The Worst Contract Ever

zong.gifI just finished Simon Schama’s Rough Crossings: Britain, Slaves, and the American Revolution. I leave an assessment of its ultimate merits to the historical experts on slavery in the late 18th-century Atlantic world, but I thoroughly enjoyed the book. By taking characters that usually sit at the margins of narratives about the American Revolution — slaves who escaped to British lines — and placing them at the center of the story, a story that ultimately sits in Britain looking west rather than American looking east, it made an old story new. Also, despite his efforts at even handedness, one can’t help but pick up on the fun that Schama is having poking at American hypocrisy and lauding “British Freedom” (the name that one of the escaped American slaves actually took). To be sure, Schama is at pains to point out the frequent expediency and hypocrisy of British policy toward African-Americans. This is not a bit of Rule Britannia flag waving. Still, reading about Glanville Sharpe and other English abolitionists, or the final English general in America — Guy Carleton — a blustering non-entity who nevertheless refused to abandon escaped slaves to their masters, despite pressure from Washington and more-or-less explicit language in the Peace of Paris gave my inner Anglo-phile a thrill. As a contract geek, however, the most fascinating part of the book was the story of The Zong, an episode that surely must stand as the most hideous example of perverse incentives in the history of contract drafting.

The Zong was a slave ship operating between West Africa and Jamaica. During the notorious Middle Passage across the Atlantic and Caribbean, disease broke out among the crew and human cargo of The Zong. In addition, the captain — apparently a less than stellar navigator — managed to miss Jamaica. The Zong like most 18th-century ships was covered by an insurance policy. To avoid liability for appalling rates of mortality among captured slaves policies on slavers routinely excluded recovery for what was euphemistically called “natural wastage,” in other words death from disease, abuse, and overcrowding below decks. On the other hand, damage to “cargo” caused in the course of efforts to save the ship from the perils of the sea was covered by the policy. Sailing across the Caribbean with a dwindling stock of water and a dying cargo of human misery, the master of The Zong seems to have hit upon a way of recouping his losses on the disastrous voyage. He would kill his “cargo” by throwing slaves over the side. His excuse was that this was necessary in order to preserve water on the ship, a claim belied by the fact that the murdering continued even after rain squalls had replenished the ship’s water. According to Schama, the captain’s real motivation seems to have been to maximize his recovery from the insurers, a course of action that promised more money than an attempt to nurse his cargo to health and then sell it upon landing in Jamaica. Hence, upon returning to England he sued the insurers, baldly claiming that the mass murder on The Zong was necessary to preserve the ship from the “perils of the sea,” a position that the trial court initially seemed inclined to accept. Indeed, the only real controversy — at least before the English abolitionists turned the case into a cause celebre — was whether the murders were truly necessary to save the ship, or whether the captain was simply killing off diseased slaves early as a way of defrauding the insurers. The best evidence for the captain, of course, was that some of the people thrown — literally — to the sharks, were in fact healthy.

All and all, it is perhaps the worst contract that I have ever read about. By covering the cost of dead slaves in some circumstances, the insurance created an incentive for slavers to kill off their “cargo” when doing so would result in an insurance recovery that exceeded their returns from sale of the slaves. Of course, by excluding “natural wastage” the insurers limited the incentive for slavers to mistreat slaves as a way of increasing insurance recovery, at least in “ordinary” circumstances (although to be sure, massive incentives to mistreat slaves remained), but The Zong case shows that even such an exclusion was hardly proof against moral hazard the most grisly kind.

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4 Responses

  1. A.W. says:

    mmm, well at the risk of being really dark, jeez, if i was in the shoes of a slave on one of those ships, i’m not sure i would see death as such a bad option. although personally i would prefer to go all “amistad” on them.

    And this is dark, too, but i have always wondered how the treatment of a slave differed from livestock in the middle passage, both in terms of the contract and in terms of the actual shipboard conditions. i have a creeping feeling that the contracts are similar, but the actual conditions are even worse for humans. Slaves as a rule were treated in a way that you wouldn’t treat a dog or a cow, and that is even if we ignore the issue of rape.

    Sorry to take things that dark, but there you go.

    On a less dark note, I have always thought that the Amistad case was underestimated as precedent. i think you have to remember that Amistad stood for a very different set of principles than Dredd Scott. Where DS said that black people were not entitled to any rights that the white man was bound to respect, Amistad said that a free black man could fight and even kill a white man to defend his freedom, if he was illegally enslaved. now, of course the term “illegally enslaved” is pretty disgusting, because to us no one should ever be legally enslaved, but it really was a much better ruling than dredd scott on that count: slaves had no rights, but free black people did.

    That is part of what was so shocking, then, about Dredd Scott to the North, and why it gave white southerners so much confidence going forward. And you have to realize that it was the flagrant disregard of precedent that alarmed the northerners like Lincoln, because it meant you really had no idea what the Supeme Court would do next.

  2. Manny J says:

    I don’t think the Northerners were too worried about what would come next from the Court. The Court wasn’t generally making radical decisions, except on the issue of race, and there wasn’t a lot worse it could do on that than rule that blacks had no rights anywhere in America full stop. That was enough to undo the last 80 years of compromises all by itself, and to make it theoretically possible to export the poisonous Southern economic system to Northern mines and mills.

    Of course, Chief Justice Taney saw himself as an originalist. His opinion is larded with carefully-slanted history to “prove” that America had always been a Christian, er, I mean, a racist nation. It was supposed “radical Republicans” like Lincoln who scandalized the law-n-order crowd by proposing that Dredd Scott be treated as a one-day ticket with no precedential value. That kind of arbitrary power in the hands of the Executive was even scarier than in the hands of the Court.

    Amazingly, we have now managed to come up with a Court that combines the horrors of the time: radical, unpredictable, willing to write one-off opinions, originalist only on the topics it favors and using only the history it likes, and infatuated with executive power.

  3. A.W. says:


    > I don’t think the Northerners were too worried about what would come next from the Court. The Court wasn’t generally making radical decisions, except on the issue of race, and there wasn’t a lot worse it could do on that than rule that blacks had no rights anywhere in America full stop.

    That was percisely what they were worried about, and the erosion of white freedom, for instance in the fugitive slave act, which purported to give the government the right to conscript anyone into the service of catching slaves.

    > That kind of arbitrary power in the hands of the Executive was even scarier than in the hands of the Court.

    Lincoln was technically right. a decision only rules one person and its reasoning can be overturned. and at Cooper’s union, Lincoln made a powerful argument that as original intent went, taney was wrong.

    Taney may have pretended to be an originalist, but he was anything but. there mere fact he declared that Scott was not a citizen, but then turned around and decided the merits anyway, was the most obvious evidence that this was a politically motivated decision. if DS was not a citizen, it was absolutely improper to reach the merits.

  4. Raymond Takashi Swenson says:

    This seems to be akin to the tort rules that allowed the survivor of a train accident to sue, but barred the family of a deceased passenger from making any claim. I remember in law school being told that this rule was so notorious that the axes kept in rail cars were said to be for the use of the crew to dispatch any surviving accident victims to decrease the plaintiff class.