III. Restraints on Free Contract

CHAPTER III. RESTRAINTS ON ]'REE CONTRACT. § 401. Society in its corporate capacity cannot be blalned for enforcing contracts to the letter-is often, indeed, to be blamed because it does not enforce them, but deliberately countenances the breaking of them, or itself breaks them; as when, after the houses forming a street have. beep taken on lease at high rents, because few vehicles pass, it authorizes the turning of this quiet street into a noisy thoroughfare; or as when, having given parlia mentary titles to buyers of encumbered estates on certain terms, it, by subsequent laws, alters those terms; or as when it allows a proprietory agreement, entered into for one pur pose, to be extended by a two-thirds majority so as to cover another purpose. Contracts, then, must be strictly adhered to and legally enforced; save, as before pointed out, in cases where a man contracts himself away. And this necessity for severity in' the enforcement of contracts,will he manifest on observing that if there grew up the system of judicially qualifying them, out of beneficent regard for defaulters, this beneficent regard would prolllptly be counted upon; and reckless contracts would be made in the expectation that, in cases of failure, the worst consequences would be staved off~ But while it is not for the State to relax contracts or (287) 288 THE ETHICS OF SOCIAL LIFE.

Initigate their mischievous results, it remains open for those between wholn they are made, voluntarily to modify the operation of thern. Negative beneficence may still enjoin an entire or partial relinquishment of such undue advantage as a contract, literally interpreted, has given. Of merciless enforcement of contracts, and unscrupulous disregard of claims which have arisen under contracts, the treatment of tenants by landlords, especially in Ireland, furnish numerous instances. Where a barren tract~stony or boggy-taken on a short lease at a small rent, has by persistent labour been reclaimed, and the resulting fertility has given it some value, it not uncomnlonly happens that the landlord offers to this industrious tenant the option of either surrendering his occupancy at the end of his lease, or else of paying a greatly raised rent, proportionate to this raised value which his own toil has given to it. The con tract not having been of a kind to exclude this disastrous result, the law can say nothing; but the landlord, if duly swayed by the sentiment of negative beneficence, ",Till refrain from taking advantage of his tenant's position-will, indeed, feel that in this case what is here distinguished as negative beneficence does but enjoin a regard for natural justice, as distinguished from legal justice.

Kindred cases there are, as those of the Skye-crofters, in which the making of contracts, though nominally free, is not actually free-cases in which the absence of competing land lords gives to a local landlord an unchecked power of mak ing his own terms, and in ",rhich the people, having little or no choice of other occupations and being too poor to emi grate, are compelled to accept the terms or starve. Here, where the conditions under 'which equitable exchange can be carried on are suspended, it remains for the promptings of negative beneficence to supplement those of equity, which are rendered inoperative. The landlord is caned on to re frain from actions ,vhich the restraints of technical1y.formu lated justice fail to prevent.

RESTRAINTS ON FREE CONTRACT. 289 There are cases of a more familiar kind in which sympathy demands, and often with success, that contracts shall be but partially enforced. During recent years of agricultural depression, the requirenlents of leases have been in multitudinous instances voluntarily relaxed, in ,vays which negative beneficence suggested. Landlords have returned parts of the rents agreed upon, when tenants have been impoverished by bad harvests to an extent which could not reasonably have been expected when the lease was made. § 402. In the transactions of business men, there occur sundry allied classes of cases in which cornpromises between self-regard and regard for others, imply desistance from ac tions which strict justice does not interdict. Let us take three such. Here is a grazier who, with numerous cattle at the end of a long drought, has scarcely anything for them to eat, and who, because other graziers are similarly circumstanced, cannot sell his cattle without great loss; and here is his neighbour who happens to have reserved large stacks of hay. What shall this neighbour do? If he pushes his ad vantage to the uttermost, he will either entail on the un fortunate grazier immense loss by the sale q£ his cattle, or impoverish him for years by an enormous expenditure in fodder. Clearly negative beneficence requires him to moder ate his terms.

Another instance is that of a contractor who has under takenanextensi ve work on terms which, to all appearance, will leave him only a fair remuneration, making due allow ance for ordinary contingencies-say a heavy railway cut ting, or a tunnel a mile or two long. Noone suspected when the contract was made, that in the hill to be tun nelled there existed a vast intrusion of trap. But now where the contractor expected to meet with earth to be excavated he finds rock to be blasted. What shall be 290 THE ETHICS OF SOCIAL LIFE. done ~ Unless he is .a man of large capital, strict enforce ment of the contract will ruin him; and even if wealthy he win do the work at a great loss instead of at a profit. It may be said that even justice, considered not as legally formulated but as reasonably interpreted, implies that there should be a mitigation of the terms; since the intention of the contract "ias to make an exchange of benefits; and still more is mitigation of the terms required by negative beneficence-by abstention from that course which the la,v ,vauld allow. But clearl}! it is only where a disastrous contingency is of a kind greatly exceeding reason able anticipation, that .negative beneficence may properly come into play.

Under pressure entailed by a commercial crisis, a trader, while unable to get further credit from his bank, is obliged to meet a bill immediately falling due. One who has capital in reserve is asked for a loan on the security of the trader's stock. He Inay make either a merciful or a merciless bargain. He may he content with a moderate gain by the transaction, or, taking advantage of the other's necessities, may refuse except 011 conditions which will in volve immense loss, or perhaps eventual bankruptcy. Here, again, there is occasion for the self-restraint which sympathy prompts. Since, in cases such as these three, there is voluntary aetion on both sides, insistance on ruinously hard terms cannot be classed under the head of injustice; but we are led to recognize the truth that in such cases the injunc tions of negative beneficence are scarcely less stern than those which justice utters. Though in the first and the last instances, the taking of a pound of flesh is not under a contract previously Inade, it is under a contract to which there is practically no alternative; and in the last case as in the first, if the contract is fulfilled the patient may be left to bleed to death.

Let it be added that not only does the sympathetic RESTRAINTS ON FREE CONTRACT. 291 regard for others' welfare which we here class as negative bene£cence, forbid the unscrupulous carrying out of cer tain transactions· "vhich strict justice does not forbid, but regard for public welfare does the sarrIe thing. Any course which needlessly ruins those who are on the whole carrying on well their occupations, entails an injury to the social organization. § 403. A still larger sphere throughout which the requirements of justice have to be qualified by the re quireInents of negative bene£cence, is presented by the re-, lations between employers and errlployed-the contracts between those who yield services and those who pay for theIne How far ought an employer to take advantage of the cOlupetition among workers, '\"ho often greatly exceed in number the number 'wanted, and are SOllIe of them willing to accept low payments rather than starve? This question is much less easy to answer than at first appears; since it is cOInplicated by other questions than those which concern the qualification of justice by negative beneficence. People whoblarne, often in the strongest language, masters who do not give higher wages than the market rate obHges them to give, think only of the fates of those who are enlployed, and forget the fates of those who remain unemployed. Yet obviously a master who, in an over-fun market of wage-earners, gives more than he is obliged, rejects the offers of those who would have taken less.

lIenee the most needy go without work, while the work is given to those whose needs are not so extrerne-those who ·would not accept such low pay. N ow while con templating the benefits derived by these less necessitous, it will not do to leave out of consideration. the exacerbated distress of the more necessitous. It seems a necessary implication that a seelningly-generous eluployer, who looks only at direct results, may, by his generosity, intensify the 57 292 'THE ETHICS OF SOCIA.L LIFE •. miseries of the most miserable, that he may mitigate the miseries of the less miserable. A further disastrous effect may be entailed. The com petition in each business is keen, and the margin of profit on transactions is often thereby nlade so narrow, that n1uch increase in the cost of production consequent on paylnent of higher wages, must cause inability to meet con1petitors in the market. Bankruptcy, by no lneans uncornmon even among traders who economize in wages as much as they can, must therefore be the fate of those who do not econo mize. Only one whose capital is greatly in excess of his immediate wants, can behave thus generously for a tirne; and even on him bankruptcy must come if he persists.

To the reply that he might distribute among his work people his surplus returns when these vvere greater than usual, the rejoinder is that disaster would follow were he ordinarily to do this. Though, during a time of prosperity, an employer makes large profits, yet when there presently comes a tilne of depression, he is not unfrequently obliged to continue working without profit, or even at a loss,.that he filay keep his staff elnployed and his machinery in or del'; and had he not allowed himself to acculnulate while prosperous, he could not do this. Once more there is the fact, either overlooked or de liberately ignored by those who foster the antagonism be tween employers and employed, that a universal rise in wages is of no use if there occurs simultaneously a uni versal rise in the prices of commodities. The rnembers of each Trades-Union, thinking only of themselves as pro ducers, and of the advantage to be gained by forcing masters to pay them more, forget that, other things equal, the price of the article they produce must presently rise in the market to a proportionate extent. They forget that if the members of each other Trades-Union do the like, the things they seve1~al1y produce ,viU also rise in price; and that since, in respect of the more important RESTRAINTS ON FREE CONTRACT. 293 commodities, the chief consumers are the masses of pro..

ducers, or the people at large, these ,vill have to .pay more for all the things they buy. A broad view of the matter would show them that the factors are these: - 1. A quantity of labour expended by all workers. 2. A quan tity of capital required for the producing appliances, for stocks of raw materials, and for stocks of the articles produced. 3. A proportion of brain-work for regulat ing the labour and carrying on the financial operations purchase and sale. 4. A. resulting supply of products, which, in one way or other, has to be divided out among members of the comulunity. As this supply is for the time being fixed, an increased share awarded to bodily labour iInplies a decreased share to capital, or luental labour, or both. Reduction of the interest Dn capital is restrained, since, if it is great, capital will go elsewhere; and if, by combination, the reduction is universally pushed below a certain liInit, capital will cease to be accumulated.

There is also a limit to the lowering of the payment for mental labour. Business capacity will go abroad if ill-paid at hOlne; and if everywhere the remuneration is inade quate, the stock of it will diminish. Men will not undergo the intellectual labour and the discipline needed to luake them good nlanagers, if they are not tempted by the pros pect of considerable rewards. Thus the rnargin within which, under ordinary circumstances, negative beneficence may Initigate the usually hard terms of the labour-Iuarket, is but narrow; and even within this margin,. it may, as we have seen, involve unintentional cruelty 'with intentional kindness. In so far as pecuniary contracts for services are con cerned, the only cases in which negative beneficence oper ates, with undoubted advantage, are cases in which an employer whose returns are being so rapidly augmen..ted as to give him more than the needful reserve, does not continue passively to take advantage of the change until he is forced 294 THE· ETHICS OF SOCIAL LIFE.

to raise wages by the increased demand for labour-declines to use his power of monopolizing all the profit which cir~ cumstances give him. But here we verge upon the province of positive beneficence. § 404. While, in the treatment of the ernployed by the eln ployer, there is recognized scope for negative beneficence, in the treatment of an employer by the employed many sup pose there is none. But this is untrue. Every now and then the newspapers report some case in which a large contract for works, which have to be completed before a specified time under heavy penalty, is rendered unprofitable, Or even ruinous, by "Torklnen who seize the opportunity of demanding higher wages: be lieving that the contractor will have no alternative but to comply. If they give the required notices of terlnination of their engagements with the employer, they cannot be charged with injustice. They simply propose terms more favourable to themselves and decline continuing to work on the less favourable terms. How far the sentiment of negati ve beneficence ought to qualify their action, must depend on the circuIDstances of the particular case. Per haps they have good reason to know that the contract has been taken at very profitable rates, and that pay ment of the higher wages demanded will still leave the contractor a sufficient return; and in this case the taking advantage of his necessity is consistent with a reasonable altruism. Perhaps, though not likely to gain largely by this particular contract, he has, during previous years, accu mulated vast sums and has been a hard task-master; and in which case, too, sympathy with hhn does not dictate such re gard for his interests as may prevent him from losing. But in other cases the treatment of an enlplo)7er as one whose interests are to be entirely disregarded, is indefensible. And not only does due consideration for hin1 forbid this indirect coercion, but it is forbidden by regard for society. If, be-RESTRAINTS ON FREE CONTRACT. 295 ing frequently thus treated, a contractor is ruined, the society loses a useful functionary; and, at any rate for a time, the employed themselves find a diminished delnand for their services.

But the endeavours of workers. thus to better them selves by taking advantage of an employer's necessities, are in most cases not only unrestrained by the promptings of negative beneficence, but they are unrestrained by the promptings of justice. For while they refuse to work any longer on the terms previously agreed upon, the strikers comlnonly use either violence, or threats of violence, to pre vent others from accepting those terms. They thus break the law of equal freedoln. 'Vhile they assert the right to enter into, or to refuse, contracts themselves, they deny to their fellows the saIne right. They may without ethical transgression try to persuade others to join them-may with out doing wrong argue with those who propose to take their places, and frown on thenl if they persist; but any course which either forcibly hinders them from taking the places, or puts them in. fear of evil consequences other than unpopu larity, is morally forbidden: doubly forbidden, since nega ti ve beneficence joins with justice in reprobating their course.

Those who would accept the terlns they refuse (frequently good terms) are often impelled to do so by their responsibili ties; and to prevent them is to entail distress not only on thern but on their falnilies. If, as happens not only in the cases indicated but in cases of other kinds, both masters and non-unionist workers are coerced by some forIn of the systeln now called boycotting -if, as comnlonly happens, a united body of lnen refuse to ,vork along ","'ith a man \vho is not a member of their union; or if, as in Ireland, a political combination enforces social outlawry against those who do not join them; we Dlay see, as before, that the wrongs done are primarily in justices. Whatever the law may at present say ~bout the. matter,it is clear that men may, both i~dividual1~ and in 296 THE ETHICS OF· SOCIAL LIFE •. combination, refuse to work with, or trade with, or hold any communication with, a certain person, so long as they· do not in any ,vay interfere ,vith his activities. Their cOlllbination cannot properly be called a conspiracy, unless the thing ",,"'hich they conspire to do is wrong; and· there is no breach o£ the law of equal freedom in declining to work along ,vith one "".,.ho is disapproved, or in declining to do business with him. The wrong done usually consists in the use of coer cion to £orln and maintain the boycotting organization, and in inflicting penalties on those who do not obey it. No appreciable evil 'would result if each person remained not nominally but actually free to join or not to join the conl bination. Even without the checks which negative benefi cence imposes the checks which justice iInposes would suffice.

I may reInark, in passing, that by their disregard of such checks, we are shown how far the mass of lllen are from fitness for free institutions. A society in which it has be come a vice to lnaintain personal independence, and a virtue to submit to a coerci ve trade-organization and to persecute those who do not, is a society which will rapidly lose again the liberties it has, in recent times, gained. Men who so little understand what freedom iR will inevitably lose their freedom. § 405. On contracts which justice does not restrain, the restraints put by negative beneficence which have been thus far considered, are· those which forbid unduly pressing against another an advantage which circumstances give. A higher form of negative beneficence operating-in busi ness transactions has to be considered. Here and there may be found one who not only declines to sacrifice another's interests for his own benefit, but who goes further, ~nd will not let the other make a sacrifice will not let the other injure himself by a bad bargain. While not disregarding his own claims, he win not:let his client RESTRAINTS ON FREE· CONTRACT. 297 or friend nlake bad terlns for hiInself; but volunteers to give more, or to do more, than is asked. In a fully devel oped industrial society, formed of units having natures llloulded to its requirements, such a ll10de of action will be normal. Beyond observance of that justice which consists in fulfilment of contract, there ,vill be observance of that negative beneficence which forbids making a contract un duly advantageous to self.

Conduct thus guided is at present necessarily rare. People whose ne"rspapers record in detail the betting transactions by which one receives pleasure through another's pain, are not people likely to refrain from hard bargains. _ The quali fying of contracts by sympathetic anxiety for another's wel fare, cannot be prevalent in a nation which is given over to ganlbling throughout all its grades, from princes down to pOt-bO)TS..