ABSTRACT
The roots of commodity risk management stretch back to antiquity. Commercial transactions in early markets often involved a sale agreement structured as a forward contract with option features. The contract could vary from loosely structured to formal and notarized. Unstated terms and conditions of such agreements were often governed by merchant convention. An agreement for a future sale would typically have a provision that would permit the purchaser to refuse delivery if the delivered goods were found to be of inadequate quality when compared to the original sample. As reflected in notarial protests stretching back to antiquity, disagreement over what constituted satisfactory delivery was a common occurrence. Some of the earliest examples of written language, the Sumerian cuneiform tablets, contain such notarial protests. See, for example, Figure 1.26, which provides a picture of a Sumerian tablet circa 1750 BC from the British Museum collection. The description provided is: “A letter complaining about the delivery of the wrong grade of copper after a Gulf voyage.” Widell (2005) has further information about Sumerian and Babylonian business practices. Sumerian Cuneiform Tablet https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107614/6e85ce34-6622-49e8-8487-0a67e4f184fd/content/fig1_26_B.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/>
