1. The fundamental problem of exchange

The key element inhibiting trade expansion is risk. Long-distance trade is marked by a time lag between delivery of goods and payment. Merchants in locations that are far apart agree to exchange payment and goods. They accept the risk that the other party will not deliver as promised. Such a breach of contract may cause financial ruin. Thus, this risk needs to be mitigated for trade to occur. The smaller the risk, the more individuals will be willing to enter the market, the more trade and exchange will take place, and the more economic growth occurs. In consequence, prosperity may increase and living standards improve. A growing body of opinion sees institutions as the solution to this problem. Depending on the quality of institutions for contract enforcement, trade will grow – or not – in a given time and place. This implies that trade increases reflect institutional improvement.

According to the NIE, in early modern Europe the state emerged as the main guarantor of property rights.Footnote ³ Beginning in the late Middle Ages, European countries moved from a situation in which private order institutions dominated contract enforcement towards one in which the state played an ever greater role. Public courts, relying on the state's monopoly of force to carry out their verdicts, came to replace earlier, private institutions. The English state proved particularly successful in monopolising contract enforcement. Over the course of the early modern period, it developed an increasingly centralised judicial system, which dealt out justice throughout the state's territory.Footnote ⁴ According to Douglass North and Robert Thomas, the Glorious Revolution of 1688 was a watershed in this development. It enabled the central government to consolidate control and complete the centralisation of the judicial system. This was important, as North and Thomas argue, because it allowed public courts to enforce contracts throughout the state's territory.Footnote ⁵ Similar developments took place, albeit to a less complete degree, throughout Europe. This meant that merchants in Europe could resort to courts when business associates broke their promises to pay debts or deliver wares. The courts heard the dispute, found one party guilty and ordered them to pay. The state then enforced its courts’ verdicts. Thereby it facilitated trade expansion and sustained economic growth.Footnote ⁶

In areas where courts were either unavailable or inefficient, merchants had to rely on private or community-based institutions to enforce contracts. Avner Greif famously theorised that in the medieval Mediterranean, the Maghrebi merchants used multilateral reputation mechanisms to enforce contracts. Any merchant who broke a promise was ostracised and lost the prospect of future trade with any member of the community. However, membership in pre-modern merchant communities was based on faith, kinship or other pre-existing, non-economic, criteria. This limited the number of those who could use the reputation mechanism, and thereby the number of people who would participate in the market. These private order institutions were, therefore, less capable of supporting trade than public courts, setting limits to market expansion and economic growth.

While Greif maintained that merchants accessed either public or private order institutions, and that these emerged sequentially, with public order institutions replacing private order ones, researchers including Jessica Goldberg, Regina Grafe and Oscar Gelderblom have since shown that pre-modern merchants used both state and private order institutions in tandem, making use of any tool available to reduce risk.Footnote ⁷ In the colonial trades, these included multilateral reputation mechanisms based on kinship, local origin and faith.Footnote ⁸ Merchants used courts, but only as a last resort. As Philadelphia merchant Isaac Norris informed a correspondent about his attempts to secure a debt, ‘I have been very pressing with Jos. Jones, and do all in my power, but don't love the law’.Footnote ⁹ Early modern merchants across the Western hemisphere shared in this sentiment.Footnote ¹⁰ Courts were expensive and slow; they could harm one's reputation and were thus best avoided.

Legal historians agree that whenever possible, traders resorted to arbitration instead.Footnote ¹¹ This was particularly true for American merchants, who were faced with unreliable public courts. Their preference for arbitration continued until the mid-eighteenth century, when courts improved and litigation became prevalent.Footnote ¹² For arbitration to be able to solve disputes and enforce contracts, arbitration awards need to be enforced. Yet it is unclear how American colonists accomplished this. Bonds are one contender.Footnote ¹³ A bond obliged parties to a contract to pay a fine if they did not fulfil their side of the agreement. However, enforcing bonds required going to court, which limited their use. Given these institutional constraints, how do we explain the sustained expansion of trade that took place in the Atlantic during the late seventeenth and early eighteenth century?

Scholarship on Atlantic trade has overlooked an important piece of the institutional puzzle: the state was not the only provider of ‘law’ in the colonies. In the absence of a strong state, multiple alternatives can offer institutional solutions. These may include private corporations, such as the chartered trading companies, or religious bodies like the Anglican church. In Pennsylvania, religion was the most important of these. Religion's role as the basis for informal trading networks in the Atlantic is long established. This paper argues that religion did more than that. In Pennsylvania, the Society of Friends stepped in to fill the institutional vacuum left by weak state institutions: It established legal forums. These were formal institutions in that they followed standardised procedures based on written rules. As part of the institutional landscape of colonial Pennsylvania, they enforced contracts and thereby facilitated trade expansion.

2. Important lessons from Legal History have been overlooked

Why has the possibility of formal religious institutions enforcing contracts in the colonies been neglected? Studies on the institutional foundations of long-distance trade have been influenced strongly by the NIE view of the state. This is based on the concept of ‘legal centralism’. ‘Legal centralism’ assumes that ‘law’ only exists within and through the power of the nation state and that the nation state is in control of everything happening in its territory.Footnote ¹⁴ At the time of North's first writing on the state's role for protecting property rights in 1973, legal centralism was the generally accepted understanding of how law works. However, legal scholarship has since moved on from this view. Over the course of the 1970s and 1980s, legal historians replaced the idea of ‘legal centralism’ with that of ‘legal pluralism’.Footnote ¹⁵ There are two models of legal pluralism: ‘Weak’ legal pluralism posits that there are several legal orders in one territory, which ultimately derive their legitimacy from the state. ‘Strong’ legal pluralism frees law from its ties to the nation state. Instead, it posits that legal orders are connected to ‘semi-autonomous social fields’. A semi-autonomous social field is a ‘social group which engages in reglementary activities’.Footnote ¹⁶ It is not defined by its boundaries, but by ‘the fact that it can generate rules and coerce or induce compliance to them’.Footnote ¹⁷ At the same time, it is part of, and influenced by, a larger society.Footnote ¹⁸ Social fields overlap. Ergo, several legal orders will operate within the same social and economic space.Footnote ¹⁹ This means that within a state's territory, forces other than the state will provide and enforce law. The more socially diverse a society – its members organised along ethnic, socio-economic, religious and occupational lines – the more pluralistic the legal order in that society will be.Footnote ²⁰

Contrary to North et al.'s theory, in early modern Europe, the state did not enjoy a monopoly of force. While it was making efforts towards greater judicial control, progress remained slow. The institutions European states created to address commercial disputes were hybrid, that is, they combined state and private elements. English bankruptcy commissions consisted of merchants who, while appointed by the Lord Chancellor, investigated commercial failures and determined debtors’ obligations and creditors' rights independently.Footnote ²¹ English colonies in North Africa and the Caribbean setup merchant courts, where instead of judges with legal training, merchants themselves decided commercial disputes.Footnote ²² At the King's Bench in London, Lord Mansfield relied on merchant juries in order to comprehend and decide commercial cases.Footnote ²³ Sixteenth-century France created courts staffed by merchants rather than professional judges, who used their expertise to solve commercial disputes. Courts of this nature exist in France to this day, so legal centralism is still not a reality.Footnote ²⁴

England remained legally pluralistic throughout the early modern period. Philip Loft recently showed that even after 1688, local corporations and power holders heavily curtailed parliament's influence.Footnote ²⁵ The ‘state’ constituted one corporation among many, all of which governed by sharing power and cooperating with each other to various degrees.Footnote ²⁶ Royal, local, ecclesiastical, and seigniorial jurisdictions, provincial and local estates, feudal lords, guilds, urban corporations and trading companies all provided and enforced law. Many of these legal institutions did not derive their legitimacy from the crown.Footnote ²⁷ In Philip Stern's words, the early modern European ‘state’ was really a ‘composite of agents, networks, and “grids of power” that operated within, aside, and sometimes in conflict with the sovereign Crown’. Correspondingly, Larry Epstein argued that the NIE ‘project backwards in time a form of centralised sovereignty and jurisdictional integration that was first achieved ( … ) during the nineteenth century; they therefore fundamentally misrepresent the character of pre-modern states’.Footnote ²⁸ These were unable ‘to enforce ( … ) a unified legal regime’.Footnote ²⁹

The acquisition of overseas territories further increased legal plurality. In the colonies, new situations and conflicts arose which European law lacked the instruments to resolve.Footnote ³⁰ Lauren Benton has shown how European empires responded to this challenge by adopting and incorporating local legal orders.Footnote ³¹ This understanding of the plurality of law has not yet been applied in research on the institutional foundations of long-distance trade, despite the recognised importance of semi-autonomous structures, such as the English and Dutch East India Companies in this context. As Philip Stern and Adam Clulow have shown, these corporations, crucial to the expansion of long-distance trade, enjoyed sovereignty and jurisdiction over their ‘subjects’, making and enforcing law that governed trade.Footnote ³²

3. Quaker dispute resolution

One such non-state legal institution supported trade expansion in the Atlantic: the Philadelphia Quaker Monthly Meeting (PMM). Founded in 1682, Philadelphia suffered from a fragile institutional environment. The political situation was instable and the legal structure malfunctioning. These factors conspired to make Philadelphia an unlikely candidate for commercial success. Yet, the city's commerce thrived. How was this possible? This paper argues that Philadelphia Monthly Meeting played an important role in this development.

The Quaker Monthly Meeting was a religious private order institution. In colonial Pennsylvania, there were some overlaps between Quaker meetings and the state – some of PMM's officers also acted as judges or magistrates. Formally, however, the two were distinct, and the meeting was independent of the state. The Society of Friends’ arbitration procedure was based on scripture and followed the same pattern commonly used by English guilds to solve disputes between members.Footnote ³³ Arbitration in a Quaker Monthly Meeting was open to Friends only. Friends were first to try and solve their differences privately. If unable to reach an agreement, the aggrieved party was to recruit some ‘judicious and discreet Friends’ to negotiate with the opponent. If their efforts failed, too, the parties were to ‘choose referees, or arbitrators’, and promise to honour their verdict. Only if an opponent refused to take this step, should Friends approach a monthly meeting for help. At the monthly meeting, the parties each chose several arbitrators who together would make inquiries, uncover evidence and discuss the conflict. The monthly meeting would ‘add one or more friends to them ( … ) for determining the said difference by a majority’.Footnote ³⁴ The arbitrators were to determine the case swiftly and report to the next monthly meeting. Appeals could be directed to a quarterly meeting and eventually a yearly meeting.Footnote ³⁵

We know that Friends arbitrated disputes in their meetings. Morton Horwitz argued that a Quaker preference for arbitration led to an unusually frequent use of that form of dispute resolution in Pennsylvania.Footnote ³⁶ Carli Conklin's study of arbitration in colonial Quaker records has established that Friends in the Jerseys also used arbitration, as well as the rules by which this procedure took place.Footnote ³⁷ Peter Philips argued that arbitration in Quaker meetings was common in the seventeenth century and gradually declined from the nineteenth century onwards. His study is based on several editions of the Society of Friends’ Discipline, using a few examples of disputes arbitrated by various American Quaker meetings for illustration. The Discipline, however, is not evidence of actual Quaker practice. It sets out how Yearly Meetings would have liked Friends to behave, while containing no information on what actually took place at the monthly meeting level.Footnote ³⁸ None of these studies provide evidence of the frequency of arbitration in Quaker meetings, how it developed over time, who was involved and what types of conflicts were arbitrated. A quantitative study of arbitration in rural Pennsylvania Quaker meetings by William Offutt conflates dispute resolution with the meetings’ regular disciplinary procedures. In the latter, rather than responding to a member's complaint against another, monthly meetings became active on their own behalf to deal with members who broke the Quaker discipline, and whose behaviour threatened to cause the Society reputational harm.Footnote ³⁹ This is distinct from dispute resolution, in which individual Friends approached the meeting with cases of disagreements with each other. As a consequence, the image that emerges from Offutt's study is distorted, overestimating the use of dispute resolution. To sum up: We know that Quaker dispute arbitration took place in Pennsylvania, and we know the formal rules the Society laid out for the procedure. So far, we do not know how common the procedure was, who used it, and what types of disputes they brought to the meetings.

4. The Quaker colony and its courts

The Quakers are a dissenting group that emerged during the English Civil Wars in the 1640s. Their core belief was the immediate relationship between the individual and God, without the need for priests to serve as intermediaries.Footnote ⁴⁰ They emphasised the importance of personal religious experience over the knowledge of scripture. The participation of those ‘convinced’ was central. At meetings, Friends might sit completely silent for hours, each listening for the voice of God within.Footnote ⁴¹ The early Quakers missionized very successfully, and by 1700, there were about 50,000 Quakers worshiping in meetings all over the British Empire.Footnote ⁴² A formal, hierarchically structured organisation connected their meetings. At its lowest tier stood local meetings for worship, where Friends gathered several times a week. At the next higher level stood the monthly meetings. They consisted of respected community members, often merchants or other, wealthier Friends. The monthly meetings were responsible for the administration of the communities in their areas. They organised poor relief, registered births, solemnised marriages, maintained Friends’ buildings and burial grounds. In this, they shadowed the Anglican parish. Quaker Monthly Meetings, furthermore, sanctioned Friends whose behaviour might cause the community's reputation to suffer, such as public drunkenness. Monthly meetings also kept up a regular correspondence with other Quaker meetings.Footnote ⁴³ They sent emissaries to quarterly meetings, which in turn dispatched representatives to yearly meetings. Yearly meetings were the highest body within the Quaker organisation, possessing the greatest authority. The most important yearly meetings were located in London and Philadelphia. They formulated Quaker policies regarding all issues that concerned Friends or the public at large, from how to raise one's children to participation in privateering. They issued annual letters, called epistles, which form the basis of the Quaker discipline. They also decided internal conflicts. Their decisions were binding for all lower-tier meetings.

Until 1660, Quakers tried to bring about a radical reform of society. Emphasising equality before God, Friends rejected the authority of the Anglican Church and to a certain degree that of the state. The government responded to their dissent from social and political order with persecution. It banned Quaker meetings and expropriated Friends’ possessions. Thousands were incarcerated, hundreds died in prison.Footnote ⁴⁴ Only with the Toleration Act of 1689 did persecution decrease and Friends gain some security.Footnote ⁴⁵ In response to persecution, in 1681, William Penn obtained a charter from Charles II to found Pennsylvania as a place where Friends could live safely in accordance with their beliefs.

Settlement of the colony began in 1682. Historians agree that it was an immediate success.Footnote ⁴⁶ Within three years of the first ships’ arrival, Philadelphia ‘was firmly established in the Barbados provisioning trade and had cut deep inroads into New York's control of the middle-Atlantic fur and tobacco markets’.Footnote ⁴⁷ Gary Nash concluded that ‘There are few parallels in colonial history to the economic success of Pennsylvania in the first two decades’.Footnote ⁴⁸ Philadelphia exported tobacco, skins, furs, lumber and flour to the West Indies. In return, its merchants received bills of exchange. These were used to purchase English manufactured goods via the New England colonies. This pattern lasted almost 40 years. Around 1720, a major change occurred: More wheat and flour were sold to Southern Europe and Ireland, and the coastal trade with the other colonies grew, too. In the following years, Philadelphia's external trade almost tripled.Footnote ⁴⁹

Demographic developments mirrored these economic ones. In 1690, Philadelphia counted roughly 2,000 inhabitants, including 1,100 Quakers.Footnote ⁵⁰ The city's population stagnated until 1718. Then, immigration increased. In 1720, just below 5,000 inhabitants lived in Philadelphia. By 1775, their number had grown to 32,000.Footnote ⁵¹ The new arrivals were pre-dominantly non-Quaker, many stemmed from continental Europe.Footnote ⁵² It is unclear when Friends became outnumbered by others. PMM's 1760 census lists 2,250 Quaker women, men and children.Footnote ⁵³

Until about 1720, the colony suffered from political and legal instability.Footnote ⁵⁴ The frame of government changed repeatedly.Footnote ⁵⁵ The colonial assembly frequently passed laws, only to have them repealed by the crown. Offutt found that Pennsylvania suffered ‘the highest percentage of disallowed colonial legislation’.Footnote ⁵⁶ For instance, in 1706, the Privy Council revoked 53 of 105 laws submitted by the assembly.Footnote ⁵⁷ In between sending laws for approval to England and hearing back about their acceptance, rumours and uncertainty ruled. This led to general confusion over which laws were in place, as well as colonial courts’ jurisdiction.Footnote ⁵⁸

Pennsylvania had four types of courts: The county courts sat four times a year, alternatively as courts of quarter sessions and common pleas. The quarter sessions heard non-capital criminal cases, while courts of common pleas handled civil disputes. In addition, there was an orphan court, which administered decedents’ estates and appointed guardians for their children. The lines between these courts were permeable, as the same judges presided in all four, deciding cases in common pleas, sessions, equity and orphan courts.Footnote ⁵⁹ Finally, a ‘Provincial Court’, which travelled from county to county in circuit, heard the most serious criminal cases as well as appeals from civil and equity cases.

Of special importance to our study is equity jurisdiction. This was controversial, and nowhere more so than in the Quaker colony.Footnote ⁶⁰ According to Stanley Katz, ‘Controversies over the nature of jurisdiction of equity courts was a distinguishing feature of early Pennsylvania political life’.Footnote ⁶¹ Proponents of equity courts argued that these were essential to economic development, as they remedied short-comings of common law which made it difficult to obtain justice in commercial cases. Proceedings in common law were bound by a stiff framework. Pleadings had to fall within established writs – or formulars – to allow for litigation. This considerably narrowed the types of grievances plaintiffs were able to bring to court. Common law pleadings, furthermore, had to be framed in a way that ‘narrowed the dispute to a single question of law raised against a single defendant’, in order to make them easier for juries to understand and decide. Moreover, common law did not permit the parties themselves to appear as witnesses, thereby disqualifying important evidence.Footnote ⁶² In equity courts, in contrast, plaintiffs were able to file cases against multiple parties, and others involved in the suit were able to add their own related claims. Equity courts relied on testimonies in writing, including that of the dispute parties, and generally included a broader range of evidence. This, as Amalia Kessler put it, increased ‘the probability that the suit would be decided in accordance with the actual facts’.Footnote ⁶³

Some colonists worried because equity courts acted without juries, while at the same time being headed by the governor. They feared such courts would give too much power to proprietors, while disadvantaging the colonists. For instance, it might force them to pay quitrents.Footnote ⁶⁴ These concerns existed across the American colonies. Different provinces found different solutions for the dilemma. New York, Maryland and South Carolina did introduce chancery courts, which were active for long periods of time.Footnote ⁶⁵ Most of the New England colonies incorporated equity law and procedure into common law legislation and courts. In Massachusetts, home to the highly successful port of Boston, county courts were empowered to ‘act as courts of equity, and they retained this authorization throughout the colonial period’.Footnote ⁶⁶ Pennsylvania experimented in this direction. Equity powers of common law courts were introduced or confirmed repeatedly between 1684 and 1720. However, the Queen repealed them each time. This meant that in the period between the assembly passing the legislation granting equity powers to the county courts, and news of the repeal reaching Pennsylvania, the county courts did hold these powers. They lost them the moment the repeal became known. Courts with equity powers were active in Pennsylvania briefly after 1684, again from 1690 to 1693, from 1701 to 1705, from 1710 to 1713 and 1715 to 1719.Footnote ⁶⁷ This back and forth led to constant confusion over whether the courts held equity powers or not.Footnote ⁶⁸ Importantly, it also caused insecurity as to whether verdicts issued by equity courts in these periods would hold and be enforced once the courts lost their equity powers again. Only in 1720 would the colony finally establish a durable equity court, which operated until 1736.Footnote ⁶⁹ After the final abandonment of this court, common law courts slowly began to adopt individual equity procedures.Footnote ⁷⁰

The insecurity regarding Pennsylvania's courts was further aggravated by the ‘oath controversy’ from the 1690s to about 1720.Footnote ⁷¹ The English legal system required the swearing of oaths throughout. As part of their beliefs, Friends refused to swear. In Pennsylvania, they therefore replaced oaths with affirmations. However, Pennsylvania colonists from the outset included other protestants as well. Soon, a power struggle between Friends and non-Quaker settlers emerged, centring around the use of oaths. Anglicans argued that the lack of oaths made the justice system unfit to deal with crime, lobbying for a replacement of affirmations by oaths locally and with the government in England. Losing the option of affirming would have put Quakers at a serious disadvantage in the legal system, making it impossible for them to litigate, and excluding them from acting as judges or jurors. Moreover, it raised the question whether courts’ decisions based on the use of affirmations would continue to be binding, if these became outlawed. Churchmen brought the legal process to a halt repeatedly.Footnote ⁷² Between 1705 and 1710, Pennsylvania's courts functioned merely based on ordinances issued by the governors. During brief periods in 1708 and 1709, they did not sit at all.Footnote ⁷³

Political instability further eroded trust in the courts. William Penn was twice arrested after the Glorious Revolution under charges of treason, due to his close relationship with former King James II. Between 1692 and 1694, the colony came under crown control, as it failed to take measures to defend itself against the French in the War of the League of Augsburg.Footnote ⁷⁴ In 1708, Penn again was imprisoned, this time for debts. Close to bankruptcy, he prepared to sell the colony to the crown. These plans hung over Pennsylvania until his death in 1718. Penn's heirs held on to the colony and appointed governors to represent their interests vis-à-vis the Pennsylvania Assembly. The legal and political situation improved dramatically from about 1722 onwards.Footnote ⁷⁵ Political unrest calmed down, laws remained in place and courts sat regularly.

Given the constraints described above, how did Philadelphia Quaker merchants solve commercial disputes and enforce contracts? The inhabitants of early modern European states and empires, including merchants, compared the services and possible outcomes they could expect from dispute resolution in different legal forums, choosing the one they thought would provide for them most desirable outcome.Footnote ⁷⁶ The seventeenth- and early eighteenth-century records of Delaware Valley courts outside Philadelphia show that in spite of their unreliability, Friends at times did apply to the courts for help.Footnote ⁷⁷ Moreover, their letters show that they often used informal arbitration, which was common practice in both the colonies and England.Footnote ⁷⁸ In addition, as the following sections of this paper will show, Friends obtained help from the Quaker Monthly Meeting to solve disputes.

5. The Quaker meeting offers an alternative to public courts

Philadelphia Yearly Meeting's 1719 Book of Discipline first defined the types of conflicts that might be brought to monthly meetings’ attention. These included ‘differences (that) happen or arise between any Friends’ in ‘their interests, claims or properties in worldly affairs’.Footnote ⁷⁹ It specified debts, bonds and ‘differences in accounts’.Footnote ⁸⁰ This tells us first, that the Yearly Meeting intended the arbitration process not for spiritual or religious matters, but for conflicts of a secular nature. Specifically, it had in mind differences that arose during the conduct of business – conflicts likely to involve contracts. To what extent did PMM employ this procedure? What types of conflicts did it focus on in practice? Its minutes provide answers to these questions. They survive for the entire colonial period. In 1772, PMM split in three to accommodate the growing size of the city and community. For the sake of simplicity, this study uses only the records of the original monthly meeting and ends in 1772 (Table 1).

Table 1. Conflicts arbitrated by Philadelphia Monthly Meeting

Source: Haverford Special Collections, Philadelphia Monthly Meeting Minutes.

The minutes specify the causes of conflicts for 161 cases (56.1 per cent). The remainder concerns undefined ‘differences’ or ‘complaints’. Which causes were specified appears determined by chance. The known causes were divided into categories according to issues which appeared most frequently. The largest category is ‘debt’, constituting 57.5 per cent of causes. In 1744, for example, George James complained that Samuel Redman was ‘indebted to him and delays payment’.Footnote ⁸¹ PMM appointed two Friends to ‘use their endeavours to get the matter accommodated’.Footnote ⁸² The following month, these reported that Redman ‘promiseth to pay the money in a few days’.Footnote ⁸³ In response, PMM directed the two Friends to follow up on the case, to ensure he kept his promise. Again, the following month, they reported to the meeting that the procedure continued, and the next, the minutes noted that it was ‘ended’.Footnote ⁸⁴

The next largest group is ‘estates’, with 21.9 per cent. This includes cases in which creditors complained against the executers of deceased persons’ estates. The vast majority of these concern the settlement of debts owed by, or to, the deceased. Therefore, both ‘debts’ and ‘estates’ constitute conflicts over the payment of debts. Together, conflicts over financial obligations make up at least 79.4 per cent of cases PMM arbitrated.

A closer look at the debt cases reveals that they often concerned commerce, some explicitly long-distance trade. They include conflicts over bills of exchange, differences in accounts and money lent on bond.Footnote ⁸⁵ The minutes often do not specify whether the conflict was between Friends residing in Philadelphia, or elsewhere. While PMM arbitrated his complaint, Francis Richardson was actually living in New York. This is not obvious from the minutes, however, and is only revealed by his correspondence.Footnote ⁸⁶ Other Friends in PMM may have acted as agents for their overseas correspondents, without this being specified in the minutes. Fifteen cases (16.3 per cent) can with certainty be identified as involving at least one party living in a different colony or in England.Footnote ⁸⁷ These Friends were represented at PMM by their agents, or their home meetings approached PMM by letter.

For instance, in 1687, Daniel Wharley, Quaker and hatter of London needed help with a bill of exchange he received from Philadelphia Quaker merchant Griffith Jones. Instead of taking the case to court, Wharley asked his correspondent, Samuel Carpenter, merchant of Philadelphia, for support. Carpenter approached Jones but could not convince him to compensate Wharley for the protested bill. As a next step, Carpenter turned to PMM. He reported Jones ‘for not satisfying this Bill of Exchange to him in the behalf of Daniel Wharley with charge of protest and interests since it became due’. He requested PMM exert pressure on Jones. PMM directed that:

The ‘lawful damage and protest’, and the interest rate of six per cent were standard procedure in Pennsylvania at the time. PMM enforced commercial contracts.

6. Merchants embrace the new institution

If PMM's contract enforcement supported trade expansion, we would expect a large number of merchants among those submitting complaints or being ‘sued’. Two sources on Philadelphia merchants exist: First, Gary Nash compiled a list of Philadelphia merchants active in the city between 1682 and 1740. This is based on a wide range of colonial records and probably captures most merchants active in Philadelphia during this time. It comprises 245 merchants, including 131 Quakers.Footnote ⁸⁸ Of these 131 Quaker merchants, 56 (42.7 per cent) appeared in PMM arbitration cases up to 1740. They acted either as defendants, plaintiffs, attorneys or were the deceased, whose estates their survivors negotiated.

Second, a PMM ledger containing copies of 482 marriage certificates for the period 1672–1759 survives.Footnote ⁸⁹ The certificates frequently include husbands’ occupations, thus allowing the identification of arbitration parties’ occupations. Comparing the names appearing in the arbitration cases to these two sources allowed the identification of 19.6 per cent as merchants. The disproportionate importance of merchants among the conflict parties becomes even clearer when calculated for a single year. In 1690, roughly 330 adult male Friends lived in Philadelphia.Footnote ⁹⁰ Of these, ten (3 per cent) were merchants.Footnote ⁹¹ That year, PMM arbitrated nine disputes, involving 21 individuals. Of these, seven, or 33.3 per cent, were merchants.

Clearly, a significant number of Philadelphia Quaker merchants used PMM to solve disputes, and a disproportionate number of arbitration parties were active in trade. Merchants found PMM useful for enforcing contracts, suggesting that it supported trade expansion.

7. Why did the society of friends resolve disputes?

But why did PMM become involved in its members’ commercial conflicts? The reason was the colony's weak institutional environment. This becomes apparent when comparing the conflicts which PMM negotiated to those brought before the courts. Only one Philadelphia court ledger survives for the early colonial period. It contains Philadelphia county court's cases for the year 1695/1696. That year, the court sat four times each as a court of common pleas and quarter sessions. The court of common pleas that year held equity powers.

The 1695/1696 Philadelphia court ledger was used to compare the types of cases the court decided to those brought before PMM. PMM arbitrated too few cases in 1695/1696 to allow a meaningful comparison. Therefore, PMM cases from the entire period under investigation were used. These included a total of 159 cases. Of these, 92 concerned debt, 33 estates, 12 land disputes, 3 defamation and 19 miscellaneous issues. The court ledger contains 35 cases and lists dispute causes. Comparing the two revealed that the types of cases the court dealt with were identical to those of PMM. In fact, the correlation coefficient, a statistical tool to measure degree of correlation between two sets of cases, is 1.0, indicating the highest possible correlation. Therefore, PMM offered not merely an alternative legal forum. By focusing on equity, it specialised in an area particularly under-served by the state. Moreover, the pattern of cases brought before PMM resembles that of contemporary courts elsewhere. Across the Delaware Valley in the period 1680–1710, disputes over debts and contracts constituted 82.3 per cent of identifiable issues.Footnote ⁹² In mid-seventeenth-century London, debt suits accounted for 88 per cent of the business of the court of common pleas, and 80 per cent of that of King's Bench.Footnote ⁹³ Craig Muldrew argued that these figures prove that the courts ‘played an important role in economic life’.Footnote ⁹⁴ Following this logic, the same must be claimed for PMM.

Did PMM arbitrate disputes in order to compensate for the unreliable courts? We can determine this by comparing monthly meeting practices in different locations. The ideal comparison for Philadelphia is London. London was the biggest port at the time and possessed a sophisticated court system. It was also home to the largest single community of Quakers, counting 5,000–8,000 Friends in the late seventeenth and early eighteenth century.Footnote ⁹⁵ Unlike Philadelphia Yearly Meeting, London Yearly Meeting at the time did not explicitly prohibit Friends from entering law-suits. It, however, repeatedly encouraged Friends to solve disputes by arbitration and ‘avoid the scandal of going to law one with another’.Footnote ⁹⁶ London Friends were organised into six monthly meetings. For five of them, the complete minutes for the period 1682–1772 survive. Searching these records for arbitration cases for sample years of one in ten reveals that while they did occasionally dabble in arbitration, this was far less common than in Philadelphia. Consider the year 1700. While the London community at the time was at least five times the size of that of Philadelphia, PMM arbitrated nine disputes that year, the five London Monthly Meetings for which records survive, together only one.Footnote ⁹⁷ What is more, among the Philadelphia minutes of 1690, entries concerning arbitration make up 30 per cent of overall entries. In some months, arbitration constituted the only type of activity entered in the minutes aside from marriages.Footnote ⁹⁸ Finally, the London Monthly Meetings’ involvement in arbitration remained consistently low throughout the period, with three cases at most, in contrast to the high volatility PMM showed in its involvement in arbitration.Footnote ⁹⁹ Hence, arbitration was not inherently part of Quaker monthly meetings’ tasks. Instead, PMM must have adopted the practice for a reason.

If PMM arbitrated disputes because courts were not reliable, we would expect its involvement in arbitration to vary according to the political situation. Figure 1 shows that the distribution of cases is uneven. PMM's first years saw few cases. Their number increased rapidly towards the end of the seventeenth century. Declining briefly in the early 1700s, they rose again to peak in the 1710–1714 period. They then declined again and reached a nadir in the early 1730s. Rising again briefly during the 1740s, they consequently petered out.

Figure 1. Cases arbitrated by Philadelphia Monthly Meeting.

This trend roughly mirrors the development of political and legal stability in the colony. Within the first years after arrival, Friends learned that the courts were unreliable. Then political conflict began: the crown expropriated Penn, placing the colony under the jurisdiction of non-Quaker New York from 1692 to 1694. Simultaneously, the oath controversy, lasting from the 1690s to about 1720 impeded the courts’ functioning. Penn's 1708 bankruptcy and pending threat to sell the colony until 1718 gave Friends cause not to trust the authorities, including courts. In this context, it is also worth noting that Offutt found an increased frequency of civic contempt across the colony, ‘as courts struggled to maintain their authority’.Footnote ¹⁰⁰ Courts’ difficulties to enforce their verdicts gave Friends even more reason to turn to their monthly meeting, instead.

The literature agrees that courts improved significantly from 1720 onwards, as legal instability and political conflict subsided. Importantly, from 1720 to 1736, a court of equity was active in the colony. In this period, PMM's case load receded. This may reflect Friends’ growing trust in the courts. On the other hand, from the 1750s onwards, a major political crisis shook Pennsylvania. During the Seven Years' War, Pennsylvania Quakers quarrelled with the colony's proprietors over military spending. In consequence, Friends eventually withdrew from all public office, including the justice system.Footnote ¹⁰¹ If Friends’ use of PMM for dispute resolution merely mirrored the level of trust in, or access to courts, PMM's case load would have increased again in this period. Yet, it did not. While level of accessibility probably mattered, another factor must have been at play in determining PMM's involvement in dispute resolution. As the next section will show, this factor was PMM's ability to enforce its arbitration awards.

8. How Philadelphia Monthly Meeting harnessed reputation to enforce its verdicts

The final question regarding PMM's arbitration must address enforcement: For a legal institution to be effective, it requires reliable tools to enforce its verdicts. What instruments did PMM possess to ensure Friends honoured its decisions? Three forms of enforcement emerge from the sources.

First, ‘disownment’. This was a form of ostracism, which PMM sometimes applied to Friends who broke its rules or tarnished the Society's reputation. Carli Conklin and Peter Philips attributed much power to disownments, assuming it a harsh measure.Footnote ¹⁰² However, if we look at the practice of disownments, a different picture emerges: A disownment consisted of a declaration in front of the community explaining the person's crimes and that PMM no longer considered them a member. Disowned Friends were no longer allowed to preach or receive poor relief. They could however continue to attend meetings for worship, and later apply for re-admission. For pious Friends, membership in the Society was important, and many submitted ‘self-condemnations’ in which they admitted their guilt and apologised. The self-condemnation was publicly read at monthly meetings before the Friend was re-admitted. The nature of the ostracism, as well as reinstatements into membership, suggest that disownments derived at least part of their power from public shaming. The exposure a culprit's misconduct received through the publicity of a disownment caused reputational damage.Footnote ¹⁰³

PMM recorded hundreds of disownments for disciplinary digressions during the colonial period.Footnote ¹⁰⁴ In the context of arbitration, disownment appears 18 times.Footnote ¹⁰⁵ PMM actually ‘executed’ a disownment in eight of these instances.Footnote ¹⁰⁶ Twice the parties reached an agreement immediately after PMM threatened disownment.Footnote ¹⁰⁷ The remaining cases dragged on, some of them occasioning several threats of disownment before disappearing from the minutes.Footnote ¹⁰⁸

A second enforcement instrument was PMM's granting plaintiffs permission to approach the public courts. The minutes include 47 such instances. While the Discipline prohibited Friends from entering law-suits without permission, we know that Pennsylvania Quakers litigated regularly without facing repercussions from their monthly meetings.Footnote ¹⁰⁹ Yet, Friends sometimes approached PMM, explaining their grievance over another Friend's conduct and requesting ‘liberty to go to law’. If they did not have to fear repercussions for appealing to court of their own accord, why did they bother asking PMM's permission? Most likely, this served to threaten defendants.Footnote ¹¹⁰ By seeking PMM's permission to sue, plaintiffs communicated the seriousness of their intention, while still avoiding the disadvantages of a law suit. PMM met more regularly than the courts, shortening the waiting periods a person wanting to litigate would otherwise have to endure. Approaching PMM first might also save court fees, as the meeting's service was free. As Isaac Norris put it in a letter to a Friend in England, whose claims on an inheritance he was representing: ‘I had thoughts of entering an attachmt and recover it legally but that will be chargeable & therefore apply'd again to our meeting who have appointed Two Ffrds to assist me’.Footnote ¹¹¹ The 1,717 case of Mary Howard illustrates this further: In that instance, Richard Moore, as attorney to one Henry Childs of Maryland, issued a complaint with PMM against Mary Howard for refusing to settle a debt. PMM appointed two Friends to ‘endeavour to persuade her to pay the money’.Footnote ¹¹² The following month, ‘she appearing justly indebted to the said Childs, the same friends are continued, and desired to put her upon making pay to said Childs ( … ), or otherwise to let her know, that he or Richd. Moore on his behalf may take a legal course against her’.Footnote ¹¹³ Four weeks later the case was minuted as ‘ended’.Footnote ¹¹⁴ Apparently, the threat worked. There were also multiple cases which disappeared from the minutes without formal ending. In these instances, we do not know whether the dispute was settled as a consequence of PMM's threat, or whether Friends in fact continued their conflict in court. As Friends employed this method quite frequently, they appear to have thought it useful.

Friends used disownments and law-suits as threats. Both practices involved a high degree of publicity, they shone a light on the conflict parties and their behaviour. This indicates that reputation played an important role in PMM's resolution of disputes. Indeed, the importance of reputation in the early modern world cannot be overstated. Its role in long-distance trade has been discussed above. No less important, a person's reputation determined her or his standing in their local community, both socially and economically. With little currency in circulation, economic transactions, from intercontinental trade to buying bread at the local baker's, were based on credit.Footnote ¹¹⁵ Whether others would grant you credit or not depended on whether they trusted you to repay them. Their trust depended on a person's reputation. If someone's reputation was tarnished, others would refuse to deal with them.

The impact of spoken words is further reflected in the use and practice of law. American colonists turned to courts to salvage their reputations after having been slandered. Slander suits included instances of ‘charging the target with fraudulent or deceptive business practices’.Footnote ¹¹⁶ Mary Beth Norton found that ‘The two epithets most commonly employed by men against other men, “rogue” and “knave”, both implying a lack of trustworthiness’.Footnote ¹¹⁷ In early colonial Pennsylvania, accusations of commercial malfeasance were among the three most common causes of slander accusations.Footnote ¹¹⁸ The frequency of slander suits reflects the damage people feared loss of reputation would do to their social and economic lives.

Colonial courts, in turn, used the force of reputation to punish crimes.Footnote ¹¹⁹ In seventeenth-century Maryland, courts sentenced those convicted of slander to apologise publicly to the person s/he had slandered and explain that their accusations were false.Footnote ¹²⁰ Pennsylvania law ‘mandated that those found guilty of fraud ( … ) have their names published as frauds and that disorderly people be publicly termed “Breakers of the Peace”’.Footnote ¹²¹

A connection between reputation and arbitration has been suggested by Bruce Mann's 1984 study of dispute resolution in seventeenth-century Connecticut. He showed that formal dispute resolution mechanisms replaced informal arbitration as the local population's size and composition changed.Footnote ¹²² His illuminating research predates more recent work on private order institutions for contract enforcement, and a possible role of reputation mechanisms for the enforcement of arbitration awards remains unexplored. When disputes were arbitrated in early modern Scotland and England, Margo Todd argued more recently, publicity provided by ‘large numbers of witnesses’ ensured that ‘the settlement would be kept, since violating an agreement witnessed by the whole neighbourhood would bring charges of duplicity and undermine reputation’.Footnote ¹²³

It is here that the key to PMM's success as a legal forum lies: Its most powerful tool was the ability to tarnish a malfeasant Friend's reputation. In order to enforce its arbitration awards, PMM deliberately employed reputation mechanisms, in a fashion similar to that of American courts. According to Marc Galanter, the ability to provide stigma is among courts’ most powerful instruments, and courts’ impact on disputes derives largely from their ability to disseminate information.Footnote ¹²⁴ Thanks to the Atlantic-wide scope of the Society of Friends’ formal organisation, PMM could disseminate information further, making its arbitration particularly useful to long-distance merchants.

PMM developed means to gather, verify and disseminate information about individual Friends’ conduct. First, it appointed and monitored arbitrators. These investigated disputes and reported back to PMM regularly. Through these investigations PMM ensured that the information it obtained was accurate. Next, PMM diffused this information locally and internationally. It discussed cases at its monthly gatherings, which were open to the public. As mentioned above, merchants tried to avoid taking disputes to courts because they feared the damage to reputation this could cause.Footnote ¹²⁵ PMM made use of this fear. Discussing a dispute at PMM increased its visibility in the community, as well as the (mis-)conduct of the dispute parties. It thereby exerted pressure on the defendants.

PMM, furthermore, transmitted information through the Society of Friends’ Atlantic-wide organisation of meetings. According to its minutes, PMM corresponded formally with other monthly meetings in America and Europe in order to solve conflicts. In 1690, PMM contacted the Monthly Meeting of Hartshaw, Lancashire, regarding the payment of maintenance by some Lancashire Friends to Thomas Hodge in Philadelphia. They asked Hartshaw Friends

Alternatively, if there was a conflict between a Philadelphia Friend and a Friend belonging to another monthly meeting not too far away, representatives of both meetings would meet to settle the dispute. In 1696, PMM noted:

Those corresponding monthly meetings would then discuss the conflicts as well, increasing the circle of those who learned PMM's verified information.

Furthermore, many of PMM's officers were merchants. A list of names of those acting as officers in arbitration cases for one year in every ten includes 70 individuals. The sources discussed above allowed for the identification of 39 of these, 55.7 per cent, as merchants. They maintained business correspondence with agents across the Americas and Europe. While their surviving correspondence contains no evidence of their passing on information gleaned specifically from PMM arbitrations, they do share information about each other's conduct of business and character regularly with their correspondents.Footnote ¹²⁸ Jonathan Dickinson, for instance, appeared as an arbitrator in 1698.Footnote ¹²⁹ His letters include addressees in London and Jamaica.Footnote ¹³⁰ Officer Samuel Carpenter traded with Barbados, Samuel Richardson with Boston and New York.Footnote ¹³¹ It is unlikely that these merchants, concerned with sharing important information with their correspondents, would have omitted intelligence gleaned from arbitration procedures.

Through its investigations PMM ensured that the information it obtained was more reliable than rumours circling informally. Through the public discussion of this information at monthly meetings in Philadelphia and elsewhere, and its ‘leaking’ by officers, the Society of Friends reinforced reputation mechanisms.

PMM, moreover, showed concern over the reputational damage its procedures might cause. In 1687, John Ithell accused merchant Robert Turner of malfeasance. PMM thereupon ‘appointed some friends to hear the matter in difference between them’. These Friends reported back that, according to the best of their judgement, the said John Ithell had ‘wrongfully charged him the said Robert Turner’.Footnote ¹³² PMM ordered further investigations, and two months later, it directed several Friends to ‘draw up a certificate ( … ) to be sent to England & Ireland for the clearing him (Robert Turner) of those scandalous reports that hath been spread concerning him in those parts to his defamation’.Footnote ¹³³

A comparison of the development of arbitration cases with Philadelphia's population reveals more evidence. As discussed above, there is a certain correlation between the numbers of cases PMM arbitrated, and political crises in the colony. Figures 2 and 3 demonstrate a stronger, negative correlation between three factors: PMM's case load and case outcomes, on the one hand, and Philadelphia's demographic development, on the other.

Figure 2. Completed arbitration cases. Sources: Haverford Special Collections, Philadelphia Monthly Meeting minutes and Billy G. Smith, ‘Death and life in a colonial immigrant city: a demographic analysis of Philadelphia’, The Journal of Economic History 37, 4 (1977), 863–89.

Figure 3. Meeting arbitration cases and Philadelphia population. Sources: Haverford Special Collections, Philadelphia Monthly Meeting minutes and Billy G. Smith, ‘Death and life in a colonial immigrant city: a demographic analysis of Philadelphia’, The Journal of Economic History 37, 4 (1977), 863–89.

From the late 1710s onwards, PMM's case load decreased dramatically. Moreover, cases’ outcomes changed. Overall, 48 per cent of cases disappeared from the minutes without a formal ending, that is, the minutes do not mention them for 12 consecutive months. This number closely resembles that for Delaware Valley courts.Footnote ¹³⁴ Figure 2 shows that the formally ended cases were distributed unevenly. Constituting roughly 50 per cent until about 1720, their proportion increased rapidly thereafter.

The decline in PMM's case load and the number of cases without formal ending coincided with the exponential increase in migration to Philadelphia. Local Quaker merchant James Logan in 1717 described this development as follows:

The changes in PMM's handling of cases were not due to its limited capacity. It expanded its work dramatically during this period. This is evidenced by the number of pages of minutes for each session. While the Philadelphia Quaker population roughly doubled between 1690 and 1760, the length of PMM's minutes increased about 26-fold.Footnote ¹³⁶ This demonstrates an intense increase in PMM's effort of administration per capita. However, it chose not to use this extra capacity for conflict arbitration, instead focusing on other matters.

The new immigrants differed from their predecessors. First of all, they were not Quakers.Footnote ¹³⁷ Ergo, they would not participate in monthly meetings and witness arbitration proceedings there. They were also less likely to learn of information discussed in Quaker meetings from other Quakers. Additionally, many of them were German and spoke no English.Footnote ¹³⁸ As Jack Marietta and G.S. Rowe put it, the new arrivals’ ethnic and linguistic diversity ‘diluted the homegeneity of the province’.Footnote ¹³⁹ Population growth, combined with the change in religious and linguistic composition, must have posed a barrier to the flow of information. Thereby it lowered the possible impact of reputation mechanisms. Social pressure exerted through everyone in town learning about alledged misconduct would have diminished significantly. The degree of public shaming for malpractice diminished, and thereby the reputation mechanism's power to pressure conflict parties into giving in and finding informal solutions. Consequently, PMM's power to enforce contracts faded. Friends noticed this and began searching for alternative forms of contract enforcement. As discussed above, Pennsylvania's courts improved from about 1720 onwards, as political and legal stability finally arrived in the colony. Likely, Friends now turned to the courts to solve disputes between them.