Evolution of Commercial Law: From Medieval Origins to Nations

The Middle Ages and Commercial Ethics

During the Middle Ages, the Christian church attempted to enforce moral commands adverse to commercial transactions. The taking of interest for loans of money was considered income without true work, deemed sinful and prohibited. There was also an attempt to generalize the idea of a just price. Although both rules, especially the former, influenced the law and the economy for centuries, neither finally prevailed in the secular world.

The Law Merchant (Lex Mercatoria)

Another feature of the medieval period was the development of a separate commercial law—the law merchant.

Origins and Customary Law

Like the jus gentium of early Roman days, the law merchant differed from existing ordinary rules that varied by location. It was the original source of the law of negotiable instruments. It was not a formal law but a body of commercial custom that evolved as merchants in England increased commerce with continental counterparts. Drafts, checks, and notes were governed by the custom of merchants regarding the transmission of funds and evidence of credit.

Uniformity and International Fairs

The need for certainty and uniformity in trade provisions motivated the growth of these rules, which were valid throughout Europe. These rules were disseminated and applied in special courts at international fairs attended by local and foreign merchants. The primary sources of the law merchant were the customs of the most developed commercial communities of the time—the northern Italian cities.

Early Codification

In the 13th and 14th centuries, Italian, French, and Spanish cities made the first attempts at codifying certain branches of commercial law.

Medieval Business Structures

The medieval period saw the development of company and banking law. The compagnia and the comenda, forerunners of the partnership and limited partnership, were in frequent use. The Italians created a sophisticated system of bills of exchange used for the transfer of money, payment via endorsement, and credit through discounting. They also invented bankruptcy as a method for dealing equally with an insolvent merchant’s creditors.

The Shift to Nation-States

In the period following the medieval era, but before the French Revolution, the law of commercial transactions lost its universal character.

Nationalization of Commercial Law

The birth of pronouncedly national states in Europe provoked a “nationalization” of the law. In 1673 and 1681, the French king Louis XIV enacted ordinances on land and maritime commerce. These were precursors of the French Commercial Code of 1807, which set the pattern for national codification of the law of commercial transactions in the Latin countries of Europe and America.