On the State of Commercial Law at the End of the 20Th Century [Article]
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On the State of Commercial Law at the End of the 20th Century [Article] Item Type Article; text Authors Kozolchyk, Boris Citation 8 Ariz. J. Int'l & Comp. L. 1 (1991) Publisher The University of Arizona James E. Rogers College of Law (Tucson, AZ) Journal Arizona Journal of International and Comparative Law Rights Copyright © The Author(s) Download date 28/09/2021 22:36:14 Item License http://rightsstatements.org/vocab/InC/1.0/ Version Final published version Link to Item http://hdl.handle.net/10150/659475 ON THE STATE OF COMMERCIAL LAW AT THE END OF THE 20TH CENTURY Boris Kozolchyk* I. INTRODUCTION: THE MISSION OF COMMERCIAL LAW In order to evaluate the state of commercial law its mission must be identified. Norbert Reich, among other scholars concerned with law and economics, describes the mission of law as "organizing" and "correcting" the marketplace.I These are not, however, discrete functions. Law organizes the marketplace by correcting distortions, and corrects distortions by organ- izing a more efficient market. Nevertheless, Reich's description remains valid. A marketplace cannot exist without guideposts of acceptable behav- ior, whether by sanctioning a given usage or custom, or by promulgating a new rule or principle of interpretation. Such a guidepost organizes the marketplace by giving it order and predictability. In turn, when sanctioned or acceptable behavior results in inequalities it must be susceptible to correction, not only to adjust the law to unforeseen circumstances or new practices, but also to prevent abuses or distortions. The mission of organizing and correcting the marketplace is particularly appropriate for commercial law, the quintessential branch of private law. Commercial law is quintessentially private because it is usually made by the participants in the various transactions. As a branch of private law, commercial law was concerned from its inception not only with the meum et tuum (mine and thine) but also with third party, "marketplace" rights. I will first identify, with the help of historical perspective, the marketplace(s) which present day commercial law is at- tempting to organize and correct. Having done this, it will be possible to identify some of the law's guiding principles and assess their effectiveness in carrying out their assigned mission. The marketplaces discussed are not necessarily the most representative of a given stage of commercial law development. Important legal institutions * Professor of Law, University of Arizona College of Law. President of the International Academy of Commercial and Consumer Law. S.J.D., University of Michigan, 1966; LL.M., University of Michigan, 1960; LL.B., University of Miami, 1959; D.C.L., University of Havana, 1956. This article is based on my inaugural presidential presentation at the August 1988 meeting, in Melbourne Australia, of the International Academy of Commercial and Consumer Law. I wish to thank Peter Matiatos, Managing Editor of the AJICL, for his painstaking copywork and valuable editorial comments. I also wish to thank Benis Bernstein, Articles Editor of the AJICL for her valuable editorial assistance. Copyright © 1990 by Boris Kozolchyk. All rights reserved. 1. See N. REICH, MERCADO y DERECHO (1984). Arizona Journalof Internationaland ComparativeLaw [Vol. 8 emerged from other periods and places not discussed, such as the late medieval trade of Italian port cities, French fairs, and the colonial maritime trade of the 16th and 17th centuries. Nor are the chosen marketplaces described in an exhaustive or systematic fashion. Rather, the following thumbnail sketch of marketplaces is intended merely to help understand the purpose of key contemporary legal concepts and principles whose roots lie in the chosen marketplaces. H. SELECTED MARKETPLACES AND ROLES OF COMMERCIAL LAW A. The Roman and Early Medieval European Marketplace Commercial law played only a modest role in the Roman and early medieval European marketplaces. Trade and moneylending were not held in high esteem by Roman lawmakers. 2 In pre-republican Rome, trade was passive.3 Few manufactured items were sold, and if they were sold it was through non-professional intermediaries. When wholesale commerce did arrive, during late Roman republican and early imperial days, it was control- led by large landholders. These landholders acted directly or through slave surrogates, instead of professional intermediaries. Although Roman cities had numerous craftsmen and petty merchants, their trade was only a subsis- tence. Commercial prosperity was limited to the large landowner monopolies. Commerce was viewed as less respectable than fanning. According to Cato: When our ancestors had to praise a good man, they spoke well of a... good farmer. Such was the finest praise. I am aware of the merchant's diligence and pursuit of profit... [but] ... is not agriculture [the activity] that provides the strongest and vigorous of soldiers? could be more honest that of the farmer? Those who What profit 4 devote themselves to tilling the soil do not think evil thoughts. Medieval religious doctrines on usury and just price strengthened the view that commercial and money lending activities lead to evil thoughts. During Charlemagne's empire an influential body of ecclesiastical legislation, the Hadriana,5 contained a papal decree that forbade clerics from taking usury, 2. See Kozolchyk, Transfer of PersonalProperty by a Non Owner: Its Future in Light of Its Past, 61 TuL. L. REv. 1453, 1459-62 (1987) [hereinafter, Kozolchyk, Transfer]. 3. Id. 4. Id. 5. See J. NOONAN, JR., THE ScHoLAsnc ANALYSIS OF USURY 15 (1957) [hereinafter Noonan]; see also B. NELSON, THE IDEA OF USURY 3-4 (2d ed. 1969) [hereinafter Nelson]. Nelson traces the evolution of Christian views of usury to a dictum by St. Jerome (340-420 A.D.) and an elaborate commentary in De Tobia by St. Ambrose of Milan (340-397 A.D.). St. Jerome contended that the prohibition of usury among brothers in Deuteronomy had been universalized by the Prophets and the New Testament. St. Ambrose interpreted Deuteronomy 23:20 as allowing usury against the enemies of Biblical Israel. 1991] Commercial Law at the End of the 20th Century and declared usurious laymen guilty of turpe lucrum (shameful gain). Usury, a mortal sin, was defined as any amount of interest charged for the loan of principal. 6 In addition, the just price, or the price that could be lawfully charged for one's wares, was limited to amounts that allowed the producer to live and support his family on a scale suitable to his station in life (per 7 quanto res suas vendendo statutum suum continuarepossit). Another influential rule, attributed to Albert Magnus and Thomas Aqui- nas, directed parish priests to admonish flocks to charge wayfarers no more than the price obtainable in the local market (quam in mercato vendere possint).8 Aquinas' market was not comprised of professional intermediaries or distributors seeking independent profit. Rather, those who earned their livelihood selling everyday commodities, such as bread, were licensed to do business only on condition that they maintain certain pricing and quality standards. 9 While the prevailing just price standard was determined by a market estimation (secundum aestimationemfori),this estimation could be superseded by prices or standards set by priests or by boni viri (decent men, or men of humanity). 10 Thus, in the Roman and European medieval marketplace, commercial law was only a marginal organizer and corrector. In comparison with present day marketplaces, there was precious little to organize and correct. Sales of valuable assets such as land, cattle, and horses was discouraged by the cumbersome formalities of pre-classical Roman law.1 Marketplace trans- actions were mostly face to face, and paid for in cash or equivalent. Goods and monies were seldom entrusted to professional intermediaries. Even when long distance trade took place in Central Europe entrustment did not occur. The Central European merchant transported his wares by himself, or 6. See Noonan, supra note 5, at 17-20, especially at 20, and Nelson, supra note 5, at 5-28. 7. See generally de Roover, The Concept ofthe Just Price: Theory andEconomic Policy, 18 J. ECON. Hisr. 418-19(1958). For a discussion on the relationship betweenjust price theories and the fairness of commercial law, see Kozolchyk, The Commercialization of Civil Law and the Civilization of Commercial Law, 40 LA. L. REv. 3, 9-35 [hereinafter Kozolchyk, Commer- cialization]. 8. Kozolchyk, Commercialization, supra note 7, at 11. 9. But cf.the wise warning in R. LopEz, THE COMMERCIAL REvoLUnON OFTHE IDDLE AcES, 950-1350 127 (1971). Lopez stated: Guilds often stressed their concern for producing good wares at low prices; their statements to that effect should be neither disbelieved nor overrated. Then, as now, the main object of a producer could not be to serve God and the public, but to sell his goods at a profit; still he knew that shoddy goods at inflated prices would not keep him in business. The religious, patriarchal character of guilds, and the pressure of what was essentially a buyer's market were mutually reinforcing interests. Id. at 127-28. 10. Kozolchyk, Commercialization, supra note 7, at 11 (especially note 41). 11. Kozolchyk, Transfer, supra note 2, at 1456. Arizona Journal of nternational and Comparative Law [Vol. 8 in caravans which he accompanied.12 Marketplace corrections were imposed by rulers who granted the licenses to trade or enacted regulations on the quality, weight and measure, and just price of the goods or products. Although Roman merchants played a marginal role in the formulation of commercial law, Roman jurists contributed momentously to the entire spec- trum of private law. Roman jurists shaped what von Jhering aptly described as the law's "alphabet" by applying "geometric" logic to the resolution of legal disputes.' 3 The Roman legal alphabet continues to supply building blocks of contemporary legal institutions. Contemporary concepts such as obligation, intent, notice, diligence, negligence, and possession, owe their existence and much of their precision to Roman law.