Before concluding the subject of partnership, we must make reference to the trinus contractus, which caused much discussion and great difficulty. As we have seen, a contract of partnership was good so long as the person contributing money did not contract that he should receive his original money back in all circumstances. A contract of insurance was equally justifiable. There was no doubt that A might enter into partnership with B; he could further insure himself with C against the loss of his capital, and with D against damage caused by fluctuations in the rate of profits. Why, then, should he not simultaneously enter into all three contracts with B? If he did so, he was still B's partner, but at the same time he was protected against the loss of his principal and a fair return upon it—in other words, he was a partner, protected against the risks of the enterprise. The legitimacy of such a contract—the trinus contractus, as it was called—was maintained by Carletus in the Summa Angelica, which was published about 1476, and by Biel.[1] Early in the sixteenth century Eck, a young professor at Ingolstadt, brought the question of the legitimacy of this contract before the University of Bologna, but no formal decision was pronounced, and, had it not been for the reaction following the Reformation, the trinus contractus would probably have gained general acceptance. As it was, it was condemned by a provincial synod at Milan in 1565, and by Sixtus V. in 1585.[2]
[Footnote 1: Op. cit., IV. xv. 11. Lecky attributed the invention of the trinus contractus to the Jesuits—who were only founded in 1534 (History of Rationalism, vol. ii. p. 267).]
[Footnote 2: Ashley, op. cit., vol. i. pt. ii. pp. 439 et seqq.;
Cleary, op. cit., pp. 126 et seqq.]
We should also refer to the contract of bottomry, which consisted of a loan made to the owner—or in some cases the master—of a ship, on the security of the ship, to be repaid with interest upon the safe conclusion of a voyage. This contract could not be considered a partnership, inasmuch as the property in the money passed to the borrower; but it probably escaped condemnation as usurious on the ground that the lender shared in the risk of the enterprise. The payment of some additional sum over and above the money lent might thus be justified on the ground of periculum sortis. The contract, moreover, was really one of insurance for the shipowner, and contracts of insurance were clearly legitimate. In any event the legitimacy of loans on bottomry was not questioned before the sixteenth century.[1]
[Footnote 1: Ashley, op. cit., vol. i. pt. ii. pp. 421-3; Palgrave, Dictionary of Political Economy, art. 'Bottomry'; Cunningham, Growth of English Industry and Commerce, vol i. p. 257.]
§ 10. Concluding Remarks on Usury.
It is to be hoped that the above exposition of the mediæval doctrine on usury will dispel the idea that the doctrine was founded upon the injustice of unearned income. Far from the receipt of an unearned income from money or other capital being in all cases condemned, it was unanimously recognised, provided that the income accrued to the owner of the capital, and not to somebody else, and that the rate of remuneration was just. The teaching on partnership rested on the fundamental assumption that a man might trade with his money, either by using it himself, or by allowing other people to use it on his behalf. In the latter case, the person making use of the money might be either assured of being paid a fixed remuneration for his services, in which case the contract was one of locatio operarum, or he might be willing to let his remuneration depend upon the result of the enterprise, in which case the contract was one of societas. In either case the right of the owner of the money to reap a profit from the operation was unquestioned, provided only that he was willing to share the risks of loss. But if, instead of making use of his money for trading either by his own exertions or by those of his partner or agent, he chose to sell his money, he was not permitted to receive more for it than its just price—which was, in fact, the repayment of the same amount. This was what happened in the case of a mutuum. In that case the ownership of the money was transferred to the borrower, who was perfectly at liberty to trade with it, if he so desired, and to reap whatever gain that trade produced. The prohibition of usury, far from being proof of the injustice of an income from capital, is proof of quite the contrary, because it was designed to insure that the income from capital should belong to the owner of that capital and to no other person.[1] Although, therefore, no price could be paid for a loan, the lender must be prevented from suffering any damage from making the loan, and he might make good his loss by virtue of the implied collateral contract of indemnity, which we discussed above when treating of extrinsic titles. If the lender, through making the loan, had been prevented from making a profit in trade, he might be indemnified for that loss. All through the discussions on usury we find express recognition of the justice of the owner of money deriving an income from its employment; all that the teaching of usury was at pains to define was who the person was to whom money, which was the subject matter of a mutuum, belonged. It is quite impossible to comprehend how modern writers can see in the usury teaching of the scholastics a fatal discouragement to the enterprise of traders and capitalists; and it is equally impossible to understand how socialists can find in that doctrine any suggestion of support for the proposition that all unearned income is immoral and unjust.
[Footnote 1: See Rambaud, op. cit., p. 59.]
SECTION 3.—THE MACHINERY OF EXCHANGE
We have already drawn attention to the fact that there was no branch of economics about which such profound ignorance ruled in the earlier Middle Ages as that of money. As we stated above, even as late as the twelfth century, the theologians were quite content to quote the ill-founded and erroneous opinions of Isidore of Seville as final on the subject. It will be remembered that we also remarked that the question of money was the first economic question to receive systematic scientific treatment from the writers of the later Middle Ages. This remarkable development of opinion on this subject is practically the work of one man, Nicholas Oresme, Bishop of Lisieux, whose treatise, De Origine, Natura, Jure et Mutationibus Monetarum, is the earliest example of a pure economic monograph in the modern sense. 'The scholastics,' says Roscher, 'extended their inquiries from the economic point of view further than one is generally disposed to believe; although it is true that they often did so under a singular form…. We can, however, single out Oresme as the greatest scholastic economist for two reasons: on account of the exactitude and clarity of his ideas, and because he succeeded in freeing himself from the pseudo-theological systematisation of things in general, and from the pseudo-philosophical deduction in details.'[1]