relief involves no material sacrifice of the interests of creditors, since, even if their claims were kept legally valid, they would still have no effective means of compelling the defaulting debtor to earn the funds required to satisfy them. I admit the general force of this reasoning, but I think that its application requires to be very carefully guarded, to minimise the danger of encouraging reckless industrial adventures; and that a bankrupt who has not paid his debts should remain in a position of marked social inferiority.1

§ 6. So far I have examined the conditions under which legal validity should be given to agreements in which both parties receive some utility. It will be evident that the limitations expedient in this case should also be applied-so far as they are applicable to one-sided transfers of utility: but it may be questioned whether the legal enforcement of agreements of this latter kind should not be still further limited; since there is obviously not the same prima facie ground for considering the agreement advantageous to both parties. Still it would clearly interfere with freedom of action if A were not allowed to transfer property to B, merely because there was no commodity or " valuable consideration" received by him in return; and it does not at first sight appear why he should not be compelled to render a service to which he has voluntarily bound himself under similar circumstances. There is, however, in our law, a provision that there must, generally speaking, be valuable consideration to make a promise enforceable, unless it is made with special formalities; and this provision seems to be approved by the most esteemed living writers on this branch of law. Apparently it is thought that persons should be able to bind themselves by gratuitous promises, but that some special solemnity should be required (1) as a protection of the inconsiderate, and (2) as evidence of the fact that the promise was really made -“preappointed" evidence. The former argument is

1 I think (e.g.) that he should be deprived of all political franchises; and that his legal immunity should depend on his name being kept in a register open to public inspection.

obviously an introduction of the "paternal" principle; but there seems to me to be force in the latter, from our present point of view, owing to the greater difficulty, in the case of such one-sided promises, of distinguishing a statement of a benevolent intention, not intended as a pledge, from a promise really understood as such on both sides. Still, on the individualistic principle, it seems clear that any adequate evidence of a one-sided promise ought to be accepted, and that it ought to be as valid as a contract in which an exchange is made, that is, if we are merely considering the claim arising out of such a promise as a single and separate claim. It is another question whether we should enforce a two-sided promise rather than a one-sided one, if we have to choose between the two; e.g. as against an insolvent estate, whether a gratuitous promise should be allowed to rank along with promises given for value. Here, I think, we should certainly decide in the negative on utilitarian grounds it is much more important that men should rely on bargains than that they should rely on one-sided promises -not to speak of the need of providing that persons practically insolvent should not be able to create "friendly" creditors on similar grounds it is necessary to invalidate. even gifts of property made by persons who cannot pay their debts.

§ 7. I will now notice a special operation of contract which is important as determining a modification of ownership. When we were examining the general desirability of securing to individuals the right of exclusive use of material things, the question might have been raised: Why appropriate to individuals? Productive labour, under modern industrial conditions, is usually the labour of many co-operating. Why not allow appropriation to the whole group? And the answer clearly is that we ought to allow this, provided the group is so organised as to act collectively; otherwise the appropriation of matter to a number of persons would be too indefinite, and would obviously give occasion for conflict in management and enjoyment. When we go on to ask how such a group capable of collective owner

ship is to be organised, the individualistic answer is again clear viz. that it should depend on free contract among the members of the group, because men in general can determine on what terms they can combine better than government can determine for them. If such collective ownership is to be useful it must carry with it the capacity of being the subject of rights arising out of contract; and, obviously, the corporate body or "artificial person" who possesses these rights must equally be the subject of contractual obligations, and obligations attaching to property. But a little reflection will show that obligations can only be to a limited extent transferred to such an artificial person by the real persons comprising it. It is evident that such persons cannot be allowed to diminish their general responsibility for the observance of the rights of others; it would be absurd that by any compact among themselves they should be able to contract themselves out of prior legal obligations to other men; therefore, if anything is done in the name of an artificial person, by which such obligations are violated, the individuals who do it must be liable as such.1

The case is different with obligations arising out of contract it is clearly in accordance with the individualistic principle that a group of persons should be allowed to contract on the basis of "limited liability," provided this is clearly

1 An exception to this rule may reasonably be made in the case of the secondary and indirect liability which a company-formed on the basis of limited liability-may incur for the acts of its employees. In this case the limitation of liability may fairly be allowed to hold good for liabilities ex delicto, as well as for liabilities ex contractu. The rationale for this exception is, that the extension of liability from agents to principals is hardly justifiable without some straining of the conception of negligence. If I am run over by a cart negligently driven by a servant of a railway company, it is possible that the directors of the company may have been somewhat remiss, either in employing a careless driver or in not sufficiently impressing on him the duty of careful driving: but it is very likely that they are not to blame at all, in which case there is some hardship in making the company liable for damages; -although it may be on the whole expedient to do this, owing to the great difficulty of obtaining positive proof of this kind of remissness on the part of employers, even when it has actually occurred. Hence I may think myself fortunate, in the case supposed, that I have any one to sue except the driver of the cart so that I have no reason to complain of the limitation of the liability of the shareholders.

understood by the other party to the contract, since the latter can always decline to enter into the contract if the security seems insufficient. In short, on the individualistic principle, the only legitimate end with which legal restraints can be imposed on the formation of corporations capable of holding property and making contracts is that of securing clear intimation of their formation to the rest of the community, and clear distinction between their acts and the acts of the individuals composing them. Some part of our actual regulation of joint-stock companies is clearly designed to realise this end, and is therefore simply individualistic ; though other rules can only be interpreted as intended to protect the ordinary members of the company against the mischievous consequences of leaving too much to their directors.1

1 Such rules belong to the species of governmental interference, which I shall discuss in Chapter viii., as “indirectly individualistic" or "paternal."

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CHAPTER VII

INHERITANCE

§ 1. THE right of Bequest, and the title to property arising out of it, comes naturally to be considered after the rights arising out of contract. Indeed, a bequest made and accepted under conditions may be regarded as a kind of contract between. the dead and the living. It follows that bequests should only be treated as valid under limitations generally similar to those which we have minutely examined in the case of contract; i.e. they must be liable to be invalidated, in whole or in part, by the absence of mature reason, or the presence of coercion or deception. It has to be observed, however, that where bequest operates some fresh legal intervention would be necessary, whether there was a bequest or no; since it would be manifestly inexpedient that the wealth left by a dead man should be liable-like things thrown away during life-to become the property of the survivor who seized it first. There must therefore be in any case a Law of Intestate Inheritance: and it might seem simpler to consider first the plan on which such a law should be constructed, before proceeding to discuss the conditions under which bequest should be allowed.1 But, on the whole, it seems to me better to adopt the opposite order; since, when wills are allowed, any rules deviating widely from normal customs of bequest would tend to cause painful disappointment of expectation: hence the regulation of in

1 This is (e.g.) the order in which Bentham (Civil Code, Part ii. chapters iii. and iv.) deals with the two questions of "Wills" and "Intestate Succession."