THE GENIUS OF ROMAN LAW

FROM A LAW AND ECONOMICS PERSPECTIVE

By

Juan Javier del Granado

1. What makes Roman law so admirable?

2. Asymmetric information and numerus clausus in Roman private law
2.1 Roman law of property
2.1.1 Clearly defined private domains
2.1.2 Private management of resources
2.2 Roman law of obligations
2.2.1 Private choices to co-operate
2.2.2 Private choices to co-operate without stipulating all eventualities
2.2.3 Private co-operation within extra-contractual relationships
2.2.4 Private co-operation between strangers
2.3 Roman law of commerce and finance
3. Private self-help in Roman law procedure
4. Roman legal scholarship in the restatement of civil law along the lines of law and
economics

1. What makes Roman law so admirable?

Law and economics aids us in understanding why Roman law is still

worthy of admiration and emulation, what constitutes the “genius” of Roman
law.

For purposes of this paper, “Roman law” means the legal system of the
Roman classical period, from about 300 B.C. to about 300 A.D. I will not
attempt the tiresome job of being or trying to be a legal historian in this paper. In
the manner of German pandect science, let us stipulate that I may arbitrarily
choose certain parts of Roman law as being especially noteworthy to the design
of an ideal private law system. This paper discusses legal scholarship from the
ius commune. It will also discuss a few Greek philosophical ideas which I
believe are important in the Roman legal system. Finally, the “ideal” system
based on Roman law will be compared to modern French and German civil law.

I argue that the admirable character of Roman law is its quality as an

(almost) paradigmatic private law system. Understanding how a system of
private law works is relevant for economic liberalization. My discussion of
Roman law illustrates how private law aligns incentives for people to (1) exert
efforts and (2) share information. Roman private law also enables people, who
face resource constraints and incentive constraints, to act (1) in their own
interest and, when efficient, to act (2) in the interest of others. Without the law
of obligations, people cannot credibly be expected to act in the interest of others.

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Moreover, this paper argues that without the law of property people will even
fail to act in their own interest.

This paper demonstrates that what is admirable about Roman private law
is its quality as a mechanism of communication that allows people to
decentralize the management of resources. Roman private law makes possible a
decentralized social order and the market, without mediation by public law.
German civil law recognizes the private Rechtsordnung as a subsidiary source of
legal authority (Berkowitz 2005.) Yet civil law scholars are unable to say
precisely what is the private legal order. Law and economics may provide the
answers.

The paper is organized as follows: The second part of this paper discusses
the Roman private law of property, of obligations and of commerce and finance.
The third part of this paper discusses private procedural aspects of the Roman
legal system. The fourth and final part of this paper suggests how law and
economics can help civilian legal scholars in Latin America reorganize the
system of pandects in restating civil law for the 21st century.

2. Asymmetric information and numerus clausus in Roman

private law

In this part of paper I discuss how Roman private law makes private
effort, private cooperation and private commercial and financial intermediation
possible and credible.

2.1 Roman law of property

2.1.1 Clearly defined private domains

Law and economics literature emphasizes the importance of clearly

defined property rights. Yet the literature fails to discuss how the law of
property defines these rights. People have private information about their control
over things they possess in fact. Property rights make this information public.

Roman law uses the principle of numerus clausus to define property

rights. Roman lawyers conceive of property in a “closed number” of typical
forms. Roman civil law recognizes property ex iure Quiritum and Roman
Praetorian law recognizes property in bonis habere. With the promulgation of
the Constitutio Antoniniana in 212 A.D., which extended Roman citizenship to
all of the inhabitants of the Empire, these typical forms of property became
unified. By the end of the classical period, the terms mancipium, dominium and
proprietas were used interchangeably to denote Roman typical property.

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 While Roman typical property consists of bundle of rights, Roman
lawyers also conceive of unbundled property rights in a “closed number” of
typical forms. These iura in re aliena are limited to seruitutes praediorum, usus
fructus and usus et habitatio. I discuss security interests in another’s property
such as fiducia cum creditore contracta, datio pignoris and pignus conuentum in
section 2.3.

In seruitutes praediorum the rights of exclusion are partly unbundled from

the property; to which they refer; instead they are tied to the property of a
neighbor, who is entitled to exclude the property holder from interfering with his
passage or conveyance of water through the property. This interpretation echoes
the modern insights of the law and economics movement, but it is consistent
with the Roman conception that such a right-of-way gives no one any positive
right to perform an act, which would have clearly had to be established as a
personal right under the law of obligations (Inst. 8.1.15); simply a negative right
to avoid interference with an act. Accordingly, seruitutes praediorum are not
personal assets (Dig. 33.2.1.,) but instead run with the dominant property to
which these rights become tied. Moreover, Roman lawyers recognize that
seruitutes praediorum might exist only to the extent that they prove useful to the
dominant property.

In usus fructus the rights of use and of enjoyment of fruits are partly
unbundled from another’s property, and given to one. A limited case is usus et
habitatio, in which one is given unbundled rights of use over another’s property.
Roman lawyers did not recognize the inverse case. They accepted that no one
was able to enjoy the fruits of a domain if he was not entitled to use that domain,
“fructus quidem sine usu esse non potest” (Dig. 7.8.14.) After the rights of use
and of enjoyment of fruits are unbundled, the remaining property becomes an
empty shell, nuda proprietas. The property holder retains the rights of
disposition. He remains entitled to alienate or encumber his property as long as
he does not affect the usufructuary, and he is entitled to enjoy the fruits not
collected by the usufructuary and retains the right to monitor the use of his
property by the usufructuary. As a result, Roman law limits the life of an usus
fructus to the life of the usufructuary as well as to non-fungible things, and
prevents the usufructuary from altering the economic destination of the thing.

The forms discussed above are all-inclusive. Roman private law only
accepts a “closed number” of typical forms of property bundles or of unbundled
property rights. The principle of numerus clausus in the Roman law of property
allows everyone in society easily to understand what rights the legal system
gives to any property holder. Legally speaking, one property is like another
property, is like any other property. Accordingly, people rationally expect that
their experience with the property rights the legal system defines for one thing,
will hold for another thing, will hold for any other thing.
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 Roman law avoids the piecemeal approach that would create distinctive
and separate property regimes for, say, res mobiles and res immobiles. Roman
law recognizes the differences between these kinds of things. This distinction
becomes especially important after the difference between res mancipii and res
nec mancipii loses relevance with the promulgation of the Constitutio
Antoniniana. However, under the principle of numerus clausus, Roman law
approaches all property in the same way.

Moreover, each piece of real property has boundaries that are clearly
defined by the legal system. The German scholar von Ihering (1968b, bk. 1 ch.
1.) offers a folk etymology for ‘Quirites,’ relating the term to the Sabine
warriors who carried lances with which property was staked out in a way that
everyone could see. Romans surveyors were masters at squaring off property
with terminationes as visible markers. The glossator Accursius formulated
another boundary principle by providing an easily-grasped image. In his
explication of a Roman text discussing that the space above a property surface
must be left unhindered, he wrote (1969, on Dig. 18.2.1.) that the limits of
property extend from the surface in a column down to the center of the earth and
up to the heavens, “cuius est solum eius est usque ad coelum et ad inferos.”

Moreover, Roman lawyers recognized that many movable things have

their own boundaries. Corporeal things have bodies that we can see, touch and
hold, “quae tangi possunt” (Gai. Inst. 2.13.; 2.14.) Roman lawyers understood
that many things are contained in themselves, “quod continetur uno spiritu” or
composed of several things attached to one another, “pluribus inter se
coherentibus constat” (Dig. 41.3.30.,) and in some cases are indivisible, “quae
sine interitu diuidi non possunt” (Dig. 6.1.35.3.,) such as animals that would die
or jewels that would lose their value if they were partitioned.

Through the use of typical forms and clearly defined boundaries, Roman
private law reduces asymmetries of information between property holders and
everyone else. The private legal system minimizes the amount of information
that people need to know in order to recognize the property of others and to
understand their own property. The legal system still has to solve the problem of
clearly defining which property belongs to what property holder. A system of
private law must also make this information public. Roman law has a unique
solution for this problem as well.

The modern registration systems which record which property belongs to

what property holder make this information public. Most legal systems in the
world use a registration system for valuable property. A registration system,
however, is too costly to require for every type of property. Given the
agricultural base of Rome’s thriving economy, res mancipii such as land, beasts
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of draught and burden, seruitutes praediorum for conveying water for irrigation
purposes, and slaves (Ep. Ulp. 19.1.) were valuable property. To perform the
functions now embedded in registration systems, Roman lawyers developed a
solemn and elaborate ceremony involving bronze and scales (Gai. Inst. 1.119.)
for the private conveyance of res manicipi; the memorable ceremony of
mancipatio created publicly available information about the change in the
property’s ownership. Alternatively, Roman law allowed substitution of a public
declaration and confirmation before the praetor, in iure cessio. For other
property, Roman law relied on collective memory and, ultimately, possession to
publicize the identity of the property holder.

Since rights in possessory property were difficult to prove, Roman private

law protects both property and possession, as von Ihering (1968a) famously
explains. A property owner has a right on the basis of which he may claim the
protection of the legal system. A possessor in fact has no such right on which to
base his claim. Nonetheless, in Roman law, rei uindicatio and actiones ad
exhibendum et negativa protect property right holders and interdicta retinendae
et recuperandae possessionis protect possessors. The Roman legal system
protects both property right holders and possessors in fact in order to align their
interests with the development and maintenance of the resources under their
domain or in their possession.

2.1.2 Private management of resources

The social norms movement makes a great brouhaha over the possibility
of combining law and morality (see Cooter 1997.) The law and economics
movement, however, demonstrated its usefulness. No speculation is required to
recognize that private law creates bounded domains within which both central
planning (Coase 1937) and social norms can operate within a competitive
environment. The Roman law of property, by defining a domain where the
dominus may act as he chooses (with the limits discussed below,) and protecting
the possessor, whom acquired his possession not by force, nor stealth, nor
licence, nec vi, nec clam, nec precario, removes public regulation from private
spaces and replaces it with private initiative. Within the boundaries of a
dominium or legally protected possession, the property holder or the possessor is
able to manage resources without any interference from others.

Roman law does not stipulate what a holder may do or not do with his
property. That choice is left to the arbitrium of the property holder. Property
generally includes an ample range of faculties, uses, attributions and
possibilities, such as the rights of use, rights of enjoyment of fruits, rights of
disposition, and rights of exclusion. The property holder chooses what to do
with his property. In Roman law, property is not held by the individual as in

5
modern law. Property is held by the family unit, or more correctly speaking, by
the head of that family. The paterfamilias is discussed later in section 2.3.

Roman law cunningly and wisely leaves unstipulated what a holder may
do or not do with his property, but stops short of conferring absolute rights to
property holders (see Mattei 1997, pp. 27-67.) If the legal system conferred
absolute rights, without taking account of external effects, the use that others
give to their property might destroy the value that property has for one. As a
result, property rights would lose their value, as von Ihering (1968a) notably
explains. Accordingly, Roman law establishes limits that control external effects
derived from the use of property. For example, a property holder in an
apartment-block may not operate a cheese factory, taberna casearia, that causes
nauseating odors for the neighbors above unless he acquires a seruitus, or he
may not flood the property of the neighbors below (Dig. 8.5.8.5.) Within these
limits, Roman law leaves the choice of use of property to the property holder.

Roman law ties property together by using a Gordian knot of wide-

ranging typical rights which cannot be separated out of the bundle. Ideally, this
bundle of property rights is tied to a single property holder. Roman private law
abhors situations of communio. Property consists of a typical bundle of rights
over a domain given to a single property holder. Roman lawyers understood that
all of these rights are largely complementary to one another. Property loses its
efficacy if these rights are unbundled, or if they are scattered among several
joint property holders.

The tragedy of the commons is a generalized form of a prisoners’

dilemma with many players, where the dominant strategy of each player is not to
cooperate (here many people, who lack any coordination between themselves,
fail to take care for the maintenance of the resource) by which an open access
resource is condemned to overexploitation and disappearance. Demsetz (1967)
brought this analysis into law and economics literature. The flip side of this
analysis is brought up in the literature by Heller (1998.) The tragedy of the anti-
commons is a generalized form of a prisoners’ dilemma with many players,
where the dominant strategy of each player again is not to cooperate (here many
property holders, who lack any coordination between themselves, raise the price
of the resource excessively) by which a jointly-held resource is condemned to
underuse.

The word “tragedy” here has the sense of the inevitable of Greek theater.
Law and economics literature has recovered the analysis of the tragedy of the
commons from Roman law. Harding’s (1968) Malthusian article attributes the
idea to an obscure 19th-century mathematical amateur. The insight behind it
goes back to Greek philosophy. Aristotle refutes Plato’s community of property
by explaining (1988, bk. 2) that what is common to everyone no one will take
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care of, “½cista g¦r ™pimele…aj tugc£nei tÒ ple…stwn koinÒn.” From this
passage in Artistotle, the tragedy of the commons became a Roman law trope.
Fernando Vázquez de Menchaca (1934) fully develops the analysis of the
tragedy of the commons in his 16th-century treatise on the Roman law of
property, from which Hugo Grotius (1950) takes the analysis without supplying
any additional insights.

Roman typical property solves both prisoners’ dilemmas by removing the

need for coordination within a domain. Roman law gives a single property
holder a bundle of rights with respect to a thing, opposable to the whole world.
The property holder is entitled to use, enjoy and dispose of the thing owned, at
his choice; as well as to exclude others from the use, enjoyment or disposition of
the thing owned. The property holder internalizes the external benefits and costs
from the use, enjoyment or disposition of the thing owned (and his incentives
are aligned with the care and maintenance of the resource) because he is able to
put a price on the rights involved; his ability to price is the result of his power to
exclude others from using, enjoying or disposing of the thing owned.

The dominus proprietarius is the residual claimant of the resources

managed in the domain. With unbundled property rights such as usus fructus, on
the other hand, the dominus usus fructus fails to be the residual claimant of the
property. Since the incentives of the usufructuary are not perfectly aligned, in
the indefinite long-term, with the management of the resources in the domain,
Roman private law requires the posting of a bond, the cautio usufructuaria, in
guarantee of the diligent management of the property, and its return, according
to the standard of care of a man of good judgment, “et usurum se boni uiri
arbitratu et, cum usus fructus ad eum pertinere desinet, restituturum quod inde
exstabit” (Dig. 7.17.19.1.) Roman private law requires the dominus usus to post
the cautio usuaria for the same reason.

An Edgeworth box graphically represents how people can benefit from

exchange. Goods have both a use value and an exchange value. Yet the analysis
again goes back to Greek philosophy. People will not enter into exchanges if
they have like things. How, then, can people find an equivalence between unlike
things to make an equal exchange? Aristotle (1998 bk. 5) observes that a
voluntary exchange is equivalent even if it is not equal, “kat\ ¢nalog…a m¾
kat\ „sÒthta.” However, a voluntary exchange requires more than mere
possession in fact; it requires property rights. Otherwise, the asymmetry of
information between possessors may defeat attempts at barter. Even a barter
economy requires property rights. Moreover, the law of property supports the
market. As I explain above, rights of exclusion are logically prior to the pricing
mechanism.

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 To provide for proper management of resources, Roman law incorporates
institutional mechanisms that maintain typical property through time, as a well-
defined bundle of rights over a domain tied to a single holder. These methods of
maintaining property are accessio, novam speciem facere and confusio uel
commixtio as well as usucapio and longi temporis praescriptio.

Legal doctrine in civil law jurisdictions generally refers to these Roman

legal institutions as methods of acquiring property. (Note that law and
economics has suggested an improvement in the system of pandects. The legal
institutions of accessio, novam speciem facere and confusio uel commixtio as
well as usucapio and longi temporis praescriptio, more properly speaking, are
methods of maintaining Roman typical property.)

Through time, both people and things undergo changes. Through time, the
attachments between things change. Roman private law avoids a situation of
communio between joint property holders whenever possible. In accessio, one’s
thing becomes combined with, or incorporated into, another’s thing. Instead of
establishing communio between joint property holders, Roman private law
subjects the accessory thing to the dominium of the property holder of the
principal thing. Thus, he acquires the accretion in the natural area along a river
(Dig. 41.1.7.1.,) the threads woven into a piece of cloth (Inst. 2.1.26.,) the dyes
used to process cotton fabric (Dig. 41.1.26.2.,) the wood panel containing an oil
painting (Gai. Inst. 2.72.,) the writing on a goatskin parchment (Gai. Inst. 2.77.,)
the buildings put up on land (Dig. 41.1.12.) or the crops sown in the ground
(Inst. 2.1.32.)

In novam speciem facere, one creates a thing of a new species, through

the application of labor to another’s materials. Instead of establishing communio
between joint property holders, Roman private law subjects the thing of the new
species to the dominium of the laborer, unless the materials can be returned to
their primitive state, “si ea species ad materiam reduci possit” (Inst. 2.1.12.)
Thus, he acquires the wine made from grapes, the oil pressed from olives and
the flour ground from wheat kernels; but not the goblet cast in gold, nor the
vestment confectioned with wool nor the boat assembled with planks of wood
(Gai. Inst. 2.79.) belonging to another.

In confusio uel commixtio, one’s thing becomes intermingled with

another’s thing. If the intermingling occurs by chance or the will of the property
holders, Roman law will allow a situation of communio here between joint
property holders. If not, and the component things cannot be separated, the
property holders may ask the iudex to partition the thing in proportion to the
value that corresponds to each (Dig. 6.1.5.1.)

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 Through time, people move and leave, or perish. Property becomes
vacant, and occupied by new possessors. Roman private law puts an end to the
divorce between possession and property through usucapio and longi temporis
praescriptio. The possessor acquires dominium over another’s property through
usage over time (Dig. 41.3.3.; 44.3.3.) That way the legal system assures that
every domain is managed by a single property holder, who has an interest and
control over the domain. Furthermore, the grant of property rights to the
possessor aligns his incentives with the care and management of the resources in
the domain. Roman law gives him the expectation of obtaining the residual
interest with time.

Roman law relies on typical forms of property bundles, typical forms of

unbundled property rights, and clearly defined boundary markers for property to
reduce informational asymmetries, and employs institutional mechanisms that
maintain typical property through the vagaries of time and avoid situations of
communio between joint property holders. Where a situation of joint property is
unavoidable, as in communio incidens, I will show in section 2.2.3 of this paper
that Roman private law turns communio into a quasi contract. That way the legal
system provides a legal mechanism for coordination of a situation of joint
ownership.

2.2 Roman law of obligations

2.2.1 Private choices to co-operate
Roman law works because it supports private choices to co-operate. Co-
operation requires credible commitments. A commitment is credible only if one
expects another will have the incentives to comply in the future. The Roman law
of obligations provides such incentives. Therefore, Roman law encourages
expectations of co-operation between private parties. This is a beneficial
outcome, because trust between people has an economic value.

The Roman law of obligations enables people to commit to future actions.

By entering into a contractual obligation, a person undertakes a legally binding
commitment. The debtor who enters into a contract gives the creditor a legal
claim against his person, thus rendering his commitment to future action
credible when made. Without such legal support for commitment, we would be
forced to use other more extreme measures as demonstrated by Hernan
Cortes. Cortes, of course, is the 16th-century Spanish conquistador who burned
his ships in the harbor of Veracruz to foreclose the option of retreat during the
conquest of Mexico.

Part of the credibility of obligations under Roman law is the distinction

between actiones in rem (see my discussion above in section 2.1) and actiones

9
in personam (see Merrill and Smith 2001.) Under the Roman law of obligations,
if the debtor breaches, the creditor is able to force him, through an actio in
personam, to pay an amount of money equal to (not more than) the value of the
performance. Even where the obligation is incerta, the procedural formula
stipulates that the iudex must assess an amount of money equal, tantam
pecuniam, to whatever the defendant ought to give to, or do for, the plaintiff,
quidquid Numerius Negidius Aulum Agerium dare facere oportet. Accordingly,
when performance becomes more costly to the debtor than the value of the
performance to the creditor, the system of Roman private law allows the debtor
to breach and pay damages, through the principle of omnis condemnatio
pecunaria (see Zimmermann 1996, p. 772.) The contract restructures the future
incentives of the debtor, and makes his promises credible.

The Roman contractual system transforms the private expectations that

people hold about the future actions of others into public information. Roman
law enables people to know clearly when their promises are to be enforceable as
contracts. Under the Roman law of obligations, people know that they have
entered into a contract either because they have conducted (1) an appropriate
ceremony or because they have concluded (2) a typical contract. The legal
system adopts the same institutional mechanisms, ponderous ceremonies or
typical forms, as those used in the Roman law of property (which I surveyed in
section 2.1.) Through the use of typical forms and clearly stipulated obligations,
Roman private law reduces asymmetries of information between contractual
parties.

Today scholars dispute as to whether Roman law, in archaic times,

required contractual parties to participate in a ceremony involving bronze and
scales in order to enter into an enforceable agreement; if such a ceremony
existed, its purpose was to subject their persons to seizure if they failed to
perform an obligation. The ceremony openly established the parties as bound,
nexus (see de Zulueta 1913.) However, under the legal system of the Roman
classical period, the most important ceremonial means of forming binding legal
commitments was the verbal question-and-answer sequence of stipulatio. In the
immediate presence of each other (and before witnesses,) the reus stipulandi
asks a question, and the reus promittendi responds directly with a promise, in
terms that mirror the question. Dare spondes? Spondeo. Dabis? Dabo.
Promittis? Promitto. Fidepromittis? fidepromitto. Fideiubes? fideiubeo. Facies?
faciam. (Inst. 3.15.) Accordingly, Roman law enables the parties to stipulate a
mutually-understood unilateral obligation, which is legally enforceable as a
contract (see section 2.3 below for a discussion of the literal contractual form.)

Under the legal system of the Roman classical period, the parties are also
able to form binding legal commitments by concluding any one of a “closed
number” of typical contracts, without need for ponderous ceremonial trappings.

10
Roman typical forms facilitate contracting. (Note that law and economics
scholars have failed to see that the numerus clausus principle also operates in
the law of obligations, Merril and Smith 2000.) The parties are able to form a
consensual contract simply by manifesting their agreement. The parties are able
to form a real contract simply by handing over a thing with an intention to form
such a contract. Since Justinian was particularly fond of the number four, the
system of pandects identifies four consensual contracts, emptio uenditio, locatio
conductio, mandatus and societas, as well as four real contracts, depositum,
mutuum, commodatum and pignus.

The typical contracts are one of the greatest achievements of Roman

private law. The typical contracts have names, which is why they are also
referred to as the nominate contracts. Merely by referring to a nominate contract,
the parties know that they have concluded an enforceable contract. Moreover,
they are able easily to understand what implied obligations they have assumed
without need for detailed stipulations. To illustrate, when the parties enter into
an emptio uenditio, they must stipulate the price and the thing. However, the
obligation of the seller to respond for eviction, euictionem praestare, is created
without being mentioned because it is part of the typical contract invoked by the
name, emptio uenditio. The parties take on all implied obligations of an emptio
uenditio by giving their contract that name.

Modern law and economics teaches that when one party is better able to
anticipate future contingencies and risks than the other, mutually beneficial
transactions may fail to take place (Ayres and Gertnert 1992.) Roman law
encourages such contracts by incentivizing revelation of privately-held
information through default rules (Ayres and Gertnert 1989.) Roman law
enables parties to stipulate out of legal rules that are not essential to the typical
contractual form. For example, when the parties enter into an emptio uenditio,
the parties may agree that the seller not respond for eviction, through a pactum
de non praestanda euictione. The seller who has private information that may
affect the peaceful possession of a thing by the buyer, responds by the default
rule for eviction. Accordingly, Roman private law gives him an incentive to
reveal that private information if he wants to avoid the responsibility that the
legal system imposes by default.

While the Roman legal system allows some modifications of the typical
forms, it prevents formation of agreements which change the essential features
of a contractual form. Thus, the parties are unable to agree to a commodatum in
exchange for merces, which makes the transaction something other than a
gratuitous loan. The Roman lawyers indicated that such a transaction would
have to be enforced by another legal action, for the lease of the thing, ex
locatione conductione (see Dig. 13.6.5 12.) In the Roman contractual system,
any odd contract, which lacks the ceremonial trappings of stipulatio and fails to

11
fit into one of the typical forms, is unenforceable. Roman law refuses to provide
a legal remedy to enforce it, “nuda pactio obligationem non parit” (Dig.
2.14.7.4.)

2.2.2 Private choices to co-operate without stipulating all

eventualities
The Roman law of obligations establishes full freedom of contract.
However, the principle of freedom of contract is a necessary, but not sufficient,
condition for realizing a decentralized market economy. Law and economics
literature emphasizes that writing a complete contract which stipulates all
eventualities is often impossible or undesirable. People (including those who
choose to form a contract) are incapable of anticipating every contingency. The
future is unpredictable. Moreover, negotiating and drafting clauses to resolve
possible future contingencies and risks is costly. Rational contracting parties
may decide that leaving remote contingencies unstipulated is preferable. Rather
than abridging full freedom of contract, Roman private law supplements, not
substitutes for, incomplete contracts with the (1) typical contractual forms, the
(2) principle of bona fides of Roman Praetorian law and (3) quasi contractual
obligations. Roman law works because it supports private choices to co-operate
without stipulating all eventualities.

Roman typical contractual forms approximate complete contracts. As I

discussed earlier, each nominate (or typical) contractual form in Roman law
includes implied obligations covering unstipulated matters. The obligations
implied in each typical form cover the unstipulated eventualities most likely to
arise in the contract with that name.

The ius honorarium develops, “adiuuandi uel supplendi uel corrigendi

iuris ciuilis” (Dig. 1.1.7.); its formation is similar to equity in common law
systems. Both supplement and mitigate the rigors of strict law. In classical
Rome, the praetor allowed a defendant to request the insertion of an exceptio
doli into the procedural formula; this addition instructed the iudex to consider
the equity of the case, si in ea re nihil dolo malo Auli Agerii factum sit neque
fiat. The inverse of dolus is bona fides (Dig. 18.1.68.) When enforcing any of
the four consensual contracts, emptio uenditio, locatio conductio, mandatus and
societas, or the real contract of depositum, the Praetorian formula contains an
instruction to the iudex to consider more than whether both parties strictly
performed their legal obligations, quidquid ob eam rem Numerium Negidium
Aulio Agerio dare facere oportet ex fide bona.

Modern scholars have been unable to fully explicate the Roman meaning
of bona fides. Law and economics suggests that bona fides allowed Roman law
to supplement incomplete contracts. When the parties are able to stipulate the

12
entire content of a contract, bene agere requires that each party faithfully
execute the obligations expressly stipulated, not more. When the parties are
unable to stipulate the entire content of a contract, Roman law does not require
the parties to act altruistically (see Dig. 19.2.22.3.) However, the parties are
required to go beyond the mere express terms. They are required to act bona
fide, that is, to respond to unstipulated eventualities without dolus or culpa
within the bounds of foreseeability, “non etiam improuisum casum praestandum
esse” (Cod. 4.35.13.)

Modern scholars disagree about the exact standard of care that Roman
lawyers applied. Modern scholars miss the point of bona fides. The iudex
evaluates whether each party has acted as a bonus uir on a case-by-case basis.
The circumstances of each case are so variable that ultimately Roman law
adopts a case-by-case approach to iudicia bonae fidei, unlike German civil law
which fits bona fides into typical Fallgruppen. If iudicia bonae fidei could be
reduced to typical groups of cases, Roman lawyers would have adopted a
solution based on the typical contractual forms. The Praetorian formula instructs
the iudex to look at the unique circumstances of each case to figure out whether
each party acted ex fide bona precisely because the unstipulated eventualities
fail to conform to typical patterns.

Incomplete contracting is particularly problematic and expensive (because

of information rents,) when the reason (or causa) of a contract is precisely that
one party is better positioned than the other to acquire private information. Only
in these situations of asymmetric information, does bene agere in Roman law
insist that a party subordinate his interests to the interests of others. Roman
lawyers approach these situations by applying quasi contractual obligations
which are subsidiary to the incomplete contracts.

2.2.3 Private co-operation within extra-contractual relationships

Another aspect of Roman law which encourages co-operation involves
extra-contractual relationships. In general, persons who are supposed to act for
the benefit of others are considered to have special relationships with each other,
despite the absence of any express agreement between them. Roman lawyers
refer to certain obligations as almost arising from a contract, quasi ex contractu.
Paralleling the closed system of typical contracts (which has been discussed in
section 2.2.2 of this paper,) Roman lawyers conceive of a “closed number” of
typical quasi contractual forms, negotiorum gestio, tutela uel curae gestio,
communio incidens and indebitum solutum.

In negotiorum gestio, someone undertakes to take care of some business

or interest for another. Roman law requires that the negotiorum gestor act in the
interest of this other (Dig. 3.5.6.3.) Once begun, the negotiorum gestor must

13
attempt to complete what he sets out to do (Dig. 3.5.3.10.); after finishing his
stewardship he must give a full accounting of his actions to the dominus negotii
as well as return any fruits he may have acquired as a result. Because of conflict
of interest problems (which modern law also recognizes,) a person is prevented
from acquiring a private interest in the business he undertakes for the dominus
negotii. The bias of Roman law toward encouraging co-operation also enforces
realistic limits; it prevents what might look like co-operative arrangements but
are actually one person interfering with another’s property. To avoid officious
interference with private interests, Roman law requires some underlying utility
that necessitates meddling in the affairs of another, “non autem utiliter negotia
gerit, cui non necessaria uel quae oneratura est” (Dig. 3.5.9.1.) This limit is
enforced by denying the negotiorum gestor a claim for reimbursement while still
requiring the officious negotiorum gestor to be liable for culpa levis and casus
fortuitus (Dig. 3.5.11.)

In tutela uel curae gestio, someone looks after the affairs of another who
is a minor or of unsound mind. The tutor must look after the interests of his
ward as if they were his own (Dig. 26.7.15.) Where the incentives of the tutor
are not perfectly aligned with the interests of the ward, Roman private law
requires the posting of a bond, the cautio, rem pupilli saluam fore, in guarantee
of the diligent management of the affairs of the ward (Inst. 1.24.)

Roman law also applies quasi contractual obligations, in communio

incidens, where several people become, unavoidably, the joint property holders
of a common thing (see section 2.1,) and, in indebitum solutum, where someone
unjustly enriches another.

All quasi contractual obligations are iudicia bonae fidei. The Praetorian
formula instructs the iudex to review the circumstances of each case to decide
whether a person has acted as a bonus uir. Moreover, in classical Roman law,
violations of quasi contractual obligations carry the type of stigma currently
reserved for criminal convictions (see Peter Garnsey 1970.) In addition to legal
liability, the legal system imposes a reputational punishment, infamia.

Additionally, Roman lawyers refer to certain obligations as almost arising

from a delict, quasi ex delicto. Roman lawyers conceive of a “closed number” of
typical quasi delictual forms. Roman law subjects to objective responsibility
(‘strict liability’ is the term used by the common law) the iudex who makes a
case his own, qui litem suam fecerit, the sea carrier, innkeeper and stable keeper
whose employees steal or damage the property of a customer, furtum uel
damnum in naui aut caupona aut stabulo, as well as anyone from whose
dwelling something is thrown or poured, deiectum uel effusum, onto the street,
or from whose building something is placed or suspended, positum uel
suspensum, which falls and obstructs traffic.

14
2.2.4 Private co-operation between strangers
One of the central functions of any legal system is to promote responsible
behavior. One way of describing such behavior is consideration towards the
interests of others, though expecting altruism would be requiring too much of a
mere legal system. Roman law encourages cooperation between persons acting
for the benefit of others, even when such persons have not formed any
agreement or are unknown to each other.

Modern law uses criminal prosecution by the state’s bureaucracy to

impose co-operation among strangers. Bureaucratic inertia, however, impairs the
effectiveness of such prosecution. Roman law is more adept in encouraging co-
operation because it enables individuals to bring legal actions against others for
harms, without needing state prosecution.

Roman law protects property and persons through civil rather than
criminal means. Roman law imposes responsibility for the harms that are done
intentionally (with dolo malo) through civil delicts. The Roman law delicts
include many harms which modern law classifies as crimes (against person or
property.) A wide variety of behaviors involving the involuntary removal of
property from the control of its rightful holder, inuito domino, constitute furtum;
if done with force, rapina. As with modern law, the offense does not include
removing property under the mistaken belief that it belongs to you (Dig.
47.2.21.3.) Roman law iniuria includes many modern crimes against the
person. As with modern law, the offense does not include injuring someone
negligently during a sports competition (Dig. 47.10.3.3.)

Roman law imposes responsibility for the harms that are done even
unintentionally (with culpa) through civil delicts. The Roman delict damnum
iniuria datum (for damage to property) evolved from a system of objective
responsibility to a system of culpa. Law and economics scholars may be puzzled
by the change. A determination of objective responsibility (‘strict liability’ is the
term used by the common law) in a case seems more straightforward for a iudex
than establishing the proper standard of care. Presenting evidence about
inadequate precautions adds to the cost of the litigation. However, law and
economics scholars overlook asymmetric information. A finding of civil
responsibility for damnum iniuria datum under culpa publicizes private
information about cost effective standards of care in different cases. Someone
cutting off the branches of a tree, who fails to shout a warning over the public
throughway, is responsible for killing the slave passing by, “si is in publicum
decidat nec ille proclamauit” (Dig. 9.2.31.) A farmer, who chooses a windy day
to burn thorn trees and grass, is responsible for the damage to his neighbor’s
crops, “si die uentoso id fecit, culpae reus est” (Dig. 9.2.30.3.) Asymmetric

15
information explains why Roman lawyers moved away from objective
responsibility and toward defining explicit standards of care in specific cases.

2.3 Roman law of commerce and finance

Roman law works because it supports the market. The market
intermediates between supply and demand through the price mechanism.
Economists tend to assume that markets clear effortlessly. However, law and
economics scholars know better. For markets to clear, intermediaries must make
markets. Market makers are brokers who manage inventories of commercial and
financial assets across space and time. Market makers are able to buy where and
when people want to sell. Market makers are able to sell where and when people
want to buy. Market makers buy and sell with a spread between the ask price
and the bid price.

Roman law supports the making of markets through the law of property
and the law of obligations. Principals are able to reduce agency costs either by
aligning their agents’ interests with their interests own, or through monitoring of
their agents. Principals run up monitoring costs in order to keep agents from
hiding their actions. In order to facilitate financial intermediation, the Roman
law of property includes typical forms of security interests in another’s property
such as fiducia cum creditore contracta, datio pignoris and pignus conuentum.
Law and economics literature clarifies that the collateral must be more valuable
to the debtor, than to a creditor, in order to align their interests. Debtors are less
able to give up possession of valuable collateral. The pignus conuentum is
especially useful, since a debtor pledges property without delivering possession
of the collateral. Moreover, the Roman law of obligations enables people to
enter into an arrangement of fideiusso through a stipulatio with the verbal form,
“Quod mihi debet, id fide tua esse iubes? Fideiubeo.” Law and economics
literature clarifies that a surety, better able to monitor a debtor, by stipulating an
obligation accessory to that of the debtor, is able to lower the creditor’s
monitoring costs (Katz 1999.)

Moreover, as discussed earlier, the Roman typical consensual and real

contractual forms greatly facilitate commerce and finance. Particularly useful for
business transactions is a depositum apud sequestrem. Pending the outcome of a
controversy or condition, several parties hand over a thing to a sequester
(‘escrow agent’ is the term used by the common law) for him to hold for
safekeeping, (Dig. 16.3.17.) Once the controversy is resolved or the condition is
met, he must return whatever they deposit with him to the prevailing party or to
the party stipulated.

16
 The Romans also used the verbal contractual form of the stipulatio with a
pactum fiduciae to make a donatio sub modo. As part of a donatio inter vivos,
the donor imposes an obligation on the donee to do something or to make a
distribution of funds (Cod. 8.55.) The usefulness of a donatio sub modo (‘trust’
is the term used by the common law) is that the donor can stipulate just about
anything he wants, and even attach a stipulatio poenae (discussed below in
section 3) to guarantee that the donee carry out his wishes. If the donee fails to
carry out the charge, the donatio is revocable.

A variant of the verbal contractual form useful in business transactions is

the literal contractual form. Mere annotations made in a codex expensi et accepti
fail to create obligations, “nuda ratio non facit aliquem debitorem” (Dig.
39.5.26.) A banking deposit, ratio mensae, or banking loan, pecunia foenerare,
becomes binding only after money is handed over, as in the real contracts.
Banking transactions typically include interest without the need to enter into a
stipulatio; charging compound interest, annatocismus coniunctus, is standard
practice, at least during the Roman classical period. Moreover, bankers or
argentarii held auctions for their clients, devising bidding systems which would
attract the highest and best bidder, “melior autem condicio adferri uidetur, si
pretio sit additum” (Dig. 18.2.5.,) as well as issued letters of credit, receptum, to
guarantee payments for clients (Dig. 13.5.26.)

Furthermore, other specialized private Roman legal institutions related to

commerce and finance also support the market. Modern scholars debate whether
a distinctly Roman law of commerce and finance ever existed. Some scholars
argue that the ius mercatorium developed during the Middle Ages, that is
between 500 and 1500 A.D. Modern scholars fail to recognize that a Roman law
of commerce and finance existed, but it was not a separate body of law; it was
embedded in the basic Roman civil law. Modern legal systems separate the body
of commercial (and financial) law as a lex specialis from the lex generalis of the
body of civil law. Roman private law was more congruent because it lacked this
divorce.

Similarly, many modern commentators fail to recognize that slavery was

an economic institution; the law of slavery was an important component of the
Roman law of commerce and finance. Roman law improved the efficiency of
ancient slavery by improving slaves’ incentives. Slavery is a highly inefficient
(and oppressive) legal institution. By giving slaves the possibility to manage a
peculium and buy their manumission, Roman private law simultaneously
rendered slavery more efficient and less oppressive.

According to Roman law, property is held by the paterfamilias. However,

having the paterfamilias conduct every transaction on behalf of his filiifamilias
and slaves is burdensome and time-consuming. Accordingly, Roman law allows

17
both filiifamilias and slaves to manage a peculium. The peculium is the property
of the paterfamilias. However, self interest and social norms reinforce a social
convention in Roman society requiring the paterfamilias to respect the peculia
of both his filiifamilias and slaves. This limit on the paterfamilias is in his own
best interest. Without this limit on his power, a filiusfamilias would be strongly
motivated to commit patricide. Similarly, this limit on the paterfamilias better
aligns the interests of the paterfamilias and his slaves. Lacking any expectation
of manumission, a slave would also lack the incentive to exert effort for the
benefit of the paterfamilias or to share information with him. As Vergil put it,
“nec spes libertatis erat nec cura peculi” (1977, pm. 1, l. 32)

Roman law does have at least one major shortcoming; it lacks a sufficient
system of agency. Of course, the Roman law consensual contract of mandatus is
a form of indirect agency, but this is not a sufficient substitute for agency-
proper. The mandatarius is only able to act on his own behalf, even when he
transacts business in the interest of another. However, the Romans were not
entirely without agency law. Both filiifamilias and slaves are able to act on
behalf of the paterfamilias. While this is not a solution well-regarded today, the
Roman empowerment of the paterfamilias over both slaves and filiusfamilias
does lower what moderns recognize as a major inefficiency in society, agency
costs. By simultaneously allowing slaves and filiusfamilias to act for the
paterfamilias, and giving the paterfamilias enormous power (even ownership)
over his agents, Roman law reduces agency costs.

Roman private law from the classical period contains sophisticated legal
institutions related to commerce and finance. Roman law institutes limited
liability; it also creates incentive-compatible mechanisms for information
revelation, thus supporting commercial and financial intermediation.

The peculium introduces limited liability to Roman law. Both filiifamilias

and slaves are able to manage a peculium independently. Roman law limits the
liability of the patrimonium for obligations incurred by filiifamilias and slaves to
the amount of the peculium (see Dig. 15.1.) If either a filiusfamilias or slave
incurs a delictual obligation, the paterfamilias has the option to hand over his
filiusfamilias or slave in lieu of payment. In either case, the legal system limits
the liability of the sui iuris to the peculium.

The peculium of a filiusfamilias or slave may include any res in

patrimonio. Under Roman law, even slaves may hold other slaves, serui uicarii,
in their peculium. Accordingly, a paterfamilias is able under Roman law to set
up a taberna or officina and put the business into the peculium of either a
filiusfamilias or slave (Dig. 14.4.) As Horace put it, “Vulcanus ardens uisit
officinas” (2004, pm. 1.4., l. 8.) The institution of limited liability enables
people to separate management from investment in the economy. Roman private

18
law of commerce and finance aligns the incentives of both paterfamilias and
filiifamilias or slaves inasmuch as the peculium is the separate interest of the
filiusfamilias or slave, less the payments to the patrimonium for the cost of
capital. The variety of tabernae in the Roman economy runs all the way from
banks, tabernae argentariae, to inns, tabernae deuersoriae; from fleets of ships,
naues instructae or societates exercitorum, to companies for purposes of tax
collection or public works, societates publicanorum; from cheese factories,
tabernae caseariae, to brick factories, officinae lateribus.

Limited liability is the norm in Roman businesses or negotiationes held

in peculia. However, Roman law also allows individuals to choose non-standard
terms in their business organization. For example, a paterfamilias who wishes
to opt out of the background rule of limited liability may establish his unlimited
liability by indicating that he runs the business under his management by the
simple expedient of posting a sign in the establishment in a visible place (Dig.
14.3.11.3.)

Incentivizing investment requires markets. People never know when

they will need to sell and when they will need to buy. Accordingly, people will
only invest in commercial and financial assets if market brokers make markets
liquid enough so that people are able to buy when they need and sell when they
need. Moreover, participants are similarly unwilling to transact or make
investments unless commercial or financial assets are accurately priced by the
market. Market prices reflect accurate valuations of the utility and scarcity of
assets when all material private information is publicized. In addition to the
information revealing aspects of the law of property and the law of obligations
discussed earlier, Roman law presents uniquely commercial or financial legal
institutions to support information revelation.

Slavery, as discussed above, lowers agency costs. Slaves also constitute a

form of living tradable shares in businesses. The sale of a slave who holds a
taberna or officina in his peculium is equivalent to selling the business. Serui
communes were used in conjunction with the consensual contractual form of
societas to bring rationally ignorant investors together, without forfeiting the
protection of limited liability.

Accordingly, the Aedilitian regulation of the slave market addresses

problems of asymmetric information that go beyond access to a skilled labor
force. The aedile required a uenaliciarius (and anyone selling a slave in the
secondary market) to reveal, pronuntiatio, at the moment of sale, in uenditione,
any material private information affecting the valuation of the slave; moreover,
the aedile established objective responsibility (‘strict liability’ is the term used
by the common law) for the failure to divulge information or for any
contradiction with an express warranty, dictum promissumue, given (Dig.

19
21.1.1.1.) However, mere puffery or laudation, nudam laudem, of a slave (or
business) was excused (Dig. 21.1.19.) In addition, Roman law allowed the buyer
of a slave (or business) to institute legal proceedings against the majority
shareowner, cuius maior pars aut nulla minor est, of a seruus communis (Dig.
21.44.1.) Law and economics literature explains that information revelation
gives better protection to market makers than a system which ex post imposes a
penalty on persons for trading with private information (Manne 1966.)

3. Private self-help in Roman law procedure

In Roman law, litigation before an iudex is conceived of as a private
contract, litis constitutio. The parties stipulate before the praetor that they will
abide by the sententia of the iudex. In order to litigate their claim or offer a
defense, the parties must enter into this stipulatio before the praetor. The new
contract, litis constitutio, novates the earlier obligation that forms the basis for
their claims or defenses or counterclaims, no matter what their nature. After the
litis constitutio, the pre-existing obligations cease to exist. Accordingly, the
Roman system of procedure under the control of the praetor is a private system
of binding arbitration.

Moreover, in Roman law, private parties are able to use self-help

measures by executing sententiae. Beyond constituting means for the execution
of res iudicata, private self-help measures are means of effectively bringing a
legal action. Any creditor whose claim was invalid, yet who laid their hands on
the debtor, manus iniectio, or took property of the debtor in pledge, pignoris
capio, risked liability in twice the amount, in duplum. However, debtors who
faced valid claims made arrangements for payment, rather than the go before the
praetor, as von Ihering (1968b, bk. 1, ch. 1) distinctively explains. Accordingly,
manus iniectio and pignoris capio are private self-help means of collection, able
to work without the intervention of the curule authorities.

If the debtor breaches an obligation, the iudex must assess the value of
the performance to the creditor. However, establishing “quanti ea res est” (Dig.
13, 3, 4.; the expression belongs to Bulgarus 2007 on Cod. Cod. 2.6.6.) can be
difficult where an obligation is incerta. Accordingly, Roman law allows the
parties themselves to agree privately on the amount of damages, by entering into
a stipulatio poenae. The ponderous ceremonial trappings of the verbal
contractual form put people on notice that they assuming an enforceable
unilateral obligation. Moreover, stipulationes poenarum are also means to
enforce immaterial interests that could not be reduced to a pecuniary amount
(Zimmermann 1996, p. 97.) What modern scholars overlook, and a stipulatio
poenae may capture, is that damages from disappointed expectations are often
much greater than the amount of the obligation.

20
 Lastly, rather than prosecute public claims against private persons, the
Roman state even privatized tax and debt collection. Societas publicanorum may
purchase these claims and use the private self-help measures discussed above.

4. Roman legal scholarship in the restatement of civil law

along the lines of law and economics
Latin America must grasp the nettle of globalization; to survive, each
Latin American country needs a competitive economy. Unfortunately, Latin
American countries liberalized and privatized their economies in the 1990s,
forgetting that their legal systems had been socialized and constitutionalized
during much of the 20th century under the influence of French legal sociology
(see Duguit 1901.) Such systems do not mesh well with global
economic pressures. Economics needs to be partnered with law and economics.

Arguing for a return to Roman law is the best way to introduce law and
economics into the civil law tradition and to reprivatize Latin America’s ailing
legal system. The private sector cannot exist in a vacuum. Private law enables
the private sector to be the main driver of the economy.

The economic analysis of Roman law suggests a new system of pandects

within the civil law tradition. Rather than classifying legal institutions along the
line of persons, things and methods of acquiring property, law and economics
suggests a new arrangement of Roman law. The entire body of private law must
be unified. Civil and commercial law must be brought together. The methods of
maintaining property must be moved to the book on things. For reasons
unrelated to classical Roman law, property in civil law jurisdictions is resistant
to horizontal partitions. New typical forms of property, such as private mineral
rights and industrial property rights, must be added to the book on things. New
typical contractual forms, such as insurance and annuity contracts, must be
added to the book on obligations. Law and economics suggests the expansion of
the Roman system of subsidiary quasi contractual obligations, undergirded by
the principle of bona fides. Law and economics suggests the depenalization of
the legal system and expansion of the Roman system of typical delictual forms.
A book on commercial and financial intermediation must be added to
complement the book on obligations. Most fundamentally, a book on the law of
civil procedure must be brought into the civil code. Bringing procedural law
back into the realm of private law (privatizing legal procedure) is the most
effective way to improve the Latin American legal system.

Here are some other points to keep in mind: Roman law lacks labor law.
Employment contracts are at will; they are treated like any other consensual
contract for hire, locatio conductio. Roman law lacks consumer protection law.
When the emperors intrude into the legal system, private law creates new forms

21
to escape the public law’s most severe restrictions, such as in the shift from
fidepromissio to fideiusso (see Zimmermann 1996, p. 121.) Roman law lacks
antitrust law. Antitrust law seeks to promote competition through state
intervention. That is quite a paradox considering that most limits on competition
are created by state intervention. Roman law lacks regulatory law. Roman iuris
prudentes favoured letting markets self-regulate.

The German and French civil law doctrine of abuse of right contradicts
Roman legal limitations to property. Scholars in the 19th century interpreted a
passage against the mistreatment of slaves, “male enim nostro iure uti non
debemus” (Gai Inst. 1.53.) to suggest that a property holder may not use his
rights with dolus or the intention to do harm to another (BGB §226.) French
legal sociology unwittingly extended this doctrine when legal authors attempted
to formulate a ‘social function of property’ (see Duguit 1901.) Civil law must
limit the use of property to avoid external effects that would destroy the value of
property; other legal limits on property are destructive. Let me be clear: property
serves a private function, not a social function. Private law must leave to the
property holder all choices regarding the use of his property. Similarly, the
supposed ‘social function of contracts’ is destructive. Contracts serve a private
function, not a social function. Private choices to cooperate must be left to
the contracting parties.

Contractual rigidity is another modern problem with a Roman solution.

Typical contracts are insufficient for the variety of private choices to co-operate.
Therefore, social co-operation is hampered unless people are empowered to
form atypical contracts. Atypical contracts in Roman law take the verbal
contractual form of stipulatio with ceremonial trappings. This alternative means
of contracting has survived into modern civil law in the form of notarial
instruments. However, modern civil law misses the atypical character of
stipulated notarial contracts. Therefore, the civil law system has lost the
flexibility that the Roman stipulatio gave to contractual parties. The legal
scholarship from the ius commune makes atypical contracts enforceable through
the doctrine of causa. The commentator Bartolus (1544, on Dig. 44.4.2.3.)
misreads a text that mentions that a stipulatio has a reason or causa
(‘consideration’ is the term used by the common law) to mean that atypical
contracts with a causa are enforceable even without the ceremonial trappings of
the stipulatio. Although atypical contracts are enforceable in theory, in practice
modern notary publics often attempt to make atypical agreements fall into one of
the typical contractual forms. All too often, notary publics rewrite contracts
along typical lines. A better alternative would follow the practice of Roman
tabelliones; they publicized the atypical obligations that contractual parties
stipulated, without changing the terms of the agreements. An example where
modern civil law has lost the flexibility of the stipulatio is the pactum fiduciae to
make a donatio sub modo. Unfortunately, in civil law jurisdictions today, trust-

22
like relationships, where they do exist, straitjacket contractual parties with
typical commercial forms that are too rigid, if not utterly inflexible.

The civil law and the common law are fairly equal in their protection and
enhancement of freedom of contract. The distinctive difference of the common
law consists of its unique system of quasi contractual obligations. The
development of the ius honorarium, under which the praetor formulated the
principle of bona fides, parallels the historical development of equity, in
common law systems. (In equity, the chancery courts formulated those quasi
contractual obligations called ‘fiduciary duties.’) However, Latin American civil
law needs to go further in this direction, for example by following the model of
German civil law in its expansion of the principle of bona fides (through BGB
§242, §138, §157, §826.) This expanded bona fides accomplishes many of the
same tasks that fiduciary duties carry out in the common law (see Wieacker
1956.)

Unfortunately, German civil law has expanded the meaning of bona fides
to the point where it abridges freedom of contract. The Fallgruppen where the
principle of bona fides is found to apply are too broad. By far the greatest danger
facing Latin American law today is the German tradition of constitutionalization
of private law, that is, the so-called doctrine of mittelbare Drittwirkung of
fundamental rights in private law, made possible through Generalklauseln
requiring the observance of bona fides in the German Civil Code. German law
stretches the principle of bona fides by giving judges the counter-productive
ability to interfere with private choices regarding the substance of contracts. In
this detail, perhaps French civil law is a better model for Latin America, because
it has been less prone to deny freedom of contract.

Addressing the problems of Latin America’s legal systems is an

exquisitely difficult balancing act, one legal scholars have shown themselves ill-
equipped to handle in the past. But handle it they must. In short, Roman law
combined with law and economics are the best guides to the paradigmatic
private legal system of the 21st century.

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