The Normans separated Church and State. So there began a dual legal system between church and common law. In the early days, common law was concerned with land. Naturally, the Ecclesiastical Courts, versed in Roman Law were where contract developed. Later, this was transferred to Chancery and Equity, then to Exchequer.

Latin contract existed in several categories: sale and purchase, usufruct, loan, hire, deposit, pledge and security. There was a poorly developed concept of “quid pro quo,” or consideration which became defined in the Medieval period. A
contract “promissio per stiputationem” – a mere pledge to perform could be enforced. This changed in the Middle Ages. The other prominent Latin form was the “pactum” – a mutual agreement between two or more persons.

At the same time, each trading center had its own legem mercatoriam, or law merchant courts which were efficient in dispensing justice for the local merchants. The Church may or may not have had significant influence in these, depending on the locale. In those days, the sin of usury (the loaning of money with the expectation of exorbinant profit) came to be distinguished from loaning of money for a business venture, where the profits were not guaranteed. Profit in the latter was considered to be acceptable, either in terms of indemnification of loss (refectione damni) or assumption of risk (assumptionem periculo).

Several letters and decrees made by various popes peripherally trace the development of medieval contract.

Innocent II in the Second Lateran Council 1139 condemned the insatiable rapacity of money lenders forbidden by divine and human laws throughout the Scripture of Old and New Testament.

Alexander III (circa 1170) wrote a letter to the Archbishop of Geneva distinguishing that money put at risk in the contract for buying and selling of goods was wholly different from usury, and considered licit by church teaching.

Urban III (1185) wrote a letter to a priest of Brescia condemning money lending without contract, and the expectation of immediate payment, or excessive payment.

Gregory IX (Decree circa 1240) He who loans a sum of money to one sailing or going to market, since he has assumed upon himself a risk is not to be considered a usurer who will receive something beyond his lot….if there is doubt in the amount for which the goods can be sold at market, there is no usury.

Probably the greatest influence on the later Medieval Scholasticists view of law as social justice was Aquinas who introduced the moderate, natural, even liberal philosophy of Aristotle to the study of theology. This was in contrast to the stark teachings of Plato which had dominated the Church for the first thousand years, and Jewish thought before that. Every educated Jew at the time of Christ in the Eastern Mediterranean was a follower of Plato. St. Paul is an excellent example of Platonic thought. The liberality of Aristotle led the way to mutual consent, and even “freedom to contract.” This is from Aquinas distinguishing usury from legitimate contract, and social consciousness written about 1270:

Summa Theologia II II Q 78

A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money but to avoid a loss. It may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained. But the lender cannot enter an agreement for compensation, through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having.

If a man were, in return for money lent, as though there had been an agreement tacit or expressed, to expect or exact repayment in the shape of some remuneration of service or words, it would be the same as if he expected or exacted some real remuneration, because both can be priced at a money value, as may be seen in the case of those who offer for hire the labor which they exercise by work or by speaking. If on the other hand the remuneration by service or words be given not as an obligation, but as a favor, which is not to be appreciated at a money value, it is lawful to take, exact, and expect it.

He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk and is bound to pay it all back: wherefore the lender must not exact more. On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society,
does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money.

If a man in return for money lent to him pledges something that can be valued at a price, the lender must allow for the use of that thing towards the repayment of the loan. Else if he wishes the gratuitous use of that thing in addition to repayment, it is the same as if he took money for lending, and that is usury, unless perhaps it were such a thing as friends are wont to lend to one another gratis, as in the case of the loan of a book.

If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury: because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. On like manner if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is a sin of usury; because again this anticipated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.

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One of the most liberal Medieval laws was the Statute Quia Emptores (1290) which allowed peasants and freemen to sell their feudal holdings and obligations. It allowed those who were expected to vow loyalty to a specific earl or lord to outright make a contract of sale of their services. This was quite novel. Of course, the the real beneficiaries of this were the great English houses, including those of York and Lancaster which led to the massive accumulation of land holdings. From this arose the War of the Roses and the establishment of the Tudors, Henry VII, Henry VIII and Elizabeth R two centuries later.

This matter has even more powerful ramifications.