CHAPTER I. INTRODUCTORY. SECTION 1. THE LAW MERCHANT. The "law merchant," or the lex mercatoria, was a special system of laws governing merchants and mercantile transactions, which was in force during the latter half of the medieval period of history, not only in England but also in all the countries of western continental Europe. This law was administered in special courts, which were, in the main, conducted by the merchants themselves. The effect of this was to harmonize the lex mercatoria in the different countries. "The merchant traders traveling from fair to fair might form part of a court at St. Ives to-day and in a few weeks they might be found in one of the European marts forming a part of the market court there. It would be preposterous to imagine that courts so constituted should enforce one principle at Bristol and another at Ypres. The same questions were constantly arising, and they were doubtless decided the same way in all places, whether at Lyons, Antwerp, Winchester, or St. Ives, to which places the merchants flocked from afar at the season of the fairs."1 The principal subjects covered by the law merchant were admiralty, insurance, and bills and notes. In its earlier stages only a very small part of this body of law was concerned with the subject of bills and notes; but the importance of these subjects rapidly increased, until to-day the law merchant is mainly 'Street's Foundations of Legal Liability, Vol. II, p. 328. remembered and referred to in connection with these branches of the law. The best account of the law merchant and the scope of its authority is that found as an appendix to the first volume of Cranch's Reports of the Supreme Court of the United States, some selections from which are here inserted: "1. In order to ascertain how the law stood before that statute it may be necessary to examine how far the custom of merchants, of the lex mercatoria, was recognized by the courts of justice, and by what means the common law forms of judicial proceedings were adapted to its principles. "A distinction seems to have been made very early between the contracts of merchants (especially of foreign merchants) and those of other people. Nearly six hundred years ago we find their 'old and rightful customs' protected by the great charter of English liberties. (Magna Charta, c. 30.) Peculiar privileges were also granted them more than 500 years ago by the statute of Acton Burnel de mercatoribus, 11 Edw., 1, and the statute of merchants, 13 Edw., 1. And in the reign of Edw. III, many statutes were made for their encouragement, in some of which, particularly 27 Edw. III, c. 19 and 20, the law merchant is expressly recognized. In the 13 Edw. VI, 9, 10 (cited by Molloy, book 3, c. 7, No. 15), it is said that 'a merchant stranger made suit before the King's privy council, for certain bales of silk feloniously taken from him, wherein it was moved that this matter should be determined at common law; but the Lord Chancellor answered, that this suit is brought by a merchant who is not bound to sue according to the law of the land, nor to tarry the trial of twelve men.' "The custom of merchants is mentioned in 34 H. VIII, cited in Bro. Abr., tit. Customs, pl. 59, where it was pleaded as a custom between merchants throughout the whole realm, and the plea was adjudged bad, because a custom throughout the whole realm was the common law. And for a long time it was thought necessary to plead it as a custom between merchants of particular places, viz., as a custom among the merchants residing in London and merchants in Hamburgh, &c. By degrees, however, the courts began to consider it as a general custom. Co. Litt., 182; 2 Inst., 404. And in the time of James I, Ch. J. Hobart, in the case of Vanheath vs. Turner, Winch., 24, said, that 'the custom of merchants is part of the common law, of which the judges ought to take notice.' It was still, however, deemed necessary to set forth the custom specifically; and in that form the precedents continued for some time after. Indeed, the pleadings continued in that form long after the courts had decided it to be unnecessary. Lord Coke, in his Commentary on Littleton (first published in 1628), folio 182, a., speaking of the lex mercatoria, says, 'which, as hath been said, is part of the laws of this realm.' See, also, 2 Inst., 404. "But after this, in the year 1640, in Eaglechild's Case, reported in Hetly, 167, and Lit. Rep., 363, 6 Car. I, it was said to have been ruled in B. R. 'that upon a bill of exchange between party and party who were not merchants, there cannot be a declaration upon the law merchant; but there may be a declaration upon assumpsit, and give the acceptance of the bill in evidence.' "This decision seemed to confine the operation of the law merchant, not to contracts of a certain description, but to the persons of merchants; whereas the custom of merchants is nothing more than a rule of construction of certain contracts. Jac., Law Dict., Toml. edit., tit. Custom of Merchants. Eaglechild's Case, however, was overruled in the 18 Car. II B. R. (1666), in the case of Woodward vs. Rowe, 2 Keb., 115, 132, which was an action by the indorsee against the drawer of a bill of exchange. "The plaintiff counted on the custom and law of the realm, that if any man writes a bill to another, then if he to whom the bill is directed, do not pay for the value received by the maker, the maker of such bill should pay.' 'It was moved in arrest of judgment, that this count is ill, the general custom being the law; and it doth not appear to the court that there is any such law. Sed curia contra, that by the common law a man may resort to him that received the money, if he to whom the bill was directed, refuse.' It was afterwards moved again that this 'is only a particular custom among merchants, and not common law; but, per curiam, the law of merchants is the law of the land; and the custom is good enough generally for any man, without naming him merchant; judgment pro plaintiff, per totam curiam, and they will intend that he, of whom the value is said to be received by the defendant, was the plaintiff's servant.' "The same principle was, two years afterwards, recognized in an anonymous case (but believed to be Milton's Case, vide 1 Mod., 286), in the exchequer, reported in Hardres, 485 Mich., 20 Car. II (1668), where the plaintiff declared on the custom of England, and after verdict, Offley moved in arrest of judgment, because the 'plaintiff had declared that per consuetudinem Angliae, etc., which he said was naught, because the custom of England is the law of England, and what the judges are bound to take notice of; and that therefore the consuetudo Angliae ought to have been omitted.' "But the chief baron said: 'But for the plaintiff's inserting the custom of the realm into his declaration here, I hold that to be mere surplussage and redundancy, which does not vitiate the declaration.' And again he says: 'It were worth while to inquire what the course has been amongst merchants; or to direct an issue for trial of the custom among merchants in this case; for although we must in general take notice of the law of merchants; yet all their customs we cannot know but by information.' Afterwards, in declaring their opinions, the court said, 'that this course of accepting bills being a general custom amongst all traders both within and without the realm, and having everywhere that effect to make the acceptor subject to pay the contents, the court must take notice of that custom.' "Notwithstanding these decisions, the question was again made about twenty years afterwards, in the case of Carter vs. Downish, 1 W. & M. anno 1688, 1 Shower, 127, in the exchequer, on a writ of error from the King's bench. The defendant had covenanted to pay all bills which should be drawn on him in favor of the plaintiff on account of 1,000 kentles of fish, and the breach assigned was the non-payment of a certain bill. The defendants pleaded that the plaintiff by indorsement on the bill, according to the custom of merchants, appointed the payment to Herbert Alwyn or his order, who indorsed it to Tassel, to whom the defendant paid it. To this plea there was a demurrer and joinder. One of the errors as |