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convenience of parting with it for the present, and the hazard of losing it entirely. The inconvenience to individual lenders can never be estimated by laws; the rate, therefore, of general interest must depend upon the usual or general inconvenience. This results entirely from the quantity of specie or current money in the kingdom: for, the more specie there is circulating in any nation, the greater superfluity there will be, beyond what is necessary to carry on the business of exchange and the common concerns of life. In every nation or public community, there is a certain quantity of money thus necessary; which a person well skilled in political arithmetic might perhaps calculate as exactly, as a private banker can the demand for running cash in his own shop: all above this necessary quantity may be spared, or lent, without much inconvenience to the respective lenders; and the greater this national superfluity is, the more numerous will be the lenders, and the lower ought the rate of the national interest to be: but, where there is not enough circulating cash, or barely enough, to answer the ordinary uses of the public, interest will be proportionably high; for lenders will be but few, as few can submit to the inconvenience of lending.

*So, also, the hazard of an entire loss has its weight in the regulation of interest: hence, the better the security, the lower will the interest be; the rate of interest being generally in a compound ratio, formed out of the inconvenience, and the hazard. And as, if there were no inconvenience, there should be no interest but what is equivalent to the hazard, so, if there were no hazard, there ought to be no interest, save only what arises from the mere inconvenience of lending. Thus, if the quantity of specie in a nation be such, that the general inconvenience of lending for a year is computed to amount to three per cent.: a man that has money by him will perhaps lend it upon good personal security at five per cent. allowing two for the hazard run; he will lend it upon landed security or mortgage at four per cent., the hazard being proportionably less; but

he will lend it to the state, on the maintenance of which all his property depends, at three per cent., the hazard being none at all.

But sometimes the hazard may be greater than the rate of interest allowed by law will compensate (23). And this gives rise to the practice of, 1 Bottomry, or respondentia. 2. Policies of insurance. 3. Annuities upon lives.

And first, bottomry (which originally arose from permit- Of bottomry or respondentia ting the master (24) of a ship, in a foreign country, to hypo- bonds. thecate the ship in order to raise money to refit) is in the nature of a mortgage of a ship; when the owner takes up money to enable him to carry on his voyage, and pledges the keel or bottom of the ship (partem pro toto) as a security for the re-payment. In which case, it is understood, that, if the ship be lost (25), the lender loses also his whole money; but, if it returns in safety, then he shall receive back his principal, and also the premium or interest agreed upon, however it may exceed the legal rate of interest (26). And this is allowed to be a valid contract in all trading

(23) Public opinion seems to be coming round to, though it has not yet reached, the point of considering gold and silver exactly in the same light as any other articles of commerce. When common sense has succeeded in establishing this not very abstruse doctrine; of course it will be thought as absurd to fix a maximum price upon the use of money as upon any other commodity.

(24) The account given by our author of the origin of bottomry and respondentia contracts, has been declared to be very doubtful by Lord Tenterden, who observes, that the practice of lending money upon maritime risks at a high premium, was well known to the Romans before the time of Justinian; yet in those titles of the digest and the code which expressly

treat of this subject, no mention is
made of contracts of this nature entered
into by the master of a ship, in that
character. (Abbott on Shipping, part 2,
ch. 3).

(25) Nothing short of a total loss
will discharge the borrower of money
on bottomry. (Thompson v. The Royal
Exchange Assurance Company, 1 Mau.
& Sel. 31).

(26) In every loan, the principal must be hazarded to a certain extent; namely, by the risk of the borrower's insolvency: but in bottomry bonds the principal is, on the face of the contract itself, put in hazard; and in such cases the lender may reserve more than 51. per cent. interest, without incurring the (legal) guilt of usury. (Morse v. Wilson, 4 T. R. 356).

nations, for the benefit of commerce, and by reason of the extraordinary hazard run by the lender (h). And in this case the ship and tackle, if brought home, are answerable (as well as the person of the borrower) for the money lent. But if the loan is not upon the vessel, but upon the goods and merchandize, which must necessarily be sold or exchanged in the course of the voyage, then only the borrower, personally, is bound to answer the contract; who therefore in this case is said to take up money at respondentia. These terms are also applied to contracts for the repayment of money borrowed, not on the ship and goods only, but on the mere hazard of the voyage itself; when a man lends a merchant 1,000l. to be employed in a beneficial trade, with condition to be repaid with extraordinary interest, in case such a voyage be safely performed (i): which kind of agreement is sometimes called foenus nauticum, and sometimes usura maritima (j). But, as this gave an opening for usurious and gaming contracts, especially upon long voyages, it was enacted by the statute 19 Geo. II. c. 37, that all monies lent on bottomry or at respondentia, on vessels bound to or from the East Indies, shall be expressly lent only upon the ship or upon the merchandize; that the lender shall have the benefit of salvage (k); and that if the borrower hath not an interest in the ship, or in the effects on board, equal to the value of the sum borrowed, he shall be responsible to the lender for so much of the principal as hath not been laid out, with legal interest and all other charges, though the ship and merchandize be totally lost †. (i) 1 Sid. 27.

(h) Moll. de Jur. Mar. 361. Malyne. lex Mercat. b. 1, c. 31. Bacon's Essays, c. 41. Cro. Jac. 208. Bynkersh. Quæst. Jur. Privat. 1. 3, c. 16.

(j) Molloy, ibid. Malyne, ibid.
(k) See Vol. I. page 294.

a

+ Mr. Christian observes, that " respondentia lender may be considered as a material partner in the loss and gain of the adventure; and therefore he may insure his interest in the

success of the voyage; but it must be expressly specified in the policy to be respondentia interest, (3 Burr. 1394), unless there is a particular usage to the contrary. (Park, Ins. 11). A lender

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insurance.

Secondly, a policy of insurance is a contract between A. Of policies of and B., that upon A.'s paying a premium equivalent to the hazard run, B. will indemnify or insure him against a particular event. This is founded upon one of the same principles as the doctrine of interest upon loans, that of hazard; but not that of inconvenience. For, if I insure a ship to the On ships. Levant, and back again, at five per cent., here I calculate the chance that she performs her voyage, to be twenty to one against her being lost: and, if she be lost, I lose 100l. and get 51. Now, this is much the same as if I lend the merchant, whose whole fortunes are embarked in this vessel, [459] 1007. at *the rate of eight per cent. For, by a loan I should be immediately out of possession of my money, the inconvenience of which we have supposed equal to three per cent. if, therefore, I had actually lent him 1007. I must have added 37. on the score of inconvenience, to the 51. allowed for the hazard, which together would have made 81. But, as upon an insurance, I am never out of possession of my money till the loss actually happens, nothing is therein allowed upon the principle of inconvenience, but all upon the principle of hazard. Thus too, in a loan, if the chance on lives. of re-payment depends upon the borrower's life, it is frequent (besides the usual rate of interest) for the borrower to have his life insured till the time of re-payment; for which he is loaded with an additional premium, suited to his age and constitution. Thus, if Sempronius has only an annuity for his life, and would borrow 100l. of Titius for a year; the inconvenience and general hazard of this loan, we have seen, are equivalent to 5l., which is, therefore, the legal interest: but there is also a special hazard in this case; for, if Sem

upon respondentia is not obliged to pay salvage or average losses, but he is entitled to receive the whole sum advanced, provided the ship and cargo arrive at the port of destination; nor will he lose the benefit of the bond, if an accident happens by the default of

the borrower or the captain of the ship.

(Ib. 421)." [But Mr. Serjeant Marshall,
in the 6th ch. of the 2nd book of his
Law of Insur. contends, that by the
general law of merchants, the lender
upon bottomry or respondentia con-
tracts is liable to general, though not to
particular average.-ED.]

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Policies of in

surance are va

cated by the

slightest fraud

or undue concealment.

pronius dies within the year, Titius must lose the whole of his 100. Suppose this chance to be as one to ten: it will follow that the extraordinary hazard is worth 107. more, and, therefore, that the reasonable rate of interest in this case would be fifteen per cent. But this the law, to avoid abuses, will not permit to be taken; Sempronius, therefore, gives Titius, the lender, only 57., the legal interest; but applies to Gaius, an insurer, and gives him the other 107. to indemnify Titius against the extraordinary hazard. And in this manner may any extraordinary or particular hazard be provided against, which the established rate of interest will not reach; that being calculated by the state to answer only the ordinary and general hazard, together with the lender's inconvenience in parting with his specie for the time. But, in order to prevent these insurances from being turned into a mischievous kind of gaming, it is enacted by statute 14 Geo. III. c. 48, that no insurance shall be made on lives, or on any other event, wherein the party insured hath no interest; that in all policies the name of such interested party shall be *inserted; and nothing more shall be recovered thereon than the amount of the interest of the insured.

The

This does not, however, extend to marine insurances, which were provided for by a prior law of their own. learning relating to these insurances hath, of late years been greatly improved by a series of judicial decisions; which have now established the law in such a variety of cases, that (if well and judiciously collected) they would form a very complete title in a code of commercial jurisprudence: but, being founded on equitable principles, which chiefly result from the special circumstances of the case, it is not easy to reduce them to any general heads in mere elementary institutes. Thus much, however, may be said; that, being contracts, the very essence of which consists in observing the purest good faith and integrity, they are vacated by any the least shadow of fraud or undue concealment: and, on the other hand, being much for the benefit and extension of trade, by distributing the loss or gain among a number of adventur

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