Contracts re

This category comprised four contracts: mutuum, commodatum, deposltum, and pigmts. The common denominator was that the obligations in these contracts arose from the delivery of a corporeal thing—hence the name 'contract re', i.e.

9.5.1 Mutuum

(Inst.Gai.3.90.-1., Inst.3.14., D.12.1.)

Mutuum was a unilateral and stricti iuris contract, consisting of an essentially gra­tuitous 'loan' for consumption of things that could be measured and that were consumable through use, i.e. fungibles (often an amount of money):

Paul, Edict, book 28: This kind of lending happens in relation to those things which are dealt in by weight, number or measure. (D.12.1.2.1.)

The description 'lending' is somewhat misleading. There was strictly no loan since ownership of the thing was transferred (using a traditio) to the borrower:

Paul, Edict, book 28: The word for Joan for consumption, mutuum, is formed from meum and tuum, because what is mine becomes yours. (D.12.1.2.2.)

9.5.1.1 Development

Mutuum was the oldest of the contracts re. Its origins are obscure, but what is unde­niable is that it grew in importance after the lex Poetelia 326 BC (see Kelly, J. M., ‘A Hypothesis on the Origin of Mutuum', (1970) 5 IJ, 156-63). Before that time, obliga­tions were often incurred through nexum, a formal ceremony similar to mancipatio. Nexum was a form of bond: a debtor bound himself by pledging his body as security for the payment of a debt. A defaulting debtor was liable to seizure (manus iniectio) by the creditor, and thereafter to possible enslavement or even execution (see 3.2.3.1). The lex Poetelia greatly improved the debtor's position by insisting on legal judgment before seizure, and by removing the threat of death and sale into slavery. Nexum thereafter declined in importance (it ceased to exist by the time of the late Republic) and was superseded by mutuum that had probably been confined to informal loans up to that time.

The most frequent use of mutuum was in relation to money—it became the stand­ard moneylending contract of the Republic. It was common to attach subsidiary terms by stipulations, e.g. as to the interest payable or the date of repayment, since mutuum was essentially gratuitous and bare agreements to pay interest were unin- forceable (Metzger, Companion, 129). Rates of interest were regulated throughout Roman legal history, and harsh penalties were exacted on lenders who tried to exceed the limit. Although professional moneylenders were regarded with great dis­taste, it appears that the practice of lending money at interest was widespread, at least among the wealthy: 'Here we are with a civil war on, with Pompey under siege by a Roman army; and yet there is the City the same as usual, the courts in session, the games in preparation, and, as usual, the great and the good are clocking up their interest' (Cicero, ad Atticum, IX, 12, 3 quoted by Crook, Law and Life of Rome, 211; see also Andreau, J., Banking and Business (1999), 9-29). The maximum rate during the classical period was generally 12 per cent, Justinian reducing it to 6 per cent for commercial loans, 4 per cent for private ones (cf. C.4.32.26.). Compound interest was not allowed. In later law, the whole agreement was often made through stipula­tio, and thus mutuum lost its importance.

9.5.1.2 The duty to restore

The borrower had to restore not the thing itself^—it would be consumed by use—but the equivalent (see MacCormack, G., 'Gift, Debt, Obligation and the Real Contracts' (1985) 31 Labeo, 131-54). This duty was precisely interpreted: the thing that was returned had to be equivalent in size, number, and quality to the borrowed thing:

Pomponius, Sab'mus, book 27: Even if there is no provision in a loan for consumption that the thing returned should be of the same quality, the debtor is not allowed to give back some thing which, though of the same kind, is of inferior quality, for example, new wine for old.

The fact that the object had been lost or stolen did not relieve the borrower from his duty to restore it, since the contract was stricti iuris (Metzger, Companion, 129). However, if a loan was made to finance the voyage of a cargo ship (bottomry), the loan was repayable only if the ship completed the journey safely. The lenders took the risks, so they were allowed to charge unlimited rates of interest, at least until Justinian fixed the maximum at 12 per cent for such loans (cf. D.22.2.3., C.4.32,26.1.). The position was similar in the case of loans made to professional athletes for their maintenance and expenses (D.22.2.5pr.). The loan was returnable, together with interest, only if victory was gained. See Zimmermann, Obligations, 181 ff.

The duties of the borrower could be enforced by amdictio. The lender in mutuum did not have contractual duties (since the contract was unilateral). If he lent some­thing for consumption that was defective, he might be liable for delict if he was at fault and damage resulted; but there was no contractual liability.

9.5.1.3 5. C. Macedonianum (Second half of the 1st century AD)

(D.14.6., C.4.28.)

Moneylending inevitably leads to problems—abuses, corruption, and exploita­tion. Roman society was no exception:

Ulpian, Edict, book 29: Whereas Macedo's borrowings gave him an added incentive to commit a crime to which he was naturally predisposed and whereas those who lend money on terms which are dubious, to say the least, often provide evil men with the means of wrongdoing, it has been decided, in order to teach pernicious moneylenders that a son's debt cannot be made good by waiting for his father's death, that a person who has lent money to a son-in-power is to have no claim or action even after the death of the person in whose power he was.

This enactment of the early Empire was concerned with loans of money, not of other property. It applied to loans made to children and remoter issue under potes- tas. The reform protected not only the borrower but also his paterfamilias and any guarantor. The blanket exclusion of such loans from lawful recovery, although well- intentioned, could have had unfortunate economic repercussions. Accordingly, the provision was subjected to generally restrictive interpretation. For example, the rule was excluded if the paterfamilias had consented to the loan, or if the lender had honestly believed that the borrower was not in power, or if the borrower had peat- lium castrense or quasi castrense (see 5.1.2.2), or if the borrower had acknowledged the loan on becoming sul iuris.

9.5.2 Commodatum

(Inst.Gai.3.90.-1., Inst.3.14.2., D.13.6., C.4.23.)

Commodatum consisted of a gratuitous loan of a corporeal thing (mostly mova­bles, rarely immovables) for use, the thing to be returned at the end of the loan (see. Birks, Obligations, 135-42). Unlike mutuum, ownership of the object remained with

Obligations: Common Principles and Obligations Arising from Contracts 303 the lender. It was a bilateral and bonae fidei contract, the development of which owed much to praetorian intervention. The loan had to be gratuitous: if it was for money, the contract would be locatio conductor, not commodatum. The loan was usu­ally made for a specified purpose and duration, but if the duration was not fixed, the borrower could keep the thing for a reasonable time (taking into account the purpose of the loan). Land could be the subject of commodatum (although this was doubted before the classical period), but perishables could not be, subject to minor exceptions, e.g. where things were let for display purposes (D. 13.6.3.6.). The bor­rower did not receive ownership, unlike the case in mutuum. Nor did he acquire possession of the thing—he received only physical control. It followed that there could be a valid commodatum even though the lender was not the owner.

Paul, Edict, book 29: It is possible to lend for use property which belongs to another but which is in our possession, even where we know it is another person's property we possess. (Marcellus, Digest, book 5] [16]: This is carried to the extent of enabling even a thief or robber who lends to have the action on loan for use. (D. 13.6.15.-16.)

9.5.2.1 Duties of the borrower

He had to use the property for the purposes agreed, otherwise he was liable for theft unless he honestly believed that the lender would have consented. Even if the bor­rower did have that belief, he would normally be liable for any damage caused to the property during unauthorized use, irrespective of fault (even damage through vis maior). Moreover, the borrower was liable for any damage, howsoever caused, if he was in mora, e.g. if he had delayed in returning the property.

Which standard of care was expected of the borrower? In the absence of any agreement to the contrary, the following standard applied:

Gaius, Provincial Edict, book 9: The standard of care to be adhered to in relation to things lent for use is that which any very careful head of a family keeps to in relation to his own affairs to the extent that the borrower is only not liable for those events which cannot be prevented, such as deaths of slaves occurring without fault on his part, attacks of robbers and enemies, surprises by pirates, shipwreck, fire, and escape of slaves not usually confined. (D. 13.6.18pr.)

The reference to the 'very careful head of a family' (diligentissimus paterfamilias) suggests that the standard of care was beyond that of the bonus paterfamilias (see Metzger, Companion, 131). Most probably, the borrower was subject to liability for custodia, i.e. any loss other than that caused by vis maior. As theft (without violence) was regarded as preventable, it followed that the borrower was liable for failure to restore the property to the lender if a third party had stolen it.

At the end of the loan, the borrower had to return the property, together with any accretions, in substantially the same condition as when he received it:

Ulpian, Edict, book 28: If the thing lent is indeed returned but returned in worse condition, it is understood not to have been returned at all, unless the lender's interest is made good. (D.13.6.3.1.)

9.5.2 2 Duties of the lender

He had to allow the borrower the use of the thing for the agreed period; but if the borrower misused the property the lender could recover it immediately. The lender had to reimburse the borrower for any abnormal expenses incurred in using the thing, and the borrower could lawfully retain the object until such expenses had been paid. It seems that the lender was not liable for negligence, only for dolus. Hence, he was liable for damage caused by the thing if he knew of the defects and failed to disclose them:

Gaius, Provincial Edict, book 9: Again, someone who knowingly lends defective containers must, if wine or oil poured in is spoiled or spilled, be condemned on that account. (D. 13.6.18.3.)

9.5.2.3 joint benefit

What if the loan benefited both parties? Then it seems that the borrower was sub­ject to the standard of care expected of him in his own affairs (diUgentia quam suis rebus). If the loan was for the benefit of the lender alone, the borrower was liable for dolus only:

Ulpian, Edict, book 28; There are clearly cases in which the borrower will be liable only for will­ful harm, for example, when that is what is agreed, or where the loan is only in the interest of the lender, as by a man to his fiancee or wife to enable her to dress with greater dignity for her presentation to him or by a praetor putting on games to actors or indeed by someone only too glad to lend to the praetor. (D.13.6.5.10.)

As for the lender, if he benefited from the loan, he was liable for any damage caused by defects of which he ought to have known. The shifting standard of care in these scenarios reflects the principle of utility applied by the jurists; namely, that the liability of the parties is conditioned by the balance of their interests in the perfor­mance of the contract. See Zimmermann, Obligations, 198-9.

9.5.2.4 Remedies

The lender had the actio commodati ('the action on the loan’) to enforce the bor­rower's duties. The latter could retain the borrowed thing as a set-off against what­ever might be owed to him by the lender. In addition, the borrower had the actio commodati contraria—useful, for example, if the borrower's expenses exceeded the value of the property that had been loaned.

9.5.3 Depositum

(Inst.3.14., D.16.3., C.4.34.)

Deposit was a bonae fidei, imperfectly bilateral contract whereby a movable thing was handed over to another person (the depositee) for safekeeping (see Birks, Obligations, 142-6). There could not be a deposit of land. The deposit had to be gratuitous, otherwise the transaction would constitute hire;

Ulpian, Edict, book 30: If clothes given to the keeper of a bath for safekeeping are lost and if the keeper has received no fee for the safekeeping, I think that he is liable in an action on deposit and that he ought to be responsible only for his fraud; but where he has received a fee, he is Hable on the action on hire. (D.16.3.1.8.) (cf. Inst, 3.14.3.)

As in commodatum, the depositee did not receive ownership or possession. Consequently, the depositor need not be the owner—he could even be a thief.

Unlike commodatum, however, the contract of deposit was entirely for the benefit of the depositor: if the depositee benefited, the contract would be treated as com­modatum (but as hire if he was remunerated).

9.5.3.1 Duties of the depositee

The obligations in depositum were primarily on the depositee. He had to keep the thing safe but was liable only for dolus, as we have seen in D.16.3.1.8. (previously mentioned), However, dolus was sometimes equated with gross negligence, and could consist of the failure to do what a person would do with his own property, according to the following passage attributed to Celsus:

Celsus, Digest, book 11: The statement made by Nerva that gross fault is equivalent to fraud was not accepted by Proculus but seems to me to be very true. For even if a person is not care­ful in the degree required by the nature of man, still, unless he shows in the deposit the care customary with him, he is not free from fraud; for good faith is not maintained if he shows less care than in relation to his own affairs. (D. 16.3.32.)

It is doubtful whether this controversial text was generally equating dolus with fail­ure to behave as one normally would in one's own affairs: it is more likely that it was concerned with the particular case of deposit, see Zimmermann, Obligations, 208 ff.

Of course, the parties could agree, as in other contracts, to vary the depositee's duty of care by imposing on him the bonus paterfamilias standard (see Litewski, W., 'Depository’s Liability in Roman Law' (1976) 190 AG, 3-78), But they could not validly agree to absolve him from dolus. The depositee could not use the depos­ited thing—if he did so in bad faith, he would be liable for theft of use (cf. Inst. Gai.3.196.). Generally, he had to return the thing on demand, and in substantially the same condition as when it was received, subject to reasonable wear and tear. Any accretions that arose during the deposit had to be handed over as well.

9.5.3.2 Duties of the depositor

He was liable, if negligent, for damage caused by the deposited thing, the bonus paterfamilias standard applying. He had to reimburse the depositee for expenses incurred in looking after the property and in returning it at the venue chosen by the depositor:

Pomponius, Sabinus, book 22: if a deposit is made in Asia to be returned at Rome, it is seen to have been intended that this occur, not at the expense of him with whom the deposit was made, but at the expense of him who deposited. (D.16.3.12pr.)

9.53.3 Remedies

The depositor had the actio depositi for the depositee's breach of duty (see Metzger, Companion, 132). If the depositee was found liable, infamia resulted—a seemingly harsh rule but justifiable, at least to the Roman mind, on the grounds that dolus by the depositee represented a breach of trust on his part. Also, the depositee would have to pay damages. They were doubled if the deposit had been made in an emer­gency, e.g. during a riot or fire, since in such circumstances the depositor had less opportunity to choose his man:

Ulpian, Edict, book 30:... when someone has chosen to rely on the trustworthiness of another and the deposit is not returned, he ought to be content with simple damages. However, when he deposits through necessity, the crime of perfidy increases and the public welfare demands retribution for the sake of protecting the common interest; for it is harmful to betray trust in cases of this kind. (D.16.3.1.4.)

The depositee had the actio depositi contraria against the depositor for the recovery of expenses. And probably the depositee had a right to retain the thing as a set-off against unpaid expenses, but Justinian appears to have terminated the right.

9.5.3.4 Special deposits

There were some special cases of deposit, with different rules from those already outlined. Depositum irregulare was a transfer of fungible things (usually money) to a depositee (usually a banker) with the intention that he should become the owner of the property, with a duty to restore the equivalent on demand (see Andreau, Banking and Business (1999), ch. 3). This looks very much like mutuum, but the difference was that depositum- irregulare was not primarily intended to benefit the transferee—he was more a custodian than a borrower.

Sequestratio was a deposit of property by two or more persons in dispute about their rights in the thing. The purpose of the deposit was that the depositee should hold the property until the dispute was settled. He received legal possession of the property, thus preventing time running (for the purposes of usucapio) in favour of any of the disputants. When the dispute was settled, the property had to be returned to the successful party. It seems that both land and movables could be the subject of a sequestratio.

9.5.4 Pignus

(Inst.Gai.3.115.-27., lnst.3.14., D.13.7., C.4.24.)

Pignus ('a pledge') was a bonae fidei and bilateral contract, consisting of the trans­fer of property as security by a borrower to a lender by way of mortgage (see Birks, Obligations, 146-55). The lender received legal possession of the property (which could be land or movables). The effect of this contract was to create a strong, limited, real right over property. Thus, any discussions of the contract of pledge should be read in conjunction with the discussion of real security in the law of property. The proprietary aspects of pledge and hypothec are discussed in D.20.1 and C.8.13. For a comprehensive survey of the main texts, see Hausmaninger, Gamauf, and Sheets, Casebook, 266-320. This section should also be read in conjunction with Ch. 6, 'Interests in Property'.

95.4,1 Development

Pignus developed from the original form of real security, fiducia, under which the borrower transferred the ownership of property that was pledged as security to the lender (see Metzger, Companion, 133). The transfer in fiducia had to be affected by formal conveyance, i.e. mancipatio or cessio in lure. The lender undertook to recon­vey the property once the debt was fully paid. However, being owner, the lender could sell the property if the borrower defaulted. Apart from being cumbersome, fiducia had the disadvantage of depriving the borrower of ownership of the thing that had been pledged.

Pignus was free of these disadvantages since the transfer could be affected by tra- ditio, and the borrower retained ownership, parting only with possession. However, fiducia did not disappear until the late Empire, when the formal modes of convey­ance became obsolete. Its lengthy survival was due to its relative popularity with lenders—they had greater rights over the property than was the case in pignus. So, fiducia and pignus co-existed side by side for several centuries, although it was the latter that became the most usual form of real security.

9.5 4.2 Position of the parties

The borrower in pignus was liable for damage caused by defects in the property transferred as security, the standard of care being that of the bonus paterfamilias (cf. Inst.3.14.4.). The lender received possession of the thing, although in practice the borrower was sometimes allowed to keep physical control. If the lender had actual control (the usual case), he had to safeguard the property, the bonus paterfamilias standard of care applying. If the lender mistreated the property, the contract was terminated:

Ulpian, Edict, book 30: It is something to be taken into account under the action on pignus if the creditor mistreats pledged property.... If, therefore, he puts a slave-girl to prostitution or compels her to some other disreputable conduct, the pignus of her is discharged on the spot. (D.13.7.24.3.)

The lender was entitled to recover expenses that were properly incurred in looking after the property. Any profit that he made out of the property was regarded as a set-off against the debt. If the debt was repaid, the lender had to return the thing, together with any accretions (e.g. where a racehorse produced offspring).

9.5.4.3 Remedies

The lender's duties could be enforced only if the borrower paid the debt (with the actio pigneraticia), or was ready to tender payment, or gave 'satisfaction' for it:

Ulpian, Edict, book 28: The pledgor's action on pignus only arises when all the money is paid or satisfaction is given for it. By satisfaction we mean anything that suits the lender in the absence of actual payment.... It is right to say quite generally that whenever the creditor chooses to give up the pledge he is understood to have been satisfied, so long as whatever he wants is assured to him, even though he be let down in relation to it. (D.13.7.9,3.)

What if the borrower failed to pay the debt? The basic position was that the lender could retain possession of the security until the debt was paid; but he could not become its owner, nor could he sell or otherwise dispose of it. In short, his position was not very favourable. Therefore, it was customary for the parties to agree that the lender should have a right of sale if the debt was not paid. If the lender sold the property for more than the amount of the debt, he had to account for any excess after deducting the debt, the interest, and his expenses in arranging the sale. The practice of allowing the lender a right of sale became so widespread that it came to be implied in the classical period in all contracts of pignus unless expressly excluded.

Another arrangement, often made in practice, was to agree that the lender should acquire ownership of the property if the debt was not paid on the specified date, i.e. automatic foreclosure. But such agreements were eventually banned under Constantine. However, a delayed form of foreclosure was possible, under a proce­dure dating from the middle Empire, whereby the lender could apply to a court to have ownership vested in him (after the lapse of the appropriate period of usucapio) unless the borrower paid the debt in the intervening period.

9.5.4.4 Hypothec

Although pignus was more advantageous to the borrower than fiducia, it, neverthe­less, required the transfer of the possession of the security to the lender. The borrower would lose the benefit of the property, and he could use it to secure only one loan at a time, In response to the need for a more flexible form of mortgage contract, there emerged in the later Republic a modified form of pignus—the hypothec—under which the lender was promised rights in the borrower's property in the event of the debt being unpaid, the borrower meanwhile retaining ownership and possession. Hypothec probably developed from the practice whereby tenants agreed that the landlord could distrain on goods or crops if rent was unpaid. Hypothec came to be used mainly in mortgages of land, although it could be applied to movables as well.

Under a hypothec, the borrower could secure more than one loan on the same piece of property. Such a possibility necessitated the development of rules concern­ing priority of charges. The basic rule was that priority was determined by the order of creation of the charges, i.e. the first in time prevailed:

Gaius, Action on Mortgage, sole book: The mortgagee who first lent money and took a mortgage is preferred, although the debtor had previously agreed to mortgage the property to another if he gave him a loan (even if the loan was later made). (D.20.4.11pr.)

Since priority depended on the time of creation of the charge, the borrower was under a duty to give notice (to a potential lender) of any existing charges. It became a criminal offence to fail to disclose a prior charge. In the late Empire, the priority rules were significantly amended. Priority was given to charges that were formally registered or witnessed, in preference to informal charges. And certain charges were given automatic priority, e.g. the wife's implied mortgage (over her husband's prop­erty) as security for her rights in the dowry.

Apart from real security formed by contract, Roman law also knew real security implied by law. On this, see Zimmermann, Obligations, 203 ff.

9.5.5 Modern use

The Roman contracts re have had a substantial influence on modern law. For exam­ple, the distinctions between the different types of loan are maintained—as in ss. 598-610 BGB and Articles 1874-914 of the Code Civil—as are (with some variations) the rules on s tandards of care. Thus, in a gratuitous loan for use, s. 599 BGB provides that the lender is liable only for wilful conduct and gross negligence; while Article 1880 of the Code Civil applies the bon pere de famille test to the duty of the borrower to care for the property. English law too has been clearly affected by the Roman contracts, especially commodatum, depositum, andpignus. The fundamental analysis of bailment by Holt CJKB in Coggs v Bernard (1703) 2 Ld Rayn 909, 92 ER 107, was largely inspired by the Roman rules, see Zimmermann, Obligations, 203 ff.