THE ORIGINS OF SALE: SOME LESSONS FROM THE ROMANS
James Gordley
I. THE ROMAN LAW OF SALE: TWO MYSTERIES
The recognition of the contract of sale is rightly said to be a key achievement of the
Roman jurists.1 In Roman law, it had three characteristics. First, a sale is entered into
informally. The parties are bound without the use of any special formality such as an oath, a
document, a deed, or even a handshake. Second, sale is what the Romans called a contract of
good faith (bonae fidei) as distinguished from a contract of strict law (stricti iuris). The
parties are bound, not only to what they said, but to all the obligations that follow as a matter
of good faith. Third, a sale is binding upon consent before delivery of the goods to be sold or
payment of any of the purchase price. Virtually all modern legal systems recognize a contract
of sale with these three features. The Romans were the first.
The Romans recognized such a contract by at least the second century B.C.2 How
they came to do so is “dark and contested,” in the words of Max Kaser.3 The contracts that
Roman law previously recognized did not have the characteristics of sale. One was a
formality called stipulatio that could be used to make any promise binding. To complete the
formality, the promisee asked the promisor, “Do you promise such-and-such?” and he
responded that he did. Tony Weir‟s example is taken from “The Owl and the Pussycat”:
“Dear pig, are you willing to sell for one shilling your ring? Said the piggy, „I will.‟” The pig
1
REINHARD ZIMMERMANN, THE LAW OF OBLIGATIONS ROMAN FOUNDATIONS OF THE
CIVILIAN TRADITION 230 (1990). ALAN WATSON, THE EVOLUTION OF WESTERN PRIVATE
LAW 40 (expanded ed. 2001).
2
1 MAX KASER, DAS RŐMISCHE PRIVATRECHT 456 (1955).
3
MAX KASER, DAS ALTRŐMISCHE IUS STUDIEN ZUR RECHTSVORSTELLUNG UN
RECHTSGESCHICHTE DER RŐMER 296 (1949).
1
had made a stipulatio. Unlike sale, a stipulatio was formal and it was a contract of strict law.
The promisor was bound only to what he said.
The Romans also had recognized the contracts of commodatum and depositum.
Commodatum was a gratuitous loan for use. The borrower was entitled to use an object
without charge and was obligated to care for it and to return it. Depositum was a gratuitous
deposit. The party receiving the object deposited was obligated to look after it without charge
and to return it. Like a sale, commodatum and depositum were contracts of good faith and
were entered into informally. Unlike a sale, they were not binding upon consent but only
upon the delivery of the object loaned or deposited.
One mystery is how the Romans came to recognize a contract with the characteristics
of sale. Another is why, having done so, they went no further, and so left their law with
features that seem to be primitive by comparison with modern legal systems. According to
some leading modern scholars, the reason was that tradition hindered further development.
One feature that has seemed primitive was that the parties were bound upon consent
only in sale and in a few other contracts that were recognized later such as lease, partnership,
and mandatum, which was a gratuitous agency. These became known as contracts consensu,
consensual contracts, in contrast to contracts re, literally, “thing” contracts, such as
commodatum and depositum that were binding only when an object was delivered. Other
contracts – the so-called “nameless” or “innominate” contracts -- were not binding. An
example was barter: one object was given in return for another, such as a horse for a mule.
Eventually, long after sale was recognized, Roman law gave a remedy to a party who had
already performed. He could either reclaim what he had given or demand what the other
party was to give in return.4 Alan Watson finds it “astonishing that no contract of barter
4
ZIMMERMANN, supra note 1, at 532-33.
2
developed until the empire” and that even then “it was never fully accepted into the Roman
system of contracts.”5 It was an instance of “legal blindness.”6
Another feature that has seemed primitive is that Romans never recognized a generic
sale. In a generic sale, the seller is obligated to deliver, not specific goods, but any goods that
answer to a certain description. They might be a certain quantity of a fungible commodity
such as wheat. They might objects such as pots or carts of a certain design. In Roman law,
the owner of a barn that contained wheat could sell so many bushels of it although they had
not yet been measured out.7 The owner of a field could sell wheat that had yet to be grown on
it.8 A goldsmith could sell a ring he was yet to make.9 A fisherman could sell whatever his
net would catch on the next cast.10 But one could not sell or buy any wheat or any ring that
met certain specifications.11 According to Kaser, the reason is that, originally, sale-like
transactions were executed on the spot. Consequently, every sale was of a specific object to
be delivered immediately. The failure to recognize generic sale was a relic of this earlier way
of thinking.12
In this Article, I will discuss why the Romans came to recognize the contract of sale. I
will suggest that resolving this mystery will help to resolve the second as well: why the
Romans stopped where they did. The stopping point was logical given the reasons that led
5
6
WATSON, supra note 1, at 49.
Id. 50.
7
DIG. 18.1.35.5.
8
DIG. 18.1.8. pr.; 18.1.39.1.
9
DIG. 18.1.20.
10
DIG. 18.1.8.1.
11
W.W. BUCKLAND, A TEXT-BOOK OF ROMAN LAW FROM AUGUSTUS TO JUSTINIAN 484
(2d ed. 1950); ZIMMERMANN, supra note 1, at 238.
12
KASER, supra note 2, at 455. Similarly, ZIMMERMANN, supra note 1, at 238.
3
them to recognize a contract of sale. Indeed, we will see that the stopping point was so
logical that modern legal systems have made difficulties for themselves by going further. The
features of Roman law that seem primitive may have been wise.
II. THE FIRST MYSTERY: WHY THE ROMANS RECOGNIZED SALE
Before Roman law recognized the contract of sale, there were only two ways in which
parties could make a legally enforceable exchange of goods for money. They could complete
the transaction on the spot. The buyer would then own the goods and the seller the money.
Or they could make a stipulatio and bind themselves for the future. Most historians now
agree that the Romans were not copying a foreign model.13 In explaining how the Romans
themselves came to recognize sale, most historians have tried to give an account, that, in Alan
Watson‟s words, “avoids any sudden leap forward in legal thinking….”14 They have looked
for a missing link from which sale could have evolved. The trouble is that if there ever was
such a missing link, it left no fossil evidence.
The missing link for some historians such as Theodor Mommsen and more recently
Filippo Cancelli is the sale by Roman magistrates of public property such as booty taken in
war which they believed served as the model on which the law of sales in private law was
based. 15 These public sales were binding in advance of performance and were made without
using a stipulatio. Nevertheless, to hold the parties bound in an auction of war booty is a
practical necessity, not a breakthrough in legal thought. It would be hard to have an auction if
buyers were not bound by their bids before payment and delivery. Private parties holding an
13
WATSON, supra note 1, at 40.
14
Id. 42.
15
Theodore Mommsen, Die Rőmische Anfänge von Kauf und Miethe, 6 ZEITSCHRIFT
DER SAVIGNY-STIFTUNG FŰR RECHTSGESCHICHTE, ROM ABT. 260 (1885); FILIPPO CANCELLI,
L‟ORIGINE DEL CONTRATTO DI COMPRAVENDITA NEL DIRITTO ROMANO (1963). Kaser thought
it “clear” that there was an “influence” on the private law of sale, but that it is difficult to tell
how great it was. KASER, supra note 3, at 297.
4
auction could have used a stipulatio to do so.16 As critics have pointed out, public magistrates
could not use that formality, there is no evidence that their sales were made with no formality
at all. They were made according to an administrative procedure of which we know
nothing.17
Alfred Pernice believed that the missing link is a transitional stage in which Roman
law treated sale as it eventually treated barter.18 An exchange of goods for money became
enforceable but only after one party had performed. Pernice argued that this step was an easy
one to take because, since performance transferred ownership to the other party, it seemed
reasonable that he should have to perform as well. Eventually, the law held both parties
bound before performance. The trouble is that, as noted earlier, barter came to be treated in
this way long after the recognition of sale. There is no evidence of a transitional stage in
which a sale was binding upon partial performance.19
According to Phillipe Meylan, the transitional stage was one in which the seller
extended the buyer credit by allowing him to pay after an interval of time. Recognizing the
need to protect those who sold on credit, Roman law allowed the seller an action for the price
even if the buyer had not made a stipulatio. Later, the law gave a similar action to the buyer
16
Luigi Lambrona, Plauto, Manilio, Catone Premesse allo studios dell’“emptio”
consensuale, 14 LABEO: RASSEGNA DI DIRITTO ROMANO 24, 46-47 (1968).
17
1 VINCENZO ARANGIO-RUIZ, LA COMPRAVENDITA IN DIRITTO ROMANO 50 (2d ed.
1956); VITTORIO SCIALOJA, CORSO DI ISTITUTIONI DI DIRITTO ROMANO 184 (1934).
18
1 ALFRED PERNICE, MARCUS ANTISTIUS LABEO: DAS RŐMISCHE PRIVATRECHT IM
ERSTEN JAHRHUNDERTE DER KAISERZEIT 454 (1873).
19
ARANGIO-RUIZ supra note 17, at 49.
5
when the seller failed to deliver goods.20 There is little evidence that Roman law gave the
seller such an action before it gave a similar one to the buyer.21
According to other historians, the transitional stage was one in which Roman law
relaxed the rules governing stipulatio. They believe that, originally, parties who wished to
make and exchange of goods for money bound themselves in advance by each making a
stipulatio conditional on the other‟s performance. The buyer promised to pay the price if the
seller delivered the goods. The seller promised to deliver the goods if the buyer paid the
price. According to Vincenzo Arangio-Ruiz, eventually, the parties who wished to make
conditional stipulationes merely promised “to buy” and “to sell.” Finally, Roman law
enforced the transaction when the parties agreed to buy and to sell without using a stipulatio.22
As Kaser pointed out, however, there is no good evidence that parties ever entered into salelike transactions by making conditional stipulationes.23 Moreover, in this account, the reason
that Roman law finally dispensed with the formality is left as mysterious as ever.
Alan Watson also believes that parties had been exchanging conditional stipulationes.
Unlike Arangio-Ruiz, who thought that the promises made by stipulatio eventually became
simpler until they were merely promises “to buy” and “to sell,” Watson believes that they
became more complicated. They included so many terms that it was cumbersome for both
parties to have to make one and easy to leave a term out by mistake. Consequently, Roman
20
Philippe Meylan, Le Rôle de la bona fides dans le passage de la vente au comptant à
la vente consensuelle à Rome in FESTGABE ZUM 70. GEBURTSTAG VON AUGUST SIMONIUS 247,
251-54 (1955).
21
Meynal‟s evidence (id. 252) is J. INST. 2.1.41 which says that “things which have
been sold and delivered only become the buyer‟s if he has paid the price or satisfied him in
some other way, as by providing a guarantor or pledge.” But this merely gives the seller the
equivalent of a security interest in the goods sold, and there is no reason to think it preceded
the recognition of sale.
22
ARANGIO-RUIZ supra note 17, at 57-62.
23
KASER, supra note 2, at 456.
6
law came to enforce a sale-like transaction in which there was only one stipulatio and in
which each party was obligated to whatever good faith required. Finally, a stipulatio was not
necessary.24 That account requires one to imagine an interval of time in which Roman law
treated stipulatio as a contract of good faith and allowed one stipulatio to bind two parties.
There is no evidence that Roman law ever did so. For that matter, as noted, there is no
evidence that parties entered into sale-like transactions by making conditional stipulationes.
According to all of these accounts, the recognition of a sale came gradually because it
took the Romans time either to grasp the idea that a sale could bind the parties in advance of
performance or to work out the practical problems the parties confronted because they were
not bound in advance. It need not have been so. I think it is more likely that by the time that
Roman law recognized such a contract, people were already buying and selling, even though
they knew the law would not give a remedy if the other party did not follow through. Indeed,
I believe that their transactions had already taken on the three features characteristic of the
Roman law of sale: the parties expected to be bound without a formality, to be bound to
whatever good faith required of them, and to be bound upon consent and before performance.
Watson describes the Roman law of sale as “one of the great Roman inventions.”25 I do not
think the Roman jurists invented it. They appropriated it and incorporated it into Roman law.
The reason one can find no evidence of a missing link is because there never was one.
One reason to think that the law of sale originated in this way is that it was, from the
beginning, a contract bonae fidei, obligating the parties to do whatever good faith required. It
would be odd to require the parties to a sale to act in good faith unless people already had
formed expectations as to what good faith required.26 Moreover, it is difficult to believe that
24
WATSON, supra note 1, at 41-43.
25
Id. 40.
26
Meynal thought that, initially, the obligation of the buyer and seller act in “good
faith” meant only that the one should pay the price and the other deliver the goods. Other
7
sale would have been recognized as a good faith contract if previously the parties had trusted
each other so little that they would only trade on the spot or with the use of a stipulatio.
Another reason for thinking so is that other basic concepts of Roman law originated in
a similar way. They were concepts familiar from ordinary experience. The genius of the
Roman jurists was not that they invented these concepts but that they saw their legal
significance, appropriated them, and refined them. Examples are concepts such as possession,
negligence, and consent. They would be familiar in the ordinary experience of people living
in almost any society. Wherever objects belong to people, a person will sometimes possess
an object that does not belong to him. He may pick up another‟s blanket or spear. It is the
same with negligence. In any society, people are taught from childhood to be careful with fire
so they don‟t burn down the house, or hut, or reindeer skin tent, and to mind what they do
with a kitchen knife, a javelin, or a rock. Similarly, it is hard to imagine a society in which it
never matters whether a person gave his consent to something or not. The Roman jurists
appropriated these concepts. They concluded that the possession of a non-owner should be
protected, that a defendant should have an action for harm caused negligently, and that certain
mistakes made by the parties to a sale would vitiate consent and consequently the contract.27
These conclusions seem obvious now, but English law did not arrive at them until the 19th
century.28
Yet another reason for thinking the law of sale originated in this way is a much
discussed passage in a treatise on farming written by Cato around 160 B.C. The passage,
which deals with the sale of olives, is one of several in which he discusses buying and
obligations were said to arise from good faith only later on. Meynal, supra note 20, at 25354. But then it is hard to see why, initially, the obligations of the parties were said to be to act
in good faith rather than to pay the price and delivery the goods.
27
James Gordley, Brendan Brown Lecture Series: Ius Civile and Civil Codes: Lessons
from the Romans, 54 LOY. L. REV. 555, 557-62 (2008).
28
Id. 563-66.
8
selling.29 The other texts merely describe what an astute farmer should buy and sell and on
what terms. As Watson observes, one cannot tell from them whether sale was as yet
recognized because “it may be argued that every time a text seems to be concerned with a
formless contract there was in fact a stipulation.”30 Neither, I would add, can one tell
whether or not the parties expected the obligations that they assumed to be legally
enforceable. In the passage that deals with the sale of olives, Cato advised the seller what
obligations the buyer should assume. He said that that he should have the buyer make a
stipulatio as to one obligation: to pay the price by a certain date.31 This stipulatio, Watson
notes, “does not cover all the obligations of the buyer, especially” the obligation – in Cato‟s
words -- to return in good condition “all presses, ropes, ladders, mills, and whatever else has
been furnished by the owner.” Watson infers, as Kaser did, that the buyer must have been
legally bound to that obligation without a stipulatio, and therefore sale must have been legally
recognized.32 Arangio-Ruiz claimed instead that Cato must have expected the seller to ask for
a stipulatio as to that obligation as well even though he only mentioned the need to do so
when he spoke of the obligation to pay on time.33 That is an odd interpretation. If Cato had
expected a stipulatio to cover the entire transaction, there is not reason he would have singled
out the case of late payment. Nevertheless, the interpretation of Watson and Kaser is odd as
well. If the buyer would have been obligated by the law of sale to pay the price on time, why
would the seller want him to make a stipulatio to do so? The reason cannot have been to
provide firmer evidence of the obligation as a formality such as a document under seal or a
29
CATO, DE AGRI CULTURA c. 146.
30
ALAN WATSON, THE LAW OF OBLIGATIONS IN THE LATER ROMAN REPUBLIC 40
(1965).
31
CATO, DE AGRI CULTURA c.146.
32
WATSON, supra note 30, at 42-43; KASER, supra note 3, at 297.
33
ARANGIO-RUIZ, supra note 17, at 76-77.
9
written contract would in other legal systems. A stipulatio was made orally, and no witnesses
were required. The reason cannot have been to make the buyer assume a more extensive
obligation. Stipulatio was a contract stricti iuris, which, if anything would limit his obligation
by excluding a duty to perform in good faith. Watson cites three texts which “certainly date
from a period after the introduction of the consensual contract [and] still show stipulations
being taken for the price.”34 I do not think the texts must be interpreted that way.35 In any
event, none of them suggest why, after sale was recognized, a purchaser would do such an
odd thing as to ask for such a stipulatio. None of them suggest how the legal consequences
would differ if the buyer made a stipulatio. Yet, by Watson‟s and Kaser‟s interpretation, not
only must there have been a reason that Cato thought a seller should ask for one, but the
34
WATSON, supra note 30, at 43.
35
The first is VARRO, DE RE RUSTICA II.ii.5. It is an obscure passage. It begins by
describing how the buyer and seller of sheep make promises to each other by “the old
formula,” and the promises that they make are indeed those one would use to give a stipulatio.
It ends by saying that the buyer can bring an action on the sale (ex empto) if he does not make
delivery, and the seller can bring a similar action on the buyer if he does not pay the price. It
is very hard to see why a passage that begins the one way should end in the other, and a great
of scholarly energy has been spent trying to make sense of it. But one cannot assume it
means that the parties asked each other for a stipulatio even though they had an action on the
sale.
The other texts are Dig. 18.1.40.2 and Dig. 44.1.14. In the first text, “a seller of land
said that it comprised eighteen acres and a definite price per acre was stipulated.” In the
second text, a son sold a slave and a price “stipulated.” In both texts, the word used was
stipulatus which does have a precise legal meaning: he “made a stipulatio.” In these two
texts, however, could the word have been used in a looser sense to mean he “set” a price? It
is hard to see what evidence one could present either way. One would think a jurist would
always use the term in its precise legal sense. But if it were perfectly clear to the jurist that no
party would ask for a stipulatio if he were protected by action on the sale, he could use it in
the loose sense without creating confusing. Assuming that the term was used in its precise
legal sense, one wonders why the Roman jurists would mention that a stipulatio was made. It
does not seem to add to the rights of seller, and consequently, it does not seem to have
anything to do with the legal problem. Usually, the jurists mention only those facts relevant
to the problem they are addressing. When they do not, it is a sign that they are describing a
real case, not a hypothetical one, and mentioning the extraneous fact because it actually
occurred. It may be then, that, in these two cases, a seller who was not fully conversant with
Roman law asked for a stipulatio imagining that would strengthen his legal position, when, in
fact, it did not.
10
reason must have been so important that he advised him to do so, a piece of advice he does
not give in any other text. It is more likely that Cato thought the seller could trust the buyer to
return all presses, ropes, ladders, mills, and whatever else, without the threat of legal recourse,
but that he should play safe when it came to payment of the price on time. Watson described
this passage as the best evidence that Roman law recognized sale in Cato‟s time.36 Instead, it
is good evidence that Roman law did not.
In the nineteenth century, one historian, Moritz Voigt, did suggest that before Roman
law recognized sale, people were entering into sale-like transactions in which each had a duty
to perform in the future even though this duty could not be legally enforced.37 Most
historians ignored this idea, and Arangio-Ruiz ridiculed it. “A vision of this sort,” he said, is
“inspired by the ever recurrent myth of an age of gold in which innocence presided over
human relationships....”38 People then as now were capable of chicanery.
As it happens, if we look at the pre-commercial societies that anthropologists have
studied, when the parties exchange goods, they often do not rely upon legal remedies. They
trust each other. The reason is not that they live in an age of innocence. To ensure that they
can trust each other, they do not trade with just anyone but with a person with whom they
have a long term relationship.39 If that person violates his obligations, they will not trade with
him again, and the offender may have trouble establishing such a relationship with anyone
36
WATSON, supra note 30, at 42.
37
3 MORITZ VOIGT, DAS IUSNATURALE, AEQUUM ET BONUM UND IUS GENTIUM DER
RŐMER 231 (1875).
38
ARANGIO-RUIZ supra note 17, at 46.
39
MAX GLUCKMAN, THE IDEAS IN BAROTSE JURISPRUDENCE 170 (1965); BRONISLAW
MALINOWSKI, CRIME AND CUSTOM IN SAVAGE SOCIETY 25 (1926); Marshall Sahlins,
Exchange Value and the Diplomacy of Primitive Trade, in ESSAYS IN ECONOMIC
ANTHROPOLOGY. PROCEEDINGS OF THE 1965 ANNUAL SPRING MEETING OF THE AMERICAN
ETHNOLOGICAL SOCIETY 95, 102 (June Helm, ed., 1965); MARSHALL SAHLINS, STONE AGE
ECONOMICS 186-87 (1972).
11
else. The exchanges made within these relationships had two of the three features of the later
Roman law of sale: each party would be expected to conform to prevailing norms of good
faith, and the transaction would be entered into without a formality. Indeed, to ask for a
formality would indicate distrust.
Anthropologists have noted, however, that exchanges in pre-commercial societies
generally lack the third characteristic of the Roman law of sale. The parties are not bound
before performance and upon consent.40 The reason is not that people in these societies have
no general concept of agreement or consent. They do in Kenya.41 Tswana courts recognize
the principle that promises ought to be kept.42 Among the Kapauku Papua, where a creditor
cannot legally demand payment of interest on a loan, a debtor will often pay anyway to avoid
a reputation as one who fails to keep promises.43 The Barotse traditionally condemned people
severely who did not keep promises.44 Yet, in these societies, sale-like transactions are not
binding upon consent.
We can see why if we consider the differences between these societies and ours, or for
that matter, between them and Rome in the 3rd century B.C. In our society, as Melvin
Eisenberg and I have noted, one reason that parties want to bind themselves in advance is that
40
Anthony Allott, A.L. Epstein & Max Gluckman “Introduction,” in GLUCKMAN, supra
note 39, at 1, 74 (African law generally); HANS CORY & M.M. HARTNOLL, CUSTOMARY LAW
OF THE HAYA TRIBE TANGANYIKA TERRITORY 208-09 (1945)(Haya); Yash Ghai, Customary
Contracts and Transactions in Kenya, in IDEAS AND PROCEDURES IN AFRICAN CUSTOMARY
LAW 333, 334 (Max Gluckman, ed., 1966)(Kenya); GLUCKMAN, supra note 39, at 182-83
(Barotse); MAX GLUCKMAN, AFRICAN TRADITIONAL LAW IN HISTORICAL PERSPECTIVE 23-24
(1974)(pre-commercial societies generally); WALTER GOLDSCHMIDT, SEBEI LAW 188
(1967)(Sebei); J.O. Ibik, The Customary Law of Wrongs and Injuries in Malawi, in IDEAS
AND PROCEDURES, supra, at 305,307 (Malawi).
41
Ghai, supra note 40, at 334.
42
Issac Schapera, Contract in Tswana Law, in IDEAS AND PROCEDURES, supra note 40,
at 318, 327.
43
LEOPOLD POSPISIL, KAPAUKU PAPUAN ECONOMY (1963), 349.
44
GLUCKMAN, supra note 39, at 182.
12
each wants to lock in what he regards as a favorable price.45 Each is afraid that he may not
get such a good deal from another buyer or seller or that the market price will change to his
disadvantage. In pre-commercial societies, the parties do not have that reason for wishing an
exchange to be binding upon consent because the rates of exchange typically do not fluctuate,
or at least they are not supposed to do so, except gradually over a long period of time.
Anthropologists have described two types of exchanges that take place in these
societies which Marshall Sahlins has termed “generalized” and “balanced reciprocity.” When
reciprocity is generalized, something eventually must be given back for what is received, but
what and when are left open. The series of transactions can be one-sided over a long period
but eventually it balances out. When reciprocity is balanced, individual transactions are not
one-sided.46 As Gluckman reports of the Barotse, Schapera of the Twana, Firth of the
Tikopia, Haar of Adat or Indonesian customary law, the parties exchange goods that are
regarded as equivalent.47 Some societies have fixed exchange rates in which so many
physical units of commodity A must be exchanged for commodity B.48 Some have an ideal
exchange rate that may not be the average rate at which people normally trade but is deemed
to be the rate that an honest person would demand.49 A person who was charged a different
45
Melvin Eisenberg, The Theory of Contracts, in A THEORY OF CONTRACT LAW: NEW
ESSAYS 206, 279 (Peter Benson, ed., 2001); JAMES GORDLEY, FOUNDATIONS OF PRIVATE LAW
296 (2006).
46
Sahlins, Exchange Value, supra note 39, at 97; SAHLINS, STONE AGE ECONOMICS,
supra note 39, at 191-96.
47
GLUCKMAN, supra note 40, at 24, GLUCKMAN, supra note 39, at 189, 192-93;
Schapera, supra note 42, at 242; RAYMOND FIRTH, PRIMITIVE POLYNESIAN ECONOMY 347-48
(2d ed. 1965); BAREND HAAR, ADAT LAW IN INDONESIA 109 (1948). See also Allott, Epstein
& Gluckman, supra note 40, at 76.
48
GLUCKMAN, supra note 39, at 189; FIRTH, supra note 47, at 347-48; ELIZABETH
CASHDAN, RISK AND UNCERTAINTY IN TRIBAL AND PEASANT SOCIETIES 260-71 (1990);
Schapera, supra note 42, at 242.
49
CASHDAN, supra note 48, at 271; POSPISIL, supra note 43, at 305.
13
rate can rescind the transaction later if he chooses.50 As Cashdan, Firth and Pospisil have
observed, over the long run these exchange rates to respond to the forces of supply and
demand.51 Over the short run they do not.
The reason for trading at fixed or ideal rates of exchange, as Plattner and Cashdan
have noted, is that they protect parties in societies where markets are poorly developed or
non-existent.52 A sudden scarcity in a basic commodity could leave people who happened to
have less of this commodity at the mercy of those who have more. Short term information is
often not worth seeking given the rapidity with which conditions may change and the low
volume of transactions. Fixed or ideal exchange rates protect the parties against the risk of
short term changes in supply and demand and codify information about the conditions of
supply and demand in the long run. Thus, as Firth observed, the exchange rate is set, not for a
particular transaction, but for an infinite series of transactions.53 The parties can obtain this
security only if neither is willing to pursue his short term interest by demanding the most he
can get in a particular transaction. He can do so, as Firth observed, because the particular
transaction is part of an ongoing relationship in which he will be compensated in the future
for the advantage he foregoes in the present.54
In these societies, the parties would not have the motive we described for wishing the
transaction to be binding upon consent. If prices do not fluctuate, they will not be trying to
lock in a favorable price. There may, of course, be another reason why the parties would
50
POSPISIL, supra note 43, at 309.
51
CASHDAN, supra note 48, at 263; FIRTH, supra note 47, at 348; POSPISIL, supra note
43, at 309-10.
52
STUART PLATTNER, ECONOMIC ANTHROPOLOGY 214-16 (1989); CASHDAN, supra note
48, at 264-67.
53
FIRTH, supra note 47, at 348;
54
Id. 349.
14
want to be bound in advance. Immediate performance may not be possible, and one party or
both parties may have to change their position before performance is made in a way that will
hurt them if the other party refuses to perform. In a common situation, an artisan agrees to
make an object that takes time to make, that is not readily available, and that cannot readily be
sold after it is made. In that situation, often, the parties can protect themselves by making a
commitment that is binding in advance. Gluckman was told by the Barotse that if a man
orders a net or a dug-out canoe – only a few of which can be made in a season – he may pay
something in advance. If the item is not made, he only gets back his payment. If the item is
made, he is a provisional owner and can claim it from the artisan or even from an innocent
purchaser.55 An advance payment can also protect the artisan. Among the Haya, a workman
who agrees to make a certain article can ask for an advance payment and keep it if the other
party refuses to take the article and he cannot sell it elsewhere.56
We should not assume, then, that because the parties had no legal remedy before
Roman law recognized the contract of sale, the parties must have completed sale-like
transactions on the spot or used a stipulatio. They would have trusted each other, and, at one
time, may have been able to do so by entering into the sort of stable trading relationships one
finds in pre-commercial societies. Whether or not there were fixed or ideal exchange rates,
the parties to these relationships would have looked to the long term benefit they gained from
the relationship rather than to the short term gain they could make in a particular transaction.
To charge as much as one could or to seek a better bargain from another party would be
disruptive of the relationship, as would any other departure from customary norms of good
faith. To ask for a stipulatio would imply distrust. Sale-like transactions would be entered
55
GLUCKMAN, supra note 39, at 180.
56
CORY & HARTNOLL, supra note 40, at 208.
15
into on the basis of good faith, and informally, but there would have been no reason that the
parties would have wanted them to be binding in advance.
As goods become more abundant, trading more common, and information easier to
obtain, there is less need for the protection that a long term trading relationship can provide.
As goods become more differentiated, it is more burdensome to deal only with a person with
whom one has a trading relationship rather than whomever has the goods that one wants the
most. When money comes into use, goods have prices, and prices can be readily compared.
At some point, the parties to sale-like transactions would rather shop around for goods and be
free to buy or sell at the best price they can find. Prices will fluctuate. The parties will them
have reason for wishing a transaction to be binding in advance of performance that they did
not have before. They may want to lock in a favorable price.
The Romans began to coin money in 275 B.C.57 It is generally agreed that as between
Romans and non-Romans, contracts of sale with the characteristics we have described became
actionable shortly after 241 B.C. when a magistrate, the praeter peregrinus, was appointed to
administer the law in transactions with foreigners.58 As we have seen, it is disputed whether
sale between Roman citizens had been recognized by the mid-second century B.C. when Cato
wrote his treatise on farming. It surely was recognized later in that century. But be that as it
may, what were the Romans doing after they began to use money and before their law
recognized the contract of sale? Presumably, they did not move from a system based on trust
to one in which every transaction was executed on the spot or by making a stipulatio. They
would have continued to trust but now each party would have understood that it was
permissible to trade with whomever offered the better bargain and also that it was no longer
permissible was to back out after the bargain was made. If the parties no longer trusted each
57
MICHAEL H. CRAWFORD, ROMAN REPUBLICAN COINAGE 35 (1976).
58
ALAN WATSON, THE LAW OF OBLIGATIONS IN THE LATER ROMAN REPUBLIC 40
(1965).
16
other because they had a long term relationship, they could do so because the other party had
a reputation for being trustworthy. If he backed out of a bargain, the sanction would be that
he lost that reputation and would no longer be trusted by others with whom he might want to
deal. Most of the time, the other party would prove trustworthy. By recognizing sale, Roman
law did not allow buyers and sellers, for the first time, to commit themselves before
performance without making conditional stipulationes. It gave a legal remedy, for the first
time, against those who reneged on their commitments.
III. THE SECOND MYSTERY: WHY THE ROMANS STOPPED WHERE THEY DID
As mentioned earlier, a second mystery about the Roman law of sale is why the jurists
did not go further. Their law retained features which, to modern eyes, seem primitive. Not all
contracts were binding upon consent but only sale and a few others such as lease, partnership,
and mandatum. The parties to an “innominate” contract such as barter were not bound before
performance. Moreover, the Romans did not recognize a generic sale. It may be, however,
that the Romans were right to stop where they did. Later jurists may have applied the rules of
the Roman law of sales to barter and to generic sale without proper reflection on how these
transactions differ from the ones the Romans had in mind when they developed their rules.
We should consider whether these transactions require different rules.
A. Barter
Although some medieval jurists had expressed surprise that barter, unlike a sale, was
not binding upon consent,59 the attack on the Roman distinction between nominate and
innominate contracts began in the early 17th century. It was launched by the late scholastic
jurist Luis de Molina. Alan Watson has said that “economic and social conditions demanded”
the recognition of a contract of barter that is binding before performance. He believes that the
59
E.g., Iacobus de Ravanis, Lectura Super Codice to C. 4.64.3 (1519; repr. Opera
iuridica rariora, vol.1, 1967)(published under the name of Petrus de Bellipertica: see E.M.
Meiers, Etudes d’histoire du droit vol. 3 Le droit romain au moyen âge 72-77 (1959).
17
Roman jurists failed to do so only because of their allegiance to “legal tradition.”60
Nevertheless Molina thought that the failure to do so had few practical consequences.61 He
meant, presumably, that an important transaction such an exchange of land would be entered
into formally anyway by notarization, a formality which had replaced stipulatio, and that all
that remained was an occasional horse swap. His objected to the Roman distinction because
he thought it was wrong in principle. In a barter, according to Roman law, the parties could
transfer ownership by delivery. He saw no reason why, if they so intended, they could not
transfer upon consent the right to demand delivery. A court should ascertain their intent by
examining the “circumstances.”62 Molina concluded that “everything, indeed, concerning ...
innominate and innominate contracts that was invented and introduced by the pagans more
subtly than usefully should be abolished.”63 His contemporary Leonard Lessius agreed that
the Roman distinction had no principled justification, but for a different reason. He claimed
that Molina had failed to recognize that promises are binding simply because they are
promises and not because of the precise intention with which they are made. A promise was a
commitment to do something, not a mere statement about what one would do. Therefore
every promise gave rise to an obligation.64
In the 17th and 18th centuries, these arguments
were repeated by the leaders of the northern natural law school, Hugo Grotius, Samuel
Pufendorf, and Jean Barbeyrac. Grotius and Barbeyrac made the argument of Molina.
60
WATSON, supra note 1, at 34.
61
LUDOVICUS DE MOLINA, DE IUSTITIA ET IURE TRACTATUS disp. 255 (1614). He was
repeating a remark made by Bartolus de Saxoferrato in the 14th century. BARTOLUS DE
SAXOFERRATO, COMMENTARIA CORPUS IURIS CIVILIS in OMNIA QUAE EXTANT OPERA to C.
4.6.2 (1615).
62
63
MOLINA, supra note 61, at disp. 262.
Id. disp. 258.
64
LEONARDUS LESSIUS, DE IUSTITIA ET IURE CETERISQUE VIRTUTIBUS CARDINALIS LIBRI
QUATUOR lib. 2, cap. 18, dub. 2 (1628).
18
“Why,” Grotius asked, “may there not be transferred a right in personam either that
ownership be transferred or that something be done?”65 Barbeyrac concluded that “if a purely
gratuitous promise can confer a true right, then the one to whom the promise was made has
certainly lost a right that he had acquired.”66 Pufendorf conflated the arguments of Molina
and Lessius. Every “perfect promise” gave rise to an obligation because “it is a perfect
promise when a man not only declares his will for a future time to perform something for
another, but also shows that he gives him a right whereby the other is fully entitled to demand
of him the thing promised.”67 The Roman distinction between nominate and innominate
contracts came to be regarded, at best, as a peculiarity of Roman positive law, and, at worst,
as a mistake. The distinction fell into discredit and was abandoned by the courts.68
These arguments are based on the assumption that, typically, the parties to a barter do
intend or implicitly promise that neither will withdraw from the arrangement. That
assumption may be incorrect. It might seem as though the parties to a barter would want to
lock in a favorable bargain just as the parties to a sale might want to lock in a favorable price.
We have seen that Romans may have recognized sale to enable them to do so. Nevertheless,
although the parties to a sale typically are seeking the best bargain they can make, it is hard to
say what is typical of the parties to a barter. In some cases, an intention to bind the other
party legally would be repugnant to the reason the parties chose to barter instead of to buy and
sell. One party might want a unique item that the other party has but, because they are
friends, relatives, neighbours or colleagues, they might prefer to barter because a cash
65
HUGO GROTIUS, DE IURE BELLI AC PACIS LIBRI TRES II.xi.1.3 (B.J.A. de Kanter-van
Hetting Tromp, ed., 1939).
66
JEAN BARBEYRAC, LE DROIT DE LA NATURE ET DES GENS . . . PAR LE BARON DE
PUFENDORF n. 10 to III.v.10 (1734).
67
SAMUEL PUFENDORF, DE IURE NATURAE ET GENTIUM LIBRI OCTO III.v.7 (1688).
68
ZIMMERMANN, supra note 1, at 538-40, 544-45.
19
transaction seems commercial. Artists frequently trade their work with each other in part
because it would be embarrassing for them to buy and sell for cash based on the estimated
market value of the work of each artist. One of the parties might be trying to do the other a
favor and wish to barter because the favor is less obvious than if he had adjusted the price.
During the Depression my wife‟s grandfather, a general practitioner, used to accept cuts of
lamb and beef from a local meat dealer in return for the medical services he provided as his
family physician. I suspect that my grandfather-in-law was receiving less meat than he could
have purchased for his normal fee because he wanted to help his patients in hard times, but it
may be that the dealer was doing him the favor and giving him more meat than his normal fee
would buy because the dealer knew that many of his patients were no longer paying their bills
and noticed that he was no longer buying choice cuts of meat. Or it could be that the meat
dealer is like a lost-volume seller, a person we will discuss shortly: he can sell as much meat
as his customers order. If the doctor would not otherwise have bought the meat traded for his
services, then he is like an extra customer. When they regularly exchange meat for medical
services, the doctor has done the dealer a favor by becoming a regular customer. The dealer
may have exchanged a favor by becoming a regular patient, thus establishing a trading
relationship. In a sale, it is typical for each party to be interested only getting a good bargain.
In a barter, it is hard to say what is typical.
Moreover, even if each party to a barter were interested only in getting a good bargain,
they might not have the same reason for wanting the transaction to be binding in advance as
the parties typically do in a sale. Each party to a sale has the choice of taking the price that
the other party proposes or waiting and looking for a better one. If the parties choose not to
look further, each is insuring himself against the loss he would suffer if he later obtained a
worse price by forfeiting the gain he would make if he obtained a better one. If the parties are
risk averse, they would want to insure even if each believes that, if he looks further, he is as
likely to get a better price as to get a worse one. The parties to a barter may not be insuring
20
themselves against such a risk. They may have chosen to barter rather than to buy and sell,
not to avoid the risk that if they will find worse terms if they look further, but to take
advantage of the coincidence that each happens to have the very thing that the other wants.
Each may have something that the other regards as very special and that may each believe that
he would have trouble obtaining any other way. Or they may be bartering in order to avoid
such extra costs as broker's fees, taxes, possibly, and, in any case, the time and money spent in
looking for a good price. In either case, the coincidence may be unlikely to happen again if
they do not trade with each other. The Roman jurist Paulus said that the sale replaced barter
because “it did not always and easily happen that when you had something I wanted, I, for my
part, had something that you would accept.”69 He was incorrect about the role of barter in the
pre-commercial societies that he imagined that he was describing. As we have seen, people in
pre-commercial societies who have nuts and need milk do not go roaming in search of those
with the opposite needs. They form trading relationships for goods they need regularly.
Nevertheless, he correctly described the adventitious role that barter plays in a society like his
or ours in which people regularly buy and sell. It may be then, that the parties who find
themselves with the opportunity to barter would not want the transaction to be binding in
advance because they are trying to limit the risks of looking further. Neither may think that if
he looks further he can make a similar trade on better terms with someone else, and neither
may have considered whether, if he had to buy and sell rather than barter, the prices he could
obtain later on will be better or worse that the ones he could obtain at the moment. If one
party wishes to lock in the other in advance of performance, in the reason is more likely to be
a fear that the other party will back out, not because he has found better terms, but because he
has reconsidered and decided the exchange would make him worse off rather than better.
69
DIG. 18.1.1.pr.
21
One reason a party might be afraid that the other party will reconsider is that he
recognizes that a sensible person in his position would have agreed to such an exchange. He
is afraid the other party will realize he acted foolishly and want to back out. It is hard to see
why the law should hold the other party bound in advance if the only purpose served were to
allow him to be gulled. In any event, it is unlikely that both parties would want the
transaction to be binding upon consent for this reason, each believing he has gulled the other.
Even if both of them did, it is hard to see why the law should respect a bet they placed on
which of them has been gulled.
Another reason that one party might be afraid that the other will reconsider is that his
circumstances may change or he may simply change his mind. He may no longer want to
part with a horse because his other horse has died, or he may no longer want to acquire mule
because he could not renew the lease on his farm. Or, having thought the matter over, he may
have decided he is better off keeping the horse or not acquiring the mule. Again, it is hard to
see why the fear that he will reconsider is a reason for wanting to locking him in that the law
should respect. An objective of contract law is to enable the parties to make contracts that
leave each of them better off, at least in his own estimation. Sometimes the law will enforce a
contract although it is clear in advance that one party or the other will end up worse off than if
he had not contracted because the purpose of the contract is to insure against a risk, such as
the risk that a house will burn down, or, in a sale, the risk that one will find worse terms if one
waits and looks further. Here, however, the reason that one party wants to lock in the other is
because he might decide that the exchange will make him worse off. If he is free to withdraw,
it may be that the parties can renegotiate and make a new deal that leaves each of them better
off. It may be that no exchange on any terms that both parties will accept will make both
parties better off. In either case, it is hard to see what good purpose is served if the party who
has reconsidered is not allowed to withdraw. The advantaged party would gain but only by
22
the other party's loss and only by the accident that he made an error about where his true
interests lay which he could costlessly correct before performance.
Moreover, it is unlikely that both parties would want the exchange to be binding in
advance of performance for fear that the other would reconsider. They would be placing a bet
on which one of them had made an error that could corrected without any cost to the other
party. Risk averse people do not bet on a matter that is uncertain when the uncertainty can be
removed without cost. If one party finds an unopened trunk in the attic of a house that he
inherited from his grandfather, he is not likely to sell it unopened when, depending on its
contents, either he or the purchaser will greatly regret the transaction afterwards. If a party
swapping his horse for a mule thought that he might need the horse because his other horse
might die, or that he might not want the mule because the lease on his farm might not be
renewed, he would not commit himself to the exchange if the truth could be learned in
advance of performance and before the other party had incurred any expense or given up any
opportunities to enter into an alternative transaction. He would make the contract conditional
on the survival of the horse or the renewal of lease. A party may not have thought about the
possibility that he might reconsdier. But then one must ask what he would have done if he
had.
Sometimes, the parties to a barter may be in much the same position as the parties to a
sale. There may be alternative transactions available to them, and each may be giving up his
chance to exchange elsewhere on more advantageous terms in return for a like commitment
by the other party. They would each be limiting the risks they will run if they shop around.
As Robert Scott said, rules should be made for the majority of cases,70 a point also made by
Thomas Aquinas.71 It may be that the majority of cases, the parties to a barter, unlike the
70
Robert E. Scott, The Case for Market Damages: Revisiting the Lost Profits Puzzle, 57
U. CHI. L. REV. 1155, 1172 (1990).
71
THOMAS AQUINAS, SUMMA THEOLOGIAE I-II, Q. 94, a. 4.
23
parties to a sale, the opportunity to reconsider would be of more value to the parties than
insurance against having to against having to exchange on less advantageous terms. If so, the
Romans should not be faulted for applying different rules to sale and barter.
B. Generic Sale
The other point on which the Romans have been faulted is their refusal to extend the
law of sales to a generic sale. As we have seen, in the 17th century, when jurists attacked the
distinction between nominate and innominate contracts, as we have seen, their arguments
begged the question. Iin the Middle Ages, when jurists extended the Roman law to extended
to generic sale, there was no discussion at all. In the Ordinary Gloss to the Corpus Iuris of
Justinian, Accursius, speaking of a sale of so many amphrorae of wine, simply noted, “and so
it is the sale of a quantity or of a genus, which is the same.”72 The medieval jurists often
failed to explain the reasons for their conclusions. Here, however, absence of discussion may
have been due in part to absence of a Roman text standing in the way. No text said that a
generic sale would not be enforced. We know that the Romans did not enforce such a sale
largely because no text mentions one.73 Why the medieval jurists accepted the generic sale is
pure conjecture. Perhaps they saw no reason why they should not. Perhaps they did so
because the leading philosophical issue of their day was the existence of “universals”: of
“cow,” rather than this or that cow. John of Salisbury said that the scholars of his age had
spent more time on this problem than the Caesars did conquering the world.74 The jurists,
aware that one could conceive of things in either way, may have thought that one could sell
them in either way. Perhaps, instead, they were responding to a commercial need. In ancient,
72
ACCURSIUS, GLOSSA ORDINARIA to C. 4.48.2 to veneant (1551). See generally
Wolfgang Ernst, Gattungskauf und Lieferungskauf im rőmischen Recht, 114 ZEITSCHRIFT DER
SAVIGNY-STIFTUNG FŰR RECHTSGESCHICHTE, ROM. ABT. 303 (1997).
73
BUCKLAND, supra note 11, at 484.
74
ETIENNE GILSON, HISTORY OF CHRISTIAN PHILOSOPHY IN THE MIDDLE AGES 152
(1955).
24
medieval and modern times, merchants have needed to protect themselves against fluctuations
in commodity prices. Since the Middle Ages, a generic sale of goods for future delivery has
been a common way to do so. In Roman times, there were substitutes.75 Not knowing of
these substitutes, the medieval jurists may have been using the Roman law of sale to meet a
commercial need that in Roman times had been met in other ways. There is no way to know
what was on their minds. The result, however, was that a body of law that had been
developed for the sale of specific goods was carried over to a generic sale without reflection
as to whether all of it should be. There must, of course, be some way to insure against price
fluctuations. It is not clear that the right way is to apply the same rules as in a non-generic
sale.
1. The lost-volume seller. -- One difficulty with doing so is illustrated by the problem
of what damages to award to the lost volume seller. The lost volume seller was mentioned
earlier. He is a person who could have made an extra sale if the buyer had not withdrawn
from his contract. Suppose someone ordered a Thanksgiving turkey from a meat dealer and
then cancelled the order an hour later. If the dealer can sell as many turkeys as he has orders,
he has lost the profit he would have made by selling an additional turkey. In a well known
American case, a man signed a contract with a store to buy a boat that he had picked out of
the store catalogue. The store put the boat on order for him. Because of a medical problem,
he could not sail and wanted to cancel the order. The store sold the boat it had put on order
for him to another person. It claimed damages for the profit it had lost. Had he not cancelled
his order, it would have sold two boats, one to him and one to the person who bought the boat
that it had put on order. The store recovered.76 Although this problem could arise in a sale of
75
Wolfgang Ernst, Kurze Rechtsgeschichte des Gattungskaufs, 7 ZEITSCHRIFT FÜR
EUROPÄISCHES PRIVATRECHT 600 (1999).
76
Neri v. Retail Marine Corp., 285 N.E.2d 311 (N.Y. 1972).
25
specific property it is much more likely to do so in a sale of generic goods.77 As the First
Restatement of Contracts noted:
“Specific goods cannot be sold twice; therefore their market value obtainable
on another sale is deducted. But manufacturing facilities can usually be
expanded to meet all demands; therefore profit made on the manufacture and
sale of a second article is not deducted. And the same is true in the case of a
contract to sell a non-specific article, of which the supply in the market is not
limited.”78
American courts have consistently held that the lost volume seller can recover
damages for the profit he would have made on the extra sale.79 They are applying a rule to
the sale of generic goods a rule that was developed by the Romans for the sale of specific
property, the rule that the party in breach must compensate the other for what became known
in the Middle Ages as lucrum cessans and damnum emergens,80 for lost profit and harm
suffered. We say that he must pay expectation damages, the amount that will make the other
party as well off as if he had not breached.81 In the case of the meat dealer and the boat store,
that amount includes the extra profit they would have made on the extra sale. Although courts
consistently award this amount, there is a vigorous discussion by scholars as to whether they
should. We have finally begun to consider whether a rule developed for the sale of specific
property should be carried over to a sale of generic goods.
77
As Cooter and Eisenberg note, it can arise in contracts to complete a certain work,
such as a building. The contractor is awarded the profit he would have made had the work
been completed. Robert Cooter & Melvin Eisenberg, Damages for Breach of Contract, 73
CALIF. L. REV. 1432, 1469-70 (1985). The Roman texts that deal with such a contract
(locatio conductio operis) deal with such matters as the damages to be awarded if the
contractor is unable to complete the work but do not provide for the recovery of lost profits.
See Zimmermann, supra note 1, at 401-04.
78
Restatement of Contracts 336 cmt. c (1932).
John M. Breen, The Lost Volume Seller and Lost Profits Under U.C.C. 2-708(2): A
Conceptual and Linguistic Critique, 50 U. MIAMI L. REV. 779, 781 ( )
79
80
81
Zimmermann, supra note 1, at 827.
On the differences between the modern concept of expectation damages and the
Roman rules, see id. 826-27.
26
While a full discussion would require an article in itself, from what has already been
said, we can see prima facie why to do so is a mistake. We have seen that the law should
respect some but not all of the reasons that one party might have for wanting to lock in the
other in advance of performance. Among the reasons it should respect are a party‟s need to
change his position in advance of performance and to insure against the risks of waiting and
looking for a better price. Among the reasons it should not respect are to prevent the other
party from withdrawing if, on reconsideration and before performance, he decides that an
exchange will make him worse off. That was the situation in the case of the boat store. The
boat store had not changed its position in any way that harmed it. The price that the store
received for the boat had not changed. The customer had not tried to cancel because he had
found a better deal elsewhere. Because of a medical problem, buying a boat would make him
worse off. No good purpose is served by awarding the seller a gain that he only made because
the buyer learned of the medical condition after the boat was put on order. Robert Scott
describes “[t]he right of cancellation” in lost volume cases “as an insurance policy purchased
by the buyer.”82 According to Scott, depending on how much insurance the buyer will pay
for, “[t]he seller can choose either to market the product at a high price with a lenient
cancellation policy, or at a lower price with a harsher cancellation policy.”83 The risk in
question, however, is that the seller will lose his chance to sell his product to someone who
does not want it. It is hard to see why the law would place that risk on the buyer who then
needs to buy insurance against it.
Moreover, in a truly competitive market in which both parties had their eyes open and
in which the terms of their contract could be negotiated costlessly, one would expect the
amount the buyer would pay for such insurance to fall to zero. Suppose the person who
82
Scott, supra note 70, at 1183
83
Id. 1183
27
wished to buy the turkey or the boat thought he might wish to cancel his order because he had
doubts about his Thanksgiving plans or his medical condition. Suppose he could negotiate
with two competing dealers or stores over the extra amount he would have to pay for the right
to cancel his order provided that they had incurred no expense. If each seller were trying to
underbid the other, each would agree to make his order cancellable without any extra charge.
Each seller would lose nothing if he cancelled and would gain if he did not.84 Under
competitive conditions, then, it is hard to think that the parties would make a contract in
which the buyer who cancels is liable for the profit that the seller failed to make. A seller
could not cut his price to induce a buyer to take that risk.
If the buyer is free to cancel, however, then he is not in breach of his contract if he
does. One should not assume that he is and then ask what remedy he should have. It is easy
to make that assumption. As Robert Cooter and Melvin Eisenberg explain, a reason for
awarding expectation damages is that, [i]f the promisor does not perform, the promisee loses
his share of the value of the contract. If the promisor is liable for that loss, he internalizes not
84
A similar argument is made by Cooter and Eisenberg to explain why, in the sale of
“off the shelf” services to a consumer, such as a series of dancing lessons, the buyer would
not agree, nor the seller insist, that the buyer compensate the seller for the profit that he would
have made by having one more customer. “In effect, such a provision would allocate to Buyer
all the risks entailed by his change of mind. Buyer would be unlikely to accept such a risk
allocation, because it would be greatly disproportionate to both the benefit to be derived
(which is not the dancing lesson itself, but the reservation of a place in line and the personal
commitment), and the harm inflicted on Seller in terms of how much worse off he is as a
result of having made the contract. Seller, for its part, would not be likely to insist on such a
risk allocation, because (a) if he did so he would diminish his profitability, since too few
consumers would sign contracts; (b) it would be unnecessary to do so, in light of the relatively
low degree of harm he will suffer; and (c) as we shall show, Seller could utilize other
mechanisms that would address his needs at significantly less cost (and therefore greater
acceptability) to Buyer than lost-surplus damages.” Cooter & Eisenberg, supra note 77, at
1472. A similar argument could be made in any case in which the seller‟s commitment is of
little value to the buyer, and the seller has incurred no extra cost. In that event, the seller
should not be able to recover his lost profit as a general rule, not only in the sale of “off-theshelf” services. But that is not the position that Cooter and Eisenberg take. See notes 85 &
86, infra.
28
only his own loss but the losses to the promisee that result from his failure to perform.”85
They conclude that an award of lost profits “will cause the buyer to internalize the full
benefits of the contract” to a lost volume seller.86 But if the contract gives the buyer a right to
cancel his order, he is not failing to perform his contractual obligations. The profits that the
lost volume seller loses are not “benefits of the contract.” Similarly, Victor Goldberg wishes
“to view the retailer as a fisherman and ask what he loses if someone liberates a fish from his
catch.” But that assumes he has caught the fish.87 As Robert Scott notes, we cannot discuss a
remedy until we know whether, implicitly, there was a right to cancel.88
2. Drastic change in the market price.--A second difficulty concerns a question
which, as we will see, has been improperly characterized as whether the doctrine of changed
and unforeseen circumstances relieves the seller of an obligation to deliver generic goods
when the market price has changed drastically.
In the early 20th century, the highest German court for civil matters, then called the
Reichsgericht, flip-flopped, holding first that no relief could be given in such a case, and then
that it could. In a case decided in 1916, the defendant had sold brands of English tin on July
14, 1914, for future delivery. He refused to deliver tin after the price rose in October because
war had made it impossible to import the tin through Holland. The Reichsgericht held that he
was liable for the full difference between the market price and the contract price.89 In 1921,
the Reichsgericht repudiated that position. A party who had sold who had sold ten tons of
85
Id. 1463.
86
Id. 1470-71.
87
Victor P. Goldberg, An Economic Analysis of the Lost-Volume Retail Seller, 57 S.
CAL. L. REV. 283, 298. Although Goldberg thinks that an implication of the Coase theorem is
that it does not matter whether or not the lost volume seller recovers damages for his lost
profit. Id. 294-97.
88
Scott, supra note Error: Reference source not found, at 1171
89
Reichsgericht, 21 Mar. 1916, RGZ 88, 172.
29
iron wire in October, 1918, refused to deliver it when the price had soared due to the German
military defeat. The court applied the doctrine of changed circumstances (clausula rebus sic
stantitbus) to relieve the seller of his obligation.90 The view of the German courts is still that
the doctrine applies to radical and supposedly unforeseen changes in prices.91
In the United States, it is an open question whether a seller would receive relief in
such a case under the doctrine of changed or unforeseen circumstances, or, in the language of
the Uniform Commercial Code, of “commercial impracticability.”92 The question arose in the
Westinghouse litigation.93 Westinghouse had agreed to provide a continuing supply of
uranium at a fixed price to fuel nuclear generators. The price of uranium then skyrocketed
due to the Arab oil crisis. The case was settled before appeal.
In my view, the seller should be given relief in such a case, not because the change in
price was unforeseeable, but because the rule that the Romans applied to the sale of specific
goods should not be carried over to a generic sale.
In a sale of specific goods, if the market price rises, the gain must go to someone,
either the buyer or the seller. In Roman law, it goes to the buyer. That is as it should be since
a sale is meant to transfer ownership to the buyer along with it the risks associated with
ownership such as the risk that the market price of what he owns will change. If the seller
could back out, he would be keeping for himself a gain that the buyer should have received.
90
Reichsgericht, 29 Nov. 1921, RGZ 103, 77, 78.
91
On the development of German doctrine, see John P. Dawson, Judicial Revision of
Frustrated Contracts: Germany, 63 B.U.L. REV. 1039 (1983).
92
U.C.C. § 2-615.
93
See generally Paul L. Joskow, ACommercial Impossibility, the Uranium Market and
the Westinghouse Case, 6 J. Leg. Stud. 119 (1977).
30
In contrast, in a sale of generic goods, typically, if the market price rises, the seller
who backs out is not keeping for himself the gain that results from the increase.94 He is
escaping the loss that he would suffer if he had to buy the goods at the increased market price
to deliver to the buyer. In the German case described earlier, the appellate court had denied
relief on the ground that the seller should have bought earlier instead of waiting to buy until
the market went up. Paul Joskow made the same argument as to why Westinghouse should
not recover.95 The Reichsgericht, quite rightly, rejected that argument, noting that in a
contract to deliver generic goods (Gattungsschuld) “the usual thing is for the seller to buy the
product on the open market” and that [i]n general, it is assumed that the seller will obtain the
product in this fashion....”96 Nor did the court say that the seller was trying to pocket a gain.
It was trying to avoid a loss. Nevertheless, the court claimed that if “obtaining the product at
the market price imposes an especially great sacrifice on the seller, then, when no delivery is
made, the same loss falls on the buyer” even if it takes “the form of a lost gain.” “If the seller
were to be freed by unforeseen, unusual increases in the market price, then the damages ...
would only be shifted from one shoulder to the other.”97 That might not be true. The buyer
might not incur the expense of buying the same goods at the increased market price because
the price has increased so much that buying them is not the most profitable course of action.
If the price of uranium had risen enough, the buyer who recovered expectation damages
would not buy uranium. Had the uranium had been delivered, he would have resold it rather
94
Consequently, I do not see how the analysis that Jeffrey Perloff applies to the case of
a farmer selling his crops for future delivery can be carried forward, as he says it could be, to
the case of a dealer who breaches because the price of his “inputs” rises. The farmer is trying
to adjust the risk on the crop he raises by selling forward. The dealer is insuring the other
party against some loss he may suffer. Jeffrey M. Perloff, The Effects of Breaches of
Forward Contracts due to Unanticipated Price Changes, 10 J. LEG. STUD. 221, 233 (1981).
95
Joskow, supra note 93, at 162,
96
RGZ 88, at 174.
97
Id. 175.
31
than using it to make electricity. If the uranium was not been delivered, to say that the buyer
lost the difference between market and contract price is to assume that he had a right to it in
the first place, which is the point in dispute.
As Joskow notes, the reason that the parties would enter into a contract for the future
delivery of generic goods like the one in the Westinghouse case is to insure against changes in
the market price which, if they occur, will hurt one or both of them.98 It is a contract of
insurance cast in the form of a contract of sale. But it doesn‟t follow, as Joskow believes, that
the seller assumes the risk of a rise in price, however drastic.99 The seller‟s potential liability
would then extend beyond any loss that the buyer will have suffered. A person who buys fire
insurance for his house does not insure himself for more than the value of the property that he
owns that might be destroyed. The reason is not merely that the insurer would refuse for fear
that the insured might burn down the house to collect the insurance. If the parties are risk
averse, the insured himself would not be willing to pay the amount an insurance company
would charge to cover such as loss. It would be as though the parties had insured the house
for is full value and then placed a side bet on whether the house would be destroyed by fire.
If the buyer of uranium is allowed to recover an amount greater than any loss he suffered, it is
as though the seller had insured him against the loss he feared, and then the parties made a
side bet on how high the market price would rise. They would not do so because risk averse
people to do not gamble.
3. The warranty against defects.-- A third difficulty concerns the seller‟s warranty
against defects.
98
Joskow, supra note , at 173
99
Id.
32
a. When are goods defective? – In Roman law, originally, the buyer of slaves
and cattle had a remedy for defects which impaired their fitness for their ordinary use. 100
Eventually this rule was extended to all sales.101 The seller was not liable for what we call
expectation damages unless he knew of the defect and kept silent, or unless he had told the
buyer that the goods were not defective. Instead the buyer had one of two remedies. He
could rescind the sale if the defect was sufficiently important. Or he could require the seller
to reduce the price to the amount he would have paid had he known of the defect.
The rule that goods are defective when they are unfit for their ordinary use passed into
modern civil law.102 Eventually it passed into common law. Originally, the common law rule
was caveat emptor. In 1844, William Story observed that the rule of caveat emptor had been
so undermined by exceptions that "there has been a tendency in the common law to
approximate to the rule of the Roman law, which implies a warranty, that the goods sold are
merchantable, and fit for the purpose for which they are known to be bought."103 The
approximation became still more perfect when, in 1877, the Court of Common Pleas declared
the Roman rule to English: a buyer of spoiled rabbits could recover on "an implied warranty
that goods shall be fit for the purpose for which they ordinarily would be intended to be
used."104 The rule was approved in later English and American decisions105 and finally
enacted as Section 2-314(2)(c) of the Uniform Commercial Code: an implied warranty of
100
D. 21.1.1.7; D. 21.1.1.8.
101
There is a controversy, however, as to when it was extended. For a discussion see
ZIMMERMANN, supra note 1, at 319-22.
102
German Civil Code (Bűrgerlichesgesetzbuch § 434; French Civil Code (Code civil)
art. 1641.
103
WILLIAM WENTWORTH STORY, A TREATISE ON THE LAW OF CONTRACTS NOT UNDER
SEAL 333 (1844).
104
Beer v. Walker, [1877] 46 L.J. Q.B. 677.
105
William Prosser, The Implied Warranty of Merchantable Quality, 27 MINN. L. REV.
117, 130-36 (1943).
33
merchantability is breached if the goods are not "fit for the ordinary purpose for which such
goods are used."
The rule works well for the sale of specific as distinguished from generic goods. A
racehorse is merchantable when, despite physical impairments, it can win three races in
thirteen starts.106 Pigs are not merchantable when they are infected with cholera and so unfit
for any purpose.107 When the contract is for fungible generic goods, the test must be
supplemented since it does not make sense to ask if “wheat” is fit for its ordinary use, as long
as it is edible, but it does to ask what grade of wheat the seller must provide. According to the
Uniform Commercial Code, he must provide goods of “fair average quality.”108 The test
works poorly indeed when the contract is for the sale of goods made to a manufacturer's
specifications, and the question is whether the design of the goods is defective. As White and
Summers have noted, "in most cases, to say goods are fit for the ordinary purpose does little
to advance the analysis; it ... does nothing to tell a lawyer whether the protective guards
around the sides of a rotary lawnmower are sufficient...."109 It is one more instance in which a
rule developed by the Romans has been applied to a type of transaction that the Romans did
not have in mind.
b. Liability for delivering defective goods versus liability for failing to deliver.- Another difficulty is that, in a generic sale, it becomes difficult and in many cases
conceptually impossible to distinguish liability for delivering defective goods from liability
for failure to deliver. That distinction matters when, as in Roman law and in many modern
106
Sessa v. Riegle, 427 F. Supp. 760 (E.D. Pa. 1977), aff'd w'out opinion, 568 F.2d 770
(3d Cir. 1978).
107
Garner v. S & S Livestock Dealers, 248 So.2d 783 (Miss. 1971).
108
U.C.C. § 2-314(b).
109
JAMES J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE 668, § 9-13
(5th ed. 2006).
34
legal systems, the buyer‟s remedies will be different. In Roman law the seller‟s duty to
deliver was straightforward. He had to give the buyer free and undisturbed possession of a
particular object such as the cow in his barn or the grain to be harvested on his land.110 The
seller who did not deliver had refused to give up the cow or the grain. He was liable for an
amount the corresponded to what we call expectation damages. When the Roman rules are
carried over to a generic sale in which goods are sold according to a description, it is not clear
how to characterize the seller‟s failure to deliver goods that match that description: as a failure
to deliver, or a delivery of defective goods. In France, when a manufactuer sold a home
builder “a coating material called Lutèce Projext which was unsuitable for exterior use, which
the court said was “the use defined by the contract,” the court held the manufacturer liable for
“non-delivery.”111 So did another French court when the plaintiff who had bought a car
called a “Flipper” from a dealer in that brand and claimed that there was “an error in a design
and in construction.”112 So did a court in Louisiana when, in a generic sale of timber to a
lumber company, the seller delivered timber that was green and “wet and off grade and was
unusable” as well as being “rough timber,” which the court said, “is not merchantable except
for a few specific purposes.”113 Similarly, in another Louisiana case, the seller who delivered
diesel fuel that “was not of the specifications and quality which had been ordered” was held
liable for failure to deliver the goods called for by the contract.114 As Zimmermann has
observed, the problem of distinguishing, in a generic sale, between failure to deliver and
110
BUCKLAND, supra note 11, at 488.
111
Cass. 1e civ., June 17, 1997, Bull. civ. I, no. 205.
112
Cass. 1e civ., Dec. 13 1989, Bull. Civ. I, no. 393.
113
Mabry v. Midland Valley Lumber Co., 47 So. 673 (La. 1950).
114
Victory Oil Co., Inc. v. Perrett, 183 So.2d 360 (La. App. 1966).
35
delivery of defective goods was noted by German jurists in the 19th century. It was one that
the German Civil Code failed to resolve.115
c. Cure.-- Another difficulty is that in Roman law, the seller who delivers
defective goods does not get a second chance. As we would say, he cannot cure. As a result,
when goods were defective, the buyer was able sometimes defeat one of the purposes of
entering into a sale in advance of performance: to lock in a good price. If the goods were
defective and the buyer had found he could get a better price elsewhere, he could rescind the
contract. If he found the bargain advantageous could merely claim a reduction in price. The
result was unfortunate, but, as Zimmermann has noted, “[t]he supply of another object, free
from defects, is impractical, probably even conceptually inconceivable, as far as the sale of
specific objects is concerned.”116 The seller cannot cure by giving the buyer a different horse.
In a generic sale, the seller not only can cure by providing other goods of the same type, but to
fail to let him do so is even more destructive of the ends for which such contracts are typically
made: to insure against changes in the market price. It is now widely recognized that the
buyer should have the right to rescind only after he has allowed the seller a reasonable
opportunity to cure. That rule has been accepted by an amendment to § 2-508 of the Uniform
Commercial Code approved by the National Conference on Commissioners of State Laws and
the American Law Institute, by the German reform of obligations of 2002,117 by the United
Nations Convention on the International Sale of Goods,118 and by the Principles of European
Law.119
115
116
REINHARD ZIMMERMANN, THE NEW GERMAN LAW OF OBLIGATIONS 88-89 (2005).
Id. 90.
117
Although the rule is not spelled out in German Civil Code (Bürgerlichesgesetzbuch) §
437. ZIMMERMANN, supra note 115, at 104.
118
UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS art. 48.
119
PRINCIPLES OF EUROPEAN CONTRACT LAW SALES art. 4-203(1).
36
d. The buyer's remedy.--Yet another difficulty concerns the damages the buyer
should recover. In Roman law, unless the seller knew of a defect or expressly denied that the
goods were defective, the buyer could only rescind the sale or require a reduction in price.
Roman law treated the existence of a defect unknown to the seller as an accident for which
neither party is responsible. The buyer was allowed to undo the sale, but the seller was not
liable for the harm that the buyer had suffered because of the accident. That rule made sense
with the sale of specific goods. There is no point in shifting losses caused by accident from
the person on whom they happen to fall to someone else. There is no reason that the seller
typically would be a better position than the buyer to assume the risk that the buyer will suffer
a loss on account of an unknown defect. If the parties wished to shift that risk, in Roman law,
the seller could deny the existence of a defect, thereby giving what we would call an express
warranty.
In a generic sale, however, a seller may typically be the party better able to bear such a
risk. Generally speaking, the party best able to bear a risk is the one who can best foresee it
and control it and who will confront the risk in a larger number of transactions. The party
who is better able to foresee the risk can more easily bear it since risk is uncertainty and he is
the least uncertain. In the same way, a hand of poker is less risky for a player who has peeked
at another players‟ down card. The party who can best control the size of the risk can more
easily bear it because he can take measures to reduce its size.120 One could not place that risk
on the other party without creating the additional risk that the first party will not take the
measures he should. The party who faces the risk of loss in many transactions can, in effect,
self insure by charging a bit more in each and absorbing the loss when it occurs.121 He can
bear the risk more easily for the same reason an insurance company can more easily bear the
120
Richard A. Posner & Andrew M. Rosenfield, Impossibility and Related Doctrines in
Contract Law: An Economic Analysis, 6 J. LEG. STUD. 83, 90 (1977).
121
See id.
37
risk that a house will burn down or a casino can more easily bear the risk of a losing throw of
the dice. Sometimes, one who sells specific property may, for these reasons, be the best one
to bear the risk that it will be defective. More frequently, however, the person making a
generic sale will be the best one to bear that risk. A dealer in a fungible commodity may be
better able to foresee and control the risk that he is buying bad goods. A manufacturer of
goods made to his own specifications may be better able to foresee and control the risk of
defects in design or manufacture. As long as they are engaged in the business of selling
goods of the same type, the risk that the goods are defective will be the same in each
transaction, and they can spread it by charging each customer a higher price.
Consequently, it is not surprising that after the Roman rules were extended to sale of
generic goods, some jurists found ways to extend liability for damages caused by defects.
French jurists did so by the interpretation they placed on a Roman text that said that if a vessel
was defective and the wine that the buyer had stored in it leaked out, the seller was liable for
the wine.122 The text was puzzling because it seemed to contradict the normal rule. Other
texts said, for example that the unless the seller of unsound wood or contagious sheep knew
of the defect, he would not be liable for the collapse of a building or the infection of a herd.
In the 16th century, the French jurist Du Moulin suggested that the vessel had been purchased
from one who produced or professionally sold such vessels, and that such a person should be
deemed tacitly to have affirmed that it was free from defects.123 As Zimmermann has
noted,124 that rule was restated by the Robert Pothier,125 a French jurist from whom many
provisions of the French Civil Code were taken almost verbatim. Although in this case, his
122
DIG. 19.1.6.4.
123
MOLINEUS, TRACTATUS DE EO QUOD INTEREST EST § 49.
124
ZIMMERMANN, supra note 1, at 334-36.
125
ROBERT POTHIER, TRAITÉ DU CONTRAT DE VENTE no. 214
38
rule was not adopted by the Code, it was by the case law which “without any modification of
the texts of the Civil Code ... has accepted the principle that a manufacturer or professional
seller knows or ought to know of the defects of the thing sold and therefore is liable in
damages if the thing is defective.”126 That rule was adopted by the Louisiana Civil Code.127
As Zimmermann notes, “there is every reason to believe” that it inspired § 14(2) of the
English Sale of Goods Act, which provided, until 1973: “Where the goods are bought by
description from a seller who deals in goods of that description, there is an implied condition
that the goods shall be of merchantable quality.”128
In Germany, the Civil Code was amended in 2002 to provide that all sellers are liable
for harm caused to the buyer‟s property by defective goods. The common law reached a
similar result by a selective adoption of legal principles that were originally Roman. It
adopted that rule that the remedy for breach of contract was an award of expectation damages.
It abandoned the rule of caveat emptor in favor of one in which the seller was liable on an
implied warranty that his goods were fit for the use for which they were sold. The common
law did not borrow the Roman remedies for the buyer of defective goods. Putting together
what it did borrow, the common law treated the delivery of defective goods as a breach of
contract that entitled the buyer to expectation damages. Suppose, however, that the only
reason for shifting the risk of loss to the seller is that he is a better position to bear it because
he manufactures or deals in a large number of goods of the same kind, as it often the case in a
generic sale. In that event, a rule imposing liability on all sellers goes too far. Some of the ill
effects of going to far are avoided in the United States by rules about strict liability for
defective products. They apply only to a “seller engaged in the business of selling such a
126
PHILIPPE MALAURIE, LAURENT AYNÈS & PIERRE-YVES GAUTHIER, LES CONTRATS
SPÉCIAUX no. 411 (2003).
127
LA. CIV. CODE art 2545.
128
39
product”129 including manufacturers but not those who make an occasional sale.130 Similarly,
a European Community Council Directive limits strict liability to “producers” of defective
products and, if he cannot be identified, to “suppliers.”131 The Principles of European
Contract Law propose that a similar limitation be made part of the law of sales: “If the seller
is a natural person acting for purposes not to any extent related to that person‟s trade, business
or profession, the buyer is not entitled to claim damages exceeding the contract price.”132
IV. CONCLUSION
Over two thousand years after the Romans recognized the contract of sale, we are still
retailoring rules that we took from them, directly or indirectly, to make them work better for
transactions for which they were never intended. By understanding how the Romans came to
recognize sale, we can better understand why they did not apply the same rules to transactions
such as barter and generic sale. The mystery is not why they stopped where they did. It is
how they could have been sensitive to differences among kinds of transactions that were lost
on later jurists.
129
Restatement (Second) of Torts § 402A.
130
Id. cmt. f.
131
Council Directive on the Approximation of the Laws, Regulations and Administrative
Provisions of Member States Concerning the Liability for Defective Products, 32 I.L.M.
1347, Official Journal of the European Community L. 210/29-33, August 7, 1985.
132
PRINCIPLES OF EUROPEAN CONTRACT LAW SALES art. 4:207(1).
40