The Rise and Fall of the Nexus of Contracts: The Venetian Commenda and the Origins of the Corporation

I. Introduction

Modern corporate theory often treats organizational forms as the cumulative product of private ordering. Parties bargain over risk, control, and returns, and the law largely supplies off-the-rack defaults that reduce drafting costs while tracking what rational actors would have bargained for. This Comment tests that claim against a premodern yet commercial setting, the medieval Venetian commenda, where sophisticated investors and traveling managers repeatedly structured ventures to allocate upside, limit downside exposure, and police agency costs through contract. The commenda looks, in many respects, like a “nexus of contracts.”  It standardized governance terms in response to recurring tradeoffs, relied on predictable enforcement mechanisms, and depended on legal infrastructure that made those bargains credible at scale. But the same episode also supplies the critical stress test for contractarian confidence: Venice’s post-Serrata political settlement altered the institutional environment in ways that private parties could not replicate or contract around. By tracing both the commenda’s contractual logic and the political transformation that helped unravel it, this Comment argues that private bargaining can explain the formation of the commenda’s internal architecture, but not its continued function, because of the state’s willingness to sustain or retract the underlying concession.

A. Agency, Partnership, or Corporation

This Comment treats the commenda as a pseudo-corporation, though it engaged with questions of agency, partnership, and the corporation. To understand each, the issues the form seeks to solve and how each relationship forms must be elucidated.

Agency doctrine provides the legal infrastructure that enables private actors to transact and operate through human intermediaries while allocating the resulting contract, tort, and fiduciary-misconduct risks. At bottom, agency is “the fiduciary relationship” created when one person manifests that another “shall act on his behalf and subject to his control, and consent by the other so to act,” even if the parties never sign a contract or use agency labels.1 In that sense, agency resolves (i) when an intermediary can bind someone else in contract, capturing implied authority to do what is “practically necessary to carry out” the assigned job,2 as well as liability for “acts . . . within the authority usually confided to an agent of that character” even when the principal is undisclosed;3 (ii) when control triggers vicarious liability, since “[n]o particular mode of creating an agency is required and it may be done in a very informal manner,”4 and a creditor crosses the line into principalship once it “assumes de facto control over the conduct of his debtor;”5 and (iii) how enterprise risk and loyalty police the relationship, because respondeat superior reaches “risks . . . which arise ‘out of and in the course of [the employer’s] employment of labor.’”6 Put differently, these cases together show that agency forms by manifested assent to benefit the principal under their control, and it functions to make authority, risk, and loyalty legible to third parties and enforceable between principal and agent.

Partnership doctrine, in turn, supplies the default governance and liability rules for jointly owned, sometimes informally created business ventures, deciding who counts as a co-owner, who can bind the firm, how gains and losses are allocated, and what fiduciary standards constrain opportunism. A partnership is not manufactured by vocabulary alone, as sharing profits and labeling an arrangement a ‘partnership’ is not enough to conclusively form a partnership absent the hallmarks of co-ownership and shared control,7 and even aggressive lender protections do not convert debt into equity when the lenders do not, in substance, become partners.8 Once formed, partnership rules solve the outward-facing authority problem by treating each partner as a general agent for ordinary-course transactions, as “[e]very partner is an agent of the partnership,”9 and they solve the inward-facing opportunism problem through stringent fiduciary duties. “A trustee is held to something stricter than the morals of the market place,” and partners must meet “the punctilio of an honor the most sensitive” when partnership opportunities arise.10 That duty framework constrains exit as well as entry, because departing partners may not secretly compete by withholding material information, as partners must deal with “the utmost good faith and loyalty.”11 Finally, partnership also addresses the issue of loss-allocation, supplying default rules.12 In short, these cases show that partnerships arise from functional co-ownership and shared management, not labels or covenants, and partnership law then supplies a package of authority, fiduciary, and accounting rules that makes the venture governable both against third parties and among the partners themselves.

The corporation deals with the same and similar issues to agency and partnership, as it attempts to structure human behavior. Corporations do not arise accidentally, as in the United States, they are formed by filing paperwork. They can live in perpetuity, and they act as their own legal person. Yet exactly what the corporation’s structure reflects is a matter of debate.

II. Dueling Theories of the Corporation

The two views of the corporation contemplated in this comment are the “nexus of contracts” or “contractarian” view and the “concessionary” view. Though put forward and discussed by many, the primary articulation used for each view will be the contractarian view of Easterbrook and Fischel, and the concessionary view of Padfield.

A. The Nexus of Contracts

Easterbrook and Fischel argue that the corporation is best understood as a “nexus of contracts” among managers, shareholders, and other participants, and that corporate law’s proper role is supplying a legal framework and defaults that facilitate private ordering rather than imposing mandatory governance designs. On their account, the corporation is an institutionalized pattern of explicit and implicit agreements, so regulation should generally provide a flexible architecture of default terms that parties can vary, and mandatory rules are suspect because they disrupt market-driven selection among governance arrangements. In this way, corporate law both mirrors and facilitates private bargaining with courts and legislatures selecting defaults by looking to the governance deals that market participants actually strike. The theory’s influence is substantial and enduring, shaping both academic debates and the continued emphasis in corporate law on broad private choice in internal governance. The contractarian view frames corporate law as the legal infrastructure that makes firm-specific contracting possible, scalable, and enforceable.

Easterbrook and Fischel present a view of the corporation as emergent from private contracts that govern the relationship between managers, shareholders, and the firm, and they argue this view best explains those relationships and the role of regulators.13 On their account, the public corporation is not most usefully treated as a freestanding ‘thing’ that managers control by virtue of office, but instead as an institutionalized pattern of agreements and understandings among heterogeneous participants, so that, in their canonical formulation, “[t]he corporation is a complex set of explicit and implicit contracts,” with corporate law’s central task being to supply a legal architecture within which those contracts can be specified, revised, and enforced.14 The “nexus of contracts” label is therefore not a metaphysical claim about corporate personhood; it is, as they put it, “just a shorthand for the complex arrangements of many sorts that those who associate voluntarily in the corporation will work out among themselves.”15 This perspective foregrounds variation rather than a single ‘right’ governance design, because “[j]ust as there is no right amount of paint in a car, there is no right relation among managers, investors, and other corporate participants. The relation must be worked out one firm at a time.”16 It yields a correspondingly modest, structural conception of regulation: because the corporation’s internal relationships are constituted through (often incomplete and evolving) contractual allocations of authority, risk, and monitoring, the most coherent account of corporate law is not that it continuously directs firms toward a regulator-chosen governance optimum, but that it supplies a generally enabling menu of default rules by “adopt[ing] a background term that prevails unless varied by contract” while leaving room for firm-specific ordering.17 Even the threshold decision to incorporate is framed as a domain of institutional choice,18 underscoring that the firm is assembled through legal and contractual selection rather than imposed by a government. Such government prescriptions are suspect under this view, as “mandatory terms prescribed by law halt the process of natural selection and evaluation.”19 This view of the corporation emphasizes its flexibility as well as the contracts and contracting principles that give rise to the corporation itself.

For Easterbrook, the corporation’s basic architecture and most of corporate law is best understood as the product of private ordering against a largely enabling statutory backdrop. Because “the corporate code in almost every state is an ‘enabling’ statute,” it “allows managers and investors to write their own tickets,” selecting governance arrangements, capital structure, voting rights, board composition, internal organization, and even the jurisdiction of incorporation with no “substantive scrutiny from a regulator” and only limited mandatory constraints.20

In their account, the firm’s constitutive documents are themselves “real agreements,” including the meta-rule that the articles may “allow changes to be made by bylaw or majority vote;” or instead require supermajorities, lock in terms, or mandate buyouts, such that the amendment mechanism is part of the initial bargain rather than a departure from it.21 Beyond expressly drafted provisions, they treat a large share of corporate governance as contractual because corporate law supplies “presets of fall-back [sic] terms specified by law and not varied by the corporation,” which “become part of the set of contracts” unless displaced.22 Because many governance terms are not individually bargained for by dispersed investors, the relevant “bargaining” is often mediated or standardized through representatives like indenture trustees, unions, and investment banks, or even through ‘take it or leave it’ charters whose costs and benefits are still “reflected in price” so that market pricing operates as the functional analogue of individualized negotiation at the point capital is raised.23

On this view, corporate default rules exist largely to economize on transaction costs. Corporate law is “a set of terms available off-the-rack” that codes and cases provide “for free,” enabling parties to avoid reinventing common provisions while concentrating on firm-specific terms.24 Since parties cannot foresee everything and will inevitably “miss something,” so “the fiduciary principle enforced by courts” operates as a generalized default that “fills in the blanks and oversights with the terms that people would have bargained for had they anticipated the problems and been able to transact costlessly in advance.”25 That doctrine is framed as a supplement to, rather than a displacement of, the parties’ own arrangements. Finally, because courts and legislatures need a basis for selecting those gap-filling defaults, Easterbrook and Fischel emphasize that “the deals people actually strike when they bargain over the subject” act as a “ready source of guidance” for “filling in blanks (or establishing background terms).”26 Corporate law, in this view, allows for, catalyzes, and supplements private bargaining.

This view has been widely influential. Some scholars very explicitly and rather quickly built off of Easterbrook and Fischel’s view.27 Others still found value in the theory later on.28 Not merely far-reaching in time, “[l]ed largely by the work of Frank Easterbrook and Daniel Fischel in the 1980s, a ‘contractarian’ theory of corporate governance and corporate law dominated thinking among US corporate law scholars for many years.”29 Their paper was “well-known” and “put forward an influential statement of a contractarian view of corporate law.”30 Beyond academia, “[p]erhaps due to the contractarian theory’s influence, corporate statutes—particularly Delaware statutes” allowed corporations “almost complete discretion with respect to the bylaws contents” in accordance with Easterbrook and Fischel’s theory.31 Suffice it to say, the contractarian view of the corporation has been significant since its formulation.

B. The Concessionary Model

A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created . . . The objects for which a corporation is created are universally such as the government wishes to promote. They are deemed beneficial to the country; and this benefit constitutes the consideration, and in most cases, the sole consideration of the grant.32

The concessionary model of the corporation appears in scholarship as a prime alternative to the contractarian view.33 While Padfield is a repeat scholar on the subject, he is far from the only commentator.34 This opposing view of the corporation as, at its base, a concession from the government, appears as a lens in scholarship.

The concessionary view treats the corporation not as a naturally emergent private arrangement, but as a juridical franchise and “artificial being” that exists only because the sovereign affirmatively constitutes it and confers the attributes that make large-scale capital aggregation and coordinated enterprise feasible.35 On this account, incorporation historically required a special legislative act and was therefore “a privilege or concession awarded by the state,”36 often paired with franchise or monopoly rights and justified by a public or quasi-public purpose, which made it intuitive to say the corporation “possesses only those properties which the charter of its creation confers.”37 Concession theory therefore frames corporate ‘rights’ as conditional and bounded by the terms, and implicit public-regarding consideration, of the state’s grant, such that regulatory constraints are not exogenous interferences with private bargains but internal limitations of the corporate franchise itself. Modern general incorporation statutes may have lowered the administrative gatekeeping, but the concessionary lens insists the state remains constitutive. Even today, the separate legal personality, continuity, and liability partitioning that define “the corporation” are statutory creations rather than privately manufacturable facts.38 Contemporary scholarship leverages this framing as a systematic alternative to contractarianism and a live explanatory and normative resource for debates about the scope of corporate rights and the legitimacy of corporate regulation.39 It is with this opposing scholarly lens that attention can turn to medieval Venice.

III. The Venetian Commenda

A. The Venetian World

Over its 118 tiny islands, Venice grew from a corner of the Adriatic into a major maritime and trading power during the Middle Ages.40 Founded in the 5th century A.D. by populations fleeing instability and raids on the Italian peninsula, Venice’s marshy islands offered refuge for peasants and fishermen.41 To form usable land, settlers drove wooden piles into the lagoon, made of oak, alder, pine, spruce, and elm trees.42 With 14,000 such poles holding up the Rialto Bridge alone, the process of reclaiming land proved laborious.43 While some bacteria damage the wood, the anaerobic environment largely prevents fungi and insects from degrading the wood, making the structures’ millennial longevity possible.44 The requisite wood reserves were vital for the continued development of the city, and Venetians managed forests on the mainland from at least 1111 A.D.45 This reserve of wood and knowledge of sylviculture proved valuable for constructing the wooden fleets which carried the Venetians far and wide throughout the Mediterranean world. This contrasts with other medieval and early modern thalassocratic regimes, as deforestation led to wood shortages in England from the 1500s on.46 It is from this quiet corner of a lagoon that Venetian people were able to dramatically expand. With that, Venice became not merely a hub of trade, but an innovator in and controller thereof.

The lifeblood of Venice was trade. With few natural resources and little land, Venetians turned outward to take advantage of their strategic location. Trade and merchants were significant in Venetian culture and held positions of power as they liaised with richer states. The Islamic world was rich in spices, silks, and ideas, and the Venetians positioned themselves as the intermediary between Europe and Muslim North Africa and the eastern Mediterranean.47 Trading primarily with Ottoman Turkey and Mamluk Egypt, mutual gains from trade led to profits and development in Venice. From this trade, business developments arose. “Venetian business history has long been integral to the study of the origins of capitalism [and] the development of credit and finance.”48 Some Venetian innovations are still with us today, for example, bookkeeping alla veneziana, or “the Venetian method” of bookkeeping, which saw creditors recorded in the right-hand column, and debtors in the left-hand column of the ledger.49 This “double-entry bookkeeping,” as it is known today, is still foundational.50 While Florentine and even Cairo-based Jewish bankers contributed the double-entry bookkeeping in Venice, it is most associated with Venice. Nor is it the only innovation, as the “Rule of 72” helped Venetians predict future values of investments before the discovery of the logarithm.51 This intellectual environment with a focus on the practicalities of trade and accounting reinforces the view of Venetian trade’s prioritization.

Venetian political institutions were intricate. The head of state and chief magistrate was the Doge, whose election process is an indicium of the complexity of the Venetian system.

On the morning after a Doge’s death the members of the Maggior Consiglio, the council representing the freemen of the city, convened to first select by lot 30 of its members older than 30 years, who were designated as electors . . . Those 30 were reduced to 9 by lot. The 9 then designated a group of 40, each of whom needed 7 approval votes out of the 9 members of the committee. Back in the hall, with the entire Maggior Consiglio present, these 40 would be reduced by lot to 12. As before, the 12 would nominate 25 names, subject to approval by 9 members of the committee. In the hall, these 25 would be reduced to 9. In turn, the 9 nominated 5 names each, commanding the support of at least 7 members of the group. Those 45 would be reduced by lot to 11, and then nominate the 41 true electors of the Doge. Only then would the real election begin.52">https://www.cato.org/commentary/mechanism-design-venetian-republic. 

The procedure for those quarantuno to elect the Doge, and how it changed over time, would belabor the point. The mechanics of this procedure are less important than the observation that Venice’s political institutions had complex and well-developed practices. While the process for electing the Doge seems near-impenetrable on first read, “[t]he complex voting and randomization procedure was connected to a broader set of rules curbing electoral patronage, corruption, and factions.”53 Supermajoritarian requirements, elements of randomness, and approval voting encouraged sincere rather than strategic voting.54 The Venetian Republic, like the Roman Republic before it55 and the American after it, utilized procedure to check the abuses and degradation of the political system.

The Maggior Consiglio itself was the highest authority in the Venetian Republic; it was the electorate, and it was not itself elected.56 Established in 1172, it succeeded the Concione or Concio, which was the earliest popular assembly in Venice.57 It contrasts with the Minor Consiglio, which was elected and primarily counseled and assisted the Doge, while also restraining him from unilateral action.58 Made up of over two thousand members, the Maggior Consiglio’s primary purpose was to elect the Doge.59 Secondarily, the state sometimes sold seats in the Maggior Consiglio less to update the voting roles and more to raise revenue when needed, while poorer families sold their seats on a form of secondary market.60 The Maggior Consiglio was the source of authority in Venice, and its composition both reflected the fortunes of Venetians and shaped the direction for the Doge.

B. Sedentary and Traveling Partners

The relationship between the sedentary and traveling partners was at the heart of the commenda. Harris describes the commenda in its basic form as “a bilateral contract” between an investing, sedentary party, sometimes called the commendator or stans, and a traveling party, sometimes called the tractor, which simultaneously allocated capital provision, labor, agency, risk, control, and profit.61 The sedentary partner “invested only capital,” used to purchase trade goods and cover travel costs, sometimes contributing goods in kind, while the traveling partner often did not invest capital but instead “invested his labor,” including “expertise, information, contacts and bodily risk.”62 Because the traveling partner operated “geographically separated” from the investor, the contract’s agency element centered on how much discretion the traveler received, as though an investor could theoretically impose highly specific instructions that would reduce the traveling partner to a “mere employee,” Harris emphasizes that the more common arrangement granted the traveling partner broad discretion “to make the maximum profit,” with limited carveouts, effectively making him “the de-facto managing party” in control of the commenda’s assets and trade decisions.63 Risk and liability followed this division of roles: the traveling party “did not assume responsibility for capital invested” and thus did not have to return capital lost to trade or travel hazards, leaving the investing party as a “residual claimant” who bore the downside of an equity-like investment, while the traveler remained accountable to the investor chiefly for breaching the mandate or merchant customs and, conversely, “would bear sole liability toward third parties” contracting with him abroad.64 The upside was likewise split to reflect the complementarity of sedentary finance and traveling management: “a common arrangement was 75% to the investing partner and 25% to the traveling partner,” though Harris notes other splits, including 50/50, depending on place, period, and trade route.65

From this partnership core, the commenda allowed for other contracts to be organized around it. “The bilateral commenda could appear as part of a complex multilateral system.”66 As he could contract with and be liable to third parties, “[t]he traveling party could, if not prohibited, create a second commenda in which he placed all or part of the goods in the hands of a third person who traveled to a more distant market. The traveling party of the first commenda became the investing party of the second.”67 “Another variation was that the subject matter of the commenda could be not only distinct goods but also a share in a pool of goods or in a ship . . . For example, a single traveling party could pool together goods from numerous investing parties into a commenda.”68 The historical practice of combining and building off of the commenda base elucidates that “[t]he single commenda contract was not only a nexus of several contracts, it was itself part of a complex web of contracts.”69 “To sum up, the commenda was a complex institution. In modern terms, we can call it a nexus of contracts.”70

C. Governance Arising from Bargaining

Commenda governance was a product of private ordering in which parties either opted for a familiar transaction template or bargained specifically for operative control terms. The sedentary partner demanded a return on the capital tied up in the endeavor and for bearing the substantial downside risk of vulnerable ships in far-flung parts of the Mediterranean world. Yet the traveling partner required a return as compensation for the long and hazardous journeys that came with risk to his person rather than wealth. The result was an implicit menu of standard profit-splitting arrangements that could be adjusted on the margins but that largely supplied default terms from the experience of past contracts. “In most jurisdictions, the [profit] split was a contractual matter, sometimes a default rule or a custom, but was not forced upon the parties as a mandatory rule.”71 Furthermore, repeated commercial practice generated modular variants that operated as governance choices, e.g., the “traveling party also invested money,” changing the “splitting of profits;” he could “if not prohibited, create a second commenda;” the subject matter could include “a share in a pool of goods or in a ship;” a traveler could “pool together goods from numerous investing parties;” and an investor could “split his investment among several traveling parties,” illustrating how commenda governance terms accreted as an experienced menu of bargained-for options rather than as an imposed corporate statute or board-centered regime.72

IV. Lacking Corporate Personhood

The commenda differed from the modern corporation because it lacked juridical personhood and perpetual life. It was a bilateral, voyage-specific contract rather than a separate legal entity with enduring capacity to own property and contract in its own name. Yet it confronted corporate-law problems through private ordering, allocating residual risk and returns, and managing acute agency costs created by distance and information asymmetry through ex ante mandate restrictions and bonding via liability for deviations from custom. Precisely because the commenda was finite and non-personal, Venice’s state institutions supplied the enforcement and information infrastructure, such as monitoring, notarial documentation, and trade-linked rents that discouraged exit, exactly what was needed to make long-distance, contingent risk-sharing credible. While the commenda did create a separate venture asset pool, its entity and management shielding was deliberately asymmetric: venture and traveling-party creditors could reach both the venture pool and the traveling merchant personally. While the traveling merchant’s personal creditors could penetrate the venture pool, the investing party was effectively insulated so the partial shielding that emerged reflected business necessity and bespoke bargaining rather than the modern corporation’s robust, symmetric shields.

A. Personhood & Longevity

Two of the most distinctive differences between the commenda and the modern corporation are the commenda’s lack of personhood and longevity. Because the commenda was “a bilateral contract, involving only two parties” at its core rather than an organization endowed with juridical personality, it lacked the core corporate attribute of being “a separate legal entity . . . with the capacity to own property separate from that of its individual members [and] to contract with third parties.”73 Commenda contracting was also typically tied to a discrete venture, and archival deposits are organized around contracts referring to a single voyage with one merchant simultaneously party to numerous commenda for that same sailing.74 This arrangement lacked the corporation’s longevity and going-concern orientation, functioning instead as a deal that begins with capital committed to a trip and ends with the voyage’s close-out.

Yet the commenda’s internal allocation of risk, return, and control tracks problems that sit at the center of modern corporate law: the investing party supplied capital on an equity-like basis and bore downside as the residual claimant, while the traveling party supplied labor, expertise, and effort for a contingent slice of the upside, an allocation that squarely raises residual-claimancy and incentive-alignment questions. At the same time, the traveling merchant operated at a distance, “not work[ing] under direct instructions and supervision” but having “room for decision-making” which raised classic agency questions under conditions of severe informational asymmetry.75 This underlies some scholars’ view of the commenda as an agency contract rather than investment contract.76 Finally, the contract’s governance technology is recognizably corporate in functional terms, as the investor relied on ex ante “restrictions of the mandate,” while the traveling party’s exposure for breaching the mandate or deviating from “common merchant customs and practices” served as a form of bonding that substituted for fiduciary-style oversight.77 In this way, the commenda could replicate core corporate-law concerns through private ordering even while remaining a non-person, non-perpetual deal form.

Yet the state also played a critical role in enforcing a commenda and propping up the system of trade. De Lara helps explain how the commenda system could sustain credible long-distance, equity-like risk sharing even though the commenda was not a juridical “person” and typically wound up at the end of a voyage.78 In late medieval Venice, contract enforcement relied on “the authority of the state” as a third-party enforcer “with more than just coercive power,” and the state’s comparative advantage lay as much in information production and verification as in formal adjudication.79 To keep itinerant merchants from simply absconding once the venture ended (a problem sharpened by the commenda’s finite horizon and the absence of an enduring entity to streamline repetition and “hold” reputational capital), Venice created institutional “incentives to submit” to state authority by tying participation in overseas trade to durable, Venice-specific rents, including commercial privileges, protections, and access conditions that rewarded continued affiliation and created “effective barriers to exit.”80 At the same time, the state made “trading a public affair” by generating “verifiable information” needed to adjudicate disputes and discipline opportunism.81 “State delegates abroad, scribes en route, and public mediators in Venice carefully monitored commercial ventures in each and all of their phases,” thereby enhancing the state’s ability to verify conduct and returns and enabling enforcement of “contingent contracts . . . such as the commenda.”82

Where corporate personhood and perpetual existence would later help address endgame and information problems by stabilizing governance and recordkeeping within the firm, Venice substituted a public verification and enforcement infrastructure of court monitoring and notarial documentation so that even a short-lived, non-corporate deal form could be credibly policed ex post.

B. Entity & Management Shielding

The commenda shielded assets of the venture or the partners asymmetrically. While the commenda created “a new pool of assets, separate from that of either party,” with limited and one-sided entity shielding, the commenda pool was “reachable to creditors of the commenda and to creditors of the traveling party,” and the traveling party’s private assets were likewise exposed, but “the investing party’s private pool of assets was not.”83 A creditor of the venture could proceed against the commenda assets and also against the traveling party personally, while a creditor of the traveling party could penetrate the venture’s asset pool, undermining the strength of the entity shielding characteristic of the corporation. Yet the investing party’s personal creditors could not reach the venture’s assets. In short, the commenda had “asymmetric owners’ shielding and an asymmetric entity shielding.”84

The commenda’s liability architecture only vaguely approximated entity- and management-shielding in deliberately asymmetric ways for the functioning of the business. On one side, “the traveling party would bear sole liability toward third parties” for the ordinary debts of the voyage, such as borrowing, buying on credit, and delivery and quality commitments.85 On the other side, the investing party was effectively insulated because counterparties “would not know the identity of the investing party and thus would not be able to sue him.”86 This ties into the pattern of the traveling party’s agency status being “only for some purposes and not for others.”87 Functionally, this arrangement fits the practical reality of business, as traveling merchants need to be able to enter enforceable arrangements to help them on their journeys. Similarly, sedentary partners could invest more confidently knowing they had a kind of shielding as the capital provider, since venture creditors could reach, at most, the capital committed to the trip. For the traveling merchant, who remained personally exposed and who was the quotidian decision-maker, the commenda was the opposite of the ‘management shielding’ associated with the modern corporate form. This fit the practical reality that “[t]he agency contract element of the commenda was not a standard form contract. It was drafted differently by different parties for different ventures.”88 With different degrees of micromanagement and delegation of authority depending on the specific parties, the trends in practice arose from what partners were willing to bargain for. While the commenda lacked modern robust entity and management shielding, the partial shielding that arose fit the demands of the business.

V. The Death of the Commenda

In the early fourteenth century, the ruling Maggior Consiglio restricted the use of commenda contracts. The commenda system was ultimately beholden to the Venetian state, which in turn was vulnerable to a political disturbance against which a mere nexus of contracts was ill-equipped to resist. In other words, without the concession of the Venetian state, the commenda system ceased to function.

A. Historical Developments

The Serrata led to a narrower ruling class and consequent governance structure that enabled its beneficiaries to entrench economic advantage through law. The Venetian Serrata, a drawn-out constitutional “closing” of the Maggior Consiglio that unfolded through enactments between 1297 and 1323, transformed Venice’s governing assembly from a body marked by meaningful entry and exit into a legally entrenched patriciate, reallocating political control to “a tightly knit cabal of the richest families.”89 On February 28, 1297, a decisive measure shifted effective control over Maggior Consiglio elections to the Council of Forty and created a two-track membership regime: recent insiders were functionally re-confirmed (subject to a modest approval threshold), while outsiders faced escalating procedural barriers, which were then ratcheted tighter by follow-on measures in 1298, 1300, and 1307.90 Venice then constitutionalized status: by 1310, the concept of nobility was defined in terms of actual or potential Maggior Consiglio eligibility; in 1319, admission was narrowed to those who could establish a paternal ancestor’s prior seat; and by 1323, membership was “unequivocally” hereditary, converting officeholding capacity into an inheritable legal attribute.91 These political shifts allowed the entrenched nobility to weaponize corporate law to further secure their economic position, and the Serrata heralded the beginning of a phase in which political closure was systematically translated into economic exclusion.

The post-Serrata Venetian state restricted the use of the commenda until it faded away. By converting Maggior Consiglio participation into a hereditary status and then leveraging that political closure to “restrict participation in long-distance trade,” the Serrata turned what had been a comparatively open, mobility-generating risk-sharing contract into an increasingly oligarchic tool of patrician commerce.92 “The commenda benefited new merchants, and now the established elite was trying to exclude them.”93

In the notarial record the shift is stark. In 1324, one year after the completion of the Serrata, a new law, the Capitulare Navigantium, entered force, and commoner participation in surviving commenda collapsed.94 Commoners appear in 27% of commenda in 1310–1323, but after 1324 there is only a single commenda with any commoner involvement.95 By 1310 the Serrata was already well on its way to excluding commoners, as over half of the commenda in 1221–1261 involved commoners.96 After the Serrata in general and the Capitulare Navigantium in particular, commenda use shifted “to more and more powerful families,” and then the contract itself began to recede as the state-sponsored galley system became the dominant and lucrative venue for long-distance trade, with access and control “restricted to nobles” and financing migrating toward within-family capital and marriage alliances rather than one-off commenda ventures.97 Other forms of Venetian notarial contracts did not follow that trend; only the commenda collapsed.98 The collapse of the commenda did not reflect a change in what was privately bargained for, but a deliberate reallocation of commercial opportunity through state-backed institutional design.

The commenda-style trade that continued saw a redrawing of the balance of partnership. 

From the thirteenth century on, the centralized model of trade came to dominate: the majority of business deals were thereafter struck in Venice and traveling merchants had relatively little scope for independent action. This eventual triumph of the ‘sedentary merchant’ was an outcome of the broader sociopolitical restructuring of Venetian society, and stemmed from a series of violent conflicts whose logic was at least as political as it was economic.99 

This outcome is to be expected with the falloff in non-noble merchants. Command and control from Venice itself secured the political and economic power of the ever-fewer elites, which broke the social as well as economic logic of the commenda. Venice would remain a republic but lacking the political and economic freedoms that had overseen the advent of its prosperity. While Venice would remain an independent republic for centuries, it was captured and dismantled by Napoleon Bonaparte in 1797.100 The Maggior Consiglio accepted the abdication of Doge Ludovico Manin and, in its last act, voted to dissolve itself.101 “Today the only economy Venice has left, apart from a bit of fishing, is tourism. Instead of pioneering trade routes and economic institutions, Venetians make pizza and ice cream and blow colored glass for hordes of foreigners . . . Venice went from economic powerhouse to museum.”102

B. The Concessionary Lens

Viewed through the concessionary lens supra, the post-Serrata experience reads less like the law updating defaults to mirror evolved private bargains and more like the sovereign narrowing and partially withdrawing the concession that had made the commenda scalable in the first place. On a concessionary account, durable organizational capacity is not just a contract among private parties; it was a legally constituted privilege to invoke institutional machinery on terms the polity was willing to honor. The commenda’s core virtues, including easily repeatable allocation of risk and control, credible discipline of the traveling agent, and predictable returns for sedentary capital, depended on that machinery being available to the relevant commercial public, not merely on the ingenuity of the parties’ drafting. After the Serrata, however, the state’s priorities shifted toward entrenchment and political closure, and the resulting legal environment cut directly against what commenda parties would have bargained for in an unconstrained market. Instead of supplying neutral, commerce-facilitating infrastructure that tracked transactional practice, the regime could recalibrate access, enforcement, and background rules to serve a narrower governing class. It is not that private ordering suddenly became irrational; it is that private ordering became insufficient. The post-Serrata trajectory thus marks a boundary condition for the nexus of contracts story, as even where a form’s internal terms plainly emerge from bargaining and commercial learning, the form’s continued viability still turned on an external political decision: whether the government will keep extending the concession that makes those bargains enforceable and widely usable at all.

VI. Analysis

What can the commenda elucidate about the corporation? First, the post-Serrata shift exemplifies how state structure informs the concessions the state is willing to grant. Second, that default terms within the concession largely mirror those bargained for in private business. Third, that the economic structure arising from the use of the entity can be self-undermining. The contractarian view of the commenda is empirically borne out only to the extent that its predictions fit within the state’s concession.

The first observation is that the state structure matters for what concession it is willing to grant to private forms of organization. Before the Serrata, the state’s structure was comparatively open and aligned with merchant and commercial expansion. The concession extended to the commenda reflected those priorities. In that period, the state supported a decentralized, contract-based venture form that allowed non-nobles to pool capital and labor, travel abroad with broad discretion for the merchant, and rely on public enforcement and verification to make equity-like risk sharing function. The concession was not formal incorporation, but it was nonetheless real, as access to courts, notarial infrastructure, information production, and trade privileges made the commenda viable. After the Serrata, Venice’s political structure hardened into a hereditary oligarchy whose dominant interest was preserving patrician control over trade rents. That shift produced a different concession. State capacity was redeployed to restrict access to long-distance trade, narrow who could use a commenda, and ultimately channel commerce into state-sponsored, noble-controlled galley systems. The commenda did not fail because its contractual logic ceased to function; the commenda did not fall out of favor in the market which state rules then reflected; it failed because the state, captured by a closed ruling class, withdrew the institutional support that had made that logic operative. The pre- and post-Serrata experiences, derived from the state’s political structure, determined whether the commenda would be permitted to work at all.

The second observation is that within the bounds of the state’s concession, Easterbrook’s expectation that default terms mirror those bargained for fits with the observed reality. The commenda’s internal terms tracked what repeat players actually bargained for, consistent with Easterbrook and Fischel’s account of default-rule formation. Across governance, profit allocation, risk bearing, and control, the commenda exhibits the kind of modular and experiential standardization that a contractarian would predict. Profit splits converged on familiar ratios while mandate restrictions varied with the parties’ tolerance for agency risk. The asymmetric entity and management shielding that emerged was a practical response to information asymmetry and third-party contracting needs. These features recured not because they were imposed by statute, but because they minimized transaction costs and agency problems in a setting of repeated voyages and known hazards and were therefore selected and reused. The commenda supports Easterbrook’s descriptive claim that default-like governance arrangements tend to mirror market bargains, but only insofar as the state continued to supply an enabling framework within which such bargains can be struck and reused. Easterbrook’s expectation for private bargaining to inform default rules squarely fits the Venetian experience as long as such bargaining was endorsed by the state.

A necessary caveat for that finding is concern about endogeneity. While Easterbrook was likely not thinking about medieval Venice, he was searching for a theory that explained the corporate reality of his era. The commenda system existed centuries before the modern corporate world of 1989, but even then, these early business arrangements were governed by terms that closely resembled those negotiated in competitive markets. The commenda was just one episode in the series that led to 1980s capitalism. Had it gone differently, chances are the theory to explain it would have developed differently too. A better test case for Easterbrook’s claims would be a pseudo-corporate form of business organization that arose after his theory. Such an example could not endogenously affect how the theory formed in the first place. Especially if the subsequent practice deviated from Easterbrook’s expectations, it would provide valuable insight into the limit of Easterbrook’s theory’s explanatory power. The concern for such a case study would be that Easterbrook’s widely read work would influence how courts interact with the emerging entity.103 Such influence would call into question courts both following Easterbrook’s predictions or consciously disregarding them. In any event, subsequent practice of emerging business organizations would offer a valuable yet different perspective on Easterbrook’s empirical claims.

Third, the economic structure arising from the use of a pseudo-corporate entity can be self-undermining. The commenda’s effectiveness at generating wealth, mobility, and commercial expertise altered the distribution of economic power in Venice in ways that eventually provoked a political response. By allowing non-nobles to utilize capital, reputational standing, and transregional connections, the commenda avoided the exclusivity of established patrician trading networks and threatened the rents associated with elite control of long-distance commerce. Over time, the profits generated by decentralized, contract-based trade translated into wealth concentrated in Venice. Once the ruling class consolidated political control, it could internalize the gains from trade while externalizing the risks of openness by restricting access to the commenda form and redirecting commerce into noble-controlled, state-sponsored channels. In this sense, the commenda did not merely depend on a state concession; it helped create the conditions under which that concession would be withdrawn. That the concessionary view had more explanatory power at the end of the lifecycle of the commenda than at the beginning is not merely due to a difference in timing. The same entity design that maximized trade, learning, and capital access in an open regime made the form politically intolerable once that very wealth concentrated in incumbents. The successful pseudo-corporate form sowed the seeds of its own institutional demise.

Resolving what aspects of the commenda fit which conception of the corporation matters to elucidate what corporate law is doing, and therefore what it can legitimately claim to justify. The commenda is a boundary problem for the view of the corporation. If theories fail to clearly delineate where they apply and where they do not, the theories risk misapplication and incorrect predictions, not because the theory is flawed, but because the domain in which it operates is misapplied. Which features of the firm are products of private ordering, and which depend on the political decisions of the state, effect what state actions are justified. If a corporation is a nexus of contracts all the way down, then corporate law is at its most justified supplying defaults that align with practice, and at its lowest ebb when applying mandatory restrictions. On the other hand, if the ability to sustain business organizations is merely dependent on the state, many more regulations are justified, including who may participate, what forms are available, and what terms may be struck. Resolving the boundaries of the state’s concession and the private nexus matters to our theoretical justifications of corporate law.

Such a resolution concretely applies in at least three corporate law questions. First, as just considered, it bears on the legitimacy of mandatory rules, including disclosures and the legal treatment of sophisticated and unsophisticated investors. With the contractarian view demonstrating predictive power for internal governance while the concessionary view better explains the threshold matter of the types of entities in existence, mandatory rules are more justified to combat systemic issues from the existence of corporate forms in the entity ecosystem and are less justified on matters of internal governance. Second, it affects what default rules courts should select. A contractarian view suggests mirroring the market, while a concessionary view suggests simply pursuing the state’s ends. Corporate law should supply enabling default rules that mirror bargained-for practice to questions of internal entity structure, while corporate law is justified in imposing mandatory rules for questions external to the entity, such as systemic risks and inter-firm coordination. Beyond this normative angle, which view is likely to apply to a particular form of organization grants predictive power. Third, resolving the views of the corporation vis-à-vis the commenda informs the connection between corporate law and political economy. The Serrata experience exemplifies one way that corporate forms can entrench elite control, and it narrows focus on the allocation of access to entity forms. The modern corporation depends upon understanding how default and mandatory rules come about, and corporations must continue to navigate questions about whether, for whom, and on what terms firms may be organized.

VII. Conclusion

The commenda demonstrates that a functioning nexus of contracts can exist without full corporate personhood, but not for long without the concession of the state. Legal rules and norms arose out of private bargaining in a way that the state did not and could not set for itself, as contractarian scholarship suggests. However, the concessionary view of the corporation finds justification in the decline of the commenda system after the Serrata. The explanatory weaknesses of each theory become clear in the attempt to explain the whole of the history of the commenda.

A comparative historical approach can provide contributions to business organization and law and economics scholarship. A more historically grounded contractarianism that uses pre-corporate institutions as test cases for theoretical claims about the firm can sharpen the theory in general and its empirical predictions specifically. There are further lines of inquiry from many other empirical examples, namely by extending the analysis to other pre-corporate forms, like Hanseatic partnerships and early joint-stock ventures. Using historical institutional data to refine both contractarian and concessionary models of firms and their boundaries, as well as exploring how legal history has dealt with pseudo-corporate ideas, can inform current policy debates. At least, such empirical evidence is useful for evaluating Easterbrook and Fischel’s claim of convergence between the default menu of corporate law and the terms privately bargained for, which occurred, but only for a limited time.

The medieval Venetian commenda both elucidates and limits modern contractarian accounts of the corporation. By reconstructing the commenda’s governance, risk allocation, and enforcement mechanisms, derived from sophisticated private actors repeatedly converging on standardized contractual solutions to agency costs and capital aggregation, the commenda took a form that functioned in many respects like a proto-corporation. But in tracing the commenda’s decline following Venice’s post-Serrata political transformation, history’s course saw that those contractual arrangements depended on a stable institutional environment that private ordering alone could not sustain. The commenda did not fail because its internal bargains were inefficient or incomplete; it failed because the state altered the conditions that made those bargains credible and scalable. The episode therefore supports a bounded view of the nexus of contracts theory: private ordering can explain how corporate forms are structured, but not why they endure. In applying the contractarian and concessionary theories to different questions about the corporation or commenda, the explanatory strengths of each view shine within the proper domain for each theory.

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• Ira S. Bushey & Sons, Inc. v. United States, 398 F.2d 167, 171–72 (2d Cir. 1968) (internal quotation marks omitted).
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• Id. at 1426.
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• Id. at 1417 (“The founders and managers of a firm choose whether to organize as a corporation, trust, partnership, mutual or cooperative.”)
• Id. at 1442.
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• Lewis A. Kornhauser, The Nexus of Contracts Approach to Corporations: A Comment on Easterbrook and Fischel, 89 Colum. L. Rev. 1449 (1989).
• Michael Klausner, The Contractarian Theory of Corporate Law: A Generation Later, 32 J. Corp. L. 779 (2006).
• Michael Klausner, The “Corporate Contract” Today (Stan. L. & Econ. Olin Working Paper No. 490 (Apr. 9, 2016)).
• Lucian A. Bebchuk, Competing Views on the Economic Structure of Corporate Law (ECGI L. Working Paper No. 651/2022, 5 (July 2022)).
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• Trs. of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 636–37 (1819) (Marshall, C.J.).
• See, e.g., Stefan J. Padfield, A New Social Contract: Corporate Personality Theory and the Death of the Firm, 101 Minnesota L. Rev. 363, 373 (2017), (citing Woodward, 17 U.S. at  637 (1819) for the “formulation [that] has commonly been associated with concession theory, also known as artificial entity theory”). See also Stefan J. Padfield, Corporate Social Responsibility & Concession Theory, 6 Wm. & Mary Bus. L. Rev. 1, 21 (2015), (“[T]o say that the corporation is a nexus of contracts but then ignore the state as one of the primary contracting parties assumes many things that are likely contestable.”); Stefan Padfield, Rehabilitating Concession Theory, 66 Okla. L. Rev. 327, 332 (2013), (“[T]he concession theory of the corporation . . . views the corporation as a tremendous capital accumulation device that was only made possible by the state conveying certain privileges to incorporators for which they could not otherwise privately contract.”).
• Christopher J. Wolfe, “An Artificial Being”: John Marshall and Corporate Person, 40 Harv. J. of L. & Pub. Pol. 201, 211 (2017), pdf (discussing commentators calling William Blackstone’s view of the corporation as the concession theory of corporate personhood, and comparing it to C.J. Marshall’s opinion in Woodward).
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• Id.
• Margaret M. Blair, Corporate Personhood and the Corporate Persona, 2013 U. Ill. L. Rev. 785, 791, 799 (May 15, 2013) (discussing, as the section is called, corporate personhood, corporate persona, and Woodward, 17 U.S. (4 Wheat.) 518 (1819)).
• See id. at 804.
• See generally Padfield, Rehabilitating Concession Theory, 66 Okla. L. Rev. 327 (the raison d’être of the piece being putting forward concession theory as a live resource in scholarship).
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• The Metropolitan Museum of Art, “Introduction,” (providing background on Venetian culture as arising from trade) https://www.metmuseum.org/learn/educators/curriculum-resources/art-of-the-islamic-world/unit-seven/chapter-two/introduction.
• Elena Shadrina, Sedentary Merchant Triumphant: The Transformation of Venetian Trading Patterns in the Long Twelfth Century, 98 Bus. Hist. Rev. 37, 39 (Aug. 5, 2024).
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• Polybius, The Rise of the Roman Empire, trans. Ian Scott-Kilvert (1979) Book VI, 302—305 (distinguishing between kingship, aristocracy, and democracy, “we should regard as the best constitution one which includes elements of all three species”) (note that while translated in 1979, Polybius wrote in the second century B.C. on his contemporaries).
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• Id. 
• Id.
• Ron Harris, The Institutional Dynamics of Early Modern Trade: The Corporation and the Commenda, (Feb. 5, 2007) 8.
• Id. at 9.
• Id.
• Id. at 10.
• Id. at 11.
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• Id.
• Id. 
• Id. at 13.
• Id.
• Harris, supra note 61, at 11.
• Id. at 12–13.
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• Id. at 9.
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• Id.
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• Id.
• Id.
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• Id.
• Shadrina, supra note 48 at 39.
• Rohac, supra note 52..
• Seindal, “The Maggior Consiglio,” supra note 56.
• Acemoglu & Robinson, supra note 93, at 156.
• See Choi & Min, supra note 31, at 12.