The Dignity of Commerce: Markets and the Moral Foundations of Contract Law
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The Dignity of Commerce: Markets and the Moral Foundations of Contract Law
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Overview
With The Dignity of Commerce, Nathan B. Oman argues persuasively that well-functioning markets are morally desirable in and of themselves and thus a fit object of protection through contract law. Markets, Oman shows, are about more than simple economic efficiency. To do business with others, we must demonstrate understanding of and satisfy their needs. This ability to see the world from another’s point of view inculcates key virtues that support a liberal society. Markets also provide a context in which people can peacefully cooperate in the absence of political, religious, or ideological agreement. Finally, the material prosperity generated by commerce has an ameliorative effect on a host of social ills, from racial discrimination to environmental destruction.
The first book to place the moral status of the market at the center of the justification for contract law, The Dignity of Commerce is sure to elicit serious discussion about this central area of legal studies.
Product Details
| ISBN-13: | 9780226415666 |
|---|---|
| Publisher: | University of Chicago Press |
| Publication date: | 01/19/2017 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 304 |
| File size: | 912 KB |
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The Dignity of Commerce
Markets and the Moral Foundations of Contract Law
By Nathan B. Oman
The University of Chicago Press
Copyright © 2016 The University of ChicagoAll rights reserved.
ISBN: 978-0-226-41566-6
CHAPTER 1
Introduction
Shakespeare and the Predicament of Contract Theory
This book presents a normative argument about contract law and its relationship to markets. Stated as simply as possible, well-functioning markets are morally desirable, and contract law should be organized to support such markets. Contracts are such a ubiquitous part of market exchange that one would think that the moral status of markets would be entwined in contemporary scholarship with the moral status of contract law. Such is not the case. Markets, however, have not always been absent from the moral discussion of contract law. Indeed, they were present at the birth of the common law of contracts. William Shakespeare captures a sense of the moral complexity of markets at that moment of birth and points modern students of contract law toward a richer sense of the moral importance of commerce in justifying that law. A reconsideration of his play is a good place to begin this book's argument.
Shakespeare and the Birth of Contract Law
The Merchant of Venice provides a dramatic window into the world that gave birth to the common law of contracts. As we shall see, its debut corresponded almost exactly with the birth of what became the common law of contracts, and, as a historical document, it provides insight into some of the ideas about contracts and commerce swirling through England at the time. Beyond its historical interest, however, Shakespeare's play frames the basic question of why the law should enforce voluntary agreements. Written at a time when large-scale international trade and commercial society were still a novelty, The Merchant of Venice presents the enforcement of contracts not in terms of personal morality but in terms of maintaining a particular kind of social arrangement: the market.
The Merchant of Venice is a play about contracts. The initial driver of the plot is Bassanio, who proposes to earn money the old-fashioned way by marrying Portia, "a widow richly left." It takes money to make money, however, and Bassanio enlists the help of his wealthy friend Antonio. Antonio is a merchant. His wealth doesn't take the form of land or even hoards of gold. Rather, it is in commercial ventures, "argosies with portly sail ... pageants of the sea." It's an unstable kind of wealth, subject to constant risk, managed through diversification — "my ventures are not in one bottom trusted" — and illiquid. In Antonio's words, "all my fortunes are at sea; neither have I money nor commodity to raise a present sum." Antonio, however, has another asset, one even more ethereal than his "argosies with portly sail": his creditworthiness. "Try what my credit can in Venice do," he tells Bassanio, and the two go to Shylock the Jew to borrow 3,000 ducats for Bassanio's romantic venture. Shylock famously demands that Antonio stand as surety for his friend:
Go with me to a notary, seal me there
Your single bond; and, in merry sport,
If you repay me not on such a day,
In such a place, such a sum or sums as are
Expressed in the condition, let the forfeit
Be nominated for an equal pound
Of your fair flesh, to be cut off and taken
In what part of your body pleaseth me.
Much of the rest of the plot of the play revolves around this contract and the ultimate question of its enforcement.
In many ways the play trades on the moral discomfort created by the transition from a medieval worldview to that of an emerging commercial society. Medieval influences on the play can be seen in the sources from which Shakespeare drew in writing it and its anti-Semitic framing of the issue of usury. The evil and wealthy Jew was a stock character in the melodramas of the Middle Ages, a tradition that The Merchant of Venice draws on to create the character of Shylock. Shakespeare's play was also clearly influenced by a contemporary work, The Jew of Malta by Christopher Marlowe. Marlowe's villain, Barabas, is also a merchant, but we do not see him trading. Rather, having lost his wealth to a Christian prince in the course of the latter's crusade against the Turks, Barabas pursues a course of Machiavellian revenge, murdering those who have taken his wealth and those who seek to expose his crimes. Shakespeare, however, transposes his Jew from the crusader outpost of Malta to the commercial entrepôt of Venice. Shylock's vice is not murder but usury. Thus, The Merchant of Venice, unlike The Jew of Malta, is not a story of political machinations but of the dangers of commercial contracts.
Shakespeare's story also displays a medieval outlook in how it links Judaism and usury. The relationship between Shylock and the other characters in the play is defined in part by the former's status as a usurer. Antonio proudly insists that he does not "lend nor borrow upon advantage," and Shylock hates Antonio because the latter complains "in the Rialto" about Shylock's "moneys and ... usances." Shylock responds with two well-worn defenses of usury. The first is to invoke the biblical story of Jacob, who gained wealth through the increase of his father-in-law's herds. Antonio insists, however, that this was a "venture" — in other words, what we would today call an equity investment rather than a loan. "Is your gold and silver ewes and rams?" he contemptuously asks Shylock. Second, Shakespeare is at some pains to emphasize that Shylock regards all Christians as his enemies, an important premise in a medieval Jewish argument over usury. The Torah states, "to a foreigner you may lend upon interest, but to your brother you shall not lend upon interest." Medieval rabbis interpreted this as permitting usury as long as a Jew was lending to a Christian. At the same time, the early canon lawyers relied on the so-called Exception of Saint Ambrose, which held that it was permissible to demand usury of an enemy. So far, so medieval.
Notice that the early framing of usury assumes a basic enmity between the two parties to the contract. The assumed context of the exchange is ultimately war — or at any rate, an uneasy truce between warring enemies. In The Jew of Malta, war was literally the context for Barabas's story. Marlowe's is a medieval story of crusaders, heathens, and infidels. In The Merchant of Venice, however, war is wholly absent from the plot. Rather, the market looms large. First, there is the ubiquitous image of the Rialto, the great international marketplace of Venice. Antonio's access to wealth comes not from hard assets but from his ability to create relationships on the Rialto, even with Shylock. He is a merchant rather than a duke or some other grandee whose wealth was based on land. The very attraction of Venice as a setting lies in the sense of adventure and glamour wrought by commerce. There are fortunes being made here not through the staid accumulation of land by family but through trade, "the pageant of the seas." At the same time, there is anxiety over the way in which the market structures relationships between individuals. Antonio contrasts his open-hearted loaning of money without interest to Bassanio with Shylock's mercenary motives. "If thou wilt lend this money, lend it not as to thy friends, for when did friendship take a breed for barren metal of his friend?" Likewise, Bassanio, for example, describes his friendship with Antonio in the language of commercial debt. "To you, Antonio, I owe the most, in money and in love, and from your love I have a warranty to unburden all my plots and purposes." There is a sense throughout the play that something different and morally complex happens when the Rialto emerges as the structuring context for relationships.
The ideas of market and contract come together in the play's climax. Bassanio is unable to pay Shylock, and Antonio's argosies have all failed. May Shylock now execute his bond on a pound of the merchant's fair flesh? In answering this question, the play offers a particular vision of the normative foundations of a contract — one that links the law decisively to the support of commerce. From the point of view of contract theory, the climax is interesting for what it doesn't do. The dramatic logic of Antonio's tragic moment does not rely on the idea of promissory morality. He is not presented as a man of honor forced into the terrible position of forswearing himself. Absent from Shakespeare's play is the intense concern with fidelity to promises that one sees in a medieval work such as Sir Gawain and the Green Knight, for example. One of the central plot elements of that fourteenth-century story is Sir Gawain's struggle against all odds and temptations to keep his solemn promise to an enemy. Nothing in the dramatic logic of The Merchant of Venice, however, suggests that Antonio should be understood as facing a similar crisis of personal honor and fidelity to his word. Rather, he is a merchant tragically caught in the demands of the market on which his status depends. The tragedy is not that he will break his word to Shylock but that the logic underlying the law's support for the Rialto cannot relieve him of his contractual obligations. As Antonio acknowledges earlier in the play:
The Duke cannot deny the course of law;
For the commodity that strangers have
With us in Venice, if it be denied,
Will much impeach the justice of the state,
Since that the trade and profit of the city
Consisteth of all nations.
Yet Shakespeare has structured the play so that the audience sees Shylock as in the wrong. The virtue of mercy demands that he not execute on Antonio's bond. The enforcement of the contract is morally questionable. When Shylock calls on the Duke of the city to judge the case, however, the Duke stands ready to regretfully enforce the bond. Like Antonio's earlier statements, Shylock's argument to the Duke also invokes the good of the city's commerce. "If you deny it, let the danger light upon your charter and your city's freedom." Strikingly, when Portia appears disguised as a jurist to decide the case, she maintains the integrity of the contract. Bassanio urges her:
I beseech you,
Wrest once the law to your authority.
To do a great right, do a little wrong.
Her reply again invokes the importance to the city of honoring contracts.
It must not be. There is no power in Venice
Can alter a decree established.
'Twill be record for a precedent,
And many an error by the same example
Will rush into the state. It cannot be.
Rather than presenting contractual obligations as a reflection of promissory morality, the play examines their enforcement in social and communal terms. Shylock can stand on his contract not because Antonio is bound by honor or morality to perform his obligation but because allowing Shylock to demand enforcement makes Venice into a commercial hub. Contracts must be enforced not because of the inherent moral obligations that they create or represent but because their enforcement fosters commerce on the Rialto. Antonio is only saved because Portia insists on the letter of the contract. Shylock may have his pound of flesh, but he may not take any of Antonio's blood. The merchant, the law, and the Rialto are all saved in a neat comic denouement.
The Merchant of Venice was first performed in 1596 or 1597. As it debuted, English judges were hearing the case that would give birth to the common law of contracts. Like the characters in Shakespeare's comedy, they were struggling to adapt medieval habits and practices to a new world of commercial society. During Lent, 1595, a year or two before Shakespeare's play premiered in London, John Slade sued Humphrey Morley before the Devon Assizes. Slade claimed that he and Morley had agreed in May of that year that Morley would purchase his grain crop for £16 at harvest time. Morley failed to pay on the appointed day, and Slade brought an action against him of indebitatus assumpsit. From the Devon Assizes, the case was appealed to the court of King's Bench, and from there the final appeal was heard in 1597 by the Exchequer Chamber, where it was debated again in 1598 and 1601 before finally being decided in 1602. Contract was a relatively late arrival to the common law, which lavished the bulk of its medieval attention on the law of real property. Prior to the seventeenth century, actions on agreements to pay a sum of money could be brought using the writ of debt. Later, courts modified the writ of trespass to create the writ of assumpsit, which allowed actions based on a theory of deceit where a party had made a promise to do something and subsequently reneged. The protracted litigation over John Slade's unpaid £16 resulted from a judicial disagreement about the relationship between these two writs.
The court of Common Pleas took the position that one could not bring an action in assumpsit if an action in debt could also be brought. The court of King's Bench, in contrast, held that an action of assumpsit could be brought without first bringing an action in debt. The distinction was important because the action of debt was subject to the defense of wager of law. A defendant could escape liability by simply swearing that he was not liable and bringing oath helpers into court who were willing to swear to the truth — or, at any rate, the trustworthiness — of his oath. Although wager of law seems bizarre by modern standards, in the context of a close-knit medieval economy, it made good sense. As one scholar has observed:
Within the framework of local markets and regimes of credit discipline, where a trader's good name, personal honor, and reputation for performing his obligations were his principal assets, the risk attendant to false swearing were material as well as spiritual. A tradesman who acquired a reputation for failure to pay debts or for false dealing of any sort would soon find that his credit was naught, or nearly so.
Beyond such practical considerations, however, wager of law traded on the theological power of oaths. To be foresworn was still a sin, a grave moral lapse that could put one's soul in danger of hellfire. As markets expanded in early modern England, however, commercial transactions became increasingly impersonal. Without the immediate fear of reputational sanctions, the temptations to perjury increased and wager of law became an impediment to the enforcement of the informal contracts that increasingly came to dominate commerce.
The judges of Common Pleas also sat in Exchequer Chamber, where they overruled cases brought in assumpsit in the court of King's Bench. Rather than bow to the higher court, however, the judges of King's Bench stuck to its position, creating uncertain and conflicting common law rules depending on the court in which one's suit landed. Thus stood the law when John Slade and Humphrey Morley brought their case before the Exchequer Chamber. The details of the litigation are uncertain. Two of the most celebrated lawyers of the time argued the case. Slade retained Sir Edward Coke, while Sir Francis Bacon represented Morley. Through some mechanism that remains unclear, the judges of King's Bench invoked a disused custom and sat with the judges of Common Pleas in the Exchequer Chamber. After nearly five years of debate, the position of King's Bench prevailed. Thereafter, suits could be brought in assumpsit even where the action of debt — and, with it, wager of law — was available. Picking origins is always arbitrary, but the 1602 decision in Slade's Case has as good a claim as any other moment for marking the birth of what became the common law of contracts. It was the opening up of assumpsit that allowed the common law to gradually develop into a fit instrument for the enforcement of contracts in the rising commercial economy of seventeenth- and eighteenth-century England.
The Merchant of Venice offers us a window into the world that gave birth to the common law of contracts. It was a world in which commerce was increasingly important. It is certainly not accidental that Slade's Case and the rise of the action of assumpsit corresponded with an economic revolution in which trade and market exchange came to rival land as a source of wealth. In the play, the law enforces contracts in order to make commerce on the Rialto possible. It is difficult to divine the precise intentions of the judges of Exchequer Chamber that decided Slade's Case, but we do know that during this period commerce was making contract disputes more common and the various common law courts were competing to capture this new judicial business. One of the reasons that King's Bench obdurately stuck to its liberal position on the writ of assumpsit in the face of conservative opposition from the appellate courts was surely a desire to create a forum more congenial to the rising tide of commercial litigants. To be sure, the common law developed slowly, and it took time for its law of contracts to become a fit instrument for commerce. A historian could still write that, when Lord Mansfield ascended to King's Bench in 1756, "English lawyers had been so long preoccupied with the problems of real property that they felt themselves strangers to a generation that knew not feudalism." By the eighteenth century, however, contract law was becoming intimately entwined with questions of commerce, as illustrated by Mansfield's dictum in Pillans v. Van Mierop that "the law of merchants, and the law of the land is the same."
(Continues...)
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Table of Contents
PrefaceChapter 1. Introduction: Shakespeare and the Predicament of Contract Theory
Part 1
Chapter 2. Well-Functioning Markets and Contract Law
Chapter 3. The Moral Consequences of Well-Functioning Markets
Chapter 4. Contract Law, Efficiency, and Morality
Part 2
Chapter 5. Consideration
Chapter 6. Remedies
Chapter 7. Boilerplate
Chapter 8. Pernicious Markets and the Limits of Contract Law
Conclusion
Notes
Bibliography
Table of Authorities
Index