CAVEAT CREDITOR!
CATRAT creditor !" The words are startling to hear in the House of Commons; but Lord Palmerston is in the habit of dash- ing at the stronghold of a question, and he does often startle us by the sudden and concise enunciation of a principle with which the public becomes perfectly reconciled after ihas worked to- wards it in its own slower fashion. The phrase which looks so strange is the exact paraphrase of the legal maxim, "caveat emptor." Why should Emptor be left to his own resources more than Creditor ? The arguments directed against the Limited Liability Bill have been in contravention of free-trade principles, although they have been urged by free-trade advocates. Perhaps if the speakers against the bill were to divide, a considerable ma- jority would be found in favour of free trade in corn. Why, then, so stoutly phalanxed against free trade in credit ? There is not a Free-trader of them all who -would have vindicated anything like fraud even in corn. Conspiracies to swamp a farmer by car- rying off his stock under false pretences, deluging the market with bad corn, or forestalling the market with sales of foreign corn never to be produced, would have been resisted by any Free-trader as much as by any Protectionist; and the Limited Liability Bill offers no new opening for fraud upon the creditor—for deranging his plans of action by false pretences, or for surprising him out of his trust. Rather the reverse. Inasmuch as the limitation of the debtor's liability will be distinctly known, the creditor is positively forewarned that he should look sharply to his guarantees. In ordinary cases there is, indeed, a certain delusion upon the creditor's mind, that liability is "unlimited "; and because lia- bility is unlimited, it is presumed that there must be unlimited means of meeting the liability ; or that the debtor will not incur liabilities because he will dread the pains and penalties of default. Theoretically, these pains and penalties would be equivalent to commercial death ; but the humaner spirit of modern times has so mitigated the laws of bankruptcy as to place the debtor nearly upon an equality with the creditor. It is the regular practice for them both to share the consequences of the debtor's mistakes. This is a sort of liability in partnership which is most likely to he greatly restricted under the operation of a Limited Liability Bill, since the creditor will feel far less disposition on his own side to enter into partnership with the debtor in a trade of mistakes, in which the unlimited liability must fall back upon himself. The opponents of the bill object to it as a new law. It is for- gotten, in the present case, that the reform is not in augmentation of the mass of law-making, but in abatement of it. Supposing there were no law upon the subject at all, it is evident that people would be enabled to put their stakes together as boys can do for gambling at marbles or buying pastry, and to risk no more than their stakes. The boy is not obliged to give his cap, jacket, and trousers, in addition to his pence, if the money be not enough for the purpose. When the laws of commerce were far less distinctly understood than they are at present, when, in fact, commerce was the employment of low people, and laws were made by doctors under the patronage of military nobles, legislators rushed into law- waking which has encumbered the statute-books of most coun- tries with a moss of rubbish. Much of our modern reform con- sists, not in inventing new regulations, but in removing parts of the rubbish as we get access to it The object here is to effect the removal with a minimum of disturbance in the transaction. The Limited Liability Bill introduces a sound principle certainly in no very alarming form.
Yet there are dangers to be apprehended from any new state, simply because it is new, and because it is entered upon with ex- aggerated fears and with exaggerated hopes. Nobody, in these railway days, would object to joint-stock companies ; yet the first laws for materially facilitating joint-stock enterprise were followed by the most extravagant projects, and successively by panic, rain, and unreasoning hatred of joint-stock enterprise. More recently we have become so accustomed to considerable changes for the better,—changes, in fact, only making progress in proportion to the boasted march of intellect,—that there are not the same random consequences of new improvement We have instituted free trade in corn without the threatened failure of supply, the total rain of farming business, or the utter depreciation of landed property. On the contrary, prices have been steady, although not regulated; supply has been abundant and constant, although not guarded; the farmer has ceased to complain, and farming business was never more flourishing than it is now, although not protected ; and landed property was never worth so many years' purchase as it is since the increasing wealth of the community has multiplied purchasers and railways have given access to every acre of the country. So much for the consequence of joint-stock enterprise and free trade in corn.
Yet it is not to be denied, that an impulse given to the principle of limited liability at present may be followed by absurd projects and disaster. Concurrently with the passing of the act we have had an exposure of unlimited liability in partnerships of limited numbers. Strahan and Co. have capped the curiosities of private banking, and undoubtedly, just now, there is a run against confi- dence in private banks,--partly reasonable, partly unreasoning. The Legislature is giving a new facility to joint- stock enterprise, and joint-stook banks are at a premium. There is no objection to this, so long as the public will only apply joint-stock principles to proper joint-stock- objects; will only encourage banks where banks are wanted. Whether the bank be private or joint-stock, the con- fidence which it deserves can only be ascertained by knowing that its founders are persons to tell the truth, that its managers are prudent, and its officers attentive and sharpsighted. With these conditions, any bank, private or joint-stock, must be "as safe as the Bank of England," because it will undertake nothing that it cannot perform ; will receive no trust that it cannot fulfil. Yet there are expectations in the City of half-a-dozen new schemes, where probably the City Bank, and one or two others, will do all that is wanted. Is there, then, to be an act of Parliament to pre- vent the consequences of these new schemes ? No; "caveat creditor." Parliament ought as little to pass general laws to pre- vent foolish enterprise, and, incidentally, to check a larger num- ber of good enterprises, as to stop up our sea-ports, because in some ships, with bad construction and foolish captains, life may, be ventured and all on board lost
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