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Dubitatio 4: is it licit in some cases to sell a good dearer or buy it cheaper than it is worth?

[20] Preliminary remarks

1. Deception Above or Under Half of the Just Price

It is to be noted first that in the external court no legal action is given to the offended if he has not been deceived for more than half of the just price. If, for instance, you sell a field currently worth 100 pounds at 70, 60, or only 50 pounds, you are unable to institute legal proceedings in order to get rescission of the sale or a supplementation of the price because you have not been deceived for more than half of the just price. The situation is different, however, should you have sold your field for 48, 49, or less pounds. Similarly, if you buy a field currently worth 100 pounds at 152 or more, you are able indeed to go to court and ask either for a restitution of the surplus you have paid or for a rescission of the purchase contract. Again, should you have bought the land at 140 or even 150 pounds, no legal action is available. (22)

[21] 2. In the Internal Court One Is Obliged

It is to be noted second that a buyer or seller who commits fraud for less than half of the just price is not therefore released from the duty to make restitution of the amount above or under the just price. (23) The reason thereof is that the surplus is not considered to be donated liberally but only given inasmuch as it is due on grounds of a sale or purchase title. That is, the surplus is considered to be spent as though it were part of the just price, namely as a sum equivalent and due to the value offered. Consequently, if it is not due, because it exceeds equality, it cannot be retained unless it is made up for in a convenient way through a supplementation of the price or the mending of the good. (24)

[22] 3. The Opinion of Gerson

From this, it is clear that Ioannes Gerson is wrong when he takes the view that someone who deceives his contracting partner for less than half of the just price is not obliged to make restitution, though he did commit a sin and is obliged to go to confession. He argues that an injury is not done to one who knows and wills it. Yet, I disagree with this viewpoint because the offended party does not consent to the injury absolutely voluntarily but rather in the way I explained above, namely, like a borrower paying usuriously high interest. Furthermore, Gerson's reasoning is self-defeating. If such fraud is a sin, it certainly is a sin against justice, and, accordingly, restitution is obligatory. Last but not least, positive law does not approve of these malpractices as though they were licit. Positive law merely tolerates them by making neither restitution nor rescission of the contract obligatory lest greater evil emerges. (25)

[23] The latter viewpoint is not contradicted by Dig. 4, 4, 16, which goes as follows: Pomponius also says that as regards the price in purchase and sale, it is naturally licit for the contracting parties to overreach each other. This kind of overreaching is to be understood within the limits of the just price, (26) and naturally licit actually means that it is tolerated according to the law of nations.

Against this background, I will now answer the question of this dubitatio.

1. legal grounds to sell dearer

First, there exist certain legal grounds that make it licit in some cases to sell a good for a higher price than it would actually be worth and sold for in other circumstances.

[24] 1.1. By Virtue of Office

The first legal ground is based on the specific office or job of doing business. Accordingly, merchants are allowed to demand a little higher price than people who are not selling by virtue of office, but just occasionally. (27) The reason thereof is that it is estimable in money that merchants constantly have to be solicitous and preoccupied about acquiring, storing, and supplying commodities, and by doing so are forced to omit many other opportunities of making profit. Therefore, a good is estimated more when sold by a merchant, who does so by virtue of his office, than when it is sold by a soldier or a craftsman because the latter coincidentally obtains and sells the same good.

Remarks

1.1.1. It is to be remarked, however, that this legal ground does not entail the permission to sell dearer than the legal or common price. In the determination of the price, the office of doing business has already been taken account of.

[25] It Is Allowed to Sell at the Usual Price

1.1.2. If someone selling occasionally demands the same price as is usually demanded by the merchants, he is not wronging the buyer as long as the good is of equal quality. He can sell at the current price, even though he did incur neither the costs nor the solicitude of the merchant. Anyway, it is not a necessary precondition for demanding a certain estimation that you actually suffered the particular inconveniences that gave rise to the estimation. It is not a sufficient counterargument to maintain that the goods are estimated less in the hands of a nonprofessional, for merchandise is estimated less in the hands of a nonprofessional not because it really is of less worth in his hands (supposing that he has the intention of selling it at the right moment). Rather, goods get a lower price in their hands because that kind of people do not have the intention nor the knowledge to wait for an opportunity. Consequently, they throw their goods on the market themselves without having been asked by a buyer to do that.

[26] 1.2. Potential Profits Foregone, Etc.

Further legal grounds to sell a good dearer than it is worth out of itself are potential profits foregone, and damages incurred as a consequence of the alienation of the good. By the same token, a seller is allowed to take into account his affections toward the good and the pleasure he takes in it, all of which he is deprived through selling. The surplus should be determined according to the estimation of the profits foregone, the damages incurred, or the pleasure and the affections lost, respectively. If present, these circumstances are licit grounds to charge a surplus because a seller not only transfers the naked good in itself but also the convenience, pleasure, and affections he experiences on account of it. Consequently, it is allowed to demand their estimation, even though the good has got a legal price. (28)

[27] Remarks

1.2.1. The seller should signal to the buyer the legal cause on the basis of which he demands the higher price, lest the buyer believes the good in itself is worth more, for the buyer might not wish to buy off the inconvenience affecting the seller.

1.2.2. Affections

If a good is estimated more on account of the title affections, these affections have to rest on a just reason that makes it prudent to estimate the good so much. As is the case, for example, with a very unique gem or an ancient statue. Now what to do if the affections do not rest on reason, and yet you do estimate the good to be as valuable as the price you demand for it on the basis of your affections? For example, you estimate a house worth 1,000 guilders at 2,000, because it is a family heirloom. Some admit of it, given that anybody is allowed to estimate the inconveniences he suffers. However, I do absolutely not approve of these practices because affections that lack reason need to be corrected. Such affections should not be bought off or made up for by a towering high price.

[28] 1.2.3. If You Wanted to Preserve the Good

The legal ground of "potential profits foregone" allows you to sell dearer if you had intended to preserve the good until it would be worth more, but now a buyer already presents himself. In that case, there are two ways of reaching an agreement.

Two Ways of Reaching an Agreement

1.2.3.1. An Agreement About a Fixed Price

If it is certain that the good will be worth, say 30 guilders, at the time you initially intended to sell it, then you are allowed to sell at that price after having deducted the estimated value of storage and risk of corruption or loss. Consequently, if you estimate the cost of storage and the risk to be only 2 guilders, you are allowed to sell at 28; if cost and risk amount only to 1, at 29.

If it is doubtful whether this good will be worth 30 guilders but certain that it will be worth between 24 and 30, then the seller is allowed to demand a price that lies between the lowest and the highest: The more certain he is, the higher the sum he can charge. This is the background against which Decretal. 5, 19, 6 (Alexander III) needs to be understood: This text deals with someone who initially intended to preserve his good until the future moment agreed on for payment and states that this person is now allowed to sell the good at the price it is deemed more or less to be worth at that future moment. More or less, that is at the medium price in between the highest and lowest just price of that future moment. (29)

1.2.3.2. An Agreement About an Undetermined Price

You can also make an agreement about an undetermined price. In that case, the seller asks the buyer to pay him what his merchandise will turn out to be worth commonly at the time he initially decided to sell his good, after having deducted the estimation of storage and risks. However, he is not allowed to demand the highest future price because he is not certain that he will obtain that price if he keeps his good until later. Put differently, you cannot rightly speak of profit foregone in this case. Therefore, the estimation of that certainty should be deducted, i.e., the price of being certain about the highest price.

[29] 1.3. Labor and Expenses

A third legal ground for selling dearer consists of the labor and expenses you have incurred in obtaining, transporting, and storing the goods. This is to be understood, however, for goods that did not yet have their price determined, for the first time a good is priced, the seller can take into account extraordinary expenses. Like in the case, for instance, of merchandise that needs to be protected against pillards by a military escort because it is transported through dangerous areas. However, I do not understand this to apply for expenses incurred through bad luck or imprudent behavior.

Another matter altogether is the case in which the goods have already received a price for which they are sold in different places because one is obliged either to sell at the current price or to retain his goods. (30) In the determination of that price, the merchant's labor and his ordinary costs have already been taken into account. If a merchant has incurred more labor and expenses than are covered by the current price, that is his bad luck, and the common price cannot be increased on that account, just as it need not be decreased even if he has not made any expenses at all. It pertains to the very basic condition of merchants that they can make profits if they have small expenses, just like they can suffer losses if they make large and extraordinary expenses.

[30] 1.4. Abundance of Buyers, Etc.

On the grounds of an abundance of buyers and money but a shortage of goods, prices are higher than under opposite circumstances, namely when there is a shortage of buyers and money but an abundance of goods. The reason thereof is that these factors make the common estimation of goods rise. A thing will be dear when it is asked for by many buyers and can be obtained very difficultly or only in small amounts. Conversely, a thing will be cheap if it is abundantly available and few people ask for it. This is the reason why it may suddenly happen that prices rocket when plenty of rich and avid buyers arrive on the market, whereas prices may collapse just as quickly when these people all move away. For example, when all of a sudden a prince accompanied by his court visits a city, or the Indian fleet moors, as is correctly explained by Ludovicus Molina. (31)

Is It Licit to Sell Dearer to Strangers?

Moreover, in the latter cases, Molina does not condemn the practice whereby strangers have to pay higher prices than the local people if the goods are sufficiently available. With respect to those strangers who have plenty of money and are willing to buy a lot, the goods are held to be dearer than with respect to the local people. However, if goods are not sufficiently available, then the price indiscriminately increases with respect to everybody. In that case, sellers should not be tolerated to sell dearer to the strangers in order to be able to demand a lower price from the locals.

Actually, one could say that in both cases the price raises with respect to everybody. No seller is obliged to sell cheaper to the locals than to the strangers. Nevertheless, it has become accepted through custom that the locals are given preferential treatment, given that the increase is sudden and transient. It is not illicit to sell dearer to strangers than to locals if the limits of the rigorous price are not exceeded in contracting with the foreigners.

[31] 1.5. In Favor of the Buyer

It is allowed to raise the price of a good if you sell it only to do the buyer a favor and if otherwise you would not have sold your good. The reason thereof is that it is estimable in money that you sell a good that was not for sale. However, I would limit this ground to those cases in which you suffer a real inconvenience or detriment.

Utility

It is to be remarked, though, that it is not allowed to sell a good dearer on account of the subjective utility or necessity that drives one to buy your good (as is the depraved practice of many utterly immoral merchants).32 The reason thereof is that no one is allowed to sell to another precisely that which belongs to that other person. Now, the subjective utility is that which the good offers to the buyer, not to the seller. It comes forth from a circumstance of which the seller is not the cause.

2. Legal Grounds to Buy Cheaper

Second, there exist also certain legal grounds that in some cases allow a good to be bought cheaper than it would actually be worth in other circumstances.

[32] 2.1. The Good Is of Little Use to the Buyer

The first legal ground is that the good is of little use to the buyer and is bought to do the seller a favor, (33) for prices fall both on account of the fact that there are no buyers on the market and that the good is hardly convenient to them.

[33] 2.2. The Mode of Selling

Second, prices may fall on the grounds of the mode of selling: at a public auction, for instance, or when buyers are solicited to buy. As the maxim goes, according to Cajetan, merchandise coming onto the market without being solicited becomes a third cheaper.34 The reason thereof is that this mode of selling betrays an abundance of goods and a lack of buyers who are willing to buy in the ordinary way, both factors of which make the price of the good fall. War booty, for example, sells cheap, just as a good that is of no use or is inconvenient to the seller.

Remarks

[34] 2.2.1. Annuities

First, if a good has a legal price fixed in favor of the sellers (as in the case of newly created annuities), the price should not be lowered on grounds of the mode of selling or abundance. After all, as long as the same legal order persists, a change in some of the market circumstances will not immediately bring about a change in that price. Otherwise, it would be licit to buy a newly constituted annuity worth 1 guilder for 12 guilders, if only the buyer were solicited. Now, this is false because it is at variance with prevailing law. The situation is different, however, with respect to old annuities because, for a variety of reasons, their legal price has been abolished through custom, especially in the Netherlands.

[35] 2.2.2. If the Price Is Higher at Auction

Second, it may happen at auctions that sometimes the common price is exceeded because the buyers are bidding against each other. It is probable that under these circumstances, a seller is not obliged to make restitution. (35) The reason thereof is that the price of goods offered for sale at an auction is fortuitous and uncertain. Though they are mostly sold cheaply because people have no appetite to buy them or buyers are not abundantly present, sometimes it may happen that prices rise due to the presence of a multitude of buyers with big buying appetites. It ultimately depends on good or bad luck. This opinion is to be confirmed because the just price of such a marketplace is the price that one is able to charge through that mode of selling in the absence of fraud. Moreover, it is the common practice and use of learned and pious men in all places.

[36] 2.3. Abundance of Goods

A good can be bought cheaper if there are plenty of goods available and fewer buyers present, as is usually the case at the closing of the fair, particularly when a shortage of money comes on top of this. All these factors sharply decrease the common price of saleable goods. I deliberately speak about the common price; the legal price does not fluctuate so easily. For that reason, it is illicit to deviate from the legal price immediately.

[37] 2.4. Donation

A good can be bought cheaper than the common price also on the grounds of donation. For a seller may be held to condone an insufficiently high payment, just as he is allowed to sell dearer if the buyer is held to donate a surplus. (36) However, donation is never assumed to have taken place when either ignorance of the just price or necessity to enter into the sale-purchase contract are involved. It is strictly required that the contracting parties are informed about the prices of the good, and that they voluntarily enter into the contract in the absence of fraud and force. What is more, I believe that these requirements are not sufficient, unless the two parties are closely affiliated to each other by family bonds or ties of friendship. Donation is never to be assumed to have taken place under people who do not know each other, unless there are crystal clear signs of a willingness to make a gift. (37)

[38] 2.5. Buying a Huge Amount of Goods at Once

If you buy plenty of goods at once, you are allowed to buy at a cheaper price than if you had bought only a small amount of goods. The reason thereof is that you save the seller from many a worry and concern he would otherwise have had. Moreover, you make it easier for him to acquire a new stock. Selling a huge amount at once, then, is quite a bit more profitable for the seller than trading his goods one by one at the ordinary price. Consequently, this mode of buying makes the seller bring down the price.

(21) See Divine Thomas, Summa Theologiae, 2, 2, quaest. 77, art. 1.

(22) This is clear from C. 4, 44, 2; C. 4, 44, 8; Decretal. 3, 17, 3 (Alexander III); Decretal. 3, 17, 6 (Innocentius III). See also Gomesius, Commentaria variaeque resolutiones iuris civilis, communis, et regii, tom. 2, cap. 2, num. 22, and Covarruvias, Variarum resolutionum, lib. 2, cap. 3, num. 2.

(23) Divine Thomas, Summa Theologiae, 2, 2, quaest. 77, art. 1; Divine Antoninus, Summa Theologica, part. 2, tit. 1, cap. 16, [section] 3; Ioannes Medina, De poenitentia, restitutione et contractibus, tom. 2, cap. De rebus restituendis, quaest. 32; Covarruvias and the authors quoted by him in Variarum resolutionum lib. 2, cap. 4, num. 11.

(24) Navarrus, in cap. Novit., de iudiciis, 6, num. 54.

(25) See the teachings of Thomas, Summa Theologiae, 2, 2, quaest. 77, art. 1, ad 1, and of Bartolus a Saxoferrato in his commentary on C. 4, 44, 2 and 8.

(26) Covarruvias, Variarum resolutionum, lib. 2, cap. 3, num. 2.

(27) Ioannes Medina, De poenitentia, restitutione, et contractibus, tom. 2, cap. De rebus restituendis, quaest. 31, [section] Et procedit; and Caietanus, ad IIam.IIae, quaest. 77, art. 1.

(28) As is rightly taught by Petrus De Navarra, De ablatorum restitutione in foro conscientiae, lib. 3, cap. 2, num. 21.

(29) Covarruvias, Variarum resolutionum, lib. 2, cap. 3, num. 6.

(30) See Medina, De poenitentia, restitutione et contractibus, tom. 2, cap. De rebus restituendis, quaest. 31; Covarruvias, Variarum resolutionum, lib. 2, cap. 3, num. 3, and other doctors.

(31) De iustitia et iure, tom. 2, disput. 346, num. 2.

(32) See Divine Thomas and the common opinion of the doctors.

(33) Medina, De poenitentia, restitutione et contractibus, tom. 2, cap. De rebus restituendis, quaest. 32; Navarrus, Manuale, cap. 23, num. 84, and other doctors.

(34) Caietanus, ad IIam.IIae, quaest. 77, art. 1; Medina, De poenitentia, restitutione, et contractibus, tom. 2, cap. De rebus restituendis, quaest. 31, [section] Similiter; Covarruvias, Variarum resolutionum, lib. 2, cap. 3, num. 5; Navarrus, Manuale, cap. 23, num. 78; etc.

(35) This opinion is held by the merchant community and taught by Petrus de Navarra, De ablatorum restitutione in foro conscientiae, lib. 3, cap. 2, num. 36-37.

(36) Conradus Summenhart, Septipertitum opus de contractibus, part. 3, quaest. 57, [section] Prima conclusio (immo quinta conclusio) and quaest. 58, [section] Quarta conclusio (immo quinta conclusio); Medina, De poenitentia, restitutione et contractibus, tom. 2, cap. De rebus restituendis, quaest. 32.

(37) Caietanus, ad IIam.IIae, quaest. 77, art. 1, and Covarruvias, Variarum resolutionum, lib. 2, cap. 4, num. 9.
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Title Annotation:On Buying and Selling (1605)
Author:Lessius, Leonardus
Publication:Journal of Markets & Morality
Article Type:Excerpt
Geographic Code:1USA
Date:Sep 22, 2007
Words:3792
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