NOTES OF CASES Gold Clauses in Domestic Transactions
| Published date | 01 May 1957 |
| Author | J. Unger |
| DOI | http://doi.org/10.1111/j.1468-2230.1957.tb00444.x |
| Date | 01 May 1957 |
NOTES
OF
CASES
GOLD
CLAU8E8
IN
DO~6TIC
%ANSACTION8
TEE
difference between a promise to pay
€100
in notes and
a
promise to pay
€100
in silver coin lies in the manner of payment.
But let gold coin be substituted
for
silver coin and, according to
Feist
v.
Socidtd Intercommunale Belge d’Electn’citd
the difference
becomes one of amount.
A
promise
to
pay
€100
in gold coin is
not
a promise to pay
€100,
but such amount
as
will
buy
€100
in gold coin.
If
this is the meaning we must give
to
a promise
to
pay
€100
in gold coin, what is meant by a promise to pay
€100
“in gold
coin
or
in
notes to the equivalent value
of
gold coin”?
this question arose in
an
action brought by a landlord claiming
rent under a lease, granted in
1988,
which provided for an annual
rent of
E1,900
“
in gold sterling
or
Bank
of
England notes to the
equivalent value in gold sterling.” Lord Goddard held that the
Feist
construction applied
a
fortiori
and gave judgment
for
the
landlord for
€7,505,
which was agreed to be the current price
of
1,900
gold sovereigns. This decision was reversed by a majority
of
the Court of Appeal who held that the landlord was only entitled
to
€1,900.
Harman
J.,
who dissented, held that the landlord
was entitled to rent based, not
on
the market value of sovereigns,
but
on
the rather lower value
of
the gold content of sovereigns.
This basis of calculation would seem preferable to that used by
Lord Goddard, as the gold clause was introduced to protect the
landlord against depreciation of sterling, which was feared, but not
in
order
to
secure for him windfalls due to unforeseeable fluctuations
in
the price of sovereigns.
The majority of the Court
of
Appeal, in order to arrive at their
decision, had to distinguish the decision of the House
of
Lords in
Feist’s
case.
In
fact, only Lord Justice
Morris
tried to do this,
the judgment of Lord Justice Denning being largely occupied by
a
discussion of the legality of gold clauses. Lord Justice
Morris
pointed out that the construction of the clause used in the
Feist
case
was explained by the fact that payment in gold
coin,
which was the
only form
of
payment mentioned, would have been impracticable.
In
the present case provision had been made for alternative forms
of
payment. Payment in one of these forms was practicable.
It
could therefore be concluded that the parties were concerned with
In
Treseder-Grifin
v.
Co-operative Insurance Society, Ltd.
1
[1964]
A.C.
161.
*
[l956]
2 Q.B.
127.
266
MAY
1957
NOTES
OF
CASES
267
the manner of payment, that they wanted to make it clear that
payment was to be made,
if
not in gold coin, then in notes and
not by cheque.
Even if this were conceded (although
it
is not easy to see why
the parties should have objected to cheques)., it still would not
follow that this was the only reason for the clause. The intention
to deal also with the amount of payment appears quite clearly
from the addition of
“
to the equivalent value
in
gold sterling
”
to the words providing for payment in notes. Lord Justice Morris
thought that
‘‘
equivalent value
”
meant nominal value and he
appeared to suggest that this would be the natural
or
literal reading
of the phrase.
“
Anyone reading the lease,” he said,
“
without
critical consideration of all its words might confidently conclude
that the obligation of the lessees was to pay
€1,900
rent, and such
obligation could be discharged either by paying
E1,900
in gold
or
by paying
g1,WO
in notes.”
One might have thought that, since
Feist’s
case, the impressions
formed by uncritical readers are of little value
in
the construction
of gold clauses. Even such readers would probably suspect that
in the present case the parties had been thinking of the danger of
depreciation of sterling and had tried to provide some protection
against
it.
It
is perhaps not surprising that Lord Justice Morris should
have felt the need for justifying his refusal to adopt the
Feist
construction by offering a lengthy catalogue of the difficulties which
this construction would produce. Some of these difficulties were
the results of defective drafting, others arose from the unforeseen
turn of events. Some points had been raised and answered in
Feist’s
case, others could be resolved, as
Harman
J.
showed, by
examining the circumstances under which the lease had been
granted. None of these difficulties presented insuperable obstacles,
nor
could they be taken as a satisfactory basis for distinguishing
the decision in
Feist’s
case.
There remained, however, the possibility of distinguishing this
decision
on
the ground that the court there was dealing with
an
international contract, whereas the present case was of a purely
domestic character and indeed appears to be the first reported
instance
of
a
domestic gold clause. Lord Justice Morris did not
take the point, although it was considered and rejected as irrelevant
by the Lord Chief Justice and by Harman
J.
Lord Justice Denning
8ttached decisive importance
to
it,
not, however,
on
the question
of construction but
on
that of the legality of the gold clause.
On
the other hand,
it
seems clear that Lord Justice
Morris
as
well as Lord Justice Denning approached the question of
construction in
a
spirit of hostility towards gold clauses even
if
this found articulate expression only in the observations of Lord
Justice Denning
on
the legality of domestic gold clauses.
If
the
domestic nature of the clause was considered by him to be relevant
To continue reading
Request your trial