With the fall of the Roman Empire, commercial activities in Europe were almost non existent relative to what had occurred before and what would come after. Things began to change in the eleventh and twelfth centuries. Rapid expansion in agricultural productivity meant that less labor was needed to produce sufficient food and clothing to sustain the population. Agricultural commodities were produced at levels which stimulated greater trade, and population began to move into towns many of which rapidly became cities of substantial size.
One consequence of (and simultaneously, one impetus for) the increased productivity in agriculture and the urbanization which followed was the emergence of a class of professional merchants. There were significant barriers to overcome before substantial interregional and international trade could develop. Merchants spoke different languages and had different cultural backgrounds. Beyond that, geographic distances frequently prevented direct communication, let alone the building of strong interpersonal bonds that would facilitate trust. Numerous middlemen were often required to bring about an exchange, including buyer, seller and shipping agents. All of this, in the face of localized, often contradictory laws and business practices, produced hostility towards foreign commercial customs and led to mercantile confrontations.
There was a clear need for Law as a language of interaction. It was during this period, due to the need for uniform laws of commerce to facilitate international trade, that the basic concepts and institutions of modern Western mercantile law-lex mercatoria ("The Law Merchant")-were formed. Even more important, it was then that mercantile law in the West first came to be viewed as an integrated, developing system, a body of law".
Virtually every aspect of commercial transactions in all of Europe (and in cases even outside Europe) was governed by this body of law after the eleventh century. In fact, the commercial revolution of the eleventh through the fifteenth century that ultimately led to the renaissance and industrial revolution could not have occurred without the rapid development of this system of law. This body of law was voluntarily produced, voluntarily adjudicated and voluntarily enforced. In fact, it had to be. There was no other potential source of such law, including state coercion.iv The Law Merchant did not spring from a void. A considerable part of it was based on Roman Commercial Law.
Nonetheless, Roman law passed down through the centuries was not adequate to meet the kinds of problems that arose in the early commercial revolution.Furthermore, none of the other systems of law that existed or were being formulated during this period were sufficient to meet the needs of the merchant class either. The development of commercial law was almost entirely left up to the merchants themselves.
This meant that the Law Merchant was customary law, and the customary nature of the Law Merchant was by far the most decisive factor in its development. It made the law eminently a practical law adapting to the requirements of commerce". When new forms of commercial activity developed, evolving business practice framed the new law. The emergence of the commercial society was spontaneous and undersigned. Its development on an international level required simultaneous and complementary evolution of the mechanics of market exchange and of commercial law.