Mutuum : a comparative analysis with particular reference to the prohibition of usury in Maltese law

Abstract

The function of credit is no longer exclusively confined to the contract of mutuum. It is enough if one thinks of the various banking transactions. Even the contract of mutuum itself is no longer circumscribed by the provisions of the Civil Code but is more than ever being regulated by special laws. In the great majority of loans, decisive importance is being given to the destination for which the sum is lent. Doctrine, however, still classifies credit contracts in one general category, which due to the continuous increase of new credit contracts seems to have unclear boundaries. With the above scenario in the background, this thesis aims at investigating the role which the contract of mutuum as regulated by the Civil Code presently plays in our legal system. This entails investigating whether there has been a subtle change in the legal content and regulation of this contract and whether it is possible to conclude that mutuum is to be considered as being of residual significance, or whether it should rather be considered as the prototype of all credit contracts. Special reference is also given to the related issue of usury. Chapter 1 explores the definition and fundamental characteristics of mutuum, commencing from the contract under Roman law and tracing its historical origins under Maltese law. Importance is also given to the comments of Sir Adriano Dingli who drafted the provisions dealing with mutuum. Chapter 2 then focuses on the juridical nature of the contract of mutuum and endeavors to establish various debated issues, including whether mutuum is to be considered as a synallagmatic or a unilateral contract, whether it is a real or a consensual contract and whether it is to be considered as having an onerous or a gratuitous nature. Due regard is also given to the nature of promise of loan and to the distinctions and similarities between mutuum and other similar transactions. Chapter 3 is the central chapter on mutuum, which deals from a comparative perspective with the defining characteristics of the contract of loan for consumption, the object of the contract, the effects of the contract (including the transfer of ownership), the obligations of the borrower and the obligations of the lender. Chapter 4 delves into a comparative analysis of the legal provisions related to the charging of interest. This chapter explores the relevant Maltese and foreign provisions and also attempts to analyse Maltese jurisprudence dealing with the stipulation of interest. Chapter 5 pays special attention to the prohibition against usury by tracing its historical profile, starting from usury in antiquity, going through the Roman and medieval eras till the modern times. This introduces a review of the theoretical debates on the charging of interest, which is in turn supplemented by a comparative analysis of usury law which delves into the contemporary rationale for regulating usury. The chapter is concluded by reviewing Maltese case decisions which treat usurious contracts as having a causa which goes against our public policy provisions. I conclude by opining that there has been a change in the economic functions of mutuum, since the time when it was first regulated by the Romans such that it can no longer be considered as primarily a unilateral, gratuitous contract. In the light of this change and of the essential problem of usury, I make some recommendations for reform to Maltese Law. I argue in brief, that we should follow the example of the Italian legislator by modifying the way mutuum is legally regulated to take more account of its economic functions.