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Committee of the Association of American Law Schools, Select Essays in Anglo-American Legal History, vol. 3 [1909]

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Committee of the Association of American Law Schools, 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. http://oll.libertyfund.org/titles/2086

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About this Title:

A massive three volume collection of essays by leading American and English legal experts which surveys the entire body of Anglo-American law. Volume 3 covers particular topics such as commercial law, torts, property, wills and marriage.

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Table of Contents:

Edition: current; Page: [ii]
SELECT ESSAYS IN ANGLO-AMERICAN LEGAL HISTORY
Volume Three
Edition: current; Page: [iii]
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 VOLUME III
BOSTON
LITTLE, BROWN, AND COMPANY
1909
Edition: current; Page: [iv]

Copyright, 1909,

By Little, Brown, and Company.

All rights reserved

Published, September 1909

Electrotyped and Printed by

THE COLONIAL PRESS

C. H. Simonds & Co., Boston, U.S.A.

Edition: current; Page: [v]

PREFACE

WITH the present Volume ends this collection of essays, and the editors finish their task.

  • How shall we prologuise, how shall we perorate,
  • Say fit things upon art and history?

Suffice it, in taking leave, to express the hope that these volumes have in perusal been as interesting to their readers as they were in preparation to their editors. Carlyle, discoursing on History, reminds us that “whereas of old the charm of History lay chiefly in gratifying our common appetite for the wonderful, for the unknown, and her office was but as that of Minstrel and Story-teller, she has now farther become a Schoolmistress, and professes to instruct in gratifying.” That these essays may gratify while instructing is the wish of the editors.

It is to them a special satisfaction, in this third Volume, to have succeeded in the endeavor (announced in the preface to the second Volume) to include an essay worthily representative of French scholarship in the field of English law—that of Professor Robert Caillemer, of the University of Grenoble.

In this Volume, the topics are all of concrete and vivid interest. Several of them trace principles still in process of growth. Research has in some important respects revealed different results to different scholars working on the same materials. Hence occasionally the added interest, for the student, of reconciling the conflicting beliefs, or of choosing between them. For those who must decline either alternative, Edition: current; Page: [vi] there remains the consolation proffered six centuries ago by the seer of Italy, “To doubt is not less grateful than to know.”

The editors, in thus assembling these seventy-six essays, may be granted leave (without desiring to magnify their office) humbly to take pleasure in the thought that at least and at last something has been finished which needed to be done, while the profession is awaiting the accomplishment of greater and more difficult tasks in the vast region of Anglo-American legal history.

The Editors.
Edition: current; Page: [vii]

A TABLE OF BRITISH REGNAL YEARS

1Although Charles II. did not ascend the throne until 29th May, 1660, his regnal years were computed from the death of Charles I., January 30, 1649, so that the year of his restoration is styled the twelfth year of his reign.
Sovereigns Commencement of Reign
William I October 14, 1066
William II September 26, 1087
Henry I August 5, 1100
Stephen December 26, 1135
Henry II December 19, 1154
Richard I September 23, 1189
John May 27, 1199
Henry III October 28, 1216
Edward I November 20, 1272
Edward II July 8, 1307
Edward III January 25, 1326
Richard II June 22, 1377
Henry IV September 30, 1399
Henry V March 21, 1413
Henry VI September 1, 1422
Edward IV March 4, 1461
Edward V April 9, 1483
Richard III June 26, 1483
Henry VII August 22, 1485
Henry VIII April 22, 1509
Edward VI January 28, 1546
Mary July 6, 1553
Elizabeth November 17, 1558
James I March 24, 1603
Charles I March 27, 1625
The Commonwealth January 30, 1649
Charles II1 May 29, 1660
James II February 6, 1685
William and Mary February 13, 1689
Anne March 8, 1702
George I August 1, 1714
George II June 11, 1727
George III October 25, 1760
George IV January 29, 1820
William IV June 26, 1830
Victoria June 20, 1837
Edward VII January 22, 1901
Edition: current; Page: [1]

SELECT ESSAYS IN ANGLO-AMERICAN LEGAL HISTORY:
VOLUME III HISTORY OF PARTICULAR TOPICS, CONTINUED

Edition: current; Page: [2]

CONTENTS

  • BOOK II: HISTORY OF PARTICULAR TOPICS (Continued)
    • part v. commercial law
      • 47. General Survey of the History of the Law Merchant . . Thomas Edward Scrutton 7
      • 48. The Merchants of the Staple . . . . 16

        Spencer Brodhurst

      • 49. Contributions of the Law Merchant to the Common Law . Francis Marion Burdick 34
      • 50. The Early History of Negotiable Instruments . 51

        Edward Jenks

      • 51. Promissory Notes Before and After Lord Holt . 72

        William Cranch

      • 52. The Early History of Insurance Law . . . 98

        William Reynolds Vance

      • 53. The Early History of the English Patent System 117

        Edward Wyndham Hulme

      • 54. The History of the Carrier’s Liability . . 148

        Joseph Henry Beale, Jr.

      • 55. Early Forms of Corporateness . . . . 161

        Cecil Thomas Carr

      • 56. Early Forms of Partnership . . . . 183

        William Mitchell

      • 57. The History of the Law of Business Corporations before 1800 . . Samuel Williston 195
      • 58. History of the Law of Private Corporations in the Colonies and States Simeon Eben Baldwin 236Edition: current; Page: [3]
    • part vi. contracts
      • 59. The History of Assumpsit . . . . 259

        James Barr Ames

      • 60. The History of Parol Contracts prior to Assumpsit . . . . James Barr Ames 304
      • 61. The History of Contract . . . . . 320

        John William Salmond

      • 62. History of the Beneficiary’s Action in Assumpsit 339

        Crawford Dawes Hening

      • 63. The History of Agency . . . . . 368

        Oliver Wendell Holmes, Jr.

    • part vii. torts
      • 64. The History of Trover . . . . . 417

        James Barr Ames

      • 65. The History of the Law of Defamation . . 446

        Van Vechten Veeder

      • 66. Responsibility for Tortious Acts: Its History . 474

        John Henry Wigmore

    • part viii. property (in general)
      • 67. The Disseisin of Chattels . . . . . 541

        James Barr Ames

      • 68. The Mystery of Seisin . . . . . 591

        Frederic William Maitland

      • 69. The History of the Action of Ejectment in England and the United States . . . . 611

        Arthur George Sedgwick and Frederick Scott Wait

      • 70. The Gage of Land in Mediæval England . . 646

        Harold Dexter Hazeltine

      • 71. Changes in the English Law of Real Property During the Nineteenth Century . . . 673

        Arthur Underhill

        Edition: current; Page: [4]
    • part ix. wills, descent, marriage
      • 72. The Mediæval Law of Intestacy . . . 723

        Charles Gross

      • 73. Executors in Earlier English Law . . . 737

        Oliver Wendell Holmes, Jr.

      • 74. The Executor in England and on the Continent . 746

        Robert Caillemer

      • 75. The Rise of the English Will . . . . 770

        Melville Madison Bigelow

      • 76. Marriage and Divorce Under Roman and English Law . . . . . James Bryce 782
Edition: current; Page: [5]

PART V.: COMMERCIAL LAW

  • 47. General Survey of the History of the Law Merchant.

    Thomas Edward Scrutton.

  • 48. The Merchants of the Staple.

    Spencer Brodhurst.

  • 49. Contributions of the Law Merchant to the Common Law.

    Francis Marion Burdick.

  • 50. Early History of Negotiable Instruments.

    Edward Jenks.

  • 51. Promissory Notes before and after Lord Holt.

    William Cranch.

  • 52. Early History of Insurance Law.

    William Reynolds Vance.

  • 53. History of the System of Patents for Industrial Invention.

    Edward Wyndham Hulme.

  • 54. History of the Carrier’s Liability.

    Joseph Henry Beale, Jr.

  • 55. Early Aspects of Corporateness.

    Cecil Thomas Carr.

  • 56. Early Forms of Partnership.

    William Mitchell.

  • 57. History of the Law of Business Corporations before 1800.

    Samuel Williston.

  • 58. History of the Law of Private Corporations in the Colonies and States.

    Simeon Eben Baldwin.

Edition: current; Page: [6]

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, , 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).

Edition: current; Page: [7]

47.: 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, Edition: current; Page: [8] 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 Edition: current; Page: [9] 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 Edition: current; Page: [10] 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 Edition: current; Page: [11] 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 Edition: current; Page: [12] 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 Edition: current; Page: [13] 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 Edition: current; Page: [14] 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. Edition: current; Page: [15] 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.

Edition: current; Page: [16]

48.: 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 Edition: current; Page: [17] 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, Edition: current; Page: [18] 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 Edition: current; Page: [19] 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 Edition: current; Page: [20] 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, Edition: current; Page: [21] 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 Edition: current; Page: [22] 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 Edition: current; Page: [23] 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 Edition: current; Page: [24] 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 Edition: current; Page: [25] ‘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 Edition: current; Page: [26] 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 Edition: current; Page: [27] 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 Edition: current; Page: [28] 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 Edition: current; Page: [29] 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 Edition: current; Page: [30] 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 Edition: current; Page: [31] 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, Edition: current; Page: [32] 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 Edition: current; Page: [33] 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.

Edition: current; Page: [34]

49.: 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 Edition: current; Page: [35] 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, Edition: current; Page: [36] 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

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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, Edition: current; Page: [38] 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, Edition: current; Page: [39] 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 Edition: current; Page: [40] 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 Edition: current; Page: [41] 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 Edition: current; Page: [42] 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: Edition: current; Page: [43] 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 Edition: current; Page: [44] 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 Edition: current; Page: [45] 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

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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 Edition: current; Page: [47] 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 Edition: current; Page: [48] 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 Edition: current; Page: [49] 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 Edition: current; Page: [50] 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.

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50.: 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; Edition: current; Page: [52] 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 Edition: current; Page: [53] 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 Edition: current; Page: [54] 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 iis tandem (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 Edition: current; Page: [55] 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 à Edition: current; Page: [56] nostro 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 Edition: current; Page: [57] 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 Edition: current; Page: [58] 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.

Edition: current; Page: [59]

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 Edition: current; Page: [60] 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 Edition: current; Page: [61] 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 exigendum et dispensandum dederis.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 in Edition: current; Page: [62] vice 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) petere executioni mandari contra Scribentem.6 And in the Stralsunder Stadtbuch for the years 1287-8 we get this interesting entry:—Ludekinus de Fonte dabit in Edition: current; Page: [63] festo beati Michaelis vel Gerardo dicto Repere uel 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,6 oder behelder des briefs,7 ou 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 cui Edition: current; Page: [64] scriptum 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 Edition: current; Page: [65] 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 sui Edition: current; Page: [66] heredes 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 Edition: current; Page: [67] 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 literam presentaverit,6 joft den ghenen die dese lettren bringhen sal.7 Thus the existence of the fourth or presenting party, who appeared in our first Edition: current; Page: [68] 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 causa permutacionis seu cambh a 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 vestris vel cui mandaveritis 100l. turonensium apud Parisius in medio mense aprilis et omnes depensas et dampna et gravamina quae pro dicto Edition: current; Page: [69] debito petendo feceritis vel incurreritis ultra terminum supradictum credendo inde vobis et vestris vestro simplici verbo absque testibus et alia probatione; obligans, &c. Actum Massiliae juxta tabulas campsorum. Testes (4). Factum fuit inde publicum 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

Once more:—

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 die post 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 Edition: current; Page: [70] 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 solemne publicum 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 Edition: current; Page: [71] 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.

Edition: current; Page: [72]

51.: 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;” Edition: current; Page: [73] 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 Edition: current; Page: [74] 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 Edition: current; Page: [75] 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, Edition: current; Page: [76] 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. Edition: current; Page: [77] 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 Edition: current; Page: [78] 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 [1622] 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 Edition: current; Page: [79] 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, —.”

Edition: current; Page: [80]

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 Edition: current; Page: [81] 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 Edition: current; Page: [82] 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; Edition: current; Page: [83] 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 Edition: current; Page: [84] 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, Edition: current; Page: [85] 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.”

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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 Edition: current; Page: [87] 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 [1678] 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 Edition: current; Page: [88] 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 Edition: current; Page: [89] 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 Edition: current; Page: [90] 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 Edition: current; Page: [91] 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 Edition: current; Page: [92] 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 Edition: current; Page: [93] 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 Edition: current; Page: [94] 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 Edition: current; Page: [95] 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.

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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 Edition: current; Page: [97] 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.

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52.: 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 Edition: current; Page: [99] 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 Edition: current; Page: [100] 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 Edition: current; Page: [101] “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 Edition: current; Page: [102] 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 Edition: current; Page: [103] 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, 3which 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 Edition: current; Page: [104] 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 Edition: current; Page: [105] 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 Edition: current; Page: [106] 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 Edition: current; Page: [107] 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 Edition: current; Page: [108] 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 Edition: current; Page: [109] 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 Edition: current; Page: [110] 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

Edition: current; Page: [111]

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 Edition: current; Page: [112] 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 Edition: current; Page: [113] 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 Edition: current; Page: [114] 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 Edition: current; Page: [115] 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 Edition: current; Page: [116] 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.”

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53.: 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 Edition: current; Page: [118] 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 Edition: current; Page: [119] 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 Edition: current; Page: [120] 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 Edition: current; Page: [121] 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)

No. I. 1554. May 29. License to Burchart Cranick (See Grant No. vii infra) to mine, break open ground, melt, divide (i. e. separate metals) and search for all manner of metals according to an indenture made the 18th May of the same year. For 20 years.

The discovery of this grant is due to Mr. J. W. Gordon, author of Monopolies by Patents and other works on the history of Edition: current; Page: [122] 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)

No. I. 1561. Jan. 3. A lycense to Stephen Groyett and Anthony Le Leuryer to make white sope [for 10 years].

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.

No. II. 1561. Aug. 8. License to Philip Cockeram and John Barnes to make saltpetre [for 10 years].

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.

No. III. 1562. May 26. Privilege to George Cobham, alias Broke, for a dredging machine [for 10 years].

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.

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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.’

No. IV. 1562. Dec. 31. License to Wm. Kendall to make Alum in Devon, Cornwall, &c. [for 20 years].

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.

No. V. 1562. Dec. 31. Patent to John Medley for an instrument for the drayninge of water [for 20 years].

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.

No. VI. 1563. Feb. 26. A license to George Gylpin and Peter Stoughberken to make ovens and furnaces [for 10 years].

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 Edition: current; Page: [124] 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.

No. VII. 1563. June 22. A license to Burchsard Cranick to make engines for the draining of waters [20 years].

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.

No. VIII. 1564. July 3. License to Cornelius de Vos to make Alum and Copperas [for 21 years].

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.

Nos. IX, X. 1564. Oct. 10. Commission to Daniel Houghstetter and Thomas Thurland for mining in eight English Counties.
1565. Aug. 10. Special license to the same concerning the provision for the minerals and mines of gold, silver, &c.

The validity of these grants was challenged by the Earl of Northumberland on the ground that the work was within the Edition: current; Page: [125] 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.

No. XI. 1565. Jan. 29. License to Armigil Wade and Wm. Herlle for the manufacture of sulphur and oil [for 30 years] (Latin).

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.

No. XII. 1565. April 20. License to Roger Heuxtenbury and Bartholomew Verberick for Spanish or beyond sea leather [for 7 years].

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.

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Nos. XIII, XIV. 1565. Sept. 17. Two licenses to Wm. Humfry and Christopher Shutz to dig (1) for the Lapis Calaminaris, the manufacture of brass and iron wire and battery wares, (2) for tin, lead, and other ores.

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.

No. XV. 1565. July 31. License to Francis Berty to put in practice the trade of making white salt.

The patent was surrendered and reissued in the following year.

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No. XVI. 1565. Sept. 7. License to James Acontius for the manufacture of machines for grinding, &c. [for 20 years] (Latin).

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.

No. XVII. 1566. Jan. 23. License to Francis Berty for the making of salt.

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.

No. XVIII. 1567. Aug. 26. A special license to Peter Anthony van Ghemen [for 21 years] to cut iron, save fuel and extract oil.

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.

No. XIX. 1567. Sept. 8. License to Anthony Becku and John Carré to make Normandy and Lorraine glass [for 21 years].

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 Edition: current; Page: [128] ‘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).

No. XX. 1568. Oct. 14. Grant to Peter Backe to collect madder in Ireland and dye skins of animals [for 21 years].

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.

No. XXI. 1568. Nov. 10. License to Peter de la Croce (De la Croix) to make Cendre de Namour [for 7 years].

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.

No. XXII. 1569. Apr. 20. A license to Dan. Houghstetter to use the arte of myninge [for 21 yeares].

[See also patent dated Oct. 1564.] The grant is for setting up and using engines for mine drainage.

No. XXIII. 1569. May 26. License to John Hastinges to make clothes called Frestadowes [for 21 years].

Frisadoes may be regarded as a variety of ‘broad bayes,’ but of a somewhat lighter character, and dyed and finished for the Edition: current; Page: [129] 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.

No. XXIV. 1571. July 5. Grant to Sir Thos. Goldinge for an engine for land drainage and water supply [for 20 years].

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.

No. XXV. 1571. July 30. Grant to Rd. Mathewe to make ‘Turkye haftes’ for knives, &c. [for 6 years].

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.

No. XXVI. 1571. Sept. 1. Grant to Rd. Dyer to make earthen pots to hold fire for seething meat [for 7 years].

According to Howes the grantee learned the art of making ‘earthen furnaces, firepots, and ovens transportable’ when a Edition: current; Page: [130] 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.

No. XXVII. 1573. June 13. Grant to John Payne for mills for grinding corn [for 21 years].

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.

No. XXVIII. 1573. July 8. Grant to John Synertson to put in practice an instrument for land drainage, and for the stopping of breaches in dams [for 10 years].

The grantee is described as of Amsterdam, stranger. Prior rights are reserved, and a term of two years assigned for introducing the industry.

No. XXIX. 1573. Oct. 28. Grant to Rd. Candish for an engine for draining coal and iron mines [for 20 years].

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.

No. XXX. 1574. April 3. License to John Collyns to make ‘brode clothes called Mildernix and Polledavies’ [for 21 years].

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 Edition: current; Page: [131] reissued to John and Rd. Collyns for twenty-one years. Cf. also Statute 1 Jac. I, cap. 24, where the above statements are confirmed.

No. XXXI. 1574. Aug. 27. Grant to Jeremy Nenner and George Zolcher for a method of sparing fuel [for 7 years] (Latin).

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).

No. XXXII. 1574. Dec. 13. Grant to James Verselyn for making drinking glasses [for 21 years].

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.

No. XXXIII. 1575. Feb. 14. Grant to Sir Thos. Smythe, the Earl of Leicester, Lord Burghley, and others of the ‘Society of the New Art,’ and to their successors.

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.

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No. XXXIV. 1577. June 8. Grant to Wm. Wade and Henry Mekyns, alias Pope, for making sulphur, brimstone, and oils [for 30 years].

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.

No. XXXV. 1578. Jan. 24. Grant to Peter Morris for engines for water-raising [for 21 years].

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.

No. XXXVI. 1582. June 26. Grant to Rd. Spence to make white salt [for 20 years].

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.

No. XXXVII. 1582. Sept. 22. Grant to Wm. Harebrowne and his son to make salt upon salt at Yarmouth [for 21 years].
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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.

No. XXXVIII. 1583. April 10. Grant to Geo. Langdale to make sackbuts and trumpets [for 20 years].

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.

No. XXXIX. 1584. Feb. 28. Grant to James Humfry to make train oil [for 7 years].

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.

No. XL. 1585. Sept. 1. Grant to Thos. Wilkes, Clerk of the Privy Council, to make white salt [for 21 years].

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, Edition: current; Page: [134] 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.

No. XLI. 1586. March 11. Grant to Francis Dal Arme (alien), and Robert Clarke, to work out oil of woollen cloth, with consent of the owners—‘the same oil to have for their labour’ [for 21 years].

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.

No. XLII. 1587. Dec. 30. Grant to John Purchise, ‘our subject,’ to make armour and harness for man and horse [for 7 years].

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.

No. XLIII. 1588. April 15. Grant to Rd. Young to import, make, and sell ‘le starche’ [for 7 years].

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 Edition: current; Page: [135] 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).

No. XLIV. 1588. July 26. Grant to Timothy Bright, M. D., of a short and new kind of writing by character [for 15 years].

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.

No. XLV. 1588. Dec. 4. Grant to Bevis Bulmer to make and cut iron into small pieces to work out nails [for 12 years].

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.

No. XLVI. 1589. Jan. 28. Grant to George and John Evelyn and Rd. Hills to dig and get saltpetre [for 11 years].

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.

No. XLVII. 1589. Feb. 7. Grant to John Spilman to buy all manner of linen rags, &c., to make white writing paper [for 10 years].

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 Edition: current; Page: [136] 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.

No. XLVIII. 1589. Oct. 9. Grant to Thos. Procter, of Marske, Yorkshire, and Wm. Peterson to make iron, steel, and lead by using earth coal, sea coal, turf, or peat [for 7 years].

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.

No. XLIX. 1590. Oct. 15. Grant to John Thorneborough, Dean of York, for the refining of pit coal [for 7 years].

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.

No. L. 1591. Nov. 4. Grant to Reynold Hoxton to make flasks for touch-boxes, powder-boxes, and bullet-boxes for small-arms [for 15 years].

Apparently a form of wooden cartridge containing powder and shot, for facilitating the loading of firearms.

No. LI. 1594. March 23. Grant to Richard Drake to make aqua composita, aqua vitae, and vinegar [for 21 years].

This grant may be regarded as typical of the Elizabethan monopoly system at its worst. It recites that about thirty years Edition: current; Page: [137] 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.

No. LII. 1597. July 22. Grant to Thos. Lovell to inne, fence, win, drain, and recover all grounds, &c., and to make turf or peat fit to be burned [for 21 years].

The ‘inventor’ learned the art from the Dutch, and undertakes to introduce skilled labour from abroad.

No. LIII. 1598. April 21. Grant to Edward Wright to make and utter mathematical instruments [for 8 years].

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.

No. LIV. 1598. Aug. 11. Special license to Edward Darcye for transporting cards and for making them [for 21 years].

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 Edition: current; Page: [138] 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.

No. LV. 1599. July 11. Grant to Capt. Thos. Hayes for making of instruments of war [for 10 years].

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:—

Period Alien Grants Native Grants Grants for regulating Trade Total
1561-1570 15 8 0 23
1571-1580 4 7 1 12
1581-1590 2 11 1 14
1591-1600 0 4 2 6
1601-1603 0 0 0 0
1561-1603 21 30 4 55
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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 Edition: current; Page: [140] 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 Edition: current; Page: [141] 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 Edition: current; Page: [142] 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:

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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 Edition: current; Page: [144] 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 Edition: current; Page: [145] 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.’ Edition: current; Page: [146] 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 Edition: current; Page: [147] 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.

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54.: 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 Edition: current; Page: [149] “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

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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 Edition: current; Page: [151] 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 Edition: current; Page: [152] 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

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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 Edition: current; Page: [154] 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, Edition: current; Page: [155] 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 Edition: current; Page: [156] 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 cui Edition: current; Page: [157] resisti 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 Edition: current; Page: [158] 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 Edition: current; Page: [159] 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 Edition: current; Page: [160] 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.

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55.: 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 Edition: current; Page: [162] 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 Edition: current; Page: [163] 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 Edition: current; Page: [164] 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 Edition: current; Page: [165] 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 Edition: current; Page: [166] 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 Edition: current; Page: [167] 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 Edition: current; Page: [168] 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. Edition: current; Page: [169] 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 Edition: current; Page: [170] 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

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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 Edition: current; Page: [172] 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 Edition: current; Page: [173] 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 Edition: current; Page: [174] 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 Edition: current; Page: [175] 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 Edition: current; Page: [176] 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. Edition: current; Page: [177] 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 Edition: current; Page: [178] 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 Edition: current; Page: [179] 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.

Edition: current; Page: [180]

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. Edition: current; Page: [181] 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 Edition: current; Page: [182] 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

Edition: current; Page: [183]

56.: 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 Edition: current; Page: [184] 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 Edition: current; Page: [185] 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 Edition: current; Page: [186] 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 Edition: current; Page: [187] 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 Edition: current; Page: [188] 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 Edition: current; Page: [189] 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 Edition: current; Page: [190] 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 Edition: current; Page: [191] 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 Edition: current; Page: [192] 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 Edition: current; Page: [193] 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 Edition: current; Page: [194] 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.

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57.: THE HISTORY OF THE LAW OF BUSINESS CORPORATIONS BEFORE 18001

I

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 Edition: current; Page: [196] 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 Edition: current; Page: [197] 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.

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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 Edition: current; Page: [199] 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, Edition: current; Page: [200] 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 Edition: current; Page: [201] 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 Edition: current; Page: [202] 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 Edition: current; Page: [203] 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 Edition: current; Page: [204] 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 Edition: current; Page: [205] 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 Edition: current; Page: [206] 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 Edition: current; Page: [207] 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.

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“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, Edition: current; Page: [209] 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 Edition: current; Page: [210] 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 Edition: current; Page: [211] 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 Edition: current; Page: [212] 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 Edition: current; Page: [213] 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 Edition: current; Page: [214] 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 Edition: current; Page: [215] 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 Edition: current; Page: [216] 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

II

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 Edition: current; Page: [217] 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.

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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 Edition: current; Page: [219] 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 Edition: current; Page: [220] 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.”

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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 Edition: current; Page: [222] £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 Edition: current; Page: [223] 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 Edition: current; Page: [224] 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 Edition: current; Page: [225] 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 Edition: current; Page: [226] 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 Edition: current; Page: [227] 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 Edition: current; Page: [228] 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

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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 Edition: current; Page: [230] 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, Edition: current; Page: [231] 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. Edition: current; Page: [232] 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 Edition: current; Page: [233] 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 doctrine itself, whatever its basis may have been, was uniformly quoted by judges and text-writers as accurate,3 excepting in one case.4

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 Edition: current; Page: [234] 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 Edition: current; Page: [235] 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.

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58.: 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 Edition: current; Page: [237] 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, Edition: current; Page: [238] 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 Edition: current; Page: [239] 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 Edition: current; Page: [240] 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.

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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 Edition: current; Page: [242] 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 Edition: current; Page: [243] 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 Edition: current; Page: [244] 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 Edition: current; Page: [245] 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.

5Some 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, Edition: current; Page: [246] 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 Edition: current; Page: [247] 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 Edition: current; Page: [248] 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

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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 Edition: current; Page: [250] 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 Edition: current; Page: [251] 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 Edition: current; Page: [252] 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 Edition: current; Page: [253] 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.

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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 Edition: current; Page: [255] 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

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PART VI.: CONTRACTS

  • 59. The History of Assumpsit.

    James Barr Ames.

  • 60. The History of Parol Contracts prior to Assumpsit.

    James Barr Ames.

  • 61. The History of Contract.

    John William Salmond.

  • 62. The History of the Beneficiary Third Person’s Action in Assumpsit.

    Crawford Dawes Hening.

  • 63. The History of Agency.

    Oliver Wendell Holmes, Jr.

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Other References on the Subject of this Part are as Follows:

History of the Common Law Theory of Contract, by C. Morse (Canada Law Journal, 1903, XXXIX, 379-395).

The Doctrine of Consideration, in English Law, by E. Jenks (London, 1892), cc. III, IV.

The Foundations of Legal Liability, by T. A. Street (Northport, 1906), vol. II, cc. I-IV, vol. III, cc. X-XVI.

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59.: THE HISTORY OF ASSUMPSIT1

I.—: EXPRESS ASSUMPSIT

THE mystery of consideration has possessed a peculiar fascination for writers upon the English Law of Contract. No fewer than three distinct theories of its origin have been put forward within the last eight years. According to one view, “the requirement of consideration in all parol contracts is simply a modified generalization of quid pro quo to raise a debt by parol.”3 On the other hand, consideration is described as “a modification of the Roman principle of causa, adopted by equity, and transferred thence into the common law.”4 A third learned writer derives the action of assumpsit from the action on the case for deceit, the damage to the plaintiff in that action being the forerunner of the “detriment to the promisee,” which constitutes the consideration of all parol contracts.5

To the present writer6 it seems impossible to refer consideration to a single source. At the present day it is doubtless just and expedient to resolve every consideration into a detriment to the promisee incurred at the request of the promisor. But this definition of consideration would not Edition: current; Page: [260] have covered the cases of the sixteenth century. There were then two distinct forms of consideration: (1) detriment; (2) a precedent debt. Of these, detriment was the more ancient, having become established, in substance, as early as 1504. On the other hand, no case has been found recognizing the validity of a promise to pay a precedent debt before 1542. These two species of consideration, so different in their nature, are, as would be surmised, of distinct origin. The history of detriment is bound up with the history of special assumpsit, whereas the consideration based upon a precedent debt must be studied in the development of indebitatus assumpsit. These two forms of assumpsit will, therefore, be treated separately in the following pages.

The earliest cases in which an assumpsit was laid in the declaration were cases against a ferryman who undertook to carry the plaintiff’s horse over the river, but who overloaded the boat, whereby the horse was drowned;1 against surgeons who undertook to cure the plaintiff or his animals, but who administered contrary medicines or otherwise unskilfully treated their patient;2 against a smith for laming a horse while shoeing it;3 against a barber who undertook to shave the beard of the plaintiff with a clean and wholesome razor, but who performed his work negligently and unskilfully to the great injury of the plaintiff’s face;4 against a carpenter who undertook to build well and faithfully, but who built unskilfully.5

In all these cases, it will be observed, the plaintiff sought to recover damages for a physical injury to his person or property caused by the active misconduct of the defendant. The statement of the assumpsit of the defendant was for centuries, Edition: current; Page: [261] it is true, deemed essential in the count. But the actions were not originally, and are not to-day, regarded as actions of contract. They have always sounded in tort. Consideration has, accordingly, never played any part in the declaration. In the great majority of the cases and precedents there is no mention of reward or consideration. In Powtuary v. Walton1 (1598), a case against a farrier who undertook to cure the plaintiff’s horse, and who treated it so negligently and unskilfully that it died, it is said: “Action on the case lies on this matter without alleging any consideration, for his negligence is the cause of the action, and not the assumpsit.” The gist of the action being tort, and not contract, a servant,2 a wife,3 or a child,4 who is injured, may sue a defendant who was employed by the master, the husband, or the father. Wherever the employment was not gratuitous, and the employer was himself the party injured, it would, of course, be a simple matter to frame a good count in contract. There is a precedent of assumpsit against a farrier for laming the plaintiff’s horse.5 But in practice assumpsit was rarely, if ever, resorted to.

What, then, was the significance of the assumpsit which appears in all the cases and precedents, except those against a smith for unskilful shoeing? To answer this question it is necessary to take into account a radical difference between modern and primitive conceptions of legal liability. The original notion of a tort to one’s person or property was an injury caused by an act of a stranger, in which the plaintiff did not in any way participate. A battery, an asportation of a chattel, an entry upon land, were the typical torts. If, on the other hand, one saw fit to authorize another to come into contact with his person or property, and damage ensued, there was, without more, no tort. The person injured took the risk of all injurious consequences, unless the other expressly assumed the risk himself, or unless the peculiar nature of one’s calling, as in the case of the smith, imposed a customary Edition: current; Page: [262] duty to act with reasonable skill. This conception is well shown by the remarks of the judges in a case against a horse-doctor;1 Newton, C. J.: “Perhaps he applied his medicines de son bon gré, and afterwards your horse died; now, since he did it de son bon gré, you shall not have an action. . . . My horse is ill, and I come to a horse-doctor for advice, and he tells me that one of his horses had a similar trouble, and that he applied a certain medicine, and that he will do the same for my horse, and does so, and the horse dies; shall the plaintiff have an action? I say, No.” Paston, J.: “You have not shown that he is a common surgeon to cure such horses, and so, although he killed your horse by his medicines, you shall have no action against him without an assumpsit.” Newton, C. J.: “If I have a sore on my hand, and he applies a medicine to my heel, by which negligence my hand is maimed, still I shall not have an action unless he undertook to cure me.” The court accordingly decided that a traverse of the assumpsit made a good issue.2

It is believed that the view here suggested will explain the following passage in Blackstone, which has puzzled many of his readers: “If a smith’s servant lames a horse while he is shoeing him, an action lies against the master, but not against the servant.”3 This is, of course, not law to-day, and probably was not law when written. Blackstone simply repeated the doctrine of the Year-Books.4 The servant had not expressly assumed to shoe carefully; he was, therefore, no more liable than the surgeon, the barber, and the carpenter, who had not undertaken, in the cases already mentioned. This primitive notion of legal liability has, of course, entirely disappeared from the law. An assumpsit is no longer an essential allegation in these actions of tort, and there is, therefore, little or no semblance of analogy between these actions and actions of contract.

An express assumpsit was originally an essential part of the plaintiff’s case in another class of actions, namely, actions Edition: current; Page: [263] on the case against bailees for negligence in the custody of the things intrusted to them. This form of the action on the case originated later than the actions for active misconduct, which have been already considered, but antedates, by some fifty years, the action of assumpsit. The normal remedy against a bailee was detinue. But there were strong reasons for the introduction of a concurrent remedy by an action on the case. The plaintiff in detinue might be defeated by the defendant’s wager of law; if he had paid in advance for the safe custody of his property, he could not recover in detinue his money, but only the value of the property; detinue could not be brought in the King’s Bench by original writ; and the procedure generally was less satisfactory than that in case. It is not surprising, therefore, that the courts permitted bailors to sue in case. The innovation would seem to have come in as early as 1449.1 The plaintiff counted that he delivered to the defendant nine sacks of wool to keep; that the defendant, for six shillings paid him by the plaintiff, assumed to keep them safely, and that for default of keeping they were taken and carried away. It was objected that detinue, and not case, was the remedy. One of the judges was of that opinion, but in the end the defendant abandoned his objection; and Statham adds this note: . . . “et credo the reason of the action lying is because the defendant had six shillings which he [plaintiff] could not recover in detinue.” The bailor’s right to sue in case instead of detinue was recognized by implication in 1472,2 and was expressly stated a few years later.3

The action against a bailee for negligent custody was looked upon, like the action against the surgeon or carpenter for active misconduct, as a tort, and not as a contract. The immediate cause of the injury in the case of the bailee was, it is true, a nonfeasance, and not, as in the case of the surgeon or carpenter, a misfeasance. And yet, if regard be had to the whole transaction, it is seen that there is more than a simple breach of promise by the bailee. He is truly an Edition: current; Page: [264] actor. He takes the goods of the bailor into his custody. This act of taking possession of the goods, his assumpsit to keep them safely, and their subsequent loss by his default, together made up the tort. The action against the bailee sounding in tort, consideration was no more an essential part of the count than it was in actions against a surgeon. Early in the reign of Henry VIII., Moore, Sergeant, said, without contradiction, that a bailee, with or without reward, was liable for careless loss of goods either in detinue or case;1 and it is common learning that a gratuitous bailee was charged for negligence in the celebrated case of Coggs v. Bernard. If there was, in truth, a consideration for the bailee’s undertaking, the bailor might, of course, declare in contract, after special assumpsit was an established form of action. But, in fact, there are few instances of such declarations before the reign of Charles I.2 Even since that time, indeed, case has continued to be a frequent, if not the more frequent, mode of declaring against a bailee.3 Oddly enough, the earliest attempts to charge bailees in assumpsit were made when the bailment was gratuitous. These attempts, just before and after 1600, were unsuccessful, because the plaintiffs could not make out any consideration.4 The gratuitous bailment was, of course, not a benefit, but a burden to the defendant; and, on the other hand, it was not regarded as a detriment, but an advantage to the plaintiff. But in 1623 it was finally decided, not without a great straining, it must be conceded, of the doctrine of consideration, that a bailee might be charged in assumpsit on a gratuitous bailment.5

The analogy between the action against the bailee and that against the surgeon holds also in regard to the necessity Edition: current; Page: [265] of alleging an express assumpsit by the defendant. Bailees whose calling was of a quasi public nature were chargeable by the custom of the realm, without any express undertaking. Accordingly, so far as the reported cases and precedents disclose, an assumpsit was never laid in a count in case against a common carrier1 or innkeeper2 for the loss of goods. They correspond to the smith, who, from the nature of his trade, was bound to shoe skilfully. But, in order to charge other bailees, proof of an express assumpsit was originally indispensable. An assumpsit was accordingly laid as a matter of course in the early cases and precedents. Frowyk, C. J., says, in 1505, that the bailee shall be charged “per cest parol super se assumpsit.3 In Fooley v. Preston,4 Anderson, Chief Justice of the Common Bench, mentions, it is true, as a peculiarity of the Queen’s Bench, that “it is usual and frequent in B. R. if I deliver to you an obligation to rebail unto me, I shall have an action upon the case without an express promise.” And yet, twelve years later, in Mosley v. Fosset5 (1598), which was an action on the case for the loss of a gelding delivered to the defendant to be safely kept and redelivered on request, the four judges of the Queen’s Bench, although equally divided on the question whether the action would lie without a request, which would have been necessary in an action of detinue, “all agreed that without such an assumpsit the action would not lie.”6 But Edition: current; Page: [266] with the lapse of time an express undertaking of the bailee ceased to be required, as we have already seen it was dispensed with in the case of a surgeon or carpenter. The acceptance of the goods from the bailor created a duty to take care of them in the same manner that a surgeon who took charge of a patient became bound, without more, in modern times, to treat him with reasonable skill.

Symons v. Darknoll1 (1629) was an action on the case against a lighterman, but not a common lighterman, for the loss of the plaintiff’s goods. “And, although no promise, the court thought the plaintiff should recover;” Hyde, C. J., adding: “Delivery makes the contract.” The later precedents in case, accordingly, omit the assumpsit.2

There is much in common between the two classes of actions on the case already discussed and still a third group of actions on the case, namely, actions of deceit against the vendor of a chattel upon a false warranty. This form of action, like the others, is ancient, being older, by more than a century, than special assumpsit. The words super se assumpsit were not used, it is true, in a count upon a warranty; but the notion of undertaking was equally well conveyed by “warrantizando vendidit.

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Notwithstanding the undertaking, this action also was, in its origin, a pure action of tort. In what is, perhaps, the earliest reported case upon a warranty,1 the defendant objects that the action is in the nature of covenant, and that the plaintiff shows no specialty but “non allocatur, for it is a writ of trespass.” There was regularly no allusion to consideration in the count in case; if, by chance, alleged, it counted for nothing.2 How remote the action was from an action of contract appears plainly from a remark of Choke, J.: “If one sells a thing to me, and another warrants it to be good and sufficient, upon that warranty made by parol, I shall not have an action of deceit; but if it was by deed, I shall have an action of covenant.”3 That is to say, the parol contract of guaranty, so familiar in later times, was then unknown. The same judge, and Brian, C. J., agreed, although Littleton, J., inclined to the opposite view, that if a servant warranted goods which he sold for his master, that no action would lie on the warranty. The action sounding in tort, the plaintiff, in order to charge the defendant, must show, in addition to his undertaking, some act by him, that is, a sale; but the owner was the seller, and not the friend or servant, in the cases supposed. A contract, again, is, properly, a promise to act or forbear in the future. But the action under discussion must be, as Choke, J., said, in the same case, upon a warranty of a thing present, and not of a thing to come. A vendor who gives a false warranty may be charged to-day, of course, in contract; but the conception of such a warranty, as a contract, is quite modern. Stuart v. Wilkins,4 decided in 1778, is said to have been the first instance of an action of assumpsit upon a vendor’s warranty.

We have seen that an express undertaking of the defendant was originally essential to the actions against surgeons or carpenters, and bailees. The parallel between these actions and the action on a warranty holds true on this point also. A case in the Book of Assises is commonly cited, it is true, to show that from very early times one who sold goods, Edition: current; Page: [268] knowing that he had no title to them, was liable in an action on the case for deceit.1 This may have been the law.2 But, this possible exception apart, a vendor was not answerable to the vendee for any defect of title or quality in the chattels sold, unless he had either given an express warranty, or was under a public duty, from the nature of his calling, to sell articles of a certain quality. A taverner or vintner was bound as such to sell wholesome food and drink.3 Their position was analogous to that of the smith, common carrier, and innkeeper.

The necessity of an express warranty of quality in all other cases is illustrated by the familiar case of Chandelor v. Lopus4 (1606-1607). The count alleged that the defendant sold to the defendant a stone, affirming it to be a bezoar stone, whereas it was not a bezoar stone. The judgment of the King’s Bench, that the count was bad, was affirmed in the Exchequer Chamber, all the justices and barons (except Anderson, C. J.) holding “that the bare affirmation that it was a bezoar stone, without warranting it to be so, is no cause of action; and although he knew it to be no bezoar stone, it is not material; for every one in selling his wares will affirm that his wares are good, or that his horse is sound; yet, if he does not warrant them to be so, it is no cause of action.” The same doctrine is repeated in Bailie v. Merrill.5 The case of Chandelor v. Lopus has recently found an able defender in the pages of this Review. In the number for November, 1887, Mr. R. C. McMurtrie urges that the decision was a necessary consequence of the rule of pleading that the pleader must state the legal effect of his evidence, and not the evidence itself. It is possible that the judgment would have been arrested in Chandelor v. Lopus, if it had come before an English court of the present century.6 But Edition: current; Page: [269] it is certain that the judges in the time of James I. did not proceed upon this rule of pleading. To their minds the word “warrant,” or, at least, a word equally importing an express undertaking, was as essential in a warranty as the words of promise were in the Roman stipulatio. The modern doctrine of implied warranty, as stated by Mr. Baron Parke in Barr v. Gibson,1 “But the bargain and sale of a chattel, as being of a particular description, does imply a contract that the article sold is of that description,” would have sounded as strangely in the ears of the early lawyers as their archaic doctrine sounds in ours. The warranty of title stood anciently upon the same footing as the warranty of quality.2 But in Lord Holt’s time an affirmation was equivalent to a warranty,3 and to-day a warranty of title is commonly implied from the mere fact of selling.4

However much the actions against a surgeon or carpenter for misfeasance, those against a bailee for negligent custody, and, above all, those against a vendor for a false warranty, may have contributed, indirectly, to the introduction of special assumpsit, there is yet a fourth class of cases which seem to have been more intimately connected with the development of the modern parol contract than any of those yet considered. These cases, also, like the actions for a false warranty, were actions on the case for deceit. That their significance may be fully appreciated, however, it will be well to give first a short account of the successive attempts to maintain an action for the simple breach of a naked parol promise, i. e., for a pure nonfeasance.

The earliest of these attempts was in 1400, when an action was brought against a carpenter for a breach of his undertaking to build a house. The court was unanimous against the plaintiff, since he counted on a promise, and showed no specialty.5 In the same reign there was a similar case with Edition: current; Page: [270] the same result.1 The harmony of judicial opinion was somewhat interrupted fifteen years later in a case against a millwright on a breach of promise to build a mill within a certain time. Martin, J., like his predecessors, was against the action; Cockayne, J., favored it. Babington, C. J., at first agreed with Cockayne, J., but was evidently shaken by the remark of Martin, J.: “Truly, if this action is maintained, one shall have trespass for breach of any covenant2 in the world,” for he then said: “Our talk is idle, for they have not demurred in judgment. Plead and say what you will, or demur, and then it can be debated and disputed at leisure.” The case went off on another point.3 Martin, J., appears finally to have won over the Chief Justice to his view, for, eight years later, we find Babington, C. J., Martin and Cotesmore, JJ., agreeing in a dictum that no action will lie for the breach of a parol promise to buy a manor. Paston, J., showed an inclination to allow the action.4 In 1435 he gave effect to this inclination, holding, with Juyn, J., that the defendant was liable in an action on the case for the breach of a parol promise to procure certain releases for the plaintiff.5 But this decision was ineffectual to change the law. Made without a precedent, it has had no following. Edition: current; Page: [271] The doctrine laid down in the time of Henry IV. has been repeatedly reaffirmed.1

The remaining actions on the case for deceit before mentioned may now be considered. In the first of these cases the writ is given, and the reader will notice the striking resemblance between its phraseology and the later count in assumpsit. The defendant was to answer for that he, for a certain sum to be paid to him by the plaintiff, undertook to buy a manor of one J. B. for the plaintiff; but that he, by collusion between himself and one M. N., contriving cunningly to defraud the plaintiff, disclosed the latter’s evidence, and falsely and fraudulently became of counsel with M. N., and bought the manor for M. N., to the damage of the plaintiff. All the judges agreed that the count was good. Babington, C. J.: “If he discovers his counsel, and becomes of counsel for another, now that is a deceit, for which I shall have an action on my case.” Cotesmore, J.: “I say, that matter lying wholly in covenant may by matter ex post facto be converted into deceit. . . . When he becomes of counsel for another, that is a deceit, and changes all that was before only covenant, for which deceit he shall have an action on his case.”2

The act of the defendant did not affect, it is true, the person or physical property of the plaintiff. Still, it was hardly an extension of the familiar principle of misfeasance to regard the betrayal of the plaintiff’s secrets as a tortious invasion of his rights. But the judges encountered a real difficulty in applying that principle to a case that came before Edition: current; Page: [272] the Exchequer Chamber a few years later.1 It was a bill of deceit in the King’s Bench, the plaintiff counting that he bargained with the defendant to buy of him certain land for £100 in hand paid, but that the defendant had enfeoffed another of the land, and so deceived him. The promise not being binding of itself, how could the enfeoffment of a stranger be a tortious infringement of any right of the plaintiff? What was the distinction, it was urged, between this case and those of pure nonfeasance, in which confessedly there was no remedy? So far as the plaintiff was concerned, as Ayscoghe, J., said, “it was all one case whether the defendant made a feoffment to a stranger or kept the land in his own hands.” He and Fortescue, J., accordingly thought the count bad. A majority of the judges, however, were in favor of the action. But the case was adjourned. Thirty-five years later (1476), the validity of the action in a similar case was impliedly recognized.2 In 1487 Townsend, J., and Brian, C. J., agreed that a traverse of the feoffment to the stranger was a good traverse, since “that was the effect of the action, for otherwise the action could not be maintained.”3 In the following year,4 the language of Brian, C. J., is most explicit: “If there be an accord between you and me that you shall make me an estate of certain land, and you enfeoff another, shall I not have an action on my case? Quasi diceret sic. Et Curia cum illo. For when he undertook to make the feoffment, and conveyed to another, this is a great misfeasance.”

In the Exchequer Chamber case, and in the case following, in 1476, the purchase-money was paid at the time of the bargain. Whether the same was true of the two cases in the time of Henry VII., the reports do not disclose. It is possible, but by no means clear, that a payment contemporaneous with the promise was not at that time deemed essential. Be that as it may, if money was in fact paid for a promise to convey land, the broach of the promise by a conveyance to a stranger was certainly, as already seen, an actionable deceit Edition: current; Page: [273] by the time of Henry VII. This being so, it must, in the nature of things, be only a question of time when the breach of such a promise, by making no conveyance at all, would also be a cause of action. The mischief to the plaintiff was identical in both cases. The distinction between misfeasance and nonfeasance, in the case of promises given for money, was altogether too shadowy to be maintained. It was formally abandoned in 1504, as appears from the following extract from the opinion of Frowyk, C. J.: “And so, if I sell you ten acres of land, parcel of my manor, and then make a feoffment of my manor, you shall have an action on the case against me, because I received your money, and in that case you have no other remedy against me. And so, if I sell you my land and covenant to enfeoff you and do not, you shall have a good action on the case, and this is adjudged. . . . And if I covenant with a carpenter to build a house and pay him £20 for the house to be built by a certain day, now I shall have a good action on my case because of payment of money, and still it sounds only in covenant and without payment of money in this case no remedy, and still if he builds it and misbuilds, action on the case lies. And also for nonfeasance, if money paid case lies.”1

The gist of the action being the deceit in breaking a promise on the faith of which the plaintiff had been induced to part with his money or other property, it was obviously immaterial whether the promisor or a third person got the benefit of what the plaintiff gave up. It was accordingly decided, in 1520, that one who sold goods to a third person on the faith of the defendant’s promise that the price should be paid, might have an action on the case upon the promise.2 This decision introduced the whole law of parol guaranty. Cases in which the plaintiff gave his time or labor were as much within the principle of the new action as those in which he parted with property. And this fact was speedily recognized. In Saint-Germain’s book, published in 1522, the student of Edition: current; Page: [274] law thus defines the liability of a promisor: “If he to whom the promise is made have a charge by reason of the promise, . . . he shall have an action for that thing that was promised, though he that made the promise have no worldly profit by it.”1 From that day to this a detriment has always been deemed a valid consideration for a promise if incurred at the promisor’s request.2

Jealousy of the growing jurisdiction of the chancellors was doubtless a potent influence in bringing the common-law judges to the point of allowing the action of assumpsit. Fairfax, J., in 1481, advised pleaders to pay more attention to actions on the case, and thereby diminish the resort to Chancery;3 and Fineux, C. J., remarked, after that advice had been followed and sanctioned by the courts, that it was no longer necessary to use a subpœna in such cases.4

That equity gave relief, before 1500, to a plaintiff who had incurred detriment on the faith of the defendant’s promise, is reasonably clear, although there are but three reported cases.5 In one of them, between 1377 and 1399, the defendant promised to convey certain land to the plaintiff, who, trusting in the promise, paid out money in travelling to London and consulting counsel; and upon the defendant’s refusal to convey, prayed for a subpœna to compel the defendant to answer of his “disceit.”6 The bill sounds in tort Edition: current; Page: [275] rather than in contract, and inasmuch as even cestuis que use could not compel a conveyance by their feoffees to use at this time, its object was doubtless not specific performance, but reimbursement for the expenses incurred. Appilgarth v. Sergeantson1 (1438) was also a bill for restitutio in integrum, savoring strongly of tort. It was brought against a defendant who had obtained the plaintiff’s money by promising to marry her, and who had then married another in “grete deceit.”2 The remaining case, thirty years later,3 does not differ materially from the other two. The defendant, having induced the plaintiff to become the procurator of his benefice, by a promise to save him harmless for the occupancy, secretly resigned his benefice, and the plaintiff, being afterwards vexed for the occupancy, obtained relief by subpœna.

Both in equity4 and at law, therefore, a remediable breach of a parol promise was originally conceived of as a deceit; that is, a tort. Assumpsit was in several instances distinguished from contract.5 By a natural transition, however, actions upon parol promises came to be regarded as actions ex contractu.6 Damages were soon assessed, not upon the Edition: current; Page: [276] theory of reimbursement for the loss of the thing given for the promise, but upon the principle of compensation for the failure to obtain the thing promised. Again, the liability for a tort ended with the life of the wrong-doer. But after the struggle of a century, it was finally decided that the personal representatives of a deceased person were as fully liable for his assumpsits as for his covenants.1 Assumpsit, however, long retained certain traces of its delictual origin. The plea of not guilty was good after verdict, “because there is a disceit alleged.”2 Chief Baron Gilbert explains the comprehensive scope of the general issue in assumpsit by the fact that “the gist of the action is the fraud and delusion that the defendant hath offered the plaintiff in not performing the promise he had made, and on relying on which the plaintiff is hurt.”3 This allegation of deceit, in the familiar form: “Yet the said C. D., not regarding his said promise, but contriving and fraudulently intending, craftily and subtly, to deceive and defraud the plaintiff,” etc.,4 which persisted to the present century, is an unmistakeable mark of the genealogy of the action. Finally, the consideration must move from the plaintiff to-day, because only he who had incurred detriment upon the faith of the defendant’s promise, could maintain the action on the case for deceit in the time of Henry VII.

The view here advanced as to the origin of special assumpsit, although reached by an independent process, accords with, it will be seen, and confirms, it is hoped, the theory first proclaimed by Judge Hare.

The origin of indebitatus assumpsit may be explained in a few words: Slade’s case,5 decided in 1603, is commonly thought to be the source of this action.6 But this is a misapprehension.

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Indebitatus assumpsit upon an express promise is at least sixty years older than Slade’s case.1 The evidence of its existence throughout the last half of the sixteenth century is conclusive. There is a note by Brooke, who died in 1558, as follows: “Where one is indebted to me, and he promises to pay before Michaelmas, I may have an action of debt on the contract, or an action on the case on the promise.”2 In Manwood v. Burston3 (1588), Manwood, C. B., speaks of “three manners of considerations upon which an assumpsit may be grounded: (1) A debt precedent, (2) where he to whom such a promise is made is damnified by doing anything, or spends his labor at the instance of the promisor, although no benefit comes to the promisor . . . (3) or there is a present consideration.”4

The Queen’s Bench went even further. In that court proof of a simple contract debt, without an express promise, would support an indebitatus assumpsit.5 The other courts, for many years, resisted this doctrine. Judgments against a debtor in the Queen’s Bench upon an implied assumpsit were several times reversed in the Exchequer Chamber.6 But the Queen’s Bench refused to be bound by these reversals, and it is the final triumph of that court that is signalized by Slade’s case, in which the jury found that “there was no other promise or assumption, but only the said bargain;” and yet all the judges of England resolved “that every contract executory implied an assumpsit.”

Indebitatus assumpsit, unlike special assumpsit, did not create a new substantive right; it was primarily only a new form of procedure, whose introduction was facilitated by the same circumstances which had already made Case concurrent Edition: current; Page: [278] with Detinue. But as an express assumpsit was requisite to charge the bailee, so it was for a long time indispensable to charge a debtor. The basis or cause of the action was, of course, the same as the basis of debt, i. e., quid pro quo, or benefit. This may explain the inveterate practice of defining consideration as either a detriment to the plaintiff or a benefit to the defendant.

Promises not being binding of themselves, but only because of the detriment or debt for which they were given, a need was naturally felt for a single word to express the additional and essential requisite of all parol contracts. No word was so apt for the purpose as the word “consideration.” Soon after the reign of Henry VIII., if not earlier, it became the practice, in pleading, to lay all assumpsits as made in consideratione of the detriment or debt.1 And these words became the peculiar mark of the technical action of assumpsit, as distinguished from other actions on the case against surgeons or carpenters, bailees and warranting vendors, in which, as we have seen, it was still customary to allege an undertaking by the defendant.

It follows, from what has been written, that the theory that consideration is a “modification of quid pro quo,” is not tenable. On the one hand, the consideration of indebitatus assumpsit was identical with quid pro quo, and not a modification of it. On the other hand, the consideration of detriment was developed in a field of the law remote from debt; and, in view of the sharp contrast that has always been drawn between special assumpsit and debt, it is impossible to believe that the basis of the one action was evolved from that of the other.2

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Nor can that other theory be admitted by which consideration was borrowed from equity, as a modification of the Roman “causa.” The word “consideration” was doubtless first used in equity; but without any technical significance before the sixteenth century.1 Consideration in its essence, however, whether in the form of detriment or debt, is a common-law growth. Uses arising upon a bargain or covenant were of too late introduction to have any influence upon the law of assumpsit. Two out of three judges questioned their validity in 1505, a year after assumpsit was definitively established.2 But we may go further. Not only was the consideration of the common-law action of assumpsit not borrowed from equity, but, on the contrary, the consideration, which gave validity to parol uses by bargain and agreement, was borrowed from the common law. The bargain and sale of a use, as well as the agreement to stand seised, were not executory contracts, but conveyances. No action at law could ever be brought against a bargainor or covenantor.3 The absolute owner of land was conceived of as having in himself two distinct things, the seisin and the use. As he might make livery of seisin and retain the use, so he was permitted, at last, to grant away the use and keep the seisin. The grant of the use was furthermore assimilated to the grant of a chattel or money. A quid pro quo, or a deed, being essential to the transfer of a chattel or the grant of a debt,4 it was required also in the grant of a use. Equity might conceivably have enforced uses wherever the grant was by deed. But the chancellors declined to carry the innovation Edition: current; Page: [280] so far as this. They enforced only those gratuitous covenants which tended to “the establishment of the house” of the covenantor; in other words, covenants made in consideration of blood or marriage.1

II.—: IMPLIED ASSUMPSIT

Nothing impresses the student of the Common Law more than its extraordinary conservatism. The reader will easily call to mind numerous rules in the law of Real Property and Pleading which illustrate the persistency of archaic reverence for form and of scholastic methods of interpretation. But these same characteristics will be found in almost any branch of the law by one who carries his investigations as far back as the beginning of the seventeenth century. The history of Assumpsit, for example, although the fact seems to have escaped general observation, furnishes a convincing illustration of the vitality of mediæval conceptions.

We have had occasion, in the preceding part of this paper, to see that an express assumpsit was for a long time essential in the actions of tort against surgeons or carpenters, and bailees. It also appeared that in the action of tort for a false warranty the vendor’s affirmation as to quality or title was not admissible, before the time of Lord Holt, as a substitute for an express undertaking. We are quite prepared, therefore, to find that the action of Assumpsit proper was, for generations, maintainable only upon an express promise. Furthermore, Assumpsit would not lie in certain cases even though there were an express promise. For example, a defendant who promised to pay a sum certain in exchange for a quid pro quo was, before Slade’s case,2 chargeable only in Debt unless he made a second promise to pay the debt.

It was only by degrees that the scope of the action was enlarged. The extension was in three directions. In the first place, Indebitatus Assumpsit became concurrent with Debt upon a simple contract in all cases. Secondly, proof Edition: current; Page: [281] of a promise implied in fact, that is, a promise inferred from circumstantial evidence, was at length deemed sufficient to support an action. Finally, Indebitatus Assumpsit became the appropriate form of action upon constructive obligations, or quasi-contracts for the payment of money. These three developments will be considered separately.

Although Indebitatus Assumpsit upon an express promise was valuable so far as it went, it could not be resorted to by plaintiffs in the majority of cases as a protection from wager of law by their debtors. For the promise to be proved must not only be express, but subsequent to the debt. In an anonymous case, in 1572, Manwood objected to the count that the plaintiff “ought to have said quod postea assumpsit, for if he assumed at the time of the contract, then Debt lies, and not Assumpsit; but if he assumed after the contract, then an action lies upon the assumpsit, otherwise not, quod Whiddon and Southcote, JJ., with the assent of Catlin, C. J. concesserunt.1 The consideration in this class of cases was accordingly described as a “debt precedent.”2 The necessity of a subsequent promise is conspicuously shown by the case of Maylard v. Kester.3 The allegations of the count were, that, in consideration that the plaintiff would sell and deliver to the defendant certain goods, the latter promised to pay therefor a certain price; that the plaintiff did sell and deliver the goods, and that the defendant did not pay according to his promise and undertaking. The plaintiff had a verdict and judgment thereon in the Queen’s Bench; but the judgment was reversed in the Exchequer Chamber “because Debt lies properly, and not an action on the case; the matter proving a perfect sale and contract.”

What was the peculiar significance of the subsequent promise? Why should the same courts which, for sixty years before Slade’s case, sanctioned the action of Assumpsit upon a promise in consideration of a precedent debt, refuse, during the same period, to allow the action, when the receipt of the quid pro quo was contemporaneous with or subsequent Edition: current; Page: [282] to the promise? The solution of this puzzle must be sought, it is believed, in the nature of the action of Debt. A simple contract debt, as well as a debt by specialty, was originally conceived of, not as a contract, in the modern sense of the term, that is, as a promise, but as a grant.1 A bargain and sale, and a loan, were exchanges of values. The action of debt, as several writers have remarked, was a real rather than a personal action. The judgment was not for damages, but for the recovery of a debt, regarded as a res. The conception of a debt was clearly expressed by Vaughan, J., who, some seventy years after Slade’s case, spoke of the action of Assumpsit as “much inferior and ignobler than the action of Debt,” and characterized the rule that every contract executory implies a promise as “a false gloss, thereby to turn actions of Debt into actions on the case; for contracts of debt are reciprocal grants.”2

Inasmuch as the simple contract debt had been created from time immemorial by a promise or agreement to pay a definite amount of money in exchange for a quid pro quo, the courts could not allow an action of Assumpsit also upon such a promise or agreement, without admitting that two legal relations, fundamentally distinct, might be produced by one and the same set of words. This implied a liberality of interpretation to which the lawyers of the sixteenth century had not generally attained. To them it seemed more natural to consider that the force of the words of agreement was spent in creating the debt. Hence the necessity of a new promise, if the creditor desired to charge his debtor in Assumpsit.

As the actions of Assumpsit multiplied, however, it would naturally become more and more difficult to discriminate between promises to pay money and promises to do other things. The recognition of an agreement to pay money for a quid pro quo in its double aspect, that is, as being both a grant and a promise, and the consequent admissibility of Assumpsit, with its procedural advantages, as a concurrent Edition: current; Page: [283] remedy with Debt, were inevitable. It was accordingly resolved by all the justices and barons in Slade’s case, in 1603, although “there was no other promise or assumption but the said bargain,” that “every contract executory imports in itself an assumpsit, for when one agrees to pay money, or to deliver anything, thereby he assumes or promises to pay or deliver it; and, therefore, when one sells any goods to another, and agrees to deliver them at a day to come, and the other, in consideration thereof, agrees to pay so much money at such a day, in that case both parties may have an action of Debt, or an action on the case on assumpsit, for the mutual executory agreement of both parties imports in itself reciprocal actions upon the case as well as actions of Debt.” Inasmuch as the judges were giving a new interpretation to an old transaction; since they, in pursuance of the presumed intention of the parties, were working out a promise from words of agreement which had hitherto been conceived of as sounding only in grant, it was not unnatural that they should speak of the promise thus evolved as an “implied assumpsit.” But the promise was in no sense a fiction. The fictitious assumpsit, by means of which the action of Indebitatus Assumpsit acquired its greatest expansion, was an innovation many years later than Slade’s case.

The account just given of the development of Indebitatus Assumpsit, although novel, seems to find confirmation in the parallel development of the action of Covenant. Strange as it may seem, Covenant was not the normal remedy upon a covenant to pay a definite amount of money or chattels. Such a covenant being regarded as a grant of the money or chattels, Debt was the appropriate action for their recovery. The writer has discovered no case in which a plaintiff succeeded in an action of Covenant, where the claim was for a sum certain, antecedent to the seventeenth century; but in an action of Debt upon such a claim, in the Queen’s Bench, in 1585, “it was holden by the Court that an action of Covenant lay upon it, as well as an action of Debt, at the election of the plaintiff.”1 The same right of election was conceded Edition: current; Page: [284] by the Court in two cases1 in 1609, in terms which indicate that the privilege was of recent introduction. It does not appear in what court these cases were decided; but it seems probable that they were in the King’s Bench, for, in Chawner v. Bowes,2 in the Common Bench, four years later, Warburton and Nichols, JJ., said: “If a man covenant to pay £10 at a day certain, an action of debt lieth for the money, and not an action of covenant.” As late as 1628, in the same court, Berkeley, Serjeant, in answer to the objection that Covenant did not lie, but Debt, against a defendant who had covenanted to perform an agreement, and had obliged himself in a certain sum for its performance, admitted that, “if a covenant had been for £30, then debt only lies; but here it is to perform an agreement.”3 Precisely when the Common Bench adopted the practice of the King’s Bench it is, perhaps, impossible to discover; but the change was probably effected before the end of the reign of Charles I.

That Covenant became concurrent with Debt on a specialty so many years after Assumpsit was allowed as a substitute for Debt on a simple contract, was doubtless due to the fact that there was no wager of law in Debt on a sealed obligation.

Although the right to a trial by jury was the principal reason for a creditor’s preference for Indebitatus Assumpsit, the new action very soon gave plaintiffs a privilege which must have contributed greatly to its popularity. In declaring in Debt, except possibly upon an account stated, the plaintiff was required to set forth his cause of action with great particularity. Thus, the count in Debt must state the quantity and description of goods sold, with the details of the price, all the particulars of a loan, the names of the persons to whom money was paid with the amounts of each payment, the names of the persons from whom money was received Edition: current; Page: [285] to the use of the plaintiff with the amounts of each receipt, the precise nature and amount of services rendered. In Indebitatus Assumpsit, on the other hand, the debt being laid as an inducement or conveyance to the assumpsit, it was not necessary to set forth all the details of the transaction from which it arose. It was enough to allege the general nature of the indebtedness, as for goods sold,1 money lent,2 money paid at the defendant’s request,3 money had and received to the plaintiff’s use,4 work and labor at the defendant’s request,5 or upon an account stated,6 and that the defendant being so indebted promised to pay. This was the origin of the common counts.

In all the cases thus far considered there was a definite bargain or agreement between the plaintiff and defendant. But instances, of course, occurred in which the parties did not reduce their transactions to the form of a distinct bargain. Services would be rendered, for example, by a tailor or other workman, an innkeeper or common carrier, without any agreement as to the amount of compensation. Such cases present no difficulty at the present day, but for centuries there was no common-law action by which compensation could be recovered. Debt could not be maintained, for that action was always for the recovery of a liquidated amount.7 Assumpsit would not lie for want of a promise. There was confessedly no express promise; to raise by implication a promise to pay as much as the plaintiff reasonably deserved for his goods or services was to break with the most venerable traditions. The lawyer of to-day, familiar with the Edition: current; Page: [286] ethical character of the law as now administered, can hardly fail to be startled when he discovers how slowly the conception of a promise implied in fact, as the equivalent of an express promise, made its way in our law.

There seems to have been no recognition of the right to sue upon an implied quantum meruit before 1609. The innkeeper was the first to profit by the innovation. Reciprocity demanded that, if the law imposed a duty upon the innkeeper to receive and keep safely, it should also imply a promise on the part of the guest to pay what was reasonable.1 The tailor was in the same case with the innkeeper, and his right to recover upon a quantum meruit was recognized in 1610.2 Sheppard,3 citing a case of the year 1632, says: “If one bid me do work for him, and do not promise anything for it; in that case the law implieth the promise, and I may sue for the wages.” But it was only four years before that the Court in a similar case were of opinion that an action lay if the party either before or after the services rendered promised to pay for them, “but not without a special promise.”4 In Nichols v. More5 (1661) a common carrier resisted an action for negligence, because, no price for the carriage being agreed upon, he was without remedy against the bailor. The Court, however, answered that “the carrier may declare upon a quantum meruit like a tailor, and therefore shall be charged.”6 As late as 1697, Powell, J., speaking of the sale of goods for so much as they were worth, thought it worth while to add: “And note the very taking up of the goods implies such a contract.”7

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The right of one, who signed a bond as surety for another without insisting upon a counter bond or express promise to save harmless, to charge his principal upon an implied contract of indemnity, was developed nearly a century later. In Bosden v. Thinne1 (1603) the plaintiff at the defendant’s request had executed a bond as surety for one F, and had been cast in a judgment thereon. The judges all agreed that upon the first request only Assumpsit did not lie, Yelverton, J. adding: “For a bare request does not imply any promise, as if I say to a merchant, I pray trust J. S. with £100, and he does so, this is of his own head, and he shall not charge me, unless I say I will see you paid, or the like.” The absence of any remedy at law was conceded in 1662.2 It was said by Buller, J., in Toussaint v. Martinnant,3 that the first case in which a surety, who had paid the creditor, succeeded in an action at law against the principal for indemnity, was before Gould, J.,4 at Dorchester, “which was decided on equitable grounds.” The innovation seems to be due, however, to Lord Mansfield, who ruled in favor of a surety in Decker v. Pope, in 1757, “observing that when a debtor desires another person to be bound with him or for him, and the surety is afterwards obliged to pay the debt, this is a sufficient consideration to raise a promise in law.”5

The late development of the implied contract to pay quantum meruit, and to indemnify a surety, would be the more surprising, but for the fact that Equity gave relief to tailors and the like, and to sureties long before the common law helped them. Spence, although at a loss to account for the jurisdiction, mentions a suit brought in Chancery, in 1567, by a tailor, to recover the amount due for clothes furnished. The suit was referred to the queen’s tailor, to ascertain the amount due, and upon his report a decree was made. The Edition: current; Page: [288] learned writer adds that “there were suits for wages and many others of like nature.”1 A surety who had no counter bond filed a bill against his principal, in 1632, in a case which would seem to have been one of the earliest of the kind, for the reporter, after stating that there was a decree for the plaintiff, adds “quod nota.2

The account just given of the promise implied in fact seems to throw much light upon the doctrine of “executed consideration.” One who had incurred a detriment at the request of another, by rendering service, or by becoming a surety with the reasonable expectation of compensation or indemnity, was as fully entitled, in point of justice, to enforce his claim at law, as one who had acted in a similar way upon the faith of an express promise. Nothing was wanting but an express assumpsit to make a perfect cause of action. If the defendant saw fit to make an express assumpsit, even after the detriment was incurred, the temptation to treat this as removing the technical objection to the plaintiff’s claim at law might be expected to be, as it proved to be, irresistible.3 The already established practice of suing upon a promise to pay a precedent debt, made it the more easy to support an action upon a promise when the antecedent act of the plaintiff at the defendant’s request did not create a strict debt.4 To bring the new doctrine into harmony with the accepted theory of consideration, the promise was “coupled with” the prior request by the fiction of relation,5 or, by a Edition: current; Page: [289] similar fiction, the consideration was brought forward or continued to the promise.1 This fiction doubtless enabled plaintiffs sometimes to recover, although the promise was not identical with what would be implied, and in some cases even where it would be impossible to imply any promise.2 But after the conception of a promise implied in fact was recognized and understood, these anomalies gradually disappeared, and the subsequent promise came to be regarded in its true light of cogent evidence of what the plaintiff deserved for what he had done at the defendant’s request.

The non-existence in early times, of the promise implied in fact, also makes intelligible a distinction in the law of lien, which greatly puzzled Lord Ellenborough and his colleagues. Williams, J., is reported to have said in 1605: “If I put my cloths to a tailor to make up, he may keep them till satisfaction for the making. But if I contract with a tailor that he shall have so much for the making of my apparel, he cannot keep them till satisfaction for the making.”3 In the one case, having no remedy by action, he was allowed a lien, to prevent intolerable hardship. In the other, as he had a right to sue on the express agreement, it was not thought necessary to give him the additional benefit of a lien.4 As soon as the right to recover upon an implied quantum meruit was admitted, the reason for this distinction vanished. But the acquisition of a new remedy by action did not displace the old remedy by lien.5 The old rule, expressed, however, in the new form of a distinction between an express and an implied contract, survived to the present century.6 At length, in Edition: current; Page: [290] 1816, the judges of the King’s Bench, unable to see any reason in the distinction, and unaware of its origin, declared the old dicta erroneous, and allowed a miller his lien in the case of an express contract.1

The career of the agistor’s lien is also interesting. That such a lien existed before the days of implied contracts is intrinsically probable, and is also indicated by several of the books.2 But in Chapman v. Allen3 (1632), the first reported decision involving the agistor’s right of detainer, there happened to be an express contract, and the lien was accordingly disallowed. When a similar case arose two centuries later in Jackson v. Cummins,4 this precedent was deemed controlling, and, as the old distinction between express and implied contracts was no longer recognized, the agistor ceased to have a lien in any case. Thus was established the modern and artificial distinction in the law of lien between bailees for agistment and “bailees who spend their labor and skill in the improvement of the chattels” delivered to them.5

The value of the discovery of the implied promise in fact was exemplified further in the case of a parol submission to an award. If the arbitrators awarded the payment of a sum of money, the money was recoverable in debt, since an award, after the analogy of a judgment, created a debt. But if the award was for the performance of a collateral act, as, for example, the execution of a release, there was, originally, no mode of compelling compliance with the award, unless the parties expressly promised to abide by the decision of the arbitrators. Tilford v. French6 (1663) is a case in point. So, also, seven years later, “it was said by Twisden, J., that if two submit to an award, this contains not a reciprocal promise to perform; but there must be an express promise Edition: current; Page: [291] to ground an action upon.”1 This doctrine was abandoned by the time of Lord Holt, who, after referring to the ancient rule, said: “But the contrary has been held since; for if two men submit to the award of a third person, they do also thereby promise expressly to abide by his determination, for agreeing to refer is a promise in itself.”2

In the cases already considered the innovation of Assumpsit upon a promise implied in fact gave a remedy by action, where none existed before. In several other cases the action upon such a promise furnished not a new, but a concurrent remedy. Assumpsit, as we have seen,3 was allowed, in the time of Charles I., in competition with Detinue and Case against a bailee for custody. At a later period Lord Holt suggested that one might “turn an action against a common carrier into a special assumpsit (which the law implies) in respect of his hire.”4 Dale v. Hall5 (1750) is understood to have been the first reported case in which that suggestion was followed. Assumpsit could also be brought against an innkeeper.6

Account was originally the sole form of action against a factor or bailiff. But in Wilkins v. Wilkins7 (1689) three of the judges favored an action of Assumpsit against a factor because the action was brought upon an express promise, and not upon a promise by implication. Lord Holt, however, in the same case, attached no importance to the distinction between an express and an implied promise, remarking that “there is no case where a man acts as bailiff, but he promises to render an account.”8 The requisite of an express promise Edition: current; Page: [292] was heard of no more. Assumpsit became theoretically concurrent with Account against a bailiff or factor in all cases, although by reason of the competing jurisdiction of equity, actions at common law were rare.1

In the early cases of bills and notes the holders declared in an action on the case upon the custom of merchants. “Afterwards they came to declare upon an assumpsit.2

It remains to consider the development of Indebitatus Assumpsit as a remedy upon quasi-contracts, or, as they have been commonly called, contracts implied in law. The contract implied in fact, as we have seen, is a true contract. But the obligation created by law is no contract at all. Neither mutual assent nor consideration is essential to its validity. It is enforced regardless of the intention of the obligor. It resembles the true contract, however, in one important particular. The duty of the obligor is a positive one, that is, to act. In this respect they both differ from obligations the breach of which constitutes a tort, where the duty is negative, that is, to forbear. Inasmuch as it has been customary to regard all obligations as arising either ex contractu or ex delicto, it is readily seen why obligations created by law should have been treated as contracts. These constructive duties are more aptly defined in the Roman law as obligations quasi ex contractu than by our ambiguous “implied contracts.”3

Quasi-contracts are founded (1) upon a record, (2) upon a statutory, official, or customary duty, or (3) upon the fundamental principle of justice that no one ought unjustly to enrich himself at the expense of another.

As Assumpsit cannot be brought upon a record, the first class of quasi-contracts need not be considered here. Many of the statutory, official, or customary duties, also, e. g., the duty of the innkeeper to entertain,4 of the carrier to carry,5 Edition: current; Page: [293] of the smith to shoe,1 of the chaplain to read prayers, of the rector to keep the rectory in repair,2 of the fidei-commiss to maintain the estate,3 of the finder to keep with care,4 of the sheriff and other officers to perform the functions of their office,5 of the ship-owner to keep medicines on his ship,6 and the like, which are enforced by an action on the case, are beyond the scope of this essay, since Indebitatus Assumpsit lies only where the duty is to pay money [or a definite amount of chattels]. For the same reason we are not concerned here with a large class of duties growing out of the principle of unjust enrichment, namely, constructive or quasi trusts, which are enforced, of course, only in equity.

Debt was originally the remedy for the enforcement of a statutory or customary duty for the payment of money. The right to sue in Indebitatus Assumpsit was gained only after a struggle. The assumpsit in such cases was a pure fiction. These cases were not, therefore, within the principle of Slade’s case, which required, as we have seen,7 a genuine agreement. The authorities leave no room for doubt upon this point, although it is a common opinion that, from the time of that case, Indebitatus Assumpsit was concurrent with Debt in all cases, unless the debt was due by record, specialty, or for rent.

The earliest reported case of Indebitatus Assumpsit upon a customary duty seems to be City of London v. Goree,8 decided seventy years later than Slade’s case. “Assumpsit for money due by custom for scavage. Upon non-Assumpsit the jury found the duty to be due, but that no promise was expressly made. And whether Assumpsit lies for this money thus due by custom, without express promise, was the question. Resolved it does.” On the authority of that case, an officer of a corporation was charged in Assumpsit, three Edition: current; Page: [294] years later, for money forfeited under a by-law.1 So, also, in 1688, a copyholder was held liable in this form of action for a customary fine due on the death of the lord, although it was objected “that no Indebitatus Assumpsit lieth where the cause of action is grounded on a custom.”2 Lord Holt had not regarded these extensions of Indebitatus Assumpsit with favor.3 Accordingly, in York v. Toun,4 when the defendant urged that such an action would not lie for a fine imposed for not holding the office of sheriff, “for how can there be any privity of assent implied when a fine is imposed on a man against his will?” the learned judge replied: “We will consider very well of this matter; it is time to have these actions redressed. It is hard that customs, by-laws, rights to impose fines, charters, and everything, should be left to a jury.” By another report of the same case,5 “Holt seemed inclined for the defendant. . . . And upon motion of the plaintiff’s counsel, that it might stay till the next term, Holt, C. J., said that it should stay till doomsday with all his heart; but Rokesby, J., seemed to be of opinion that the action would lie.—Et adjournatur. Note. A day or two after I met the Lord Chief Justice Treby visiting the Lord Chief Justice Holt at his house, and Holt repeated the said case to him, as a new attempt to extend the Indebitatus Assumpsit, which had been too much encouraged already, and Treby, C. J., seemed also to be of the same opinion with Holt.” But Rokesby’s opinion finally prevailed. The new action continued to be encouraged. Assumpsit was allowed upon a foreign judgment in 1705,6 and the “metaphysical notion”7 of a promise implied in law became fixed in our law.

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The equitable principle which lies at the foundation of the great bulk of quasi-contracts, namely, that one person shall not unjustly enrich himself at the expense of another, has established itself very gradually in the Common Law. Indeed, one seeks in vain to-day in the treatises upon the Law of Contract for an adequate account of the nature, importance, and numerous applications of this principle.1

The most fruitful manifestations of this doctrine in the early law are to be found in the action of Account. One who received money from another to be applied in a particular way was bound to give an account of his stewardship. If he fulfilled his commission, a plea to that effect would be a valid discharge. If he failed for any reason to apply the money in the mode directed, the auditors would find that the amount received was due to the plaintiff, who would have a judgment for its recovery. If, for example, the money was to be applied in payment of a debt erroneously supposed to be due from the plaintiff to the defendant, either because of a mutual mistake, or because of fraudulent representations of the defendant, the intended application of the money being impossible, the plaintiff would recover the money in Account.2 Debt would also lie in such cases, since, at an early period, Debt became concurrent with Account, when the object of the action was to recover the precise amount received by the defendant.3 By means of the fiction of a promise implied in law Indebitatus Assumpsit became concurrent with Debt, and thus was established the familiar action of Assumpsit for money had and received to recover money paid to the defendant by mistake. Bonnel v. Fowke4 (1657) is, perhaps, the first action of the kind.5

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Although Assumpsit for money had and received was in its infancy merely a substitute for Account, it gradually outgrew the limits of that action. Thus, if one was induced by fraudulent representations to buy property, the purchase-money could not be recovered from the fraudulent vendor by the action of Account. For a time, also, Indebitatus Assumpsit would not lie in such a case. Lord Holt said in 1696: “But where there is a bargain, though a corrupt one, or where one sells goods that were not his own, I will never allow an indebitatus.1 His successors, however, allowed the action. Similarly, Account was not admissible for the recovery of money paid for a promise which the defendant refused to perform. Here, too, Debt and Indebitatus Assumpsit did not at once transcend the bounds of the parent action.2 But in 1704 Lord Holt reluctantly declined to nonsuit a plaintiff who had in such a case declared in Indebitatus Assumpsit.3 Again, Account could not be brought for money acquired by a tort, for example, by a disseisin and collection of rents or a conversion and sale of a chattel.4 It was decided, accordingly, in Philips v. Thompson5 (1675), that Assumpsit would not lie for the proceeds of a conversion. But in the following year the usurper of an office was charged in Assumpsit for the profits of the office, no objection being taken to the form of action.6 Objection was made in a similar case in 1677, that there was no privity and no contract; but the Court, in disregard of all the precedents of Account, answered: “An Indebitatus Assumpsit will lie for rent received by one who pretends a title; for in such cases an Account will lie. Wherever the plaintiff may have an account an indebitatus Edition: current; Page: [297] will lie.”1 These precedents were deemed conclusive in Howard v. Wood2 (1678), but Lord Scroggs remarked: “If this were now an original case, we are agreed it would by no means lie.” Assumpsit soon became concurrent with Trover, where the goods had been sold.3 Finally, under the influence of Lord Mansfield, the action was so much encouraged that it became almost the universal remedy where a defendant had received money which he was “obliged by the ties of natural justice and equity to refund.”4

But one is often bound by those same ties of justice and equity to pay for an unjust enrichment enjoyed at the expense of another, although no money has been received. The quasi-contractual liability to make restitution is the same in reason, whether, for example, one who has converted another’s goods turns them into money or consumes them. Nor is any distinction drawn, in general, between the two cases. In both of them the claim for the amount of the unjust enrichment would be provable in the bankruptcy of the wrong-doer as an equitable debt,5 and would survive against his representative.6 Nevertheless, the value of the goods consumed was never recoverable in Indebitatus Assumpsit. There was a certain plausibility in the fiction by which money acquired as the fruit of misconduct was treated as money received to the use of the party wronged. But the difference between a sale and a tort was too radical to permit the use of Assumpsit for goods sold and delivered where the defendant had wrongfully consumed the plaintiff’s chattels.7

The same difficulty was not felt in regard to the quasi-contractual claim for the value of services rendered. The averment, in the count in Assumpsit, of an indebtedness for Edition: current; Page: [298] work and labor was proved, even though the work was done by the plaintiff or his servants under the compulsion of the defendant. Accordingly, a defendant, who enticed away the plaintiff’s apprentice and employed him as a mariner, was charged in this form of action for the value of the apprentice’s services.1

By similar reasoning, Assumpsit for use and occupation would be admissible for the benefit received from a wrongful occupation of the plaintiff’s land. But this count, for special reasons connected with the nature of rent, was not allowed upon a quasi-contract.2

In Assumpsit for money paid the plaintiff must make out a payment at the defendant’s request. This circumstance prevented for a long time the use of this count in the case of quasi-contracts. Towards the end of the last century, however, the difficulty was overcome by the convenient fiction that the law would imply a request whenever the plaintiff paid, under legal compulsion, what the defendant was legally compellable to pay.3

The main outlines of the history of Assumpsit have now been indicated. In its origin an action of tort, it was soon transformed into an action of contract, becoming afterwards a remedy where there was neither tort nor contract. Based at first only upon an express promise, it was afterwards supported upon an implied promise, and even upon a fictitious promise. Introduced as a special manifestation of the action on the case, it soon acquired the dignity of a distinct form of action, which superseded Debt, became concurrent with Account, with Case upon a bailment, a warranty, and bills of exchange, and competed with Equity in the case of the essentially equitable quasi-contracts growing out of the principle of unjust enrichment. Surely it would be hard to find a better illustration of the flexibility and power of self-development of the Common Law.

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III.—: ASSUMPSIT FOR USE AND OCCUPATION

In the foregoing pages it was stated that Indebitatus Assumpsit for use and occupation was not allowed upon a quasi-contract, for special reasons connected with the nature of rent. To set forth briefly these reasons is the object of this excursus.

It is instructive to compare a lease for years, reserving a rent, with a sale of goods. In both cases, debt was originally the exclusive action for the recovery of the amount due. In neither case was the duty to pay conceived of as arising from a contract in the modern sense of the term. Debt for goods sold was a grant. Debt for rent was a reservation. About the middle of the sixteenth century Assumpsit was allowed upon an express promise to pay a precedent debt for goods sold; and in 1602 it was decided by Slade’s case that the buyer’s words of agreement, which had before operated only as a grant, imported also a promise, so that the seller might, without more, sue in Debt or Assumpsit, at his option.1

Neither of these steps was taken by the courts in the case of rent. There is but one reported case of a successful Indebitatus Assumpsit for rent before the Statute 11 Geo. II. c. 19, § 14; and in that case the reporter adds: “Note, there was not any exception taken, that the assumpsit is to pay a sum for rent; which is a real and special duty, as strong as upon a specialty; and in such case this action lies not, without some other special cause of promise.”2 This note is confirmed by several cases in which the plaintiff failed upon such a count as well when there was a subsequent express promise3 as where there was no such promise.4

The chief motive for making Assumpsit concurrent with Debt for goods sold was the desire to evade the defendant’s Edition: current; Page: [300] wager of law. This motive was wanting in the case of rent, for in Debt for rent wager of law was not permitted.1 Again, although Assumpsit was the only remedy against the executor of a buyer or borrower, the executor of a lessee was chargeable in Debt. These two facts seem amply to explain the refusal of the courts to allow an Indebitatus Assumpsit for rent.

But although the landlord was not permitted to proceed upon an Indebitatus Assumpsit, he acquired, after a time, the right to sue in certain cases, in special Assumpsit, as well as in Debt. This innovation originated in the King’s Bench, which, having no jurisdiction by original writ in cases of Debt, was naturally inclined to extend the scope of trespass on the case, of which Assumpsit was a branch. At first this court attempted to justify itself by construing certain agreements as not creating a rent. For example, in Symcock v. Payn,2 the plaintiff declared that “in consideration that the plaintiff had let to the defendant certain land, the defendant promised to pay pro firma prædicta terræ at the year’s end, £20.” “All the court (absente Popham) held that the action was maintainable; for it is not a rent, but a sum in gross; for which he making a promise to pay it in consideration of the lease the action lies.”3 This judgment was reversed in the Exchequer Chamber in accordance with earlier and later cases in the Common Bench.4

In the reign of Charles I. the rule was established in the King’s Bench that Assumpsit would lie concurrently with Debt, if, at the time of the lease, the lessee expressly promised to pay the rent. Acton v. Symonds5 (1634) was the decisive case. The count was upon the defendant’s promise to pay the rent in consideration that the plaintiff would demise a house to him for three years at a rent of £25 per annum. The court (except Croke, J.) agreed that if a lease Edition: current; Page: [301] for years be made rendering rent, an action on the case lies not upon the contract, as it would upon a personal contract for sale of a horse or other goods, but where there is an assumpsit in fact, besides the contract on the lease, an action on this assumpsit is maintainable. In the report in Rolle’s Abridgment it is said: “The action lay, because it appeared that it was intended by the parties that a lease should be made and a rent reserved, and for better security of payment thereof that the lessor should have his remedy by action of debt upon the reservation, or action upon this collateral promise at his election, and this being the intent at the beginning, the making of the lease though real would not toll this collateral promise, as a man may covenant to accept a lease at a certain rent and to pay the rent according to the reservation, for they are two things, and so the promise of payment is a thing collateral to the reservation, which will continue though the lessee assign over.” This doctrine was repeatedly recognized in the King’s Bench;1 it was adopted in the Exchequer in 1664;2 and was finally admitted by the Common Bench in Johnson v. May3 (1683), where “because this had been vexata quæstio the court took time to deliver their opinion, . . . and all four justices agreed that the action lay, for an express promise shall be intended, and not a bare promise in law arising upon the contract, which all agree will not lie.”

In the cases thus far considered the assumpsit was for the payment of a sum certain. Assumpsit was also admissible where the amount to be recovered was uncertain; namely, where the defendant promised to pay a reasonable compensation for the use and occupation of land.4 Indeed, in such a Edition: current; Page: [302] case Assumpsit was the sole remedy, since Debt would not lie for a quantum meruit.1

Such was the state of the law when the Statute 11 Geo. II. c. 19, § 14, was passed, which reads as follows: “To obviate some difficulties that may at times occur in the recovery of rents, where demises are not by deed, it shall and may be lawful to and for the landlord, where the agreement is not by deed, to recover a reasonable satisfaction for the lands, tenements, and hereditaments held or occupied by the defendant in an action on the case for the use and occupation of what was so held and enjoyed; and if, in evidence on the trial of such action, any parol demise or agreement, not being by deed, whereon a certain rent was reserved, shall appear, the plaintiff shall not therefore be nonsuited, but may make use thereof as an evidence of the quantum of damages to be recovered.”

The “difficulties” here referred to would seem to be two. If, before this statute, the plaintiff counted upon a quantum meruit, and the evidence disclosed a demise for a sum certain, he would be nonsuited for a variance. Secondly, if he declared for a sum certain, he must, as we have seen, prove an express promise at the time of the demise. The statute accomplished its purpose in both respects. But it is in the removal of the second of the difficulties mentioned that we find its chief significance. Thereby Indebitatus Assumpsit became concurrent with Debt upon all parol demises. In other words, the statute gave to the landlord, in 1738, what Slade’s case gave to the seller of goods, the lender of money, or the employee, in 1602; namely, the right to sue in Assumpsit as well as in Debt, without proof of an independent express promise.

The other counts in Indebitatus Assumpsit being the creation of the courts, the judges found no great difficulty in gradually enlarging their scope, so as to include quasi-contracts, Edition: current; Page: [303] where the promise declared upon was a pure fiction. Thus, one who took another’s money, by fraud or trespass, was liable upon a count for money had and received;1 one who wrongfully compelled the plaintiff’s servant to labor for him, was chargeable in Assumpsit for work and labor;2 and one who converted the plaintiff’s goods, must pay their value in an action for goods sold and delivered.3

But Indebitatus Assumpsit for rent being of statutory origin, the courts could not, without too palpable a usurpation, extend the count to cases not within the act of Parliament. The statute was plainly confined to cases where, by mutual agreement, the occupier of land was to pay either a defined or a reasonable compensation to the owner. Hence the impossibility of charging a trespasser in Assumpsit for use and occupation.

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60.: THE HISTORY OF PAROL CONTRACTS PRIOR TO ASSUMPSIT1

IT is generally agreed by the Continental writers that in early German law, from which our law comes, only real and formal contracts were binding. The same is unquestionably true of the English common law from the time of Edward III. to the introduction of Assumpsit towards the end of the fifteenth century. But Mr. Justice Holmes in his Common Law, 260-264, and again in his essay on Early English Equity, 1 L. Q. Rev. 171-173,3 endeavors to show that the rule requiring a quid pro quo for the validity of a parol undertaking was not of universal application in England, and that a surety, in particular, might bind himself without a specialty prior to the reign of Edward III. If this opinion is well-founded, an innovation and the abolition of the innovation must be accounted for. The evidence in favor of the validity during the two centuries following the Norman Conquest, of any parol obligation which was neither based upon a quid pro quo, nor assumed in a court of record, should, therefore, be very strong to carry conviction. The evidence thus far adduced has failed to convince the present writer.

Prior to the appearance of Assumpsit the contractual remedies in English law were Debt, Detinue, Account, and Covenant. Detinue and Account, every one will agree, were Edition: current; Page: [305] based upon real contracts. Covenant lay only upon sealed instruments, that is, formal contracts. If, therefore, parol undertakings, other than real contracts, were ever recognized in early English law they must have been enforced by the action of Debt. But no instance of such an action in the royal courts, it is believed, can be found.

Glanvil, Bracton, and Britton all recognize the validity of debts founded upon a specialty.1 Glanvil also says in one place that no proof is admissible in the king’s court, if the plaintiff relies solely upon fidei laesio; and in another that the king’s court does not enforce “privatas conventiones de rebus dandis vel accipiendis in vadium vel alias hujusmodi,” unless made in that court, that is to say, unless they were contracts of record.2 Bracton makes the statement that the king’s court does not concern itself except occasionally de gratia with “stipulationes conventionales,” which may be infinite in their variety.3 The language of Fleta is most explicit against the validity of formless parol promises. “Oportet igitur ex hoc quod aliquis ex promissione teneatur ad solutionem, quod scriptura modum continens obligationis interveniat, nisi promissio illa in loco recordum habenti recognoscatur. Et non solum sufficiet scriptura, nisi sigilli munimine stipulantis roboretur cum testimonio fide dignorum.” The same principle was expressed a few years later in a case in Y. B. 3 Ed. II. 78. The plaintiff counted in Debt on a grant for £200, showing a specialty as to £140, Edition: current; Page: [306] and offering suit as to the rest. Frisk, for defendant, said: “Every grant and every demand by reason of grant must be by specialty, but of other contracts,1 as of bailment or loan, one may demand by suit. Therefore as you demand this debt by reason of grant and show no specialty but of part, judgment,” etc. The plaintiff was nonsuited. In Y. B. 2 Ed. III 4-5, Aldeburgh (Judge of C. B. four years later) said: “If one binds oneself to another in a debt in presence of people ‘sans cause et sans especialtie,’ never shall an action arise from this.” The same doctrine is repeated in later cases in the fourteenth century.2 In the light of these authorities it seems highly improbable that Debt was ever maintainable in the king’s court, unless the plaintiff could show either a specialty or a quid pro quo received by the defendant.3

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In the essay upon Early English Equity, already referred to, the distinguished writer makes the further suggestion that, although the formless parol undertakings ultimately failed of recognition in the King’s Courts, the Church for a long time, with varying success, claimed a general jurisdiction in cases of læsio fidei; and that after the Church was finally cut down to marriages and wills, the clerical Chancellors asserted for a time in Chancery the power of enforcing parol agreements, for which the ordinary King’s courts afforded no remedy. It is believed that undue importance has been attached to the proceedings in the spiritual court for læsio fidei. It is doubtless true that this court was eager to enlarge its jurisdiction, and to deal with cases of breach of faith not properly within its cognizance. We may also concede that the court was sometimes successful in keeping control of such cases when the defendant did not dispute the jurisdiction. But the authorities would seem to make it clear that from the time of the Constitutions of Clarendon, a prohibition would issue as a matter of course from the King’s Court upon the application of one who was drawn into the spiritual court upon breach of faith in a purely temporal matter.1

Nor has the present writer been able to discover any traceable connection between the ecclesiastical claim of jurisdiction over læsio fidei and the jurisdiction of the Chancellor in the matter of parol agreements. If the Chancellor proceeded in the same spirit as the ecclesiastical judge, purely upon the ground of breach of faith, it would follow that in the absence of a remedy at common law, equity would give relief upon any and all agreements, even upon gratuitous parol promises. And Mr. Justice Holmes seems to have so interpreted the Edition: current; Page: [308] following statement, which he cites from the Diversity of Courts (Chancery): “A man shall have remedy in Chancery for covenants made without specialty, if the party have sufficient witness to prove the covenants, and yet he is without remedy at the common law;” for he adds that the contrary was soon afterwards decided, citing Cary, 7: “Upon nudum pactum there ought to be no more help in Chancery than there is at the common law.”1 But, without all deference, the passage in the Diversity of Courts seems to have been misapprehended. There is really no contrariety between that passage and the extract from Cary. It is not asserted in the Diversity of Courts that one should have remedy for all parol covenants, where there was no remedy at common law. Full effect is given to the language used if it is taken to import that relief was given upon some parol covenants. So interpreted the Diversity of Courts accords with other authorities. For while it is confidently submitted that no instance can be found prior to the time of Lord Eldon2 in which Equity gave relief upon a gratuitous parol promise, it is certainly true that Chancery did in some cases furnish a remedy upon parol covenants. But in all these Chancery cases it will be found that the promisee, acting in reliance upon the promise, had incurred expense, or otherwise parted with property, and that the Chancellor, upon an obvious principle of natural justice, compelled the promisor to make reparation for the loss caused by his breach of promise. Three such instances, between 1377 and 1468, are mentioned in an essay upon “The History of Assumpsit,” in an earlier3 Edition: current; Page: [309] part of this Collection. Those instances might have been supplemented by three similar cases which were brought to light by Mr. S. R. Bird.1 In Gardyner v. Keche (1452-1454), Margaret and Alice Gardyner promised to pay the defendant £22, who on his part was to take Alice to wife. The defendant, after receiving the £22, “meaning but craft and disceyt,” married another woman, “to the great disceyt of the said suppliants, and ageyne all good reason and conscience.” The defendant was compelled to answer the bill. In Leinster v. Narborough (circa 1480), the defendant being betrothed to the plaintiff’s daughter-in-law, but desiring to go to Padua to study law, requested the plaintiff to maintain his fiancée, and a maid-servant to attend upon her during his absence, and promised to repay upon his return all costs and charges incurred by the plaintiff in that behalf. The defendant returning after ten years declined to fulfil his promise, and the plaintiff filed his bill for reimbursement, and was successful.2 In James v. Morgan (1504-1515), the defendant promised the plaintiff 100 marks if he would marry his daughter Elizabeth. The plaintiff accordingly “resorted to the said Elizabeth to his great costs and charges,” and “thorow the desavebull comforde” of the defendant and his daughter delivered to the latter jewels, ribbons, and many other small tokens. Elizabeth having married another man through the “crafty and false meane” of the defendant, the plaintiff by his bill sought to recover the value of his tokens, and also the “gret costs and charges thorow his manyfold journeys.”

In all these cases there was, it is true, a breach of promise. But there seems to be no reason to suppose that the Chancellors, in giving relief, were influenced, even unconsciously, by any recollection of ecclesiastical traditions in regard to læsio fidei. It was so obviously just that one who had intentionally misled another to his detriment should make good the loss, that we need not go further afield for an explanation of the Chancellor’s readiness to give a remedy upon such Edition: current; Page: [310] parol agreements. In A little Treatise concerning Writs of Subpœna,1 written shortly after 1523,—that is, at about the same time as the Diversity of Courts,—occurs the following instructive passage:—

“There is a maxim in the law that a rent, a common, annuity, and such other things as lie not in manual occupation, may not have commencement, nor be granted to none other without writing. And thereupon it followeth, that if a man for a certain sum of money sell another forty pounds of rent yearly, to be percepted of his lands in D, &c., and the buyer, thinking that the bargain is sufficient, asketh none other, and after he demandeth the rent, and it is denied him, in this case he hath no remedy at the common law for lack of a deed; and therefore inasmuch as he that sold the rent hath quid pro quo, the buyer shall be helped by a subpœna. But if that grant had been made by his mere motion, without any recompense, then he to whom the rent was granted should neither have had remedy by the common law nor by subpœna. But if he that made the sale of the rent had gone farther, and said that he, before a certain day, would make a sufficient grant of the rent, and after refused to do it, there an action upon the case should lie against him at the common law; but if he made no such promise at the making of the contract, then he that bought the rent hath no remedy but by subpœna, as it is said before.”

Here the subpœna is allowed in the absence of a promise. There could, therefore, be no question of breach of faith. But the money having been paid and received under the expectation of both parties that the plaintiff would get a valid transfer of the rent, it was plainly just that equity should not permit the defendant to rely on the absence of a remedy at common law as a means of enriching himself at the expense of the plaintiff.

It is hardly necessary to remind the learned reader of the analogy between the case just considered, and uses arising upon a bargain and sale, which were supported for the first time only a few years before.2 It was doubtless the same principle of preventing unjust enrichment which led the Chancellor in the reign of Henry V. to give a legal sanction Edition: current; Page: [311] to the duty of the feoffee to uses which before that time had been a purely honorary obligation.

To sum up, then, the Ecclesiastical Court had no jurisdiction over agreements relating to temporal matters. Chancery gave relief upon parol agreements only upon the ground of compelling reparation for what was regarded as a tort to the plaintiff, or upon the principle of preventing the unjust enrichment of the defendant; and the common law, prior to Assumpsit, recognized only those parol contracts which were based upon a quid pro quo.

The jurisdiction of Equity was rarely invoked upon breaches of promises after the development of Assumpsit, unless specific performance of the contract was desired. We have only to consider, therefore, the nature of the common-law real contracts which were enforced by the actions of Debt, Detinue, and Account.

It is not necessary to deal specially with Account, since the essential principles of that action have been clearly and fully set forth by Professor Langdell in the Harvard Law Review.1 It will suffice to emphasize the fact that a defendant’s duty to account, whether as bailiff or receiver, arose from his receipt of property as a trustee, and that a plaintiff entitled to an account was strictly a cestui que trust. In other words, trusts for the payment of money were enforced at common law long before Chancery gave effect to trusts of land. It need not surprise us, therefore, to find that upon the delivery of money by A to B to the use of C, or to be delivered to C, C might maintain an action of Account against B.2 Account against a receiver was long ago superseded by the common count for money had and received by the defendant to the use of the plaintiff. But the words “to the use of” still bear witness to the trust relation.

Detinue was usually founded upon the contract of bailment. Edition: current; Page: [312] This contract was a real contract by reason of the delivery of a chattel by the bailor to the bailee. The duty of the bailee was commonly to redeliver the same chattel to the bailor, either upon demand or at some time fixed by the terms of the bailment. But the chattel might be delivered to the bailee to be delivered to a third person, in which case the third person was allowed to maintain Detinue against the bailee.1

Detinue would also lie against a seller upon a bargain and sale. Here it was the payment of the purchase-money that as a rule constituted the quid pro quo for the seller’s duty to suffer the buyer to take possession of the chattel sold. If the bargain was for the reciprocal exchange of chattels, the delivery of the chattel by the one party would be as effective a quid pro quo as payment of purchase-money to support an action of Detinue against the other party. It was hardly an extension of principle to treat the delivery of the buyer’s sealed obligation for the amount of the purchase-money as equivalent to actual payment of money, or delivery of a chattel, and accordingly we find in Y. B. 21 Edward III. 12-2, the following statement by Thorpe (Chief Justice of the Common Bench in 30 Edward III.): “If I make you an obligation for £40 for certain merchandise bought of you, and you will not deliver the merchandise, I cannot justify the detainer of the money; but you shall recover by a writ of Debt against me, and I shall be put to my action against you for the thing bought by a writ of Detinue of chattels.” But it was a radical departure from established traditions to permit a buyer to sue in Detinue when there was merely a parol bargain of sale without the delivery of a physical res of any sort to the seller. But this striking change had been accomplished by the time of Henry VI. The new doctrine may be even older,2 but there seems to be no earlier expression of it in the books than the following statement by Fortescue, Edition: current; Page: [313] C. J.: “If I buy a horse of you, the property is straightway in me, and for this you shall have a writ of Debt for the money, and I shall have Detinue for the horse on this bargain.”1 From the mutuality of the obligations growing out of the parol bargain without more, one might be tempted to believe that the English law had developed the consensual contract more than a century before the earliest reported case of Assumpsit upon mutual promises.2 But this would be a misconception. The right of the buyer to maintain Detinue, and the corresponding right of the seller to sue in Debt were not conceived of by the medieval lawyers as arising from mutual promises, but as resulting from reciprocal grants,—each party’s grant of a right forming the quid pro quo for the corresponding duty of the other.3

It remains to consider the most prominent of all the English real contracts, the simple contract debt. The writ in Debt, like writs for the recovery of land, was a praecipe quod reddat. The judgment for the plaintiff is that he recover his debt. In other words, as in the case of real actions, the defendant was conceived of as having in his possession something belonging to the plaintiff which he might not rightfully keep, but ought to surrender. This doubtless explains why the duty of a debtor was always for the payment of a Edition: current; Page: [314] definite amount of money or a fixed quantity of chattels.1 A promise to pay as much as certain goods or services were worth would never support a count in Debt.2 In Y. B. 12 Edw. IV. 9-22, Brian, C. J., said: “If I bring cloth to a tailor to have a cloak made, if the price is not determined beforehand that I shall pay for the making, he shall not have an action of Debt against me.”3 For the same reason, the quantum meruit and quantum valebant counts seem never to have gained a footing among the common counts in Debt, and in Assumpsit the quantum meruit and quantum valebant counts were distinguished from the indebitatus counts. But principle afterwards yielded so far to convenience that it became the practice to declare in Indebitatus Assumpsit when no price had been fixed by the parties, the verdict of the jury being treated as equivalent to a determination of the parties at the time of bargain.

The ancient conception of a creditor’s claim in Debt as analogous to a real right manifested itself in the rule that a plaintiff must prove at the trial the precise amount to be due which he demanded in his præcipe quod reddat. If he demanded a debt of £20 and proved a debt of £19, he failed as effectually as if he had declared in Detinue for the recovery of a horse and could prove only the detention of a cow.4 Edition: current; Page: [315] For the same reasons Debt would not lie for money payable by instalments, until the time of payment of the last instalment had elapsed, the whole amount to be paid being regarded as an entire sum, or single thing.1

The quid pro quo which the debtor must receive to create his duty might consist of anything that the law could regard as a substantial benefit to him. Debts were usually founded upon a loan of money, a sale, a lease of property to the debtor, or upon work and labor performed for him. The quid pro quo in all these cases is obvious.2 The execution of a release by an obligee to an obligor was also a sufficient quid pro quo to create a new debt between the same parties.3 Forbearance to sue on a claim has been regarded in the same light: “for the forbearing of a suit is as beneficial in saving, as some other things would have been in gaining.”4

But Debt will not lie upon mutual promises. In Smith v. Airey,5 “Holt, C. J., said that winning money at play did not raise a debt, nor was debt ever brought for money won at play, and an Indebitatus Assumpsit would not lie for it; but the only ground of the action in such cases was the mutual promises. That though there were a promise, yet Debt would not lie upon that.” According to another report of the same case Lord Holt said, “There is no way in the Edition: current; Page: [316] world to recover money won at play but by special Assumpsit.”1

Originally there was no quid pro quo to create a debt against a defendant if the benefit was conferred upon a third person, although at the defendant’s request. Y. B. 9 Henry V. 14-23 is a case in point. The plaintiff, having a claim for £10 against T, released the claim upon the defendant’s promise to pay him the same amount. The plaintiff failed because the benefit of the release was received by T.2 In Y. B. 27 Henry VIII. 23, upon similar facts, Fitz-James, C. J., thought the plaintiff should recover in an action on the case upon the promise, but not in Debt, “for there is no contract,3 nor has the defendant quid pro quo.” Post, J., and Spelman, J., on the other hand, thought there was a quid pro quo. It was also made a question, on the same ground, whether a defendant who promised money to the plaintiff if he would marry the defendant’s daughter was liable in Debt to the plaintiff who married the daughter.4 But here, too, the opinion finally prevailed that though the girl got the husband, her father did receive a substantial benefit.5 In Y. B. 37 Henry VI. 9-18, Moyle, J., said: “If I say to a Surgeon that if he will go to one J who is ill, and give him medicine and make him safe and sound, he shall have 100 shillings, now if the Surgeon gives J the medicines and makes Edition: current; Page: [317] him safe and sound, he shall have a good action [Debt] against me for the 100 shillings, and still the thing is to another and not to the defendant himself, and so he has not quid pro quo, but the same in effect.” This reasoning of Moyle, J., met with general favor, and it became a settled rule that whatever would constitute a quid pro quo, if rendered to the defendant himself, would be none the less a quid pro quo, though furnished to a third person, provided that it was furnished at the defendant’s request, and that the third person incurred no liability therefor to the plaintiff. Accordingly, a father was liable for physic provided for his daughter;1 a mother for board furnished to her son;2 a woman was charged in Debt by a tailor for embroidering a gown for her daughter’s maid;3 a defendant was liable for instruction given at his request to the children of a stranger, or for marrying a poor virgin.4 The common count for money paid by the plaintiff to another at the defendant’s request is another familiar illustration of the rule.

But it is an indispensable condition of the defendant’s liability in Debt in cases where another person received the actual benefit, that this other person should not himself be liable to the plaintiff for the benefit received. For in that event the third person would be the debtor, and one quid pro quo cannot give rise to two distinct debts.5 Accordingly where the plaintiff declared in Debt against A for money lent to B at A’s request, his declaration was adjudged bad; for a loan to B necessarily implied that B was the debtor. If B was, in truth, the debtor, the plaintiff should have declared in Special Assumpsit against A on the collateral promise. If B was not the debtor, the count against A should have been for money paid to B at A’s request.6 By Edition: current; Page: [318] the same reasoning it would be improper to count against A for goods sold to B at A’s request. If B was really the buyer, the seller should charge him in Debt, and A in Special Assumpsit on the collateral promise. If B was not the buyer, the count against A should be for goods delivered to B at A’s request.1 The same distinction holds good as to services rendered to B at A’s request. If B is a debtor A is not, but only collaterally liable in Assumpsit.2

The distinction between Debt and Special Assumpsit, as illustrated in the cases mentioned in the preceding paragraph, is of practical value in determining whether a promise is in certain cases within the Statute of Frauds relating to guaranties. If B gets the enjoyment of the benefit furnished by the plaintiff at A’s request, but A is the only party liable to the plaintiff, A’s promise is not within the statute. If, on the other hand, B is liable to the plaintiff for the benefit received, that is, is a debtor, A’s promise is clearly a guaranty and within the statute.3

There were obviously many parol agreements that did not come within the scope of Debt, Detinue, or Account. This difficulty was at length met by the action of Assumpsit, which became, indeed, a remedy upon all parol agreements.4 But the distinction between Debt and Assumpsit is fundamental. For, while Assumpsit might always be brought where Debt would lie upon a simple contract, the converse Edition: current; Page: [319] is not true. There were many cases where Assumpsit was the only remedy. Assumpsit would lie both where the plaintiff had incurred a detriment upon the faith of the defendant’s promise, and where the defendant had received a benefit. Debt would lie only in the latter class of cases. In other words, Debt could be brought only upon a real contract,—Assumpsit upon any parol contract.

Edition: current; Page: [320]

61.: THE HISTORY OF CONTRACT1

THE modern law of contract consists of a general theory, forming the bond of union between numerous, and otherwise unconnected, classes of contracts. This general theory is posterior in date to, and different in origin and history from, the particular contracts which it comprehends. Buying and borrowing, pledging and suretyship, cannot wait for the development of a refined system of law, and these processes must have been regulated by definite principles long before they were embraced in a comprehensive generalization. A complete history of contract must therefore consist of two parts. With the first of these, consisting in an enquiry into the origin and mode of development of the different species of contracts, we have not here to do. Our attention will be confined to the rise of the general principles that have given system and unity to the mass of detail.

The general theory of contract is almost entirely of domestic origin. In Bracton and Fleta indeed we find an attempt to employ the general principles of the Roman Law as a setting for English contracts,3 but the chief significance of this Edition: current; Page: [321] attempt lies in its failure. Perhaps in no other part of the law have Roman principles been so prominently introduced, only to be so completely rejected. The English law was thus left to fashion a theory of contract for itself. The manner in which it did so is an excellent illustration of the operation of modes of procedure in determining the development and form of the substantive law, for the history of the law of contract is almost entirely comprised in that of three forms of action. These are Debt, Covenant, and Assumpsit.

The first of these can be traced back to the beginnings of the law, but the earliest fact respecting it which need here be noticed is its division into the two actions of debt and detinue. Save for obscure hints in Bracton and Fleta,1 there seems to be no reference to this division in the early legal writers, though it appears as well established in the Year Books of Edward I.2 It was based, not, as is often said,3 on the distinction between money and chattels, but apparently on that between obligation and property. Detinue was an action for the recovery of money or chattels of which the plaintiff had the ownership; debt for the recovery of money or chattels over which the plaintiff’s right was merely in personam.4 This division had important effects upon the law of contract, for it is evident that all bailments would be relegated to the action of detinue. Now this action played no part in the development of the theory of contract, and bailments consequently remained outside that theory until the rise of the action of assumpsit restored them to their rightful position as a class of contracts. Furthermore this removal of bailments rendered possible, as will be seen later, an important generalization within the action of debt. It is evident that debt, as the general remedy for all obligations that gave rise to liquidated claims, must have had a scope in some respects wider and in some narrower than the sphere of contract. Since, however, the cases in which it was the remedy for Edition: current; Page: [322] causes of action not contractual were comparatively unimportant, they may be here neglected.

In every action of debt two elements were originally necessary, a justa causa debendi and a legal proof.1 There were within historical times two principal modes of proof, the carta or written acknowledgment, and the secta or train of witnesses. It is to this fact that we owe the distinction between specialty debts and debts on simple contract. With respect to the causae debendi the most important fact to be noticed is that among them the early law did not include a promise or agreement. The idea of the obligatory nature of a mere executory agreement seems to have been unknown, and part performance was a condition precedent to the existence of an obligation.2 Indeed it is doubtful whether an agreement was in any distinct manner recognised as an element of debt, or whether any conscious distinction was drawn between obligations ex contractu and any other form of obligation.3 It was an accident of procedure that first introduced into the law the principle of enforcing mere promises. A written acknowledgment of a debt, or written promise to pay it, was obviously the best evidence that could be obtained, and by a transition very natural to early law it passed from the position of good evidence to that of conclusive proof. This appears from Bracton: ‘Per scripturam vero obligatur quis, ut si quis scripserit alicui se debere, sive pecunia numerata sit sive non, obligatur ex scriptura, nec habebit exceptionem pecuniae non numeratae contra scripturam, quia scripsit se debere.’4 The obvious effect of this rule of evidence upon the substantive law was that a written promise to pay ceased to be a mere proof of an already existing debt, and became a causa debendi itself. Thus was introduced into the English law a formal contract, and it would seem that to this same application of estoppel early law is largely indebted for this class of contract. Thus in Edition: current; Page: [323] the law of Rome the contract literis and the release by acceptilatio are undoubted instances of the process,1 though to extend the same explanation to the stipulation might be overbold.

In debts proved by good suit, on the other hand, it remained necessary to allege an independent causa debendi. ‘En dette sur contract le plaintiff monstra in son count pur quel cause le defendant devient son dettour. Autrement in dette sur obligation, car l’obligation est contract in luy meme.’2 What then were these causae? To give a complete list of them is impracticable, but they were such transactions as sale, barter, loan (mutuum), and hiring of services. The common feature of them all was something given or done on one side in return for something to be given or done on the other. A generalization of the causae debendi was therefore possible, and this resulted in the well-known doctrine of quid pro quo. It was laid down that debt on a simple contract did not lie unless the defendant had received something in recompense for the obligation sought to be enforced against him.3 The cause that led to this explicit statement of what had been implicit from the earliest times was probably the disturbing influence of the idea that simple contract debts were really based upon promises, and the consequent necessity of defining the limits within which a promise was obligatory. In the early theory of contract quid pro quo, as yet ungeneralized, was the principal; the promise, if recognised at all, merely the accessory. With the progress of legal theory, however, this relation became reversed, and quid pro quo assumed the aspect of a limitation upon the binding effect of promises.

The exact date of this generalization is uncertain. What seems the earliest mention of the term occurs in 39 Ed. III,4 where however it is unconnected with contract. In 9 Hen. Edition: current; Page: [324] V1 debt was brought by a plaintiff who had released a judgment debtor on the promise of the defendant to become debtor in his stead. It was held that this was not sufficient matter in law to charge the defendant. This is a good example of the kind of case that must have led to the formulation of the doctrine of quid pro quo, but the report makes no use of that expression. In 7 Hen. VI we find an objection made to the absence of quid pro quo, though not in an action of debt,2 and thirty years later the rule is treated as perfectly familiar.3 In 16 Ed. IV4 it is remarked that ‘parols sans reason’ have no binding force. The principle in question has been somewhat hastily identified with the modern principle of consideration, but as we shall see it is very doubtful whether there is between them any historical connection whatever.

The second form of action to be considered is that of Covenant. By the time of Edward I this was fully established as a general contractual remedy by which damages could be obtained for the breach of any agreement under seal. It seems probable that this action passed into the law of contract from the law of real property, the earliest conventiones being leases of land for life or years.5 However this may be, its history as a general contractual remedy can be traced with considerable clearness in the early writers. Glanvil tells us that privatae conventiones were not enforceable.6 This assertion seems sometimes to be interpreted as meaning merely that contracts were invalid unless reduced to writing;7 but Glanvil himself defines privatae conventiones as agreements made anywhere save in the King’s Court. If not Edition: current; Page: [325] there made, no executory contract was enforceable whether reduced to writing or not. By the time of Bracton we find an advance in legal theory, for covenants are now enforced in the King’s Court not of right but occasionally de gratia. ‘Non solet aliquando necessitas imponi curiae domini regis de hujusmodi conventionibus privatis discutere. Sed tamen si quis a conventione recedat, succurritur alteri parti per actionem de conventione.’1 Finally in Fleta the foregoing passage is transcribed with an omission of all reference to the remedy being of grace rather than of right.2 Unlike debt and, as will be seen, unlike assumpsit, covenant was from the first recognised as a remedy for breach of promise. Unlike these actions therefore its origin imposed no limitation on its scope, and it threatened to become co-extensive with agreements. A limitation stringent enough however was imposed by the law of evidence. In 20 Ed. I3 a plaintiff offered good suit to prove his covenant, and it was decided that a writing was the only admissible proof of an agreement. This rule determined the whole future history of the law of contract, for it obtained recognition at a time when a writing meant a writing under seal, and covenant was thus restricted to a class of agreements that became narrower every day.

The limitations thus sought to be imposed on the law of contract proved too strait to be borne. A form of action never fashioned for that end was soon pressed into the service for which debt and covenant had proved inadequate, and this in process of time developed into the third and most important contractual remedy. Of the origin and nature of Trespass on the Case it is needless here to speak, but a subject deserving some consideration is the process by which it became a remedy for breach of contract. It was intended as a provision for those cases of damage to person or property that did not fall within the original scope of trespass. Now inasmuch as breach of contract is a fruitful source of damage to person and property, it is evident that Edition: current; Page: [326] in many instances trespass on the case must have been in reality a contractual remedy. Very frequently therefore an undertaking or assumpsit formed part of the circumstances of the case, and appeared in the count.1 This aspect of trespass on the case was early perceived, and the objection used at first to be brought that in such cases covenant was the appropriate and exclusive remedy. This, however, was overruled. Thus in 48 Ed. III, in an action against a surgeon for negligence, it is said: ‘This action of covenant is of necessity maintainable without specialty, because for every little thing a man cannot have a clerk to make a deed.’2 In a similar case in 11 Rich. II3 the contract was made in London, and the negligent performance of it occurred in Middlesex. A dispute arising as to the venue, it was decided that issue might be joined either on the assumpsit or on the ‘contrary medicines,’ and that the venue would be determined accordingly. This shows a distinct appreciation of the double character of the action, trespass from one point of view, covenant from another.

Now happened an event closely analogous to what we have already noticed in the history of debt. In trespass on the case, as in debt, a promise was not originally the cause of liability, but merely an accessory; in both actions the promise came subsequently to be regarded as the principal; and in both a consequent necessity arose of limiting the new principle by a generalized statement of the old. In debt this resulted, as has been seen, in the doctrine of quid pro-quo. In assumpsit it resulted first of all in the rule that the action lay for a breach of promise by malfeasance only, as distinguished from a breach by nonfeasance.4 This rule was evidently a recognition that the action, though from one point of view contractual, was in reality delictual. If it resulted from a mere omission, damage to the plaintiff’s person or property was not regarded as a cause of action; for, generally speaking, it is only through a contractual Edition: current; Page: [327] obligation that a man becomes liable for passively permitting another’s loss.

For a century the ‘merveillous ley’ that resulted from this distinction was subjected to a vigorous attack,1 until at last in 20 Hen. VII the efforts of the assailants proved victorious. In this year it was decided, in defiance of all precedent, that an action on the case lay for a nonfeasance. ‘If I covenant for money to build a house by such a day, and do it not, an action on the case lies for the nonfeasance.’2 This piece of judicial legislation obtained immediate recognition,3 and from this time the law of contract may be regarded as established in what is practically its modern form.

It might be supposed that after this extension assumpsit would become coextensive with parol agreements. Not so however. There is no more curious feature in the history of the English law of contract than the manner in which limitations were invariably imposed upon the scope of contractual remedies and the obligatory nature of agreements. The limitation now imposed upon assumpsit was the necessary result of the fact that it was an action ex delicto perverted into a contractual remedy. A purely delictual action is based upon detriment suffered by the plaintiff, and that detriment is the measure of damages. A purely contractual action, on the other hand, is based on breach of promise, whether accompanied by detriment or not, and the measure of damages is the benefit that would have resulted to the plaintiff from performance. The employment of an action ex delicto as a remedy for breach of contract naturally resulted in a union of these two principles; the real, though not the ostensible, cause of action continued to be injury to the plaintiff, but the amount of this injury was immaterial, for the measure of damages was, as in a true contractual action, the benefit that would have resulted from performance.4 This injury which, though an essential Edition: current; Page: [328] element, was neither the measure of damages nor the ostensible cause of action, operated as a limitation upon the action of assumpsit, and in a slightly modified form is still to be seen in the modern requirement of Consideration. It is true that valuable consideration is generally regarded as being of two kinds, only one of which consists in damage to the plaintiff. But even that form of consideration which consists in a benefit to the defendant ought logically and historically to be regarded as an injury to the plaintiff from whom it moves. And such is now the prevalent opinion. ‘Detriment to the promisee is a universal test of the sufficiency of consideration’ in assumpsit: Langdell, Summary, § 64.

The rule that assumpsit would not lie unless the plaintiff had suffered damage required and received distinct recognition on the extension of the action to nonfeasance. It was held that a breach of contract by nonfeasance, as a failure to build a house, was no ground of action unless loss had been incurred, as by prepayment of the price. In 21 Hen. VII, Chief Justice Frowike says, ‘I shall have a good action on my case by cause of the payment of the money, and without payment of the money in this case there is no remedy; and yet if he builds the house and does it badly, an action on my case lies. . . . And so it seems to me that in the case at bar the payment of the money is the cause of the action on the case.’1

It has been already said that this requirement of injury to the plaintiff, which existed in assumpsit as a relic of the Edition: current; Page: [329] original delictual character of the action, is represented with some modifications by the modern rule as to consideration. The cause and the significance of these modifications constitute the obscurest problem in the history of contract. The theory to be here advanced is that there is no historical connection between consideration and the original limitation of assumpsit, but that the former was an independent development in another part of the law, which by its strong analogy to the aforesaid limitation was enabled to introduce itself into assumpsit and to supplant the earlier principle. This process must have taken place between the end of the reign of Henry VII, when assumpsit was extended to nonfeasance, and the beginning of the reign of Elizabeth, in whose tenth year the later principle appears in an unmistakeable form.1 There can be little doubt that the idea of consideration received its first applications from the Court of Chancery, where it formed an essential part of the equitable doctrine of uses. It is needless here to enter into the details of the varied and extensive use made of this principle by equity; it is sufficient to mention the necessity for good consideration in covenants to stand seised to uses, in conveyances without declaration of uses, and in the alienation of land subject to uses. The application of consideration to the law of uses has been brought into special prominence, partly by the importance of this branch of equitable jurisdiction, and partly by the operation of the Statute of Uses; but there is no sufficient reason for supposing that this was the only equitable application of the principle. There are some grounds for believing that consideration was originally in equity, as subsequently in law, a principle of contract. That there was an equitable jurisdiction in contract is undoubted. In 8 Ed. IV2 the right to determine suits pro fidei laesione was distinctly claimed and exercised by the Chancellor. Fairfax, a judge of this reign, jealous of the growing jurisdiction, urged that the action on the case ought to be extended so as to obviate the Edition: current; Page: [330] necessity of an appeal to Chancery.1 From the Diversité de courtes2 we learn that ‘a man can have remedy in the Chancery for covenants made without specialty, if the party has sufficient proof of the covenants, since he is without remedy at the common law.’ It was doubtless in order to check the growth of this jurisdiction that the judges extended the remedy of assumpsit, as already mentioned. Fineux, one of the authors of this change, remarks that since the party can have assumpsit for a nonfeasance, ‘there will be no necessity for a subpœna.’3 On the extension of the common law action, Chancery to a large extent abandoned its jurisdiction over contracts, though a relic of it is still to be seen in the remedy of specific performance.4

There is little or no direct evidence that consideration was applied by equity to contracts, for few examples of this branch of equitable jurisdiction are to be found. It appears from the early bills in Chancery that the term consideration, with its synonym cause, was in use in contracts as early as the reign of Edward IV;5 but to what extent these words had a technical meaning, or bore reference to a definite legal principle, it is impossible to tell. In the absence of direct evidence we must fall back upon inference. Even within the law of uses we find consideration applied to contracts, for covenants to stand seised to uses (which might be by parol6) were limited by this requirement. That this was an isolated application of the principle to a single class of contracts seems a much less probable supposition than that it was merely a particular instance of a rule requiring a consideration in all contracts whatever. Furthermore the principle in question is applied by equity to contracts at the present day. As has been said, specific performance is a relic of the general equitable jurisdiction in contract. Now the application of this remedy is still limited by the requirement of consideration, a requirement Edition: current; Page: [331] more imperative than in the common law, inasmuch as it disregards the distinction between specialty and parol agreements. For the application of this principle to contracts therefore, either equity must be indebted to the law, or the law to equity. Can the former supposition be maintained, when we know that to equity is due the origin of the principle, and its varied applications throughout the law of uses, trusts, and even in particular instances contract itself?

In treating of the history of this subject it is essential to bear in mind that consideration was not what is now known as valuable consideration. It was a much wider idea, and may be defined as any motive or inducement which could be regarded as rational and sufficient. It included four principal species: first, valuable consideration; second, natural affection; third, legal obligation; and fourth, moral obligation. This wide idea was destined to undergo a process of atrophy, the result of which has been that at the present day it is practically reduced to valuable consideration, though various relics of the original doctrine are still to be met with scattered through the law. The proofs of the original form of the idea, and of its more or less complete application in this form to assumpsit, are in the main the same, and may be given together:—

At the time when its legal use originated, the word was popularly used in the wide sense above indicated. Thus in Doctor and Student:1 ‘The said statute was well and lawfully made, and upon a good reasonable consideration.’ In all probability the legal and popular uses were at first identical. Secondly, that natural affection originally formed part of the idea in question needs no proof, for even at the present day it receives nominal recognition under the title of good consideration.2 What is perhaps the first mention of consideration in the Year Books is in 20 Hen. VII, where it is said of a grant: ‘it was made on good consideration, for the elder brother is bound by the law of nature to Edition: current; Page: [332] aid and comfort his younger brother.’1 The relationship of good to valuable consideration can be satisfactorily explained only on the theory that they were originally species of a generic notion, which could not have been narrower than that above indicated. Thirdly, that consideration originally included legal obligation seems the only possible explanation of such actions as indebitatus assumpsit2 and insimul computassent.3 If the idea in question had been as narrow when these actions originated as it is now, there must have been an absurdity in alleging a debt as a consideration for a promise to pay it. Fourthly, that in certain cases moral obligation was regarded as a good consideration, may be gathered from anomalies that exist even at the present day. These and other exceptions to strict theory are commonly explained as relaxations that have been gradually permitted in the rule respecting consideration.4 But it is extremely difficult to see how such exceptions could ever have been allowed entrance into the law. A far more satisfactory explanation is that these anomalies are the relics of a wider rule that included both the modern rule and the modern exceptions to it. Such an exception is to be seen in the doctrine that a past consideration is sufficient to sustain a promise if moved by a precedent request. The first statement of this rule is reported in 10 Elizabeth. Assumpsit was brought on a promise to indemnify the plaintiff, who had previously become bail for the defendant’s servant. ‘By opinion of the court it does not lie in this matter, because there is no consideration wherefore the defendant should be charged for the debt of his servant, . . . . for the master did never make request to the plaintiff to do so much for his servant, but he did it of his own head.’5 The rule is evidently based on the idea that there is no moral obligation to recompense a benefit, and therefore no consideration for a promise to do so, unless the Edition: current; Page: [333] benefit is conferred at the request of the person benefited.1

Of the method in which this principle obtained entrance into the action of assumpsit, there seems to be little or no evidence; but if we take into account the facts that it was probably applied to contracts by equity, that the development of assumpsit was determined by the desire to absorb the equitable jurisdiction in contract, that since the Statute of Uses consideration had spread widely through the common law, and that a strong resemblance existed between consideration and the common law limitation of assumpsit, it can scarcely be a matter of surprise that the latter was finally supplanted by the former.

Had the idea of consideration proved more stable, and made successful resistance to the process by which it has been reduced to its modern limits,2 its introduction into assumpsit would have caused a profound modification of the law of contract. As it is, however, it may be said that even had this equitable principle never been borrowed by the common law, the law of contract would have been, except in one point, practically identical with what it now is. The exception lies in this, that whereas the original limitation of assumpsit consisted simply in detriment to the promisee, consideration consists in such detriment regarded as an inducement to the promise. The difference is important, for its effect was to render assumpsit inapplicable, save by reasoning approaching closely to the fictitious, to the very cases to which trespass on the case was first applied. Coggs v. Bernard is a typical example of this. Damage directly resulting from the breach of contract, as the loss of the brandy in this celebrated case, cannot of course be regarded Edition: current; Page: [334] as an inducement to the promise; and therefore, although it would have fallen within the common law limitation of assumpsit, it is no consideration.

Assuming then that the law derived consideration from equity, the question remains: Whence did equity derive the principle? It is sometimes answered: From the civil law. If this means that it resulted from an adoption or adaptation of the Roman distinction between contractus and nudum pactum, the opinion is untenable. The causæ civiles which turned pacts into contracts were incapable of generalization, and even by omitting the formal contracts we obtain only the inadequate idea of valuable consideration. The civil law supplies however another application of the term causa, which is more to the point. Money paid or property delivered sine causa could be reclaimed; and a promise made sine causa was invalid.1 This rule applied to contracts, whether formal or not. Causa was not of course restricted to valuable consideration, for this was never essential to a stipulation, but it included any adequate motive or sufficient reason. The rule rendered invalid promises made either under a mistake (sine causa ab initio) or for a valuable consideration which failed (causa data causa non secuta). Now the Canon Law expressly renounced the moribund distinction between contractus and pactum,2 and this example was followed very generally throughout Europe.3 This breakdown of the old theory would naturally call into prominence the requirement of causa, as being the only remaining limitation upon the binding efficacy of agreements; and that this was actually the case sufficiently appears from the following extract from Molina, a jurist of the sixteenth century. ‘Observant etiam Felinus . . . et doctores communiter, ut jure canonico ex pacto nudo actio concedatur, qua paciscens cogatur implere pactum, necessariam esse causae expressionem: alioquin reus non cogetur solvere, nisi Edition: current; Page: [335] actor causam sufficienter probet. . . . Quo loco observa, sufficientem causam ut solvere cogatur esse titulum donationis.’1 Molina proceeds to give examples of the rule, to identify it with the rule of the civil law already mentioned, and to call attention to the mistake made by some writers in confounding causa in this sense with the causa that was originally necessary as a vestimentum pacti. This same rule that a cause is necessary to sustain a promise is still recognised in its original form by the French law.2 An enunciation of the same principle, very significant with regard to the English law, is to be found in Doctor and Student. The Student knows nothing of consideration, but expounds the law of contract exactly as it was understood during the reign of Henry VIII. But the Doctor of Divinity speaks as follows: ‘And of other promises made to a man upon a certain consideration, if the promise be not against the law, as if A. promise to give B. 20l. because he hath made him such a house, or hath lent him such a thing, or such other like, I think him bound to keep his promise. But if his promise be so naked that there is no manner of consideration why it should be made, then I think him not bound to perform it, for it is to suppose that there was some error in the making of the promise. . . . And in all such promises it must be understood that he that made the promise intended to be bound by it, for else commonly after the doctors he is not bound, unless he were bound to it before his promise: as if a man promise to give his father a gowne that hath need of it to keep him from cold. And also such promises, if they shall bind, they must be honest, lawful, and possible, and else they are not to be holden in conscience though there be a cause. And if the promise be good and with a cause, though no worldly profit shall grow thereby to him that maketh the promise, but only a spiritual profit, as in the case before rehearsed of a promise made to an University, to a Citie, to the Church, or such other, and with a cause as to the honour of God, there is Edition: current; Page: [336] most commonly holden that an action upon these promises lieth in the Law Cannon.’1

That the principle so expounded by the doctor of divinity is identical with that which we have already found to exist in the Canon Law, there can be no doubt. Is it not almost equally obvious that it is also identical with the equitable principle of consideration? In name the two principles are the same, and in nature they are practically indistinguishable, save that consideration is not met with in equity until after the commencement of that process of contraction which finally reduced it to its modern limits. May we not conclude then that when the Chancellors, who till the reign of Henry VIII were almost invariably ecclesiastics, sought a basis on which to found their equitable jurisdiction in contract, they adopted a principle lying ready to their hands in a system of law with which they were familiar?

The theory that consideration is a modification of the Roman principle of causa, adopted by equity, and transferred thence into the common law, finds some support from Mr. Pollock in his work on Contracts,2 but is rejected by Mr. Justice Holmes,3 who attempts to prove the principle in question to be entirely an internal development of the English law of contract. The central point of Mr. Holmes’s theory is that the modern rule of consideration is merely a modification of the ancient requirement of quid pro quo in the action of debt. But to this view the objections seem almost insurmountable. It is based on a mistaken view of the original contents of the idea of consideration. Between this idea, as first understood, and quid pro quo, there is a gap too wide to be bridged by any theory of development. Furthermore, quid pro quo was a principle confined to the action of debt, while consideration (as a theory of the law of contract) was found only in assumpsit. Thirdly, this latter principle was well known in the law of property some time before it appears in contracts; it seems scarcely probable Edition: current; Page: [337] therefore that it was derived from the action of debt. Again, it is alleged that the modification by which quid pro quo became consideration was the recognition of detriment to the promisee as well as benefit to the promisor. But in debt this extension was again and again attempted without success,1 and it is not probable that it could have succeeded in assumpsit. Lastly, the two ideas in question lived on independently in their own spheres, and the clearest distinction was always drawn between them. Thus in 27 Hen. VIII it is said: ‘I understand that one cannot have a writ of debt except when there is a contract; for the defendant has not quid pro quo, but the action is founded solely on the assumption, which sounds merely in covenant.’2 Again in 27 & 28 Eliz.: ‘In assumpsit it is not necessary that they contract at the same instant, but it suffices if there be inducement enough to the promise, and although it is precedent it is not material; otherwise in debt it is requisite that the benefit come to the party, otherwise for want of a quid pro quo debt does not lie.’3 Again, as late as 4 Charles I: ‘There is no contract between them nor hath he any quid pro quo, but he ought to have had an assumpsit.’4 Could two principles have been kept so distinct, if one had been merely a modification of the other permitted by the laxity of the law?

To the later history of contract a mere allusion must suffice. Its chief feature was the temporary though prolonged disappearance of debt in favour of assumpsit in the case of simple contracts. For the purpose of avoiding the defendant’s wager of law, early attempts were made to bring assumpsit where debt was the appropriate remedy. After a struggle between the Court of King’s Bench and the Court of Exchequer Chamber,5 it was finally decided in Slade’s Case6 that an action on the case would lie although Edition: current; Page: [338] debt was available. The only subsequent change that need be mentioned is the final recognition of a single limiting principle throughout the law of contracts by the merger of quid pro quo in valuable consideration.

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62.: HISTORY OF THE BENEFICIARY’S ACTION IN ASSUMPSIT1

“The true interest of the topic of Procedure is derived from the manner in which the tribunals have contrived from time to time to effect changes in the substance of the law itself, under cover of merely modifying the methods by which it is enforced.”—Holland: “Elements of Jurisprudence,” chap. xv. page 267 (1888).

MODERN English law, in a familiar line of decisions since the year 1724, has pronounced against the right of a third person, not a party to a contract, to maintain an action of assumpsit upon the contract, even though it was made for his benefit.3

Upon examination of these cases, the following questions are presented:

Is there any substantive right by which the beneficiary of a contract can enforce a part from the action of assumpsit?

Is the denial of the beneficiary’s right in the cases of assumpsit due to a judicial denial of the existence of such a substantive right; or is the inability of the beneficiary to Edition: current; Page: [340] recover due in reality to certain technicalities of procedure or principles of substantive law incident and peculiar to the action of assumpsit itself?

If, apart from assumpsit, there is such a substantial right of a beneficiary, what is its basis, its scope, and its limitations, and in what formal procedure or actions is it enforceable? At the present day, “Whatever disadvantages the English law on the question may have, it has at least the merit of definiteness. A beneficiary has no legal rights.”1 That the modern English judicial conscience finds satisfaction in this conclusion may be seen from the exclamation of Crompton, J.: “It would be a monstrous proposition to say that a person was a party to the contract for the purpose of suing upon it for his own advantage, and not a party to it for the purpose of being sued.”2 But why “monstrous,” if conformable to the contractors’ intent?

That the modern English courts in preventing this monstrosity believe they have not sacrificed any cherished English judicial principle appears from the repeated assurances of the modern English judges that the beneficiary cannot recover because he is “a stranger to the consideration,” and because “he is not a party to the contract.”3

Unfortunately, for judicial uniformity, the monstrosity of the proposition that a person may be entitled to sue on a contract without being himself liable to suit thereon, never shocked any judicial conscience in England until 1861.

It can be shown (conclusively, I submit), that outside of assumpsit this so-called “monstrosity” has been the law of England for five hundred years.

The line of approach in investigating the common law on this subject, lies in challenging and demanding proof for the propositions so often asserted, that:

(1) No one can recover on a contract except the person who furnishes the consideration.

(2) No one can recover on a contract except the promisee.

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We find both these propositions asserted in the English decisions in the action of assumpsit. That the foregoing two propositions are invariably discussed solely from the stand-point of the action of assumpsit is apparent from any study of the opinions of the leading text-writers.

There is, however, no consensus of opinion among text-writers with respect to the truth of both propositions.1 And Edition: current; Page: [342] there is hardly any unanimity of judicial opinion among common law judges to-day upon any point involved in the subject of the beneficiary.1

That various courts of common-law origin, professedly expounding and administering that law, should reach not only contrary conclusions on this problem, but conclusions involving fundamentally antagonistic conceptions of the doctrine of Contract and of Consideration, provokes the inquiry whether the common law on the subject of the right of action of a stranger to the contract has ever been fully investigated, ascertained and presented.

So far as the question is a legal and not an equitable question, nearly all text-writers of the present day on contracts, attempt to solve the problem of the beneficiary’s right Edition: current; Page: [343] of action by the aid of or in conformity to the doctrine of consideration in special assumpsit, i. e., as a question of the law and procedure in special assumpsit. In reality, the question is one of the general substantive contract law of England and of the States inheriting that law. In point of fact, all the decisions usually cited on the right of action of the beneficiary are decisions in actions of special assumpsit and, hence, these decisions turn on the doctrine of consideration, and are controlled and limited by the judicial interpretations of that doctrine.

The citations of these assumpsit decisions therefore, proves nothing beyond the action of assumpsit; and because by the very nature of such actions they rest on the doctrine of consideration (which invariably requires that no one who has not furnished the consideration, or, at least, that no one who is not the promisee, shall have the right to maintain assumpsit), these decisions are convincing to only those who regard contract and assumpsit as identical concepts.

The real question is, however, a much broader one. Is there any substantive right of action conferred by the common law of England on the beneficiary of a contract independent of assumpsit and therefore independent of the doctrine of consideration, i. e., independent of his having furnished the consideration and of his being the promisee? “An English misunderstanding or perversion of the common law is not necessarily our law.”

The doctrine of consideration was, of course, unheard of in England until the reigns of Henry VII, Henry VIII and Elizabeth, when it came into vogue gradually, in the extension of the action on the case to promises previously unenforceable. “The name ‘consideration’ appears only about the beginning of the sixteenth century, and we do not know by what steps it became a settled term of art.”1 Outside of Edition: current; Page: [344] the action on the case and its derivative special assumpsit, it is familiar law that the doctrine of consideration was never recognized and had never been heard of or applied.

But the right of action of the beneficiary was an established right long before the doctrine of consideration existed. The right of action of the beneficiary was previously recognized and firmly established in the ancient actions of account and of debt, years before the rise of the action of Case on “Promises.” The doctrine that neither Case nor assumpsit would lie except for a consideration, and finally the definition of consideration as consisting in a detriment suffered by the plaintiff who must be the promisee, had obviously no place in the action of debt where “there was no theory of consideration, and therefore, of course, no limit to either the action or the contract based upon the nature of the consideration received.”1 No more was there any conception of “Consideration” (as we now have come to accept the term) in the action of Account.

The relation of consideration in special assumpsit to the rights of third parties will be discussed later. We shall first deal with account and debt, where consideration was of course, unknown, and examine the cases giving the beneficiary a right to sue in those actions.

I.: THE ACTIONS OF ACCOUNT AND OF DEBT, AND THE RIGHT OF ACTION OF THE BENEFICIARY IN EACH

Before discussing the principles governing the beneficiary’s right of action in Account, let us examine the facts in a number of cases where the right was recognized.

In the fourteenth century the writ of account was in common use wherever the plaintiff had constituted the defendant either his customary bailiff or his bailiff pro hac vice, to sell goods, or his receiver to take money from third persons.

This use of the writ of account is at least six hundred years old.2 The plaintiff counted upon the fact that he had Edition: current; Page: [345] bailed merchandise to the defendant to sell, that the defendant had sold the goods and had received divers sums of money at the hands of divers mentioned persons, and a count was useless if it failed to mention definitely by whose hands the defendant received the monies, unless he was the plaintiff’s duly constituted bailiff.1

From this use of the writ of account by the lord or master against the steward or servant2 is to be traced its use by the beneficiary.

The customary bailiff’s receipt of the property and monies were received under a prior authority from the lord to act as bailiff or to receive. Suppose, however, a stranger without previous authority from the lord received his rents from the hands of his tenants, they directing payment to be made to their lord? The common law at length impressed upon this transaction the fiction of the lord and bailiff and held Edition: current; Page: [346] the bailee accountable to the beneficiary. In 1368 (41 Ed. III) in an action of account involving another point, and the issue being whether account or debt would lie, Cavendish1 (then Sergeant) argued: “If I bail certain moneys to you to bail to John, he shall have writ of account because the property is in him immediately when you receive them by my hand, and he cannot have account by writ of debt.”2 This assertion of Cavendish was unchallenged and he speaks of John’s right to an account as familiar law.

But this same year that first of the abridgers of the Common law, Nicholas Statham (or perhaps we should say, Baron Statham)3 queried, “Whether he to whom the bailment ought to have been made shall have action of account.”4

In Michaelmas 1374, Y. B., 47 Ed. III, Fol. 16, pl. 25, such an action was brought and the defendant pleaded that the person at whose hands the alleged receipt was had, was a co-monk with the plaintiff, the Abbot of Wanerle, but was not named as co-monk. This defence was allowed to be made, and this judgment points to the conclusion that the action of account was then clearly maintainable, unless there was a plea filed good in law to bar this action of account, but that otherwise, this declaration was good.5

Flowing from out this marshland the stream almost immediately appears, running clear, distinct, in a fixed course between well defined banks. As the following decision of Edition: current; Page: [347] 1379 is the earliest now accessible to the writer and probably one of the earliest that can be found, the full report of it by Fitzherbert1 is reprinted. In the Common Pleas:

“Account against one J. D. and counts that he received of him ten marks to bargain by the hand of one Rauffe Barnerde to profit and merchandize.

Clopton. We say that for certain business which the town of B. had to transact with the plaintiff, the people of the town sent to us ten marks by the said R. B. by whose hands, &c., to carry to him who is now plaintiff, whereupon we come to him who is now plaintiff and to carry the money to him as messenger and you see here is the money taken, absque hoc that we were his receiver of this money in another manner. Judgment if we ought to account, &c.

Hols. And we (ask) judgment, &c., since you have admitted the receipt and we pray for an account and damages for the detention, &c.

Bel.2 It is positive law that a man shall not have damages in a writ of account, and of the balance he has admitted by his reply that he was only a messenger wherefore he was not accountable by the law in respect of any profit of this in so much as he has made tender of the money and still by the law he cannot have any other action except by writ of account to recover the money because the receipt was not for the purpose of merchandizing but as messenger he received the money; but if the receipt had been to profit and merchandize, the plaintiff would stand as well for the loss as for the gain. Wherefore I put this case that my bailiff of my manor receives my rents of my lands and retains the money in his hands for two or three years, I shall have no other remedy except by writ of account and in this suit I shall have nothing except the money which he received, and he shall account for no profit coming from it during the same time because he has no authority to put out the money in merchandizing either to gain or to lose wherefore will you have the money or not?

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Persey.1 If I am receiver of your monies &c. to merchandize with and I retain them in my hand without putting them to merchandize so that I do not lose or gain anything shall I not be obliged to account for the profits of them?

Belk. Yes, certainly you can show on the account that you could have put the monies to merchandize and profit for us and if you cannot be excused in respect of it by oath or in some other way, you will be charged with reasonable profit &c. quod.

Skipwith.2 That is agreed because he received the money to put them to merchandize but not so here because he never had authority to put them out of his hand.

Belk. If I am debtor to Sir Henry Persey in 20 pounds and I bail the money to J. Holt to pay it to him, if J. Holt does not pay the money to him he shall have action of account against him and no other action, but by this action, he shall have only the same money though he has detained it for ten years. Quod fuit concessum, and then.

Belk said: take the money, because you shall have no other answer for us and it shall be entered upon the record that you have received them and neither of you shall be amerced, wherefore the defendant comes the first day and the plaintiff shall have good action, and so it was entered, &c.”

In 1405 (6 Hen. IV,) in the Common Pleas, debt was brought to recover 40 s. delivered to the defendant by the lessee of a manor to pay to the plaintiff. It was held that the proper remedy was not debt because “there is no contract between you.” Account would have been proper had there not been a frank tenement. Hence as a writ of annuity was the only remedy the plaintiff took nothing by his writ of Debt.

But Hankford, Justice, putting his decision on the ground that not debt but account would lie, made the positive and unqualified assertion that “if a man deliver certain monies to you to pay to me, I shall have action of account against Edition: current; Page: [349] you and not writ of debt because there is no contract between you.”1

Account is the well recognized remedy of the beneficiary throughout the fifteenth century,2 and continued to be so employed in the sixteenth century.

In 1458, (36 Hen. VI), Wangford’s language (arguendo), shows unmistakably not only that the beneficiary had a right of action in account where there had been a prior appointment of the defendant, but that the old distinction between debt and account to enforce this right was becoming obliterated: “Sir, I grant willingly that this is a good plea; and the reason is because when a man pays to another certain money by my commandment to my ‘oeps’3 if he who receives this money is unwilling to pay me, I shall have a good writ of debt or account against him, and in that way I will have my money.”4

In 1476 (15 Ed. IV), an Abbot brought a writ of account against a man alleging that he had received 100l. of A, predecessor of the same Abbot, from the hands of one D and C, to render an account. The defendant in vain objected, (1) that the plaintiff should have alleged that the goods belonged to the house and not to A, (2) that the receipt was from the hands of a co-monk, and that such a receipt was like a receipt from the hands of the plaintiff’s wife and that the writ in such case, abated.

Brian:5 “That is not so, for the writ is good but in such a case as you speak of, a receipt by the hands of the wife, the defendant shall have his law . . . wherefore answer to this, for the writ is good enough.”6

In 1479 (18 Ed. IV) the existence of an alternative remedy for the beneficiary, by writ of Debt, or by writ of Account, is mooted.7 Counsel, arguendo that Case was alternative Edition: current; Page: [350] with Detinue proposed the following analogy: “As if I deliver 20 pounds to Catesby to deliver to Pigot he can elect to have writ of Account against Catesby or writ of Debt.”

But Brian,1 holding that in the case in judgment, Detinue only would lie, counter-argued, “And as to what is said that he shall have action of Debt or of Account, I say that he shall have action of Account and not action of Debt, upon what thing shall his action of Debt be founded? Not upon a contract, nor upon a sale, nor upon a loan can he declare.”

In 1506 (21 Hen. VII) Frowike, C. J.2 remarked in a dictum: “The stranger has not other remedy except action of account.”3

The motive which impelled the beneficiary to seek redress by the writ of debt rather than by the writ of account, is quite plain. The plaintiff in account was compelled to undergo the delay of two distinct trials, the first before a jury to determine merely his right to an accounting, the judgment for the plaintiff being that the defendant do account, (quod computet), and the second trial being the accounting itself before the court-appointed auditors. In the writ of Debt, on the contrary, the plaintiff, if successful in establishing the defendant to be his debtor, was entitled to judgment and immediate execution, even in the case of default. Moreover, the fixing of any liability upon a receiver at the hearing before the auditors was always contingent upon his not having been robbed, or not having lost the property without his own fault, &c. &c.4 Once establish, however, that the defendant is not merely your receiver but your debtor, and his liability is absolute.

When the attempt was first made there were manifest obstacles to the employment of the writ of Debt by the beneficiary, though admittedly an action of Account would lie where there had been a bailment of money or chattels to the defendant upon the latter’s promise to the bailor to pay the Edition: current; Page: [351] plaintiff a sum certain. There was no privity between plaintiff and the defendant.1 The argument at first seemed unanswerable: “there is no contract between you.” The defendant being a receiver, was accountable, but not being a debtor how could he be liable in the writ of Debt?

The moral pressure of the plaintiff-accountee, seeking to recover by writ of debt, finally forced the courts to treat a receiver as a debtor. The successful argument was that if the plaintiff showed a demand upon the defendant for an account and the latter refused or failed to render an account he had presumably converted to his own benefit, all the property bailed and hence had made himself the plaintiff’s debtor.2

Long prior to 1573 the alternative remedy of the beneficiary by writ of debt was clearly established. Sir Robert Brooke, who sat as Chief Justice of the Common Pleas from 1554 to 1558, states in his “Graunde Abridgment”3 published in 1573, that “where ten pounds is paid to W. N. to my use I shall have action or Debt or of Account against W. N.” Brooke cites a precedent then over a hundred years old—the above mentioned Year Book, 36 H. 6. f. 8, pl. 5. And in the last year of the reign of Elizabeth there is this dictum, if not judgment, of the Queen’s Bench: “adjudged, although no contract is between the parties, yet when money Edition: current; Page: [352] or goods are delivered upon consideration to the use of A, A may have debt for them.”1 As in the action of Account there was no wager of law where the plaintiff counted that the defendant had received the money or goods at the hands of a stranger;2 neither did that mediæval mode of trial embarrass the plaintiff accountee, who, by establishing a demand and default thus converted his accountant or receiver into his debtor.3

In 1587, in the Queen’s Bench, in 30 Eliz., in an action of account, Andrews et ux. and one Cocket declared against Robsert that he, Robsert, on 20 Aug., 10 Eliz., was the receiver of the money of the said Cocket and Ann, the wife of the plaintiff Andrews.

“It was found by special verdict that the 10 Aug., 10 Eliz., one M gave the said 100 pounds for the relief of the said Cocket and Ann and delivered the same to the said Edition: current; Page: [353] Wase, then his servant, to the intent he should deliver it to the said Robsert for the relief of the said Ann and Cocket; and that he, the said Wase, did deliver it to the said Robsert for the relief of the said Ann and Cocket, according to the said intent.”

. . . “It was adjudged he shall be said to be their receiver, and that he shall account with the said then plaintiffs for the said 100 pounds.”1

The end of the reign of Elizabeth which is substantially the date of Slade’s Case,2 will afford for many reasons a convenient stopping place for retrospection. The cases of the Stuart period and in fact of all successive reigns, can be understood only in the light of Slade’s Case.3

The principles underlying the substantive right of the beneficiary to bring an action of debt or an action of account at common law may now be summarized from the preceding and other cases.

First, however, the phraseology of mediæval law must be Edition: current; Page: [354] considered; for the mediæval lawyer had a legal vocabulary of his own, and unless we understand his terms we cannot understand the substantive rights which his law recognized. “The word contract was used in the time of the Year Books in a much narrower sense than that of to-day. It was applied only to those transactions where the duty arose from the receipt of a quid pro quo, e. g., a sale or loan. In other words, contract meant that which we now mean by ‘real contract.’ What we now call the formal or specialty contract was anciently described as a grant, and obligation a covenant, but not as a contract.”1

The rule was clearly this, that a third person could recover in the action of Account against a defendant, notwithstanding there was no “contract” between them. Taking the word “contract” in its true mediæval sense of a debt, as used in the Year Books we immediately perceive that the plaintiff in Account and Debt was not required to have furnished the property or thing bailed.

The rule is equally plain that the plaintiff in Account and Debt was not required to be privy to the “contract” or, as we would now say, “the promisee.”

The right of action of the beneficiary in Account should be considered in further detail. Historically, this remedy of the beneficiary antedates his action of Debt, doubtless because in account there was never required to be a “contract” between the plaintiff and the defendant.

“A receiver is one who receives money belonging to another for the sole purpose of keeping it safely and paying it over to its owner.”2

No one could be your receiver unless he had received money. The receipt of chattels when the obligation was to sell them and convert them into money constituted the defendant not a receiver, but a bailee, who was also liable in Account.3

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Certainly after 1379 it was never necessary, in order to constitute a man your receiver and therefore to render him accountable to you, that he should have received the money from you.

“If money be delivered by A to B in order that it may be delivered by B to C, or if it be delivered by A to B to the use of C, it has often been held that B will be accountable to C.”1

It thus became firmly settled that it was not necessary for the receiver to have actually received the money from the plaintiff. If, in the course of his dealing with another person, the defendant became the receiver of money due the plaintiff, though the plaintiff was not privy to the transaction or even aware of it, he could enforce it.

In a case of account by a legatee against executors the objection was made: “How can the daughter who never bails the money to the executors have account?” To which Lord Brooke answered: “I command you to receive my rents and deliver them to Lord Dyer, he shall have account against you: yet he did not bail the money.”2

“If a man deliver money to you to pay to me, I shall have account against you, although he may be but a messenger.3

“A man shall have a writ of account against one as bailiff or receiver where he was not his bailiff or receiver; for if a man receive money for my use, I shall have an account against him as receiver; or if a man do deliver money unto another to deliver over unto me, I shall have an account against him as my receiver.”4

In 1489 (4 Hen. VII) it is said by Brian5 per dictum:

“And sir, if I have lands, and a man receives my rents, and without my assent, still he is receiver &c. because the receipt charges him etc.”6

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Ownership by the third party beneficiary, of the money or thing bailed was neither essential to, nor was it at all present in, the basis of the right to bring account or debt.

It is perfectly true, as has been said by Professor Ames, that in debt, “the defendant was conceived of as having in his possession something belonging to the plaintiff which he might not rightfully keep, but ought to surrender.”1 But Professor Ames here is describing an early juridicial conception; and he does not mean that in every case the thing sought must be proved to have belonged to the plaintiff. This conception was in reality the explanation of the judicial reasoning by which debt for property loaned by the plaintiff2 expanded in an early age of the common law into debt for money due on a “real contract.”

“In its earliest stage the action is thought of as an action whereby a man ‘recovers’ what belongs to him. It has its root in the money loan; for a very long time it is chiefly used for the recovery of money that has been lent. The case of the unpaid vendor is not—this is soon seen—essentially different from that of the lender: he has parted with property and demands a return.”3 Of course, by 37 Hen. VI (1459) any idea that the plaintiff vendor really owned the money due on a sale of a chattel has disappeared, and the conception has become merely a legal fiction.

In debt, if the quid pro quo was a chattel, the title to or the ownership of it was by the delivery absolutely vested in the debtor.

Where A loaned money to B and then brought debt for its recovery, the legal title to the money bailed was always in B, otherwise the very intention of the loan would be defeated—i. e., if B could not transfer title to the money he could have no benefit from the loan.4 Where A promised Edition: current; Page: [357] B “that if he is willing to carry 20 quarts of wheat of my Master Prisot to G, he shall have 40 shillings,”1 no one in the time of Henry VI or to-day would contend that the title to any specific 40 shillings was ever in B. The situation is not different where A gives B 40 shillings to give to C. B after the conversion is C’s debtor, but C does not have the title to any specific 40 shillings. Of course, A can say to B, give C this bag of coins or these particular crowns, and then no title passes to B, for the title, so far as B is concerned, is always either in A or C, according to the nature of the Edition: current; Page: [358] transaction between them. B is then not a debtor but a bailee, and is liable to C in an action of detinue.

Thus in 1339 detinue was brought for 20 pounds “in a bag sealed up, etc., etc.” The defendant objected to the writ on the ground “that he demands money, which naturally sounds in an action of debt or account.” The plaintiff replied, “We did not count of a loan which sounds in debt, nor of a receipt of money for profit, which would give an action of account, but of money delivered in keeping under seal, etc., which could not be changed.” The defendant was required to answer over.1

But where money in an unsealed bag was delivered, “one penny cannot be known from another in a bag, we are of opinion that detinue does not lie and therefore reverse the judgment.”2

“When the defendant receives money belonging to the plaintiff but receives it under such circumstances that he has a right to appropriate it to his own use, making himself a debtor to the plaintiff to the same amount, and the defendant exercises such right, the receipt of the money will create a debt.”3

Surely therefore there is sufficient warrant for the induction that although title did not exist in the beneficiary to the specific goods or money bailed to the defendant, this fact constituted no objection either to the beneficiary’s right to have an account or to his later right to treat as his debtor the accountant who failed to produce an account of the property bailed by a stranger for the plaintiff’s benefit.

The nature of the action of account imposes this limitation upon the beneficiary that he can have no remedy unless property has been transferred to the accountant by the stranger. Hence, mutual promises between the defendant Edition: current; Page: [359] and a stranger could never make the defendant accountable to the plaintiff.1 Notwithstanding the fact that the conception of a quid pro quo expanded so as to comprise services performed on request as well as property delivered,2 the writer has been unable to discover any case wherein a beneficiary has recovered upon a bilateral contract made between the defendant and a stranger,3 even though that bilateral contract has been afterwards executed by the stranger’s performing some act other than the delivery of property &c. to the defendant.4

Undoubtedly however, the defendant has always been liable in the action of account when the defendant has received property though from a stranger, under a promise to account in respect thereof to the beneficiary. It would be incorrect however to say that this action will lie upon “an executed consideration.” Though a consideration may be executed by the promisee, the promisor does not thereby become accountable to the plaintiff-beneficiary.

A later age, the legal phraseology of which, as applied in assumpsit, has invaded all our conceptions of contractual liability, will speak of an “executed consideration;” but in the actions of Account and of Debt, from the earliest to the latest times, there was no consideration, and hence it tends only to confusion of thought to say that “the consideration” must be “executed” and not “executory.”

Therefore to state the doctrine of accountability to a beneficiary with accuracy, we should say that the defendant could be made accountable to the plaintiff only where property Edition: current; Page: [360] had been bailed or land had been conveyed, or money had been received for the plaintiff’s benefit (i. e. to pay him money or give him an account); and this conveyance or bailment might be at the hands of a stranger.

THE DEBT AND THE ACCOUNTABILITY DISTINGUISHED FROM A TRUST

In the action of debt, the relation of the debtor to both the beneficiary and the quid pro quo is plainly distinguishable from the relation of the modern trustee to the cestui que trust, and to the “trust property.” This distinction is demanded nowadays, because the tests which determine a trust are not those which determine an accountability or a debt.

The practical consequence of confounding debts or accountabilities with trusts is to erroneously limit the right of action of the beneficiary at common law to only those cases which fulfil the requisites of a modern trust.1

The modern trust, with its conception of a double title to the trust property,—i. e., of a distinct “equitable ownership” apart from the legal title,—was a conception which developed in the Court of Chancery many years after the right of the beneficiary in Account and in Debt had been established at law. The cestui que trust in later times recovers, because as to certain specific property he has a title recognized by Chancery. The above conceptions of liability in Account and in Debt are radically distinct from that of the trust. The bailee has ownership of the thing as to which he must render an account. The quid pro quo, if a chattel, becomes, as above stated, the absolute property of the debtor. His receipt of it gives rise to an obligation to pay the beneficiary; but no one ever supposes that the beneficiary’s right to recover is based on any “equitable ownership” of the chattel, or of the sum of money recovered.

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It has been said by Professor Ames that “A plaintiff entitled to an acount was strictly a cestui que trust;1 and further, that “trusts for the payment of money were enforced at common law long beefore Chancery gave effect to trusts of land. It need not surprise us, therefore, to find that upon the delivery of money by A to B to the use of C, or to be delivered to C, C might maintain an action of account against B.”2

This language is an apt analogy or simile, but does not represent, and was doubtless not intended to represent, an exact equation.

Misapprehension will arise if the position of the beneficiary in account is understood as identical with that of the modern cestui que trust in equity.

If A transfers chattels or stock to B, directing B to apply the rent or income of the property to the payment of A’s creditor, X, there arises, by the doctrine of trusts, a double title, one equitable in X, and the other legal in B, and the situation is called in equity a trust.

If A gives chattels to B in such a way that the chattels are the absolute property of B, and in consideration thereof B promises A to pay A’s creditor, X, there is no trust whatever.

While it is true that the action of account is based on the conception that something—viz., an account—belonging to one man, the plaintiff, is in the possession of another man, the defendant, we have above shown that no specific money is supposed to be owned by the plaintiff. His right is only to receive an equivalent sum. In account, the defendant’s “obligation must be capable of being discharged by returning Edition: current; Page: [362] to the plaintiff (not the identical money received, but) any money equal in amount to the sum received.”1 In the former of the two above stated cases, X has by the modern doctrine of trusts an equitable title with respect to the chattels. In the latter case, he has no equitable title, but he has the right to recover in the common law action of account.

The right of action of the beneficiary at common law in account was therefore different from that of a cestui que trust, because the former had a right of action notwithstanding the fact that the title to the property might be vested absolutely and solely in the defendant.

This distinction between a trust and an accountability to, or receivership in favor of, a third party is of much consequence because the second of the two above hypothetical cases (i. e., where no modern trust exists) is a typical formula expressing the right of a third party to recover at common law in account.

The cases cited by Professor Ames have all been examined without disclosing anything inconsistent with this conclusion.

The first reported cases in Chancery where the heir or transferee of the title of cestui que use compels “the feofee to uses” to convey2 are of the reign of Edward IV,3 and are readily explained on the ground of a duty imposed by Chancery on the conscience of the feofee to uses without resorting to any conception of “equitable ownership.”

We find the right of the beneficiary in account recognized as early as 1364-1368,4 where the transaction is described as a bailment and not yet as a transfer of property “al oeps.” The first case the writer has found where the words “al oeps” are used in this connection was in 1458.5

If we look to the then contemporaneous chancery doctrine of uses, we find nothing to indicate that a use in Chancery in the fourteenth and fifteenth centuries was more than a Edition: current; Page: [363] personal right of cestui que use, his heirs, devisee, or assignee, against the feofee to uses.

The authorities collected by Professor Ames establish beyond question that as late as 1450 the heir of the feofee to uses held the land free from liability to the cestui que use.1

A use might be enforced by the heir, etc., “but neither a wife, a husband, nor a judgment creditor was entitled to this privilege.”2 “If the feofee to uses died without heir or committed a forfeiture or married, neither the lord who entered for the escheat or forfeiture nor the husband who retained the possession as tenant by the curtesy, nor the wife to whom the dower was assigned, were liable to perform the trust, because they were not parties to the transaction, but came in by act of law, or in the post, and not in the per, as it was said, though doubtless their title in reason was no better than that of the heir against whom the remedy was extended. It was the same as regards any other person who obtained possession, not claiming by any contract or agreement with the feofee, between whom and the cestui que use, therefore, there was no privity. ‘Where there was no trust, there could be no breach of trust.’ The remedy against a disseisor, therefore, was not in Chancery at the instance of the cestui que trust, but at law at the instance of the feofee; and it was part of his duty to pursue his legal remedies at the desire of the cestui que trust.3

Uses of personalty were doubtless enforced in Chancery at an early date,4 but in debt and account there is not the slightest ground for believing that the recovery of a beneficiary was based on any ownership, equitable or otherwise, of any specific coins or chattels, or that the defendant in account could ever be restricted from transferring the title to both the money received and the property bailed. It has been previously shown that the same is true of the title to the quid pro quo in debt. The modern characteristic of Edition: current; Page: [364] equitable ownership—the right to compel the trustee to devote the res to the designated purposes—was precisely what courts of law in account never dreamed of attempting. If complete title had not been transferred to the bailee or receiver, the very purpose of the bailment ad merchandisandum would have been frustrated and so of the bailment to sell and render account to the beneficiary. A court of law was obviously without the machinery to enforce such an equitable title had it existed.

It is, of course, true that judges and counsel, in speaking of the plaintiff’s right of recovery in account, refer to his “property” in the money sought to be recovered.1

But this means no more than the similar popular conception that we have seen existed in regard to debt and which survives to-day in the popular expression “money in the bank.”2

It is true that the cases in account speak of the defendant’s having received the money “al oeps” of the plaintiff.3

But in reading cases of debt and account in the fifteenth, sixteenth, and seventeenth centuries we must not mistranslate “oeps”—use, still less should we translate “oeps”—trust. The word “oeps” is derived from the Latin opus, signifying benefit, and not from the word uses,4 a term of definite legal meaning in the civil law.5

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Thanks to Professor Maitland’s researches, we have direct evidence that for many years “oeps” was used merely to signify a benefit and without any settled technical signification, either of a later Chancery trust or of a civil law “usus.

His researches show that in 1238-9 Bracton records that “a woman, mother of H, desires a house belonging to R; H procures from R a grant of the house to H to the use (ad opus) of his mother for her life.”1

As late as the year 1339 occurs a case, not mentioned by Professor Maitland, where the word “oeps” is used unmistakably in the sense of benefit and without any suggestion of a legal and equitable title. In Year Book XII and XIII Edward III, page 231 (1339) occurs the description of a feudal conveyance, and in describing the transaction the language applied to the vendors is: “Il vendront et rendront en la court le seignur al oeps celui qe serra feffe et les baillifs front execution.”

The note of the editor of this translation of the Year Books shows that the words “ad oeps,” which he has translated “to the use,” are in the record “ad opus.

“We hardly need say that the use of our English law is not derived from the Roman ‘personal servitude;’ the two have no feature in common. Nor can I believe that the Roman fideicommissum has anything to do with the evolution of the English use. In the first place, the English use in its earliest stage is seldom, if ever, the outcome of a last will, while the fideicommissum belongs essentially to the law of testaments. In the second place, if the English use were a fideicommissum it would be called so, and we should not see it gradually emerging out of such phrases as ad opus and ad usum. What we see is a vague idea, which developing in one direction becomes what we now know as agency, and developing in another direction becomes that use which the common law will not, but equity will, protect. Of course, Edition: current; Page: [366] again, our ‘equitable ownership’ when it has reached its full stature has enough in common with the praetorian bonorum possessio to make a comparison between the two instructive; but an attempt to derive the one from the other would be too wild for discussion.”1

The present investigation does not involve such recondite issues as whether or not, and if so, to what extent, Chancery was indebted to the civil law for the doctrine of uses.

The cases taken from the Year Books show that the word “oeps” is frequently used in describing the beneficiary.

The writer submits that there is not the slightest reason to believe that either in the Year Books or in Rolle the word “oeps” or “use,” etc., was used in the technical meaning of a modern trust—i. e., to convey the idea of equitable ownership and a double title. What is here contended is that in the cases of debt and account in the Year Books the word “oeps” or “opus” is used in the then familiar and common everyday meaning of benefit.2 In debt or account it was enough if the chattel or money was received for the benefit of a third person. The beneficiary recovered in debt or in account, not because he was a “fructuarius” under the civil law, nor because he was a “cestui que trust,” that later Edition: current; Page: [367] protégé of Chancery, but because the primary obligation known as a debt or a receivership had been created for the plaintiff’s benefit by the defendant’s receipt of money or property.

As account was not based on contract (i. e. in the nineteenth century use of that word), the liability of the defendant to account to the beneficiary presupposed no prior contractual relation of any kind between them. The phrase “stranger to the consideration,” as applied to the plaintiff in account, would have been meaningless jargon to the lawyers of the fourteenth and fifteenth century. After four centuries the phrase has become no more applicable.

Nor was the plaintiff in account required to be the promisee. Privity to the defendant’s obligation was a pure fiction. “If, however, he obtain possession in the plaintiff’s behalf and as his representative, though without any actual authority, the plaintiff may adopt and ratify his acts, and thus establish privity between him and the plaintiff.”1

Debt and accountability were therefore primary common law liabilities and species of simple contract enforceable by the beneficiary, not because he was a “privy” to the contract, or a “promisee” or a “cestui que trust,” or had furnished that “mystery” of the eighteenth and nineteenth centuries—“the consideration.” We err in attempting to analyze into constituent elements a substantive right which is itself primary and elemental.

The beneficiary recovered in Account because the judicial instinct recognized that he ought to recover, and the courts held that by common law he had a substantive right. This common law right was the expression of a public sense of justice, and a firmer foundation for a positive rule of law need not be sought.

  • “Justinian’s Pandects only make precise
  • What simply sparkled in men’s eyes before,
  • Twitched in their brow or quivered on their lip,
  • Waited the speech they called but would not come.”
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63.: THE HISTORY OF AGENCY1

I PROPOSE in these lectures to study the theory of agency at common law, to the end that it may be understood upon evidence, and not merely by conjecture, and that the value of its principles may be weighed intelligently. I first shall endeavor to show why agency is a proper title in the law. I then shall give some general reasons for believing that the series of anomalies or departures from general rule which are seen wherever agency makes its appearance must be explained by some cause not manifest to common sense alone; that this cause is, in fact, the survival from ancient times of doctrines which in their earlier form embodied certain rights and liabilities of heads of families based on substantive grounds which have disappeared long since, and that in modern days these doctrines have been generalized into a fiction, which, although nothing in the world but a form of words, has reacted upon the law and has tended to carry its anomalies still farther. That fiction is, of course, that, within the scope of the agency, principle and agent are one. I next shall examine the early law of England upon every branch of the subject,—tort, contract, possession, ratification,—and show the working of survival or fiction in each. If I do not succeed in reducing the law of all these branches to a common term, I shall try to show that at least they all equally depend upon fiction for their present existence. Edition: current; Page: [369] I shall prove incidentally that agency in its narrower sense presents only a special application of the law of master and servant, and that the peculiar doctrines of both are traceable to a common source. Finally I shall give my reasons for thinking that the whole outline of the law is the resultant of a conflict at every point between logic and good sense—the one striving to work fiction out to consistent results, the other restraining and at last overcoming that effort when the results become too manifestly unjust.

A part of my task has been performed and my general view indicated in my book on the Common Law. It remains to discuss the matter systematically and in detail, giving due weight to the many difficulties or objections which are met with in the process.

My subject extends to the whole relation of master and servant—it is not confined to any one branch; so that when I choose the title “Agency,” I do not use it in the strict sense just referred to, but as embracing everything of which I intend to treat.

The first question proposed is why agency is a proper title in the law. That is to say, Does agency bring into operation any new and distinct rules of law? do the facts which constitute agency have attached to them legal effects which are peculiar to it, or is the agency only a dramatic situation to which principles of larger scope are applied? And if agency has rules of its own incapable of being further generalized, what are they?

If the law went no farther than to declare a man liable for the consequences of acts specifically commanded by him with knowledge of circumstances under which those consequences were the natural results of those acts, it would need no explanation and introduce no new principle. There may have been some difficulty in arriving at this conclusion when the intervening agent was a free person and himself responsible. Speaking without special investigation, I do not remember any case in early law in which one could charge himself thus in contract or even in tort. Taking the allied case of joint trespassers, although it long has been settled that each wrong-doer is liable for the entire damages, the objection Edition: current; Page: [370] that “the battery of one cannot be the battery of the other” prevailed as late as James I.1 It is very possible that liability even for the commanded acts of a free person first appeared as an extension of the liability of an owner for similar acts by his slave.

But however this may be, it is plain good sense to hold people answerable for wrongs which they have intentionally brought to pass, and to recognize that it is just as possible to bring wrongs to pass through free human agents as through slaves, animals, or natural forces. This is the true scope and meaning of “Qui facit per alium facit per se,” and the English law has recognized that maxim as far back as it is worth while to follow it.2 So it is only applying the general theory of tort to hold a man liable if he commands an act of which the natural consequence, under the circumstances known to him, is harm to his neighbor, although he has forbidden the harm. If a trespass results, it is as much the trespass of the principal as if it were the natural, though unwished for, effect of a train of physical causes.3 In such rases there is nothing peculiar to master and servant; similar principles have been applied where independent contractors were employed.4

No additional explanation is needed for the case of a contract specifically commanded. A difficulty has been raised concerning cases where the agent has a discretion as to the terms of the contract, and it has been called “absurd to maintain that a contract which in its exact shape emanates exclusively from a particular person is not the contract of such person [i. e., the agent], but is the contract of another.”5 But I venture to think that the absurdity is the other way, and that there is no need of any more complex machinery in such a case than where the agent is a mere Edition: current; Page: [371] messenger to express terms settled by his principal in every detail. Suppose that the principal agrees to buy a horse at a price to be fixed by another. The principal makes the contract, not the referee who settles the price. If the agreement is communicated by messenger, it makes no difference. If the messenger is himself the referee, the case is still the same. But that is the case of an agent with discretionary powers, no matter how large they may be. So far as he expresses his principal’s assent to be bound to terms to be fixed by the agent, he is a mere messenger; in fixing the terms he is a stranger to the contract, which stands on the same footing as if it had been made before his personal function began. The agent is simply a voice affording the marks provided by the principal’s own expression of what he undertakes. Suppose a wager determined in amount as well as event by the spinning of a teetotum, and to be off if numbers are turned up outside certain limits; is it the contract of the teetotum?

If agency is a proper title of our corpus juris, its peculiarities must be sought in doctrines that go farther than any yet mentioned. Such doctrines are to be found in each of the great departments of the law. In tort, masters are held answerable for conduct on the part of their servants, which they not only have not authorized, but have forbidden. In contract, an undisclosed principal may bind or may be bound to another, who did not know of his very existence at the time he made the contract. By a few words of ratification a man may make a trespass or a contract his own in which he had no part in fact. The possession of a tangible object may be attributed to him although he never saw it, and may be denied to another who has it under his actual custody or control. The existence of these rules is what makes agency a proper title in the law.

I do not mean to assume in advance that these rules have a common origin because they are clustered round the same subject. It would be possible to suggest separate reasons for each, and going farther still, to argue that each was no more than an application, even though a misapplication, of general principles.

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Thus, in torts it is sometimes said that the liability of the master is “in effect for employing a careless servant,” repeating the reason offered by the pseudo-philosophy of the Roman jurists for an exceptional rule introduced by the prætor on grounds of public policy.1 This reason is shown to be unsound by the single fact that no amount of care in selection will exonerate the master;2 but still it might be argued that, whether right or wrong, this or some other notion of policy had led to the first of the rules which I selected as peculiar, and that at most the liability of a master for his servant’s torts is only a mistaken conclusion from the general theory of tort.

Then with regard to undisclosed principals in contract, it might be said that it was no hardship to hold a man bound who had commanded his servant to bind him. And as to the other and more difficult half of the doctrine, the right of an undisclosed principal to sue, it might be observed that it was first asserted in cases of debt,3 where the principal’s goods were the consideration of the liability, and that the notion thus started was afterwards extended to other cases of simple contract. Whether the objections to the analogy and to the whole rule were duly considered or not, it might be urged, there is no connection other than a purely dramatic one between the law of agency in torts and in contracts, or between the fact of agency and the rule, and here, as there, nothing more is to be found than a possibly wrong conclusion from the general postulates of the department of law concerned.

Ratification, again, as admitted by us, the argument would continue, merely shows that the Roman maxim “ratihabitio mandato comparatur” has become imbedded in our law, as it has been from the time of Bracton.

Finally, the theory of possession through servants would be accounted for by the servant’s admission of his master’s present right to deal with the thing at will, and the absence Edition: current; Page: [373] of any claim or intent to assert a claim on his part, coupled with the presence of such a claim on the part of the master.

But the foregoing reasoning is wholly inadequate to justify the various doctrines mentioned, as I have shown in part and as I shall prove in detail hereafter. And assuming the inadequacy to be proved, it cannot but strike one as strange that there should run through all branches of the law a tendency to err in the same direction. If, as soon as the relation of master and servant comes in, we find the limits of liability for, or gain by, others’ acts enlarged beyond the scope of the reasons offered or of any general theory, we not only have good ground for treating that relation separately, but we fairly may suspect that it is a cause as well as a concomitant of the observed effects.

Looking at the whole matter analytically it is easy to see that if the law did identify agents with principals, so far as that identification was carried the principal would have the burden and the benefit of his agent’s torts, contracts, or possession. So, framing a historical hypothesis, if the starting-point of the modern law is the patria potestas, a little study will show that the fiction of identity is the natural growth from such a germ.

There is an antecedent probability that the patria potestas has exerted an influence at least upon existing rules. I have endeavored to prove elsewhere that the unlimited liability of an owner for the torts of his slave grew out of what had been merely a privilege of buying him off from a surrender to the vengeance of the offended party, in both the early Roman and the early German law. I have shown, also, how the unlimited liability thus established was extended by the prætor in certain cases to the misconduct of free servants.1 Of course it is unlikely that the doctrines of our two parent systems should have been without effect upon their offspring, the common law.

The Roman law, it is true, developed no such universal doctrines of agency as have been worked out in England. Only innkeepers and shipowners (nautae, caupones, stabularii) were made answerable for the misconduct of their free Edition: current; Page: [374] servants by the prætor’s edict. It was not generally possible to acquire rights or to incur obligations through the acts of free persons.1 But, so far as rights of property, possession,2 or contract3 could be acquired through others not slaves, the law undoubtedly started from slavery and the patria potestas.

It will be easy to see how this tended toward a fictitious identification of agent with principal, although within the limits to which it confined agency the Roman law had little need and made little use of the fiction. Ulpian says that the act of the family cannot be called the act of the paterfamilias unless it is done by his wish.4 But as all the family rights and obligations were simply attributes of the persona of the family head, the summary expression for the members of the family as means of loss or gain would be that they sustained that persona, pro hac vice. For that purpose they were one with the paterfamilias. Justinian’s Institutes tell us that the right of a slave to receive a binding promise is derived ex persona domini.5 And with regard to free agents, the commentators said that in such instances two persons were feigned to be one.6

Such a formula, of course, is only derivative. The fiction is merely a convenient way of expressing rules which were arrived at on other grounds. The Roman prætor did not make innkeepers answerable for their servants because “the act of the servant was the act of the master,” any more than because they had been negligent in choosing them. He did so on substantive grounds of policy—because of the special confidence necessarily reposed in innkeepers. So when it was held that a slave’s possession was his owner’s possession, the practical fact of the master’s power was at the bottom of the decision.7

But when such a formula is adopted, it soon acquires an Edition: current; Page: [375] independent standing of its own. Instead of remaining only a short way of saying that when from policy the law makes a master responsible for his servant, or because of his power gives him the benefit of his slave’s possession or contract, it treats him to that extent as the tort-feasor, possessor, or contractee, the formula becomes a reason in itself for making the master answerable and for giving him rights. If “the act of the servant is the act of the master,” or master and servant are “considered as one person,” then the master must pay for the act if it is wrongful, and has the advantage of it if it is right. And the mere habit of using these phrases, where the master is bound or benefited by his servant’s act, makes it likely that other cases will be brought within the penumbra of the same thought on no more substantial ground than the way of thinking which the words have brought about.

I shall examine successively the English authorities with regard to agency in tort, contract, ratification, and possession. But some of those authorities are of equal importance to every branch of the proposed examination, and will prove in advance that the foregoing remarks are not merely hypothetical. I therefore begin with citations sufficient to establish that family headship was recognized as a factor in legal rights and duties; that this notion of headship was extended by analogy so as to cover the relation of a master to freemen filling a servile place for the time being, and that the relations thus embraced were generalized under the misleading fiction of identity.

The familia, Bracton says, embraces “those who are regarded in the light of serfs, such as, &c. So, too, as well freemen as serfs, and those over whom one has the power of command.”1

In West’s Symboleography,2 a work which was published towards the beginning of the reign of James I., and which, though mainly a form book, gives several glimpses of far-reaching insight, we read as follows:—

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“The person is he which either agreeth or offendeth, and beside him none other.

“And both may be bound either mediately, or immediately.

“Immediately, if he which is bound doe agree.

“Mediately, when if he, which by nature differeth from him, but not by law, whereby as by some bond he is fained to be all one person, doth contract, or offend, of which sort in some cases be those which be in our power, as a wife, a bondman, servant, a factor, an Attourney, or Procurator, exceeding their authority.”

Here we see that the patria potestas is the substantive ground, that it is extended to cover free agents, who are not even domestic servants, and that it finds its normal expression in the fiction of identity.

So, at the beginning of the next reign, it was said that an action for hire, due to the negligence of a wife, or servant, lay “vers patrem familias.1 The extension of the liability, as shown by West, is sometimes expressed in later books by saying that it is not confined to cases where the party stands in the relation of paterfamilias to the wrong-doer;2 but this only means that the rule extends to other servants besides domestic servants, and admits the analogy or starting-point.3

Every one is familiar with the fiction as applied to married women. The early law dealt with married women on the footing of servants. It called both wives and servants chattels.4 The wife was said to be in the nature of a servant,5 and husband and wife were only one person in law.6 So far was this identification carried, so far was the persona of the wife swallowed up in and made part of her husband’s, that whereas, in general, assigns could not vouch upon a warranty unless they were expressly mentioned in it,7 a husband could always vouch upon a warranty made to his wife before marriage. Edition: current; Page: [377] By marriage, as was said in Simon Simeon’s case “it vested in the person of the husband.” That is to say, although what actually happened was that the right to enforce a contract was transferred to a stranger, in theory of law there was no transfer, because the stranger had become the same person as the contractee.1

Of course the identification between husband and wife, although by no means absolute, was far more complete than that between master and menial servant, just as in the latter case it went farther than in that of an agent employed for some particular transaction. Even in the case of villeins, while the lord might take advantage of their possession or their title, he could not take advantage of contracts or warranties made to them.2 But the idea and its historical starting-point were the same throughout. When considering the later cases, the reader will remember that it is incontrovertibly established that a wife was on the footing of a servant, that the consequences of the relation were familiarly expressed in terms of the fiction of identity, and, therefore, that the applicability of this fiction to the domestic relations generally must have been well known to the courts long before the date of the principal decisions, which it will be my task to interpret.

I now take up the liability of a master for the torts of his servant at common law. This has been supposed in England to have been manufactured out of the whole cloth, and introduced by the decision in Michael v. Alestree3 in the reign of Charles II. In view of the historical antecedents it would be very extraordinary if such a notion was correct. I venture to think that it is mistaken, and that the principle has gradually grown to its present form from beginnings of the earliest date. I also doubt whether Michael v. Alestree is an example Edition: current; Page: [378] for the principle in question. It rather seems to me a case in which the damage complained of was the natural consequence of the very acts commanded by the master, and which, therefore, as I have said above, needs no special or peculiar doctrine to account for it. It was an action on the case against master and servant;

“for that the Defendants in Lincoln’s-Inn Fields, a Place where People are always going to and fro about their Business, brought a Coach with two ungovernable Horses, & eux improvide incaute & absque debita consideratione ineptitudinis loci there drove them to make them tractable and fit them for a Coach; and the Horses, because of their Ferocity, being not to be managed, ran upon the Plaintiff, and ** wounded him: The master was absent,” but both defendants were found guilty. “It was moved in Arrest of Judgment, That no Sciens is here laid of the Horses being unruly, nor any Negligence alledged, but e contra, That the Horses were ungovernable: Yet judgment was given for the Plaintiff, for it is alledged that it was improvide & absque debita consideratione ineptitudinis loci; and it shall be intended the Master Sent the servant to train the Horses there.”1

In other words, although there was no negligence averred in the mode of driving the horses at the instant of the accident, but, e contra, that the horses were ungovernable, which was the scope of the defendant’s objection, there was negligence in driving ungovernable horses for the purpose of breaking them in a public place, and that was averred, and was averred to have been done negligently. Furthermore, it was averred to have been done negligently by the defendant, which was a sufficient allegation on its face, and would be supported by proof that the defendant, knowing the character of the horses, ordered his servant to break them in a public resort. Indeed, the very character of the command (to break horses) imports sufficient knowledge; and when a command is given to do the specified act complained of, it always may be laid as the act of the party giving the order.2

When I come to investigate the true history of this part of the law, notwithstanding the likelihood which I have pointed out that it was a continuation and development of what I Edition: current; Page: [379] have traced in one or both of the parent systems, I must admit that I am met with a difficulty. Even in Bracton, who writes under the full influence of the Roman law, I have failed to find any passage which distinctly asserts the civil liability of masters for their servants’ torts, apart from command or ratification. There is one text, to be sure, which seems corrupt as it stands and which could be amended by conjecture so as to assert it. But as the best manuscripts in Lincoln’s Inn substantially confirm the printed reading, conjecture would be out of place.1

On the other hand, I do find an institution which may or may not have been connected with the Anglo-Saxon laws touching the responsibility of masters, but which, at any rate, equally connects liability of a different sort with family headship.

At about the time of the Conquest, what was known as the Frithborh, or frankpledge, was either introduced or grew greatly in importance. Among other things, the master was made the pledge of his servants, to hand them over to justice or to pay the fine himself. “Omnes qui servientes habent, eorum sint francplegii,” was the requirement of William’s laws. Bracton quotes the similar provisions of Edward the Confessor, and also says that in some counties a man is held to answer for the members of his family.2 This quasi-criminal liability of master for man is found as late as Edward II. alongside of the other rules of frankpledge, with which this discussion is not concerned. Fitzherbert’s Abridgment3 reads as follows: “Note that if the servant (serviens) of any lord while in his service (in servicio suo existens) commits a felony and is convicted, although after the felony (the master) has not received him, he is to be amerced, and the reason is because he received him ‘in bourgh.’ ” Bracton, in like manner, says that the master is bound “emendare” for certain torts of his servant,4 meaning, as I take it, to pay a fine, not damages.

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But true examples of the peculiar law of master and servant are to be found before Edward II. The maxim respondeat superior has been applied to the torts of inferior officers from the time of Edward I. to the present day. Thus that chapter of the Statute of Westminster the Second,1 which regulates distresses by sheriffs or bailiffs, makes the officer disregarding its provisions answerable, and then continues, “si non habeat ballivus unde reddat reddat superior suus.” So a later chapter of the same statute, after subjecting keepers of jails to an action of debt for escapes in certain cases, provides that if the keeper is not able to pay, his superior, who committed the custody of the jail to him, shall be answerable by the same writ.2 So, again, the eighteenth chapter of the Articuli super Chartas3 gives a writ of waste to wards, for waste done in their lands in the king’s hands by escheators or sub-escheators, “against the escheator for his act, or the sub-escheator for his act (if he have whereof to answer), and if he have not, his master shall answer (‘si respoigne son sovereign’) by like pain concerning the damages, as is ordained by the statute for them that do waste in wardships.” A case of the time of Edward II. interpreting the above statute concerning jailers is given in Fitzherbert’s Abridgment,4 and later similar cases are referred to in Coke’s Fourth Institute.5

It may be objected that the foregoing cases are all statutory. But the same principle seems to have been applied, apart from any statute except that which gave counties the power to elect coroners, to make the county of Kent answerable to the king for a coroner’s default, as well as in other instances which will be mentioned later.6 Moreover, early Edition: current; Page: [381] statutes are as good evidence of prevailing legal conceptions as decisions are.

But again it may be objected that there were special grounds of public policy for requiring those who disposed of public offices of profit to appoint persons “for whom they will answer at their peril,” in the words of another similar statute as to clerks in the King’s Courts.1 It might be said with truth that the responsibility was greater than in the case of private servants, and it might be asked whether respondeat superior in its strict sense is not an independent principle which is rather to be deemed one of the causes of the modern law, than a branch from a common stem. It certainly has furnished us with one of the inadequate reasons which have been put forward for the law as it is,—that somebody must be held who is able to pay the damages.

The weight of the evidence seems to me to overcome these objections. I think it most probable that the liability for under-officers was a special application of conceptions drawn from the family and the power of the family head over his servants. Those conceptions were in existence, as I have shown. From a very early date, under-officers are called servants of their superior, as indeed it seems to be implied that they are, by the word “sovereign,” or even “superior,” in the statutes which have been cited. “Sovereign” is used as synonymous with master in Dyer.2 In the Y. B., 11 Edward IV. 1, pl. 1, it is said, “If I make a deputy, I am always officer, and he performs the office in my right and as my servant;” and from that day to this, not only has the same language been repeated,3 but, as I shall show, one of the chosen fields for the express use of the fiction of identity is the relation of superior and under-officer.

Under Edward III. it was held that if an abbot has a wardship, Edition: current; Page: [382] and a co-canon commits waste, the abbot shall be charged by it, “for that is adjudged the deed of the abbot.”1 This expression appears to me not only to apply the rule respondeat superior beyond the case of public officers, but to adopt the fiction of identity as a mode of explaining the rule.

An earlier record of the same reign, although it turned on the laws of Oleron, shows that the King’s Court would in some cases hold masters more strictly accountable for their servants’ torts than is even now the case. A shipmaster was held liable in trespass de bonis asportatis for goods wrongfully taken by the mariners, and it was said that he was answerable for all trespasses on board his ship.2

A nearly contemporaneous statute is worth mentioning, although it perhaps is to be construed as referring to the fines which have been mentioned above, or to other forfeitures, and not to civil damages. It reads, “That no merchant nor other, of what condition that he be, shall lose or forfeit his goods nor merchandizes for the trespass and forfeiture of his servant, unless he do it by the commandment or procurement of his master, or that he hath offended in the office in which his master hath set him, or in other manner, that the master be holden to answer for the deed of his servant by the law-merchant, as elsewhere is used.”3 The statute limits a previously existing liability, but leaves it open that the master still shall be holden to answer for the deed of his servant in certain cases, including those of the servant’s offending in the office in which the master hath set him. It is dealing with merchants, to be sure, but is another evidence that the whole modern law is of ancient extraction.

It must be remembered, however, that the cases in which the modern doctrines could have been applied in the time of the Year Books were exceedingly few. The torts dealt with by the early law were almost invariably wilful. They were either prompted by actual malevolence, or at least were committed Edition: current; Page: [383] with full foresight of the ensuing damage.1 And as the judges from an early day were familiar with the distinction between acts done by a man on his own behalf and those done in the capacity of servant,2 it is obvious that they could not have held masters generally answerable for such torts unless they were prepared to go much beyond the point at which their successors have stopped.3 Apart from frauds4 and intentional trespasses against the master’s will5 I only know of one other case in the Year Books which is important to this part of my subject. That, however, is very important. It is the case concerning fire,6 which was the precedent relied on by Lord Holt in deciding Turberville v. Stampe,7 which in its turn has been the starting-point of the later decisions on master and servant.8 I therefore shall state it at length.

Beaulieu sued Finglam, alleging that the defendant so negligently guarded his fire that for want of due guard of the same the plaintiff’s houses and goods were burned. Markham [J.], A man is held to answer for the act of his servant or of his guest (hosteller) in such case; for if my servant or my guest puts a candle on a beam, (en un pariet,) and the candle falls in the straw, and burns all my house, and the house of my neighbor also, in this case I shall answer to my neighbor for the damage which he has, quod concedebatur per curiam. Horneby [of counsel], Then he should have had a writ, Quare domum suam ardebat vel exarsit. Hull [of counsel], That will be against all reason to put blame or default in a man where there is (il ad) none Edition: current; Page: [384] in him; for negligence of his servants cannot be called his feasance. Thirning [C. J.], If a man kills (tue ou occist) a man by misfortune he will forfeit his goods, and he must have his charter of pardon de grace. Ad quod Curia concordat. Markham, I shall answer to my neighbor for him who enters my house by my leave or my knowledge, or is entertained (hoste) by me or by my servant, if he does, or any one of them does such a thing, as with a candle (come de chandel), or other thing, by which feasance the house of my neighbor is burned; but if a man from outside my house, against my will, puts the fire in the straw of my house, or elsewhere, by which my house is burned and also the houses of my neighbor are burned, for that I shall not be held to answer to them, etc., for this cannot be said to be through illdoing (male) on my part, but against my will.” Horneby then said that the defendant would be ruined if this action were maintained against him. “Thirning [C. J.], What is that to us? It is better that he should be undone wholly, than that the law should be changed for him.”1 Then they were at issue that the plaintiff’s house was not burned by the defendant’s fire.

The foregoing case affords some ground for the argument which was vainly pressed in Turberville v. Stampe, that the liability was confined to the house.2 Such a limit is not unsupported by analogy. By the old law a servant’s custody of his master’s things was said to be the master’s possession within his house, but the servant’s on a journey outside of it.3 So an innkeeper was liable for all goods within the inn, whether he had the custody of them or not.4 So in the case which has been mentioned above, a master was said to be responsible for the acts of his servants on board ship. It will be noticed also that the responsibility of a householder seems to be extended to his guests. From that day to this there have been occasional glimpses of a tendency to regard guests as part of the familia for the purposes of the law.5 And in view of the fact that by earlier law if a guest was allowed to stop in the house three days, he was called hoghenehine or agenhine, that is, own hine or servant of the host, it may be thought that we have here an Edition: current; Page: [385] echo of the frithborh.1 But with whatever limits and for whatever occult causes, the responsibility of the head of the house for his servants was clearly recognized, and, it would seem, the identification of the two, notwithstanding a statement by counsel, as clear as ever has been made since, of the objections to the doctrine.

The later cases in the Year Books are of wilful wrongs, as I have said, and I now pass to the subsequent reports. Under Elizabeth a defendant justified taking sheep for toll under a usage to have toll of strangers’ sheep driven through the vill by strangers, and if he were denied by such stranger driving them, to distrain them. The defendant alleged that the plaintiff, the owner of the sheep, was a stranger, but did not allege that the driver was. But the court sustained the plea, saying, “The driving of the servant is the driving of the master; and if he be a foreigner, that sufficeth.”2

I leave on one side certain cases which often have been cited for the proposition that a master is chargeable for his servant’s torts, because they may be explained otherwise and make no mention of it.3

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The next evidence of the law to which I refer is the passage from West’s Symboleography which was given in full at the outset, and which gives the modern doctrine of agency as well as the fiction of identity in their full development. There are two nearly contemporaneous cases in which unsuccessful attempts were made to hold masters liable for wilful wrongs of their servants, in one for a piracy,1 in the other for a fraud.2 They are interesting chiefly as showing that the doctrine under discussion was in the air, but that its limits were not definitely fixed. The former sought to carry the rule respondeat superior to the full extent of the early statutes and cases which have been referred to, and cited the Roman law for its application to public affairs. The latter cites Doctor and Student. West also, it will have been noticed, indicates Roman influence.

Omitting one or two cases on the liability of the servant, which will be mentioned shortly, I come once more to a line of authorities touching public officers. I have said that although there was a difference in the degree of responsibility, under-officers always have been said to be servants.

Under Charles II. this difference was recognized, but it was laid down that “the high sheriff and under-sheriff is one officer,” and on that ground the sheriff was held chargeable.3 Lord Holt expressed the same thought: “What is done by the deputy is done by the principal, and it is the act of the principal,” or, as it is put in the margin of the report, “Act of deputy may forfeit office of principal, because it is quasi his act.”4 Later still, Blackstone repeats from the bench the language of Charles’s day. “There is a difference between master and servant, but a sheriff and all his officers are considered in cases like this as one person.” So his associate judge, Gould, “I consider [the Edition: current; Page: [387] under-sheriff’s clerk] as standing in the place of, and representing the very persons of . . . the sheriffs themselves.”1 Again, the same idea is stated by Lord Mansfield: “For all civil purposes the act of the sheriff’s bailiff is the act of the sheriff.”2 The distinction taken above by Blackstone did not prevent his saying in his Commentaries that underofficers are servants of the sheriff;3 and in Woodgate v. Knatchbull,4 Ashurst, J., after citing the words of Lord Mansfield, adds, “This holds, indeed, in most instances with regard to servants in general;” and Blackstone says the same thing in a passage to be quoted hereafter.

Having thus followed down the fiction of identity with regard to one class of servants, I must now return once more to Lord Holt’s time. In Boson v. Sandford,5 Eyres, J., says that the master of a ship is no more than a servant, “the power which he hath is by the civil law, Hob. 111, and it is plain the act or default of the servant shall charge the owner.” Again, in Turberville v. Stampe,6 Lord Holt, after beginning according to the Roman law that “if my servant throws dirt into the highway I am indictable,” continues, “So in this case, if the defendant’s servant kindled the fire in the way of husbandry and proper for his employment, though he had no express command of his master, yet the master shall be liable to an action for damages done to another by the fire; for it shall be intended, that the servant had authority from his master, it being for his master’s benefit.” This is the first of a series of cases decided by Lord Holt7 which are the usual starting-point of modern decisions, and it will be found to be the chief authority relied on by cases which have become leading in their turn.8 It therefore Edition: current; Page: [388] is interesting to note that it only applied the principles of Beaulieu v. Finglam, in the Year Book 2 Henry IV., to a fire outside the house, that the illustration taken from the Roman law shows that Lord Holt was thinking of the responsibility of a paterfamilias, and that in another case within three years1 he made use of the fiction of identity.

I may add, by way of confirmation, that Blackstone, in his Commentaries, after comparing the liability of the master who “hath the superintendence and charge of all his household” if any of his family cast anything out of his house into the street, with that of the Roman paterfamilias,2 further observes that the “master may frequently be answerable for his servant’s misbehavior, but never can shelter himself from punishment by laying the blame on his agent. The reason of this is still uniform and the same; that the wrong done by the servant is looked upon in law as the wrong of the master himself.”3

There is another line of cases which affords striking and independent evidence that the law of master and servant is a survival from slavery or other institution of like effect for the present purpose, and that the identification of the two parties was carried out in some cases to its logical result. If a servant, although a freeman, was treated for the purposes of the relation as if he were a slave who only sustained the persona of his master, it followed that when the master was liable, the servant was not. There seems to have been a willingness at one time to accept the conclusion. It was said under James and Charles I. that the sheriff only was liable if an under-sheriff made a false return, “for the law doth not take notice of him.”4 So it was held in the latter reign that case does not lie against husband and wife for negligently keeping their fire in their house, “because this action lies on the . . . custom . . . against patrem familias and not against a servant or a feme covert who is in the Edition: current; Page: [389] nature of a servant.1 So Rolle says that “if the servant of an innkeeper sells wine which is corrupt, knowing this, action of deceit lies not against the servant, for he did this only as servant.”2 So as to an attorney maliciously acting in a case where he knew there was no cause of action. “For that what he does is only as servant to another, and in the way of his calling and profession.”3

Later this was cut down by Lord Holt to this rule that a servant is not liable for a neglect (i. e., a nonfeasance), “for they must consider him only as a servant;” “but for a misfeasance an action will lie against a servant or deputy, but not quatenus a deputy or servant, but as a wrong-doer.”4 That is to say, although it is contrary to theory to allow a servant to be sued for conduct in his capacity as such, he cannot rid himself of his responsibility as a freeman, and may be sued as a free wrong-doer. This, of course, is the law to-day.5 Yet as late as Blackstone’s Commentaries it was said that “if a smith’s servant lames a horse while he is shoeing him, an action lies against the master, and not against the servant.6

I think I now have traced sufficiently the history of agency in torts. The evidence satisfies me that the common law has started from the patria potestas and the frithborh,—whether following or simply helped by the Roman law, it does not matter,—and that it has worked itself out to its limits through the formula of identity. It is true that liability for another as master or principal is not confined to family relations; but I have shown partly, and shall complete the proof later, that the whole doctrine has been worked Edition: current; Page: [390] out in terms of master and servant and on the analogies which those terms suggested.

The history of agency as applied to contract is next to be dealt with. In this branch of the law there is less of anomaly and a smaller field in which to look for traces of fiction than the last. A man is not bound by his servant’s contracts unless they are made on his behalf and by his authority, and that he should be bound then is plain common-sense. It is true that in determining how far authority extends, the question is of ostensible authority and not of secret order. But this merely illustrates the general rule which governs a man’s responsibility for his acts throughout the law. If, under the circumstances known to him, the obvious consequence of the principal’s own conduct in employing the agent is that the public understand him to have given the agent certain powers, he gives the agent those powers. And he gives them just as truly when he forbids their exercise as when he commands it. It seems always to have been recognized that an agent’s ostensible powers were his real powers;1 and on the other hand it always has been the law that an agent could not bind his principal beyond the powers actually given in the sense above explained.

There is, however, one anomaly introduced by agency even into the sphere of contract,—the rule that an undisclosed principal may sue or be sued on a contract made by an agent on his behalf; and this must be examined, although the evidence is painfully meagre. The rule would seem to follow very easily from the identification of agent and principal, as I shall show more fully in a moment. It is therefore well to observe at the outset that the power of contracting through others, natural as it seems, started from the family relations, and that it has been expressed in the familiar language of identification.

Generally speaking, by the Roman law contractual rights could not be acquired through free persons who were strangers to the family. But a slave derived a standing to Edition: current; Page: [391] accept a promise to his master ex persona domini.1 Bracton says that contracts can be accepted for a principal by his agent; but he starts from the domestic relations in language very like that of the Roman juris consults. An obligation may be acquired through slaves or free agents in our power, if they take the contract in the name of their master.2

It was said under Henry V. that a lease made by the seneschal of a prior should be averred as the lease of the prior,3 and under James I. it was held that an assumpsit to a servant for his master was properly laid as an assumpsit to the master.4 West’s Symboleography belongs to the beginning of the same reign. It will be remembered that the language which has been quoted from that work applies to contracts as well as to torts. A discussion in the Year Book, 8 Edward IV., fol. 11, is thus abridged in Popham: “My servant makes a contract, or buys goods to my use; I am liable, and it is my act.”5 Baron Parke explains the requirement that a deed executed by an agent should be executed in the name of his principal, in language repeated from Lord Coke: “The attorney is . . . put in place of the principal and represents his person.”6 Finally, Chitty, still speaking of contracts, says, like West, that “In point of law the master and servant, or principal and agent, are considered as one and the same person.”7

I have found no early cases turning upon the law of undisclosed principal. It will be remembered that the only action on simple contract before Henry VI., and the chief Edition: current; Page: [392] one for a good while after, was debt, and that this was founded on a quid pro quo received by the debtor. Naturally, therefore, the chief question of which we hear in the earlier books is whether the goods came to the use of the alleged debtor.1 It is at a much later date, though still in the action of debt, that we find the most extraordinary half of the rule under consideration first expressly recognized. In Scrimshire v. Alderton2 (H. 16 G. II.) a suit was brought by an undisclosed principal against a purchaser from a del credere factor. Chief Justice Lee “was of opinion that this new method [i. e., of the factor taking the risk of the debt for a larger commission] had not deprived the farmer of his remedy against the buyer.” And he was only prevented from carrying out his opinion by the obstinacy of the jury at Guildhall. The language quoted implies that the rule was then well known, and this, coupled with the indications to be found elsewhere, will perhaps warrant the belief that it was known to Lord Holt.

Scott v. Surman,3 decided at the same term that Scrimshire v. Alderton was tried, refers to a case of T. 9 Anne, Gurratt v. Cullum,4 in which goods were sold by factors to J. S. without disclosing their principal. The factors afterwards went into bankruptcy. Their assignee collected the debt, and the principal then sued him for the money. “And this matter being referred by Holt for the opinion of the King’s Bench, judgment was given on argument for the plaintiff. Afterwards at Guildhall, before Lord Chief Justice Parker, this case was cited and allowed to be law, because though it was agreed that payment by J. S. to [the factors] with whom the contract was made would be a discharge to J. S. against the principal, yet the debt was not in law due to them, but to the person whose goods they were . . . and being paid to the defendant who had no right to have it, it must be considered in law as paid for the use Edition: current; Page: [393] of him to whom it was due.” This explanation seems to show that Chief Justice Parker understood the law in the same way as Chief Justice Lee, and, if it be the true one, would show that Lord Holt did also. I think the inference is somewhat strengthened by other cases from the Salkeld MSS. cited in Buller’s Nisi Prius.1 Indeed I very readily should believe that at a much earlier date, if one man’s goods had come to another man’s hands by purchase, the purchaser might have been charged, although he was unknown and had dealt through a servant,2 and that perhaps he might have been, in the converse case of the goods belonging to an undisclosed master.3

The foregoing cases tend to show, what is quite probable, that the doctrine under discussion began with debt. I do not wish to undervalue the argument that may be drawn from this fact, that the law of undisclosed principal has no profounder origin than the thought that the defendant, having acquired the plaintiff’s goods by way of purchase, fairly might be held to pay for them in an action of contract, and that the rule then laid down has been extended since to other contracts.4

But suppose what I have suggested be true, it does not dispose of the difficulties. If a man buys B.’s goods of A., thinking A. to be the owner, and B. then sues him for the price, the defendant fairly may object that the only contract which he has either consented or purported to make is a contract with A., and that a stranger, to both the intent and the form of a voluntary obligation cannot sue upon it. If the contract was made with the owner’s consent, let the contractee bring his action. If it was made without actual Edition: current; Page: [394] or ostensible authority, the owner’s rights can be asserted in an action of tort. The general rule in case of a tortious sale is that the owner cannot waive the tort and sue in assumpsit.1 Why should the fact that the seller was secretly acting in the owner’s behalf enlarge the owner’s rights as against a third person? The extraordinary character of the doctrine is still clearer when it is held that under a contract purporting to be made with the plaintiff and another jointly, the plaintiff may show that the two ostensible joint parties were agents for himself alone, and thus set up a several right in the teeth of words used and of the ostensible transaction, which gave him only a joint one.2

Now, if we apply the formula of identification and say that the agent represents the person of the owner, or that the principal adopts the agent’s name for the purposes of that contract, we have at once a formal justification of the result. I have shown that the power of contracting through agents started from the family, and that principal and agent were identified in contract as well as in tort. I think, therefore, that the suggested explanation has every probability in its favor. So far as Lord Holt is concerned, I may add that in Gurratt v. Cullum the agent was a factor, that a factor in those days always was spoken of as a servant, and that Lord Holt was familiar with the identification of servant and master. If he was the father of the present doctrine, it is fair to infer that the technical difficulty was consciously or unconsciously removed from his mind by the technical fiction. And the older we imagine the doctrine to be, the stronger does a similar inference become. For just in proportion as we approach the archaic stage of the law, the greater do we find the technical obstacles in the way of any one attempting to enforce a contract except the actual party to it, and the greater therefore must have been the need of a fiction to overcome them.3

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The question which I have been considering arises in another form with regard to the admission of oral evidence in favor of or to charge a principal, when a contract has been made in writing, which purports on its face to be made with or by the alleged agent in person. Certainly the argument is strong that such evidence varies the writing, and if the Statute of Frauds applies, that the statute is not satisfied unless the name of the principal appears. Yet the contrary has been decided. The step was taken almost sub silentio.1 But when at last a reason was offered, it turned on, or at least was suggested by, the notion of the identity of the parties. It was in substance that the principal “is taken to have adopted the name of the [agent] as his own, for the purpose of such contracts,” as it was stated by Smith in his Leading Cases, paraphrasing the language of Lord Denman in Trueman v. Loder.2

I gave some evidence at the beginning of this discussion, that notions drawn from the familia were applied to free servants, and that they were extended beyond the domestic relations. All that I have quoted since tends in the same direction. For when such notions are applied to freemen in a merely contractual state of service it is not to be expected that their influence should be confined to limits which became meaningless when servants ceased to be slaves. The passage quoted from Bracton proved that already in his day the analogies of domestic service were applied to relations of more limited subjection. I have now only to complete the proof that agency in the narrower sense, the law familiar to the higher and more important representatives employed in modern business, is simply a branch of the law of master and servant.

First of the attorney. The primitive lawsuit was conducted by the parties in person. Counsel, if they may be Edition: current; Page: [396] called so, were very early admitted to conduct the formal pleadings in the presence of the party, who was thus enabled to avoid the loss of his suit, which would have followed a slip on his own part in uttering the formal words, by disavowing the pleading of his advocate. But the Frankish law very slowly admitted the possibility of giving over the conduct of a suit to another, or of its proceeding in the absence of the principals concerned. Brunner has traced the history of the innovation by which the appointment of an attorney (i. e., loco positus) came generally to be permitted, with his usual ability.1 It was brought to England with the rest of the Norman law, was known already to Glanvill, and gradually grew to its present proportions. The question which I have to consider, however, is not the story of its introduction, but the substantive conception under which it fell when it was introduced.

If you were thinking of the matter a priori it would seem that no reference to history was necessary, at least to explain the client’s being bound in the cause by his attorney’s acts. The case presents itself like that of an agent authorized to make a contract in such terms as he may think advisable. But as I have hinted, whatever common-sense would now say, even in the latter case it is probable that the power of contracting through others was arrived at in actual fact by extending the analogy of slaves to freemen. And it is at least equally clear that the law had need of some analogy or fiction in order to admit a representation in lawsuits. I have given an illustration from Iceland in my book on the Common Law. There the contract of a suit was transferred from Thorgeir to Mord “as if he were the next of kin.”2 In the Roman law it is well known that the same difficulty was experienced. The English law agreed with the Northern sources in treating attorneys as sustaining the persona of their principal. The result may have been worked out in a different way, but that fundamental thought they had in Edition: current; Page: [397] common. I do not inquire into the recondite causes, but simply observe the fact.

Bracton says that the attorney represents the persona of his principal in nearly everything.1 He was “put in the place of” his principal, loco positus (according to the literal meaning of the word attorney), as every other case in the Abbreviatio Placitorum shows. The essoign de malo lecti had reference to the illness of the attorney as a matter of necessity.2 But, in general, the attorney was dealt with on the footing of a servant, and he is called so as soon as his position is formulated. Such is the language of the passage in West’s Symboleography which I have quoted above, and the anonymous case which held an attorney not liable for maliciously acting in a cause which he knew to be unfounded.3 When, therefore, it is said that the “act of the attorney is the act of his client,” it is simply that familiar fiction concerning servants applied in a new field. On this ground it was held that the client was answerable in trespass, for assault and false imprisonment, where his attorney had caused the party to be arrested on a void writ, wholly irrespective, it would seem, of any actual command or knowledge on the part of the client;4 and in trespass quare clausum, for an officer’s breaking and entering a man’s house and taking his goods by command of an attorney’s agent without the actual knowledge either of the client or the attorney. The court said that the client was “answerable for the act of his attorney, and that [the attorney] and his agent [were] to be considered as one person.”5

The only other agent of the higher class that I think it necessary to mention is the factor. I have shown elsewhere that he is always called a servant in the old books.6 West’s language includes factors as well as attorneys. Servant, Edition: current; Page: [398] factor, and attorney are mentioned in one breath and on a common footing in the Year Book, 8 Edward IV., folio 11 b. So Dyer,1 “if a purveyor, factor, or servant make a contract for his sovereign or master.” So in trover for money against the plaintiff’s “servant and factor.”2 It is curious that in one of the first attempts to make a man liable for the fraud of another, the fraudulent party was a factor. The case was argued in terms of master and servant.3 The first authority for holding a master answerable for his servant’s fraud is another case of a factor.4 Nothing is said of master and servant in the short note in Salkeld. But in view of the argument in Southern v. How, just referred to, which must have been before Lord Holt’s mind, and the invariable language of the earlier books, including Lord Holt’s own when arguing Morse v. Slue (“Factor, who is servant at the master’s dispose”),5 it is safe to assume that he considered the case to be one of master and servant, and it always is cited as such.6

To conclude this part of the discussion, I repeat from my book on the Common Law,7 that as late as Blackstone agents appear under the general head of servants; that the precedents for the law of agency are cases of master and servant, when the converse is not the case; and that Blackstone’s language on this point is express: “There is yet a fourth species of servants, if they may be so called, being rather in a superior, a ministerial, capacity; such as stewards, factors, and bailiffs; whom, however, the law considers as servants pro tempore, with regard to such of their acts as affect their master’s or employer’s property.”8

Possession is the third branch of the law in which the peculiar doctrines of agency are to be discovered, and to that I now pass.

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The Roman law held that the possession of a slave was the possession of his master, on the practical ground of the master’s power.1 At first it confined possession through others pretty closely to things in custody of persons under the patria potestas of the possessor (including prisoners bona fide held as slaves). Later the right was extended by a constitution of Severus.2 The common law in like manner allowed lords to appropriate lands and chattels purchased by their villeins, and after they had manifested their will to do so, the occupation of the villeins was taken to be the right of their lords.3 As at Rome, the analogies of the familia were extended to free agents. Bracton allows possession through free agents, but the possession must be held in the name of the principal;4 and from that day to this it always has been the law that the custody of the servant is the possession of the master.5

The disappearance of the servant under the persona of his master, of which a trace was discovered in the law of torts, in this instance has remained complete. Servants have no possession of property in their custody as such.6 The distinction in this regard between servants and all bailees whatsoever7 is fundamental, although it often has been lost sight of. Hence a servant can commit larceny8 and cannot maintain trover.9 A bailee cannot commit larceny10 and can maintain trover.11 In an indictment for larceny against a Edition: current; Page: [400] third person the property cannot be laid in a servant,1 it may be laid in a bailee.2 A servant cannot assert a lien;3 a bailee, of course, may, even to the exclusion of the owner’s right to the possessory actions.4

Here, then, is another case in which effects have survived their causes. But for survival and the fiction of identity it would be hard to explain why in this case alone the actual custody of one man should be deemed by the law to be the possession of another and not of himself.

A word should be added to avoid a misapprehension of which there are signs in the books, and to which I have adverted elsewhere.5 A man may be a servant for some other purpose, and yet not a servant in his possession. Thus, an auctioneer or a factor is a servant for purposes of sale, but not for purposes of custody. His possession is not that of his principal, but, on the contrary, is adverse to it, and held in his own name, as is shown by his lien. On the other hand, if the fiction of identity is adhered to, there is nothing to hinder a man from constituting another his agent for the sole purpose of maintaining his possession, with the same effect as if the agent were a domestic servant, and in that case the principal would have possession and the agent would not.

Agency is comparatively unimportant in its bearing on possession, for reasons connected with procedure. With regard to chattels, because a present right of possession is held enough to maintain the possessory actions, and therefore a bailor, upon a bailment terminable at his will, has the same remedies as