Point II. On Some Buyings and Sellings in Species

I. Sale with an added pact. Sale with a pact concerning the right of the seller to redeem the thing if he himself should demand it,¹ a sale of this kind, I say, is licit, provided that in establishing the price account is taken of the burden which is imposed on the buyer or seller (St. Alphonsus, III, 812, 813). Let the law of one's country also be consulted.

¹ Akin to this pact was the contract whose Spanish name was mohatra, by which someone sold on credit with an explicit or implicit pact that the thing would immediately be sold back to him at a lesser price, but for present money. It was therefore a disguised contract of loan and was for cloaking usury, and therefore was condemned by Innocent XI.² But since civil laws commonly permit interest to be received from money given as a loan, that contract has become obsolete (Sweens, n. 719; cf. St. Alphonsus, III, 813).

² Proposition 40, Denzinger-Bannwart, n. 1190.

II. Sale under the spear. 1. Notion. Sale under the spear, or auction, is a sale in which the things to be sold are proclaimed by a crier and are commonly adjudged to the last or first bidder: to the last, if successively greater prices are offered by the bidders; to the first, if the highest price proposed by the crier is diminished until one bidder assents. It is called sale under the spear because among the Romans in sales a spear, that is, a sign of ownership, was fixed in the ground. It is also called public auction, because a later bidder, by offering more, increases the price offered by a former bidder.

2. Division. It is distinguished as twofold, judicial and voluntary, according as it is made by precept of the judge or freely. In the former, the thing must be adjudged to the last or first bidder; in the latter, the seller can withdraw the thing. Public auction somewhat puts on the nature of an aleatory contract, insofar as the seller has hope of selling his things at a greater price because of the concurrence and rivalry, but runs the risk of selling them at a lesser price; likewise the buyer has hope of buying at a lesser price, but because of the concurrence he also runs the risk of buying at a greater price. These things, however, have more force for a judicial auction than for a voluntary one, because in the latter the seller can still retain his thing if a lesser price is offered.

3. The just price is that which is determined by bidding, even if it is above the highest or below the lowest; and this has force both for a judicial auction and for a voluntary one, provided nevertheless that the matter was done without fraud which restricts freedom of acting. It has force for a judicial auction; for since in the case authority absolutely wills the sale, it itself "implicitly approves as just that price which is publicly approved by the concurrence of buyers" (St. Alphonsus, III, 808). It has force for a voluntary auction; for all, being free to do the same thing if the occasion is given, freely judge as just the price approved by the concurrence of buyers. They judge thus both because the somewhat aleatory character of sale under the spear counsels this, and so that the sale of things, in a case greatly desired, may be better provided for. It was said: provided that the matter was done without fraud. Further, they act unjustly:

a) Sellers, if they positively deceive buyers as regards the thing to be sold. Mere concealment of defects now is not unjust, since they are accustomed to sell things as they are.

b) Buyers, if by an unjust means, for example deceit or fear, they prevent others from bidding; otherwise it must be said if they employ only prayers (St. Alphonsus, III, 808, dub. 1).

c) Officials, if they begin the auction before the time, that is, while buyers are still lacking, so that the thing is sold for less; likewise, if they adjudge the thing to a bidder too quickly.¹

Corollary I. The seller licitly: 1° bids himself, for example through a friend; 2° suborns fictitious bidders; 3° retains the thing if a lesser price is offered. These things indeed were formerly illicit, with attention paid to the commonly admitted aleatory character of an auction; but today, the character of an auction having been tempered by common and known practices, true fraud seems absent, and therefore the aforesaid devices seem licit. There is added that even those whom the seller harms use various devices; hence the devices employed by the seller do not harm the equality to be preserved in the contract.

Corollary II. Buyers licitly agree by pact, either to buy a thing in a common name; or, when a determined price has been offered by one of them, to abstain from bidding; or, that one shall in no way bid against another. Buyers, I say, act licitly in this way if there is question of a voluntary auction, because the seller can withdraw his thing when a lesser price is offered. If there is question of a judicial auction, it seems illicit, because a judicial auction has retained more the nature of an aleatory contract, in which the seller is obliged to yield his thing at whatever price. But the equality to be preserved in contracts of this kind requires that the said obligation be compensated by hope of obtaining a greater price, and this hope is diminished too much if the buyer turns many away from bidding (St. Alphonsus, III, 808, dub. 2). Except, however, if only one or another is turned away from bidding.

Corollary III. A buyer licitly gives or promises money to another so that the latter abstain from bidding; and this holds not only in a voluntary auction, since the seller can withdraw his thing, but also, as is drawn from what was said in Corollary II, in a judicial auction, if he gives or promises money to only one or another. But it is disputed whether one licitly accepts money who does not have the intention of bidding, or even has a positive intention of not bidding. It seems that it must be affirmed, because by accepting the money he takes on the obligation of not bidding; and this is estimable by price.

¹ Cf. Sweens, n. 707.

III. Buying and selling through a broker. 1. Notion. A broker is called one who buys or sells in the name of another, and therefore obliges that other person - not himself - toward the one with whom he deals. Some are public brokers, others are simple mandataries, according as they have been constituted by the municipality or have not been constituted by it. Brokers are distinguished from the so-called commission agents, who indeed act for another, but in their own name, and therefore oblige themselves - not another - toward the one with whom they deal.

2. Obligations of the broker. a) A broker, whether constituted publicly or privately: 1° by reason of the office undertaken, whether gratuitously or for payment, ought from strict justice to carry out the affairs of his patron diligently on account of at least a tacit contract; nevertheless one who receives a stipend for his office is held to greater diligence; 2° he is held from contract, and therefore from strict justice, to observe the obligations defined by a special mandate of the broker.

b) A public broker in addition, from the office tacitly undertaken according to the law in force concerning his function, and therefore from a tacit contract from strict justice, is held to the obligations which civil law decrees are to be observed by him.

c) A broker in the forum of conscience: 1° before any sentence whatever of a judge is held for damage which he has inflicted on the mandator either in bad faith or by grave culpable negligence; 2° for damage inflicted with merely juridical fault, he is not held except after the sentence of a judge.

Corollary I. A broker who in the name of the mandator buys below or sells above the price determined by the mandator cannot per se retain the profit thus made; for the mandator has a right to the profit which the contract entered into in his name carries with it, unless he must be judged to have yielded it to the mandatary. But determination of the price does not contain a cession of profit, since by determining the price the owner intends only this, that the thing not be bought more dearly or not be sold for less. Nevertheless he can retain the profit: 1° if the mandator is judged tacitly to consent, which is presumed by law to have place in the case in which the mandator assigns no wage of labor to the broker; 2° if the broker sold the thing more dearly because he himself improved it by undue industry. If he did not improve the thing, but sold it more dearly by employing undue diligence, likewise if by undue diligence he bought some thing for less, he can retain for himself a wage for the undue diligence (St. Alphonsus, III, 825).

Corollary II. A broker can buy for himself a thing of the mandator which is to be sold at a determined price, and afterward sell it for more, provided both that, after employing moral diligence, he has found no one who offers more, and that he truly buys the thing and therefore has it at his own risk. I said who offers more, because the owner, by determining the price, intends that his thing not be sold for less, but, if it can be done, for more (St. Alphonsus, loc. cit.); the broker is held by this disposition of the owner concerning his own thing. I said also and truly buys the thing and has it at his own risk, so that, if he does not sell the thing for so much, he nevertheless returns the determined price to the owner (St. Alphonsus, III, 825).

Since the matter is not without risk, several civil laws are opposed to a way of acting of this kind.

Corollary III. A broker can sufficiently probably buy for himself at a lower price a thing which the mandator committed to him to buy at a determined price, and afterward sell it to the mandator at a higher price, provided that afterward, after employing ordinary diligence, he has found no occasion of buying the thing except at that higher price (St. Alphonsus, loc. cit.).

Objection 1. The moral diligence to be employed demands that the broker not pass over an occasion of buying that thing for the owner at a cheap price.

Response. It is not clear that the diligence to be employed demands more than that the broker buy at the price assigned by the mandator.

Instance. If the opinion defended is admitted, a broker who in the name of the mandator buys below the price assigned by the mandator can - contrary to what was said in the first corollary - retain the profit for himself, because the mandator also in that case has only the right that the thing, if it can be done, be bought at the assigned price.

Response. I deny the parity of the cases; in the first corollary the mandatary buys something for the mandator, who has a right to the profit which the contract entered into in his name carries with it; in our case the mandatary buys something for himself.

Corollary IV. One who buys a thing for another, that is, not at his own risk but at another's risk - as a maid-servant who goes to a shop in the name of her mistress, a tailor who buys cloth not for himself but for a client, from which he is to make clothing - can retain the part of the price which the seller gives to him; or, as the same thing is expressed less precisely, he can retain what the seller remits from the price in favor of the broker or of any mandatary. Nevertheless, let deceit be guarded against, since "sometimes merchants in reality rather simulate giving to them than give, so that if the owner himself went, he would obtain the thing for the same price" (St. Alphonsus, III, 826).

Corollary V. Servants, who are going to pay for a thing previously bought for the owner, can retain the part of the price which the merchant refunds to them, or the little gifts which he bestows on them. For an intention of favoring the servant is presumed.

IV. Monopoly. 1. Notion. Monopoly is called the power of selling or determining the price acquired exclusively by one alone or by only a few.

2. Division. Monopoly is distinguished into public or legal and private. Public monopoly is that which the government reserves to itself, or grants to one or a few. Private monopoly is that which is acquired by the industry of private persons, for example by buying up all goods of some kind; by preventing goods of the same kind from being brought in by foreigners. Private monopoly is especially introduced by companies which either buy up certain goods in a very great quantity, or determine the regions where individual companies are to trade, and quasi-divide them among themselves. According to their diverse constitution they are called: trust, cartel or syndicates, pool, ring, corner.

There is also monopoly improperly so called, which is had when several persons conspire not to sell goods except at such and such a price.

3. Morality. 1. A monopoly which the government reserves to itself is licit, provided there is a proportionate cause, for example that the State may enjoy necessary revenues; that public order may be provided for, as in the monopoly of the postal office.

2. A monopoly which the government grants to another is likewise licit if a proportionate cause is present, for example that art, or industry generally, may be promoted.

3. One who, after buying up all the goods of some kind, sells them at the highest price which would be current if the monopoly were excluded, that seller, I say, sins neither against justice nor against charity. He does not sin against justice, "because everyone has a right to sell his own thing at the strict price" (St. Alphonsus, III, 816); he does not sin against charity, because no one is bound to neglect his own advantage in order to provide advantage for another (St. Alphonsus, loc. cit.). Nevertheless he is bound to abstain from a way of acting of this kind if competent authority, insofar as that is required by the common good and can practically be done, restricts the rights of private persons.

I said: "at the highest price which would be current if the monopoly were excluded"; for he would sin against justice if he increased the price above the highest at which the goods would be sold if the monopoly did not exist, or if the goods were available among several sellers (St. Alphonsus, loc. cit.). The reason is that the just price of a thing is that which is assessed by common estimation, with attention paid to the quantity of goods commonly known, whether they are or are not among several sellers - for the price does not increase precisely from fewness of sellers, but from the rarity itself of the goods; whence if there were few sellers but abundant goods, they would not on that account be estimated more highly. But the quantity of goods is the same in one seller as if it existed divided among several.

4. Those who conspire about not selling goods except at the highest price do not sin against justice; since they neither deprive buyers of a good to which they have a right - for no one has a right to buy at a lesser price - nor by an unjust means do they impede them from obtaining a good, that is, from buying at a lesser price. But it is more commonly taught that they sin against charity. "The reason is that although charity does not oblige you to sell below the highest price, it nevertheless seems to oblige you not to dissuade others from selling at a milder price; just as, although charity does not oblige you to give alms, it nevertheless seems to oblige you not to dissuade others who wish to give it" (St. Alphonsus, III, 817).

Corollary I. The things said about the conspiracy of sellers must also be applied to the conspiracy of buyers not buying except at such a price.

Corollary II. Those who sell goods at the lowest price with this event, that after others' shops have been overthrown they may demand a greater price, do not sin against justice, as is clear; nor against charity, because no one is bound to neglect his own advantage on account of another's damage, which will follow occasionally. And this has even more force if, with you abstaining, another perhaps less liberal person would do the same thing.

Corollary III. They act unjustly who compel their workers to buy goods in their own shops or in other determinate shops, and to receive goods less good or of greater price; which way of acting, moreover, is commonly also prohibited by civil laws.

Finally note that the contract of exchange is ruled by the same principles by which buying and selling is ruled.

V. Buying and selling of shares. Buying and selling of shares contains the buying and selling of a right to part of the profits of some company; but it is just if it is done at the current price; for otherwise trading would become morally impossible, so that all are presumed to consent. But one who has induced the price by fraud is held to restitution. Besides, trading in shares is especially to be dissuaded for the inexperienced.