration upon a bill of exchange at double usance, which is probably upon an inland bill, as the custom is alleged, generally, among merchants, but does not say at what place. . . .
In 2 Mod. Intr. 126, is another declaration upon the custom, by the indorsee against the maker of three promissory notes, dated in 1697. This declaration is precisely like a modern declaration upon a promissory note, excepting that the note is called a bill, and is said to be made and indorsed “according to the custom of merchants,” “whereby, according to the custom of merchants,” the defendant became liable, and so being liable, &c. In p. 122, is another by payee v. the maker of a promissory note, calling it a “bill or note,” and setting forth the custom specially. In every case upon a promissory note, the declaration is grounded on the custom of merchants.
Upon a review of this list of authorities and precedents, we are at a loss to imagine from what motive, and upon what grounds, Lord Holt could at once undertake to overrule all these cases, and totally change the law as to promissory notes: and why he should admit inland bills of exchange to be within the custom of merchants, and deny that privilege to promissory notes; when the same evidence which proved the former to be within the custom, equally proved that it extended to the latter. By examining the books, it will be found, that most of the points which have been decided respecting inland bills of exchange, have been decided upon cases on promissory notes. If he considered promissory notes as a new invention, when compared with inland bills of exchange, he seems to have mistaken the fact; for the probability is, that the former are the most ancient, or, to say the least, are of equal antiquity.
VI. But let us proceed to examine the case of Clerke v. Martin (Pasch., 1 Anne, B. R., 2 Ld. Raym. 757; 1 Salk. 129), upon which alone is founded the assertion in modern books “that before the statute of Anne, promissory notes were not assignable or indorsable over, within the custom of merchants, so as to enable the indorsee to bring an action in his own name against the maker.” The case is thus reported by Lord Raymond:
“The plaintiff brought an action upon the case, against the defendant, upon several promises; one count was upon a general indebitatus assumpsit for money lent to the defendant; another was upon the custom of merchants, as upon a bill of exchange; and showed that the defendant gave a note subscribed by himself, by which he promised to say—to the plaintiff, or his order, &c. Upon non assumpsit, a verdict was given for the plaintiff, and entire damages. And it was moved in arrest of judgment, that this note was not a bill of exchange, within the custom of merchants, and therefore, the plaintiff, having declared upon it as such, was wrong; but that the proper way, in such cases, is to declare upon a general indebitatus assumpsit for money lent, and the note would be good evidence of it.
“But it was argued by Sir Bartholomew Shower, the last Michaelmas term, for the plaintiff, that this note being payable to the plaintiff or his order, was a bill of exchange, inasmuch as, by its nature, it was negotiable; and that distinguishes it from a note payable to I. S., or bearer, which he admitted was not a bill of exchange, because it is not assignable nor indorsable by the intent of the subscriber, and consequently, not negotiable, and therefore, it cannot be a bill of exchange, because it is incident to the nature of a bill of exchange to be negotiable; but here this bill is negotiable, for if it had been indorsed payable to I. N., I. N. might have brought his action upon it, as upon a bill of exchange, and might have declared upon the custom of merchants. Why, then, should it not be, before such indorsement, a bill of exchange to the plaintiff himself, since the defendant, by his subscription, has shown his intent to be liable to the payment of this money to the plaintiff or his order; and since he hath thereby agreed that it shall be assignable over, which is, by consequence, that it shall be a bill of exchange. That there is no difference in reason, between a note which saith, ‘I promise to pay to I. S., or order,’ &c., and a note which saith, ‘I pray you to pay to I. S., or order,’ &c. they are both equally negotiable, and to make such a note a bill of exchange can be no wrong to the defendant, because he, by the signing of the note, has made himself to that purpose a merchant (2 Vent. 292, Sarsfield v. Witherly), and has given his consent that his note shall be negotiated, and thereby has subjected himself to the law of merchants.
“But Holt, Chief Justice, was totis viribus against the action; and said that this could not be a bill of exchange. That the maintaining of these actions upon such notes, were innovations upon the rules of the common law; and that it amounted to a new sort of specialty, unknown to the common law, and invented in Lombard street, which attempted, in these matters of bills of exchange, to give laws to Westminster Hall. That the continuing to declare upon these notes, upon the custom of merchants, proceeded upon obstinacy and opinionativeness, since he had always expressed his opinion against them, and since there was so easy a method as to declare upon a general indebitatus assumpsit for money lent, &c. As to the case of Sarsfield v. Witherly, he said, he was not satisfied with the judgment of the king’s bench, and that he advised the bringing a writ of error.
“Gould, Justice, said, that he did not remember it had ever been adjudged, that a note in which the subscriber promised to pay, &c., to I. S., or bearer, was not a bill of exchange. That the bearer could not sue an action upon such a note in his own name, is without doubt; and so it was resolved between Horton and Coggs, now printed in 3 Lev. 299, but that it was never resolved, that the party himself (to whom such note was payable) could not have an action upon the custom of merchants, upon such a bill. But Holt, Chief Justice, answered, that it was held in the said case of Horton v. Coggs, that such a note was not a bill of exchange, within the custom of merchants. And afterwards, in this Easter term, it was moved again, and the court continued to be of opinion against the action. . . . And judgment was given quod querens nil capiat per billam, &c., by the opinion of the whole court.” . . .
These five cases, viz., Clerke v. Martin, Potter v. Pearson, Burton v. Souter, Cutting v. Williams, and Buller v. Crips, are the only reported cases in which the former decisions were overruled, and it may be observed, that the four last were decided upon the authority of the first, which is to be considered as the leading case; and it is, in that case, therefore, that we are to look for the grounds upon which so great a change of the established law was founded. . . .
Hence, then, we find, from an examination of all the cases before the statute of Anne, that it never was adjudged, that a promissory note for money, payable to order, and indorsed, was not an inland bill of exchange. But we find, that the contrary principle had been recognised, in all the cases, from the time of the first introduction of inland bills and promissory notes, to the first year of Queen Anne, and that in one of them, it had been expressly adjudged, upon demurrer, in the king’s bench, and the judgment affirmed, upon argument, in the exchequer chamber, before all the judges of the common pleas and barons of the exchequer, so that it may truly be said to have been solemnly adjudged by all the judges of England. Principles of law so established, are not to be shaken by the breath of a single judge, however great may be his learning, his talents or his virtues. That Lord Holt possessed these in an eminent degree will never be denied; but he was not exempt from human infirmity. The report itself, in the case of Clerke v. Martin, shows that, from some cause or other, he was extremely irritated with the goldsmiths of Lombard street, and that his mind was not in a proper state for calm deliberation and sound judgment. The same observation applies to the case of Buller v. Crips, and is further confirmed, by that of Ward v. Evans, 2 Ld. Raym. 930, in which his lordship said, “But then I am of opinion, and always was (notwithstanding the noise and cry, that it is the use of Lombard street, as if the contrary opinion would blow up Lombard street), that the acceptance of such a note is not actual payment.” This circumstance has also been noticed by judges and others, in some of the more modern reports.
VII. From this concurrent testimony, it is apparent, that the case of Clerke v. Martin was a hasty, intemperate decision of Lord Holt, which was acquiesced in by the other judges, in consequence of his overbearing authority, “which made others yield to him;” and that he so “pertinaciously” adhered to his opinion, as to render it necessary to apply to parliament to overrule him. This, it is believed, is the true origin of the statute of Anne, which did not enact a new law, but simply confirmed the old; the authority of which had been shaken by the late decision of Lord Holt. This idea is confirmed by the words of the preamble of the statute, which are, “Whereas, it hath been held,” that notes in writing, &c., payable to order, “were not assignable or indorsable over, within the custom of merchants,” and that the payee could “not maintain an action, by the custom of merchants,” against the maker; and that the indorsee “could not, within the said custom of merchants, maintain an action upon such note” against the maker; “therefore, to the intent to encourage trade and commerce,” &c., be it enacted, &c., that all notes in writing made and signed by any person, &c., whereby such person, &c., shall promise to pay to any other person, &c., or his order, or unto bearer, any sum of money, &c., “shall be taken and construed to be, by virtue thereof, due and payable to any such person, &c., to whom the same is made payable;” “and also every such note, payable to any person,” &c., “or his order, shall be assignable or indorsable over, in the same manner as inland bills of exchange are or may be, according to the custom of merchants,” and that the payee “may maintain an action for the same, in such manner as he might do upon any inland bill of exchange, made or drawn according to the custom of merchants, against the person, &c., who signed the same.” And that the indorsee “may maintain his action,” for such sum of money, either against the maker or any of the indorsers, “in like manner as in cases of inland bills of exchange.” Here, it may be observed, that by using the words, “it hath been held,” the legislature clearly allude to certain opinions, which they carefully avoid to recognise as law. And in the enacting clause, they say, that such notes “shall be taken and construed to be due and payable,” &c., expressing thereby a command to certain persons, without saying expressly that the notes shall be due and payable, &c., for this being the law before, it was not necessary to enact the thing itself, but to instruct the judges how they should construe it. The mischief to be remedied was the opinion which had “been held,” not any defect in the law itself. By comparing this act with the cases decided prior to Clerke v. Martin, it will be found to contain no principles but such as had been fully recognised by the courts of law. It follows, therefore, that it was passed simply to restore the old order of things, which had been disturbed by Lord Holt.
The only real effect of the statute was to alter a few words in the declaration. The old forms allege that the defendant became liable by reason of the custom of merchants, the new say, that he became liable by force of the statute. Even Lord Holt himself always admitted, that an indebitatus assumpsit for money had and received, or money lent, would lie, and the note would be good evidence of it. His objections were only to the form of the action, and not to the liability of the parties. A promissory note was always as much a mercantile instrument as an inland bill of exchange, and there certainly seems to be more evidence that the former is within the custom of merchants than the latter, and that it was so, at an earlier period, on the continent of Europe, from whence it was introduced into England; and when introduced, it came attended with all the obligations annexed, which the custom had attached to it.
We, sometimes, in modern books, meet with an assertion that a promissory note was not negotiable at common law; this may be true, because a promissory note was not known at common law, if from the term common law we exclude the idea of the custom of merchants. It was a mercantile instrument, introduced under the custom of merchants. But if the custom of merchants is considered, as it really is, a part of the common law, then the assertion that a promissory note was not negotiable at the common law, is not correct. . . .
IX. The statute of Anne having put the question at rest, no one has taken the pains to examine the real state of the law, prior to the statute, but one writer after another has repeated the assertion, without the least examination. In England, it is of no importance, whether they are correct or not; but in this country, where few of the states have adopted the statute, it becomes interesting to know how the law really stood before. . . .
The observations in these cases from Virginia, respecting promissory notes, may be reduced to three propositions. 1st. That promissory notes were not negotiable, before the statute of Anne, so as to enable the indorsee to bring an action in his own name. 2d. That the act of assembly, by assimilating notes to bonds, shows an intention in the legislature to restrain the negotiability of both within the same limits. 3d. That the negotiability given by the act of assembly to bonds and notes was not “intended for purposes of commerce.”
The first of these propositions is clearly incorrect. It never was doubted, until the case of Clerke v. Martin, in the first year of Queen Anne, that a promissory note was a bill of exchange, even between the payee and the maker. . . .
The second proposition, that the act of assembly, by assimilating notes to bonds, intended to restrain their negotiability within the same limits, contains an argument which, if used at the trial, was not much insisted on, but which seems to be the only ground upon which a doubt can be supported. . . .
In Pennsylvania, a number of cases have occurred, from the whole of which it appears doubtful, whether the statute of Anne is to be considered as having been extended in practice to that state, or whether their actions upon promissory notes are grounded upon the custom of merchants. Their act of assembly of 28th May 1715, seems to have been passed in the full contemplation of the statute of Anne, but it provides a right of action only for the indorsee against the maker, and that only to recover so much “as shall appear to be due at the time of the assignment, in like manner” as the payee might have done. But it gives no action to the payee against the maker, nor to the indorsee against any of the indorsers. . . .
In the subsequent case of McCulloch v. Houston, in the supreme court of Pennsylvania, 1 Dall. 441, Chief Justice McKean was of opinion, that the legislature intended to put promissory notes on the same footing as bonds, at least, so far as to admit the equity of a note to follow it into the hands of the indorsee. He says, “before this act, it appears, that actions by the payee of a promissory note were not maintained, nor can they since be maintained, otherwise than by extending the English statute of Anne.” And to account for this extension of the statute, he supposes, “that actions upon promissory notes were brought here, soon after the passing of the statute, by attorneys who came from England, and were accustomed to the forms of practice in that kingdom, but did not perhaps nicely attend to the discrimination with regard to the extension, or adoption, of statutes.” But this could not have happened in the course of ten years, so as to have established a practice; for we are first to suppose a practice in England under the statute, a subsequent removal of attorneys from England to Pennsylvania, and then a practice in Pennsylvania to be established, and all this between the passing of the statute of Anne in the year 1705, and the act of assembly in 1715. A more probable conjecture seems to be, that the first settlers who came over from England about the year 1683, were well acquainted with the use of promissory notes, and the laws respecting them, as they had been practised upon in that country, for at least thirty years. The first emigrations to Pennsylvania were about the time when the banking business of the goldsmiths was at its greatest height, and it was fifteen or twenty years after the first settlement of Pennsylvania, before a doubt was suggested, whether an action would lie on a promissory note, as an instrument. Hence, it is probable, that actions on such notes were brought in the same manner as they had been used in England, to wit, on the custom of merchants; and upon that ground, and not upon the statute of Anne, probably rests the present practice in Pennsylvania.
The practice in New Hampshire and Massachusetts seems to have the same foundation. They declare upon promissory notes, as instruments, and rely upon the express promise in writing, without alleging a consideration, or referring to any statute or custom whereby the defendant is rendered liable, without a consideration. In Connecticut, it is said by Swift, in his System of the Laws, that the indorsee must sue in the name of the payee; but the payee can maintain an action upon the note, without alleging any custom, or statute or consideration. In New York, they have nearly copied the statute of Anne, as far as it relates to promissory notes, but how the law was considered, before their act of assembly of 1788, we are not informed. In Maryland, the statute of Anne was considered as in force and always practised upon. Their declarations have been precisely in the English form, alleging the defendant to be liable by force of the statute, and the courts have strictly adhered to the adjudications in England. Hence, nothing conclusive can be inferred from the practice of the states.
The third proposition drawn from the reported cases in Virginia is, that the negotiability given to bonds and notes by the act of assembly of that state, was not intended for purposes of commerce. It seems difficult to assign a reason why the legislature should have made bonds and notes assignable, unless it was to enable people to transfer that kind of property which existed in such bonds and notes; and the transfer of property is the only means of commerce. . . . If, therefore, for the purposes of commerce, the legislature intended to make those contracts negotiable, which were not so, either in their nature or by the consent of the parties, it is fair to presume, that they did mean to impede the negotiability of such as were in their own nature negotiable, and were expressly intended to be made so, by the will of the contracting parties? If there were any principles of law which would support the negotiability of a promissory note, payable to order, it cannot be supposed, that the legislature intended, by implication alone, to obstruct their operation. And even admitting that they did not, by the act making bonds and notes assignable, mean, to aid commerce, yet it cannot be presumed, that they intended to wage war with those commercial principles which were already established.
This brings us back again to the first inquiry, what were the principles upon which the negotiability of promissory notes was supported, before the statute of Anne? If such principles did exist, there seems to be nothing in this act of assembly which prevents their full operation in Virginia.
THE EARLY HISTORY OF INSURANCE LAW1
IT seems so highly improbable that the practice of insurance, now deemed indispensable to the safe conduct of commerce on sea or land, should have been unknown to the Phœnicians, Rhodians, Romans and other ancient commercial peoples, that scholars have subjected ancient writings to the closest scrutiny in the effort to find in them some evidence that insurances were made in early times. The result has been the discovery of accounts of certain transactions which bear such a resemblance to insurance as to have led not a few scholars to the conclusion that insurances were known to the ancients, although the business of underwriting commercial risks was probably not highly developed. Foremost among these writers championing the ancient origin of insurance is Emérigon, whose brilliant and learned Traité des Assurances, first published in 1783, is still read with respect and admiration by all students of the subject, and cited as authority in the courts of all civilized countries. In this country the same view has been advocated by Justice Duer, whose discriminating and scholarly Lectures on Marine Insurance were published in 1845, and there are not wanting recent text-writers to reach the same conclusion.3 The contention that insurance was known to the ancients rests mainly upon certain passages found in the histories of Livy and Suetonius and in the letters of Cicero. Livy tells us that the contractors who undertook to transport provisions and military stores to the troops in Spain stipulated that the government should assume all risk of loss by reason of perils of the sea or capture.1 In the second passage from Livy,2 which gives in detail an account of the extensive frauds practised by one Postumius upon the country during the Second Punic War by falsely alleging that his vessels, engaged in the public service, had been wrecked, or by making false returns of the lading of old hulks that were purposely wrecked, it seems to be taken as a matter of course that the government was liable to make good such losses.3
Suetonius, in his life of Claudius, states that that emperor, in order to encourage the importation of corn, assumed the risk of loss that might befall the corn merchants through perils of the sea.4 This passage alone was sufficient to comvince Malynes that Claudius “did bring in this most laudible custom of assurances.”5
Likewise many writers have thought that Cicero refers to a transaction of commercial insurance when he writes to Caninius Sallust, proquæstor, that in his opinion sureties should be procured for any public moneys sent from Laodicea, in order that both he and the government should be protected from the risks of transportation.6 These passages, of doubtful significance when read in connection with the well-known fact that the rules of general average, and bottomry and respondentia loans, transactions closely related to insurance, were familiar to the ancients,1 have been considered by these writers adequate evidence that insurance was at least known to the commercial peoples of the ancient world.
On the other hand, a great number of writers on insurance consider that these passages refer to other transactions than insurance, and conclude that insurance was wholly unknown among the ancients. Among these are Grotius2 and Bynker-shoek3 on the Continent, and Park,4 Marshall and Hopkins in England.
This conflict of opinion as to the practice of insurance among the ancients is due largely to the fact that some writers restrict the significance of the term “insurance” more narrowly than others. The fact that we find no trace of the insurance contract in the laws of Rome or of any of the other ancient peoples, indicates unquestionably that if the contract of insurance, as known in modern times, was known to the ancients at all, its practical use was so little developed as to have made it insignificant. But if the term “insurance” be given a broader significance and made to include any kind of conventional arrangement by which one or more persons assume the risk of perils to which others are exposed—that is, an arrangement for aiding the unfortunate—then it is equally unquestionable that insurance is as old as human society itself. Friendly societies organized for the purpose, among others, of extending aid to their unfortunate members from a fund made up of contributions from all, are as old as recorded history. They undoubtedly existed in China and India in the earliest times.1 Among the Greeks these societies, known as Eranoi and Thiasoi, are known to have existed as early as the third century before Christ.2 These Grecian societies were largely religious and ritualistic, but among their chief functions, we learn, was that of providing for the expense of fitting burial for members. Similar societies, called Collegia, existed in Rome, where their establishment was attributed to Numa. These also performed many of the functions of benefit insurance societies, providing succor for the sick and aged members, and burial for those deceased.3 These Roman Collegia fell into disfavor under the emperors, but nevertheless continued to exist, with restricted functions and influence, up to the time of the fall of the Empire, and it is probable that their existence was continued in spite of the disorder due to the numerous invasions of Italy until they reappeared in history as the mediæval guilds.1 Of this, however, there is no documentary proof. It is certain that the guilds, which throughout Europe became so numerous and influential from the eleventh to the eighteenth centuries, possessed very many of the characteristics of the modern mutual benefit association, and, as such, carried on a primitive kind of insurance against the misfortunes incident to sickness and old age.2
In England, these guilds existed among the Saxons before the Conquest. We learn that among the purposes of these Saxon guilds was to provide for any member who had had occasion to take the life of anyone, the wergeld, or indemnity that, under the Saxon law, was payable to the family of the person slain.3 It seems that these guilds, in addition to providing, by contribution of the members, aid for the sick and burial of the dead among their number, also furnished indemnity to those who had suffered loss by fire or theft.4 After the Conquest, the English guilds became numerous and influential. Of one of these, the Guild of St. Katherine, Aldersgate, we learn that the brethren assisted any member if he “falle in poverte, or be aneantised thorw elde or thorw fyr oder water, theves or syknesse.”1 Thus we perceive that what are now termed sick benefit insurance and burial insurance have existed from time immemorial, and that, while many of the benevolences of these fraternal associations were charitable merely, yet there is to be found in their history distinct evidence of contractual insurance, and even of mutual fire insurance.
In like manner there may be included under the broad definition of insurance given above agreements made by governments, whether through the medium of enactments or through private contract, in accordance with which indemnity is provided for those who suffer loss from peculiar perils. Such just and proper provisions for the protection of the citizen rendering service to the government are doubtless of great antiquity. As stated above, Livy speaks of the practice whereby the Roman Republic indemnified those engaged in transporting military supplies for losses suffered by perils of the sea or acts of the enemy, as one long established and unquestioned.2 This undoubtedly was insurance in a limited sense. Indeed, we have evidence that a sort of government insurance was practised in times much earlier than those of which Livy wrote. In the Code of Hamurabi, 3 which must have been enacted at least as early as 2250 bc, we find a provision that a city in which any man should be robbed of his property should be under obligation to indemnify him for his loss, while if the city and governor permitted such disorder that a person lost his life, the family of the murdered man were entitled to be indemnified from the public treasury.
Furthermore, bottomry and respondentia bonds and the allowing of general average in case of shipwreck and the jettison of the goods of one or more of the joint adventurers, may well be included under the term insurance in its broadest significance, and these were unquestionably known and much used among the ancients, particularly among the Rhodians. The lender of money in bottomry who could claim the repayment of his loan only if the vessel upon whose bottom the loan was made completed the contemplated voyage in safety, was entitled, not merely to the current rate of interest on the money loaned, but also to an added sum which would compensate him for the risk he ran of losing his whole principal, and which, in reality, represented the premium paid upon the risk assumed.1 We therefore conclude that the principle of insurance, considered as an arrangement whereby a person subjected to any peril may be indemnified for loss on account of such peril, was known to the ancients and made use of by them to a very considerable extent; but that commercial insurance, as practised so extensively in modern times, was either unknown to them or little used.
We are, therefore, safe in concluding that the practice of insurance as an important element of commerce and social economy, has had its origin in relatively recent times, but we cannot with any accuracy fix the date of its beginning nor determine indisputably what city or country is entitled to the credit of having originated it. Some scholars have professed to discover evidence that commercial insurance was first developed in Portugal, while some others favor Spain and Flanders.2 More recent research, however, made among the ancient records of the Chamber of Commerce of Florence has established satisfactorily that insurance had its origin in the great commercial cities of Northern Italy, where it must have been in common use among the merchants engaged in carrying on the large foreign trade of those cities as early as the beginning of the fourteenth century, and possibly more than a century earlier.3 Among the records of the Florentine Chamber of Commerce are the books of Francesco del Bene and Company, of Florence, which set forth commercial transactions dating from ad 1318. In these books are recorded the items of expense incident to trade in Flemish cloth and other articles. Among these items one frequently finds the cost of insuring the goods in transit.1 From the character of the references to insurances thus made, we can readily infer that as early as 1318 the custom of making insurances upon goods subject to peril of transportation either on sea or land had become a customary incident of traffic. This fact justifies the conclusion that among these Italian cities insurance had been in use many years before the date of the entry in these old Florentine books. The earliest policy of insurance now extant was made in Genoa in the year 1347. This quaint old document which, it will be observed, was in the form of a promise to repay a fictitious loan upon the happening of any misfortune to the vessel insured,2 is set forth in all of its barbarous Latin in the note below.3 The first certain record of an insurance transaction at Bruges is of the year 1370, but the policy in question was evidently issued by a Genoese underwriter.1 The earliest trustworthy evidence of the practice of insurance at Barcelona is found in certain ordinances of the City of Barcelona, published in 1435, which contain extensive provisions for the regulation of marine insurance.2 The particularity of these regulations shows clearly that the practice of insurance had already become extensive and of much importance in the commercial life of the Catalonian city some time before the date mentioned, but it is hardly probable that it antedated the similar practice in the Italian cities, which, as we have seen, certainly existed considerably more than a century earlier than the date of the Barcelona ordinances. Another positive reason for thinking that insurance was of later development in Barcelona than in the Italian cities is found in the earliest extant edition of the Consolat de Mar, known to have been published at Barcelona in 1494. This celebrated collection of sea laws, which under its Italian name of Consolato del Mare, had for three centuries such wide currency throughout Europe, and which is generally believed to have been first published in Barcelona as early as the middle of the thirteenth century, contains no reference whatever to insurance.1
It has been generally believed that the contract of insurance was first used in underwriting marine risks, and it is indisputable that it had its earliest and most important development in connection with maritime interests. Nevertheless, it is interesting to observe from these ancient books of Francesco del Bene and Company, the Florentine merchants already referred to, that as early as 1318 insurances were customarily made against loss by reason of dangers incident to land transportation, as well as to that by sea, and that shipments of specie were also at that early day insured just as in modern times.2
The daring and adventurous merchants of the Italian cities carried on extensive commerce with all of civilized Europe, and during the fourteenth and fifteenth centuries their practice of insuring their ventures spread with their trade to every considerable trading town of the Continent and of England. The usages of insurance, therefore, readily took on the same international character that had already been impressed upon the other customs of traders engaged in international mercantile pursuits. The usages governing the older forms of commerce, especially maritime usages, had found expression in collections of regulations and ordinances of great antiquity, that came to possess the greatest authority throughout Europe rather by their general acceptance than by force of authoritative enactment. These “sea laws,”3 as they were known, had their origin much earlier than the beginning of the practice of insuring ventures at sea, for otherwise they would not have been silent on so important an adjunct to successful commerce. But their existence undoubtedly greatly facilitated the rapid growth of a body of international insurance customs, which soon became incorporated with the greater body of commercial usages and became an integral part of the law merchant, having the same sanctions and enforced through the same procedure before conventional merchant courts.
As early as 1411 the business of making contracts of insurance had become of sufficient importance among the Venetians to attract legislative action, for on May 15th of that year we find that an ordinance was passed condemning and prohibiting the prevalent practice among Venetian brokers of underwriting foreign risks. But it is evident that underwriters did not at that early day regard insurance regulations with any greater respect than do their successors of the present time, for in June, 1424, another ordinance again prohibited insurances upon foreign vessels or goods, the preamble carefully explaining that an added reason for not underwriting such risks lay in the fact that war was raging between the Genoese and the Florentines and Catalonians, on which account the Venetians should refrain from aiding any of the belligerents. After this insurance became a favorite subject for regulation, often of a very drastic character. From the texts of these ordinances it is evident that in Venice the business of underwriting early became localized, just as in London it was carried on in Lombard Street, for in these Venetian ordinances it was usually provided that they should be read at noon on the “Street of Insurances at the Rialto.”1
In 1435 insurance ordinances, still extant, were published at Barcelona. As already stated, the edition of the Consolat de Mar published at Barcelona in 1494 contained no reference to insurance, nor did the Laws of Wisby or of the Hanse Towns, which, though of earlier origin, were published probably about this same time. It seems that these laws of the northern commercial cities were little more than adaptations of the much earlier laws of Oleron, which likewise make no mention of insurance. In 1647 there was published at Bordeaux Cleirac’s Us et Coustumes de la Mer, which contained the text of the Guidon de la Mer. This famous treatise on sea laws, which was compiled by some unknown author of Rouen between the years 1556-1600, treated extensively of marine insurance. In 1681 the Marine Ordinances of Louis XIV were published. These ordinances, supposed to be largely the work of Colbert, Louis XIV’s gifted Minister of Finance, provide for the regulation of the business of insurance with a completeness of detail that speaks clearly both of the importance of commercial insurance at that time and of the age and extent of the practice that could make such detail possible. Additional evidence of the important place assumed by insurance during the sixteenth century is found in the publication of treatises on insurance by Santerna1 in 1552 and by Straccha2 in 1569. The excellent treatise of Roccus, an eminent jurist of Naples, was not published until 1655, much later than the first English treatise by Gerard Malynes, which first appeared in 1622.
The introduction of the practice of insurance into England is shrouded in the same obscurity that envelops its origin on the Continent. Gerard Malynes, in his quaint treatise on the law merchant, published in 1622, asserts that policies of insurance were written in England at an earlier date than in the Low Countries, and that in fact Antwerp, then in the meridian of its glory, learned the practice of insurance from London. This conclusion he reached through the wording of the policies issued at Antwerp, which “do make mention that it shall be in all things concerning the said assurances as was accustomed to be done in Lombard Street, in London.” Malynes’ reasoning is far from convincing, and his conclusion is probably incorrect. It is highly probable, however, that the enterprising Lombards who had taken up their residence in London, in many cases as representatives of Italian trading houses, did not long delay in bringing to England the device of having their commercial ventures assured by underwriters which had proved so advantageous to the trade of their Italian associates. The activity of these London Lombards was so great as to give a name to Lombard Street,1 where they dwelt and carried on business as pawn-brokers, goldsmiths and importers of foreign goods. That the introduction of insurance into England is to be attributed to Italians there resident is not only highly probable in itself, but is also supported by much circumstantial evidence. Thus one of the clauses of the modern Lloyds’ policy provides that the policy “shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street.” We know also that the earliest policies issued in London of which we have any certain knowledge were written in Italian with English translations attached.2
The first certain record of an insurance transaction in England is found in the report of the case of Emerson c. De Sallanova,3 determined in a court of admiralty in 1545. Curiously enough the insurance involved in this proceeding was not against the perils of the sea, as might have been expected, but against possible loss consequent upon the withdrawal by the King of France of a safe conduct. The oldest English policy extant, dated September 20, 1547, is set forth in both Italian and English in the report of Broke c. Maynard, an admiralty cause.4 The copy of this policy is much mutilated, but a somewhat similar policy involved in Cavalchant c. Maynard, bearing date only a year later, is found in good condition among the records of the proceedings in admiralty. The English version of this venerable instrument is given in the note below.5
It is evident that prior to the time of Lord Mansfield’s accession to the bench, the development of insurance law in England followed the same lines as that of the other branches of the law merchant. It was generally understood that the common law courts, which did not recognize the quasi-international customs of merchants, afforded no fit forum for the determination of causes between merchants. Hence all early insurance disputes must have been settled by conventional merchant courts or arbitrators, who, it seems, might be appointed, upon petition, by the Privy Council, the Lord Mayor of London, or by the Court of Admiralty. Thus, in the record of the proceedings before admiralty prior to 1570 we find a petition by the owner of insured goods asking that arbitrators be appointed and the underwriters made to pay, “forasmuche as your said rater hath noe remedye by the ordre and course of the common lawes of the realme, and that the ordre of insurance is not grounded upon the lawes of the realme, but rather a civill and maritime cause to be determined and decided by civilians, or else in the highe courte of Admiraltye.”1
There were evidently numerous disputes about the payment of insurances, and there were probably many cases in which the underwriters refused to perform the judgments of the merchant courts, whose great weakness lay in the lack of a sheriff, for in the admiralty records for the year 1570 is found a petition on behalf of certain foreign merchants who complained that they could not get their insurance paid. In the same year there was an application by an “Easterling” for the appointment of arbitrators “forasmuche as the matter consistethe muche upon the ordre and usage of merchantes by whom rather than by course of law yt may be forwarded and determyned.” It is noteworthy that when the Court of Admiralty made the reference, the commission to hear the case ran to certain English and foreign merchants.1
The extracts just given from the admiralty records show that the inability of the conventional merchant courts to enforce their judgments compelled the merchants and underwriters to seek more formal and efficient tribunals before which to bring their causes. They first turned to the courts of admiralty, which easily assumed jurisdiction of maritime and foreign contracts of insurance, and readily took cognizance of the customs of merchants. But for some reason, not easily understood, the courts of admiralty did not prove satisfactory tribunals for the determination of insurance causes, and relatively few of such causes were brought before them.2 Lord Coke’s misleading report of Crane v. Bell,3 a case decided in 1546, has been the source of several mistaken statements that the writ of prohibition granted in that case by a common law court took away from the admiralty courts all jurisdiction of insurance questions.4 As a matter of fact, however, Crane v. Bell had nothing to do with insurance,5 and we know that admiralty courts still heard insurance cases for nearly half a century after the date of that case.6
Whatever may have been the cause, it is clear that the admiralty judges contributed little to the development of insurance law, and that during the latter part of the sixteenth century litigants sometimes felt compelled to carry insurance causes to the common law courts, in some cases even after they had been heard and determined by merchant courts. Lord Coke’s report of Dowdale’s Case7 refers to an action brought in a common law court on an insurance policy in 1588. But manifestly the common law courts of that day, with their highly technical and tedious rules of procedure, as governed by precedents of agricultural rather than mercantile origin, were ill adapted for the settlement of merchants’ disputes. Thus it appears that at the beginning of the seventeenth century persons having insurance causes were without a satisfactory tribunal for their determination. The conventional courts could not enforce their judgments, the courts of admiralty had proved inadequate, possibly because of the vexatious jealousy of the common law courts in unreasonably restricting their jurisdiction, while the common law courts were wholly unfit. The merchants and underwriters naturally sought relief from Parliament, and secured, in 1601, the first English insurance act,1 “for the obtaining whereof,” wrote Malynes, “I have sundry times attended the committees of the said Parliament, by whose means the same was enacted not without some difficulty; because there was [sic] many suits in law by action of assumpsit before that time upon matters determined by the Commissioners for Assurances, who for want of power and authority could not compel contentious persons to perform their ordinances; and the party dying, the assumpsit was accounted void in law.” The preamble of this act is exceedingly interesting, since it not only shows the great importance of the business of insurance at the time of its enactment, and a remarkably clear understanding of the real nature of insurance, but it also gives in striking summary the history of insurance law and practice during the preceding century, which necessitated the establishment of the court created by the act. This preamble, in part, is as follows:
2 “(2) And whereas it hath been time out of mind an usage amongst merchants, both of this realm and of foreign nations, when they make any great adventure, (especially into remote parts) to give some consideration of money to other persons (which commonly are in no small number) to have from them assurance made of their goods, merchandizes, ships and things adventured, or some part thereof, at such rates and in such sort as the parties assurers and the parties assured can agree, which course of dealing is commonly termed a policy of assurance; (3) by means of which policies of assurance it cometh to pass upon the loss or perishing of any ship, there followeth not the undoing of any man, but the loss lighteth rather easily upon many than heavily upon few, and rather upon them that adventure not than those that do adventure, whereby all merchants, especially of the younger sort, are allured to venture more willingly and more freely; (4) and whereas heretofore such assurers have used to stand so justly and precisely upon their credits, as few or no controversies have arisen thereupon, and if any have grown, the same have from time to time been ended and ordered by certain grave and discreet merchants appointed by the lord mayor of the city of London, as men by reason of their experience fittest to understand, and speedily to decide those causes, until of late years that divers persons have withdrawn themselves from that arbitrary course, and have sought to draw the parties assured to seek their monies of every several assurer, by suits commenced in Her Majesty’s courts, to their great charges and delays.”
By the provisions of this act authority was given to the Lord Chancellor or to the Lord Keeper of the Great Seal, to issue commissions directed to “the judge of the admiralty for the time being, the recorder of London for the time being, two doctors of the civil law, and two common lawyers, and eight grave and discreet merchants, or any five of them,” with authority to hear and determine in a summary manner insurance causes. This court of insurance commissioners did not, however, prove successful, owing to the fact that its jurisdiction was confined to causes arising on policies issued in London, and construed not to extend to any other insurances than those on goods. The court was also held to be open only to the insured and not to the underwriter, and its judgments could not be pleaded in bar to a subsequent action at law.1 We are not surprised, therefore, to learn that this special court lapsed into disuse, and died of inanition within a century after its creation.
The failure of this special court seems to have discouraged any further attempts to better an almost intolerable situation, for the hundred and fifty years intervening between the enactment of 43 Eliz. and the appointment of Mansfield as Chief Justice of the Court of King’s Bench are almost a barren waste as far as the history of the development of insurance law is concerned. The common law judges did not grow in wisdom or in the favor of those having insurance causes. The merchants and underwriters continued to submit their disputes to arbitrators and commissions, sedulously avoiding the common law courts. It is said that, all told, the reported insurance cases determined at law prior to Lord Mansfield’s time did not exceed sixty in number,1 nor among these can there be found one that clearly establishes a great principle or that can be fairly considered a leading case. So slight was the grasp of the common law judges of this period upon the nature and true function of the contract of insurance that as late as 1746 it was uncertain whether an insurable interest was necessary to support a policy,2 although the fundamental principle requiring the presence of such an interest was perfectly well understood by the Continental authorities of an earlier time. In 1746, by Statute 19, Geo. II, c. 37, the making of policies without interest was prohibited, as was also the making of reinsurances, under the mistaken impression that they fell under condemnation as wager policies. During this period the doctrine of concealment was applied by the Court of King’s Bench in Seaman v. Fonereau,3 and the peculiar doctrine of warranties in insurance policies was foreshadowed, rather than definitely declared, in Jeffery v. Legender,4 and in Lethulier’s Case.5 Add to these a few somewhat uncertain cases on the effect of deviation,6 and we have practically the sum of the contributions made to insurance law by common law judges prior to Mansfield.
Lord Mansfield became Chief Justice of the Court of King’s Bench in 1756, which may rightly be considered as the date of the beginning of the development of the modern law of insurance as a part of the common law system. This great judge, thanks to his more liberal Scottish training, was not so slavishly attached to common law precedents as to be unable to perceive the necessity of recognizing merchants’ customs in determining rights under merchants’ contracts, nor so bigoted as to be unwilling to seek light from foreign sources. In insurance causes, as with causes involving other branches of the law merchant, he impanelled juries of merchants and underwriters, to establish customs and usages current among those who made insurances, and diligently consulted the time-honored maritime laws of the Continent, and the treatises of English and Continental writers.1 Thus he not only gave prompt justice to litigants who appeared before him, and provided a fit tribunal for merchants, but he saw so clearly the fundamentals of the theory of insurance, and understood so well its practical applications to the needs of business and commerce, that the numerous doctrines that he laid down have survived all of the many changes in commercial conditions and methods that have since taken place, and almost without exception they apply as well to the commercial transactions of to-day as to those of Mansfield’s own time. When he retired from the bench in 1788, he left a complete system of insurance law, as is so well shown by Sir James Park, a contemporary of Mansfield’s, in his brilliant work on marine insurance. This system has been much extended in modern times, but it has been little changed, and still stands as a lasting monument to the great judge whom Mr. Justice Buller2 rightly called “the founder of the commercial law of this country.”
THE EARLY HISTORY OF THE ENGLISH PATENT SYSTEM1
IN 1827, when the subject of patent law reform first began to claim the attention of the English Legislature, an effort was made by the Lower House to obtain the data requisite for an investigation of the history of the patent system under the prerogative and at common law. In this year the Crown, in compliance with a resolution of the House, ordered a return to be prepared ‘of the titles and dates of all special privileges and patents granted in England previous to March 1, 1623, and stating whether for English or foreign manufactures and inventions.’ Unfortunately, the resources of the Keepers of the National Records proved unequal to the demands made upon them; and as a matter of fact the return was never presented. The resolution, nevertheless, deserves to be rescued from oblivion. For, while on the one hand it excludes as foreign to the inquiry an investigation of the commercial privileges of the trading companies, the supposed connexion of which with patents for inventions has misled so many writers upon Patent Law, it includes all grants made in respect of manufactures or inventions irrespective of the nature of the privileges conferred therein. In other words, we are told to look, not for Monopoly patents, but for grants to individuals made in furtherance of particular industries. With this clue to guide us we shall at once proceed to inquire, firstly, at what period the Crown by means of its grants first actively interfered in the promotion of industry, and secondly, what relation these grants may be found to bear to the first recorded Monopoly patents of invention. For this purpose we may briefly summarize the conclusions which may be obtained from a perusal of any standard history of industrial progress in this country.
During the period of history known as the Middle Ages, the industrial attainments of the English were far below the level of their continental rivals, France, Germany, Italy, Spain and the Low Countries. Moreover, throughout Europe progress in the manufacturing arts is found to be due, not so much to individual experimental effort, as to the slow infiltration of improved processes, the source of which is ultimately traceable to the more advanced civilization of the East. As late as the sixteenth century the type of English society was mainly that of an agricultural and mining community, exchanging its undressed cloth, wool, hides, tin and lead for the manufactures of the continent and the produce of the East. The rise of the native cloth industry in the fourteenth century gave to this country her first considerable manufacturing industry: and, inasmuch as the development of the industry is universally attributed to the fostering influence of the Crown, it will be necessary to scrutinize somewhat closely the various grants by means of which these results were obtained. For the facts here presented no originality is claimed. Their connexion, however, with the history of patent law has never yet been properly established.
In the letters of protection to John Kempe and his Company dated 1331 (Pat. 5 Ed. iii p. 1, m. 25),1 will be found the earliest authenticated instance of a Royal grant made with the avowed motive of instructing the English in a new industry. Here we have, not a solitary instance of protection, but the declaration of a distinct and comprehensive policy in favour of the textile industry; for the grant contains a general promise of like privileges to all foreign weavers, dyers and fullers, on condition of their settling in this country and teaching their arts to those willing to be instructed therein. Nor is this all. In 1337 these letters patent were expressly confirmed by a statute framed for the protection of the new industry, cap. 5 of which enacts, that all cloth-workers of strange lands, of whatsoever country they may be, which will come into England, Ireland, Wales, and Scotland, and within the King’s power, shall come safely and surely and shall be in the King’s protection and safe-conduct to dwell in the same lands, choosing where they will; and to the intent that the said clothworkers shall have the greater will to come and dwell here, Our Sovereign Lord the King will grant them franchises as many and such as may suffice them.1
As it is with the continuity rather than with the success of the new policy that we have here to deal, we shall briefly enumerate in their chronological order the grants which appear to have been issued in furtherance of the above object. In 1336 similar letters were issued (10 Ed. III, Dec. 12) to two Brabant weavers to settle at York in consideration of the value of industry to the Realm. In 1368 (42 Ed. III, p. 1) three clockmakers of Delft were invited to come over for a short period. In the following reign we are informed (Smiles, Huguenots, p. 10) that the manufacture of silk and linen was established in London by the king by the introduction of similar colonies from abroad, but whether by letters patent or otherwise has not been ascertained. The first instance of a grant made to the introducer of a newly-invented process will be found in letters patent dated 1440 (18 H. 6. Franc. 18. m. 27) to John of Shiedame, who with his Company was invited to introduce a method of manufacturing salt on a scale hitherto unattempted within the kingdom. Twelve years later, in 1452, a grant was made in favour of three miners and their Company, who were brought over from Bohemia by the king on the ground of their possessing ‘meliorem scientiam in Mineriis’ (Rymer, xi. 317).
These instances, although, probably, not exhaustive of the industrial grants of the fourteenth and fifteenth centuries, sufficiently illustrate the well-known citation from the Year Book, 40 Ed. III, fol. 17, 18, to the effect that the Crown has power to grant many privileges for the sake of the public good, although prima facie they appear to be clearly against common right.
With the alchemical patents of Henry VI, wrongly assigned by Hindmarch and subsequent writers to the reign of Edward III, we must deal briefly.
In 1435-36 two successive Commissions were appointed to inquire into the feasibility of making the philosopher’s stone for medicinal and other purposes. Respecting these Commissions we are assured by Prynne in his Aurum Reginæ that they proved ‘entirely abortive for aught that he could find.’ The fiction of a monopoly having been intended, based upon an obviously inaccurate account in Moore’s Reports, p. 671, may be dismissed as the invention of a later date. Other so-called alchemical patents resolve themselves into either warrants for the arrest of the individuals concerned, or dispensations from the penal statute of 5 Henry IV, by which the practice of transmutation was made a felony. In any case the connexion of these grants with the history of patent law must be considered as exceedingly remote.
With the accession of the Tudor dynasty the patent system underwent a characteristic change. In place of the open letters for the furtherance of the national industry, we now find the Crown negotiating for the purpose of attracting skilled foreigners into its own service. Amongst these we may instance the introduction of German armourers, Italian shipwrights and glass-makers, and French iron-founders and sail-makers. In the absence of any grants recorded in connexion with these transactions, it is impossible to define the precise relations existing between the Crown and the immigrant artisan. The Italian glass-makers introduced circa 1550, i. e. under the protectorate of Somerset, were recalled by the Venetian State; but the French iron-founders appear to have successfully established in the Weald of Sussex the art of casting iron ordnance, which shortly afterwards superseded the older forms of bronze cannon.
The first acts of Elizabeth were directed to the question of national defence. In 1560 the reformation of the coinage was taken in hand, for which purpose a body of Easterling assayers were brought over. In the following year the policy of the promotion of new industries under the special protection of the Crown was inaugurated and steadfastly pursued to the last few years of the reign. As to the legality of the new licenses no scruples appear to have been entertained. The monopolies were not without foreign precedents. Throughout Western Europe the new art of printing was being controlled and regulated by special licenses. With this preface we may leave the following list of grants to speak for itself. Their history from the political and economic standpoints has recently formed the subject of a monograph by Dr. Hyde Price (English Patents of Monopoly. Boston, 1906) to which frequent reference will be made. The list, it should be stated, has been prepared from the Calendars of the Patent Rolls of Elizabeth. Its claim to completeness for this reign, therefore, rests mainly upon the sufficiency of these Calendars.
(Mary. Monopoly Patent)
The discovery of this grant is due to Mr. J. W. Gordon, author of Monopolies by Patents and other works on the history of English Patent Law. The above grant contains a prohibition against the use of Cranick’s methods for the space of six years.
(Elizabeth. Monopoly Patents)
The best English soap of the period was a soft potash Bristol soap, ‘very sweet and good,’ but unsuitable for fine laundry work, for which the hard Spanish soda soap of Castile was preferred. The grant stipulates that two at the least of the servants of the patentees shall be of native birth, and that the soap, which is to be of the white hard variety, shall be as good and fine as is made in the Sope house of Triana or Syvile. The patentees are bound to submit their wares for the inspection of the municipal authorities, and on proof of defective manufacture the privilege is void. The grant appeared in full in ‘Engineering,’ June 22, 1894, with a brief outline of the origin of patent law by the present writer.
At the date of the grant saltpetre was not manufactured within this country; most of the imported article arriving viâ Antwerp, a port controlled by the Catholic King of Spain. The Queen therefore bargained with Gerard Honricke, ‘an almayne Captain,’ to come over and teach her subjects ‘the true and perfect art of making saltpetre’ as good as that made ‘beyond the seas,’ stipulating, however, that the secrets of the manufacture should be reduced to writing before the promised reward of £300 should be paid. On the arrival of Honricke the Queen resigned her bargain (Pat. 3 Eliz. p. 6) into the hands of the above patentees, who were both London tradesmen. The specification will be found in full in ‘Engineering,’ June 15, 1894.
In case the new invention (sic) be not proved to be of value within a year, the making of saltpetre to be thrown open as at present.
The petition of G. Cobham, Tomazo Chanata, stranger, and their Company endorsed with the erroneous date 1550, is to be found in the S. P. Dom. Eliz. vol. i. No. 56.
The patentee represents that ‘by diligent travel’ he had discovered a machine to scour the entrances to harbours, &c., to a depth of sixteen feet. The patent is for the importation of a sufficient number of these machines. The rights of scouring channels by the older methods are reserved, and the Queen expresses a hope that her favourable treatment of the patentee ‘will give courage to others to study and seke for the knowledge of like good engines and devyses.’
In the recital of the grant Kendall represents that he had discovered ores of alum in abundance with a practical method of its extraction. The manufacture was started in Devonshire, but failed. See also 1564, July 3, Alum patent of Cornelius De Vos.
The recital states that mines of tin, lead, coal, &c., in Devon as elsewhere, were drowned and altogether unoccupied, ‘owing the great habundance of water.’ It is not clear that Medley lays claim to the invention of the present device, although the grant covers all subsequent improvements. The rights of users of old machines are reserved, and clauses are inserted regulating the compensation to be paid for entering upon abandoned properties. In case of disputes arising, the quarrel is to be referred to the Privy Council. The source of inspiration of this and the numerous subsequent patents for mine drainage and water raising will be found in the illustrated work of Agricola published in 1559.
In the S. P. Dom. 1565 there is a certificate from some London brewers, who testify to the economy of fuel effected by the furnaces of a German, Sebastian Brydigonne, who may have been connected with the above patentees. The grant refers to the growing scarcity of wood fuel, owing to the large consumption in the brewing and baking trades. The grant is void in case the patentees fail to come over and put the grant into practice within two months, or prove extortionate in their charges.
This grant is similar to that of Medley’s, but gives some additional powers of entering upon old and abandoned mines under proper restrictions. The engine is stated to have been lately invented, lerned and found out by Cranick, and to be unlike anything devised or used within the realm. Three years are allowed for the patentee to perfect and demonstrate the utility of his engines. Disputes are to be referred to the Warden of the Stannaries and three Justices of the Peace.
De Vos obtained this grant on the strength of the discovery of ores of alum and copperas (sulphate of iron) in the Isle of Wight (Alum Bay). His rights were shortly afterwards assigned to Lord Mountjoy, who in 1566 obtained parliamentary confirmation of the grant. Both the Queen and Cecil were originally financially interested in the success of the experiment. In 1571 Bristol merchants complain of the decay of their trade owing to the fact that iron and alum, which had hitherto come from Spain, were now made better and cheaper in this country. See also Stow’s Annals, 1631, pp. 897, 898; Geological Survey, Memoirs, Jurassic Rocks, i. 452-454. Hyde Price, p. 82. The grant confers the right to take up workmen at reasonable wages, together with all materials requisite for the manufacture.
The validity of these grants was challenged by the Earl of Northumberland on the ground that the work was within the Royalties granted to his family in a former reign. The case was decided in favour of the Queen, on the ground that the neglect of the Earl and his predecessors to work the minerals during seventy years ‘had made that questionable which for ages was out of question’ (Pettus, Fodinae Regales). On May 28, 1568, the Company was incorporated by Charter as the Society of the Mines Royal, which existed down to the eighteenth century. See also Hyde Price, pp. 49-55 and Grant-Francis, Copper-smelting.
The full text of the grant will be found in Rymer. The sulphur was required for making gunpowder, and the discovery may be attributed to the labours of John Mangleman, a German, who was authorized to search for earth proper for making brimstone (Lansd. MSS.). The second part of the invention related to the extraction of oil from seeds for finishing cloth. The proper machinery for extracting oil from rape and other seeds does not seem to have been known at the period. The grant was subsequently reissued to Wade and another for a further term of thirty years. Cf. No. XXXIV, infra.
The process relates, in all probability, to sumach tanning which produces a white leather suitable for dyeing in light shades. Shoes of Spanish leather, i. e. yellow leather, appear to have been preferred ‘to those which shine with blacking’ (Howell, Letters, I. i. 39). The grant dispenses with the provisions of an Act forbidding the export of leather. On the other hand, it insists on the employment and instruction of one English apprentice for every foreigner employed, and subjects the industry to the inspection of the Wardens of the Company of the Leather Sellers, who are responsible for ‘the skins being well and sufficientlie wrought.’ This grant must not be confused with a subsequent license to Andreas de Loo to export pelts which gave great offence to the trade. For evidence as to the use of sumach at this period see Library Association, Leather for Libraries, pp. 7-8.
These grants covered geographically those parts of England not included in Houghstetter’s patents and the Alum patent of De Vos. Calamine or zinc carbonate is an essential in the manufacture of latten or brass, which it was proposed to use in casting ordnance (S. P. Dom. Eliz. vol. 8, No. 14). The mineral was discovered in Somersetshire in 1566, and the first true brass made by the new process was exhibited in 1568. The patentees also erected at Tintern the first mill for drawing wire for use in wool-carding. In 1568 the Company was incorporated by Charter as the ‘Company of the Mineral and Battery Works,’ and remained under practically the same management as that of the Society of the Mines Royal (Stringer, Opera Mineralia Explicata). In 1574, and again in 1581, the assignees of the patent obtained an injunction against several owners of lead mines in Derbyshire for using certain methods of roasting lead ores in a furnace worked by the foot blast and other instruments invented by Humphrey after the date of his patent. The Court of Exchequer ordered models to be made, and after repeated adjournments a Commission was appointed to investigate ‘the using of furnaces and syves for the getting, cleansing, and melting of leade Ower at Mendype, and the usage and manner of the syve’ (Exchequer Decrees and Orders). The depositions in this case are still preserved, but it is impossible to trace the history of the case to its completion. Coke informs us that as regards the use of the sieve, the patent was not upheld on the ground of prior user at Mendip. It is a peculiarity of the grant that it covered all subsequent inventions of the patentees in this particular branch of metallurgy. The hearth was invented after the date of the patent, and one of the questions to be decided was whether a subsequent invention could be covered by letters patent or no. See also Hyde Price, pp. 55-60.
The patent was surrendered and reissued in the following year.
Acontius, an Italian engineer, had taken out letters of naturalization and was in receipt of a small Crown pension. The undated petition is to be found in S. P. Dom. Eliz. 1559. The real date, no doubt, is 1565.
Berty was a native of Antwerp, and probably introduced the Dutch mode of making salt for fish-curing. The salt was extracted by boiling in copper pans. Plans of the furnaces will be found in S. P. Dom. Eliz. 1566. The later salt patents of the reign gave rise to great local discontent, owing to the oppression of the patentees, who claimed the right to control the price of salt within certain areas.
In the Lansd. MSS. there is a declaration of the inventions of the above individual and his Company. They consisted of a process of tempering iron so that it might be cut into bars for various purposes, and of special mills for corn and for extracting oil from rape-seed, which for want of proper appliances was sent out of the kingdom to be extracted.
Strype, Eccles. Mem. records an attempt to introduce Normandy or ‘Crown’ glass in 1552. In 1557 English glassmakers were said to be ‘scant in the land,’ the seat of the manufacture, which was confined to small green glass ware, being at Chiddingfold. This patent may be said to have laid the foundation of modern English glass-making; see Antiquary, Nov. 1894—May, 1895 and Hyde Price, pp. 67, etc. It should be noted that the Crown had twice failed to manufacture glass on its own account. The patent insists on the instruction of the English as a condition of the validity of the grant. The attempt to manufacture ‘Crown’ glass appears to have been unsuccessful (Lansd. MSS. 76) and to have been abandoned until one Henry Richards brought the art to England in 1679 (Petition Entry Books, 2, 359).
Backe was a native of Brabant—a province noted for its dyers. The English dyers, on the other hand, bore an evil reputation. ‘No man almost wyll meddle with any colours of cloth touching wodde and mader, unlesse it beare the name of French and Flaunders dyes, for reason of the deceits practised by the English and the ignorance of the principles of their craft’ (Camden Miscellany). The grant covers all parts of Ireland, with special reference to specified counties. Infringement is punishable by one year’s imprisonment. Probably the first Irish monopoly grant.
A patent for dyeing and dressing cloth after the manner of Flanders. English cloth was still exported in the white, undressed condition to be finished abroad. According to the ‘Request of a true-hearted Englishman,’ dated 1553 (Camden Miscellany), this was due to ‘our beastlie blindness and lacke of studyous desire to do things perfectly and well.’ But probably the trade was hampered by the absence of the subsidiary industries of oil, alum, &c.
[See also patent dated Oct. 1564.] The grant is for setting up and using engines for mine drainage.
Frisadoes may be regarded as a variety of ‘broad bayes,’ but of a somewhat lighter character, and dyed and finished for the retail trade. The patent therefore was essentially for dyeing and finishing cloth. Hastings’ suit was supported by the Dyers’ Company, who reported that if English cloth were dyed within the country the Queen would gain £10,000 annually by the increased custom. The manufacture was established at Christchurch, Hampshire, but Hastings seems to have used his grant vexatiously by wantonly molesting the Essex weavers on the ground that the manufacture of baize came within the four corners of the patent. The matter was referred by the clothiers of Coggeshall to the Exchequer, when they claimed to have gained the day (S. P. Dom. Eliz. vol. 106, No. 47, and Noy, 183). Subsequently an agent of Hastings was brought before the Lord Mayor’s Court for trespass, and was fined £9 for molesting a weaver within the jurisdiction of the city (S. P. Dom. Eliz. vol. 173, No. 28). For text of the grant see Edmunds, Law of Patents, 2nd ed. p. 883.
The grant recites the condition of the lowlands and the need of a proper system of water supply for municipal and industrial purposes. The engines, once erected, will continue working without men’s labour. The grant is void if the engine be not erected within two years or fails to work efficiently as set forth. The petition appears in S. P. Dom. vol. 127, under the incorrect date 1578.
The grantee obtained his information by residence abroad. The patent was contested successfully by the London cutlers (Matthey’s case), apparently on the ground of ‘general inconvenience’ of patents of improvements in an existing trade. The text and history of the grant will be found in Edmunds, 2nd ed., p. 885.
According to Howes the grantee learned the art of making ‘earthen furnaces, firepots, and ovens transportable’ when a prisoner of the Spaniards (Portuguese?). The grant covers London and a three-mile radius. The industry was carried on ‘at London without Moorgate,’ and the patent was extended for seven years on January 28, 1579.
The grant is for modified forms of combined hand and treadmills, examples of which had already been erected at Glastonbury. The petition addressed to Burghley with ‘a plat of my worke, the fyrst I ever made,’ is preserved in the Lansd. MSS. Prior rights of millowners reserved. This is undoubtedly a native invention of considerable merit. As in some other cases, protection is sought in view of threatened unauthorized imitation of the invention.
The grantee is described as of Amsterdam, stranger. Prior rights are reserved, and a term of two years assigned for introducing the industry.
The grant covers all engines invented or to be invented by the grantee within this term, and extends to eight counties. Prior rights are reserved, but no term is fixed for working, owing probably to the invention being in the experimental stage.
The subject of the grant is the manufacture of sailcloths, hitherto brought from France. The grant recites that the art had been introduced and apprentices educated therein, and proceeds to confine the trade to Ipswich and Woodbridge under the supervision of the patentee. On February 5, 1590, the grant was reissued to John and Rd. Collyns for twenty-one years. Cf. also Statute 1 Jac. I, cap. 24, where the above statements are confirmed.
The grantees are bound to erect within one year a trial installation and to prove its efficacy. The invention appears to relate to a method of domestic heating by a system of flues connected with a central furnace, and to have been adopted in practice by brewers and others (Acts of the Privy Council, April 27, 1578).
The grant is made on the strength of works already erected at Crutched Friars, and aimed at superseding the trade in Italian glasses. The patentee undertakes to teach the art to natives, the Crown laying stress upon the fact that “great sums of money have gone forth of our Realms for that manner of ware.” Importation of foreign glass is prohibited, and the relations between the retail trade and the grantee regulated. In 1592 Verselyn surrendered the grant in favour of Sir Jerome Bowes, to whom a patent of twelve years was issued. Under this grant a rent of 100 marks is reserved to the Crown. For the further history and text of the grant cf. Antiquary, March, 1895, and Hyde Price, pp. 69, etc.
Strype’s Life of Smythe contains an account of this extraordinary undertaking, which was for the transmutation of iron into copper, and of lead and antimony into quicksilver. After several failures at Winchelsea, further attempts were made at Anglesea, where possibly some success was met with by the deposition of copper on iron rods laid in the copper-bearing waters of the district. The grant, or charter of incorporation, which is based on the invention of one Wm. Medley, illustrates the state of the native metallurgical science at the period.
A reissue of grant XI. Wm. Wade succeeds to the rights of the late Armigil Wade and introduces Mekyns, a London jeweller, as a capitalist prepared to spend large sums in extending the industries. By this grant it is proposed to substitute the use of vegetable oils extracted by the patentees for train or whale oil in soap-making and dressing cloth. The use of fish oil in the soap manufacture was prohibited in the following year (Acts of the Privy Council, 1578). There is a proviso that the quantities of rape and other oils made under the grant shall not be below that of the train oil entered in the London Customs’ books during the last three years. With regard to the extraction of sulphur from mineral sulphides the Crown secures a rebate of one-twelfth below market prices. Note generally that this and other patents of reissue are open to objection on the ground of the ‘unreasonable’ extension of their term and the undue enlargement of powers conveyed in the original grant.
The text and history of this important grant will be found in the Antiquary, Aug.—Sept. 1895. The patentee was of Dutch extraction. The grant reserves prior rights and fixes three years for the introduction of the invention, which comprised the first application of the force-pump to water-raising in this country, and led almost immediately to the introduction of the manual fire engine. On the continent the application of the force-pump was well known at this period.
The patentee undertakes to introduce the industry and to supply a better salt at cheaper rates. Two years are fixed for this purpose. A rent of £10 is reserved to the Crown.
The process consists of blending white Spanish salt with sea salt, and the product is applicable to fish-curing. The grantees were recommended by the Bailiffs and inhabitants of Yarmouth. The grant is made in part ‘for the relief of the decayed state’ of the Harebrownes’ fortunes occasioned by losses at sea, and is revocable at six months’ notice if found inconvenient to the town or commonweal. Importation of foreign white salt to Yarmouth forbidden.
The patentee is described as ‘one of our Trumpeters.’ The grant covers all future improvements, regulates prices, and reserves the right of one Peter Grinn, ‘who has heretofore mended trumpets.’ The grant extends to London and a seven-mile radius.
The grant recites that the patentee, a citizen of London, had for over twelve years practised and devised to make very good train oil from the livers of fishes imported from the north seas, and had erected houses and furnaces for the purpose. The uses of the oil are stated, and a rent of 20s. reserved to the Crown. The grant was reissued for ten years on May 1, 1591, to Richard Matthews, Yeoman of the Pantry; and again to his widow for twenty-one years. There can be no doubt as to the irregularity of these reissues, the first of which was opposed by the shoemakers and others of Scarborough. The industry existed for many years at Southwold.
Under the original grant the industry is confined to Lynn Regis and Boston. A rent of £6 6s. 8d. is reserved and immediate prosecution of the industry insisted upon. The patent was extended on Feb. 20, 1586, to Kingston-upon-Hull. On Aug. 31, 1599, the grant was surrendered in favour of John Smithe for the remainder of the term, and a new grant was issued in consideration of the payment by the latter of two sums of £4,750 and £2,250, apparently due to the Crown by one Robert Bowes, of Berwick, deceased. In defiance of the terms of the grant, which regulated prices by those of London (with a maximum price of 20d. a bushel), Smithe raised his prices to 14s. and 15s., and was thereupon committed by the Lord President, and the old prices restored. The salt was manufactured under a subcontract by Sir George Bruce, a colliery owner at Culross, who subsequently petitioned for a renewal of the license in 1611, offering to reduce the price of salt to 16d., or 2d. less than the London prices, and stating that he employed over 1,000 workmen.
The grant insists on the instruction of any member of the public for a reasonable recompense, of which one-tenth is reserved to the Crown. Trial of the invention is to be made before the Privy Council, and the grant is void if the cloth is injured in the process of calendering.
The subject of the grant is a light bullet-proof fabric without any metal ‘mingled or wrought in the same.’ The trademark is to be a half-moon, suggestive, as in Mathewe’s patent, of an Eastern origin. Probably a revival of the Saracenic defensive felt armour.
The grant was reissued to Sir John Pakington for eight years on July 6, 1594, and again to the same individual on May 20, 1598. The consideration stated is the annual rent of £40, but the real consideration of the grant is the suppression of the manufacture of starch from grain—the patentee being confined ‘to bran of wheat.’ The grant of the trade was clearly illegal. As an instance of gross oppression by the patentee we may cite Hatfield MSS. 4, p. 261, where an individual appears to have been imprisoned by Pakington for selling starch bought under Young’s patent. Pakington appears to have undertaken to pay certain pensions to certain Dutch women whose names are connected with the introduction of starching into England (ib. p. 614).
The grant is to teach, print, and publish works in shorthand. In the Lansd. MSS. there is a letter in favour of the system, with the Epistle to Titus enclosed as a specimen.
There is reason to believe that the invention was of foreign origin, although it is stated that Bulmer ‘is the first inventor and publisher within the realm.’ Bulmer was a good mechanic and mining engineer, whose services were in demand in all parts of the kingdom.
The grant is described as ‘our letters of commission for the making of saltpetre,’ and is made in consideration of a great quantity of corn powder to be delivered to ‘our store within the Tower.’ A new grant, drawn by Coke, on Sept. 7, 1591, was made to Evelyn and others, annulling all earlier grants. The constitutional nature of the saltpetre grants was admitted by the Statute of Monopolies, but the practice was objectionable, owing to the inquisitorial powers and right of entrance upon lands conveyed by these grants.
The grantee, an alien, held the office of Jeweller to the Queen. The grant is possibly connected with the petition of Rd. Tottyll, the Elizabethan law publisher, who in 1585 stated that the French, by buying up all the linen rags in the kingdom, had thwarted his efforts to introduce the manufacture. The industry was established by Spilman at Dartford, where he employed over 600 workmen. The grant prohibits the manufacture of brown paper, and is void if the former manufacture be discontinued for six months. On July 15, 1597, the patent was reissued for fourteen years with the same proviso, but covering the manufacture of all kinds of paper. The text of the original grant and the petition of Tottyll will be found in Arber’s Registers of the Stationers Company, i. 242, ii. 814. See also Rhys Jenkins in Library Association Record, Sept.—Nov. 1900.
The consideration of the grant is the economy of fuel, of which one load would be required in place of four per ton of iron. Various small royalties are reserved to the Crown.
The object of the invention is to overcome the popular objection to the unsavoury fumes of coal used in the imperfectly constructed hearths of the period. A royalty of 4d. per chaldron on the refined coal for domestic use and 8d. per chaldron on the exported coal is reserved, with the usual proviso in favour of users of old processes.
Apparently a form of wooden cartridge containing powder and shot, for facilitating the loading of firearms.
This grant may be regarded as typical of the Elizabethan monopoly system at its worst. It recites that about thirty years past strangers and others had substituted beer in the manufacture of the above liquors and ‘sauces’; but that of late certain covetous makers had further employed such ‘corrupt, noisome, and loathsome stuff’ that a reformation of the abuses was urgently required in the interests of the public health. The grant proceeds to invest in Drake the sole manufacture of the ale to be employed—such ale to be sold at London rates, with a rent of £20 per annum reserved to the Crown. Drake was further charged with the suppression of all vinegar, &c., sold in casks not bearing his own trademarks. At the last moment, ‘when the grant was fully passed,’ Lord Burghley intervened, and insisted upon the insertion of clauses reserving the rights of those manufacturers who employed wine lees in the manufacture, together with those of the makers of vinegar for domestic uses and charitable purposes. Wales is also excepted from the grant. The exaggerated recitals in this grant excited notice at the time; cf. Harrington, Metamorphosis of Ajax, and the ‘Case of Monopolies.’ For the abuse of the grant cf. D’Ewes Journal, 644, and the Lansd. and Harl. MSS.
The ‘inventor’ learned the art from the Dutch, and undertakes to introduce skilled labour from abroad.
Another water-raising device, obtained ‘by long and painful study of the mathematical sciences’ by the petitioner, a Cambridge Master of Arts. It is stated ‘a special work’ for supplying water to London had already been undertaken by the patentee. Prior rights reserved.
A patent for the sole importation of playing-cards had been granted (18 Eliz. p. 1) to Ralph Bowes and Thomas Bedingfield, and in 1578 John Acheley, of London, was called upon by the Privy Council to answer by what authority he presumed to manufacture and sell playing-cards notwithstanding the above patent. Acheley replied that his doings were lawful, ‘grounding himself upon the laws of the realm.’ The legal points were thereupon referred to the Master of the Rolls (Sir Wm. Cordell) and the Attorney-General (? G. Gerrard), praying them to take some pains and certify their opinion, that such order may be taken as shall be agreeable with justice and equity. Their lordships, however, hint that a composition between the parties would be an acceptable termination of the dispute, as ‘Acheley doth by his cardmaking set manie personnes on work which by the inhibition of his profession would otherwise be ydele.’ In 1579 and 1580 further action was taken against other parties who had imitated the seal of the patentee with a view to avoid detection. In 1589, on the complaint of Bowes, the Privy Council ordered that the grants be maintained according to the contents thereof, and that hereafter infringers shall not only be taken to prison until sufficient security has been provided, but shall also have such tools, moulds, or other instruments taken away, broken in pieces and defaced. For the further history of the celebrated grant see Gordon, Monopolies by Patents.
Various military inventions and accoutrements to enable soldiers to perform the work of ‘Pyoners.’ There is a proviso that the requirements of the Crown shall be supplied. In 1604 the patentee notified his intention to present the above invention to the Crown, offering the master of the Ordnance £2,000 if he could get the portsack introduced into the southern counties.
The results of the industrial policy of the Elizabethan reign may now be presented in tabular form:—
The first column of our classification comprises grants for new industries and inventions to aliens or naturalized subjects of the Crown. With these we find occasionally associated a native, acting as interpreter and intermediary between the foreigner and the public. The figures for the period 1571-90 indicate the development of native enterprise, although the industries still bear the impress of foreign suggestion. The Statistics for 1591-1603, which indicate a practical reversal of the favourable attitude of the Crown toward the inventor, afford a fair criterion of the industrial value of the Elizabethan patent system. During this period we have to record the rejection of the suits for protection of the following inventions:—(a) The stocking frame of Lee—the most original invention of the age, which for lack of encouragement went to France, where the inventor is stated to have received a privilege; (b) the water-closet of Harington, which was reintroduced about a century and a half later; (c) a scheme of Gianibelli for land reclamation; (d) various devices of the ingenious Hugh Platt, in part of foreign origin; (e) Stanley’s invention of armour plates; and (f) a scheme for sugar-refining, the novelty, however, of which was questioned.
True and First Inventor. An attempt to further illustrate the growth of the native inventive talent by subdividing the above figures into grants of importation and invention proved impracticable owing to the want of definition in the phraseology descriptive of the relation of the patentee to the subject of the grant. In the 16th Cent. the meaning of the verb ‘to invent’ and its derivatives was not confined to its modern signification. For instance in the translation of the well known work of Polydore Vergil De inventoribus rerum, under a chapter headed ‘Who found out Metals’ we are told that ‘Eacus invented it [i. e. gold] in Panchaia,’ and again that the Justinians, a religious order, were ‘invented’ [i. e. founded] by Lewis Barbus. This view has since been confirmed by the ‘Oxford English Dictionary,’ which has assigned to the verb ‘invent’ two meanings now obsolete (a) to discover—a meaning still preserved in the phrase ‘the invention of the Cross,’ (b) ‘to originate, to bring into use formally or by authority, to found, establish, institute or appoint.’ Before attempting, however, to assign a definite equivalent of the ‘the true and first inventor’ of the Statute of Monopolies the results of an examination of the phraseology of the patent grants and legal decisions prior to the Statute must be given. Briefly, on the Patent Rolls the words are found in all these meanings: but when used in the modern sense they are generally preceded or supported by another less equivocal term or phrase, e. g. ‘invented and devised’ ‘devise and invention.’ Frequently a different terminology is selected, e. g. ‘first finders out and searchers’ ‘first deviser and maker.’ Again ‘invention’ is often asserted in the later clauses of the patent grant where no claim to invention is made in the recitals of the grant (Cf. Patents No. ii, xxxv, xlv, lii). Here ‘invention’ must be translated as ‘new art,’ for as invention was not required to support a patent the patentee had no object in laying claim to it, whilst a false recital was fatal to the validity of a patent.
Turning from the Patent Rolls to the judicial decisions, in Darcy v. Allen, ‘invention’ is used in its modern sense preceded by another word, viz. ‘wit and invention’; but in the Clothworkers of Ipswich case (1615) the phrase ‘invention and a new trade’ is actually used to distinguish an imported process from ‘invention,’ i. e. the result of the exercise of the inventive faculty. ‘If a man hath brought in a new invention and a new trade . . . in peril of his life or consumption of his estate, or if a man hath made a new discovery of anything, in such cases, etc.’ Again, ‘Of a new invention the King can grant a patent’ but ‘where there is no invention the King cannot by his patent hinder any trade.’ Here the Court is dealing with the amount of difference required to support a patent, not with the source from which the patented process is derived. The following reasons, therefore, may be given for attributing to the phrase ‘true and first inventor’ the meaning ‘true and first originator, founder or institutor’ of the new manufactures, viz.:
(a) The meaning is consistent with contemporary usage.
(b) It maintains complete conformity between the judicial decisions and the Statute which is professedly declaratory of those decisions, as to the description of the two parties who could qualify for the grant; while it retains in the Statute a declaration of the express ‘consideration’ of the grants which is otherwise wanting. The suggested interpretation, it will be observed, specifies neither the inventor nor the importer directly, but includes both.
(c) If any preference had been intended between the importer and inventor, the former would have been favoured, for the introduction of new foreign industries was less likely to prove inconvenient than improvements on existing ones (Cf. D’Ewes’ Journal, 678).
(d) If the Statute had proposed to favour the inventor as against the importer the party denoted would have been described with greater precision, and some ‘consideration’ would have been exacted by limiting a term for the introduction of the industry or by requiring some form of disclosure of the invention.
It will be readily understood how the meaning of invention became associated with the idea of experimental effort as distinguished from the practical institution of a new art. In the natural order of things patents of invention succeeded to patents of importation as the base of national industry was broadened and as its level was gradually raised to that of the Continent. Yarranton’s complaint in 1677 (Law Quart. Review July 1902) could hardly have been penned if the word had then retained its original signification. The practice of the Crown with respect to patents of importation was supported indeed by Edgebury v. Stephens (1691) on the ground that the source of an invention is immaterial, ‘whether learned by study or travel it is the same thing,’ but the light which once illuminated the word ‘inventor’ had faded, and henceforward the practice of the Crown has been treated as ‘an anomaly which has acquired by time and recognition the force of law (Edmunds 2nd ed. pp. 266-67), but for which no statutory authority is forthcoming.’
Disclosure of invention. Hindmarch, one of the greatest writers on English Patent Law, once expressed a doubt whether the patentee was ever under an obligation to work his grant at all. The same writer in his chapter on the patent specification asserted that a grant was bad in law which contained no technical description in the recitals of the patent, or in respect of which no specification was required to be filed. Both statements however are directly opposed to the evidence of the Patent Rolls.
That disclosure was not required prior to the middle of the eighteenth century may be gathered from the final clause in the Letters Patent which ran that the grant should be favorably construed by the Courts ‘notwithstanding the not full and certain describing the nature and quality of the said invention or of the materials thereunto conducing and belonging.’ This clause, although not peculiar to Letters Patent for inventions, could hardly have been introduced, if at the date of its introduction written or printed disclosure of the invention had been required of the patentee. The attitude of the Crown toward disclosure may be gathered from the three following typical cases: (A) The first known patent specification relates to the saltpetre patent of 1561. Here the original proposal was that the Crown should manufacture on its own account, and a sum of money was to be paid by the Queen in return for the disclosure of the new art and the personal services of the introducer. Subsequently the bargain was transferred to two London tradesmen who took over the Crown’s liability in consideration of the monopoly. (B) In 1611 Simon Sturtevant, on his own initiative and probably with a fraudulent motive, filed with his petition what he called a ‘Treatise of Metallica’ which treatise he covenanted to supplement by a fuller statement to be printed and published within a given term after the letters patent. This anticipation of the system of provisional and complete specification is in itself sufficiently curious. But in his final treatise Sturtevant lays down with great clearness the modern doctrine of the patent specification, adding that ‘he was not tied to any time in the trial of his invention.’ He was speedily undeceived, for in the following year the patent was cancelled on the ground of his outlawry and neglect to work the patent. (C) A century later, 1711, we have the case of Nasmith’s patent from which we quote the following extract:
Patent Roll, 10 Anne. Part 2.
‘Anne, &c., Whereas John Nasmith of Hamelton in North Britain, apothecary, has by his petition represented to us that he has at great expense found out a new Invention for preparing and fermenting wash from sugar “Molosses” and all sorts of grain to be distilled which will greatly increase our revenues when put in practice which he alleges he is ready to do “but that he thinks it not safe to mencon in what the New Invention consists untill he shall have obtained our Letters Patents for the same. But has proposed to ascertain the same in writeing under his hand and seale to be Inrolled in our high Court of Chancery within a reasonable time after the passing of these our Letters Patents,” &c.’
From these cases we may deduce the origin of the specification, viz. that the practice arose at the suggestion, and for the benefit, of the grantee with the view of making the grant more certain, and not primarily as constituting the full disclosure of the invention now required at law for the instruction of the public.
This theory harmonizes with what is known of the practice of the sixteenth and seventeenth centuries. So long as the monopoly system aimed at the introduction of new industries such as copper, lead, gold, and silver mining, or the manufacture of glass, paper, alum, &c., &c., the requisition of a full description would have required a treatise rather than a specification, and would have materially detracted from the concession offered by the Crown, besides constituting a precedent for which no sufficient reason or authority could have been adduced. But when, by a natural development, the system began to be utilized by inventors working more or less on the same lines for the same objects, the latter for their own protection draughted their applications with a view of distinguishing their processes from those of their immediate predecessors, and of ensuring priority against all subsequent applicants. Hence, while the recitals of the sixteenth century deal almost exclusively with suggestions of the advantages which would accrue to the State from the possession of certain industries, or with statements respecting steps taken by the applicants to qualify themselves for the monopoly, those of a later date not infrequently deal with the technical nature of the proposed improvement. These recitals, therefore, while forming no part of the consideration of the grant, are undoubtedly the precursors of the modern patent specification. Between 1711 and 1730 the wording of the proviso (when the latter appears among the general covenants of the grant) distinctly recognizes the proposal as emanating from the applicant—‘whereas A did propose to ascertain under his hand and seal, &c., &c.;’ but about the year 1730 the form of a proviso voiding the grant in case of the non-filing of a specification was substituted. Still the practice of requiring a specification cannot be said to have been established prior to the middle of the eighteenth century.
The first judicial pronouncement as to the position which the patent specification has since occupied in English patent law must be claimed for Lord Mansfield, though the exact date of his Lordship’s dictum cannot at present be stated. The following quotation, establishing the fact, is taken from the summing up of Lord Mansfield in Liardet v. Johnson (1778), a case supposed to have been unreported. There is some reason to think that the pamphlet containing the account of the trial was suppressed shortly after its publication (Cf. Law Quart. Review, July 1902). Lord Mansfield’s words are as follows:
‘The third point is whether the specification is such as instructs others to make it. For the condition of giving encouragement is this: that you must specify upon record your invention in such a way as shall teach an artist, when your term is out, to make it—and to make it as well as you by your directions; for then at the end of the term, the public have the benefit of it. The inventor has the benefit during the term, and the public have the benefit after. But if, as Dr. James did with his powders, the specification of the composition gives no proportions, there is an end of his patent, and when he is dead, nobody is a bit the wiser; the materials were all old—antimony is old, and all the other ingredients. If no proportion is specified, you are not, I say, a bit the wiser; and, therefore, I have determined, in several cases here, the specification must state, where there is a composition, the proportions; so that any other artist may be able to make it, and it must be a lesson and direction to him by which to make it. If the invention be of another sort, to be done by mechanism, they must describe it in a way that an artist must be able to do it.’
Novelty. The statutory definition of novelty is precise. It confines future grants ‘to the sole working and making of new manufactures . . . which others at the time of making such letters patent and grant shall not use. The statutory limitation reappears in the clause in the letters patent which avoids the grant on proof that the said invention ‘is not a new manufacture as to the public use and exercise thereof.’ Modern commentators, however, jump to the conclusion that under the Statute ‘there must be novelty.’ But manifestly a proper deduction from the clause is that want of novelty could not be raised as a separate issue apart from prior user. Neither in Bircot’s case or in Coke’s commentary do we find any trace of the doctrine that proof of prior publication would avoid a patent. Yarranton (Law Quart. Review, July 1902) who states the case against patents more strongly even than Coke is also silent as to this defeasance. Novelty according to these writers is limited to a comparison with the corresponding art within the realm, but within this limited area absolute distinction may be required to be shown. By a curious coincidence this interpretation of the Statute is to be found in Liardet v. Johnson, the case already referred to as having by its enunciation of the doctrine of the patent specification substantially relaid the foundations of the law of patents.
‘The other extreme,’ said Lord Mansfield, ‘is the suffering men to get monopolies of what is in use and in the trade at the time they apply for letters patent, and therefore the Statute of King James expressly qualifies it. That it must be of such invention (sic) as are not then used by others.’ Again ‘An invention must be something in the trade and followed and pursued;’ ‘whether it was in books or receipts it never prevailed in practice or in the trade.’ The modern view of the law of Novelty was unsuccessfully urged, it should be noted, by the defendants’ counsel, but in this trial the learned judge would appear not to have realised, or to have been unwilling to apply the results which flowed naturally from his previous dicta. If disclosure was the sole obligation laid upon the inventor by the grant, proof of prior disclosure must render the patent invalid for want of consideration.
Utility. The statute does not in terms mention utility (Edmunds. 2nd ed. p. 100: Frost 2nd ed. 139) and the chapter on utility in the textbooks is generally vague and unsatisfactory. Utility, of course, is implied in the phrase ‘new manufactures . . . to the true and first inventors thereof,’ for the introduction of a new art on a commercial scale cannot take place unless the product serves some useful purpose. Arts, the exercise of which are ‘contrary to law, or mischievous to the State or generally inconvenient’ are separately provided for.
Jurisdiction. In a recent Government paper on the working of the Patent Acts [Cd 906] the origin and exercise of the powers committed to the Privy Council with respect to the revocation of patents on the ground of inconvenience is dealt with at some length. Under the Stuarts a clause was also inserted directing the patentee in case of resistance to the grant to certify the same to the Court of Exchequer. Later on the King’s Bench or Privy Council are substituted: but finally the Crown was content to threaten the utmost rigour of the law in case of contempt of this ‘Our Royal Command,’ without specifying where relief was to be obtained. The whole question of the jurisdiction of the patent grants in the 17th Century requires further research; but there are grounds for thinking that as a rule this jurisdiction was exercised by the Privy Council down to the middle of the 18th Century. The point is of great importance in explaining the want of continuity between the Statute of Monopolies and the decisions under the Statute in the latter half of the 18th Cent. It is clear that at this period the Courts were without precedents to guide them, for the Privy Council was an executive body, and not a legally qualified tribunal. The following case of revocation of a patent by the Privy Council in the year 1745, acting under the powers reserved to it by the above clause in the letters patent will go far to confirm this view. In this year an order vacating Betton’s patent for making British oil was made at a meeting of the Council, at which were present the King, the Archbishop of Canterbury, and other dignitaries. The order states that a petition for revocation had been presented by two makers and dealers in a similar oil, that the matter had been referred to the Law Officers, who reported that the petitioners had made good their case and that they were of opinion that the letters patent should be made void. Whereupon the Lords of the Committee of the Privy Council agreeing with the opinion of the Law Officers, the King was pleased to order that the patent should be made void, and an order to this effect was therefore signed by 7 of the Privy Councillors present.
THE HISTORY OF THE CARRIER’S LIABILITY1
THE extraordinary liability of the common carrier of goods is an anomaly in our law. It is currently called “insurer’s liability,” but it has nothing in common with the voluntary obligation of the insurer, undertaken in consideration of a premium proportioned to the risk. Several attempts have been made to explain it upon historical grounds, the most elaborate that of Mr. Justice Holmes.3 His explanation is so learned, ingenious, and generally convincing, that it is proper to point out wherein it is believed to fall short.
His argument is in short this. In the early law goods bailed were absolutely at the risk of the bailee. This was held in Southcote’s Case,4 and prevailed long after. The ordinary action to recover against a bailee was detinue. But as that gradually fell out of use in the seventeenth century its place was necessarily taken by case; and in order that case might lie for a nonfeasance, some duty must be shown. There were two ways of alleging a duty: by a super se assumpsit, and by stating that the defendant was engaged in a common occupation. It was usual to include an allegation of negligence, from abundant caution, but that was “mere form.” Chief Justice Holt1 finally overthrew the doctrine of the bailee’s absolute liability, except where there was a common occupation, or (of course) where there was an express assumpsit. The extraordinary liability of a carrier is therefore a survival of a doctrine once common to all bailments.
Judge Holmes does not explain satisfactorily why this doctrine should not have survived in the case even of all common occupations, but only in the case of the common carrier of goods; nor does he account for the fact that the carrier is held absolutely liable, not merely, like the bailee once, for the loss of goods, but, unlike that bailee, for injury to them. The difficulties were not neglected from inadvertence, for he mentions them.2 But without laboring these points, his main proposition should be carefully considered. Is it true that the bailee was once absolutely liable for goods taken from him? It may be so; Pollock and Maitland seem to give a hesitating recognition to the doctrine,3 but the evidence is not quite convincing.4
No one versed in English legal history will deny that the bailee of goods was the representative of them, and the bailor’s only right was in the proper case to require a return; and therefore that when a return was required it was incumbent upon the bailee to account. Nor can it be doubted that the law then tended to lay stress on facts rather than reasons,—to hang the man who had killed another rather than hear his excuse. We should therefore not be surprised, on the one hand, to find that, where one had obliged himself to return a chattel, no excuse would be allowed for a failure to return. On the other hand, by the machinery of warranty, it was always possible to explain away the possession of an undesirable chattel; why not to explain the non-possession of a desired one? We should therefore not be greatly surprised if the authorities allowed some explanation.
Three actions were allowed a bailor against a bailee: detinue, account, and (after the Statute of Westminster) case. Let us see whether in either of these actions the defendant was held without the possibility of excuse.
Case lies only for a tort; either an active misfeasance, or, in later times, a negligent omission. There must therefore be at the least negligence; and so are the authorities. The earliest recorded action against a carrier is case against a boatman for overloading his boat so that plaintiff’s mare was lost; it was objected that the action would not lie, because no tort was supposed; the court answered that the overloading was a tort.1 So in an action on the case for negligently suffering plaintiff’s lambs, bailed to defendant, to perish, it was argued that the negligence gave occasion for an action of tort.2 So later, in the case of an agister of cattle, the negligence was held to support an action on the case.1 In these cases the action would not lie except for the negligence.2 In the case of ordinary bailments, therefore, negligence of the bailee must be alleged and proved to support an action on the case against him. I shall hereafter consider actions on the case against those pursuing a common occupation.
In the action of account there is hardly a doubt that robbery without fault of bailee could be pleaded in discharge before the auditors.3 To the contrary is only a single dictum of Danby, C. J., and there the form of action is perhaps doubtful.4 Indeed, in Southcote’s Case the court admitted that the factor would be discharged before the auditors in such a case, and drew a distinction between factor and innkeeper or carrier.
In the action of detinue then, if anywhere, we shall find the bailee held strictly; and the authorities must be examined carefully.
The earliest authority is a roll where, in detinue for charters, the bailee tendered the charters minus the seals, which had been cut off and carried away by robbers. On demurrer this was held a good defence.5 The next case was detinue for a locked chest with chattels. The defence was that the chattels were delivered to defendant locked in the chest, and that thieves carried away the chest and chattels along with the defendant’s goods. The plaintiff was driven to take issue on the allegation that the goods were carried away by thieves.6 A few years later, counsel said without dispute that if goods bailed were burned with the house they were in, it would be an answer in detinue.1 Then where goods were pledged and put with the defendant’s own goods, and all were stolen, that was held a defence; the plaintiff was obliged to avoid the bar by alleging a tender before the theft.2 Finally in 1432, the court (Cotesmore, J.) said: “If I give goods to a man to keep to my use, if the goods by his misguard are stolen, he shall be charged to me for said goods; but if he be robbed of said goods it is excusable by the law.”3
At last, in the second half of the fifteenth century, we get the first reported dissent from this doctrine. In several cases it was said, usually obiter, that if goods are carried away (or stolen) from a bailee he shall have an action, because he is charged over to the bailor.4
In several later cases the old rule was again applied, and the bailee discharged.5 There seems to be no actual decision holding an ordinary bailee responsible for goods robbed until Southcote’s Case.6
This was detinue for certain goods delivered to the defendant “to keep safe.” Plea, admitting the bailment alleged, that J. S. stole them out of his possession. Replication, that J. S. was defendant’s servant retained in his service. Demurrer, and judgment for the plaintiff.
The case was decided by Gawdy and Clench, in the absence of Popham and Fenner; and it is curious that Gawdy and Clench had differed from the two others as to the degree of liability of a bailee in previous cases.1 It would seem that judgment might have been given for plaintiff on the replication; the court, however, preferred to give it on the plea. This really rested on the form of the declaration; a promise to keep safely, which, as the court said, is broken if the goods come to harm. The only authority cited for the decision was the Marshal’s Case, which I shall presently examine and show to rest on a different ground. The rest of Coke’s report of the case (of which nothing is said in the other reports) is an artificial and, pace Judge Holmes, quite unsuccessful attempt to reconcile, in accordance with the decision, the differing earlier opinions. The case has probably been given more authority than it really should have. At the end of the manuscript report cited we have these words: “Wherefore they (cæteris absentibus) give judgment for the plaintiff nisi aliquod dicatur in contrario die veneris proximo.” And it would seem that judgment was finally given by the whole court for the defendant. In the third edition of Lord Raymond’s Reports is this note: “That notion in Southcote’s Case, that a general bailment and a bailment to be safely kept is all one, was denied to be law by the whole court, ex relatione Magistri Bunbury.”2 It was not uncommon for a case to be left half reported by the omission of a residuum; and it may be that Southcote’s Case as printed is a false report. One would be glad to see the record.
Southcote’s Case is said to have been followed for a hundred years. The statement does it too much honor. It seems to be the last reported action of detinue where the excuse of loss by theft was set up; and, as has been seen, the principle it tries to establish does not apply to other forms of action. It was cited in several reported actions on the case against carriers, but seems never to have been the basis of decision; on the other hand, in Williams v. Lloyd,1 where it was cited by counsel, a general bailee who had lost the goods by robbery was discharged. The action was upon the case.
Having thus briefly explained why Judge Holmes’s theory of the carrier’s liability is not entirely satisfactory, I may now suggest certain modifications of it. I believe, with him, that the modern liability is an ignorant extension of a much narrower earlier liability;2 but the extension was not completed, I think, for eighty years after the date he fixes, and the mistaken judge was not Lord Holt, but Lord Mansfield.
From the earliest times certain tradesmen and artificers were treated in an exceptional way, on the ground that they were engaged in a “common” or public occupation; and for a similar reason public officials were subjected to the same exceptional treatment. Such persons were innkeepers,3 victuallers, taverners, smiths,4 farriers,5 tailors,6 carriers,7 ferrymen, sheriffs,8 and gaolers.9 Each of these persons, having undertaken the common employment, was not only at the service of the public, but was bound so to carry on his employment as to avoid losses by unskilfulness or improper preparation for the business. In the language of Fitzherbert, “If a smith prick my horse with a nail, I shall have my action on the case against him without any warranty by the smith to do it well; for it is the duty of every artificer to exercise his art rightly and truly as he ought.”10 By undertaking the special duty he warrants his special preparation for it. The action is almost invariably on the case.
One of the earliest cases in the books was against an innkeeper, stating the custom of England for landlords and their servants to guard goods within the inn; it was alleged that while plaintiff was lodged in the inn his goods were stolen from it. There was no allegation of fault in the defendant, and on this ground he demurred; but he was held liable notwithstanding. The plaintiff prayed for a capias ad satisfaciendum. Knivet, J. replied, that this would not be right, since there was no tort supposed, and he was charged by the law, and not because of his fault; it was like the case of suit against the hundred by one robbed within it; he ought not to be imprisoned. The plaintiff was forced to be content with an elegit on his lands.1 A few years later a smith was sued for “nailing” the plaintiff’s horse; the defendant objected that it was not alleged vi et armis or malitiose, but the objection was overruled, and it was held that the mere fact of nailing the horse showed a cause of action.2 An action was brought against a sheriff for non-return of a writ into court; he answered that he gave the writ to his coroner, who was robbed by one named in the exigent. He was held liable notwithstanding, Knivet, J. saying, “What you allege was your own default, since the duty to guard was yours.”3
In 1410, in an action against an innkeeper, Hankford, J. used similar language: “If he suffers one to lodge with him he answers for his goods; and he is bound to have deputies and servants under him, for well keeping the inn during his absence.”4 A noteworthy remark was Judge Paston’s a few years later: “You do not allege that he is a common marshal to cure such a horse; and if not, though he killed your horse by his medicines, still you shall not have an action against him without a promise.”5 Soon after was decided the great case of the Marshal of the King’s Bench.6 This was debt on a statute against the Marshal for an escape. The prisoner had been liberated by a mob; the defendant was held liable. The reason was somewhat differently stated by two of the judges. Danby, J. said that the defendant was liable because he had his remedy over. Prisot, C. J. put the recovery on the ground of negligent guard. This case was frequently cited in actions against carriers; but not, I think, in actions against ordinary bailees before Southcote’s Case.
The earliest statement of the liability of a common carrier occurs, I think, in the Doctor and Student (1518), where it is said that, “if a common carrier go by the ways that be dangerous for robbing, or drive by night, or in other inconvenient time, and be robbed; or if he overcharge a horse whereby he falleth into the water, or otherwise, so that the stuff is hurt or impaired; that he shall stand charged for his misdeameanor.”1 In the time of Elizabeth, the hire paid to the carrier was alleged as the reason for his extraordinary liability.2 Finally, in Morse v. Slue3 the court “agreed the master shall not answer for inevitable damage, nor the owners neither without special undertaking: when it’s vis cuiresisti non potest; but for robbery the usual number to guide the ship must be increased as the charge increaseth.”
Thus stood the law of carriers and of others in a common employment down to the decision in Coggs v. Bernard.1 Two or three things should be noted. First, carriers are on the same footing with many other persons in a common employment, some bailees and some not, but all subjected to a similar liability, depending upon their common employment; and there is no evidence in the case of these persons of anything approaching a warranty against all kinds of loss. The duty of the undertaker was to guard against some special kind of loss only. Thus the gaoler warranted against a breaking of the gaol, but not against fire; the smith warranted against pricking the horse; the innkeeper against theft, but not against other sorts of injury;2 the carrier against theft on the road, but probably not against theft at an inn.
Secondly. This is put on different grounds; but all may be reduced to two. On the one hand, it may be conceived that the defendant has undertaken to perform a certain act which he is therefore held to do: either because the law forces him into the undertaking (as a hundred is forced to answer a robbery), or, as seems to have been in Judge Paston’s mind, because there was some consent which took the place of a covenant. On the other hand, it may be conceived that the defendant has so invited the public to trust him that certain avoidable mischances should be charged to his negligence; he ought to have guarded against them. “The duty to guard” is the sheriff’s or the carrier’s or the innkeeper’s; he is bound to have deputies for well keeping the inn; if a mob breaks in he shall be charged for his negligent guard; the usual number must be increased as the charge increases; if he go by the ways that be dangerous, or at an inconvenient time, he shall stand charged for his misdemeanor. It is to be remembered that during this time case on a super se assumpsit had this same doubtful aspect; to use a modern phrase, it was even harder then than now to tell whether such an action sounded in contract or in tort. The test of payment for services is a loose and soon abandoned method of ascertaining whether the defendant was a private undertaker or in a common employment.1
Another thing important to notice is that all precedents of declarations against a carrier or an innkeeper allege negligence.2 It is of course impossible to prove that this did not become a mere form before rather than after Lord Holt’s time; but it is on the whole probable that it originally had a necessary place.
We have now brought the development of the law to the great case of Coggs v. Bernard.3 This was an action against a gratuitous carrier, and everything said by the court about common carriers was therefore obiter. Three of the judges did, however, treat the matter somewhat elaborately. Gould, J. put the liability squarely on the ground of negligence: “The reason of the action is, the particular trust reposed in the defendant, to which he has concurred by his assumption, and in the executing which he has miscarried by his neglect. . . . When a man undertakes specially to do such a thing, it is not hard to charge him for his neglect, because he had the goods committed to his custody upon those terms.” Powys, J. “agreed upon the neglect.” Powell, J. emphasized the other view, that “the gist of these actions is the undertaking. . . . The bailee in this case shall answer accidents, as if the goods are stolen; but not such accidents and casualties as happen by the act of God, as fire, tempest, &c. So it is in 1 Jones, 179; Palm. 548. For the bailee is not bound upon any undertaking against the act of God.” Holt, C. J. seized the occasion to give a long disquisition upon the law of bailments. In the course of it he said that common carriers are bound “to carry goods against all events but acts of God and of the enemies of the King. For though the force be never so great, as if an irresistible multitude of people should rob him, nevertheless he is chargeable.” And the reason is, that otherwise they “might have an opportunity of undoing all persons that had any dealings with them, by combining with thieves,” &c.
Was this the starting point of the modern law of carriers? It seems to be a departure from the previous law as I have stated it, but how far departing depends upon what was meant by act of God. Powell appears to include accidental fire, and cites a case where the death by disease of a horse bailed was held an excuse. Lord Holt does not explain the term; but his reasoning is directed entirely to loss by robbery. That “act of God” did not mean the same thing to him and to us is made probable by the language of Sir William Jones,1 whose work on Bailments follows Lord Holt’s suggestions closely. After stating Lord Holt’s rule as to common carriers, he adds that the carrier “is regularly answerable for neglect, but not, regularly, for damage occasioned by the attacks of ruffians, any more than for hostile violence or unavoidable misfortune,” but that policy makes it “necessary to except from this rule the case of robbery.” As to act of God, “it might be more proper, as well as more decent, to substitute in its place inevitable accident,” since that would be a more “popular and perspicuous” term. He cites the case of Dale v. Hall,2 which appeared to have held the carrier liable though not negligent; but explains that the true reason was not mentioned by the reporter, for there was negligence. Much the same statement of the law of carriers is made by Buller in his Nisi Prius.3 It would seem, then, that the change in the law which we should ascribe to Lord Holt was one rather in the form of statement than in substance; but the new form naturally led, in the fulness of time, to change in substance.
In the fulness of time came Lord Mansfield, and the change in substance was made. In Forward v. Pittard,4 we have squarely presented for the first time a loss of goods by the carrier by pure accident absolutely without negligence,—by an accidental fire for which the carrier was not in any way responsible. Counsel for the plaintiff relied on the language of Lord Holt. Borough, for the defendant, presented a masterly argument, in which the precedents were examined; the gist of his contention was, that a carrier should be held only for his own default. Lord Mansfield, unmoved by this flood of learning, held the carrier liable; and he uttered these portentous words: “A carrier is in the nature of an insurer.”
From that time a carrier has been an insurer without the rights of an insurer.
EARLY FORMS OF CORPORATENESS1
THE Italians conceived the corporation to be a fictitious person. Now this was a refined and artificial doctrine, and therefore a late one. Before it spread over England, conducted through the channels of Canonism, natural corporateness had already appeared in certain forms. With regard to this natural growth, there are many questions which, if we cannot answer, we ought at least to ask. What was the earliest form of corporateness here? Was it popular with Englishmen? Upon what principle and by whose authority was corporateness granted to some groups of persons and withheld from others? How far did the early form differ from the final, and by what influence was that difference gradually removed?
The early forms of corporateness are two-fold—the ecclesiastical and the lay. Of these the ecclesiastical body was the more abstract, foreign, and fictitious: the lay body was the more concrete, natural, and spontaneous. The spiritual bodies were dependent upon Canonist Law and upon the authorised version as ordained by the Pope. Their want of a natural membership and a natural existence, and their inability to sin and be damned, left them a mere name. On the other hand, the temporal bodies—and especially the early forms of municipal association—were vigorous, independent, and full of a corporate spirit; they soon showed themselves fit for that autonomy which is claimed to be native in Englishmen.
In a previous chapter on the corporation sole some slight mention has been made of the beginnings of corporateness in the Church. It is now proposed to consider the beginnings of municipal corporateness.1
When did the borough become a corporation?
Presumably we should reply: “When the lawyers conferred upon it an abstract juristic personality.” That would be to answer one question by suggesting another.
If a royal charter necessarily implied incorporation, then there were municipal corporations in the time of William the Conqueror. Among the privileges “incident” to the perfect corporation are the right to use a common seal, to make by-laws, to plead in Courts of law, and the right to hold property in succession. If the existence of these privileges necessarily implied corporateness, then there were many municipal corporations within a few centuries of the Conquest. But these privileges were apparently held alike by boroughs which had, and boroughs which had not, a royal charter.
The question is one to which Merewether and Stephens paid special attention. Their laborious History of Boroughs, published in 1835, was designed to throw light on what was then the engrossing subject of municipal reform. The sixth of the eleven inferences which they claim to have established declared that the burghal body got its first charter of municipal incorporation in the reign of Henry VI.2 Their research fixes the first date at which certain magic words are found in use as a formula of incorporation. Being thus concerned with documentary evidence, they nowhere admit that the essence of municipal corporateness is to be found far earlier. Both their facts and their inferences have been vigorously attacked, charters being cited which suggest formal incorporation and a kind of abstract personality conferred on towns a hundred years before. Dr. Gross observes that municipal corporateness existed as early as the reign of Edward I.1
Such differences of opinion illustrate the difficulty of searching for the germ of true corporateness in early institutions. Much caution is needed on a road where milestones are irregular and landmarks few. Stages in the development of gild and borough can be definitely dated (if at all) only when all extant charters have been disclosed, analysed, and classified. The various forms of apparent corporateness are neither clearly marked off from one another, nor capable of classification according to modern standards. Such differences as existed in fact between these various forms are ignored and confused by the vocabulary. If twenty men hold land (a) jointly, (b) severally, or (c) as a true corporation, these are three distinct conceptions: but all three are covered in early times by the one word communitas.2 Inferences based upon names are therefore dangerous. But the ambiguity of words does not rest there. Even in modern English the word corporation is used with such a loose and extended meaning that it is necessary to define the sense in which the word will be used in this chapter. Some writers have applied the word to any association which combines communal ownership and interests with the slightest degree of autonomy and representation.3 Thus Sir Henry Maine says, “The family is a corporation.”4 Another writer observes that “as cities and built towns have a more compact municipal life and action than other places, the notion of corporations (in the political sense) is apt to be exclusively attached to them. But this is quite incorrect. Every place where a court leet has been held is, or has been, really a corporation. Hundreds are corporations. . . . counties are also corporations. So also are parishes and the true ‘Wards’ of London.”1 It is proposed to use the word corporation now in the strict sense of a body possessing an ideal personality which is distinguished from the collective personalities of the members which compose the body. In this sense of the word, the family, the county, and the hundred never became corporations.
While examining the early forms of the borough, one becomes aware of other groups of men which might have attained, but which failed to attain, incorporation.
In the village, for instance, there existed, even before Domesday, a kind of communal ownership. Whether the land was first owned by the community, or—which seems more probable—first owned by the individual, we cannot pause to consider.2 What was the exact nature of that communal ownership we cannot hope to decide. All villages were not alike, and if they were alike they would probably resist any attempt to thrust them into the classes approved by modern ideas.
Corporateness is on no account to be presumed from communal ownership. True corporateness entails a polish and refinement not to be looked for in the early stages of village life. In the words of Professor Maitland, “if we introduce the persona ficta too soon we shall be doing worse than if we armed Hengest and Horsa with machine-guns or pictured the Venerable Bede correcting proofs for the press.”3
Yet although corporateness is not to be presumed where community is found, the existence of communal ownership offers some prospect that corporateness may appear later. But that is just what does not happen in the village. The village is never incorporated. At first it is too small, too unimportant, too ill-organised. Its geographical limits, its agricultural system, and the natural feeling of neighbourliness tend to make a unit of its inhabitants; but the group of persons never becomes a true group-person. At a later date the village fails to attain corporateness for another reason. In England, as in Germany, the “kings became powerful and the hereditary nobles disappeared. There was taxation. The country was plotted out according to some rude scheme to provide the king with meat and cheese and ale. Then came bishops and priests with the suggestion that he should devote his revenues to the service of God, and with forms of conveyance which made him speak as if the whole land were his to give away.”1 And so, when the king has learnt that the land is his land, and is a source of possible profit to him, the villages throughout the country begin to fall under the dominion of lords. Henceforward the village develops not so much of itself as under the lord—and perhaps in spite of him. He interposes himself between it and all those external forces which might otherwise have hammered it into corporate shape.
A similar result occurred in the case of the manor. The manor was an economic, administrative, and judicial unit, but, as such, it failed in general to become a group-person, because there was one person (the lord) who could always represent the group of persons contained in the manor. What the manor was is not precisely known. It was certainly a financial unit in the assessment of Domesday and long afterwards. Taxes were more conveniently and speedily collected in large round sums from rich landlords than in small sums from scattered and possibly insolvent tenants. Consequently the landlord was made to stand between the king and the group of manorial taxpayers who might otherwise have been ultimately formed into a corporate organisation. There was never in the village or in the manor that keen sense of common property, of profitable common assets, of common revenues and privileges, which so largely assisted the borough to realise corporateness.
The county also and the hundred failed to become generally incorporated. They lacked the importance, the spontaneity, and the unity of the borough: they had no such opportunities or desire for organising a natural self-government: they had no such privileges to strive for and to maintain.
Both county and hundred were governmental districts:1 each had a court, and apparently each had had communal property.2 Some counties even possessed such charters as were given to early boroughs. Devon and Cornwall received from King John grants of liberties which were in form not unlike the grants made to towns.3 They were treated as a communitas, a collective body of men whom to name individually would be impossible as well as wearisome. A grant of liberties had been made by John in similar form to all the free men of England and their heirs. But the Magna Carta no more made England a corporation than the charters to Devon and Cornwall incorporated the men of those counties. The western shire may by its position and history have possessed and preserved an unusual degree of exclusive unity. There seems to have been a common seal belonging to the county of Devon.4 The county also was capable of being indicted, although it was doubtful how damages could be recovered from it.5 “Among the several qualities which belong to corporations,” says Lord Kenyon, C. J., in 1788, “one is, that they may sue and be sued: that puts them, then, in contradistinction to other persons. I do not say that the inhabitants of a county or a hundred may not be incorporated to some purposes, as if the king were to grant lands to them, rendering rent, like the grant to the good men of Islington town. But where an action is brought against a corporation for damages, those damages are not to be recovered against the corporators in their individual capacity, but out of their corporate estate: but if the county is to be considered as a corporation, there is no corporate fund out of which satisfaction is to be made.”1 The county therefore, though an organised collective body with group liability, failed to obtain a corporate existence apart from that of the several inhabitants.
That appearance of corporateness which grew up in the English boroughs was a native English product. However Italian may have been the principles which came to govern the corporation at the end of the Middle Ages, it is doubtful whether there was anything Roman about the earliest English municipalities, except perhaps, here and there, the fortifications. The connection with Rome which was afterwards so well maintained in the ecclesiastical houses, had been broken in the towns. The thread of Roman influence in England had been snapped when the Romans retired and left the country to relapse into barbarism.
From that barbarism and lawlessness there emerged at length the true germ of municipal life. It was the burh, the strong place upon a hill, the rallying-point and shelter for the country-side. At first it was neither large, nor populous, nor well-built. It was just such a stockade as any man might make wherewith to enclose and protect his house. But it protected a group; and it was the interest and duty of the group to establish and maintain the defences. Not only must each man help to build and repair the walls, but he must also help to maintain some kind of rough discipline within them. There must be no burh-bryce,2 no breach of the burh or borough.3 The burh is sacrosanct.1 Moreover, the greater the burh, the more sacred the peace therein.2
Then, because there was peace in the borough, men carried on their buying and selling therein. There were witnesses: there were all the materials for doing right between honest men and thieves, and generally for hearing the case of any who had a grievance. If it was well to have witnesses for the sale of cattle and goods, it was not well to have sales of cattle and goods where there were no witnesses. Consequently men sought the site of the burh because it was a military and a marketing centre, a meeting-place, and a place for obtaining justice.3
The military needs of the country-side in time became less pressing, but otherwise the burh or borough grew in importance. After the Norman Conquest the town was not protected by a common fort, but was dominated by a castle.4 The institution of these castles was typical of Norman rule. The king assumed a new position as the overlord of each of his subjects: henceforward a universal “king’s peace” was to be substituted for the various local “peaces.”
But in spite of the pressure of Norman rule the rise of the boroughs was not for long impeded. Open rebellion had been powerless to regain England for the English, but in the towns the innate Saxon spirit of self-government asserted itself. Commerce grew: population increased: the position of the old burghal shire-towns was strengthened. Their importance began, however, to be challenged by upstarts, enfranchised manors, and other vills which enjoyed religious or commercial advantages. Still it was possible to distinguish the old borough from its newer rivals by a test which was not theoretic, but practical. It was not a difference arising out of the presence or absence of royal gifts of franchise: it was a difference arising out of facts within men’s knowledge. Local representation was required when the judges were sent round the country on circuit. The vill sent a reeve and four men to attend the justices in eyre: the borough sent twelve men. There was an unmistakable distinction of fact.1 A town either did, or did not, send twelve men. The distinction was perpetuated in two ways. In the first place it was important for the governors of the county. By the rough and ready methods of direct taxation in the twelfth century, “cities and boroughs”2 were charged with the payment of certain gifts and “aids.” The Exchequer was not likely to allow uncertainty to exist with regard to the towns which owed the tax. Secondly, the distinction was an important one for the governed, when the parliamentary system was created in the time of Edward I. For the first great representative council3 writs were directed to the sheriffs of certain counties and to certain boroughs and cities, commanding the recipient to choose knights, burgesses, and citizens to attend.4 The borough contributed its two burgesses if it had previously sent its twelve men to attend the justices in eyre. There was thus less doubt whether a town was or was not a borough.
The communalism of the early village was not reproduced in the early borough. This was not because there was lacking among burgesses the identity of agricultural interest which existed amongst villagers. On the contrary there was a strong pastoral element in the early borough. But the burgesses, when once they ceased to form units in the scheme of national and local defence were not knit together by reason of land tenure. Trade and the borough organisation upset the old agrarian scheme. The borough had to fight its own battle against trade rivals at a time when commercial success was a matter of trade monopoly. It had to struggle for itself to obtain its monopoly, to win its charter, to gain its right to manage itself and farm its own tolls. It was these common aspirations and interests which bound the burgesses together. They were not united as were the villagers, by reason of their being tenants of one lord.
The burgesses indeed were not tenants of one lord. Their tenure was heterogeneous.1 Homogeneity vanished before the new influences of burghal life.2 And because there was less homogeneity in burghal tenure, the lord had the less power in the borough. The burgesses dealt with the king direct: they excluded the mesne lords. The king exacted his tolls and taxes from the townsmen, and they tried to win from him the recognition of their rights of meeting and market. They strove to eliminate the middleman. They offered a fixed round sum as the farm of their borough, and desired to assess for themselves in their own manner the relative liabilities of burgesses to make up that sum. Thus the payment of the firma burgi by the community was the beginning of municipal self-government, and a step—though not the final step—in the direction of corporateness.
Some important results follow. Burgesses did not hold land as an individual held it. They broke loose from the feudal system. They evaded, when they could, the discharge of feudal dues. The lord of the land lost his near interest in it: he lost his escheat: he became remote: he sank back into the position of “the man with a rent-charge.”3 The men of the borough contended stoutly for the authority of the burghal courts, and for the validity of alleged burghal customs. One such custom concerning burgage tenure4 as upheld in the borough court permitted men to bequeath their houses by will, as “quasi-chattels.”5
The borough had considerable advantages to lose. These advantages were intimately concerned with the prosperity of the community, and so were highly prized. They were for the most part of spontaneous growth, not acquired by formal grant. The king had not yet formulated in full his royal right to confer upon, and withhold from, groups of townsmen various privileges which might be made a source of profit to the royal purse. Hitherto these privileges had been claimed by the burghers without offence and exercised without restriction.1 But the day came when the kingly prerogative was asserted in order to uphold the kingly dignity and fill the kingly pocket. It was to the interest of the Crown that liberty enjoyed by the subject should be considered a diminution of the power enjoyed by the king; consequently it was a gracious concession on the part of the king, which the subject should acknowledge with gratitude and even payment. However strong the natural growth of these burghal privileges, the borough was not safe in its possession of them until they were recognised and confirmed by the authority of the Crown. Natural prescriptive right had to be supplemented or supplanted by royal authorisation.2 The burgesses wished to be secure in their title to the franchises which they claimed. There were kings like Richard I who were perfectly willing, for a consideration, to meet the wishes of the burgesses.1
Every instance of a charter granted to a town was an opportunity for the Crown to define, to amplify, or to complicate that formula in which earlier royal concessions to towns had been made. Every time the king or the royal advisers framed a charter, he or they had to consider what he was conceding and to whom. Was he making a grant merely to the citizens of a town, or to them and their heirs, or to them and their successors? Who was to have the benefit of the grant when the citizens died? Would the citizens as a body ever die?
It was probably a long while before the communitas of townsmen was regarded as anything more than a mere aggregate of individuals. But the more the townsmen acted and were treated as a unit, the more natural it would seem to treat them as a collective person. To regard the group as a single person would be impossible until the group will was regarded as a single will.
Sometimes men are unanimous. In that case plurality naturally becomes unity: the many think and act “like one man.” But more often there is dissension: then unity becomes impossible—or possible only by some kind of fiction. Suppose a score of men cry “No,” while 80 cry “Aye”: to our modern minds it is plain that the “Ayes” have it. But the whole hundred men cannot thereby be said to cry “Aye,” unless men are content to ignore the voice of the minority and agree to record a fictitious unanimity. This recognition of the majority as equivalent to the whole, although so readily allowed to-day,2 is not an early principle. To count polls, to “give one man one vote,” to make a man count for one and no more, must have seemed in the Middle Ages unnatural and inconvenient. The opinion of the sage was thereby made of no greater weight than the opinion of the fool.
Italy and the Church helped to establish the authority of the major pars.1 It was conceded that the will of the universitas could be expressed by the major pars of members properly present at a proper meeting, if the major pars were also the sanior pars. Henceforward the shout of the major et sanior pars was allowed to drown the shout of the minority. When a minority began at length to be considered as bound by the vote of the majority, the communitas of the whole body began to show a truer corporateness.2
Two other influences were at work to unify and personify the group, the common seal,3 and the common name. The use of a seal provided a tangible token of burghal unity and unanimity. The seal was an authoritative sign which many men who could not read could recognise. The formal affixing of the common seal sanctified the expression of the common will and accentuated the singleness of the collective person. This accentuation was deepened by the existence of a common name.4 The possession of a common seal and a common name tended to mark off the borough community from other bodies which consisted merely of co-owners or joint tenants. The names of nascent corporations remained, however, suggestive of collective rather than single personality. The borough of X and the university of Y are legally described as the Mayor, Aldermen, and Burgesses of X, and the Chancellor, Masters, and Scholars of Y.5 The collective character of such corporate names show how hardly the personality of the group was to be distinguished from the sum of the members thereof. Nevertheless the facts were being prepared for the theory.
There is nothing surprising in the idea that a group of men is capable of collective action. Instances of early group-action might be multiplied almost indefinitely. There was, for example, group-accusation in the process of frank-pledge: in the village there was group-liability, in the manor group-payment. When the group-action becomes organised, the group is readily conceived to act as a person.1 One remarkable case of village personality is to be found in the Select Pleas in the Manorial Courts:2
“Ad istam curiam venit tota communitas villanorum de Bristwalton, et de sua mera et spontanea voluntate sursum reddidit domino totum jus et clamium quod idem villani habere clamabant.”
The village of Brightwaltham appears in Court as an organised community, a definite party to an action. By virtue of a quasi-juridical personality it enters into a formal agreement with the lord of the manor. It resigns its claim to the wood of Hemele, and in return gets rid of the lord’s claim to the wood of Trendale. If the feebly organised village had something of juristic personality, the strongly organised borough was likely to possess more. It is therefore the less surprising to find London town spoken of in a Yearbook of Edward III as a “Cominaltie come un singuler person qe puit aver action per nosme de comon come un sole person averoit.”3
If the borough could be thought of as a person, the time was now at hand when it could be considered a perpetual person.4 Mortmain legislation had hitherto been confined to ecclesiastical associations, but towards the end of the fourteenth century a change took place. It was realised that it was inconsistent and inconvenient that citizen groups should be exempted from the laws which were applied to religious groups. Accordingly the Second Statute of Mortmain struck at municipal bodies, because “mayors, bailiffs, and commons of cities, boroughs, and others which have offices perpetual” were “as perpetual as men of religion.”1 Thus this statute was not the least powerful of those forces which were co-ordinating the citizen body with the religious house, and preparing in England the way for the more refined Italian doctrines of corporateness.
To call a borough a perpetual person was to emphasise the distinction between it and its mortal members. To bring the borough into line with the religious houses was to subject it to the exact and polished notions of the Canonists. Side by side the members of the borough and of the religious house had to seek the royal licence to evade the mortmain restrictions.2
The charters which the boroughs were now anxious to obtain might be expected to show traces of the canonistic ideas. They might be expected to answer for us the question at what point the borough became a true corporation. But for two reasons the question is not to be answered so easily. In the first place the words and the thoughts underlying the words are vague and defy interpretation. The corporateness of a borough possessing a charter dated from this period is not proved merely by the presence therein of words which in later times implied corporateness.3 Incorporation was a thing which the burgesses of this period neither wanted nor realised that they lacked. “Nobody, no body wanted it,” says Professor Maitland.1 They wanted to be assured of their privileges to trade, hold land, and the like, but they probably had no desire for, and small knowledge of, corporateness in the abstract. There was in the boroughs a strong indigenous stock of what one may perhaps call “concrete corporateness,” upon which the alien growth of abstract corporateness was afterwards quietly and successfully grafted. In the second place the charters of this period are not decisive as to the corporateness of the boroughs, because at this point the confusion between borough and gild can no longer be ignored.
Although closely connected and frequently identified, gild and borough were distinct. Of the many forms of gild the gild merchant now concerns us most. It is sufficiently important to require some preliminary remarks.
Trade in the Roman world was largely in the hands of collegia,2 but it seems probable that the English gild merchant was not the survival of any Roman institution.3 Whether it was of exclusively English origin,4 or whether it came from the Continent,5 it appears in England soon after the Conquest, if not earlier, as a widely-spread trade organisation. In those days the towns were the trading units. Commerce was municipal and intermunicipal.1 The gild merchant, along with the several craft-gilds, supervised the conditions of trade and labour. Thus were regulated processes and prices, materials and tools, working-hours and wages, the number of apprentices and the nature of their duties. Thus also were punished dishonest workmanship, the use of bad stuff, or the use of short weights and measures. Consequently the traders of the town were united in the protection and pursuance of their common trade interests. Just as men met as Christians for mutual comfort and spiritual benefit, so they met as members of a gild for mutual protection and earthly benefit. The gild excluded the alien: it fostered a strong but narrow municipal monopoly. It was consequently a valuable asset of the town, and one for which it was most important to obtain royal recognition. It was largely identified with the town, its members with the townsmen, its system of government with the municipal system of government. This considerable identity has interest for those who are inquiring at what moment the borough became a corporation. For out of this identity arose the theory that the grant of gilda mercatoria to a borough was a grant of corporateness.2 According to this view the gild merchant was the corporate realisation of the borough: the gild machinery was transferred to the borough: the gild-head became the town-head: the gild-alderman became the town-alderman, the gild-hall the town-hall.3 The supporters of this view point out that the important members of the gild were the same men as the important members of the borough:1 that the gild organisation supplanted the old borough moot,2 and therefore it was by way of the gild that the borough received from the Crown the privilege of incorporation.3
This theory, after having won wide acceptance,4 has been strenuously opposed by Mr. Gross.5 It must be admitted that in a few cases gild and borough may have become fused, and that in general the spirit and organisation of the gild-community may have affected the development of the borough-community. But if we find that both gild and borough are described by the word “communitas,” we must remember that that word was capable of both a refined and a natural meaning. It may well be that the gild-community was as concrete as the truly corporate borough-community is abstract.
No general inference can be drawn with safety from the history of any single town,—least of all from that of London. Apparently at Bristol and at Nottingham the hall of the gild existed side by side with the burghal moot-hall.6 If it were true to say that the importance of the burghal moot declined while that of the gild increased, it might still be untrue to say that the officials and governors of the gild became the officials and governors of the borough.
The fact that the liber burgus and the gilda mercatoria were occasionally granted separately seems to show that the two were regarded as distinct.1 The mayor and burgesses of Macclesfield, in answer to the Earl of Chester in the twenty-fourth of Edward III, claim (a) liber burgus, and (b) gild, not only as distinct things, but for distinct reasons.2
But although gild and borough were not identical, they were sufficiently similar to deceive Coke.
“Et fuit bien observe,” he reported, “que dauncient temps inhabitants ou Burgesses d’un ville ou Burgh fuerent incorporat quant le Roy graunt a eux daver Guildam Mercatoriam.”3
This dictum was faithfully followed in 1705 by Holt, C. J., in the case of the Mayor of Winton v. Wilks. The defendant was accused of having carried on a trade without being a member of the gild-merchant. “The Court was moved in arrest of judgment, and the Judges observed that when in ancient times the king granted to the inhabitants of a villa or borough to have Gildam Mercatoriam, they were by that incorporated, but what it signified in this declaration nobody knew.”4
This opinion of Coke appears untenable. To suppose that the possession of any one of the incidents of corporateness necessarily implied the existence of a corporation is inaccurate. A similar error was cherished with regard to the possession of a Firma Burgi.5 The possession of this, one of the franchises of a fully incorporated borough, was from the time of Edward IV considered to imply municipal incorporation. The rights of having a mayor, of being toll-free, and of using a corporate name,6 appear in like manner to have been considered to imply the legal incorporation of a borough, although in fact the possession of such rights might leave a borough still far from true corporateness.
The existence of burghal privileges and burghal property raised the question in whom such privileges and property vested. Gradually men had ceased in this connection to speak of the “burgesses and their heirs,” and spoke rather of the “burgesses and their successors.”1 In many towns there was a steady municipal income derived from various sources.2 It was something to be able to distribute this, and perhaps to share in the distribution. It was something to be a burgess. In consequence citizenship became restricted. Mere geographical connection with the community was not necessarily a sufficient qualification. A town would contain many men who were not freemen of it. The freedom of a city was heritable, though not strictly hereditary, because a man and his son might both be freemen simultaneously.3 Freedom was most usually obtained by transmission from father to eldest son or from a master to his apprentice: in other words, in these two cases less restrictions, and perhaps less entrance-fees, were imposed upon the aspirant to citizenship.4
To restrict the numbers and to close up the ranks of the burgesses was to knit them together as members of an organisation now highly complex and ready for the new foreign theory of corporateness. Much of this effect is due to the influence of the gild. The gild-merchant may not have included all the burgesses, and may not have excluded all the non-burgesses, but it existed in order to work the common borough trade to the best common advantage. It may not have been the mainspring of burghal corporateness, it may not have provided the borough with a ready-made system of government, but it undoubtedly taught the borough some practical lessons. For the gild was the grand example of voluntary association.1 In an age when men were “drilled and regimented into communities in order that the State might be strong and the land might have peace,”2 it arose spontaneously3 and bound men together by ties of social, religious, and commercial support. The feudal system had supported the theory that all power and all right came from above, and was entrusted by God to Pope and Emperor, to be by them in turn transmitted down through a series of chosen agents. But men felt that they had power and rights within themselves, underived from such sources as these: this feeling, finding expression in the principle of voluntary association, triumphed over feudalism and theocratism.4
This form of voluntary association had one striking feature. The associates bound themselves by oath.5 The gildsman swore in a certain formula, promised to obey common rules and to support the gild,6 paid his entrance-fee and thus became a member. This method of making membership personal and basing it upon a definite ceremony, spread to the borough, where citizenship could no longer satisfactorily be defined according to the quantity of land held or the quality of the tenure.
The adoption of this ceremony and oath by the borough had considerable consequences. Any ill-dealing between fellow-freemen was a violation of that oath, which might be punished by the body of freemen or their representatives. It might or might not be breach of law: it was certainly breach of contract: it was treason to the community. Moreover the man who took an oath on entering the citizenship found himself resembling the monk who took vows on entering a religious house.1 This was one more power at work to bring the borough into line with the more technically corporate ecclesiastical body.
Artificial membership tended to make an artificial community. The time was coming when the English borough was fit to receive the Italian doctrine,—when its personality might be deemed a persona ficta.2
EARLY FORMS OF PARTNERSHIP1
DURING the Middle Ages contracts of partnership were common, and at their close companies with freely alienable shares had come into existence. In the early centuries the most common form of partnership was the “commenda.” This was a partnership in which one of the parties supplied the capital either in the shape of money or goods, without personally taking an active part in the operations of the society, while the other party supplied none or only a smaller fraction of the capital and conducted the actual trade of the association. This form of partnership was especially used in maritime trade and was often confined to single ventures. Its popularity was due to the fact that it enabled the capitalist to turn his money to good account without violating the canonical laws against usury, and the small merchant or shipper to secure credit and to transfer the risk of the venture to the capitalist. The nature of the contract will best be shown by quoting one or two examples of the vast number of these contracts that have been preserved.
The following is a Marseilles contract of the year 1210:
“Notum sit cunctis quod ego Bonetus Pellicerius confiteor et recognosco me habuisse et recepisse in comanda, a te Stephano de Mandoil et a te Bernardo Baldo, xxv l. regalium coronatorum . . . quas ego portabo ad laborandum in hoc itinere Bogie, is nave de Estella, vel ubicumque navis ierit causa negotiandi, ad vestrum proficuum et meum, ad fortunam dei et ad usum maris, et totum lucrum et capitale convenio et promitto reducere in potestatem vestri et vestrorum fideliter, et veritatem inde vobis dicam, et ita hoc me observaturum in mea bona fide per stipulationem promitto, et in omni lucro quod Deus ibi dederit, debeo habere et accipere quartum denarium.”1
Such contracts were not rare in Italy in the 12th century and the contracts are to the same intent as those of Marseilles in the 13th century. “March 1155. Ego Petrus de Tolosi profiteor me accepisse a te Ottone Bono libras centum viginti septem quas debeo portare laboratum Salernum vel ex hinc apud Siceliam, et de proficuo quod ibi deus dederit debeo habere quartam et reditum debeo mittere in tua potestate.”2
Often when both parties to the contract contributed to the capital of the association the partnership was termed “collegantia,” or “societas,” to distinguish it from the more common form of commenda in which the commendator alone supplied the funds.
“Bonus Johannes Malfuastus et Bonus Senior Rubeus contraxerunt societatem, in quam Bonus Johannes libras 34 et Bonus Senior libras 16 contulit. Hanc societatem portare debet Alexandriam laboratum nominatus Bonus Senior et inde Januam venire debet. Capitali extracto proficuum et persone (?) per medium. Ultra confessus est nominatus Bonus Senior quod portat de rebus nominati Boni Johannis libr. 20 sol. 13 de quibus debet habere quartam proficui—. Juravit insuper ipse Bonus Senior quod supradictam societatem et commendacionem diligenter salvabit et promovebit societatem ad proficuum sui et Boni johannis et commendacionem ad proficuum ipsius Boni johannis et quod societatem omnem et ipsam commendacionem et proficuum in potestatem reducet ipsius Boni Johannis.”3
But whether the commendator alone or both parties contributed to the capital, the association remained essentially of the same character. The commendator in both cases was a kind of sleeping partner, and it was left to the “tractor” to carry out all the necessary operations. Though the partnership was generally formed for the purpose of a definite speculation, it was also formed for an indefinite series of commercial transactions, or for as indefinite or sometimes a definite time, which was occasionally as long as 10 years.1
As a rule the commendator who supplied the capital took the risk of the transaction; if the goods were lost he could not recover the amount he had advanced, provided that the contract contained the usual clause “ad risicum et fortunam Dei, maris et gentium,” or its equivalent. The usual share in the profits of a tractator who brought no capital into the partnership was a quarter, while in the case where he contributed to the general fund, his share of the profits amounted to a half. It is hard to tell whether the “tractator” in early times always traded in his own name, though there is no doubt that in later times he did.2 Pertile holds the view that originally the tractator was regarded as a mere factor of the commendator who was responsible for the acts of the tractator, but that gradually in the course of time the principle was established that he was only responsible to the amount of the capital which he had advanced.3 In Florence this principle was definitely established by statute in 1408. In the medieval commenda was represented both the dormant partner and the principle of limited liability of modern times. The commenda was not confined to England:4 it existed during the Middle Ages in Germany and Scandinavia.5 In cases where there were several commendators who entrusted their capital to one or more tractators, the latter began to assume a more independent position towards commendators. Contracting in their own name the managers were responsible for the debts of the association, while the commendators were freed, in Florence as early as 1408, from all liability beyond the amount of their quota. This type of commenda was a natural development of the simple original type in which there were but two persons involved,—a single commendator who advanced the capital to a single tractator; but it was an important development, and in the 16th century it was regulated in Italy by several city statutes and in the following century in France by regulation.1 Thus regulated the society contained both members with limited liability and members with unlimited liability, and it was the latter that controlled the administration of the society. The older and simpler form of commenda, however, existed side by side with the newer and more complex type. Of the newer type the modern “Société en commandite” is the historical descendant and it is characterised by the same essential features, the existence of two classes of members, the one with a responsibility limited to the amount of the capital they have contributed, and the other with an unlimited liability for the debts of the society, the administration of which lies solely in their hands.2 On the other hand the commendator of the older and simple type of commenda has his counterpart in the dormant partner of modern commercial law.
But side by side with the commenda there existed throughout the Middle Ages a closer kind of partnership in which the partners were normally coordinate members of the association with the same privileges and responsibilities. The usual expression for this type of society was “compagnia” or “societas,” and the firm was generally designated by the name of one of its members with the addition of the phrase “et socii,” or the like. It became an essential feature of this form of partnership that the partners were all of them responsible individually for the debts of the firm.3 At no time in Italy was the power of partners to bind by contract their fellow partners in practice denied.1 The principle of direct representation was thus admitted, and Baldo writing in the 14th century declared “ex consuetudine mercatorum unus socius scribit nomen alterius.”2 Baldo however adds that this was “abusio.” This was an important advance upon the principles of both Roman and old Germanic law, neither of which recognised sufficiently the principle of direct representation. “All this view of the law,” says Kohler writing of the principle of representation, “appears altogether artificial and cannot well appeal to primitive man: he cannot understand a transaction (based) upon the will of another; even a developed law like Roman law has only developed ‘representation’ very imperfectly and German law long resisted it.”3 Medieval merchants and mercantile usage recognised the principle of representation; they recognised it not only in the right of one partner to make contracts binding upon the other partners of a firm, they also recognised it in the medieval bills of exchange with their clauses to order or bearer.
As the names of all partners did not appear4 in the name of the firm, but were simply referred to generally in the phrase “et socii” or some equivalent expression, it became important to determine who were to be legally regarded as members of the firm. In early Italian statutes actual common trading of the persons concerned, or general notoriety, sufficed to prove the partnership: “et intellegantur socii qui in eadem statione vel negotiatione morantur vel mercantur ad invicem.”1 In doubtful cases the books of the firm were consulted.2 But general notoriety and the books of the firm were not found sufficient either to protect the general public against partners who denied the partnership altogether or who asserted that the partnership had been dissolved, or to protect merchants from a general liability for all the debts of a trader with whom they occasionally combined for the purpose of a common speculation. Dissolution of partnerships was to be valid only if effected “per instrumentum publicum.” “If any one practising in the Calimala craft,” says a Florentine gild statute of 1301, “or having a share in any ‘societas’ of that craft has renounced or shall renounce it in the future, such renunciation shall not be valid nor be admitted by the consuls, unless he shall show that he withdrew from that firm by means of a public document, and the consuls shall have that document published throughout the whole craft.” Registration of partners became usual; from the 14th century onwards such registers were kept not merely by the gilds but by the city authorities; and the registration required, as a rule, “the direct intervention either personally or by special procuration of all the members of the firm.”3
It has been stated that one partner could represent the rest and make contracts binding upon the whole firm, and that this was an advance upon the principles of Roman and Germanic law, which only recognised representation to a limited degree. But though a single partner could thus represent the firm, originally it was as a rule only in virtue of special procuration that he was privileged so to do. In the medieval contracts of partnership the partners often gave one another by procuration the right to represent and bind the firm. In the absence of such clauses in the contract creditors of the firm for a debt contracted by an individual partner could in some places only make good their claim against the firm as a whole, if the debt had been recognised as a debt of the firm, as by entry in the firm’s book, or employment of the money or goods for the common purposes of the firm. Simply in his capacity as partner a merchant had not everywhere in the early centuries of the Middle Ages a right to bind his copartners. “Whoever in the city or district of Florence,” declares a Florence gild regulation of the year 1236, “has sold cloth or other things pertaining to trade to any one of this gild cannot seek nor sue for the money or price of the sale from any of the partners of the buyer, or from any one of his firm, unless the money shall be found written in the books of the buyer’s firm as payable for the price of that sale.”1 Similarly the gild statute of Verona for the year 1318 required the tacit consent of the other partners or an express promise on their part to pay—“nec praejudicet etiam stando in statione et essendo socius palam; dummodo non esset praesens cum socio ad accipiendam mercandiam et non promitteret de solvendo eam.”
As late as the 15th century the jurist Alexander Tartagnus denies the responsibility of the other partners, unless the contract had been made with full powers “nomine societatis.”2 Slowly however the principle gained ground that a partner had as partner the right to make contracts binding upon his firm. In all probability this change was due to the frequency with which the individual partner was entrusted with this power by special procuration. Thus in one of the Marseilles documents of the 13th century which have been already referred to, two partners concede full powers to the third. “Nos Dietavivo Alberto et Guidaloto Guidi, Senenses facimus, constituimus, ordinamus, Bellinchonum Charrenconi, consocium nostrum, absentem, nostrum certum et generalem procuratorem in omnibus nostris negotiis peragendis, . . . promittentes nos ratum perpetuo habitaturos quicquid cum eo vel per eum actum fuerit in praemissis, sub obligacione omnium bonorum meorum praesentium et futurorum.”1 Such procurations were exceedingly common,2 and the great Calimala Gild of Florence went so far as to instruct (1301) all its members when they sent any one abroad to transact business to provide them with a special or general procuration. The result was that in actual practice the partner did have power to bind the firm, and that gradually this power was regarded as a matter of course. During the 14th and 15th centuries numerous Italian statutes recognised the responsibility of the other partners for the debts and contracts made by an individual member of the firm. But both the doctrine of the great civil jurists and the decisions of isolated commercial courts were long opposed to this new view of the position of the partner. Thus the decisions of the “Rota of Genoa” only go so far as to say that whatever is written by one of them having the “facultas” of using the name of the firm is said to be written by the firm itself, while another decision declares most plainly that such “facultas” is not to be taken as a matter of course. By the 17th century however the power of an individual partner, though without special procuration, to act in the name of his firm was admitted by the civil jurists.3 The unlimited liability of the partner for the debts of the firm was, like the right of the partner as partner to represent the firm, of gradual growth, and was not in the early centuries of the Middle Ages universally enforced by the law.4 In medieval contracts unlimited liability was indeed often stipulated and was in some places a maxim of the law: in the fairs of Champagne, for example, the unlimited responsibility of partners was under certain conditions expressly recognised; the “usage of the fairs” declared that a partner “oblige tous leurs biens (i. e. the partners) pour cause de l’administration qu’il a et qu’il semble avoir, et plus, se aulcun des compaignons se boute en franchise ou destourne ses biens ou les biens de sa compagnye, il est oblige et tout li autre compaignon qui paravant cette fuite ou tel destournement des biens n’estoient obligez en corps et en biens par la coustume, stille et usaige des foires notoires.”1 It was not however till towards the close of the 16th century that the solidarity of partners was in Italy generally recognised. “Only gradually and without the support of positive law the liability of every partner ‘in solidum’ came through mercantile usage to be enforced in statutes and judicial decisions. This liability was repeatedly recognised in the decisions of Genoa. Since that time it was never a matter of doubt,”2 and in the 17th century the jurist Ansaldus who, as auditor of the Roman Rota, must have had a thorough acquaintance with judicial decisions in commercial cases, recognised this unlimited liability and declared that in the first place the creditor had recourse to the capital of the firm, and only in the second place could he avail himself of the unlimited liability of the individual partner.3
The commenda and the societas had an independent origin and an independent development. Originally the commenda was a purely speculative enterprise, confined mainly at first to maritime trade in which one partner found all or most of the capital and the other traded in his own name. The societas on the other hand had its root in the more permanent association of the family or of persons who had full confidence in each other for the purpose of carrying on, in common, industrial and commercial enterprises in city or town. Both extended the scope of their application, commendas were formed for inland trade and partnerships of the collective type for maritime commerce. Each however developed on its own lines. In the commenda, where from the first the capitalist must have as a rule remained unknown to the merchants who traded with the active partner, the limited liability of the capitalist and the unlimited liability of the active partner were before long firmly established, while in the open “societas” the right of the individual partner to represent and bind the firm on the one hand, and on the other his unlimited liability for its debts, were finally recognised. Both types, modified in points of detail, have passed into modern commercial life. If the commenda has developed into the “Société en commandite,” the “societas” has its historical counterpart in the modern “Société en nom collectif” and the Offene Gesellschaft.
A third type of partnership, that of joint-stock companies with the capital in the shape of freely alienable shares, with a liability limited to the amount of capital represented by the share, and with an administrative governing body composed of shareholders in which the majority decided, was in process of formation during the Middle Ages.
To the origin of this type of partnership many causes contributed, but the decisive cause was the growth of colonial enterprises in Italy in the 15th century, and in Holland, France and England in the 16th and 17th centuries. A recent German writer1 has attributed a great influence upon the birth and development of these companies to a peculiar form of partnership with limited liability that in shipping enterprises was common both in Northern and Southern Europe during the earlier part of the Middle Ages. At Amalfi, for example, in the 11th century the owners, the captain, and even the common sailors all had a share in the profits of the voyage and formed an association whose liability was strictly limited.2 But it can hardly be said that the adoption of this peculiar form of partnership had a great influence upon the formation of joint-stock enterprises. No doubt it offered an example of a partnership with limited liability, but so did the far more common commenda; and the essence of a joint-stock company does not consist in the principle of limited responsibility, but rather in the prolongation of the corporate existence and organisation of the company beyond the life of its members and in the free negotiability of the shares.
Of greater influence were the public loans1 raised by Italian cities during the 13th and following centuries. The loans were divided into shares (luoghi) and the names of the owners were registered in special books. The shares not only passed to the heirs in case of the owner’s death, but could be freely bought and sold; and as negotiable shares, even though they cannot in any sense be regarded as shares in a commercial speculation, they showed the keen commercial mind of the Italian an expedient that might be adopted for raising capital for commercial as well as for military purposes. It was in Genoa that the first joint-stock companies arose. To cover the cost of the conquest of Chios and Phocaea (1346) a loan was raised by the Genoan state and as usual was divided into shares of 100 lires, and the shareholders were given the “dominium utile” of the conquered lands. This Colonial company, incorporated with the bank of St. George in 1513, continued to exploit the resources of the two islands until their conquest by the Turks in the 16th century. Far more important however was the founding of the great bank of St. George in 1407 when the various state loans were consolidated into a single state debt. As security for the interest the city granted important privileges to the holders of the new consolidated stock, which was divided into shares of 100 lires. The stockholders were granted the right (1408) to carry on banking business, and especially after 1453 the administration and exploitation of important Genoan colonies passed into their hands. The creditors of the Genoan state had become the shareholders of a great colonial company which ultimately governed and administered Corsica, Kaffa and the greater part of the foreign dominions of Genoa.2
Colonial expansion in England, France and Holland led, though much later, to the creation of companies similar to that of Genoa. The Compagnie des Iles d’Amérique, which seems to be the earliest example in France, was created in 1626 and was rapidly followed by others of the same type.1 The Dutch East India Company (1602) was but little earlier. In England the East India Company2 received a royal charter in the opening year of the 17th century. At first the company could hardly be considered as a joint-stock company; for in the early years of its history the voyages were separate and not necessarily permanent ventures of the subscribers, who contributed varying amounts to the capital required for the expedition and received a proportionate share of the proceeds when the expedition returned. A shareholder in one of the early expeditions might or might not be a shareholder in the next. In 1613 the first so-called joint-stock was subscribed; but the term is misleading; it was not a subscription of permanent capital. As late as the middle of the 17th century subscribers wished to carry on separate trade in ships of their own, but the company protested and in 1654 a decision of the council of state was given “in favour of joint-stock management and exclusive trading.”
It would seem that joint-stock companies took their rise owing to colonial expansion in Italy at the close of the Middle Ages, and had spread to Holland, France and England by the 17th century. The history of the development3 and of the gradual extension of this form of partnership from projects of colonisation to commercial undertakings of every kind and variety lies outside the scope of this essay. But it is interesting to note that that system of partnership that now controls most of the great commercial and industrial enterprises of modern life, that has popularised and democratised capital and enabled the savings of the people as a whole to be applied to commercial speculations, great and small, of every kind, and that has changed the whole nature of commercial finance, was in its origin the outcome of state necessities and of colonial expansion.
THE HISTORY OF THE LAW OF BUSINESS CORPORATIONS BEFORE 18001
THE most striking peculiarity found on first examination of the history of the law of business corporations is the fact that different kinds of corporations are treated without distinction, and, with few exceptions, as if the same rules were applicable to all alike. Subdivisions into special kinds are indeed made, but the classification is based on differences of fact rather than on differences in legal treatment. Thus, corporations are divided into sole and aggregate. Again, they are divided into ecclesiastical and lay, and lay corporations are again divided into eleemosynary and civil. But the division having been made, the older authors3 proceed to treat them all together, now and then recording some minor peculiarity of a corporation sole or of an ecclesiastical corporation with one member capable.
Municipal and business corporations, so unlike according to modern ideas, are classed together as civil corporations, and treated together along with the rest. Yet the East India Company was chartered in 1600, and other trading companies had been chartered even earlier, and between 1600 and 1800 numerous corporations were chartered, having for their objects, trade, fishing, mining, insurance, and other business purposes. To understand how it was that the law of business corporations was so connected with that of other corporations, and how it gradually became distinguished, it is necessary to understand how such corporations grew up, and in what way they were regarded when first they came into existence.
The general idea of a corporation, a fictitious legal person, distinct from the actual persons who compose it, is very old. Blackstone ascribes to Numa Pompilius the honor of originating the idea.1 Angell and Ames are of the opinion that it was known to the Greeks, and that the Romans borrowed it from them.2 Sir Henry Maine, however, shows that primitive society was regarded by its members as made up of corporate bodies, that the units “were not individuals but groups of men united by the reality or the fiction of blood relationship,” and that the family, clan, tribe, were recognized as distinct entities of society before individuals were.3 It is not surprising, therefore, to find in the Roman law the conception of corporate unity early developed. Savigny, in whose treatise4 may be found the best connected account of corporations in the Roman law, states that villages, towns, and colonies were the earliest. “But once established definitely for dependent towns, the institution of the legal person was extended little by little to cases for which one would hardly have thought of introducing it. Thus, it was applied to the old brotherhoods of priests and of artisans; then, by way of abstraction, to the State, which, under the name of fiscus, was treated as a person and placed within the jurisdiction of the court. Finally, to subjects of a purely ideal nature, such as gods and temples.” Savigny then enumerates the different kinds of corporations among the Romans. The present subject is concerned with but one of these,—the business associations. “To this class belong the old corporations of artisans who always continued to exist, and of whom some, the blacksmiths, for example, had particular privileges; also new corporations, such as the bakers of Rome, and the boatmen at Rome and in the provinces. Their interests were of the same nature, and this served as the basis of their association, but each one worked, as to-day, on his own account.”
“There were also business enterprises carried on in common and under the form of legal persons. They were ordinarily called societates. Their nature was, in general, purely contractual; they incurred obligations, and they were dissolved by the will as well as by the death of a single member. Some of them obtained the right of being a corporation, keeping always, however, the name of societates. Such were the associations for working mines, salt-works, and for collecting taxes.”1
This latter kind of corporation seems never to have become sufficiently numerous or important to exert a definite influence on the law. Perhaps the Romans were not a sufficiently commercial people to develop the uses of business corporations. In common with other associations the authorization of the supreme power of the State was needed to constitute them legal persons, though this might be given by tacit recognition;2 and the assent of the sovereign was equally necessary for dissolution. Three members were requisite for the formation of a corporation, though not for its continued existence. The rights and duties of the fictitious person corresponded closely to those of an actual person, so far as the nature of the case admitted. It could hold and deal with property, enjoy usufructus, incur obligations, and compel its members to contribute to the payment of its debts, inherit by succession either testamentary or by patronage, and take a legacy. Whether it could commit a tort was a disputed question.
After the introduction of Christianity the church found numerous applications in its own organization for the doctrines which had been developed in regard to corporations, and through the church and its officials these doctrines strongly influenced the law of England, where they were applied to the existing associations.
The earliest corporate associations in England seem to have been peace-guilds, the members of which were pledged to stand by each other for mutual protection.1 Such brother-hoods would naturally be formed by neighbors or by those exercising similar occupations. From the tendency to associate on account of proximity of residence were developed municipal corporations; from the tendency to associate on account of similarity of occupation the craft guilds grew. These two classes of corporations were the earliest regularly chartered lay corporations in England. Both of them had their counterparts in the Roman law.2 At first sight they do not seem to have much in common, but the ancient municipal corporation differed from its modern descendant. It was a real association, and membership could not be acquired simply by residing within the town limits. It exercised a minute supervision over the inhabitants,—among other things regulating trades. The guilds or companies did the same thing, only on a more restricted scale. They made by-laws governing their respective trades, which were not simply such regulations as a modern trade-union might make, since any one carrying on a trade, though not a member of the guild of that trade, was bound by its by-laws, so long as they were not opposed to the law of the land or to public policy as it was then conceived.3 In short, the guilds exercised a power similar to that exercised by the municipal corporations, and, indeed, so late as the time of Henry VI. guildated and incorporated were synonymous terms.4 Instead of having for its field all inhabitants of a district and local legislation of every character, the guild was confined to such inhabitants of the district as carried on a certain trade and to regulations suitable for that trade. So far as that trade was concerned the right of government belonged to the guild.
The first trades to become organized in this way were naturally the manual employments necessary to provide the community with the most fundamental necessities of civilized life. The weavers were the earliest. They received a charter from Henry II., “with all the freedom they had in the time of Henry I.” The goldsmiths were chartered in 1327, the mercers in 1373, the haberdashers in 1407, the fishmongers in 1433, the vintners in 1437, the merchant tailors in 1466.1
During the sixteenth century the growth of the commercial spirit, fostered by the recent discovery of the New World, the more thorough exploration of the Southern Atlantic and Indian Oceans, and the search for a North-west passage, led to the establishment and incorporation of companies of foreign adventurers, similar in all respects to the earlier guilds, except that their members were foreign instead of domestic traders. Among the earliest of these were the African Company, the Russia Company, and the Turkey Company.2 The last two were called “regulated companies;” that is, the members had a monopoly of the trade to Russia and to Turkey, but each member traded on his own account.
A more famous company was chartered by Queen Elizabeth in 1600, under the name of the Company of Merchants of London, trading to the East Indies.3 It had been found that the expense incident to fitting out ships for voyages, often taking several years for their completion, was too great to be borne easily by individual merchants, and it was one of the claims to favorable consideration which the East India Company put forward, that “noblemen, gentlemen, shopkeepers, widows, orphans, and all other subjects may be traders, and employ their capital in a joint stock.”1
Sums of various amounts were subscribed, and the profits were to be distributed in the same proportions. This joint-stock adventure was not, however, identical with the corporation. Members of the corporation were not necessarily subscribers to the joint stock, and any member could, if he liked, carry on private trade with the Indies,—a privilege belonging exclusively to members. By the charter, apprentices and sons of members were to be admitted to membership in the same way as was customary in the guilds.
The East India Company was, therefore, in its early days, like the other trading companies,—an association of a class of merchants to which was given the monopoly of carrying on a particular trade, and the right to make regulations in regard to it. Till 1614 the joint stock was subscribed for each voyage separately, and at the end of the voyage was redivided. After that, for many years, the joint stock was subscribed for a longer or shorter term of years, and at the end of each term the old stock was usually taken at a valuation by the new subscribers. Membership in the corporation, however, soon became merely a formal matter,—useless, except to those interested in the joint stock, especially as regulations were passed forbidding other members from engaging in private trading ventures to India. After 1692 no private trading of any kind was allowed except to the captains and seamen of the Company’s ships. The form, however, was still retained, and every purchaser of stock who was not a member of the Company was obliged to pay a fee of £5 for membership.
At this time (1692) there were but two other joint-stock companies of any importance in England,—the Royal African Company and the recently chartered2 Hudson’s Bay Company. The outline given above will serve to indicate their general nature and also to show how something like the modern joint-stock corporation grew out of the union of the ideas of association for the government of a particular trade by those who carried it on, and of combination of capital and mutual coöperation, suggested and made necessary by the great expense incident to carrying on trade with distant countries. But the corporation was far from being regarded as simply an organization for the more convenient prosecution of business. It was looked on as a public agency, to which had been confided the due regulation of foreign trade, just as the domestic trades were subject to the government of the guilds. In a little book, entitled “The Law of Corporations,” published anonymously in 1702,1 it is said: “The general intent and end of all civil incorporations is for better government, either general or special. The corporations for general government are those of cities and towns, mayor and citizens, mayor and burgesses, mayor and commonalty, etc. Special government is so called because it is remitted to the managers of particular things, as trade, charity, and the like, for government, whereof several companies and corporations for trade were erected, and several hospitals and houses for charity.”2
This idea that the object of a business corporation is the public one of managing and ordering the trade in which it is engaged, as well as the private one of profit for its members, may also be noticed in the charters granted to new corporations, especially in the recitals, and in the provisions usually found that the newly chartered company shall have the exclusive control of the trade intrusted to it.
At the end of the seventeenth century the advantages of corporate enterprises seem to have been realized, and acts of Parliament, authorizing the king to grant charters to various business associations, were more frequent. In 1692 the Company of Merchants of London trading to Greenland was incorporated;3 the act reciting the great importance of the Greenland trade, how it had fallen into the hands of other nations, and could only be regained by a greater undertaking than would be possible for a private individual, and the consequent necessity of a joint-stock company. In 1694 the Bank of England received its first charter.1 The act authorizing it was essentially a scheme to raise money for the government. Those who advanced money to the government were to receive a corresponding interest in the bank, the capital of which was to consist of the debt of the government. No other association of more than six persons was allowed to carry on a similar business.2 Charters were also granted about this time to the National Land Bank,3 the Royal Lustring Company,4 the Company of Mine Adventurers,5 the famous South Sea Company,6 the Royal Exchange and the London (Marine) Assurance Companies.7 In these charters also the public interest in having the undertaking prosecuted and the great expense incident thereto are mentioned. The capital of the South Sea Company, like that of the Bank, consisted of a debt due from the government on account of money loaned by private individuals.
The extravagant commercial speculations in joint-stock companies and the stock-jobbing in their shares which characterized the early part of the eighteenth century are well known. Anderson, in his “History of Commerce,”8 enumerates upwards of two hundred companies formed about the year 1720, for the prosecution of every kind of enterprise, including one for the “Insurance and Improvement of Children’s Fortunes,” and another for “Making Salt Water Fresh.” With very few exceptions, these companies were not incorporated, and in 1720 writs of scire facias were issued,9 directing an inquiry as to their right to carry on business, in usurpation of corporate powers. This put a sudden end to many of these unfortunate ventures, and the consequent collapse of the enormously inflated public credit carried down others, so that only four of the long list were still in existence when Anderson wrote,—the York Buildings Company, the two Assurance Companies mentioned above, and the English Copper Company. The speculation in shares had been too great and the expectations of profit too extravagant not to cause a correspondingly great distrust in corporate enterprises when the bubble burst, and the profits realized were found to be small and extremely variable. Adam Smith, writing in 1776 was of opinion1 that “the only trades which it seems possible for a joint-stock company to carry on successfully without an exclusive privilege, are those of which all the operations are capable of being reduced to what is called routine, or to such a uniformity of method as admits of little or no variation. Of this kind is, first, the banking trade; secondly, the trade of insurance from fire, and from sea risk and capture in time of war; thirdly, the trade of making and maintaining a navigable cut or canal; and, fourthly, the similar trade of bringing water for the supply of a great city.” To render the establishment of a joint stock reasonable, however, the author says, two other circumstances should concur: first, “that the undertaking is of greater and more general utility than the greater part of common trades; and, secondly, that it requires a greater capital than can easily be collected into a private copartnery.”
But during the latter part of the eighteenth century corporations were gradually increasing in number and importance. The need for them was felt in establishing canals, water-works, and, to some extent, in conducting the growing manufactures of the kingdom. The progress was indeed slow, and was destined to be so until the introduction of gas-lighting into all the larger cities and towns early in the present century, and later the laying of railways, created a widespread necessity for united capital.
The outline sketch just given of the growth of business corporations shows that they are not a spontaneous product, but are rather the result of a gradual development of earlier institutions, running back farther than can be traced. It would be strange if signs of this development were not found in the history of the law relating to them. The natural expectation would be, and such is in fact the case, that as to the points which modern business corporations have in common with the early guilds and municipalities, the law relating to them dates back farther than almost any other branch of the law, while as to the points which belong exclusively to the conception of the business corporation, the law has been formed very largely since 1800. And not only had a body of new law to be thus formed, but old doctrines laid down by early judges as true of all corporations, though in reality suited only to the kinds of corporations then existing, had to be discarded or adapted to changed conditions.
In the first place, then, the endeavor will be to examine the points which belong essentially to every kind of corporation, and afterwards to consider what was settled before the present century in regard to the peculiar relations arising from the nature of a business corporation.
In the case of Sutton’s Hospital,1 decided in 1612, the general law of corporations was considered at some length, and the following things were said to be “of the essence of a corporation:2 1st, Lawful authority of incorporation, and that may be by four means, viz., by the common law, as the king himself, etc.; by authority of Parliament; by the king’s charter; and by prescription. The 2d, which is of the essence of the incorporation, are persons to be incorporated, and that in two manners; viz., persons natural, or bodies incorporate and political. 3d, A name by which they are incorporated. 4th, Of a place, for without a place no incorporation can be made. 5th, By words sufficient in law, but not restrained to any certain, legal, and prescript form of words.”
This, then, was the mould in which every corporation had to be cast, regardless of what might be its nature or its purpose.
The first requirement, due authorization, existed in the Roman law as well as in the English.1 But, since corporate bodies were recognized as facts from the earliest dawn of history, when the rule became recognized that the authority of the supreme power of the State was necessary for their formation, a theory had to be found to support the old associations, which had not been formed in accordance with the rule. This was done both in Roman and in English law by recognizing that a corporation could come into existence by prescription. It is safe to say, however, that prescriptive and common-law corporations were of the older forms only, and that for the formation of business corporations, from the first, a charter from the king directly or by authority of Parliament was necessary.
Originally the power was exercised exclusively by the king; but his power to grant charters allowing exemptions or monopolies was gradually restricted, like many of his other powers, as little by little the House of Commons assumed the entire effective control of the government. The regulated Russia Company received its charter from the crown in 1555 without the consent of Parliament; so did the East India Company in 1600, the Canary Company in 1665, the Hudson Bay Company in 1670. All of these companies were given monopolies. The rights of the Russia Company and of the East India Company were afterwards regulated by statute; and the patent of the Canary Company was soon withdrawn, though not before giving rise to a test case2 on the validity of the monopoly, in which the court decided against it. The Hudson’s Bay Company continued to enjoy its charter without interference, but its right to a monopoly held good so long only as nobody cared to dispute it. After the Revolution, no doubt, it was tacitly admitted that for the validity of a charter conferring a monopoly or other special privilege an act of Parliament was necessary, though for granting the simple franchise of acting as a corporation the patent of the king was sufficient.
The last of the requisites enumerated by Coke may be regarded as included within the first. “Lawful authority of incorporation” must necessarily be given “by words sufficient in law.” The necessity for persons to compose the corporation results from the nature of things rather than from any rule of law. Perhaps the same may be said of the importance of a name. As an actual person could hardly transact business or sue and be sued in the courts without a name, so the fictitious person of a corporation rests under a similar necessity. Possibly Coke meant something more, regarding a corporation as an abstraction which would have no existence without a name. “For a corporation aggregate of many is invisible, immortal, and rests only in intendment and consideration of the law.”1 But if such was his view, it was not shared by his successors, when the tinge of scholasticism which colored all the law of the period faded away. In the case of the Dutch West India Company v. Van Moses,2 decided in 1724, it was held that the action was well brought, though no certain name had been given the company by the Dutch States, the name being that by which it was usually called; and there are numerous cases to the effect that a technical misnomer of a corporation had even less effect than the misnomer of an individual.3
When Coke wrote, it seems to have been necessary that a corporation should be named as of a certain place.4 This requirement, apparently so fanciful, is explained by the fact that the early corporations were almost all formed for local or special government of some kind, and it was consequently necessary to designate the place where the jurisdiction was to be exercised. The requisite must very early have become merely formal in case of certain classes of corporations, and might be fictitious. Thus, such names may be found as “The Hospital of St. Lazarus of Jerusalem in England” and “The Prior and Brothers of St. Mary of Mt. Carmel in England.”5 As the purpose for which corporations were instituted became more varied, and the modes of thought of lawyers became more reasonable, less stress was laid on the formality under consideration. It is hardly mentioned in “The Law of Corporations” or in Blackstone’s chapter.1 Kyd merely says, “It is generally denominated of some place;”2 and it may be assumed as true of business corporations, as well as of most others, that before the beginning of the present century there was no force in Coke’s fifth essential for the existence of a corporation other than as a matter of convenience.3
Grant, now, that a corporation was legally called into being, what abilities and disabilities was it considered to have? Coke says:4 “When a corporation is duly created all other incidents are tacitly annexed—. . . and therefore divers clauses subsequent in the charters are not of necessity, but only declaratory and might well be left out; as—
“1st. By the same to have authority, ability, and capacity to purchase, but no clause is added that they may alien, etc., and it need not, for it is an incident.
“2d. To sue and be sued, implead and be impleaded.
“3d. To have a seal; that is also declaratory, for when they are incorporated they may make or use what seal they will.
“4th. To restrain them from aliening or devising but in certain form; that is an ordinance testifying the king’s desire, but it is but a precept and does not bind in law.
“5th. That the survivors shall be a corporation; that is a good clause to oust doubts and questions which might arise, the number being certain.
“6th. If the revenues increase, that they shall be used to increase the number of the poor, etc.; that is also explanatory.
“8th. To make ordinances; that is requisite for the good order and government of the poor, etc., but not to the essence of the incorporation.
“10th. The license to purchase in mortmain is necessary for the maintenance and support of the poor, for without revenues they cannot live, and without a license in mortmain they cannot lawfully purchase revenues, and yet that is not of the essence of the corporation, for the corporation is perfect without it.”
This list of attributes laid down by Coke as necessarily belonging to all corporations is quoted with approval in “The Law of Corporations.”1 It is given by Blackstone in substance, though altered to the following form:2 —
The incidents which are tacitly annexed to every corporation as soon as it is duly erected are—
“1st. To have perpetual succession. This is the very end of its incorporation, for there cannot be a succession forever without an incorporation, and therefore all aggregate corporations have a power necessarily implied of electing members in the room of such as go off.
“2d. To sue or be sued, implead or be impleaded, grant or receive, by its corporate name, and do all other acts as natural persons may.
“3d. To purchase lands and hold them for the benefit of themselves and their successors, which two are consequential of the former.
“4th. To have a common seal. . . .
“5th. To make by-laws or private statutes for the better government of the corporation, which are binding on themselves, unless contrary to the law of the realm, and then they are void.”
The enumeration of Blackstone is given without substantial alteration by Kyd,3 though he adds that the last two powers are unnecessary for a corporation sole, and that the right to make by-laws is not inseparably incident to all kinds of corporations aggregate, for there are some to which rules may be prescribed; and, further, that the list is not exhaustive. The first three capacities are reducible to this, that the fictitious person of the corporation shall have, in general, the capacity of acting as an actual person, so far as the nature of the case admits. Such must have been the recognized law ever since corporations, as we understand the word, existed; for the conception of a corporation as a legal person, a conception going back farther than can be definitely traced, involves necessarily the consequence that before the law the corporation shall be treated like any other person. To this consequence there is a necessary exception in regard to such rights and duties as require an actual person for their subject.
The right and the necessity of having a corporate seal was probably in its origin simply the result of treating a corporation in the same way as an individual. The great antiquity of the custom of using seals is well known. It prevailed among the Jews and Persians,1 as well as among the Romans. It was spread over all the countries whose systems of law were borrowed from the Romans, and it was introduced into England by the Normans.2
In England, owing to the generally prevailing illiteracy, the use of the seal became the ordinary way of indicating the maker of a charter. The practice, apparently, was not the result of a desire for peculiar solemnity, but merely for identification. The use and object of a corporate seal may be assumed to have been the same as of an individual seal. It is true that Blackstone3 finds a reason for its use in the fact that “a corporation, being an invisible body, cannot manifest its intentions by any personal act or oral discourse; it therefore acts and speaks only by its common seal.” But this reason, besides bearing on its face indications of having been invented after the fact, goes altogether too far. A corporation has no hand with which to affix its seal, and if it may perform that act by an agent, there is no reason in the nature of things why it should not do anything else by the same instrumentality.4 And in the Roman law the use of a common seal was only a possible, not a necessary, way for a corporation to act.
When writing became a general accomplishment, the use of a seal for private documents was reserved for instruments of a peculiarly formal or solemn character. That a similar transition did not take place in the use of the seal of a corporation may be ascribed to the natural conservatism of a number of men acting in a body, and to the fact that from the character of early corporations the inconvenience of sealing all corporate contracts was not likely to be felt. However this may be, it was a rule of law well settled before business corporations came into existence that a corporation could only act by deed under its common seal. To the rule some slight exceptions were allowed, but only in few cases. Such a restriction could not fail to be extremely embarrassing to corporations, when they afterwards sprang up, the object of which was to carry on trade; and the development of the law on this point in regard to such corporations shows not so much a growth of legal doctrine, as an endeavor to do away with the inconvenient restraint imposed on all aggregate corporations, which had its origin when guilds and municipal and ecclesiastical associations were the only corporate bodies,—an endeavor that met with but indifferent success.1
The general rule seems to have been well settled in the fifteenth century, and it also appears that there were some slight exceptions to it.2 Just what these were, was by no means definitely marked out. In Y. B. 4 Hy. VII. 17 b, one of the judges, Townsend, said: “A body corporate cannot make a feoffment or lease or anything relating to their inheritance without deed, but of offices and things which pertain to servants they can. For they can appoint plowmen and servants of husbandry without deed, and butlers and cooks and things of that kind, and can depute their servants to do anything without deed. They can do this because it is not in disinheritance of the corporation, but only by way of service, and it is the common course to justify by command of the body corporate, and not show anything from it.” Brian, however, was of a contrary opinion, saying, “A body corporate can do none of those things without deed.” Townsend’s opinion undoubtedly made more sweeping exceptions than were afterwards allowed, but his statement that a corporation could appoint a cook or butler without a deed was for centuries cited as indicating the extent of the power of acting without using the corporate seal.1 In Y. B. 7 Hy. VII. 9, it was held that the defendant in an action of trespass could not justify as acting for a corporation without showing authority by deed. Wood adds: “But of little things the law is otherwise, for it would be infinite if each little act was by deed, as, a command to their servants, to light a candle in church, or to make a fire, or such things.” With this the court with one exception agreed. This statement of the law is based on a principle which continued to be decisive in the eighteenth as in the sixteenth century. In transactions which from their nature could be done under seal only with great inconvenience, the formality of sealing was dispensed with. The inconvenience might arise from the pettiness of the act, or from its being of every-day occurrence and necessity, or from the importance of immediate action. The exception was wrested by common sense from the scope of the rule.
Accordingly, when business corporations arose, it must have been tacitly admitted that the daily business need not all be transacted under seal. For instance, the bills of the Bank and of the East India Company were never sealed. The right to make such bills was afterward defended and explained as necessarily implied in the powers given them by Parliament. These corporations “could not carry on their business without the making of such instruments, and they would cease to be bills or notes if under seal. It is clear, however, that this indulgence is not allowed by law to be extended beyond cases of absolute necessity.”2
A more difficult point was raised in 1717, in the case of Rex v. Bigg,1 the leading case before the present century on the extent to which a business corporation could act without the use of its seal. Bigg was charged with felony in altering a bank-note signed by one Adams, an officer of the bank. It was objected that Adams did not have authority under the seal of the bank to affix his name, and that consequently the altered instrument was not a valid obligation, and the prisoner was not guilty of forgery. The argument of Peere Williams for the prisoner is fully given, and the cases which he cites seem to bear him out in his contention that such an agent could not be appointed without deed; but a majority of the Court held the prisoner guilty of felony. No opinion is given. It must be admitted that the decision involved some extension of the old rule that a cook or butler or servant for some petty purpose could be retained without a sealed instrument, but after this the law was settled that the regular servants and agents of a business corporation were to be regarded in a similar way.2
But, granting this, how far could an agent of such a corporation act in its behalf without a deed? As mentioned above, a corporation, the charter of which authorized it to carry on a business that required for its proper exercise the issue of bills and notes, did not need to affix the common seal to such obligations. Undoubtedly, also, a large amount of routine business was transacted entirely by parol, and there is no case reported where a transaction executed on both sides was set aside because the corporation did not act by deed. But, for the rest, it may at least be said that till after the first quarter of the present century had passed, no unsealed executory contract was binding on either party;3 and it is probable, also, that in a partially executed transaction no special agreement was valid without seal. On the other hand, if the transaction was such as of itself gave rise to an obligation, it could be enforced; forfeitures and tolls could be recovered in assumpsit;4 if land were demised without deed, and the lessee occupied the premises, he was liable for rent in an action for use and occupation; and similarly, no doubt, if goods were bought or sold by a corporation and delivery was made, the vendee could have been forced to return or pay for them.1
The courts were sometimes able to mitigate the hardships which followed from the necessity of doing everything under seal, by presuming, as a matter of pleading, that when performance by a corporation was averred, performance with all necessary formalities was intended,2 and partial relief was given in special instances by act of Parliament;3 but at best it would be hard to find a more striking instance of a rule of law which arose from the customs prevailing in an entirely different state of society still maintaining itself when every reason for its existence had ceased, and its only effect was to produce injustice.
The right to pass by-laws for the regulation of their affairs belonged to corporations in the Roman law4 from a very early period, and also in the English law. Indeed, the right is a consequence almost necessarily following from the nature of the early corporations. Institutions to which were delegated powers of government, whether ecclesiastical or secular, whether exercised over all within a certain locality or confined to those practising a particular trade, must have been allowed appropriate means of exerting their authority, and the scope of the by-laws must have been proportioned to the jurisdiction. Thus, the by-laws of a corporate town were binding on any one who came within its limits.5 The by-laws of a guild were binding not on its members only, but on such outsiders as exercised the trade which the guild governed and regulated.1 The power of making by-laws would be useless without means of enforcing them, and the imposition of penalties for failure to comply with its by-laws was within the power of a corporation, from an indefinite time.2 The farther back the examination is carried the broader seems to have been the power of punishing the refractory, extending by special charter in many cases to imprisonment as well as fine.3 By Coke’s time, however, it was settled that the power of imprisonment could not be given by letters-patent from the king, but required an act of Parliament;4 and it was further held that similar authority was needed for a by-law affixing as a penalty the forfeiture of goods;5 but that such by-laws were formally valid may be inferred from the fact that this mode of enforcement was sometimes supported as being in accordance with an immemorial custom.6 Further limitations on the power of making by-laws, which were more strictly construed as time went on, were that they must not be contrary, nor even cumulative, to the statutes of Parliament,7 nor in restraint of trade,8 nor unreasonable.9 Business corporations, when they arose, were dealt with according to the same principles. As it was well recognized that such by-laws only could be made as were in harmony with the objects for which the corporation was created,10 and as the purposes for which business corporations were chartered were as a rule definitely marked out, the scope of the right to make by-laws was correspondingly narrowed. A few of the earlier joint-stock companies were intrusted with the regulation of the trade in which they were engaged, and the by-laws of these were binding on all engaged in the trade, precisely as was the case with guilds.11 But by the change in the conception of a corporation from an institution for special government to a simple instrumentality for carrying on a large business, the right to pass by-laws was restricted to regulations for the management of the corporate business.1 Such regulations, of course, like the by-laws of municipal corporations and guilds, were void if contrary to statutory or common law, or if unreasonable. Whether a certain by-law was held unreasonable or not depended in some measure on the discretion of the court. The decision might be different when judged by the standards of the eighteenth century from what it would be if judged by modern standards. Thus, a by-law of the Hudson’s Bay Company giving itself a lien on its members’ stock for any indebtedness due from them to the Company was held valid,2 the Court saying, “All by-laws for the benefit and advantage of trade are good unless such by-laws be unreasonable or unjust; that this, in their opinion, was neither.” To-day, in a jurisdiction unfettered by authority, the conclusion would probably be otherwise.3
In addition to the doctrines which have just been considered, a few others may be mentioned as applicable to all corporations alike. In general, questions of rights and duties towards the outside world are much the same for all kinds of corporations. The law, it is said, makes no personal distinctions, and it is at least true that wherever considered practicable the fictitious legal person of a corporation, whatever its nature, was treated by the law in the same way as an actual person. On the other hand, the law regulating the relations of the members to each other and to the united body must differ according to the nature and objects of the corporation.
It has often been questioned whether a corporation could commit a tort or crime. The better opinion in the Roman law seems to have been that the question should be answered in the negative, at least whenever dolus or culpa was necessary to make the act under consideration wrongful.1 In England, however, it was very early held that corporations might be liable in actions on the case or in trespass,2 and afterwards in trover.3 But it is not likely that a corporate body would have been held liable for any tort of which actual malice or dolus was an essential part. Similarly it was held that a corporation could not be guilty of a true crime,4 that is, it could not have a criminal intent, but it could be indicted for a nuisance or for breach of a prescriptive or statutory duty, and, in general, where only the remedy was criminal in its nature.5
It was generally laid down that a corporation could not hold in trust.6 It is not very clear exactly on what reasoning the conclusion was based. There is very little to support it, except in very old cases. The view gradually became obsolete, and though there was no decision before the year 1800 definitely deciding the point, it is probable that it was recognized before that time that a corporation might hold in trust.7
The fundamental difference in the constitution of business corporations from the earlier forms which preceded them is the joint-stock capital, and most of the law peculiar to this class of corporations relates to that difference, and the consequences which follow from it. From motives of convenience it early became customary to divide the joint stock into shares of definite amounts. The nature of the interest which it was conceived the holders of such shares possessed, and their rights and duties among themselves and against the corporation, so far as these were settled or discussed by the courts before the nineteenth century, will now be treated.
The most accurate definition of the nature of the property acquired by the purchase of a share of stock in a corporation is that it is a fraction of all the rights and duties of the stockholders composing the corporation.1 Such does not seem to have been the clearly recognized view till after the beginning of the nineteenth century. The old idea was rather that the corporation held all its property strictly as a trustee, and that the shareholders were, strictly speaking, cestuis que trust, being in equity co-owners of the corporate property.2
There are several classes of cases illustrating this difference in theory. Thus, if the shareholders have in equity the same interest which the corporation has at law, a share will be real estate or personalty, according as the corporate property is real or personal. If it were personalty, as was usually the case, no question would arise, for then on any view the shares would be personalty likewise. Let it be supposed, however, that the corporate property was real estate; then, according to the view formerly prevailing, the shares must be devised and transferred according to the statutes regulating the disposition of real estate; they would be subject to the land tax; and, in short, would have to be dealt with in the same way as other equitable interests in land. Exceptions to this general rule would have to be made if special modes of transfer were prescribed by a statute of incorporation. This was generally the case; provision was ordinarily made that the title to shares should pass by transfer on the books, and also that they should be personal property.
The question arose several times in regard to the shares of the New River Water Company. The title to the real estate controlled by the company seems to have been in the individual shareholders, the company (which was incorporated) having only the management of the business.1 It was uniformly held that the shares were real estate, that they must be conveyed as such inter vivos, that a will devising them must be witnessed in the same manner as a will devising other real estate,2 and that the heir and not the personal representative of a deceased owner was entitled to shares not devised.
The cases which were thus decided were afterwards distinguished3 on the ground that the title to a large part of the real estate was in the corporators, and as to all of it the company had no power to convert it into any other sort of property, but had simply the power of managing it. The distinction, however, amounts to nothing. If the individual proprietors owned the land and the company controlled it, the proprietors had two distinct kinds of property. One was real estate, and the fact that it was occupied by a corporation was immaterial; the other was personalty, consisting of the bundle of rights belonging to the shareholders in any corporate company. Moreover, the decisions do not indicate that they were based on such a distinction.4 It was not until the decision of Bligh v. Brent,5 in 1836, that the modern view was established in England. The contention of the counsel for the plaintiff in that case, that the company held the corporate property as a trustee, and that the interest of the cestui que trust was coextensive with the legal interest of the trustee, was well warranted by the decisions which he brought forward to sustain it. Indeed, the greater part of the argument for the defendant admitted this, but contended that real estate held by a corporation for trading purposes should be treated as personalty, like that similarly held by a partnership.1
It is true that it was decided in 1781, in Weekley v. Weekley,2 that shares in the Chelsea Water Works were personalty; but no reasons are given for the decision, and it may have been based on the facts that a large part of the property of the company was personalty,3 and that the shares were generally considered personalty, and dealt with as such. Otherwise the case seems inconsistent with the cases and reasoning previously alluded to.
In the case of the King v. The Dock Company of Hull4 an attempt was made to apply conversely the principle that the property of a corporation and of its individual corporators is the same, except that the interest of the former is legal, of the latter, equitable. The act under which the company was formed5 declared that the shares of the proprietors should be considered as personal property. It was argued that this made the real estate of the corporation personalty, and hence not subject to the land tax. The Court overruled the objection, not on the ground that the property of the corporation was entirely different from that of the shareholders, but because, “as between the heir and executor, this (the real estate of the company) is to be considered as personal property, but the Legislature did not intend to alter the nature of it in any other respect.”
Another class of cases illustrating the theory now under consideration arose from the transfer of stock on the books of the company by fraud or mistake without the consent of the owner. When it is understood that the right of a shareholder is a legal right, it is obvious that such a transfer cannot affect his rights unless he is estopped to assert them.1 If, however, the legal interest is in the corporation, and the right of a shareholder is only equitable, the transferee, in the case supposed, will acquire title, though perhaps he may not be allowed to retain it. The latter view was taken in all the cases which arose prior to the year 1800. One of the earliest of them was Hildyard v. The South Sea Company and Keate.2 The plaintiff’s stock had been transferred to Keate, an innocent purchaser, under a forged power of attorney. The court decided that the plaintiff was entitled to relief, and that the loss must fall on Keate. Apparently the Court was of opinion, however, that until relief was given Keate was the actual stockholder, and not the plaintiff. Thus, it is assumed that the dividends which Keate had received were the dividends on the plaintiff’s stock, and that they must be recovered at the suit of the plaintiff, not of the company. Further, the company is directed to “take this stock from the defendant Keate and restore it to the plaintiff.” The case was afterwards overruled,3 but in a way which served rather to emphasize the theory that the legal title to all the stock of a corporation is in the corporation itself.4
In Harrison v. Pryse5 the facts were substantially the same, except that the defendant was not a purchaser for value. The company was not made a party. The plaintiff recovered the full value of his stock on the theory that it had been converted. The transfer on the books of the company, though without the plaintiff’s authority, was assumed to have divested him of his stock. Lord Hardwicke, who decided the case, was of opinion that in case the estate of the defendant proved insufficient to satisfy the plaintiff’s claim the company might be liable. “His reason was that the company must be considered as trustees for the owner at the time he purchased this stock, and as the stock had not been transferred with any privity of his, they must be considered as continuing his trustees.”
The last and most explicit of this series of cases was decided by Lord Worthington in 1765.1 The facts were the same as in Hildyard v. The South Sea Company.2 It was admitted that the plaintiff was entitled to relief, and the only question was which of the defendants should bear the loss. It was decided that it must fall on the bank. The reason given was that “a trustee, whether a private person or body corporate, must see to the reality of the authority empowering them (sic) to dispose of the trust money.” Again, it is said by the Chancellor, “I consider the admission and acceptance of the transfer as the title of the purchaser.”
Whether a contract for the sale of stock was a contract for the sale of goods, wares, or merchandise, within section 17 of the Statute of Frauds, is a question which was several times considered but not definitely decided in the eighteenth century. In Pickering v. Appleby3 the judges were divided six to six as to whether a contract for the sale of ten shares of the Company of the Copper Mines required a memorandum in writing to make it enforceable. In other cases,4 also, the point came up, but they went off on other grounds.
Whether specific performance could be had of such a contract is another question which was raised in the early part of the eighteenth century, because of the enormous fluctuations in prices at that time.5 The earliest case was Cud v. Rutter,6 decided in 1719. Sir Joseph Jekyll decreed specific performance of a contract for the sale of South Sea stock, and Lord Chancellor Parker overruled the decree, his chief reason being, “Because there is no difference between this £1,000 South Sea stock and £1,000 stock which the plaintiff might have bought of any other person upon the very day.”1
There is nothing to indicate that any distinction was supposed to exist between South Sea stock, which was government stock with certain additional rights, and shares in ordinary companies. Moreover, two years later Lord Macclesfield dismissed a bill for specific performance of a contract for the sale of £1,000 stock in the York Buildings Company, which was an ordinary joint-stock corporation, on the ground that the proper remedy was at law.2
The only foundation afforded before the year 1800 for the view now prevailing in England,3 that contracts for the sale of shares, as distinguished from government stock, will be specifically performed, is the case of Colt v. Netterville,4 a bill for specific performance of a contract for the transfer of York Buildings stock, which was demurred to. Lord King overruled the demurrer, saying that the case might be “attended with such circumstances that may make it just to decree the defendant either to transfer the stock according to the express agreement, or at least to pay the difference.” This, however, is altogether too indefinite to be regarded as disapproval of the previous cases, and it may be confidently stated that the former rule on this point in England was the same as that now prevailing in this country;5 that is, in the absence of special circumstances, such contracts will not be specifically enforced.6
Though the corporation was looked upon as a trustee and the shareholders as cestuis que trust, it was of course perfectly well recognized that there were rights and obligations not incident to an ordinary trust.
The practice of keeping books to record the transfer of stock was adopted by the East India Company, perhaps from its inception, and transfer on the books was regarded as essential for passing the title. Thus in 1679, in a suit for an account against a fraudulent assignee of East India stock, the company being joined,1 the Court decree that the company “do, upon application made to them, according to their custom, transfer back the said £150 stock to the plaintiff;” and it was customary to insert in the early charters incorporating business associations, a provision that the shares might be assigned by entry in a book kept for that purpose.2 Therefore, one of the earliest well-recognized rights of a shareholder was to have his name kept upon the transfer book so long as he held stock;3 and, in consequence of the assignability of shares, to have the name of his assignee substituted, if he parted with his interest.4 It follows that if the company transferred stock, however innocently, without due authority from the owner, it was liable. Several cases arose of such transfers, where the company acted in compliance with a forged power of attorney.
In all these cases,5 it seems to have been decided or assumed that the company was bound to reinstate the original owner on its books, as well as to pay him the dividends that had accrued, though the reasoning on which these decisions were based was influenced by the notion previously adverted to, that the shareholder occupied the position of a cestui que trust.
When shares were held in trust, of course, it was the name of the trustee which appeared upon the books; he and not the beneficial owner was entitled to all the rights of a shareholder.1 This was fully recognized by the Courts; and not only this, but it was laid down that the company, after express notice that stock was held in trust, was at liberty to ignore the fact, even so far as to allow the trustee to commit a fraud on the cestui que trust unless the trust appeared on the books.2 The right to such complete disregard of equitable interests rested perhaps not so much on decisions as on dicta which may be attributed to a careless over-emphasis of the fact that the legal interest, and, in general, the entire control of stock held in trust, is in the trustee.
In case of refusal by the officers of a company to transfer on the books at the request of the owner of stock, the proper remedy was not wholly clear in the eighteenth century. In the case of King v. Douglass3 an application was made for a mandamus to compel a transfer. Lord Mansfield refused to allow this extraordinary remedy, and suggested a special action of assumpsit, and probably that action would have been held proper. Whether specific performance of the obligation would be enforced by equity was not suggested, but it is not unlikely that such a remedy would have been allowed.4
The right of a shareholder to vote at the election of officers, and in regard to by-laws for the management of a business corporation, was formerly precisely analogous to the similar right necessarily possessed by the members of all corporations from their origin, such as the members of a municipal corporation, for instance, still possess. That is, each shareholder was entitled to one vote if given by him in person. This was at first the rule in the East India Company, but, naturally enough, it soon became distasteful to the larger owners, and various changes were made at different times; for example, that only holders of £500 stock should have the right to vote, the smaller holders being allowed to pool their stock to make up the necessary amounts.5 This was simply a restriction of the suffrage. The units of which the corporation was composed were still considered to be the members, as is the case in municipal corporations and guilds,—not shares, as is the case in the modern joint-stock corporation. The gradual progress from the old view to the modern one is shown by the changes in the power of voting. It soon became usual to allow the larger holder more than one vote, and it was customarily provided in the charters how many votes should belong to the owner of a given number of shares, the owner of a large number having more votes than the owner of a few, but not proportionately more. Thus, in the Greenland Company, each subscriber of £500 had one vote, each subscriber of £1,000 or more had two votes, and in no case could a shareholder have a greater number, however great his holding might be;1 and in other charters are similar provisions. Except for some such provision, no doubt, each shareholder would have been entitled to but one vote. It did not take very great ingenuity to devise a plan by which owners of large amounts of stock could, in effect, secure a number of votes in proportion to their holdings. All that was necessary was to make temporary transfers of stock to a number of friends,—a practice called “splitting stock.” The preamble of an act passed in 17662 shows the custom at that time. It recites “certain publick companies or corporations have been instituted for the purpose of carrying on particular trades or dealings with joint stock, and the management of the affairs of such companies has been vested in their general courts, in which every member of each company possessed of such share in the stock as by the charter is limited, is qualified to give a vote or votes;” and it is further recited that “of late years a most unfair and mischievous practice has been introduced, of splitting large quantities of stock, and making separate and temporary conveyances of the parts thereof for the purpose of multiplying or making occasional votes immediately before the time of declaring a dividend, of choosing directors, or of deciding any other important question, which practice is subversive of every principle upon which the establishment of such general courts is founded, and if suffered to become general, would leave the permanent welfare of such companies liable at all times to be sacrificed to the partial and interested views of a few.” It is then provided by the act that in future members who have not held their stock for at least six months shall not vote.
As an instance of the conservatism of the English law in matters of form it may be mentioned that by the English Companies Act of 1862 the votes of shareholders are limited, so that one vote is allowed for every share up to ten, for every five shares between ten and one hundred, and for every ten shares beyond that.1 But it is now held that a shareholder may distribute his stock in lots of ten among his friends, and thereby secure, in a clumsy and troublesome way, a vote for every share.2
The right to vote by proxy was not allowed at common law, in the absence of some special authorization.3 This was often given the charter.4 Contrary to what is now generally held,5 it is very doubtful if the authority of a by-law would have been held in the last century sufficient to confer the right.6
That the directors of a corporation shall manage its affairs honestly and carefully is primarily a right of the corporation itself rather than of the individual stockholders. The question may, however, be considered in this connection.
The only authority before the present century is the case of The Charitable Corporation v. Sutton,7 decided by Lord Hardwicke. But this case is the basis, mediate or immediate, of all subsequent decisions on the point, and it is still quoted as containing an accurate exposition of the law.8 The corporation was charitable only in name, being a joint-stock corporation for lending money on pledges. By the fraud of some of the directors or “committee-men,” and by the negligence of the rest, loans were made without proper security. The bill was against the directors and other officers, “to have a satisfaction for a breach of trust, fraud, and mismanagement.” Lord Hardwicke granted the relief prayed, and a part of his decision is well worth quoting. He says, “Committee-men are most properly agents to those who employ them in this trust, and who empower them to direct and superintend the affairs of the corporation.
“In this respect they may be guilty of acts of commission or omission, of malfeasance or nonfeasance.1
“Now, where acts are executed within their authority, as repealing by-laws and making orders, in such cases, though attended with bad consequences, it will be very difficult to determine that these are breaches of trust. For it is by no means just in a judge, after bad consequences have arisen from such executions of their power, to say that they foresaw at the time what must necessarily happen, and therefore were guilty of a breach of trust.
“Next as to malfeasance and nonfeasance.
“To instance in non-attendance; if some persons are guilty of gross non-attendance, and leave the management entirely to others, they may be guilty by this means of the breaches of trust that are committed by others.
“By accepting of a trust of this sort, a person is obliged to execute it with fidelity and reasonable diligence, and it is no excuse to say that they had no benefit from it, but that it was merely honorary; and therefore they are within the case of common trustees.2
“Another objection has been made that the Court can make no decree upon these persons which will be just, for it is said that every man’s non-attendance or omission of duty is his own default, and that each particular person must bear such a proportion as is suitable to the loss arising from his particular neglect which makes it a case out of the power of this court. Now, if this doctrine should prevail, it is indeed laying the axe to the root of the tree. But if, upon inquiry before the master, there should appear to be a supine negligence in all of them, by which a gross complicated loss happens, I will never determine that they are not all liable.
“Nor will I ever determine that a Court of equity cannot lay hold of every breach of trust, let the person be guilty of it either in a private or public capacity.”
The members of any corporation were entitled to inspect the books of the corporation. The only difference between business and other corporations as to the right of inspection was this: The books of municipal corporations and guilds might be inspected by non-members under certain circumstances, because the regulations of such bodies were not binding on members alone, and consequently outsiders might be vitally interested in the corporate proceedings.1 Business corporations, on the other hand, were private, and the right of inspection belonged solely to members.2
The most important right of shareholders, the right to dividends, was of course always recognized. It is necessarily implied in the conception of a joint-stock company. No cases, however, seem to have been decided before the year 1800 which illustrate the nature of the right. The same remark applies to the right of a shareholder to share in the distribution of the capital stock if the affairs of the corporation are wound up.
The correlative duties imposed on a shareholder were fewer and simpler than his rights. In the first place, he was bound to pay to the corporation, when called upon, the amount of his share in the joint stock, or so much of it as had not been paid by prior holders. The practice of paying in instalments for stock subscribed seems to have arisen at an early date. It is referred to as common in 1723. Lord Macclesfield speaks of “the common by-laws of companies to deduct the calls out of the stocks of the members refusing to pay their calls.”3
In 1796 the question arose whether an original subscriber could avoid liability for future calls by assigning his stock.1 It was contended that the case was like the assignment of a lease, “in which, though the lessor consents to the lessee’s assigning to a third person, he does not give up his remedy against the original lessee.” The Court of King’s Bench, however, decided that assignees held the shares on the same terms as the original subscribers, and were substituted in their places. The objection that an assignment might be made to insolvent persons was met by saying that it was presumed that the undertaking was a beneficial one, and therefore the right to forfeit shares for non-payment of calls furnished a sufficient check.
No doubt it has been settled for a long time that individual members are not liable for the debts of a corporation, and it has even been said that “the personal responsibility of the stockholders is inconsistent with the nature of a body corporate;”2 yet in the Roman law it seems that if the corporation became insolvent the persons constituting it were obliged to contribute their private fortunes;3 and though it may be hazardous to assert that at common law the rule was the same in England, it is certain that, so far as the evidence goes, it points to that conclusion. This was not on any theory that the debt of the corporation was directly the debt of its members, for the contrary seems to have been well understood. For instance, in Y. B. 19 Hy. VI. 80, it was held that an action of debt being brought against the Society of Lombards, and the sheriff having distrained two individual Lombards, trespass would lie against him. “For where a corporation is impleaded they ought not to distrain any private person.” And in the case of Edmunds v. Brown4 it was held that certain members of the Company of Woodmongers, who had signed a bond as its officers, were not personally liable when the company was dissolved.5 If, however, there was an obligation running to the corporation from its members, to be answerable to the corporation for the liability of the latter to the outside world,1 this obligation would be part of its assets, which, though not available in a law court, could be reached in equity, and so indirectly the members could be forced to discharge the corporate debts. That such was the case was directly decided in the case of Dr. Salmon v. The Hamborough Company.2 This was an appeal to the Lords from the dismissal of a bill in Chancery against the Hamborough Company and some of its individual members, setting forth that the company owed the plaintiff money, but had nothing to be distrained by, and could, therefore, not be made to appear.3 The Lords ordered that the dismissal be reversed, and that if the company did not appear the bill should be taken pro confesso, and in that event, and also in case the company appeared and the plaintiff’s claim was found just, a decree should be made that the company pay; and on failure to do so for ninety days, “that the governor or deputy governor and the twenty-four assistants of the said company, or so many of them as by the tenor of their charter do constitute a quorum for the making of leviations upon the trade or members of the said company, shall make such a leviation upon every member of the said company as is to be contributary to the public charge, as shall be sufficient to satisfy the sum decreed to the plaintiff;” and in case of failure to answer these “leviations,” process of contempt should issue against them. By a note to Harvey v. East India Company,4 it may be seen that the course thus outlined was actually carried out, and the individual members were charged in their private capacities. It is true that the Hamborough Company was a regulated, not a joint-stock, corporation; but there seems to be no reason why the question should not be the same for both kinds, or that, when the case was decided, there was supposed to be any distinction. Indeed, there is no case decided before the present century which is inconsistent with the theory that members of a corporation are thus liable, though very possibly that idea became contrary to the general understanding.
In another early case1 creditors who were members of the indebted company were postponed to the other creditors. Lord Nottingham says, “That if losses must fall upon the creditors, such losses should be borne by those who were members of the company, who best knew their estates and credit, and not by strangers who were drawn in to trust the company upon the credit and countenance it had from such particular members.”
The case of Dr. Salmon v. The Hamborough Company was criticised by Fonblanque in 1793.2 It was, however, followed to its fullest extent in South Carolina so late as 1826 in a very carefully considered case, and on appeal the decision was affirmed.3 Even after 1840 the doctrine for which the case stands found support.4
The ways in which a corporation might be dissolved, and the consequences of dissolution, were fully considered by the older writers. It was laid down that a corporation might be dissolved, 1st, by act of Parliament; 2d, by the natural death of all its members; 3d, by surrender of its franchises; 4th, by forfeiture of its charter through negligence or abuse of its franchises.5 The second of these methods is inapplicable to business corporations, for the shares of the members are property and would pass to their personal representatives. Further, it should be added that a corporation may be dissolved by the expiration of the time limited in its charter.
Forfeiture of a charter was enforced by scire facias or an information in the nature of quo warranto. It is only in connection with the question of forfeiture that importance was attached to the fact that a corporation had acted in excess of the authority given by its charter. Not a trace of the modern doctrine of ultra vires is to be found before the present century.1 The other ways in which a corporation could be dissolved need no elaboration.2
Kyd says,3 “The effect of the dissolution of a corporation is, that all its lands revert to the donor, its privileges and franchises are extinguished, and the members can neither recover debts which were due to the corporation, nor be charged with debts contracted by it in their natural capacities. What becomes of the personal estate is, perhaps, not decided, but probably it vests in the crown.”
The accuracy of the statement that the lands of a dissolved corporation revert to the donor has been doubted in Gray on Perpetuities.4 After a very careful examination of authorities the learned author arrives at the conclusion that the lands would escheat, and offers the following explanation to account for the prevalence of the theory which he controverts. Most early corporations held their lands in frankalmoign, a tenure in which the lord was always the donor. Hence, on the dissolution of a corporation, its lands, though they escheated, would generally go to the donor.
The explanation is ingenious, and very likely true. It may, however, be urged that Lord Coke, to whose statements5 are to be attributed, in the main, the wide acceptance in later times of the doctrine under consideration, is not likely to have made such a palpable blunder in regard to a question of tenure. The suggestion is offered with diffidence, that a real or fancied analogy in the civil law may be the true foundation on which the doctrine rests. The early English law of corporations is borrowed almost wholly from the Roman law.1 This certainly creates an antecedent probability in favor of the suggestion offered. Domat says, “If a corporation were dissolved by order of the Prince, or otherwise, the members would take out what they had of their own in the corporation.”2 This confines the application of the rule to members; but it may have been regarded as applying to any donor of a corporation, or may, at least, have furnished an analogy.
The disposition of the personalty of a corporation on its dissolution was not discussed by the early writers, undoubtedly because of the insignificance at that time of personal property. No expression of judicial opinion on the matter is to be found. Kyd’s remark5 probably represents the generally received opinion at the time he wrote.6
The statement was made by Blackstone7 that “the debts of a corporation either to or from it are totally extinguished by its dissolution.” This remark has been repeated by later authors, and has led to some confusion. It was, undoubtedly, an error. The only authority cited to support it is Edmunds v. Brown.8 The Company of Woodmongers had been dissolved. It had given a bond to the plaintiff, which was signed by the defendants for the company. This action was debt on the bond against the individuals who signed it. The plaintiff failed, and rightly, for the bond was not executed by the defendants as individuals but for the company. The difficulty, however, was simply in the remedy which the plaintiff chose. This is evident from the case of Naylor v. Brown,1 —a suit in equity by the creditors of the Woodmongers’ Company, begun immediately after the failure of the action at law just referred to. On the dissolution of the company, the members had divided up its property. It was decreed that the property should be returned, “it being in equity still a part of the estate of the late company,” and that the debts due the plaintiffs should be discharged from the fund so formed. This important case, which seems to have been generally overlooked,2 clearly shows that the property of a dissolved corporation was liable in equity for the corporate debts, although they were unenforceable at law.
Whether debts owing to a dissolved corporation could be enforced for the benefit of the creditors or members of the corporations, or for the benefit of the State as bona vacantia, was not decided before the year 1800.
The history of the law of business corporations has thus far been treated with reference only to English decisions. In this country questions pertaining to corporations were brought before the courts in very few cases until the nineteenth century.
Pennsylvania is entitled to the honor of having chartered the first business corporation in this country,3 “The Philadelphia Contributionship for Insuring Houses from Loss by Fire.” It was a mutual insurance company, first organized in 1752, but not chartered until 1768. It was the only business corporation whose charter antedated the Declaration of Independence. The next in order of time were: “The Bank of North America,” chartered by Congress in 1781 and, the original charter having been repealed in 1785, by Pennsylvania in 1787; “The Massachusetts Bank,” chartered in 1784; “The Proprietors of Charles River Bridge,” in 1785; “The Mutual Assurance Co.” (Philadelphia), in 1786; “The Associated Manufacturing Iron Co.” (N. Y.), in 1786.
These were the only joint-stock business corporations chartered in America before 1787. After that time the number rapidly increased, especially in Massachusetts. Before the close of the century there were created in that State about fifty such bodies, at least half of them turnpike and bridge companies. In the remaining States combined, there were perhaps as many more. There was no great variety in the purposes for which these early companies were formed. Insurance, banking, turnpike roads, toll-bridges, canals, and, to a limited extent, manufacturing1 were the enterprises which they carried on.
The rapid growth of corporations was followed in the early decades of the nineteenth century by the judicial decision of the questions which naturally arose as to the nature of the bodies which had been created by the Legislature, their rights and duties, and the rights and duties of their stockholders. But not even a beginning of this development was made prior to the year 1800. Before that time, whatever knowledge of these matters American lawyers possessed must have been derived from the English cases and English textbooks previously considered.
HISTORY OF THE LAW OF PRIVATE CORPORATIONS IN THE COLONIES AND STATES1
THE law of corporations was the law of their being for the four original New England colonies. Of whatever else they might be ignorant, every man, woman, and child must know something of that. It governed all the relations of life. This was true, whether the government to which they were subject was set up under a charter from the crown or those who held a royal patent,3 or—as in New Haven—was a theocratic republic, owing its authority to the consent of the inhabitants. The one rested on the law of private corporations de jure: the other on that of public corporations de facto.
On October 25, 1639, the first General Court of the plantation of New Haven was organized, and on October 26, an Indian was arrested under its authority on a charge of murder. Three days later he was tried and sentenced, and the day following his head was cut off “and pittched upon a pole in the markett-place.”4 We may be sure that this was not done by such men as Eaton and Davenport, nor the steps taken that put them in a position in which they might be called upon to take such action, without careful study, first, of the powers rightfully belonging to de facto public corporations.
For all the charter governments, the seventeenth century, as has been suggested in Chapter II., was one long school of study for their leaders into the rights of private corporations as founders of colonies, and then into those of the colonies as they grew into public corporations—or provinces hardly distinguishable from public corporations1 —and received, as such, new authority from the Crown. Occasions arose upon which they sought counsel as to points of this kind from the leaders of the English bar, and the opinions thus obtained were eagerly read and everywhere discussed, not only by those in authority, but by their constituents in every local community.2
That the colonists thought and studied on these problems for themselves is evidenced by a letter from the General Court of Massachusetts to the counsel whom they had retained to defend against quo warranto proceedings brought for a forfeiture of the colony charter in 1683. He had been authorized to engage professional assistance, and “we question not,” they wrote, “but the counsel which you retain will consult my Lord Coke his Fourth Part, about the Isle of Man, and of Guernsey, Jersey, and Gascoigne, while in the possession of the Kings of England: where it is concluded by the Judges, that these, being extra regnum, cannot be adjudged at the King’s Bench, nor can appeal lie from them, &c.”3
The question met and decided for itself by the Colony of New Haven at its outset was answered in the same way by the charter governments with which she soon became confederated, and into one of which she was finally absorbed. They claimed and exercised from the first the power of life and death as respects all crimes committed within their territorial limits; but to do so, it was necessary to found it on the general grant to them of legislative authority. The view repeatedly urged upon the home government in opposition to this contention, that the charters contemplated only the making of such by-laws as a trading corporation might need for its better regulation,1 was certainly plausible, and their use as the foundation of capital sentences was disputed before the Queen in Council in an attack upon the Connecticut charter as late as 1705.2
The Englishman’s right to local self-government, wherever he was, was the question fundamentally at issue, and as to that, the general sentiment was the same throughout all the colonies. Ultimately it led to a gradual undermining of the authority of the provincial Governors and their Councils, which prepared the way for American independence.
Even after that event, however, and when the political sovereignty of the United States and of each of them had been fully acknowledged by Great Britain, the English courts continued to insist that the colonies had never occupied the position of public governments. Maryland, in the first half of the eighteenth century, had put out circulating bills, as currency, on the security of shipments of tobacco, the proceeds of which were invested in stock of the Bank of England held by trustees appointed for the purpose. The title of the State of Maryland to this stock came in question before the English Court of Chancery some years after the Treaty of Peace. If the doctrine of public law that a change in the political government of a people does not affect its proprietary rights or obligations was to apply, the equitable interest in the shares belonged to the State. It was held by Lord Loughborough that it did not apply. “The old government of Maryland,” he said, “a government of a singular species, existing by Letters Patent, in some degree similar to a corporation, possessing rights in England, must sue in England, and ought to be regulated by the law of England, under which it has its existence.”1 Under that law, in his opinion, the new State could not be regarded as its lawful successor in title.
Lord Eldon, in referring to this case some years later, summarized it as deciding “that the property in question, which was stock in a London corporation held by English trustees, as it belonged originally to a corporation existing by the King’s charter, was not to be transferred to the State of Maryland after the Treaty of Peace of 1783, as that State did not exist by the King’s authority; but constituted bona vacantia, and fell to the Crown.”2
In this known attitude of the English courts, early taken and always maintained, reflecting, as it did, the attitude of the English Crown, we find one of the divisive forces leading to the Revolution. Opposed to it from the first was an American doctrine of colonial and corporate rights, rooted in Massachusetts Bay, and emphasizing the political and public character of our local governments. The better to repress its growth, the mother country, about the year 1680,3 determined to make applicable here the system of appeals to the King in Council, which she had devised for the better regulation of what remained of her French possessions,—the Channel Islands. That, under their charters, their proceedings were thus subject to review, some of the American colonies at first denied, and it took nearly half a century for the Crown to establish it as unquestionable.4
This contest against a royal prerogative, the maintenance of which all now must admit to have been then indispensable to the preservation of proper relations between England and her colonies, was one of the chief causes of a bill brought into the House of Lords by the ministry in 1701, to bring back under the direct control of the throne, by means of royal Governors, all those of the American colonies not already subject to those so appointed.1
By this time it was becoming the custom for each colony to keep in commission an agent at London to watch proceedings at court or in Parliament, and represent its interests wherever they might be concerned. One of them, Sir Henry Ashurst, procured leave for Connecticut to be heard by counsel at the bar of the House against this bill, and it was defeated, largely by raising the cry that its enactment would afford a precedent alarming to all the chartered corporations in England.2
A few years later, in 1714, a similar measure was again introduced and again defeated. The main object of that was to get rid of the proprietary government in Carolina; but the Northern colonies, in carefully prepared “cases,” copies of which have recently been found among the MSS. in the Bodleian library, successfully opposed it, insisting, among other grounds, upon this: that while it was true that if a charter held as private property were revoked for reasons of State policy, due compensation could be made to those divested of their franchises; yet, as those of the New England Colonies were vested in the body of the people, no equivalent for their loss could be provided.3
Questions like these were too large for the American lawyers of those days to handle. They belonged rather to statesmen. Franklin was perhaps the first of our countrymen to deserve that name, and he discussed them with more force than could any of the bar. There were indeed few in America during the first half of the eighteenth century who could be called lawyers.4 Those who had come over in the original companies of planters had passed away. There were no facilities for legal education in this country, and no inducement to incur the expense of seeking one in the Inns of Court at London, for our colonial courts were held by men little versed in law, and often, like the Roman prætors, holding judicial office as an incident of civil office.
The few controversies that might still arise before our domestic tribunals upon the construction and effect of colonial charters or grants belonged rather to the domain of public law. There was slight occasion, except as a mere matter of speculative inquiry, to study the principles governing private corporations, until such bodies were constituted by our own legislatures. The law of municipal corporations, however, became somewhat earlier a subject of investigation.1 The practice of the proprietaries, Governors, or legislatures in every colony, almost from the beginning of the eighteenth century had established it as one of their prerogatives to confer upon the owners or inhabitants of any political division of territory within their jurisdiction the attribute of legal personality.2 This is the essence of every corporation and, to understand all that it implies, some knowledge of the scientific conceptions of jurisprudence is quite necessary.
A franchise of this kind must come from the sovereign power of the State, either directly or by delegation. Such a delegation was fairly implied in favor of the creation of political agencies for local government like towns and cities. But if for these purposes, why not for any which were political and governmental?
This line of reasoning early led to the incorporation of religious societies for the support of churches in most of the colonies, and was followed by Massachusetts, in 1639, so far as to induce the incorporation of a military company, and then of Harvard College, in 1650.
But by this last step a new field was clearly invaded. A college had always been considered by English law as something belonging to the field of ecclesiastical order and superintendence, and to be set up only by special permission from the highest authority. To found such institutions had been claimed as a papal prerogative. After the Reformation certainly, it belonged solely to the Crown. A college could only be founded by license from the King.3 His title, in the form adopted by Henry VIII., was, inter alia, “Fidei Defensor, in terra Ecclesiæ Anglicanæ & Hiberniæ supremum caput;”1 and in an ecclesiastical commission issued as late as 1728 we find George II. styling himself, yet more offensively, “supremum ecclesiæ in terris caput.”2 It is probable that Massachusetts only ventured on the incorporation of Harvard because the execution of Charles I. had extinguished for the time, and, she hoped, for all time, the royal prerogative, and replaced it by the form of a free commonwealth. She paid dearly for this. In the next reign she was called to account for it and certain other excesses of authority, before the Lord Chancellor, on a writ of scire facias, and in 1684 a judgment was entered against her for the cancellation of her colonial charter.3
In 1701, when the plan for establishing a college in Connecticut was taking shape, this ill consequence of the foundation of Harvard was in all men’s minds, and explains the care to avoid giving any definite form of incorporation to the ten Trustees or “Undertakers,” in the Act of the Assembly which is commonly called the first charter of Yale.4
Similar caution dictated the general policy of all the colonial legislatures in matters of this description. Down to 1741, when Parliament intervened and absolutely forbade for the future any American grants of corporate privileges for business purposes,5 there had been but three such, and during the whole of the eighteenth century, including the period subsequent to the Declaration of Independence, the number granted probably did not exceed two hundred and fifty.
A list of these charters, from the first settlements down to 1799, inclusive, which is believed to be approximately correct, follows this chapter and may serve to show how slowly the American business corporation became a factor in our economic life I am aware of no published record of an action at law in which one of them appeared as a party in our courts before 1790.1 By the first decade of the next century such forms of litigation became common, and four such cases appear in one volume of the Connecticut Law Reports,2 which were heard in or before 1809.
Long before the days of the Revolution, many of the enterprises in which the colonists became engaged were so extensive that they could hardly have been undertaken without the aid of aggregated capital, contributed by many, but managed by a few. This was done in rare instances under an English charter, but commonly by means of voluntary associations in the nature of partnerships, acting under a company name. One of the earliest of those of the latter description was the Undertakers of the Iron Works, who were given special privileges by the General Court of Massachusetts soon after the establishment of the Colony. The first grant was in 1643, and a later one, which has sometimes, though I think erroneously, been termed a charter of incorporation, was obtained in 1645. They soon found it necessary to call their managing agent to account in a suit demanding a balance of £13,000 from him, and their affairs occupied much of the time of the General Court for ten or twelve years. They sued in the names of certain persons as their deputies and attorneys, and it was apparently conceded that those who were full partners in the enterprise were personally liable to the creditors of the concern.3
Similar privileges were afterwards given to other undertakers, engaged in the same kind of mining.4
In 1670 a committee of the General Court was authorized to treat with certain “adventurers” who had asked for special privileges as manufacturers of salt, as to granting them a charter, but nothing further was done in regard to it.5
One of these partnership companies was formed for banking purposes in Massachusetts, under the license or sanction of Governor Dudley in 1686.1
In the same year we find in the early records of Pennsylvania one instance of an attempt of a number of landholders to combine without any public license or authority for the joint management and disposition of their interests, under a common seal. The agreement for this purpose was executed at Frankfort-on-the-Main in 1686; probably in ignorance of the English law of incorporation. The name assumed was “The Frankfort Company,” and it appeared under this designation in a suit in the colonial courts in 1708,2 but never, I believe, received a charter.
In 1688, Wait Winthrop and other inhabitants of Massachusetts united with Sir Matthew Dudley and others in England, in a petition to the Crown for a charter of incorporation for a trading company with authority to open mines in New England. The colony instructed its agent at court to object to the grant, urging that any such charter tended to create a monopoly and enhance prices, and trenched upon the field of government. The Attorney-General was consulted by the Lords of Trade and Plantations in regard to the matter, and gave an opinion that there was no legal objection, but the petition was finally rejected in 1703.3
The Ohio Company was incorporated in England in 1749, by a royal charter, for the purpose of dealing in American lands and effecting settlements beyond the Alleghanies, its capital stock being divided into twenty shares.4 The other land companies whose names often appear in our colonial history were, it is believed, with one exception,5 all voluntary associations. Of these, perhaps the best known was the Indiana Company, but it consisted simply of a number of sufferers from Indian depredations, who accepted a grant of three million acres in what is now Indiana from the Six Nations in satisfaction of their claims. The conveyance was made to the King in trust for them according to their respective interests, and the suit brought in the Supreme Court of the United States in 1793 against the State of Virginia to enforce their title was instituted in the names of the equitable owners as individuals.1
Among the moneyed companies with a considerable capital, but unincorporated, which were engaged in active business during the colonial period, several of the most prominent were in Maryland. The Patapsco Iron Works Company, sometimes called the Baltimore Company, was an important concern there as early as 1731.2 Another was the Potomac Company, or Potomac Canal Company, formed for improving the navigation of the Potomac River in 1762,3 and finally incorporated in 1784;4 and a third also deserves mention, the partnership known in 1781 as the Principio Company.
5 Some of these associations received from the colonial authorities almost all the attributes of corporations, except what it was thought impossible to confer, that of artificial personality. Similar privileges were also bestowed on tenants in common of landed property. Thus in 1709, the General Assembly of Connecticut gave the major part of the proprietors of the Simsbury copper mines power to appoint annually a committee with the powers for their management now usual for a board of directors, and even erected a special court to determine any differences that might arise between the owners or those with whom they dealt.6
Adjoining proprietors of low lands or on a water-course were not infrequently given power to associate for improving their property in such manner as a majority might determine. Some of these drain companies were made quasicorporations, and could sue in the name of the treasurer. They were really public agencies, created on account of the interest of the State in regulating a use of land or water shared in by many under separate titles, and it was no part of their purpose to make money for their members. Indeed, their powers extended over those who might not desire to come into them, precisely as is the case with municipal corporations.1
It was one of the greatest of the voluntary joint-stock companies, the “Manufacturing Company” or Land-bank of Massachusetts, whose issue of circulating bills in 1740, against the protest of the royal Governor, to the amount of nearly £50,000, led to the Act of 1741, which has been already mentioned.2 This made unlawful the establishment of or transaction of business by any unincorporated jointstock company, having transferable shares, and consisting of over six persons. Any one violating the statute was subject to the penalties of præmunire, that is, of confiscation and imprisonment, and to payment of treble damages to any merchant suffering by his acts.3 This continued to be the law of the land for every American Colony until the Revolution.
The earliest moneyed corporation, formed for the profit of its members to come into existence on this continent, under a legislative charter, was the “New London Society United for Trade and Commerce in Connecticut,” incorporated perpetually in 1732. It was a rash act. The society was formed for trading with any of “his Majesties Dominions, and for encouraging the Fishery, &c., as well for the common good as their own private interest.”4 It proceeded to set up a land-bank and issue circulating notes, and with consequences so disastrous to the currency of the colony that after a single year the charter was declared forfeited and repealed, a special court of chancery being organized ad litem to wind up its affairs and do what justice it could to the unfortunate billholders.1 The General Assembly also resolved that “although a corporation may make a fraternity for the management of trades, arts, mysteries, endowed with authority to regulate themselves in the management thereof: yet (inasmuch as all companies of merchants are made at home by letters patent from the King, and we know not of one single instance of any government in the plantations doing such a thing), that it is, at least, very doubtful whether we have authority to make such a society; and hazardous, therefore, for this government to presume upon it.”2
This reference to fraternities was probably made in view of certain action taken by the General Court of Massachusetts in the previous century. That was a grant of license to the shoemakers of Boston to form a guild for the better regulation of their trade, and investing them with a monopoly of the market. It was made in 1648 and was to endure for three years only. There was no capital stock, no provision for a common seal, no specification of the name to be assumed, nor were any words used that were indicative of an intention to constitute a legal corporation. Similar privileges were granted at the same session to the coopers of Boston and Charlestown.3
Pennsylvania, in 1768, ventured to incorporate a fire insurance company;4 but not till the Continental Congress led the way was there to be found, after 1741, a commercial corporation of any magnitude under an American charter. In 1781 came the Bank of North America, with an authorized capital of $10,000,000, incorporated by the United States, and soon reincorporated by Pennsylvania.
Up to this time, the only branch of corporation law which had been of real importance in the United States, except that concerning public (including municipal) corporations, was the law of religious societies. These had been freely incorporated both by the royal Governors and the colonial Assemblies, and soon acquired considerable possessions, some of them receiving public grants.1 In the Colonies where there was an established church, charters for any of a different character were obtained with difficulty. The Earl of Bellomont, when Governor of New York, wrote in 1698 to the Lords Commissioners of Trade and Plantations, of one procured by a Dutch Reformed Church from one of his predecessors (and as it was hinted by means of a present of plate) that such a grant was a very extraordinary proceeding “for it is setting up a petty jurisdiction to fly into the face of the government.”2
There were also two missionary societies chartered in England for operations in America, which were much before the public eye. One was “the President and Society for Propagating the Gospel in New England and Parts adjacent” incorporated in 1659 under the Commonwealth, and rechartered soon after the Restoration. This was in the hands of the dissenters.3 The other, the “Society for the Propagation of the Gospel in Foreign Parts,” was chartered in 1701, in the interest of the Church of England, by the procurement of an American clergyman, the Rev. Dr. Thomas Bray, Commissary of the Bishop of London for Maryland.4 This soon sent its missionaries over all the colonies. Grants of land were occasionally made to it, and it not infrequently stood behind the parish clergy, when they were setting up the claims of the church to property which had been devoted to pious uses.5
It has been already said that the large business enterprises of the earlier colonists had been managed through the form of voluntary association in a joint-stock company. Such organizations were good at common law, and when the Act of Parliament by which they were prohibited in the colonies after 1741 fell with the Revolution, the old practice was naturally resumed.
Alexander Hamilton organized in this manner the Bank of New York,1 which did a large business without a charter until 1791.
Land companies were formed in the same way. The Connecticut Gore Land Company, which bought in 1795 the Connecticut title to a long gore of territory west of the Delaware River, was one of this kind, and the conveyance was taken to five of the members, in behalf of all the shareholders.2
The table appended to this chapter shows that no considerable impulse towards the granting of business charters was felt in any of the United States until after the adoption of the national Constitution. This first put our foreign commerce and that between the States upon a solid footing. It first also gave to capital a sense of security, for the government which it replaced had been found from the first too weak even to protect itself.
The States, however, for many years after 1789 dealt such charters out with a sparing hand, and most of the large business enterprises were still carried on by voluntary associations. The cumbersome methods of combining capital which were endured originally from the cost of getting a royal charter were followed after the Revolution, largely by the force of tradition. At the opening of the two centuries of which this volume particularly treats, there had been but three joint-stock commercial companies under full charters existing in England,3 and the monopolies enjoyed by the “regulated” companies had fallen under the ban of the Parliament which came in with William and Mary. So late as 1717 the Attorney-General and Solicitor-General had advised the rejection of an application for the incorporation of a London marine insurance company, as being a dangerous experiment.1 It took the descendants of the English colonists in America a long time to emancipate themselves from their inherited prejudices against private corporations. It was the same sentiment that put so many restrictions against voting in proportion to stock interests into our earlier charters, and which looks to-day with disfavor and suspicion upon the modern “trust,” whether its business be fairly or unfairly conducted.
Of the charters granted prior to 1800 for moneyed corporations, two-thirds were of a quasi-public character, and such as carried or might properly have carried the right of eminent domain. Most of these were for the improvement of transportation facilities by roads, bridges, and canals, or by deepening rivers or harbors. Of the corporations whose business would bring them into daily contact with the people at large, irrespective of locality, there were less than eighty, the most considerable of which were twenty-eight banks and twenty-five insurance companies.
By this time, however, the number of public and municipal corporations, religious societies, academies, library companies, and public quasi-corporations, such as drain companies, had become very large, and probably approached two thousand. The principle of freedom of incorporation or organization under general laws had been applied to them in several of the States, although only extended thus far to a single class of private corporations, and by a single State.2
What now had been accomplished towards the formation of an American law of corporations by the close of the eighteenth century?
Law is the philosophy of society. It must reflect the political and economic views of the State for which it speaks, or it speaks in vain. It must answer the needs of the people who are subject to it, or they will throw it aside. Under the English and American system of government to keep Law and Society in adjustment to each other is mainly the office of the Judges. The people believe that their will is, on the whole, more faithfully interpreted and fulfilled by courts than by legislatures. The legislature hears the loudest talkers, and hurries to the relief of the last sufferer, without always stopping to consider how helping him will affect the rest of the community. The courts act more slowly. They do not act at all unless parties in interest have had a fair opportunity to be heard. They take that judicial notice of the lessons of history and the nature of things, which stands for the common knowledge and common sense of the people at large. They administer a science which rests on reason, and proclaims as one of its fundamental principles: Cessante ratione, cessat et ipsa lex.1
It was with these powers that the American judiciary first took up the work of bringing the English law of corporations into harmony with the social conditions of the colonies.
Our political conditions differed widely from those of the mother country: our social conditions more widely still.
There one class of corporations—the corporation sole—had been created for the benefit of an hereditary crown and an established church. We had got rid of one, and were, wherever the other still existed, steadily advancing towards its destruction.
The English corporation held its franchise as a special favor. It was of the nature of a monopoly; perhaps a reward for party service; perhaps gained by a purchase for which some minister or court favorite received the price.
The American corporation could only come into existence legitimately for the public good. Such franchises, under the principles of our government, could only be dealt out with an equal hand.
These considerations early led our courts to certain definite conclusions as to the nature of corporate rights, which differed essentially from those of English law.
Before the Revolution the people had accustomed themselves to the assertion that their charters had made them certain irrevocable grants, one of which was that they were to possess all the rights and privileges of Englishmen. From this standpoint, it was a logical conclusion that they could not be taxed without their own consent. To do so was to alter the colonial charters, and in the language of Franklin, they could not be altered, “but by consent of both parties, the King and the colonies.”1 An executed grant is inviolable because it is a contract. The party who made it has lost certain rights; the party who received and accepted it has acquired them; and each must stand by his bargain.
The same effect was attributed under the proprietary charters, both to them and to such charters as the proprietaries might themselves grant by their delegated authority.2 President Clap in 1763 had set up, and successfully, a similar claim as to the charter of Yale College, when the General Assembly were threatening to amend it without the consent of the corporation.3
Here then was one fait accompli. It became such by the Revolution, if not before it. The Declaration of Independence proclaimed this doctrine of the inviolability of grants of franchises, when it gave as a reason for renouncing all allegiance to George III. that he had assented to Acts of Parliament “for taking away our charters . . . and altering fundamentally the powers of our governments.”
A different theory was asserted and acted upon by Pennsylvania in 1785, when she repealed the charter which she had granted to the Bank of North America, notwithstanding the masterly argument of James Wilson in support of its vested rights.4 Two years later, however, the injustice was redressed by a new charter, and as soon as the question whether a charter was a contract came before a judicial body it was unhesitatingly (in the Dartmouth College Case) decided to be such, and therefore to be inviolable.1
Another doctrine may be said to have become established by popular acquiescence before the opening of the nineteenth century. It is that a corporation can acquire a legal existence under the laws of several States, by accepting a charter from each; and so in each be a corporation, although holding its meetings in but one of them.
The first of these organizations was the Bank of North America, chartered first by the Congress of the United States in 1781, and then in 1782 by Pennsylvania2 and New York, and in 1786 by Delaware. This is still in existence under the form of a national banking association. Another was “The Corporation for the Relief of the Widows and Children of Clergymen in the Communion of the Church of England in America,” which received charters from New York, New Jersey, and Pennsylvania (1785). Each authorized the annual meetings to be held in any of these States, according to such rotation as it might appoint.3 This organization was found to be unwieldy, and in 1797, by concurrent legislation on the part of these three States, provision was made for dividing it into three new corporations. The method devised, as set forth in the new Pennsylvania charter,4 was a grant from each State to its citizens, who were members of the “aggregate” or in modern parlance “consolidated” corporation, to draw off and form a separate one, on such terms as they might agree on with their fellow-members from New York and New Jersey for the division of the corporate funds. When such a division should be agreed on, the seal of the old corporation was to be broken, and the Pennsylvania citizens were to become “The Corporation for the Relief of the Widows and Children in the Communion of the Protestant Episcopal Church in the Commonwealth of Pennsylvania,” with a new seal of their own.
The courts of the nineteenth century have often had occasion to define the nature and incidents of such consolidated corporations; but they were an inheritance from the century before, and in that the legal conception of a dual personality in bodies of this nature had become familiar.
In respect to the powers of legislation granted by the colonial charters, the popular construction, as has been seen, had always favored extreme liberality. This was in accordance with the general English doctrine that as a corporation was a person, it had all the rights of a person, in the absence of a particular exception or prohibition. This lay at the root of much of the opposition to the ratification of the Constitution of the United States. As Patrick Henry put it, in addressing the Virginia Convention, the Congress which it created could do everything that it was not forbidden to do.1 But as soon as the courts set themselves to constructing an American theory of corporate personality, the judicial position became antagonistic to what had been the common opinion before the Revolution. All our circumstances were changed. It had been our interest to make the most and claim the most of whatever franchises we had obtained from the Crown or the agents of the Crown. Americans had been only recipients of corporate privileges. Now they began to be givers, also. They had been but too glad to repeat the doctrine of the English Judges that corporations possessed power to do anything which they had not been expressly or by fair implication forbidden to do.2 Their own Judges now began to assert that corporations could do nothing which they were not expressly or by fair implication authorized to do.3
Starting with this assumption there was less to fear from free grants of corporate franchises. They could be used for the proper purposes of the corporation, but for those only. Hence the principle of free incorporation under general laws early found its way into American legislation, while even now it is in England subject to great restrictions. Hence also special charters have been far more freely granted with us, and corporation law has become a much more important and extensive branch of jurisprudence.1 Hence also the corporations of one State were for a long time encouraged to engage freely in business in any of the others, and are still admitted for this purpose on easy terms.2 Up to 1839, on the other hand, no case was to be found in the English reports of a suit brought by a foreign corporation on an English contract.3
The first general incorporation law, since the days of Queen Elizabeth, was enacted by New York in 1784. Delaware followed in the same line in 1787,4 and Pennsylvania in 1791.5 The system thus early inaugurated and since so extensively pursued, of free incorporation, offered to all on equal terms, removed the foundations of the common-law doctrine that to charter a corporation indicated special confidence in those named as corporators, and so implied a trust in the artificial person thus created which justified a liberal construction of its rights and powers. In its application to municipal corporations not only was this view early abandoned by our courts, but they have gone to what might be regarded as the other extreme and hold that no powers are implied in their favor which are not either such that their possession is necessary for the proper exercise of those expressly granted, or indispensable to the fulfilment of the public purposes to be attained.6
[1 ]This Essay appeared as pp. 4-16, Chap. I, of “The Elements of Mercantile Law,” 1891 (London: Wm. Clowes & Sons), a course of lectures delivered before the Incorporated Law Society. The same passage was afterwards reprinted in the late Professor Huffcut’s “Cases on Bills and Notes.”
[2 ]A biographical notice of this author is prefixed to Essay No. 7, in Vol. I of these Essays.
[3 ]Chalmers, Bills, Pref. p. 36.
[4 ]Park, I. Pref. 43.
[1 ]Zouch, Jurisdiction of the Admiralty (1686), p. 89.
[2 ]Blackstone, Commentaries, I. 273; IV. 67.
[3 ]Luke v. Lyde, 2 Burr. at p. 887.
[1 ]M’Lean v. Clydesdale Bank, 9 App. C. at p. 105.
[2 ]Macdonell, Preface to Smith’s Mercantile Law, p. 82.
[3 ]Coke, Inst. IV. 272.
[1 ]Bracton, f. 334.
[2 ]Blackburn on Sale, 1st ed. p. 207.
[3 ]Selden Society, Vol. II. pp. 130 et seq.
[1 ]Black Book of Admiralty, Rolls Series, II. 23.
[1 ]Sir J. Fortescue.
[2 ]E. g. the Court established by 43 Eliz. c. 12, of which eight “grave and discreet merchants” were to be members, who were to determine all insurance cases in a brief and summary course, without formalities of pleadings or proceedings.
[3 ]Vide post, pp. 29, 30.
[1 ]Chalmers, Bills, Pref. p. 44.
[2 ]Cf. Sarsfield v. Witherby (1692), Carthew, 82.
[3 ]2 T. R. 73.
[1 ]2 Burr. 883.
[2 ]Cf. the judgment of Willes, J., in Dakin v. Oxley, 15 C. B. N. S. 646, for similar authorities.
[3 ]Campbell’s Lives of the Lord Chief Justices, II. 407, note.
[1 ]This Essay was first published in the Law Quarterly Review, vol. XVII, 1901, pp. 56-76.
[2 ]Barrister of the Inner Temple, 1891; Oxford University, M. A. 1891, B. C. L. 1891.
[3 ]The principal authorities referred to in this article are:—A Dialoge or Confabulation between Two Travellers. By William Spelman, circa 1580. Edited by J. E. Latton Pickering. London, 1896. Statutes of the Realm, 1810-1824. Prolusiones Historicae. By the Rev. E. Drake. Salisbury, 1837. Commentaries on the City of London. By George Norton. 1869. English Gilds. By Toulmin Smith. London, 1870. Drei volkswirthschaftliche Denkschriften. By Reinhold Pauli. Göttingen, 1878. The Gild Merchant. By Charles Gross, Ph. D. Oxford, 1890. A History of the Custom Revenue in England. By Hubert Hall. London, 1892. The Growth of English Industry and Commerce. By W. Cunningham, D. D. Cambridge, 1896.
[1 ][Here the author, in two pages omitted, comments on certain modern English cases.—Eds.]
[1 ]Cunningham, English Industry and Commerce, i. 290, 291.
[2 ]Rymer, Foedera, ii. 202.
[1 ]Cunningham, English Industry and Commerce, i. 293.
[3 ]Ibid., i. 418.
[1 ]Gross, Gild Merchant, i. 144.
[1 ]A Treatise concerning the Staple, in Pauli, Drei volksw. Denk., pp. 19, 32.
[2 ]27 Edw. III. c. 3, 14.
[3 ]14 Rich. II. c. 1.
[4 ]8 Henry VI. c. 17.
[5 ]Ibid. c. 18.
[1 ]27 Edw. III. c. 2.
[2 ]Norton’s City of London, 324.
[3 ]27 Edw. III. c. 2.
[4 ]Ibid. c. 8.
[5 ]Ibid. c. 9.
[6 ]Hall’s History of the Customs, i. 34. Chapter 8 of 27 Edward III gave jurisdiction to the staple courts to try felonies committed by or against merchants of the staple or their servants, but this power was withdrawn by 36 Edward III. c. 7.
[7 ]Ibid. i. 33.
[1 ]27 Edw. III. c. 21.
[2 ]P. 419.
[1 ]A cocket was a parchment scroll sealed and delivered by the officers of the custom-house to merchants as a warrant that ‘their merchandises are customed.’
[2 ]Seyer’s Bristol Charters, pp. 52 et seq.
[3 ]Gross, Merchant Gild, i. 146, 147 and notes.
[1 ]27 Edw. III. c. 8.
[2 ]27 Edw. III. c. 5.
[3 ]Ibid. c. 21.
[4 ]Blackburn on Sale, 317 (2nd ed.); and see Malynes, Lex Merc. 311.
[1 ]Gross, Gild Merchant, i. 142, n. 7.
[2 ]Duke in his Prolusiones Historicae suggests that the word staple originally meant padlock, and that its application in this sense arose from the fact that when the wares, on which customs were payable, were brought to the seaports for exportation, they were bonded in the royal warehouses under lock and key, until such time as they could be sold and the duties on them paid from the proceeds; that in course of time the word was applied to the goods so treated, and, lastly, to the merchants who dealt in the goods. But this seems merely fanciful. See Skeat, Etym. Dict. s. v. Staple, and Littré, s. v. Étape.
[3 ]Comm. i. 314, 315.
[1 ]2 Edw. III. c. 9.
[2 ]Hall’s History of the Customs, i. 215.
[3 ]27 Edw. III. stat. 2.
[4 ][Here the author, in six pages omitted, discusses the shifting of the staple towns and the date of the origin of the Company.—Eds.]
[1 ]Hall’s History of the Customs, i. 36.
[1 ]Hall’s History of the Customs, i. 37-39.
[2 ]Cunningham’s English Industry and Commerce, ii. 21.
[1 ]21 Q. B. D. 160.
[1 ]This Essay was first published in the Columbia Law Review, vol. II, 1902, pp. 470-485, under the title “What is the Law Merchant?”
[2 ]Dwight professor of law in Columbia University since 1891. Hamilton College, A. B. 1869, LL. B. 1872, LL. D. 1895; professor of law and history in Hamilton College, 1882-1887; professor of law in Cornell University, 1887-1891.
[3 ]Ewart on Estoppel, 370.
[1 ]Bracton, De Legibus Anglicæ, 1. v. f. 334 a.
[2 ]Ibid. 1. vi, 444 a.
[3 ]Pollock and Maitland’s History of English Law, Vol. 2, p. 212. Select Civil Pleas, pl. 146 (1203).
[4 ]Clermont’s Fortescue, 121, note.
[5 ]Ibid. 120.
[1 ]Coke. Fourth Institute 272.
[2 ]3 Blackstone’s Commentaries 33. Blackstone rejects the etymology of pepoudrous given by Coke, and prefers that suggested by Barrington, in his Observations on the Statutes, who derives the term from pied puldreaux, which, in old French, signifies a pedlar. “The court of Pipowder” (as Barrington spells the word,) is “the court of such petty chapmen,” or pedlars and “low tradesmen” as resort to fairs and markets. See Barrington’s Observations, (2d ed. 1766) 321, 322. To Barrington and Blackstone, courts pepoudrous were only a name. It was easy for them to picture these tribunals as of small consequence, and as dealing with trifling disputes. In Coke’s time, they held an important place in the judicial system. Two centuries earlier, they had so extended their jurisdiction by an ingenious fiction as to call forth an act of parliament reducing them to their original limits. 17 Ed. iv. Ch. 2.
[3 ]Sir Henry Spellman offers a very different and less complimentary explanation of the judicial habit of limiting sittings to the forenoon. This is his language. “It is now to be considered why high courts of justice sit not in the afternoon . . . Our ancestors and other northern nations being more prone to distemper and excess of diet used the forenoon only, lest repletion should bring upon them drowsiness and oppression of spirits. To confess the truth our Saxons were immeasureably given to drunkenness.” He adds that judges do sit from morning to evening, in great causes, but without dinner or intermission, for “being risen and dining, they may not meet again.” It is because of this tendency to drunkenness, he thinks, that jurors were prohibited from having meat, drink, fire or candle light “till they agreed of their verdict.”—Spellman’s The Original Terms (1614), Sec. V. Chap. 1.
[1 ]27 Ed. III. Statute 2 (1353:) This statute enacted “That the staple of wools, leather, woodfels and lead shall be perpetually holden at the places underwritten, that is to say, for England, at Newcastle upon Tine, York, Lincoln, Norwich, Westminster, Canterbury, Chichester, Winchester, Exeter and Bristol; for Wales, at Kaermerdyn; and for Ireland at Devylen, Waterford, Cork and Drogheda.”
[2 ]Ibid. ch. 2.
[3 ]Ibid. ch. 19, § 2.
[4 ]Ibid. ch. 21 and ch. 8.
[1 ]Ibid. ch. 5.
[2 ]Ibid. ch. 19, § 2.
[3 ]Cunningham’s Western Civilization, Vol. 2, p. 95.
[1 ]Malynes’ Lex Mercatoria, Chap. XVI. p. 308 (1622).
[2 ]27 Ed. III, St. 2, ch. 8, § 7.
[3 ]Norton’s History of London, Book II, Chap. XIX. The ninth charter of Henry III, granted 1268.
[4 ]Clermont’s Fortescue, 120.
[5 ]The author refers to 27 Ed. III St. 2 and quotes at length from ch. 21.
[1 ]Coke’s Fourth Institute, Chap. XLVI.
[2 ]The first edition was published in 1622.
[1 ]Lex Mercatoria, Chap. XIV.
[2 ]Lex Mercatoria, p. 303.
[3 ]Ibid. p. 337.
[4 ]Published 1661. See pp. 126, 127.
[5 ]Prepared for publication prior to 1663, but first published in 1686.
[6 ]Published in 1669.
[1 ]Davies on Impositions, written about 1600 and first published 1656.
[2 ]As Dr. Zouch refers to this work as a “manuscript tract,” it would appear that his own treatise must have been written before the publication of “The Impositions” in 1656.
[3 ]The Jurisdiction of Admiralty, 89.
[1 ]Prynne’s Animadversions, 83. On pp. 95, 96, he speaks of the Admiral’s Court as proceeding according to the “law of merchants, Oleron and the civil law,” and on p. 102 he refers to the “civil law, of merchants and Oleron.”
[2 ]Coke intimates that the only staple court in existence when he wrote his Fourth Institute was that “holden at the Wool Staple at Westminster.” Fourth Institute, p. 237, Prynne says “the Court of the Mayor of the Staple is now expired,” Animadversions, p. 175.
[3 ]It is rather curious that these courts gained a new lease of life in some of the American Colonies. In 1692 New York passed an act “for the Setling of Affaires and Marquets in each respective City and County throughout the Province,” which provided for a “Governor or Ruler” of each fair with power “To have and to hold a court of Pypowder together with all Libertys and free customs to such appertaining,” and to hear “from day to day and hour to hour, from time to time all Occasions plaints and pleas of a Court of Pypowders together with summons, attachments, arrests, issues, fines, redemptions and commodyties and other rights whatsoever to the same Courts of Pypowder any way appertaining.” In 1773, these provisions were extended to new counties and to additional fairs and markets authorized in newly settled parts of the colony. The Colonial Laws of New York, Vol. 1, p. 296; Vol. 5, p. 589.
[1 ]Macdonell’s Introduction to Smith’s Mercantile Law. 2d ed., lxxxiii.
[2 ]Ibid. Scrutton, Elements of Mercantile Law, Chap. I.
[1 ]Scrutton, Elements of Mercantile Law, Chap. I.
[2 ]An excellent illustration of this is afforded by the Bank of England v. Newman, Ld. Raymond, 442 (1699). Lord Holt told the jury that when a person sold a note payable to bearer, without indorsing it, he did not become liable to the buyer; but the jury found a verdict against the seller who had not indorsed the note.
[3 ]Campbell’s “Lives of the Chief Justices.” Vol. 2, 407, note.
[4 ]Not infrequently were the verdicts of these mercantile juries upset by Lord Mansfield. In Grant v. Vaughan, 3 Burr, 1516 (1764) the Chief Justice left to a special jury the question whether a check payable to bearer was “in fact and practice negotiable.” The jury found it was not. Whereupon, Lord Mansfield and his colleagues Justices Wilmot and Yates set aside the verdict. The Chief Justice said he thought he was leaving to the jury “a plain fact upon which they could have no doubt,” but upon further consideration, he had reached the conclusion that he ought not to have left the question to them, “for it is a question of law whether a bill or note is negotiable or not, and it appears in the books that these notes (checks to bearer) are by law negotiable.”
[1 ]2 Burrows 882. (1759.)
[1 ]Judge Story in 2 Gallison (U. S. Circuit Court) 398, 472 (1815).
[2 ]McLean v. Clydesdale Bank, 9 App. Cases, pp. 95, 105 (1883).
[1 ]Quoted in Zouch’s “Jurisdiction of Admiralty,” 128.
[2 ]That this distinction is one of practical importance to-day is shown by Preston v. Fitch, 137 N. Y. 41; 33 N. E. 77 (1893).
[3 ]Lord Thurlow in Lyster v. Dolland 1 Ves. Jr. at p. 434 (1792).
[4 ]Hammond v. Jethro, 2 Brownlow 99, note.
[1 ]Jeffreys v. Small, 1 Vern. 217.
[2 ]Laws of Oleron, by Guy Meige, chap. xxvii. This appears as chap. xxv. of the Laws of Oleron, as they are printed in the Appendix to Godolphin’s View of Admiralty Jurisdiction. 1661.
[3 ]Gibson v. Carruthers, 8 M. & W. 321, 338 (1841).
[4 ]Blackburn on Sales (2d ed.) 317, et seq.
[5 ]Kendal v. Marshal, 11 Q. B. D. 356, 364.
[1 ]Ibid. at p. 368.
[2 ]Lex Mercatoria, p. 303.
[3 ]Cited in Blackburn on Sales (2d ed.) 318.
[1 ]This Essay was first printed in the Law Quarterly Review, 1893, vol. IX, pp. 70-85.
[2 ]A biographical note of this author is prefixed to Essay No. 2 in Volume I of this Collection.
[3 ]Cf. Byles, preface to 1st edition; Chitty, Bills of Exchange, 11th edition, pp. 1-3; Jencken, Compendium, &c., Introduction.
[1 ]E. g. the late Sir Alexander Cockburn, in Goodwin v. Robarts, L. R. 10 Exch. pp. 347 et seq.
[2 ]Chitty, p. 2; Jencken, p. 1.
[3 ]In the 3 Ric. II, c. 3 (Chitty, p. 2).
[4 ]Martin v. Boure, Cro. Jac. 6 (ib.).
[5 ]L. R. 10 Exch. p. 347.
[6 ]Versuch einer historischen Entwickelung des wahren Ursprungs des Wechselrechts. (Göttingen, 1797.)
[7 ]Wechselrechtliche Abhandlungen. (Leipzig, 1859.)
[8 ]Studien in der Romanisch-kanonistischen Wirthschaft- und Rechtslehre. (Berlin, 1874.) [The valuable results of Goldschmidt, in his Handbuch des Handelsrechts, Pt. I, Universalgeschichte, 3d ed., 1891, should be compared.—Eds.]
[1 ]Printed in Martens, App. p. 18.
[2 ]Martens, App. p. 107.
[3 ]Recueil Général des anciennes Lois françaises, by Isambert, Jourdan, and De Crusy (ed. 1825), x. 451-6. The Ordinance is dated 1462.
[4 ]There appears to have been an earlier charter by Charles VII, in 1443, but this is not printed (cf. vol. ix. p. 119).
[1 ]App. p. 2, where Pegoletti’s 45th chapter is reprinted.
[2 ]Salvetti, Antiquitates Florentinae (1777), § 93, p. 62.
[1 ]Printed by Brunner, Zeitschrift für Handelsrecht, xxii. 8. Martens (p. 65) speaks of an example of the year 1325, quoted by Baldus de Ubaldis.
[1 ]Zeitschrift für Handelsrecht, xxii. 7.
[2 ]As to the dates of the various codes comprised in this compilation, cf. an interesting note by Brunner, Zeitschrift für Handelsrecht, xxii. 4, n. 5. They are much later than the Bruges decisions.
[1 ]It is well known that, in the Middle Ages, the town-corporations frequently acquired or absorbed the jurisdiction formerly belonging to the local Schöffen or scabini.
[2 ]Printed in Martens, App. pp. 56-63.
[1 ]Printed in Zeitschrift für Handelsrecht, xxii. 22-24.
[2 ]According to the Bolognese Ordinance of 1454, the protest had to be made before a judex (Martens, App. p. 61). Had this precaution been adopted in the case quoted, in all probability the fraud would have been discovered.
[1 ]Schröder, Lehrbuch der deutschen Rechtsgeschichte, p. 709. [Compare Brunner’s essay on The Early History of the Attorney in English Law, translated in the Illinois Law Review, 1908, III, 257.—Eds.]
[2 ]Cf. Loersch and Schröder, Urkunden zur Geschichte des deutschen Rechtes, Nos. 5, 25, 56, 60, 63, 68, 74, 81, 105.
[3 ]Zeitschrift, xxii. p. 103.
[4 ]Das französische Inhaberpapier, p. 30 and passim; [now reprinted in his Forschungen zur Geschichte des deutschen und franzosischen Rechts, 1894.—Eds.]
[1 ]See this idea worked out by Sohm, Fränkische Reichs- und Gerichts-Verfassung, p. 24-26.
[2 ]E. g. in questions of Dower and the Traditio per cartulam.
[3 ]Codex Cavensis, synopsis, p. ix. (It will interest British readers to know that to the expense of the edition there contributed, amongst others, the ‘Praesidens rebus Regni Britannici’ and the ‘Academia cui titulus Innertemple.’)
[1 ]Loersch and Schröder, No. 32.
[2 ]Memorie di Lucca, No. 424.
[3 ]Ib. No. 532.
[1 ]Cf. Codex Cavensis, vol. i. No. 11; vol. ii. Nos. 11, 221, 225, 242.
[2 ]Memorie di Lucca, v. 2, No. 825.
[3 ]Codex Cavensis, ii. No. 213.
[4 ]Codex Cavensis, ii. No. 218.
[5 ]See the examples quoted in the Zeitschrift, xxii. 505-510.
[6 ]Ordinance, xliii. § 3 (Martens, App. p. 57).
[1 ]Fabricius, Das älteste Stralsunder Stadtbuch, p. 67, No. 526 (also printed in Loersch and Schröder, No. 152).
[2 ]Zeitschrift, xxiii. p. 228.
[3 ]Das französische Inhaberpapier, App. 29, 57.
[4 ]See the rare examples quoted by Gareis, Zeitschrift, xxi. p. 372 n.
[5 ]Loersch and Schröder, No. 159.
[6 ]Loersch and Schröder, No. 161 (13th cent.).
[7 ]Ib. No. 294 (15th cent.).
[8 ]Das französische Inhaberpapier, p. 50 (13th cent.).
[1 ]De Blasius. Series Principum Salerni, App. p. iii, No. 1. Doubtless with the representative clauses the transferee had to show his authority (see the literam creditivam of the Stralsund entry). [An interesting controversy over the correctness of Brunner’s theory in this respect, as relating to the Codex Cavensis material, has arisen between Brandileone and Schupfer, two distinguished Italian legal historians; Brandileone, Le così dette clausole al portatore nei documenti medievali italiani (in Rivista di diritto commerciale e marittimo, 1903, vol. I, No. 5); Schupfer, Il diritto privato dei popoli germanici con speciale riguardo all’ Italia, 1907, vol. I, p. 214.—Eds.]
[2 ]Loersch and Schroder, No. 317.
[1 ]See Madox, Formulare Anglicanum, Nos. 641-645, 647-649, &c. There is a bond in 27 Hen. VIII. made payable to the king, his executors or assigns, but the exception in favour of the crown is well known.
[2 ]E. g. Nos. 107, 119.
[3 ]Earle, Land Charters, pp. 130, 139, 141, &c. These are grants by private owners. Royal and episcopal grants by boc occur much earlier, and there is a doubtful instance of a private grant in 692 (p. 13). The royal consent, however, seems to have been required even for private grants. For other early examples, cf. Birch, Cartularium Saxonicum, Nos. 30, 57, 81, &c.
[4 ]Loersch and Schröder, No. 32.
[5 ]Monumenta Germaniae, Leges, iv. p. 595. (Extracts given in Loersch and Schröder, pp. 69-70.)
[1 ]If the purchaser were an Alamman there was added the mysterious wandilanc.
[2 ]This is evident from the early example of the Edict of Rothar, caps. 359-366. (Mon. Germ. Leges, iv. 82.)
[3 ]The carta is sometimes expressly described as firmitas (Memorie di Lucca, v. 2, No. 14). [The position of the carta in conveyances is shown by the fact that it was not written on till after the traditio.]
[4 ]Loersch and Schröder, p. 69.
[5 ]Memorie di Lucca, v. 2, Nos. 18, 24, 26, 28, 30, 31, 33-37, 39, 44-46, &c. Codex Cavensis, Vol. i., Nos. 11, 13, 14, 15, 16, 20, 24, 26, &c. The penalty was usually in duplum, but a fixed sum was frequently named.
[1 ]Loersch and Schröder, No. 17.
[2 ]Ib. No. 18.
[3 ]Ib. No. 213. For earlier examples see Rozière, Recueil Général des Formules, I, Nos. 378-382.
[4 ]Memorie di Lucca, v. 2, No. 424.
[5 ]Ib. No. 285; v. 3, Nos. 1107, 1148.
[6 ]Loersch and Schröder, No. 159.
[7 ]Ib. No. 161.
[1 ]Ante, p. 55.
[2 ]Coutumes d’Anvers, vol. iv. p. 32, art. 42 and 43.
[3 ]Loersch and Schröder, No. 275.
[4 ]I. e. probably renuncians exceptionem pecuniae non numeratae vel aliam exceptionem de jure competentem. (See Bolognese Ordinance, xliii. § 1, Martens, App. p. 56.)
[1 ]Quoted in Brunner, Das französische Inhaberpapier, p. 73.
[2 ]Loersch and Schröder, No. 147.
[3 ]Ib. No. 196.
[4 ]Ante, p. 55.
[1 ]Martens, App. p. 18.
[2 ]Das französische Inhaberpapier, p. 68.
[4 ]Tit. vi. of the Ordinance of 1673 lays down specific rules on the subject of Les Intérêts du change et du rechange.
[5 ]Quoted in Das französische Inhaberpapier, p. 74.
[1 ]Isambard et De Crusy, xix. p. 100.
[2 ]Auerbach, Jüdische Obligationenrecht, i. 283 and note.
[1 ]This Essay first appeared as Note A to the case of Mandeville v. Riddle, in the Appendix to Cranch’s Reports of Cases in the Supreme Court of the United States, vol. I, 1804. Large portions have been omitted, chiefly the detailed quotations of cases.
[2 ]1769-1855. Harvard College, A. B. 1787, LL. D. 1829; admitted to the Massachusetts Bar in 1790, and to the Washington Bar in 1794; assistant judge of the Circuit Court of the District of Columbia, 1801-1805; chief justice of the same, 1805-1855.
[1 ]This Essay first appeared in the Columbia Law Review, 1908, vol. VIII, pp. 1-17, and has been revised by the author for this Collection.
[2 ]Professor of law, and dean of the faculty of law, in George Washington (Columbian) University, since 1903. Washington & Lee University, A. B. 1892, M. A., 1893, Ph. D. 1895, LL. B., 1897; professor of law in the same, 1897-1902; dean of the law department in the same, 1902-3.
[3 ]E. g., Joyce on Insurance (1897), Vol. I, p. 14.
[1 ]Livy, lib. 23, c. 49. “* * * ut quæ in naves imposuissent ab hostium tempestatisve vi publico periculo essent.”
[2 ]Livy, lib. 25, c. 3.
[3 ]It is stated by Dr. August Böckh that in the time of Alexander the Great a certain Macedonian grandee of Rhodian birth living at Babylon, named Antimones, devised a plan of insuring masters against the loss they might suffer through the escape of slaves required to serve in the army, the insurer requiring a payment of eight drachmas for each slave, and paying to the master of a lost slave the estimated value of such slave. See The Public Economy of the Athenians (Second German Ed., Lamb’s Translation), p. 101.
[4 ]Suetonius, lib. 5, c. 18. “Nam et negotiatoribus certa lucra proposuit, suscepto in se damno, si cui quid per tempestates accidisset, et naves mercaturæ causa, fabricantibus magna commoda constituit.”
[5 ]Malynes, Lex Mercatoria, (1st ed., 1622) 146.
[6 ]Cicero, Epist. ad Fam., lib. II, Epist. 17. “Laodiceæ me prædes accepturum arbitror omnis pecuniæ publicæ, ut et mihi et populo cautum sit sine vecturæ periculo.” But the course suggested by Cicero can hardly have been in general use, for, according to Plutarch, when Cato the Younger wished, about the same time, to transport a large sum of public money from Cyprus to Rome he adopted the following curious device to prevent its loss at sea. The money was placed in a large number of small casks, to each of which was attached by means of a long rope a large block of cork. By this means, we are told, the money was carried to Rome with very little loss.
[1 ]See Moldenhauer, Das Versicherungswesen, p. 9; Walford, Encyclopædia of Insurance, Vol. I, p. 333. In the speech against Lakritos attributed to Demosthenes, but now thought to have been written by some other Athenian advocate about 341 bc, there is set forth a bottomry bond which contains provisions for general average contribution, and other terms strikingly like those of a modern bottomry bond. For the provisions of the Roman Law governing maritime loans, see De nautico fenore, Dig. xxii, 2; Code, iv, 33.
[2 ]Grotius, De Jure Belli et Pacis, ii, 12, 3, 5.
[3 ]Bynkershoek, Quæst, Juris Pub. i, 21. “Adeo tamen ille contractus olim fuit incognitus, ut nec nomen ejus, nec rem ipsam in jure Romano deprehendus.”
[4 ]System of the Law of Marine Insurances (1786). This most careful and learned work by Sir James A. Park (afterward Mr. Justice Park of the Common Pleas) is the first orderly treatment in English of the law of insurance. It reflects much of the spirit and genius of Lord Mansfield, with whose whole judicial career the author was personally familiar. (See especially his summary of the argument against the ancient origin of insurance at p. lxi, 8th ed.)
[1 ]Walford, Encyc. Ins., Vol. IV, p. 380.
[2 ]Walford, ibid.; Martin Saint-Léon, Histoire des Corporations de Metiers, p. 23 et seq.
[3 ]Martin Saint-Léon, Histoire des Corporations de Metiers, p. 24.
[1 ]Palgrave’s Dict. of Political Economy, Vol. II, p. 209.
[2 ]See in general Brentano, The History and Development of Guilds.
[3 ]Lambert, Two Thousand Years of Guild Life, p. 43 et seq. Palgrave’s Dict. of Political Economy, Vol. II, p. 209.
[4 ]Brentano, The History and Development of Guilds, p. 11; Cheyney, Industrial and Social History of England, p. 72.
[1 ]Palgrave’s Dict. of Political Economy, ubi supra; Brentano, The History and Development of Guilds, p. 20.
[2 ]Livy, lib. 23, c. 49; lib. 25, c. 3.
[3 ]§§ 23, 24 (ed. Harper).
[1 ]In Chapter XXIII of The Public Economy of the Athenians, by August Böckh (Second German Ed., Lamb’s Translation) is found an interesting account of bottomry loans among the Athenians.
[2 ]See the statement of these conflicting claims in Il Contratto di Assecuratione nel Medio Evo, by Enrico Bensa, 18 p. 42 et seq. Richards, in his Insurance (1892), states, without citing authority, that “a Chamber of Assurance was established in Bruges as early as 1310.” This can scarcely be correct.
[3 ]Bensa, Il Contratto di Assecuratione nel Medio Evo, p. 48. Goldschmidt, Handbuch des Handelsrechts, p. 354, et seq. This valuable and scholarly treatise contains an exceedingly interesting account of the origin of the practice of insurance in the Middle Ages. At p. 360 the author expresses the opinion that reference is made to insurance in the following extract from an ordinance of the City of Pisa enacted prior to 1233:
[1 ]Extracts from Books of Francesco Del Bene e Compagnia di Ferenze, taken from Bensa, Il Contratto di Assecuratione nel Medio Evo, p. 183:
[2 ]This curious form is probably due to the surviving influence of bottomry loans previously of frequent occurrence, but prohibited by the church between 1227 and 1235. Goldschmidt, Handbuch des Handelsrechts, p. 363.
[3 ]“In nomine D. Amen. Ego Georgius Lecavellum civis Janue confiteor tibi Bartholomeo Basso filio Bartholomei me habuisse et recepisse a te mutuo gratis et amore libras centum septem Janue. Renuncians exceptioni dicte pecunie ex dicta causa non habite, non recepte, non numerate et omni juri.
[1 ]Bensa, Il Contratto di Assecurazione nel Medio Evo, p. 48, Genova, 1884.
[2 ]See Walford, Encyc. Ins., Vol. I, p. 251, where these ordinances are set forth in part. Also Duer, Marine Ins., Vol. I, pp. 34, 35.
[1 ]There is an excellent brief history of the Consolato del Mare, by Sir Travers Twiss, in 9 Encyclopædia Britannica, 317, and of the other ancient sea laws by the same author in 21 Encyclopædia Britannica, 583.
[2 ]Bensa, Il Contratto di Assecuratione nel Medio Evo, p. 51. It is highly probable that the practice of insurance during the Middle Ages was not so narrowly confined to marine risks as is generally believed. Nicholas Magens, in his essay on Insurance, published at London, in 1755, at p. 267, gives a complete copy of a policy written at Hamburg in 1720, on the lives of certain cattle. Here we have our very modern live-stock insurance!
[3 ]The history of these sea laws is very uncertain. 21 Encyclopædia Britannica, 583. They are collected and translated in Malynes’ Lex Mercatoria and Magens’ Essay on Insurance, and in Cleirac’s Les Us et Coustumes de la Mer, with extensive comments. They are easily accessible to American students in 30 Federal Cases, Appendix.
[1 ]For a more complete account of the Venetian ordinances see Hopkins, Marine Ins., p. 20 et seq.
[1 ]“De Assecurationibus et Sponsionibus Mercatorum.” Santerna was a distinguished Portuguese lawyer.
[2 ]“De Assecurationibus.”
[1 ]Malynes explains the name of Lombard Street by saying that “certain Italians of Lombardy kept there a pawn-house or Lombard” [cf. our term “lumber-room”].
[2 ]See Selden Soc. Pub., Vol. XI, pp. 45-58, where several of these policies are given.
[3 ]Selden Soc. Pub., Vol. XI, p. lxvi.
[4 ]Selden Soc. Pub., Vol. XI, p. 47.
[5 ]Selden Soc. Pub., Vol. XI, p. 46.
[1 ]Selden Soc. Pub., Vol. XI, p. lxxvi.
[2 ]Id., Vol. XI, p. lxxx.
[3 ]4 Coke Inst., 139.
[4 ]E. g., Bradley, J., in Insurance Co. v. Dunham (1870), 11 Wall. 1, 34.
[5 ]This is made perfectly clear by Selden Soc. Pub., Vol. VI, pp. lxviii, 129, 229.
[6 ]E. g., Maye c. Hawkyns (1573), Selden Soc. Pub., Vol. XI, p. 149. In this case the insurer of goods taken by pirates was subrogated to the rights of the insured against Hawkyns, the doughty English admiral, who had recaptured the goods.
[7 ]6 Coke’s Rep., 46 b. The case referred to is believed to be the earliest common law insurance case of which any record was made.
[1 ]St. 43 Eliz., c. 12.
[2 ]Lex Mercatoria, p. 106 (3rd ed., 1686).
[1 ]For the history of the Court of Insurance Commissioners, see Cunningham, Law of Insurances (3rd ed., 1766) pp. 163-169. Also 3 Blackstone’s Comm., 74, 75.
[1 ]Park, Marine Ins. (4th ed.) xliii.
[2 ]Compare Depaba v. Ludlow (1720) 1 Comyns 360, with Goddart v. Garrett (Chancery, 1692) 2 Vern. 269.
[3 ](1743) 2 Strange 1183.
[4 ](1691) 3 Lev. 320.
[5 ](1692) 2 Salk. 443
[6 ]Green v. Young (1702) 2 Salk 444; Foster v. Wilmer (1745) 2 Strange 1249; Elton v. Brogden (1746) 2 Strange 1264.
[1 ]Thus, in Luke v. Lyde (1759), 2 Burr, 883, 889, he cites the Rhodian Laws, The Consolato del Mare, The Laws of Oleron and of Wisby. The Ordinances of Louis XIV, and the treatise of Roccus.
[2 ]In Lickbarrow v. Mason (1787), 2 T. R. 73.
[1 ]This essay was first published in four parts in the Law Quarterly Review, 1896-1902, vols. XII, 141-154, XIII, 312-318, XVI, 44-56, XVIII, 280-288, and has been revised and condensed by the author for this Collection.
[2 ]Librarian of the Patent Office, London. Corpus Christi College, Oxford, B. A., 1880.
[1 ]This text will be found in Rymer. A facsimile reproduction forms the frontispiece to Prof. Cunningham’s Alien Immigrants in England. 1897.
[1 ]In the report of the Hist. MSS. Comm. xiv, pt. viii. p. 7, Lincoln, there is an ordinance dated May 1, 1291, which at first sight carries back this policy of encouragement to a still earlier date. It runs as follows: ‘and that men may have the greater will to labour in the making of cloth in England, Ireland, and Wales, We will that all men may know that We will grant suitable franchises to fullers, weavers, and dyers, and other clothworkers who work in this mystery so soon as such franchises are asked of us.’ The ‘Athenæum,’ 1896, however, points out from internal evidence that the true date of the document is probably May 1, 1326. See also Calendar of Patent Rolls, 1327-30 under date May 1, 1327, where it appears that the first act of Ed. III. was to cause a renewal of the ‘Ordinance of the late king.’
[1 ]This Essay was first printed in the Harvard Law Review, 1897, vol. XI, pp. 158-168.
[2 ]A biographical sketch of this author will be found prefixed to Essay No. 17, Vol. I of this Collection.
[3 ]The Common Law, Lecture V.
[4 ]4 Co. 83 b; Cro. Eliz. 815. A fuller and better report than either of these is in a manuscript report in the Harvard Law Library, 42-45 Eliz. 109 b.
[1 ]In Lane v. Cotton, 12 Mod. 472, and Coggs v. Bernard, 2 Ld. Raym. 909; obiter in both cases.
[2 ]Page 199.
[3 ]Hist. Eng. Law, 169.
[4 ][It is however certain that the Germanic common law of the Norman Conquest period did make bailees for hire, of all sorts (including innkeepers, pledgees, and carriers), responsible absolutely for the goods delivered, even when lost by theft, and regardless of negligence; e. g. Loersch, Aachener Rechtsdenkmaler aus den 13o, 14o, 15o Jahrhunderten, 1871, p. 115, Art. 63: “Weirt sache dat eyn gast geve synen vert zo halden gelt, golt, silver off ander have, ind dan deme werde dat gestolen worde, ind neyt van synen gude, dat were he schuldich deme gast zo richten”; Sachsenspiegel, II, 60, § 1: “Svelk man enen anderen het oder sat perde oder en kleid oder ienegerhande varende have, to svelker wis he die ut sinen geweren let mit sime willen, verkoft sie die, die sie in geweren hevet, oder versat he sie, oder verspelet he sie, oder wert sie ime verstolen oder afgerovet, jene die sie verlegen oder versat hevet, die ne mach dar nene vorderunge up hebben, ane uppe den deme he sie leich oder versatte;” so also ib. III, 5; 4. This rule was inseparable from the notion of gewere, or seisin, and from the corresponding action of the bailee against the thief and the lack of action by the bailor against the thief,—a connection expressly mentioned in the Year Book cases cited post, p. 152, note 4, and fully expounded by the historians of Germanic law: Heusler, Institutionen des deutschen Rechts, 1885-6, I, 390-96, II, 191, 203, 212; Brunner, Deutsche Rechtsgeschichte, 1892, II, 509, 510; Jobbé-Duval, La revendication des meubles en droit français, in Nouv. revue hist. de droit fr. et étranger, IV, 1880, p. 463, at p. 475, note 1 (Laband, Vermögensrechtliche Klagen, 1869, p. 67, is explainable otherwise). This being so (and the presumption being that the Anglo-Norman rule of the same period shared this fundamental idea), it is obvious that the conflict of precedents in England between the 1200s and the 1500s (as shown in this Essay) is more naturally explained as a growing effort to cut down an originally absolute liability than as an effort to increase an originally limited liability. In other words, Mr. Justice Holmes’ explanation fits perfectly with the tenor of the primitive law, while the learned Essayist’s explanation does not fit at all.—Eds.]
[1 ]22 Ass. 41 (1348).
[2 ]2 H. 7, 11, pl. 9 (1487).
[1 ]Moo. 543 (1598).
[2 ]The assumpsit is also mentioned in them; but this means, not a contract that they shall be safe, but an undertaking to perform a certain purpose. Holt, C. J., in Coggs v. Bernard, 2 Ld. Raym. 909, 919.
[3 ]Fitz. Accompt, pl. 111 (1348); 41 E. 3, 3 (1367); 2 R. 3, 14 (1478); Vere v. Smith, 1 Vent. 121 (1661).
[4 ]9 E. 4, 40 (1469). In an action of account, the court held that robbery could not be pleaded in bar, but if it was an excuse it must be pleaded before the auditor. Danby’s remark, that robbery excuses a bailee only if he takes the goods to keep as his own, has no reference to the action itself. Brooke abridges the case under Detinue. 27.
[5 ]Brinkburn Chartulary, p. 105 (1299).
[6 ]Fitz., Detinue, 59 (1315). According to Southcote’s Case and Judge Holmes (Com. Law, p. 176), Fitzherbert states the issue to have been that the goods were delivered outside the chest. Neither the first (1516) edition of Fitzherbert, nor others (1565, 1577) to which I have access, are so. In the printed book (8 E. 2, 275) it is indeed laid down as Gawdy and Holmes state it; we have therefore a choice of texts. It is common knowledge that Maynard’s text is often corrupt; it is a century and a half further from the original; and in this case the inaccuracy is manifest. The text throughout has to be corrected by comparison with Fitzherbert in order to make it sensible. From internal evidence Fitzherbert’s text must be chosen. It would be interesting to have a transcript of the roll.
[1 ]12 & 13 E. 3, 244 (1339).
[2 ]29 Ass. 163, pl. 28 (1355). Judge Holmes, following the artificial reasoning of Gawdy (or Coke?) says the pledge was a special bailment to keep as one’s own. The reason stated by Coke is exactly opposed to that upon which Judge Holmes’s own theory is based; it is that a pledgee undertakes only to keep as his own because he has “a property in them, and not a custody only,” like other bailees. The court in the principal case knows nothing of this refinement. “For W. Thorpe, B., said that if one bails me his goods to keep, and I put them with mine and they are stolen, I shall not be charged.” After refusal of tender, defendant would have been, not, as Judge Holmes says, a general bailee, but a tortious bailee, and therefore accountable. The refusal was the detinue, or as the court said in Southcote’s Case, “There is fault in him.”
[3 ]10 H. 6, 21, pl. 69.
[4 ]2 E. 4, 15, pl. 7, by Littleton (1462); 9 E. 4, 34, pl. 9, by Littleton and Brian, JJ (1469); 9 E. 4, 40, pl. 22 (1469), by Danby, C. J. (ante); 6 H. 7, 12, pl. 9, per Fineux, J. (1491); 10 H. 7, 26, pl. 3; per Fineux, J. (1495). In the last two cases, Keble, arguendo, had stated the opposite view; and Brooke (Detinue, 37) by a query appears rather to approve Keble’s contention.
[5 ]1 Harvard MS Rep. 3a (1589, stated later), semble; Woodlife’s Case, Moo. 462 (1597); Mosley v. Fosset, Moo. 543 (1598), semble.
[6 ]4 Coke, 83 b, Cro. Eliz. 815; Harv. MS. Rep. 42-45 Eliz. 109 b (1600).
[1 ]Woodlife’s Case, Moo. 462; Mosley v. Fosset, Moo. 543.
[2 ]2 Ld. Raym. 911 n.
[1 ]Palmer, 548; W. Jones, 179 (1628).
[2 ]See The Common Law, pp. 199, 200.
[3 ]11 H. 4, 45, pl. 8; 22 H. 6, 21, pl. 38; ib. 38, pl. 8.
[4 ]46 E. 3. 19.
[5 ]Often called “common marshal.” 19 H. 6, 49, pl. 5.
[6 ]1 Harv. MS. Rep. 3a.
[7 ]These were “country” carriers; the term did not at first include carriers by water.
[8 ]41 Ass. 12.
[9 ]33 H. 6, 1, pl. 3.
[10 ]F. N. B. 94 d.
[1 ]42 E. 3, 11, pl. 13 (1367). In 43 E. 3, 33, pl. 38, it was alleged that a “marshal” had undertaken to cure a horse, but had proceeded so negligently that the horse died. The defendant was driven from a denial of the undertaking, and was obliged to traverse the defect of care.
[2 ]46 E. 3, 19, pl. 19 (1371).
[3 ]41 Ass. 254, pl. 12 (1366).
[4 ]11 H. 4, 45, pl. 18 (1410).
[5 ]19 H. 6, 49, pl. 5 (1441).
[6 ]33 H. 6, 1, pl. 3 (1455).
[1 ]Doctor and Student, c. 38. A little later is found this curious case, Dall. 8 (1553). “Note by Browne, J., and Portman, J., as clear law; if a common carrier takes a pack of stuff from a man to carry it to D. and while in a common inn the pack is taken and stolen, the owner for this shall have an action against the innkeeper for the stuff and the carrier shall not; for they are not the goods of the carrier, nor shall he be charged with them inasmuch as he was by law compellable to carry them; and it is not like where one takes goods to carry generally, for if he be robbed, it shall be charged to the carrier for his general taking, to which he was not compellable, and so he shall have action over in respect of his liability.” This is the only hint at a less liability of the common carrier than of the private carrier. It is interesting to notice that it was regarded as the duty of the innkeeper, and not of the carrier, to guard the goods in the inn. The duty is imposed by law for a purpose; that purpose is served by putting the duty on the innkeeper here; the law need not require a double service.
[2 ]“It was held by all the Justices in the Queen’s Bench, that if a man bail certain cloths to a tailor to make a robe of them, who does so, and then it is stolen out of his shop, still he shall be accountable for it; the same is law of a carrier who has anything for his labor. But it is otherwise of him who has nothing for keeping it, but keeps it of his good will.” 1 Harv. MS. Rep. 3a. To the same effect is Woodlife’s Case, as reported in 1 Rolle’s Abridgment, 2, as follows: “If a man deliver goods to a common carrier to carry, and the carrier is robbed of them, still he shall be charged with them, because he had hire for them, and so implicitly took upon him the safe delivery of the goods; and therefore he shall answer for the value of them if he be robbed.”
[3 ]3 Keb. 135 (1672).
[1 ]2 Ld. Raym. 909 (1703).
[2 ]Dawson v. Chamney, 5 Q. B. 164.
[1 ]Woodlife’s Case, Moore, 462, makes that clear, I think. Though both are paid, a distinction is drawn between factor and carrier.
[2 ]Holmes, Common Law, 200.
[3 ]2 Ld. Raym. 909 (1703).
[1 ]Bailments, pp. 103 et seq.
[2 ]1 Wils. 281.
[3 ]Page 69 (1771).
[4 ]1 T. R. 27 (1785).
[1 ]This essay originally formed Chapter IX, pp. 128-149, of the Yorke Prize Essay (Cambridge University) for 1902, “The General Principles of the Law of Corporations,” 1905 (Cambridge, University Press), and has been revised by the author for this Collection.
[2 ]B. A., 1900, LL. B., 1901, M. A., 1904, LL. M., 1907, Trinity College, Cambridge; Barrister of the Inner Temple, 1902.
[1 ]Chapter IV of this Essay. See Professor Maitland’s articles in L. Q. R., XVI, p. 335, XVII, p. 131.
[2 ]Hist. of Boroughs, Introd. p. v.
[1 ]Gild Merchant, I, 93: Bibliography of Municipal History, Introd. p. xxvii. See Stubbs, Const. History, III, p. 586, and, in the French edition thereof, by Prof. Petit-Dutaillis, the Editor’s Appendix VIII: Maitland, Township and Borough, pp. 18-20.
[2 ]See Township and Borough, Maitland, p. 12. See also Pollock and Maitland, History of English Law, I, pp. 494-5. See, generally, Maitland’s Introduction to Cambridge Borough Charters.
[3 ]These privileges are given by extant fourteenth century charters.
[4 ]Ancient Law, ed. 6, p. 184, where it is said that the family was a corporation and the patriarch its public officer. See Maitland, Township and Borough, p. 21. In its most developed form the family was nothing more than a “herrschaftliche Verband,” see Gierke, Genossensschaftsrecht, I, p. 90. See Tacitus, Germ. c. 20.
[1 ]Unpublished paper by Toulmin Smith, inserted in Miss Toulmin Smith’s Introduction to Early English Text Society’s volume on English Gilds.
[2 ]See the summary of the controversy contained in Sir F. Pollock’s Land Laws (English Citizen Series), Appendix C; and Professor Petit-Dutaillis’ Appendix I on Les Origines du Manoir in his edition of Stubbs, I, p. 765.
[3 ]Domesday Book and Beyond, p. 356.
[1 ]Domesday Book and Beyond, pp. 351-2: and see Bookland and the Landbook, pp. 226, etc. in the same vol.
[1 ]See Pollock and Maitland, History of English Law, I, pp. 534, 556. For the ordinance of the holding of the Hundred see Kemble, Saxons in England, I, pp. 515-6.
[2 ]See Pollock and Maitland, ib. I, pp. 535, 557-8. And see Domesday Book and Beyond, Maitland, p. 355, n. 2.
[3 ]See Pollock and Maitland, History of English Law, I, pp. 535, 673-4.
[4 ]See ib. I, 535, n. 1.
[5 ]See Pasch. 17 Edw. II. f. 539 (Maynard). The county is still indictable as such. Its lands are vested in a county official, the clerk of the peace, who is by 27 Eliz. c. 13, a corporation sole. See 21 & 22 Vic. 92. See Pollock and Maitland, History of English Law, I, 535, n. 3.
[1 ]Russell v. the Men of Devon, 2 T. R. at p. 672.
[2 ]See Domesday Book and Beyond, Maitland, p. 184.
[3 ]No distinction is here made between the words “burh,” “bury,” “burg” and “borough.” “The word ‘borough’ signifies security with the collateral idea of defence. It is no other than the word ‘bury.’ The word ‘bury’ signifies a fort or stronghold, and is to the English language what Arx was to the Latin, or Polis (in its archaic use equivalent to ἄκρον ἀκρόπολις) was to the Greek.” Bath Ancient and Modern, Prof. Earle, pp. 84 and 6-7.
[1 ]A reminiscence of the borough-peace perhaps survives in the word “burglary” and in its early definitions.
[2 ]The greatest of all peaces is the king’s peace, which the Justices of the Peace locally maintain. See 1 Edw. III. st. 2, c. 16.
[3 ]See Township and Borough, Maitland, p. 211.
[4 ]As for instance at Cambridge; two castles were found necessary to dominate Durham. See Freeman’s William the Conqueror, p. 117.
[1 ]Probably the distinction of the borough is to be traced still earlier. See the laws of Edgar (959-975 ad), Supp., cc. 3, 4, 5, and 6. Ethelred (978-1016) 11, c. 6. Canute (1016-1035) Secular Dooms c. 18. See Stubbs, Select Charters, pp. 70-2.
[2 ]The city cannot be marked off from other towns on any very clear principle. Civitas is often—but not necessarily—the cathedral town. See Pollock and Maitland, History of English Law,i. p. 634.
[3 ]Jan. 20, 1265.
[4 ]See Stubbs, Const. Hist. v. 2, pp. 92, 221: Todd, Parl. Govt. (ed. Walpole), (i. 23-4).
[1 ]See Domesday Book and Beyond, Maitland, p. 179.
[2 ]See Township and Borough, Maitland, p. 45; Domesday Book and Beyond, p. 203.
[3 ]Township and Borough, p. 71.
[4 ]For burgage tenure see Domesday Book and Beyond, p. 196: Township and Borough, p. 71: Pollock and Maitland, History of English Law, I, 295-6, II, 330.
[5 ]The borough Courts successfully contested the jurisdiction of the ecclesiastical judges in the matter of these bequests. See O. W. Holmes, Law Quarterly Review, I, p. 165.
[1 ]For these burghal privileges see Pollock and Maitland, ib. i. pp. 643, etc. They are there enumerated as (i) Jurisdictional, (ii) Tenurial, (iii) Mercantile, (iv) the Firma Burgi, (v) Property of the Borough, (vi) Election of Officers and Government of the Borough, (vii) By-laws and Self-Government, (viii) Self-taxing Powers, (ix) Gild Merchant. The privilege of minting money was early resumed exclusively into royal hands.
[2 ]The following is a specimen of such royal confirmations. It is given by Henry II. to Winchester:
[1 ]For the venality of the royal prerogative in the time of Richard I see Stubbs, Select Charters, p. 256.
[2 ]An obvious exception to the modern supremacy of the majority is the requirement of unanimity in a jury. For the history upon this point see Pollock and Maitland, History of English Low,ii. pp. 625-7.
[1 ]See Pollock and Maitland, ib. I, p. 509: Township and Borough, Maitland, pp. 34-5: Political Theories of the Middle Ages,vii., and Prof. Maitland’s notes, pp. 166-7 (in square brackets).
[2 ]See Gierke, Genossensschaftsrecht, II, 478, III, 322, etc.
[3 ]See Pollock and Maitland, History of English Law,i. pp. 683-4.
[4 ]The corporate name, says Blackstone, is the very being of the constitution of the body, the knot of its combination, without which it could not perform its corporate functions. Comm.i. 474-5.
[5 ]Sometimes these corporate names were so cumbrous as to need abridgment by subsequent charter. See the charter of the Merchants Adventurers for Discovery of New Trades, 1566: “Whereas . . . the Fellowship’s name is long and consisteth of many words.”
[1 ]For instance, if the village acts as farmer. See Villainage in England, Vinogradoff, pp. 356, 360: Madox, Firma Burgi, 54 f, 54 g.
[2 ]Ed. Maitland, II Selden Society, p. 150. Vinogradoff, pp. 358-9.
[3 ]Liber Assisarum, 62, 19 Edw. III. See the valuable list of references in Gross, i. 93, n. 3.
[4 ]See Liber Assisarum, 321, 49 Edw. III; “La City est perpetuel.”
[1 ]1391. 15 Ric. II, c. 5.
[2 ]Many towns applied for such charters to hold land. The following is a specimen:—Rex omnibus ad quos etc. salutem. Licet etc. de gracia tamen nostra speciali et pro xx libris nobis solutis in hanaperio nostro concessimus et licentiam dedimus . . . J. S. et W. H., Senescallis gilde mercatorie de Bruggewater et communitati ejusdem ville quod ipsi x mesuagia V acras terre iii acras prati . . . dare possint et assignare cuidam Capellano divina in ecclesia beate Marie de Bruggenwater singulis diebus celebraturo imperpetuum, habenda et tenenda sibi et successoribus suis in auxilium sustentacionis sue imperpetuum . . . (1392) Gross, II. 353.
[3 ]For example here follows a charter of Edward III to Coventry (20th day of January, 1345):—
[1 ]Township and Borough, p. 20.
[2 ]Of some forty-four kinds of trading associations known to have existed in Imperial Rome, only one (the smiths) is mentioned on inscriptions found in England. See Bath, Ancient and Modern, Earle, p. 30.
[3 ]According to Scrutton (Influence of Roman Law on the Law of England, p. 55), the birth-place of the gilds is England, and possibly London. Although this statement would probably not find universal acceptance, it is at least improbable that the gilds are a Roman survival. See City Guilds Commissioners’ Report (1884), p. 8. For the two views, see Coote, The Romans of Britain, on the one hand, and Stubbs, Const. Hist., p. 105 on the other.
[4 ]On the subject of the Gild merchant see the two volumes of Dr. Gross. See also Two Thousand Years of Gild Life, Lambert.
[5 ]See Gross, i. pp. 169-70.
[1 ]See Social England, ed. Traill, i. p. 467. For example, there was a recognised practice of intermunicipal reprisals. When the king freed burgesses of X from toll throughout the realm, he allowed them to make reprisals against men of Y taking toll of a man of X. These reprisals suggest the idea that a trader was a member of a body answerable for trade acts of other members. In the trade community there was a rough kind of several guarantee by members of a member’s debt. The community was in no way a “juristic person.” It did not sue, and was not sued, by a common name as would be the practice in the case of the Cives de X or the Burgesses de Y. See Select Pleas in Manorial Courts, ed. Maitland, vol. 2, Seld. Soc., pp. 134-5; Gierke, das deutsche Genossenschaftsrecht, II. pp. 388-9.
[2 ]Merewether and Stephens in combating this view attribute it to Brady, see History of Boroughs, p. 118.
[3 ]See for instance the Early English Text Society’s volume on English Gilds, p. 250. For the part played in this controversy by the word ‘alderman,’ see Madox, Firma Burgi. 30, and the discussion in Gross.
[1 ]See Early English Text Society’s English Gilds, p. 329.
[2 ]Of course gildsmen and burgesses were in the mass identical. The description of Chaucer’s Pilgrims may be recalled, though the language be untechnical:
(Prologue to Canterbury Tales, 11. 362-372). To ask if a man were a gildsman or a burgess would be as unsatisfactory as to ask if he were a father or a son.
[3 ]See Gierke, Genossenschaftsrecht, I, pp. 243-4, 345.
[4 ]See ib. I, ss. 27 and 37. Social England, II, 407.
[5 ]Gild Merchant,i. p. 80.
[6 ]See Gross, I, p. 82, n. 3.
[1 ]See the grant to Newton (South Wales). Gross, II, pp. 385-6.
[2 ]See Gross, II, p. 171.
[3 ]Coke, 10 Rep. 30. And see 1 Roll Ab. 513: cited in Blackst. Comm.i. 474. See also Cokenage v. Large, Madox, Firma Burgi, 197.
[4 ]Kyd, Corporations, I, p. 64. See Gross, II, p. 269.
[5 ]See Kyd, ib. I, p. 43.
[6 ]In Norris and Trussell, etc. v. Staps (Pasch. 14 Jac. Rot. 907), it is said: “I am of opinion that they (the guardians, etc. of Newbury) needed not to show how they were incorporated, for the name argues a corporation, as the like of cities.” Hobart, 210. See Arundel’s case, ib. p. 64. For plea of corporation without shewing the creation of it, see 9 Edw. III, 19.
[1 ]See Gross, Gild Merchant, I, 95.
[2 ]See Maitland, Township and Borough, Appendix, ss. 145 and 148.
[3 ]See Pollock and Maitland, History of English Law, I, 671. Freedom of boroughs was a matter of custom. See R. v. Salway, 9 B. & C. 424. It has suffered from the Municipal Corporations Acts. See 45, 46 Vict. c. 50, s. 202.
[4 ]According to the Report of the Municipal Corporations Commission (1835) freedom was obtainable by (a) birth, (b) apprenticeship, (c) gift, (d) purchase, and (e) marriage. See the Report, p. 2016. See also Gierke, Genossenschaftsrecht, I, s. 57. What is important for our purpose now is to notice that the citizenship was restricted, was valuable to the claimant, and was a source of profit to the body of citizens by means of a system of entrance-fees. Citizen-bodies which had paid considerable sums to obtain from the king recognition of their municipal franchises, naturally considered that a new-comer to the citizenship should make to them some payment on his accession to privileges for which they had themselves been put to expense.
[1 ]See Gierke, Genossenschaftsrecht, I, ss. 26-7, die freie Einung.
[2 ]Pollock and Maitland, History of English Law, I, p. 688.
[3 ]The origin of the gild-system is variously attributed to heathen and to Christian institutions. Wilda attributes it to the fusion of heathen practices of sacrifice and feasting with the Christian idea of brotherly love: others to Scandinavian associations for mutual revenge, others to more natural associations for mutual support. See Gierke, Genossenschaftsrecht, I, p. 222, where see references in n. 1.
[4 ]See Gierke, ib. I, pp. 155, 220: Althusius, pt. I, c. 2, etc.
[5 ]The binding by oath seems to have been distasteful to monarchs on the continent. The Capitularium of Charlemagne contains the ordinance “de sacrament per gildonia invicem conjurantibus ut nemo facere praesumat” (779 ad). See Gierke, ib. 1, p. 224, n. 2: p. 236, n. 57.
[6 ]In the Cambridge gild, for instance, a man swore to hold “true brotherhood for God and all the world and all the brotherhood, to support him that hath the best right,” to avenge his comrades in the gildship if an outlaw failed to discharge his boot, and agreed to pay out of the gild funds the wer due from a comrade in a case of emendable homicide. The principle of “Let all bear it, if one misdo” thus provided a rough system of insurance. See Kemble, Saxons in England, I, pp. 513-14. Gierke, Genossenschaftsrecht, I, pp. 230-1.
[1 ]See Pollock and Maitland, History of English Law, I, p. 671.
[2 ]Y. B. Hen. VI, 9, in reference to “le Commonalty et les Baill. de Ipswich,” says “ils son per cest nom un person corporate et un entier corps.” The authority for saying that English law holds the “Fiction theory” of corporateness is usually found in the following sentence from Coke’s Report of the Sutton’s Hospital Case (10 Rep. 32 b):—“The corporation is only in abstracto, and rests only in intendment and consideration of the law: it is invisible and immortal.” For other theories of corporateness see the following chapters of this Essay; see also especially Professor Freund’s Legal Nature of Corporations, pp. 40-83.
[1 ]This Essay was first published in “An Essay on the Early History of the Law Merchant,” Yorke Prize Essay (Cambridge) for 1903 (Cambridge: University Press, 1904), pp. 124-140, being part of c. V.
[2 ]B. A. Cambridge University, 1903, M. A., 1907.
[1 ]Documents Inédits sur le Commerce de Marseilles au Moyen Age, by Blancard, Document 4, vol. i. p. 7. There are scores of similar contracts of Commenda in these two volumes, and there are numerous 12th century examples in the volume of Chartae in the Monumenta Historiae Patriae.
[2 ]Monumenta Historiae Patriae, Chartae, column 287.
[3 ]Goldschmidt, Handelsrecht, p. 260 and note 88 b.
[1 ]Goldschmidt, p. 264.
[2 ]Goldschmidt, p. 265 and note 104. Lattes, Il diritto commerciale, p. 157.
[3 ]Pertile, Storia del diritto italiano, IV, 685, note 24. Cf. Viollet, Histoire du droit civil français, p. 762. “Dans la société le bailleur de fonds ou commendataire n’est passible des pertes que jusqu’à concurrence des fonds qu’il a mis ou dû mettre dans la société.”
[4 ][An example of a commenda in early English trade is found in Gross’ Select Cases in the Law Merchant, I, 77, dated 1300 (Selden Soc. Pub., vol. XXIII, 1908)—Eds.]
[5 ]Norrnheim, Geldersen’s Handlungsbuch, Introduction, 43-5.
[1 ]Goldschmidt, 269. Lattes, p. 162 and notes.
[2 ]V. Thaller, Traité Élémentaire de Droit Commercial, §§ 258-262, pp. 160-162.
[3 ]Lattes, p. 161 and notes.
[1 ]Cf. however pp. 188-189 below.
[2 ]Goldschmidt, p. 276, note 139.
[3 ]Kohler, “Zivilrecht” in Holtzendorff’s Encyklopädie der Rechtswissenschaft, ed. 1904, I, p. 598. Kohler quotes from and refers to many Italian authorities of the 12-14th century on representation. Among them St. Como (ad 1232). “Tantum valeat et prosit illi, ad cujus partem vel cujus nomine facta est vel recepta, ac si illam cartam vel contractum vel obligationem recepisset.”
[4 ]Bartolus. “Secundum consuetudinem et fere totius Italiae—litteris mercatorum unus nominatur nomine proprio et omnes alii nomine appellativo, hoc modo: Titius et socius talis societatis,” quoted by Goldschmidt, p. 276, note 137.
[1 ]St. Mutinae, 1327, quoted among others by Goldschmidt, 276, notes 140 and 141.
[2 ]St. of Calimala of Florence, Lb. ii. rubric 43. “Si quis . . . librum corporis sue societatis celavit vel celaverit ita quod haberi et videri non possit quod sit sotii (sic) dicte societatis.” Cf. Lattes, p. 174, note 59 and p. 283.
[3 ]Lattes, p. 162 and note 68.
[1 ]St. of Calimala, 1301, Lb. ii. rubric 19. The date 1236 is given in the rubric.
[2 ]Goldschmidt, 281, note 154. Goldschmidt gives many quotations from and references to city and gild statutes, inter alia St. of Calimala Gild (1341). “E niuno mercantante di questa arte possa obligare in Firenze o nel distretto la sua compagnia o alcuno compagno della sua compagnia—se non in debiti o cose che fossono scritte nel libro o libri della sua compagnia, o se almeno due o più de’ compagni non fossono insieme a tale obligazione fare, o se non avese in ciò speciale o generale procurazione e mandato da’ suoi compagni.”
[1 ]Blancard, op. cit., no. 115.
[2 ]See numerous quotations and references in Goldschmidt, p. 282, note 155.
[3 ]De Luca, De Camb., disc. 29, nos. 3, 4, quoted Goldschmidt, p. 283.
[4 ]Goldschmidt, pp. 284 and 288 and note 159.
[1 ]Goldschmidt, 285, note 160.
[2 ]Endemann, Studien in der romanisch-kanonistischen Wirtschaftsund Rechtslehre, vol. i. p. 395.
[3 ]Endemann, op. cit., pp. 395-6 and 55, 56.
[1 ]Lehmann, Geschichtliche Entwickelung des Aktienrechts (1895). Das Recht der Aktiengesellschaften (1898).
[2 ]Wagner, Seerecht, pp. 8, 9. Thaller, Société par Action, p. 15.
[1 ]Pertile, II, i. pp. 508-510. Goldschmidt, 292.
[2 ]Pertile, II, i. p. 509.
[1 ]Viollet, op. cit., p. 767. Thaller, Société par Actions, p. 5, says “on ne doit pas remonter plus haut que le règne de Henri IV.”: but he gives no example for this earlier date.
[2 ]Article on East India Company in Palgrave’s Dictionary of Political Economy.
[3 ]Especially interesting seems the combination of the commenda with the new form as seen in the Commandite par actions.
[1 ]This Essay was first published in the Harvard Law Review, 1888, vol. II, pp. 105-124, 149-166, and has been revised by the author for this Collection.
[2 ]Weld Professor of Law in Harvard University. A. B. 1882, A. M., LL. B. 1888, Harvard University; draftsman of acts on Bills of Sale, etc., for the National Conference of Commissioners on Uniform State Laws, 1905-1908.
[3 ]E. g., Coke, in Sutton’s Hospital Case, 10 Rep. 1, The Law of Corporations, 1 Blacks. Com. ch. xviii., Kyd on Corporations.
[1 ]1 Blacks. Com. 468.
[2 ]Angell and Ames on Corp. (1st ed.).
[3 ]Ancient Law (4th ed.), 183.
[4 ]System des heutigen romischen Rechts, vol. ii. § 86 et seq.
[1 ]Savigny, System etc., § 88.
[2 ]Blackstone is, therefore, in error in saying (1 Com. 472) that by the civil law the voluntary association of the members was sufficient unless contrary to law—an error probably caused by the fact that penalties were imposed on certain forbidden associations in the nature of clubs for acting without the authorization of the State, and only on these.
[1 ]See History of Guilds, Luigi Brentano.
[2 ]For an account of guilds at Rome see “Les Sociétés Ouvrières à Rome,” 96 Rev. des Deux Mondes, 626, by Gaston Boissier.
[3 ]Butchers’ Company v. Morey, 1 H. Bl. 370; Kirk v. Nowill, 1 T. R. 118.
[4 ]Madox, Firma Burgi, 29.
[1 ]1 And. Hist. of Commerce, 250.
[2 ]Knight’s Hist. of England, vol. v. 39.
[3 ]What follows in regard to the East India Company is based on “The History of European Commerce with India,” by David Macpherson, London, 1812, and documents therein quoted.
[1 ]From the defence of the Company in the Privy Council, 2 And. Hist. Com. 173.
[1 ]This is the first English book wholly devoted to the subject of corporations; with the exception of a small volume by William Shepheard, published in 1659 in London, entitled: Law of Corporations, Fraternities, and Guilds.
[2 ]Law of Corporations, p. 2.
[3 ]4 and 5 Wm. III., c. 17.
[1 ]5 and 6 Wm. III., c. 31.
[2 ]By Stat. 6 Anne, c. 22, § 9.
[3 ]7 and 8 Wm. III., c. 31.
[4 ]9 and 10 Wm. III., c. 43.
[5 ]See 9 Anne, c. 24.
[6 ]9 Anne, c. 21.
[7 ]6 Geo. I., c. 18.
[8 ]9 Vol. I, (1st ed.) 291 et seq.
[9 ]And. Hist. Com., Vol. II, 296.
[1 ]Wealth of Nations, book V, ch. I, art. 5.
[1 ]10 Rep. 22 b.
[2 ]10 Rep. 29 b.
[1 ]See supra, p. 196.
[2 ]Horne v. Ivy, 1 Ventr. 47.
[1 ]Sutton’s Hospital Case, 10 Rep. 32.
[2 ]1 Stra. 612; and see the Law of Corporations, 13. Also, if the name of a corporation be changed, it retains its possessions, debts, etc. Bishop of Rochester’s Case, Owen, 73; s. c. 2 And. 107; Luttrel’s Case, 4 Rep. 87 b; Mayor of S. v. Butler, 3 Lev. 237; Haddock’s Case, 1 Ventr. 355.
[3 ]1 Kyd, 236 et seq.
[4 ]Button v. Wrightman, Cro. Eliz. 338.
[5 ]Rol. 512.
[1 ]Blacks. Com. ch. xviii.
[2 ]1 Kyd, 228.
[3 ]See Mayor of Stafford v. Bolton, 1 B. & P. 40.
[4 ]Sutton’s Hospital Case, 10 Rep. 30, citing as authority 22 Edw. IV., Grants, 30.
[1 ]P. 16.
[2 ]1 Blackst. Com. 475; also in Wood’s Inst. of the Laws of Eng., bk. I, ch. VIII.
[3 ]Vol. i. p. 60.
[1 ]2 Blackst. Com. 305; Genesis, xxxviii. 18; Esther, viii. 8; Jeremiah, xxxii. 10.
[2 ]2 Blackst. Com. 306.
[3 ]1 Com. 475.
[4 ]1 Blackst. Com. (Sharswood’s ed.) 475, n. 7.
[1 ]Taylor on Evidence (8th ed.), § 976 et seq.
[2 ]Y. Bks. 9 Edw. IV. 39, 4 Hy. VII. 17 b, 7 Hy. VII. 9.
[1 ]Horne v. Ivy, 1 Vent. 47; Dunston v. Imp. Gas Co., 3 B. & Ad. 125, 129; Tilson v. Warwick Gas Co., 4 B. & C. 962, 964.
[2 ]East London Waterworks Co. v. Bailey, 12 Moore, 532; s. c. 4 Bing. 283; and see Edie v. E. I. Co., 2 Burr. 1216, where assumpsit was brought against the Company on a bill of exchange, without objection.
[1 ]3 P. Wms. 419.
[2 ]Bac. Abr., tit. Corporation (E) 3; 1 Kyd on Corp. 26.
[3 ]East London Waterworks v. Bailey, 12 Moore, 532; s. c. 4 Bing. 283.
[4 ]The Barber Surgeons v. Pelson, 2 Lev. 252; Mayor of London v. Hunt, 3 Lev. 37; and see Parbury v. Bank of England, 2 Doug. 524, where, at the suggestion of Lord Mansfield, a special action of assumpsit was brought on account of the bank’s refusal to transfer stock on the books.
[1 ]E. I. Co. v. Glover, 1 Stra. 612.
[2 ]Edgar v. Sorell, Cro. Car. 169; Tilson v. Warwick Gas Co., 4 B. & C. 962; Rex v. Bigg, 3 P. Wms. 419.
[3 ]E. g., 11 Geo. I. c. 30, § 43, which allowed the two insurance companies recently chartered to make use of the freer pleading in vogue in the action of assumpsit when sued on their policies, which were under seal.
[4 ]Dig. xlvii. 22, lex 4.
[5 ]Cuddon v. Eastwick, 1 Salk. 193, pl. 5.
[1 ]Butchers’ Co. v. Morey, 1 H. Bl. 370; Kirk v. Nowill, 1 T. R. 118.
[2 ]The Law of Corp. 209.
[3 ]Grant on Corp. 86, especially notes d and f.
[4 ]Towle’s Case, Cro. Car. 582; Chancey’s Case, 12 Rep. 83.
[5 ]8 Rep. 125 a; Horne v. Ivy, 1 Ventr. 47; Clarke v. Tuckett, 2 Ventr. 183; Nightingale v. Bridges, 1 Show. 135.
[6 ]Clearywalk v. Constable, Cro. Eliz. 110; Sams v. Foster, Cro. Eliz. 352; s. c. Dyer, 297 b.
[7 ]Grant on Corp. 78.
[8 ]Ibid. 83.
[9 ]Ibid. 80.
[10 ]Child v. Hudson’s Bay Co., 2 P. Wms. 207; 2 Kyd on Corp. 102.
[11 ]E. g., the East India Company in its early days regulated the right of private trading with the Indies, and soon forbade it altogether. It endeavored to enforce this rule against a non-member by forfeiture of his vessel. He petitioned the House of Lords, which ordered the Company to put in its answer. The case finally resulted in a quarrel between the Lords and the Commons as to the right of the former to take jurisdiction. The Lords gave judgment for the plaintiff, but it was never executed. Macpherson, Hist. 127. See, also, Horne v. Ivy, 1 Ventr. 47.
[1 ]Child v. Hudson’s Bay Co., 2 P. Wms. 207.
[2 ]Child v. Hudson’s Bay Co., 2 P. Wms. 207, re-argued sub nom. Gibson v. Hudson’s Bay Co., 1 Stra. 645; s. c. 7 Vin. Abr. 125.
[3 ]Lowell, Transfer of Stock, § 166.
[1 ]Savigny, System, §§ 94, 95.
[2 ]See Grant on Corp. 277, 278, and notes, in which are cited many cases from the Year Books.
[3 ]Yarborough v. Bank of England, 16 East, 6.
[4 ]Anon., 12 Mod. 559; that it cannot commit treason see Vin. Abr., Corpor. Z, pl. 2.
[5 ]Grant on Corp. 283, 284.
[6 ]The authorities are collected in Gilbert on Uses, 5, 170, and Sugden’s note.
[7 ]See Atty.-Gen. v. Stafford, Barnard. Ch. 33.
[1 ]Lowell, Transfer of Stock, § 4.
[2 ]“The legal interest of all the stock is in the company, who are trustees for the several members.” Per Lord Macclesfield, Child v. Hudson’s Bay Co., 2 P. Wms. 207.
[1 ]As to the nature of the company see Bligh v. Brent, 2 Y. & C. 268.
[2 ]Drybutter v. Bartholomew, 2 P. Wms. 127; Townsend v. Ash, 3 Atk. 336; Stafford v. Buckley, 2 Ves. Sr. 171, 182; Swaine v. Falconer, Show. P. C. 207; Sandys v. Sibthorpe, 2 Dick. 545.
[3 ]Bligh v. Brent, 2 Y. & C. 268, 296.
[4 ]See further, Howse v. Chapman, 4 Ves. 542, where a share in the Bath navigation was held to be real estate, and also Buckeridge v. Ingram, 2 Ves. 652, as to the Avon navigation. The latter company was not, it is true, incorporated, but the decision is not based on that distinction.
[5 ]2 Y. & C. 268.
[1 ]In Wells v. Cowles, 2 Conn. 567, it was decided that turnpike shares were real estate. The argument was almost wholly confined to the question whether the property of the company was real estate or not. It was very summarily remarked that the property of the individual shareholders was of the same nature as that of the company.
[2 ]2 Y. & C. 281, note.
[3 ]It was said in Bligh v. Brent, supra, that five-sixths of the property of the company was personalty.
[4 ]1 T. R. 219.
[5 ]14 Geo. III. c. 56.
[1 ]For a careful exposition of the modern view see Lowell, Transfer of Stock.
[2 ]2 P. Wms. 76 (1722).
[3 ]Ashby v. Blackwell, Ambl. 503.
[4 ]See also Monk v. Graham, 8 Mod. 9.
[5 ]Barnard. Ch. 324 (1740).
[1 ]Ashby v. Blackwell and The Million Bank, Ambl. 503.
[2 ]2 P. Wms. 76.
[3 ]1 Com. 354, referred to in Colt v. Netterville, 2 P. Wms. 304, 308.
[4 ]Colt v. Netterville, 2 P. Wms. 304; Mussell v. Cooke, Prec. in Ch. 533. In this last case the court seemed of opinion that a memorandum was necessary.
[5 ]Caused by the expected vast profits of the South Sea Company and other “bubbles,” and the subsequent collapse of these speculations.
[6 ]1 P. Wms. 570; sub nom. Cuddee v. Rutter, 5 Vin. Abr. 538, pl. 21; sub nom. Scould v. Butter, 2 Eq. Cas. Abr. 18, pl. 8.
[1 ]See also, to the same effect, Cappur v. Harrison, Bunb. 135; Nutbrown v. Thornton, 10 Ves. 159.
[2 ]Dorison v. Westbrook, 5 Vin. Abr. 540, pl. 22.
[3 ]See Fry on Spec. Perf., part vi. ch. 1.
[4 ]2 P. Wms. 304.
[5 ]Morawetz, Corp. (2d ed.) § 218.
[6 ]It was, indeed, said by Lord Eldon in Nutbrown v. Thornton, 10 Ves. 159, after he had remarked that it was perfectly settled that the Court would not decree specific performance of an agreement to transfer stock, “In a book I have of Mr. Brown’s, I see Lord Hardwicke did that;” but there is no record of any such decision by Lord Hardwicke, and further, there is an express dictum by him to the contrary in Buxton v. Lister, 3 Atk. 383.
[1 ]Cas. temp. Finch, 430.
[2 ]See, e. g., in the case of the Greenland Company, 4 and 5 Wm. & M. c. 17, s. xxiv., in the case of the Bank of England, 5 and 6 Wm. & M. c. 20, s. xxv., in the case of the Nat. Land Bank, 7 and 8 Wm. III., c. 31, s. xvii.
[3 ]Bank of Eng. v. Moffatt, 3 Bro. C. C. 160; Johnson v. E. I. Co., Cas. temp. Finch, 430.
[4 ]Cock v. Goodfellow, 10 Mod. 489, 498, 20 Vin. Abr. 5, pl. 16.
[5 ]See supra.
[1 ]Stockdale v. South Sea Co. 1 Atk. 140; s. c. Barnard. Ch. 363; Hartga v. Bank of England, 3 Ves. 55; Bank of England v. Parsons, 5 Ves. 664.
[2 ]Stockdale v. South Sea Co. 1 Atk. 140; s. c. Barnard. Ch. 363.
[3 ]2 Doug. 524.
[4 ]See Meliorucchi v. Royal Exchange Ass. Co., 1 Eq. Cas. Abr. 8, pl. 8; Gibson v. Hudson’s Bay Company, 1 Str. 645.
[5 ]Macpherson, Hist. of Com. 125.
[1 ]4 and 5 Wm. & M., c. 17, s. xvii.
[2 ]7 Geo. III., c. 48.
[1 ]Buckley on the Companies Acts (4th ed.), 436.
[2 ]Moffat v. Farquhar, 7 Ch. D. 591, and cases therein cited.
[3 ]Phillips v. Wickham, 1 Paige Ch. 590; State v. Tudor, 5 Day 329; Taylor v. Griswold, 14 N. J. L. 222; People v. Twaddell, 18 Hun 427; Common. v. Bringhurst, 103 Pa. St. 134; Harben v. Phillips, 23 Ch. D. 14.
[4 ]E. g., the charter of the Mine Adventurers, 9 Anne, c. 24, or of the Northumberland Fishery Soc., 29 Geo. III., c. 25.
[5 ]Common. v. Bringhurst, 103 Pa. St. 134, and cases therein cited.
[6 ]See the early case of Taylor v. Griswold, 14 N. J. L. 222 (1834).
[7 ]2 Atk. 400.
[8 ]Taylor on Corp. § 619.
[1 ]Citing Domat’s Civil Law, 2d B., tit. 3, secs. 1 and 2.
[2 ]Citing Coggs v. Bernard, 1 Salk. 26.
[1 ]See Grant on Corp. 311-313.
[2 ]Charitable Corp. v. Woodcraft, Cas. temp. Hard. 130.
[3 ]Child v. Hudson’s Bay Co., 2 P. Wms. 207.
[1 ]Huddersfield Canal Co. v. Buckley, 7 T. R. 36.
[2 ]Myers v. Irwin, 2 S. & R. 371, per Tilghman, C. J.
[3 ]Ayliffe, 200, referring to code, Bk. i. tit. 3; Savigny Sys. § 92.
[4 ]1 Lev. 237.
[5 ]See also Bishop of Rochester’s Case, Owen 73; s. c. 2 And. 106; Case of the City of London, 1 Ventr. 351.
[1 ]That there was such an obligation in the Roman law see Savigny, § 92.
[2 ]Ch. Cas. 294; s. c. 6 Vin. Abr. 310.
[3 ]A distringas was the proper and only process against a corporation. Curson v. African Co., 1 Vern. 182; Harvey v. E. I. Co., 2 Vern. 395; 3 Keb. 230, pl. 8.
[4 ]2 Vern. 396.
[1 ]Naylor v. Brown, Finch, 83 (1673).
[2 ]1 Fonblanque Eq. (1st ed.) 297, note. The learned author also suggests that the Hamborough Company was not incorporated, but in Viner’s report of the case it is expressly called a corporation, and it appears that as a matter of fact it had been chartered. Ang. and Ames on Corp. (11th ed.) 42; 4 Am. Law Mag. 366, note.
[3 ]Hume v. Windyaw and Wando Canal Co., 1 Car. L. J. 217; s. c. 4 Am. L. Mag. 92.
[4 ]1 Am. Law Mag. 96, answered in 4 Am. Law Mag. 363. See also a small pamphlet by A. L. Oliver, entitled “The Origin and Nature of Corporate Powers and Individual Responsibility of the Members of Trading Corporations at Common Law,” in which the author favors the view here expressed, though on the broader, and it seems untenable, ground that a corporation is in its nature a partnership with a right to sue by one name.
[5 ]1 Blackst. Com. 485, and to the same effect, 2 Kyd, 446.
[1 ]Brice, Ultra Vires (2d ed.), x.
[2 ]They are fully discussed in 2 Kyd, 446, Grant on Corp. 295, and elsewhere.
[3 ]Vol. ii. 516.
[4 ]§§ 46-51.
[5 ]Co. Lit., 13 b; Dean and Canons of Winsor v. Webb, Godb. 211.
[1 ]Mackenzie, Studies in Roman Law, 149; Grant on Corp. 2.
[2 ]Vol. ii. bk. i. tit. 15, § 2, Par. 8.
[3 ]1 Roll. Abr. 816 a; Moore 282, 283, pl. 435; per Lord Hardwicke in Atty.-Gen. v. Gower, 9 Mod. 224, 226; per Lord Mansfield in Burgess v. Wheate, 1 W. Bl. 123, 165; Law of Corp. 300; Wood, Inst. bk. i. c. viii.; 1 Blackst. Com. 484; 2 Kyd, 516; Bell’s Principles (Scotch), § 2190.
[4 ]Johnson v. Norway, Winch, 87, and Co. Lit. 13 b, Hargrave’s note. In the case as reported no decision is given. The only authority is Hargrave’s statement that in Lord Hale’s MS. it is said that the court finally decided that the land should go to the lord, not to the donor.
[6 ]The same statement is made by counsel arguendo in Colchester v. Seaber, 3 Burr. 1868.
[7 ]1 Com. 484.
[8 ]1 Lev. 237.
[1 ]Finch, 83.
[2 ]It is not referred to by Blackstone, Kyd, Kent, Angell and Ames, Field, Taylor, Morawetz, or any other writer on the subject so far as observed.
[3 ]Laws of Pa. ch. dlxxvi.
[1 ]There were several manufacturing companies in Massachusetts, but very few in other States.
[1 ]This Essay was first published in “Two Centuries’ Growth of American Law,” Yale University Bicentennial Publications, on the occasion of its Bicentennial, 1901, (New York: Scribner’s Sons), pp. 261-281, being part of c. X.
[2 ]Chief Justice of the Supreme Court of Errors of Connecticut, and Professor of Constitutional and Private International Law in Yale University. A. B. 1861, A. M. 1864, Yale University, LL. D. 1891, Harvard University.
[3 ]See Chapter II., pp. 11, 17-19, 21, 24.
[4 ]New Haven Col. Rec., I. 24.
[1 ]See Report of the American Historical Association for 1895, 619, 626, and Pennsylvania Statutes at Large, V. 645, 735.
[2 ]Such was the opinion of Ward, Somers, and Treby, given at the request of Connecticut in 1690, as to the effect of her involuntary submission to Sir Edmund Andros, upon her charter rights. Trumbull’s Hist. of Conn., I. 407. See also that from Sir John Holt (afterwards Chief Justice) and seven others in New Jersey Archives, 1st series, I. 272.
[3 ]Palfrey, Hist. of New England, III. 389.
[1 ]See Palfrey’s Hist. of New England, I. 307.
[2 ]Hinman, Letters from the English Kings, etc., 325, 328.
[1 ]Barclay v. Russell, 5 Vesey’s Reports, 424, 434.
[2 ]Dolder v. Bank of England, 10 Vesey’s Reports, 352, 354.
[3 ]Pitkin, Hist. of the United States, I. 23.
[4 ]See the memorial to the Lords Commissioners of Trade and Plantations, drawn for Connecticut in 1700, and other documents of following years, in Hinman’s Letters, 286, 292, 296, 316, 328; Report of the American Historical Association for 1894, 314; Pennsylvania Statutes at Large (ed. 1899), III. 32. Cf. Chapter II. p. 18.
[1 ]Pitkin’s Hist. of the United States, I. 125.
[2 ]Trumbull, Hist. of Connecticut, I. 431.
[3 ]Report of the American Historical Association for 1892, 25, 27.
[4 ]See Chapter II. pp. 13-17.
[1 ]See Chapter IX. p. 259.
[2 ]Baldwin, Modern Political Institutions, 184; Report of the American Historical Association for 1895, 304.
[3 ]Jacobs’ Law Dictionary, in verbo; Adams & Lambert’s Case, 4 Reports, 107.
[1 ]Cowel’s Interpreter (ed. 1727), Chronological Table.
[2 ]Documents relating to Col. Hist. of New York, V. 849.
[3 ]Palfrey, Hist. of New England, III. 390, 394; New Haven Colony Hist. Soc. Papers, III. 413.
[4 ]New Haven Colony Hist. Soc. Papers, III. 406, 410.
[5 ]By the extension to the colonies of the “Bubble Act” of 1720. Hildreth, Hist. of the United States, II. 380; Transactions of the Colonial Society of Massachusetts, III. 27.
[1 ]Bank of North America v. Vardon, 2 Dallas’ Reports, 78.
[2 ]3 Day.
[3 ]Mass. Col. Records, 1642-9, 61, 81, 103, 125, 185; III. 58, 351, 370; IV. 188. Bolles, American Industrial History, 190.
[4 ]Mass. Col. Records, IV. 311.
[5 ]Mass. Col. Records, 1661-1674, IV. pt. ii. 505.
[1 ]It has been stated that this was actually incorporated, but I find no evidence of that: Proceedings of the American Antiquarian Society for 1884, 266; Trumbull, First Essays in Banking, 12.
[2 ]Heather v. The Frankfort Company, Pa. Colonial Cases, 147.
[3 ]Palfrey, Hist. of New England, IV. 395, n.
[4 ]Life of George Mason, I. 58.
[5 ]The Society of Free Traders of Pennsylvania.
[1 ]Life of George Mason, I. 284, II. 341; Calendar of Virginia State Papers, Vol. VI.
[2 ]Life of Charles Carroll of Carrollton, I. 23, 60; Bishop, Hist. of American Manufactures, I. 586.
[3 ]Life of Carroll, 94.
[4 ]Pickell’s Hist. of the Potomac Company, 44, 64.
[5 ]See Laws of Maryland (ed. 1811), I. 419.
[6 ]Colonial Records of Connecticut, 1706-1716, 105. Cf. Ibid. 315; Col. Rec., I. 222.
[1 ]Of this kind were the following in Pennsylvania, which are sometimes referred to as incorporated:—
[2 ]Transactions of the Col. Soc. of Massachusetts, III. 2, 22, 34.
[3 ]Ibid., 26.
[4 ]Colonial Records of Connecticut, VII. 390.
[1 ]Colonial Records of Connecticut, VII. 421, 450.
[2 ]Colonial Records of Connecticut, VII. 421.
[3 ]Massachusetts Colonial Records, 1644-1657, 132, 133.
[4 ]This was probably not in existence in 1776. See statement of Mr. Ingersoll of Philadelphia, arguendo, in Bank of Augusta v. Earle, 13 Peters’ Reports, 575.
[1 ]See Documents relating to Colonial History of New York, IV. 271.
[2 ]Documents relating to Colonial History of New York, IV. 427, 463.
[3 ]Douglass’ Summary, II. 121; Documents relating to the Colonial History of New York, IV. 455.
[4 ]Perry, History of the American Episcopal Church, I. 142.
[5 ]See Douglass’ Summary, II. 106, 124, 127.
[1 ]Hamilton’s Works, I. 414 et seq.
[2 ]Report of the American Historical Association for 1898, 148.
[3 ]They were the East India Co., the Royal African Co., and the Hudson’s Bay Co. Anderson, History of Commerce, II. 598.
[1 ]Chalmers’ Opinions of Lawyers, 599, 608.
[2 ]North Carolina, in the case of canal companies.
[1 ]I venture to think that Sir H. S. Maine has laid too much stress on Legal Fiction as the instrument by which this judicial power is applied. See his Ancient Law, chapter ii.
[1 ]These words were used by him in 1769. Franklin’s Works (ed. of 1834), I. 220. He had asserted the same doctrine at the bar of the House of Commons in 1766. Ibid., 214.
[2 ]Ibid., I. v. Report of the Committee of Grievances of the Assembly of Pennsylvania, in 1757.
[3 ]Trumbull, History of Connecticut, II. 331.
[4 ]Wilson’s Works (ed. of 1896), I. 549.
[1 ]Dartmouth College v. Woodward, 4 Wheaton’s Reports, 518.
[2 ]This Pennsylvania charter, repealed in 1785, was restored in 1787.
[3 ]Dallas, Laws of Pennsylvania, II. 135, 240.
[4 ]Dallas, Laws of Pennsylvania, IV. 136.
[1 ]Elliot’s Debates, III. 461.
[2 ]Pollock on Contracts, Appendix D.
[3 ]Head v. Providence Insurance Co., 2 Cranch’s Reports, 127; Baldwin, Modern Political Institutions, 206.
[1 ]Commonwealth v. Arrison, 15 Sergeant & Rawle’s Reports, 131.
[2 ]Bushel v. Commonwealth Ins. Co., 15 Sergeant & Rawle’s Reports, 176.
[3 ]Ingersoll, arguendo, in Bank of Augusta v. Earle, 13 Peters’ Reports, 573.
[4 ]Laws of Delaware (ed. of 1797), II. 879.
[5 ]Baldwin, Modern Political Institutions, 174, 194.
[6 ]Merrill v. Monticello, 138 United States Reports, 673, 681; Crofut v. Danbury, 65 Connecticut Reports, 294, 300.