X. On Mutuum

What is mutuum? Mutuum is sometimes taken for the thing itself given as a loan, but sometimes and more often for the contract itself by which that thing is given as a loan to another; and it is defined: a contract by which, through delivery, ownership of a thing consumable by use is transferred to another, with the obligation of returning only as much in the same species and goodness after some space of time. Through delivery, so that it may be indicated that it is a real contract, which is perfected by delivery of the thing. Wherefore a promise of mutuum is not mutuum. C. A. 983; C. B. 610. Ownership is transferred; for he who receives a thing by mutuum can use it; otherwise it would be a mere deposit.

But he cannot use it unless he has ownership, since that thing is consumable by use, and no one can consume another's thing at will. - Consumable, whether physically as bread, or morally as money, which, although by use it does not perish in itself, nevertheless perishes for him who hands it over to another. - With the obligation of returning as much, otherwise it would be a donation. In the same species, otherwise it would be sale or exchange, if in a different species; commodatum or lease, if the identical thing and in the individual had to be returned. And goodness, lest the lender suffer detriment from the benefit. - After some space of time, by which it is distinguished from exchange, by which immediately gold, for example, is given for silver. - L. 754; L. 2 de Reb. cred.; C. I. 1819; C. G. 1892; C. A. 983; C. H. 1740; C. B. 607; C. L. 1523, 1524; E. M.

Whether there is a precept of lending? - As there is a precept of giving alms to the poor, so there is a precept of granting a loan to the rich who, on account of a peculiar circumstance, are in the greatest need of it. The reason is that the precept of charity binds us toward all human beings, even the rich, and requires that we gladly furnish this which we would wish to be furnished to us in an equal case, if nevertheless we can assist them by a loan without grave inconvenience. "No one," says Benedict XIV in the Encyclical Vix pervenit, "can be unaware that in many cases a man is bound to assist another by a simple and bare loan, especially with Christ Himself warning: From him who wishes to borrow from you, do not turn away," Matt. 5:42.

What are the obligations of the borrower in mutuum? - 1. By force of mutuum the borrower becomes owner of the lent thing, which, in whatever way it perishes, perishes for him. L. 9 de Reb. cred.; C. I. 1820; C. G. 1893; C. H. 1740, 1753; L. 755. 2. The borrower must restore the thing lent in the same species and in the same quantity, quality, and established time; and, in defect of the thing, he must pay its value, according to the established time and place. C. I. 1828; C. G. 1902; C. L. 1524 ff.

If no time and no place have been established, restitution must be made according to the value corresponding to the time at which he is constituted in delay according to C. I., or at which the loan was made according to C. G. 1903. - The borrower cannot return money before the predefined time if it has been credited to him with legal interest; but if, from some agreement made, it exceeds the measure, he can do so only after five years, and with the creditor warned six months before, according to C. I. 1832. L. 2, 22 de Reb. cred.; C. B. 247. 3. Money given by mutuum must always be restored in the same numerical sum expressed in the contract. And whether the value of coins is increased or diminished, the same numerical sum must be restored in the species current at the time of payment. C. I. 1821; C. G. 1895; C. L. 1638. It is lawful, however, even in the forum of conscience, to give banknotes for silver or gold coins, any law or pact to the contrary having been removed.

Italian Law of May 1, 1866; S. Poenit., Jan. 21, 1873. But when gold or silver money has been given by mutuum with a pact of restitution in the same species and quantity, and its intrinsic value is modified, the equivalent must be returned according to the value at the time the loan was given. C. I. 1822; C. A. 988, 989. Cf. C. H. 1170, 1754; L. 782, 791; Gousset 814. 4. If the borrower does not restore the thing, or its value according to the established pact, interest is owed from the day of judicial petition. C. G. 1904. Indeed, if he is in culpable delay, he is also liable for the damages of which he is the cause. C. H. 1108.

What are the obligations of the lender? 1. He is bound to warn the borrower concerning a defect of the thing handed over, if there is one; likewise concerning imminent damage, ceasing profit, and danger of the principal, unless he wishes to lend gratuitously; otherwise the borrower does not consent, and sustains an injury which the lender will be bound to repair. C. I. 1824; C. G. 1898; L. 754. 2. He cannot demand the thing back before the established time. C. I. 1824; C. G. 1899; C. B. 609; L. 754. If the time of restitution was not established, the judge can grant delay to the borrower according to the circumstances. C. I. 1826; C. G. 1900. But if it was established that the borrower should pay when he can, or when he has means for this, the judge will establish a term according to the circumstances. C. I. 1827; C. G. 1901; C. L. 1524 ff. 3. He is bound, per se, not to receive more than the lent thing was worth when it was given by mutuum; because mutuum per se is a gratuitous contract in this sense, that it imposes no other burden on the borrower than that he return in species, at the due time, that which he received. L. 754, 755.

Whether you can receive the thing lent in the same measure and quantity if its price increases during the loan? Whether you can demand more if it decreases? If, when the thing is handed over by mutuum, there is equal doubt on both sides whether at the time of restitution the thing will be worth more or less, it is lawful to make an agreement that, with the same goodness and measure preserved, it must be returned at its time, even if its price has been greatly increased. The reason is that, since there was equal danger on both sides, equality is already preserved by that very fact. - The aforesaid pact is not lawful per se if it is certainly established, or is far more probable, that at the time of payment the value will be increased. The reason is that equality is not preserved in this way, but more is demanded than is given at the time of the loan. Hence, if a modius of wheat is now worth three francs and will be worth four at the time of restitution, it is not lawful to agree that just as much be paid. Exception, however, unless you had determined to preserve the thing until the time of the price; because then more is demanded by reason of ceasing profit.

If you foresee diminution of value or price, you can demand only as much, and the borrower must pay as much, as the thing was worth when it was handed over by mutuum; because in reality you do not demand more than you gave. - According to C. I. 1823; C. G. 1897, if metallic bars or saleable things are given by mutuum, they must always be restored in the same quantity and quality, although their price is increased or diminished. L. 782, 791; La-Croix 910 ff.

Note: "That a loan furnished to a Church, Pious Cause, or University cannot be demanded back unless it is proved to have been turned to its utility. L. Civitas ff. Si certum petatur. And the same is said of a loan given to a minor, who otherwise is not bound, even when made an adult, to restore. L. 3 C. Quando ex facto tut. If nevertheless a Prelate, with the consent of the chapter, and the same is said of a governor with the consent of officials, receives a loan in the name of the church, the church itself is always bound to pay; since Prelates with the chapter can rightly alienate movable things of the church.... - That a loan given to sons of families, regarded as such and lacking castrense goods, without at least tacit consent of the parents, need not afterward be restored by them, at least in the external forum. L. 14 C. de S. C. Maced. Sons can use this privilege, even if they renounce it.... Exception: 1. If the loan is in things other than money, of which the law speaks. 2. If the son swore to pay; although after payment he has an action for reclaiming it; indeed he can procure for himself relaxation of the oath. 3. If the loan was given with the father knowing and not contradicting, or was turned to the utility of the father or children in things which the father was bound to furnish to him.

Likewise if the lent thing still exists, or if the father was accustomed to pay the debts of the children. - It is doubtful whether sons of families in the first case posited are free from restitution of the loan not only in the external forum but also in the internal. Bonacina, etc., deny it, because Civil Law does not take away natural obligation.

But Lessius, etc., affirm it sufficiently more probably, because the law with just cause can indeed take away a natural obligation, and is judged to have done so in this case in order to provide against the damage of parents and to avert the wickedness of usurers. But it does not seem that it can be denied that the supreme human power, on account of the high dominion which it has, can indeed, for the common good, transfer ownership of things from one to another, as is clear in the law of prescription." L. 756, 757, 918; C. I. 1307; C. G. 1312; C. H. 1263, 1304; C. A. 152; C. L. 1535, 1536. Cf. here 953.

What are usury and a usurious contract? Resp. To the 1st: Usury is profit immediately arising from mutuum as something owed. Profit immediately arising from mutuum; for usury is properly committed when the lender seeks profit immediately because of the mutuum, and precisely under the title of mutuum, or something above the principal and the substance lent. Therefore, although he also who sells a thing above the highest just price, or leases it to another for use, sins against justice, nevertheless he is not said to commit usury strictly so called. Profit is understood as whatever can be estimated by price; whence, if, in giving a mutuum, you demand, e.g., that the other return to you what from another source he owes you by justice, it is not usury. As something owed, namely by justice, or by a pact of grateful spirit or benevolence. Wherefore, if the borrower, precisely from a natural grateful spirit and without an intervening pact, liberally gives something beyond the principal to the lender, or even from fear lest otherwise a loan be denied to him in the future, or lest he be judged ungrateful, the lender can accept this without the vice of usury. - C. L. 1636.

Resp. To the 2nd: A usurious contract is a pact by which the lender obliges the borrower to give something estimable by price above the principal from the title of mutuum alone. Hence simple mutuum, or mutuum without usuries, is distinguished from mutuum with usuries, which is called fenus and fenerari. L. 33 de Reb. cred.; L. 758, 761-765, 774, 777-781, 791; St. Thomas 2. 2. q. 78. a. 2; E. M.

Of how many kinds is usury, and what are its names? Resp. To the 1st: One usury is mental and another real. The former is that by which the lender, without an externally manifested pact, either formally intends profit, not to be offered gratuitously, but as though owed under the title of mutuum; or virtually, for example if he internally hopes for profit in such a way that such hope is the principal motive of lending. But the latter is that by which the lender brings profit into an external pact, whether expressly or tacitly. Real usury is either open or disguised. Open usury, or express and formal usury, is when in the contract of mutuum itself something beyond the principal is demanded under this title. Disguised or virtual usury is that which is cloaked by another distinct contract, in which profit because of the mutuum is involved; as would happen if a merchant sold goods at a dearer price than is just precisely from the fact that he must wait for payment, for thus a greater profit would be virtually demanded because of the mutuum. - L. 761, 762; St. Thomas 2. 2. q. 78. a. 2; De Malo q. 13. a. 4.

Resp. To the 2nd: As regards the names of usury, centesimae were usuries in which the hundredth part of the principal, that is, one for a hundred, was paid each month, and accordingly twelve for a hundred each year, twelve percent; by this reckoning in the hundredth month the usury equaled the principal. This was the gravest of usuries, and as it were the as, from which the lesser usuries were called by the names of the parts of the as: the very least usury, semunciaria, one half percent per year; uncia, unciaria, one percent; sextans, sextantaria, two; quadrans, quadrantaria, three; triens, trientaria, four; quincunx, five; semissis, semissalis, six; septunx, seven; bes, bessalis, eight; dodrans, nine; dextans, ten; deunx, eleven; centesima, twelve; double centesimae, twenty-four; triple, thirty-six; quadruple, forty-eight; quintuple, sixty.

Whether usury is licit? Usury is prohibited by natural, divine, and ecclesiastical law. - By natural law. "For the evidence of this, it must be known that there are certain things whose use is the consumption of the things themselves; as we consume wine by using it for drink, and we consume wheat by using it for food. Hence in such things the use of the thing ought not to be counted separately from the thing itself; but to whomever the use is granted, by this very fact the thing is granted; and on account of this, in such things ownership is transferred by mutuum. Therefore if someone should wish separately to sell wine, and should wish separately to sell the use of wine, he would sell the same thing twice, or he would sell what does not exist; whence he would manifestly sin by injustice. And by a similar reason he commits injustice who lends wine or wheat, asking that two recompenses be given to him: one, indeed, the restitution of an equal thing; but the other, the price of the use, which is called usury. But there are certain things whose use is not the very consumption of the thing, as the use of a house is habitation, but not its destruction. And therefore in such things each can be granted separately, as when someone hands over to another ownership of a house, reserving to himself the use for some time; or conversely, when someone grants to another the use of a house, reserving its ownership to himself. And on account of this a man can licitly receive a price for the use of a house, and besides this demand back the house lent, as is clear in the hire and lease of a house. But money, according to the Philosopher in Ethics 5, ch. 5, middle, and Politics 1, chs. 5 and 6, was principally invented for making exchanges; and thus the proper and principal use of money is its consumption or alienation, according as it is expended in exchanges. And on account of this, in itself it is illicit to receive a price for the use of lent money, which is called usury; and just as a man is bound to restore other things unjustly acquired, so he is bound to restore the money which he has received through usury." St. Thomas 2. 2. q. 78. art. 1; Quodl. 3. a. 19. "It is certain," says St. Alphonsus 759, "that usury is illicit even by natural law." "But a certain modern author in a recently published book laboriously attempted to prove that money of itself is not sterile and unfruitful, as other things consumable by use are; since, as he asserts, from the common commerce of men we observe very many profits to arise from money. Hence he infers that, apart from the just titles of danger, loss, etc., something can licitly be demanded from a loan of money beyond the principal, provided the profit is moderate, and provided the borrower is rich and expends that money in increasing his goods. But deservedly this new opinion was interdicted by Benedict XIV in the Encyclical Letter Vix pervenit. The certain reason is that the profit which is received from money arises entirely not from the money itself, which, since it is altogether sterile, cannot bear fruit, but arises from the mere industry of men. Nor, because my money will profit another through his industry, can I demand from him anything beyond the principal." L. 758; Collectan. S. C. de P. F. n. 2130.

By divine and ecclesiastical law. Thus Ezekiel 18:10, 13 said: "If he has begotten a son who is a robber, shedding blood ... giving at usury and receiving more, shall he live? He shall not live ... since he has done these detestable things, he shall die by death; his blood shall be upon him." And "the Lateran Council, sess. 10 under Leo X, condemns as usury any profit perceived from an unfruitful thing, with the title of labor, or expense, or danger, however, excluded. When, namely, in the words of the Council, from the use of a thing which does not germinate, with no labor, no expense, or no danger, profit and fruit are sought to be acquired." L. 765. Whence it is evidently clear that usury is not condemned because it is exorbitant, or because it is demanded even from the poor, or for another similar extrinsic reason, but because it is usury. Thus Benedict XIV also openly pronounces illicit any profit arising from a mutuum by reason and force of that same mutuum, in his celebrated Encyclical Vix pervenit ad aures. Add the whole title de Usuris in the Corpus of Canon Law, from which also the usurer, if he is public and notorious, is kept from Communion, is deprived of absolution for the forum of penance, is regarded as infamous, and, if he dies impenitent without having made satisfaction, is deprived of ecclesiastical burial. Add propositions 41 and 42 condemned by Innocent XI, and 42 condemned by Alexander VII. - Benedict XIV, de Syn. 1. 10. c. 4; Catech. Rom. 11; E. M. Hence "the usury of money which we receive is not in the fruit, because it is not from the body itself, but from another cause, that is, a new obligation." L. 121 de Verbor. signif. Nor indeed, for the intrinsic licitness of usury, is it valid to say that he who gives money as a loan furnishes a benefit which is worthy of a fee; that he himself undergoes a burden while he deprives himself of his thing, which again is estimable by price; that mutuum in reality is nothing other than the lease of money, since in money not the body but the value is considered, and ownership of this always remains with the lender; whence it is that the borrower is truly said to be and is burdened with another's money; that finally, with attention to the present increased commerce of things, constant and always progressing in modern Society, by the force precisely of money, and of the incredible facility of transmitting and exchanging it, money in reality today can no longer be called sterile and unfruitful, but fruitful and most fruitful. But all these things are worth only as much as nothing. For to a benefit considered formally a fee is not owed, but gratitude of spirit. But the benefit here considered materially is worth no more than the lent thing itself; therefore, when this has been restored in the same quantity and quality, all things return to the equality which commutative justice intends and makes. Likewise deprivation of one's thing is estimated not at more, but at as much as the thing itself of which one is deprived is estimated. Therefore, when it is restored, that burden is entirely compensated according to equality. Otherwise it would have to be said that in the sale of a thing, besides the price of the thing itself, the seller would have to receive another price equivalent to the deprivation of his thing; and since this deprivation in sale is forever, he would have to receive not only a doubled or tripled price, but one multiplied several times, so that perpetual deprivation of the thing might be compensated. If the borrower were not truly owner of the money, not only materially but also formally considered, he certainly could not expend it according to its monetary value. The formal value of money is in reality inseparable from the money itself materially considered. And if this formal value did not pertain to the borrower himself, but to the lender, the borrower could enter into no onerous contract in his own name from the money. But that he is said to be burdened with another's money certainly does not mean that the borrowed money is not his, but that it is not his absolutely, namely without the obligation also of restoring as much. Another's money has never indeed signified stolen money, deposited money, leased money, etc., but has signified and does signify debts to be paid, from whatever source those debts arise, whether from mutuum, or from another contract, or from another title. That present commerce of things has not rendered money fruitful is as true as it is true that present commerce is governed more by credit, as they say, than by material money; and credit is from one's own industry, talent, labor, and trust acquired among public merchants, especially from honesty of life. Moreover, especially at present, it is seen that poor workers, laborious and industrious, in a short time gather enormous riches; on the contrary, very wealthy noble men, because of defect of labor and due industry, are reduced to extreme poverty. Therefore it is not money which is fruitful, but one's own labor and one's own industry. - Nor indeed are business and commerce something new; but ancient, most ancient; and nevertheless usury had always previously been regarded as illicit from its nature. Increased business and increased commerce could not change the intrinsic nature of things. L. 758, 759, 764; St. Thomas 2. 2. q. 78. a. 2, q. 106; De Malo q. 13. a. 4; Gousset 815 ff.; Collectan. S. C. de P. F. n. 2119, 2121, 2122, 2124, 2133; C. B. 138.

He resolves: Both the usurer and his cooperators are obliged to restitution of the usury received. For a usurious contract is altogether null; and the bare delivery of the thing does not transfer ownership. L. 761, 783, 791 ff.; St. Thomas 2. 2. q. 78. a. 3.

In doubt whether the borrower gave something above the principal gratuitously or not, can you retain it? Resp. Affirmatively, with the common and more probable opinion, if you accepted it in good faith and the doubt supervenes; negatively, if you accepted it with negative doubt. But if with positive doubt, or with probability, you are bound to restore, commonly speaking; since in doubt the borrower ought to be presumed, speaking per se, to have given under compulsion, not gratuitously; for men with difficulty lavish their own things gratuitously. But you are by no means bound to restitution if from the circumstances a donation can truly be presumed. - According to C. H. 1256, a borrower who has paid interest not in the least stipulated can neither reclaim it nor impute it to the principal. L. 761.

Whether the lender can retain what the borrower gave from fear lest otherwise a loan be denied to him? - Resp. More probably affirmatively. The reason is that for usury it is required that it be given by force of a pact, or as something owed by justice. Thus more commonly. L. 763; St. Thomas 2. 2. q. 78. a. 2.

Whether a donation of antidoron, or one which is made from a grateful spirit, can be brought into a pact? - Resp. Negatively. The reason is that from pacts a title of justice necessarily arises, but not a donation merely given from a grateful spirit. L. 764; St. Thomas 2. 2. q. 78. a. 2.

Whether for an obligation to which the lender would submit himself, of not demanding back the loan except after a long time, he can demand something beyond the principal, even if no inconvenience comes to him from the delay? There are three opinions. The first common opinion denies, and Lessius, Viva, Laymann, and Lugo hold this; they call the contrary opinion most false and commonly rejected by others. The reason is that such an obligation is intrinsically annexed to mutuum, that it not be demanded back at once; therefore, just as something cannot be demanded because payment is awaited for some time, so neither for such a long time; otherwise, they say, in this way usury could easily be disguised many times by demanding it not for the mutuum, but for the obligation of awaiting payment. And the condemnation of proposition 42 proscribed by Alexander VII seems to favor this. The second opinion says that, although in mutuum there is an obligation of awaiting payment for some time, nevertheless when the obligation is of not demanding it back except after a long time, say for three years, then, since that is not intrinsic to mutuum, something can licitly be demanded. Thus Medina, Serra, and Ledesma apud Salm. n. 25; and there Trullench, Henriquez, and Bassaeus think it probable, and Sporer thinks it not improbable. And this opinion truly does not seem to lack its probability. For if he who is obliged to give a mutuum after a long time can licitly demand something, as the doctors more commonly teach with Molina apud Viva on the condemned proposition 42, n. 5, why cannot he who is obliged not to demand back his own except after a lengthy time? See what will soon be said below. The third opinion, not much unlike this second opinion, which the Salmanticenses hold with Banez, etc., says that, although, by adhering to the first opinion, to demand something precisely for time is usury, nevertheless, since it is morally impossible that, by waiting for a long time, the lender should not suffer some danger, loss, or inconvenience, or at least not be impeded from exercising some act of liberality or another decent operation, for that reason he can receive and contract for something beyond the principal. To any mutuum there is indeed intrinsic the obligation of waiting for some ordinary time; nevertheless to a particular mutuum, with a pact of waiting for an extraordinary time, such an obligation is not intrinsic, but altogether extrinsic; and therefore that obligation does not proceed from liberality, but from justice, which obliges him to wait for so much time. Hence, if the lender receives something for such an obligation, he receives it rightly, not by reason of the convenience of which he is deprived, but by reason of the burden imposed on him by the pact, which burden indeed is estimable by price. L. 760.

This intrinsic and extrinsic obligation of not demanding the principal back for some certain time can be declared from another title, namely from danger to the principal, which likewise can be intrinsic and extrinsic to the mutuum; whence from it some increase beyond the principal is illicitly or licitly perceived. Cf. Instruct. S. C. de P. F. part II. Quaeri nunc potest. - C. B. 609; E. M.

What are Montes pietatis, and are they usurious? - Resp. To the 1st: Montes pietatis are certain treasuries, whether public or private, which were instituted so that the needy might have recourse to them as to a mountain of refuge, to receive money on loan for a pledge, lest they be compelled to receive money from usurers with greater damage to themselves; yet in such a way that they must leave a certain profit to the Monte pietatis, and unless, e.g., within a year they redeem the pledge, it falls into the ownership of the Monte itself.

Resp. To the 2nd: Montes pietatis, duly instituted, are not usurious. This is clear from the authority of Leo X, who in the Lateran Council, sess. 10, by the Bull Cum inter nonnullos, approved such Montes pietatis as licit and free from the stain of usury. But the reason of the response is that the moderate profit which the borrower must leave to similar Montes or public treasuries is not demanded under the title of mutuum, but for paying the salaries of officials and conserving a similar treasury; and accordingly such profit is not usurious. - Duly instituted.

For 1. that profit which is received must be moderate and proportionate to the expenses to be made for the ministers of that Monte, whose labor is truly estimable by price. 2. Sufficient time must be conceded to borrowers so that they can redeem the pledges and not be compelled to abandon them. 3. An equivalent pledge, or one not greatly exceeding the thing lent, should be demanded; for since those pledges, unless, e.g., they are redeemed within a year, fall under the ownership of the Monte, disguised usury would intervene if those pledges were appraised at too cheap a price and then sold for much more, without any refund made to the pledger. L. 765; Benedict XIV, de Syn. 1. 10. c. 5; A. S. S. v. 4. p. 27 ff.; E. M.

What is the just interest of the lender? - In mutuum, usury is one thing, fenus, just interest or the just interest of the lender, another: for usury properly exists when the lender immediately because of the mutuum demands something beyond the principal; but the just interest of the lender exists when he, from another just extrinsic title, which accidentally occurs in the mutuum, demands something beyond the principal in compensation for such title, or cause estimable by price. For this reason that increase which is demanded is not demanded by force of the contract of mutuum, but by force of another contract annexed to the mutuum. This interest can also be called usury, but less properly and only in a broad signification, insofar as it is beyond the principal. But a contract must intervene; otherwise, although a just title of demanding something is present, nothing can be justly demanded. Thus expressly C. H. 1755, and it is clearly deduced from C. I. 1829, 1830; C. G. 1902, 1903; C. A. 984; C. B. 608. L. 765, 773; E. M.

Whether it is lawful for a lender to demand his interest because of the title of emergent loss or ceasing profit? Resp. Affirmatively. For in two ways, says the Angelic Doctor 2. 2. q. 62. a. 4, someone can be damaged: in one way, by taking away from him what he actually has, and this is called emergent loss; in another way, by impeding him from acquiring what he was on the way to having, and this is called ceasing profit. Moreover, both because of emergent loss and because of ceasing profit it is lawful for the lender to demand from the borrower what concerns his interest on account of the loan, if the due conditions are present. The same Angelic Doctor gives the reason, 2. 2. q. 78. a. 2 ad 1, teaching that this is not to sell the use of money, but to avoid loss. And certainly equity does not allow that someone lose profit or suffer loss from conferring a benefit: in the Law it is read, No one ought to suffer expense from that from which he seems to have deserved a reward. Add that this is expressly approved by Benedict XIV in the Encyclical Letter on usuries.

If the due conditions are present. The conditions are: 1. That the interest be brought into the pact from the beginning, though not demanded immediately, with the borrower also warned concerning the title of emergent loss and ceasing profit, or another title, if any exists, for which he wishes to demand something beyond the principal; for after the contract the lender can no longer demand anything, even if he had forgotten emergent loss and ceasing profit; for an interpretative or conditional will does not suffice for a contract, but an actual or virtual will is required, or at least one sometime had and not retracted: he ought to have provided for himself, says the Angelic Doctor, q. 3 De Malo a. 4, concerning the lender in such a case, lest he incur detriment; nor ought he who receives the mutuum to incur loss from the foolishness of the lender.

Nevertheless, even if emergent loss was not brought into the contract, if the borrower culpably delays payment beyond the established term, he is bound to repair to the lender whatever damage arises from such delay; for according to Rule 25 in 6: His own delay is harmful to each person. 2. That the lender not demand more than the loss which he suffers, or the profit which he hopes for from another licit contract, according to the estimation of hope and danger, and with expenses deducted; for this is the whole reason for the exaction.

Hence interest cannot be demanded for the whole quantity of profit which the lender could hope for; for this profit, since it can often be impeded, must be estimated at less; indeed the lender would have had to concur toward it through his own labor, the lack of which likewise is estimable by some price. Whence the value of ceasing profit must be estimated according to the judgment of prudent men; and this is well to be observed. - 3.

That the mutuum is actually the cause of the emergent loss or of the ceasing profit. Whence, if someone had no occasion at all of making some profit by business, or even when the occasion was given did not wish to engage in business, he could not demand interest precisely from the title of ceasing profit, although he could from other titles. L. 768, 799; St. Thomas 2. 2. q. 62. a. 4; Gousset 819; Collectan. S. C. de P. F. n. 2133; E. M.

Whether the lender can demand compensation for emergent loss if he himself freely offers to give the mutuum? Resp. More probably affirmatively. "The reason is that the lender then does not offer the loan absolutely, but under the condition that ceasing profit be compensated to him; and thus the borrower, by accepting the loan, is the true cause of the cessation of profit, and truly impedes the lender from justly making profit from his own money." L. 760, 807; E. M.

Whether it is lawful for the lender to make an agreement from the beginning about a certain profit to be perceived, if the emergent loss is only probably future? It is common that something can still be demanded above the principal, while nevertheless the proportion between the fear of loss or hope of profit and the increase which would be received in the hypothesis is considered and carefully preserved. The reason is that due equality is already preserved thence; for just as, if the loss does not occur, the lender would profit, so on the contrary, if it does occur, the borrower would profit. Nor does it matter that the foreseen loss does not occur; for the pact concerning the increase is not made for the loss, but for the danger of it, which is actually supposed and is estimable by price. A fisherman who sells the cast of a net does not indeed sell the fish, which perhaps will not be caught at all, but sells the probable hope of them, which actually exists and is estimable by price. L. 770; E. M.

Whether you can demand something by reason of ceasing profit because of a loan of money, if you keep other idle money? Resp. Affirmatively, "if you had reserved that other money for the use of the family ... because you are not bound by reason of the loan to neglect your own providence." Also probably affirmatively, if without such inconvenience you can substitute other money for the money destined to business. For, with this posited, that you had determined to destine this money alone to business, you can licitly ask ceasing profit; "because the lending is truly the cause that the hoped-for profit from that money ceases for you." L. 771, 772.

Whether it is licit to demand something above the principal by reason of the danger of losing it? Resp. Affirmatively. The reason is that the lender is not bound to give a loan with danger of losing the principal, and such probable danger is estimable by price; just as the labors perhaps necessarily to be undertaken and expenses to be made for recovering the principal are also estimable by price, if, e.g., it is later necessary to go to the judge. And accordingly, if proportionate interest is demanded because of this danger, such a contract is contrary neither to the virtue of liberality nor to justice. St. Thomas 2. 2. q. 78. a. 2; L. 765. Exception: 1. If the borrower is poor, because then the precept of lending from charity urges. 2. If the borrower secures the principal by pledge, because thus the danger ceases. E. M.; Collectan. S. C. de P. F. n. 2135.

What conditions must be observed in the aforesaid title? - In order that interest be just from this title, two things must be attended to: 1. The danger of losing the principal must not be precisely possible, but also probably future; either by reason of the borrower, who is not sufficiently known, or is of doubtful faith, or conducts dangerous business; or by reason of the principal, which is to be carried elsewhere with danger to the lender. 2. The quantity of the interest itself must be proportionate to the quantity of the danger. Each is clear from the response of the S. C. de P. F., which in the year 1645, having been questioned by Missionaries from the Chinese Kingdom in a similar doubt, and having been convoked by mandate of Innocent X, responded: "They judged that by reason of mutuum immediately and precisely, nothing is to be accepted beyond the principal sum; but if they accept something by reason of danger probably arising, as in the case, they are not to be disturbed, provided account is taken of the quality of the danger and of its probability, and proportion is preserved between the danger and that which is accepted." La-Croix n. 856; L. 765.

Whether in a mutuum it is licit to make an agreement about a penalty to be paid by the borrower if he does not return the principal at the defined time? Resp. Affirmatively.

The reason is that in this way provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against. L. 766. Nevertheless it must be observed that this pact is not licit unless 1. the delay of the debtor is notable and culpable; notable, for some delay is intrinsic to mutuum; culpable, for he who has not sinned is not to be punished. 2. The intention of profiting through that attached penalty is absent; and this is presumed to be present if the debtor is burdened with the obligation of restoring the principal at that time at which it is certainly known that he is by no means able to pay. 3. The penalty is moderate and proportionate to the fault; otherwise it would be unjust. But more probably it is owed before the sentence, for it has more the nature of a pact than of a penalty, although it also is a penalty. L. 44 de Usur.; L. 766, 767, 775.

Whether civil law supplies a just title for demanding something above the principal, even with any other title excluded? - C. I. 1829; C. G. 1905. Resp. Affirmatively. And, when written law is lacking, legitimate existing custom, which has the force of law, supplies. - Proof: 1. For since ordinarily in a mutuum an extrinsic title of just interest is not lacking, by reason of danger to the principal, ceasing profit, and emergent loss, civil authority can well determine by law the increase which can justly be demanded, to impede the unjust extortions of wicked men, to render the contract of mutuum easier for all, and also to impede lawsuits and controversies, not without grave damage to the parties. - 2. Public authority can, by reason of the common good, transfer the ownership of private persons, as is seen in the law of prescription. Therefore the same authority can transfer ownership of an increase above the principal, which in this case is freely and willingly given by all, by reason of the public and private good, to which, as has been discovered by experience itself, facility of lending especially contributes. 3. The same is evinced from the Responses of the Sacred Congregations, namely that those who accept the profit conceded by law, even without any other title, are not to be disturbed. Collect. cit. 2141; E. M. Legal interest or fenus of this kind is in the manner of civil fruits, L. 34 de Usur. et fruct., and can also be called usury, but less properly and in a broad signification. Cf. 1086, 1095. As civil law, so consequently legitimate custom, and as the S. Penitentiary has it, April 18, 1889, the common practice observed by men of fearful conscience in their respective places and times, can determine the just interest to be received from mutuum. E. M.

What kind is the fenus, or interest, constituted by positive laws?

According to C. I. 1831; C. G. 1907 and the Law of Sept. 3, 1807, one interest is legal, another conventional. Legal interest is five per cent in civil matter, six per cent in commercial matter; or civil usuries are quincunces, mercantile are semisses. Nevertheless by the Law of June 22, 1904 in Italy, and the Law of Apr. 7, 1900 in France, legal interest is four per cent in civil matter and five per cent in commercial matter. Conventional interest according to the cited French Law cannot exceed the aforesaid quantity; according to C. I. it depends on the judgment of the contracting parties; but if it exceeds legal interest, it must be established by a written act; otherwise no interest is owed. Nevertheless the debtor after five years from the contract can always restore the sums accepted with interest to be paid exceeding the legal, notwithstanding any contrary pact, but with written notice given six months before. C. I. 1832. Cf. 1833. According to C. H. 1100, 1109, in civil matter likewise one interest is legal, another conventional. Legal interest is six per cent. In commercial matter one must stand by the Commercial Code. But in it commercial contracts are treated, arts. 50-63. According to C. L. likewise one interest is conventional, another legal, and this is five per cent, art. 1640. According to C. A. 994, 995, one interest is legal, another conventional. The first is four per cent, and among merchants six per cent. The other cannot exceed five per cent in a loan with pledge, and six per cent in a loan without pledge. But by the Law of June 14, 1868, the predefined limits for conventional interest of this kind were abrogated. C. B. 246, 247. Legal interest is four per cent. Conventional interest can exceed this quantity. But if it exceeds six per cent, the debtor can restore the capital after six months, with a prior delay of notice of six months. As regards Roman Law, cf. L. 36. E. M. de Usur. C.

Whether from positive laws interest also from interest, anatocism, is constituted? - According to Roman law it is prohibited. L. 29 de Usur.; L. 27 de Re iud.; L. 28 de Usur. C. - According to C. I. 1232, 1233; C. G. 1154, 1155, interest from interest is owed after a year, if the creditor juridically seeks it, or by a particular agreement, after the prior interest has already become due. But it can also be demanded from the beginning from revenues of estates, perpetual or life-long. Gousset Cod. comm. on art. 1154. According to C. H. 1109, legal interest from interest is likewise owed after this is owed and the former is juridically sought. According to C. A. 998, only interest which is owed from two or more years can, by means of an agreement, constitute a new capital. Likewise according to C. L. 1642, cf. C. A. 1335, it is required that interest already owed be constituted as capital by a new contract. According to C. B. 248, an agreement made in advance that interest which is owed should be productive of new interest is null. - E. M.

Whether legal interest is sometimes to be paid even without agreement? Civil law itself, apart from every agreement, establishes legal interest to be paid sometimes by reason of delay and loss; sometimes by reason of fault and injury; sometimes by reason of natural equity. By reason of delay, e.g., of a debtor who does not restore at its time money credited to him, C. I. 1231; C. G. 1153; C. B. 288; by reason of fault and injury, e.g., of a guardian who did not invest the money of a ward, C. I. 291; of a mandatory or depositary who used another's sum, C. H. 1724, 1770; C. B. 698, etc. This interest is in the manner of a penalty, and accordingly before the sentence of the judge it is not owed; after it, it is owed even in the forum of conscience, even if because of only civil fault.

By reason of natural equity, e.g., if a dowry has been constituted in counted money, if the buyer of a house or estate does not pay the price on the established day, and the thing sold and handed over produces fruits, etc. C. I. 1397, 1509; C. G. 1548, 1652. This interest does not need the sentence of a judge in order to be owed. Cf. n. 1114. 2, 3. The cases in which, according to C. I., legal interest is owed by the law itself are: 1. The remaining sum owed by the guardian, once accounts have been rendered, C. I. 308. 2. The dowry owed by those promising from the day of marriage, C. I. 1397. 3. The dowry to be restored from the day of the dissolved marriage, C. I. 1415. - 4.

The sum owed by a partner of a partnership, C. I. 1710. 5. The sum which the surety paid, C. I. 1915; C. H. 1838. 6. Advances made by a mandatory, C. I. 1755. 7. A legacy from the death of the testator, if it is a legacy of a farm, capital, or a fruitful thing, C. I. 865. 8. Whenever a sold thing produces fruits, the price not yet having been paid, C. I. 1509. 9. Whenever an agent of affairs has made expenses for the utility of another, C. I. 1144. 10. Whenever someone in bad faith has received what was not owed, C. I. 1147. 11. Whenever reduction of a donation is juridically sought as regards the excess of the disposable part, C. I. 1094. C. B. 256, 288, 289, 290, 291, 347, 452, 641, 668, 698, 849, 1834; C. H. 1724, 1770.

Whether a borrower paying interest not owed can reclaim it according to positive laws? - Although in the Law there is generally given a reclaiming of what was not owed, C. I. 1237; C. G. 1235; C. H. 1895, nevertheless here it is not given. C. I. 1830; C. G. 1906; C. H. 1756. Wherefore the borrower who pays interest which was not agreed upon, or beyond what was agreed upon, cannot reclaim it, nor impute it to the principal.

To whom is it lawful to receive 5 or 6 per 100, by reason of commerce, according to civil laws? It is certainly lawful for merchants lending money to other merchants, because it is altogether a matter of commerce. It is also lawful for merchants with respect to others who are not merchants, because the law intends to favor commerce; but it favors it by permitting merchants to receive a greater rate from lent money. If it concerns others who are not merchants with respect to merchants, it is disputed. More commonly they deny that it is lawful, and report that such is the decision of tribunals. The reason is that the law which intends to favor merchants would rather be harmful to them, if they had to pay greater interest. Nevertheless several, even among jurists, affirm it. Their reason is: 1. Because the words of the law are general: in matter of commerce; nor is it established what the genuine sense of those words is. 2. Because it is expedient for commerce that the law be so understood: for thus merchants much more easily find money with greater utility to themselves and to commerce.

Whether it is lawful to exceed the legal rate in a mutuum by reason of emergent loss or ceasing profit? - Resp. Negatively, with respect to the poor or others who seek a loan in necessity, and who would be oppressed by a greater increase. Nevertheless you do not seem to be bound, with great inconvenience to yourself, to grant them a loan. Charity does not oblige with grave inconvenience.

If money is handed over for the utility, but not for the necessity, of another, it is disputed, and a twofold opinion is given. The first opinion affirms by reason of indemnity or just compensation. The second opinion denies. The reason is that compensations for losses arising from a pecuniary obligation can be demanded according to the legal rate. This opinion indeed can have place if the lender compels or obliges another to receive a loan from himself; otherwise the reason does not appear why the lender should undergo the detriment of emergent loss for the favor of another. In many places, from the common practice even of the timorous, the legal rate is exceeded; nor for that reason is it believed that sin is committed. For emergent loss, ceasing profit, and the danger of losing the principal must be estimated variously from the various circumstances of places, things, and persons. Hence generally in great cities it is thought to be less than in small towns; and in the former semis usuries, six per cent, and in the latter septunx usuries, seven per cent, are often tolerated. Those which exceed these must be judged from particular circumstances. But those which exceed the decunx, ten per cent, seem immoderate, regularly speaking, and to be rejected. And since Governments themselves rather reduce legal interest, and in titles of public debt in reality pay only three and four per cent and even less, private interest among themselves of a dextans or ten per cent now seems excessive also, speaking per se, at present. Cf. 1087.

Whether it is lawful to receive the legal increase where it exceeds 5 or 6 per 100? Resp. Affirmatively, if the law, after all circumstances have been weighed, and especially the practice and custom of the timorous, seems just, that is, if equality appears between the profit permitted by law and the value of the use of money or the dangers to the principal, etc. For no absolute rate can be established, but attention must be paid to the various circumstances of places, and also to the dearness of money, from which its price and therefore its use increases, as in Africa, in India, etc.

What must be said of institutions which are commonly called Savings Banks or Banks of Thrift? Not only are institutions of this kind to be tolerated, but they are also to be praised, since they assist widows, servants, maids, and the poor, while their modest money is accepted by loan and proportionate interest is paid back to them.