munity, there is a certain quantity of money thus necessary; which a person well skilled in political arithmetic might perhaps calculate as exactly as a private banker can the demand for running cash in his own shop: all above this necessary quantity may be spared, or lent, without much inconvenience to the respective lenders; and the greater this national superfluity is, the more numerous will be the lenders, and the lower ought the rate of the national interest to be; but where there is not enough circulating cash, or barely enough, to answer the ordinary uses of the public, interest will be proportionably high: for lenders will be but few, as few can submit to the inconvenience of lending.

[457]

So also the hazard of an entire loss has its weight in the regula tion of interest: hence the better the security, the lower will the interest be; the rate of interest being generally in a compound ratio, formed out of the inconvenience, and the hazard. And as, if there were no inconvenience, there should be no interest but what is equivlent to the hazard, so, if there were no hazard there ought to be no interest, save only what arises from the mere inconvenience of lending. Thus, if the quantity of specie in a nation be such, that the general inconvenience of lending for a year is computed to amount to three per cent.: a man that has money by him will perhaps lend it upon a good personal security at five per cent., allowing two for the hazard run; he will lend it upon landed security or mort gage at four per cent., the hazard being proportionably less; but he will lend it to the state, on the maintenance of which all his property depends, at three per cent., the hazard being none at all. 25

But sometimes the hazard may be greater, than the rate of interest allowed by law will compensate. And this gives rise to the practice of, 1. Bottomry, or respondentia. 2. Policies of insurance. 3. Annuities upon

lives.

And first, bottomry 27 (which originally arose from permitting the master of a ship, in a foreign country, to hypothecate the ship in order to raise money to refit) is in the nature of a mortgage of a ship; when the owner takes up money to enable him to carry on his voyage, and pledges the keel or bottom of the ship (partem pro toto) as a security for the repayment. In which case it is understood, that if the ship be lost, the lender loses also his whole money; but, if it returns in safety, then he shall receive back his principal, and also the premium or interest agreed upon, however it may exceed the legal rate of interest. And this is allowed to be a valid contract in all trading nations, for the benefit of commerce, and by rea

(26) This dissertation upon the usury laws contains many of the principles and arguments which are now confidently used against any legislative restraint upon the rate of interest, though the learned Commentator has treated them as favourable to such restraints. The existence of continued enactments of that nature, with the crude and popular prejudices of the times, seetus, to have tended to embarrass and confuse the author's perception of the sound maxims of political economy on this subject. It is not now the practice for men to stop short of the conclusions to which their researches in juridical science tend, from an overweening deference to established doctrines; and the frequent discussions in parliament upon the usury laws, for which the comtry is mainly indebted to Mr. Serjeant Onslow, must eventually lead to a wise and permanent settlement of the question. See Bentham's Treatise on the Usury Laws, and Mr. Sugden's observations on the same subject. See the statute of usury, and observations on the same, post 463. The value of the use of money would at all times find its natural and just level, and by fixing a standard price by legislative enactment, with penalties for the infraction of the law, the fair lender and borrower are obliged to resort to the more expensive modes of loans, by the intervention of annuities, &c.; or the usurer, exacting greater interest than might be reasonable, charges more exorbitantly for the use of the money, on account of the additional risk he incurs of forfeiting the whole. Chitty (27) See in general, Abbott on Shipping, 143. 2 Holt, 398. 3 Chitty's Com. L. 313 to 316.

son of the extraordinary hazard run by the lender. (h) And in [458] this case the ship and tackle, if brought home, are answerable (as well as the person of the borrower) for the money lent. But if the loan is not upon the vessel, but upon the goods and merchandise, which must necessarily be sold or exchanged in the course of the voyage, then only the borrower, personally, is bound to answer the contract; who therefore in this case is said to take up money at respondentia. These terms are also applied to contracts for the repayment of money borrowed, not on the ship and goods only, but on the mere hazard of the voyage itself; when a man lends a merchant 1000l. to be employed in a beneficial trade, with condition to be repaid with extraordinary interest, in case such a voyage be safely performed: (i) which kind of agreement is sometimes called foenus nauticum, and sometimes usura maritima.(j) But as this gave an opening for usurious and gaming contracts, especially upon long voyages, it was enacted by the statute 19 Geo. II. c. 37. that all monies lent on bottomry or at respondentia, on vessels bound to or from the East Indies, shall be expressly lent only upon the ship or upon the merchandise; that the lender shall have the benefit of salvage; (k) and that if the borrower hath not an interest in the ship, or in the effects on board, equal to the value of the sum borrowed, he shall be responsible to the lender for so much of the principal as hath not been laid out, with legal interest and all other charges, though the ship and merchandise be totally lost. 23

Secondly, a policy of insurance is a contract between A and B, that upon A's paying a premium equivalent to the hazard run, B will indemnify or insure him against a particular event. This is founded upon one of the same principles as the doctrine of interest upon loans, that of hazard; but not that of inconvenience. For if I insure a ship to the Levant, and back again, at five per cent.; here I calculate the chance that she performs her voyage to be twenty to one against her being lost: and, if she be lost, I lose 100l. and get 51. Now this is much the same as if I lend the 'merchant, whose whole fortunes are embarked in this vessel, 100l. at

h Moll. de jur. mar. 361. Malyne, lex mercat. b. 1. c. 31. Bacon's essay's, c. 41. Cro. Jac. 208. Bynkersh. quaest. jur. privat. l. S. c. 16. i1 Sid. 27.

j Molloy, ibid. Malyne, ibid.

k See Book I. page 294.

(28) The general nature of a respondentia bond is this, the borrower binds himself in a large penal sum, upon condition that the obligation shall be void, if he pay the lender the sum borrowed and so much a month from the date of the bond till the ship arrives at a certain port, or if the ship be lost or captured in the course of the voyage. The respondentia interest is frequently at the rate of forty or fifty per cent. or in proportion to the risk and profit of the voyage. The respondentia lender may insure his interest in the success of the voyage, but it must be expressly specified in the policy to be respondentia interest, 3 Burr. 1391.; unless there is a particular usage to the contrary. Park. Ins. 11. A lender upon respondentia is not obliged to pay salvage or average losses, but he is entitled to receive the whole sum advanced, provided the ship and cargo arrive at the port of destination; nor will he lose the benefit of the bond, if an accident happens by the default of the borrower or the captain of the ship. Ib. 421. Nor will a temporary capture, or any damage short of the destruction of the ship, defeat his claim. 2 Park. 626, 7. 1 M. & S. 30.

Where bottomry bonds are sealed, and the money paid, the person borrowing runs the hazard of all injuries by storm, fire, &c. before the beginning of the voyage, unless it be otherwise provided. As, that, if the ship shall not arrive at such a place at such a time, &c. then the contract hath a beginning from the time of sealing; but if the condition be, that if such ship shall sail from London to any port abroad, and shall not arrive there, &c. then, &c. the contingency hath not its beginning till the departure. Beawes. Lex. Merc. 143. Park. 626. A lender on bottomry or respondentia is not liable to contribute in the case of general average, nor is he entitled to the benefit of salvage. Park. 627. 629. 4 M. & Selw. 141. In the case of hypothecation, the lender may recover the ship itself in the admiralty court, but not in bottomry or respondentia. See 6 Moore, 397.

(29) See in general, Park and Marshall on Insurances, and 3 Chitty Com. L. 445. to 536. VOL. I.

94

[459] the rate of eight per cent. For by a loan I should be immediately out of possession of my money, the inconvenience of which we have supposed equal to three per cent.: if therefore I had actually lent him 100l., I must have added 31. on the score of inconvenience, to the 5l. allowed for the hazard, which together would have made 81. But, as upon an insurance, I am never out of possession of my money till the loss actually happens, nothing is therein allowed upon the principle of inconvenience, but all upon the principle of hazard. Thus, too, in a loan, if the chance of repayment depends upon the borrower's life, it is frequent (besides the usual rate of interest) for the borrower to have his life insured till the time of repayment; for which he is loaded with an additional premium, suited to his age and constitution. Thus, if Sempronius has only an annuity for his life, and would borrow 100l. of Titius for a year; the inconvenience and general hazard of this loan, we have seen, are equivalent to 5l., which is therefore the legal interest; but there is also a special hazard in this case; for, if Sempronius dies within the year, Titius must lose the whole of his 1001. Suppose this chance to be as one to ten: it will follow that the extraordinary hazard is worth 107. more, and therefore that the reasonable rate of interest in this case would be fifteen per cent. But this the law, to avoid abuses, will not permit to be taken; Sempronius therefore gives Titius the lender only 51., the legal interest; but applies to Gaius an insurer, and gives him the other 10l. to indemnify Titius against the extraordinary hazard. And in this manner may any extraordinary or particular hazard be provided against, which the established rate of interest will not reach; that being calculated by the state to answer only the ordinary and general hazard, together with the lender's inconvenience in parting with his specie for the time. But, in order to prevent these insurances from being turned into a mischievous kind of gaming, it is enacted by statute 14 Geo. III. c. 48., that no insurance shall be made on lives, or on any other event, wherein the party insured hath no interest; that in all policies the name of such interested party shall be inserted; and [460] nothing more shall be recovered thereon than the amount of the interest of the insured.

This does not however extend to marine insurances, which were provided for by a prior law of their own. The learning relating to these insurances hath of late years been greatly improved by a series of judicial decisions; which have now established the law in such a variety of cases, that (if well and judiciously collected) they would form a very complete title in a code of commercial jurisprudence: but, being founded on equitable principles, which chiefly result from the special circumstances of the case, it is not easy to reduce them to any general heads in mere elementary institutes. 30 Thus much however may be said; that being contracts, the very essence of which consists in observing the purest good faith and integrity, they are vacated by any the least shadow of fraud or undue con cealment; and on the other hand, being much for the benefit and extension of trade, by distributing the loss or gain among a number of adventurers, they are greatly encouraged and protected both by common law and acts of parliament. But as a practice had obtained of insuring large sums without having any property on board, which were called insurances, inte

(30) This task was accomplished by Mr. Justice Park in his masterly treatise on the subject, which was followed by Mr. Serjt. Marshall's excellent work; and see 3 Chitty's Commercial Law, 445 to 536.

rest or no interest, and also of insuring the same goods several times over; both of which were a species of gaming without any advantage to com#merce, and were denominated wagering policies: it is therefore enacted by the stat. 19 Geo. II. c. 37., that all insurances, interest or no interest, or without farther proof of interest than the policy itself, or by way of gaming or wagering, or without benefit of salvage to the insurer, (all of which had the same pernicious tendency) shall be totally null and void, except upon privateers, or upon ships or merchandise from the Spanish and Portuguese dominions, for reasons sufficiently obvious; and that no re-assurance shall be lawful, except the former insurer shall be insolvent, a bankrupt, or dead; and lastly, that, in the East India trade the lender of money on bottomry, or at respondentio, shall alone have a right to be insured for the money lent, and the borrower shall (in case of a loss) [461] recover no more upon any insurance than the surplus of his property, above the value of his bottomry or respondentia bond. 31

(31) This statute does not extend to foreign ships, upon which, as before the statute, there may still be insurances, interest or no interest. These were not included in the act, on account of the difficulty of bringing witnesses from abroad to prove the interest. Doug. 316. But where there is an interest on board, the owner by a valued policy may insure somewhat beyond the extent of the real value, because the adverse party has admitted the value. Such a case is held not to be within the statute, unless it should appear that the interest of the insured is so small as to be a mere evasion of the act, and a pretence for gaming. But if the loss be partial, then the amount must be proved, even under a valued policy. If the goods are fraudulently overvalued, to cheat the insurers, nothing can be recovered. 3 Camp. 319. In an open policy, where no value is fixed, the prime cost of the goods must be proved. 2 Burr. 170. 4 Burr. 1966.

A policy may be altered without a fresh stamp, before notice of the determination of the risk, so that the property remain in the same person, and the term and sum be the same; but a new stamp is necessary if any material or essential alteration is made. See 35 Geo. Ill. c. 63. s. 13. 8 East, 373. 4 Taun. 169. 1 M. & S. 217. 4 Camp. 107. 5 Taun. 359. 1 Stark. 336. 5 M. & S. 267. 2 B. & A. 320. But a material alteration, without the consent of the underwriter, who is defendant (though others who signed may have assented), vitiates the policy, 4 Taunt. 329. 7 Taunt. 416. 2 Stark. 64. 3 Brod. & Bingh. 168, but not so an immaterial alteration. 4 Moore, 5. 1 B. & B. 426. A misrepresentation of a material fact by the assured, though innocently or inadvertently made, vitiates the policy, the premium to be returned; and if fraudulently made, the underwriter may retain the premiuin, i Bla. Rep. 593, 594. Dougl. 260. 1 T. R. 12.

There is a distinction between a representation and a warranty, the latter being a condition or contingency inserted in the policy itself; thus, where a ship is warranted to sail on a particular day, and she sails either before or after, though, for the best reason, the assurer is discharg ed. 1 T. R. 345. Cowp. 606, 607. see 3 M. & S. 461. 6 Taun. 241. 1 Marsh. 570.; but it is enough that a representation be substantially performed. Cowper, 785. Negligence of the crew at the time of the loss is no breach of the implied warranty, if the crew be sufficient at the outset. 2 B. & A. 73. An insurance on goods from an enemy's port to this country, though in a neutral vessel, is void. 8T. R. 548. 1 East, 475. 8 East, 273. A voluntary and unneces sary deviation, even for a night or an hour, from the voyage, discharges the assurer from the policy, Park, Ins. 298. 3 Taunt. 16. 4 Taunt. 229. S Camp. 437. 16 East, 312. Selw. N. P. 978. 4 Moore, 150. 5 Bar. & Ald. 45. ; but a vessel when insured, may always do whatever it would be expedient to do if uninsured." Per Gibbs, C. J. Holt's N. P. C. 186.

The underwriter is not answerable for any loss happening (though in consequence of an act done in the voyage) after the ship has been twenty-four hours in port in good safety, Park, 35.; but if the policy be, "until the ship shall have ended and be discharged of her voyage," and not "until she shall have moored at anchor twenty-four hours in good safety," it has been holden that the policy is not discharged till she is unloaded. Skin. 243. The presumption, as to the loss of a missing ship, will be governed by the circumstances laid before the jury. Holt's N. P. C. 244. 2 Camp. 85. If after payment on such a presumption the vessel reappear, she will belong to the underwriters. Holt, 242.

Barratry comprehends every species of fraud, knavery, or criminal conduct in the master, by which the owners or freighters are injured. Cowp. 155, 156. 1 T. R. 159. 4 T. R. 33.

It is a general principle that the insured shall recover, in case of loss, no more than an indemnity; but mercantile usag may entitle him to the whole, which would be payable to him on a safe arrival, without deducting tonnage duty, pilotage, &c. Bingh. Rep. 61. If the voyage is lost, though the property is safe, the owner may abandon; or if the salvage is high, the expense of pursuing the voyage great, and the assurer will not bear it, 1 T. R. 615. 2 Burr. 1209.; but he cannot elect to abandon or not till he hears of the loss, nor after he hears the peril is over and the ship is in safety. 2 Burc. 1211. Sec 2 Saunders, 200. Goram v. Sweeting, in notes.

Thirdly, the practice of purchasing annuities for lives at a certain price or premium, instead of advancing the same sum on an ordinary loan, arises

A re-assurance is the contract which an insurer, who wishes to be indemnified against the risk he has taken upon himself, makes with another person, by giving him a premium to re-assure to him the same event, which he himself has insured. Re-assurances are prohibited by the statute 19 Geo. II. c. 37. both upon foreign and English ships, unless the assurer is insolvent, a bankrupt, or dead; in which cases he, his assignee, or personal representative, may make a re-assorance, which must be expressly mentioned as a re-assurance in the policy. 2 T. R. 161. The object of prohibiting re-assurance, was to prevent idle gaming speculations, by persons endeavouring to obtain a high premium for insurance, and then to secure themselves by getting the same risk insured at a lower rate. The learned judge seems to have mistaken a double assurance for a re-assurance; a double assurance is where the owner insures his goods twice or several times over, with different underwriters, which he may lawfully do. By which means he increases his security, and though he cannot recover more than a single satisfaction for his loss, yet he may bring his action against any one of the underwriters, and compel him to pay the whole extent of the interest insured. And this underwriter may afterwards recover from each of the rest a rateable satisfaction or apportionment of the sum which he has been obliged to pay to the assured. Park, Ius. 280. Insurance is merely a contract of indemnification against loss, and cannot be made a mode of gaining a prize, where no-loss has been sustained. A person to whom Mr. Pitt was indebted insured his life to the amount of his debt; after Mr. Pit's death, he was paid by his executors, and in an action against the insurers, the court of king's bench held that he could not recover, and that no action can be brought for indemnity, where, upon the whole event, no damage has been sustained. 9 East, 72. Chitty.

(32) See in general, 3 Chitty's Com. L. 312, 3. The 17 Geo. III. c. 26. is repealed, except as to annuities, &c. existing at the time, by the 53 Geo. III. c. 141. which is different in some of its details from the former statute. It provides that a memorial of every bond, deed, instrument, or other assurance, for the granting of any annuity or rent charge, shall be enrolled in chancery within thirty days after the execution. The memorial must contain the date, the names of the parties and witnesses, of the person or persons for whose life the grant is made, and of the persons by whom the same is to be beneficially received, the pecuniary consideration for the grant, and the sum to be annually paid, according to a form inserted in the statute. Companies being grantors or grantees of annuities, &c. may be described by the usual firm or name of trade. Section 4. requires, that where the grantee named in the deed shall not be entitled thereto beneficially, the name of the person who is, shall be described, in the same manner as in the enrolment, otherwise such deed, &c. shall be void. Sect. 5. The grantee, upon twenty-one days' notice in writing from the grantor, must deliver a copy of the deed, &c. to the grantor, charging 6d. for every hundred words, and upon refusal to do so, or to permit an examination of the copy with the original, he may be compelled by summons before either of the judges of the king's bench or common pleas. Sect. 6. provides that if any part of the purchase money be returned, or if it be paid in part notes, and such notes, with the privity of the grantee, shall be cancelled or not paid when due; or if expressed to be paid in money, when the same is paid in goods, or if any part is retained under pretence of answering future payments of the annuity, &c. or on any other pretence, it shall be lawful for the person liable to pay the annuity, &c. to move the court to stay proceedings in any action upon the deed, &c. and the court may cancel the deed, &c. and order the judgment, if any has been entered, to be vacated. By Sect. 8. contracts for purchase of annuities by persons under age are utterly void any attempt to confirm the same on the infant's coming of age notwithstanding; and soliciting any person under age either directly or indirectly to grant any annuity, &c. or advanc ing or treating to advance any money upon consideration of an annuity, &c. to be granted when the infaut comes of age, or to induce such infant to make oath, or give his word of honour or solemn promise, that he will not plead infancy or any other defence to such demand when he comes of age, or that he will ratify such annuity, &c. every such person so offending shall be guilty of a misdemeanor, and punished by fine, imprisonment, or other corporal punishment as the court shall see fit. By Sect. 9, all solicitors, brokers, or others, acting between the parties in completing any annuity, loan, &c. who shall demand or accept in money or any other gratuity more than 10s. per cent. shall be guilty of a misdemeanor. Sect. 10. declares that the act shall not extend to Scotland or Ireland, nor to any annuity given by will, marriage settlement, or for the advancement of a child, nor to any annuity secured on freehold, copyhold, or customary lands of equal annual value, whereof the grantor is seised in fee-simple, or fee-tail in possession, or secured by actual transfer in the funds, the dividends whereof are of equal value with the annuity, &c. nor to any voluntary annuity, &c. without regard to pecuniary consideration, nor to annuities granted by any body corporate, or act of parliament. By the 3 Geo. IV. c. 92. the names, without any further address of the witnesses in an annuity deed, &c. is sufficient in the memorial. The 2d section provides that every deed duly enrolled shall be valid, notwithstanding the omission to enrol any other deed or security relating to the same annuity.

The memorial must contain the christian name of the subscribing witness to the securities. The initial thereof is not sufficient, 2 B. & C. 1. 3 D. & R. 185. Doe & Bromley, K. B. Easter T. 1825; but where eighteen years had expired, and it was doubtful whether the christian names had not beei erased, the court would not interfere. 4 D. & R. 344. The memorial need not state