Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
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Original Agency Principles from Hammurabi’s Code

October 3, 2017 - Updated: October 3, 2017

Original Agency Principles from Hammurabi’s Code
 

Hammurabi’s Code appears to have been published around 1754 BC in Mesopotamia. That was Babylonia in ancient times, now Bagdad in modern Iraq.
 

It includes numerous references to barbarous acts, including an “eye for an eye”.
 

However, this was to some degree and indication of “progress”. Rather than an eye for an eye and a tooth for a tooth, in the sense of "revenge"; this was somewhat tempered. Before that time, the punishment inflicted was death for either the loss of an eye or the loss of a tooth.
 

Some historians view this as a progressive approach to civility in society.
 

The entire Code has not been found to date, but there are a few laws which appear to apply to “agency” and here they are:
 

100. . . . interest for the money, as much as he has received, he shall give a note therefor, and on the day, when they settle, pay to the merchant.
 

101. If there are no mercantile arrangements in the place whither he went, he shall leave the entire amount of money which he received with the broker to give to the merchant.
 

102. If a merchant entrust money to an agent (broker) for some investment, and the broker suffer a loss in the place to which he goes, he shall make good the capital to the merchant.
 

103. If, while on the journey, an enemy take away from him anything that he had, the broker shall swear by God and be free of obligation.
 

104. If a merchant give an agent corn, wool, oil, or any other goods to transport, the agent shall give a receipt for the amount, and compensate the merchant therefor. Then he shall obtain a receipt form the merchant for the money that he gives the merchant.
 

105. If the agent is careless, and does not take a receipt for the money which he gave the merchant, he can not consider the unreceipted money as his own.
 

106. If the agent accept money from the merchant, but have a quarrel with the merchant (denying the receipt), then shall the merchant swear before God and witnesses that he has given this money to the agent, and the agent shall pay him three times the sum.
 

107. If the merchant cheat the agent, in that as the latter has returned to him all that had been given him, but the merchant denies the receipt of what had been returned to him, then shall this agent convict the merchant before God and the judges, and if he still deny receiving what the agent had given him shall pay six times the sum to the agent.
 

Let’s have a look at each of the sections to determine whether there is relevancy today.
 

100. Agency and the Principle of Accounting (Interest)
 

This certainly appears to be an indicator of accounting. The full amount of interest is to be “paid over”.
 

100. . . . interest for the money, as much as he has received, he shall give a note therefor, and on the day, when they settle, pay to the merchant.
 

Interesting, there are no holdbacks for either fees or compensation. Remit the interest in full.
 

101. Agency and the Principle of Accounting
 

This looks to be the first clear indication of the principle of accounting in agency laws:
 

101. If there are no mercantile arrangements in the place whither he went, he shall leave the entire amount of money which he received with the broker to give to the merchant.
 

The interesting point here is the “entire amount of money”.
 

That means the agent does obtain his money first and then pay the rest to the Principal. It’s the other way around. All the money goes to the Principal who then pays the Agent.
 

That’s the principle of accounting which we have today.
 

102. Agency and the Principle of Competency
 

This looks to be the first indication of the principle of competency in agency laws:
 

102. If a merchant entrust money to an agent (broker) for some investment, and the broker suffer a loss in the place to which he goes, he shall make good the capital to the merchant.
 

The matter of interest and capital were discussed in the Code. This is really the liability for the loss of capital. The matter of loss of profits or interest was overlooked. Here, we are talking about an issue which goes right to the heart of the Agent’s ability to manage the investment competently.
 

That’s the principle of competency which we have today.
 

103. Agency and the Doctrine of Indemnification
 

This looks to be the first indication of the doctrine of indemnification in agency laws:
 

103. If, while on the journey, an enemy take away from him anything that he had, the broker shall swear by God and be free of obligation.
 

The Broker here is the Agent. If someone steals property from the Agent, then it’s the Principal’s loss.

 

That’s the doctrine of indemnification which we have today.

 

104. Agency and the Principle of Accounting (Receipts)

 

This looks to be the first indication of the principle of accounting in agency laws:

 

104. If a merchant give an agent corn, wool, oil, or any other goods to transport, the agent shall give a receipt for the amount, and compensate the merchant therefor. Then he shall obtain a receipt form the merchant for the money that he gives the merchant.

 

Like 101, this particular rule also is demonstrative of the law of accounting. This deals with receipts and payments and naturally “proper business practices”.
 

Again, that’s the principle of accounting which we have today.
 

105. Agency and the Principle of Competency (2)
 

This looks to be the first indication of the principle of competency in agency laws:
 

105. If the agent is careless, and does not take a receipt for the money which he gave the merchant, he can not consider the unreceipted money as his own.
 

The premise here is carelessness and the fact that there is an obvious penalty for that carelessness.
 

This would seem to be indicative of the principle of competency which we have today as well as accounting.
 

106. Agency and the Principle of Accounting (Dispute Resolution)
 

This looks like another indication of the principle of accounting in agency laws:
 

106. If the agent accept money from the merchant, but have a quarrel with the merchant (denying the receipt), then shall the merchant swear before God and witnesses that he has given this money to the agent, and the agent shall pay him three times the sum.
 

This issue seems to be “dispute resolution”. There’s no question that the merchant is considered to be “superior”, since it is the agent who suffers the loss.
 

This is another situation involving the principle of accounting.
 

107. Agency and the Principle of Accounting (Legal Recourse)
 

This looks another indication of the principle of accounting in agency laws:
 

107. If the merchant cheat the agent, in that as the latter has returned to him all that had been given him, but the merchant denies the receipt of what had been returned to him, then shall this agent convict the merchant before God and the judges, and if he still deny receiving what the agent had given him shall pay six times the sum to the agent.
 

In this situation , we have a dispute, but in this case we are not simply taking the agent’s word for it, there are to be Judges involved. That is sounding like a legal procedure. In this situation we have a stronger penalty being imposed upon the merchant which would suggest that the merchant is not really superior to the agent.
 

This seems to be another example of the principle of accounting.
 

Comment
 

We cannot be sure how the laws were truly applied in those times, nor can we offer a clear explanation. Perhaps, as time goes by, other information and resources will come to light.
 

It is entirely possible that other sections of the Code dealt more extensively with agency. However, they have been discovered yet. So far laws 1 to 65 and 100 to 282 have been found. Laws 66 to 99 are still missing. In fact, it would appear that they were all missing for centuries. They were not unearthed until an archeological dig in 1901.
 

The Code of Hammurabi was not the first. The earliest, created by the Sumerian ruler Ur-Nammu of the city of Ur, dates all the way back to the 21st century B.C.

 

Also, there is the Sumerian Code of Lipit-Ishtar of Isin which predates Hammurabi by about 200 years.
 

It is interesting that it offers a forerunner of the doctrine of “innocent until proven guilty.” The Code states:
 

“If any one bring an accusation of any crime before the elders, and does not prove what he has charged, he shall, if it be a capital offense charged, be put to death.”
 

The Code also refers judicial procedures. Referring to disputes it permitted two parties to bring their case before a judge and provide evidence and witnesses to back up their claims.
 

It will be interesting to see the development of agency laws throughout history. The first references appear to be in Hammurabi’s Code.
 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: hammurabis code agency laws innocent until proven guilty eye for an eye ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

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