Moral Theology Part 101

2126. The Obligation of Observing Prices Settled by Law Or Custom.--(a) The legal price (e.g., in some countries the prices on government monopolies, such as tobacco and salt), which in modern times is rare, is ordinarily obligatory in virtue of commutative justice, since its disregard harms one of the parties to the sale. But in exceptional cases the price may for reasons of equity be no longer obligatory (e.g., when the lawgiver does not insist on its observance).

(b) The market price is ordinarily of like obligation, and for the same reason. But it should be noted that the current price allows of some lat.i.tude, since the common estimate does not agree on exactly the same figure, and hence there is a highest, a lowest, and an average price.

Injustice is done when one sells above the highest market price, that is, when one charges a sum notably in excess of that charged by others at the same place and time; or when one buys below the lowest market price, that is, when one pays a sum notably less than that paid by other buyers. St. Alphonsus gives as a rule that when a commodity is valued at 5, it may be sold for 6 or bought for 4; when valued at 10, it may be transferred or acquired for 12 or 8; when valued at 100, it may be exchanged for 105 or 95.

2127. When the Market Price May Be Disregarded Without Injustice.--In some exceptional cases one may disregard the market price without injustice, if there are reasons that justify this.

(a) Reasons that rest on the matter of the contract are that the thing on sale has increased or decreased in value (e.g., the merchandise is of extraordinary excellence or rarity), or that the contractant would lose or risk loss from the sale itself by keeping to the market price (e.g., the buyer would by his purchase deprive himself of money that could be used more profitably in another transaction; the article if sold would have to be replaced by the seller at a higher price; the vendor by waiting can make a better sale later; the object which a person wishes to purchase is especially prized by the owner and cannot be duplicated). In these cases, however, the vendor should give notice to the buyer that for special reasons a higher price is being asked, so that the latter may have the choice of going elsewhere, if he prefers.

(b) Reasons that rest on the manner of the contract are that certain exceptional forms of sales are justified by law or custom and do not violate basic justice. Auction sales are of this kind, and, if the conditions of aleatory contracts are observed so that the risk will be equal on both sides, it is not unfair to take a price above the highest current price or to bid and buy below the minimum price.

2128. If the reason for the increase is the accommodation of the sale itself to the purchaser, because he specially prizes the article, does it justify an increase above the market price?

(a) If the article has become of greater value to many because of its own worth, the market value has also risen, and one may raise one's price; but if its greater value to many is due only to public distress, as in time of war, it would be a cruel form of injustice known as profiteering to raise the price exorbitantly.

(b) If the article has become of greater value to one person only, the seller may not raise his price for that reason, since the special worth the article has is not inherent in it, and hence it may not be sold by the owner as if it were his own possession. If, however, the purchaser wished to add something as a free gift, there would be no objection to his doing so. The same principles apply to the purchase of an article at less than its value, for the sole reason that ready money has special value for the seller.

2129. Unjust Sales Based on Ignorance of Real Value.--There are also cases in which an object is purchased at an unjust price because its true value was unknown to the contractants or was hidden.

(a) If the value was unknown on account of substantial error (e.g., a woman buys paste ornaments, thinking they are genuine diamonds), the contract is invalid; if it was unknown on account of the individual error of a contractant (e.g., a woman buys a diamond of great value for a few dollars, because the seller did not know the value of the jewel), the contract is unjust; if it was unknown on account of public error reflected in the current price (e.g., an art dealer buys at a low price a masterly painting, because his superior judgment enables him to recognize in it qualities which others did not perceive), the contract is both valid and just. It is also lawful to buy at the present prices when one knows from sources that one can honorably use that the objects purchased will soon rise greatly in value, for one is not bound to share with others one's personal knowledge.

(b) If the hidden value is no man's property or is abandoned (e.g., a man buys a field in which he, but not the owner, knows that a treasure is concealed, or he buys a goose and finds gold pieces in its stomach and cannot discover how they got there), the buyer is ent.i.tled to acquisition; but if it has an owner who can be discovered (e.g., a man buys a coat in a second-hand store and discovers a large quant.i.ty of money in bills sewed inside the lining, and is able to trace back the coat to its former wearer, if he tries), the buyer is bound to rest.i.tution.

2130. Obligation of Rest.i.tution on Account of Unjust Prices.--(a) Unjust Possession.--If there was bad faith without fraud, the seller should restore the difference between what he received and the highest current price, the buyer the difference between what he paid and the lowest current price. Overcharges or underpayments in conventional prices should be compensated for according to a reasonable standard, such as the decision of the experts.

(b) Unjust Damage.--If there was bad faith and fraud with resultant damages to one of the parties, the losses should be made good, even though the just price itself was not violated by excess or defect (see 1762).

(c) Nullity.--If there was good faith on both sides, there is no obligation of restoration, unless we suppose substantial error, lack of proper consent, conditional agreement, etc., which make the sale null or rescindable (see 1725).

2131. Injustice Regarding the Thing Sold.--Having spoken of the injustices committed in reference to the price, we shall now treat of the injustices committed in reference to the thing sold. The contract supposes that the thing sold be of a certain character, and hence injustice is done if one of the parties wilfully misleads the other about that character.

(a) Thus, the species of the thing sold enters into the contract, and so it is unjust to deceive another person about the nature of the thing that is being sold (e.g., if the seller gives inferior subst.i.tutes or adulterated goods to those who desire the genuine and pure article, or if the buyer deceives an inexperienced merchant into thinking that the high-grade clothing material he has for sale is low grade).

(b) The quant.i.ty of the thing sold is also a part of the contract, and it is unjust to take advantage by giving less or taking more than is agreed on: "Thou shalt not have divers weights in thy bag, a greater and a less, neither shall there be in thy house a greater bushel and a less" (Deut., xxv. 13, 14).

(c) The quality of the thing sold belongs to the contract, and hence there is fraud if one of the parties deceives the other about it (e.g., if the horse sold is sickly or slow, when he is supposed to be healthy and speedy).

2132. Defects in the Thing Sold.--If there are defects in an article sold, but a fair reduction in the price is made on account of the imperfection of the article, there is no injustice in the price. But the seller is unjust, nevertheless, if he conceals the defects in spite of a contrary condition in the contract, for he injures the buyer by leading him into an agreement against his will.

(a) There is an indicated condition when the buyer inquires whether there are defects in the article, having the intention to take nothing that has any considerable defect. In such a case if the seller conceals even an accidental defect (i.e., one that makes the article less suitable for the buyer), the contract is null on account of lack of consent, or at least, as others think, it is rescindable on account of the fraud practised. But if a defect is inconsiderable, the contract, unless it is expressly stipulated to the contrary, is good and lawful, for there is hardly anything that has not some small defects.

(b) There is an implied condition when the buyer makes no inquiry, but there is a substantial defect (i.e., one that makes the article dangerous or unsuitable for the purchaser), and this defect is hidden, either because it is of a kind that would escape most persons, or because the purchaser is inexperienced or unable to perceive it for himself. Since every person who buys intends to get something useful, there is no consent and the contract is invalid, if one is given something harmful (e.g., corrupted or poisonous food instead of good food), or something entirely useless to him either for service or for sale (e.g., a lame horse instead of a sound horse for one who deals in race-horses).

2133. Circ.u.mstances in Which Defects Need Not Be Revealed.--Fairness of price being supposed, the seller is not unjust in not calling attention to defects in the thing he sells, if the buyer does not ask about defects and there is no implied condition that the seller should volunteer the information. This happens as follows:

(a) if the defect is hidden, but only accidental, there is no condition that the seller shall point out the defect, for the understanding is only that the buyer shall receive something serviceable at a fair return for his money, Nevertheless, most merchants wish to please the public and will take back or exchange an article that is not satisfactory;

(b) if the defect is open, but accidental, there is no condition that the seller shall instruct the buyer about things that the latter can and should observe for himself; for it is supposed that the buyer will exercise ordinary care and prudence in making purchases, nor is the seller paid for supplying this, nor for a.s.sisting the buyer to make good bargains. Thus, if a man were to buy a one-eyed horse, because he had not examined the horse, he should blame his own negligence, not the silence of the seller, for his bad bargain.

2134. Definition of Trading.--Trading (_negotiatio_) in the strict sense is the purchase of an object with the intention of selling it unchanged at a profit. If any one of the conditions mentioned in this definition are lacking, there is trading in a wide sense. (a) Thus, trading includes purchase, and hence he who sells the produce of his own farm or vineyard is not strictly a trader; (b) there must be an intention of reselling the thing bought, and hence there is trading only in a wide sense if one buys an article for one's own use but, finding it unsuitable to that use, sells it to another person; (c) the object must be sold unchanged, that is, in the same form in which it was received, otherwise there is not strict negotiation, as when one buys colors and canvas and makes them into a picture; (d) the object must be sold at a higher price than was paid for it, and hence it is not trading in the strict sense to let a customer have an article for just what it has cost oneself.

2135. The Morality of Trading in the Strict Sense.--(a) In itself, trading has the appearance of evil, inasmuch as money-making may be an encouragement to avarice. But in reality profit as an end is morally indifferent, neither good nor bad, and all will depend on the ultimate reason for which one engages in business. He who makes the whole purpose of his existence the acquisition of gain is a materialist, but he who has some higher end, such as public benefit or private maintenance, is virtuous in his aims. (b) For clerics, trading is forbidden by Canon Law (Canon 142), and the reason is that clerics should be free from the distractions and dangers of commerce, so as to devote themselves entirely to their own spiritual duties (II Tim., ii.

4).

2136. Usury.--The sin of usury is committed in two ways.

(a) Usury in the strict sense is the taking of interest by reason of intrinsic t.i.tle (i.e., on account of the use) for money or other fungible loaned on condition that it be restored in kind (_mutuum_).

This is unjust since it exacts payment for that which is nonexistent, that is, for use, as a distinct value, of a fungible whose only value is in its use (see Aristotle, _Politics_, Bk. I, Ch. 10, 1258b 2-8; St.

Thomas, Summa Theologica II-II, q. 78, a. 1). This was the opinion of most medieval theologians based on the fact that money was solely a medium of exchange. Interest was permitted, however, on the grounds of extrinsic t.i.tles, e.g., compensation for the expense of a transaction (_d.a.m.num emergens_), the loss of opportunity to make good bargains (_lucrum cessans_).

(b) Usury in the wide sense, which is all too common, is the taking of interest for a fungible loaned at _mutuum_, where there is an extrinsic t.i.tle (e.g., the loss or inconvenience suffered by the lender) for the interest, but the rate charged is unjust, exceeding that fixed by law or that which is fair and reasonable (see Canon 1543). This is unjust when the lender takes more than his loan is worth; it is uncharitable when the lender does not demand more than the worth of his loan, but does exact what is due in a heartless manner. Examples of usury in the wide sense are the acts of loan sharks who take advantage of the distress of the poor to make them pay enormous interest for small loans, or who hold the debtor to the strict letter of the agreement at a great loss to him.

In recent years a new concept of usury in the wide sense has emerged.

It is based upon the fact that in modern times the function of money has changed. In ancient times it was solely a medium or measure of exchange that could not be turned easily into capital. With the emergence of the capitalistic system, opportunities for investment increased, and money a.s.sumed the role of a factor of production. Money a.s.sumed a new value and function: it became virtually productive, and so today money does fructify. To place money, then, at the disposal of another to be employed in profitable ventures const.i.tutes an economic service and, as such, is worth its price as any other service. This price of money const.i.tutes modern interest, which seems to differ radically from the old contract of interest and to be more one of hire or lease. So viewed, interest, or the price of money, is determined in the same way as the price of any other service; the unjust price, or usury, is an excessive price. This is the modern concept of usury.

2137. Principles Obligatory in All Forms of Contract.--The principles of equality and honesty that are morally obligatory in sales and loans at interest are also obligatory in other forms of contract. The following are examples of equality.

(a) Gratuitous Contracts.--Obviously these contracts do not require equality in respect to recompense, since their nature is that no recompense is given for what is received. But in other ways equality must be observed. Thus, there must be mutual consent, offer on one side and acceptance on the other; there must be mutual respect, for each must honor the gratuitous promises made to the other; there must be a return of the same thing in quality and quant.i.ty as was borrowed, unless this would mean (as in _mutuum_) a loss to the borrower, etc.

Moreover, the fact that all the advantage is received by one party is balanced by the fact that this party must bear the ordinary expenses and is held to special care himself, but cannot exact special care in the other party. Thus, a borrower has all the advantage from a loan, and he is obliged to use extreme care in using the lender's property, while a depositor has all the advantage from the contract of deposit and cannot demand more than ordinary diligence of the depositary in guarding the goods left with him.

(b) Aleatory Contracts.--Aleatory contracts, or contracts of chance, are concerned with some uncertain event whose outcome depends upon luck or skill or a combination of both. The chief forms are betting, lottery and gaming (all are considered as gambling), to which must be added insurance and market speculations. All of these are indifferent in themselves and obtain their morality from circ.u.mstances. However, gambling, besides conforming to the requirements of contracts in general, must observe some special conditions to guarantee its lawfulness:

1) The outcome should be objectively uncertain and not a "sure thing"

to be truly a contract of chance. While the contractants may be subjectively certain of winning, neither may so manipulate the matter as to exclude the other's chance of winning. Should one insist upon betting against another's a.s.surance of a certain outcome, he is making a gift, hardly a bet.

2) Each must stake what belongs to himself and is not needed for satisfying other obligations, e.g., supporting one's family, paying creditors, etc. Failure to observe this condition leads to many sins of theft or negligence. Should a person gamble with money belonging to another, _per se_ he has a right to the winnings under the t.i.tle of industrial fruits. However, if it would be impossible for him to restore in the event of a loss, the wager is void and the winnings must be restored to the other player, since the amount bet could not be lawfully won by the other contestant.

3) A reasonable proportion should be observed between what is bet and the probable winnings, and all betting should offer a fair chance of winning. Equality is not necessary, but odds and handicaps should be offered by the favored side. However, the odds may be waived by other bettors.

4) Honesty must prevail to exclude fixing the outcome or an unlawful style of play. The conventions of each bet or game establish the norms of cheating. Thus, hidden cards, marked cards, false dice void a bet.

But running a horse solely to "tighten him" or "round him into shape"

without full effort to win is expected in horse racing. Winnings through cheating must be refunded.

5) The loser must pay. Since civil law forbids many forms of organized gambling, the question arises whether a wager that has been outlawed const.i.tutes matter for a valid contract that must be fulfilled. If the law is purely penal, the contract is valid and the obligations ensue; if it is a law that binds morally, then the contract is invalid, and the loser probably need not pay, but has acted sinfully in gambling.

Although not sinful in itself, gambling is so open to serious abuse that it has been strictly regulated by civil laws which bind in conscience.

Insurance is reduced to the category of contracts of chance, although its purpose is different from gambling, for it is concerned not with an uncertain good, i.e., to make money quickly, but with an uncertain evil, i.e., to avoid loss. In many instances an individual who does not take out insurance gambles more than one who does.

Conditions Requisite for Validity. The special conditions requisite for the validity of an insurance contract are founded upon its aleatory nature. This involves especially that the matter of the contract is in some way outside the control of both insured and insurer and beyond their power, both legal and moral, to govern beforehand. From this follows the second essential condition, that there be some risk for both parties. Some moralists today maintain that many insurance contracts are unjust to the insured by reason of defect of proportionate risk on the part of the insurer. They argue that the insurer avoids all risks and makes increasing profits annually whenever insurance is on such a large scale that the use of statistical tables favors the insurer. The fact that insurance companies are listed among the most wealthy corporations lends credence to the argument and explains why some moralists favor the insured in cases of rest.i.tution not involving fraud on the part of the beneficiary. Other moralists insist that such injustice can not be proved, that high profits are owing to increased efficiency and better service, that premiums are adjusted when it becomes apparent that they are out of proportion to the risks involved by the insurers.

On the part of the insurer is required the ability to pay indemnities occurring at the normal rate, but not to cover all at once. His right to the premiums is correlative to the obligation to pay the stipulated indemnities, while his liabilities are based upon probable losses occurring successively. In regard to the insured, his basic obligation is to make an honest and complete disclosure of the risk involved.

Moral cases, for the most part, are concerned with error, innocent misrepresentation, and fraud on the part of the insured. Both the natural and civil law indicate the effect of these elements on an insurance contract.

The natural law invalidates a contract in which consent of one or both parties arises from substantial error concerning the nature or the matter of the contract--in insurance, the risk involved. In general, then, whenever the error of the insured is such that he would not have contracted had he known the facts, the contract is invalid, even if the error was due to innocent non-disclosure or misrepresentation on the part of the insured. In such cases, the innocent insured has no right to the indemnity owing to the invalidity of the contract; he has, however, a natural right to all premiums paid out, since no contract is involved and the insurer has no claim to them. In case of fraud, at least after judicial decision, the insured would have no right to the premiums and must also recompense the insurer for expenses sustained.

Error is considered accidental and as not invalidating in natural law when the insurer, knowing the facts, would have issued a policy, but at a higher premium. In this case the beneficiary may accept the indemnity, but must return the difference in the amount owed in premiums.

A special case of substantial error involving a disease unknown to the insured and undiscovered or undiscoverable by the insurance company doctors is considered by moralists as not invalidating a contract in natural law. It is argued that the insurer must a.s.sume such risks and that the insured intends to cover such unknown conditions. Moreover, an invalidating clause concerning such a contingency may be considered penal in nature and obligatory only after the sentence of a judge.