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`3 CONTRACT ENFORCEMENT
`
`Introduction
`
`An active market will develop only if traders can be sure that their trades will be exe-
`
`cuted by the market.' A trader will be hesitant to enter into a transaction if his coun-
`
`terparty can renege on his obligations without suffering adverse effects. So, for the
`
`development of the secondary market for \-’O(; shares, some kind of mechanism for
`
`contract enforcement had to be in effect. Fortunately, the Low Countries already had
`
`a long history of commercial contracting when share trading started in 1602, so mer-
`
`chants and legal institutions were experienced in enforcing commercial transactions?
`
`Moreover, the legal system acknowledged its important role in the development of
`
`trade. In Antwerp, the comme.rcial metropolis of the sixteenth-century, the legal insti-
`
`tutions interacted with the merchant community and promoted the merchants’ inter-
`
`ests.3
`
`Share trading did thus not emerge in a legal void. On the contrary, the legal
`
`principles that applied to the transactions on the share market were already in exis-
`
`tence and hence the share transactions fitted into existing categories of commercial
`
`law. The laws that applied to the transfer of title of a share, for example, were the
`
`same as those that applied to the transfer of ownership of real estate - both were con-
`
`sidered immovable goods under Dutch law." However, not everything was clear from
`
`the start, as the large number of conflicts between share traders that ended up in
`
`lengthy court cases in the period before 1630 shows. For period 1510-30, I have found
`
`thirty lawsuits dealing with share-trade-related court cases in the archives of the Court
`
`of Holland in The Hague.-3 This provincial court pronounced judgment in about 150
`
`' O'Hara, ‘Optimal microstruetures’, 831-2.
`‘~’ Sec, e.g., Herman van der Wee, T728 growth of tin.’ xlrtttt-‘sip rnnrltrt and tits’ E.=n'opean rconorry ofmn'£eentlt—
`.ri.rt.*:.-3:101 cerztttries) I] [The Hague I963}. Oscar Celderblom, Cr.-ty?out3'ng ttinfence and npfiortwtism. The organiza-
`tion rgfilong-(J'i.t'tr.=rt(e trade in Bmgges, ;'lnttt.'er,f) rum’ Arn.n‘e:'dam_. I250—}6'5I’) (manuscript 2009).
`3 Date de Ruysscher, Hmtdel m rrcltt in die Anraerptr: rmttrltnrtlr (I 535-17 1'3), Llnpnolishccl PhD thesis [K.U.
`Lcuven 2009).
`1 See footttote 28 on page 98.
`Helueen Kole generously shared the notes she made for Oscar Gelderblom in the Court of Holland
`archives with me. She used a sample of court cases over the period 1585-1630 in which litigants ap-
`peared whose last names started with B, l\'I or P. In addition to her sample, I used the name index (N.-\,
`Court of Holland, inv. nr.
`lU?'7] to look up all cases whose litigants are known to also have been share
`traders. There are no share-trade-related court cases available prior to 1610; which can be explained by
`the facts that it took several years before the court p1'o11ounecd judgment, that there were relatively few
`trades in the first years after 1602 and that share traders started using more advanced financial tech-
`niques {forward trading, short selling} only from I607 onwards.
`
`102
`
`102
`
`

`

`cases per year, which means that one percent of the cases concerned share transac-
`
`tions.
`
`After 1640, however, the ratio decreased to about one in every five-hundred
`
`lawsuits.“ I will show in the first section of this chapter that in the earliest decades of
`
`the development of the secondary market for V00 shares, traders started litigation to
`
`test the bounds of the existing legal concepts. These litigants were convinced that
`
`there existed some space to maneuver within the rule of law. They were willing to
`
`enter into costly litigation - lawsuits before the appeal courts of Holland became espe-
`
`cially costly if‘ litigants kept adducing new evidence and appealing judgmentsi - that
`
`took up a great amount of effort; lawsuits that were ultimately brought before the
`
`Court of Holland could take anywhere between three-and-a-half‘ and twelve years.3
`
`From around 1640 onwards, however, traders no longer brought their share-
`
`trade-related conflicts before the higher courts. By then, the Court of Holland had
`
`pronounced judgment on all legal concepts that applied to the share trade. Hence-
`
`forth, share traders could predict how the courts would decide in share-trade-related
`
`conflicts. Traders were no doubt abreast of the jurisprudence concerning the share
`
`trade and they regarded the Court of‘ Holland as the authoritative institution regard-
`
`ing new interpretations of the law; they explicitly referred to earlier judgments of the
`
`" There are twenty so-called extended sentences of lawsuits dealing with sliare-trade—related conflicts
`available for the period 1640-] T00. I have used the name index {-N.»-X, Court of Holland, inv. nr. 1078) to
`look up all cases fin‘ which I knew that the litigants (or their close relatives) trad ed shares. Additionally, I
`have checked all lawsuits listing names of Portuguese Jews.
`7 In the case between the directors olltlte VOC: and Abraham de Ligne c.s., for example, the costslb1'tl1e
`repo11 made by o11e of the Councilors of the High Council already amounted to f 126; each party l1ad to
`pay half. This sum does not include the costs of lower courts, the process sen-'cr, the solicitors’ fee and
`taxes. ;\‘;\, High Council, it]\'. or. 64-2, 7 December H52]. These reports usually constituted hall‘o[‘thc
`cottrt’s total costs; a bill in the Cardoso fantily’s estate shows that the report constituted about 50 per-
`cent of the court’s costs: f36 on a total ol‘f59.2ll. Rachel Cardoso had to pay half of this amount
`{f28.=l—0), to which a total off] 2.90 taxes were added: bill Parnassim of the Jewish community of Am-
`sterdam :..-_r. Rachel Cardoso, 2 Novemlner 1712, estate David Abraham Cardoso, SA.-\, PIG, inv. nr. 654-.
`The reports of the Court of Holland's .-snmrrtistrtrtssert (e.g. NA, Cottrt of Holland, int-'. nr. 13.35, for the
`year I672] sometimes also include the hill of the court’s process server. He charged f3.7'5 for every
`summons. The clerk ofthe court’s oflice chargedf6.20 per document. The bill could become steep ifa
`lawsuit inx-‘olvcd several litigants who all had to be sewed summons individttally.
`“ The main factor ofinliuence on the variation in duration was the amount of time litigants let go by
`before they submitted a request for appeal. The Court of Holland of course employed a maximum term
`to request an appeal, but the court could make exceptions for special cases. l\-foreovcr. a lower court’s
`judgment could be suspended for the duration ofthe appeal trttanderirtrnt in ms z.-‘rm rtppetj only ifthe appeal
`had been requested within a short period: M.-Ch. le Bailly, Hr_JfL'an Holland, zrrfitrtd an I-'l"r.t't-Frie5t'artd.' rt’:
`altotp/irt’l'_f,t'neri rrm fret fjrorzderert
`in rt't-‘in’: zatlten near her‘ Ht_Jft.-'13:: Iloltlatid, Zsslarral an |'rfr'=e*.t't-if7r*.=}?5l'rrrta' zonal in eer.t'.-fie
`t'n5:‘a:ttie edit in [anger brraegli EHil\-'ersun1 2008} 26. Le Bailly does not mention the maximum periods before
`lodging an appeal.
`
`92
`
`103
`
`103
`
`

`

`Court of Holland ifa new conflict arose.” The courts’ jurisprudence can thus be re-
`
`garded as securities law.
`
`The legal certainty that emanated from the judgments of the Court of Holland
`
`reduced investors’ hesitancy - smaller merchants and, most prominently, Portuguese
`
`_]ews - to participate in the share trade. As a result of the establishment of a clear legal
`
`framework, the market grew considerably in size.'” Focusing on transaction costs can
`
`help to understand how legal certainty can persuade people to invest: the formation of
`
`a clear legal framework reduced the costs of protecting contractors’ rights and also of
`
`costly enforcement of agreements by a third party, i.e. the court.‘ '
`
`However, the legal certainty applied only to part of the market: shareholders
`
`were allowed to trade only shares they legally owned on the spot and forward markets.
`
`The possibilities for growth were thus limited by the size ofthe \-‘DC capital stock -- the
`
`amount of legal shares available on the market. The sources clearly show that a num-
`
`ber of traders performed far more transactions than their shareholdings would legally
`
`allow. Jacob Athias and Manuel Levy Duarte, for example, had monthly share turn-
`
`overs on the forward market during the period 1683-4 of between 200,000 and
`
`f2,000,000.'9 At the same time, however, there were only very few mutations regis-
`
`tered on their account in the capital book ofthe Amsterdam chamber and their nomi-
`
`nal position never exceeded _f3,000. In June 1684, they liquidated their position.”
`
`Their forward trades generally netted out, so they did not take large short positions in
`
`the VOC, but their official ownership of shares was nevertheless insufficient to legally
`
`justify their forward sales. These were, in other words, short sales and would not be
`
`enforced by the courts.” I will argue in the second section that the participants of the
`
`forward market were aware of this. They therefore established a private enforcement
`
`mechanism that replaced the rule of law. This mechanism, which was in force in the
`
`‘-' Diego d‘Aguirre, Duarte Rodrigues Mendcs. Antonio do Porto and lsaack Comes Sil\-‘era, for exam-
`ple, referred to ajudgment of the Clourl ufHulland ill a claim they submitted to the Court ofAlde1'rner1
`{I8 September 1672}: S.-\.-\, Notaries, inv. nr. il-075, pp. 186-9.
`'“ Cf. Chapter 2; particularly Figure 2.1 (p. ?6} and Figure 2.2 (p. 7?}.
`” North, In.t'h}‘rt£iem', 27.
`'9 S.-\.-\, PIG, inv. nrs. 687-8. The values given are market values.
`'5‘ Interestingly, their nominal position in the \'OC.' lluetuatecl I1-etweenf9,000 andf27,000 in the years
`H380 and l68i; NA, \"('J(.', inv. nr. 707?, f0. 23.’), 383. Unfo1'tun;ttely, their finwarcl trading activity dur-
`ing these years is unknown.
`Isaac le Maire on page 24- ll". The ban
`"' For the ban on short selling, see chapter 1, section I609-l0
`of [610 was reissued in 1623, 162-1», 1630, i636 and 1677. Placard 3_]u11e 1623: Can, (}:r;0!;Jr’arae£-bore/r
`I, 555—‘:l. Placard 20 May 1624: Ibidem, 665-T. Plaeard l October 1630: lbidcm, 667, Plaeard 27 May
`1636: Ibitiem, 667. Placard I6 September I677: Catt, (£t'oot,{:l'ame*£—lJue::k III, l30?.
`
`104
`
`104
`
`

`

`trading clubs”, was based on the traders’ reputations and the condition that each par-
`
`ticipant benefited from suborclirlating to it.
`
`The line of argument is thus as follows: courtjudgments in the first decades of
`
`the seventeenth century created a level of legal certainty that induced the entry to the
`
`market of new groups of traders. The subsequent growth could no longer fit within the
`
`legally approved boundaries of the market and created the need for a sub-market
`
`where a private enforcement mechanism was in force and where access restrictions
`
`made sure that only trustworthy traders could participate.
`
`The two parts of this chapter build on two different fields of historiography.
`
`The first deals with the development of commercial law in Northwestern Europe and
`
`third—party enforcement of trade-related conflicts. In the province of Holland, the law
`
`consisted ofa combination of Roman law and customary law, compiled by the famous
`
`jurist Hugo de Groot (Grotius).“5 Gcldcrblom has argued that this was not a static law.
`
`The Hoflandscfte Cons'itt’£atié}z, a seventeenth-century collection of legal advices compiled
`
`by jurists working for the provincial Court of Holland show that this court based its
`
`judgments ‘on a combination of Roman law, local and foreign customs, Habshurg
`
`ordinances, and Italian and Spanish mercantile law’.” It is therefore interesting to
`
`study the sentences of the Court of Holland in detail - in pronouncingjudgments on
`
`share-trade-related court cases this court’s judges drafted the world’s first securities
`
`law. Banner has traced the origins of Anglo-American securities regulation from the
`
`eighteenth century onwards. He analyzed attitudes towards the trade in securities and
`
`studied how these influenced the regulation of the trade. Banner found that although
`
`the societies and the authorities in England and the United States were often ill-
`
`disposed towards the trade in financial securities, leading to bans on the trade of spe-
`
`cific derivatives, the courts kept enforcing the contracts. They based their judgments
`
`on general legal concepts rather than on the attitudes of the general public, thus giving
`
`legal protection to the trade. '“
`
`The second focuses on private enforcement mechanisms. The most influential
`
`works on this topic have focused on international trade. The difficulty of monitoring
`
`business partners abroad required a high level of commitment by all partners in-
`
`'7‘ See, For a general introduction on trading clubs, chapter 1, section 16605 -- ’l':'atlin_t>; clubs on page 45
`[ll
`
`"5 R.C. van Caenegem, G£.tcIriedkrrnd{ge Errfeiding .Er;H'rt’£,t1.='itIrz(rh't’r:’tf (Ghent l98l_] 5 l.
`'7 Gcldcrblom, Chnflnntingtriolenrr mm’ omnrmnirm, 356.
`'” Banner, Arrgt'a—/lm:=rfrr::: sm:rft.=}>.s' rrgufatiurr.
`
`94»
`
`105
`
`105
`
`

`

`volvecl. Greif has shown for the eleventh—century trade between North Africa and Italy
`
`that traders organized themselves in coalitions. This coalition-forming created a situa-
`
`tion in which even traders who did not know each other personally were willing to
`
`trade with one another. The system worked so well because all participants benefited
`
`from it.” The share market cannot be seen as an example of international trade,
`
`though. While foreign traders occasionally participated, the majority of the traders
`
`came from Amsterdam. But the trading community did not consist ofa homogeneous
`
`grottp of traders either - particularly after the Sephardic community of Amsterdam
`
`started participating in the market from the 1640s onwards. Hence the forward mar-
`
`ket was characterized by a large heterogeneous group of traders who pttt very large
`
`amounts of money at stake. How did they make sure that all members of the trading
`
`community lived up to their agreements?
`
`Court cases form the most important source for this chapter’s analysis. A short
`
`review of the procedure of civil litigation in the Dutch Republic is therefore indispen-
`
`sable. Conflicts concerning share transactions on the Amsterdam market would usu-
`
`ally lirst come up before the local court of Amsterdam. The archives of this court have
`
`been lost, however, so my argument is based on the extended sentences that are avail-
`
`able in the archives of the Court of Holland and - to a lesser extent - the High Coun-
`
`cil. The Court of Holland was the court of appeal for cases that had come up before
`
`one of the local courts in Holland. After this court had pronounced judgment, litigants
`
`could appeal to the High Council, but this court was neither more authoritative, nor
`
`more inlluential; the only di{i'ercnee was that the High Council also had jurisdiction
`
`over the province of Zeelandfz"
`
`The near total loss of the archives ofthe local court ofAmsterdam is a pity, but
`
`these sources are not indispensable for my argument, since my main interest concerns
`
`the development of jurisprudence on share trade. It is to be expected that the local
`
`court ofAmsterdam could very well deal with most of the share-trade-related conflicts.
`
`There are indications that share traders went to the Amsterdam court to exact pay-
`
`ment or delivery ofa share from their eounterparties9‘, but these were probably not
`
`"-' Avner Gr-:'if'_. ‘Reputation and coalitions in nieclieval trade: F.vidence on the Maghribi traders‘, 77:9
`jotttrtal oferonontic a"tt'.t'£o{‘,u 4-9 H989} 857-882.
`1"‘ ;\-'l.—Cl1. le Bailly and Chr. i\-'I.O. \-*'erhas, Huge Reed’ van Hoflartd. Zeefartrf on l1"e?s!—I'i‘t'e*n’ctrtrf (1582—l'79.'3J.'
`dc? tmfitym am: last pt'0r'e’(t’er.€H in (fairly zaker: mar dr? Ifqsgr Read zrtumt in mr,s'te irtstaittie air in ltogrr be°.=‘oe,b {Hilve 1'-
`sum 2006) 7.
`21 This is based on the amirtttrttirs in the protocols of Anisterdanfs notarics. An ierirttmtie, or notarial
`summons, was usually the first step in legal action. The protocols of 1672 and 1688, two years with
`
`106
`
`"-DLn
`
`106
`
`

`

`the most interesting cases. However, if one of the parties was convinced that there
`
`were several possible interpretations of a lawsuit, he would appeal the judgment of the
`
`lower c.ourt to the Court of Holland. Hence, those cases are particularly important for
`
`a reconstruction of the development of a legal framework.
`
`The procedure of litigation before the Court of Holland was as follows. The
`
`plaintiff first submitted a petition to the court, listing a short summary of the case and
`
`his principal arguments. The court then, provided that it had approved the petition,
`
`entered the case onto the scroll (ml), the list of cases to be dealt with by the court.
`
`Thereafter, the plaintiff could summon the defendant to appear in court. The plain-
`
`tiffs solicitor then submitted his claim to the court, to which the defendant could re-
`
`spond within two weeks’ time. Thereafter, both parties could submit a rejoinder,
`
`which could take another four weeks in total. Both parties had now set forth their po-
`
`sitions, but the court could ask the parties to submit more information or to prove a
`
`certain argument.
`
`Naturally, both the plaintiff and the defendant adduced evidence, for example
`
`attestations before a notary, questionings of witnesses and other forms of written evi-
`
`dence such as brokers’ records.” Conflicting parties often asked other merchants or
`
`brokers - people, in sum, who were demonstrably well informed about the share trade
`
`- to attest before a notary public.” They attested, for instance, the customary way of
`
`trading shares or the share price at a certain date. They could also give a report as a
`
`witness.'3’* Case files that contain all written evidence are available for some lawsuits.‘-’5
`
`'t'Vhcn the court had collected all
`
`the necessary information, it pronounced
`
`judgment. A report of the court procedure was included in the collection of extended
`
`sentences of the Court of Holland. This collection, as well as the collection of ex-
`
`tended sentences of the High Council, contains reports of all cases in which the judges
`
`took some sort of action. These collections thus also contain lawsuits in which, for in»
`
`stance, the judges referred the litigants to mediators. This means that my sources are
`
`large price fluctuations and consequently many conflicts between share traders, contain high numbers
`of i;t.ti'ni1at‘ie*.r. It is very well possible that these conflicts were also brought before the local court. Only
`one conflict stemming from a transaction in 1672 and one from a transaction in 1688 reached the
`Court of Holland, ltowever.
`33 See for the types of cviclcnce accepted by the courts: Gelderblom, Corfl'or:£iag:.=inlear:e. 2?2—3.
`33‘ Cf. Van Mceteren, Op hoop mm akkoorra’, 172-3. According to \-"an l\-'Ieeteren_. fiir an attestation to be
`credible, it had to be attested to a notaiy public as soon after the event had happened as possible: Van
`Meetcren, Op itaap trait akkaoin’, I8] .
`3" E.g. N.-\, Case files, lI]\-'. nr. ll'l‘39.
`25 N.-\, Case files. l\Eorinally, litigants received the contents of the case file back when the court proce-
`dure was Iinished. However, some litigants did not collect the case files.
`
`96
`
`107
`
`107
`
`

`

`not biased by the selection procedure of the clerk of the court. It is true, however, that
`
`my method of research excludes those cases that reached amicable settlement before
`
`the courts’ mediators. Again, this is not problematic: I have checked the reports of
`
`mediators in the years after 16?? when the price crash led to a high number of con-
`
`flicts - but the share-trade-related cases in these reports deal with relatively minor
`
`issues. The litigants whom the lower courts had ruled against simply appealed to the
`
`Court of Holland to postpone the execution of the lower court’s judgment. Subse-
`
`quently, the Court of Holland realized that it was no use to start a full court procedure
`
`again and referred the litigants to mediation?“ So, to conclude, the extended sen-
`
`tences of the provincial courts of Holland are the right sources to use for an analysis of
`
`the development ofjurisprudence on share-trade-related issues.
`
`‘Nee legaffiamework
`
`Conflicts about share transactions could involve three legal concepts: ownership and
`
`the transfer of ownership, endorsement* and the terms of settlement of a transaction.
`
`The courts of the province of Holland refined jurisprudence on these concepts by
`
`judging on a number of court cases. All three legal concepts will subsequently be ad-
`
`dressed in the lbllowing subsections.
`
`O\\’NERSHlP AND 'I'l{+\_\'Sl“I’.R OF O\-\'N[’.RSHlP
`
`Clear rules for share ownership and the transfer of share ownership were crucial for
`
`the development of the secondary market. Under Roman-Dutch law, the general rule
`
`for transfer of title was that ownership passed on the basis of delivery. Since \-"OC
`
`shares were not payable to the bearer, however, they could not be physically deliv-
`
`ered, so a special rule for the conveyance of ownership was needed. The directors of
`
`the \-'OC were aware of this and therefore they included a rule that regulated how in-
`
`vestors could ascertain and convey share ownership in the subscription book of 1602.
`
`Shareholders owned those shares registered under their account in the capital books
`
`that were kept by the company bookkeeper. Title to a share could be transferred by
`
`means of oflicial registration.“ This procedure was similar to the procedure for trans-
`
`‘-"5 N.-\, Court of Holland, inv. nrs. I552, I559.
`97 Tlie lirst page of the Amsterdaln Chamber's subscription book stated this rule. Transcript of this page
`{followed by the entire book): Van Dillcn, A(Indra£'!:nudrr.sregi.s'ter, I05-6. See also chapter 1 section I602 -
`The subscription on page 17 ll‘.
`
`108
`
`108
`
`

`

`ferring unmovable goods such as real estate. Hence, the law also classified shares as
`
`unrnovable goods?“
`
`Van Balck as. Rotgans (1622) marlcs an important step in clarifying the rules
`
`{or ownership ofa share. This case made clear that a shareholder could be certain that
`
`the shares listed on his account in the capital book of the VOC were his full property
`
`and that previous holders ofthe ownership ofthe share could not lay claims on it. The
`
`judges thus confirmed the legal force ofthe capital books. The plaintiifin this lawsuit,
`
`Allert van Balck, believed that he had right of vindication on the share he had trans-
`
`ferred tojan Hendricksz. Rotgans. Right of vindication means that the transferor of a
`
`good could reclaim ownership if the good had not been fully paid for or if he could
`
`prove that the purchaser had practiced fraud at the time of the transaction - for ex-
`
`ample hy hiding his impending insolvency or fleeing from town without paying?" Van
`
`Balck had transferred a share, but he never received full payment and therefore
`
`claimed the ownership of the share.
`
`Van Balck had sold this particular share to Hans Bouwer on April 5, 1610.
`
`Bouwer, for his part, sold a similar share to Rotgans on the next day. Rotgans ap-
`
`proached Van Balck on the exchange, saying that he. wanted to receive his share, but
`
`Van Balck replied that he did not know Rotgans and that he had traded with Bouwer.
`
`Rotgans then explained the situation and told Van Balck that he should transfer the
`
`share to him; he would pay himfl,000 and Bouwer would see to the payment of the
`
`remaining sum. Van Balck agreed to transfer the share, but he never received full
`
`payment: Bouwer left Amsterdam in the following days to flee from his creditors. Van
`
`Balck went to court, where he requested seizure of the share, but the Court of Alder-
`
`men refused to adjudicate this; the judges reasoned that Van Balck no longer had title
`
`to the share after he had transferred it to Rotgans. Van Balck argued that he still had
`
`the right of mortgage of the share, because he had never received full payment. In his
`
`view, he still had a claim on Bouwer’s share and hence on Rotgans' payment to Bon-
`
`‘-’” Tlle Cfrinsrtttrrtierr, a liunous compilation ol'eaI‘ly-modern Utttcli jl.ll‘iS[)I‘l1d{:‘l1£'C.. confirms ll1at the courts
`treated shares as immo\~ables in the winding up ol‘ estates: C.‘uns'm‘tatim, adzysm an adz.-ertismrie*m’er:_. ge'_:;ez;er.=
`emrfe gesc/trewr: by a.wm’ig}'rt't=..r: t:'gf]ét'§irke .=m':ts'—geEa°rde:: in Holtaridt I (Rotterdam 1645] T7, 139-40. In Fniglancl,
`it had been unclear after the foundation ofthe lirstjoint-stock companies whether common law treated
`shares as real or personal property-'. This had implications for the translerability of shares. Subsequent
`incorporation acts added a clause that declared shares to be personal property: Harris, I:ia‘tt.s'm'ati.zing
`Engt’i.t'1i
`t'(It£.',
`ll7-8. In the Dutch Republic, there were no impediments to the transfer of unmovable
`goods other than the obligation to oflicially register a transfer.
`2*’ De G root, .’r.=£eir1t‘r:_gr= Ilzlaritateiiirigeit, 236.
`
`98
`
`109
`
`109
`
`

`

`wer. Van Balck appealed the Aldermen’s decision before two higher courts, but both
`
`the Court of Holland and the High Council also ruled against him.”
`
`The fact that Van Balck and his lawyer appealed the courts’ decisions twice
`
`indicates that this was not a clear-cut case. This lawsuit was not just about the right of
`
`vindication; Bouwer had practiced fraud, so there was little doubt that Van Balck had
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`right of vindication. However, the courts had to balance Van Balck’s right of vindica-
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`tion and the rights of Rotgans, who gave the impression that he was a sincere buyer
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`who had paid for the transfer, against each other. Rotgans was not as sincere as he
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`had the court believe, in fact, he was in league with Rotgans, but Van Balck did not
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`succeed in convincing the court of Rotgans’ insincerity.3' In the end, the courts fa-
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`vored the interests of the buyer who had purportedly done nothing wrong.
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`This judgment had far-reaching consequences; with it, the courts safeguarded
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`the interests of commerce. Share trading could have been severely hampered had Van
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`Balck won this lawsuit, because in that case a buyer of a share would always have to
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`fear that there was still a claim on the share he had bought, which would give. the
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`seller the right to claim it back.” This particular lawsuit, in other words, took away
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`legal doubts that could have restrained investors from buying shares on the secondary
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`market for \--'0(: shares.
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`Interestingly, a few years before the High Court pronounced final judgment in
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`this case, the \-’0(.‘ had also recognized the potential problems of transfers of shares
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`that had claims attached to them. The VOC: feared that buyers would not only lay a
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`claim on the seller, but also on the company. It therefore changed the share transfer
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`regulation. From l6 l6 onwards, the buyer of a share had to sign a statement when the
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`bookkeeper added the share to his account that indemnified the company against any
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`future claims. The buyer signed that he had accepted a ‘good’ share - a real share, in
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`other words, a share that had formed part of the capital stock since 1602
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`and that he
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`was satisfied with it.”
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`3” Allerl van Balck E.-‘J’. Jan Hentlricksz. Rotgans, 22 December I622, N.-\, High Council, inv. 11r. 715.
`The iniirturrtie that p1'eceded the court case has beeit published by \-"an Dillen: Van Dillen, ‘Isaac le
`l\-'Iai:'e', I01 (doc. nr. 45]. Pieter Syinoitsx. van der Schclling ended up in a similar situation after trans-
`ferring shares to Hans Bouwer: Van Dillen, ‘Isaac le i\/Iaire’, I08 (doc. nr. 57}.
`3' Van Dillen, ‘Isaac le ;\-Iairc’, I2].
`39 IJ.L. Carey Miller, "l‘ransfer oi'ownership’, in: Robert Feenstrzt and Reinhard 2u.'.Cimmcrman [eds.),
`Dos riiirtisdt-}taHtfndis'cFw Rerlit. I‘h:'t'.rr!'nitt‘r= (I'M Zfz.Ii't'm:Fit‘.s' for 1.7. um} I3. Jrtitrfzttndert Berlin 1997], 52 1-4-0, there
`.327, 53124.
`33* \v"aI1 Dam, Bess/twinge l.-\, I4-1-5.
`
`110
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`110
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`

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`By extension, the same legal principle that the court applied in Van Balck vs.
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`Rotgans was in force in the forward trade. In a series ofjudgments, the courts ruled
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`that forward buyers could also expect the underlying asset of their forward contract to
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`be a real share. There was no need to explicitly state in the contract that the share had
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`to be free of any claims; the judges held the opinion that that was a matter of course.
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`The Court of Holland thus clarified the procedure of transfer of ownership in a for-
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`ward transaction.
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`The lawsuits that dealt with these matters were to a large extent similar to Van
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`Balck vs. Rotgans, although they look much more complicated at first sight. These
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`court cases all started with Pieter Overlander who found out that the share he had
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`received in settling a forward contract was fraudulent. The seller had transferred a
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`non-existent share to his account, which the company‘ bookkeeper had knowingly exe-
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`cuted. The complication of this case lies in the fact that many more traders were in-
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`volved in this transaction; the transfer of a share to Overlander had settled the con-
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`tracts of a chain of forward traders. The following description of the lawsuit shows
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`that these chains oftraders could prove problematic if conflicts arose between one pair
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`of traders within the chain.
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`Pieter Overlander had bought a forward with af3,000 \-‘DC share as underly-
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`ing asset from Abraham Abelijn on 13 Nlarch 1609, but the share was eventually
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`transferred to him by Hans Bouwer. Abelijn had a similar transaction (a forward with
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`the same nominal value and settlement date) with Dirck Semeij, who for his part had
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`bought a similar forward from Maerten de Mcijere. When the contract was due for
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`delivery, Semeij asked De Meijere to transfer the share directly to Abelijn. De Mei-
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`jere, however, was to receive a share from Jacques van de Geer and Hans Pellicorne
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`and therefore he asked Abelijn if he would be satisfied if they delivered the share to
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`him. Abelijn referred the question to Overlander. But Overlander had just heard a
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`rumor that Van de Geer and Pellicorne were on the verge of going bankrupt, so he
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`refused to accept this deal, unless De 1\/Ieijere would explicitly indemnify him against
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`any trouble. De Meijere then proposed to let Hans Bouwer, who also owed a share to
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`him, deliver the share instead. Overlander accepted this deal and Abelijn also trusted
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`that
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`this transfer would successfully settle all
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`the abovementioned transactions: he
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`traded with Bouwer on a daily basis. Overlander had the share transferred to Frans
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`van Cruijsbergen, his brother-in-law, and each pair of traders in the chain came to-
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`gether once more to tear up the contracts and pay possible price differences.
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`IOU
`
`111
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`111
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`

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`A little later, however, the transferred share was found to be fraudulent, so
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`Overlander started litigation. He summoned Abelijn -
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`the only trader he had a right-
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`ful claim on - to appear in court and demanded that Abelijn replace the share with a
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`good one. What makes this lawsuit so interesting is that the Amsterdam Court of A1-
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`dermen requested Overlander to give evidence under oath that he had been promised
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`a ‘sincere and sound’ share on contracting this transaction. His claim would be dis-
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`missed if he did not take the oath, which reveals that the lower court did not acknowl-
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`edge the legal principle that the buyer of a good can always expect this good to be
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`delivered according to the conditions in the contract.
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`Abeli_jn’s lawyer had made this particular point an important part of the de-
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`fense, arguing that Overlander had requested to be indemnified against any troubles if
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`Van de Geer and Pellicorne would have transferred the share, but he had not made
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`any such requests when Abelijn proposed to let Bouwer transfer the share. Overlander
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`had thus, according to the defense, accepted the share without reservations.
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`Overlander did not hesitate to make his declaration under oath and the court
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`consequently sentenced Abelijn to replace the share. Abelijn then summoned his
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`original counterparty Semeij, and the Aldermen pronounced the same judgment.
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`Hence, the chain of share transactions became mirrored in a chain of court cases be-
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`fore the Court of Aldermen. Furthermore, every one of the defendants appealed the
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`Aldermen’s sentences to the Court of Holland, resulting in another chain of court
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`cases (this time the other way around: Abelijn at. Overlander, Semeij vs. Abelijn, ete.),
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`but the appeals were disallowed. The judges of the Court of Holland did not require
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`the litigants to