Amalia D. Kessler

Enforcing Virtue: Social Norms and Self-Interest in an Eighteenth-Century Merchant Court

How to recommend these merchants [négociants] who provision with clothes and food the farmer, the shepherd and the families of the sailor who serves the king? We engrave their names in bronze in our merchant courts, so that posterity will perceive these facts and say that this century was not devoid of virtues.

—Bedos, Le négociant patriote (1779).^1*

Recent scholarship on law and norms has emphasized that important social values are at work in the law.² But nothing could prepare us for the "Red Ink Case." Decided by an eighteenth-century French merchant court, the suit was brought by a young woman driven by poverty to prostitute herself in return for a bill of exchange, written with her lover's blood. When the person on whom the bill was drawn refused to accept it for payment, the woman sued her lover, demanding that he honor it instead. Although the applicable law required the defendant to pay the bill, the merchant-court judge declined to enforce payment on the ground that "humanity is the primary law."³ Instead, the judge ordered the defendant to marry the plaintiff and thereby restore the virtue he had taken. With virtue thus saved, "[t]hese poor children withdrew satisfied."⁴

What are we to make of this case? It appears in Le négociant patriote, an account of Old Regime commercial life and merchant-court practice penned by a successful eighteenth-century merchant named Bedos, who claimed to have served as a merchant-court judge⁵ and president of a chamber of commerce.⁶ Although Bedos' depiction of the Red Ink Case may well be exaggerated, his professional experience suggests that it must be taken seriously—if only as an expression of what contemporary merchants believed merchant-court litigation should be like. Yet, as familiar as we have become with the notion that law shapes and expresses social values, the case remains puzzling. What commercial interests are served, we might ask, by enforcing norms of sexual virtue? And how does a court order of marriage promote the transactional efficiency that bills of exchange, as a defining feature of merchant-court jurisprudence, were presumably intended to facilitate?

By examining the workings of a merchant-run court in eighteenth-century Paris, this article seeks to make sense of the Red Ink Case and its place in merchant-court jurisprudence. Section I examines the representation of eighteenth-century merchant-court adjudication encountered in Bedos' Le négociant patriote. According to Bedos, the merchant court functioned as a bastion of Christian virtue, actively seeking to promote charitable love and to restrain unbridled self-interest. Section II assesses the accuracy of Bedos' depiction of merchant-court adjudication by examining the actual workings of the eighteenth-century Parisian Merchant Court. Having explored several features of the court's legal doctrine and procedure, it concludes that Bedos' depiction is remarkably accurate. Section III demonstrates that the court's norms of charitable virtue emanated from Christian ideals of charity animating Old Regime society and culture more generally. It then argues that, by promoting long-term, trust-based trading relationships and thereby encouraging the sharing of vital information, these Christian norms of virtue lowered transaction costs sufficiently to make commerce in the relatively undeveloped economy of the Old Regime profitable. Furthermore, because the merchant court could tap into a preexisting network of communal institutions to which it was integrally linked, it was able cheaply and effectively to monitor and regulate commercial behavior by enforcing the community's norms. Finally, Section IV briefly reassesses the meaning of the Red Ink Case and the commercial purposes served by the merchant court's enforcement of norms of virtue, in light of this article's examination of the eighteenth-century Parisian Merchant Court.

I. The Merchant Court as Bastion of Virtue

For eighteenth-century merchants, as well as their nonmerchant contemporaries,⁷ the merchant court was first and foremost a bastion of virtue. In contrast to other royal, seigneurial, and city courts, the sixty-some merchant courts situated throughout Old Regime France⁸ provided justice at no cost. The litigants who came before these courts were not required to pay any fees and, since they were (at least in theory)⁹ to represent themselves, they did not have to hire lawyers. Likewise, the lay merchants who served as the courts' judges worked for free. That merchant-court litigation did not require vast expenditures of time and money, and thus assured merchants a forum for quick, efficient dispute resolution, provided some security that contractual obligations would be enforced. This security, in turn, contributed significantly to promoting commercial exchange. In addition, however, the fact that litigants argued without the assistance of lawyers and merchant-court judges received no emolument was crucial to contemporary merchants because it ensured that justice would not be for sale—that it would be kept outside the realm of commerce and thus shielded from the base commercialization to which the "normal" courts were deemed so susceptible.

In the view of contemporaries, it was particularly important that the merchant courts be shielded from the dangers of commercialization, because they were the most susceptible. In the early-modern world, and especially in Catholic France, the age-old Christian belief that the pursuit of profit is sinful continued to exert significant force, and commerce was therefore viewed by many with suspicion and distaste. The evils of usury, for example, were vociferously decried throughout the eighteenth-century.¹⁰ To survive in a Christian culture that had traditionally cast the pursuit of profit as sinful, merchants conceived of their courts as bastions of virtue, which implemented Christian ideals of charity by placing the community's long-term well-being above the individual's short-term gain.

This conception of the eighteenth-century merchant court as a bulwark of virtue, or charitable love, is most readily apparent in Le négociant patriote, the source of the above-described Red Ink Case. The book is a somewhat disjointed series of reflections on commerce in eighteenth-century Europe and particularly France, which was first published in 1779 and then again in 1784, "by a Négociant"—a term used to designate wholesale merchants engaged in international trade and banking activities. Although nothing is known about this "négociant" other than the autobiographical information contained in Le négociant patriote itself, the author was subsequently identified as Bedos and claimed to have a great deal of experience in commercial practice and law.

Of particular interest to Bedos were the merchant courts, which he characterized as "masterpieces of royal justice, where talent, enlightenment, virtue, and experience render justice."¹¹ In a lengthy narrative describing a day in the life of a merchant-court judge, Bedos related numerous anecdotes demonstrating that Christian charity was the guiding principle of the merchant court and of the merchants who served as its judges, disputants, and audience members.

According to Bedos, the first thing the merchant-court judge considered each day was his charitable love for his fellow men: "What is my task, he inwardly asks himself? To be useful to my equals."¹² Believing that it was his supreme duty to work and thereby contribute to society, the judge awoke at three in the morning so that he could devote several hours to his own business before departing for court. His primary concern in running his business, however, was not to make a profit, but to help others. Thus, before leaving for the courthouse, the judge instructed his cashier that if bakers or others came to purchase wheat, he was to sell "at ten percent below the legal rate."¹³ Although this would result in a loss of profit, it was what charity required: "The soul is our primary wealth; led it spread forth to all who suffer."¹⁴

Just as love was the guiding principle of the merchant-court judge in managing his own business, so too it was his guiding principle in running the merchant court. Consider, for example, Bedos' account of a petition brought by anégociant whose fortune was invested in goods that were en route to France when the ship on which they were being transported was seized by pirates. As a result of this loss, the négociant was unable to pay his debts and requested a court declaration permitting him to suspend payments. The judge granted the suspension, but then announced to his colleagues on the bench that charity required more than this minimal undertaking: "Let us try to sustain him; what can we do?"¹⁵ Pooling their resources, concluded the judge, they could afford to give the unfortunate négociant 240,000 livres—an extraordinarily large sum in age when the annual income of a tradesman ranged from 300 to 1,000 livres and that of a nobleman from 40,000 to 100,000 livres.¹⁶ Their recompense for this tremendous act of charity would be the knowledge that they had come to the aid of their fellow man and merchant: "If these two hundred forty thousand livres saved him, we would have invested our capital well."¹⁷ In the future, the judge urged, a more formal procedure should be established for such charitable undertakings so as to ensure that all needy and virtuous merchants would receive assistance. The best such procedure, he suggested, would be to establish a fund by collecting donations at a special Mass arranged for this purpose: "I would strongly hope that in the future a Mass is established to provide for the needs of honest merchants who experience setbacks and who have always been virtuous."¹⁸

When the facts of the case before it were such that the court could not itself provide the necessary charity, it ordered the parties to do so themselves. This, for example, was the court's approach in the Red Ink Case, described briefly above. In Bedos' narrative, the plaintiff in this case demanded payment on a negotiable bill of exchange for 10,000 livres, claiming that she had given the defendant value in return for the bill, but that the person on whom the defendant had drawn the bill refused to pay it when it fell due. The bill, she insisted, was written in strict accordance with the requirements of the Commercial Ordinance of 1673¹⁹— recording that she gave value, that the value took the form of cash, and that the locations of purchase and payment of the bill differed.²⁰ In addition, she noted, she had made the requisite protest to the drawee when he failed to pay. In other words, she argued, "it is not lacking anything."²¹

The judge admitted that "everything is proper as to the structure of the bill of exchange" but explained, "I am only surprised that it was written with red ink."²² When the plaintiff insisted that the Ordinance said nothing about the color of the ink used to draw bills of exchange, the judge responded firmly but gently, "Yes, miss; but have you always observed the ordinance of modesty?"²³ At these words, the plaintiff suddenly collapsed. Apparently, the judge understood that the value she had given in exchange for the bill was the use of her body and that, as the defendant later admitted, the red ink consisted of his own blood, which he obtained by sticking a pin into his vein.

As an aside, it must be noted that negotiable bills of exchange were important instruments of credit, which developed in merchant, rather than ordinary, civil-law courts, and which necessitated the abandonment of longstanding principles of privity of contract. Under traditional contract law and its rule of privity, a person who is assigned an interest in a contract receives no more or less than that belonging to the assignor. In contrast, under the law of negotiable instruments, a good-faith holder for value—namely, someone who purchased the instrument without knowledge of any defenses against its enforcement—is entitled to payment, even if it is later discovered that the person from whom he purchased it had himself never paid for it. Because bills of exchange protect the interests of the good-faith holder for value, they serve as a secure vehicle for investment and their emergence in mid–seventeenth century France²⁴ greatly facilitated access to credit. As a result, negotiable instruments have been traditionally cited as a prime example of the efficiency-minded nature of merchant-court jurisprudence.²⁵

Though it is indisputable that negotiable bills of exchange promoted transactional efficiency, such efficiency was not self-consciously a concern of Bedos' merchant court. As Bedos depicts it, the court was focused on the parties' virtue—which negotiable paper threatened to commercialize and thereby undermine—rather than on such efficiency-oriented concerns as protecting the interests of the good-faith holder for value. Thus, the court did not resolve the case by enforcing payment, as the Commercial Ordinance of 1673 would have required. Nor did it simply deny enforcement, as an ordinary court might have done, on the grounds that the "cause" underlying the transaction was immoral.²⁶ Precisely because the transaction was immoral, the merchant court did not wash its hands of it, but instead tried to save the parties by actively promoting virtue, or Christian love. The court's motto, as Bedos explained, was that "humanity is the primary law."²⁷ Thus, after ordering the clerk to come to the aid of the grief-stricken plaintiff, the judge turned to the defendant and said, "Here, sir, is where you have led her, she sinned out of weakness and you by setting the trap: tell her that you will marry her, her restored honor will call her back to life."²⁸ Properly chastened, the defendant agreed that he ought to marry the plaintiff and promised God that he would make her happy. At this point, the plaintiff immediately revived and recovered sufficiently to ask the court to keep the bill until the day following the marriage, upon which it could be returned to her then husband. Thus assisted by the merchant court in their efforts to remain virtuous, the litigants departed to live happily ever after: "These poor children withdrew satisfied."²⁹

According to Bedos' account, further acts of Christian charity followed upon the conclusion of the day's docket. Once the last case of the day was heard, "[t]he president of the court asked Messieurs the merchants to ascend to the courtroom and to leave all the doors open."³⁰ Once all the merchants were gathered, the judge announced the misfortunes that had recently befallen various members of the merchant community, including the imprisonment of a number of Frenchmen by English pirates, the death of a man who fell off a topgallant sail, leaving a wife and five children, and the desperate poverty of several old sailors. At this point, "the corps of merchants [le Corps du Commerce] in general assembly having been consulted," the judge and consuls³¹ unanimously decreed that all merchants would contribute money to the court treasurer, who would then use these funds to provide for the needs of "so many unfortunate innocents."³² Before releasing the gathering, the judge made a final series of announcements concerning the good news that the merchant community had to celebrate. In these announcements as well, Christian charity was the central theme:

[T]he president added that tomorrow it would be appropriate for merchants [le Commerce] and the Court to go to the cathedral, in order to pray, so as to obtain from heaven a successful childbirth for the queen; ... that on that day the poor in the hospitals would be splendidly nourished at the expense of merchants [du Commerce]; that a sum for relief of the truly indigent would be remitted to ministers; that twenty-four girls would be married with respectable dowries, which would be doubled on the day they first gave birth; that fifty foundlings would be given trades; ... that the hospitals would be emptied of these children, so as to occupy them with agriculture, shepherding, trades [Arts et Métiers]....³³

Through such numerous acts of charity, the merchants who worked in and came before the merchant court displayed and acted upon their virtuous love of their fellow men. As the king and queen were in no need of financial assistance, the merchants expressed their love for their rulers by piously attending church services and praying for their well-being.

II. Situating the Parisian Merchant Court within a Christian Social Fabric

What are we to make of Bedos' utopian depiction of the merchant court as a realm of Christian charity and love, in which self-interest was regularly subordinated to communal well-being? Were eighteenth-century merchant courts really as Bedos described? And, if so, what accounts for this surprising fact?

Given that the only information available about Bedos is that which he himself supplied in Le négociant patriote, it may be tempting to dismiss his account of the Old Regime merchant court as one man's idiosyncratic musings. Archival research into the structure and operation of the eighteenth-century Parisian Merchant Court, however, suggests that this would be a serious mistake. Although a complete portrait of the court is beyond the scope of this article, this section provides several discrete snapshots,³⁴ which together reveal that Bedos' portrait of the merchant court as a bastion of Christian charity and love—while perhaps somewhat exaggerated for literary effect and thus not necessarily true in every detail—was grounded largely in fact. Having confirmed the accuracy of Bedos' account, this article then turns in Section III to explore the reasons why the court placed such emphasis on Christian norms of virtue and the ways in which these norms advanced commercial self-interest.

The Parisian Merchant Court was officially established by a royal edict of 1563, which provided that it was to consist of one judge and four consuls, all five of whom were endowed with the ultimate decision-making power—hence the official name of the court, la juridiction consulaire de Paris.³⁵ Judge and consul differed only in that the former served as the court's chief judge, or administrative head. The judge and consuls were lay merchants elected on an annual basis through a procedure that, although varying slightly over time, accorded the leading Parisian guilds a prominent role.³⁶

The court was not a governmental institution in the modern sense—an institution staffed by bureaucratic functionaries employed to carry out the wishes of the state. Instead, it was an extension of the merchant community whose disputes it resolved. In this sense, the royal edict founding the court served essentially to place the monarchy's imprimatur on an institution that had existed in one form or another for several centuries. The extent to which the merchant court was an extension of the merchant community, rather than an arm of the state, is evident from the fact that the Edict of 1563 provided for a courthouse by authorizing Parisian merchants to levy a tax on themselves for this purpose.³⁷ In other words, even after its establishment as a royal institution, the merchant court continued literally to belong to the merchant community.

As an institution of the merchant community, the merchant court was situated within a web of interlocking institutions, such as guilds, religious confraternities, and parish churches, animated by shared values and beliefs. Foremost among these values and beliefs were norms of Christian charity, according to which, love of God translated into love of fellow man and a concomitant willingness to place communal well-being above self-interest.

To argue as this article does that Christian norms were an important basis of merchant-court jurisprudence is not to suggest that they were the only basis. As I have described elsewhere, a complete portrait of the eighteenth-century Parisian Merchant Court would reveal that there were some cases in which it simply applied the relevant statutory law or customary rule with relatively little attention to norms of any kind, or where it instead relied on a very different set of norms.³⁸ But though not every case was resolved by applying norms of Christian virtue, such norms were, as described below, the driving force behind many of the court's decisions and procedures.

A. The Role of the Church

That norms of Christian charity were a defining feature of the eighteenth-century Parisian Merchant Court is hardly surprising given that the court, like so many other Old Regime institutions, was integrally linked to the Church. Priests served two critical functions in the merchant court—one clerical, and the other judicial.

In their strictly clerical role, priests were responsible for overseeing the religious life of the merchant court and of the community it served. The court itself was housed in a church³⁹ and contained an internal chapel, built in 1630.⁴⁰ In this chapel, Mass was said every Monday, Wednesday and Friday morning, which were the days that the court sat to hear new cases.⁴¹ Generally, the judge and consuls attended this Mass, but when time did not permit, they and all others in the main courtroom were still able to hear it, because the chapel was separated from the courtroom by only a grille. The court hired a chaplain who was a priest from the local parish of Saint-Merry not only to say Mass on these weekday mornings, but also to hold the annual Mass of the Holy Spirit on the day the new judge and consuls were elected. This chaplain also held Requiem Masses for the souls of any current or former judges and consuls who died during the year. Furthermore, in addition to celebrating certain religious events in their own chapel, the judge and consuls also participated in some larger celebrations held outside the courthouse. For example, they sometimes joined in the procession held by the parish church on Corpus Christi, and they attended the Cloister of Saint-Merry for an annual service held to pray for the souls of their passed colleagues.⁴²

In addition to officiating in the merchant court's religious functions, priests served as court-appointed arbitres—a function, described below, which was a kind of hybrid between the modern-day positions of arbiter and magistrate. It is not entirely clear exactly when, why, and how the Parisian Merchant Court designated particular disputes for arbitration,⁴³ but the many reports written by arbiters suggest that the court typically sent the more complex and time-consuming cases to arbitration.⁴⁴ Once appointed, arbiters were responsible for both fact-finding and adjudication. When assigned a case, they began by investigating and deciding the facts in dispute. For this purpose, they had full authority to interview the parties and any witnesses and to examine all relevant documents, merchandise, and other materials. As to adjudication, the arbiters of the Parisian Merchant Court served two distinct roles.⁴⁵ Their primary task was to try to reconcile the parties by helping them reach some compromise. If the arbiters succeeded in reconciling the parties, the dispute, it appears, did not come before the judge and consuls again. The court does not seem to have ratified or enforced the compromise reached through arbitration.⁴⁶ If the arbiters failed to reconcile the disputants, they became more like modern-day magistrates—in other words, they had to write a report to the judge and consuls discussing their efforts and suggesting how the court should proceed.⁴⁷ Not surprisingly, given the extremely large number of cases that they were expected to decide, the judge and consuls appear usually to have adopted the judgments that the arbiters suggested.⁴⁸

Arbitration served two important functions in the merchant community. First, it offered the possibility of healing the rifts that had emerged between the disputants and that threatened to sunder the long-term, personal ties that were so important for Old Regime commerce. Second, arbitration mediated the distance between decision-maker and disputant. Merchant-court judges and consuls could not possibly know all of the litigants who came before them. However, a judge and consul could always appoint an arbiter who was personally familiar with the disputants, or who, at least, was connected to the disputants' social and professional worlds.⁴⁹ The arbiter's personal connection with the litigants enabled him not only to identify the relevant facts with ease, but also to inspire the disputants' trust and to bring communal pressure to bear, thereby furthering his efforts to achieve reconciliation—or, if reconciliation failed, to recommend a judgment to be imposed by the judge and consuls by which the parties would willingly abide. Parish priests frequently served as arbiters. Surprisingly, this has been ignored in the scholarly literature,⁵⁰ but research reveals that when the parties resided in any of the many rural villages falling within the court's jurisdiction, it was almost always the local village priest whom the court appointed as arbiter. As observed by Philibert-Joseph Masson, a contemporary commentator on merchant-court practice, and former judge and consul of the Parisian Merchant Court, "Arbiters hear witnesses and inform the judges about that which they were able to discover. It can be said on this subject that messieurs the parish priests render services that are essential."⁵¹

Although the Parisian Merchant Court often chose priests as arbiters when one or both parties resided in a small town or village outside Paris, priests from within Paris were never chosen.⁵² One reason that priests outside Paris were employed in this manner—and that priests within Paris were not—must have been administrative convenience. When the parties to a dispute lived in a town outside Paris it was surely much easier to have the local priest arbitrate the dispute than it was to send a busy, Parisian merchant all the way to the town or to require the parties to travel to Paris. In addition, while the judge and consuls were acquainted with the prominent merchants in Paris, they were unlikely to know those outside the city. Thus, it was probably simplest just to send the parties before the local priest. It would be a mistake, however, to assume that priests were selected as arbiters in the towns and villages outside of Paris purely as a matter of administrative convenience. After all, there were other distinguished local figures who might have been selected as arbiters.

Given the two goals of merchant-court arbitration—reestablishing sundered ties of friendship and gathering information—priests were an obvious choice. By virtue of his profession, the parish priest was likely to have known his parishioners for many years, if not from birth, and to have heard their confessions. He also learned many things about his parishioners—or at least, his parishioners' reputations—by listening to the stories and complaints of their relatives, friends, and neighbors. Indeed, when people were involved in everyday disputes, they often sought their priest as mediator.⁵³ Furthermore, through pastoral activities, priests were accustomed to assessing moral character, promoting virtuous behavior, and encouraging people to place community above self-interested gain. As a result of the Catholic Church's highly successful, seventeenth-century movement to reform the clergy, most parish priests in the following century enjoyed a very high status within the village community.⁵⁴ Because of priests' moral authority and standing in the community, litigants were especially likely to heed their call to compromise. In addition, if a priest failed in his efforts to reconcile the parties, his judgment as to which party deserved to lose was likely to carry considerable weight.

In small towns and villages, parish priests were so well informed that, long before legal disputes arose, merchants would sometimes contact priests to inquire about the moral character and business activities of people with whom they were considering doing business. This, for example, is what Nicolas François Viennos did after entering a business deal with a certain Berthin.⁵⁵ Viennos was a farmer from Vincennes, whose friend Claude Launoy, a teamster from the Faubourg St. Antoine, recommended that he purchase some oats from his friend Berthin. Viennos did not know Berthin, who lived in Dronay en Champagne. However, Launoy vouched for him, and on the advice of his friend, Viennos agreed to buy some oats from Berthin. The total price was 300 livres, of which Viennos paid 120 as a cash deposit. When Berthin failed to deliver the oats as agreed, Viennos became nervous and wrote a letter to the parish priest of Dronay, Berthin's hometown, explaining his situation and asking for any information that the priest could provide about Berthin's character and activities. As explained by the arbiter, himself a priest, who was appointed in the lawsuit that eventually arose, "The aforementioned priest ... responded [to Viennos] that the aforementioned Berthin was in the habit of doing mischief under the pretext of deals similar to the one that Viennos described, that Berthin was in debt for considerable sums of money, that Berthin owed him some money, and he exhorted Viennos to console himself for the 120 livres that he lost, along with many others who lost a lot more than he."⁵⁶ As the community's confessor and, interestingly, as someone who had been personally duped by Berthin, the parish priest knew perhaps better than anyone else Berthin's reputation as a scoundrel who promised more than he could deliver and who regularly failed to meet his obligations.

Likewise, the parish priest from Chevilly, assigned to arbitrate a lawsuit brought by Margueritte Jolle, was able to call on his knowledge of his parish in recommending that the court find in the plaintiff's favor.⁵⁷ The arbiter based his decision almost entirely on an assessment of the plaintiff's moral character, which was derived from his own acquaintance with her as one of his parishioners and from her reputation within the parish as a whole. As he stated, "I the undersigned certify and attest ... that the aforementioned Margueritte Jolle is a person who leads a good life and has good morals and is known by everyone as such and that, according to my own knowledge and that of the inhabitants of my parish where she was born and has always lived, she has never failed to pay a debt...."⁵⁸

When serving as arbiter, the parish priest, in his role as town confessor and representative of the Church, possessed a peculiar moral force, which he could exert in pressing the disputants to agree to a compromise. Moreover, priests regularly used their unique moral authority to promote Christian charity—even when such charity ran counter to the letter of the law. Thus, they frequently argued that it was wrong for a rich person to demand money from someone who could not afford to pay, even when the impoverished litigant was legally bound to honor an obligation.⁵⁹ Consider, for example, the arbiter's opinion in a lawsuit brought by Simon, a carpenter, against Mr. and Mrs. Dubreuil.⁶⁰ Simon had performed various services for the defendants over the years, all on credit as recorded in his accounting books. After waiting a long time for the defendants to pay, Simon finally sued for an amount exceeding 456 livres. The defendants for the most part did not deny their obligation, stating only that the plaintiff's claim should be reduced by twenty livres because they had given him a horse worth that amount. Their main defense was simply that they were too poor to pay their debts. They claimed that they could not afford to pay more than thirty livres per year—which would mean a delay of approximately fifteen years, rather than the official three-month legal limit. The arbiter-priest succeeded in convincing the plaintiff to grant a delay, but not for so long. The priest thus asked the court to decide how long a delay to order. However, the priest depicted the defendants' plight in the most sympathetic terms. He remarked on "the state of poverty to which they have been reduced" and noted that "they were obliged to quit the bakery trade and to become day laborers, even hiring themselves out to carry sacks in the market."⁶¹ There is little doubt that, in the arbiter-priest's view, the defendants, by virtue of their poverty, should be granted the longest delay possible.

Concern with requiring the poor to pay the rich is even more apparent in the arbiter's report written by a parish priest in the case of Meusnier v. Meusnier.⁶² Jean Meusnier, an innkeeper from the small town of Champlan, sued his cousin, Denis Meusnier, a fruit seller from the same town, for a debt of sixty livres that he claimed Denis had never paid. Denis insisted that he had already paid Jean this amount and that he no longer owed him any money. After examining several witnesses, the arbiter-priest remained uncertain as to which party was telling the truth, but concluded that the plaintiff was probably in the right because two witnesses in particular "seem to prove the deception of Denis Meusnier."⁶³ In spite of his conclusion that Denis did in fact owe Jean the money, the priest nonetheless tried to convince Jean to reduce the amount of his claim and to agree to a one-year moratorium on payment because Jean could so easily afford to do so and because Denis was so poor: "[W]e spoke to the aforementioned Jean Meusnier, plaintiff, in private and did our best to get him to agree to reduce the obligation of the aforementioned Meusnier, defendant, in consideration of his lack of affluence and the well-being, in the contrary, of the aforementioned Jean Meusnier, plaintiff."⁶⁴ Although Jean ultimately agreed to a reduction in price and to "content himself with ... a one-year delay," Denis refused, insisting that he had already paid his obligation and would not pay twice.⁶⁵ Unable to reconcile the cousins, the priest recommended to the court that it find for Denis, the defendant, because it was wrong to hold a debtor to his obligation when the debtor could not afford to pay and the creditor could easily afford to lose the money. In the priest's own words, "[I]n our view, given the state of poverty of Denis Meusnier and the affluence in the contrary of Jean Meusnier, we think the misery of the former obliterates his debt and it is not to be supposed that Jean Meusnier, who is more comfortable, would be capable of wanting to be paid ... by his cousin, who is less comfortable than he...."⁶⁶

B. Mandating Morality

Although parish priests were particularly likely to insist that the merchant court's function was to promote Christian virtue, rather than to enforce the letter of the law, they were not the only arbiters to do so. Even ordinary merchants serving as arbiters sometimes concluded that it was more important to protect the interests of a destitute litigant than to enforce the rights of a legally entitled but wealthier opponent.

Consider, for example, the case of le comte de Colincour v. Bequet, in which a colonel in the royal army, who had sold a mare to a Parisian horse merchant, sued on the grounds of nonpayment.⁶⁷ The arbiter, who referred to himself as a merchant and police expert,⁶⁸ sought to reconcile the parties by convincing the plaintiff to grant the defendant a two- to three-month delay in which to pay, but the plaintiff refused. In his report, the arbiter berated the colonel for his hard-heartedness, remarking that he was steadfast in his refusal, "in spite of the representations that the aforementioned defendant honestly made to him concerning the large number of horses that remained on his hands."⁶⁹ According to the arbiter, the court should simply order the delay that the defendant had requested because it would cost the colonel so little, while helping the defendant enormously. In his opinion, he explained, "Colincour, being above such a little concern, should have easily accorded this delay to his debtor." Since he did not, however, "the aforementioned defendant must have recourse to your justice as concerns his situation."⁷⁰

A particularly clear example of the moral concerns that animated merchant-court adjudication—regardless of the arbiter's profession—is the continuing force exercised by the notion of the just price. The idea of the just price had deep roots in the learned law and was embraced widely by canon lawyers in the Middle Ages. It is generally argued, however, that by the eighteenth century, the theory of the just price had little real bite.⁷¹ The only area of the law in which the idea of the just price is thought to have continued in force was in contracts for the sale of land. A contract for the sale of land could be rescinded on the grounds of lésion, meaning that the land had been sold for less than half the just price. In contracts for chattels, however, lésion was supposedly not deemed grounds for rescission.⁷²

Contrary, however, to the standard wisdom that failure to pay the just price was no longer an actionable claim in the eighteenth century, evidence from the Parisian Merchant Court reveals that arbiters would occasionally examine a price agreed upon by the litigants in order to determine its justness. That they would do so is entirely consistent with the long-standing view of merchant-court jurisprudence—grounded in the canon-law idea of "cause"—that "[e]quality is the general law of all commercial contracts...."⁷³ Thus, for example, in the case of Bas v. Grapin, a Parisian wine seller sued a Parisian restaurateur for payment for wine that he had delivered to her on credit over the course of many years.⁷⁴ Based on the good state of the plaintiff's accounting books and the defendant's total lack of such books, the arbiter found for the plaintiff. He noted that the plaintiff's accounting books listed wine delivered to the defendant, for which payment was never made, totaling in value 2,808 livres. Although the arbiter ultimately recommended that the Parisian Merchant Court order the defendant to pay the plaintiff this amount, he did not reach this conclusion immediately. Before doing so, he considered whether the price of 2,808 livres was a fair one. It is only because he concluded that "[t]he price of the wines seemed reasonable to me," that he was willing to recommend that the defendant pay this amount.⁷⁵

While the arbiter chose in this case not to alter the parties' agreement, the reports reveal other occasions when arbiters were perfectly willing to modify a contractually established price. In one unfortunately terse report, an arbiter who identified himself as a former guild leader⁷⁶ considered a dispute between two guild members in which the seller sued the buyer for nonpayment.⁷⁷ The arbiter examined the merchandise purchased by the defendant and concluded that the price demanded by the plaintiff was unjustly high. On this basis, he reduced the price so as to arrive at the "just value": "I examined the aforementioned merchandise, which is listed in the parties' written accounting at 688 livres, the value of which I estimated, and I reduced the price to the sum of 645 livres, the just value."⁷⁸

Consider also the case of Boullan v. Michel, in which the arbiter concluded that a bill of exchange had been sold at too great a discount.⁷⁹ Joseph Boullan, a Parisian bourgeois, had somehow come into possession of a bill of exchange for 700 livres, drawn to his order. Desperate for cash, Boullan entrusted the bill to Michel, a leader [ancien] of the tapestry guild, with the understanding that Michel would either purchase it himself or negotiate it to another.⁸⁰ Somehow a decision was made that Michel would use the bill of exchange to purchase merchandise, which he would sell, so as to give the proceeds to Boullan.⁸¹ With Boullan's written authorization to sell "the most advantageously that could be done,"⁸² Michel sold the merchandise for approximately 327 livres. Deducting twenty-five livres as his fee, Michel then gave Boullan 302 livres.

Boullan promptly filed suit in the Parisian Merchant Court, arguing that he had not received fair value for the bill of exchange. While admitting that the bill of exchange had been sold "at a very low price [à vil prix]," Michel claimed that Boullan was responsible because he "had showed too much eagerness."⁸³ According to Michel, he had notified Boullan of the price prior to the sale, and Boullan had consented to it because he "claimed to be pressed for money."⁸⁴ Without determining the truthfulness of Michel's assertion that Boullan had consented to the price, the arbiter concluded it was unjustly low—so low, in other words, that the issue of consent was irrelevant. "[T]o lose three-sevenths," he explained, "is too much."⁸⁵ In other words, the arbiter concluded that there had been a lésion of the value of the bill—that it had been sold for less than half the just price and that the sale was therefore voidable. Concluding that Boullan had paid far too high a discount rate, the arbiter recommended that the court order Michel to pay 100 livres as an indemnity. Why he chose this particular sum for the indemnity is not clear. Presumably, however, one factor in his decision was that Boullan would thereby receive a total of 402 livres. Unlike the 302 livres he had previously received, this amount was more than half the just price—the bill's face value of 700 livres—and, thus, cured the lésion.

C. Distinguishing between Parties of Good and Bad Faith

The merchant court's commitment to advancing substantive morality—even if this required violating the letter of the law—lent itself to the view that litigation was a moral struggle in which good and evil confronted one another, and in which it was the function of the court to ensure the triumph of good. Ideally, the court would ensure such a virtuous outcome by convincing the parties voluntarily to embrace a moral compromise, but if such attempts at reconciliation failed, it would simply mandate the victory of the morally rightful litigant.

Precisely because the merchant court understood its role to be the active promotion of Christian virtue, it employed certain procedures and modes of legal reasoning designed to distinguish between parties of good and bad faith.⁸⁶ As explained by Louis-Sébastien Mercier, a contemporary commentator on life in Paris, who was in no way associated with the court, "All vain subtleties are banished from this tribunal, as well as the lengthy formalities of the ordinary court. The judges, who are merchants, seek only to identify the good faith of one of the litigants and the bad faith of the other."⁸⁷

1. Evidentiary Procedures The merchant court's high degree of concern with the litigants' moral character is evident in its distinctive use of oaths. According to Jean Toubeau, the leading commercial jurist of the age and a former merchant-court judge, "In the merchant court, where more than in any other court good faith reigns, judges, and decides lawsuits, affirmations by oath are used and relied on more than in other courts...."⁸⁸ Like the ordinary, civil-law courts of the Old Regime, the merchant court regularly required litigants to take a decisory oath, which as its name suggests, determined the litigation's outcome. If a party who was asked to take the oath did so, he won the lawsuit, but if he refused, he lost.

Although from the modern perspective it seems extraordinary that the outcome of a lawsuit could turn solely on a litigant's oath,⁸⁹ in the world of the Old Regime an oath made to God on penalty of eternal damnation remained a serious matter. As Toubeau remarked, "[I]f God, who is the avenger of perjury, does not punish perjurers visibly as he did in the past, they are no less grievously chastised, because we do not know from where our miseries, losses, sudden death, etc. come. But what must give us even greater fear is the eternal damnation that such an enormous sin merits."⁹⁰ For eighteenth-century merchants, whose lives were structured around a constant series of religious rituals, God was in a literal sense omnipresent. As discussed above, members and attendees of the merchant court began each sitting by attending Mass, and the court held numerous special Masses for the repose of the souls of various departed judges and consuls. In this context, people who pledged their souls in taking an oath to God were likely to think twice before lying.⁹¹

Although the decisory oath was in no way unique to the merchant courts, it was administered differently in these courts than it was in the ordinary civil-law courts.⁹² In the civil-law courts, a party could be asked to take the oath only when the party who bore the burden of proof failed to meet the evidentiary standard of "full proof," which consisted either of "authentic" written evidence (such as a notarized document) or some combination of half-proofs. "Private" written evidence (such as an unnotarized document) and a witness's testimony each constituted a half proof.⁹³ Thus, for example, if a plaintiff seeking payment on an alleged contract offered as evidence only an unnotarized document, the judge might require either the plaintiff or the defendant to swear an oath as a means of completing the proof. In determining the party to whom to "defer the oath," as this procedure was termed, the judge was supposed to consider such factors as which party might be more likely to know any relevant information, as well as the status and reputation of the parties.⁹⁴

If the party who bore the burden of proof failed to proffer any evidence at all, however, the judge was required to defer the oath to his opponent.⁹⁵ Thus, in the typical scenario, when a plaintiff filed suit without mustering even a half proof, the defendant would take the decisory oath swearing that he was under no obligation or that he had fulfilled it. The plaintiff's suit would then be dismissed. As a contemporary commentator explained, dismissal on the basis of the defendant's oath was appropriate because it was that for which the plaintiff himself had bargained: "[The plaintiff] relied on [the defendant's] faith; this is the title to property that the alleged creditor chose for himself; he therefore cannot seek to eschew it."⁹⁶ Rather than demanding a writing or other evidence, the plaintiff had decided to place his trust in the defendant's good faith, and it was thus only right that the plaintiff's claim should be resolved by the defendant taking an oath in which he pledged his faith.

In contrast to the procedure followed in the ordinary courts, the merchant court required all plaintiffs to take an oath attesting to the truthfulness of their claims, even if they proffered a writing as evidence. Likewise, defendants raising affirmative defenses were required to back these defenses by an oath. In Toubeau's words, "[T]he appearance of litigants in person before the court, which is so valued by our edict [the Commercial Ordinance of 1673], is designed not only so that the parties can speak for themselves, but also so that they can affirm by oath their claims or their defenses; thus, a merchant court does not find for a plaintiff, even if the defendant defaulted by failing to appear, and even if the plaintiff has a written contract as evidence, unless the plaintiff affirms by oath that what he claims is truly owed him...."⁹⁷ That the merchant court required plaintiffs to take the decisory oath even when they proffered signed notarized contracts constituting full proof clearly indicates that the oath's function in commercial adjudication went far beyond its civil-law role of evidentiary gap-filling. Indeed, because a notarized contract was such powerful evidence, there was no question but that the merchant court would defer the oath to the plaintiff who came forward with such a contract. Here, therefore, the purpose of the decisory oath was not to complete the evidence, but rather to highlight the fact that, as Toubeau explained, "[i]n the merchant court ... more than in any other court good faith reigns."⁹⁸ To win a case in the merchant court, it was not sufficient for the plaintiff to satisfy a technical legal requirement concerning the sufficiency of the evidence. His claim had to be true—so true, in fact, that he was willing to pledge his eternal soul and good reputation on its merit.

A second reason why the decisory oath played a more significant role in the merchant court than elsewhere was because of the court's frequent reliance on merchants' accounting books. In a civil-law court, the records kept by a nonmerchant would have little if any evidentiary value, and a plaintiff who filed suit relying solely on such records would likely find his suit dismissed upon the court's decision to defer the oath to the defendant. By contrast, in a merchant court, significant evidentiary weight was given to merchants' accounting books. Although contemporary jurists were uncertain whether accounting books constituted full proof or half proof,⁹⁹ the merchant court—which required the decisory oath even when a notarized contract was available—also required the oath when the plaintiff relied exclusively on accounting books. If accounting books were deemed half proof, the oath could be viewed as completing the proof, and if the books were deemed full proof, the oath could be seen as emphasizing the importance of good faith. Either way, the real purpose of the oath was to ensure that reliance on accounting books was justified by the knowledge and reputation of the merchant who prepared them. As explained by an arbiter, who paraphrased the work of a contemporary jurist, it was the party with properly maintained accounting books and a reputation for probity who ought to swear the decisory oath: "In one word, the order in which accounting books are kept, the reputation of the parties, and the most apparent good faith must always enter into consideration in determining to which party to defer the oath."¹⁰⁰ In this way, administration of the decisory oath by the merchant-court judge was yet another vehicle for the community's judgment as to the parties' moral character to enter into the litigation and into the court's ultimate decision.

Although the merchant court generally would not admit accounting books into evidence unless the party who proffered them took the decisory oath, the accounting books themselves were also thought to speak to the party's moral character. A merchant who properly maintained his or her accounting books was a person with nothing to hide, who on a daily basis sought transparency in his dealings and took responsibility for his obligations. In contrast, the merchant who did not keep accounting books at all or who failed to maintain them in the prescribed manner was a person who, at best, did not sufficiently appreciate the weight of his or her obligations and, at worst, was actively engaging in chicanery. As the noted jurist Bornier remarked, any deviation from the strict rules for maintaining accounting books, including "poor ordering or lack of chronological continuity, is a mark of bad faith."¹⁰¹ Thus, failure to present properly ordered accounting books was detrimental not only because a litigant lacked an important piece of evidence. This failure also reflected negatively on the merchant's character as a whole. Indeed, the state of a merchant's accounting books, as revealed over the course of the litigation, could profoundly shape his or her reputation. Reputation would, in turn, have a significant effect on the merchant's professional prospects. In this way, the Parisian Merchant Court's reliance on accounting books reinforced the important role in commercial affairs of the merchant's reputation for morality.

The case of Colon v. De Sainte Beuve illustrates the moral weight accorded to accounting books.¹⁰² Colon was a locksmith and mechanic who for several years had provided various services for De Sainte Beuve, a goldsmith. Colon worked on credit, and every so often De Sainte Beuve paid Colon part of what he owed him, while at the same time giving him more work and thus incurring further debt. After several years, the parties did an accounting, which they recorded in a writing stating that De Sainte Beuve owed Colon 1,326 livres. According to Colon, De Sainte Beuve never paid him any of this amount, and thus, he was forced to bring suit two years later. In his defense, De Sainte Beuve claimed to have paid most of his obligation in the form of promissory notes for the sum of 1,200 livres. Colon, however, denied ever receiving the notes. The arbiter examined both parties' accounting books. In part, this examination focused on the particular factual issue at stake—namely, whether Colon ever received the notes. Thus, the arbiter noted that Colon's accounting books recorded money received from De Sainte Beuve in prior years, but did not list any money received for the particular services in question. This, he suggested, was evidence that De Sainte Beuve had never paid Colon for these services.

The accounting books, however, served the arbiter as evidence not only of the fact of nonpayment in this particular transaction, but also as evidence of the parties' moral character. De Sainte Beuve, the arbiter noted, possessed one sole "imperfect book" with only recent entries totaling three or four written pages.¹⁰³ Furthermore, this sole accounting book recorded only De Sainte Beuve's sales transactions and contained no information about his obligations to people he hired. While De Sainte Beuve presented these shoddy books, continued the arbiter, "Colon, in contrast, presented to me books that reveal careful administration and good faith."¹⁰⁴ Based largely on this evidence, the arbiter concluded that the court ought to grant judgment to Colon. Thus, accounting books provided not only a source of information concerning particular disputed facts, but also evidence of the merchant's character—and consequently, of which party was likely to be speaking the truth.

2. Sentimental Legal Reasoning The merchant court pursued the task of distinguishing between parties of good and bad faith not only in its formal legal procedures, but more subtly, in the way it approached legal reasoning. Arbiters sometimes employed a sentimental, narrative-based form of reasoning, in which the judgment recommended seemed to follow naturally, indeed necessarily, from the highly melodramatic presentation of facts, rather than from any applicable rules of law. Like all melodrama, such reports presented a narrative in which virtue and vice—merchants of good and bad faith—confronted one another.¹⁰⁵ The resolution of the melodrama—the triumph of virtue—was brought about by the arbiter's recommended judgment in favor of the merchant of good faith.

Reports penned in this sentimental, melodramatic style are characterized first and foremost by their narrative form. In relating a narrative account, the arbiter presented the particular transaction at issue in the context of the parties' long-term relationship and, more generally, in the context of their respective characters and lives. In extravagant prose, the arbiter commented on the litigants' various virtues and vices, noting the ways in which these contributed to the formation of the transaction in question. In this way, the arbiter's judgment as to which party should win the lawsuit appeared to emerge directly from his assessment of the parties' moral character. The arbiter's report in the case of Blaincourt v. Dubois et Dubuisson, entrepreneurs is a classic example of this sentimental style of reasoning.¹⁰⁶

In this case, a man named Blaincourt sued Dubois and Dubuisson, the owners of a starch factory, for money that he claimed they owed him for his services as their agent. Dubois had discovered a secret process for making starch out of spoiled flour. As a result, he obtained an authorization from the King's Council to build his own starch factory employing this secret process. Lacking the funds to undertake this venture himself, Dubois enlisted Dubuisson as his associate, who provided the necessary financial backing. Dubuisson then made an agreement with Blaincourt, the exact terms of which were the subject of the lawsuit, but which provided generally that Blaincourt would be responsible for the daily operation of the factory whenever Dubuisson had to leave town. Believing that he had been remunerated insufficiently for his services as their agent, Blaincourt sued Dubois and Dubuisson after five months had passed. In response, Dubuisson argued that he had no formal agreement with Blaincourt establishing the latter as his agent. Instead, he claimed, he had allowed Blaincourt to help him during his absences, in return for some money, purely out of kindness. Dubuisson had already been very charitable with Blaincourt, giving him money on many past occasions, and his decision to allow Blaincourt to oversee the factory while he was away was but one more act of charity. Furthermore, Dubuisson continued, he had already given Blaincourt more money than he deserved, since Blaincourt was extremely negligent in overseeing the factory and thereby caused him and Dubois to lose a great deal of money. In addition, Dubuisson claimed that he had given Blaincourt more money than Blaincourt was now willing to acknowledge. No response from Dubois is reported, presumably because whatever deal existed with Blaincourt was made by Dubuisson.

The arbiter concluded the report by recommending strongly that the judges find in favor of Dubois and Dubuisson. In his view, Blaincourt's claim should not only be dismissed, but in addition, Blaincourt should be made to pay Dubuisson back for the money that he claimed he never received and for which he could not account. The way in which the arbiter arrived at this conclusion was through the presentation of a narrative in which the virtues and vices of the various parties are so readily apparent that no doubt was possible concerning who should win. The arbiter began his report by stating that before he explained the parties' respective claims and supporting arguments, "it is very essential to give you an idea of the characters and of their position." As the term "characters [personnages]" would suggest, what follows is a description of the parties that reads as if it were excerpted directly from a novel:

Mr. Dubois is a former officer for whom fortune serves above all to furnish the mediocre necessities; he has applied himself forever to chemistry and this art, which is most often fatal to whose who try to make discoveries, provided him with knowledge of means to fabricate high quality starch from all kinds of spoiled flour; thus, after different experiments conducted in the presence of the commissioner of the [Royal] Academy [of Sciences] and upon the commissioner's certification, Dubois was authorized by decree of the [King's] Council to set up a starch factory. This authorization, though potentially profitable, did not eliminate his incapacity to provide the necessary capital; he had only talent and needed money, thus an associate; but new enterprises rarely find proselytes; it is necessary to find men who, blind with ambition, are willing to risk their fortune on their faith in the experiments, whose success does not guarantee profit; we are about to see who is the man whom the most gratifying hopes seduce.
Mr. Dubuisson is the valet of the King's barber; he was born with that tender soul that often causes generosity to degenerate into a shortcoming and that, due to an inability to discern those on behalf of whom feeling must weep, transforms a virtue into a weakness; having besides a too credulous spirit, with an ambition too eager to seize upon the first projects that might satisfy it, Dubuisson resides in the country, where he lives without spending much money.
Mr. de Blaincourt is one of those beings who, after having passed through different places in the army and lived from day to day, turned up during a time of peace in the capital, where tumult serves to disguise to some extent their unhappy existence, where after having spent the year, they find themselves astonished by the miracle that enabled them to subsist and hope that it will enable them to survive the next year; pillars of the cafes, trying to convince themselves that they have dined because they find themselves in the cafes during the hours when others occupy themselves with precipitating digestion, nourishing themselves with the fumes of hope; amateurs in business; among those beings, in conclusion, whom unhappiness renders as crafty as ingenious and whom it is impossible to approach without them producing a very strong shock, like a jolt of electricity, that makes itself felt by all those who dare to touch them.¹⁰⁷

The arbiter's description of these characters, at the beginning of his report, left little doubt concerning how the narrative would develop and to whom the arbiter would grant victory. Dubois, the scientific genius, was unfit for all practical endeavors. While he understood the abstruse complexities of science, he lacked the worldliness necessary to undertake commercial activity. Not surprisingly then, the arbiter turned to Dubuisson and, thereafter, Dubois' role in the establishment and running of the starch factory all but disappears from the report. Dubuisson, in contrast, possessed common sense, but he suffered from the Achilles heel of an overtrusting and overly generous nature. A kind man, living simply in the countryside and eschewing the falseness and luxury of the city, he embodied traditional, Christian ideals of simplicity and charity. As one would expect, Dubuisson was the inevitable dupe of Blaincourt, a man so corrupted by the vileness of the city—so obsessed with luxury and so accustomed to idleness—that he was a danger to all who approached him. The arbiter's decision in favor of Dubois and Dubuisson and against Blaincourt followed directly from this opening narrative account of the parties' moral character. Hardworking, productive, generous, and honest, Dubois and Dubuisson necessarily had to triumph over the lazy, selfish, and duplicitous Blaincourt.¹⁰⁸

Sentimental legal reasoning of this kind transformed contests of legal claims into battles between virtue and vice, and thereby served to bridge the distance between legal and moral judgment. Such reasoning ensured that the judgments of the merchant court would follow from the community's norms and, in particular, from the importance it placed on status and reputation. Likewise, by highlighting that, as Mercier claimed, the merchant court was devoted primarily to discovering "the good faith of one of the litigants and the bad faith of the other," sentimental legal reasoning served to promote and legitimate the court and its judgments in the eyes of the community.¹⁰⁹

III. The Utility of Virtue

What accounts for the eighteenth-century Parisian Merchant Court's extraordinary commitment to Christian norms of charitable virtue? The answer, this article suggests, is twofold. First, the Parisian Merchant Court sought publicly to embrace Christian norms of charitable love because these were the prevailing norms of contemporary society. Indeed, given the pervasiveness of these norms in eighteenth-century France, it is their absence from the court, rather than their presence, that would beg explanation. Second, however, norms of Christian charity were highly conducive to commercial success. In the relatively undeveloped economy of the Old Regime, even more than today, commercial survival required friends. A merchant could not hope to succeed without long-lasting trading relationships, for the sake of whose preservation he was willing to forego short-term profit—and norms of charitable love, as promoted and enforced by the merchant court, helped ensure that he would do so.

A. Virtue and the Social Order

Old Regime merchants participated in a web of interlocking communal institutions, linked together by overlapping memberships and by shared social norms, including norms of Christian virtue. The typical eighteenth-century Parisian merchant—who was generally both a trader and an artisan—was involved, at a minimum, in a guild, a religious confraternity, a parish church, and the merchant court,¹¹⁰ each of which was to some extent a Christian institution. Parish churches were, of course, by definition Christian. So too, however, were guilds, the confraternities or brotherhoods with which guilds were usually associated, and as described above, the merchant court. Guilds, confraternities, and the merchant court devoted significant resources to such Christian rituals as celebrating Mass, marching in religious processionals, and honoring patron saints. Likewise, these institutions, seeking to display their Christian virtue, devoted considerable time and money to such charitable undertakings as providing food and money to the sick, the widowed, and the orphaned.¹¹¹

To recognize the important role played by Christianity and Christian institutions in the daily life of the Old Regime merchant is not to claim that all merchants of this time were genuinely devout, God-fearing souls—though many no doubt were. Indeed, there is evidence to suggest that, at least among certain portions of the populace, including notably Parisians, religiosity was on the wane during the eighteenth century.¹¹² But while not all merchants may have been true, believing Christians, they all participated in and depended on a network of institutions that embraced core Christian rituals and values. In other words, Christianity continued to infuse the social structure, expressing itself in the prevailing communal practices and norms, such that merchants engaged in Christian ritual and espoused Christian belief because that is what respectable merchants were expected to do.

Consider, for example, Jacques-Louis Ménétra, a master in the glaziers' guild of eighteenth-century Paris, who wrote an autobiography¹¹³ in which he repeatedly criticized priests as hypocritical and intolerant,¹¹⁴ but in which he also offered numerous examples of how Christian practices and norms pervaded his daily life as a merchant-artisan. While insisting that priests are "hypocrites who take advantage of the people's credulity" and are moved by "fanaticism and superstition,"¹¹⁵ he also proudly described his participation as a young man in a religious processional held by the members of his journeymen's association to thank God for the king's recovery from an illness. According to Ménétra, each member of the association contributed twelve and a half sols to fund the processional, which he described as follows: "We were accompanied by drums and oboes and were all lined up with our ribbons in the streets of the city and of the abbey of Baumont where the abbess in her princess' garb received a silver platter that I presented to her the blessed bread and a brief compliment that had been given to me She put four louis on the plate and said to me I am very satisfied with the blessed bread I have just received and with the compliment of my little glazier."¹¹⁶ Despite the great antipathy he felt towards Catholic officialdom, Ménétra clearly considered some degree of communal religious practice useful for preserving and promoting his social standing.

To the extent merchant respectability hinged on at least outward adherence to certain core Christian practices and beliefs, a merchant's status as a Christian and his status as a citizen were fundamentally intertwined. As described above, the key communal institutions of Old Regime Paris shared an overlapping membership, such that those who attained prominence in one were that much more likely to do so in all the others. Thus, for example, a leader in the guild was often also a director of the confraternity, an administrator in the parish church and a member of a prominent neighborhood family. And, those merchants who had in this manner achieved true success might finally hope to end their careers by holding office in the central municipal governing body of Paris, the bureau de la ville.¹¹⁷

Given the overlapping nature of religious and civic institutions, the prevailing social norms were themselves both religious and civic. Nowhere was this more apparent than in the era's devotion to and obsession with notions of virtue. As J. G. A. Pocock has so brilliantly shown in his analysis of the Anglo-American political tradition, Christian conceptions of virtue had a distinctive origin and content from that of civic conceptions of virtue, which were rooted in the republican traditions of the ancient world. Over many centuries, however, as Western society modeled itself on both Jerusalem and Rome, these distinctive conceptions came to shape and inform one another.¹¹⁸

Although a complete history of French notions of virtue on the scale of Pocock's epic narrative has yet to be written, it is clear that a similar intermingling of distinctive conceptions of religious and civic virtue was at work in early-modern France.¹¹⁹ Thus, for example, the Old Regime monarch was conceived as an earthly emissary of God whose selfless devotion to his people was at once a manifestation of Christian virtue (loving fellow man above one's own self) and of civic republican virtue (placing service to the state and its citizenry above all self-interest).¹²⁰ This intermingling of religious and civic virtue also expressed itself in the various public processionals that punctuated daily life in the Old Regime. In the processionals accompanying, most notably, royal entries, royal funerals, and lits de justice (special sessions of the parlement in which the king presided), the various corporate entities constituting society paraded before the king according to rank, thereby representing and reaffirming the social order.¹²¹ Because the social order was a divinely-established hierarchy ranging from the spiritual to the physical,¹²² as well as the totality of the citizenry constituting the state, participation in such processionals was an expression of both religious and civic virtue.

It was precisely this intersection of two kinds of virtue—precisely the fact that religious virtue implicated civic virtue, and thus social status—that led even deeply anticlerical merchants like Ménétra to participate in public religious rituals. In other words, it was only by embracing the community's ideals of virtuous, Christian behavior—only by adopting its norms—that merchants could ensure themselves a good reputation. In this sense, a merchant's reputation, which was so crucial for obtaining credit, was not simply a stand-in for the modern-day credit bureau; it was not simply, in other words, a source of known facts about prior obligations. Instead, a merchant's reputation reflected on his moral probity in the broadest sense—his probity not merely as a merchant, but as a Christian member of the community. Indeed, as discussed below, the merchant court was able so effectively to harness the power of reputation as a tool for regulating commercial exchange precisely because there was no meaningful distinction between a person's moral standing as a merchant, as a citizen, and as a Christian.

In sum, norms of Christian virtue were a defining feature of the eighteenth-century merchant court because they were a defining feature of eighteenth-century French society. Furthermore, as enforced by the merchant court, such Christian norms—including norms requiring selfless love, and consequently deeming commercial self-interest sinful—actually facilitated commercial investment and growth. Anticommercial norms of selflessness served to promote commercial self-interest because they significantly lowered the costs of transacting business in the Old Regime economy. But to understand how this was so, it is necessary to begin by exploring in greater depth the nature of contractual exchange in the relatively undeveloped economy of the Old Regime.

B. Relational Contracting, Transaction Costs, and the Harnessing of Christian Norms of Virtue

Key to understanding the nature of Old Regime contractual exchange are the severe technological limitations that existed on the availability and flow of information. As a result of these limitations, men and women¹²³ involved in commercial activity in eighteenth-century Paris were illable to predict how much of any given product or service they would be able to sell. Because demand was usually uncertain, and because economies of scale were far less significant in a preindustrial era, most merchant-artisans produced and sold goods that they made and/or obtained to order.¹²⁴ Since production and sales were geared towards the short term—towards requests that could be made at any moment—merchant-artisans needed to ensure that they would be able to obtain any necessary inputs immediately upon demand. In a world in which the sellers of these inputs, like the buyers, were unlikely to have large stocks of generic goods on hand, this was no small problem. By building long-lasting relationships with their suppliers, eighteenth-century merchant-artisans increased the chances that the latter would come to their aid when necessary.¹²⁵

Such long-term relationships also proved valuable in addressing the problem of insufficient and inaccurate information about potential suppliers, customers, creditors, and debtors. In a world without the vast informational infrastructure to which we today have become accustomed, search costs were very high. A buyer seeking a supplier who could provide the kind, quality, and number of goods that he or she sought—and who could be trusted to honor obligations—had to rely almost entirely on word of mouth. Similarly, a supplier seeking buyers depended largely on reputation—his or her own and that of potential buyers. Thus, finding the right people could be quite expensive for both buyers and sellers. A long-term relationship between buyer and seller greatly reduced such search costs and provided an additional incentive for maintaining established relationships. Furthermore, a long-term buyer-seller relationship, in which the parties came to know and trust one another increasingly over the years, was itself a source of valuable information about other merchants. This was so not only because people who trusted one another were that much more likely to share vital information, but also because they had a vested interest in each other's success.

The means by which commercial credit was extended and the nature of contracting also encouraged long-term trading relationships. One of the primary credit mechanisms of the Old Regime merchant-artisan was book debt.¹²⁶ A book debt usually arose when buyer and seller made an oral agreement for the sale and delivery of a particular good or service, which they would then record in their respective accounting books. Typically, the buyer would pay the debt in installments, while at the same time purchasing additional goods on credit from the seller. Thus, the buyer's debt, while continuously amortized, was never paid in full.¹²⁷ Alternatively, if buyer and seller reciprocally bought and sold from one another, a purchase made by one would compensate for a purchase made by the other. Unless the goods were of identical value, however, one of the parties would always remain in debt to the other.¹²⁸ In either case, the buyer and seller would meet together periodically to do an accounting, when they would create a list of the goods sold and payments made, and both parties would typically sign this document. On this occasion, the parties would usually also agree that the buyer was to pay a portion of the debt at a specified time. Generally, these accountings would occur not at predetermined, regular intervals, but every so often, when the parties decided it was timely and convenient.¹²⁹ When payments were made, they usually took the form either of cash or of promissory notes, the latter of which served to extend further the credit already granted. Because by means of book debt, credit was continuously extended between the parties, their relationship did not come to an end and they had every incentive to focus not so much on the individual transaction—on obtaining the best possible deal in the short term—but on building a long-lasting relationship that would be to their mutual advantage over the long term.

An integral aspect of this book-debt system was that the initial contract between the parties was typically oral. The parties committed their dealings to writing only in their respective accounting books and in their periodic accountings. Because both parties to this long-term book-debt relationship expended a great deal of time, effort and money in its establishment and maintenance, they had little incentive to seek one-sided, short-term gain by shirking their contractual obligations. As a result, there was little reason to conform to the traditional legal requirements of contract formation, and in particular, the requirement of a writing. In fact, insistence on a writing might indicate a mistrustfulness corrosive to the goal of establishing a long-term, trusting relationship. Thus, Guyot, a noted jurist and author of a legal dictionary, explained that the merchant courts, unlike all others, were willing to enforce oral contracts because, "[t]he danger of a few particular acts of fraud is preferred to that of destroying good faith and the ease of transacting by demanding too many precautions."¹³⁰

This commitment to undertaking commercial activity on the basis of long-term relationships of trust was made possible by the institutional context in which most merchant-artisans lived and worked—a context that gave rise to reputation as a powerful social force. As described above, most merchant-artisans in eighteenth-century Paris were reminded daily of their dependence on one another through their participation in an active communal life grounded in such interlocking institutions as guild, confraternity, parish church, and merchant court. And, because these institutions overlapped to a significant extent—such that, for example, members of a particular guild often belonged to the same confraternity, lived in the same neighborhood, and went to the same church¹³¹—the reputation that an individual developed in one institution followed him to all others.

For merchants, whose survival depended on obtaining credit, the reputation thus developed could lead to either success or failure. This was because, in an age of relatively primitive technology, word of mouth was the creditor's only source of information concerning potential debtors. By giving rise to reputation as such a powerful force, the interlocking communal institutions of the Old Regime made possible the exchange of information necessary for the transaction of commerce and produced the incentives necessary for contract enforcement. Information about reputation provided merchant-artisans with some security regarding the trustworthiness of those with whom they entered long-term creditor-debtor relationships and thereby enabled the book-debt system (and the oral contracts on which it relied) to function. Likewise, the power of reputation discouraged parties from shirking—from placing short-term self-interest above long-term relationships—because the consequences of earning the community's disfavor were so dreadful.¹³²

In sum, because eighteenth-century merchant-artisans had difficulty predicting demand, discovering available buyers and suppliers, and assessing the credit worthiness of potential debtors, they invested in developing long-term relationships, which served significantly to reduce future search costs. In selecting those with whom to enter such long-term relationships, merchant-artisans were influenced greatly by knowledge of one another's reputation, as developed and transmitted within the interlocking institutions constituting their community. And, when tempted to abandon these long-term relationships in order to pursue their short-term self-interest, they were dissuaded from doing so by their recognition of the disastrous effects such action would have on their reputation, and thus on their access to credit.

In recent years, economists have begun trying to make sense of the kind of commercial behavior that typified Old Regime contractual exchange—in particular, the willingness of market players to abandon short-term self-interest for the sake of developing and maintaining long-term trading relationships. According to these New Institutional Economists, such seemingly selfless behavior, which they have termed "relational contracting," actually promotes commercial self-interest because it serves to reduce transaction costs.

Rejecting the neoclassical approach to economics and its exclusive focus on the direct costs of production, the New Institutional Economists have demonstrated that a significant proportion of a society's resources are typically expended on transaction costs—namely, the totality of those costs necessary to keep the society and its economy functioning.¹³³ Transaction costs arise, they assert, because of certain facts about the human character and the nature of contractual exchange that neoclassical economists have, for the most part, assumed away.¹³⁴

As for human character, the New Institutional Economists argue that neoclassical economics fails to take into account that: (1) people lack complete rationality and full knowledge (in other words, they possess only "bounded rationality"), and (2) they often engage in opportunistic, self-serving behavior. In the view of these scholars, these human character traits add significant costs to economic transactions, entirely distinct from those directly incurred in the production of goods and services. Such transaction costs include, for example, the cost of searching for reliable buyers and suppliers and the cost of renegotiating and/or enforcing contracts, neither of which would be incurred if the neoclassical assumptions of perfect rationality and complete honesty actually pertained.

Scholars of the New Institutional Economics also claim that while bounded rationality and opportunism are inherent to human nature, the effect of these character traits on transaction costs depends on the nature of contractual exchange. To the extent contractual exchange is of the sort presupposed by the neoclassical economists—namely, highly standardized transactions, consisting of a one-time exchange, such as for example, the sale of mass-produced consumer goods—information relevant to the transaction is likely to be readily available. And for precisely this reason, incentives and opportunities to shirk are likely to be minimal. As the New Institutional Economists observe, however, many transactions are not standardized. Furthermore, some transactions, such as long-term supply contracts, envision not a one-time exchange, but an ongoing relationship. In the case of both nonstandard and long-term contracts, information relevant to the transaction is much harder to obtain—not least because this would include information about future events. In addition, to the extent the parties to the transaction lack relevant information, they are that much more dependant on one another to renegotiate in light of events as they unfold—and thus, that much more subject to the other's tendency to act in an opportunistic, self-serving fashion. As such transactions are neither discrete nor impersonal, but long-term and personal, scholars have termed them "relational contracts."¹³⁵

Contractual exchange in Old Regime France approached the model of relational contracting far more than that of classical or neoclassical contracting. As described above, transactions in this relatively undeveloped economy were not standardized, demand was hard to predict, and information about prospective suppliers, buyers, debtors, and creditors was difficult to obtain. Furthermore, the book-debt system of credit transformed the onetime exchange into an ongoing creditor-debtor relationship. As a result of all these factors, opportunities for shirking abounded, and transaction costs were quite high. To lower these costs, merchants forged long-term trading relationships, which promoted the sharing of vital information and fostered trust. This system of relational contracting—so characteristic of the Old Regime and so effective in reducing transaction costs—was greatly facilitated by the merchant court, which helped ensure that at precisely those moments when long-term trading relationships were most threatened, the merchant community would be reminded of their key importance.

That the mechanisms or "governance structures" established to regulate commercial exchange, including, most directly, the legal framework in which such exchange takes place, have a significant impact on transaction costs is an insight that has followed from recognizing the differences between classical or neoclassical and relational contracting. A formalist legal system, which functions in a standardized, impersonal fashion to enforce standardized agreements or to fill gaps in agreements by applying standardized rules, may well be the appropriate governance structure for the classical or neoclassical contract. However—to the extent that relational contracts are sui generis, long-term, and personal—standardized, impersonal agreements and rules are likely to be unavailing. Furthermore, in the case of such contracts, renegotiation that would permit continuity in the relationship may be more valuable than the unilateral victory of contract enforcement. Thus, scholars suggest that relational contracts may be better suited to governance structures, such as third-party arbitration, that allow for greater flexibility than the legal system.¹³⁶

Drawing on these lessons from the New Institutional Economics, scholars in the field of law and social norms have developed an increasingly nuanced understanding of when parties to contractual exchange might prefer various types of governance structure. Moving beyond the broad division between classical or neoclassical and relational contracts, Lisa Bernstein has observed that, even for relational contracts, different governance structures might be appropriate for different periods in the relationship. Thus, as the parties attempt to solidify and perpetuate a long-term relationship, they are likely to seek a governance structure that implements "relationship-preserving norms"—such as resolving disputes by "splitting the difference"—which are premised on a willingness to compromise and be flexible. In contrast, when the parties have decided to terminate their relationship, they are likely to adopt a governance structure that facilitates a distinctive set of "end-game norms," aimed at promoting and securing self-interest by enforcing clearly-established formal rights.¹³⁷

Empirical research has demonstrated that parties often leave the enforcement of relationship-preserving norms to a variety of informal sanctions, such as the threat of discontinuing the relationship or maligning the other party's reputation. In contrast, they prefer to rely on an established method of third-party dispute resolution, including both the legal system and arbitration tribunals, to enforce end game norms.¹³⁸ In addition, studies have shown that social institutions and conditions established for purposes other than regulating commercial activity, can function as extralegal governance structures that promote relationship-preserving norms by providing a network of strong interpersonal relationships which can be cheaply utilized for monitoring and controlling behavior (including commercial behavior). Reliance on such preexisting institutional networks avoids the significant transaction costs of developing a specialized governance structure.<