The myth of the customary law merchant

Legal scholars from many disciplines-including law and economics, commercial law, and cyber law-have for decades clung to the story of the so-called law merchant as unassailable proof that private ordering can work. According to this story, medieval merchants created a perfect private legal system out of commercial customs. As this customary law was uniformly and universally adopted across Europe, it facilitated international trade. The law merchant myth is false on many levels, but this Article takes aim at two of its fundamental principles: that uniform and universal customary merchant law could have existed and that merchants needed it to exist. The Article argues that the most widespread aspects of commercial law arose from contract and statute rather than custom. What custom the merchants applied often did not become uniform and universal because custom usually could not be transplanted and remain the same from place to place. Yet, the use of local custom did not hamper international trade because intermediaries such as brokers ensured that medieval merchants had no need for a transnational law. Advocates of private ordering have fallen in love with the Middle Ages. Scholars in fields ranging from domestic and international sales law, cyber law, law and economics, sports law, and aviation law, as well as judges and casebook authors have made the medieval law merchant into the archetypal sophisticated legal system that private groups can create when not impeded by the intermeddling of the state.1 In the mercatorists'2 retelling, the law merchant evolved from merchant practices, as traders experimented to find the most efficient commercial methods. Bubbling up from below and independent of government involvement, the best of these practices spread across Europe. The uniformity and universality of the resulting customary rules facilitated transnational trade in a world of parochial local jurisdictions hostile to foreign merchants and lacking unifying states.3 As a consequence, no matter where in Europe they traveled, traders could rely upon these merchant-devised customs to provide default rules and to fill in gaps around negotiated contracts.4 Should disputes arise, the traders could have confidence that the merchant-created and merchant-staffed courts would apply the lex mercatoria customs as rules of decision.5 The law merchant story has such intrinsic appeal and carries so much weight in the literature of so many areas of legal scholarship that the efforts of numerous historians to expose it for the myth that it is have been met with skepticism at best.6 More commonly, the mercatorists have ignored the existence of challenges to their theory.7 The story simply holds too much symbolic power for modern advocates of private ordering looking to give the underpinning of historical legitimacy to their political and economic theories about how law is and should be made.8 Inconveniently, however, the historical evidence does not bear out the law merchant tale. To the extent that merchants did indeed invent a special set of uniform and universal rules governing long-distance trade across premodern Europe, those legal rules usually arose from contract and legislation rather than from custom. Commercial custom did exist, but it was primarily local. The reason for this, this Article argues, relates to the nature of custom and legal borrowing. Unless merchant customs arose spontaneously and identically in every place they were found,9 then the lex mercatoria story implicitly assumes that the users of those customs transmitted them from market to market and fair to fair.10 The literature of legal transplants is extensive, but transplant scholars do not appear to have inquired into the characteristics of laws that can be borrowed successfully.11 Most studies of legal transplants concern fully expressed, normally written rules.12 The hypothesis of this Article is that such rules can be borrowed or shared in part because they are sufficiently capable of a definite and bounded articulation. …