Daily entries from the 17th century London diary
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Wikipedia
A bottomry, or bottomage, is when the master of a ship borrows money upon the bottom or keel of it, so as to forfeit the ship itself to the creditor, if the money is not paid at the time appointed with interest at the ship's safe return.
This occurs in cases where the ship needs urgent repairs during the course of its voyage or some other emergency arises and it is not possible for the master to contact the owner to arrange funds, allowing him to borrow money on the security of the ship or the cargo by executing a bond. Where both cargo and ship are hypothecated, the bond is called a bottomry bond. Due to the bond's relatively low priority as against other liens in the event of a libel against the ship, the use of bottomry bonds declined greatly in the 19th century and the subject is today of interest only to legal historians.
The Code of Hammurabi describes a form of bottomry that was a type of insurance. A bottomry would be taken, but the repayment would be contingent on the ship successfully completing the voyage.
In his Life of Cato the Elder, Plutarch describes how he would use the process to make money, but calls it "the most disreputable form of money-lending."[1]
"Ship insurance springs naturally from the necessity of trade, the existence of sophisticated entrepots, and the rapacity of barbarians -- all long-familiar facts of life on the Mediterranean. Its ancient Greek form, as described by Demosthenes, was what is now called by the splendid name of "bottomry." It was not a direct transfer of risk, but rather a conditional loan: The insurer staked the merchant to a sum of money in advance of the voyage, which was to be repaid with (considerable) interest if the voyage succeeded -- but forgiven if the vessel was lost. It is an arrangement that is easy to describe but difficult to characterize: not a pure loan, because the lender accepts part of the risk; not a partnership, because the money to be repaid is specified; not pure insurance, because it does not specifically secure the risk to the merchant's goods. It is perhaps best considered as a futures contract: the insurer has bought an option on the venture's final value.[2]
[edit] Respondentia
Respondentia is a loan where a ship's cargo is the security, on similar terms to bottomry.[3]
[edit] See also
[edit] References
- ^ Cato, c. 21, in Waterfield, Robin. Plutarch, Roman Lives. ISBN 978-0-19-282502-5
- ^ "Changes Are...Adventures in Probability" by Michael Kaplan and Ellen Kaplan. Viking Penguin, 2006, p. 94.
- ^ The Free Dictionary
This article incorporates content from the 1728 Cyclopaedia, a publication in the public domain.
1893 text
“The contract of bottomry is a negotiable instrument, which may be put in suit by the person to whom it is transferred; it is in use in all countries of maritime commerce and interests. A contract in the nature of a mortgage of a ship, when the owner of it borrows money to enable him to carry on the voyage, and pledges the keel or bottom of the ship as a security for the repayment. If the ship be lost the lender loses his whole money; but if it returns in safety, then he shall receive back his principal, and also the premium stipulated to be paid, however it may exceed the usual or legal rate of interest.” — Smyth’s Sailor’s WordBook.
Annotations
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AS Gleaned from the OED [f. BOTTOM n. 7 + -RY, after Du. bodmerij.]
“A species of contract of the nature of a mortgage, whereby the owner of a ship, or the master as his agent, borrows money to enable him to carry on or complete a voyage, and pledges the ship as security for repayment of the money. If the ship is lost, the lender loses his money; but if it arrives safe, he receives the principal together with the interest or premium stipulated, ‘however it may exceed the usual or legal rate of interest’. Also attrib., as in bottomry-bond, -money.
1622 MALYNES Anc. Law-Merch. 171 The name Bottommarie is deriued by the Hollanders from the Keele or Bottome of a ship..The money so taken vp by the master of the ship, is commonly done vpon great necessitie..the vse payed for the same is verie great, at 30, 40, and 50 pro cent. without consideration of time”