Most of the time, mercantile affairs were conducted through an extensive network of agents and representatives. So the most logical form of enforcement in the case of a dispute would be through the ordinary legal system, navigated by the merchant’s local agent. The agent would presumably have knowledge of the local courts and have access to one or more guild’s resources to impose enforecement (oftentimes, the guild itself would run the court. Predictably, this meant that a local guild member acting as agent would be invaluable in order to guarantee enforcement of contracts and settle disputes).

An agent swindling their principal could also be persecuted in the merchant’s home city, although you might imagine an agent particularly bent on swindling their principal and disappearing with the goods would presumably avoid places where they might be hauled into a courtroom. And while they might enjoy their ill-gotten gains in the short term, they wouldn’t be able to conduct much more business in their “home” city if they became known as a swindler. And besides, it would be only a matter of time until the merchant they swindled found a new agent in their city or town who would haul them in front of a court. Dishonest behavior was further discouraged by the presence of multiple agents (both transplants from the merchant's hometown and locals: Christopher Columbus, for example, testified in Portuguese courts when operating an agent for a Genoese trading house) just as there seldom was a single merchant acting as principal: there might be multiple merchants financing the expedition, some of which would physically oversee transport and sale of the goods. And even without partners, a merchant might be accompanied by extended family or trusted friends working for their trading house, in addition to being accompanied by one or more local agents. All this made for a large posse of people overseeing the mercantile adventure, and reduced opportunities for theft or fraud.

But commerce was still risky business, and merchants were adept at finding ways to divide or reduce risk for a good reason: theft and fraud, in addition to pillage and shipwreck, continued to be very serious risks even for the most prudent merchants! One way to divide risk was by specializing and cutting up roles within the commercial supply chain, meaning that goods could change multiple times over the course of their journey from marketplace to marketplace: e.g. one merchant might source the goods in their place of origin (say, the Levant) a second merchant would buy the goods to transport them elsewhere (e.g. buy them up and oversee their transport to Venice), and a third merchant would buy them and sell them to their ultimate users, or sell them on to other merchants (e.g. buying the goods in a Venetian warehouse with the intent of forwarding them to other parts of Italy or across the Alps). And while personal networks were a very valuable resource which could make or break a successful merchant, so was knowledge and understanding of the local legal landscape.

This is why one of the major concessions that maritime republics negotiated for in overseas harbors was the ability to set up their own courts and tribunals. This allowed them to have a reasonable assurance that contracts would be enforced in a legal environment that would be familiar and known to them.

But while this might be interesting for the merchant sourcing goods faraway from home, what about “the next city over” as you ask? Well, fortunately for our hypothetical merchant things might be easier closer to home. Apart from familial and social ties which would probably be stronger closer to home, allowing the merchant to have an easier time sourcing trusted of agents, the next town over would probably also have a more familiar legal system. In fact, it is improbable that neighboring towns would be the same size: the merchant’s hometown would probably be a more developed or established commercial center, with an elaborate court and guild system, while the “neighboring” town which they supplied might be tied to the hometown by ties of fealty or other accords, making it simple for a merchant to navigate the local court system. The legal system might even depend on the larger town: The presence of established courts was a major factor which led the Italian mercantile centers to develop, so in most cases a dispute in “the next town over” would be solved in the merchant's hometown.

Only where cities got distant enough to be “out of network,” merchants would begin to solicit the aid of an extended network of agents and intermediaries (and if they got really far, trade would be mostly funneled where they had accords and concessions, as described above). A hazardous expedition might involve towns which might be close “as the crow flies,” but were divided geographic barriers or political rivalries (or both!): Padua and Venice, for example, were on very unfriendly terms for much of the high Middle Ages (pretty much up until Venice fortuitously annexed their southern neighbor), separated as they were by a muddy river estuary and salt marshes (the rights over which were a serious point of contention). A Venetian merchant could drag an untrustworthy agent before the courts in Venice granted they grabbed them on the near bank of the Brenta River, but for a dispute occurring on the “Paduan” side, seeking enforcement might be more contentious and difficult, not in the least because finding a trustworthy agent in the first place would have been no easy task. This is not to say there was no trade at all between two cities which had a poor relationship (granted they were at peace) but rather for the most part, trade did tend to flow along the path of least resistance.