27. Euler, as have seen above, says that if a man has nothing in the world and even owes 50 crowns it is certain that he has 50 crowns less than nothing. He also says that if any one makes the Debtor a present of 50 crowns to pay his Debt, he would still be only at the point 0, though really 50 crowns richer than before.

Euler is right so far; but as we observed he has only stated half the case: because the same result may be attained in another way.

Suppose his Creditor Releases him from his Debt, his Property would then = 0, and he would also be 50 crowns richer than before.

Hence this example shews that the Release of a Debt is exactly the same thing as a Gift of Money. A principle of great importance in commerce.

So it is said in the Digest - "He gives a profit to another who frees him from an obligation: he who is freed is made richer, although nothing is truly added to him: yet he is richer in this that nothing is taken away from him."

And also - "He who is freed from an obligation seems to have gained something."

So Pothier says - "A Release is a Donation."

So also Ortolan - "The Release from a Debt is always classed as a Donation in Roman Law."

So Von Savigny - "A simple contract or the Release of a Debt may be the subject of a Donation."

"The increase of Wealth may result from a Credit given to the Debtor, or the Release of a Debt."

"Every Release of a Debt enriches the Debtor. The amount of the Donation is always equal to that of the Debt, even though the Debtor is insolvent. Although the Release from a Debt destined never to be paid seems a thing of no consequence, the augmentation of Property does not the less exist. In effect not only does Property represent a quantity always indeterminate, but its total Value also can either be Positive, or Negative, [Negative Property is a Negative Right i.e. a Duty or Debt]. If, then, Property is reduced to a Negative Value, the diminution of minus is, in Law, a change identical with the increase of plus for a Positive Value."

"The Release of a Debt always constitutes a Gift equal to the amount of the Debt, even though the Debtor is insolvent."

This vesting of the Right to demand and the Duty to pay in the same person was called Confusio in Roman Law.

How Confusio extinguishes a Debt has given rise to much subtle speculation, and for centuries has puzzled Divines and Jurists. For the Divines alleged that a Right once created cannot be destroyed; and the Jurists said that the Right being transferred to the Debtor, he cannot sue himself, and, therefore, the Debt is extinguished.

This explanation, however, is not satisfactory, because in many cases a man can sue himself. He may fulfil two characters; and in one character he may sue himself in another character. And moreover, this would shew only that the Right was in abeyance not that it was extinguished. And Jurists have shewn that there are cases in which the Eight and the Duty have afterwards separated, although they have vested in the same person. The considerations however we have presented will give a complete solution of the case.

The Release of a Debt may take effect in two ways: either as the Creditor agreeing to destroy his Right; in which case the Duty is destroyed with it: or else as the Gift or Transfer of his Right by the Creditor to the Debtor. The practical result, of course, is the same either way, and the operations may be exhibited thus.

Of course Creating and Destroying being Inverse Operations may be represented by + and -. Hence to Create a Debt may be denoted by + (- £50).

Debts are always created by an exchange. Suppose that a man incurs, a Debt of £50, by borrowing £50. As it is a Mutuum, the £50 become his Property; but at the very same time is created the Duty to pay them: consequently his Property will be represented thus-£50 + (- £50), or £50 - £50, i.e. he possesses £50, but also coupled with the Duty to pay £50. Suppose he wastes or spends the £50: he will then be in Debt £50, or his Property will be - £50.

Now if to Create a Debt be denoted by + ( - £50) then of course to Destroy or Cancel a Debt will be denoted by - ( - £50).

But -(-£50) = +£50.

Which shews that to Cancel a Debt is exactly the same thing as to make a Gift of so much money.

If therefore the Creditor releases or cancels the Debt of £50, then the Debtor's Property is - ( - £50) or + £50. That is he is now £50 richer than he was before, though his Property is now = 0.

WHEN + £50 CANCELS - £50.

Let us now take it the other way. The Credit or Right of action, being a Chattel, Goods, or a Commodity, may be the subject of a Donation, or Gift, exactly like any other Chattel, or Goods, or Commodity. The Creditor may present his Right of Action, + £50, as a Donation to his Debtor as well as to any one else. Then the Debtor's Property will be - £50 + £50.

These two Quantities cancel each other exactly like + a and - a on the same side of an equation, and they vanish together. The Right is not in abeyance, it is absolutely extinguished: and the +£50 ceases to exist as an Economic Quantity as well as the - £50, or the Debt: and thus the Obligation is absolutely extinguished.

But it is only in the case in which the person has the Right to demand from himself as well as the Duty to pay to himself, that the Contract is extinguished. Because a man's Property may be represented by - £50 + £50, and therefore, for practical purposes, only = 0, and yet these two Quantities will not extinguish or cancel each other.

Suppose a person owes A £50, and at the same time holds £50 of a banker's Notes. In such a case his Property is £50 - £50, and in substance = 0: but in this case the+ £50 and -£50 do not cancel each other, and the+ £50 is not extinguished as an Economic Quantity. For he may pay them away in commerce.

Suppose a Banker A holds £100 of another banker B's Notes: and B also holds £100 of A's Notes. Then the Property of each banker is + £100 - £100: but in such a case the + £100 and the -£100 do not cancel each other: and though it may be said that the Property of each banker, so far as these Notes are concerned is = 0, yet there are in existence £200 of Economic Quantities.

Hence it must be carefully observed that it is only when the Right and Duty emanate from the same source, and when they are again revested in the same source from which they emanated, that they are extinguished and cancelled as Economic Quantities.

We will only mention another case in which the Release of a Debt is equivalent to a Payment in Money. Suppose a Bank issues Notes which circulate among the public. Suppose the Bank proposes to increase its Capital, and invites subscriptions.

Then if the holders of its Notes wish to subscribe, they may pay the Bank's own Notes to it as their subscription. That is they Release the Bank from its Debt to them: and this is increase of Capital to the Bank.

Or if a customer of the Bank wishes to subscribe he simply gives the Bank a Cheque on his account: that is he Releases the Bank from its Debt to him: and that is increase of Capital to the Bank, exactly as the payment of so much Money. As the Digest says - "Release has the same effect as Payment."