Was Hundi a Merchant Guild? The Question of Contract Enforcement

Merchant guilds are an important subject for economic historians because of their importance in understanding merchant organisation or networks in trade. One question that particularly occupies occupies economic historians is the question of contract enforcement. How did merchants cooperate and transact with each other, and minimise the risk of defaulting? Today we tend to think of contracts as a necessary prerequisite for transactions, backed up by a legal system. In times past, promises would have formed the basis for the earliest form of contract. A promise was regarded as less risky where parties were known to each other because peer pressure and collective reprisals in the community were more likely to reduce the risk of someone reneging on a promise. As long-distance trade with foreign entities developed, the risk of defaulting would have been greater.