Saturday, November 4, 2017

Commercial Contracts of Genoa

A View of Genoa and Its Fleet by Christoforo de Grassi, 1597 copy
The Medieval Age had been known as the Dark Ages – a misconception that is being defunct today. In fact, it was during the Medieval Age that the commercial revolution takes place. And in Genoa, the commercial revolution led to the development of investments and contracts.

Giovanni Scriba

The notarial cartulary or compilation of legal documents of Giovanni Scriba or John the Scribe gave a glimpse of the sophisticated dealings of many Genoese. In the 12th century, Genoa emerged as a maritime power that rivalled Venice and Pisa. During the course of its prosperity, its people became highly active participants in their city’s mercantile life. They did so by entering into commercial contracts with travelling merchants.

Back then, merchants needed huge capital to sail to another port. They took their capital from investors and formed a contract to seal the deal. This documents became legally binding after its notarization by men like Giovanni Scriba.

Giovanni Scriba’s cartulary provided an insight on the commercial life of Genoa. It contained 1,306 acts ranging from estates to commercial contracts from the period 1154 to 1164. His commercial contracts revealed 3 prevalent types: (1) Societas; (2) Commenda; and (3) Sea Loan.

Societas, Commenda, and Sea Loan

The Societas formed most of Scriba’s cartulary, around 80%. Later also came known as the bilateral commenda, both the travelling merchant or travelling partner (called the tractator or socius portat) and the investor (called the commendator) formed the capital. 1/3 of the capital came from the travelling partner while the 2/3 came from the investor. Once the merchant returned to Genoa safely, the partners divided the profits equally. But if the venture incurred losses, both partners shared the burden.

The Commenda on the other hand, formed partial of Scriba’s contracts but after 1164, other cartularies revealed it trended as the most favored form of agreement. Under it, only the investor provided the capital. Upon the travelling partner’s return, the investor received back his investment plus 75% of the profits and the rest went to the merchant. In this case, however, if the venture incurred losses, the investor took all of it.

Lastly, the Sea Loan or Foenus Nauticum existed long before the time of the Italian maritime republics. As the oldest form of contract, as the name implies a merchant borrowed a sum of money from a creditor. If the merchant returned safely, he paid the creditor the principal plus the interest. Interest rates varied depending on the distance and risk of the voyage. Short distances incurred 10 to 20% while long distances had 40% or as high as 50%. If the ship and cargo faced mishap, such as pirate attack or sinking, the creditor must forgive the debt. The nature of the Sea Loan, however, faced condemnation in 1236 when Pope Gregory IX declared it as usury, a crime under canon law, and the usage declined.

In Economic Life of Genoese

The contracts helped merchants to get capital for their ventures, especially to small and upstarts. It mitigated or even eliminate risk their livelihood incurred, which in the case of the Medieval world numerous – from pirate attacks, storms, and dangerous waters.

For the investors and creditors, entering in a commercial contract allowed their money to grow rather than being hidden in coffers back home. The commercial contracts served as the early stock market as merchant announced their willingness in plazas where every Genoese – man, woman, and old – could see and choose to invest in.

No money was too small for the commercial contracts, as a merchant and multiple investors could pool their money into a large capital under a contract called accomandatio.

Genoese families entered this ventures and found many ways to optimize their profits. For example, a husband served as the travelling merchant, while his wife played as the investor. Even widows entered into commercial contracts. If the heir of a husband was a minor, the widow served as a guardian and she invested the child’s estate to commercial contracts for hefty returns.

Key to the success of the commercial contracts was trust. A merchant had the option of getting the capital and running away, leaving his investors dry and at loss. Trustworthiness was a value that Genoese looked for an investment. Commercial contracts commonly stated the purpose of the capital and the destination of the merchant to ensure transparency and complacency of investors. In a way, commercial contracts served as the early investment instruments during the Medieval Age built upon trust.

Decline of Commercial Contracts

These commercial contracts, especially the Commenda, declined as the trade industry changed in nature, from travelling to sedentary trading companies housed in a city. As traders stayed in one place, the need for capital lessen alongside the opportunity of the people to speculate. Soon, the nature of partnership also change from bilateral or accomodatio to longer and bigger partnerships that led to the development of a compagnia or a company.

Summing Up

The commercial contracts showed the sophistication of the Genoese economy. It represented the ingenuity of merchants to get the capital they needed. It showed the courage of ordinary Genoese to enter into such contracts – the handing over of savings to a complete stranger. Most importantly, it displayed a core value of any maritime or commercial state – integrity and faith. Merchants showed great deal of integrity for people to entrust them their life’s work and great deal of faith from ordinary Genoese to strangers. In the end, these values led to profits and prosperity that made Genoa a great commercial center in the Mediterranean. 

See also:
Cipolla, Carlo. Before the Industrial Revolution: European Society and Economy, 1000-1700. New York, New York: Routledge, 2004.

Coispeau, Olivier. A Brief History of International Financial Centers in the Last Millennium. Singapore: World Scientific Publishing Co. Pte., Ltd., 2017.

van Doosselaere, Quentin. Commercial Agreements and Social Dynamics in Medieval Genoa. New York, New York: Cambridge University Press, 2011.

Geary, Patrick (ed.). Readings in Medieval History. North York, Ontario: University of Toronto Press, 2016.

Greif, Avner. Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. New York, New York: Cambridge University Press, 2006. 

Mitchell, Linda (ed.). Women in Medieval Western European Culture. New York, New York: Routledge, 1999.

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