Mutuo

MUTUUM. - It is the contract by which one party (the lender) delivers to the other (the borrower) a determined quantity of money or of other fungible things, and the other binds himself to return an equal amount of things of the same kind and quality (CIC, art. 1813).

I. LEGAL PROFILE

Since the mutuum is a real contract, delivery of the thing is essential to it, so that, before such delivery, there may be - if its requirements are met - a promise of mutuum, but not a mutuum properly so called (art. 1822). Since mere use generally destroys the fungible thing, the use cannot be separated from it. Therefore the delivery of the thing necessarily transfers to the borrower not only the use, but also ownership (art. 1814) and with it every risk. In the lender, however, there remains liability for damage caused to the borrower by defects in the thing, when he, although aware of them, has not disclosed them (art. 1821). In due time (arts. 1816-17) the thing lent must be returned. Fungible things other than money are returned with things of quantity, kind and quality equal to those lent; nor are fluctuations in economic value undergone by those things during the entire time the mutuum lasted relevant. For the return of money it is enough that the sum returned and the sum lent correspond to the same nominal value (nominalistic principle), even when the intrinsic value, for whatever reason, is different (art. 1277). Only if the mutuum was made with metallic coin (gold or silver) and the return in the same kind was also agreed upon, must this be satisfied according to the intrinsic value that the coin had at the time of the loan (art. 1280).

These explicit provisions of Italian law also hold for the fulfillment of the natural obligations of conscience, at least in Italy and insofar as justice requires; equity, according to the circumstances, might require appropriate modifications to the advantage either of the lender or of the borrower. Thus, on the basis of the nominalistic principle, maintained in Italian law, monetary devaluation (v.) results in a loss for the creditor alone. Therefore from the moral point of view one must examine concretely the utility and advantage that the mutuum has brought to the debtor, with a view to possible compensation to the creditor. Often, and this is the ordinary case of the issuance of loans by commercial companies, public bodies, etc., the obligation of return is guaranteed and incorporated in special credit instruments (e.g., bonds) which have value on the market and can therefore be the object of negotiations, thus allowing the lender and subsequent holders to realize their market value, even before the maturity of the mutuum.

Besides the return of the thing, interest must also be paid at the rate of 5%; however, the agreement of the parties may modify the rate of interest or abolish it entirely (art. 1815). The mutuum is extinguished by the return, which may be established in installments; but failure to pay the interest or any installment gives the lender the right to demand early settlement of the contract (art. 1820).

II. MORAL PROFILE

1. Granting of the mutuum

By the natural law of fraternal charity, the mutuum must be granted to one's neighbor, poor or rich, who has need of it. The sum necessary to seize the opportunity of a good bargain does not constitute a true necessity of a mutuum, when the general economic conditions of the petitioner are proportionate to the needs of his own life and of his family. The obligation to grant the mutuum grows all the greater the more serious the neighbor's necessity and the fewer the inconveniences that derive from it for us. Fr. Vermeersch (Theol. mor., II, Rome 1924, n. 449,5) very aptly suggests a discreet alms instead of the mutuum, when the latter would prove of little use to the petitioner and very risky for the grantor.

2. Interest and its measure

Whatever the fungible things lent, as a matter of fact interest at the rate of the legal rate is certainly lawful (CIC, can. 1543). But, as a matter of law, what title justifies the acquisition of ownership of it? The ancient theological-moral literature on this point is exceedingly abundant (v. usura). Today, apart from its historical importance, the principles established by it provide a sure criterion for determining the maximum and minimum limits within which the rate of interest lawfully fluctuates. Analyzing the mutuum in its constitutive elements alone, the right-duty to interest remains clearly excluded. Because mere use consumes the fungible thing, it has no economic value when considered in itself, as separated from the thing itself; therefore, by the mere restitution of the thing the lender receives everything that juridically belongs to him. Any additional percentage is not supported by any title: neither by the furnishing of the thing, which is returned to him in full, nor by the furnishing of its use, which, independently of the thing, has no economic value. The reality of this principle emerges with particular clarity in the mutuum for purposes of consumption, the only one generally possible in ancient times. Canon law, even today, accepts and sanctions this principle in the first part of can. 1543; Italian civil law presupposes it in the definition it gives of the mutuum in art. 1813. Nevertheless in practice the mutuum is not realized in the abstract configuration of its essential constitutive elements alone; concrete circumstances, depending on the economic position either of the lender or of the borrower, enter into it, modifying its consequences. For it may happen that, in lending the thing, the lender either in some way harms his own economic position (damnum emergens), or weakens its efficiency (lucrum cessans). On the other hand, the precarious economic position of the borrower might make the restitution of the thing foreseeable as either insecure (risk of the thing) or at least deferred (danger of delay). Now these four circumstances: damnum emergens, lucrum cessans, risk of the thing, danger of delay, have economic value and therefore can, when they actually occur, constitute so many titles to the right to a proportionate compensation, beyond the restitution of the thing. They nevertheless always remain titles extrinsic to the mutuum, a contract essentially gratuitous in itself.

Only titles extrinsic to the mutuum, when they truly occur, can justify the right-duty to interest and determine its just measure. In the light of this most ancient doctrine the juridical institution of the mutuum takes shape within the framework of the modern social economy.

The guarantees of a bill of exchange or of credit instruments, such as are usually received in the granting of a mutuum, neutralize the risk of the thing and the danger of delay; which therefore cannot generally be invoked today as a title to the right to interest. Instead, lucrum cessans has become a customary effect of the mutuum. Because in the modern economic system the occasions for trading in things of any kind and in money itself are greatly facilitated and multiplied; so much so that, in the great majority, loans today are made for purposes of profit. There is therefore a legitimate presumption that every mutuum entails to the disadvantage of the lender a lucrum cessans, to which a proportionate compensation is owed. This justifies the right to interest, now generally connected with the contract of mutuum; the legal rate of 5% is presumed as the average profit among the many possible. But, since against these presumptions different conditions of fact may occur, it is juridically permitted and morally lawful for the parties to agree either on a rate higher than the legal one, or on the exclusion even in full of interest. Finally, also damnum emergens, which however rarely occurs, could, in particular cases, be a new title to the right to interest and raise its rate.

Leonardo Azzollini