[PDF]Money in the Law: National and International

Copyright, 1939
By
THE FOUNDATION PRESS, INC.


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PREFACE


The law of money which, prior to the nineteenth century,
had been a major subject of legal inquiry, seems to have re-
gained its place in legal thought. The importance and multi-
plicity of the problems involved have perhaps never made
themselves more strongly felt than within the last few years.
The legal difficulties arising from monetary troubles are un-
usual, not only because of their financial and social implica-
tions, but also because of their theoretical intricacies. The
arguments advanced by courts in cases of a monetary nature
are often unsatisfactory. Again and again, monetary situa-
tions have been misinterpreted by courts, and confused doc-
trines advanced. Most legal writing touching money has been
so scanty or so limited in scope as to be of little material aid
to the courts in dispelling difficulties. These circumstances
warrant an effort to attack the legal problems of money at
their very foundations in order to find the basis for a sound
and consistent body of law.

The present volume, which is the outcome of more than
fifteen years’ work, represents such an effort. While empha-
sizing American law, it aims at analyzing and determining
the universal principles that underlie the law of money. Use
of the comparative method is indicated for that purpose.
Even the courts, contrary to their customary attitude, have in
monetary cases not infrequently referred to foreign law, be-
ginning with the famous Mixed Money case, decided in 1604 by
the Privy Council. In this volume the view is taken that the
basic monetary problems of developed economic systems are
substantially the same throughout the world; and that the
legal thought and experience of each country concerning these
problems may therefore aid in a better understanding of
monetary troubles in others. This conception led quite natu-
rally to another aspect of the matter, namely, to a search into
the attitudes of the judiciaries of the leading countries in
monetary controversies; controversies which because of their
social and political consequences, present tests of the compe-


ili


PREFACE


tence and impartiality of the courts. In this sense the pres-
ent study may be said to constitute a comparative inquiry
into justice as well as into law.

The predominance of American law in the discussion is
not merely attributable to the fact that the book was written
in this country. American monetary history from the colonial
era to the present time affords a unique wealth of important
and often dramatic events and problems, mirrored in several
hundred reported cases. Apart from the analytical interest
which they offer, the study of their background is worthwhile
in itself. Hence, a relatively large portion of the volume has
been devoted to an exposition, from the legal angle, of this
country’s monetary history.

This is a legal study, written primarily for lawyers, prac-
titioners as well as students. It makes no pretense to discuss
the purely economic aspects of money. The legal problems
involved are sufficiently important to warrant independent
treatment based on methods of legal research. Nevertheless
the writer believes that his study may prove to have perti-
nence for many questions with which economists are con-
cerned. The legal considerations arising in connection with
the study of money have certainly been neglected in English
and American economic learning.

The first three chapters of the book are concerned with
money as such, namely, with its general legal aspects, and
particularly with the conception of the monetary unit (chap-
ter I) ; with the various kinds of money (chapter IT) ; and with
the systems by which various kinds of money are coordinated
on the basis of a unit (chapter III). While the sections open-
ing the third chapter treat the subject of monetary systems
in general terms, the concluding sections offer a discussion of
the American system, illustrative of the viewpoints previously
set forth. Chapters four to eight form the second and larger
part of the volume. Devoted to an analysis of debts, é.e., of
monetary obligations, they contain the bulk of the cases and,
generally, the material which will be of particular interest to
the practicing lawyer. These chapters progress from the pure
and simple debt (chapter IV), through the impact of fluctu-
ating currencies upon debts (chapter V) to the more compli-
cated forms of debts (chapter VI: gold debts; chapter VII:


iv


PREFACE


foreign currency debts), concluding with the recent and revo-
lutionary transformation of debts through exchange control
(chapter VIII).

Cases and materials which were available to the author
up to October, 1938, have been covered; in some instances, it
was possible during the process of printing to include refer-
ences of later date.


It is through the hospitality of Columbia University that
I have been able to continue my work which was so precipi-
tately interrupted. I am particularly and deeply grateful to
the members of the Columbia Law Faculty for their encour-
agement and the insight into American law and conditions
which my association with them has afforded me. Their aid
has been generous and of inestimable value to me. I also wish
to express appreciation of the work done by the students in
my seminar on the Law of Money at Columbia Law School.
I have benefited greatly from their studies. The Columbia
Council for Research in the Social Sciences has aided me by a
substantial grant for the preparation and publication of this
volume. It appears under the auspices of the Council to which
I feel sincerely indebted.

I am happy to acknowledge the valuable assistance of
Mr. Herman Marcuse of New York, a graduate of the Colum-
bia Law School, in the preparation of this book. He was par-
ticularly helpful in the tracing and collecting of material so
widely spread over space and time, and in the correction of
the manuscript. I also wish to express my thanks to Mr.
Sanford Schwartz of the New York Bar. He has read the
whole manuscript and has contributed much to the improve-
ment of this volume by giving me the benefit of his competent
linguistic criticism and of his extraordinary juridical dis-
cernment and acumen.

Finally, I thank the editors of the Columbia Law Review,
Michigan Law Review, University of Pennsylvania Law Re-
view, and Yale Law Journal for permitting me to incorporate
into the volume discussions previously published in these
journals.

ARTHUR NUSSBAUM
New York, March, 1939.


ABBREVIATED TABLE OF CONTENTS


PAGE
Pull Table of Contents 222: s2.2.22553 te et ected xi
List of American, English and Dominion Cases ............... xix
Selective List of Names from Civil Law Cases and In-
CEIMaIONal Cases ice so ine Ge i es aes teccdoecs XXxiii
Note on Abbreviations -._......2.... eee ee eee ence ec cneneeeeeeeceees XXXVii
CHAPTER I
BAsiIc MONETARY CONCEPTIONS IN LAW
§§ 1. Legal Significance and Concept of Money.............. 1
2. Nominalism and Metallism. Purchasing Power.... 12
3. Money and the State _........0...2.-- enn ee nee 23
4. Voepal: TOWN ican. cata ce oo tesserae 37
5. Money as Personal Property...............-------..-...:..---- 53
CHAPTER II
KINDS OF MONEY
SS Bs COUMNS 5s Doce cates A ececeedeaS alen ealecastaes 62
7. Attributes of Paper Money...................202...------eceeo--- 78
8. Rules Governing Paper Money................20.-...----.-- 87
Ds SANK DG ROSICS es secs eae ee 99
TO: ORCI GM MONG 25 5.ccces hss is ce sestes gente a aes 113
11. Valuation and Taxation of Foreign Money............ 125
CHAPTER III
THE MONETARY SYSTEM
A. In General
§§ 12. Structure and Types of Monetary Systems............ 134
13. Modifications and Transformations of a Monetary
SV NNN cts lee a tet er 146
14, Impact of International Law on Currencies.......... 153


Vii


ABBREVIATED TABLE OF CONTENTS


B. The American Monetary System


PAGE
15. Colonial Antecedents.._... 2.002.222 22o ence eee eee eee 162
16. Outline of the Legal History of the Dollar..____. 172
17. The Present Dollar.........-.- 2. 185
18. Constitutional Aspects of the American Monetary
SVS IN Nn ct ah ot 2h cen eg ce 198
CHAPTER IV
DEBTS IN GENERAL
§§ 19. Characteristics of Debt___......0002222 22 eee eee . 212
20. Rules of Debts. o.oo ene enn neem 219
Zl, WRCOROCSE nies ea ee 233
CHAPTER V
DEBTS UNDER FLUCTUATING CURRENCIES
§§ 22. The Immutability of the Nominal Amount.._......... 249
23. Revaluation in Germany......22.00022222. 02 eee 269
24, Revaluation in General _......-00.-- ow 283


Excursus on Savigny’s ‘Current Value” Doctrine 297


CHAPTER VI
GOLD CLAUSES AND OTHER PROTECTIVE CLAUSES
§§ 25. Occurrence and Types of Gold Clauses.._................ 301
26. Implied and Sham Gold Clauses..............-....-.-......-.-- 313
2¢. Operation of Gold Clauses... we ennnenn-nneeeeeennneee 326
28. Judicial Restriction of Gold Clauses_...............002.-.. 335
29. Legislative Restriction of Gold Clauses .....-......... 356
30. Conflict-of-Laws and International Law Aspects
rey i © 0) (6 Mn @} £:1) [\- : Sc 317
31. Commodity and Index Clauses...._............--..--....-.- 403
CHAPTER VII
FOREIGN CURRENCY DEBTS
§§ 32. Foreign Currency Debts in General....................-... 411
33. Operation of Foreign Currency Debts...................... 422


viii


ABBREVIATED TABLE OF CONTENTS


PAGE
34. Determination of the “Money of Contract’’_....... 437
35. Multiple Currency Clauses..................-..--......-.-------- _. 447

36. Foreign Currency in Damages and Other Unliqui-
RRCOG: DCS aca ect ees eee aes 464

CHAPTER VHI
DEBTS UNDER EXCHANGE CONTROL

§§ 37. Local Effects of Exchange Control...._.....00.2.... 475
38. Effect in Foreign Countries of Exchange Control 487


. International Controversies and Agreements on


exchange: COMtVOl cocci cos oes ores eee 505


FULL TABLE OF CONTENTS


Page

List of American, English, and Dominion Cases ...................... w-- xix
Selective List of Names from Civil Law Cases and International

CO soe a a Se ce eS xxxili

Note on Abbreviations .........0.....1..-..c.--csncce ceeeescscceencecaseecessenecessenanonccees xxxvii


CHAPTER I


Basic MONETARY CONCEPTIONS IN LAW
Section 1
Legal Significance and Concept of Money


I, Legal Importance of the Money Concept (1) II. Definition of Money
(2) I. The “Ideal Unit” (5) IV. Interrelation of Monetary and Metal
Value (8) V. The “moneta imaginaria” (10)


Section 2
Nominalism and Metallism. Purchasing Power


I. Metallistic Conceptions (12) II. Money and Commodities; Securi-
ties (17) I. Purchasing Power and Index Numbers (20)


Section 3


Money and the State


I. The Sovereign's Powers and Prerogatives—The Kossuth Case (28)
II. Limits of the Monetary Power of the State (26) MIT. Dlegal Cur-
rency (29) IV. Penal Law. Counterfeiting (31) V. Law of Money—
Public or Private Law? (35)


Section §
Legal Tender


I. Significance of “Legal Tender’ (3%) II. Qualifications of Legal
Tender—Public Receivability (42) YZ. Historical Development of Legal
Tender (44) IV. Refusable and Irrefusable Money (47) V. Non-
Money as Legal Tender (49) VI. Legal Tender and Cours Forcé
Abroad (52)


FULL TABLE OF CONTENTS


Section 5


Money as Personal Property


I. Transfer of Specific Money (53) MI. Delivery of Money for Trans-
mission to Another Person (58) IU. Changing Money (59) IV. Liti-
gation Over Specific Money (59) V. Transferring Counterfeit Money
(61)


CHAPTER I


KINDS OF MONEY
Section 6
Coins
I. Nature and History (62) II. Coins, Medals and Tokens (63) ILI.
Monetary Value of Coins (65) IV. Abrasion (66) V. Fiduciary and
Fractional Coins (67) VI. Trade Coins (68) VU. Restrictions on Own-


ership of Coins (70) VIII. Compensation for Requisitioned Coins (73)
IX. Gold and Silver Bullion (74)


Section 7


Attributes of Paper Money


I. Paper Money and Money Paper (76) II. Survey of the Features of
Paper Money (79) I. The Chose in Action Embodied in the Paper—
Convertibility and Inconvertibility (80) IV. Reserves Held Against
Paper Money (85)


Section 8


Rules Governing Paper Money


I. Free Banking and Franchise (8%) WU. Loss, Theft, Destruction and
Other Events Affecting Paper Money (89) MII. The Portuguese Bank
Note Case (93)


Section 9
Bank Deposits


I. Definition and Legal Nature (99) I. The Bank Deposit as Money
(102) III. Questions of Interpretation (104) IV. Law of Contracts
(106) V. Taxation (110) VI. Procedure (111)


xil


FULL TABLE OF CONTENTS


Section 10
Foreign Money


I. Foreign Money as a Commodity (113) Il. Trading in Foreign Money
(116) IL. “Cable Transfers” and “Letters of Delegation” (117) Iv.
Futures. Restrictions on Foreign Exchange Transactions (122)


Section 11


Valuation and Taxation of Foreign Money


I. The Mint Par (125) MII. Rate of Exchange (128) IL. “Inland
Money” (129) IV. Fiat Valuation (180) V. Taxation (182)


CHAPTER Ii


THE MONETARY SYSTEM
A. In General
Section 12


Structure and Types of Monetary Systems

I. Constituents of a Monetary System (184) IL. Standards of Monetary
Systems (136) IL. Operation of the Standard Upon the Fiduciary Con-
stituents of the System (189) IV. Bimetallism (143) V. Dual Stand-
ard (144)

Section 13

Modifications and Transformations of a Monetary System

I. Formation of a New Currency (146) I. Charting the Boundary Line
(148) IL. Rise of a New Currency by Disintegration of a Monetary
System (151)

Section 14


Impact of International Law on Currencies
I. International Treaties (153) II. Warfare (158)


B. The American Monetary System
Section 15


Colonial Antecedents


I. Basic Factors (162) II. “Commodity Money” (163) ITI. Metallic
Circulation (164) IV. Colonial Paper Money (168)


xili


FULL TABLE OF CONTENTS


Section 16


Outline of the Legal History of the Dollar


I. The Continental Dollar (172) IT. The Act of 1792 (1978) IZ. The
Dollar: 1792-1834 (178) IV. The Dollar: 1834-1873 (179) V. The Dol-
lar: 1873-1933 (182)


Section 17


The Present Dollar


I. Devaluation (185) I. The Silver Legislation (190) II. Constitu-
ents of the American Monetary System (193)


Section 18


Constitutional Aspects of the American Monetary System


I. Coins and the Constitution (198) II. Paper Money: Negative Power
of Congress (199) II. Paper Money: Affirmative Power of Congress
(201) IV. Indirect Currency Power of Congress (208)


CHAPTER IV


DEBTS IN GENERAL
Section 19
Characteristics of Debt


I. The Object of Debt (212) TI. Debt a “Personal” Obligation (214)
II. Obligations Purporting Delivery of Fungible Things (217)


Section 20
Rules of Debts


I. The Rule of Indestructibility (219) II. Abolition of the Currency
Contracted For (221) M1. The Place of Payment (225). IV. Debt En-
forcement and Specific Performance (229)


Section 21
Interest


I. Types and Rates of Interest (233) II. Interest or Damages for De-
layed Payment (235) III. Restrictions on Interest. Usury (237) IV.
American Maximum Interest Acts (241) V. The Present Situation
(247)


Xiv


FULL TABLE OF CONTENTS


CHAPTER V


DEBTS UNDER FLUCTUATING CURRENCIES


Section 22


The Immutability of the Nominal Amount


I. The Principle of Immutability (249) I. Adaptable Debts—Damages
(255) II. Limits of Adaptability (261) IV. Executory Contracts
(262) V. The Public Utilities Situation (266)


Section 23


Revaluation in Germany


I. General Remarks: Preliminary Phases (269) II. Judicial Revalua-
tion (278) I. Statutory Revaluation (278) IV. Sociological Aspects
(281)


Section 24


Revaluation in General


I. Scaling Laws. Debts in Continental and Confederate Dollars (288)
I. Judicial versus Legislative Revaluation (288) Iii. International
Aspects of Revaluation (290)


Excursus on Savigny’s “Current Value” Doctrine (297)


CHAPTER VI
GOLD CLAUSES AND OTHER PROTECTIVE CLAUSES
Section 25


Occurrence and Types of Gold Clauses


I. Gold Clauses and Silver Clauses. The Facts (301) If. Gold Coin
Clauses and Gold Value Clauses (306) III. Gold Bullion Clauses (808)
IV. Accounting in Gold (and Silver) Values (310)


Section 26


Implied and Sham Gold Clauses


I. Evidential Basis of Gold Clauses (318) If. Implied Gold Clauses
(315) UI. Sham Gold Clauses (320) IV. Devaluation of the Gold
Unit Contracted For (324)


XV


FULL TABLE OF CONTENTS


Section 27


Operation of Gold Clauses
I. Significance of the Subject Matter (326) 1. Application to “Gold”
Obligations, of the Rules of Ordinary Debts (327) ITI. Ascertainment
of the Gold Value (3381)
Section 28
Judicial Restriction of Gold Clauses


I. Gold Clauses Under Cours Forcé. The French Rule (835) 1. Cri-
tique of the French Rule (340) IT. Attitude of the non-French Juris-
dictions (347) IV. The “Tantalus” Interpretation of the Gold Clause
(851) V. Other Devices of Judicial Restriction of Gold Clauses (355)


Section 29
Legislative Restriction of Gold Clauses


I. Comparative Survey (356) I. Constitutionality of American Gold
Clause Abrogation (361) III. Comparative Aspects (369) IV. Limita-
tions and Effects of Gold Clause Abrogation (8373)


Section 30


Conflict-of-Laws and International Law Aspects
of Gold Clauses


I. The Legal System Applicable (377) II. Government Bonds (387)
Tl. Public Policy (ordre public) (391) IV. Territorial Limitations Im-
posed by the Law Restricting the Gold Clauses (397) V. International
Law Aspects of Gold Clauses (399)

Section 31


Commodity and Index Clauses
I, Commodity Clauses (403) II. Index Clauses (406)


CHAPTER VII
FOREIGN CURRENCY DEBTS
Section 32


Foreign Currency Debts in General


I. The Foreign Currency Debt, a Monetary Obligation (411) 1. Appli-
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