Dubitatio 7: is the buyer allowed to offer less because of advance payment?
It is illicit to pay a price lower than the lowest just price merely by virtue of advance payment itself. (54) The reason being that this would amount to making a profit beyond the principal on account of an implicit loan. Paying in advance is like implicitly lending money now to be offered an implicitly usurious restitution later when the good, increased in value, is delivered. The surplus value of the good as compared to the price is given by virtue of a prior agreement on the basis of advance payment, that is, on the basis of the use the seller gets of the money for the period in between payment and delivery.
 2. legal grounds to Buy cheaper
It should be noted, however, that sometimes extrinsic factors make it licit to buy cheaper by reason of advance payment; for example, if the buyer suffers damage, foregoes profits, runs the risk of dealing with a fraudulent seller who will not respect the deadline, delivers filthy goods, or is not going to bring them altogether. All these circumstances are estimable in money. Ultimately, this mode of selling makes the price fall because it attracts plenty of sellers, whereas it repels the buyers.
 3. the Wool trade
Consequently, it is not easy to condemn the common practice of buying wool cheaper in advance. This occurs in Spain and in other regions, as an arroba of wool (which equals 25 pounds) is usually bought there in advance at a much lower price than it is worth at the time of delivery. (55)
3.1. Profits Foregone
Merchants buying on advance payment suffer a loss of profit precisely because of the anticipation. For several months before the delivery of the wool, they lack the money by means of which they could have made profits through money-exchanging activities in the meantime. A sign thereof is that they readily pay an additional one or two crowns per arroba if the seller permits them to extend the payment until the moment of delivery or even two or three months after delivery. Therefore, a buyer is allowed to enjoy a discount that equals the estimation of the profit he could have hoped to make and of which he deprived himself by paying in advance.
3.2. Fear of Perfidy
Merchants often fear default on the part of the seller. He might not deliver the total weight of wool promised, for instance, or deliver filthy wool or wool of bad quality. A sign thereof is that buyers readily pay somewhat more than usual, say half a crown per arroba, if they can trust the seller to bring goods of the right quality. Moreover, the extra sum they are willing to pay per arroba is all the higher the bigger the stock is of the seller because that makes the buyers less fearful of default on the part of the seller. Now, this fear is estimable in money. Therefore, it causes the estimation of the goods to decrease.
3.3. Scarcity of Buyers
Just as the particular mode of selling on credit makes the price rise in that it attracts plenty of buyers, conversely the particular mode of selling on advance payment makes the price fall in that it attracts only a few buyers but plenty of sellers. There are few who buy wool by this mode of sale-purchase, and many who sell. Therefore, the price in this mode of selling is lower than if the good is delivered immediately following payment.
3.4. The Good Is Less Convenient to the Buyer
Fourth, a good that needs to be delivered to the buyer only after a few months is worth less than a good to be handed down to him immediately. A present good and the immediate ownership over it offer many opportunities that a future good does not. Thus, if he buys and gives the money at once, he is allowed to pay less than he should have paid at the time of delivery.
 3.5. Even in the Other Case, the Goods Would Not Get a Higher Price
Let us suppose that sale on advance payment did not exist, for instance because it was forbidden by a decree or because merchants were not prepared to pay in advance. In that case, the wool would not get a higher price than if advance payment had taken place. As experienced merchants claim, and as is proven by reason, the wool would rather be sold at an even lower price, for the price would seriously fall due to the huge amount of wool coming available at the time of shearing. What is more, the sellers would try to sell the wool immediately to avoid the costs of storage and to get the money they badly need at that moment to pay their debts and buy fodder for wintertime. To conclude, the sellers are not wronged by those advance payments because ultimately they get the same price as if no advance payment existed.
You might object that the value of the good at the moment of delivery exceeds the price paid in advance, and that, as a result, this price is unjust. This inference is proven as follows. The just price of a good is the value of the good at the time of delivery and not at the time of the agreement. If I buy grain worth 10 crowns at a price of 10 through advance payment, but this grain is only to be delivered after 4 months when the grain is worth 14, then the purchase contract is inequitable and implicitly usurious because the grain is worth more at the moment of delivery. Similarly, buying a pound of wool at 14 crowns that is in fact worth 18 crowns at the moment of delivery makes the purchase contract inequitable and implicitly usurious. The excess value of the good as compared to the price is a profit directly stemming from advance payment.
 3.5.3. Response: Settlement of the Dispute When the Price Is Not Attended at the Time of Delivery
I reject the inference made. The just price of a good is its value at the moment of delivery, unless on external grounds the good is estimated less at the moment of contracting, for instance, if there happen to be few buyers and many sellers because of the mode of selling at that time, or if buyers forego profit and fear fraud and default on the part of the seller by reason of this mode of sale-purchase. In that case, a good may well be considered to have a higher naked value of its own. It still is not worth that value because of the circumstances just mentioned. In addition, the just price of a good at the moment of contracting should not be estimated according to the price at the moment of delivery. If done, then the price is influenced by the contracts concluded before: due to the sale-purchase agreements on advance payment a scarcity of goods has been created until the time of delivery, and, concomitantly, prices have risen. Now, since this scarcity depends on the preceding contracts, it is not allowed to take the price of the goods at the time of scarcity as a measure for the prices agreed on in the preceding contracts. Otherwise you would have to pay the price prevailing in times of scarcity even if you buy in times of abundance, but the seller is unable to deliver the good immediately. That would be absurd.
 Consequently, it is required that the price at the time of delivery is not derived from the price brought about through the sales on advance payment. It must be derived from elsewhere, so that the good is worth that higher price at the moment of delivery even if such sales had not taken place, but that obviously is not the case. If the wool had not been sold through many a contract of that kind, it would not be dearer at the time of delivery than it was at the time of the prior agreement. Thus, the wool sold dear at the time of delivery is not at all the same wool as has been sold on advance payment. It is the wool supply that is still left and is dearer because of its scarcity. If all the wool already sold in advance would be put for sale at the moment of delivery as if it had not yet been sold, it will not be dearer. It is required, however, that the price of a good sold on advance payment is derived from the moment of delivery.
(54) According to the common opinion of the doctors.
(55) This practice can be defended according to Sotus, De iustitia et iure, lib. 6, quaest. 4, art. 1, ad 4; Cordubensis, Summa Hispana, quaest. 85; and Molina, De iustitia et iure, tom. 2, disput. 360, who very recently gave an elaborate account of the current wool practice.
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|Title Annotation:||On Buying and Selling (1605)|
|Publication:||Journal of Markets & Morality|
|Date:||Sep 22, 2007|
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