The canonical prohibition on usury in the Middle Ages

The history of the law relating to usury is a very interesting and varied one. The development in the Middle Ages was dominated by a rule of canon law which prohibited the charging of interest.^[875] ^{^[876] It was based on a number of scriptural texts, as, particularly St.}

Luke's exhortation "mutuum date nihil inde sperantes",^[877] ^{^[878] but it also tied in with economic and dogmatic considerations: the charging of interest entails the exploitation of need and leads to the further pauperization of the debtor; furthermore, it was argued that money, in the nature of things, cannot yield fruits:⁴³ pecunia pecuniam parere non potest.^[879] The Church, traditionally, regarded commercial profits as a danger to salvation. ..homo mercator vix aut nunquam potest Deo placere. Et ideo nullus Christianus debet esse mercator, aut, si voluerit esse, proiiciatur de ecclesia Dei." This was the view of St. John Chrysostomus about merchants,^[880] and it applied, of course, a fortiori to a usurer. If the Church tried to imprint its economic ethics on the secular law,^[881] it was, generally speaking, only partially successful; the canonical prohibition on interest did, however, come to be received, in principle, in iure avili.^[882] The sanctions against usury were strict. The usurious transaction was invalid and whatever the usurer had taken in excess of the loan was treated as stolen goods. The usurer was also liable for punishment."⁸
But this is only one side of the story. The economic realities were stronger than the monastic ideals of the early Christian Church. With a general prohibition of interest, not even the need to borrow merely for consumption, which arises in a predominantly agrarian society, could be adequately tackled.
But in the late 11th and early 12th centuries, the whole economic situation began to change. The rise of commercial capitalism, in its vigour and in the relative rapidity of its development, has been compared with the industrial revolution of the 19th century." Money came to be lent for production or investment; large sums were needed lor financing venturesome economic and military enterprises. The crusades, launched by the Church itself, are one obvious example. Thus, "legitimate trade based on good faith was distinguished from illegitimate trade based on avarice";¹'⁷⁰ lawful credit devices were distinguished from the sin of usury. The history of the prohibition Q{ usury from the Middle Ages onwards could well, therefore, be written as the history of its gradual erosion. A variety of transactions were developed and used simply for the purpose of circumventing the prohibition;^[883] the contractus mohatrae, where two contracts of sale disguised a loan on interest, has already been mentioned as an example. They necessitated the extensions of the usury rule to contracts of sale and other transactions. This in turn gave rise to a voluminous body of casuistry.^[884] ^{^[885] ^[886] ^[887] ^[888] ^[889] ^[890] ^[891] Very fine lines, too, had to be drawn to distinguish between illicitae usurae lucratoriae and usurae compensatonae;¹"³ availing themselves of the Roman concept of quod interest (interesse),¹⁰⁴ the medieval lawyers allowed the creditor to claim a surcharge in the form of (lawful) interest as a compensation for lucrum cessans, damnum emergens and periculum sortis, or to charge interest in case of delay of performance. Another intricate distinction was that between usury and cmptio annuorum rcdituum (purchase of an annuity, Rentenkauf).¹ "⁵ The latter, defined as "contractus instituais a consuetudine, ex quo unus vendit, et alter emit ius certi reditus, singulis annis solvendi in pccunia",^1()fl had always been regarded as valid, even though the obligation to pay an annual return (census or reditus) usually went ultra sortem and might well have been regarded as a contravention of the prohibition of interest. Especially in Germany, this transaction has been of enormous practical importance as an opportunity to raise and invest capital and thus to create credit. 4.}}

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Source: Zimmermann R.. The Law of Obligations. Roman Foundations of the Civilian Tradition. Juta & Co, Ltd,1992. — 1241 p.. 1992

The canonical prohibition on usury in the Middle Ages

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