OBLIGATIONS ARISING BY AGREEMENT

Four contracts are classified as arising by agreement: sale, hire, partnership and mandate. For these contracts, no formalities were required beyond the presence of agreement.

Sale

Requirements of the contract of sale

A sale was the exchange of ownership of property for money.

The general rule was that the price had to be certain. Justinian, however, laid down that if the price was to be fixed by a third party this was to be a valid contract of sale, conditional on the price being fixed. There was in the classical law some dispute between the Sabinians and the Proculians as to whether the price had to be in money, or whether payment could be in the form of goods. The view eventually taken, however, was that the price had to be a monetary one. The price had to be a real price, so if the seller did not intend to take the agreed payment the contract was void. Finally, there was some control over the fairness of pricing. In the case of a contract for sale of land, the seller could rescind the contract where the price was less than half of the land’s value. This situation, of a grossly unfair price, was known as laesio enormis.

As noted, it was also necessary to agree the subject matter of the contract. The subject matter had to be an existing thing, so the contract was void if the thing had never existed or had perished at the time of making the contract. There was, however, apparently exception for future crops and offspring of live property.

It was not necessary for the seller to be the owner of the property. If a person contracted to sell property he had no right to sell, that was nonetheless a valid contract of sale.

Error

The general principle was that if the parties were not agreed on the subject matter or the price, the contract was void for lack of agreement. Thus, if one thing was sold for another, for example where A intended to sell one field but B intended to buy another, there was no contract. Greater difficulty was found where the parties had agreed on the thing to be sold but differed as to its nature or qualities. To meet this, the doctrine of error in substantia (error in the substantials) developed. Where the parties were in error with regard to the fundamental characteristics of the property, the contract was void. Various examples are given in the sources, such as vinegar sold as wine, gold or lead sold as silver, or a slave of one sex sold as the other. It is not, however, every error that will have this effect. Lesser errors would not render a contract void. One example given of such a lesser error would be the virginity or otherwise of a slave. It is not always easy to distinguish errors in substantia from other errors, however. For example, although we are told that it is such an error where one metal is sold for another, we are also told that it is not such an error where an alloy is sold as a pure metal. It is not easy to devise a principle that adequately explains this distinction.

Risk

What happens if the property is damaged or destroyed before delivery to the buyer? Is the buyer still required to pay? The relevant concept here is “risk”. The rule was that risk passed on completion of the contract, even though (because of the requirement for delivery) the seller was still the owner. Thus, if the property was destroyed or damaged after the contract was made, the buyer would nonetheless be bound to pay the agreed price. This is also the rule in modern Scots law for sales of land, though the position has been changed with regard to sales of moveable property.

The seller's obligations

The seller was obliged to give the buyer peaceable possession of the property. If the buyer was evicted, the seller would be liable for this. This obligation is known as warrandice. “Eviction” in this context means the establishment of a better right to the property by someone else rather than necessarily physical ejection. Note that this was only a guarantee against eviction, not a guarantee of ownership. If it transpired that the seller did not own the property, the buyer nonetheless had no remedy for this unless and until the actual owner evicted him by making a claim to the property. This is also the rule in modern Scots law for sales of land. The position has been changed in the modern law with regard to sales of moveable property.

Originally, the seller bore no liability for any defects in the goods. In the late Republic, however, the jurists developed a ground of liability where the seller knew of the defect. Latent defects were not, however, covered. The aediles’ edict introduced a remedy for defects in slaves and cattle sold in the marketplace. Where there was such a defect, the buyer could rescind the contract if the defect was material. Alternatively, if the defect was not material, the buyer could claim the difference in value caused by the defect by means of an action called the actio quanti minoris. By time ofJustinian, this had been expanded to being the rule for all contracts of sale.

Hire

The Roman texts identify a contract called hire. They do not, however, distinguish expressly between different forms of this contract. This is the case even though it is apparent that under this head fall several distinct types of relationship. Modern works on Roman law distinguish three types of hire. The first is the hire of property. This includes both land and moveable property. The second is hire of a piece of work, as where a tradesman is engaged to manufacture some item. The third is hire of services. The hire of services can be distinguished from the hire of a piece of work on the basis of being an ongoing relationship, more like a contract of employment.

Hire was governed by rules in some respects similar to those applying to sale. There had to be a price in money and the parties had to be agreed on the subject matter of the contract.

Distinguishing hire and sale

It was sometimes difficult to distinguish hire from sale. For example, where land was to be enjoyed by the “hirer” in perpetuity as long as rent continued to be paid, this was in substance very similar to a sale. The emperor Zeno in the fifth century established this as a separate institution, called emphyteusis.

Another example where there might be difficulty was the contract providing for the manufacture of something by one of the parties. An example of this would be a goldsmith engaged to make rings. The rule for cases of this kind was that, if the smith used his own gold, the contract was sale. If the customer supplied the gold, the contract was one of hire.

The parties' obligations

The hirer had to comply with the express terms of the hire. In the absence of express agreement, a hirer of property had to keep it “as carefully as the most careful owner would keep his own property” J.3.24.5). The hirer would be liable for any damage caused by his fault, but the owner would have to bear any loss resulting from ordinary wear and tear or accidental damage.

In a hire of services or a hire of a piece of work, either party was liable for any loss caused to the other by his fault.

In a hire of work, the party making the order bore the risk of damage by act of God or caused by defect in materials supplied by him. Otherwise, the risk was borne by the party carrying out work.

Partnership

Partnership was an arrangement whereby two or more parties pooled property or labour. Unlike the modern partnership, this was not neces­sarily a commercial relationship. Partnership could cover all the partners’ assets or only a single line of business or a particular transaction.

Each partner was expected to show in relation to the partnership affairs “the same care as he usually displays in his own” J.3.25.9). The partners were liable to each other for any loss caused by their failure to meet this standard.

Partnership was brought to an end by renunciation by any of the partners or by the death of any partner, unless the contrary was agreed when the partnership was established. Where the partnership was entered into for a specific matter, it ended when that matter was dealt with. Partnership was also ended if one of the partners was subject to bankruptcy proceedings.

How were the assets of the partnership divided on dissolution? Justinian considers this question:

“if someone is sharp to withdraw with an eye to a profit for himself, for example where a partner in all worldly wealth is left heir to some­body’s estate and renounces the partnership in order to take the inheritance himself, he will be compelled to share his profit.” J.3.25.4)

However, where there was no such intention, he could keep the gain for himself. Subject to this exception, the partners could keep any property acquired after dissolution.

Mandate

Mandate involved one person, the mandatary, acting on behalf of another, the mandator. This contract arose only where the mandatary was to act at least partly on another’s behalf, although Justinian points out that one can be acting partly for one’s own benefit as well for the benefit of another. It was essential to the contract of mandate that the mandatary be acting gra­tuitously, and mandate can be distinguished from the modern law of agency on this ground.

The mandatary was not to exceed the limits of the mandate. There was, however, a dispute between the Sabinians and the Proculians over the result of exceeding the mandate. Suppose, for example, that the mandatary had a mandate to buy a particular thing for 100, but in fact paid more. The Sabinians said that the mandatary could recover nothing. The Proculians, however, took the view that the mandatary should be entitled to recover 100 from the mandator, though he would be left to bear the excess himself. The latter view was ultimately settled as the correct view.

The mandate could be revoked by the mandator or mandatary at any time before there was a change of position on the part of either party. However, if the mandatary withdrew he was expected to notify the mandator promptly. Unless he had good reason for not doing so, the mandatary would be liable for any prejudice caused to the mandator by this failure. The mandate was ended immediately by the death of either party, although the mandatary would still be entitled to raise an action on the mandate to recover his expenses in complying with the mandate if he carried through the com­mission in ignorance of the mandator’s death.