CASE 124: Business Managers

Gaius, Institutiones 4.71

... Institoria vero formula tum locum habet, cum quis tabernae aut cuilibet negoti­ationi filium servumve aut quemlibet extraneum, sive servum sive liberum, praepo­suerit et quid cum eo eius rei gratia, cui praepositus est, contractum fuerit.

D. 14.3.19.2 (Papinianus libro tertio Responsorum)

Tabernae praepositus a patre filius mercium causa mutuam pecuniam accepit: pro eo pater fideiussit: etiam institoria ab eo petetur, cum acceptae pecuniae speciem fideiubendo negotio tabernae miscuerit.

(Gaius in the fourth book of his Institutes)

... The procedure for the managerial action (actio institoria) is relevant when someone places his son or slave, or (indeed) any outsider whether slave or free, in charge of a shop or some other business, and a contract is (then) made with him in relation to what he was placed in charge of. It is called the managerial ac­tion because a person placed in charge of a shop is called a “manager” (institor). This procedure is also for the entire amount.

(Papinian in the third book of his Responses)

A son placed in charge of a shop by his father took money on loan for (the pur­chase of) goods; his father acted as personal guarantor (fideiussor) for him. Here too he (the father) is liable in a managerial action because, by guaranteeing it, he made the receipt of the loan into shop business.

1.      The Institor.

2.      Is the Institor an Agent? No. The transaction of the institor makes the princi­pal liable to a third party; for instance, if the institor as manager sells a slave, the third party can sue the principal on sale if the slave is not delivered. But the reverse is not true; the principal does not automatically acquire the action against the third party, although this action is usually available through some other legal theory Thus, for instance, if the third party refuses to pay for the slave, and if the institor is a slave or a son-in-power, the pater acquires the right of action on the theory of Case 117. If the institor is a free person (e.g., an employee hired to run a shop), the principal can use the action of man­date; and so on. See Ulpian and Gaius, D. 14.3.1-2. Finally, if this is legally possible (as it would be in the case of a son-in-power), the institor also re­mains personally liable on the transaction; that is, his transactions as an insti­tor are not treated as, in effect, transactions by the principal. What concrete difference does all this make?

3.      Scope of Authorization.

•       The father places his son in charge of buying goods; the father is liable on the son's contract if the son buys but not if he sells.

•       The father places his son in charge of buying goods and paying for the lease on a shop; the father is liable if the son borrows money in order to pay for the goods or to pay the rent, even though he had no specific authorization to borrow money.

•       The father places his son in charge of buying and selling olive oil; the father is liable if a third party lends olive oil to the son in the expectation of re­payment without interest.

•       The father places a son in charge of selling olive oil; the father is liable if the son sells olive oil on credit, unless the son was ordered to sell only for ready cash.

4.      Notice to Third Parties. The sources are unclear about whether the third party must realize that he or she is dealing with a manager rather than with the principal, but it is likely that this was not necessary.

There is no more remarkable institution in all of Roman law than the peculium, the principal device whereby some of the entrepreneurship of children-in-power and slaves was released from the constrictions of the familia. The peculium seems to have begun life as a small assemblage of property allocated by the paterfamilias to his subordinate, whom the pater then let deal with the property as he or she wished; it may have resembled the allowance that modern parents give to chil­dren in order to teach them the value of money. However, by the early Empire, pe­culia, often of very large size, had become a ubiquitous feature of Roman eco­nomic life; a peculium could include an entire farm or a business operation.

In principle, children, like slaves, could own and possess nothing (Case 113); and the fact that a person held a peculium did not alter that persons legal position as a subordinate to a paterfamilias. Thus, for instance, a son-in-power remained sub­ject to his father's potestas, and any power that the son possessed was still derivative from that of his father. The peculium itself was granted by the father, who theoreti­cally could withdraw it at will; but in practice the fund tended to be regarded as the son's “quasi property,” which the father was socially (and to some extent also legally) discouraged from rescinding.

The peculium came into its own when the child or slave dealt with third parties on the basis of it. Usually the pater accorded its holder “free administration” (libera administratio) in such dealings, meaning that the holder could enter into contracts and conduct other business as he or she wished, without consulting the pater or seeking his subsequent approval. Any property or debts acquired on the basis of these dealings became effectively part of the peculium, and so they indirectly were acquired by the pater even though he was unaware of them (see Case 116). In fur­therance of peculium business, the holder of a peculium was also usually able to alienate (transfer ownership of) property. And when the peculium became indebted to a third party, this person was able to sue the pater on the debt, although only up to the value of the peculium at the time of the lawsuit. Thus, by more or less formally ceding the peculium to a subordinate, the pater achieved a limited liability in its re­gard, while his children and slaves were permitted to demonstrate and develop their independent commercial skills.

The jurists richly developed the basic legal institution of the peculium, and the Cases in this section represent only a sampling of their legal rules.