Conferences on the Virtues
By Fr. Bruno Cocuzzi, ocd
Number 59
Contract of Purchase
and Sale, continued…
These are the
remaining kinds of onerous contracts we must treat of in this part of
the tract on Commutative Justice:
Monopoly, Exchange (or Barter),
Profiteering (Latin: Negotiatio),
Leasing & Renting, Contracting, and Employment Contracts.
Generally
speaking, a Monopoly is the exclusive power and authority, held by just one
person, or by very few persons, to sell a certain type of merchandise.
There are private
monopolies and public or legal monopolies. The private monopolies arise out of
conditions and circumstances of daily business life. The public (or legal) monopolies are authorized by civil
authority.
One example of
a public monopoly is found here in New Hampshire and in certain other States
of our country. That is the Liquor
monopoly. The State reserves to itself
the exclusive right to sell alcoholic beverages. In some European countries, the civil authority reserves to itself
the exclusive right to sell such things as salt and tobacco. It is a means of obtaining revenue to support
the Government.
Private
Monopolies come into being as a result of deliberate efforts on the part of
merchants and business people. Strictly
speaking, these are not contracts between buyer and seller, since the
consumer has no say in the matter. (In
the legal monopolies we are familiar with in the States, the voters apparently
do have a say in the matter). Rather,
contracts among suppliers and merchants and business people are the means by
which private monopolies are created.
This happens
when a particular merchant (or alliance of merchants) buys all of a certain
article of merchandise from the producers thereof, and this is called directly
cornering the market.
A conventional
monopoly occurs when all the vendors of a certain article of merchandise agree
among themselves to sell it at a fixed price, pre-determined among themselves.
Then again,
contracts can be made among suppliers, merchants and business people to prevent
the importation of a particular article of merchandise from certain (foreign)
sources, and this is called indirectly cornering the market.
The purpose of
all monopolies is to prevent a flooding of the market with the article
of merchandise in question, with the result that it can be sold for a greater
than just price.
When things
like this happen on the level of producers within a nation, it is called a Trust. To protect against this we have Anti-Trust
Laws.
When this
happens on an International scale, it is called a Cartel, as among the
oil-producing nations.
Some Principles concerning Monopolies…
I.
When private monopolies are established to
prevent a “wasteful” oversupply, and the means to bring this about are honest
and just, then they are neither unlawful nor unjust. (I would never have imagined that private monopolies could be
created honestly).
II.
On the other hand, when dishonest and unjust
means are employed by one or more merchants or producers to create a “scarcity”
of a certain commodity, or to put competing vendors of the same commodity out
of business, then obviously, the said monopolies would violate commutative
justice. In the first instance they
would unjustly burden the consumer (who is forced to pay more than a just
price). In the second instance, it
would be an injustice against the competing vendors.
III.
Legal or public monopolies, (in the United States,
at least) usually operate in favor of the consumer. That is because the State can afford to sell
for less than private vendors would be able to. If there were any injustice, it would be against those citizens
who would like to be in the business of selling the commodity in question.
Apparently the
National Monopolies my author was familiar with (in Europe) did at times charge
an inflated price for a particular commodity.
Still, he says that, provided the greater price is not burdensome, it could
be justified as an indirect tax, which the government would have to
collect in order to help support the cost of governing.
Some Remarks concerning Monopolies…
1. There
can be useful and beneficial monopolies for the purpose both of reducing the
cost of producing a commodity or merchandise, and of distributing the costs
thereof. This can be done by the use of
more advanced manufacturing techniques or by a better division of labor.
They
can be created also to prevent “price wars” among vendors and abuses and harms
resulting there from. Monopolies
created for this purpose have in view the stability and security of the jobs of
the workers who produce the commodity, and of the business of those who market
it.
2. Monopolies
tend to be unjust because ordinarily the merchants in control of them demand a
price that is out of proportion to the cost of labor and materials needed to
produce the commodity or merchandise in question, or out of proportion to the
price they, the vendors, had to pay to acquire them.
3. Wherever
unusually large margins of profit accrue to those controlling
monopolies, there is always the suspicion that unjust practices are
responsible. Nevertheless, according to
my author, they may be the result of honest circumstances, e.g.:
a) The
rate of currency exchange between where the goods are produced and where they
are sold may be responsible for the greater margin of profit.
b) Some
new invention or technique may bring it about that a particular commodity can
be produced for much, much less than the consumers are willing and happy to pay
for it.
c) Honest
skill and industry that is used to reduce the price to the producer and the
vendor might be the reason for the greater margin of profit.
4. For
the common good for the citizens of a nation, it behooves the government to
regulate monopolies that happen to be good and useful. The common good in this instance is to
prevent hiring of cheap labor to the detriment of the workers who
produce the goods, and an increase of retail prices to the detriment of poor
folks in society. Other reasons are to
prevent the controllers of the monopoly to gain inequitable economic power and
influence in society to the detriment of the lawful civil authority. Power to influence the civil authority
easily results in the passing of laws favorable to the monopolies to the
detriment of ordinary citizens.
5. Therefore
the words of Pius XI in the encyclical Quadragesimo Anno are still
timely and applicable:
“Some
[controllers of monopolies] have so dulled their consciences that they have
come to believe that it is lawful for them to increase their profits by any
means whatever and have made studied efforts to use whatever means are
available, both lawful and unlawful, to protect themselves and their wealth
against sudden reverses of fortune. The
easy profits that come to hand when law and justice are disregarded cause many
to wheel and deal in good and commodities with one purpose in mind: to obtain huge profits with minimal personal
labor and cost. Profiteering without
restraint, they capriciously and greedily raise and lower prices on goods and
commodities beyond the prudent expectations of the workers who produce
them. The laws, which promote the
welfare of business and industrial federations by seeking to divide and
minimize risks, have been exploited shamefully. We note that their consciences are scarcely touched by the
obligation these laws impose to act responsibly. In addition, those who are designated to protect the common good
of such federations have been guilty of injustices and over-reaching. Even the heads of economic associations
(Unions?) have not been mindful of their duties; they have betrayed the rights
of the members whose funds and interests they have been appointed to manage and
promote. [I couldn’t find an English
version of the Encyclical in our library here, so I can’t vouch for the
complete accuracy of my translation from the Latin.]
Article VI – Bartering and Profiteering…
The subject of
bartering is treated in one short paragraph:
Barter is a consensual contract in which the contracting parties
exchange one kind of merchandise or item for another. It differs from a contract of purchase and sale. In the latter, money is given for
merchandise. In the other, merchandise
for merchandise. The same rules and principles
govern Barter that govern purchase and sale, with the exception that contracts
of barter are not rescindable.
Profiteering
is the practice of buying up large quantities of merchandise for the express
purpose of selling them for profit. In
the wide sense, profiteering includes buying large quantities of goods for the
purpose of altering them in some way to make them more valuable and then
selling them for a profit. In the
strict sense it means buying up the goods and selling them unchanged for
a higher price. In profiteering the
single motivation is monetary gain. My
author has an interesting comment to make about profiteering:
Of
itself, profiteering in the strict sense is neither honorable nor illicit;
there is nothing “wicked” about it. Although
it is morally “indifferent”, there is something offensive and blameworthy about
it, because it caters to a “hunger” for gain that cannot be reconciled with
fitting and decent human goals.
Therefore, in
order to be a worthwhile human objective, it must be made honorable by the use
made of the monetary gain: to support
one’s household, to assist the needy, or supply some public need that otherwise
would not be met in society.
Profiteering is “dangerous” because one can easily make the love of gain
the primary motive for engaging in it; and often it is the occasion of deceit
and fraud and other kinds of injustice.
To sell something
for a price that is higher than its actual worth is not unjust; nor is it
unjust to buy something at a lower than actual cost for the purpose of selling
at a higher than actual cost. Whoever
does this is not necessarily engaging in profiteering. Almost anyone would have occasion to do so
in isolated instances. This could
happen because one bought something for a much lower than ordinary price with
the intention of keeping it permanently, and then later on didn’t need it
or want it, and sold it for its true value.
Or it may have become more valuable with the passage of time and so
commanded a higher price when the owner no longer wanted it. Many other similar reasons would exist to “justify” making a substantial
profit on any item bought “cheap” and sold “dear”.
One final
observation concerning this subject.
The old Canon law prohibits Clerics and Religious from engaging in
profiteering. The reasons cited are
that those who profess to follow Christ more closely must abstain from anything
that has even the mere “appearance” of love of money; and besides, profiteering
gets one involved in worldly cares, and so tends to withdraw one from devoting
due attention to spiritual realities.
Second Question – Renting Out (Letting) and
Renting (Leasing)…
I use Renting
Out and Letting to translate the Latin word Locatio; and
the words Renting and Leasing to translate Conductio. To tell the truth, I have never learned how
to use these English words accurately, so I hope I don’t create confusion
in your minds or fail to convey accurately Catholic moral theology in these
matters. In any event:
Locatio is the bilateral
“onerous” contract by means of which one grants the use of his personal skills
or an employee’s skills to another, or in the alternative, grants the use of
one’s property to another, for a determined time and price.
Conductio is the very same
contract considered from the point of view of the one who “hires” the use of
the skills or the property just mentioned.
In reality, they are both partial contracts, or, components of a single
complete contract. A more formal
definition would be:
Letting
and Leasing is a bilateral onerous contract by means of which the use or the
earnings (fruits of property, or of the skills of a person are promised
for a specified time and a specified price.
1. Bilateral
Contract: to distinguish it from a
gift, which is unilateral.
2. Burdensome: to distinguish it from a mere “lending”,
which is done “gratis”.
3. The
use or the earnings: which distinguish
this contract from a purchase and sale agreement, by means of which ownership
is transferred.
4. Of
a thing or of a person’s skills: In
this kind of contract the object or the person with the skills are not consumed
or “used up”. This also distinguishes
it from a purchase and sale of consumable goods.
5. For
a specified time: If the use of the
thing or the person’s skills were to be granted in perpetua, the
Lessor’s ownership would be meaningless.
6. For
a specified price: which price is to be
determined according to prevailing values so that there be equality when
comparing the money paid to the value of the benefits obtained.
7. Is
promised: A mutual promise exchanged
between contracting parties is of the very essence of a Contract. The promises could be exchanged either
verbally or in writing.
There are two
types of Locatio (Letting): of things
or of applied skills (labor). The fruits
or earnings of the applied skills also admits of two types: the value of the applied skills only
(of the labor alone), or the things produced by the applied skills or labor.
The
Letting of things…
Several
are the kinds of things that generally are let to others: Buildings and furnishings, land, animals,
conveyances (motor vehicles, ships, planes), equipment and machinery, etc. The moral principles governing the letting
of all these are substantially the same.
The
Obligations of Lessors…
The
lessor must:
1. surrender
the thing to the lessee at the specified time and in good
condition. He is held to reparation if
the lessee suffers loss either because the thing is not delivered at the
specified time or in a condition unsuitable to the use for which it was let.
2. The
lessor must also maintain the thing let in a condition that suitably meets the
needs for which it was let. Ordinarily,
this applies to necessary ‘repairs” only.
The Lessee is responsible for “mere servicing” of the thing leased
(i.e., keeping it well oiled). When
complicated machinery or equipment is let (rented out), however, (e.g.,
copiers) the lessor must also provide the basic servicing.
3. If
the thing let is subject to State or Federal tax, the owner, that is, the
Lessor, is responsible therefor.
4. In
the case of lands or buildings, the Lessor must also guarantee quiet (tranquil)
use and enjoyment thereof.
Obligations
of the Lessee…
In
turn, the Lessee is obliged:
1. to
use the thing leased as if he were its worthy owner, and for those purposes
only for which it was leased, whether the purposes were expressly stated or
whether they are implicit in virtue of the nature of the thing or the
circumstances.
2. Pay
the agreed upon price at the agreed upon times specified.
3. When
the Let and Lease time has transpired, to return or surrender the
thing leased to the Lessor in the same condition in which it was received or
possessed, with the exception of ordinary, inevitable deterioration due to wear
and tear of regular use.
However,
the Lessee is not responsible for fortuitous damage caused by flood,
earthquake, hurricanes, tornadoes and the like.
All
of the above obligations proceed from natural Law. Civil Authority always has the right to legislate for the purpose
of modifying or enlarging upon the said obligations of Lessor and Lessee. This is especially true in our days with
regard to residential property, as those of you who are Lessors or Lessees
thereof, well know.
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