Friday, May 31, 2013

Reid on Scotland's First Banknotes

Kenneth Reid, University of Edinburgh School of Law, has posted Banknotes and Their Vindication in Eighteenth-Century Scotland, which is forthcoming in Money in the Western Legal Tradition, ed. David Fox and Wolfgang Ernst (Oxford University Press, 2014).  Here is the abstract:    
The first banknotes in Scotland were issued in 1695 following the incorporation of the Bank of Scotland. In a country critically short of coin and vulnerable to changes in its value, they were an almost immediate success. A century later no fewer than 21 banks, mainly private, issued notes, and Scotland was awash with paper money. This proliferation of paper would hardly have been possible without a stable legal framework. In 1749 the case of Crawfurd v The Royal Bank considered, and settled, one of the key legal issues: whether the holder of a banknote took free from infirmities of title which affected those from whom it had been acquired. In the litigation Mr Crawfurd sought to vindicate a £20 Bank of Scotland note which had gone missing in the post and turned up some time later in the hands of the Royal Bank of Scotland. The printed arguments of counsel which have survived provide a fascinating glimpse into a collision between orthodox property law on the one hand and the needs of commerce and the future of the banking system on the other. According to the former, Mr Crawfurd’s victory was assured because no one can acquire title through a thief; according to the latter, the Royal Bank must prevail, for any other result ‘would be to render the Notes absolutely useless, and consequently would in a great Measure deprive the Nation of the Benefit of the Banks, which could hardly subsist without the Circulation of their Notes’. In this battle of doctrine against policy, Roman law was used as a proxy, with both sides calling on Digest texts and on the account of vindication in Voet’s Commentarius ad Pandectas. Victory for the Royal Bank was obtained only by re-characterising a rule of bona fide consumption, by spending, as one of bona fide acquisition; and so with this flimsiest of doctrinal veneers, the free circulation of banknotes was assured.