Reflections on the Historical Origins and Economic Structure of the Law Merchant

The purpose of this short essay is to make some introductory remarks to frame the debate about the historical evolution and economic structure of the Law Merchant. For these purposes the capitalization of the phrase should not mislead, for by the Law Merchant I mean nothing more pretentious than the commercial law rules-contractual, customary, and statutory-that govern transactions among merchants. It includes the rules governing sale, credit, insurance, transportation, and, probably, partnership. In approaching so salient a topic, it comes as something of a shock to realize that the first order of business in this venerable area is the extensive debate over whether there really is a Law Merchant at all. The positions on this matter are many and subtle, and it is worthwhile to give a capsule account of the overall situation. One point of broad agreement is that a body of law largely directed to the business transactions between merchants arose sometime during the Middle Ages. Much of this law derived from the Roman law of sale, but much of it, such as the creation of bills of exchange and similar credit instruments, was created by merchants in response to the difficulties of trading at a distance. There is further agreement that this law prized freedom of choice and speed of enforcement. There is yet further agreement that it had a distinct international cast in that a large number of transactions that fell within the scope of the Law Merchant involved trade between merchants from two or more nations. Thus, one party often had to sue in a court in which he faced the risk of discrimination as a foreigner. And last, there is some agreement that the principles that were embodied in the Law Merchant had some relationship to the ius gentium, or the law of nations as it has come down to us from Roman times. [CONT