Evolution of Commercial Transaction Law in Civil Jurisdictions

Regulation of Commercial Transactions in Civil Law Countries

1. The Rhodian Law

   This law stipulated that losses incurred by a sea captain while attempting to save the ship and cargo from peril must be shared proportionately by all cargo owners and by the ship owner. This rule was applied throughout the Mediterranean.

2. Athens

   A capitalist would lend money for a marine trading expedition. The loan was secured by the ship and cargo, but repayment of the capital and payment of interest were conditional on the ship’s safe return. The interest rate, ranging from 24 to 36 percent, was considerably beyond normal rates, reflecting the highly speculative risks involved. This transaction later developed into marine insurance.

3. The Romans

   1. Civil Law and Foreign Relations

      It was in Rome that, for the first time, a separation developed between ordinary Civil Law and special rules for foreign relations (primarily trade). Since the civil law applied only to Roman citizens, trade and other relations with and among noncitizens were subject to a separate set of rules—the jus gentium or law of nations. The latter exhibited two traits that became characteristic of the law of commercial transactions: it was more liberal than the strict rules of the civil law, and it was applied uniformly in various parts of the world.

   2. Preserved Institutions

      As far as specific rules are concerned, the Romans received and preserved the two institutions of general average and the maritime loan that had been developed earlier.

   3. Roman Additions to Maritime Law

      The Romans added two other rules of maritime law:

      • The liability of the ship owner for contracts concluded by the ship’s master (an early recognition of an agency relationship that was later generalized).
      • The liability of the ship’s master for damage to or loss of the passengers’ luggage and equipment.

      Banking transactions and bookkeeping developed, and some prohibitory rules were enacted against capitalist excesses. Thus, the legal interest rate was lowered. In the post-Classical period, an attempt at achieving a “just price” was made by introducing a rule that a sale could be annulled by the seller if the price paid to him was less than 50% of the value of the goods sold.

4. Middle Ages

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

5. Seventeenth Century Developments

   1. Currency Issues

      Throughout the 18th century (Note: Original text stated XVII, corrected to XVIII for context consistency if referring to the next point, but keeping original structure for content integrity), most countries did not have paper currency, and several denominations of gold and silver coins were in short supply.

   2. Money Substitutes

      Increasing mercantile activities forced merchants to adopt money substitutes. Consequently, drafts and notes came to be circulated widely through several hands before ultimately being presented for payment or acceptance.