Article IV: On Retrovendition

531. Retrovendition, or sale with a pact of redeeming (avec faculte de rachat ou de remere; met recht van wederinkoop) is that in which the seller reserves to himself the faculty of recovering the thing within some time.

Considered according to natural law, such a sale can be made:

a) in favor of the seller, that is, on this condition, that if it pleases the seller, the buyer is bound to sell the thing back to the seller;

b) in favor of the buyer, that is, on this condition, that if it pleases the buyer, the seller is bound to buy the thing again;

c) in favor of a third party, so that if it pleases the seller, some third party has the right of buying the thing in question.

A pact of this sort contains nothing unjust of itself, provided that in the fixed price account is taken of the burden imposed, which is estimable by price, and due equality is preserved. Hence the price must be diminished if the pact of redeeming is made in favor of the seller or of a third party, because a burden is imposed upon the buyer; on the contrary, it must be increased if the pact is made in favor of the buyer; if it is in favor of both, the mean equality of price is to be observed. This being posited, the pact is licit: for when the seller alienates his own thing, he can add whatever honorable condition, even though burdensome. Thus of itself, and apart from the intervention of positive law.

Nevertheless retrovendition in favor of the buyer is a dangerous contract, not to be admitted in practice. It favors usurers, when from such a purchase the buyer intends to make gain, as if he compels the seller to redeem at a greater price than he himself bought, or at the same price, but meanwhile by receiving the fruits.

532. Dispositions of civil law. Present-day civil law, although it permits all honorable conditions in contracts, nevertheless does not expressly treat of these, but only of retrovendition in favor of the seller, which it does not call retrovendition but repurchase (a. 1659-73). That contract was retained so that persons, compelled for the moment to sell their goods because of adverse fortune, might have the hope of recovering them afterward. The law does not understand this contract in the same way as theologians, as if it were truly a new purchase; but it regards it as one contract, one sale under a resolutory condition. And thus, when the condition arrives, a new contract of sale is not made, but the first sale is annulled and all things are restored integrally as if the sale had not intervened (a. 1183). Hence the seller must restore the price without increase, pay expenses and make good the damages that followed and whatever the buyer expended on the thing necessarily or usefully (a. 1673); but he recovers his own thing free from any burden imposed by the buyer (for example, mortgage), except a lease, which he must sustain if it was not entered into by the buyer in fraud of the seller (a. 1673).

Our law establishes that the time for rescinding the contract is not extended beyond five years (a. 1660).

533. Observation. Under the appearance of retrovendition there can lie hidden a usurious contract condemned by Innocent XI,¹ which by its Spanish name is called mohatra. It is a certain retrovendition made in an instant with usury on the part of the seller; a contract by which someone, in place of a loan, sells his merchandise at the highest price with the intention that the buyer immediately sell it back at the lowest or at a mean price. Namely, the contract consists in this, that a certain thing is sold at the highest price (1,000 fr., for example) to him who needs money, but it is sold on that condition that the same thing be immediately sold back at a lesser price (800 fr.) to the former seller. Then the former seller pays this lesser sum, but the buyer remains obligated also for the difference which exists between the two prices (namely, 200 fr.). It is evident that it concerns a fictitious sale, not truly intended, and a fraudulent contrivance for extorting immoderate usury. Hence it is an unjust contract.

¹ "The mohatra contract is licit, even with respect to the same person, and with a contract of retrovendition previously entered into with the intention of gain," prop. 40.