Section 1. On the Nature of Mutuum

575. Definition. Mutuum (Darlehensvertrag) is a contract by which a thing consumable by the first use is handed over to another, with the obligation of returning another thing of the same nature and goodness at the established time.

a. The name mutuum is taken in a twofold sense: in the formal sense, in which it signifies the contract described above, and in the real or objective sense, in which it signifies the thing which is handed over to another by way of mutuum (Darlehen).

b. He who hands over the thing to another is called the lender, or giver of the mutuum; but he to whom the thing is handed over by way of mutuum is called the borrower.

c. Mutuum is a real contract, which is perfected only by the handing over of the thing; from mutuum must be distinguished the promise of giving a mutuum, which ordinarily precedes the mutuum itself.²

d. The object of mutuum is a thing consumable by the first use; but not only a thing which is physically destroyed by use, as grain, wine, oil, is said to be consumable by use, but also a thing which indeed physically remains as to substance, but perishes for the user, so that the same thing in its individuality cannot be returned, as money, which is destined to be spent, and wood which is used for building a house.

e. The borrower becomes the owner of the thing lent by mutuum: for by force of the mutuum the right of using the thing handed over is conceded; but the right of using a thing consumable by the first use is the same as the right of destroying the thing; but the right of destroying a thing pertains to ownership of the thing. If therefore the thing lent by mutuum perishes in any way, it perishes to the borrower, because the thing perishes to the owner; therefore when the thing perishes, the borrower is not freed from the burden of restoring a thing of the same kind. Likewise the fruits, if the thing lent by mutuum produces any, are acquired by the borrower, because the thing bears fruit for the owner.

f. Mutuum differs: alpha. from commodatum and lease, because in mutuum a thing consumable by the first use is handed over, ownership of the thing is transferred, and a similar thing or a thing of the same kind is returned; but in those contracts a thing not consumable by the first use is handed over, ownership of the thing is not transferred, and the same thing in species or individuality must be returned; beta. it differs from exchange, because in exchange, for example in sale, a thing of a different kind is returned; gamma. it differs from exchange of money, because in exchange of money the thing is handed over immediately, not after some time.

¹ St. Thomas II-II, q. 78; Lessius, De iustitia, l. 2, c. 20; Lugo, De iustitia, disp. 25; Benedict XIV, De synodo, l. 10, c. 4; his encyclical Vix pervenit, Nov. 1, 1745; Fr. Zech, Rigor moderatus doctrinae pontificiae circa usuras etc.; Alb. Weiss, Soziale Frage und soziale Ordnung (Freiburg: Herder, 1892); Fr. X. Funk, Zins und Wucher (Tubingen: Laupp, 1868); the same author, Zur Geschichte des Wucherstreites (Tubingen: Laupp, 1901); H. Pesch, Zinsgrund und Zinsgrenze, Zeitschrift fur kath. Theol. (Innsbruck, XII, 1888), pp. 36, 393; J. Diederlack, Der Darlehenszins (Vienna: Mayer, 1898); A. Vermeersch, Quaestiones de iustitia^2 (Bruges: Beyaert, 1904), n. 357-385; Van Roey, De iusto auctario ex contractu crediti (Louvain: Van Linthout, 1903).

² From C.A. Section 983 a promise of giving a mutuum produces a civil obligation; likewise from C.G. Section 610.

576. On the gratuitousness of mutuum. Mutuum of itself is a gratuitous contract, so that it is not permitted to impose any other burden on the borrower, except that he return a thing of the same kind and goodness at the due time, without anything being required for the lending itself. Indeed he who requires gain for the thing lent by mutuum requires a price for the use of the thing lent by mutuum: for since the thing lent by mutuum is consumed by the first use, nothing is found in the mutuum which can be judged estimable by price except the use of the thing; but he acts against justice who requires a price for the use of the thing lent by mutuum: for if the lender were to require anything for the use, since the borrower becomes owner of the thing, he would require something for a thing not his own. Moreover the use of a consumable thing does not have a value distinct from the value of the thing, just as the use of purchased wine does not have a value distinct from the substance of the wine. Therefore he who requires a price for the use of the thing lent by mutuum is like a seller of wine who separately sells the wine and the use of the wine.¹

a. Therefore he who requires anything for the mutuum itself or for the lending and use of the thing lent by mutuum sins against justice and is bound to restitution. And a contract whose object is gain to be received from the mutuum itself is invalid as illicit and unjust. Therefore the Church by most severe laws prohibited any gain beyond the thing lent by mutuum from being received by reason of the mutuum itself.

b. Against the proposed argument this cannot be excepted: the lender, by lending to the borrower, performs a service which is estimable by price. For if by the name of service is understood the thing lent itself, this is restored in the same kind and the same goodness; but if by the name of service is understood the use of the thing, this in a consumable thing does not have a value distinct from the thing itself; if finally there is understood the utility which the borrower receives from the use of the thing, it is wrong to require a price for the utility which someone receives from his own thing. Nor can this be excepted: he who concedes a mutuum to another deprives himself of his own thing; but the burden which someone undergoes by this privation is estimable by price. For the burden itself by which someone deprives himself of his own thing, where this privation is not conjoined with a special detriment, is not worth more than the thing itself of which he deprives himself; and since this is restored, nothing remains which is estimable by price. The same privation is also had in sale, without a price being able to be required for it. The following exception returns to the same point: to lack one's own thing for a certain time is estimable by price. For to lack an unfruitful thing, which has no other use except consumption, is not estimable by price, where the lender receives a similar thing when he himself has need of it. The obligation which the lender contracts of not reclaiming the mutuum for a certain time is likewise not estimable by price, where the thing lent by mutuum is not necessary to the lender. He indeed deprives himself of the liberty of reclaiming the thing lent by mutuum; but this inconvenience, whatever it be, is abundantly compensated by another advantage, namely that the borrower undergoes the danger of losing the thing lent by mutuum while the obligation of restoring a similar thing remains: for the mutuum perishes to the borrower.² The lender does not suffer damage, because he lends an unfruitful thing which he himself does not need. He would suffer damage if, from circumstances not foreseen, the borrower lost the power of restoring; but he can meet this danger by demanding a surety, who, if the borrower fails, will restore the thing.

¹ Cf. St. Thomas, II-II, q. 78, a. 1.

² Therefore this proposition (42) was condemned by Alexander VII: It is licit for a lender to require something above the principal if he obligates himself not to reclaim the principal until a certain time.

577. On external titles. An external title is called a cause placed outside the essence of mutuum, on account of which the lender in a particular case can require a price for the mutuum. Now four titles of this kind exist: ceasing profit, emergent damage, danger of the principal, and conventional penalty.

From these titles, with the Church itself approving, some gain beyond the principal could already in ancient times be licitly required. But it was necessary that these titles really exist, that a special pact distinct from the mutuum be entered between the lender and the borrower, and that certain conditions be observed, especially that the due proportion of equality not be exceeded between the gain and the title from which the gain was to be received.

1. Ceasing profit is the loss of a price which the lender would have gained if he had used his thing in another licit contract or business; now hope of gain is estimable by price and is external to the mutuum; therefore because of ceasing profit it is permitted to accept something above the mutuum.

2. Emergent damage is a positive detriment which the lender must undergo because he gives his thing to another by mutuum; but it is manifest that compensation can be required for damage which someone undergoes in favor of another.

3. Danger of the principal is a special danger which is prudently feared, lest the lender not recover his own thing. This danger is external to the mutuum and estimable by price; wherefore, if the lender truly must undergo it, he licitly requires something for it, and the greater the danger of losing the principal is, the greater compensation he can require.

a. For the common danger to which any thing whatsoever, and therefore also the thing lent by mutuum, is subject with the lender, it is not permitted to accept anything, because this danger is internal to the mutuum; but for the special danger to which the thing is exposed with the borrower, it is permitted to accept something beyond the mutuum, because this danger is estimable by price and external to the mutuum.

b. Danger of the principal can arise either on the part of the thing lent by mutuum, if, for example, it must be transported through dangerous roads, but the borrower cannot restore it if the thing perishes; or on the part of the borrower, if he is a man little trustworthy, negligent, or fraudulent, whereby it happens that the mutuum cannot be recovered without troubles and lawsuits.

4. Conventional penalty is a money fine to be paid by the borrower from agreement if he does not return the thing accepted by mutuum at the established time; but nothing prevents contracting parties from mutually obligating themselves to paying a certain penalty if they fail in contracts.

578. Civil law or legal reward. From the seventeenth century onward civil laws here and there admitted a certain interest to be received from mutuum and compelled the borrower by civil action to pay it. From that time there was much discussion among theologians whether, with other titles lacking, the title of civil law alone suffices in conscience for receiving gain from mutuum licitly.¹ The chief reason of those who affirmed that this is licit is this: civil authority can validly transfer ownership of material goods from one person to another where the necessity or great utility of the common good demands it; but the common good of our time demands great facility of lending money by mutuum for fostering and increasing commerce; and since this facility cannot be universally obtained among men in another way except by permitting interest as a kind of reward for money given by mutuum, civil authority can permit this and transfer ownership of the interest to the lender.

This title of civil law, about which theologians in the eighteenth century sharply disputed and still dispute, the Church seems not at all to have reprobated, but rather to have approved; for it decrees both that the faithful who receive interest established by civil law from mutuum are not to be disturbed, and that confessors who teach that it can be licitly received are not to be disturbed, provided they are prepared to stand by the mandates of the Holy See if it defines anything on this matter.²

Nevertheless the Church by these things did not wish to settle the question agitated among present-day theologians concerning the force and efficacy of this title: for they dispute whether civil law itself, with no other title existing, renders the agreed interest licit, or whether it is rather itself an argument for the existence of some external title on account of which interest can be licitly received. Many are of this latter opinion, which Ballerini briefly presents in this way: the law "does not make just the gain received from mutuum, but finds it just."

¹ Cf. Fr. Zech, Rigor moderatus, c. 1, sect. 5.

² Concerning the title of civil law there are two decrees of the Holy See, one of Sept. 16, 1830, the other of Jan. 17, 1838.