Partnership, Insurance, and Speculation

614. Notions. 1. Partnership is a contract by which two or several persons obligate themselves to bring some thing into common, so that the profit received from it may be divided among them.

a. Profit received from goods brought into common immediately pertains to the partnership, if it is itself a juridic person; but individual partners have a right to a part of the common profit which corresponds to the good brought into common by them; but at the same time they must also bear part of the common damage.

b. The contract of partnership is a consensual contract, which is perfected by agreement alone before the handing over of the good to be brought into common. Yet by positive law the agreement ordinarily must be confirmed in writing in order that it receive force.

c. The thing to be brought into common is either money or another good or one's own work. But partnerships can be entered in such a way that individual partners bring into common either all their goods or only part of their goods, or in such a way that some bring money, but others only their work.

2. Partnerships are divided by reason of end into civil partnerships (Erwerbsgesellschaften), which are entered for receiving profit not by trade, but by any other mode whatsoever, as if two agree between themselves concerning a farm to be bought and administered from money brought into common and concerning dividing the profit received from it; and into commercial partnerships (Handelsgesellschaften), which are entered for receiving profit from trade.¹

Note. Partnerships are governed either by the peculiar agreements of those contributing, or, when these are lacking, by the laws of the civil or commercial code and received customs. For those who enter an onerous contract are considered to enter it according to civil laws and received customs, unless they have expressly declared the contrary.

¹ C.A. treats civil partnerships in the civil code, Section 1175 ss., and commercial partnerships in the commercial code, n. 85 s.

615. Principles. Among the diverse industrial and commercial partnerships, special attention is merited by share companies (Aktiengesellschaften) and limited partnerships (Kommanditgesellschaften), whose constitution social economics explains. It suffices to note these two principles.

1. The end of the partnership must be licit. If the end is illicit, for example, to publish depraved newspapers, the members of the partnership by force of the contract are not bound to place any action in the future, because there is no obligation to the illicit; but they are bound to pay those who from the fulfilled contract acquired some right, as is clear from the things said above concerning a base contract. If the end of the partnership is unjust, for example, to sell adulterated merchandise, the partners are also bound to repair the damage inflicted, and generally indeed in solidum.¹

2. Equality must be observed among the members of the partnership, both as to gains and as to damages. Therefore profit arisen from the partnership must be divided among the partners pro rata of the part which they brought into common, and likewise individual partners must pay debts contracted by the partnership according to the quantity of their part, unless because of peculiar circumstances some partners ought to accept a greater part of the profit or bear a lesser part of the damage.

¹ Genicot I, n. 652.

627. Nature. Insurance is a contract by which one person, for a certain price, obligates himself to compensating damages which another has suffered from a fortuitous event.

a. He who undertakes the obligation of compensation upon himself is called the insurer; but he who can require compensation is called the insured.

b. Insurance is an aleatory contract because its obligation for the insurer depends on an uncertain event; but it differs from other aleatory contracts in this, that its object consists in uncertain danger.

c. The contract of insurance can be entered validly orally; writing or the instrument of insurance is required not for perfecting the contract, but only for proving its existence. Therefore the mutual obligations of the contracting parties already exist before the instrument has been signed, unless the contracting parties have agreed otherwise.

d. De Lugo reduces the contract of insurance to sale, because the undertaking of danger which threatens another's thing is sold for a price. The undertaking of danger is of so much greater value, the greater the value of the thing insured is and the greater the probability of detriment or destruction of the same insured thing is.

e. Because the danger of any thing, provided it is estimable by price, can be the matter of insurance, therefore according to the diversity of the thing insured there are diverse contracts of insurance. Commonly buildings are insured against the danger of fire, crops against the danger of hail or flood, merchandise against the danger of shipwreck or carriage, and life against the danger of death (Lebensversicherung).

628. Justice of the contract. In order that the contract of insurance be just, these conditions are especially required:

1. That the price of insurance be proportioned to the quantity of the danger which is undertaken.

The quantity of the danger must be determined not from the event, but from the probability of detriment which in the judgment of prudent men is had at that time at which the contract is made.

2. That the danger of the insured thing be declared integrally and not increased after the insurance.

a. From those things which have been established concerning sale, it follows that the contract of insurance is void if in declaring the danger of the insured thing a notable circumstance is passed over in silence, so that the insurer would not have made the contract if he had known the circumstance: for substantial error occurs concerning the matter of the contract. But if the circumstance passed over in silence is not notable, so that the insurer would nevertheless have made the contract, but would have demanded a greater price, the contract is valid unless it is made void by the sentence of the judge; but the price must be increased according to the measure of the danger.

b. The same must be said if, after the contract has been entered, the danger of the thing is increased; namely, if it is notably increased, the contract becomes void; if it is increased only lightly, the price must be increased according to the quantity of the danger.¹

3. That the insurer have the means from which he can compensate the damages which he promised that he would compensate: for he acquires the right to the price only insofar as he can in reality furnish the security promised.

a. Therefore he can undertake as many obligations as he can fulfill according to probable foresight; but if he has undertaken more than he himself can fulfill, he cannot retain the price of insurance as to those which exceed his powers, even if the insured have suffered no damage.

b. If the insurer is equal to compensating not the whole damage but only part of it, some judge that the contract is invalid and the whole accepted price must be restored, because the insured does not consent to partial security; but others, on the contrary, think that he can retain the part of the price which corresponds to the quantity of security which he actually furnished, because the insured intends to obligate him to furnishing the security which he can furnish. But all agree in obligating the insurer to compensating the whole damage if the insured thing has perished, because by unjust fraud he impeded the insured from seeking true and full security elsewhere.

¹ Genicot I, n. 657.

629. Obligations of the contracting parties. They are bound to observe the conditions of the contract, which have been established either by private agreement or by public law, provided they are just. Concerning conditions which are customarily attached to this contract, these things must be noted.

1. The insurer is not bound to compensate damages which have arisen from grave fault of the insured or of his relatives, who are named in the document of insurance.

a. If damage was caused from light theological fault or from merely juridical fault of the insured or of his relatives, he can require and accept compensation, unless by the sentence of the judge he is deprived of this right.

b. If damage occurs from the malice of other men, the insurer is bound to compensate the damage, unless otherwise established; but the damager is bound to restitution toward the insurer. He is not indeed the efficacious cause of the damage which the insurer suffers, but only the occasional cause; nevertheless from the statute of insurance the insurer succeeds into all the rights of the insured in relation to the damager.

2. The insurer is bound to compensate only the damage which the insured actually suffered; this damage is determined according to the value which the consumed thing had at that time at which it perished.

If arbitrators establish a greater compensation than the value of the consumed thing requires, the insured can accept it; but he himself cannot require a greater one without injustice.

630. Notions. Among the diverse contracts of insurance, life insurance, both because of its great frequency and because of the moral difficulties which it contains, merits special consideration.

a. A twofold diverse mode is especially distinguished according to which this contract is customarily entered: alpha. The one to be insured pays each year to an insurance society a certain sum of money under this condition, that immediately after his death a determined sum of money be repaid to his heirs or to a third person. beta. The one to be insured pays each year to the society a sum of money under this condition, that a determined sum be repaid to himself or to a third person if he arrives at a certain year of age, for example, the sixty-fifth year. But if he dies before the year determined in the agreement, the obligation of the society is extinguished.²

b. For the equality between the insurance society and the insured, on which the justice of the contract depends, it is required that the danger which the society assumes equal the premium which the insured pays. In the former mode the danger consists in this, that the insured dies before the premiums which the society accepts are equivalent to the sum to be paid. In the latter mode the danger consists in this, that the society must repay a sum which exceeds the premiums received, where the insured attains the determined year of age.

c. For forestalling detriment arising from this contract, the insurance society is accustomed to propose several questions to those to be insured, from which it tries to gather what duration of life the one to be insured can hope for. Now it is asked whether the contract of insurance must be held as valid or invalid if at any time a false response has been made to the proposed questions, whether by fraud or from error.

Concerning the question which the insurance society proposes about hidden sins committed from a depraved habit, it seems that one must say that the insurer does not have the right of questioning about moral defects, and therefore the one to be insured is not bound to manifest his hidden vices. Therefore denial of these is neither a lie nor makes the contract void. Nor is the society deceived or harmed by this: for it belongs to the physician to examine whether perhaps health has been affected by such a vice; but if this is not the case, there is no reason why the sum to be paid should be increased on that account.

¹ These things are taken from the excellent little work of Ph. Huppert, Der Lebensversicherungsvertrag (Mainz: Kirchheim, 1896).

² Huppert, l.c., p. 15 ss.

631. On the validity of the contract. 1. The contract is invalid if a circumstance is denied or kept silent by which the probability of life being prolonged for a longer time by the one to be insured is notably diminished, as if he were to keep silent about a vomiting of blood which he had previously suffered: for substantial error intervenes concerning the object of the contract, namely concerning the life to be insured.

a. The contract must be considered valid if the notable defect of health was hidden both from the one to be insured and from the physician: for the society must undertake upon itself dangers of life which arise from altogether unknown causes.

b. If the one to be insured concealed in good faith a notable circumstance, he has the right of recovering the premiums paid by him; but those in whose favor the insurance was made acquire no right of receiving the determined sum. If in bad faith he kept silent about a notable defect of health, he not only loses the right of receiving the insured sum, but he must also repair the damages which the society suffered by entering this invalid contract, for example, because of expenses. Yet societies are accustomed to declare that the annual premiums paid in this case pertain to them.

c. There are societies which in their statutes declare that a contract of insurance void because of false declarations is to be held as valid after it has lasted for five years. Therefore after this time has elapsed the contract can be held as valid, whether the false declaration was made in good faith or in bad faith.

2. The contract is valid, but must be reduced to equality, if a circumstance is denied or kept silent by which, had it been known, the insurer would indeed have made the contract, but would have demanded a greater premium, as if an illness is kept silent by which hope of prolonging life is diminished not altogether lightly only. Therefore there must be given to the society the premium which it would have demanded had the truth been known.

If therefore in the case of misfortune the entire insured sum is paid to an insured person who falsely declared accidental circumstances, he himself must restore a proportionate part from the sum accepted to the insurance society, or, according to the measure of the circumstances, to the poor.

3. The contract is valid and must be observed by each party if a circumstance of very slight moment is denied or kept silent, as if the one to be insured falsely denies that homeopathic remedies were used by him: for the insurer, even with the truth known, would have made the contract under the same conditions.

The statutes of societies which declare that any error in the responses invalidates the contract are opposed to justice in this matter; for the insured cannot be deprived of every right of his own because of a light error which does not harm the society in any way.¹

Note. By these things are presented the principles from which one must establish the obligations and rights of the insured if the matter is not brought to a judge. When the matter has been brought to a judge, one must stand by the judicial sentence even in conscience, unless the contract is invalid on the part of the insurance society.

a. The judge gives sentence according to the statutes of the insurance society, which generally declare the contract void because of false declarations made in bad faith and, as a penalty for the fraud committed, deprive the insured of every right in the premiums paid.

b. On the part of the insurance society the contract can be unjust and invalid, both because there is not a just proportion between the annual tax and the insured sum to be paid after the death of the insured, and because the procurators of the society fraudulently deceived the one to be insured.

¹ Huppert, l.c., p. 176 ss.

631*. On insurance of workers. Declarations. 1. This insurance tends to this, that workers, for the time in which they become unfit for labors and can no longer provide for themselves and their own, receive a certain revenue. Since the wage received for labor does not suffice for them to provide for themselves for times of this kind, poverty is guarded against by this means of insurance.

2. According as the causes are diverse on account of which workers cannot be free for labor, diverse insurances are distinguished: of the sick, of misfortune, of old age, etc.; Kranken-, Unfall-, Alters-Versicherung. In Germany, Austria, and Switzerland public laws compel either all workers, or at least those laboring in workshops in which there is greater danger of misfortune, to be insured. Therefore insurance of this kind is governed by public law, not by a contract privately entered. The tax of insurance is paid partly by the workers, partly by the masters; from this the workers acquire a right to the insured sum of money.

For the solution of cases. If in a particular case there is question of the worker's right to the insured sum, attention must be given to the words of the law, which, since it was made for the assistance of workers, admits as broad an interpretation in their favor as can be made.

a. The annual pension is paid only to those to whom a misfortune happens in the exercise of work (beim Betriebe); but that is considered to have happened in the exercise of work which has occurred in an action which in some way coheres with the exercise of the work, for example, in access to the place of labor, during lunch which is taken in the place of labor, during leisure which is taken in the place of labor.

b. Workers do not receive an annual pension if the misfortune happened by their fault; but those misfortunes alone are considered to have happened by the fault of the worker which have been caused deliberately or from great negligence, by no means those which have been caused from carelessness, rashness, or some light negligence.

c. He who unjustly received an annual pension, for example, by falsely narrating the cause of the misfortune, of himself is bound to return the sum received and cannot licitly receive a further one. But since he cannot confess the fraud committed without danger of grave damage, he licitly receives the annual sum under this condition, that the money received be distributed to the poor. But if the worker himself is truly poor and cannot be sustained in another way, he can retain for himself the pension, or at least part of it. That restitution be made not to the society but to the poor can more easily be permitted because the damage which has occurred to the contributors themselves by this fraud is light, since many concur for the insurance. Wherefore that restitution be made to those damaged is an obligation only under light obligation; but restitution which obliges only under light obligation can from a reasonable cause be made to the poor.

631**. Note. Lehmkuhl judges that contracts void by natural law because of false declarations can probably be held from the very statutes of insurance societies as valid until they are declared invalid by the society or by the judge; therefore the insured can licitly accept the insured sum if the contract is not rescinded by the society. Yet he is bound to repair the damage which he efficaciously inflicted on the society by his mode of acting. Hence:

a. Because he pays a tax less than the just amount, he is bound to increase this up to that quantity which the insurer would have demanded if he had known the defect, and he must restore the increase to the society.

b. Reparation of damage must be made also in the case in which the false declarations proceeded from inculpable error, because the error is the efficacious cause on account of which the society accepted an annual tax less than the just amount.

c. But if the death of the insured follows not because of the defect concealed, but from another cause, the increase of the annual tax is not to be enjoined, because the fraud is not the efficacious cause of the damage.

d. Indeed even in this case damage is not efficaciously inflicted on the society, in which the insured actually lived as long as, probably from statistics, it was foreseen that he would live: for there is present a proportion of equality between the annual tax and the sum of insurance.¹

¹ Lehmkuhl, Casus consc. I, n. 919 ss.

PARTNERSHIP is defined to be the relation which subsists between persons carrying on a business in common with a view to profit. Business here includes every trade, occupation, or profession. The partners collectively are called a firm, and they carry on business under the firm name.

In general, all persons are capable of entering into partnership, and no special formality is required for the purpose; it may be done by word of mouth, or inferred from the conduct of the parties. By English law not more than ten persons may form a partnership for carrying on a banking business, and not more than twenty for other purposes.

Every member of a firm is an agent of the firm and of the other members for doing any act which is necessary for the carrying on of the business of the firm in the usual way.

The partners may indeed agree among themselves to restrict this power with reference to one or more of their members, and this agreement will be upheld and will excuse the firm from liability for the acts of those members against the claims of all who had notice of the agreement. Unless otherwise provided by the partnership articles, any member as agent of the firm has implied authority to receive and give receipts for debts due to the firm, to draw cheques on the firm s bankers in the firm name, to purchase on the credit of the firm goods required for carrying on its business in the usual way, to sell the goods of the firm, to engage servants for the business of the firm, and to borrow money on its credit. In order that the firm may be liable for these and other acts of a member, it is necessary that they should have been done by him in the firm’s name as agent, not as principal and in his own name.

As a principal is liable for the fraud and wrongdoing of his agent in the course of his agency, so is the firm liable for the fraud and wrongs done by a member in the ordinary course of the business of the firm. The members of the firm are jointly liable for the debts and obligations incurred by it, and the property of a deceased member is liable also severally, but not until the separate debts of the deceased have been paid.

The relations of the partners between themselves may be determined by special agreement, but in the absence of such specialagreement every partner is entitled to share equally in the profits of the business, and he must contribute equally to its losses. This remains true in the absence of agreement to the contrary even if the partners contributed unequal shares to the capital of the firm. Every member has a right to take part in the business of the firm, to express his views about the conduct of its business, and no change may be made without all being consulted. In case of disagreement, the majority decides. Partners are bound to observe the utmost good faith in their dealings with one another, to work for the benefit of the firm, and in the conduct of the partnership business they may not obtain private advantage at the firm’s expense.

A partnership may be dissolved by effluxion of time, by mutual consent, by the death of a partner, by the bankruptcy of a partner, by a judgement of the Chancery division of the High Court of Justice which may be obtained on several grounds. After dissolution, the authority of each partner to bind the firm ceases, except in so far as is necessary to wind up the affairs of the firm,

THERE are three different types of this contract—marine, fire, and life insurance. Marine and fire insurance are contracts of indemnity by which the insurer undertakes to make good any loss suffered by the insured through the happening of some accident, in consideration of the payment of a fixed sum at once or at periodical intervals. On the other hand, in a contract of life insurance the insurer undertakes to pay a given sum to another upon the happening of a particular event contingent upon the duration of human life in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments. The particulars of the contract are set forth in a formal document called the policy, but the contract is made so as to bind the parties on the payment by the insured of the premium—i.e., the money charged or an instalment thereof.

Usually insurance business is conducted by companies which frequently effect reinsurance with other companies, so that losses are spread over greater numbers and are more easily borne. In marine insurance individuals called underwriters frequently contract to indemnify the insured by subscribing the policy and putting opposite to their name the amount to which they will be personally liable in case of loss.

A man may effect an insurance with many companies, but as marine and fire insurance are contracts of indemnity, the insurer cannot get more than is sufficient to cover the loss, and if one company has paid the whole of this, it will be able to recover proportionate sums from the other companies with which the party was insured. Any person may insure his own life to any amount he thinks fit by paying proportionate premiums, but no one can insure the life of another unless he have a pecuniary interest in that life, and only to the extent of that interest. A wife has such an interest in her husband’s life, and may effect an insurance on it for her own benefit.

Marine and life insurance policies may be assigned to others, but notice of assignment must be given to the party bound by the policy.

Contracts of insurance are uberrimae fidei, and therefore require that all circumstances that are material to the contract should be made known to the insurer in order to enable him to come to a sound judgement as to the risks and the merits of the case. Questions are proposed to one who desires to effect an insurance, to which truthful answers must be given. Warranties and conditions, express and implied, are also part of the agreement. If the questions in the proposal are answered falsely, or if the warranties or conditions are not fulfilled, or if any material circumstance is not disclosed when it should be to the insurer, the latter may void the contract. It is difficult to say when, according to law, the contract is null and void so as to confer no rights in the foregoing circumstances even before the insurer has used his right to avoid the contract. In conscience it would seem that we may adopt the distinction here between what theologians call substantial and accidental mistake. That will be substantial to the contract which would have prevented the insurance being effected at all if it had been known; if it would not have prevented the insurance being effected but only varied its terms, it will be accidental. A substantial defect in the contract will make it null and void so as to transfer no rights at all; accidental defects will leave the contract valid, but there may be an obligation to supply the defect, as, e.g., by paying a larger premium corresponding to the greater risk or more advanced age. A usual condition is that the policy of life insurance is avoided if the insured should die by his own hand. The purpose of this condition is to prevent a man gaining advantage by his own felonious act. So that if no advantage would accrue to the party, the policy may be saved in the absence of express condition to the contrary, as also if the insured committed suicide while of unsound mind.

If the premiums are not regularly paid at the proper time, the policy lapses, and the paid-up premiums are forfeited to the insurer. In such cases the policy may sometimes be revived on comparatively easy terms.

In this chapter we will treat of certain contracts which depend for their effect of profit or loss upon some uncertain event.

A lottery is a distribution of prizes by lot or chance. Those who take part in a lottery ordinarily pay down a smaller sum of money in consideration for the chance of obtaining a larger sum or something of greater value, but it may happen that they lose by the transaction. The event is settled by the casting or drawing of lots in some form or other. English municipal law now prohibits lotteries where the distribution of prizes depends on mere chance, not on art or skill. The prohibition does not affect art unions carrying on business under a royal charter or under a constitution and rules approved by the Privy Council; but it does affect distributions of prizes on art union principles by persons other than art unions. However, inasmuch as a lottery is nothing more than the purchase of an uncertain chance, it is not necessarily unjust or in any way contrary to the natural law. If there is no fraud connected with the drawing of lots or the distribution of the prizes, and if the sum paid by those who take part in the lottery is to some extent proportionate to the chance of winning a prize and to its value, a lottery will be lawful as far as conscience is concerned, for the municipal law in these matters is penal.

Gaming is playing at any game, sport, or pastime for money or anything of value which is staked on the result of the game, so that it is lost or won according to the success or failure of the person who staked it.

Clerics are forbidden, as we shall see, to play at games of pure chance with scandal to others and loss of their own time. English law also makes all gaming contracts null and void so that they cannot be enforced in English courts of justice.

But here we consider the question not as affected by positive law, ecclesiastical or civil, but as it is in itself. Is gaming in itself morally wrong ?

Apart from abuse, to play games of skill or even of pure chance for a stake is not immoral. I may spend my money in moderation on recreation, or I may make a present of it to others if I choose. There is nothing immoral in agreeing to hand over a sum of money if I am beaten in a game either of skill or of chance. This perfectly lawful action will, however, become unlawful if one of the parties is compelled to play against his will, or if cheating and fraud are practised in the game, or if there is no chance of success on the part of one of the players (unless he knows this and freely consents to play in spite of it), or if the parties have not the money which they stake or at any rate not the free disposal of it on account of its being required to pay their debts or to support themselves and their families.

Moreover, although gaming in itself and under the conditions which have just been laid down is not immoral, yet it is a dangerous pastime for many, and easily leads to abuse, sin, and ruin. Especially is this the case when gambling is carried on in houses kept for the purpose, where all kinds of bad characters congregate. The keeping of such dens of iniquity is rightly punished by the law.

Wagering or betting is the making of a contract on an unascertained event, past or future, by which the parties are to gain or lose, according as the uncertainty is determined one way or the other.

Wagering contracts in general are not enforceable in English courts of law, although there are some exceptions to the rule, but here we consider the matter from the point of view of conscience, To make a bet is not sinful provided that the subject-matter of the wager is not sinful nor an incentive to sin, provided that the event is really uncertain for both parties, and provided that both understand the bet in the same way and are prepared to stand by the event and pay in case of loss. Even if one of the parties is certain as to the truth of the matter in question and he makes this known to the other, if the latter chooses to persist in his contention and stakes his money, the other will be justified in taking it.

What was said above about gambling is applicable also to betting. . Although it is not sinful to stake a moderate sum of money of which one has the free disposal on some unascertained event under the conditions laid down above, yet a strong and dangerous habit may easily be formed by indulgence in the practice, and then sin, misery, and ruin to self and others are not far off.

There are certain modes of gambling which are practised now on money and produce exchanges. Dealings in“ futures ” and “ options ” and “time bargains ” are for the most part merely speculative transactions, and do not differ essentially from betting as to what will be the price of stock or of some commodity at a future date. ‘‘ Rigging the market” and similar devices are means employed by operators to influence the market in their own favour. These means are, of course, unjust, and besides inflicting loss on competitors, they do great harm to outsiders by disturbing the natural prices of commodities, and not infrequently produce irreparable and far-reaching ruin.

I. Notion. A partnership contract is a contract by which two or more persons contribute something in common for this end, that the profit received may be divided among them. It is said something, for example money or other goods, labor, industry. But in order that a partnership contract be entered into justly, the hope of profit and the danger of loss must correspond to that which each contributed to the partnership; these things will be clearer from what is to be said under III.

II. Form. The form of the contract and its diverse species are to be drawn from civil law.

III. Morality. The honesty of this contract is clear; indeed Pius XI, with attention paid to present-day conditions of human association, judges it more advisable if, insofar as it can be done, even the contract itself of rendering work be tempered somewhat by a partnership contract (n. 913).

IV. Division of profit. In dividing profit, account must be taken both of the money or other good which each contributed, and of labor and industry, and likewise of the risk which each undergoes. But as regards the contribution of money or of another good, it must also be seen whether ownership also or only the use of them was contributed; but as regards the industry contributed, it must be noted that this sometimes is worth more than money or the use of it (St. Alphonsus, III, 907, q. 2). Moreover the division of profit will generally be just if the dispositions of the partnership itself are observed, and, if these are lacking, the statutes of law.

Note. The triple contract is called a contract of partnership together with an added double contract of insurance, namely of the principal and of the profit; that is, to some business one contributes work, another money (the first contract). The latter, furthermore, in order to remove the danger of the principal, yields part of the hoped-for profit under this condition, that his partner take on the danger of the principal (the second contract). Finally, in order to avoid the danger of making no profit, he renounces another part of the hoped-for profit, on condition that he receive a certain profit, even though a smaller one (the third contract). Now no reason appears from which the triple contract, provided equality is preserved, should be called illicit (St. Alphonsus, III, 908).

I. Notion. Insurance is a contract by which someone, the insurer, for a certain price obliges himself to compensate someone, the insured, for an uncertain damage or ceasing profit. It is said uncertain, that is, for each party.

II. Form. The form of the contract is to be drawn from the civil code; likewise those things which are required for proof of the contract.

III. Just price. The just price is that which is proportioned both to the value of the things and to their danger. Today, because of competition among diverse companies, the price can commonly be held as just.

IV. Obligations of the insured. The insured is bound: 1° not to insure a thing which he knows has already perished; 2° to manifest the true value and danger, or to leave them to be investigated; 3° to take care that, in view of the insurance, he not watch over the thing more negligently; 4° not to ask compensation for damage for which, with attention paid to the conditions tacitly or explicitly admitted, compensation is not owed; nor compensation greater than just. Nevertheless, provided that he is free from fraud, he can accept a greater compensation if arbitrators, to whose judgment the parties submitted themselves, have established it, because there is an aleatory agreement; likewise that which the agents of the company, after the matter has been investigated, bring, because it can be held as a liberal donation; for it is in the interest of the company to show itself liberal.

V. Obligations of the insurer. These are for the most part clear from the nature of the thing and the terms of the contract. He is especially bound to compensate damage insofar as that damage is the object of the insurance. Hence he is also bound, unless it was otherwise agreed, to compensation if the damage has occurred from the fault, even theological fault, of a third party; but not if it has occurred from the theological fault of the insured. In the former case, however, the insurer succeeds to the rights of the insured against the one causing the damage.

If part of the insured thing has perished, the insurer is bound only to compensate part of the damage in proportion to the insured value; except if they agreed about compensating the whole damage.

VI. Species of insurance. Insurance can be extended to things of any kind, for example insurance against fires, against damage to crops, against damages that will follow from the death of someone, against dangers of the sea, of carriage, etc. Concerning insurance against damages arising from the death of someone, or life insurance, certain things must be noted.

1. Life insurance can be accomplished in a twofold way, namely: 1° so that after the death of the one whose life is insured, for example a husband, the insurer pays a certain sum to a third party, for example the wife; 2° so that the insurer pays a certain sum after some person has reached a certain age; but if he dies before that age, the insurer is held to nothing or only to part of the sum.

2. The insured, when questioned about diseases and defects, is bound to respond if he wishes to enter into the contract; if he is not questioned, he is not bound to manifest them, because it is permissible to presume that the company either compensates itself by a greater premium, or acts thus for this end, that it may attract men.

Question. What is to be said both about the validity of the contract and about the obligation of the insured, if the latter did not manifest the things which he ought to have manifested?

Response 1. If there is question of concealing a matter of lesser moment, the contract is valid; but the insured is bound, if the matter concealed is worthy of note, to supplement the premium that was paid at less than the just amount.

Response 2. If there is question of concealing a grave matter, it is disputed. Some hold the contract as valid, because the object of the insurer's consent and the object of the present contract differ only qualitatively, for example a healthy body and a sickly body; otherwise than if there were question of a man who was already not living but dead; in a word, there is no substantial error. Nevertheless, the contract seems invalid, because the object of consent, at least morally speaking, seems diverse from the object of the present contract (n. 837). Whatever the case may be, if the contract is held as valid, the insured is nevertheless bound to supplement the premium that was paid at less than the just amount.

Forms of Contract.—The chief forms of contract are the following:

(a) gratuitous contracts, which are those that confer advantage on only one of the contractants, or those in which no payment or compensation for his acts or goods is made to one party by the other party. They include unilateral contracts, which produce obligation on one side only (e.g., a promise, gift, testament), and bilateral contracts, which produce obligation on both sides. The bilateral contracts are also known as bailments, or understandings whereby a thing or business is transferred from one person to another in trust, on condition that a return will be made to the owner, They include the following contracts: loans, in which return must be made of the identical things borrowed (commodatum), or of a thing similar in kind (mutuum); deposit, in which a thing must be returned after safekeeping (depositum); an agency, in which one conducts the business of another with the obligation of making returns, either from express contract (mandatum) or from imputed agreement (negotiorum gestio). In commodatum and mutuum the advantage is had by the bailee, in the other three by the bailor;

(b) onerous contracts of certain event, which are those that confer an advantage on both parties, and in which the thing agreed on is certain and definite. They include contracts in which one party transfers ownership to the other (e.g., buying and selling, barter, loan at interest, contracts for annuities, stocks and bonds) or useful dominion (e.g., lease of property, contractor’s agreement, hire of labor), and contracts in which both parties transfer rights to a moral person of which they are the members (partnership);

(c) onerous contracts of uncertain event, which are those that confer advantage on both parties, but in which the thing agreed on is contingent and uncertain. Examples are insurance, wager, gaming contracts, lottery, and stock market speculation;

(d) subsidiary contracts, which are those that are made in order to give security to principal contracts to which they are annexed or for whose sake they are made. Such are guaranty and surety, pledge and pawn, and mortgage.

What is the contract of partnership? Partnership is a contract by which two or more contribute something in common, for the sake of receiving profit in common, C. I. 1697; C. G. 1833; C. A. 1175; C. H. 1665; C. L. 1240. Partnership: here the discussion concerns partnership so called civil. For there are also commercial partnerships, anonymous companies, etc., which are governed by their proper statutes, approved by the authority of the Prince. Two or more: who namely are able to dispose of things, and who are not prohibited from acquiring reciprocal utility for themselves because of violation of the rights of other persons; for this reason, e.g., this partnership cannot be entered into between a mother and her natural son. C. I. 1704; C. G. 1840. - Something, that is, money, or other goods, or even one's own industry. Except goods which the partners will acquire either by donation, or by legacy, or by succession, unless according to C. G. the matter concerns spouses, which can be contributed in such a way that only their enjoyment, not their ownership, becomes common. C. I. 1433, 1698, 1701;

C. G. 1526, 1833, 1837. In common: something can be contributed in common in two ways: 1. So that not only the use and fruits, but the ownership of the thing contributed is common, so that each becomes owner of the whole capital by partial ownership. 2. So that, while ownership of the thing remains with the contributor, the use and fruits are common. L. 1 § 1; L. 2, L. 7, etc., Dig. Pro socio. Moreover, by law itself there pass into the ownership of the partnership those things which are consumed by use, or become worse; those which are contributed so that they may be sold; those which are given after an estimation of them has been made and consigned in an inventory. C. I. 1715; C. G. 1851; C. H. 1687. Cf. C. A. 1181, 1182. - Contribute; for if they do not contribute, but, e.g., two by legacy or by purchase fall upon one and the same thing, bequeathed to them or bought by them, there is not partnership, but common ownership. Profit in common; if there is no common profit, even though some utility is not lacking, as e.g., a common doorway, there is not partnership, but common ownership. Profit; if not profit as such, but a part of the profit as though a stipend and remuneration is given to him who furnishes the service, not partnership, but a hiring of service is understood. - C. B. 705; Lugo d. 30, n. 1, 4; Molina d. 411, n. 7; Less. l. 2, c. 25, n. 1; L. 904. A partnership is not a moral person or moral body, but is only a collection of persons. Hence those things which are communicated by the partners, and those things which are acquired by the partners, indeed become the property of all the partners, but not of the partnership. And if it is necessary to go to trial, not the partnership, but the individual partners must sue or be sued. C. I. Proc. 137. If someone lends money to a partnership, he claims it back from the individual partners man by man, or in equal parts, even if not all are partners in equal parts, C. I. 1727; C. G. 1863. Namely he lends not to the partnership, but to the partners, that is, to the individuals. Since partnership is a matter transacted among others, a partner can associate with himself some third person as regards his own portion in the partnership, but the creditor of the partners cannot use the right of the partners, nor involve himself in the affairs of the partners, C. I. 1725; C. G. 1861. Likewise, as regards third parties, those things which have been done by the mandatary of the partnership within the limits of the mandate are the same as if they had been done with the individual partners; but those things which have been done beyond the limits of the mandate are imputed to the mandatary himself. C. I. 1727, 1728; C. G. 1862, 1863, 1864.

Partnerships: some are Moral Bodies, others are not Moral Bodies. Both the latter and the former can acquire and possess, but with this difference: that a partnership which has been erected into a Moral Body has juridical patrimonial unity, distinct from the patrimony of any individual associate; but that which is not a Moral Body does not have the patrimony of a Moral entity, but has only co-ownership, by which the patrimony exists undivided in the individual associates. Therefore a moral body is like a private person, and has nothing in common with those of whom it consists. Wherefore what is owed to the body is not owed to the individuals; nor do the individuals owe what the body owes. And when a moral person which had been instituted for the cause of public utility has been extinguished, its goods go to the church, if it was ecclesiastical; to the treasury, if lay. But those of one which was for private utility, as commercial and industrial partnerships, pertain to the partners or colleagues and their heirs. Besides civil partnership there is also commercial partnership, so called from Commercial acts, which are enumerated at the beginning of the Commercial Code, title 2. Wherefore the definition of civil partnership is valid also for commercial partnership, whether mercantile or industrial. But according to the same Code a threefold commercial partnership is distinguished: Partnership under a collective name; partnership in commendam; anonymous company. In a collective partnership, all the partners are obliged without limit and in solidum as regards the obligations of the partnership. In a partnership in commendam, one or more commendatary partners are obliged without limit and in solidum; but the other investing partners, one or more, answer limitedly up to a determined sum, which can also be represented by shares. In an anonymous company, social obligations are secured only limitedly to a determined capital, and each partner is obliged only by his own quota or by his own share. Art. 76.

Whether the contract of partnership is licit? - Resp. Affirmatively. For it contains nothing which is opposed to justice. Nevertheless it requires the following conditions. 1. That the partnership be made in honest business. C. I. 1698; C. G. 1833; C. H. 1666. Certainly no one can licitly be obliged in a base thing. - 2. That loss of the capital pertain only to its owner, if only the usufruct of the thing is contributed into the partnership; but that it pertain to the partnership itself, if the capital itself is contributed into the partnership. For the thing perishes to the owner. C. I. 1715; C. G. 1851; C. H. 1687. Cf. C. A. 1183. 3. That due equality be preserved between profits and losses and expenses to be divided among the partners. Losses here are understood as those which come to the partners from the aspect of the partnership alone. Expenses are the costs of journeys, payments of tolls, etc. C. I. 1716, 1717; C. G. 1852, 1853; C. H.

1689; C. A. 1192-1197. 4. A partnership of immovable things, or of the use of them, indeterminate as to duration or beyond nine years, needs writing, and, as regards third parties, transcription. C. I. 1314, 1932, 1942. Cf. C.

A. 1178; C. H. 1667, 1668; L. 904-907; St. Thomas, 2. 2, q. 78, a. 2.

Resolutions: Wherefore it is necessary that for each one there be established a part of the profit in proportion to the thing which he contributed, and a part of the loss in proportion to the profit. But if something else has been spontaneously agreed, the pact is valid, provided the profit be established at least equal to the just wage of the thing or service which someone contributes, as though leased; and provided it is not established that one should feel no part of the profit, or no part of the loss, C. I. 1719; C. G. 1855; C. H. 1689, 1691; C. A. 1193, 1196; C. B. 722; C. L. 1242. The proportion of him who contributed service alone will be the part of him who contributed least. C. I. 1717; C. G. 1853; C. H. 1689. Yet, with attention to natural law, if the industry of the merchant were notably worth more than the capital of the co-partner, certainly an agreement could be made concerning a greater profit to be received proportionately, which indeed is approved by positive Law itself. Inst. l. 3, t. 26, §§ 1, 2.

Cf. C. A. 1183, 1187, 1193; C. B. 706, 707. "It seems to me that it must altogether be said," says St. Alphonsus, 907, "that, while the capital remains safe for the owner, the profit is to be divided proportionally, account being taken of the value of the industry on one side, and on the other side of the convenience furnished from the money, according to the common estimation of the profit which is commonly accustomed to be had from money applied to business. Hence it must be well noted that sometimes the industry of the merchant will be worth more than the use of the money, and then the profit must be distributed proportionally, so that sometimes a pact could be licit, that at the end even the capital be divided, while the profit meanwhile has been distributed equally, as is done by custom in many places in the partnership of animals. In addition it must be noted that sometimes the value of industry decreases because of the multitude of workers seeking partnership; for this reason perhaps several contracts can be excused which at first sight seem unjust, because the industry of the workers contributed into the partnership according to the custom of the place is commonly not estimated there as worth more."

Resolutions: The pact is altogether unjust by force of which, once the merchandise has been bought, before all else and while the partnership lasts, the capital is restored to the owner; and then what remains is divided equally, because for the one placing that capital the danger of his capital is diminished, but the merchant, if afterward the merchandise perishes, is subject without compensation to the danger of capital and profit. L. 907.

Whether the pact is licit that, if some sheep from a flock perish, they must be supplied from the offspring which are born, and meanwhile the other offspring, wool, and cheese are divided equally? The first opinion affirms, "because such substitution of sheep results as much in favor of the shepherd as of the one buying the sheep." The second opinion denies, and this seems altogether true to St. Alphonsus, 909, "because although the profit is diminished first for both, and afterward is compensated for both, nevertheless the offspring which are substituted ought to have been divided equally between the shepherd and the owner.

But when they are substituted, this certainly yields more to the utility of the owner than of the shepherd, since the owner then already compensates for himself the loss of profit, just as the shepherd does; but meanwhile the owner always preserves the capital safe for himself, which ought to be diminished for him, and therefore equality is not preserved in the contract." Partnership of animals is simple if the lessor furnishes the animals and the lessee furnishes labor for their care, custody, and feeding. It is in equal parts if each furnishes animals, and one of them also furnishes labor. In a simple partnership, the lessee has half of the increase, which consists in the offspring that come, and in the greater value of the animals. Milk and dung and the labor of the animals yield to the lessee.

Wool and what accrues to the animals are divided between the lessee and the lessor. C. I. 1669, 1676, 1684. In a partnership by equal portions, the animals become common for profit and for loss. Milk, dung, and the work which the animals furnish yield to the lessee; the lessor has right to half the wool and increase. C. I. 1684. Besides these two species of partnership as regards animals, there are two other species, namely partnership with a tenant farmer, and partnership with a sharecropping tenant farmer. In the former partnership with a tenant farmer, animals of the same value must be left at the end of the lease. Meanwhile the profits belong to the lessee. But the dung must be applied to the cultivation of the land.

C. I. 1687 ff. In the latter partnership, which is entered into with a sharecropping tenant farmer, it can be agreed that the tenant farmer yield his part of the wool, at its time, to the lessor for less, and that the latter share in half of the milk and take the greater part of the profit. C. I. 1693. In a simple partnership of animals or one by equal parts, according to law, according to C. I. 1675, the animals which perish by chance perish to the owner alone, or to the lessor. According to C. G. 1810, unless all perish, but only a part, the loss is common to the lessor and the lessee. But according to both Codes, it cannot be agreed that the lessee participate more in loss than in profit. C. I. 1677; C. G. 1811.

Whether the contract of partnership called "with capital safe" is licit, namely when animals are handed over to a shepherd with the pact of rendering them safe in the same number at the end of the partnership, and of dividing the profit? "Speaking of itself this contract is illicit, because the capital must stand at the danger of the one contributing it; for the thing perishes to its owner.

Nevertheless it can probably become licit if another contract of insurance is added, by compensating the shepherd, through a greater part of the fruits, for the burden of such danger of the capital taken upon himself.... Certainly the contract is unjust by which the owner gives oxen estimated according to their present value, with the pact that if they decrease, at the end of the partnership the same value must be restored, because deterioration of the thing pertains to the owner, unless this damage is otherwise compensated. But if nevertheless there were a pact that at the end of the partnership not only the profit, but also the capital of the animals, is to be divided with the partner, then the pact will not indeed be unjust, that if meanwhile the capital perishes, the shepherd is bound to restore to the owner half of the capital." L. 907, 909, q. 4.

According to C. I. 1683, 1686, 1692, 1695; C. G. 1817, 1820, 1830, the animals must be estimated at the very beginning of the partnership; when the partnership has ended, they are estimated again, and the lessor takes beforehand as many heads as equal the price of those contributed. But the profit is to be divided in various ways according to the various species of lease and agreements. In a simple partnership or one by equal parts, it cannot be agreed that the lessee bear the danger of the capital beyond half according to C. I. 1677, or the whole according to C. G. 1811, nor that he participate more in loss than in profit. C. I. ib.; C. G. ib.

Whether a partner who ought to have contributed a sum of money into the partnership and did not contribute it, also owes interest? Resp. Affirmatively, C.

I. 1710; C. G. 1846; C. H. 1682. And the same is established there if a partner has taken some sum of money from the partnership chest for his particular utility.

To whom does administration of the partnership pertain? - Administration of the partnership pertains to him to whom it was committed. C. A. 1190, 1198; C. B. 710. But from him to whom administration was given in the very contract of partnership, it cannot afterward be taken away except for a legitimate cause. But if it was given afterward, it can be revoked as a simple mandate. C. I. 1720; C. G. 1856; C. H. 1692; C. B. 712. If it has been committed to no one, it is judged to have been tacitly permitted to all. C. I. 1723; C. G. 1859; C. H. 1695; C. B. 709. But each one must employ such diligence in common things as he employs in his own things. C. B. 708. Cf. C. A. 1185, 1186. Therefore, if he has done some things negligently and injured the partnership, but has done other things diligently and increased the partnership, the negligence is not compensated, unless this latter was altogether extraordinary. C. I. 1714; C. G. 1850; C. H. 1686; C. A. 1191. If one of the partners has exacted something from a debtor of the partnership, who is at the same time his own debtor, he must impute the payment to each debt proportionally; but if he has ascribed the whole to the partnership, it is valid. C. I. 1712, 1713; C. G. 1848, 1849; C. H. 1684. Cf. C. A. 1202, 1203; Inst. l. 3, t. 26, § 9; C. B. 718-721.

In what ways is partnership ended? Partnership, if nothing has been specially agreed, is ended: 1. When the time for which it had been entered into has been completed. 2. When the common thing has been totally extinguished, or the business has been ended. 3. By the natural or civil death, interdiction, or publication of goods of one of the partners. 4. By the express will of one or more partners, when the duration of the partnership is unlimited; but if the partnership is for a determined time, its dissolution cannot be demanded unless some grave reason is present, e.g., the infidelity of the co-partner, or the continual infirmity of a partner by which he can no longer conduct the business of the partnership. C. I. 1729, 1731-1735; C. G. 1865, 1867, 1869-1871; C. A. 1189, 1205, 1207, 1210-1212; C. H. 1680, 1700 ff.; C. B. 723, 724, 726, 727, 728; Inst. l. 3, t. 24, §§ 4-8; L. 907.

Note: When the partnership has ended, he who administered it must render an account of the administration. If by his fault the partnership has suffered damage, that damage will be imputed to his part, and if he himself is not solvent, it will be common to all the partners. - If, on the contrary, the administrator of the partnership has incurred damage, namely from the cause of the partnership, this damage also will be common to all the partners. - When a partnership of profits has been dissolved, the capital must first be restored to the owner, even if in fact no profit remains. Sixtus V, Bull Detestabilis § 2; L. 907; St. Thomas, 2. 2, q. 78, a. 2, ad 5. Similarly, if the capital perishes at the beginning, it perishes to the owner, since in a partnership of profits the capital, or sum of money, is not contributed, but only the convenience of the money. L. 907. When the partnership has ended, first the debts of the partnership are paid; then the received profits which remain are to be distributed proportionately among the partners. C. B. 731 ff.

Whether an agreement can be made that, when a partner has died, the partnership be continued with his heir? Resp. Affirmatively. This certainly was prohibited by Roman Law, L. 35, 59, C. h.t. But it is admitted by Italian, French, Austrian, and Spanish Law. Nor indeed does it seem illicit by Natural Law. C. I. 1729; C. G. 1868; C. A. 1206-1209. C. H. 1704: the partnership remains if it was agreed that it should remain with the survivor or with the heir. But although the partnership does not remain with the heir, nevertheless he is bound to complete those things which were begun by the deceased. L. 40, C. h.t.; C. I. 4732; C. G. 1868; C. A. 1206, 1209; C. B. 727.

Whether any loss of a thing dissolves the partnership? - Resp. Affirmatively, if one of the partners promised to contribute the ownership of the thing, or only its use and fruit, in common, and the thing perishes before it is contributed. Negatively, if the ownership of the thing had already been contributed in common. C. I. 1731; C. G. 1867. Yet he is bound to furnish warranty for the eviction of those things which the partner contributed for the sake of use alone. C. I. 1709; C. G. 1845.

Whether, when a partnership has been contracted without limit as to duration, someone can withdraw from it at will? Resp. Affirmatively, provided nevertheless that his renunciation be in good faith and not made at an inopportune time. In good faith: not with evil fraud, for instance so that he alone may seize the whole profit, e.g., from inheritance, legacy, purchase. Inopportunely, that is, at that time when it was of interest to the partners that the partnership not be dissolved. C. I. 1733, 1734; C. G. 1869, 1870; C. A. 1212; C. H. 1705; C. B. 723, 738 ff.; Inst. l. 3, t. 24, § 4.

How many kinds of contract of partnership are there? - The contract of partnership can be diverse, both by reason of the end, insofar as the proximate end is either only common use of things, or only fruits or profit, or both; and by reason of the matter, insofar as either all goods are contributed, or only use and profits, or the profits of certain goods or of a certain business; and by reason of time, insofar as the partnership is entered into either for life, or for a determined time, or until the outcome of some business. C. I. 1699 ff.; C. G. 1835 ff.; C. A. 1176; L. 907.

What concerning universal and particular partnership? - A twofold partnership is distinguished: universal and particular. C. H. 1671. Universal can be either of all present goods, or of all profits. C. I. 1700 ff.; C. G. 1836 ff.; C. A. 1177; C. H. 1672, 1673.

If a partnership of all present things has been entered into, all the goods which are then those of the contracting parties immediately become common; and also those which they afterward acquire from these. But those things which the parties afterward acquire by succession or donation enter the partnership only as to usufruct, godimento. A stipulation as to the communication of these goods, according to C. I., is null; according to C. G., is prohibited. C. I. 1701; C. G. 1837; C. H. 1674. Cf. C. A. 1177, 1180. If partnership is made of all profits, it embraces only those profits which the parties will acquire by their own industry, by whatever title; goods whether movable or immovable of the partners become common only as to usufruct, C. I. 1702; C. G. 1838; C. H. 1675. Once it has ended, if the things were contributed only as to use, each one takes his own thing, or its price, if he transferred ownership into the partnership. A universal partnership entered into without another declaration is a partnership not of things but of gains, C. I. 1703; C. G. 1839; C. H. 1674.

But a particular partnership is that which is contracted concerning only some things or services, C. I. 1705, 1706, 1715; C. G. 1841, 1842, 1851; C. H. 1678. It can be made in many ways: 1. If all the partners contribute capital and service. 2. If all contribute only capital, but a third person hired by a stipend applies industry. 3. If one contributes capital and another service. - L. 907.

Note: Partners are not held in solidum on account of the debts of a non-commercial partnership; nor can one oblige another without express faculty. C. I. 1726; C. H. 1698.

Whether and what kind of partnership exists between spouses? A partnership, or rather common ownership, between husband and wife can be entered into before the wedding, and it can take its beginning only from the beginning of the marriage. C. I. 1433; C. G. 1399; C. A. 1180, 1233. Indeed, according to C. G. 1400, it is judged to be entered into by law itself, unless something else has been agreed. According to C. I. 1433, 1435, they are prohibited from entering into a universal partnership of goods; but it is permitted only as to useful things, with claims and debts both of the husband and of the wife excepted from common ownership, attivo e passivo presente dei coniugi, and likewise with goods to come from a lucrative cause of inheritance or donation excepted. Nevertheless, to the common ownership pertains the use and fruit, godimento, of all movables and immovables, present and future. The administration of this partnership is in the hands of the husband, to whom moreover it is permitted to alienate common things under an onerous cause, C. I. 1438; C. G. 1421. Leases made by him are held as made by a usufructuary. C. I. 1439. - But this partnership is dissolved by the death of a spouse, his or her declared absence, definitive personal separation, or judicial separation of goods. Once dissolved, it can be restored, but with the same pacts, and with the rights acquired meanwhile by a third party preserved. C. I. 1441, 1443. Once the partnership has been dissolved, the woman or her heirs can repudiate it or accept it with benefit of inventory. C. I. 1444.

The effect of this partnership according to Roman Law is to make ownership common to each spouse. But the husband has the usufruct, L. 539, 542. Its effect according to C. I. 1436 is to render common and divisible the acquisitions made by the spouses together or separately during the partnership or common ownership. According to C. G. 1470, 1474, when the community has been dissolved, proper goods and owed indemnities are first taken out, then what remains is divided in equal portions between husband and wife, or their representatives.

According to C. A. 1233, 1234, 1236, common ownership of goods, if it has been entered into by special contract, is understood only for the case of death, and gives to the spouse a right to half the goods which have been reciprocally placed in common, which perhaps remain after the death of the other spouse. But no right is acquired to the fruits during the marriage. - According to C. B. 1432 ff., a partnership can be entered into between spouses both before marriage and after marriage has been contracted. It can be either universal or particular, and when one or the other spouse has died it is continued with his or her descendants.

The husband has administration; but he cannot freely dispose of the goods of the partnership, nor can he bring any detriment to the wife; nevertheless from the goods of the partnership he bears the burdens of marriage. The goods of the partnership belong to each spouse, and when the partnership has been dissolved they are to be divided between them in equal portions. Cf. 677, 868.

Whether partnership is present between brothers. Among brothers "a partnership is not judged to have been made, unless this is had expressly or tacitly from conjectures. Hence not because brothers have an undivided patrimony and live from a common table is a partnership contracted among them, unless indeed all exercise themselves in some business; or unless, one conducting business, the others contribute their goods.... And this is more clearly presumed if all contribute in common all goods pertaining to each one. Yet this is understood when each one also contributes his own goods, besides the common goods; otherwise, if only one contributes his own proper goods, for instance profits of some office or art, and the others only common goods, then he can compensate these for himself.... And so likewise, if one contributes greater labor, he can receive more, according to the estimation of his labor. But if some absent brother conducts business in the common name from common goods, he is understood to have a partnership until he is admonished by the other brothers that they wish to make a division; and then the partnership does not cease even for the businesses begun." L. 907. Therefore partnership is understood among brothers if all contribute in common what they gain, or if they conduct business in common. - But once partnership has been entered into, the profits become common in proportion to the things and industry which each contributed into the partnership; and losses also become common in proportion to the profit. - If one of the brothers has children, who themselves also work for the partnership, or receive sustenance from it, in the first case a proportionate part of the profit corresponds also to them; in the other it will be imputed to the father's part.

If brothers retain for themselves those things which come to them from their own proper gain, with only the paternal inheritance left in common, so that they receive and feel also emolument and damage in common, the partnership will be restricted only to hereditary goods.

What is the triple contract? - The triple contract is that by which someone, contributing a thing or money, makes a pact with another partner that, whatever happens, the thing or the whole sum be restored to him with a certain profit, yet less than that profit which he could probably hope for. Or it is a contract of partnership to which two other contracts are joined, namely insurance of the capital and insurance of the profit, or the aleatory sale of the hope of receiving a greater profit for a lesser certain and insured profit. I contract, e.g., with Peter, giving him a sum of money for conducting business. But since the hope of gaining 15 per 100 shines upon me, and on the other side I fear lest I lose the capital, I enter into a second contract with Peter, giving him 5 per 100 if he is willing to take upon himself the insurance of the capital. With this second contract entered into, only 10 per 100 remains for me to gain. But I would prefer a profit still smaller but certain, rather than greater and uncertain. Therefore I propose to my partner that he give me only 5 per 100, but restore it certainly, whatever may come upon us, both the capital and the constituted profit. Hence a threefold contract is given, namely of partnership, of insurance of the capital, and of insurance of the profit. L. 908.

Whether the triple contract is licit? The first probable opinion denies. The reason is 1. Because thus partnership is destroyed, whose nature is that dangers be common; therefore it is a true mutuum; therefore the title or foundation for receiving profit is lacking, at least above the legal rate for mutuum. 2. Because, they say, the opposite doctrine was reproved by Sixtus V, through the Bull Detestabilis, a. 1586, § 1, and through the Bull of St. Pius V Onus, § 4.

The second probable opinion commonly affirms, provided the money is truly given for business. The reason is: 1. Because these individual contracts separately and with different persons are of themselves licit and just; therefore also if they are made together and with the same person. 2. Because there is nothing against equality, for compensation is given, and the danger is equivalently sustained by the one giving the money. 3. Because Benedict XIV declares, de Syn. l. 7, c. 1, that the triple contract was not condemned by Sixtus V, nor did he intend to condemn it. And in the Encyclical Vix pervenit he says that he does not wish to condemn contracts about which dispute exists among theologians. - As regards civil Law, some say that the triple contract is reproved, C. I. 1719; C. G. 1855; others, and more truly, say that nothing concerning it is had in C. I. or C. G. For those articles regard the simple contract of partnership. - L. 842, 847, 849, 908; Lugo n. 37; Benedict XIV, de Syn. l. 10, c. 7.

What is common ownership of goods? Common ownership of goods is indeed distinguished from the contract of partnership, yet it implicitly contains in itself some contract of partnership, whatever may have been the origin of the beginning of this common ownership. Moreover, common ownership of goods is the co-ownership of two or more persons as regards one and the same thing, as, e.g., if several persons possess one and the same house. C. A. 361, 639, 825; C. H. 392; C. B. 741; C. He. 646-654; C. L. 2175 ff. Cf. here 1121 seq.

By what laws is common ownership of goods governed? If special agreements are lacking, or special dispositions of Law, one must then stand by the general prescriptions of the Law itself. C. I. 673; C. H. 392; C. A. 826. These are the general norms of Law: The concurrence of those participating in the same ownership of a thing, in rights and burdens, must be proportioned to the quota of each. C. I. 548, 549, 561, 674, 676; C. H. 393; C. A. 830, 839 ff.; C. G. 655, 656. Anyone can use the thing placed in common ownership, and alienate, cede, subject to mortgage his own portion, or even substitute another in his own right of enjoying, unless the right in question is merely personal, as is the right of habitation. C. I. 675, 679; C. H. 394, 399; C. A. 829. If the greater part does not consent, innovations cannot be made, even if useful. Nevertheless anyone can oblige the others to necessary expenses for the conservation of the thing. C. I. 676-678; C. H. 395, 397; C. A. 828, 833. - Anyone can also always withdraw from common ownership, unless the time has been determined by pact, which will not be beyond ten years. C. I. 681; C. H. 400. Cf. C. G. 815. Dissolution of common ownership cannot be demanded by co-owners of things which, if divided, could no longer serve the use for which they are destined. C. I. 684; C. H. 401. Cf. C. A. 830 ff. According to C. B. 741 ff., the parts of a thing undivided among several, in doubt, pertain to each equally, and the fruits corresponding also to his part pertain to them, and at the same time the common use of the thing, insofar as the other undivided owners take no detriment from it. Administration of the undivided thing pertains to all in common. - The thing cannot be essentially changed. But any undivided owner can dispose of his own portion. And all are bound to sustain the burdens of administration and conservation. Any undivided owner can demand the cessation of indivision. And this is had either by the thing itself divided among the undivided owners, or, if it cannot be divided, by the thing sold. Cf. ib. art. 1008 ff.

But there are various cases of common ownership for which special dispositions of Law are present: 1. When several things of diverse owners have been mixed together, and cannot be separated without damage, the ownership is then common, yet according to the proportion of the value of the thing pertaining to each one, C. I. 471; C. H. 381; C. G. 572 ff. - 2. When a wall between houses or gardens is common, or a tree is common, a ditch on the boundary of fields is common, or flowing water is common, common pastures. C. I. 546 ff., 542 ff., 682; C. A. 421, 854 ff.; C. H. 572 ff., 593; C. G. 646, 653 ff.; C. L. 2319 ff., 2328 ff.

3. When there are several owners of the same building, some owners of the upper parts, others of the lower. C. I. 562 ff.; C. H. 396.

4. When an inheritance is common. C. I. 984 ff., 1034 ff.; C. G. 815 ff.

Common buildings. If several are owners of the same building, some owners of the upper parts, others of the lower parts, repair of the walls by which the building is supported, of the roof, and of any other common thing, as e.g., the vestibule, well, solarium, is common, according to the value of each part. But each one, beginning from the lowest cellars, must make his own rooms, ceilings or vaults by which he is covered; lay above the pavements on which he walks; build the stairs by which he goes; and if the same floor, piano, is common to several, each is held according to the value of his part. Finally he to whom the highest apartments pertain cannot, without the consent of the others, raise them higher, although he can enclose them with a ledge or parapet, if that harms others. Trees placed in a common hedge or on the boundary are common. Each can be compelled to cut them down, except those which serve as boundaries of fields.

Flowing water, except that which is of public right, provided it flows naturally and without a manufactured work, belongs to those who possess estates near the banks. Wherefore they can divert it, while it flows, for irrigating their own fields or for carrying on crafts, provided it is restored to its natural course when it goes out from their own lands.

What is wagering? Wagering is a contract in which two or more, contending about the truth or event of some thing, mutually pledge something to themselves, so that it belongs to him who has attained the truth. C. A. 1270; L. 869; Lugo d. 31, n. 73.

Whether wagering is licit? - Wagering furnished with due conditions is of itself licit. For it contains nothing dishonorable, nor is it prohibited by any positive law. The required conditions are: 1. That it not be concerning illicit things; no obligation is given against morals. 2. That it be about a thing doubtful as regards each wagerer; otherwise chance is lacking, and equality is not given, unless one certain about the thing warns the other, and nevertheless the latter wishes to commit himself; for then a donation is presumed as in gaming. C. A. 1270, 1272. 3. That there be equality between the thing which is pledged and the uncertainty of the event, namely that he for whom the greater probability stands promise more, but he for whom the lesser probability stands promise less. 4. That each accept the thing in the same sense; otherwise they would by no means agree upon one thing. L. 869, 870, 878, 879; Lugo d. 31, n. 82, 83.

Whether wagering obliges? - Wagering obliges in conscience by natural law, as any other licit contract. C. I. 1892; C. G. 1965; C. H. 1799; C. B. 762; C. L. 1543: the same is established for wagering as for gaming. Cf. 1247. C. A. 1271: a wager made in good faith and otherwise licit obliges, insofar as not only a price was promised, but also handed over or deposited. But it cannot be sought judicially. Through the Bull of Pius IV In eligendis, wagers concerning the doubtful election of the Pontiff, or concerning his life and death, are prohibited. Gregory XIV, through the Bull Cogit nos, extended this to the election of Cardinals, with excommunication latae sententiae added as regards the election of the Pontiff, and reserved even outside the time of the vacant See. And because wagers of this kind are declared invalid, no obligation arises from them. L. 869.

What is gaming, and how many kinds are there? Gaming is a contract by which players agree among themselves concerning some certain thing or concerning a certain price that will fall to the victor. - There are three kinds: 1. Industrial, which is chiefly governed by the industry of the players. 2. Aleatory, which principally depends on chance. 3. Mixed, which partly depends on industry and partly on chance. L. 871; St. Thomas, 2. 2, q. 168, a. 2.

Whether gaming is licit and valid? - A contract of this kind, considered according to the law of nature, and if the due conditions are present, is valid and licit. The reason is that any owner of his own thing, just as he can dispose of it by giving it absolutely, so can hand the same over to another under some condition, whether that condition is fortuitous or depends on industry. L. 871. Moreover, that gaming, insofar as it is a simple relaxation of the mind, is licit is beyond all controversy. For as the body needs rest, lest it be weakened too much by labor, so the soul also needs rest, lest it be too much wearied by continuous meditation. St. Thomas, 2. 2, q. 167, a. 2. Considered according to the law of nature. For games of mere chance are prohibited by Canon Law. Dist. 35, can. 1. Yet as regards laymen, they say that Canon Law has already been derogated by custom. But as regards clerics, it is disgraceful for clerics to play dice. C. 15, de Vit. et honest. cler. Cf. V. 2, n. 179. By Roman Law certain games, namely of dice and fortune, were prohibited. L. 1, 3, C. de Aleatoribus et alearum usu. By the same Law those who had been beaten in forbidden games could not be sued so that they should pay, and if they had paid, they had an action of recovery. Wherefore the payment made by the loser was not invalid, but was to be invalidated by the judge. But because these laws were penal, or were held as penal, by use and custom, hence, with attention to Roman Law, it is most probable that laymen playing would not sin even venially. L. 883-885; Lugo d. 31, n. 8. According to C. L. 1541 seq., gaming as a means for making profit is not permitted. What someone has gained in gaming he cannot seek judicially. If nevertheless he has paid it, he cannot recover it, except in the case of fraud or deceit on the part of the victor, and of a game of mere chance, commonly di azzardo. And what is lent in the act of this game of mere chance likewise cannot be recovered. According to C. A. 1272, what has been established for wagering is applied to games. Cf. 1244. But all games of chance are held as illicit, and it is declared that they bring forth no obligation. Nevertheless an action of recovery of what has been paid is denied.

According to C. I. 1802-1804 and C. G. 1965, 1967, there is no prohibition of any game. Nevertheless it is established that the law gives no action for exacting payment of that which is owed because of gaming or wagering. Games which contribute to exercise of the body are excepted, such as handling of arms, racing either on foot or on horseback, ball games, etc.; for these an action is granted. Yet it is within the power of the judge even in these to deny the action if the sum deposited for the game or wager has been exorbitant. But if the loser freely paid, he cannot recover what was paid, provided fraud or deceit of the victor was absent, and the loser is not a minor, or interdicted, or declared incapable. According to C. H. 1798-1801, games of mere chance are prohibited, and no action for them is granted to the victor; nevertheless no action is granted to the loser to reclaim what was paid, unless deceit intervened, or he is a minor or made incapable. And the same is established for wagering. Wagers which have analogy to these games are prohibited. Games which contribute to exercise of the body are permitted, as in C. I. and C. G.; and for these games and analogous wagering an action is granted; nevertheless the judge can reject the petition, or reduce the sum owed, if it is excessive. According to C. B. 762, gaming and wagering produce no obligation. But what has been paid cannot be recovered.

If the due conditions are present, which as regards validity are: 1. That the things exposed to the game are proper to the player, and in his ownership, and in his free faculty of disposing; otherwise the contract will be either null, or rescindable, or at least the payment made by the loser will be invalidable. 2. That all force and fraud be absent; hence it is necessary that the players concur freely, and indeed that there be moral equality among them in hope of gaining and in danger of losing. - But for liceity it is required: 1. That nothing dishonorable be mixed in by words or deeds. 2. That there not be present from it proximate danger of sinning, for instance of breaking out into blasphemies, or harm to neighbor, for instance of neglecting care of domestic affairs, of making oneself unable to pay debts or to feed a family, etc. 3. "That it be suited to the person, time, and place, and be duly ordered according to the other circumstances." St. Thomas, 2. 2, q. 168, aa. 2, 3, 4; L. 882;

Lugo n. 28.

Resolutions: If someone gains by exposing stolen money to gaming, apart from which he has nothing else that he might hand over, then he is bound to restore what he has gained, because the contract was null, since he exposed money which the co-player could not acquire. But if he has other money, it makes no difference at all that he stole the money from the one playing with him or from another. Since he was equal in solvency, he will indeed be able to retain the profit, for it is the fruit of his own industry; but the obligation always remains of rendering to another what was taken from him by theft. - L. 875.

Whether someone is bound to restore what he has gained from a son of a family in gaming? - Resp. Negatively, if the sum lost by the son of the family is from his own goods, of which he has perfect ownership. Affirmatively, if the sum lost is from the father's goods, or from his own goods of which he himself has only direct ownership. Except unless the sum is of small moment, in which the consent of the father is presumed, who would not wish to deny honest recreation to the son, or unless it is some moderate part deducted from the food which the father supplies to him. "Nevertheless it is probable that in that case, if the son of the family does not wish to pay what was lost in the game, he can licitly oppose the exception and is not bound to pay, reserving something from his food." L. 876, 871-873.

Whether a victor who is much more skilled in a game, so that he certainly foreknows that he will be victor, is bound to restore? - Resp. Affirmatively, much more probably, because the equality required among players is lacking, and therefore justice is injured. Hence one notably more skilled must withdraw from the game, or remit something of advantage to the adversary. Thus the more common opinion, against some. Yet in practice restitution should not be urged if the matter concerned a thing of lesser moment; or even when the adversary, sufficiently warned, nevertheless stubbornly wished to play. Then no deception would have intervened. - According to C. A. 1270, 1272, in wagering and in gaming, if the defeated party was previously conscious of the event, donation is presumed. But it is otherwise in public games. For in these the prize is promised to him who excels the others. L. 881.

Whether, according to the law of Roman Law, a victor in a prohibited game is bound to restitution, or the loser is bound to pay in the same game?

Resp. To the 1st: Negatively before the sentence of the judge, because by positive law the contract is not declared invalid, but only illicit, and an action to recover is given to the loser. Resp. To the 2nd: The first very probable opinion affirms. The reason is that by natural law the contract was valid, and therefore the loser is bound to stand by it until he judicially opposes an exception or seeks restitution. The second and more probable opinion denies. The reason is that the law, by giving to the loser a right to defend himself by exception or by recovery of what has been paid, also gives an absolute right not to pay. For to what purpose is someone bound to pay, if he can immediately recover what was paid? According to more Recent Laws also the victor is not bound to restitution, and the loser is bound of himself to pay, since the game is not prohibited by the aforesaid laws nor declared invalid, unless force or deceit intervened. But if the game is prohibited by the same laws, it can perhaps be sustained not improbably that the laws implicitly removed the obligation of paying, since the judge could not urge it by his own sentence. - L. 887-894. Cf. here 1247.

Whether gaming is valid if a large sum of money is exposed at one time? Resp. The first opinion denies. The reason is that because of prodigality the game is base. The second opinion affirms, of itself, more probably, if the players are able freely and fully to dispose of their goods without detriment to family and creditors, because the players then freely dispose of their own goods, and knowingly and willingly undergo danger equally; and therefore there is no injustice. Nor does the reason of prodigality press; for it is also base to play from the greed of profit alone, although this greed, as that prodigality, of itself is only light. Yet who would say that a game is invalid because the players are moved by desire for profit? Moreover profit can well be illicit without being invalid. Yet, practically speaking, they do not seem to be disturbed in the tribunal of penance who would not wish to pay a large sum which they had lost. And this either by reason of good faith, not to be disturbed, or because by positive Law the judge can reject the petition when the matter concerns games approved by the law itself, but the sum agreed for the game is excessive. Cf. 1247; C. I. 1803; C. G. 1966; C. H. 1801; C. B. 762; L. 735; Gousset 889.

Whether one who uses fraud while playing is bound to restitution? "He is not bound to restore who uses those clever tactics which the rules of the game and received custom allow, since each knows that such tactics are customary, and thus tacitly and freely consents to them; e.g., 1. If, having stronger cards and being sure of victory, he increases the wager, or simulates fear, so that the adversary increases it. 2. If, knowing that he has lower cards, he dissembles and increases the wager, so that what had been placed may thus be left to him. 3. If he looks at the cards of another from that one's negligence alone and without fraud; otherwise, if he places himself so that he can see, or appoints another by whom he may be warned. 4. If while playing he learns to know cards from the back, which he had not previously marked nor known. But he who uses frauds not customarily employed, or unknown to the co-player, e.g., steals cards, or marks them with signs on the back, or uses marked cards, or those which he knew beforehand while the partner is ignorant, or by some art arranges them, etc., is bound to restore not only the profit, but also as much as the hope of gaining, indeed even of playing with him, was worth to the other." L. 882, 877.

Whether, if someone injuriously compels another to play, he can afterward retain what he gains? "The first opinion denies, because damage following from an injury must altogether be restored.... But the second opinion affirms that he can retain it, because then not the coercion or the game, but rather chance or the skill of the one coercing was the cause of the damage.... This opinion, speaking of itself, is more probable to me, unless the co-player who coerced surpassed the one coerced in skill at playing; for in that case I think he is bound to restitution of at least part of what was gained, according to the measure of skill by which he excelled the other. The reason is that that contract, notwithstanding the injury of fear inflicted, was sufficiently voluntary on each side, and valid, according to the more common opinion reported.... I said, speaking of itself, for if the one who suffered fear seeks restitution of the money lost, Lessius rightly teaches that the one inflicting fear is bound to restore what was gained." L. 880; St. Thomas, 2. 2, q. 32, a. 7, ad 2, etc.

But what if someone compels only by importunate requests? - "Sanchez, etc., still hold that he cannot retain it. But Lessius, etc., far more probably contradict, because requests do not remove the voluntary, just as threats do not; as Busenbaum asserts from the common opinion with Bannes and Molina." L. 880.

What is a lottery? It is a contract by which, several persons paying money toward a certain thing or toward a certain sum of money placed in the middle, a right of drawing lots is acquired; whence, once the drawing has been made, some have the whole proposed prize, some a part, some nothing.

Whether a lottery is licit? Resp. Affirmatively of itself. For a lottery can be regarded as the sale and purchase of hope and of the right to a certain prize to be acquired by drawing lots. But as it is licit to bargain concerning the danger of some thing, so also it is licit to buy hope and the right to some thing. It is said of itself; for accidentally from extrinsic circumstances it can become illicit, e.g., if from it a family were to be thrown into misery. C. A. 1267, 1269. According to C. B. 763, a lottery does not induce obligation unless it has been approved by the State; otherwise, the dispositions established for gaming and wagering are applied to it. Cf. 1247.

What conditions must be observed in a lottery, lest it become illicit? The first condition is that there be no fraud in drawing the tickets, nor in paying the prize which has fallen. The second condition is that proportion be preserved between the smallness of the price and the greatness of the uncertainty of the hope, and at the same time with the greatness of the prize, and, in a public lottery which is constantly repeated, with the greatness of the danger to which the owner of the lottery is exposed, so that he can always satisfy future victors. There are some who add a third condition, namely that the profit in the lottery not exceed that which would be had in honest business if the money were spent in it. But this condition is established by no reason, since then the profit received in any aleatory contract, and generally the profit received in gaming, would be illicit. For this is proper to these contracts, that uncertain chance intervene, to which the contracting parties voluntarily subject themselves; and, when chance favors, it often happens that someone receives in a short time a profit which even in a long time his own industry would not produce.

C. A. 1273, 1274.

What are stock-exchange games? Stock-exchange games are commonly called certain business and mercantile operations which are ordinarily made in the money market through intermediaries, who are called exchange agents. They are called games because titles of public revenues are sold and bought, which, according to various circumstances of society and governments, have varying value; whence the aforesaid operations are aleatory, and a certain wager intervenes concerning the variety of values of this kind, namely concerning their increased or diminished price. But they are called stock-exchange games from the public place, or money market, which is called the stock exchange.

Whether stock-exchange games are licit? - Various stock-exchange games, more or less complex, are reduced to the following simple mercantile and business contracts. 1. Someone buys a title, e.g., of 1000 lire, at the current price, and with counted money of 900 lire. The annual revenue of the title is 50 lire, namely at the rate of 5 per 100. Through days, through months, through a year, through several years, the buyer receives the aforesaid revenue. Certainly nothing illicit is present in this matter, for it is a certain simple purchase, or a simple consignative census, or a simple constitution of revenue. But if the buyer, when a good occasion is offered and seized because the price of public revenues has increased, sells the title of that annual revenue of 50 lire, at the current price and for counted money, for 1100 lire, he indeed receives a great profit, but again there is nothing illicit in this matter; for it is a certain simple sale, and the profit is owed from the changed price of titles in the market. And if someone, intending this profit, buys several titles of annual revenues at the current price and for counted money when the price is lowest, so that he may resell them for counted money when the price is highest, business properly is had, which of itself has nothing illicit.

2. If someone again buys a title of annual revenue of 50 lire at the current price of 900 lire, not for counted money, but on credit to a term, e.g., for fifteen days, for a month, then either the title is immediately given, or only when the term arrives, or the fixed day, which day is called the day of liquidation: the first, the fifteenth of the month. If the first occurs, nothing is had except a certain purchase made on credit, by which the buyer can profit if on the appointed day the value of the title increases, or on the contrary the seller can profit if on the appointed day the value of the title decreases. Nothing indeed illicit is in this matter. But if meanwhile the seller demands the legal interest of the money until the price is paid, he can do this by right, since it is not equitable that the buyer retain the thing and the price for himself and enjoy the utility of both. Then sale and purchase and mutuum intervene at the same time, or a simple mutuum.

If the second is verified, then the danger of detriment is equal for buyer and seller, and likewise the hope of profit is equal for both; for meanwhile the value of the title can increase and can decrease. Therefore when the day arrives on which the seller must hand over the title and the buyer the price, if the value of the title has increased, the profit will belong to the buyer; if the value of the title has decreased, on the contrary the profit will belong to the seller. Therefore, since equality of both is preserved, nothing illicit is had here of itself.

3. The seller and buyer likewise make a contract to a term or to a day, but the seller does not hand over the title to the buyer in the present, nor does he oblige himself to hand over the title to the buyer when the day arrives. Similarly the buyer neither hands over the price to the seller in the present, nor obliges himself to hand over the price of the title to the seller when the day, or the constituted term of the contract, arrives. Therefore the seller and buyer oblige themselves, when the day arrives, only to hand over the difference of the value or price of the title in the present, or today, and of the value or price of the same title on the constituted day. It is therefore a certain wager concerning the increase or decrease of the price, in which again equal danger and equal hope exist for seller and buyer. For if, when the day arrives, the value or price of the title has increased, the buyer gains this difference of value, to be handed over to him only by the seller without the title. But if the value of the title has decreased, then the seller gains that difference of value, which the buyer alone must hand over to him, without the remaining price of the title, namely the excess of the former price constituted on the day of the contract over that lower price which the title obtains on the established day. Wherefore neither is anything illicit of itself had here, just as nothing illicit would be had in the simple contract of wagering concerning an increase of the value of the title on the part of the buyer, who hopes that it is to be increased, and therefore buys; and concerning the diminution of the value of the title on the part of the seller, who fears it, and therefore sells. But this contract would be illicit if someone certainly knew, by private knowledge, that the value of the titles was soon to be increased. For then by the contract someone would give nothing to the other; he would not give the right to profit if the price were diminished, which would be altogether fictitious. And although the other is ignorant of this, that false and empty right does not for that reason cease to be such, since the price is certainly to be increased and the other certainly knows this.

4. The buyer, buying a title, with only part of its price immediately paid, to a term or to a day, reserves to himself the right, when the day arrives, either of demanding execution of the contract, or of withdrawing from the contract, leaving to the seller that price already given. Since the right which the seller grants to the buyer is appreciable by a price, this contract is just if the price is proportionate. The proportion of this price depends on various circumstances and on the varying concurrence of sellers and buyers. The right of rescinding the contract is sometimes conceded to the seller himself, with a premium left to the buyer. This conditioned purchase and sale is called operation with premium; the two preceding ones are called operations to a term.

5. A mercantile relation, or reportus, is a certain species of retro-sale. It consists first in selling for a lower current price, immediately paid, any titles which are sold in the money market, and immediately redeeming the same at a price to be paid at a term, or on a day, but higher. C. I. Comm. 73. Here also no illicitness of itself appears; for there is a double sale of the same thing, or the sale of a thing with its immediate retro-sale, and if due equality of price is preserved, certainly there is no injustice. In the second sale, or in that immediate retro-sale, the thing indeed is sold at a term for more than it was bought. But this arises from the fact that within a short time the price of these titles is changed according to common estimation. But from the fact that the thing will probably be worth a certain amount on the constituted day, the seller can take the norm of the price. Wherefore this second sale, or retro-sale, is an aleatory contract by which both the seller and the buyer can profit, namely if the price of the title, on the constituted day, has grown or decreased still more than the price foreseen by the seller and to be paid by the buyer. Gur. Cas. 946-950. According to C. B. 764, the contract of paying by the loser to the gainer the difference between the agreed price of merchandise or of a monetary title and the price at the time of delivery is considered as a game. Cf. 1247.

917. • A contract of society is an agreement concerning some thing to be possessed in common for a common good, or for profit to be received according to a proportional share.

I say I. Every society must be made concerning a lawful and honorable thing, and also for the common good of the contracting parties. Moreover, individual partners ought to bring into the society money, or goods, or industry, or work. - Thus from every law.

I say II. A contract of society is a legitimate mode of doing business. It is clear 1. from the civil laws of all nations; 2. from the universal usage of all peoples; 3. from natural right: for it is no less lawful for many jointly than for individuals to make profit from their own things, provided due equality is preserved.

I say III. The required conditions are 1. that there be equality, that is, a division of profit according to the proportion of the thing contributed; 2. that the society be entered upon for a certain time, and before that it is not lawful to reclaim one's own; 3. that the risk of the capital pertain to the owner, unless another pact has been entered into; 4. that each undergo the burden of damages and expenses which arrive by reason of the society; 5. that each apply the same diligence in the society as in private business. - St. Lig. n. 905.

918. Questions. - Q. 1. How is a society dissolved?

Resp. A contract of society is dissolved 1. by lapse of the time for which it was made; 2. by the destruction of the thing, or by the end of the business; 3. by the natural or civil death of one of the partners; 4. by interdiction of either partner, or by bankruptcy or subversion of goods; 5. by impossibility of furnishing the promised thing ¹.

¹ Through these things the Author does not wish to exclude that the society can also be dissolved legitimately by the mutual consent of the partners.

Q. 2. What if someone, while his partner is unwilling, withdraws from the society before the time?

Resp. He is bound to compensate the damage, namely to pay the profit ceasing from the money to be furnished by him, or to render the profits of his own industry. - See Cases, n. 981 and following.

919. • The triple contract is that by which someone contributing money makes an agreement with another partner that, whatever may happen, the entire sum be restored to him with a certain profit, yet a profit less than that which he probably could hope for; or it is a contract of society to which two other contracts are joined, namely of insurance of the capital and of insurance of the profit, or of sale of the hope of receiving a greater profit for a smaller profit certain and insured. It is thus instituted. I contract, for example, with Peter, by giving him a sum of money for trading. But since a hope of gaining 15 for 100 shines upon me, and I fear on the other side lest I lose the capital, I enter into a second contract with Peter, by paying him 5 for 100, if he is willing to take upon himself the insurance of the capital. This second contract having been entered into, only 10 for 100 now remain to me to be gained. But I would prefer a profit still less but certain, than a greater and uncertain one. Therefore I propose to my partner that he give me only 5 for 100, but restore it certainly, whatever may come upon us. Hence a triple contract is given, namely of society, of insurance of the capital, and of insurance of profit.

Q. Whether the triple contract is lawful?

Resp. There is a twofold probable opinion among Theologians.

I. OPINION denies it. The reason is 1. because thus the society is destroyed, of whose nature it is that the risks be common; therefore it is a true mutuum; therefore the title or foundation of receiving profit is lacking, at least above the rate of the law for a mutuum; 2. because, they say, the opposite doctrine was reproved by Sixtus V through the Bull Detestabilis, in the year 1586. - Collet. - Habert, etc.

II. OPINION commonly affirms it, provided the money is expended in trade. The reason is 1. because these individual contracts separately and with diverse persons are of themselves lawful and just; therefore also if they are made together and with the same person; 2. because there is nothing against equality: for compensation is given, and the risk is equivalently sustained by the one giving the money; 3. because Benedict XIV declares, in the work On the Diocesan Synod, Book 10, that the triple contract was not condemned by Sixtus V, nor did he intend to condemn it. And in the Encyclical Vix pervenit he says that he does not wish to condemn contracts concerning which there is dispute among Theologians. - See St. Lig. n. 908.

940. • They are of various kinds: insurance, wager, lottery, or raffle, and game. They are called aleatory because they are liable to the vicissitudes of lot.

Insurance is a contract by which one takes upon himself the risk of some thing, and the other obliges himself to a price for a risk of this kind having been undertaken. Thus in various cities there exist societies which insure, for example, houses against fire, ships against shipwrecks, etc.

941. Questions. - Q. 1. Whether the contract of insurance is lawful?

Resp. Affirmatively. For equality is preserved when the due conditions concur, as the Theologians commonly confess, and daily practice confirms.

Q. 2. What are the conditions required for insurance?

Resp. They are the following: 1. that the price be proportioned to the risk; 2. that the risk be true and equally known to each party; 3. that the insured observe all the conditions of the contract; 4. that the insurer have that from which he can pay. - St. Lig. n. 911. - See Cases, n. 1012.

907. I. Notion and species. 1. The contract of partnership is that by which two or more bind themselves to contribute some thing in common, so that the gain which can arise from it may be divided among them in equal proportion.

² Lugo, disp. XXX; Billuart, diss. V, art. 3; St. Alphons., n. 904-910; Carriere, II, 851-900; Marc, lib. IV, n. 401-426; Ball. P., n. 884-891; Genicot, n. 651-652.

Therefore two elements are found in it: (a) some thing placed in common, which can be either money or some movable or immovable good, or also some work, industry, some commercial credit. A partnership can be entered in such a way that both together contribute money and work, - or one work and the other money; and indeed equally or unequally.

(b) Some gain to be divided among the partners (societaires); this is the intended end, namely that some advantage be received and divided: this can be either money, or the use of some thing, or an intellectual or moral benefit. It is not necessary that in fact some gain be received, but it suffices that it can probably be received. But if there are losses, the partners equally and likewise ought to undergo them.

908. 2. Today partnerships are countless, and are ruled by various rules among diverse nations.¹ - We shall set forth those which are more received.

¹ For France, cf. Cod. commerc., a. 18-64; Boeuf, Resume de Droit Commercial, Paris, 1903, p. 26-108; Baudry-Lacantinerie et Wahl, De la societe, du pret, du depot, Paris, 1898.

(A) Partnership can be universal or particular: the former contributes in common all present goods and all profits, or only all profits afterward to be made; but the latter contributes certain determined things, or their use, or the fruits to be received from them, or a determined trading. This is much more frequent than universal partnership.

(B) But particular partnerships are some civil and others commercial: the former are indeed entered for making gain, but in another way than by trading; e.g., for buying and cultivating estates, for building houses, for instituting and administering colleges, etc.; but those are called commercial which give themselves to trading.

(C) Under another respect, partnerships are: (a) designated by a collective name,² when two or more partners act under a common personal name (raison sociale), so that each one is held personally and in solidum for all the debts of the partnership; thus, e.g., Desclee, Lefebvre and associates; (b) anonymous, when the partners do not act in their own collective name, but in the name of the partnership (Banque de France, Credit Lyonnais), so that they are not held for debts beyond the portion of capital which they contributed or ought to have contributed.³

² For France, Cod. Commerc., a. 19-28; Boeuf, p. 37-70.

³ For France, see law of July 24, 1867, and Aug. 1, 1893; Boeuf, op. cit., p. 70-80; Houpin, Traite general theorique et pratique des societes civiles et commerciales, 3rd ed., Paris, 1901.

909. II. Principles. The offices of partners, whether among themselves or toward others, must be defined both from civil law, and from the special statutes of each partnership. Wherefore we can hand down only general principles.

1. On the obligations of partners toward the partnership. (A) Any partner ought honestly and integrally to transfer to the partnership all those things which he promised to contribute (apports), whether the matter concerns money or things, or industry and work; otherwise, he commits injustice and is held to restore the damage inflicted. If money was promised, and was not handed over, legal increase is owed.

(B) Partners cannot act in the name of the partnership itself, and bind it, except under the conditions determined by law, statute, or custom; likewise they cannot use things proper to the partnership except in the predefined way. If, contrary to laws and statutes, they involve themselves in the administration of the partnership, they act in their own name and bind themselves, but not the partnership.

(C) Administrators must manage the affairs of the partnership as their own, with at least common diligence, and therefore adequately compensate damage arising from culpable neglect.

910. 2. On the obligations of partners among themselves. (A) The partition of gains must be made according to the laws of equity, that is, proportionately to those things which any partner has contributed to the partnership, with attention not only to money and things, but also to industry and work furnished. But gains are computed after expenses have been deducted; wherefore there is also made a partition of losses proportionately among the partners, if these surpass the gains. Yet in many partnerships, losses are limited to the part which has been contributed in common: thus especially in anonymous partnerships.

Generally this proportion is determined by law and particular statutes, and one must stand by it in conscience, unless it is manifestly unjust. Thus a convention would be unfair by which one of the partners is altogether excluded from gain; but if someone is altogether exempted from loss, although he has a part in gain, there is not a partnership properly so called, but another contract, by force of which he who furnishes work will obtain an aleatory part in the gain.

(B) No partner can convert common money to his own uses: for this pertains to the partnership itself, but not to the individual partners, before partition. Wherefore, if any gain has been taken from the common fund, it must be restored without delay, with legal increase; besides, the damages inflicted on the partnership on this head must be compensated, as was said concerning the unjust damager and possessor in bad faith.

911. III. The principal ways by which injustice is committed in partnerships, especially anonymous ones.¹ Today frequent injustices are committed in the institution and management of partnerships, especially anonymous ones, which it is expedient briefly to enumerate, not only so that confessors may bring a fair judgment concerning them, but also so that those who transact business with these partnerships may be more cautious.

¹ Cf. Cl. Jannet, Le Capital, la Speculation et la Finance, Paris, 1892, p. 167-188.

1. In the institution itself of partnerships, (a) not rarely the founders attribute to themselves a part of the gains which greatly surpasses those things which they contributed to the partnership, namely by greatly exaggerating the value either of the things which they placed in common, or of the industry and work which they furnish or promise to furnish; it is certainly fair that those who have devised some undertaking and by their industry have formed the partnership receive some recompense, either in numbered money, or by the concession of rights which are called founder's shares;¹ but in all these things it is not permitted to exceed that which, all things considered, is held by honest men as a fair retribution.

¹ To the point Jannet, op. cit., p. 167: "Founder's shares (deferred shares, as they are called in England), are in themselves very legitimate, and, under this form, there is nothing to object to the levies of founders: they represent the legitimate remuneration of the conception of an affair. But these levies are effected most of the time under the form of increasing contributions in kind, such as immovables, patents of invention, clienteles." In the same place he brings examples, and adds: "In ten commercial or industrial affairs put into shares, the public lost more than 84 million!"

(b) When the capital of these partnerships is increased, often administrators retain for themselves a part of the money subscribed by private persons, and apply only half the part for increasing the resources of the partnership (which is called watering the stock, mettre de l'eau dans le capital):² from this it happens that the revenues of the partners are unjustly greatly diminished. - This also frequently occurs when two or more partnerships are joined together at the same time to constitute a new one, or to form what they call a trust.

² "Other times an already existing company increases its capital, under the pretext of extending its affairs, without a proportional increase of profits being the consequence; this is called, in America, putting water into the capital." Cf. Nettleton, Trusts or Competition, p. 54-56; Martin Saint-Leon, Cartells et Trusts, p. 119, 124-129.

912. (c) Sometimes also a partnership is instituted with capital plainly insufficient for managing the matter prosperously; a little afterward, when the partnership is now tending toward ruin, the founders, either through themselves or through others, institute another partnership, which at a cheap price procures all the resources of the prior partnership, to the great detriment of those who had contributed monies to it.³

³ Cl. Jannet, op. cit., p. 168.

(d) Bankers (banquiers) are likewise guilty of injustice, who cooperate in instituting these partnerships, by issuing and selling shares and obligations at a price which they know to be greater than fair;⁴ directors of newspapers,⁵ who receive money for extolling the value of these partnerships, when they foresee that readers, deceived by these writings, will suffer damage from this.

⁴ Ibid., p. 168-170; cf. Cauwes, Econ. Politique, t. II, n. 651-655.

⁵ "When in March 1888, L'Assurance financiere put up for subscription, at the price of 250 fr. each, 100,000 savings bonds, the treaty passed between M. Boulan and M. Xau, publicist, fixed at 2,850,000 fr., that is, 28 fr. 50 per title or 11 fr. 40 per 100, the expenses of publicity." (Jannet, op. cit., p. 171.)

913. 2. In the management of partnerships not a few frauds likewise are committed: -

(a) To capture the confidence of the people, political men or nobles are put in charge of these partnerships, who cannot or do not wish to give time and work to the business of the partnership, whether because of inexperience, or because they are already preoccupied with other business:¹ deceived by the authority of these names, not a few adhere to the partnership and not rarely lose part of the money committed.

¹ "Senators and deputies of the right, of the left, of the center throw themselves upon financial companies as upon prey: the title of former minister is worth a place as president of an administrative council: the common run of deputies and senators simply becomes administrator. There are indeed two or three hundred in this case, seeking to cut out for themselves some sinecure rather thin by the direct profits it gives, but which one hopes ought to be more productive by indirect profits, premium issues, participations in syndicates." (P. Leroy-Beaulieu, in Jannet, op. cit., p. 176.)

(b) Sometimes also the same men apply themselves to the management of various partnerships, and unjustly favor one before another.

(c) Frequently also the partners are deceived by a fraudulent exposition of affairs: in the earlier years gains are distributed which in reality have not been made (dividendes fictifs), so that thus new partners may be drawn to procure shares or actions at a greater price; this being done, a little afterward, the partnership suffers bankruptcy.

By these and other frauds of this sort, injustice is committed, and damages unjustly inflicted must be fairly compensated. - Therefore let priests act cautiously in judging concerning these matters, and not imprudently induce their parishioners to adhere to such or such a partnership, on the pretext that the president has merited well of the Catholic religion: for experience establishes that certain persons have been deceived by the shadow of a great name. Let them warn the same persons besides not to contribute money to those partnerships which are opposed to religion or good morals: for then they are made cooperators in the evil performed by those partnerships.

915. 1. Notion, origin, and liceity. (A) Insurance is a contract by which one person, for a certain price, obliges himself to compensate damages which another can suffer from an involuntary case. - He who takes upon himself the obligation of compensating damage is called the insuring party or insurer; but the other is called the insured.

¹ Lugo, disp. XXXI, n. 93-103; Carriere, III, n. 951-1011; Lehmk., n. 1131-1135; Ball. P., n. 933-937; Genicot, n. 656-658; - for French civil law: Alauzet, Traite general des Assurances, Paris, 1844; Agnel and de Corny, Manuel general des Assurances, Paris, 1900; - for America: J. W. May, The Law of Insurance, 4th ed. revised by Gould, Boston, 1900.

The matter of this contract can be whatever, on the one hand, is estimable by price, and, on the other hand, is subject to some danger. Thus ships and goods are customarily insured against the danger of shipwreck, buildings or movables against the danger of fire, crops against the danger of hail, fragile things against the danger of breakage, the integrity of members against mutilation, life against the danger of death, etc.

(B) A contract of this sort, almost unknown to the ancients, was instituted in modern times, and today among all cultivated nations has especially prevailed. In the fourteenth century, it was first introduced with respect to goods to be carried over the sea, namely when maritime commerce had already begun to flourish. In the seventeenth century, the first society of insurance against fires was founded in London (1684); in the eighteenth century, a society of the same kind was instituted in France;² in the nineteenth century, almost countless societies of this sort appeared everywhere and with respect to dangers of every kind.

² Sicard, L'ancien Clerge, t. I, p. 475-476, describes how Bishops in France instituted a certain kind of insurance, by prescribing collections in churches for bringing help to those who had suffered some damage from fire.

916. (C) In antiquity some theologians doubted concerning the liceity of this contract, because they feared lest it bear before itself something usurious; but today, its nature having been better inspected, its legitimacy is acknowledged by all, provided that the rules to be set forth below are observed. - Indeed there is no one who does not see its social utility. For it concerns the public good that damages which can occur from a fortuitous case be foreseen and forestalled; otherwise industry and commerce would often be retarded in their progress, and often also masters and workers would be led to the extreme of poverty and want; now, for forestalling damages of this sort, nothing simpler and more efficacious has hitherto been devised than that contract by force of which, by means of a modest price paid each year, a fund is instituted for compensating all damages fortuitously occurring. - Thus besides, the foresight and thrift of individuals is promoted, joined with the greatest security.

917. 2. Principles. In a general way one must stand by the laws and special statutes by which the mutual offices of the insurer and the insured are determined. Yet it helps to set forth certain general principles, by whose help the difficulties more commonly occurring can be solved.

(A) On the price to be paid. The price of insurance ought to be proportioned to the quantity and probability of the danger, according to the estimation of prudent persons. For the equality of this contract is placed in this, that, all things having been diligently weighed, there be a fair proportion between the probability and extension of the danger and the price which is paid by the insured, so that, from things commonly occurring, the insurance society, after all damages have been compensated, may receive some moderate gain. - But this proportion is determined according to statistics which today are sufficiently accurate; and, since besides there are many societies, not only national but also international, which freely compete in this matter, commonly the current price is legitimate. For, if the gain is immoderate, soon other societies will be stirred up which will furnish insurance against the same danger for a lower price.¹ But it would have to be said otherwise if all or most societies agreed together not to diminish the price. - Besides, when the price seems excessive, nothing prohibits mutual societies from being instituted, in which the insured themselves have a part in the gain received.²

¹ Wherefore that which Lehmkuhl says (n. 1135) rarely occurs: "For if those who have a part in the insurance society, after all expenses of administration have been deducted, are accustomed each year to have excessive gain, e.g., as it is sometimes said to happen, 20 percent and beyond, for the sum which they handed over for the sake of caution: this seems to me to exceed the limits of justice." - Besides, before a thing is declared unjust, it must be weighed whether these gains do not proceed from the great number of insured persons, from the skill of administrators, who wisely apply the money received to fruitful uses, and especially whether there is danger of losing all these gains, when a common calamity occurs, e.g., a fire in which the greatest part of a city is destroyed. Cf. Ball. P., n. 935.

² Astresse, Traite general des assurances mutuelles, Paris, 1901; Agnel and Corny, op. cit., n. 177-198.

918. (B) On the offices of the insured. The insured ought honestly and sincerely to declare the true value of the thing insured and all the dangers to which it is exposed. Otherwise there will not be proportion between the price which is demanded by the society and the danger which it takes upon itself.

(a) Wherefore, by natural right, the contract is void if, in declaring the danger of the thing insured, a notable circumstance is voluntarily kept silent, which, if known, would have prevented the contract from being entered; but if the circumstance is not notable, so that the contract would nevertheless have been entered, the contract is valid, but the insured is held to increase the price by reason of the danger. Hence also, if, after the thing has already been insured, the danger is increased, this ought to be candidly declared. - But often by civil law, or from special statutes contained in the agreement itself, the contract is declared void even when a circumstance of little note has been kept silent, or at least rescindable at the will of the insurer, and indeed in such a way that he can retain the price already paid, although he is not held to compensate the damage. Yet this, as being less consonant with natural right, does not oblige except after the sentence of a judge.

Thus, when the matter concerns life insurance (assurance sur la vie, life insurance), not a few of the insured deceive concerning their age, so that the price to be paid is diminished; then the price ought to be increased, so that the premium may be licitly received.¹ But if a disease has been kept silent, from which the danger of death is greatly increased, the error is substantial, and he who knowingly deceived the insurers not only loses the right to the money already paid, but also ought to compensate the damages which the society underwent from this. This indeed is true even when the insured has subjected himself to medical investigation, as is the custom: for he ought sincerely to set forth diseases known to himself, and candidly to respond to legitimate questions proposed by the physician.² - Yet, if, as the years pass, the health of the insured grows strong beyond expectation, the contract is made valid, because the contract is implicitly renewed as often as the price is paid and accepted.

¹ According to the statutes of certain societies, the insured can make a new declaration without losing his rights, provided he increases the price; but according to the statutes of others, he loses all his rights as soon as the fraud has been recognized. - For France, see Maire and Gellie, Manuel theorique et pratique de l'Assurance sur la vie, Paris, 1898; Agnel and Corny, op. cit., n. 258-468.

² Yet, in Germany and certain other regions, many societies declare in their statutes that they renounce the right of attacking the contract on account of false declarations, after it has already endured for five years; but not so in France (Agnel and de Corny, n. 360-376). As to Germany, see Ph. Huppert, Der Lebensversicherungsvertrag, Mainz, 1896.

919. (b) When error concerns the value of the thing, these things can be established, with attention to natural right alone: if each contracting party has erred in good faith, the contract remains valid, but, the error having been discovered, the value of the thing insured and the price to be paid ought to be diminished; if each knowingly and willingly agreed concerning the excess of value, the convention assumes the nature of a wager (gageure), concerning which we shall speak below; if the insured deceived the insurer, the contract is indeed invalid as to the excess of value, but it stands as to the true value of the thing, which therefore ought to be compensated, in the case in which the thing perishes: for the error is not substantial, and therefore does not void the whole contract. - If anything contrary is declared in the statutes, it does not oblige in the forum of conscience except after the sentence of a judge.

But the value ought to be declared as it is commonly estimated at the time the contract was entered; but if it has been diminished at the time when the thing perished, the insurance society commonly does not compensate damages except proportionately to the value then had, according to the estimation of arbitrators.

Wherefore if movables which had been insured have for the most part been sold, this ought to be declared so that the price and the owed compensation may be proportionately diminished. But if this declaration was not made, and therefore the price was not diminished, one must distinguish: if this was done fraudulently, restitution of all things is not owed, but only of those things which truly perished; but if this was done in good faith, the insured can retain whatever the society paid: for damage is not unjustly and voluntarily inflicted on it, since the same price had been paid each year.

N.B. From the things said above, where we treated the unjust damager, n. 477, he who voluntarily destroys an insured thing not only does not obtain a right to compensation, but ought to repair all damages unjustly inflicted. - But he who, in the case of a fortuitous fire, in no way tries to restrain the conflagration, is likewise guilty of injustice; for he ought to use ordinary diligence for protecting his own things; he is guilty a fortiori who prohibits others from extinguishing the flames.

920. (C) On the offices of the insurer. (a) The insurer ought to be equal to compensating all damages concerning which he is held: for to this he explicitly obliges himself. For this, however, it is not necessary that he possess a sum of money equal to all the goods whose danger he has taken upon himself, but only that he have as much as is probably required for compensating the damages which, from things commonly occurring, can happen: for it is plainly improbable that all the goods whose danger he has taken upon himself will perish at the same time.

Therefore societies act unjustly which take upon themselves more dangers than they can probably compensate, unless however they immediately reduce the danger to just limits by having recourse to societies of reinsurance, which, by means of some price, consent to undergo a proportionate part of the danger.

If the insurer is unequal to repairing the whole damage, the insured can rescind the contract and seek back the price paid, because he had not consented to the contract except for obtaining perfect security. - Hence also, if, after he has paid the price, the insured thing has perished, he has the right of pursuing full reparation of the damage by all legitimate means.

921. (b) The insurer ought to repair the whole damage truly inflicted on the thing insured, according to the conditions determined in the contract itself, and indeed as soon as morally possible after the thing has perished or has become worse: for he does not make his own the price paid by the insured, except by obliging himself to repair damages.

But what compensation is owed must be defined both from law and from the statutes expressed in the agreement. As to the time at which compensation ought to be furnished, the insurer can indeed wait until it is morally established that the damage was inflicted by a fortuitous case, but not by the fault itself of the insured or of his family; but he would act unjustly who, when this is established, under one or another pretext, deferred compensation, or compelled the insured without reason to present himself before a tribunal.

But when the damage has been inflicted from the grave fault of the insured,¹ or of his relatives - namely of those who are designated in the statutes of insurance - the insurer is not held to compensate it. But if it has occurred from the malice of others, the insurer ought to repair it, unless it has been established otherwise, yet with his recourse preserved against the unjust damager: for then the insurer succeeds to all the rights of the insured with respect to the author of the damage.

¹ If the fault is light or only juridical, the insured licitly accepts compensation, unless he is deprived of this right by the sentence of a judge, from the things said n. 475.

1. A partnership (societas sive contractus societatis) is a relation based upon a contract by which two or more persons agree to carry on a business, trade, occupation or profession in common with a view to profit. The partners collectively are called a firm and carry on business under the firm name.¹

¹ Slater, A Manual of Moral Theology, Vol. I, p. 548.

a) For a partnership contract to be licit and valid, it is necessary, first of all, that the object or purpose for which it is entered into be lawful; second, that each partner should contribute his share to the capital invested; third, that, if actively engaged in the business, he should do his part in making it successful and, fourth, that he receive his part of the profits, or bear his share of the losses, according as the venture proves prosperous or the reverse.²

² St. Thomas, Summa Theol., 2a 2ae, qu. 78, art. 2, ad 5.—Cfr. P. J. Gury, S. J., Comp. Theol. Mor., Vol. I, n. 860: “Every partnership ought to be formed concerning a lawful and honorable matter and also for the common good of the contracting parties. Each partner ought to contribute to the partnership money or merchandise or industry or work. Thus it is according to every law. A partnership contract is a legitimate mode of conducting business. This is evident from the civil laws of all nations, from the universal usage of all peoples, and from natural law; for it is no less lawful for several persons jointly than for individuals to make profit from their own property, provided due equality is observed. The required conditions are: 1. That there be equality, that is, a division of profit in proportion to the property invested; 2. That the partnership be entered into for a definite time and that before then it not be lawful to reclaim one’s own; 3. That the risk to the principal belong to the owner, unless an agreement to the contrary has been made; 4. That each person bear the burden of losses and expenses which arise on account of the partnership; 5. That each person employ the same diligence in the partnership as in private business.”

Any losses caused to the firm by negligence or fraud on the part of any one of the partners, must be borne by the latter.

An illegal contract made by one partner will not bind the others, for all parties are supposed to know and obey the law, and an illegal bargain cannot be enforced.

A partnership contract expires at the end of the period stipulated therein, or by the destruction of the object for which it was made, or by the mutual consent of the partners, or by a unilateral declaration of one or more of them, or by the attainment of the purpose for which it was established, or when it is ascertained that its objects are impossible, or, finally, by the natural or civil death of one of the partners. The cessation of a partnership does not, however, end its outstanding obligations, which, on the contrary, must be fully satisfied if possible.

The death of a partner causes a dissolution of the partnership. Nor can executors or administrators succeed to his place; if they do so, they assume an unpleasant personal responsibility. To relieve them from this, some States have passed statutes permitting surviving partners to act together under the direction of the court having charge of the estate.³

³ Gury, op. cit., I, n. 861.—Bolles, Putnam’s Handy Law Book, pp. 198 sqq.

b) A species of partnership which formed a bone of contention among moralists for a long time, is that known as triple contract (contractus societatis triplex sive contractus trinus). It is defined by St. Alphonsus as a contract by which a man entrusts his money to a partner upon condition that, no matter how the undertaking may result, he receive back the entire sum invested, together with a certain profit, which is less than may reasonably be expected. In other words, it is a contract to which are joined two other contracts, one insuring against risk and the other assuring a profit. The whole agreement is based on the desire to make a small but assured profit.⁴ For instance, A enters into a partnership contract (societas) with B and contributes $1000 to the business on condition that he may demand his capital back at any time (assecuratio sortis). He agrees to be satisfied with six per cent. on his investment, even though the actual profits may be much larger (emptio lucri).⁵ This form of contract was attacked by Soto and some other theologians because they regarded it as “veiled usury” (*usura palliata). Since the mitigation of the Church’s attitude on interest-taking the contractus trinus can no longer be condemned, provided, of course, due proportion is observed between investment and profit.⁶ The contractus trinus differs from ordinary loan contracts only in this that it refers to a certain definite business and that the profit is attributable largely to the money invested.⁷

⁴ St. Alphonsus, Theol. Mor., l. III, n. 908 (ed. Gaudé, II, 310 sqq.): “A triple contract is a contract by which one who contributes money agrees with another partner that, whatever may happen, the whole sum shall be restored to him with a certain gain, yet a smaller gain than he could probably have hoped for; or it is a partnership contract to which two other contracts are joined, namely, insurance of the principal and insurance of the gain, or the sale of the hope of a greater gain for a smaller gain that is certain and insured.”

⁵ J. E. Pruner, Kath. Moraltheologie, Vol. II, 3rd ed., p. 146; IDEM, Lehre vom Recht, Vol. I, p. 462.

⁶ It is thus that we must interpret the prohibition contained in the “Detestabilis avaritiae” of Sixtus V (1586); cfr. Göpfert, Moraltheol., Vol. II, 7th ed., p. 179; P. Cleary, The Church and Usury, pp. 129 sqq.

⁷ Göpfert, ibid. Cfr. A. Lehmkuhl, S. J., Theol. Mor., Vol. I, p. 749.

2. There are various kinds of societies or associations based upon partnership contracts, more or less clearly differentiated by their objects and their mode of organization.

a) A partnership consisting of a number of persons associated for mutual gain (societas quaestuaria), without a specific agreement as to the manner in which the expected profits are to be made, may be of two kinds: (α) one in which all the partners have an equal investment and a claim to an equal share in the profits, or (β) one in which the shares invested, and consequently the division of the profits, are unequal.

b) Partnerships or associations in which all the members contribute capital only, or in which some of the members contribute their labor in lieu of capital. The former may be either limited or unlimited, public or anonymous, according as each partner is liable for the debts of the association with the whole of his fortune or not. The latter are commonly known as c) Stock companies or corporations (associationes anonymae) because in them the capital invested is represented by shares (stocks), held by different persons, each of whom is liable for the debts of the corporation only in proportion to the amount of his shares. Under the natural law a company of this kind can only be formed with an express declaration that the liability of its share-holders is limited, in order that all those who enter into business relations with it may be aware of the risk involved.

α) Stock companies have their advantages as well as their disadvantages and dangers. The detachment of capital from personal responsibility is morally dangerous and may be permitted only in consideration of the fact that unlimited liability might easily involve serious disadvantages to many. Then there is the danger that the capital invested in a stock company, in view of the very slight influence exercised upon the management by the individual share-holders, will be improperly administered and that the company’s real aim is often obscured by a selfish desire for profits. Stock companies, furthermore, easily lend themselves to fraudulent practices, in which inexperienced or credulous investors may be robbed of their money. We need only remind our readers of the vast sums lost in this country of late years through stock companies organized to exploit real or fictitious oil wells. Stock companies are also used by capitalistic manipulators on the grain and stock exchanges. Finally, they are apt to be employed by large manufacturers and merchants as means to ruin smaller competitors and thus further the proletarization of large numbers of hitherto independent business men.⁸

⁸ V. Cathrein, S. J., Moralphilosophie, Vol. II, 4th ed., pp. 372 sq.; Göpfert, Moraltheol., Vol. II, 7th ed., pp. 180 sq.

Stock companies, says a recent writer, enable all who have a little money to take part in risky and fraudulent business ventures; they make it easy for dishonest speculators to exploit the credulity of the public; with their numerous, easily transferable and fluctuating shares they furnish a convenient and welcome means of betting, and have thereby prepared the way for excessive stock gambling. These disadvantages began to appear as early as the seventeenth century, that is, at the very start of the new development, and since then the history of stock gambling is intimately bound up with the history of stock companies.⁹

⁹ Handwörterbuch der Staatswissenschaften, 2nd ed., Jena 1901, Vol. I, pp. 181 sqq.

It should be noted, however, that the dividends paid by all the stock companies of a particular country during a definite period are not nearly as high as Socialist writers allege.¹⁰

¹⁰ Ibid., pp. 198 sq., 210 sqq.

β) Against these disadvantages stock companies have some advantages, which should not be overlooked. Thus they have played an indispensable rôle in the development of railroads, canals, tunnels, mines, and other important means of modern economic development. Hence it may safely be said that if the disadvantages and dan- gers that spring from their very nature are minimized by rational limitations and supervision on the part of the public authorities, stock companies may be useful factors in our economic life. Fr. Cathrein thinks that they are indispensable until men will discover a new form of association which offers all the advantages of limited liability without its disadvantages.¹¹

¹¹ Moralphilosophie, Vol. II, 5th ed., p. 384.

d) A corporation is a moral entity, a fictitious person with rights of its own, distinct from the rights of the physical persons who compose it. More specifically, in modern commercial life it is “an artificial person created by law, consisting of one or more natural persons united in one body under such grants as secure a succession of members without changing the identity of the body and empowered to transact business of some designated form or nature like a natural person.” The State, of course, has the right to exercise control over such societies, and they are subject to all just laws which it may make in their regard.¹²

¹² Slater, A Manual of Moral Theol., Vol. I, p. 352.

The statutes regulating corporations are so numerous and complicated that a whole class of lawyers devotes itself entirely to their study and application. These attorneys, known as “corporation lawyers,” are often hired chiefly for the purpose of aiding their clients in evading the law.¹³ One of the worst features connected with stock com- panies and corporations is the practice of stock-watering. By this term is meant overcapitalization in excess of the proper valuation of a business. It is mostly practiced by businesses that are not subject to normal competition. What is the measure of overcapitalization? According to Dr. Ryan, when the face value of its securities is greater than the money put into the business plus the subsequent enhancement in the value of its land. In brief, the proper measure of capitalization is cost—either the original cost, or the present cost of reproducing the business.

¹³ For a useful summary of the statutes regarding corporations in this country see Putnam’s Handy Law Book for the Layman, pp. 71–101.

“Stock-watering can become an instrument of unjust gains in two ways: first, through fraud inflicted upon some of the investors; second, through the imposition of exorbitant prices upon the consumers. . . . If stock is sold in excess of the earning power of the concern, those stockholders who fail to obtain the ordinary rate of interest on their money are unjustly treated in so far as they have been deceived. And those officers or members of the corporation who have profited by the deception of and injury to these stockholders, are the recipients of unjust gains.”¹⁴ The consumer also is often injured by stock-watering. “The presence of a large quantity of fictitious capital whose owners are calling for dividends, sometimes constitutes a special force impelling the imposition of higher prices and charges. . . . The U. S. Industrial Commission found that, as regards railroads, ‘in the long run excessive capitalization tends to keep rates high; conservative capitalization tends to make rates low.’ . . . When prices or charges are made high enough to provide returns on fictitious capital, the consumer is treated unjustly. . . . The consumers may justly be required to pay for the use and benefit of actual pro- ductive goods; but it is not just that they should be compelled to pay for the supposed use of a capital that has no concrete reality. The stockholders of the monopolistic corporation which imposes upon the consumers exorbitant prices or charges through the instrumentality of inflated capitalization, can become guilty of this injustice in two ways: by promoting the improper capitalization, and by getting dividends on stock for which they have not given a fair equivalent. As a rule the greater part of such guilt and responsibility rests upon certain special and powerful groups among the stockholders.”¹⁵

¹⁴ J. A. Ryan, Distributive Justice, p. 281.

¹⁵ Distributive Justice, pp. 282 sqq.

Nevertheless, Dr. Ryan, whom we have quoted, does not think that the State is obliged to protect, or even justified in protecting, the innocent victims of stock-watering: first, because it is impossible to distinguish the “innocent” holders from those who were fully acquainted with the questionable and speculative nature of the stock at the time it came into their possession; second, because the civil law has never formally recognized any such claim on the part of the innocent investors nor any such obligation on the part of itself; third, because the innocent investors are not the only persons whose rights are involved; the main injury falls upon the consumers.” But the State may and should intervene to secure fair charges for the consumers, basing them upon the capital actually invested in public utility corporations (for it is they that are mostly concerned) and used in the business of public service.¹⁶

¹⁶ Ibid., pp. 286 sqq.

In some States, e. g., Massachusetts, there are anti-stock-watering laws, which bind at least public service corporations, and there is a legal limit to the amount payable in dividends, usually eight per cent. Assuming that such laws are just, Fr. Slater says: “It may be that a larger percentage than is allowed by law to be paid in dividends would be the fruit of extortion and unjust dealing on the part of the corporation, and if this be so, the shareholders will have no right to the excess which is the fruit of injustice. Such excess is due to those who were wronged and from whom it was extorted, and it must be restored to them. Moreover, if the limit in the amount of the dividends allowed by law was accepted by the corporation and formed part of the conditions of incorporation, it must of course be adhered to like all other contracts lawfully entered into. If, however, the above expedients [such as paying the stockholders so-called stock dividends consisting of an outright bonus or new shares of stock; retirement of bonds in favor of stocks, etc.]¹⁷ are not productive of injustice or hardship to the public or to individuals, whether belonging to the corporation or not, but are merely illegal, the question for the moralist will be: What is the obligatory force of the laws which prohibit them? This will chiefly depend upon the intention of the legislator, and as modern legislators as a rule have no intention of making their rules for the individual conscience, we shall be safe in saying that they do not bind under pain of sin.”¹⁸

¹⁷ On such expedients see W. Z. Ripley, Trusts, Pools, and Corporations, N. Y. 1905, pp. 139 sqq.

¹⁸ T. Slater, S. J., Questions of Moral Theology, N. Y. 1915, pp. 170 sqq.

READINGS.—Sporer-Bierbaum, Theol. Mor., Vol. II, 2nd ed., pp. 863 sqq.—St. Alphonsus, Theol. Mor., l. III, n. 904–910 (ed. Gaudé, II, 305 sqq.).—V. Cathrein, S. J., Moralphilosophie, Vol. II, 5th ed., pp. 383 sqq.—Theo. Meyer, Instit. Juris Naturalis, Vol. II, pp. 234–239.—J. Schwane, Die theol. Lehre über die Verträge, pp. 167 sqq.—J. E. Pruner, Lehre vom Recht, Vol. I, pp. 455 sqq.—H. Noldin, S. J., Summa Theol. Mor., Vol. II, pp. 627.— J. A. Ryan, Distributive Justice, N. Y. 1916, pp. 279–290.—T. Slater, S. J., Questions of Moral Theology, N. Y. 1915, Chapter X: “The Moral Aspects of Commercial Stock-watering,” pp. 159–175.

I. Notions. Partnership (as a contract) can generally be defined as a contract by which two or more obligate themselves to pursue some end by common work. The end then can be economic or transcending the economic order.

But in Latin law they have been accustomed to reserve the name partnership for unions in which an economic end or pecuniary utility intervenes. Societies which have an immediate end of piety, religion, or even, as many wish, of pleasure, for example for exercising certain games, are not juridically partnerships but rather are called associations, and the agreements to which they give place are referred to innominate contracts. Juridically, therefore, quite commonly:

Partnership (as a contract) is a consensual, synallagmatic contract, by which two or more obligate themselves to contribute a thing or service into communion of use, or principally of profit.

Into communion of use, as if several farmers should agree concerning the common use of horses or of a machine.

Into communion of profit, when they propose to exercise together a lucrative business. Then each one contributes something or places something in common, whether industry, or money, or another thing, or credit, or the name itself, under hope of profit which will be divided among the partners.

II. Divisions. 1. According to varying comprehension, partnership is distinguished as universal or particular, according as it embraces some universality either of things or of services, or only certain businesses.

2. According to the kind of acts, it is distinguished as mercantile and civil.

Mercantile partnership is entered into principally for acts which are considered commercial; civil partnership for acts of another kind, and it obligates the partners without limit.

Mercantile partnerships have usually been governed by their proper commercial Code, or by peculiar laws; civil partnerships by the civil Code. In Italian and French law, civil partnerships are not juridical persons unless, where there is ability, they have put on the form of a mercantile partnership.

3. According to varying undertaking or obligation of patrimony, mercantile partnerships are constituted in such a way that either all partners obligate their patrimony without limit and in solidum; that partnership in Italian and French law is called in nome collettivo, en nom collectif; or some are obligated without limit, while others commit only a certain force of money; this in Italian and French law is called in accomandita, en commandite; the accomandatarii, commandité (one or more), are obligated without limit, the accomandanti, commanditaires, only within the limits of the contributed money; or no partner is obligated without limit: this is an anonymous company. For the rule of Italian and French law is that partners whose names are expressed in the social title are obligated without limit. An anonymous company is designated by a certain peculiar denomination, for example Fiat (cf. Italian Commercial Code, 76; French, 19).

In England, practically all companies do not obligate the partners without limit (limited liability); nevertheless, in partnerships, General partners are obligated without limit, Limited partners according to their contribution.

In the U.S.A. companies are assigned to four kinds: Corporations, moral persons which are created by public authority; unincorporated associations, which are not juridical persons; partnership, which is similar to our partnership acting under a collective name; and joint-stock company, which in a certain way is intermediate between corporations and partnerships.

4. According to its relation with third parties, it can be manifest or hidden.

Under another respect, partnership is distinguished as cooperative, which has these proper notes: that, with the agreement of partnership preserved, the number of partners and the capital are changed, for example, instead of stable capital a minimum capital is indicated, but rights cannot be ceded to outsiders (cf. Italian Commercial Code, art. 219 ss.).

Finally, he who has a part of the capital is called a shareholder (azionista); he who has merely given money as a loan is called a bondholder. Wherefore shares are computed among the goods of the partnership (actif, avoir social), and obligations among debts (passif).

From positive law and from the agreement one must gather what rights in administering common affairs belong to the individual partners, and who can obligate the partnership.

Although they use varying names, positive laws agree sufficiently among themselves. Concerning the notion of partnership as it is handed down in civil Codes, this should be observed. While most Codes, imitating the French (1832), posit as essential an intention of utility estimable by price (thus the Argentine, 1648; Spanish, 1665; Italian, 1697; Lusitanian, 1210; Mexican, 2219; Dutch, 1655), some more recent Codes, in a more general way, indicate some merely common end as the object of partnership. Thus the German Code, 705; Swiss, 530; Brazilian, 1363.

The rule of justice is equality, here to be defined, the intention of giving being excluded, from the geometric proportion between contributions and profits. Of itself, the danger is common. But, standing with natural law, a partner can free himself from that burden, provided that he compensates the inequality from a greater contribution or from a smaller part of the profit. How profit is equally divided is to be left to common estimation and the judgment of prudent men, care being taken that the agreement has been freely made. Nothing prevents a part of profit from falling to contributed labor, just as to contributed money. A leonine partnership, by which the whole profit is assigned to one of the partners, is unjust and null.

When nothing else is defined, equal parts are customarily made among the partners.

On equality in dividing profit and damage, Lugo treats rather fully, Iust. d. 30, n. 10 ss. Since these matters are in moral estimation, authors agree that a division which has been freely agreed upon can with difficulty be condemned; provided however, says d'Annibale, II, 175 (13), that, the intention of beneficence being excluded, each one, if the matter has gone well, can receive at least the price which he would have obtained by leasing the thing or service.

But in great undertakings a few constitute matters by their own judgment, while most are ignorant of the very conditions of the partnership. Therefore many occasions of becoming rich without cause, or beyond the merit of the cause, are offered to men of insufficiently fearful conscience.

Who will be able to say how many things are done unjustly? Let us at least inculcate this universal principle: that the right of profit must be tempered to the value of the contribution; and that, with the name therefore given, or by other open or disguised modes, partnerships whose lot is either known to be unstable or is simply unknown cannot honestly be recommended.

Notion. I. Insurance is an aleatory contract by which someone, for a certain price, obligates himself to answer to another for certain cases of chance or of prevailing force.

The printed formula which is usually employed in entering upon this agreement is called in Italian polizza, in French police d'assurances; the money to be paid after stated intervals for insurance is called premio, prime.

II. It is distinguished: 1. from the very varied event for which security is promised: for the case of fire, hail, plague, shipwreck, theft, misfortune, old age, sickness, death, or even life up to a certain age.

2. From the object insured, there is real insurance, whether of things or animals, and personal insurance, or insurance of persons.

3. Personal insurance is made, some individually, some collectively; some in the name of the person insofar as he is such, some insofar as he belongs to this or that social class: this is called social; thus there is more than one insurance of workmen.

Especially to be remembered is life insurance, which, from the Italian banker Tonti, of the seventeenth century, its inventor, is sometimes called a tontine, although by this word a certain form of this insurance is more properly designated. Life insurance properly looks to this, that the insurer, for certain annual payments, obligates himself, upon the occurrence of someone's death, to pay a definite sum either to the heirs (whose need is thus provided for) or to another designated person. Sometimes an agreement is made by the contrary reason, so that the insurer owes a sum if a definite person has reached an age, for example, of 18 years; and not rarely each manner is mixed: mixed insurance. Lesser insurances also are frequent, by which merely funeral expenses are promised.

Of the same kind are insurances against sicknesses. And rather than an agreement being made with outsiders, several societies exercise mutual insurance, so that the same persons who are insured are the insurers (Società di mutuo soccorso, Mutualità contre l'incendio, etc.).

Under the name of reinsurance comes, as it were, a second insurance, by which either the insurance societies themselves, by federation or by a greater society, guard themselves from the necessity of giving an excessive amount of money for great misfortunes, for example shipwrecks, or they favor their insured members with greater protection promised by federated societies. Thus, for example, a society of mutual assistance pays sick workmen for some days a daily wage or a quota part of it. But if sickness perseveres beyond a certain time, the federation of societies is accustomed to provide for the same persons. Reinsurance, therefore, is another insurance either of societies or of persons who are insured.

Norms. 1. The justice of the contract requires: a) an uncertain event, or at least one unknown to each party; b) a just price, so that the premium to be paid corresponds to the danger, with account taken of expenses. The price is assessed by laws, morals, and the judgment of prudent men.

Where there is no legal monopoly, it will be difficult to establish that the price was excessive. But by well-constituted mutual societies, not moderate expenses are spared.

2. One must abstain from unjust frauds. a) If the insurer is not solvent, he will not be able to retain the price except according to the proportion of the part which he made secure. - b) The insured ought to declare the whole danger, which afterwards he is forbidden to increase. Otherwise, according as fraud gave cause to the contract itself or merely to its conditions, the contract will be null by natural law, or will have to be reduced to equity, so that for the increased danger the price is increased and the obligation of compensation is diminished. The more severe sanction of positive law will bind at least after the sentence of the judge. - c) Nor can he demand compensation beyond the damage which he has suffered or outside the cases promised. Yet he can accept a greater amount than the insurer freely offers (sometimes in order to attract) or than arbitrators establish. Damages which arise from grave fault of the insured or of connected persons are customarily excluded; which grave fault, before the sentence of the judge, seems able to be taken as theological. And perhaps the agreement made is understood in such a way that the insurer ought to demonstrate the fault.

Can the same thing be fully insured twice? Of itself, certainly. But positive laws and often the stipulations of the contract themselves stand in the way. Similarly, unless the insurer himself has consented expressly or tacitly to the fiction, insurance of a quantity or value greater than that which is in truth present is valid at most only for the true quantity or estimation. If, after insurance has been made, the amount of insured things has been diminished, you will judge from the express or tacit agreements what right follows from this.

You should observe, in the partial destruction of a thing, that only the proportional part of the promised sum is paid, even if it were unequal to repairing the damage.

He who insures life ought to declare diseases insofar as this is required by the insurer. He who has unjustly concealed a hidden disease from which he was certainly going to die shortly has made the contract null and can receive nothing. He who has unjustly concealed other diseases will not be able to retain anything except what, the disease being known, he would have obtained for the premium paid. If however, contrary to expectation, he has lived longer, the defect of the contract is healed, "because the contract is implicitly renewed as often as the price is paid and accepted," Tanquerey, III, 918. On these cases, well and broadly, Gopfert, Moraltheologie, 482, n. 19.

On account of insurances which often protect the insurer himself, it is not so easily established what society has suffered damage from unjust fraud, for example from voluntary fire. The matter can be committed to those managing the society. There are also those, thus Lehmk. I, 1359, who think restitution can be made to the poor, because rather innumerable and uncertain shareholders sustain the damage, since the premium has been increased for them from foreseen frauds. Yet the Sacred Penitentiary solved the matter otherwise, ordering that restitution be made to the society.

The contract of insurance gives occasion to frauds which cannot be numbered. Indeed, insurances on the lives of infants have prepared crimes which had to be met by social laws. Let us inculcate more honorable morals, according to our powers, and rather recommend mutual insurances, as was done in Holland among the clergy themselves. For mutual insurance contains no industrial business.

Present-day laws of many regions not only have procured social insurances but have also commanded them, bringing it about that workmen especially, by money subtracted as if automatically from salaries, or even gratis from the treasury, are insured. Institutions of this kind, otherwise perhaps necessary, nevertheless labor under this not slight inconvenience: that they weaken in great part personal providence, which is accustomed to stimulate talent and industriousness at the same time and to prepare greater joys, and they multiply fiscal officials beyond measure.

313. Notion. Aleatory contracts, so called from alea, i.e., an uncertain event, are those by which an uncertain gain is sought or an uncertain loss is averted for a certain price given. It is necessary, however, that this uncertainty of gain or loss not only truly be present on the part of each contracting party, but also that it be nearly equal; otherwise injustice is committed.

The following can be held as a general principle: All aleatory contracts are lawful, provided:

1. that the chance be morally equal between each contracting party (unless, however, one contracting party, knowing the inequality, nevertheless wishes to contract);

2. that no frauds be committed;

3. that there be no scandal and no prohibition of positive law.

We shall give the application of this principle in the following aleatory contracts, which seem to be the principal ones, namely: 1. insurance; 2. wagers; 3. games; 4. lotteries; 5. stock-exchange speculations.

314. Notion. Insurance²⁰¹ is a contract by which someone assumes the risk of another's thing or person for a determinate premium, or, in other words, "it is a contract by which one person, for a certain price, obliges himself to compensate the damages which another can suffer from an involuntary event."²⁰² The object of this contract, therefore, is the risk assumed, which can occur in diverse things, e.g., the danger of fire, shipwreck, hail, death, etc. Today there exist very many kinds of insurance, which indeed are most useful if they are just. For through them the frequent ruin especially of men of moderate fortune is forestalled; and the things themselves are better guarded because of the supervision of the insurance company.

Requisites for just insurance. A contract of insurance is just:

1. If the insuring company truly pays those things which it ought to pay from the contract, and if the premium to be paid annually morally corresponds to the gravity of the risk in which the insured thing is placed;

2. if the insured sincerely declares the value of the thing and the dangers to which the thing is exposed, and does not bring the thing into danger through gravely culpable negligence;

3. if those things established by positive law or by particular stipulations justly entered into are faithfully observed.

In our days injustice can rarely arise from an excessively large insurance premium. For so many insurance companies exist that competition among them is great, and each one strives to reduce the premium as much as it can. Moreover, each person is ordinarily free to leave one company and enter another.

On the part of the insured, however, frauds and injustices are not rarely committed. For if the thing to be insured is not declared as it truly is, or if it is badly guarded with grave negligence or from direct intention, so that it perishes, or if changes are made in it which increase the danger of loss, etc., in these and similar cases injustice is committed, and a grave obligation of restitution is present if there is question of grave damage caused. (How restitution is to be made in these cases, however, see above, n. 231.)

Life insurance, which is also called a life annuity, is especially to be noted among the diverse kinds of insurance, both because of its frequency and because of the difficulties which it can cause in conscience. Life insurance can be effected in many and diverse ways. Difficulties can arise for the confessor only if the insured has employed frauds in the so-called "declarations," or if by illicit means he has violated the statutes of insurance, or if the physician has described too favorably the state of health of the person to be insured. Sometimes civil laws establish that, after a determinate time has elapsed, e.g., five years, the insurance company can no longer challenge the contract of insurance. These laws indeed seem just and useful, since they avoid very many lawsuits and render insurance companies more attentive. In practice, unless the fraud is most evident and an efficacious cause of grave damage, the confessor ought not readily to declare the contract of insurance null or oblige the insured to restitution. The reasons are: 1. because insurance companies are most cautious, so that they are very rarely led into grave error; 2. because civil laws favor the validity of the contract unless fraud truly substantial and manifest was present; 3. because it is often most difficult to determine from what disease death occurred, and whether the proximate cause of death had already existed long before. Therefore a positive doubt remains whether the fraud employed was truly an efficacious cause of grave damage. In doubt, however, an obligation of restitution is not to be imposed.

²⁰¹ There are some who are unwilling to number the contract of insurance among aleatory contracts, e.g., Koch, Moraltheol. § 149, because in aleatory contracts the danger of loss ought to arise solely from the contract itself. On the contrary, even before the contract of insurance there is already danger for him who seeks insurance, e.g., the danger of fire. This distinction seems to be of little moment and of no utility. Hence authors commonly number insurance among aleatory contracts, e.g., Lehmkuhl, Tanquerey, Noldin, Moran, etc.; because the chance of loss is not only on the part of the insurer, but also on the part of the insured, who perhaps pays the premium for many years without any emolument.

²⁰² Tanquerey, l.c. n. 915.

St. Alphonsus, III, 869-917; ed. G., II, p. 236; H. Ap., tr. X, n. 214; Lugo, disp. 31; Lehmkuhl, I, 1354; Aertnys, tr. VII, n. 511; Huppert, Lebensversicherungsvertrag; Tanquerey, II, p. 527; Genicot, I, n. 656; Pruner, n. 762; Schindler, II, p. 686.

Those contracts are called aleatory whose effects, both as regards gain and as regards loss, depend on an uncertain event. Contracts of this kind are (besides life census, concerning which n. 1146, 3) insurance, betting, lottery, and game.

1169. We certainly do not wish, even by a brief enumeration, to touch upon the various modes by which the so-called operations of the Stock Exchange are accustomed to be made. It will be enough if we note the following.

1. The more common operations are either ad terminum or ad praemium.

a) A purchase-sale is made ad terminum if wares (values) are bought to be paid after a certain time, and indeed at the price which then will prevail on the Stock Exchange. But it can happen that on the day of payment (liquidation) the seller neither ought nor intends to hand over to the buyer the wares themselves, but only, if the change of fortune is adverse to him, to pay the difference; the difference, we say, between the foreseen value of the wares and the actual real value. The same can happen to the buyer. Therefore the speculation of both consists in this, that, trusting in good fortune, they hope either to sell for more, or to buy at a small price. b) A purchase-sale is made ad praemium if an accessory pact of reservation is attached to the contract. The buyer namely reserves to himself the right, before the day stated for payment, of rescinding the contract: in which case he pays a premium to the seller.

From these things it seems that operations of the Stock Exchange can be reduced either to purchase-sale, or to betting about the increase or decrease of money.

2. If the intrinsic morality of those operations is considered, provided that the due conditions for the liceity of sale or betting are duly observed, theoretically speaking, they are not to be condemned.

But, practically, otherwise must be said, if the innumerable evils which the custom of being occupied with games of the Stock Exchange ordinarily carries with itself are considered: a) since it is not rarely a question of an enormous amount of money, one undergoes the danger of bringing the whole family into ruin; b) so that the value of various titles may grow or be diminished, false reports are published everywhere, for example concerning danger of war, concerning scarcity of a certain merchandise, etc.; and deceived by this lie, many are induced to most pernicious contracts; c) it happens that values are heaped together in a great number, so that by the help of a certain monopoly the just price is either depressed or increased beyond what is equitable, and thus the fortune of others perishes.

Wherefore it is certainly to be desired that by those in whose hands legislative power is placed, this ulcer of domestic and civil society be cut away.

In ITALY⁰² and GERMANY,⁰³ games of the Stock Exchange strictly so called (Differenzgeschaft) are to be assimilated to other games in which, namely, no action is given to the victor; in FRANCE⁰⁴ and SPAIN,⁰⁵ that action is not denied. As regards Austria, cf. the laws of 1 Apr. 1875 and 4 Jan. 1903.

Note. To clerics who have been initiated into sacred orders, negotiation properly so called (cf. n. 2227), whence also speculation of the Stock Exchange, is altogether forbidden. Yet it must be noted that operations ad terminum cannot always be equated with speculation, as experts have affirmed to us (against Tanquerey, III, Suppl. pro Gallia, XXVII, n. 5).

1013. • Definition. It is the agreement of two or several persons to contribute something for profit to be received from it, with profit and loss communicated pro rata. - Something, as money, merchandise, industry, labor. - To contribute, and not to transfer into the associate; for society is not converted with co-ownership (joint property). Wherefore between brothers and sisters society does not exist for this reason (i.e. by a precise pact), because they have an undivided patrimony and live from a common table. - With profit and loss, etc. Hence of himself he is not an associate for whom, as minister or broker, a certain quota of profit is constituted in compensation for labor, nor he who gives money by loan to a merchant, so that he may receive a fixed part from the commercial profit.

Conditions: 1. that there be equality, i.e. a right to profit pro rata of the thing contributed; 2. that, unless from a pact the loss and the principal are common, the peril of the principal regard the owner of the principal; 3. that each one undergo the burden of losses and expenses which come on account of the society; yet he who has been made liable to creditors by the fault of the associate is not held in conscience to pay before sentence. - But he who has a small portion, for example a sixteenth, although in most States he is held for the whole debt of the society, satisfies in conscience if he pays according to the pro rata part of his portion. - Whenever a society is entered by the sanction of a public charter (incorporated), the goods of the individual associates, unless the contrary is established in the Charter, are not liable to creditors, but only those things which are of the group (i.e. the capital stock);² 4. that each one apply the same diligence in the society as in private negotiation.³ It is clear that, by defect of the conditions under 1. and 3, the Leonine society is unjust (so called from the fable of the lion sharing in the hunting of the other beasts without danger to himself), by which one communicates profit without contributing anything, or one feels only profit, the other loss.

1014. You will resolve: - Associates sin and are held to restitution: 1° By using common things for their own private advantage, with the others unwilling. 2° By attending to private profit, while they ought to devote themselves to the common profit. 3° By wasting common things. 4° By not contributing into the common treasury whatever they have acquired by negotiation. 5° By neglecting to fulfill their parts. 6° By rashly entangling themselves in business which will scarcely have a happy outcome,¹ the associates being unaware or unwilling. 7° By withdrawing from the society before the time, with the associate unwilling and without a cause certainly excusing.

Note. - That faithful persons proposing cases concerning the contract of society may be rightly understood, I have judged it not useless to explain certain terms of law pertaining to the matter. - 1. Limited partnerships consist of one or more persons jointly (in solidum) and severally (pro rata) responsible, who are called general partners, and one or more, whose liability extends no farther than the fund furnished, and who are called special partners. 2. A dormant partner is one who participates in the profits, but does not appear to the world as a partner. When discovered; he is responsible for the engagements of the firm as if his name had appeared therein. 3. A nominal partner is one who has no actual interest in the trade or its profits, but lends his name and credit to a firm, or in any manner holds himself out as a partner therein. He incurs the liabilities of a partner, not as between himself and the firm, but as between himself and third persons dealing with the firm, if such holding out has come to the knowledge of such third persons. A nominal partner, however, is to be distinguished from a person receiving by way of annuity or otherwise a portion of the profits of any business, in consideration of the sale by him of the good-will of such business, i. e. of the sale of the right to use the name of the firm. Such seller is not deemed to be a partner, nor to be subjected to any liabilities incurred by the buyer. 4. Articles of association are the rules by which the partnership is to be governed. 5. Joint-stock company. This name usually designates a partnership in which the capital is distributed by shares among a large number of partners. Legally they possess none of the peculiar attributes or powers of corporations, except as conferred by statute.¹

1015. • The triple contract is that by which someone contributing money makes an agreement with another associate that, whatever may happen, the whole sum be restored to him with a certain profit, yet a profit less than that which he could probably hope for; or it is a contract of society, to which two other contracts are joined, namely insurance of the principal and insurance of the profit, or sale of the hope of receiving a greater profit for a lesser profit that is certain and insured. It is instituted in this way. I contract, for example, with Peter, by giving him a sum of money for trading. But, since the hope of gaining 15 for 100 shines before me, and on the other hand I fear lest I lose the principal, I enter a second contract with Peter, giving him 5 for 100, if he is willing to take upon himself the insurance of the principal. This second contract having been entered, there now remain to me only 10 for 100 to be gained. But I would prefer a profit still less, but certain, than a greater and uncertain one. Therefore I propose to my associate that he give me only 5 for 100, but certainly refund it, whatever may occur. Hence there is given a triple contract, namely of society, of insurance of the principal, and of insurance of the profit.

1016. • Query. Whether the triple contract is licit?

Resp. There is a twofold probable opinion among Theologians. St. Alphonsus explains both.¹ Since, with the Church permitting, it is licit to exact an increase on the occasion of a loan, this contract no longer pertains to practice here.

Insurance is a contract by which one takes upon himself the peril of some thing (fire of a house, shipwreck of a ship, etc.), and the other obliges himself to a price for peril of this kind undertaken. The instrument by which the contract is written is called "the policy": the insurer, "the underwriter."

1038. Questions. - Query 1° Whether the contract of insurance is licit?

Resp. Affirmatively. For equality is preserved when the due conditions concur, as Theologians commonly confess, and daily practice confirms.

Query 2° What are the conditions required for insurance?

Resp. They are the following: 1° that the price be proportioned to the peril, or established by an incorporated society according to the Charter of incorporation; 2° that the peril be true, and equally known to each party; 3° that the insured observe all conditions of the contract; 4° that the insurer have whence he can pay.¹

1039. • You will resolve. 1° He who accepts money by loan, with which he may buy merchandise to load a ship (to buy a cargo), in the contract which is called "bottomry" (n. 1036), is guilty of usury if he himself also furnishes insurance of the ship; for the peril of the money is removed, on account of which the great usury was promised. - But he who in this case gives money by loan, if he furnishes one security concerning the value of the ship and merchandise to be paid in the case in which the ship perishes, can receive both a premium for the security, and an increase by reason of the peril. "Although respondentia and bottomry are of themselves a species of insurance, yet the lender has an insurable interest in his securities, and therefore may protect himself from the sea-risk by insuring them. However, a policy on bottomry or respondentia cannot be subscribed by the borrower of the money; for if he were to become an insurer, this would be no longer a loan upon bottomry, but a cloak for usury."²

1040. • 2° They sin most gravely who burn their own houses so that they may receive from the insurance society money beyond their value, or, when a fire happens by chance or by the malice of another, exact money greater than their damage. But in what manner restitution is to be made in this case is in practice very often difficult to define, since very often it is not clear whether it is to be transmitted to the treasury of the insurance society, with the officials unjustly retaining it for themselves. But what some think, that it is impossible for restitution to arrive certainly to the true owners, and to each of them for the part due to himself, if it is to be made to so-called mutual insurance societies, or at least to those whose associates (stockholders) are many, on the ground that, after the damage brought on the society and before restitution, very many associates perhaps will have left it, and it is unknown who they are and by what portion they were associates, is trifling, and is valid only for the case of the dissolution of the society; for to associates who leave the society, others succeed with a right to the credits and an obligation to the debts of the society. But in the case in which it is clear that the restitution will not be transmitted to the treasury of the society, or distributed to the individual associates according to their pro rata part, it must be made to pious causes. Resolve the same, on account of parity of reason, concerning any restitution to be made to some society.

3° A shipmaster sins who by his negligence gives cause for the shipwreck of an insured ship, or deliberately directs it toward the shore where it is to perish, or conceals those things which, if they became known, would deprive the owner of the ship or merchandise of the right of insurance.

1041. • 4° The contract of life insurance is licit, by which, on account of a premium given once, or on account of money paid yearly, some society or some private person obliges himself to pay a certain sum of money when it happens that someone dies, provided a) account is had of age, health, and other circumstances, and b) the price to be paid by each contracting party is fair. For on each side there is a risk, and the lot of loss, as also of profit, is uncertain. But they sin who conceal those things which would have impeded insurance, for example a hidden grave infirmity, a more advanced age, etc., or those things which would have impeded payment of the insured price, for example suicide committed by the insured; likewise those who kill the insured so that they may obtain the price.

558. Partnership (maatschap, vennootschap) is a contract by which two or more agree concerning a thing to be placed in common for gain or common use, for example, of books, horses, grain, a machine for cultivating fields, etc. In present-day law, however, it is usually restricted to a merely economic or gainful end,¹ and therefore it is defined: an agreement by which two or more contribute something in common for receiving profit therefrom and dividing it among themselves in an equitable proportion (a. 1832). It is said:

¹ In German and Swiss law the definition is broader, and includes any common end.

1. An agreement, because if someone without agreement contributed something, say labor, he would not have the right of participating in the profit, but at most a stipend of labor would be owed to him;

2. By which two or more contribute something in common which is estimable by price, and which can be diverse and unequal: either money, or a movable or immovable good, or instruments, or work or industry, or even commercial credit, whether individuals contribute something from all of these, or some contribute one thing and others another, and indeed equally or unequally (a. 1833);

3. For receiving profit therefrom and dividing it among themselves in an equitable proportion. Community in profit is an essential element; for if it is established that a determined sum is to be paid to someone, this person is not a partner, but one lending or letting his work, as administrators with a stipend are. For the intended end is that the gain be received in common and be divided proportionately among the partners; this can be either industry, or money, or the use of some thing, or credit, or an intellectual or moral benefit, for example, the name itself. Nor is it required that some profit in fact be received, but it suffices that it can be received with probable hope; but if there are losses, they likewise must equally be distributed proportionately among the partners (cf. a. 1855).

Partnership is a consensual, non-solemn contract, not requiring writing except for proof (a. 1834),² with the exception, however, of certain commercial partnerships which are solemn, for example, anonymous companies.³

² In Belgian law writing is required for proof if the object exceeds the value of 1,500 francs.

³ Cf. Belgian law of 18 March 1873, a. 4, and 9 July 1935, a. 1.

This contract is licit and just, provided that 1. it has a licit object; 2. individuals contribute something estimable by price, which nevertheless can be diverse and unequal, as we have said; 3. profit and consequently loss are common; this is so essential that otherwise it would not be a contract of partnership but another contract; 4. profit and loss are divided proportionately to the part which each one contributed: for this is required by the equality of justice to be observed.

559. Diverse species of partnership. A. Partnership, by reason of extension, can be a) universal, whether of all present goods or of all gains afterward to be made (a. 1835 and following); or b) particular, for determined things or a determined undertaking of a work (a. 1841-1842).

B. By reason of end, partnerships are distinguished into a) civil partnerships, or partnerships of acquisition (burgerlijke maatschap of tot burgerlijke aanroerving), which indeed are constituted for making profit but in another way than by trading; for example, for buying and cultivating estates, building houses, instituting and administering colleges, etc. In our law these are not distinct juridical persons, so that the partnership itself could possess; but the partners possess the goods in common, and therefore of themselves they are not solidary. And b) commercial or mercantile partnerships, which are occupied in trading (C. Com., tit. 9, a. 2 and 3): these in our law are distinct juridical persons, so that the partnership itself, or moral person before the law, possesses the goods placed in common or acquired from them; hence in them solidarity has force of itself.

C. By reason of diverse constitution and obligation, commercial partnerships in present-day law are distinguished as five diverse kinds.⁴ For there can be constituted:

⁴ Cf. Belgian Commercial Code, book 1, title IX.

a) A partnership of persons:

1. Either so that all are held personally and in solidum for all debts of the partnership, and then there is had a partnership by collective name, which is designated under a social name (societe en nom collectif, sous raison sociale; onder gemeenschappelijken naam of onder firma), for example, Desclee De Brouwer and partners;⁵

⁵ In England partners are not accustomed to be obligated infinitely; nevertheless, in partnerships, general partners are obligated infinitely, limited partners according to their contribution.

2. Or so that some undertake the obligation in solidum, and others supply determined monies to the partnership and thus limit their obligations; and then it is a commandite partnership, which is also entered into under a social name (societe en commandite - ou en delegation - simple; stille gezelschap bij wijze van enkele geldschieting of handelsvereeniging);

b) Also a partnership of monies, so:

3. That the partners (at least 7) oblige themselves to contribute a determined sum, and are not held for debts beyond this sum, but nevertheless in solidum: this is an anonymous company, which is constituted by anonymous portions of capital, customarily called shares, and does not have a social name (societe anonyme, par actions; naamlooze vennootschap, op aandeelen), for example, Banque de France, Brouwerij de Palmboom;

4. Or also the partners, whether in solidum or separately, whether indefinitely or obligated to a certain sum, cannot cede to third parties their parts, which can vary: this is a cooperative society, whose capital is not anonymous but visible (societe cooperative; samenwerkende maatschappij), to which credit unions approach;

c) Or a mixed partnership, namely:

5. Partly of persons who oblige themselves in solidum, and partly of monies which are limited: this is a commandite partnership by shares (societe en commandite par actions; bij wijze van geldschieting met aandeelen).

To the contract of partnership as it has been defined, and to the partnerships described above, do not pertain other associations (C. Com., a. 3) for a useful end which is not profit, for example, professional unions, or associations without a lucrative end, or congregations which are constituted for games.

560. Obligations of partners toward the partnership and among themselves. Obligations generally must be defined from civil law and from the special statutes of each partnership; especially in a commercial matter one must attend 1. to the agreement of the parties and to the laws of commerce, 2. to commercial usages, constant and public, 3. in defect of these, to civil laws.⁶ But that obligations can be present, the end of the partnership must be licit not only in conscience but also in the civil forum (a. 1833), unless civil law is opposed to natural, divine, or ecclesiastical law. If the end is illicit, for example, to sell depraved newspapers, no obligation exists from the contract; but those who fulfill the contract must be paid. If the end is unjust, the partners are held to repair the damage inflicted, and often in solidum.

⁶ Cf. Belgian law of 18 May 1873, a. 1; which law was modified on 22 May 1886, 22 July 1913, and 30 Oct. 1919, and inserted into the Commercial Code.

But when a licit and just contract has been entered into, there arise:

A. Obligations of partners toward the partnership (a. 1845 and following):

1. Partners must honestly and integrally bring to the partnership all things which they have promised, whether it is money, or things, or industry or work; otherwise they commit injustice and must repair the damage inflicted from this. But if someone, having promised money, is in delay in paying, a legal increase is owed besides.

2. Partners cannot act in the name of the partnership itself and obligate it, except under the conditions determined by law, statute, or custom; nor can they use things proper to the partnership except in the predefined way (a. 1859). But if against the laws and statutes they involve themselves in the administration of the partnership, they act in their own name and obligate themselves, not the partnership.

3. Administrators must manage the affairs of the partnership as their own, with at least common diligence; hence they are held to compensate damage arising from culpable carelessness.

B. Obligations of partners among themselves:

1. Partners must establish the division of profits according to the laws of equity, that is, in geometric proportion to those things which each one contributed to the partnership, attention being paid, namely, both a) to monies and things contributed, b) to industry and works furnished, and c) to dangers to which one exposes oneself (a. 1853 and following).

Let it be noted a) that the proportion according to which the division is to be established generally is determined by law and particular statutes; this must be adhered to in conscience, unless it is manifestly unjust (a. 1854);

b) that profits are to be computed after expenses have been deducted; wherefore there must also be made among the partners a proportionate division of losses, even if these exceed profits. But in several partnerships, losses are limited to the part which has been contributed or promised in common, as in anonymous companies;

c) that a partnership is inequitable by which one of the partners is altogether excluded from profit, or also from loss. Nevertheless, with exclusion of loss, another contract of letting could be entered into, even tempered with a certain aleatory part in profit (a. 1855).

2. Partners cannot convert common money to their own uses: for this pertains to the partnership itself or to all together, but not to individuals before division (a. 1859 and 1860).

Therefore a) profit taken from the common fund must be restored without delay with legal increase (a. 1846);

b) besides, damages inflicted from this upon the partnership or upon other fellow partners must be compensated (a. 1850).

561. Modes by which injustice is committed in partnerships. Today the contract of partnership is most frequent. Moreover, multiform injustice can be committed in it:

A. In instituting a partnership: 1. by not bringing the thing promised; 2. by exaggerating the part had in the foundation and thus attributing to oneself excessive profit, for example, by reserving to oneself titles, as they say, of founder beyond merit; 3. by constituting a partnership with capital insufficient for prosperous management; 4. by issuing and selling titles above real value, and cooperating in such an issue, whether by giving one's name, or by furnishing counsel or work, or by deceptive announcements.

B. In managing a partnership: 1. by obligating the partnership contrary to the mode determined in the statutes; 2. by managing the affairs of the partnership without diligence or by undertaking management with lack of skill; 3. by dividing profits and losses in a proportion not equitable; 4. by converting the thing or money of the partnership to private use; 5. by increasing capital so that they reserve to themselves part of the increase, or when the benefits cannot be increased proportionately;⁷ 6. while they administer several partnerships, by unjustly favoring one partnership before others; 7. by a fictitious exposition of affairs conducted, diminishing the profit which is owed to partners, or unduly increasing it so that the partnership soon perishes.

⁷ This in America is usually called: watering the stock, mettre de l'eau dans le capital, as if to dilute the capital.

C. In dissolving a partnership: 1. by dissolving the partnership without sufficient reason, with damage to the partners; 2. by selling titles in a greater number for a cheaper price, so that a new partnership constituted by oneself can buy them and thence gain prosperously, with the ruin of the prior partnership and the detriment of those who contributed monies to it.

594. Insurance (assurance; verzekering) is the taking upon oneself of another's danger; whence the contract of insurance is that by which someone takes upon himself the danger of another's thing or person, obliging himself, for a determined price, to compensate it if by chance it should perish. Hence it can be defined: a real aleatory contract by which one, for a certain price paid, obliges himself to compensate damages which another can suffer on account of a fortuitous event or a superior force.¹

¹ Cf. Belgian law 11 June 1874 in the Commercial Code, l. 1, tit. X.

Hence: a) the object of this contract is the danger of damage, taken upon oneself and estimable by price; whence b) the matter about which it turns is whatever, whether a thing or a person, is subject to danger and at the same time is estimable by price. Thus ships and goods are customarily insured against the danger of the sea, buildings and movables against the danger of fire, crops against the danger of hail, fragile things against the danger of breakage, precious things against robbers, even persons against death, military service, infirmity, etc., either singly or collectively, either as they come under such a name, or insofar as they pertain to this or that social order. c) But the danger is estimated by a determined price: for although insurance can be made gratuitously, nevertheless someone is not accustomed to take upon himself the danger and compensation of a thing, and thus to furnish to another something estimable by price, except for an equivalent price. Hence the contract is of itself onerous, and is reduced to sale.

In antiquity almost unknown, in modern times this contract has widely prevailed among all nations. It is related that in the fourteenth century it was first introduced as regards goods to be carried over the sea; in the seventeenth century the first society of insurance against fires was founded at London; in the nineteenth century innumerable societies of this kind already appeared as regards things of every kind, whence it is a contract of great moment. It certainly is not lacking in social utility: for it pertains to the public and private good that damages arising from fortuitous event and the ruin of men of moderate fortune be foreseen and guarded against; otherwise a) industry and commerce would often be retarded; b) owners and workmen also would often be brought to the extreme of want and poverty; c) but now the providence and thrift of individuals is promoted for their greater security.

The contract is lawful, provided:

The contract which is called partnership is an agreement concerning some thing to be possessed in common for a common good, or for profit to be received according to a proportional part. But the contract which is called triple by theologians is the same contract of partnership, to which two other contracts are joined, namely the insurance of the principal and the insurance of profit, or the sale of the hope of receiving greater profit for a lesser profit that is certain and insured. And it is instituted thus: I contract, for example, with Peter by handing over to him a sum of money for conducting business. But since the hope of gaining 15 per 100 shines upon me, and on the other hand I fear lest I lose the principal, I enter upon a second contract with Peter, paying him 5 per 100 if he is willing to take upon himself the insurance of the principal. This second contract having been entered into, now only 10 per 100 remain for me to be gained. But I would prefer a profit still smaller but certain, rather than greater and uncertain. Therefore I propose to my partner that he hand over to me only 5 per 100, but certainly refund it, whatever may supervene. Hence a threefold contract is given, namely of partnership, of insurance of the principal, and of insurance of profit.

I say 1st. The contract of partnership concerning a licit and honorable thing, and entered into for the common good of the contracting parties, is licit, provided the required conditions have place. It is established from the civil laws of all nations, from the universal use of all peoples, and from natural law; for it is not less licit for several jointly than for individuals to make profit from their own things. But the required conditions are: 1st. that there be equality, that is, the division of profit according to the proportion of the thing contributed; 2nd. that the risk of the principal pertain to the owner, unless a pact has been entered otherwise; 3rd. that each undergo the burden of damages and expenses which arise in view of the partnership; 4th. that each employ the same diligence in the partnership as in private business. - Cf. St. Alphonsus, n. 905.

I say 2nd. The triple contract likewise is licit according to the common opinion of theologians, provided the money is spent in business. The reason is: 1st. because those three contracts, separately and with diverse persons, are of themselves licit and just; therefore also if they are made together and with the same person; 2nd. because there is nothing against equality, for compensation is given, and the risk is equivalently sustained by the one handing over the money; 3rd. because Benedict XIV declares, in the work On the Diocesan Synod, lib. 10, cap. 5, that the opinion can be defended which asserts that the triple contract was not condemned by Sixtus V, and in the Encyclical Vix pervenit he says that he does not wish to condemn contracts about which there is dispute among theologians. - Cf. St. Alphonsus, n. 908. - Kenrick, n. 136.

Those contracts are called aleatory which are subject to the vicissitudes of fortune, either wholly or only in part. Several are numbered, but the principal are insurance, wagering, lottery, and gaming. A few things will be said concerning each one.

Insurance is a contract by which one of the contracting parties takes upon himself the danger of some thing, and the other obliges himself to a certain determinate price for this kind of danger taken up. Thus, for example, life is insured against death, a house against fire, a ship against shipwreck, etc.

On life insurance. There is certainly need of great prudence in entering upon and interpreting this contract. For some things concern the validity, and some only the liceity, of the contract. Here we regard the obligations and rights of the insured. 1st. The person examined ought to be the person insured. 2nd. There are certain diseases, certain degrees of diseases, whose existence precludes every contract. 3rd. There is a determined age below and above which the company does not make a pact. If all or one of these conditions are not observed, the contract is null. But there are 4th. other things which leave the contract valid, yet, if known, would have caused the companies to bring forward another pact; for example, if the true age is not given, but some age is given within the years generally required. There are 5th. other things of lesser moment which leave the pact as it lies. Finally 6th. companies often set down other annulling clauses which nevertheless we can regard as obliging in the forum of conscience to restitution only when the sentence of a judge has then been given. In entering upon these contracts the only method to be used is the sincere method. Therefore if some damage has been unjustly inflicted on the company, this certainly must be repaired. If someone substitutes another to be examined for himself, he does not have a right to the money concerning which agreement was made. If someone has a very advanced disease, with which existing the company would not have entered, but did enter because deceived, the contract is null. If someone, say, makes a pact above the age, the money is not his or his heirs'. This money must be returned, with the sum deducted which is equivalent to the annual premiums paid, unless the sentence of a judge has declared otherwise. If someone has given a false but insurable age, let the heirs compose the matter so that they retain for themselves that quantity of the handed-over money which would have been given if the true age had been designated. Yet we judge that in these adjuncts of lesser moment one must act more mildly if the ministers of the company themselves were in the cause and the insured acted as if deceived. Besides, several other circumstances here and there are taken up by the company to be investigated, and this must be said to pertain to it: thus the disease of grandparents, and other things; we do not judge that these things, concealed in good faith or exercising no influence on the death of the insured, are to be held as destructive of the pact. Let this be said in general. There are certain companies which set down a healing clause, by force of which, if after a time determined from the pact entered the company has not discovered and decided the matter, the contract is unassailable, for example, The New York Life Insurance Co.: according to this company, incontestability means: if the insured person is the examined person (i.e., if no substitution was made), if that person has truly died and the contract or policy, as it is commonly called, is in force at the time of death according to its terms, this contract will not be contested. "This policy shall be incontestable after one year from its date of issue except for non-payment of premium." (Studies in Practical Life Insurance, p. 154.) We judge also, as we have already indicated, that the company ought to answer for errors of the contract which are owed to its agents and not to the private persons themselves, who are easily deceived by them in good faith; otherwise the whole difficulty will fall upon innocent heirs. As to restitution itself, when its obligation is truly present, it is of itself to be made to the injured company. Yet, as in other matters, so in this cause great difficulties can arise. But if it is established that the company insured itself against these events, perhaps it can more easily be permitted that restitution be made either to pious causes or to the poor. - Cf. Lehmkuhl, nn. 1036 et seq. - Bulot, n. 830. - Huppert, Der Lebensversicherungsvertrag. - Genicot, n. 658, VIII. - Hudnut, Studies in Practical Life Insurance.

I say. The contract of insurance is licit; for when due conditions concur, equality of justice certainly is preserved in it, as theologians commonly admit and daily practice confirms. - But the required conditions are the following: 1st. that the price be proportioned to the danger; 2nd. that the danger be true and equally known to both parties; 3rd. that the insurer have that from which he can pay; 4th. that the insured observe the particular conditions of the contract. - Cf. St. Alphonsus, n. 911. - Kenrick, nn. 137 and 139.

Wagering is a contract by which several persons contending about the truth or event of some thing pledge something to one another, or deposit it with a third party, so that it may belong to him who has spoken the truth.

I say. The contract of wagering is licit, with those things posited which must be posited; for it presents nothing dishonorable in itself and is approved by the common practice of all peoples. - But the conditions are: 1st. that the thing be understood in the same sense by each party; 2nd. that there be the intention of obliging oneself and paying what is pledged; 3rd. that the event be uncertain to both. Cf. Kenrick, n. 154.

Lottery is a contract by which several persons deposit something in common so that they may have the right of drawing by lot the thing exhibited in the midst. Some have the whole, some a part, and finally some nothing.

I say. The contract of lottery is licit provided the required conditions are present. The reason is that lottery can be regarded as the purchase of an uncertain thing, or as a contract by which with money is bought the right of drawing by lot and acquiring that which has fallen by lot; but it is licit to buy an uncertain thing, just as to make a pact for the danger of some thing. Therefore . . . - But the required conditions are the following: 1st. that there be no fraud in drawing out the tickets, nor in paying the prize which has fallen; 2nd. that the owner of the lottery not exceed in profit, nor morally gain more than if by another licit contract he spent his money or distributed his goods; although nevertheless, if the lottery has been instituted for a good work or public utility, it is commonly admitted that the profit can be greater.

Gaming is a contract by which those playing make a pact among themselves that the stake which they have put up should fall to the victor. Game is distinguished threefold: 1st. industrial, which is governed especially by the skill of those playing; 2nd. aleatory, which depends chiefly on chance; 3rd. mixed, which depends partly on skill and partly also on chance, as, at least for the most part, is the game of cards.

I say. None of the three aforesaid games is of itself illicit, if the due conditions are observed. The reason is that gaming is repugnant neither to good morals, since it is of itself an act of honorable recreation, nor to commutative justice, since anyone can transfer the dominion of his goods to whom and in what way he wishes. I said of itself, because often from adjuncts gaming becomes a thing full of dangers, and unless due moderation, which very often is most difficult, is employed in its use, in a short time it turns aside into detestable abuse. But the required conditions are the following: 1st. that the player have free administration of the things which he exposes; 2nd. that fraud and deceit be absent from the game; 3rd. that on both sides the danger of losing be morally equal; 4th. that the game be honorable in itself and not prohibited by law; 5th. that an enormous sum not be exposed, so that the family and creditors could suffer damage from it.

Question. Whether the victor in a prohibited game is bound to restore or the one conquered is bound to pay in the same game?

Resp. The victor certainly is not bound to restore, because the contract is not always and everywhere declared void by law, but only prohibited; and if somewhere it were declared void, yet because by natural law it is valid, as is supposed, positive law cannot, at least according to the probable opinion, invalidate it in the internal forum. For this same reason the one conquered in a prohibited game is not to be obligated to pay in the forum of conscience; for the opinion which holds that the contract becomes void by force of positive law is probable. - Cf. St. Alphonsus, nn. 887 et seq. - Lugo, disp. 22, n. 300; and disp. 31, n. 60. - Lacroix, lib. 3, part. 2, n. 1086.

The Exchange is a place constituted by public authority for the exchange of values, to which negotiators and their Agents come together for dispatching business. Among us it is called the Stock Exchange, or exchange of values. The negotiations which are made there turn about securities, stocks, obligations, commodities. The rules of the diverse Exchanges form a certain system according to which negotiation concerning stocks or commodities is made either for investing capital or for the sake of speculation. Negotiations are exercised either with cash or with credited money. In the New York Exchange fictitious sales do not exist. In the hall itself stocks or obligations are not actually exchanged, but there are only made promises of delivering or receiving a determinate number of securities at a determinate price. The actual delivery itself, if the whole transaction is regular, must be made before a quarter past two in the afternoon of the day following the sale. But negotiation can be made so that delivery is placed on the same day or after three days, or there are even options of sellers and buyers for a space which is within sixty days. All sales in that Exchange are perfected for actual delivery and for full payment at the time of delivery.

Investment, insofar as it is distinguished from speculation, simply signifies the purchase of securities for the full price paid: then the securities are kept for the annual income. One example of speculation, for there are also others: The buyer gives an order to an Agent to buy a determinate number of stocks at a determinate price, or at the prevailing price, and at the same time deposits with the Agent a sum of money which is equivalent to ten percent of the whole value of the stocks. The Agent executes the order in the Exchange itself. Afterward, if the purchased titles are active, the business is sent to a special office, and if it is not eliminated by it, the Agent who sells must deliver the stocks before a quarter past two in the afternoon of the following day; the buying Agent must give a certified check for full payment. Then he takes the stock and obtains credit from the Bank on account of it. The client of the buying Agent can now give an order that he sell the stock when the price has increased, and his profit is the difference between the price of sale and of purchase after subtracting the price of the commission given to the Agent and the interest of the credit obtained from the Agent. In these and similar operations no special difficulty seems present. Yet there are such negotiations which are very dangerous: for the price is artificially diminished or increased by false rumors being spread; or by monopoly it grows beyond value, and they are entered into by those who here and there cannot pay the differences: in these cases justice is also violated. - Cf. Ball.-Palm., v. 3, p. 796. - Bulot, n. 838. - Genicot, n. 665. - The Work of Wall Street, Sereno S. Pratt. - The A. B. C. of Wall Street, S. A. Nelson. - Gury, Cas. Conscien. de Emptione, n. 17.

I. QUESTION I. What is the triple contract? ANSWER. It is called triple because it consists of a threefold contract: first of partnership, second of assurance, third of sale. The contract of partnership is a convention of two or more concerning the contributing of something appraisable at a price into a common stock, and concerning the gain and loss in proportion. By the consent of all this contract is lawful. It demands four conditions. First, he who puts in the stake ought to undergo the danger. Second, the trade or art in which the stake is to be placed must be honourable. Third, let equity be preserved. Fourth, the stake or capital is to be delivered to an industrious man — money to a merchant, animals to husbandmen, and so forth. In this first contract Caius puts in the money, Maevius the trader his industry, and both are partakers of the gain and loss in proportion. The second contract is called of the assurance of the capital. Caius, who contributed the money, bargains with Maevius that he restore his capital immune from every danger; and for this assurance he remits a part of the gain. He gave 100. The gain to be perceived from the trade is, as is presumed, twelve. He remits four for the security of the capital to be furnished by Maevius. The third is of the sale of a greater uncertain gain for a lesser certain gain. The uncertain gain hoped for is thereabouts twelve in 100, as has been said. This Caius sells for a certain gain of four. And so Caius from his assured capital receives four or five, more or less, in the hundred, all trouble, labour, and danger being removed.

II. The simple and clear exposition alone of the question thrusts the usury into your eyes. If Caius should say in simple speech to Maevius: I give you, Maevius, a hundred on loan, that you may pay me four or five every year, he is a usurer. If he use the aforesaid crafty wrapping of words and circumlocution, he has declined the usury.

III. The invention of this triple contract Fr. Tamburini, Book IX, chapter 5, § 3, nos. 1 and 2, attributes to the acumen of the younger casuists, writing thus: “That by force of the contract of partnership alone the whole danger cannot be thrown back upon a partner is too clearly plain. … But INGENIOUS THEOLOGIANS, perhaps admonished by the merchants themselves, whose interest it is, have found a way of thus throwing back the whole danger upon one of the partners WITHOUT INJUSTICE.”

IV. Ingenious theologians, he says, admonished by the merchants themselves, have found a way of gaining from a loan without usury. But that way lay hidden from the Fathers and the theologians, who learned theology not from merchants but from the evangelical law and the sacred canons. But Fr. Joseph Gibalinus, a most keen champion of the triple contract, Book 6 On Usuries, chapter 8, article 2, page 383, no. 5, replies with this admonition: “I would only admonish for the present that very many opinions, when first they were brought into the schools against received and common opinions, were brought forward by their authors only very timidly, lest they should offend the vulgar of the Doctors. … But when opinions of this kind have been for some time weighed and examined, and the cloud being dispelled, by the light of truth at last poured upon them, they are received with great consent — opinions which when newly born scarcely dared to betray their parent. … The same thing happens in our case. For since partnership constitutes an equality among partners, these obligations of a certain gain, though a lesser one, and of the security of the principal to be furnished by the other partner, seemed rightly to wise men to fight with the nature of partnership. But when they observed that these burdens are not imposed upon the partner by force of the contract of partnership, but by new agreements,” and so forth.

V. Marvellous is the force of that new manner of opining. Formerly the countenance of the Doctors — namely of the holy Fathers, of Sts. Thomas, Raymond, Bonaventure, Antoninus, Bernardine, and their disciples — was offended at the novelty of the triple contract. At the outset the new opiners were afraid, and scarcely dared to bring forth the parents of such a contract. But afterwards, the cloud being dispelled under which the most holy Fathers were in darkness, the light of truth appeared to the younger authors. And their opinions are received with great consent, because they favour cupidity.

VI. This contract Sixtus V condemned in clear words by the peculiar constitution Detestabilis avaritia in the year 1586, from which I cull the following. “Many, weaving the specious and honourable name of partnership before their usurious contracts, under this colour and paint bargain in diverse manners with merchants, craftsmen, and traders upon this condition, that the principal itself, or the capital, both of moneys and of animals and of things, always remain safe and entire for him who contributes not industry or labour, but moneys, animals, or things of this kind into the partnership, so that every danger and loss be sustained by the other partner receiving, against the equality and justice of partnership; and lastly, that they bind by an agreement and obligation those partners with whom they contract, who are for the most part poor and needy and living by their own labour and industry, whatever chance and outcome of things may follow, and at the same time also prescribe and appoint beforehand a fixed and definite quantity of gain, so much for every hundred, to be paid every year, or every month, by the other partner, during the partnership. … Wherefore we … desiring to remove, so far as with God's favour we can, the contagion of this disease before it creep to the common ruin of the faithful, of the fullness of the apostolic power attributed to us, by this our constitution to be valid in perpetuity, condemn and reprobate all and singular contracts, conventions, and agreements hereafter to be entered upon, by which or in which it shall be provided for persons delivering moneys, animals, or any other things whatsoever under the name of partnership, that even if any loss or amission whatsoever should chance to follow by fortuitous accident, the principal itself, or the capital, always remain safe and entire, and be restored by the partner; or that a certain sum, or a definite quantity, be answered for either yearly or monthly during the partnership: and we determine that contracts, conventions, and agreements of this kind are henceforth to be reckoned usurious and unlawful; and that it is not lawful hereafter for those who deliver money, or animals, or other things into partnership, to bargain and agree among themselves concerning a certain gain, as aforesaid, to be received; nor, even if they have agreed upon either a certain or an uncertain gain, to oblige the partners who receive them, by any agreement or promise, to the principal or capital safe and entire, when it shall have perished by fortuitous accident or been lost. And lest for the future partnerships be entered upon under agreements and conditions of this kind, which savour of usurious depravity, we directly interdict and prohibit.”

VII. The most holy Pontiff BENEDICT XIV, Book VII On the Synod, chapter 1, declares that Sixtus V condemned the triple contract as usurious, in these words: “This moreover is that triple contract which the discord arisen between Dominic Soto and Martin Navarrus made celebrated. Navarrus thought, namely, that the three aforesaid contracts could be entered upon at once and with the same person with a safe conscience, and immune from usurious depravity, for the reasons which he adduces in his Manual, chapter 17, no. 254 and following. Soto on the contrary asserted that the conjunction of those three contracts degenerates into a usurious loan, and overturns the laws of partnership, which demand a community of gain and loss; and he maintained his own opinion with many arguments, which may be seen in his work On Justice, Book VI, question 6, article 2. … The cause was brought to Sixtus V, Supreme Pontiff, who, the question being diligently discussed, PRONOUNCED THE AGREEMENT OF A TWOFOLD SECURITY ATTACHED TO PARTNERSHIP USURIOUS, and FORBADE it thenceforth to be made, by his constitution 68 which begins Detestabilis, published in the year 1586, Vol. IV of the Bullarium, page 163.”

VIII. Fr. Leonard Lessius undertook beyond the rest to render the Sixtine constitution void, and, it being promulgated, to defend the triple contract. Very many of his comments being passed over, he writes these things, Book II, chapter 25, doubt 3, no. 178: Nor is it an objection that Sixtus V in the constitution published in the year 1586, on the twelfth of the Kalends of November, condemns and reprobates all contracts hereafter to be entered upon by which it shall be provided, and so forth. … For notwithstanding this constitution, in Italy especially this form of contracting has flourished and always flourished.

IX. Is not this a charming manner of arguing! The Gospel having been promulgated, thefts, perjuries, frauds, and adulteries range abroad. Therefore these crimes are not contrary to the Gospel! After the pontifical constitutions against the Baian, Jansenist, and Quesnellian propositions, and the Chinese and Malabar superstitions, the Baian, Jansenist, and Quesnellian errors and the Chinese and Malabar superstitions flourish. What of it? Have the pontifical constitutions therefore grown obsolete?

X. Fr. Lessius replies in the same place that the Sixtine constitution was never received in Italy. Much less, he says, was it received here in Belgium, where it was neither ever promulgated nor known. In a like manner Pius V in the year 1569 laid down many things concerning rent-charges, for example that they be constituted upon an immovable and fruit-bearing thing, and so forth. … Yet because here in Belgium that constitution is not received, no one makes a scruple for himself, even if he does not observe it.

XI. What handle this manner of opining affords to the Jansenists for resisting pontifical constitutions, let wiser men than I judge. At last Fr. Lessius concludes in the same place: These things I have pursued more fully than is my custom, because I see this contract still condemned by some on account of certain SHADOWS of usury, whose prohibition at this time I should not doubt would be with public loss. Shadows therefore of usury, and not usuries themselves, did the pontifical constitutions condemn! Can this contract not be disapproved without public loss? Did the Sixtine constitution therefore bring in a public loss? For it so clearly rejects and condemns the triple contract as usurious, that even Fr. Lessius himself, a theologian otherwise celebrated and most learned, does not dare to deny this condemnation; and therefore he betakes himself to the non-acceptance of Italy and of Belgium: as if pontifical constitutions which interpret the evangelical law depended upon the acceptance of the peoples. In Vol. VII, Book 3, dissertation 3, chapter 21, I have transcribed the acceptances of bishops and of synods, and more fully in the volume On the Usury of the Triple Contract. By arguments the usury of the triple contract is proved.

XII. The triple contract, coalescing out of three contracts diverse in species and mutually fighting with one another, is a pure and mere figment conceived in the mind alone: which I thus prove. The nature and essence of a contract of partnership is that the partners be partakers of the loss and of the gain. The second contract, of assurance, undertakes the danger of another's thing, and excludes all that community of loss and gain necessary to a partnership. The essence of the third contract, of the selling and buying of a greater uncertain hoped-for gain, transfers the dominion of such gain from the seller to the buyer. But this dominion in a partnership must necessarily be common. Therefore that triple contract, coalescing out of three things mutually fighting, is a pure and mere figment; a figment, namely, that it may be a mask for usury.

XIII. Further, a partnership which throws all the dangers back upon one of the partners betrays an injustice. It is true, you say, unless the dangers be compensated by an agreed price. What price is that? The diminution of a future uncertain gain. But that gain is uncertain. And this uncertain gain, though greater, cannot equal a principal certainly to be restored and a price certainly to be paid. I declare the monstrousness of the inequality by an example. Sempronius contributes a capital of a thousand crowns to be traded with by Caius a merchant, with whom he enters upon a partnership for ten years. Caius puts in his industry, which equals the principal. Together they bargain that Caius, the decade having elapsed, ought to render back the principal, and to pay each year four in the hundred as a certain price, deducting it from the uncertain gain of the trade. Caius, a year having elapsed, loses the principal either by shipwreck, or by theft, or by fire. What then? He must pay forty crowns every year, and the decade having elapsed he will have to restore the principal. Although the trade should succeed with a prosperous outcome, it cannot equal one of those cases which probably come about in trade.

XIV. Besides, that an agreement of security may be just, the price to be paid ought to be proportioned to the danger of the principal to be rendered. Further, the assurance which ingenious theologians have devised for the triple contract is so … … singular and outlandish that no law of trade approves it. The contract of assurance which the laws approve frees from this or that danger — say from the incursion of pirates, from shipwreck by tempest, or from fire. But the assurance attached to the triple contract guards against all possible dangers of land and sea, of the diminution of price, of difficult sale, of the corruption of wares, from the dangers of the faithlessness of servants or of buyers who become bankrupt. Where, I ask, is there a like spectre of assurance? Men most expert in mercantile affairs observe that a trade would have to yield forty in the hundred for that gain to equal the assurance of the triple contract. For one part of that gain is to be deducted for assuring the industry and labours of the merchant partner; another part of the gain is to be deducted for assuring the principal of the money. Lastly another portion is to be deducted for assuring the greater uncertain gain bought for a lesser uncertain one. These three heads alone absorb the whole gain of any trade whatsoever, even the most fruitful. And yet two portions would still have to remain over: one for paying the certain and lesser gain bought, four in the hundred; and at last another for assuring the partner trader. These things are obvious and fall under sense, says Cardinal de Luca, whose authority in this matter is certainly to be reckoned not small. He writes thus, On Usury, discourse 1, doubt 16: But this seems impracticable in the drawing back of gain from money counted down. Since, that the effect may follow that the creditor or lender, assured both as to the principal and as to the gain, may obtain five per hundred, it would be necessary to give a gain of more than forty per hundred, since from the gain there must first be deducted a portion in some manner tenant-like, owed to the borrower himself as to a partner putting in his labours, by a congruous and proportioned remuneration. And then indeed, of that which would be left over for the creditor's advantage, as a species of the portion of right, a great and notable quantity is to be deducted, which would probably be the congruous price of the said twofold assurance, to be made even by any third trader — which seems impracticable. This same thing two celebrated Sicilian theologians observe, Minutolo and Genatus.

XV. Finally, that contract of partnership hedged about with those two others falls back into a mere loan: since indeed money delivered into partnership, two other contracts acceding, passes into the dominion of the merchant, because it either stands or perishes to him. But any thing perishes to its lord. The examples of a thing lent for use, of depositaries, of hirers, which our adversaries oppose, are evidently false. For if it be granted that money can be let out just as a house, a field, and so forth, there is no usury in the world. If you desire to see the other sophisms overthrown, read Vol. VII, dissertation 3, chapter 16, § 8, and the other volume On the Usury of the Triple Contract.

XVI. QUESTION II. Is the twofold contract of partnership lawful, in which either the capital or the gain is assured? ANSWER. Many affirm it, even of those who assail the triple contract. Since, they say, although a partner assure the principal, he cannot nevertheless dispose of it at his pleasure, but ought to lay it out in trade. If he assure the gain, the principal not being assured, the matter is more evident.

XVII. This opinion is to me false as regards the first part, which regards the assurance of the principal, because a principal assured from every danger cannot be a gainful capital, neither by reason of industry nor by reason of danger. But these are the two titles alone by which money is rendered gainful in merchandise. There is added that in fact a price is never paid which equals all the dangers, both extrinsic and intrinsic. There is a danger, they say, of gaining nothing. But this danger is not that which renders money fruitful. That danger is truly redeemed by a price, and not feignedly, as in the triple contract. And I reply that this assurance in the twofold contract is no less feigned than in the triple contract. For who can constitute a just price for an assurance from every danger, to be paid? A price for assurance from this or that danger extrinsically occurring the usage of the marketplaces has introduced, and the laws approve it. But no law, no custom of the forum or of trade, has approved or prescribed a fixing of the price at which the principal may be assured from every danger, both of right and of fact: and it has been shown above from Cardinal de Luca and others that no trade, however abundant, at least in Europe, brings forth so great a gain that the principal could be assured from every possible danger of right and of fact, as it is in the triple and twofold contract.

XVIII. Concerning the second part, namely concerning the assurance of a certain gain, it can be disputed. The principal exposed to danger brings forth gain. This gain is uncertain. Why then cannot a contract be entered upon between the capitalist partner and the other concerning the quantity of this gain? That gain is now greater, now less: for the most part it is eight or ten in the hundred. This the capitalist, or he who puts in the principal, buys for four or five. Here, absolutely speaking, no injustice seems present: for the principal exposed to danger truly brings forth a gain now greater, now less. It is therefore a true contract of hazard, and indeed an equal one for both parties. But because Sixtus V absolutely forbids these agreements, therefore I abstain from approving it.

XIX. But, you will say, if that contract betrays no injustice, why ought it not to be entered upon? Because the Supreme Pontiff disapproves it. Because doctrine revealed by Christ Jesus, whether in the matter of faith or of morals, ought not to lie under the petty opinions of private men; but one must stand, and indeed with a simple heart, by the decisions of the Roman Pontiffs, who are judges constituted by God. Would not, if men were faithful and sincere, all deliver on loan to one another for gaining? Those who abounded in moneys but lacked industry and the art of trading would deliver the same to those who are destitute of money but are strong in industry and talent for making the same fruitful. And in truth this is the order of divine Providence. But because men are guileful, cunning, unjust, and fraudulent, therefore ingenious theologians cannot by exquisite interpretations elude, or bend, or soften the rigour of the evangelical law and the pontifical oracles, by filing away that these have not been received.

XX. QUESTION III. What is to be said of a partnership of animals? ANSWER. In this contract the animals bear the part of the stake or capital, and he who delivers them is called the capitalist, and he who receives the same is called the partner. The latter ought to pasture and guard them; and the fruits are to be divided. Sixtus V prescribes that the same conditions are to be observed in this contract as in the contract of a partnership of money: namely, that the head of the animals perish to the lord, provided they perish without the fraud and negligence of the farmer partner. Wherefore those partnerships which are wont to be made in some places, and are called a capo salvo — namely, the capital being safe — are all unjust, as Sixtus V defined, and many provincial councils have declared, especially the First of Milan under St. Charles, in which it is said: In a partnership let no agreement be made that the principal be safe, but let the fruits be divided in common.

XXI. In this contract, as in the rest, equality is always to be preserved. Commonly the poorer partner succumbs to the greater burden, when the matter ought to stand the contrary way. The inconveniences, labours, pasturage, and industry of the partner are to be compared with the capital contributed by the rich man. If these two be equal, then both the fruits and the principal itself are to be divided in proportion: for the aforesaid things which the partner puts in obtain the place of the principal. But if the capitalist deliver together with the animals the pasturage also, then the division can be made at the judgment of prudent men: but then it is rather a letting than a partnership. A precise rule cannot be prescribed, and therefore equity is to be preserved according to the diversity of regions.

XXII. QUESTION IV. Are usurers lords of the gain which they acquire by usuries? ANSWER. Not a few affirm it. But St. Thomas denies it, II-II, q. 78, art. 3, to whom theologians more commonly subscribe. The reason is evident. A usurious contract is null by law both natural and divine. Therefore it is unequal to transferring dominion. Usurious goods, if they be fruit-bearing, increase to the borrowers, not to the usurer; but they perish to the usurer, because he is a possessor of bad faith. Hence it follows that a usurer cannot transfer to others the dominion of goods which he has obtained by interest. And those who receive the aforesaid goods from a usurer ought to restore the same, no otherwise than if they had bought them from robbers. For all theologians oblige usurers to restitution, whether they possess dominion or not. For those who grant them dominion teach at the same time that such dominion is burdened with the charge of restitution.

XXIII. If the goods which a usurer has acquired be barren, as money, corn, and the like, and which are consumed by use, and he trade with them and acquire other goods, he is not bound to restore these, because they are the fruits of his industry. If the goods are fruit-bearing, the fruits also are to be restored. Those who counsel usurious contracts are held to restitution. Those who deposit money with usurers to this end, that it may be lent at interest, sin, no otherwise than those who hold out to a thief the instruments for stealing. Therefore these are held to restitution. Rectors, judges, and advocates who by some statute are the cause that usuries are paid sin against justice, and are liable to restitution, the usurers not restoring. Ministers who in their masters' name perceive usuries sin, and are held, the masters failing, to restitution. Authors except ministers who exercise offices less proximate to the usuries, such as writing, counting the moneys, guarding them, and so forth. If you regard practice, these are commonly unequal to restitution. One thing is certain to me: that ministers of this kind are to be compelled to withdraw from the ministry. The other ministers who serve the usurious art more nearly, who enter upon usurious contracts, who compel borrowers to pay, sin and are subject to restitution, as even the younger authors themselves teach.

XXIV. QUESTION V. Is it lawful to seek a loan from a usurer with usuries? ANSWER. St. Thomas denies it, II-II, q. 78, art. 4, because it is not lawful to induce another to sin. Only that asking is lawful, as the Angelic there adds, by which you succour your own or another's necessity. Not therefore that you may enlarge your trade, not that you may catch greater gains, but only on account of a true and grave necessity which cannot be repaired by another way, is it lawful to seek a loan: which action is by its own nature lawful, and the usurer out of his own depravity alone compels you to pay usury. For to give a loan is an office of charity, and it is lawful to ask it. But that the lender is unwilling to impart it without usury is his own wickedness. Wherefore you cannot offer usuries, but only ask a loan, and, being compelled, you can give, that you may provide for your necessity.

ALTHOUGH there are various kinds of Societies — for Societies are entered into in taking up Tax-farms, in executing offices, and in dispensing other goods — yet that is called Society simply which is occupied with lucrative, and profitable return from letting, selling, and the like: Wherefore, although such a contract concerns all goods, nevertheless Society is not understood to be entered into simply of them; but of the foregoing lucrative one, as Bonacina rightly admonishes disp. 3. de contract. quaest. 6. unless the wills of the contracting parties have otherwise declared themselves, leg. quaestus, ff. pro socio, to be cited below.

THE RATIO of this contract consists in this, that some, having made a pact among themselves, and joined their goods fit for gaining — money, industry, or labor — wish by some trading, or even by a craft, or agriculture to make some common gain among themselves to be divided, prepared likewise to divide among themselves a common loss, if perchance they incur one.

THAT this contract is licit is plain ex Cod. et ff. pro socio, et cap. per vestras extra de donat. inter virum, et uxorem, and from the Doctors of both laws in the same places, and from D. Thom. quaest. 78. art. 2. ad 5. and commonly from other Theologians with Valentia disput. 5. quaest. 24. puncto 1.

IT IS PROVED by D. Bonavent. in the Bibliis pauperum, cap. 119. because holy Jacob had a contract of Society with Laban, and was enriched, Genes. 30.

IT IS PROVED secondly by D. Bonavent. ad cap. 4. Ecclesiastae, where he weighs those words: Melius est duos esse simul: habent enim emolumentum Societatis mutuae; The holy Doctor says moreover that this Society is conformable to the virtue of CHARITY, since the avaricious man hates Society in its gains, that he alone may profit.

HENCE I argue by reason: that which is licit to do alone, much more is it licit to communicate a good with one's neighbor; but it is licit for one alone to exercise contracts: Therefore.

¶ BUT that this contract be licit, three conditions are to be observed.

THE FIRST is required on the part of the trading, that it be just.

THE SECOND on the part of the gain to be divided, that it be justly divided among the Partners: as, if each contribute an equal amount, let it be divided equally; if unequal, let it be divided according to that inequality; and if that be doubtful, let it be defined by the judgment of a prudent man.

THE THIRD is, that the loss also be divided by the same reason. So commonly, with Valentia quaest. 24. puncto 1. Toletum lib. 5. cap. 41. Tannerum disput. 4. quaest. 7. dubio 8.

FIRST, it is certain that in a partnership all contracts that are just can come together.

SECOND, it is held to be certain, says Valentia, that by the law of nature one may enter with another partner into that other contract of assurance of a certain lesser gain for a share of the greater gain hoped for, provided, however, that he takes the risk upon himself and retains it. The same is the judgment of Conradus q. 96., although he concludes that it involves risk.

FOR MY PART, I do not approve of this contract, even if the usurious intention of lending be absent, and the dominion of the thing indeed retained, and the risk too (as the Saintly Doctor requires as necessary, cap. 2. speculi animae;) for thus, according to the probability of the hoped-for gain, to impose upon the other partner the burden of assuring the other part of the gain for a share of that gain (even with his consent) is a hardship, not sufficiently well divided by equity among the shares; Nevertheless I do not entirely condemn this manner of contracting.

THE CONTROVERSY, however, is: whether besides the contract of partnership and the contract of assurance of the lesser gain that is hoped for, Peter, for example, who puts one hundred into the partnership, can also at the same time conclude with Paul his partner a contract of assurance of the capital, for a share of the hoped-for gain as well; We speak, however, according to the law of nature.

IT WAS the opinion of Accursius leg. si non fuerint, ff. pro socio, of Panormitanus in cap. Per vestras de donat. inter virum, et uxorem, whom Sotus follows lib. 6. de Iustitia, quaest. 6. art. 2., denying that this can be done.

THE OPPOSED opinion is that of Ioannes Maioris in 4. dist. 15. quaest. 49., who testifies that this opinion was defended by the most learned Ioannes Echius at Bologna; Gabriel ea dist. quaest. 11. dist. 10. Conradus quaest. 97. Sylvester ver. Societas, quaest. 2. Couarruvias lib. 3. var. cap. 2. Nauarrus in manuali, cap. 17. num. 254. Angles in 4. quaest. de Societate, Caietanus opusc. 17. responsionum, resp. 11. Valentia disp. 5. quaest. 24. puncto 3. These, besides the two alleged above, say that this third contract also can be joined in a partnership. Tanner subscribes with others, disp. 4. quaest. 7. dub. 8. He concludes that this opinion is approved everywhere by most learned men, at number 211. So also Bassaeus.

IT IS PROVED from cap. Per vestras, extra, de donat. inter virum, et uxorem. If with a husband verging on poverty, and not having sufficient security for preserving his wife's dowry, the dowry is exposed to peril, such a dowry is commanded to be given to some merchant for trading, that it may of course be safe with him, and from it, intact, the burdens of matrimony may be sustained. This cannot be done except by those three contracts made with the merchant, as Nauarrus noted above, and Ioannes Andreas on the said chapter Per vestras. Likewise by leg. si non fuerent. ff. pro socio, and by the opinion of Cassius it is said that a partnership can be so entered into that neither party feels any part of the loss; but the gain is common. See Valentia, who says this opinion was approved at Rome by many most learned Theologians.

Therefore this contract can be so made that Peter gives the merchant a large sum of money with the pact that the merchant receive at the end of the year, for example, five or six per cent, assuring the Capital for a share of the hoped-for gain. Nor indeed is this a loan, or usurious gain from a loan, as Caspensis notes sect. 10. and Valentia in the place cited.

You will object the Bull of Sixtus V, which begins: Detestabilis avaritia, and prohibits a partnership made with an assurance of the capital.

Caspensis answers it is to be understood of an assurance made without the burden being compensated at a just price, or of a partnership in which no other just contract is mixed in, as Reginaldus notes l. 25. num. 490. Bassaeus v. Societas, num. 4.

You will ask, what is given to the merchant for that assurance of the capital,

Filliucius answers, num. 55. tract. 38. cap. 3. that a part of the uncertain gain is given, which in the judgment of a prudent man seems just to all who hope for it, or that something is remitted from the certain gain which he would have; otherwise he would not thereby enter into a contract of assurance, but only of sale of an uncertain gain for a certain one, which would certainly be greater than if, besides, the contract of assurance were also concluded,

Doctors who undertake this contract enumerate many titles, both just and unjust,

THE FIRST is just by reason of lucrum cessans.

THE SECOND is, if a partnership is entered into with the pact of assurance of the capital, and of sale, for example, of the gain of five per cent for the greater gain hoped for, which is left to the partner in compensation for burdens of this kind, whether those pacts are made with an explicit intention, or implicit, as I said in question 2.

THE THIRD is, if a real census is bought with the pact of redemption and assurance on both sides.

THE FOURTH, if, without an express determination of a contract of partnership, or purchase of a census, or of interest of lucrum cessans, or damnum emergens, with a certain general intention, having made a choice of the person with whom he contracts, his partner also consenting, he wishes to gain those five per cent in some manner at last, which, the circumstances of the persons and of the fact having been considered, by the judgment of experts could justly be done.

LEDESMA adds a fifth just title, p. 2. tract. 8. cap. 35., because he who gives money for that time deprives himself of his liberty, and takes upon himself the burden of not reclaiming that money for that time, which indeed is estimable at a price, and consequently some gain can be taken from it for that without the vice of usury; which opinion Diana seems to approve, p. 1. tract. 8. resol. 48., against Molina T. 1. tract. 2. disput. 308. Laymann l. 3. sect. 5. tract. 4. cap. 16. Turrianus 2. 2. q. 2. disp. 61. dub 3. Salas de Usura, disp. 9. Lessius lib. 26. cap. 20. dub. 14.

Yet to these last the Saintly Bonaventure seems to nod assent, in speculo animae, cap. 2. at the end; For, not to reclaim a loan for so long a time does not detract from the nature of a loan, and is a condition common to all loans, and consequently, since from a loan no gain can be given without usury, it follows, etc. Hence in §. tertius fructus principalis; he condemns such a loan. Bassaeus approves, v. Societas, num. 4., and others cited by him. Hence such gain was condemned by Alexander VII, as we saw, while treating of the Acts of Man, disp. 17. quaest. 10. sect. 40.

But suppose we were to admit such a deprivation as estimable at a price; nevertheless to demand for it annually seven, or even nine per cent (as very many do), exceeds measure. The reason of this is, because if real exchangers are granted alone that they may demand so much, nine per cent, and this by reason of lucrum cessans, and those who enter with the same men a contract of partnership, seven, provided the conditions assigned above are present, and to both is common the lack of money, the deprivation of liberty, and the obligation of not reclaiming the principal within a year; how can these men demand a like gain, not by reason of lucrum cessans, for there is none, nor by reason of the partner's risk, which is also absent, because they not only give money, but moreover receive a mortgage, or pledge equivalent, for security.

THERE are therefore many unjust titles assigned by Valentia disp. 5. quaest. 15. p. 1. et 2. and Caspensis sect. 11.

THE FIRST is, if anyone gives a sum of one hundred, and from him to whom he gives it, for that reason receives five beyond the hundred; because that man uses the money for his own advantage. For this is usury, nor is it sufficiently covered by the cloak of piety by saying that it is given to the wretched to relieve necessity, as D. Bonaventure says, loc. cit.; but who is there in our age affected with so great a piety?

THE SECOND unjust title is, if, although there be not present the mind of receiving that gain on account of the use of the money lent, and without any other probable title, he nevertheless takes that gain, as Caspensis notes with D. Bonaventure, loc. cit., who gravely admonishes all these men to remember that God is the searcher of the innermost heart.

THE THIRD is, when under the pretext of applying the rules of justice, which are the touchstone (lapis Lydius), falsities appear; and in this what is intended must be examined.

I DISPOSE of the matter here most briefly, since I have seen nothing more in the Seraphic Doctor on this subject,

Caius, an English nobleman and a Catholic, is asked by Julius, a promoter of commercial and industrial companies, to give his name as a director to a certain new company being promoted by him. Since Caius knows absolutely nothing concerning the affairs of that company, and does not intend to learn, he discloses his ignorance to Julius, who nevertheless denies that ignorance in any way prevents him from becoming a director, since very many persons, led by the noble name of a director, are accustomed to contribute money to companies; indeed, he offers Caius five thousand pounds if he consents to give his name. Caius asks for time to deliberate, and meanwhile consults a confessor concerning the lawfulness of the business. Hence it is asked:

1. What is a contract of partnership?

2. What are the obligations of directors of companies?

3. What is to be said of the case?

1. What is the contract of Partnership?

Partnership is the relation which exists between persons who carry on business in common with a view to profit. By English law any persons may enter into such a partnership, provided they do not exceed twenty in number, or ten in the case of a banking business. The partners retain their individuality, and each partner is an agent for the rest in the matters relating to the partnership. If seven or more people wish to form a company, they subscribe their names to a Memorandum of Association and procure registration by the Registrar of Joint Stock Companies. Thereupon the members become a body corporate, a legal personality, which has rights and obligations distinct from those of the members. Modern companies are usually formed with limited liability, so that the individual members are liable for the company's debts only to the extent of their shares in its capital.

2. What are the obligations of company directors?

Directors are those appointed to manage the affairs of a company. They are the company's agents for the transaction of its business, and they should have the knowledge, capacity, integrity, and diligence required for such a position. Those who subscribe to the capital of the company are frequently led to do so by seeing the names of capable and honest men among the directors. Hence the liability of directors both in the forum of conscience and of law. English law makes directors in general liable for false statements in the company's prospectus, for violation of duty, and for gross negligence of duty.

3. The case. From what has been said it is obvious that Caius can not allow himself to be made a director of the future company without knowing more about it. The promoter wishes to use him as a decoy, and if he allows him to do so, he will be responsible for the loss inflicted on shareholders if the company turn out to be unsound. Caius must therefore either satisfy himself that the proposed company is a sound and honest enterprise, or he must refuse to allow himself to be made a director.

Titius insured his life with a certain company and assigned the policy to his wife so that, in the event of his death, she might have the means to support herself and the children. When questioned in the name of the company concerning his age, however, he said that he was 36 years old, while in fact he was 38. But it happened after five years that Titius, oppressed by misfortunes and indulging in drunkenness on account of melancholy, fell into a well and died. Since the insurance company knew nothing of the lie concerning his age or of the drunkenness that was the cause of death, it paid five hundred pounds to the wife without delay. The wife, however, doubted whether she could retain the money. Hence it is asked:

1. How many species of the contract of insurance are there?

2. What is the force of the conditions that are customarily attached to insurance?

3. What is to be said of the case?

1. How many species of the contract of insurance are there?

There are three: Marine, Fire, and Life insurance.¹

1 Manual of Moral Theology, vol. i, p. 554.

2. What is the force of the conditions which are usually annexed to insurance policies?

The effect of such conditions depends upon the intention of the parties to the contract, and in the case of insurance companies in general it is difficult to say what the intention is. The chief difficulty is to distinguish when the contract is absolutely null and void, so that no rights are conferred by it, and when it is only voidable at the option of the insurer. In general it may be said that if there were substantial mistake in the contract, it is null and void; if there were only accidental mistake, it is only voidable. Mistake will be substantial when the insurer did not intend to contract on the basis which in fact exists; it will be accidental when a full knowledge of the facts would not have prevented him from entering into the contract, but would only have varied its terms.¹

1 Manual of Moral Theology, vol. i, p. 555.

3. The case. Titius insured his life and assigned the policy to his wife. He gave his age as 36, whereas it was 38. The policy would not be void on this ground. The only effect of the truth being told would be to raise the amount of the premium. After five years Titius took to drink on account of misfortunes, and while in drink killed himself by falling into a well. The insurance company knew nothing about the lie nor about the cause of Titius’ falling into the well, and paid the insurance money. In insurance policies there is usually a suicide clause, but even suicide does not usually void the policy, especially when it has been assigned to another. A recent authority says: “Suicide of the assured was originally a reason for the avoidance of the policy. But even then, if the assured had bona fide assigned his policy and notice of the assignment had been given to the company before the suicide had taken place, the assignee would be entitled to the assurance money. And this is the law to-day, and can be relied upon in the event of the death of an assured by his own hand under such circumstances that his suicide is exempted from the risks assured against, provided of course that it is a bona fide assignee who makes the claim. But the modern practice of life assurance is either to make no distinction at all in the case of suicide, or to make only some limited or temporary distinctions.”¹

1 Knight, Business Encyclopaedia, under the entry “Life Assurance.”

The wife of Titius may therefore keep the money she has received from the insurance company. Titius should indeed have paid higher premiums than he did, in consideration of his being two years older than he said he was. The company will have the right to deduct the difference from the sum paid if it comes to know the real age of Titius.

Titius, a dealer in furniture falsely represented as antique, insures his goods, which perhaps are worth one thousand pounds, upon the customary terms with an insurance company for ten thousand pounds. This company, however, reinsures half of the goods with another company and a fourth part with a third company. A little afterward the insured goods perish by fire, and Titius, congratulating himself, receives ten thousand pounds from the first company. Afterward, however, he doubted whether he had received it justly, for, although he had paid the premium, as it is called, proportioned to the sum received, nevertheless the latter exceeds the value of the goods. Hence he explained the doubt to a confessor in order that he might know his obligations. Hence it is asked:

1. What is a contract of insurance, and concerning what things is it ordinarily entered into?

2. What conditions are ordinarily annexed to this contract in England, either by the express consent of the parties, by law, or by custom?

3. What is to be said of the case?

1. What is a contract of insurance, and what is its ordinary subject-matter?

Marine, Life, and Fire insurance are the general types of this contract, but nowadays most risks can be made the matter of insurance. The contract of Fire insurance, with which we are here concerned, is one of indemnity in consideration of a premium paid by the insured, against loss, not wilful, caused by fire, to a given account, upon certain subjects.

2. What are the conditions ordinarily annexed to this contract in England, either by the express consent of the parties, by law, or by custom?

This contract is usually effected on the basis of a proposal containing a list of questions which must be truthfully answered by the insured. Everything that can enable the insurer to arrive at an estimate of the risk insured against must be disclosed. The property insured, its value, locality, and whether it is insured with other companies, must be indicated. If any change is made which increases the risk, it must be made known to the company. On any loss to the goods insured being incurred by fire, the insurer must make a particular statement of the details of his loss, with an estimate of the value, confirmed if required by a statutory declaration of the truth of the account.¹

1 Knight, Encyclopaedia, under the entry “Fire Insurance.”

3. The case. Titius, an old curiosity dealer, insured his goods for a sum ten times their value. In this he was guilty of fraud; the company had no intention of contracting with him to pay such a sum. He has no right to keep more than what covers his loss, and he must make restitution in some way to the company from which he obtained the money. This company will then be under the obligation of squaring accounts with the other companies which took part of the risk. Titius may deduct from the sum to be restored the difference between the premiums which he paid and those which he should have paid on the real value of the property insured.

Stock companies require special consideration, since they have been advanced as an argument in favor of socialism, for the reason that the capital invested in them not rarely produces large gains, although it is almost entirely alienated from the hands of the proprietors or shareholders. Extensive enterprises in commerce, industry, mining, railroads, steamboats, etc., prove remarkably successful in companies or syndicates, although their directors have no personal interest in them.

However, the absence of personal interest is but apparent in these cases. In regard to the subordinate officials of such companies the same rule holds good as in the case of state industries—their own personal interest binds them to their position; and the higher authorities or directors confront the laborers in the capacity of proprietors. But the directors of these syndicates have themselves large interests in the enterprises and are, consequently, concerned for their success and prosperity; for in most cases they are among the chief shareholders, and in case the enterprises are prosperous they obtain larger dividends. Even the subordinate officials of such companies have in many cases a share of the profit. Sincetherefore, the directors have an almost absolute power over the officers appointed and the laborers employed by them, it is easy to perceive the reason why such companies, notwithstanding the apparent sequestration of the capital, should realize large profits.

For the rest, it is a well-known fact that stock companies, compared with private enterprises, are at a disadvantage in regard to economy in the use of raw materials, machinery, etc.; and, consequently, such organizations with small capital are generally unsuccessful. But in the case of large syndicates with extensive capital these disadvantages are counterbalanced by still greater advantages.¹

¹ Cf. Leroy-Beaulieu, Le Collectivisme, p. 348 sqq.

Another essential difference between syndicates and the ideal socialistic organization is the circumstance that in syndicates the directors are rarely changed. The permanence of the directors is a necessary condition for the success of large enterprises. If the direction is often changed there is a lack of unity and system, as the opinions of different directors will rarely be found to coincide. What guarantee would there be for this necessary permanence in the direction of the socialist industrial organizations, since the directors would be chosen and deposed by popular vote, and the principle of the equal rights of all would admit of no permanence in the administration of the more influential offices? Would not the continual changes and experiments be a source of endless disturbances and stoppages of the industrial machinery? But if the supreme directors of industrial organizations are not entrusted with sufficient power, if their decision is made dependent upon the consent of the majority, they are thus deprived of the power necessary for the efficient administration of their offices.