CHAPTER XIII. OF CONTRACTS. I. What meant by contracts.-II. Contracts are either of immediate or future performance.-III. Contracts are either of partial or mutual benefit.-IV. Contracts are either of giving or doing, or both.-V. No man by contract parts with more than he intended.-VI. The nature and obligation of a loan of inconsumable goods.-VII. Of a commission.-VIII. Of a charge.-IX. Contracts of mutual benefit either share the matter or make it common.-X. Incapacity of either party to be obliged, voids the contract.-XI. What the equality required in contracts consists in.-XII. Equality in the previous acts relates to knowledge and freedom.-XIII. Equality in the principal act relates to knowledge of the price.-XIV. Equality in the matter relates to faults in the goods, or errors in the price unknown to either party.-XV. Want of an equivalent, how supplied in auctions.— XVI. Price of things or work, what it is and how varied.—XVII. Fair price is the market price.-XVIII. Extraordinary circumstances allow to exceed the market price.-XIX. Advantages by the introduction of money.-XX. Metals, the most proper materials for money.—XXI. Uses and rules of coining.-XXII. Use of money varies the price of goods.-XXIII. Buying and selling.-XXIV. Letting and renting.-XXV. Letting and hiring of labour.-XXVI. Loan of consumable goods.-XXVII. Interest for money, upon what principles to be defended.-XXVIII. Usury, why forbidden by the Mosaic law.-XXIX. Question relating to a loan.-XXX. Nature of insurance.-XXXI. Mixed contracts.-XXXII. Gain and loss, how adjusted in partnership.-XXXIII. Partnerships mixed with insurance.-XXXIV. Contract of one party's bearing the whole loss without any share in the gain.-XXXV. Work and money how compared in partnerships.-XXXVI. Contracts how dissolved.XXXVII. Contracts of chance, their nature and obligation.XXXVIII. Contracts with a man to do or give what we might claim, are void.-XXXIX. Contracts void where the matter is unlawful.-XL. Obligation how restored to void contracts. contracts. What meant by I. In the last chapter we have considered at large the nature of promises. Where by promises I mean such acts, as lay an obligation on the party or parties concerned on one side, and convey a demand upon their person to the party or parties concerned on the other side. So that in promises, according to this description of them, there is no mutual obligation of the parties on both sides, each to the other; there is only an obligation on one part, and a correspondent right on the other part. *Such acts of mankind, as produce a mutual obligation, and consequently a mutual claim on the parties concerned on both sides, are contracts. Grot. Lib. II. Cap. XII. § VII. Contracts are ei Contracts are either such as are performed immediately, or such as we engage to perform at some fu- ther of immediate ture time. Those of immediate performance I shall call or future performsimply contracts, and those which we bind ourselves to ance. perform at some future time, may be called promissory contracts. From this description of promissory contracts, it will appear that we need not consider them particularly; for the questions which arise upon them, are either what may be determined from the rules relating to contracts in general, or from those which have been laid down relating to promises. III. A second division of contracts is into such as *are Contracts are eiof mutual, and such as are of partial benefit. All con- ther of partial or tracts, indeed, suppose a mutual obligation of the parties of mutual benefit. engaged in them; but we shall find presently that they do not all produce a mutual benefit. IV. A third division of contracts is into contracts of Contracts are eigiving, or contracts of doing, or contracts both of giving ther of giving or and of doing. For all the benefit arising from contracts, doing, or of both. whether it is partial or mutual, must arise either from things or from actions, or from both. Only it is to be observed, that under the notion of things we here include not only goods but money likewise, and the use of either goods or money. V. The fundamental rule in all contracts is, that no No man by conman by engaging in them parts with more than he de- tract parts with signed to part with, or that the demand of one party can- more than he innot exceed what was in the intention of the other party to transfer or give up to him. tended. By the design or intention of either party, is not here meant any secret or reserved design or intention, which he kept in his mind and never discovered. Such a design or intention as does not appear, is in cases of contracts, as in all other cases, of no more account than a design or intention which does not exist. But by the design or intention of either party, is meant such design or intention as may be fairly collected either from his words or his actions. In the intercourse of mankind one with another, no person can be supposed to design or intend what does not appear in one of these ways; because there is no evidence and can be no knowledge of his designing or intending any thing else but what does so appear. There is a plain reason why no person's grant on one side, and consequently no person's just demand on the other side, as far as such grant made or such demand arises from any contract, can ever extend beyond the design or intention of the person who makes the grant. If it was otherwise, he might lose a part of his property, or might be constrained to the doing certain actions without his own consent. But as all causeless harm done to a man either in his property or in his liberty, is injustice; and the taking from him his property or the constraining him to act in a certain manner without his own consent, is doing him causeless harm in these respects; it follows, that there can be no just demand either upon his goods or his person, any farther than he appears, or may be fairly shown to have had a design or intention of granting such demand. * Grotius, Lib. II. Cap. XII. § II. † Ibid. The nature and VI. We will first consider contracts of partial benefit, obligations of a which may likewise be called gratuitous contracts, beloan of inconsuma- cause there is a favour done on one side, and no return ble goods. of benefit arises from such contracts. *If one man makes over his goods absolutely to another, without reserving to himself any claim upon the goods, or upon the party to whom he makes them over; this is a gift, and does not come within our description of contracts; no mutual obligation arises from such an act as this. In like manner, if we find that any person has occasion for our assistance, and we do him the service which he wants, this is no contract; provided no mutual obligation of justice arises from such service. But where our goods are such as will not perish or be consumed in using, we have it in our power to dispose of the use of those goods, without alienating the property which we have in them; we may let a man have the use of our house, or land, or horses, or books, and still keep our claim to the things themselves. When this is done, without taking any valuable consideration of the person to whom we so make over the use, this is called a loan; and the act of our lending and his borrowing is a gratuitous contract. The act is plainly gratuitous; because he has a benefit from the use of our goods, and we receive no benefit in return: and it is a contract, because a mutual obligation upon the lender and upon the borrower arises from it. The principal obligation on the part of the lender is to take nothing for the use of his goods. This is all which is contained in the general notion of a loan: neither the words nor the actions of a man, who says that he will lend another his house, or his land, or his books, or horses, or any thing else which may be used without being consumed, and who does lend them accordingly, imply any more than this. the There may indeed be some other accidental obligations upon lender: but they are such as are not included in the general notion of a loan, and can take place no otherwise than by having been particularly specified. Thus he may, for instance, have expressed particularly for what determinate time he made over the use of his goods; if he has done this, he is obliged not to call for them, and has no right to demand them till that time is expired. The principal obligation on the part of the borrower is to return the goods in the same condition that he received them: except only as far as they must have been necessarily impaired by time or by the use which was granted to him. He is obliged to return the goods again, because the lender did not design to transfer the property of them to him: and by the general rule of all contracts, the borrower can demand no more than the lender designed to grant. If no time was fixed at first for returning the goods, it cannot be collected for what time the lender designed to part with the use of them: it must therefore depend upon his pleasure how long the borrower shall use them. But if any time was fixed when the goods were lent, the owner then agreed to let the borrower use them so long. However, therefore, the lender may want them in the meanwhile, the borrower can only be charged with ingratitude if he refuses to return them. He certainly cannot be charged with injustice in keeping the use of the goods for as long a *Grot. Lib. II. Cap. XII. § II. time as the other had given him a right to keep them. When the borrower returns the goods, he is obliged to return them in the same condition in which he received them; because otherwise he would take more than the lender designed to give him. The lender intended to grant only the use of his goods; but he loses more than this by the borrower, if his goods are returned to him in a worse condition than when they went out of his hands. We ought however to consider whether the damage which the goods have received is such as they would have suffered, though they had continued in the owner's hands, or whether it is such as they have suffered through some fault of the borrower. In the latter case he is obliged to make good the damage, for the reason already assigned. But in the former case, as for instance, suppose the house to be burnt, or the land to be washed away by the sea, or the horses to die of some common distemper, the lender must in justice bear the loss; because if the borrower was to stand to all such hazards, and to make good all accidents which happen without his fault, and would have happened, though the thing had continued in the hands of the lender, there would arise from the contract a mutual benefit to the lender, which is contrary to the nature of a loan. There is indeed no injustice in bargaining with a man, that he shall ensure our goods from casualties for the use of them: and if he agrees to this, he will be obliged to stand to all damages, as well those which happen without his fault, as those which happen with it. But then this contract is not a loan: such conditions as these are not implied in the act of lending; and if we would claim to have them observed, we must take care particularly to specify them. VII. If a man undertakes to do business for me with- The nature and out any pay or reward; his proposal of this sort, and obligation of a my acceptance of it, is a gratuitous contract, the general commission. name of which is a commission. If the service which he undertakes to do me consists in taking the custody of my goods, this particular sort of commission is called a charge. In a commission, the obligation on his part who undertakes it, is to transact the business without wages or any other valuable consideration, and to use the same care and diligence in it, as if it was his own. That he is to require no wages or reward for his work, is plain from the nature of this contract, which supposes him to undertake the business gratuitously, that is, to have declared his design of giving his time and trouble to the person for whom he undertakes it. The only question is, what degree of diligence is required of him. The degree mentioned above is the same that he would make use of in his own business, where it is of the same importance with that which he undertakes for another man; and it cannot be shown that the other has any right to claim a higher degree than this. Every man is supposed to manage his own affairs to the best of his abilities, as far as the matter in hand may deserve or require such management: and there can be no reasonable demand that he should increase his usual care, when he is to manage the affairs of another. But though a higher degree of diligence is not required, yet a lower degree would scarce be sufficient. It is better for us to pay for having our business well done, than to have it managed carelessly for nothing. Whenever, therefore, we entrust any person with a commission, we must reasonably be sup posed to have some ground for believing that our affairs, when put into his hands, will be well managed: and the most obvious ground for believing this, is what we have observed ourselves, or have heard well attested by others, concerning his management of his own affairs. Since therefore his prudent management of his own affairs, as far as our observation or intelligence reaches, is the ground of our trusting him; we show by the very act of trusting him, that we expect he will manage as carefully for us as he is used to do for himself. And if this is our intention, which is made to appear by our act of trusting him; then he, by undertaking the trust, tacitly engages for this degree of diligence. However, unless there is notorious mismanagement, his kindness entitles him to our favour: it is not reasonable that any man should be a loser by his kindness in undertaking to give us his time and trouble in doing our business for us; and upon this account it is equitable to presume, in all doubtful cases, that the damages which we may suffer in such of our affairs as are in his hands, have not been owing to any indiscretion or neglect in him. The obligation on our part, when such a commission is undertaken for our benefit, is to repay any expenses which he who undertook it, may be at, and to make good any loss which he may sustain in his own affairs, upon account of his having engaged in the management of ours. By engaging to give us his trouble, it appears, indeed, that he intended to give us thus much; but it does not appear that he intended to give us more. Therefore, by the general rule of all contracts, no more than this is due to us: and whatever he loses more than this by our means, or upon our account, he has a right to demand of us. A guardian or executor of a will is engaged in a contract of this sort; where he undertakes the trust without being paid for it, or, which amounts to the same thing, where he receives a small acknowledgment that does not by any means answer his trouble, nor was intended as a sufficient payment. The ward or the heir is not the other party concerned in this contract with the guardian or executor: for he does not undertake the trust at their request or by their appointment. The other party is the testator, who requests and appoints him to be guardian or executor. This appointment was made by the testator before his death, and the contract is completed afterwards by the acceptance of the executor or guardian. Here then, it may be asked, since the ward or the heir is not a party in the contract, how comes the guardian's or executor's demand for such expenses as he makes, or for such losses as he meets with, to be upon the ward or heir? The reason is, that the guardian or executor, being entrusted with the management and disposal of the testator's goods, has a demand for his expenses or losses, not upon the person of the testator, but upon those goods with which he is so entrusted; and by this means the demand will terminate in the ward or heir, who receives the goods chargeable with such demand. In intestate successions, where the heir is an infant, whoever voluntarily undertakes the management of his affairs has a like demand. Such inheritances are indeed introduced by positive laws, and the laws which introduce those inheritances, commonly take care to provide both for the benefit of the heir and the security of the guardian. But the claim of a guardian will appear still stronger, if we were to |