Brokers and Agents

605. On sale through brokers. Notions. a. Sale through brokers is called that which is made by others from the commission of the owner of the thing to be sold.

b. A broker (Makler, Sensal) is called one who buys or sells in the name of another.

There are brokers who are constituted by public authority for exercising this office, and there are brokers who are constituted by owners alone for buying or selling certain things, as children of the family who buy for parents, servants who buy for masters, craftsmen who buy for those from whom they undertook work to be completed.

c. Brokers by their nature are mandataries of those in whose name they sell or buy; wherefore the obligations of a mandatary must also be applied to brokers.

606. Principles. 1. A broker who sells a thing above, or buys below, the price designated to him by the owner cannot retain the profit for himself, unless he acquired it by extraordinary industry: for since he acts not in his own name but in the name of the owner, what he acquires by negotiating he acquires not for himself but for the owner.

2. It is not permitted to a broker to buy for himself a thing to be sold at a determined price and afterward to sell the same thing at a higher price and retain the excess for himself: for the owner is considered to have excluded this mode of acting, as harmful to himself, except in the case in which the broker, after using moral diligence, does not find another buyer. Yet then he must seriously carry out the purchase and take the danger of the thing upon himself.

3. A broker can retain those things which merchants remit from the just price in his favor. But attention must be given whether the merchants remitting from the price intend in reality to favor the buyer or the mandator.

If brokers buy frequently and for diverse men, as craftsmen do, the remission of the price is considered to be made rather in favor of the buyer; but if brokers always buy for the same person, as servants and children of the family do, merchants are considered to remit from the price rather in favor of the mandator.

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.

What is mandate, and what is its nature? - Mandate, insofar as it is a contract, can be defined: a contract by which one of the contracting parties commits to the other the management of some business to be performed in his name. The management of business; otherwise, not mandate, but hire of work is had. In his name; for, if not in his name, then the other executes his command, as a servant does when sweeping the house. Hence mandatories are agents, commonly agenti, fattori; brokers, commonly sensali; procurators for conducting lawsuits. Inst. 1. 3. t. 27 de Mandato § 1 ff.; C. I. 1737; C. G. 1984; C. H. 1709; C. L. 1318; C. A. 1004.

According to Roman and German Law, mandate is a contract per se gratuitous. L. 1 § 4 Dig. Mandati; Inst. l.c. § 13; C. B. 662. According to C. I. 1739; C. G. 1986; C. H. 1711, mandate is gratuitous unless it has been agreed otherwise. Per se gratuitous: otherwise it is rather hire of work, although it will always remain true that the lessor does not act as a mandatory in the name of another. - Mandate can be express and tacit; acceptance likewise can be express and tacit. The mandate is tacit if someone sees something being done for his own favor and does not prohibit it.

Acceptance is tacit if the mandatory executes the thing. L. 6 § 2 Dig. Mandati; C. I. 1738; C. G. 1985; C. H. 1701. - If the Mandate is against good morals, it is null. Hence there is no civil action of the mandatory against the mandator. Inst. l.c. § 7. Nevertheless, if the mandatory has really suffered loss by fault of the mandator, a natural action against the mandator is not denied to him. L. 825 par. Quid.; C. L. 1319 ff. Assignment is reduced to mandate, by which someone remits to another a title by which he mandates a third party to credit money or another thing to him. C. B. 783 ff.; C. A. 1403 ff.

Whether a broker who sells above, or buys below, the price designated to him, can retain the excess of the price for himself? Resp. Negatively, generally speaking. The reason is that he has no title for retaining anything. For 1. not by reason of the thing, because it is not his, but the owner's. 2. Nor by reason of labor and industry, at least by a strict title of justice owed, because if he has been hired for a stipend, he has a right to nothing else; but if he gives his industry gratuitously, he has already renounced wages. 3. Nor by reason of the price designated; for the designation of the price made by the owner is commonly understood to mean that he is not to sell below that price, but by no means that he is not to sell above it. - Except: 1. If by extraordinary and undue labor, or by wholly special industry or diligence, he has made the thing better. 2. If the owner has expressly or equivalently declared that he requires nothing beyond the determined price; for then the excess can be retained. 3. If the owner knows the broker's manner of acting and ratifies it. L. 825;

C. A. 1086.

Whether a broker can buy for himself a thing to be sold at the price determined for him, and afterward sell the same thing as his own at a greater price? - Resp. Affirmatively, with two conditions in place, namely: 1. That, after employing moral diligence, he does not find a buyer who offers more; otherwise he would act against his office and the will of the mandator. For that price is determined, at least regularly, not so that he may not sell for more, but so that he may not sell for less. 2. That he buy the thing for himself not fictitiously, but truly, so that he undergoes its risk; and if by chance he does not sell it for so much, nevertheless he pays the determined price; otherwise equity is not preserved. Cf. 1137; L. 825; C. A. 1087, 1088; C. B. 181, 456-458.

Whether a broker can retain for himself those things which the seller gives gratuitously with regard only to him? Resp. Affirmatively, if there is certainty of a true donation, because, speaking absolutely, a merchant can yield something from his own profit to some broker so that he may bring him to his shop. But for this it is required that he truly be disposed to sell to any other person at the higher price, and that in fact he ordinarily sell in this way. The confessor, however, ought not easily give credence to brokers who assert that such donations have been made to them. L. 825; H. A. 189. Thus, concerning cases of this kind, St. Lig., 826: "It must cautiously be permitted to tailors buying cloth for others to retain something from the price; for sometimes merchants rather pretend to give to them than actually give, so that, if the owner himself were to approach, he would obtain the thing for the same price. Moreover, if the tailor faithfully conducts the owner's business, and the merchant truly gives something to him gratuitously, because he frequents his shop, or in order to attract him to frequent his shop, the tailor could licitly retain what was given, provided he has employed moral diligence to buy from other merchants at a lower price."

What is exchange, and what are its properties? According to Roman Law, exchange is a real contract, and therefore it takes its beginning only from the delivery of the thing. Wherefore it does not follow all the laws of sale and purchase. Inst. l. 3, t. 24, § 2. According to C. I. 1549 ff.; C. G. 1702 ff., exchange is a contract by which each party obliges himself to give a thing, that he may have another. It is perfected by consent alone, as sale is. Wherefore at once the ownership and risk of the thing pass reciprocally to the other.

When one thing has been evicted, it is in the power of him who has suffered eviction either to demand compensation for the damage, or to reclaim the thing given, that is, to seek the restitution of his own thing. Nevertheless, according to C. I., rights acquired by a third party over immovables before the transcription of the petition for rescission remain safe. It can be perfected by private act, and even verbally. Yet in this contract there is no place, in the external forum, for rescission on account of lesion. But in the forum of conscience there is the same reason of compensation as in sale and purchase. Gousset, Cod. comm., art. 1706.

According to C. H. 1538-1541, he who has received another's thing by exchange cannot be obliged to hand over the thing which he promised in turn. He satisfies by restoring the thing received. He who has suffered eviction of a thing received by exchange can either demand the restitution of his own thing, or compensation for damages. In the rest, exchange is ruled by the same laws as sale. According to C. A. 1045 ff., the effective delivery of the thing is not necessary for the essence of this contract, yet it is required for its fulfillment and for acquiring ownership. He who does not fulfill the contracted obligation is bound concerning loss incurred and profit ceasing.

If meanwhile the thing wholly or beyond half perishes by fortuitous event, the exchange is held as not having been made. Other deteriorations are to the loss of the possessor. But if the thing has been exchanged in body, and individual things perish by chance, but not beyond half, they perish to the loss of the one accepting. The useful things of the thing, however, pertain to the possessor until its delivery. According to C. L. 1594, and according to C. B. 515, dispositions for sale are applied by analogy to exchange. For the difference concerns the price, in place of which there is another thing.

Sale through brokers is that which is not made immediately by him to whom the things belong, but through others by commission, and these are called brokers. Brokers, moreover, can be either only friends, or hired for this by a special wage, or hired for diverse works at an annual price.

915. Questions. - Q. 1. Whether a broker who sells above, or buys below, the price designated to him can retain for himself the excess of the price?

Resp. Negatively, generally speaking. The reason is that he has no title for retaining anything. For 1. not by reason of the thing, because it is not his, but the owner's; 2. nor by reason of labor and skill, at least as owed under the strict title of justice, because if he is hired by a stipend, he has a right to nothing else; but if he furnishes his skill gratuitously, he has already renounced the wage ¹. - St. Lig. n. 825 and others commonly.

¹ Understand that through this the wage has been abdicated, at least the wage which is owed by the strict title of justice.

Except 1. if by extraordinary and undue labor, or by wholly special skill or diligence, he has made the thing better; 2. if the owner has expressly or equivalently declared that he exacts nothing beyond the determined price: for then the excess can be retained; 3. if the owner has known the broker's manner of acting and has ratified it. - Thus commonly the Theologians.

916. • Q. 2. Whether a broker can buy for himself a thing to be sold at the price determined for him, and afterwards sell the same thing as his own at a higher price?

Resp. Affirmatively, with two conditions posited, namely 1. that, moral diligence having been applied, he does not find a buyer who offers more; for otherwise he would act against his office and the certainly known will of the mandator; 2. that he buy the thing for himself not fictitiously, but truly, so that he undergo its risk; and if by chance he does not sell it for so much, nevertheless he pay back the determined price; for otherwise equity is not preserved. - Thus commonly.

Q. 3. Whether a broker can retain for himself those things which the seller gratuitously gives solely on account of him?

Resp. Affirmatively, if there is certainty concerning a true donation; because, speaking absolutely, a merchant can yield something from his own profit to some broker, so that he may bring him to his own shop; but for this it is required that he be really disposed to sell to any other person at the higher price, and in fact ordinarily sell thus. But the confessor ought not easily to give faith to brokers asserting that such donations were made to them. - St. Lig. n. 825. - Hom. apost. n. 189.

1140. • DEFINITION. Sale through brokers is that which is not made immediately by him to whom the thing to be sold belongs, but from his mandate or commission by others, who are called brokers, that is, intermediate negotiators.

Some are legally created (agents de change, courtiers), others simple mandataries, for example traveling agents (commis voyageurs), and others finally act as broker by way of a transient act, as children of the family selling or buying for parents, servants for masters.

From the definition it is clear that their obligations are to be taken from the things said above (n. 1088). But if they have agreed concerning a wage to be accepted, they are to be held as lessors of work (cf. n. 1154).

PRINCIPLE. A broker, as such, has a right to the price of the labor of industry only, but not to a part of the benefit. The reason is that he acts not in his own name, but in the name of the owner (III, 825 ff.). - Hence, speaking of itself, a broker cannot retain gain for himself if he sells above the determined price, nor the excess of the price if he buys below such a price.

Yet by accident, he can retain the excess of price: a) If by his industry, or by labor not owed, the thing became better; but if he sold for a greater price, for example because in a place very distant from that which the owner designated, he cannot retain except the price of labor. The same has force if gain was made by occasion of purchase. b) If he tacitly agreed with the owner that he would give him nothing beyond the price designated. Likewise, if the owner's consent can easily be presumed, as commonly happens when the gain is of small moment. c) If to his mere favor the buyer offered a greater sum, or the seller diminished the price: for example, if a merchant remits something of the price to a tailor buying cloth, so that he may entice him to frequent his workshop. Yet let the confessor cautiously give faith to brokers asserting that such donations were made to themselves, especially if it is a question of servants or children of the family (Praxis, n. 60).

1141. • Questions. QUAER. 1. Whether a broker can BUY FOR HIMSELF a thing to be sold at a determined price, and afterwards sell the same thing, as his own, for a greater price?

Resp. Affirmatively, from Natural Law, but under these conditions: a) that, with moral diligence employed, he did not find a buyer who would offer more; b) that he buy the thing for himself not fictitiously, but truly, so that he undergo its peril, and if perhaps he does not sell it for so much, nevertheless he returns the determined price to the owner. - Likewise, if someone commits to you the purchase of some thing at such a price, and you find it at a lower price, you will be able in this case to buy the thing for yourself, and afterwards sell it to that other at a greater price (H. Ap., tr. ult., 35).

We said: from Natural Law, for, as Marres notes, this manner of acting is today reproved by law or at least by received custom, on account of the frauds which would easily arise (de Just., l. 4, n. 286).

QUAER. 2. Whether a broker who offered himself GRATIS for selling or buying can retain the price of his labor?

Resp. More probably he can, if he did not have the mind of donating, and the owner had already previously determined to sell the thing, and there was no one else who would furnish this gratis. For thus he was indeed mendacious, but not unjust; because his labor was worthy of a price (III, 825, in fine, with Roncaglia, Sporer).

1005. • Sale through brokers is that which is not made immediately by him to whom the thing to be sold pertains; but from his mandate or commission by others, who are called brokers.

Concerning sale and purchase of this kind certain special things occur to be noted a) respectively to brokers in general, and b) respectively to those brokers in particular who are such by office.

1006. I. On brokers in general. - As to brokers in general this one difficulty alone is usually moved:

Whether a broker who sells ABOVE or buys BELOW the price designated to himself by his principal can licitly retain for himself the EXCESS of the designated price?

Resp. Of itself speaking negatively; because a broker, as such, enjoys by himself no just title for retaining something for himself. Yet accidentally, namely on account of particular circumstances, he will be able to have a title of this kind and consequently licitly to retain something for himself, namely:

a) If the broker by his extraordinary and undue labor or by his special industry improved the thing to be sold, and therefore precisely sold it for more; for the fruits of industry follow industry.

b) If the owner of the thing had expressly or equivalently declared that he exacted nothing beyond the price designated from the broker; as they assert happens rather often where the owner assigns no stipend for the labor of the broker.

c) If the broker, common diligence having been carefully applied, and no greater price having been found, truly and validly buys the thing for himself and at his own risk, and afterwards sells it for more, and pays to the owner only the designated price.

d) Finally the broker can licitly retain for himself the residue of the price, given or determined by his principal for buying something, whenever that whole determined price would have had to be expended, unless the seller had diminished the price in favor of the broker himself; and thus, for example, a tailor, deputed to buy in a shop cloth and other things necessary for making garments, and besides faithfully managing the business of the owner, will licitly retain for himself that part of the price which the shopkeeper remitted or donated to the tailor in his favor, for example because he frequents his shop, etc. Yet St. Alphonsus warns that in cases of this kind one must proceed cautiously, lest justice be injured; since, as experience testifies, it not rarely happens that shopkeepers pretend that they are donating something to tailors or other brokers, while in reality the owner, if he himself went to the shop, would obtain the thing for the same diminished price.

1007. II. On brokers by office. - We call brokers by office those who perform the function of an intermediate negotiator, and in the vernacular tongue are commonly named brokers, commission-merchants. Certainly the same obligation which was just described as to the greater or lesser price is incumbent on these intermediate negotiators as on brokers in general; but more special frauds can be committed by them, which it has seemed useful here to recount summarily.

Therefore they commit fraud:

1. When in their accounts they note, or cause to be noted, the price of the thing bought as greater, or of the thing sold as lesser, than it truly was.

2. When they buy a thing at a price greater than it could easily have been had, so that they may procure a greater increase for themselves.

3. When they bring damage to the mandator by buying worse merchandise.

4. When in taxing things, for example a field, a house, they assign to them a price lesser or greater than the just price.

5. When without a just title they exact a wage or increase greater than custom permits.

525. Sale, or purchase, through brokers is that which is not made immediately by him to whom the thing to be sold pertains, or who intends to acquire it for himself, but from his mandate or commission is made by others, who are called brokers, that is, intermediary negotiators, whether they are legally constituted or simple mandataries.

Therefore brokers or factors are all those who undertake for another the care of buying or selling a thing; or those to whom something is committed to be sold or bought in the name of the one committing it, and who buy or sell something in the name of another. Whence they are as it were mandataries of those in whose name they act, and therefore they have the obligations of mandataries to be fulfilled.¹ They are called by various names: courtiers, commissionnaires, entremetteurs, commis voyageurs, representants de commerce; - makelaars, zaakvoerders, bemiddelaars, reizend-bedienden, etc.

¹ Concerning these, cf. Civil Code, a. 1984 sq., and Belgian Commercial Code I, tit. V and VII.

526. Principles concerning the obligations and rights of brokers. - I. Brokers must faithfully carry on the business committed to them, with that diligence which they are wont to employ in their own affairs of the same kind.

For to this end they are selected and employed and receive a stipend, that they may faithfully conduct the affairs of the mandator, and that purchase or sale may be made in the manner more profitable to him. Wherefore they are bound to repair damages inflicted on the mandator on account of their culpable negligence in conducting the business.

II. Brokers as such, in themselves and regularly, have a right only to the stipend of their labor (unless they wish to act gratuitously), but not to a part of the benefit. For they do not act in their own name, but in the name of the owner from whom they receive salary, and therefore whatever they gain by negotiating they acquire not for themselves but for the owner. Therefore every gain which they receive in conducting the business they must hand over to the mandator, and they can retain nothing for themselves, even if they buy below or sell above the established price.

Yet by accident they can retain part of the gain for themselves: a) if a special agreement so bears, by which, for example, five percent is conceded to them; b) if by extraordinary diligence to which they were not bound by force of office they sold more dearly or bought more cheaply than had been predetermined by the owner, if this is certain: for this is not presumed, and in this matter one must especially beware of illusions easily arising; c) if the owner explicitly consents by declaring that he demands nothing beyond the established price, or if he consents implicitly, as if he knows that this is done regularly and is silent, provided he is not silent from fear.

III. Brokers in themselves can retain gifts for themselves which are conceded to them by merchants in mere favor of themselves. For these are conceded by merchants so that they may frequent their shops rather than those of others, and they would not be attributed to the owners themselves buying or selling; this also holds concerning a diminution of price if it is certain that it is made in favor of the brokers, for example, from an existing custom. Thus a music teacher, asked by another to buy an instrument of the value of 5,000 francs, which nevertheless he buys at the remitted price of 4,500 francs (the artisan's price), can retain the gain for himself; so also tailors buying cloth for a client can retain the diminution of price gratuitously given to them by the seller, from the price established for them, "the tailor's price."

Yet brokers could not retain these things for themselves if merchants therefore sell at a dearer price or cheaper merchandise, and thus the owner is compelled to pay more; - just as neither those things which would be given to them so that they conduct the owner's business badly or less vigilantly.

527. Applications. - 1. It is asked whether a broker can buy for himself a thing to be sold at an established price, and afterward sell the same thing as his own at a greater price?

Resp. a) Regularly this is not licit, as being against the intention of the mandating owner, who takes the broker precisely so that he may conduct his affairs in the best way that can be done; - b) sometimes it is specially prohibited by civil law under penalty of nullity (a. 1596), namely to tutors concerning the goods of wards, to mandataries concerning goods which they must sell from mandate, to administrators of common goods or of a public institute, to public officials by whose ministry national goods are sold; - c) apart from those things, in a determined case, if after diligence has been applied the broker could not find a buyer who would offer more, he can acquire the thing for himself, provided he does this not fictitiously but truly, so that he takes the risk of the thing upon himself, and, having suffered detriment, does not return the thing to the owner, but whatever happens pays the established price to the owner.

2. What must be judged concerning the practice of servants who, buying for the master, receive little gifts from merchants, or retain for themselves the gain from diminution of price?

Resp. The question must be solved from the same principles, and indeed:

1. The matter is dangerous, for a) merchants act unjustly (and the servants cooperating with them) who, in order to attract servants, unjustly subtract from masters what they concede to servants; b) servants act unjustly (and merchants cooperating with them) who indicate a greater price to the master, although not beyond the highest, with the merchant conniving, and retain something for themselves.

2. Nevertheless, if it is morally certain that something is conceded by merchants, without detriment being inflicted on the masters thereby, in mere favor of the servants, these certainly can retain it for themselves. This a) is easily admitted concerning little gifts, unless they were given so that the servant would conduct the master's affairs negligently; b) concerning diminution of price it can be admitted only with difficulty: for since servants receive a salary and do not buy many things as brokers do, such a diminution is not considered made with regard to them and in itself accrues to the master; and it is greatly to be feared lest merchants write down a greater price and impose on the masters, so that from this, under the pretext of diminishing the price, they pay something to the servants. c) If nevertheless it is clear that, without injustice toward the masters, this is conceded to the servants, they can accept; or if somewhere there is a universal custom, or if the masters know the practice and consent; not however if they undergo it unwillingly.

Retrovendition is a contract by which the seller reserves for himself the right of redeeming his own thing, under the condition that he compensate the expenses, improvements, or similar things. But mohatra is a certain species of retrovendition, or a contract by which someone sells a thing at a greater price on credit, with an agreement that the buyer sell it back to him at a lower price for cash. Let there be an example: Titius, needing cash here and now, approaches Peter, who, unwilling to give money as a mutuum, offers goods to be bought with money on credit and at the highest price, say $100, with an agreement that at once he sell them back to him for cash and at the lowest price, say $90. For thus Peter, not from the contract of mutuum, but from the contract of sale and purchase, gains that increase, and Titius provides for his present necessity by having $90, although after a year he must return $100.

I say 1st. The contract of retrovendition is wholly licit, provided the required conditions are present. The reason is both because in Lev. xxv, 24 such a pact is said to have been imposed upon the Jews, and because it contains nothing which contradicts natural law. But the conditions are 1st. that the price be diminished according to the estimation of the burden which is imposed upon the buyer; 2nd. that there be no pact concerning a retrovendition to be made at a greater or lower price; 3rd. that by the pact it not be required that the risk of the thing sold fall to the harm of the seller, since this of itself pertains to the buyer, unless however the price is increased according to the estimation of the risk; 4th. that the thing be sold back as it is handed over, vacant or with fruits. - Cf. St. Alphonsus, n. 812. - Kenrick, n. 61.

I say 2nd. The contract of mohatra is of itself illicit and nothing but disguised usury, as is established from proposition 40 condemned by Innocent XI, which reads thus: "The contract of mohatra is licit, even with respect to the same person and with a contract of retrovendition previously entered into with the intention of profit." - Cf. Viva on this proposition.

I say. Sale under the spear (auction, public sale), namely that which is made through a crier and in which the thing is assigned to the final bid, is licit, whether it is done with the owner's consent or against his will or by public authority, whether it is bought below the lowest price or sold above the highest; because public power approves that the just price be publicly constituted from the concurrence of buyers. Hence if buyers concur, the thing becomes more estimable; if they do not concur, it is held cheaper. - Cf. St. Alphonsus, n. 808.

"A Catholic official whose office is to preside when goods are sold under the spear," among which "sometimes there are found books of heretics or books containing other obscene things," is not bound "to investigate whether among the goods which are sold under the spear there are found books of heretics or others containing obscene things. But if by chance he has learned this, and can prevent bad books from coming to bidders who will abuse them, let him indeed do this, since each one ought to impede the sin of his neighbor when he can do this conveniently, or without his own grave harm." - S. C. de P. F. 27 June, 1820.

Question 1. Can a seller send fictitious bidders, so that the price of the thing may rise?

Resp. Negatively, according to St. Alphonsus, because this appears too fraudulent to be excused, since it tends to deceive sincere buyers, and therefore inflicts injury upon them, since they are the cause that the price rises from fraud, and not from the natural concurrence of things, that is, from the free consent of buyers. Nevertheless others say that, by force of custom, if any exists, indulgence is to be granted to those who act thus. - Cf. St. Alphonsus, n. 808; and Hom. Ap., n. 175. - Kenrick, n. 50.

Question 2. Can a buyer make an agreement with others, that they not bid, or not offer more?

Resp. Negatively, according to St. Alphonsus and several other theologians, at least in the case of a forced auction. The reason is that the seller has a right that the buyers be perfectly free and that the increase of the price not be impeded. Yet Cardinal de Lugo with Diana and others seems to hold the contrary, at least with regard to the guilt of injustice, and he admits that it is the common opinion of the Doctors that then a sin is committed only against charity. Cf. St. Alphonsus, n. 808. - Lugo, disp. 26, n. 175. - Baller., note (b), p. 739.

Monopoly is distinguished in two ways. One is legal, which consists in the power of selling certain goods granted by public authority, for a reasonable cause, to one or to several; and the other private, which consists in a manner of acting by which one or several bring it about that they alone sell or buy something.

I say 1st. Legal monopoly is licit, provided it is done with a just price. The reason is that, on account of a just cause of the public good, the Prince can grant it as a privilege or for exacting a tax from merchants.

I say 2nd. Private monopoly is illicit in the following cases: 1st. if a merchant impedes by fraud or lie, lest other goods be brought in, so that he may sell his own goods more dearly with common detriment; 2nd. if one or a few buy all the goods so as afterward to sell them more dearly; 3rd. if workmen or craftsmen agree that they will not teach their art except at an unjust price, or that no one will complete work begun by others; 4th. if laws enacted by the State for preserving the just price and not restricting commerce are violated. For these laws oblige in conscience and indeed, as it seems to us, to restitution when others suffer harm from the violation. Such laws protect rights, secure subjects against fraudulent actions of sellers and companies of merchants. These laws among us are "The Sherman Law"; two or three or more of the last sections of the most recent law, "The Clayton Trust Bill," amend that prior one, while other sections of the same and one section of the law, "Federal Trade Commission," complete it.

"Sec. 6. That the labor of a human being is not a commodity or article of commerce. Nothing contained in the anti-Trust laws shall be construed to forbid the existence and operation of labor, agricultural or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade under the anti-Trust laws." - Clayton Trust Bill, Section 6. Cf. The World Almanac an. 1915, p. 300. See below n. 994, Q. 5.

Question 1. Whether and in what way do merchants sin who conspire not to sell their goods except at the highest, although just, price?

Resp. They certainly seem to sin against charity, because although they are not bound to sell below their own price, nevertheless they are bound not to dissuade others from selling at a lower price. Thus, although by charity you are not bound to give alms to such a poor man, nevertheless you are prohibited from dissuading others if some wish to give it. - But more probably they do not sin against justice, because if others are compelled to buy at the highest price, they are not compelled by the sellers, but by their own necessity, which cannot be called true coercion on the part of the sellers. Yet the highest price here must be understood as that which would exist without the monopoly, not that which arises from the monopoly. - Cf. St. Alphonsus, n. 817. - Lugo, disp. 26, n. 173.

Question 2. Do merchants sin against justice or against charity who, at the time of harvest or vintage, buy all the wheat or wine of the region at the cheap price then current, so that afterward they may sell more dearly?

Resp. Negatively, more probably, as it seems, with regard to justice, provided they do not sell above the highest price which would be current with the monopoly excluded. The reason is that they violate the right of no one. Indeed a negative answer must also be given, at least probably, with regard to charity, provided they do not induce others to sell more dearly, nor themselves sell above the highest price which would have place with the monopoly set aside, because they use their own right; for no one is bound to neglect his own advantage so as to avoid another's harm, when he is not obliged to avert it. - Cf. St. Alphonsus, n. 816. - Kenrick, nn. 64 et seq.

Question 3. Can the justice of the price be taken from the very state introduced by force of monopoly?

Resp. Negatively. The justice of price must not be taken from the state which monopoly has introduced, but from the state which the goods would have with the monopoly excluded. For if the justice of price depended on the will of the seller or buyer unwilling to sell or buy except at such a price, in fact no price would be unjust. Therefore the justice of price "ought," as Lugo says, "to depend on other antecedent circumstances, namely on the abundance or scarcity of goods and of money, on the many or few who sell or buy, and on the necessity of selling or buying which they have." In the case of monopoly the abundance "of goods is the same" as if no monopoly had existed; "also the will of selling," for they wish to sell their own things and at the same time "to extort a greater price; but if they cannot obtain this, they will sell at a lower price; therefore there is nothing from which, antecedently to the will of the sellers, the price is to be increased, but the same price must be estimated just which would be just if monopoly had not preceded." Hence "monopoly occurs when someone at the time of harvest or vintage, for example, buys all the wheat or wine, or the greatest part of it, at the cheap price then current, so that afterward all may be compelled to buy from him at the highest price; and this very thing will be if some few agree and conspire for this. Therefore this will be against justice if afterward they sell above the highest just price. But the highest just price must be understood, not that which results from their agreement, who are unwilling to sell except at such a price, but that which, with that agreement excluded, would be the just price, considering the quantity of wheat or wine for sale and the greater or lesser frequency of buyers." (Lugo, disp. 26, n. 176.) And thus also when monopolists by force or fraud deprive small sellers of their commerce by establishing shops in the same neighborhood and selling the same goods at a price below the lowest, and then, having obtained the whole commerce of these goods, sell them at a price above the highest just price, they certainly violate commutative justice and are bound to restitution.

In like manner they are bound to restitution when they compel other sellers of the same goods to sell at a price above the highest just price, if, for example, monopolists greatly increased the price of coffins, which they would not sell to small undertakers unless they pledged that they would sell at too high a price.

But are these second sellers, selling at that price now current, which otherwise would be unjust, also bound to restitution? Very many indeed affirm this, whose reason is urgent: these are obliged because the price is unjust. Therefore not only the imposers, which all hold, but these also must restore. But the Salmanticenses: "the truer opinion is the one denying that such sellers sin, even if they are not ignorant that the increase of price had its origin from an unjust agreement, because now that price is common and vulgar. But that it has been increased from the injustice of others is accidental to me, because by selling a thing at the current price, I sell at the just price." (Salmanticenses.) Because the just price of the market is judged among all to be that which now commonly runs, from whatever source this comes. - Sal., tr. 14, cp. 2, p. vi, n. 57.

They also commit injustice who too greatly increase the price of things which are called of first necessity, for example, bread, flour, coffee, milk, etc., because the liberty of the contracting buyers is lacking, and hence equality; the same quantity is always consumed; for whether they wish or do not wish, men must obtain those things for themselves; hence there is the same will on their part. - Cf. Bulot, n. 804, 111, 3rd. - Lugo, l. c. - Bouvier, Law Dictionary, Restraint of Trade.

Sale through brokers is that which is not made immediately by him to whom the things belong, but through others by commission, and these are called brokers. But brokers can be either merely friends, or hired for this by a special wage, or employed for diverse works at an annual price.

Question 1. Can a broker who sells above or buys below the price designated to him retain the excess of price for himself?

Resp. Negatively, generally speaking, because he has no title for retaining anything. For he does not have it by reason of the thing, because it is not his own but the owner's; nor by reason of labor and industry, at least by a strict title of justice owed to him, because if he has been hired by a stipend, he has a right to nothing else; but if he renders the industry gratuitously, he has already renounced a wage. Except: 1st. if by extraordinary and undue labor, or by wholly special industry or diligence, he made the thing better; 2nd. if the owner expressly or equivalently declared that he requires nothing beyond the determined price; 3rd. if the owner knew the broker's manner of acting and held it ratified. Cf. St. Alphonsus, n. 825.

Question 2. Can the broker buy for himself a thing to be sold at a price determined for him, and afterward sell the same thing as his own at a greater price?

Resp. Affirmatively, with two conditions posited, namely: 1st. that, having employed moral diligence, he does not find a buyer who offers more; otherwise he would act against his own office and the certainly known will of the mandator; 2nd. that he buy the thing for himself not fictitiously, but truly, so that he undergoes its risk; and if perchance he does not sell it for so much, nevertheless he renders the determined price; otherwise equity is not preserved.

Question 3. Can a broker retain for himself those things which the seller gives gratuitously solely out of regard for him?

Resp. Affirmatively, if the true donation is established; because a merchant, absolutely speaking, can yield something from his own profit to some broker, that he may bring him to his shop; but for this it is required that he be truly disposed to sell to any other at the higher price, and in fact ordinarily sell thus. But the confessor ought not easily to give credence to brokers asserting that such donations were made to them, unless there is question of places where merchants are accustomed to act thus. - Cf. St. Alphonsus, n. 825; and Hom. Ap., n. 189.