The sun. [volume] (New York [N.Y.]) 1833-1916, 1879-01-25
The Lawfulness of Speculative Contract.

The Lawfulness of Speculative Contracts.
Tho Court OF Appeals Of Kentucky has
| lately passed upon the legality Of certain
| speculative contracts entered into under the
rules Of the New York Cotton Exchange and
| the New York Produce Exchange. Tho
| agreements were purchases Of cotton, pork,
and lard, TO be delivered TO the BUYERS at a
future date II is clear that IL the market
| price of these commodities had declined be-
| low the stipulated purchase price when the
time for delivery came, the buyers would
lose by the transactions; and their loss
would be measured 10y the excess Of the
purchase price which they must pay over
that for which the goods could now be bought
In the market.
In tho ease to which we refer. just such
| decline In fact occurred. Instead uf actually
taking the cotton pork, and lard when the
! time came, the buyers settled with the
scllcr or his successor In interest, by pay
mcnt Of money. The sum paid was precisely
what the seller would have gained 10y the
| transaction il it had been completed accord
! ing Ia its terms that Is 10 say, the excess
Of the amount the buyers had agreed to pay
for the goods over and above the amount
the seller would have 10 give for them IL
obliged to go into the market and purchase
the articles for delivery ON the day Of set
| tlcment.
These contracts wcrc denounced ns I'M
lawful. aud claims founded upon them were
resisted on the ground that the purchases
were not made with any intention that there
should ever Toe an actual delivery OF the
cotton and provisions or any payment
! therefor. On the contrary. II was averrcd
that both parties understood that the COM
moditics were neither 20 be delivered nor
paid for but that the contracts wero to be-
settled by the payment OF differences only.
| This. 1t was contendcd- made the agree
mcnts mere waRers, and therefore void
under the laws OF the State Of New York.
Now. the conclusion that the transactions
were simply wagering contracts would be
correct IL il were certain that the intention
and understanding Of the parties were as
stated And this view was adopted by the
Kentucky Court Of Appeals. II both parties,
In making the contract, understood and in
tended that they were neither to perform il
! themselves nor to procure others to perform
| 1t IN their stead. or that either party might
! elect before the time Of performance not TO
| perform his portion. and discharge himself
! by paying the difference between the con-
tract price and the market price when the
agreement natures or the option l. exor-
cisod the transaction is pronounced to be
merely wager
The evidence In this particular case how
ever, did not satisfy the Judges that the
! nou-porformance of the contracts there in
! suit, and settlement by the payment Of
| al
! parties at the outset. Such an intention
| could not fairly be inferred from the fact
! that the contract provided for future do
! livery, and actually was settled by paying
! differences. II might well hc that the
agreement was entered into in entire good
! faith on both sides, with a purpose of full
! filling il according to its terms. and il this
was the ease, the original contract would
not be rendered invalid 10y a subsequent eX-
erci-c Of the lawful right Of the parties Ia
cancel 1t aud adjust the claims arising
under II rs they saw tit. II Is important to
note that the Court found nothing in the
rules of either If tho Exchanges warrant
ing the conclusion that a contract made
under them was merely an agreement for
the payment 81 differences
The disposition OF American courts gen.
orally, in dealing with such speculative con-
| tracts as We have been considering. is To
hold, with the supreme Court 81 Illinois.
that the intention Of the parties gives the
! true characterize the transaction. There Is
also an evident reluctance to adludge con-
tracts void as wagcrs cXccp: ON the clearrst
proof. Simple suspicion is not AMI ought
not 10 b" enough As the Court Of Appeals
of Kentucky truly says There is, no
doubt, mach most niqutous and pernicious
gambling IN the city vt New York, aud in
decd IN all the large cities in this country.
on the prices Of all the leading articles Of
commerce; but that ali the contracts made
upon two Of the principal Exchanges Of the
commercial metropolis OF the country are Of
that character Is not TO be credited without
the most convincing evidence similar
ndisposition To brand speculative transac-
ilons rs gambling unless the evidence is Of
the strongest character has been mani
Tested by the courts Of New York
Our own Court of Appeals in this State has
expressed views in harmony with those to
which We have called attention. in case re
ported in the latest volume Of the published
decisions of that Court. The action was
brought upon an optional contract for tho
sale of gold and its validity was sustained
but the opinion proceeds TO lay down the
rule that an optional contract for the sale
Of property. in which there ia no intention
on the one sidc TO sell OF deliver or ON
the other side to buy or take the property.
but only that the difference shall he paid
according to the riso or fall in market
valucs, must be deemed a wager within the
meaning Of our statute
The Testimony About Poison In the