A bottomry, or bottomage, is an arrangement in which the master of a

ship A ship is a large watercraft, vessel that travels the world's oceans and other Waterway, navigable waterways, carrying cargo or passengers, or in support of specialized missions, such as defense, research and fishing. Ships are generally disti ...

borrows money upon the ''bottom'' or

keel The keel is the bottom-most longitudinal structural element of a watercraft, important for stability. On some sailboats, it may have a fluid dynamics, hydrodynamic and counterbalancing purpose as well. The keel laying, laying of the keel is often ...

of it, so as to forfeit the ship itself to the creditor, if the money with interest is not paid at the time appointed at the ship's safe return. This occurs, for example, 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 the master to borrow money on the security of the ship or the cargo by executing a bond. Where the ship is hypothecated, the bond is called a bottomry bond. Where both the ship and its cargo are hypothecated, the relationship is called respondentia.

History

Due to the bottomry bond's relatively low priority as against other liens in the event of a

libel Defamation is a communication that injures a third party's reputation and causes a legally redressable injury. The precise legal definition of defamation varies from country to country. It is not necessarily restricted to making assertions ...

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 The Code of Hammurabi is a Babylonian legal text composed during 1755–1750 BC. It is the longest, best-organized, and best-preserved legal text from the ancient Near East. It is written in the Old Babylonian dialect of Akkadian language, Akkadi ...

describes a form of bottomry which is a risk transferring technique. A bottomry would be taken, but the repayment would be contingent on the ship successfully completing the voyage. This is more like a catastrophe bond than traditional insurance. In traditional insurance, you pay premiums and receive a benefit on the risk event. With bottomry and catastrophe bonds, you receive a loan up front and only pay it back with a premium if the risk event doesn't occur. By its nature, bottomry was prone to

insurance fraud Insurance fraud is any intentional act committed to deceive or mislead an insurance company during the application or claims process, or the wrongful denial of a legitimate claim by an insurance company. It occurs when a claimant knowingly attem ...

. Two common forms were taking bottomry against a ship and valuable cargo, setting sail with a cheap cargo, and scuttling the ship to keep the loan and the cargo, and pretending that the ship had sunk while it actually hid in a distant port and acquired a new name and crew. Demosthenes's speech ''Against Zenothemis'' accuses the titular shipper of the first type of fraud in the fourth century BCE. In his ''Life of

Cato the Elder Marcus Porcius Cato (, ; 234–149 BC), also known as Cato the Censor (), the Elder and the Wise, was a Roman soldier, Roman Senate, senator, and Roman historiography, historian known for his conservatism and opposition to Hellenization. He wa ...

'',

Plutarch Plutarch (; , ''Ploútarchos'', ; – 120s) was a Greek Middle Platonist philosopher, historian, biographer, essayist, and priest at the Temple of Apollo (Delphi), Temple of Apollo in Delphi. He is known primarily for his ''Parallel Lives'', ...

describes how he would use the process to make money, but calls it "the most disreputable form of money-lending". Kaplan and Kaplan describe it as follows:

Respondentia

Respondentia is a loan where a ship's cargo is the security, on similar terms to bottomry.

History

Respondentia

See also

References

Further reading