301 psi ((nrttpU ICam ^rljonl Slibtaty Cornell University Library KF 801.D51 A treatise on contracts for future deliv 3 1924 018 826 150 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018826150 A TREATISE CONTEACTS FOR FUTUEE DELIYEEY COMMERCIAL WAGERS, INCLUDING "OPTIONS," "FUTUEES," AND "SHOET SALES." BY T. HENEY DEWEY, OF THE NEW TORK BAR. NEW YOKE: BAKEE, VOOEHIS & CO., PUBLISHEES, 66 NASSAU STREET. 1886. Copyright, 1886, By T. henry DEWEY. Willis MoDokald & Co., Pkisters, 25 Park Row, N. Y. PREFACE. Theeb is a widespread opinion that much of the business done on the exchanges is illegal, in that it violates the law against gambling. This is largely due to the fact that a proper distinction is not made between regular purchases and sales for future delivery and " bucket shop " business. There is, however, a vast diflFerence between legitimate speculation and gambling. That the former is beneficial to the country at large, can hardly be disputed by even a casual observer. It has built the railways, stimulated the produc- tion of our grain and cotton, and developed our mineral and oil resources. There may be, and often is, wild and reckless speculation in "short sales," " options," and "futures," as contracts of this character are easily adapted to such use. Ambitious men with small capital are enabled through them to buy beyond their ability to pay, or sell beyond their means of purchasing; and foolish and inexperienced men buy or sell at great loss because they have miscalculated the market or do not understand the principles of trade. But these are only incidents. Speculation itself is the mainspring of com- mercial activity, and should be encouraged rather than con- demned. There is no inherent vice in " short sales " and other con- tracts for future delivery, and they are recognized through- out the commercial world. On the other hand, wagering upon the market price of stocks and commodities cannot be IV PREFACE. too severally condemned, and it must be admitted that the forms and methods of doing business on the exchanges are frequently prostituted to the worst kind of gambling. The " bucket shops " under cover of these forms and methods carry on their nefarious trade. They deal purely in "differ- ences" under the form of "short sales," "options," and " futures," and thus it is that all contracts of -that character have become associated in the public mind with gambling. In the following pages I have endeavored to present the principles and decisions of the courts respecting this subject, and although the law is far from being settled, and the de- cisions in many cases are contradictory and unsatisfactory, yet I have endeavored to classify and harmonize them, and if the distinction between open board of trade transactions for future delivery and " bucket shop " business has been made clear, the object of my work will have been accom- plished. T. H. D. 48 Wall Stkekt, New Toek Citt. CONTENTS. CHAPTER I. WAGERS. 14-34 14 Wagers defined ... . . 9 Wagers at common law . . . . 10 Statutes against wagers . . . . .13 Statutes against peculiar forms of gambling, and against contracts in the nature of wagers . English statutes against options, paying and Qompound- ing differences and short sales Act of Congress in reference to sales of gold for future delivery ...... 17 New York statute against short sales . . 18 Massachusetts statute against short sales . . 19 Pennsylvania statute against sales for future delivery. 20 Illinois statute against options . . , . 21 Georgia statute against short sales ... 21 Ohio statute . . . . . .21 CHAPTEE II. WAGERS BETWEEN PRINCIPALS. The true test ....... 28 Instances of commercial wagers . . . .31 Contracts presumed to be valid . . . .45 Defense of wager must be affirmatively made, and in many States affirmatively pleaded, and the burden of proof is on the party alleging it . . . .46 Intention, a question of fact .... 48 Unlawful intention must be mutual . . . .50 Intention determined from all the circumstances , 52 Porm not regarded ...... 54 Can a written contract of sale for future delivery be shown to be a wager by parol evidence ? . . . 62 VI CONTENTS. CHAPTER III. FACTS AND CIRCUMSTANCES WHICH HAVE BEEN CONSIDERED BY THE COURTS AS INDICATING AN INTENTION TO WAGER. Distinction between speculation and gambling Options as to the time of delivery Pure options . . . . . . Where the seller did not at the time of the sale own or have possession of the articles sold Margins ...... Where vendee intends to resell before delivery . Financial status . . . . . That the parties were engaged in a large number of mere speculative transactions .... Prior conversations ..... Prior dealings ...... Rules of the exchanges .... Usages ....... Rings — ringing out ..... Symbolical delivery . . . . • Clearing-houses ..... More sales than goods in the market Subsequent settlement of contracts . Contra transactions ..... Transfers before the time of delivery No grain offered or demanded .... Contracts closed the same day No deal lasting through option .... No preparation for delivery made . Covers ....... Original entries not produced Inability of commission merchant to give names of person with whom he dealt .... Inability of commission merchants to state where the article sold was at the time of contract Inadequacy of consideration .... Correspondence ..... Identical goods sold not delivered Two different forms of statement used The party not a dealer in the commodities bought or sold 76 82 82 95 106 115 120 131 135 185 136 136 144 159 159 169 170 178 183 183 183 183 183 183 189 189 189 191 195 195 196 198 CONTENTS. Vll CHAPTEE IV. EVIDENCE. Rules governing the introduction of evidence Rule I Rule II ... . Rule III ... PASS 201-230 . 201 203 . 204 The rules considered in reference to subjects treated of in chapter III ..... 204-230 Options . ...... 205 Not owning or having possession of the goods sold . . 208 Margins ...... 214 Where the purchaser at the time of the purchase intends to resell before the time for delivery arrives . . 214 Financial status . . . . . . 216 Where the parties were engaged in a large number of specu- lative transactions ..... 217 Prior conversations . . . ... 218 Prior dealings . . . . . .218 That the party was not a dealer in the commodities bought or sold ....... 218 Rules of the exchanges . . . . . 218 Usages ....... 218 More goods sold than in the market . . . 220 Acts and omissions of the parties after the contracts .are made 220 Subsequent settlements ..... 220 Contra transactions ..... 221 Transfers before the time of delivery arrived . . 221 No grain offered or demanded . . . 221 Contracts closed the same day .... 221 No deal lasting through the option . . . 221 No preparation made for delivery . . . 221 Covers ...... 222 Symbolical delivery ..... 223 Inability of commission merchant to produce original entries ...... 293 Inability to give the names of the parties with whom commission merchant dealt . . . 223 Inability to state where the articles sold were at the time of the sale ..... 223 VIU CONTENTS. Acts and omisssions of the parties — Inadequacy of consideration .... 223 Correspondence ...... 223 Two different forms of statement used . . 224 CHAPTER V. WAGERS CONSIDERED IN REFERENCE TO BROKERS AND COMMISSION MERCHANTS. THE SUBJECT REDUCED TO RULES. Rule I. Where a broker or commission merchant, in pursuance of instructions from his principal, buys or sells, or both, for future delivery, and in so doing makes contracts in his own name which may be enforced against him, he is entitled to his commissions and to indemnity for his dis- bursements, including losses paid, and may maintain an action therefor ...... 232 English authorities ..... 234 American authorities — Federal decisions . . . 242 American authorities — State decisions . . . 252 The Pennsylvania cases ..... 264 The New Jersey case ..... 274 Rule II. Where a broker or commission merchant, in pursuance of authority makes, in his own or his principal's name, contracts which are in form for the purchase or sale of stocks, securities, or commodities, but which are, in fact, wagers upon the market price of the same, he is entitled to recover from his principal his disbursements, including losses paid, and commissions, provided the transactions occur and the action is brought in England or in States where wagers are merely void and not un- lawful 277 English authorities ..... 277 American authorities — Federal decisions . . .281 American authorities — State decisions . . . 289 CONTENTS. IX Rule III. PAGE Where a broker, commission merchant, or other agent, in pursuance of authority makes contracts with others, in his own name, or in the name of his principal, which are in form for the purchase or sale of stocks, securities, or commodities, but are in fact wagers upon the market price of the same, and makes disbursements or pays losses in pursuance thereof, he cannot recover the money paid, or his commissions in a State where wagers are il- legal and prohibited by law .... 299 English authorities ..... 299 American authorities — Federal decisions . . . 301 American authorities — State decisions . . . 305 Rule IV. Where a commission merchant agrees with his principal that he will deal for his account, but that in no event is the principal to accept or make delivery of the articles bought or sold, and that only differences will have to be accounted for between them ; this would be a wager, and the commission merchant cannot recover the losses, or his commissions, even though, to protect himself, he made real contracts with others . . . 321 English authorities ..... 321 American authorities ..... 323 Rule V. Where the relation of principal and agent is clearly shown, and the latter guarantees a market to the former, and agrees that he will so conduct and arrange his principal's busi- ness that the latter will not have to make or receive delivery of the articles bought or sold, the agent can re- cover his commissions for losses paid . . . 324 English authorities ..... 324 American authorities ..... 326 X CONTENTS. EULE VI. PAGE Where a person loses a wager, and requests another to pay it, and the other does pay it, or loans money for that purpose, an action can be maintained to recover the money paid or loaned ; and this is so, even though the wager was unlawful, provided the person paying or loan- ing the money was not also a principal or agent in mak- ing the same, and provided also the payment itself is not prohibited by law ..... 329 English authorities ...... 329 American authorities — Federal decisions . . 333 American authorities State decisions . . . 335 Rule VII. Money advanced, loaned, or paid for the express purpose of being applied to an illegal object, cannot be recovered . 337 English authorities ..... 337 American authorities ..... 338 Rule VIII. If an agent, in the prosecution of an illegal enterprise, re- ceives money or other property belonging to his princi- pal, he is bound to account and turn it over to the prin- cipal, and cannot shield himself from liability therefor on the ground of the illegality of the business in which hewas employed . . . . . 340 English authorities . . . . . 340 American authorities ..... 342 TABLE OF CASES. American Union Tel. Co., Melchert I'., 29, 48, 54, 38, 83, 97, 99, 101, 115, 153, 173, 185, 220, 252. Amery v. Merryweather, 55, 61, 301. Anderson, Read v., 332. Armstrong v. Toler, 830, 333. Ashton I). Dakin, 97, 116, 334, 335. Atherford v. Beard, 11, 13. Aubert v. Maze, 301, 316, 319, 330, 337. Babcoct V. Thompson, 13. Backhaus, Barnard v., 29, 47, 53, 55, 61, 301, 307, 810. Baker v. Drake, 108. Baker, Tarleton v., 13. Baldwin, Flagg «., 39, 55, 59, 60, 61, 81, 109, 130, 123, 136, 139, 3( 3, 204, 274. Baldwin v. Potter, 343. Ball V. Gilbert, 18. Barnard v. Backhaus, 39, 47, 53, 54, 55, 61, 301, 307, 310. Barrows, Tyler »., 46, 53, 85, 97. Bartlett «. Smith, 38, 46, 48, 49, 51, 53, 55, 60, 61, 97, 111, 141, 144, 247, 304. Baxter, White «., 108. Beard, Atherford »., 11, 13. Beattie, Byers «., 54, 59, 60, 74, 331, 373, 333. Beeston v. Beeston, 341. Benedict, Bigelow v., 39, 45, 46, 88, 93, 97. Benedict, Sanborn «., 97. Bennett, Wordworth »., 316, 319, 830, 343. Berry, Rumsey v., 28, 46, 48, 63, 77, 99, 110, 213, 330, 353. Beveridge «. Hewitt, 29, 47, 48, 50, 52, 53, 54, 55, 83, 97, 135, 133, 153, 169, 180, 183, 185, 199, 307, 312. Bibb, Hawley v., 28, 52, 53. Bigelow V. Benedict, 29, 45, 46, 88, 93, 97. Billings, Rosewarne v., 28, 280, 330, 333. Blane, Grizewood v., 38, 31, 40, 48, 50, 51, 54, 60, 351. Blinn, Norton »., 319, 343. Bonsall, Kirkpatrick »., 29, 48, 53, 55, 60, 66, 78, 83, 85, 97, 114, 137, 133, 316. Borgie, Peck «., 339. Bouvier, Smith v., 11, 39, 78, 97, 108, 302, 358, 364. Boynton, Pixley v., 39, 50, 51, 83, 97. Brand v. Henderson, 53, 53, 62, 135, 318. Brass «. Worth, 108. Brogden v. Marriott, 11. Brown ii. Hall, 88, 97. Browne. Leeson, 11. Brown v. Speyers, 39, 97, 193, 253. Brown v. Turner, 319, 330. Bruas' Appeal, 3, 39, 55, 97. Bryan v. Lewis, 95. Bryan, Ruckman «., 339. Bryant v. Western Union Tel. Co., 28, 33, 54, 57, 74, 114, 175, 183, 331. Bryce, Cannan »., 300, 316, 330, 337. Bubb V. Yelverton, 833. Buckland, Waterman »., 13, 38, 33, 114. Bunn V. Riker, 13. Burt, Durant «., 108, 390, 335. Buss, White v., 339. Byers «. Beattie, 54, 59, 60, 74, 331, 372, 332. Cambers, Knight v., 278, 332. Cameron v, Durkheim, 108. Campbell, Chapman «., 97. Campbell v. Richardson, 13. Xll TABLE OF OASES. Cannon ». Bryoe, 300, 316, 330, 337. Oarmicliael, McEIroy v., 12. Carr, Union Nat. Bk. «., 38, 83, 113, 140. Carr, Williams v., 29, 51, 55, 60, 140, 259, 296. Cassard v. Hinman, 9, 29, 50, 65, 70, 97. CatcHngs, Mitchell v., 63. Cease, Pickering «., 28, 42, 95, 97. Chandler's Case, 36, 191, 207. Chapman a. Campbell, 97. Chicago & G. E. E. R. Co. v. Dane, 87. Child V. Hugg, 108. Clarke v. Foss, 28, 43, 46, 48, 51, 66, 76, 83, 97, 144, 148, 149, 170, 195, 300, 220, 323, 244, 330, 334. Clark V. Gibson, 3. Clark V. Meigs, 108. Clark, Shaw v., 29, 62, 83, 115. Clarkson, Frosts)., 51, 83, 108. Cobb V. Prell, 28, 47, 48, 83, 195, 196' 207, 223, 224, 303. Cockbume, Mitchell v., 319, 830. Coke on Littleton, 45. Colderwood v. McCrea, 29, 55, 60, 83, 97, 131, 136, 184, 185, 218. Collamer ». Day, 13. Cole V. Milmine, 29, 88, 97. Cooper V. Neil, 40, 234, 321. Corbett v. Underwood, 97. Crickitt, Hussy v., 11. Culbertson, Lyon «., 29, 95, 105,184. Cummings, Thompson v., 55, 60. ' Cunningham v. First Nat. Bk. of Augusta, 26, 29, 60, 61, 63, 395. Currie v. White, 97. Cushman, Ritter v., 108. Dakin, Ashton v., 97, 116, 234, 325. Dane, Chicago & G. E. R. R. Co. «., 87. Day, Collamer v., 13. DeCosta v. Jones, 11. DeHaven, Ruchizky »., 39, 55, 59, 109, 120, 269. Dehon, Milliken «., 108. Dewees «. Miller, 12. Dickson v. Thomas, 39, 55, 59, 109, 130, 167, 203, 204, 371. Dillman, Lowry v., 29, 54, 61, 115, 301, 318, 226, 264. Disborough v. Nelson, 88, 97. Ditchhurn «. Goldsmith, 11. Douglass, Hatch v., 39, 55, 60, 79, 97, 108, 216, 253. Drake, Baker «., 108. Drake, Hanks v., 108. Drake, Stewart «., 108. Dunham v. Strother, 12. Durant «. Burt, 108, 390, 835. Durkheim, Cameron v., 108. Dykers v. Townsend, 48. Edgell V. McLaughlin, 13. Edgerton «. Furzeman, 11. Egerton, Mcllvane »., 46, 97. Elliott, Good 11., 11. Elliott, Tenant v., 340. Esser v. Lindermann, 108. Evans v. Jones, 11. Evans v. Trenton, 343. Everingham v. Knapp, 54, 57, 61. Everingham v. Meighan, 313. Faikney v. Reynous, 315, 329. Fareira v. Gabell, 29, 48, 52, 59, 61, 62, 109, 120, 133, 134, 173, 317, 330, 267. Farmer ». Russell, 316, 330, 338, 340. First Nat. Bk. v. Oskaloosa, 39, 48, 50, 51, 55, 61, 136. First Nat. Bk. of Augusta, Cun- ningham v., 36, 39, 60, 61, 63, 395. Fiske, Wyman »., 29, 389, 336, 838. Fitch. Knight »., 28, 278. Flagg V. Baldwin, 29, 55, 59, 60, 61, 81, 109, 120, 133, 11:6, 129, 303, 304, 274. Poote, Jackson »., 83. 199, 248, 287, 307. Poote, Tenny v. (95 111.), 28, 55, 61, 62, 305. 813, 326. Poote, Tenny ®. (4 Brad.), 29, 48, 52, 54, 55, 61, 95, 199. Foss, Clarke b., 38, 43, 46, 48, 51, 66, 76, 88, 97, 146, 149, 170. 195, 307, 320, 333, 344, 330, 334. Friend, Wheeler «., 13. Frost V. Clarkson, 51, 83, 108. Furzeman, Edgerton v., 11. Gabell, Fariera v., 29, 48, 52, 59, 61, 62, 109, 130, 133, 134, 173, 317, 320, 267, TABLE OF CASES. XllI Ganger, Gilbert v., 29, 82, 95, 172, 220, 880, 334. Gheen, Maxton «., 29, 55, 59, 109, 366. Gheen v. Johnson, 108. Gibson, Clark v., 13. Gilbert, BallB.,13. Gilbert v. Ganger, 29, 82, 95, 172, 330, 330, 334. Gilbert v. Sykes, 11. Gilmore ®. Woodcock, 13. Glick, Wing v., 45, 46. Godefroi in re Hart, 334. Goldsmith, Ditchbnm v., 11. Good V. Elliott, 11. Gould, Staples v.. 108. Grant v. Hamilton, 13. Greaves, Sullivan v., 801. Green, In re, 28, 54, 60, 79, 136, 282, 301, 834. Gregory v. Wattowa, 39, 54, 57, 83, 264. Gregory ■». Wendell (89 Mich.), 28, 46, 48, 49, 50, 51, 53, 54, 60, 79, 97, 98, 108, 115, 130, 148, 166, 189, 301, 233. Gregory v. Wendell (40 Mich.), 28, 48, 60, 190, 191. Gray v. Hook, 819, 330. Griffith «. Pearce, 13. Grizewood ». Blane, 38, 31, 40, 48, 50, 51, 54, 60, 351. Gruman v. Smith, 108. Hall, Brov?n v., 88, 97. Hall, Johnson v., 12. Hamilton, Grant «., 13. Hamilton, Ream v., 39, 48, 55, 286. Hanks v. Drake, 108. Hannay, Petrie «., 61, 317, 329, 337. Hardy, Thacker »., 38, 40, 54, 60, 74, 75, 117, 130, 178, 216, 218, 221, 335, 236, 251, 361, 381, 331, 834, 335, 333. Harris v. Tumbridge, 46, 91. Harrison, Third Nat. Bank v., 29, 62, 382, 383, 305. Hart, ex parte Godefroi, 234. Hatch V. Douglass, 29, 55, 60, 79, 97, 108, 216, 253. Hatch, Wicks v., 108. Hawley i>. Bibb, 28, 52, 53. Heath, Wolcott v., 83, 95, 97, 264. Henderson, Brand v., 52, 53, 62, 135, 318. Hentz i>. Jewell, 39, 64, 85. Hewitt, Beveridge v., 39, 47, 48, 50, 53, 53, 313. Hewitt, Warren »., 97, 393, 313, 333, 843. Hibblewhite v. McMorine, 54, 60, 96. Higgins V. McOrea, 148, 191. Hinman, Cassard »., 9, 39, 50, 65, 70, 97. Hippie, Pettilon v., 12. Hook, Grey v., 319, 330. HoUidav, Justh v., 29, 48, 55, 59, 223", 374, 331. Hugg, Child v., 108. Hunt, Whitesides «., 28, 42, 44, 46, 48, 49, 50, 51, 52, 53, 54, 56, 60, 61, 82, 97, 98, 113, 175, 184, 314. Huntley v. Rice, 11. Hussey v. Orickitt, 11. Irwin V. Williar, 38, 43, 46, 48, 50, 51, 52, 54, 57, 60, 97, 131, 148, 155, 191, 251, 305. Ives, Phillips v., 13. Jackson v. Foote, 83, 199, 248, 287, 307. Jaudon, Markham v., 107, 191, 274, 275. Jerome, Stenton v., 108. Jessopp V. Lutwyche, 277, 331. Jewell, Hentz v., 64, 85. Johnson, Gheen v., 108. Johnson v. Hall, 12. Johnson, Trenton Ins. Co. v. , 12. Jones, DeCosta «., 11. Jones, Evans v., 11. Jones «. Marks, 113. Jonson V. Russell, 12. Jnsth 4). Holliday, 29, 48, 55, 59, 61, 109, 124, 195, 323, 274, 321. Kelly, Richardson v, , 12. Kent «. Miltenberger, 28, 41, 46, 66, 79, 83, 97, 109, 150, 174, 198, 206, 308, 218, 330, 361. Kingsbury v. Kirwan, 39, 30. Kirkpatrick a. Bonsall, 29, 48, 52, 55, 60, 66, 78, 83, 85, 97, 114, 127, 133, 316. Kirwan, Kingsbury v., 29, 30. Knapp, Everingham v., 54, 57, 61, Knight V. Cambers, 278, 332. XIV TABLE OF CASES. Knight V. Fitch, 28, 378. Knowlton v. Fitch, 108. Lamb, Seneca Co. Bk. »., 316, 330. Lashley, Steers v., 61, 319, 330, 338. Lassen v. Mitchell, 118. Lawrence v. Maxwell, 108. Leeson, Brown ii., 11. Lehmann u. Strassberger, 28, 50, 342, 281, 316, 330, 383. Leowolf, Stebbins v., 46, 48, 207. Lewis, Bryan v., 95. Linderman, Essex v., 108. Logan v. Musick, 29, 82, 97. Lorymer v. Smith, 95. Lowry v. Dillman, 29, 54, 61, 115, 301, 318, 226, 264. Lutwyche, Jessopp v., 377, 331. Lyne v. Siesfleld, 379. Lyon V. Culbertson, 39, 95, 105, 184. Lyster, ex parte Pyke, 333. Markham B. Jaudon, 107, 191, 374, 275. Marks, Jones v., 113. Marriott, Brogden »., 11. Marshall v. Thurston, 29, 55, 61, 97, 260, 297, 321, 389. Maxton v. Gheen, 29, 55, 59, 109, 266. Maxwell, Lawrence »., 108. Maze, Aubert v., 301, 316, 819, 330, 387. McCallen, Mortimer «., 97. McCarty, Melchoir o , 58. McCrea, Colderwood v., 39, 55, 60, 83, 97, 121, 136, 184, 185, 218. McCrea, Higgins v., 148, 191. McDonough ». Webster, 13. McBlroy v. Ca'-michael, 13. McGinnis v. Smythe, 108. Mcllvane v. Egerton, 46, 97. McLagon, Moeller v. , 109. McLaughlin, Edgell •»., 13. McLean e. Stuve, 29, 55, 286. McMorine, Hibblewhite v., 54, 60, 96. Meighan, Everingham v., 312. Meigs, Clark «., 108. Melchert v. American Union Tel, Co., 29, 48, 54, 58, 83, 97, 99, 101, 115, 153, 172, 185, 320, 252. Melchoir v. McCarty, 58. Menyweather, Amerv v., 55, 61, 301. Miller, Dewees »., 13. Milliken v. Dehon, 108. Milmine, Cole o., 39, 83, 97. Miltenberger, Kent v., 28, 41, 46, 66, 79, 83, 97, 109, 150, 174, 198, 206, 308, 318, 330, 361. Mitchell V. Catchings, 63. Mitchell V. Cockburn, 319, 330. Mitchell, Lassen »., 113. Moeller v. McLagon, 109. Monroe v. Smeiley, 13. Morgan, In re, 38, 53. Morgan, Ex parte Phillips in re, 38, 54, 60. Morgan!). Pebrer, 11. Mortimer v. McCalleu, 97. Murry i>. Ochletree, 39, 46, 51, 54, 61, 364. Musick, Logan »., 29, 82, 97. Neil, Cooper v., 40, 234, 321. Nelson, Disborough »., 88, 97. North V. Phillips, 29, 54, 59, 60, 109, 130, 123, 268. Norton «. Blinn, 319, 343. Noyes » Spalding, 39, 97. Nutter, Winchester a., 13. Ochiltree, Murry v., 39, 46, 51, 54, 61, 264. Oldham v. Ramsden, 333. Oskaloosa, First Nat. Bk. ■»., 39, 48, 50, 51, 55, 61, 136. Patterson's Appeal, 39, 59, 133, 273. Pearce, Griffith v., 13. Peck V. Borgia, 839. Petillon V. Hippie, 13. Petrie «. Hannay, 61, 817, 329, 337. Phillips t). Ives, 13. Phillips in re Morgan. 28, 54, 60. Phillips, North v., 29, 54, 59, 60, 109, 120, 123, 268. Pickering «. Cease, 28, 42, 95, 97. Pixley V. Boynton, 29, 50, 51, 83, 97, Porter v. Sawyer, 12. Porter ». Viets, 39, 54, 60, 68, 70, 77, 83, 97. Porter, Wells a., 96. Potter, Baldwin v., 342. Powell, Swift v., 83. Prell, Cobb v., 28, 47, 48, 88, 196, 196, 207, 233, 224, 803. TABLE OF CASES. XV Pyke, in re Lyster, 333. Quarles v. The State, 9. Eamsden, Oldham v., 332. Bead «. Anderson, 333. Eeam v. Hamilton, 39, 48, 55, 386 Reynous, Faikney v., 315, 339. Rice, Huntley v., 11. Richardson, Campbell «., 12. Richardson «. Kelley, 13. Riker, Bunn v., 12. Ritter v. Cushman, 108. Rogers in re Rogers, 341. Root, Whitehead v., 97. Rosewame v. Billings, 38, 380, 330, 332. Roundtree «. Smith, 38, 175, 230, 349. Ruchizky v. De Haven, 39, 55, 59, 109, 130, 269. Ruckman v. Bryan, 339. Rudolf V. Winters, 54, 61. Rumsey v. Berrv, 28, 46, 48, 63, 97, 99, 110, 313, 330, 353. Russell, Farmer v., 316. 330, 338, 340. Russell, Jonson «., 13. Sampson v. Shaw, 13, 319, 330. Sanborn v. Benedict, 97. Sankey, Shirley »., 11. Sawyer, Potter v., 12. Sawyer v. Taggart, 38, 46, 52, 83, 97, 98, 110, 117, 118, 135, 138, 144, 159, 166, 169, 171, 176, 195, 314, 216, 218, 330, 335, 354. Schneider, Wall u., 39, 50, 51, 111, 136, 167, 177. Seal, Wynkoop v., 108. Seneca (Jo. Bk. v. Lamb, 316, 330. Shaw V. Clark, 39, 62, 83, 115. Shaw, Sampson v., 13, 319, 330. Shirley ii. Sankey, 11. Shumate's Case, 9. Siesfleld, Lyne »., 279. Small, Stanton v., 88, 97. Smeiley, Monroe «., 13. Smith, Bartlett »., 28, 48, 49, 51, 53, 55, 60, 61, 97, HI, 141, 144, 347, 304. Smith V. Bouvier, 11, 29, 78, 9T, 108, 203, 258, 364. Smith, Gruman »., 108. Smith, Lorymer v., 95. Smith, Roundtree v., 38, 175, 330, 349. Smith, Whiter., 108. Smythe, McGinnis v., 108. Solomon, Story v., 39, 31, 45, 46, 54, 90, 98. Solomon, Yerkes v., 29, 48, 49, 54, 56, 61, 66. Spalding, Noyes v., 29, 97. Speyers, Brown «., 29, 97, 193, 252. Squires i). Whisken, 11. Stanton v. Small, 88, 97. Staples «. Gould, 108. State, Quarles v., 9. Stebbins v. Leowolf, 46, 48, 307. Steers «. Lashley, 61, 319, 330, 338. Stenton ». Jerome, 108. Stewart «. Drake, 108. Story V. Solomon, 39, 31, 45, 46, 54, 90, 98. Strassbergher, Lehman v., 38, 50, 242, 281, 816, 330, 833. Strother, Dunham a., 13. Sturges, Webster v., 39, 54, 60, 83, 95, 97, 308. Stuve, McLean v., 39, 55, 380. Sullivan v. Greaves, 801. Swartz's Appeal, 39. Swift «. Powell, 83. Taggart, Sawyer «., 38, 46, 52, 83, 97,98, 110, 117, 118, 135, 188, 144, 159, 166, 169, 171, 176, 195, 314, 216, 218, 220, 225, 254. Tarleton v. Baker, 13. Tenant v. Elliott, 340. Tenney v. Foote (95 Me.), 28, 55, 61, 63, 305, 313, 336. Tenney v. Foote (4 Bradw.), 39, 48, 53, 54, 55, 61, 95, 199. Thacker v. Hardy, 38, 40, 54, 60, 74, 75, 117, 130, 178, 316, 318, 321, 235, 336, 351, 261, 381, 331, 334, 335, 333. Third Nat. Bank v. Harrison, 39, 63, 283, 283, 305. Thomas, Dickson v., 29, 55, 59, 109, 120, 167, 203, 304, 271. Ttompson, Babcock v., 13. Thompson v. Cummings, 55, 60. Thurston, Marshall v., 39, 54, 61, 97, 360, 397, 321, 339. XVI TABLE OF OASES. .Tiedman, Williams «., 29, 46, 51, 55, 61, 83, 97, 173, 820, 264. Toler, Armstrong v., 380, 333. Townsend, Dykers «., 46, 48. Trenton, Evans v., 342. Trenton Ins. Co. v. Johnson, 13. Tumbridge, Harris v., 46, 91. Turner, Brown «., 819, 330. Tyler i>. Barrows, 46, 52, 85, 97. Underwood, Corbett «., 97. Union Nat. Bk. v. Carr, 38, 88, 118, 140. Veits, Porter v., 29, 54, 60, 63, 70, 77, 83, 97. Wall V. Schneider, 29, 50, 51, 111, 136,167,177. Warren ». Hewitt, 97, 292, 313, 883, 343. Waterman v. Buckland, 13, 28, 32, 114. Wattowa, Gregory v., 29, 54, 57, 88, 264. Webster, McDonough v., 13. Webster «. Sturges, 29, 54, 60, 88, 95, 97, 308. Wells V. Porter, 96. Wendell, Gregory v. (39 Mich.), 28, 46, 48, 49, 50. 51. 52, 54, 60, 79, 97, 98, 108, 115, 130, 148, 166, 189, 201, 233. Wendell, Gregory ®. (40 Mich.), 28, 48, 60, 190, 191. Western Union Tel. Co., Bryant «., 28, 33,54,57, 74, 114.175, 183, 321. Wheeler v. Friend, 13. Whisken, Squires v., 11. White V. Baxter. 108. White «. Buss, 339. White, Currie «., 97. White V. Smith, 108. Whitehead v. Root, 97. Whitesides v. Hunt, 38, 43, 44, 46, 48, 49, 50, 51, 52, 58, 54, 56, 60, 61, 82, 97, 98, 113, 175, 184, 814. Wicks V. Hatch, 108. Williams v. Carr, 29, 51, 55, 60, 140, 359, 296. Williams ». Tiedman, 29, 46, 51,55, 61, 88, 97, 173, 220, 264. Williar, Irwin v., 28, 42, 46, 48, 50, 51, 52, 54, 57, 60, 97, 181, 148, 155, 351, 805. Winchester v. Nutter, 18. Wing V. Glick, 45. 46. Winters, Rudolfs., 54, 61. Wolcott V. Heath, 83, 95, 97, 364. Woodcock, Gilmore v., 13. Woodworth v. Bennett, 316, 319, 380, 343. Worth, Brass v., 108. Wyman ». Fiske, 29, 289, 386, 388. Wynkoop v. Seal, 108. Yelverton, Bubb v., 882. Yerkes v. Solomon, 39, 48, 49, 54, 56, 61, 66, 92, 97, 214. Young, Bx parte, 28, 36, 50, 55, 60, 83, 93. CONTRACTS FOE FUTUEE DELIYEET COMMERCIAL WAGERS. CONTEACTS FOR EUTUEE BELIYEEY. CHAPTER I. WAGERS. Wagers Defined — A wager is defined to be " a con- tract by which two or more parties agree that a certain sum of money or other thing shall be paid or delivered to one of them on the happening or not happening of an uncertain event." ^ To constitute a wager there must be a risk on both sides.* " A wager is something haz- arded on the issue of some uncertain event ; a bet is a wager."* A wager is an agreement having all the requisites of a legal contract; parties, consideration, subject-matter, and the meeting of minds. The consid- eration is the mutual promise of each party to pay, or deliver to the other, in case he loses, the money or thing depending upon a contingent event. Such mutual promises have always been considered good considerations for each other.* The peculiarity of this contract is, that its perform- ance is in the alternative, that is by one party or the other according as one or the other loses. Hence in Shumate's case,® the Court defined a wager to be a con- ' 3 Bouvier's Diet. 647. ^ Quarles d. The State, 5 Hump. .561. ° Cassard v. Hinman, 1 Bosw. 307. ■* 1 Parsons on Contracts (5th ed.), 448. = 15 Gratt. 653. 3 10 CONTRACTS FOE FUTURE DELIVERY. tract upon a contingency by which one may lose, although he cannot gain, or the other gain, but cannot lose. In plainer language this means that there is no mutual advantage to the contracting parties ; it is all loss to one party and all gain to the other. Blackstone divided considerations for contracts into four species : First, " Do, ut des" as where I give money or goods on a contract that I shall be repaid money or goods for them again : Second, " Facio^ ut 'facias^'' as when I agree with a man to do his work for him, he will do- mine for me: Third, '■'■ Facio, ut des,^'' as where a man agrees to do anything for a price to be given him r Fourth, " JDo^ Ujt facias^'' as where a person agrees with a servant to give him wages for his services. In each of these classes it will be observed that each party receives a benefit from the other. If a person having money and wanting a home employs a person to construct him a house, both parties are benefited by the contract ; but if, out of idle curiosity or evil disposition, a contract is made that one party will pay to the other a certain sum of money, if a certain woman is found to be single, and the other is to pay the same amount if she be married, here the party losing get& no possible benefit. Such a contract is, however, perfect in law, and has every legal essential, yet it is vicious, because there is no mutual advantage, and it is this evil feature which has led the courts to regret that they ever enforced or sanctioned them, and the legislatures to make them void, and in some States to punish the parties to them. Wagers at Common Law — Wagers at common law are valid and enforcible in the courts. That they were idle did not affect their legality. There are WAGERS. 11 many exceptions to this rule founded on principles which make other contracts void. They have been held invalid on the ground of public policy, as where a wager was upon the result of a criminal trial,^ or as to the method of playing an illegal gamef on the ground of creating disturbances and encouraging cru- elty, as in the case of wagers upon the result of a dog fight,^ or a cock fight,* or whether a horse could trot eighteen miles an hour;^ on the ground that they tended to impair the purity of elections, as a wager upon the result of an election f or because in restraint of marriage, as a wager that a person would not marry in a certain number of years ; ^ or because pro- vocative of public scandal, as whether an unmarried woman had a child,^ or whether adultery had been committed,' or whether certain domestic relations ex- isted." With these and like exceptions the common law recognizes and enforces wagers.^^ Notwithstand- ing the law upheld wagers, the courts frequently expressed regret that they had ever been sanctioned. Le Blanc, J., in Gilbert v. Sykes,^^ said : " It is often ' Evans v. Jones, 3 M. & W. 77. = Brown v. Leeson, 3 H. Bl. 43. = Edgerton v. Furzeman, 1 C. & P. 613. * Squires v. Whisken, 3 Campbell, 140. ' Brogden v. Mariott, 3 Bing. (N. S.), 38. " Parsons on Contr. (6th ed.), 755. ' Huntley v. Rice, 10 East, 23. ' Ditchburn v. Goldsmith, 4 Camp. 153. " De Costa v. Jones, Comp. 739. " Shirley «. Sankey, 2 B. & P. 130. " Good «. Elliott, 3 Term R. 693 ; Gilbert v. Sykes, 10 East, 150 ; Atherford v. Beard, 3 Term R. 610; Morgan v. Pebrer, 4 Sco. 230; Hus- sey D, Crickitt, 3 Camp. 693. " 16 East, 159. 12 CONTRACTS FOR FUTURE DELIVERY. lamented that action^ upon idle wagers should ever have iDeen maintained in courts of justice. The prac- tice seems to have prevailed before that full considera- tion of the subject which bas been had in modern times, and it is now clearly settled that the subject matter of a wager must be at least perfectly innocent in itself, and must not tend to immorality or impolicy." And Ashurst, J., in Atherford v. Beard,^ expressed the opinion that " Perhaps it would have been better for the public welfare if the courts had originally deter- mined that no action to enforce the payment of wagers would be permitted ;" and Buller, J., in the same case, doubted if " it has ever been declared as a principle of common law that a wager between two persons not interested in the subject-matter was legal." In the United States courts, in the case of Grant V. Hamilton,^ it was held that a wager fairly made was recoverable at common law. In !N^ew York the early decisions^ showed a tendency to sustain wagers as valid at common law. In California,* Delaware,® Illinois,® New Jersey,'^ and Texas,® the English common law pre- vails, except so far as it has been modified by statutes. In Pennsylvania it has been decided that wagers were » 3 Term R. 610. ' 3 McLean, 100. ' Campbell v. Richardson, 10 Johns. 406; Bunn v. Riker, 4 Johns. 436. * Johnson ». Hall, 6 Cal. 359; Jonson v. Russel, 37 Cal. 670. ' Dewees v. Miller, 5 Horr. 347; Porter v. Sawyer, 1 Horr. 519; Grif- fith V. Pearce, 4 Houston, 309. " Richardson «. Kelley, 85 111. 491 ; Pettillon v. Hippie, 90 111. 420. ' Trenton Ins. Co. v. Johnson, 3 Zabr. 536. ' Dunman v. Strother, 1 Texas, 89 ; McElroy «. Carmicheel, 6 Texas, 454 ; Wheeler i>. Friend, 33 Texas, 683 ; Monroe v. Smeiley, 35 Texas, 486. WAGERS. 13 void as a part of the common law of the State, on the ground that they were contrary to the genius and policy of the people, and while admitting that wagers were valid at common law, the courts held that it was no part of the common law introduced into Pennsyl- vania by William Penn or his successors.^ So in Ver- mont,^ New Hampshire,^ Maine,* Missouri,' and Massa- chusetts ® wagers have been held to be invalid. Statutes against Wagers — In England, by statute, it is enacted: "That all contracts or agreements, whether by parol or in writing, by way of gaming or wagering, shall be null and void ; and no suit shall be brought in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager." '' In New York it is provided by statute^ that " all wagers, bets, or stakes, made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty, or unknown or contingent event what- ever, shall be unlawful. All contracts for or on account of any money or property, or thing in action so wa- gered, bet or staked, shall be void." In nearly every other State of the Union there are statutes against betting, gaming, and wagering, partially or wholly pro- hibiting the same, in many instances providing that all ' Edgell V. McLaughlin, Whar. 176 ; Phillips v. Ives, 1 Rawle, 36 ; Bruas' App. 55 Pa. St. 394. '^ Collamar v. Day, 2 Vt. 144 ; Tarlton v. Baker, 18 Vt. 9. ' Clark V. Gibson, 13 N. H. 386 ; Winchester v. Nutter, 53 N. H. 507. * McDonough D.Webster, 68 Me. 530 ; GJlmore ».Woodcock, 69 Me. 118. ^ Waterman v. Buckland, 1 Mo. App. 43. " Ball V. Gilbert, 13 Met. 399; Babcock v. Thompson, 3 Pick. 446; Sampson v. Shaw, 101 Mass. 150. ' 8 & 9 Vict. c. 109, sec. 18. » Revised Statutes, vol. Ill, p. 1963. 14 CONTRACTS FOK FUTURE DELIVERY. money deposited or wagered may be recovered back, and the parties to them made liable to penalties and severe punishments. As a general rule it may be stated that in this country all wagers are void, either at common law or made so by statute. In many of the States they are made unlawful by statute. STATUTES AGAINST PECULIAR FORMS OF GAMBLING, AND AGAINST CONTRACTS IN THE NATURE OF WAGERS. The English Statate agamst Options, paying and compounding Differences and Short Sales — In 1734 an act known as Sir John Barnard's Act^ to prevent " the infamous practice of stock jobbing" was passed, the preamble of which is as follows : " Whereas, great inconveniences have arisen, and do daily arise, by the wicked, pernicious, and destructive practice of stock jobbing, whereby many of his Majesty's good subjects have been and are diverted from pursuing and exer- cising their lawful trades and vocations, to the utter ruin to themselves and families, to the great discour- agement of industry, and to the manifest detriment of the trade and commerce." The statute then proceeds as follows: "That all contracts and agreements whatsoever * * * upon which any price or consideration in the nature of a price shall be given or paid for liberty to put upon, or to de- liver, receive, accept, or refuse any public or joint stock, or other public securities whatsoever * * * and also all wagers and contracts in the nature of wagers, and ' 7 Geo. II, c. 8. WAGERS. 15 all contracts in the nature of puts and refusals, relating to the then present or future price or value of such stock or securities as aforesaid, shall be null and void to all intents and purposes whatsoever." The act then provides a penalty of five hundred pounds for a viola- tion of this part of it, one-half to be paid to the crown, and one-half to the party prosecuting. Section 5 of said act provides as follows : " and for preventing the evil practices of compounding or making up differences for stocks or other securities bought, sold, or at any time hereafter to be agreed so to be, be it further enacted by the authority aforesaid, that no money or other consideration whatsoever (except as hereinafter provided) shall, from and after the first day of June, 1734, be voluntarily given, paid, had, or received, for the compounding, satisfying or making up any differ- ■ence for not delivering, transferring, having, or receiv- ing any public or joint stock, or other public securities, •or for the not performing any contract or agreement so stipulated and agreed to be performed ; but that all and every such contract and agreement shall be spe- cifically performed and executed on all sides, and the stock or security thereby agreed to be assigned, trans- ferred, or delivered shall be actually so done, and the money, or other consideration thereby agreed to be given and paid for the same, shall also be actually and a-eally given and paid; and all and every person or persons whatever who shall, from and after the said :first day of June, 1734, voluntarily compound, make up, pay, satisfy, or receive such difference money, or other consideration whatsoever, for the non-delivering, transferring, assigning, having, or receiving such stock, or other security so to be agreed to be delivered^ traqs- 16 CONTKACTS FOE FUTURE DELIVERY. ferred, assigned, had, or received, as aforesaid, shall forfeit and pay the sura of one hundred pounds * * * one-half to be paid to the crown and the other half to him who shall sue for the same." Section 8 of said act is as follows : " And whereas it is a frequent and mis- chievous practice for persons to sell and dispose of stock, and other securities, of which they are not pos- sessed; be it enacted by the authority aforesaid, that all contracts and agreements whatsoever, which shall, from and after the first day of June, 1734, be made or entered into for the buying, selling, assigning, or trans- ferring of any public or joint stocks or stock, or other public securities whatsoever, or of any part, share, or interest therein, wherein the person or persons con- tracting or agreeing, or on whose behalf the contract or agreement shall be made, to sell, assign, and transfer the same, shall not, at the time of making such con- tract or agreement, be actually possessed of, entitled unto, in his, her, or their own right, or in his, her, or their own name or names, or in the name or names of a trustee or trustees to their use, shall be null and void to all intents and purposes whatsoever." It then pro- vides that any person violating the same shall forfeit five hundred pounds, one-half to the crown and one- half to him who prosecute ; and further provided that any broker or agent who shall make or negotiate knowingly any such sale shall in like manner pay a penalty of one hundred pounds. This act applied only to public funds, and had no relation to other funds or to merchandise. This statute remained in force for one hundred and twenty-five years, and was repealed in 1860. That public opinion on the subject had in the WAGERS. 17 meantime undergone a change is indicated by the pre- amble of the repealing act, which is as follows ; ^ "Whereas an act was passed, in the seventh year of the reign of King George the Second, chapter eight, to prevent the practice of stock jobbing, and by another act, passed in the tenth year of the said King's reign, chapter eight, the said first mentioned act was made perpetual : and whereas the said acts impose unneces- sary restrictions on the making of contracts for the sale and transfer of public stocks and securities, and it is therefore expedient to repeal tbe same ; be it enacted by the Queen's most excellent Majesty, by and with the consent of the Lords spiritual and temporal, and commons, and present Parliament assembled, and hj the authority of the same, as follows : 1. From and after the passage of this Act, the said two several acts before mentioned shall be, and the same are hereby repealed." Act of Congress in reference to sales of gold for Future Delivery — The Congress of the United States, in March, 1863, passed an act,* by which it was provided, that "all contracts for the purchase and sale of gold or silver coin and bullion, and all contracts for the loan of money or currency secured by pledge or deposit, or all other disposition of gold or silver coin of the United States, if to be performed after a period ex- ceeding three days, shall be in writing or printed, and signed by the parties, their agents, or attorneys, and shall have one or more adhesive stamps, as provided in the act to which this is an amendment, equal in amount to one-half of one per centum, and interest at ' 23 & 24 Vict. c. 38. = March 3, 1863, 2 Bright's Stat, at Large, 144; 13 U. S. Stat. 719. 18 CONTRACTS FOE FUTDRE DELIVEET. the rate of six per cent, per annum on the amount so loaned, pledged, or deposited." This act was repealed in 1864.1 New York Statutes against Short Sales.— In 1812 an act was passed against stock jobbing as follows •? " That all contracts, written or verbal, hereafter to be made, for the sale or transfer, and all wagers concerning the prices present or future, of any certificate or evidence of debt due by or from the United States or any sep- arate State, or any share or shares of the stock of any bank, or any share or shares of the stock of any com- pany established, or to be established, by any law of the United States, or any individual State, shall be, and all such contracts are hereby declared to be abso- lutely void ; and both parties are hereby discharged from the lien and obligation of such contract or wager ; unless the party contracting to sell and trans- fer the same shall at the time of making such contract be in actual possession of the certificate, or other evi- dences of debt or debts, share or shares, or to be other- wise entitled in his own right or duly authorized or empowered by some person so entitled to transfer the said certificate, evidence, debt or debts, share or shares, «o to be contracted for. And the party or parties who may have paid any premium, difi'erences, or sums of money in pursuance of any contract, hereby declared to be void, shall and may recover all such sums, to- gether with damages and costs, by action on the case, in assumpsit for money had and received to the use of the plaintiff, to be brought in any court of record." ' 13 U. S. Stat. p. 303; Laws U. S. 1864, ch. 173, § 173; see also Rev. of Statutes of U. S. 1874, Sd ed. (1878, p. 1085). » 2 R. L. 187, sec. 18. WAGEKS. 19 In the year 1830 this statute was re-enacted as fol- lows : ^ " All contracts for the sale of stocks are void unless the party contracting to sell the same shall at the fime of making such contracts be in the actual pos- session of the certificate of such shares, or be otherwise entitled thereto, in his own right, or to be duly au- thorized, by some person so entitled, to sell the certifi- cate or shares so contracted for." This statute, like all others of the same nature, failed in its desired effect, and in the year 1858 it was repealed by an act as follows ; " No contract, written or verbal, hereafter made for the purchase, sale, trans- fer, or delivery of any certificate, or other evidences of debt, due by or from the United States, or any sepa- rate State, or of any share or interest in the stock of any bank, or of any company incorporated under any law of the United States, or of any individual State, shall be void, or voidable, for any want of considera- tion, or because of the non-payment of any considera- tion, or because the vendor at the time of making such contract is not the owner or possessor of the certificate or certificates, or other evidence of such debt, share, or interest." In New York State, as the law now stands, there is no prohibition against short sales of stock or any other commodity, though there is a constant agitation of the matter in the General Assembly from year to year, which resulted last year ^ in the passage in the Senate of a stringent act against short sales. The Hassachusetts Statute agaiust Short Sales/ — " Ev- ery contract, written or oral, for the sale or transfer of ' 1 Eev. Stat. 710, sec. 6. " 1885. ' Gen. Stat. Mass. chap. 105, sec. 6, 20 OONTKAOTS FOR FUTURE DELIVERY. a certificate or other evidence of debt due from tbe United States, or other separate State, or of any stocks, or of any share or interest in the stock of a bank, company, city or village incorporated under a law of the United States, or an individual State, shall be void, unless the party contracting to sell or transfer the same is, at the time of making the contract, the owner or assignee thereof, or authorized by the ownfer or assignee, or his agent, to sell or transfer the certifi- cate or other evidence of debt, share, or interest, so contracted for." This statute is now in force. The Pennsylvania Statute against Sales for Future De- livery.i — " If any person or persons, whatsoever, shall make or enter into any contract or agreement, written or oral, for the purchase, receipt, sale, delivery or transfer of any public loan or stock, or the stock of any corporation, institution, or company, or any secur- ity in the nature thereof, or of any share or interest in such loan or stock, or in the stock of any such corporation, institution or company, or other security in the nature thereof, or any bill, note or other obligation of any corporation, institution or company, created or authorized, or that may be hereafter created or organized as aforesaid, in which contract or agreement it may be stipulated or understood be- tween the parties thereto, his, her, or tbeir agent or agents, that the same may be executed or performed at any future period exceeding five judicial days next ensuing the date of such contract or agreement, then, and in every such case, such contract or agreement ' Laws of Pa. 1841, p. 398, sec. 6. WAGERS. 21 shall be and the same is hereby declared void." This act has been repealed. The Illinois Statute against Options.— By the revised statute of Illinois ^ it is enacted that : " Whoever contrd,cts to have or give to himself or another the option to sell or buy, at a future time, any grain, or other commodity, stock of any railroad, or other company, or gold, or forestalls the market by spread- ing false rumors to influence the price of commodities therein, or corners the market, or attempts to do so in relation to any of such commodities, shall be fined not less than $10 nor more than $1,000, or confined in the county jail not exceeding one year, or both ; and all contracts made in violation of this section shall be considered gambling contracts and shall be void." The Georgia Statute against Short Sales. — The Code of the State of Georgia ^ provides as follows : " A bare contingency or possibility cannot be the subject of sale, unless there exists a present right, in the person selling, to a future benefit ; so a contract for the sale of goods to be delivered at a future day where both parties are aware that the seller expects to purchase himself to fulfill his contract, and no skill and labor or expense enters into the consideration, but the same is a pure speculation upon chances, is contrary to the policy of the law, and can be enforced by neither party." The Ohio Statute.— A statute was passed in May, 1885, by the General Assembly,, which is very sweeping in its terms. • Sec. 178. = Sec. 3638. 22 OONTKACTS FOK FUTURE DELIVERY. By the first section it is provided that " all contracts and agreements, no matter hj what name designated, by which any person shall contract or offer to sell, or to buy, or to offer to buy, flour,, corn, wheat, or grain of any kind, or meat, fresh or salt, dry or green, smoked or not, the ownership of the same not being in the same, and has not the property on hand to deliver upon such sale, or when the purchaser of the same so contracting to buy or offering to buy the same has not the means to pay, or does not intend actually to deliver or receive and pay for the same, are hereby declared illegal contracts and agreements, against public policy, and null and void." By the second section it is provided : " All such contracts, agreements, and offers to sell or buy, as well as all transactions in stocks, petroleum, the grains and provisions aforesaid, by margins, or futures, are made and declared gambling and criminal acts, whether the parties buying or selling, or offering to buy or sell, acts for himself, or as the agent or broker for any firm, company, or broker's office ; " and further provides for conviction and punishment for a violation of this section. By the third section it is provided that in order to convict a person of the offense described in section two, " it shall not be necessary to show that both buyer and seller exist or agree, but the crime shall be complete by showing an offer to sell, whether the offer to sell is accepted or not; and any person who shall communicate, receive, exhibit or display in any manner, any such offer to so sell or buy, or any statement or quotations of the prices of WAGERS. 23 any such margins, futures or options, are deemed and held to be an accessory thereto, and punished in -the same manner as the principal ; and any such company, corporation, or person remitting any such communi- cations, reception, exhibit or display * * * shall be fined not less than five hundred dollars, nor more than one thousand dollars." The owner of buildings who knowingly permits any of the gambling acts afore- said in his building is to be fined in the same manner. Said act also provides that it shall not apply to legally incorporated produce exchanges, chambers of commerce, or boards of trade, or to members of said produce exchanges, chambers of commerce, or boards of trade, or their agents or employees, when trans- actions are done in accordance with the established rules of such exchanges, chambers of commerce, and boards of trade, and executed thereon, or to the per- sons so dealing with or through them, or to persons who shall only communicate, receive, or deposit quota- tions on said produce exchanges, chambers of com- merce, or boards of trade, and shall not apply to or interfere with legitimate business transactions in the regular course of trade. The history of these acts furnishes an interesting and instructive study, and taken as a whole they show how useless it is to legislate against the natural laws of trade. The English statute sought to prevent short sales in public funds, and compelled parties who made contracts for the future delivery of such funds to actually execute them, and prohibited con- tracts known as "puts," "calls," and "straddles." After lingering on the books for a century and a 24 OONTEAOTS FOE FUTURE BBLIVBRY, quarter, scorned and violated every day, failing to accomplish the object desired, and injuring legitimate trade, the true result and effect of it was shown, and it was repealed. It is manifestly wrong and oppressive to punish parties making short sales, or to prohibit under severe penalties the making of optional con- tracts, and absurd to punish parties who, having in good faith made time contracts, settle them upon payment of the precise sum which the law in an action for their breach would compel them to pay. The act of Congress in reference to gold sales, and the New York statute against stock jobbing, and the Pennsylvania statute against short sales, have all of them met with the same fate. It is true that the Massachusetts statute against short sales, and the Georgia statute against "futures," remain, but that either of these statutes prevent in any appreciable degree short sales or options in these States is extremely doubtful. They are like sumptuary laws and laws against the taking of usury, more honored in the breach than in the observance, and by honorable men would never be taken advantage of. What will be the effect of the Ohio statute remains to be seen. It does not pretend to prohibit the settlement of contracts honestly made by the payment of differences, but is designed to destroy and prevent that abomination known as bucket shops, and business of a kindred nature. Such places are as pernicious as the veriest gambling hells, and every member and friend of the exchanges will heartily wish that tbey may be exterminated. CHAPTER II. WAGERS BETWEEN PRINCIPALS. Sales for the future delivery of goods and securi- ties are of frequent occurrence in the commercial transactions of to-day, and were always recognized where the seller had the possession and ownership of the articles sold. In the vast majority of cases, however, contracts of sales in early ti^nes were for present delivery, and there was little opportunity for controversy to arise in respect to executory sales to he performed by delivery in the future, yet it was formerly held that a party not having the possession or ownership of the goods could not make valid contracts for their sale. In the progress of time and growth of business, the needs of manufacturers, and the natural desire of planters and farmers to dispose in advance of the goods and crops to be produced, made these contracts very common, and gave the opportunity for specula- tors to trade upon the prospective wants and pro- ductive capacities of the country, so that soon we bad an enormous trade in selling and buying goods, crops and articles to be manufactured long before they had any existence. That certain evils would naturally attend business of this character, cannot be denied, and opposition to it found expression in the several statutes against stock jobbing, short sales and options referred to in 3 26 CONTRACTS FOR FUTURE DELIVERY. Chapter I, some of which are still in force ; and for a considerable time the courts attempted to make a distinction between sales for future delivery where the seller had the articles, and where he did not, holding in the latter case that they were unlawful. But to-day the right to sell where the seller has not the articles in possession, and has no means or expectation of obtaining them except by going into the market and buying when the time for delivery arrives, is not disputed, and that there is nothing immoral in this, the enlightened sense of the com- munity and courts concede. The difficulty which has arisen, and is constantly growing, is the use which is made of the great opportunity this mode of dealing offers for reckless speculation and open gambling so rife at the present time under the forms of legitimate trade. A sale of a commodity for future delivery on the produce exchange is called an "option," the option being merely as to the day within a given month or other limited time upon which delivery may be made or required. On the cotton exchange such a sale is called a " future." ^ On the stock exchange securities sold for future delivery are called " buyer's option," or " seller's option," as the case may be. In all these cases actual delivery is contemplated and provided for by the rules of the several exchanges, and must be made on the last day of the time limited by the agreement, and may be made on any day during the time limited by the party having the option to do so. ' In Cunningham ». The National Bank of Augusta, 71 Ga. 400, the court in defining this term erroneously made it out to be a wager. WAGEES BETWEEN PRINCIPALS. 27 There is another class of options which will be spoken of hereafter as " pure options," being simply the privilege of- making or demanding delivery, and are designated as " calls," " puts," and " straddles " or " spread eagles." A call is a contract by which a party signing or making the same agrees, in consideration of a certain sum of money, to deliver at the option of the party named therein, or to his order, at a time named, certain securities or goods at a certain price.^ A put is of the same character, except that the party signing or making the same agrees that he will accept and pay for the securities or goods.^ A straddle or spread eagle is a combination of a put and a call, the owner having the right either to deliver to, or require the delivery from the maker the securities or goods designated in the contract.* ^ The following is the form of a stock " call " : New Yoke, 1886. For value received, the bearer may call on me for shares of the common stock of the Railroad Company at per cent., any time in days from date. The bearer is entitled to all dividends or extra dividends declared during the time. Expires 1886, at 1.45 p. m. [Signed]. See other forms of " pure option" contracts in Chapter III. ' The following is the form of a stock " put " : New Yobk, 1886. For value received, the bearer may deliver me shares of the common stock of the Railroad Company at per cent., any time in days from date. The undersigned is entitled to all dividends or extra dividends declared during the time. Expires at 1.45 p. m. [Signed]. ' The following is the form of a stock " straddle " : New York, 1886. For value received, the bearer may call on the undersigned for shares of the common stock of the Railroad Company at per 28 OONTEAOTS FOE FUTURE DELIVEET. These contracts have severally been held to be lawful and enforceable in the courts, though in some States there are statutes against them. It is inconsist- ent to say that such contracts are wagers; but whether^ in a given case, a transaction in the form of either of these contracts is a real contract according to its terms or a cover for a wager, we propose now to consider. THE TEUE TEST. Where the parties to a contract in the form of a sale agree expressly or by implication at the time it is made, that the contract is not to be enforced, that no delivery is to be made, but the contract is to be settled by the payment of the difference between the contract price and the market price at a given time in the future, — such a transaction is a w^^g^r.^ The form of cent., any time in days from date. Or the bearer may, at his op- tion, deliver the same to the undersigned at per cent., any time within the period named. All dividends or extra dividends declared during the time are to go with the stock in either case ; and this instru- ment is to be surrendered upon the stock being either called or deliv- ered. Expires at 1.45 p. m. [Signed]. ' Grizewood v. Blane, 11 0. B. 526; Thacker v. Hardy, L. R. 4 Q. B. D. 685; Mx parte Phillips, in re Morgan, 9 Weekly Reports, 131; Rose- warne v. Billings, 15 0. B. (N. S.) 315; Knight v. Fitch, 15 C. B. 566; Waterman v. Buckland, 1 Mo. App. 45 ; Bryant v. Western Union Tel. Co. 17 Fed. Rep. 835 ; Kent «. Miltenberger, 13 Mo. App. 503 ; White- sides 41. Huut, 97 Ind. 191; Irwin i). Williar, 110 U. S. 499; Pickering «. Cease, 79 HI. 338; Lehmann v. Strasberger, 3 Wood's C. C. 554; Sawyer V. Taggart, 14 Bush, 737; Roundtree v. Smith, 108 U. S. 369; Hawley v. Bibb, 14 Reporter, 172 ; Union Nat. Bk. v. Carr, 15 Fed. Rep. 338; Cobb V. Prell, 15 Fed. Rep. 774 ; Clarke v. Foss, 7 Biss. 640; Bartlett v. Smith, 13 Fed. Rep. S63 ; In re Green, 7 Biss. 338 ; Bx pa/rte Young, 6 Biss. 53 ; Rumsey v. Berry, 65 Me. 570 ; Gregory v. Wendell, 39 Mich. 337 ; Greg- ory V. Wendell, 40 Mich. 432; Tenney ®. Foote, 93 111. 99; Beveridge "WAGEES BETWEEN PEINCIPALS. 29 the sale is a mere cover ; the real intention being to bet upon the market price at some future time, the sum wagered being the difference between the two prices as that may subsequently appear. The essential elements, then, of such a transaction are : First. The form of a sale. Second. A contem- poraneous agreement, express or implied, that the sale is not to be enforced. Third. That the transaction is to be settled by the payment of differences in the prices. That no delivery of the commodity pretended to be sold is to be made, is a result rather than an element. As in every sale there is to be a delivery of the articles sold, and as there can be no completed sale v. Hewitt, 8 Bradw. 467 ; Barnard v. Backhaus, 53 Wis. 693 ; Kingsbury V. Kirwan, 77 N. Y. 613 ; Yerkes ». Salomon, 11 Hun, 471 ; Cassard v. Hinman, 1 Bosw. 307; Wall ». Scheider, 17 Reporter, 700; Fareira v. Gabell, 89 Pa. St. 89 ; Smith v. Bouvier, 70 Pa. St. 835 ; Kirkpatrick v. Bonsall, 73 Pa. St. 155 ; Cunningham «. First Nat. Bank of Augusta, 71 Ga. 400; Hatch «. Douglass, 48 Conn, 156; Third Nat. Bank v. Harri- son, 10 Fed. Rep. 343 ; Justh v. HoUiday, 11 Wash. R. 418 ; Lowry b. Dillman, 18 N. W. R. 4 ; Murry v. Ochletree, 59 Iowa, 439 ; Marshall v. Thurston, 3 Lea, 741 ; First Nat. Bank of Lyons «. Oskaloosa, 39 N. W. R. 355 ; Brown v. Speyers, 30 Gratt. 396 ; Ream a. Hamilton, 1 5 Mo. App. 577 ; McLean ». Stuve, 15 Mo. App. 317 ; Swarfs Appeal, 3 Brewst. 131 ; Bruas' Appeal, 55 Pa. St. 394 ; North v. Phillips, 89 Pa. St. 378 ; Flagg V. Baldwin, 38 N. J. Eq. 319; Maxton «, Gheen, 75 Pa. St. 166 ; Bigelow V. Benedict, 70 N. Y. 303. See also generally, Lyon v. Culbertson, 83 HI. 33; Logan b. Musick, 81 111. 415; Pixley ®. Boynton, 79 111. 351; Tenney v. Foote, 8 Bradw. 594 ; Webster v. Sturges, 7 Bradw. 560 ; Gil- bert V. Ganger, 8 Biss. 314 ; Gregory v. Wattowa, 58 Iowa, 711 ; Story v. Salomon, 71 N. Y. 430 ; Piitterson's Appeal, 16 Reporter, 69 ; Williams v. Tiedman, 6 Mo. App. 369; Williams v. Carr, 80 N. C. 394; Wyman v. Fiske, 85 Mass. 338 ; Noyes v. Spalding, 37 Vt. 430 ; Porter «. Viets, 1 Biss. 177; Colderwood v. McCrea, 11 Bradw. 543; Cole u. Milmiae, 88 111. 349; Shaw ». Clark, 49 Mich. 386; Melchert v. Am. Union Tel. Co. 11 Fed. Rep. 193; Dickson ». Thomas, 97 Pa. St. 378; Ruchizky v. De Haven, 97 Pa. St. 303 ; Hentz v. Jewell, 30 Fed. Rep. 593. 30 CONTRACTS FOR FUTURE DELIVERY. without a delivery, it is frequently said in the cases that the test to be applied to such a transaction is to inquire whether there was a delivery intended. This, however, is not strictly accurate, for if there were a sale really made, delivery must be intended. If, however, at the time a pretended sale is made, it is understood or agreed that no delivery to any one is ever to be made, the transaction would be a wager ; but in that case there would really be no sale. It is therefore inaccurate to say a sale is rendered void by an agreement or understanding that the articles sold shall not be delivered. That is rather a result from the fact that a contract, though in the form of a sale; is in reality only a cover for a contract of wager. This will more clearly appear further on. The sale of a pure option, take for instance a " call," does not necessarily imply a delivery of the articles mentioned ; in fact, the very object of the contract is to give the owner of the same the right to call for them or not as he chooses. And it should be remembered also that in contracts for future delivery the contract is not a contract of sale, but a contract to sell, and no right or title to any property follows from the contract. The right is purely in the fulfillment of an executory contract. The seller only agrees that he will deliver ; and so it appears that the concurrent agreement that no delivery is to be made, destroys its character as a sale and makes it a cover for a wager. In Kingsbury V. Kirwan,^ the rule is stated to be, that to render a contract for the purchase and sale of property void, as a wagering contract, it must appear to have been the understanding when the contract was made that the ' 77 N. Y. 613. WAGERS BETWEEN PRINOIPALS. 31 property was not to be delivered, and only the differ- ence in the market prices should be paid or received. This was doubtless accurate enough for the purposes of that case, but it is manifestly contradictory to say that a contract of purchase and sale is a contract of wager, and this the learned court does not intend to say, though it apparently does so. In Story v. Salomon, ^ the court, in speaking of a " call," said : " Such a transaction, unless intended as a mere cover for a bet or wager on the future price of stock, is legitimate and condemned by no statute." The real test is whether the contract in form of a sale is merely colorable and really a cover for a wager ; and the law says, if it is, the cover must be brushed away, and the parties left to whatever rights they may have under the contract of wager. In such a case the contract of sale is merely fictitious, and of course there is an agreement, express or implied, that no delivery under the fictitious sale is to be made, and the difference between the market price at the time the wager is made and the time of the event is the amount to be paid ; and it is because this amount is unknown and uncertain tbat brings the case within the statutes against gaming and wagering. Let us call wagers of this character commercial wagers to distinguish them from ordinary bets. Contracts other than sales may be made the assumed form of commercial wagers. Instances of Commercial Wagers.— In the leading case of Grizewood v. Blane,^ the plaintiff was a stock and share jobber in London, and the defendant had, ' 71 N. Y. 430. ' 11 0. B. 536. 32 CONTRACTS FOR FUTURE DBMVERY. through the broker, made contracts with the plaintiff for the purchase and sale of shares. The method pur- sued seems to have been, that the defendant sold at a given price, and subsequently purchased a like amount of the same shares. As a necessary consequence of this there would be nothing but the difference to set- tle between the parties, and no shares passed between them. There had been former dealings of the same character between the parties. The Chief Justice said : " The question here is, whether there was any contract of sale at all, and whether the transaction was not a mere bet upon the future prices of the commodi- ty," and Cresswell, J., said : " Each party meant to break the contract, and give to the other a remedy against him for the difference in price, according as the market value might rise or fall." The jury was told that if neither party intended to buy or sell it was no bargain, but a mere gambling transaction, and as to the evidence, he thought it abundantly warranted the jury in coming to the conclusion that there was no real contract of sale ; and Williams, J., said : " There was ample evidence of a mutual understanding between the plaintiff and defendant that the contract of sale was colorable only." In Waterman v. Buckland,^ the parties made an agreement which they called an option sale, but ad- mitted that it was really a wager upon the market price of one thousand ' barrels of pork. Water- man purported to be the vendor and Buckland the purchaser of the pork, and it was agreed that if at the end of ninety days the price had fallen from what it was on the date of the transaction Waterman should ' 1 Mo. App. 45. WAGERS BETWEEN PRINCIPAI;S. 33 receive the difference, and if it had risen he was to pay the difference to BucHand. Each party placed his check in the hands of a stakeholder for one thousand dollars, and a so-called settlement was to be made at the end of ninety days. It was averred in the com- plaint that the price had fallen, and Buckland claimed five hundred dollars as the difference in price, and de- manded judgment on. the grounds that in Missouri wagers were not unlawful. The court decided that, al- though wagers in that State were not illegal in the sense of being criminal, they were contra honos mores and void, and refused to enforce the contract. This case is remaitable as an illustration of what the facts should be in every case where it is claimed that transactions in the form of sales are in reality wagers. In Bryant v. Western Union Telegraph Co.,-' it ap- peared that the Chicago Board of Trade gave the Western Union Telegraph Co. permission to be on the floor and report the current transactions of the Board, on the condition that these reports should not be pub- lished to or for the use of any organization or persons in the city of Chicago or elsewhere, who would pub- licly publish or post the said quotations with the view of making transactions with other persons based upon them. Notice was given designed to prohibit the de- fendant furnishing, after the first of January, 1883, the current quotations of the Board to those who carried on trade or business in places known as " bucket shops." An injunction was obtained in the Louisville Chancery Court to restrain the defendant from removing from com- plainant's office a machine called a ticker, by which was furnished to the complainants by the Telegraph Co. re- ' 17 Fed. Rep. 825. 34 OONTEAOTS FOR FUTURE DELIVERY. ports of the daily transactions which take place on tlie Chicago Board of Trade. On a motion to dissolve the injunction, the character of the complainants' business, and whether they' kept a place known as a bucket shop, was fully considered. The complainants exhib- ited a form of contracts which they use in their trade, and insisted that it was legal, and that they did a legitimate business. The defendant, however, in- sisted that the form of the contract exhibited, if legal, was a cover, and that the complainants' business is really that of betting and taking bets upon the fluctua- tions of the market prices of grain, produce, etc., and that they carry on what is commonly known as a "bucket shop." The course of business pursued by the complainants was found to be this ; They never buy or sell for present delivery, but always deal in futures and upon margins. Whenever the required margin is placed in the hands of the complainants they will buy or sell, as the customer desires, grain, etc., at the last quotation of the Chicago Board of Trade, and this is always for the next or succeeding month's de- livery; and the deal is taken by the complainants themselves. The customer must always keep his mar- gins good without notice that they are impaired, and if, at any time before the time fixed for delivery, the market in Chicago goes against a customer to the ex- tent of his margin the deal is closed, and the complain- ants take the margin. The customer is not personally liable on the contracts made for him, the extent of his loss being his margin. If, however, the market should go in favor of the customer, lie may call for a settle- ment at any time without regard to the maturity of his contract, and he is then paid the difference between WAGEKS BETWEEN PKINOIPALS. 35 the market price and the price at which he bought or sold, less a sum which is called by the complainants a commission. The court said : "If ' bucket shop ' means a place where wagers are made upon the fluc- tuations of the market prices of grain and other com- modities, then I think the evidence shows the com- plainants keep such a ' shop,' and are of the class to which the defendants are prohibited from furnishing the market quotations of the Chicago Board of Trade. This is gambling, and a very pernicious and demor- alizing species of gambling, which a court of equity should not protect even if the board of trade had not taken the action it has." And in speaking of the so-called commission the court said : " This sum, which is one quarter of a cent on each bushel of grain which is alleged to be bought or sold, is not 'a commission,' as the complainants always take the deal themselves, and do not pretend to buy or sell to others for the account of the customer, but is really the odds which the customer gives them in the wager on the future of the market. It is perhaps true, that if a customer keeps his margin good, so that .he cannot be closed out, and does not exercise his right to settle upon the basis of the difference in the price of grain, etc., he can demand compliance with the contract and a de- livery, but if the course of business between the com- plainants and their customers is to settle their alleged contracts by the payment of differences in the market rates, the fact that a customer may, under certain cir- cumstances, require an actual delivery, does not relieve the complainants from the charge of carrying on a * bucket shop.' It is the general course of a man's business which defines and classifies it." 36 CONTRACTS FOE EUTUBE DBLIVEKY. Chandler's case^ is an interesting one. It appeared " that in the month of May, 1872, and for several years prior thereto, Peyton R. Chandler, and the firm of Chandler, Pomeroy & Co., were engaged in the busi- ness of buying and selling grain on the Chicago mar- ket, and as members of the "Board of Trade of this city; that Chandler, Pomeroy & Co. were brokers and commission merchants, and Peyton R. Chandler dealt mainly on his own account as a capitalist, through Chandler, Pomeroy & Co., who acted as his brokers ; that about the middle of May, Peyton E. Chandler conceived the idea of making a corner in oats for the month of June then ensuing, and with that view lie purchased all the ' cash oats ' as they arrived in the market, and took all the ' options ' offered him for June delivery — ^his purpose being to own all the oats in the market, and compel those who had sold ' options ' for June, to pay his price; or, in other words, to settle with him by paying such differences as should exist between the prices at which he purchased the options and the price he should establish for cash oats on the last day of June, when his options matured. In pursuance of this plan, he purchased, between the 15th day of May and the 18th day of June, 2,500,000 bush- els cash oats, being all, or substantially all, the cash oats in the market, and also bought June ' options ' to the amount of 2,939,400 bushels. The total amount of oats in store in this city on the 8th day of June was only 2,700,000 bushels, from which it will be seen that Chandler practically controlled the market up to that time, and the total amount received during the remain- der of the month was only 800,000 bushels. As inci- ' Me parte Young, 6 Biss. 53. WAGEES BETWEEN PRINOIPAIiS. 37 dental to and part of the machinery of this corner, Chandler also sold what are called ' puts,' or privileges of delivering to him oats during the month of June, for forty cents a bushel. These 'put' contracts are alike in form and are as follows : " ' Keceived of E. F. |50, in consideration of which we give him, or the holder of this contract, the priv- ilege of delivering to us or not, prior to three o'clock p, M. of June 30th, 1872, by notification or delivery, 10,000 bushels No. 2 oats, regular receipts, at 41 cents per bushel in store; and if delivered we agree to re- ceive and pay for the same at the above price. " ' Chandler, Pomeeot & Co., p. E. c' " When Chandler commenced to buy oats with a view to the corner, the price in this market was about thirty-nine cents a bushel. After he took possession of the market he put the price to forty-one cents and upwards, and held it there till the 18th of June. In the meantime the price had declined in New York and other markets, so that oats to ship were not worth over thirty-three to thirty-five cents, and July options for this market were not worth over thirty-five cents. On the 18th of June Peyton R. Chandler and Chandler, Pomeroy & Co. failed, and the price declined before the close of business that day from forty-one to thirty, and continued to decline during the remainder of the month, so that at one time they were as low as twenty- six cents per bushel. Between the time of the failure and 3 o'clock, on the 30th of June, the holders of the puts claimed to have made tender to Chandler of the quantity of oats called for by their respective contracts, and the oats not being accepted and paid for, they sold them upon the market that day or the next, under the 38 cosrrKACTS for pgtueb delivery. rules of the Board of Trade, and have proved up their claims for the differences between the price named in the 'puts' and that for which they sold. The total amount of claims thus proved up is about $400,000, and the total amount received by the bankrupt for these puts was $19,000." Chandler made an assign- ment, and these claims were first allowed pro fovTna by the Register, and were referred by him to the court for its opinion. The proof showed "conclusively that the plans of Chandler, and the fact that he was manip- ulating the market with express reference to a corner in oats for June, were well known and understood on the Board of Trade, while the number of these ' put ' claims, about one hundred and twenty-five, all, or sub- stantially all, in favor of members of the board, show that the struggle between Chandler, who was endeav- oring to hold up prices, and the sellers of the ' options ' and holders of ' puts ' who were endeavoring to break the price, was quite generally participated in by mem- bers of the board. In other words, it was notorious that Chandler was endeavoring to keep the prices at forty-one cents or 'upwards, while the sellers of ' options ' and holders of ' puts ' were endeavoring to break down the price." The assignee attacked these claims upon the ground that they were fraudulent as against the other credit- ors of the bankrupt. The court, however, considered and decided the question solely on the ground that the contracts were wagers and therefore void, and said that each of the contracts were " in substance an as- sertion by the seller of the ' put,' that oats could not be purchased on that market before three o'clock p. m., of the 30th of June, for less than forty-one cents a WAGERS BETWEEN PBINCIPALS. 39 "bushel, and an undertaking to pay the difference be- tween forty-one cents and any market price. If he, Chandler, sustains the price at forty-one cents or above, he wins the half cent a bushel paid for the * put,' because the holder will not deliver, while if the price goes below that named, he is to pay the difference. This is practically the contract. It is as manifestly a bet upon the future price of the grain in question, as any which could be made upon the speed of a horse, or the turn of a card. The evi- dence in this case shows that nearly all of the cases of settlement on ' put ' or ' option ' contracts the grain is never delivered, nor expected to be delivered, but the parties simply pay the differences as settled by the prices. But, if that were not so in all cases, it is clear that in this case no delivery of the grain was intended by these ' put ' holders, because they knew that Chand- ler controlled all the oats in the market, and fixed the price, and that their only expectation for success de- pended on their being able to break the market before their time for delivery expired. * * * From the very nature of the transactions the interest of the holder of these ' puts ' is to break down the price, and that of the seller to maintain it. The number engaged in this transaction, and the quantities involved, demonstrate that neither party expected any grain to be delivered. Chandler expected to hold up the price, in which event no grain would be offered him, and the other parties must have known that they could not get the grain to deliver, unless they first broke Chandlei-, as he held all the grain." The court, after commenting upon the great inadequacy between the price paid for these options, and the amount claimed for failure to re- 40 CONTRACTS FOR FUTURE DELIVERY. ceive the oats, said : " The total amount paid by the claimants in these cases was less than $19,000, and yet the amount they claim is within a fraction of $400,000 — a disparity between the consideration paid, and the sum demanded, which strikes the mind at once as so grossly inequitable that the judicial conscience is shocked, and revolts from being made the instru- ment for enforcing such outrageous injustice." In Thacker v. Hardy ,^ a leading English case, this subject was very thoroughly examined. It was claimed by the defendant that contracts made for his account on the stock exchange of London were time bargains. In that country the expression " time bargains" in common parlance is used to designate wagers upon the price of stock, as in this country the expressions " options " and " futures " are used, though erroneously, to designate wagers in grain or cotton. The question in the case was, whether the contracts made by the ■ plaintiffs for the defendant's account were time bargains in the objectionable sense, and in determining this the court had occasion to de- fine what such a time bargain was, and Lindley, J., said : " A real time bargain is, I suspect, a very rare occurrence. Grizewood v. Blane,* offers an instance of one, and COoper v. Niel,^ as understood by the jury, afforded another, but what are called time bargains are, in fact, the result of two distinct and perfectly legal bargains, namely, first, a bargain to buy or sell; and, secondly, a subsequent bargain that the first shall not be carried out ; and it is only when the first bar- ' L. B. 4 Q. B. D. 685; b. c. 37 W. R. 158. ' 11 C. B. 536. ' 13 Weekly Notes, 138. "WAGERS BETWEEN PRINCIPALS. 41 gain is entered into upon the understanding that it is not to be carried out that a time bargain, in the sense of an unenforceable bargain, is entered into. Such bar- gains are very rare, and this is what I understand the witnesses to mean when they say that there are no such things as time bargains on the stock exchange." And Bramwell, L. J., said : "A time bargain, merely because it is one, is not invalid. If a man were to undertake to sell me a crop of apples for* next year that is not invalid, but when, by a time bargain, you understand something different in reality from what it purports to be, and that it purports to be an agree- ment to deliver and sell an article on a particular day, it is really no such agreement, but is an agreement to pay what shall be the difference between the price when the bargain is made, and the price at the future time they name; such an arrangement is something in the nature of a wager or gaming on the question of what would be the price." In the case of Kent v. Miltenberger,^ the court in speaking of the ordinary grain option contracts made on the Merchants' Exchange of St. Louis said : " It appears that delivery is always contemplated, not as a thing which will be necessarily insisted upon, but as a thing which the purchaser may insist upon. It sufficiently ap- pears that this is the one thing which gives vitality to such contracts. * * * The circumstance which renders these contracts unlawful is a contemporaneous agree- ment that they shall not be executed by a delivery, but only by a settlement of differences. Unless there is such an agreement it is idle to talk about the gain- ' 13 Mo. App. 503. 42 CONTRACTS FOR FUTURE DELIVERY. bling intent, or wagering intent, or bets upon the future state 6f the market." And in the case of Whitesides v. Hunt/ the learned court, in commenting on the case of Kent v. Milten- berger, says : " A contract to sell a commodity for future delivery, coupled with the express agreement, made at the time, that the commodity, at the maturity of the contract, shall not be paid for or delivered, but shall be settled for by the difference in prices, is no contract of sale at all. And well may the learned judge in that case admit that such a contract is illegal and void." In Irwin v. Williar,^ the court said : " If, at the time of entering into a contract for the sale of personal property for future delivery it be contemplated by both parties that at the time fixed for delivery, the purchaser shall merely receive or pay the difference between the contract and the market price, the transaction is a wager and nothing more." Pickering v. Cease,^ is a good illustration of two contracts being made with the intent that one should neutralize the other. The court said : " There is no suflficient evidence that any grain was, in fact, bought for the defendants for delivery in August or Septem- ber. So far as anything is proven, the alleged pur- chases were purely fictitious. The grain plaintiffs bought of Hutchinson was immediately sold back to him. It was not paid for, nor was it expected by the parties that it could be called for or delivered. The parties were merely speculating in differences as to the market value of grain on the Chicago market. Such ' 97Ind. !91. " 110 U. S. 499. ' 79 m. 328. WAGEES BETWEEN PEIKOIPALS. 43 contracts are void at commoii law, as being inhibited by a sound public morality. They were in no just sense contracts with the privilege of the sdler to de- liver at a future day." In Clarke v. Foss/ it was held that the intention that such a transaction should be a 'mere bet on the market, must constitute an integral part of the con- tract, and the court said; "If the contracts were void at all, they must have been void when made. The subsequent conduct of the parties may, and should be considered as evidence tending to show what the real contracts were when entered into ; but if they were originally valid, no subsequent act of the parties can have the effect to render them obnoxious to the taint of illegality, as being gambling contracts." In all these cases we find that the contracts of sale were purely fictitious and formal only, or else if tliey could be considered as real they were neutralized by contemporaneous contracts. It must follow then, as a necessary consequence, that it was understood there was to be no delivery made. There is no difficulty what- ever in dealing with the transactions of this character, for there could be no pretense that they were real sales. It has been decided, however, in a number of cases, that there need not be an express agreement that the formal contract was simply a cover for a wager. This may be implied, and the jury may find it from the extrinsic circumstances of the case. Whether this agreement is expressed or implied the contract of sale itself must be found to be fictitious and merely a cover for a wager, and the real charac- ter of the transaction is to be determined by the " 7 Biss. 540. 44 00NTBACT8 FOE FUTURE DELIVERY. intention of the parties as to whether the contract of sale is to be executed or not. In the recent case of Whitesides v. Hunt,^ the court says: "There is a difference, and a distinction must he made, between a contract where there is a hona fide intent 'to fulfil the agreement according to its terms, and those where the difference in the market price is to be paid. There can be no doubt but that sales of a commodity to be delivered at some future time are valid, but if the pai'tie's agree at the time of making the contract that no title to any property shall pass, or delivery be made, or when, from the nature of the contract, it must be apparent that the intent of the parties was such that at some specified future time the losing party should pay to the other the difference between the selling price at that time and the time of making the contract, it would be a contract which the law would refuse to enforce, for the reason that it is clearly a wager upon the price of the commodity at some future day. A contract to sell a commodity for future delivery, coupled with the express agreement, made at the time, that the commodity, at the maturity of the contract, shall not be paid for or delivered, but shall be settled for by the difference in prices, is not a contract of sale at all. The trouble arises where, at the date of the contract, there is no express agreement as to payment and delivery, and where these ques- tions are to be settled by implication, based upon the understanding and intention of the parties. The real question, then, is to be determined by the intention of the parties whether the contract of sale is ' 97 Ind. 191. WAGERS BETWEEN PEINOIPAIiS. 45 to be enforced or not. It is this intention which gives character to the transaction. Contracts presumed to he valid. — It may be laid down as a general proposition that an agreement, having all the formal requirements of a good contract, will be presumed to be valid, and a construction that will support it, will be preferred to one that will avoid it. Lord Coke said,^ that '' whensoever the words of a deed, or of the parties without deed, may have a double intendment, and one standeth with law, and the other is wrongful and against the law, the intendment that standeth with the law shall be taken." And in Wing v. Grlick,^ Chief Justice Adams said : '' We are not allowed to construe a contract so as to deprive it of all force if it is susceptible of any other construction." This rule has been laid down and applied in many cases to a variety of transactions on the exchanges. In Bigelow v. Benedict,^ it was claimed that a " put " was a wager and void under the statute, but the court said : " If the contract in question was a mere device to evade the statute it was, as has been said, illegal, but the question here, is, does the contract, on its face, disclose an illegal transaction, and we are of the opinion that it does not, and that the defense of illegality was not established. The burden was upon the defendant to show the illegality of the contract, and this he did not do." And in Story v. Salomon,* an action founded on a pure option contract, the court said : " We should not ' Coke on Littleton, 43, 183. ' 56 Iowa, 473. ' 70 N. Y. 203. " 71 N. T. 430. 46 CONTRACTS FOR FUTURE DELIVERY. infer an illegal intent unless obliged to. Such a transaction, unless intended as a mere cover for a bet or wager on the future price of stock, is legitimate and condemned by no statute, and that it was so in- tended, was not proved." The Defense of Wager must he afflrmatively made, and in many States aflSrmatively pleaded, and the hurden of proof is upon the party alleging it.^ — The case of Harris v. Tumbridge,* involved the consideration of a straddle which, as we have seen, is a combination of a put and a call. It was claimed by the defendant that such a contract was a gambling contract and pro- hibited by the New York Statute. The court said : " It may have been, but there is no proof that it was, and no such defense was pleaded. The contract was not of necessity a wagering contract. That it might have been, does not at all dispense with the necessity of proving that it was." In Dykers v. Townsend,^ it was said : " To avoid the contract as against the Stock Jobbing Act, the burden of proof is upon the party alleging the viola- tion." And in Irwin v. Williar,* it was said : " The burden of showing that parties were carrying on a " Bigelow v. Benedict, 70 N. T. 303 ; Story v. Salomon, 71 N. T. 430 ; Wing V. Glick, 56 Iowa, 473 ; Harris «. Tumbridge, 83 N. T. 93 ; Dykers V. Townsend, 34 N. T. 57 ; Irwin v. Williar, 110 U. S. 499; Eumsey v. Berry, 65 Me. 570 ; Whitesides v. Hunt, 97 Ind. 191 ; Mcllvane v. Edger- ton, 3 Robt. 432 ; Stebbins v. Leowolf, 3 Cush. 143 ; Tyler «. Barrows, 6 Eobt. 104; Sawyer v. Taggart, 14 Bush, 737; Kent i>. Miltenberger, 13 Mo. App. 503; Bartlett i>. Smith, 13 Fed. Rep. 363; Gregory ». Wendell, 89 Mich. 337 ; Clarke «. Foss, 7 Biss. 540; Murry v.. Ochletree, 59 Iowa, 435 ; Williams «. Tiedman, 6 Mo. App. 369. ^ 83 N. Y. 93. » 34 N. Y. 57. * 110 U. 8. 499. WAGERS BETWEEN PEINOTPALS. 47 wagering business, and were not engaged in legitimate trade or speculation, rests upon the defendant. On their face, these transactions were legal, and the law does not, in the absence or proof, presume that parties are gambling." There are some cases which hold that the burden of showing the good faith in contracts for future de- livery is upon the party claiming under them. In the case of Barnard v. Backhaus,^ the court, in considering the question whether certain contracts of sale were made in good faith, or whether they were wagers, said : " It may be safely assumed that parties will make such contracts valid in form; but courts must not be deceived by what appears on the face of the agreement. It is often necessary to go behind or outside of the words of the contract— to look into the facts and circumstances which attended the making of it — in order to ascertain whether it was intended as a bona fide purchase and sale of property, or was only colorable. And to justify the court in upholding such an agreement, it is not too much to require a party claiming rights under it to make it satisfactorily and affirmatively appear that the contract was made with an actual view to the delivery and receipt of grain, not as a violation of the statute against gambling, or as a cover for a gambling transaction." This case is cited with approval in Beveridge v. Hewitt.^ In Cobb V. Prell,^ the court said : " It is the duty of courts to scrutinize very closely these time contracts, and if the circumstances are such as to throw any doubt upon the question of intention of the parties, it • 53 Wis. 593. = 8 Bradw. 467. = 15 Fed. Rep. 774. 48 OONTEACTS FOR FUTURE DELIVERY. is not too mucli to require a party claiming rights under such a contract to show affirmatively that it was made with actual view of delivery and receipt of the grain ;" and in Stebbins v. Leowolf/ it was held that, under the Massachusetts statutes against short sales, a vendor seeking to enforce a contract for the sale of stock must show that he owned it when he made the bargain. These cases are contrary to a long line of authori- ties, and would not probably be followed in other States. The last case was disapproved in Dykers v. Townsend.^ INTENTION, A QUESTION OF FACT. What the intention of the parties to a contract of sale is, as to whether it is to be enforced, is a question of fact.^ In Grizewood v. Blane,* there was a contract in the form of a sale of stock, but the Chief-Justice left it to the jury to say what was the plaintiff's intention, and what was the defendant's intention at the time of making the contract, whether either party really meant » 3 Cush. 137. " 34 N. Y. 57. = Grizewood v. Blane, 11 C. B. 526; Whitesides«. Hunt, 97 Ind. 191;' Gregoi7 «. Wendell, 89 Mich. 337 ; Yerkes ». Salomon, 11 Hun, 471 ; Eumsey v. Berry, 65 Me. 570 ; Tenney v. Foote, 4 Bradw. 594 ; Beveridge v. Hewitt, 8 Bradw. 467 ; Cobb ». Prell, 15 Fed. Eep. 774 ; Fareira v. Gabell, 89 Pa. St. 89 ; Irwin v. Williar, 110 U. S. 499 ; Clarke v. Foss, 7 Biss. 540 ; Kirkpatrick v. Bonsall, 73 Pa. St. 155 ; Gregory ®. Wendell, 40 Mich. 483 ; Justh v. Holliday, 11 Wash. R. 418 ; Third National Bank of Lyons «. Oskaloosa, 39 N. W. R. 255 ; Melchert «. West. U. Tel. Co. 11 Fed. Rep. 193 ; Ream «. Hamilton, 15 Mo. App. 577 ; Bartlett e. Smith, 13 Fed. Rep. 363. * 11 C. B. 536. WAGEKS BETWEEN PRINCIPALS. 49 to purchase or sell the shares in question, telling them that if they did not the contract was, in his opinion, a gambling contract and void. This was held to be right. In Whitesides v. Hunt,^ the court said : " The intention of the parties was a question to be decided by the jury," and in Gregory v. "Wendell,^ it was de- termined on appeal that it was error to withdraw this question from the jury. In Bartlett v. Smith,^ the action was to recover a sum claimed by the plaintiff as a commission merchant for a balance of account in tbe purchase and sale of wheat for future delivery for the account and benefit of the defendant. After the plaintiff had rested his case, the court was asked to instruct the jury to find a verdict for the defendant on the ground that the con- tracts made by the plaintiff were wagers. Judge Nel- son said : " I decline to take this case from the jury. I think there is an underlying question of fact which they must determine, and that is, were the contracts legitimately entered into ? were they contracts for an actual delivery of wheat ? or were they mere subter- fuges, and entered into on the part of the plaintiff and third parties for the purposes of promoting gam- bling transactions? That is an underlying question of fact which it seems to me the jury must determine." A party may be interrogated directly as to his intention. This was decided in the case of Yerkes v. Salomon.* The defendant had sold to the plaintiffs three options, a put and two straddles for certain stocks. Before the contract matured the defendant failed, and the contracts were closed by the defendant ■ 97 Ind. 191. = 39 Mich. 337. = 13 Fed. Bep. 363. " 11 Hun, 471. 50 COKTEAOTS FOE FUTUEB DBLIVEET. agreeing to pay a certain sum in settlement of them. The amount was not paid, and the plaintiffs brought suit to recover it. The defendant pleaded that the contracts were wagers. Upon the trial the plaintiff was asked, if, at the time the contracts were made, he intended to tender or call for the stocks. The question was excluded, but upon appeal the decision was re- versed, and the question was held to have been proper, as tending to show the intent of the plaintiffs in making the contract, and that it was error to exclude the same. This case was cited with approval in Gregory v. Wendell.^ In Cassard v. Hinman," the question asked was, " at the time of making the writings between you and Cassard, was anything said by Nathan, the broker, as to the performance by receipt and delivery of pork, or the settlement by the payment and receipt of the differences, and if so, what ? " The question was excluded, and it was held to have been erroneously ruled upon. THE UNLAWFUL INTENTION MUST BE MUTUAL. To make a contract of sale a gambling transaction, it must appear that both parties concur in the illegal intent. This is stated directly or indirectly in nearly all the cases.^ ■ 39 Mich. 337. ' 6 Bosw. 14. See also Third National Bank of Lyons v. Oskaloosa, 23 N. W. E. 255; and Ex parte Young, 6 Biss. 53. " Grizewood v. Blane, 11 C. B. 526; Lehmann v. Strassberger, 3 Woods' 0. 0. 554; Pixley v. Boynton, 79 III. 351; Whitesides «. Hunt, 97 Ind. 191; Wall v. Schneider, 17 Eeporter, 700; Irwin*. Williar, 110 U. 8. 499; Gregory v. Wendell, 39 Mich. 387; Beveridge v. Hewitt, 8 WAGBES BETWEEN PRlIfOIPALS. 51 In Grizewood v. Blane/ the question left to the jury was, what was the intention of the plaintiff, and what was the intention of the defendant; and in Leh- mann v. Strasslaerger,^ the court said : " What effect can the mental purpose of Strassberger to pay, or de- mand differences, instead of delivering cotton, have upon the contract, when that purpose is unknown to the other contracting party ? " In Pixley v. Boynton,^ the court said : "The inten- tion of the parties gives character to the transaction, and if either party contracted, in good faith, he is en- titled to the benefit of his contract, no matter what might have been the secret purpose or intention of the other party ;" and in Whitesides v. Hunt,* it was said : " If either party contracted in good faith he is entitled to the benefit of his contract, no matter what might have been the secret purpose or intention of the other." In Wall V. Schneider ,° the court said: "We are not aware of any' adjudicated cases going to the extent of holding that the mere secret intention of, one party to the contract, not communicated to the other party, is sufficient to invalidate such contract;" and in Irwin V. Williar,® it was said that " a tran'saction which on its face is legitimate cannot be held void as a wagering Bradw. 467; Clarke v. Foss, 7 Biss. 540; Bartlett v. Smith, 13 Fed. Rep. 263; Gregory ®. Wendell, 40 Mich. 433 ; Murry «. Ochletree, 59 Iowa, 435 ; First Nat. Bk. of Lyons v. Oskaloosa, 28 N. W. E. 255 ; Williams v. Carr, 80 N. C. 294; Williams v. Tiedman, 6Mo. App. 269; Hentz «. Jewell, 20 Fed. Rep. 592 ; Frost v. Clarkaon, 7 Cowen, 24. » 11 C. B. 536. = 2 Wood's C. C. 554. ' 79 111. 351. * 97 Ind. 191. ' 17 Reporter, 700. ° 110 U. S. 499. 62 CONTRACTS FOE FUTURE DELIVERY. contract by showing that one party only so under- stood, and meant it to be. The proof must go farther, and show that this understanding was mutual." THE INTENTION DETERMINED FROM ALL THE CIR- CUMSTANCES. The real intention of the parties is to be determined from a consideration of all the circumstances of the case.^ In Kirkpatrick v. Bonsall,^ it was held that a pure option contract was not on its face a gambling con- tract, but its character might be weighed in connection with other evidence on the question whether the trans- action was a gambling scheme. The court said: "A bargain for an option may be legitimate, and for a proper business object. We can imagine such cases- But it is evident such agreements can be readily pros- tituted to the worst kind of gambling ventures, there- fore its character may be weighed by the jury in connection with other facts in considering whether a bargain was a mere scheme to gamble upon the chances of prices." In Barnard v. Backhaus,® it was said : " It may be safely assumed that parties will make ' Kirkpatrick v. Bonsall, 73 Pa. St. 155 ; Barnard v. Backhaus, 63 Wis. 593 ; Brand v. Henderson, 107 111. 141 ; Whitesides v. Hunt, 97 Ind. 191 ; Hawley v. Bibb, 14 Reporter, 173 ; Irwin o. Williar, 110 U. S. 499 Sawyer v. Taggart, 14 Bush, 737 ; Gregory v. Wendell, 39 Mich. 337 Tenney v. Foote, 4 Bradw. 594 ; Beveridge i;. Hewitt, 8 Bradw. 467 Fareira v. Gabell, 89 Pa. St. 89; Tyler ». Barrows, 6 Robt. 104; Clarke ». Foss, 7 Biss. 540 ; Bartlett i>. Smith, 13 Fed. Rep. 363; In re Green, 7 Biss. 338. " 73 Pa. St. 155. » 53 Wis. 593. WAGEES BETWEEN PEINCIPALS. 53 • such contracts valid in form ; but courts must not be deceived by what appears on the face of the agreement. It is often necessary to go behind or outside of the words of the contract — to look into the facts and cir- cumstances which attended the making of it — in order to ascertain whether it was intended as a hona fide purchase and sale of property, or was only colorable ;" and in Brand v. Henderson,^ it was said : " A verbal contract may be explained by facts, circumstances or conversations, which shed light upon the meaning of its words. In such a case it is proper to ascertain such extrinsic facts as the parties had in view at the time the contract was made, in order to ascertain the true meaning of its words. So where the defendant had given his broker an order to buy a lot of grain for future delivery, to be purchased on the Board of Trade, and it was claimed that the transactions were gambling, it was held to be error to refuse to let the defendant, when sued on his alleged purchase, answer the ques- tion, as to what was said at the time the order was given about how the deal was to be settled." • In Whitesides v. Hunt,^ it was held that all the circumstances and acts of the parties may be consid- ered in determining their intention ; and in Beveridge V. Hewitt,^ the court said : " "What the real intention of the parties was, and whether the form was merely col- orable, and adopted for the purpose of covering up a series of gambling contracts, will be determined from all the circumstances of the case as disclosed by the evidence." In Hawley v. Bibb,* it was said : " What- ' 107 111. 141. ' 97 Ind. 191. ' 8 Bradw. 467. ' 14: Reporter, 173. 64 OONTKAOTS FOR FUTURE DELIVERY. ever may be the form of the contract, if, from the nature of the transaction and the circumstances around it, it is apparent that the purpose is not to buy or sell the goods, and that no delivery of them is intended, but at the time appointed for delivery the transaction shall be closed upon the basis of the then market price of the goods, the losing party paying the difference, even though there be no statute denouncing it, such contract is void." In Irwin v. Williar,^ the court said : " We do not doubt that the question whether the transactions come within the definitions of wagers, is one that may be determined upon the circumstances, the jury drawing all the proper inferences as to the real intent and meaning of the parties." FORM NOT REGARDED. Where the real intention of the parties is to gamble, it makes no difference what form of contract is used, or what relation is assumed between the par- ties to cover this intention.* 'UOU. S. 499. 2 Grrizewood «. Blane, 11 C. B. 526; Tenney v. Foote, 4 Bradw. 594; Barnard ». Backhaus, 52 Wis. 593; Beveridge ®. Hewitt, 8 Bradw. 467; Whitesides«. Hunt, 97 Ind. 191; Yerkes v. Salomon, 11 Hun, 471; Ev- eritt B. Knapp, 6 John. 331 ; Irwin v. Williar, 110 U. 8. 499; Bryant v. Western U. Tel. Co. 17 Fed. Rep. 835 ; Byers v. Beattie, 16 Weekly Rep. 379; Rudolf «. Winters, 7 Mo. 135 ; Ex parte Phillips, in re Morgan, 9 Weekly Reports, 131 ; Thacker v. Hardy, L. R. 4 Q. B. D. 685 ; Webster v. Sturges, 7 Bradw. 56 ; Gregory v. Wendell, 39 Mich. 337 ; Story v. Salomon, 71 N. Y. 420 ; Hibblewhite v. McMorine, 5 M. & W. 462 ; North V. Phillips, 89 Pa. St. 350 ; Porter v. Viets, 1 Biss. 177 ; Gregory v. Wat- towa, 58 Iowa, 711 ; Murry v. Ochletree, 59 Iowa, 485 ; Lowry v. Dillman, 18 N. W. R. 4 ; Melchert v. Western U. Tel. Co. 11 Fed, Rep. 193 ; In re WAGERS BETWEEN PEINOIPALS. 55 Thompson, J,, in Brua's Appeal/ said: "Anything which induces men to risk their money or property, without any other hope of return than to get for nothing any given amount from another, is gambling, and demoralizing to the community, no matter by what name it is called." This remark has been quoted with approval in several cases. In Tenney v. Foote^ the court said: "The statute was enacted from motives of public good and to re- press an evil, and no matter what form the transaction bears as to the terms of the contract, still, if the form be colorable only, and the real intention of the parties be that there is to be no sale of the article, no delivery or acceptance, but that the transaction is to be adjusted only upon differences, it is a gambling transaction within the meaning of the statute." Tn Barnard v. Backhaus ' it was said : " It will not do to attach too much weight or importance to the mere form of the instrument, for it is quite certain that parties will be astute in concealing their intention and the real nature of the transaction, if it be illegal." , In Beveridge v. Hewitt* the court said : " The form Green, 7 Biss. 338 ; Everingham ®. Meighan, 55 Wis. 255 ; Bartlett «. Smith, 13 Fed. Rep. 263; Kirkpatrick v. Bonsall, 55 Pa. St. 155; Hatch v. Douglass, 48 Conn. 116 ; Marshall t. Thurston, 3 Lea, 741 ; First Nat. Bk. ®. Oskaloosa, 29 N. W. R. 255 ; Justh v. HoUiday, 11 Wash. R. 418 Mc parte Young, 6 Biss. 53; Thomson v. Cummings, 68 Geo. 134; Mc- Lean v. Stuye, 13 Mo. App. 317 ; Ream v. Hamilton, 15 Mo. App. 577 WiUiams v. Carr, 80 N. C. 294 ; Tenney v. Focte, 95 111. 99 ; Amery v. Merryweather, 2 B. & 0. 573 ; Williams v. Tiedman, 6 Mo. App. 269 Maxton v. Gheen, 75 Pa. St. 166 ; Ruchizky v. De Haven, 97 Pa. St. 203 Dickson v. Thomas, 97 Pa. St. 278 ; Flagg v. Baldwin, 38 N. J. Eq. 219 Colderwood v. McOrea, 1 1 Brad. 543. ' 55 Pa. St. 29i. '■' 4 Bradw. 594. 3 55 Wis. 593. ' 8 Bradw. 467. 56 CONTRACTS FOK PUTTJBB DEMVERY. of the contract, however, is by no means conclusive of the true nature of the transaction. That must be determined from the real intention of the parties. If it appears to be their intention that the property sold is not to be delivered, but that a settlement is to be ultimately made between them upon the basis of the difference between the contract and market price, it is, notwithstanding its form, a wagering contract, void at common law, and prohibited by our statute. * * * The statute against gambling cannot be evaded by assuming the livery of legitimate commerce. It mat- ters not how nicely the forms adopted may be adjusted to legal req^iirements, if the transaction, when stripped of its covering, discloses what in substance is a bet or wager on the future price of grain or other commodity, it is a gambling transaction within the meaning of the statute." And in Whitesides v. Hunt^ it was said: "A contract in form for the purchase of wheat, to be delivered at a future day, with the intention of both parties that the property is neVer to be delivered, but that settlement shall be made by the payment of differences in price at the date fixed for delivery as compared with the purchase price, is a gambling contract and void as against public policy. * * * It is not the form, but the intent witb which the scbeme was planned." In the case of Yerkes v. Salomon'* the court said : "The form of the contract does not decide the question, because it would not be difficult to make the contract relating to a bet apparently lawful, while the intent with which it was entered into was to avoid or ' 97 Ind. 191. " 11 Hun, 471. WAGERS BETWEEN PRIKOIPALS. 57 evade the statute. It is not the form with which the trick or device is presented, but the intent with whicli it was planned." In the case of Everitt v. Knapp,^ a motion was made to set aside a judgment, entered upon confession, on the ground that the bond upon which the judgment was founded was given for a gaming debt, and the motion was granted. In Irwin v. Williar,^ it was said : " It makes no difference that a bet or wager is made to assume the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legiti- mate trade." In bucket shop business it appears that all of the transactions there made are in the form of pur- chase and sale, and purport to be made by the pro- prietor of the shop for, and on account of, the parties with whom they deal. They charge what they call commissions, thus in form establishing the relation of principal and agent between their patrons and them- selves. In the case of Bryant v. The Western Union Telegraph Company,^ the true character of these deal- ings and the real relation of the parties were shown, and they were held to be wagers between principals instead of purchases and sales by a principal through an agent. In Gregory v. Wattowa,* the plaintiff had sold some real estate, and taken in payment six notes se- cured by mortgage. Three of the notes he sent to commission merchants in Milwaukee to secure ad- vances by them in the purchase and sale of grain to ' G John. 331. ' 110 U. S. 499. ' 17 Fed. Kep. 825. " 58 Iowa, 711. 5 58 CONTEAOTS FOK FUTURE DELIVERY. be made by them for plaintijQf's account. At the close of the business the plaintiff owed the commission merchants a large amount, and the notes were sold and transferred to John Johnson. An action in equity was brought by plaintiff to declare him the owner of the notes. The court said : " It was incum- bent on the plaintiff to establish the allegations of the petition and show that notwithstanding his en- dorsement of the notes, he was still the owner of them. And in the face ot his endorsements he could do this, if at all, only by showing that the purchases and sales of grain were illegal and void as being mere gambling transactions." The plaintiff failed in his proof, but the case is a good illustration of the proposition we are considering. In Melchert v. Western Union Telegraph Co.,^ the plaintiff had made through his factor at Chicago certain contracts for the sale of rye. He delivered to the operator at Davenport, Iowa, a despatch to be forwarded to his factor at Chicago concerning the rye. Through the neglect of the company in for- warding the despatch the plaintiff suffered and actu- ally paid a large loss, and sued the company to recover his damages. The company defended on the ground that the transactions the plaintiff was engaged in were wagers on the price of rye, and prevailed in the de- fense. In Everingham v. Meighan,* the parties were en- gaged in transactions which were found to be wagers. They were in the form of purchases and sales of grain by .one as commission merchant of the other, and dif- ' 11 Fed. Rep. 193. « 55 Wis. 355. See, also, Melchoir ». McCarty, 31 Wis. 352. WAGEES BETWEEN PRINCIPALS. 59 fering as to the amount of the account, a compromise was made, and a certain sum agreed upon as due to the commission merchant. It was argued that this made a valid claim, but it was held that no action could be maintained on a compromise of the amount of illegal claims. In Byers v. Beattie,^ the form assumed as a cover was a contract between a principal and agent, by which the former, as the broker of the latter, was to buy and sell shares for him. It appeared that the agreement between the parties was that the plaintiif should buy and sell such shares as the defendant should direct, and in case the prices at which the said shares should be sold, should be greater than those for which the same should have been bought, the plaintiff should pay the difference between the said prices less the plaintiff's commissions and charges, and that, in case the prices for which said shares should be sold should be less than the prices for which the same should have been bought, the defendant should pay the plaintiff the dif- ferences, together with the plaintiff's commission and charges. This was held to be a wager ; the sole con- sideration for the defendant's promise to pay the differ- ence between the price of the sale and the price of the purchase, in case the latter should be the greater, was the plaintiff's promise to pay the defendant the differ- ence in case the former should be the greater. In the later Pennsylvania cases,* in Flagg v. Bald- win,^ and in Justh v. Holliday,* the relation of the ' 16 Weekly Reporter, 379. 2 Fareira v. Gabell, 89 Pa. St. 89 ; North ». Phillips, 89 Pa. St. 350 ; Maxton «. Gheen, 75 Pa. St. 166 ; Ruchizky v. De Haven, 97 Pa. St. 303 ; Dickson ». Thomas, 97 Pa. St. 378 ; Patterson's Appeal, 16 Reporter, 59. = 38 N. J. Eq. 319. ' 11 Wash. R. 418. 60 COKTEAOTS FOR PUTUKB DELIVERY. principal and broker, though claimed to exist, was found by the courts to be in fact mere covers for gam- bling in the price of stocks. In Colderwood v. McCrea,^ the plaintiffs brought an action to recover for money paid and commissions in the purchase of wheat on the Chicago board of trade. They acted as the commission merchants of the defend- ant. The court held that although the transactions were in. the form of purchases and sales of wheat by agents for their principals, " the entire line of dealings were simply in differences, with no intention to deliver or receive and pay for the commodities which were the subject of the deals." If, at the beginning of wagering transactions, money, notes, or bonds are given as security or mar. gins, the money cannot be recovered back, and no action can be sustained on the notes ; ^ and if the jiotes or bonds are secured by mortgage, the mortgage cannot be foreclosed, and may be set aside.^ If, after the transactions are closed, there is an amount due to either party, an action to recover the same cannot be maintained.* Nor can actions on accounts stated, • 11 Bradw. 543. ^ Gregory v. Wendell, 39 Mich. 837; Gregory v. Wendell, 40 Mich. 482 ; Cunningham v. Third Kat. Bk. of Augusta, 71 Geo. 400. = Flagg V. Baldwin, 88 N. J. Eq. 219. * Grizewood ». Blane, 11 C. B. 526 ; Hibblewhite v. McMorine, 5 M. & W. 462; Whitesides ». Hunt, 97 Ind. 191; Williams v. Carr, 30 N. C. 394; Webster v. Sturges, 7 Bradw. 56 ; Porter ». Viets, 1 Biss. 177; Col- derwood ». McCrea, 11 Bradw. 543 ; Kirkpatrick -o. Bonsall, 72 Pa. St. 155 ; Ex parte Young, 6 Biss. 53 ; In re Green, 7 Biss. 338 ; Hatch ». Douglass, 48 Conn. 116; Irwin v. Williar, 110 U. S. 499 ; Byers v. Beat- tie, 16 Weekly Reporter, 279; Thacker v. Hardy, L. R. 4 Q. B. D. 085; Ex parte Phillips in re Morgan, 9 Weekly Reporter, 181 ; North ». Phil- lips, 89 Pa. St. 250; Bartlett ». Smith, 13 Fed. Rep. 263; Thompson v. Cummings. 68 Geo. 124. WAGERS BETWEEN PRINCIPALS. 61 notes/ due bills,^ acceptances,^ guarantees of thii'd parties' notes/ mortgages/ or bonds given for the same, be sustained.* A judgment on a bond, entered upon confession, was set aside on the ground that the bond was given for a gaming debt.'' A negotiable instrument founded upon an illegal wagering consideration is void in the hands of all parties to whom it may come, even though negotiated before maturity, without notice, and for a valuable consideration.^ A distinction is made between the position of a T)(ma fide holder of a negotiable note or other secu- rities, which are void in the hands of the original payees, in a State where wagers are held to be void as against public policy, or made so by statute, and in a State where they are made unlawful by express provisions of the statute, or where securities founded upon such a consideration are made void in the 'Barnard v. Backhaus, 52 Wis. 593; Yerkes v. Salomon, 11 Hun, 471 ; Murry v. Ochletree, 59 Iowa, 435; Fareira i). Gabell, 89 Pa. St. 89; Lowry «. Dillman, 18 N. W. R. 4; Marshall «. Thurston, 3 Lea, 741; First National Bank v. Oskaloosa, 39 N. W. R. 355 ; Justh «. Holliday, 11 Wash. R. 418. ' Rudolf ». Winters, 7 Neb. 135. " Williams b. Tiedman, 6 Mo. App. 369 ; Petrie d. Hannay, 3 Term R. 418. * Tenney «, Foote, 95 111. 99. ' Barnard v. Backhaus, 53 Wis 593; Flagg v. Baldwin, 38 N. J. Eq. 319. ' Amery v. Merryweather, 3 B. «& 0. 578. ' Everitt «. Knapp, 6 Johns. 331. ' Barnard ». Backhaus, 53 Wis. 593 ; Whitesides v. Hunt, 97 Ind. 191 ; Tenney v. Foote, 4 Bradw. 494 ; Cunningham ». The Nat. Bk. of Au- gusta, 71 Geo. 400 ; Steers ». Lashley, 6 Term R. 71 ; Petrie ». Hannay, 3 Term R.'418 ; Justh «. Holliday, 11 Wash. R. 418; Lowry ». Dillman, 18 N. W. R. 4. 62 CONTKACTS FOB FUTURE DELIVERY, hands of subsequent holders of the same. In the former case he may maintain his action.^ Where part of the consideration is illegal the whole contract is void.^ An entire contract partly illegal is wholly void.^ CAN A WRITTEN CONTRACT OF SALE FOR FUTURE DELIVERY BE SHOWN TO BE A WAGER BY PA- ROL EVIDENCE? In some of the cases the statement that the right to qualify or nullify a contract of sale by showing an intention contrary to its terms, from the circumstances of the case, was limited to verbal contracts. In the case of Rumsey v. Beriy,* the court said : " As the agreement was not in writing it might have been proper for the presiding justice, had he been so re- quested, to have defined a wagering contract and have left it to the jury to find whether by a fair in- ference from all the testimony this was within the definitions." And in Brand v. Henderson,^ the court said : " A verbal contract may be explained by facts, circumstances, or conversations which shed light upon the meaning of its words. In such case it is proper to ascertain such extrinsic facts as the parties may have had in view at the time the contract was made, in order to obtain the true meaning of its words," and it was " held to be error to refuse to let ' Third Nat. Bk. ■». Harrison, 10 Fed. Kep. 343 ; Ounningham v. Third Nat. Bk. of Augusta, 71 Geo. 400 ; Mitchell «. Catchings, 33 Fed. Eep. 710; Shaw v. Clark, 49 Mich. 384. '' Tenney v. Foote, 95 111. 99. = Farsira ii. Gabell, 89 Pa. St. 89. * 65 Me. 570. . » 107 111. 141. WAGEKS BETWEEN PRINCIPALS. 63 the defendant answer the questipn as to what was said at the time the order was gi\ren about how the sale was to be settled." In Porter v. Viets/ the defendant made a contract in writing with plaintiffs by which he sold them fif- teen thousand bushels of corn for future delivery. Both parties signed the contract. The corn not be- ing delivered, suit was brought for damages. The defense was that it was not intended by the parties that the corn should be delivered, but that it was a contract for the payment of the difference between the price stated and the market value at the time mentioned for delivery; in fine, that it was nothing more than a wager between the parties as to the price of the corn at the time fixed on, and that the contract was only a cover for the real intent of the parties, which was merely to make a bet and noth- ing more. The court said : " The rule is well settled that when two men make a contract, and reduce it to writing, and sign it, that is the contract between them. It cannot be shown verbally that something different was intended at the time from what appears in the writing. It is a rule resting upon the sound- est principles, and one of uniform application. Here is no fraud intended. The contract is free from doubt or ambiguity. It is to deliver a certain quantity of corn at a certain time for a certain price, all set forth in writing. The defendant says he wishes to show that the intention of the parties at the time was to make a wager on the price of corn during the last half of June, and that the amount of the wager and the party that was to win or lose was to depend upon the market ' 1 Biss. 177. 64 OOKTBACTS FOK FUTURE DELIVERY. price of the corn. Now, it may be true that the result is precisely the same, that is, the one party loses and the other gains the same amount as in a wager. So it is in any case of this kind, when a party does not per- form his contract. But that circumstance does not make the contract the same. In case of a wager on the price, where a man pays the ' difference,' he per- forms his contract ; but if he does not fulfill the con- tract by paying the difference, he meets the penalty the law imposes for a breach of it. Here this defend- ant wishes to establish orally that another contract was made at the time not in writing, and which he alleges was illegal, in order to make out the illegality of the written contract. This cannot be done. No doubt all contracts which are illegal may be attacked, but no case has been shown which authorized a party to prove verbally that another contract (in itself illegal) exist- ed, and so get rid of a written contract on its face un- exceptionable." In Hentz v. Jewell,^ the action was brought upon promissory notes given, as was alleged in the plea, for money advanced by the plaintiffs to pay losses of the defendant's firm in dealing in cotton futures. The plaintiffs acted as commission merchants of D. A. Jewell & Bro. It was claimed that the cotton futures were gambling contracts. The court said : " To render the contracts invalid, there must, at the time of its creation, be a mutual understanding between the par- ties that no delivery is to be made, but only the differ- ences in prices paid. Kespectable authorities hold that when the contract is in writing, and. such under- ' 30 Fed. Rep, 592. WAaEES BETWEEN PRINCIPALS. 65 standing is not expressed, that paro] testimony is inadmissible to establish it. Such are the contracts proven in this case ; and if this rale is applied it will cut off this defense." On the other hand, in the same year, the case of Cassard v. Hinman,^ a different conclusion is reached. This action was brought to recover damages for the non-fulfillment of an agreement, dated the 16th of May, 1866, in which the defendant agreed to sell to the plaintiffs five hundred barrels of mess pork, deliverable in the month of September, and cash at the rate of seventeen dollars per barrel to be paid on delivery. This contract was in writing. The defendant in his answer stated that it was not his intention to make any actual sale or delivery of pork to the plaintiffs, nor was it the intention of the plaintiffs to actually buy or receive any pork from him; that it was the mutual design and intention of the plaintiffs and the defendant at the time of making such contract that the same should not be specifically performed, in whole or in any part, but on the contrary, at the maturity of such supposed contract, the difference between the market value of the pork therein mentioned and the price of the same fixed in such contract should be paid by the one party to the other, as performance or satisfaction of said supposed contract, and claimed that this wais illegal and void, and contrary to the New York statute. To this answer there was a demurrer on the ground of insufficiency. In the trial of the case at Special Term it does not appear by the report thereof that any question was made as to whether this intention could be shown by parol testimony, but on ■ 1 Bosw. 207. 66 CONTRACTS FOR FUTURE UBLITBRY. appeal to the Greneral Term it was claimed by the plaintiff that this was a speculative contract merely, and not in the nature of a wager, and neither within the letter nor the intent of the statute against betting and gaming ; that the contract on its face contains nothing contrary to the statute, and being in writing, cannot be varied or contradicted by parol evidence of an intention which must go to show that it was never to be per- formed, and that therefore the allegation of such an intent is not good in pleading, and does not raise the question of wager at all. The court said : " The rule which excludes parol evidence to contradict or vary the terms of a written instrument, applies to the con- struction of it only as a valid subsisting contract; but a party might always show that the instrument was void, either by reason of fraud, want of consideration, or as contravening a statute, or some express rule of common law, or as against public policy, and for other reasons. So infancy, coverture, and insanity may, when pleaded, be shown by parol to avoid a written agreement." The case of Yerkes v. Salomon ^ was founded upon. written contracts, and it being claimed that they were wagers upon their face, the court allowed parol testi- mony to show what the intention of the parties was as to delivery of the shares mentioned in the contracts. The question which we are now considering does not seem to have been raised in the case, but, as it stands, it is indirectly a strong authority in support of Cassard V. Hinman. In Kent v. Miltenberger,^ the court said : " There ' 11 Hun, 471. " 13 Mo. App. 503. WAGERS BETWEEN PRINCIPALS. 67 was not only no agreement that the contracts which the plaintiflf made for the defendant should be settled without delivery, but the contracts upon their face im- ported the contrary, and not a word was written or said indicating that it was the intention that the con- tracts should be in any respect different from what they purported to be on their face." In Kirkpatrick v. Bonsall,^ tke action was for the breach of a written contract, which gave to the plaintiff the option to call upon the defendant to deliver certain oil. It was claimed that the contract was a mere wager on the market price of oil ; and it was held that it was proper to ask the plaintiff, what other contracts he had made when he entered into this contract, to be followed by evidence of his financial inability to take and pay for the amount of oil specified in said con- tracts. In Clarke v. Foss,^ the facts were that C. B. Stevens & Sons had for many years shipped wheat and other grain for sale to the defendants, who were commission merchants in Chicago and members of the Board of Trade of that city, and had speculated from time to time in the Milwaukee market, and also in the Chicago market, through the defendants as their factors. Ste- vens & Sons ordered the defendants to make sales for them of grain for future delivery, which the defendants did by written contracts with third parties. These contracts were afterwards performed, or settled in a variety of ways, which it is not important now to notice. The losses were large, and, after being fully adjusted and paid by the defendants, Stevens & Sorts ' 73 Pa. St. 155. " 7 Biss. 540. (58 CONTRACTS FOR PUTUBE DELIVERY. gave their notes to the defendants for the amount. Notes secured by mortgage were afterwards given by Stevens & Sons to the defendants for a portion of the losses paid by them. Two years afterwards Stevens & Sons went into bankruptcy, and an action in equity was brought by the assignee to set aside and cancel these notes and mortgages, on the ground that they were void, as being given -to secure a consideration arising out of option contracts for the sale and deliv- ery of grain which, it was claimed, were wagering contracts under the law of Illinois in force at that time. Upon the question we are now considering, the court said : " The contracts sought to be set aside are written contracts, and the mortgage is under seal. Nevertheless, the weight of authorities, and I think the doctrine, is that you may go behind the writing and show what the real intent and meaning of the parties were; and if it appears that the writing does not express the real intent of the parties, but is merely colorable, and used as a cloak to cover a gambling transaction, the court will not lend its aid to enforce the contract, however fair on its face ; or if secu- rities are given, as in this case, will interfere on the ground of public policy and for the public good, rather than for the purpose of believing a party who is him- self particeps criminis in an inhibited transaction, to set aside such securities." Wharton,^ in his Law of Evidence, says : " It may be proved that the contract embodied by the writing is illegal, and therefore void. If void it is not a con- tract. To exclude parol evidence, because it is a con- tract, is to assume the very point in question. * * * ' Vol. n, sec. 935 (ed. 1879). WAGERS BETWEEN PRINCIPATjS. 69 Nor can any form of contract of indebtedness preclude a debtor from setting up usury." This statement of the law is undoubtedly correct, but it does not fully cover the question we are considering. Admitting that any extrinsic fact may be shown to prove that a contract was made for an unlawful purpose, or that there was added to it something, which made it void on the ground of public policy, this is not equivalent to saying, that a contract of sale in writing may be shown to be no sale at all, by proving a contem- poraneous parol agreement to that effect. Both of the agreements considered alone are perfectly valid. In each of the illustrations used in Cassard v. Hiuman, and by Wharton, some extrinsic fact appeared which rendered unenforcible in law the contract made. In none of them was it pretended that the contracts made were really fictitious. Upon the authorities, then, this question does not seem to be clearly answered. Not one of the cases cited was in a court of last resort, and until it is de- termined in such a court, where the issue is clearly made and decided, it is proper to consider the question upon its merits. The reasoning of the court in Porter v. Viets seems to be more consistent, logical, and in accordance with the established rules of evidence. Greenleaf says : ^ " When parties have deliberately put their engage- ments in writing, in such terms as import a legal obli- gation, without any uncertainty as -to the object or extent of such engagements, it is conclusively pre- sumed that the whole engagement of the parties, and the extent and manner of their undertaking, was re- ' Vol. I, sec. 375. 70 CONTRACTS FOR FUTURE DELIVERY. duced to writing ; and all oral testimony of a previous GoUoquium between the parties, or of conversation or of declarations at tlie time it was completed, or after- wards, as it would tend, in many cases, to substitute a new and different contract for the one whicb was really agreed upon, to the prejudice, possibly, of one of the parties, is rejected. In other words, the rule is more briefly expressed, ' parol contemporaneous evi- dence is inadmissible to contradict or vary the terms of a valid written instrument.' * * * The writing,^ it is true, may be read by the light of surrounding circumstances, in order more perfectly to understand the intent and meaning of the parties ; but, as they have constituted the writing to be the only outward and visible expression of their meaning, 710 other words are to be added to it, or substituted in its stead. The duty of the court in such cases, is to ascertain, not what the parties may have secretly intended, as con- tradistinguished from what their words expressed ; but what is the meaning of words they have used. It is merely a duty of interpretation; that is, to find out the true sense of the written words as the parties used them ; and of construction, that is, when the true sense is ascertained, to subject the instrument, in its opera- tion to the established rules of law. And where the language of the instrument has a settled legal construc- tion, parol evidence is not admissible to contradict that construction." In the State of New York, it has been decided by a large number of cases that " parol evidence is inadmissible to contradict or vary a written instrument." ^ " Where parties have reduced their in- tention to writing, the terms of the written instrument, ' Vol. I, sec. 277. " 3 Abbott's Dig, 82. WAGERS BETWEEN PKINCIPALS. 71 if clear and unambiguous in themselves, are deemed to be the best evidence of what is intended. And the writing cannot be contradicted or varied by parol evi- dence aiming to show that something different was designed." ^ " A written instrument can no more be contradicted or varied in respect to its legal effect, than it could be in respect to its express terms." ^ '' Con- temporaneous parol stipulations, contradicting or vary- ing the legal effect, are not admissible," ^ " Parol proof of acts of the parties under a contract clear and un- ambiguous in its terms, cannot be received to control the construction of the contract."^ The contracts which appear to have been made in the cases of Porter v. Viets, and Cassard v. Hinman, were clear and unambiguous in their terms, and being contracts of sale had a certain legal effect, and as the law stands in New York, as stated above, there does not seem to be any room for construction or interpre- tation. The contracts were contracts of sale, they were in writing, and, according to the rule laid down in Greenleaf, the duty of the court in such cases is not to ascertain what the parties secretly intended ; and, according to the decisions of New York, the legal ef- fect of a written contract cannot be contradicted by parol evidence. These principles seem to be conclu- sive of the question. The court in Cassard v. Hinman proceeds upon the theory that this rule of evidence had no applica- tion to that case, and says : " The rule which excludes parol evidence to contradict or vary the terms of a written contract, applies to the construction of it only as a valid subsisting contract." And Greenleaf says : ' 3 Abbott's Dig. 83. ' 3 Abbott's Dig. 83. 72 CONTRACTS FOR FUTURE DELIVERY. " The rule is not infringed by the admission of parol evidence, showing that the instrument is altogether voidj or that it never had any legal existence or binding force, either by reason of fraud, or for want of due exe- cution and delivery, or for the illegality of the subject- matter. * * * The want of consideration may also be proved to show that the agreement is not binding. * * * Parol evidence may also be offered to show that the contract was made for the furtherance of ob- jects /or(^«c?iiere hy law, whether it be by statute, or by an express rule of the common law, or by the general policy of the law." ^ But the contract of sale which was proved to have been made in this case was a valid, legal, and subsisting contract. Its terms imported a legal obli- gation, there was no doubt or ambiguity in reference to it, and there was no want of consideration, nor was there anything illegal about the consideration, and unless violence is done to the plain meaning of English words, the rule must be applied to it. It remains then only to be considered whether " the contract was made for the furtherance of objects for- bidden by law, whether it be by statute, or by ex- press rule of the common law, or by the general policy of the law." It is true that contracts made for the purpose of violating the law cannot be enforced ; and we have good illustrations of this in many of the cases cited in this book, where commission merchants were em- ployed to make unlawful wagers in the form of pur- chases and sales, and where money was loaned for the purpose of paying losses made under such un- ' Vol. I, sec. 384. WAGBES BETWEEN PRINCIPALS. 73 lawful wagers or compounding or paying differences in unlawful stock-jobbing. But in these, and simi- lar cases, parol evidence was not offered to show that the contracts sued upon were unlawful, or that the contracts themselves, or the intention of the parties to them were different from what their writ- ten terms implied; and the rule of evidence which we are now considering was not violated by showing that the losses paid, money loaned, and services per- formed had been, or was to be, applied to purposes which the law prohibited. It appears, then, that to allow the introduction of testimony to show that a contract of sale in writing is nullified by a parol agreement that the written contract is not to be enforced, and is really no con- tract of sale at all, violates one of the oldest and best established rules of evidence. It is submitted that to do this is altogether un- necessary. The object desired by the courts would be much better accomplished by a strict enforcement of the rule, and compelling parties who reduce their contracts to writing, to perform them, rather than to relieve them from their obligations by allowing them to show an understanding and intention contrary to their terms. It is not enough, nor is it true, to say that if a written contract can be made the cover of a wager, that there would be no means of preventing gambling. In the first place, if gamblers knew the contracts they made would be enforced against them, they would never make such covering contracts, for it would be contrary to the object which they had in view ; and the result would be that gambling would necessarily 6 74 CONTRACTS FOE FUTURE DBLIV1ERY. take the form of pure wagers or bets on the market price of the article wagered upon. It is incorrect to say that gamblers assume the cover of legitimate and lawful trade. They never really do this for the pur- pose of avoiding the obligations which they thereby in form assume. They operate in forms of legitimate trade simply as a matter of convenience. Let them understand that a written contract must be enforced, and they will never make such a contract ; and thus we would have a cure of the evil in part by the en- forcement of the rule of evidence which we are now considering. Again, the violation of the rule is not necessary, because such contracts are extremely rare. Wagers are very seldom reduced to writing, and a real wager- ing contract in form of a written sale is as rare in this country as the court in Thacker v. Hardy ^ said time bargains were in London. In fact, it can be said to the credit of the exchanges in this country, that such contracts on their floors are almost if not quite un- known. If people wish to gamble on the price of any com- modity, they do it in bucket shops. There the form assumed is not that of purchase or sale, but that of the employment of a broker or commission merchant to make the sales for an assumed principal ; ^ or they make contracts of sale directly with one another by oral agreement ; or they make a bargain with a member of an exchange, as appears in the case of Byers v. Beat- tie,^ where the mutual promises of the parties were to ' 37 W. R. 158 ; s. c. L. R. 4 Q. B. D. 685. ' Bryant v. Western Union Tel. Co. 17 Fed. Rep. 835. ' 16 Weekly Reporter, 379. See Chap. V, Rule 14. WAGERS BETWEEN PRINCIPALS. 75 pay differences to each other. It is extremely rare that any of these contracts are in writing. And lastly, it is not necessary, because if the evil is really so very great, it could be reached by legislation. It is no part of the duty or province of the court to apply the law to cases to suit their own notions of propriety. They are to apply it as they find it. Cotton, L. J., in Thacker v. Hardy,^ who certainly was no admirer of the methods pursued on the London stock exchange, said ; " We ought to decide this case, as all others, ac- cording to what we consider to be the principle, and without reference to what the consequences of our de- cision may be ; and I am not sure that a decision like tMs, when we find ourselves compelled to hold that the persons who had employed a broker under such circum- stances as the present, are liable in the event of this case, is not more likely to check these transactions on the stock exchange than if we had decided otherwise." ' 37 W. R. 158; s. c. L. R. 4 Q. B. D. 685. CHAPTER III. FACTS AND CIRCUMSTANCES WHICH HAVE BEEN CONSID- ERED BY THE COURTS AS INDICATING AN INTENTION TO WAGER. It is proposed in this chapter to consider what facts and circumstances tend to show that contracts for future delivery, lawful on their face, are in fact wagers. At the outset it must be confessed that the cases are unsatisfactory and contradictory. This is due partly to the fact that they were improperly prepared, and badly presented ; partly that the courts and counsel did not have accurate knowledge of the real methods of doing business on the exchanges ; but more especially because a proper discrimination between speculation and gambling was not made. Distinction lietween speculation and gambling.— As introductory to the consideration of this subject let us examine the decisions which refer to the distinc- tion between speculation and gambling. In Clarke V. Foss,^ the court, in speaking of contracts for future delivery, where the seller did not possess the articles sold, nor have any means of getting them, except by purchasing them in the market, said : " Such contracts, though entered into for pure purposes of speculation, however censurable, when made by those engaged in ordinary mercantile pursuits, and who have creditors depending for the payment of their just claims ' 7 Biss. 540. FACTS INDIOATING INTENTION TO WAGER. 77 upon their prudent management in business, are nev- ertheless not prohibited by law. In Porter v. Viets/ it was said : " People might diflfer about the propriety of making such a contract by one who did not know certainly where he was to acquire the property, but, having made it, the courts will compel him to abide by it. * * * Whatever may be the judgment of discreet men as to the propriety of such purely specu- lative transactions as are disclosed by this record, undertaken by men in mercantile pursuits, I am unable to see, on general principles, any objection to them in point of law. The law does not undertake to prevent speculation. It does not undertake the Quixotic task of nicely governing men in all relations of life, and compelling them to do, under all circumstances, what is prudent and reasonable. The truth is, men are speculative creatures as certainly as they are eating and sleeping ones. And although it is undoubtedly true that much harm comes to the community from over speculation, it is more than doubtful, if the world would be better off without speculators ; or if it would be that the law can do much in the way of abolishing them. It is only with the more manifest abuses of the privileges of citizens in their dealings with one another, and when the evil touches and affects the public wel- fare, that the law assumes to interfere. In the main, commercial transactions must be left to be regulated by the higher and more inexorable laws which govern the trading world. If the transactions disclosed by this case are illegal, then, undoubtedly, a great part of the banking and clearing-house transactions in our great commercial centers are illegal also. I am per- ' 1 Biss. 177. 78 CONTRACTS FOE FUTURE DELIVERY. suaded that to hold them so would be trenching too severely upon the business of the commercial world, without any corresponding benefit to be,expected from it. It might be a difficult task to lay down any single rule or draw a straight line which should define or divide all merely speculative from all pure gambling transactions, for it must be admitted that the same prime element of risk is common to both." In Smith v. Bouvier,^ which was an action arising out of a short transaction in stocks, the court said : "There is no objection to the transaction, if it be a real transaction, and a real delivery of the stocks is contemplated and effected, or that it was a speculation. It is the business of all people who engage in trade to speculate ; all trade is based upon speculation, and no contracts are obnoxious to legal objection merely because they are speculations." In Kirkpatrick v. Bonsall,^ which was an action brought for tlie non-performance of a pure option con- tract in oil, the court said : " We must not confound gambling, whether it be in corporation stocks or mer- chandise, with what is commonly termed speculation. Merchants speculate upon the future prices of that in which they deal, and buy and sell accordingly. In other words they think of and weigh, that is speculate upon, the probabilities of the coming rriarket, and act upon this lookout into the future in their business transactions; in this they often exhibit high mental grasp, and great knowledge of business, and of the affairs of the world. Their speculations display talent and forecast, but they act upon their conclusions, and ' 70 Pa. St. 335. ■' 73 Pa. St. 155. FACTS INDICATING INTENTION TO WAGER. 79 buy or sell in a bona fide way." This case has been frequently quoted in subsequent cases.^ In Kent v. Miltenberger,^ the court said : " The law puts no restraint upon trade which renders it unlawful for a man to buy or sell commodities in which he does not generally deal, if he thinks he can catcb a favor- able turn of the market and make money by so doing. What one man is at liberty to do in this respect, an- other man is equally at liberty to do. * * * The circumstance which renders these contracts unlawful is a contemporaneous agreement that they shall not be executed by a delivery, but only by a settlement of differences. Unless there is such an agreement it is idle to talk about the gambling intent, or wagering intent, or bets upon the future state of the market, because this is a mere play upon words. Every intent to speculate becomes in the opinion of some a gam- bling intent, and every mercantile venture involves in the same view a bet upon the state of the market. The law distinctly defines the characteristic of a gam- bling contract when it takes the outward form of buying and selling for future delivery. To that definition we must adhere. The rule which we are asked to assent to by the learned counsel for the defendant in this case remits the whole subject to the loose discussion of juries, and puts it entirely at sea." In Hatch v. Douglas,® which was an action brought by a broker and member of the New York Stock Ex- change for losses paid upon ordinary speculations in stocks upon margins, the court said : " Contracts of ' In re Green, 1 Biss. 338; Gregory «. Wendell, 39 Mich. 337. ' 13 Mo. App. 503. » 48 Conn. 116. 80 CONTRACTS FOB FUTURE DELIVERY. this nature however are distinguishable from specu- lating contracts. A man may legitimately buy goods or stocks intending to sell in a short time and take ad- vantage of an advance in the price if there is one. In such a case he takes the risk of a decline, but that does not make it a gambling contract. And he may purchase goods at a fixed price to be delivered at a future day, if the parties intend an actual delivery and acceptance. * * * Now there are in the transac- tions between these parties some of the elements which are usually found in a gaming contract. For instance, it is pretty evident that the parties did not contem- plate that the stock should be actually transferred to the defendant ; but he would have been satisfied with the receipt of the difference between the price paid and the price received, less interest and commission if the price advanced, and expected to pay that difference if the price declined. To that extent it was a contract for the payment of differences. But it was more than that. The defendant through his agents, the plaintiffs, actually purchased the stock, and there was an actual delivery— not to the principal, but to the agents for the principal. The plaintiffs advanced the money and held the stock in their hands as security. The plaint- iffs were ready at any time to transfer the stock to the defendant on payment of the purchase-money. The import of the finding is, and we must so regard it, that it was an actual and bona fide employment of the plaintiffs to purchase stocks, and not a mere formal employment, designed to cover a betting operation. It does not appear that the plaintiffs assumed any risk. They were entitled to their commission and interest on their advancements whether the stocks went up or FACTS INDICATIKG INTENTION TO WAGER. 81 down. The most that can be said of them is, that they knew that the defendant was speculating, and they advanced him money for that purpose. But that was neither illegal nor immoral. The circumstances relied upon to prove the illegality of this contract are con- sistent with the claim that it was a legitimate business transaction. It is probably true that dealing in stocks on ' margin,' as it is called, is fraught with much evil. It encourages speculation, and induces many to engage in it, who would not otherwise have the requisite means. In that way many people and business gener- ally suffer more or less, but it is an evil that existing laws do not reach. No case has been cited which de- clares such a contract illegal. If we should so hold it would be difficult, if not impossible, to draw the line between legal and illegal transactions. We are of the opinion that there are not in the case before us suffi- cient reasons for declaring the contract illegal." In Flagg V. Baldwin,^ the court said: "The line is to be drawn between what is legitimate speculation and what is unlawful wagering. When property is actually bought, whether with money or with credit, the purchaser and owner may lawfully hold it for a future rise, and risk a future fall. With such trans- actions th.e law does not pretend to interfere. They are witbin the line of lawful speculation. But when, either without any disguise or under a guise which simulates such legitimate enterprises, the real trans- action is a mere dealing in the difference between prices, i. e., in the payment of future profits or future losses, as the event may be, then, in my judgment, the line whicb separates lawful speculation from illegal ' 38 N. J. Eq. 319. 82 CONTRACTS FOR FUTURE BELIVERT. wagering is crossed, and the contract, under our law, becomes unlawful, and the securities for it void. This proposition is sustained by all the cases, without an exception, that I can discover. The only disagreement relates to the application of the doctrine." OPTIONS AS TO THE TIME OF DELIVEKY.— PURE OPTIONS. A distinction is to be made between what are com- monly called options, where the only thing optional is as to the time of delivery within certain fixed periods, and what has been called in the previous chap- ter, " pure options ; " the latter being a privilege which the owner of the option has of delivering or requiring delivery or not as he sees fit. The former are univer- sally regarded as legal. In Whitesides v. Hunt,^ the court said : " If the honaflde intention of the seller is to deliver, and the buyer to buy, and the option consists merely in the time of delivery within a given time, the contract is valid." And in Logan v. Musick,* where it was claimed that such a contract was within the statute of that State prohibiting the sale of op- tions, the court said : " A contract for the sale of grain for future delivery, whilst it may give the purchaser an option to select a day within a limited time on which he may receive the grain, does not constitute such an option to buy at a future time as is pro- hibited by the statute. * * * It is true, the de- fendant had an option, under the contract, to select a day within a limited time on which he would receive 1 97Ind. 191. •' 81 HI. 413. FACTS INDICATING INTENTION TO WAGER. 83 the grain ; but such an option does not fall within the statute, for the reason that it does not render the sale optional." These contracts are very common on the produce and cotton exchanges, and frequently occur on the stock exchanges. The contracts are usually at the seller's option, but may be and frequently are at the buyer's option. On the New York Stock Ex- change the time within which these optional deliv- eries may be made is limited to sixty days. On the other exchanges they are usually within any given month in the year. For instance, to buy or sell " a March " on the cotton exchange, means that the deliv- ery is to take place at any time within the month of March. To buy or sell a July " option " upon the produce exchange means that the article bought or sold shall be delivered during the month of July. In all these cases the party having the option must make or require delivery upon the last day of the time limited, unless he has exercised his option to do so be- fore that time. This form of contract has been re- peatedly held to be legal.^ In Pixley v. Boynton,^ the court said : " The pur- chase of grain at a certain price per bushel, made in • Union Nat. Bank of Chicago v. Carr, 15 Fed. Rep. 338 ; Beveridge ». Hewitt, 8 Bradw. 467 ; Webster v. Sturges, 7 Bradw. 56 ; Gilbert ». Ganger, 8 Biss. 214; Kirkpatrick v. Bonsall, 73 Pa. St. 155; Jackson v. Foote, 12 Fed. Rep, 37 ; Wolcott v. Heath, 78 111. 433 ; Sawyer v. Tag- gart, 14 Bush, 727; Cole v. Milmine, 88 111. 349; Porter v. Viets, 1 Biss. 177; Clarke v. Foss, 7 Biss. 540; Gregory*. Wattowa, 58 Iowa, 711; Melchert u. Am. Union Tel. Co.. 11 Fed. Rep. 198; Ex parte Young, 6 Biss. 53 ; Kent ». Miltenberger, 13 Mo. App. 503 ; Colderwood v. McCrea, 11 Bradw. 543; Shaw «. Clarke, 49 Mich. 384 ; Williams v. Tiedman, 6 Mo. App. 369 ; Swift s. Powell, 44 Geo. 133; Cobb ». Prell, 15 Fed. Rep. 774 : Frost v. Clarkson, 7 Cowen, 24. ' 79 111. 351. 84 CONTRACTS EOE FUTURE DELIVERY. good faith, to be delivered in the next month, giving the seller until the last day of the month, at his op- tion, in which to deliver, is not an illegal or gambling contract, and the purchaser will be entitled to its bene- fit, no matter what may have been tbe secret intention of the seller. * * * Under such a contract, as we understand the evidence, all the option the seller has is the privilege to deliver the grain at any time before the maturity of the contract. This is nothing more than a time contract, which is regarded on the board of trade and elsewhere as a legitimate and regular con- tract. Time contracts in relation to grain, as well as other commodities, are of daily occurrence, and must necessarily be in commercial transactions." The second class of options — " pure options " — are of a very different character. In these, whetber delivery takes place or not, depends upon the will of the party entitled to 'demand or make it. He may require or make it, or he may not, and he pays a certain sum for that privilege. If he does not exercise it within the time limited, his right to do so is gone and he loses the price he pays. Whether or not such contracts are wagers will depend, like all contracts for future deliv- ery, upon the question whether the contracts are de- signed as mere covers for wagers, or whether they are intended as bona fide contracts. It has sometimes been said that, like all other contracts for future de- livery, it will depend upon whether the parties thereto intended a delivery to be made. This is very incorrect and furnishes an inadequate test ; because it is perfectly apparent that an option to demand or make delivery is inconsistent with an intention that delivery should in any event be made. The fact that these pure op- FACTS raDlCATlNG INTENTION TO WAGEE, 85 tions have been sustained by the courts show that the true test, whether a contract is a wager or not, is never whether the parties intended actual delivery or not, but is, whether they intended the contract actually made to be a cover for a wager or a honafide contract. If the good faith of a transaction is to be tested by the intention as to delivery, then the question should be, could delivery in any event be compelled by either party V If it could, then the contract is not a wager. " Pure options " are never made in the New York Pro- duce and Cotton Exchanges, and would not be en- forced under their laws. In England and in this country they are recognized by the stock exchanges. In England, however, there are no adjudications upon the question whether they are legal or not. In this country there are some decisions sustaining their valid- ity, and there are some statutes, and other decisions against them. These pure option contracts have been described on page 27, and are quite common in Wall street. In Tyler v. Barrows,^ the defendants made an ex- ecutory contract by which they agreed to sell and de- liver to the plaintiff's assignors at a specified price a certain number of barrels of petroleum oil by instalments, consisting of a certain number each, at intervals of fifteen days, until the whole was de- livered, provided the buyers gave notice at such time of their intention to receive the same. The buy- ers agreed to pay that price for so many of said instal- ments as they should notify the defendants of their intention to take, and should receive and pay |1,000 ' Hentz V. Jewell, 20 Fed. Rep. 592. ' 6 Robt. 104. 86 CONTRACTS FOK FOTUEE DELIVERY. for each of sucli instalments which they should so fail to notify the defendants of their intention to take. It was held that, " although it did not appear that the defendants owned any oil at the date of the contract, such contract was not necessarily a wagering contract ; because the buyers might elect to take all the oil agreed to be delivered, and the sum agreed to be paid for the option of taking or refusing the oil was not necessarily a sum staked upon any event ; and unless such con- tract 'was incapable of any other construction, or there was extrinsic evidence to show that the parties intended to lay a wager by means of it, it was not objection- able." In Kirkpatrick v. Bonsall,^ the plaintiff and de- fendant made the following contract : " For and in consideration of the sum of $1,000 to us in hand paid by Sterling Bonsall, Esq., the receipt of which is hereby acknowledged, we hereby bind and obligate ourselves to deliver to said Sterling Bonsall, or his as- signs, should he or they call upon us to do so at any time during the first six months of 1871, five thousand barrels of good, green, merchantable, crude petroleum. * * * If said oil is called for, this becomes a contract, ten days' notice shall be given, and said Sterling Bonsall, or his assigns, hereby agree to re- ceive and pay for same, cash on delivery, at the rate of ten and a half cents per gallon on lots as gauged and delivered. One-half per cent, brokerage whether oil is delivered or not." Agnew, J., said : " We can- not pronounce this agreement a gambling contract on the face of the writing. A bargain for an option, ' 72 Pa. St. 155. FACTS INDICATING INTENTION TO WAGER. 87 such as it presents, may be legitimate and for a proper business object. We can imagine such cases." Another instance has been supposed where these contracts would be valid and in the regular line of business. " Let us suppose a person who is possessed of certain securities to be desirous of selling if he could get a bid, say one per cent, higher than the present price, and to be at the same time desirous of doubling his holding if he could buy at a price one per cent, lower. If he gives his instructions in this form to his broker, it may well happen that the price does not fluctuate sufficiently to make it possible to carry out either transaction. But the same practical result may be attained with certainty by the owner of the securities taking a one per cent, price for the put and call of them, for the money thus received would be, as it were, a reduction of one per cent, in the- purchase price if the security is put upon him, and would equally, as it were, go to increase the sell- ing price if it is called from him. There is, of course, this difference, that if the security is at pre- cisely the same price on the option day as on the day the bargain was made, it may happen that the security is neither put nor called, and in that case the owner will have secured his one per cent, with- out further liability, and be in a position to repeat the process. Under such circumstances the option could not be said to be void as a wager." ^ In the case of Chicago & G. E. R. R. Co. v. Dane ^ the defendant by letter offered to receive from the ' Laws and Customs of Stock Exchange, by Melsheimer & Laurence (London, 1879), 24. ' 43 N. Y. 340. 88 OONTKAOTS FOE FUTURE DELIVERY. plaintiff, and transport from New York to Chicago, railroad iron not to exceed a certain number of tons at a specified rate per ton. The plaintiff merely as- sented to the proposal, but did not agree to deliver the iron for transportation. Grrover, J., remarked that " this amounted to nothing more than the acceptance of an option by the plaintiff for transportation of such quantity of iron by the defendant as it chose ; and had there been a consideration given to the de- fendant for such an option, the defendant would have been bound to transport for the plaintiff such iron as it required within the time and quantity specified, the plaintiff having its election not to require the trans- portation of any." In Bigelow v. Benedict ^ an action was brought on the following contract : " Attica, January 23d, 1865. "Know all men by these presents, that I, Charles B. Benedict, for and in consideration of the sum of two hundred and fifty dollars good and lawful money of the United States, to me in hand paid, the receipt of which is hereby acknowledged, do agree to receive from M. C. Bigelow, at any time within six months from date he may choose to deliver the same, two thousand and five hundred dollars in gold coin of the United States, for which I agree to pay the said Bigelow nine- ty-five per cent, premium on the dollar, at the rate of one hundred and ninety-five dollars in good current funds for each and every one hundred of coin. The said Bigelow does not contract to deliver the coin, but pays the two hundred and fifty dollars for the privilege of delivering or not, at his option. C. B. Beioidict." ' 70 N. T. 203. See, also, Disborough ,«. Neilson, 3 Jo. Ca. 81 ; Stan- ton V. Small, 3 Sandf. 230; Brown v. Hall, 5 Lan. 180. FACTS INDIOATING INTENTION TO WAGER. 89 It was claimed ia defense that this contract was a wager and therefore void. Andrews, J., in delivering the opinion, said : " Mercantile contracts of this char- acter are not infrequent, and they are consistent with a hona fide intention on the part of both parties to per- form them. The vendor of goods may expect to pro- duce or acquire them in time for a future delivery, and while wishing to make a market for them, is un- willing to enter into an absolute obligation to de- liver, and therefore bargains for an option which, while it relieves him from liability, assures him of a sale, in case he is able to deliver ; and the purchaser may in the same way guard himself against loss be- yond the consideration paid for the option, in case of his inability to take the goods. There is no inherent vice in such a contract. * * * jf guch a contract relates to a marketable commodity the purchaser risks the chance of depreciation in market value between the execution of the contract and the time of the de- livery, and the vendor loses the opportunity of selling them at a higher price if the market advances, but this hazard is in no sense a wager, if the transaction is hona fide, and it will be presumed to be so until the contrary appears. The form of a contract of sale may be resorted to as a mere cover for betting on the future price of the commodity agreed to be sold, and if this is the real meaning of the transaction, and no actual sale or purchase is intended, the contract is illegal, and will not be enforced. But the illegality is a matter of defense, and must be established by proof, and found by the jury." 7 90 CONTBACTS FOR FUTURE DELIVERY. In Story v. Solomon/ tlie action was brought upon the following contract : " New Yoek, May 15th, 1875. " For value received, the bearer may call on the un- dersigned for one hundred (100) shares of the capital stock of the Western Union Telegraph Company, at seventy-seven and a half (77i) per cent, any time in thirty (30) days from date. Or the bearer may, at his option, deliver the same to the undersigned at seventy- seven and one-half (77i) per cent, any time within the period named, one day's notice required. All divi- dends or extra dividends declared during the time are to go with the stock in either case, and this instrument is to be surrendered upon the stock being either called or delivered. S. N. Solomon." Before the expiration of the thirty days the de- fendant suspended payment, the parties came to a settlement, and endorsed on the contract, " Settled at market 72i," which was the price of the stock on the day of settlement. The difference between that price and the contract price was thus fixed as the sum which the plaintiff was entitled to re- cover, if he was entitled to recover anything. The defense relied upon was that the contract was a viola- tion of the New York statute against gaming, and therefore illegal and void. The court said : " There was no parol proof that the parties intended by this contract a wager or bet, and the question must be de- termined by the terms of the contract itself. This contract purports to be based upon a valuable consid- ' 71 N. Y. 430. FACTS INDICATING INTENTION TO WAGER. 91 eration. The plaintiff paid for the options given him. One may pay for an option to take at a future day, at a certain price, a farm, or any article of personal prop- erty. There is always uncertainty . as to what the property will be worth at the day named, and if it should then he worth less than the price named, he will not take it. In all this there is not necessarily a bet or wager. It is an ordinary business transaction. And the case would not be altered if, instead of paying for an option to buy, he pays for an option to sell at a fu- ture day. Most contracts for the purchase or sale of merchandise at a future day are made with the view to the market price on the day of performance. There is always an element of speculation and uncertainty as to that, and yet it has never been supposed that there is any betting by such contracts. Here the option to buy and sell was put in the same contract. On the face of the contract the plaintiff provided for the con- tingency that on that day he might desire to purchase the stock, or he might desire to sell it, and in either case there would have to be a delivery of the stock or payment of damages in lieu thereof We should not infer an illegal intent unless obliged to. Such a trans- action, unless intended as a mere cover for a bet or wager on the future price of the stock, is legitimate and condemned by no statute ; and that it was so in- tended was not proved. If it had been shown that neither party intended to deliver or accept the shares, but merely to pay differences, according to the rise or fall of the market, the contract would have been ille- gal." In Harris v. Tumbridge,^ the action was brought ' 83 N. Y. 92. 92 CONTRACTS FOR FUTURE DELIVERY. against a stock-broker to recover damages for alleged unauthorized acts, negligence, and want of skill as agent of plaintiff in a stock transaction, " The plain- tiff bought through the agency of the defendant a stock option or privilege, known in the language of stock- brokers as a ' straddle.' The word, if not elegant, is at least expressive. It means the double privilege of a put and a call ; and secures to the holder the right to demand of the seller at a certain price within a certain time a number of shares of specified stock, or to require him to take at the same price and within the same time the same shares of stock. The continuance of the option is fixed by the agreement, and in this case was for sixty days. The value of a straddle, it is proven, depends upon the fluctuations of the stocks selected. It was argued that this was a gambling transaction, and as such prohibited by statute." The court said : " It may have been, but there is no proof that it was, and no such defense was pleaded. The contract was not of necessity a wager contract. That it might have been does not at all dispense with the necessity of proving that it was." In the case of Yerkes v. Solomon,^ the defendant made and for valuable consideration delivered to the plaintiff three contracts. One of them was a " put " for five hun- dred shares of the Lake Shore Railroad Company, the second a "call" for two hundred shares of the stock of the Pacific Mail Steamship Company, and the third a " call" for five hundred shares of the Lake Shore Railroad Com- pany. While these contracts were running the de- fendant became insolvent, and on being notified by the plaintiff that he intended to deliver to him the stock, ' 11 Hun, 471. FACTS INDICATING INTENTION TO WAGEB. 93 said he had failed, and that he could not take them. It was then agreed between them that the contracts be settled on the market price of that day, and a memo- randum to this effect was endorsed on the contracts, and signed by the defendant. A few days after the plaintiff presented an account made up in accordance with this statement, and defendant said it was right and promised to pay it. It was claimed that these contracts were void under the statute against betting and gaming, and that the defendant had the right to show that they were made with the intention to settle the differences, and not to deliver or accept the stock. The plaintiff was asked, if at the time the contracts were made he intended to tender or call for the stocks, or merely to settle the differences ? This testimony was excluded, and upon appeal it was held to have been error. This case is of importance here only as showing acquiescence in the point decided in the cases of Bigelow V. Benedict,^ and Story v. Solomon ; ^ and as also showing that pure options are liable to be shown to be void as wagers like any other contract for future delivery, and in that way only. In some States, however, contracts of this character, where the thing bought or sold is the mere privilege of making or requiring a delivery, have been held to be obnoxious, and contrary to public policy. In the case of Ex parte Young,^ sometimes called Chandler's case, a statement of which is given in an- other place,* the court, after finding as a matter of fact that neither of the parties to the several put contracts intended an actual delivery of the oats, but that set- ' 70 K Y. 303. ' 71 N. T. 430. ' 6 Biss. 53 * Ante, page 36. 94 CONTRACTS FOE FUTURE DELIVERY. tlements should be made upon the differences in the market price, said : " I do not intend to be understood as holding that every option contract for the delivery of grain or stock, or that every 'put' is necessarily void, but only that all these contracts, in the light of the testimony before the court, were in their essential features gambling contracts. The parties when they made them did not intend to deliver the grain, but only at the utmost to settle the differences.* They knew they could not obtain the grain to deliver if Chandler sustained his ' corner,' and their action in buying a ' put ' was virtually a bet on their part that he could not accojnplish what they all knew he was endeavoring to do ; that is, to keep up the price through June to his own figures, and virtually a bet on his part that he could do so. It is shown in the proof, and urged in the argument, that the ' put ' in itself is a very harmless contract, — that dealqi's frequently resort to it as a method of insuring prices. It is answer enough to this to say that the proof fails to show that such was the object of any of these claimants. * * * It is perhaps possible to imagine a dealer with a stock of grain on hand which he wishes to hold for an advance, who may take a privilege of this kind to insure himself against a decline while waiting for an advance. But the very act of offering to sell a ' put,'^ either implies that the seller has control of the market so that he expects to make his own price, or else it is a mere reckless assertion of the seller's opinion that the price will be maintained, either of which partakes of the character of a bet." The last remark of the learned judge seems to be inconsistent with what he had pre- viously said, but taken as a whole he seems to hold FACTS INDICATING INTENTION TO WAGBE. 95 that a contract of this character is presumed to be a wager, but may be shown to be for a lawful purpose. This is not logical, nor in keeping with principles thoroughly established. In Illinois pure option contracts have been held to be void at common law,-' and by statute are made criminal.^ WHERE THE SELLER DID NOT AT THE TIME OF SALE OWN OR HAVE POSSESSION OF THE ARTICLES SOLD, These are sometimes called time contracts. Tn Lorymer v. Smith,^ Lord Tenterden remarked : "That if a man should bargain to deliver corn not then in his possession, and rely upon making a future purchase in time to fulfill his contract, such a mode of dealing ought not to be encouraged; " and in the subsequent case of Bryan v. Lewis,* the same learned judge said: "I have always thought, and shall continue to think until I am told by the House of Lords that I am wrong, that if a man sells goods to be delivered on a future day, and neither has the goods at the time, nor has entered into any prior contract to buy them, nor has any reason- able expectation of receiving them by assignment, but means to go into the market and buy the goods which he has contracted to deliver, he cannot maintain an action on such contract. Such a contract amounts, on the part of the vendor, to a wager on the price of the ' Webster v. Sturges, 7 Bradw. 56 ; Pickering v. Cease, 79 111. 328; Tenney v. Foote, 4 Bradw. 594; Gilbert v. Gauger, 8 Biss. 314; Walcott ». Heath, 78 111. 433; Lyon v. Culbertson, 83 111. 33. " See page 31. MB. &C. 1. ' Ry. & Mo. 386 . 96 CONTRACTS FOE FUTURE DELIVERY. commodity, and is attended with the most mischievous consequences." In the case of Wells v. Porter,^ Bosan- quet, J., expiessed doubts as to the soundness of this doctrine ; and in Hibblewhite v. McMorine/ it was over- ruled. The last action was brought for breach of con- tract for failure on the part of the defendant to accept and pay for fifty shares of the stock of the Brighton Eailway Company, which the defendant had agreed, on the tenth day of September, 1838, to accept and pay for on the first day of March, 1839, or at any inter- mediate date that defendant might require them. The defense was made that, inasmuch as the plaintiff at the time he made the contract was not possessed of the shares or entitled to them, nor had entered into any contract for the purchase of them, or had any reason- able expectation of becoming possessed nor entitled to them within the time provided by the agreement, the plaintiff could not maintain his action. There was a demurrer to this plea, and it was sustained by the unanimous opinion of the court. Parke, B., said : " I have always entertained considerable doubt and sus- picion as to the correctness of Lord Tenterden's doc- trine in Bryan v. Lewis; it excited a good deal of surprise in my mind at the time, and when examined I think it is untenable. I cannot see what principle of law is at all affected by a man's being allowed to con- tract for the sale of goods, of which he has not posses- sion at the time of the bargain, and had no reasonable expectation of receiving. Such a contract does not amount to a wager, inasmuch as both the contracting parties are not cognizant of the fact that the goods are not in the vendor's possession ; and even if it were a " 3 Scott, 141. >■ 5 M. & W. 463. FACTS INDICATING INTENTION TO WAGBE. 97 wager, it is not illegal, because it has no necessary- tendency to injure third parties." This decision settled the law in England, and has since been followed in the cases of Mortimer v. McCallen,^ and Ashton v. Dakin,^ and has been universally followed in this country.^ In Stanton v. Small,* it was decided that " a contract for the sale of goods, to be delivered at a future time, is not invalidated by the circumstances, that, at the time of the contract, the vendor neither had the goods in his possession, nor has entered into any contract to buy them, nor has any reasonable expectation of be- coming possessed of them at the time appointed for delivery, otherwise than by purchasing them after making the contract." ' 6 M. & W. 58. = 4 N. & H. 869; s. c. 33 Law Times, 300. ' Sawyer v. Taggart, 14 Bush, 727 : Warren v. Hewitt, 45 Ga. 501 ; Rumsey ». Berry, 65 Me. 570 ; Gregory «. Wendell, 89 Mich. 337 ; Webster V. Sturges, 7 Bradw. 56 ; Beveridge j). Hewitt, 3 Bradw. 467 ; Whitesides «. Hunt, 97 Md. 191; Mcllvane ®. Egerton, 3 Robt. 433; Stfinton ». Small, 3 Sandf. 230 ; Pickering ». Cease, 79 111. 338 ; Logan v. Musick, 81 m. 415 ; Tyler «. Barrows, 6 Robt. 104; Irwin «. Williar, 110 U. S. 499 ; Clarke ». Toss, 7 Biss. 540 ; Kent «. Milteuberger, 13 Mo. App. 503; Bartlettc. Smith, 18 Fed. Rep. 263; Smith «. Bouvier, 70 Pa. St. 335; Hatch j). Douglas, 48 Conn. 116; Walcott ». Heath, 78 111. 433; Marshall t. Thurston, 3 Lea, 741 ; Melchert ». Am. U. Tel. Co. 11 Fed, Rep. 193 ; Brown v. Speyers, 30 Grat. 396 ; Noyes v. Spalding. 37 Vt. 431; Williams v. Tiedman, 6 Mo. App. 369; Cole ». Milmine, 88 111. 349 ; Colderwood ». McCrea, 11 Bradw. 548 ; Whitehead ®. Root, 3 Met. 587 ; Bruas' Appeal, 55 Pa. St. 394 ; Brown v. Hall, 5 Lans. 177 ; Pixley V. Boynton, 79 111. 351 ; Disborough ». Nelson, 8 Johns. Ca. 81 ; Cassard ®. Hinman, 1 Bosw. 307; Chapman v. Campbell, 13 Grat. 105; Kirk- patrick ■». Bonsall, 72 Pa. St. 155; Corbett s. Underwood, 88 111. 334; Terkes ®. Salomon, 11 Hun, 471; Porter i>. Viets, 1 Biss 177; Sanborn «. Benedict, 78 111. 309 ; Currie v. White, 45 N. T. 833 ; Bigelow v. Benedict, 70 N. Y. 303. * 3 Sandf. 330. 98 CONTRACTS FOR FUTURE DELIVERY. In Sawyer v. Taggart/ the court said : " An effort was made to prove^and, for the purposes of this case, we assume it was successful — that none of the per- sons with whom Sawyer, Wallace & Co. made contracts for purchase, had the goods contracted for on hand at the time of entering into the contracts, and that they liad no reasonable expectation of acquiring them except by purchasing in the market. But that fact did not render the contracts unenforceable, much less vicious." In Gregory v. Wendell,^ the court said : " The mer- cantile business of the present day could no longer be successfully carried on, if merchants and dealers were unable to purchase or sell that which, as to them, has no actual or potential existence. A dealer has a clear right to sell and agree to deliver at som« future time that which he then has not, but expects to go into the market and buy. And it is equally clear that parties may mutually agree that there need be no present de- livery of the goods, but that such delivery may take place at some future time." In Whitesides v. Hunt,^ it was said : " It was for- merly held that where the vendor neither had tbe goods, nor entertained any contract to buy them, at the time of the sale, nor had any reasonable expectation of receiving them by consignment, but intended to go into the market and buy the article he intended to deliver, no action could be maintained on such con- tract. But that rule has been changed by the later authorities, and thei'e have been numerous decisions, ' 14 Bush, 727. ^ 39 Mich. 337. = 97 Ind. 191. FACTS INDICATING INTENTION TO WAGEE. 99 particularly in this country, holding that the vendor may contract for the sale of an aiticle not in his pos- session, and this doctrine seems to be entirely in accord- ance with the rules of public policy." And in Eumsey v. Berry ,^ it was said, the fact that the seller had no wheat to sell at the time he made the contract, was immaterial, and that consequently the knowledge of it was equally so. The case of Melchert v. American Union Telegraph Co.^ seems to be in conflict with this rule. The action was brought to recover damages against the defendant for negligence in forwarding a message, whereby the plaintiff sustained damage in his speculation in rye through a factor in Chicago. It was held that, even admitting the negligence of the Telegraph Co., the plaintiff could not recover, because the transactions in which the plaintiff was engaged through his factor were wagers, and not bona fide sales and purchases of rye. The rye was purchased by the Chicago factor from A. M. Wright 11 Fed. Rep. 193. 102 CONTRACTS FOE FUTURE DELIVERY. from obtaining the goods in question unless he pays the premium to the retailer; and the manufacturer or wholesale dealer unites in this 'cornering' by refusing to sell to the consumer unless on retail price. The principle is the same as when particular parties unite to ' engross ' or absorb that particular staple by buying up the whole of it in the market and then holding it for a rise. This, which is ' cornering ' in a popular sense, no doubt may be used for extortionate purposes, yet it cannot be prohibited without at the same time prohibiting all retail trade. The evil cures itself far more effectually than it can be cured by the interference of the law. Supposing that a monopoly is obtained by mere voluntary absorption of a particular article by which great gains are got, this leads only to the starting of competitors in the same line ; and for the law to interfere and say, ' you shall not monopolize,' is equivalent to saying, ' you shall not trade.' The same distinctions may be taken in respect to sales of things not at the time owned by the vendor. It is said that for me to agree to deliver next week at a fixed price a thing I do not own, is gambling. It may be so ; but, if it be, then gambling infects so large a part of every-day life that if all that gambling thus infects be prohibited, business will bo prohibited. My baker and butcher, for instance, en- gage to supply me with provisions each day for a month in advance, though these provisions are not now in their hands; and though they usually engage to supply at the market price, yet the cases are rare in which (e. g.,80 much for a pound of butter or so much for a loaf of bread) are fixed in advance. All build- ing contracts are based on this principle ; the con- FACTS INDICATING INTENTION TO WAGER. 103 tractor makes or loses as the materials he uses fall or rise in the market, or the weather is uupropitious or propitious. If things are let alone, all this corrects itself. Men will make their contracts more special, so as to guard against disasters, or they will obtain insurances collaterally against loss ; and even if there are occasional disasters, it will be found that in the excitement of competition, and in the constant presence of risk, there is a stimulus, without which enterprise, caution, and sagacity would not effectually be called forth. That when things are let alone— in other words, when ' trade ' is ' free ' — things ultimately adjust them- selves far better than could be done if the government interfered, is illustrated by the every-day operation by which a great city is fed. Here are 100,000 families, and each family has brought to its door the supply of milk, of bread, of meats, on which it relies. You station yourself — I borrow in this one of Archbishop Whatley's illustrations — on one of the avenues to a city as day is breaking, and you see approaching multitudinous wagons or boats laden with produce of all kinds. No law uttered by legislation or courts prescribes to each producer or pedler what he shall bring to. the city and what he shall sell ; the only law is the social law of supply and demand ; but this works so perfectly that the milk from a thousand dairies is col- lected to-night to be distributed early to-morrow morn- ing precisely where it is needed in the city. And so with the vegetables from a thousand truck farms, and the meat from hundreds of slaughter-houses. If gov- ernment, through either legislature or court, should interfere, this delicate adaptation of supply for demand would be destroyed. It is only by letting competition 104 CONTKAOTS FOR FUTURE DELIVERY. be unrestrained that supply is so adjusted to demand as to properly employ the producer and properly supply the consumer. It is only under the incitement of competition thus induced that the staples of trade are from day to day extended and machinery made moi'e perfect. Such is the ' laissez faire ' theory of political economy, a theory of late years, since the triumph of free trade principles in England adopted by the English courts as well as by the British Parlia- ment, and adopted also by the courts of several of our States. " 2. The conflicting schools to which I called attention, starts from an ethical or police basis. ' Certain business contracts,' it says, ' are immoral and must be prohibited; ' and among immoral contracts are classed all contracts for the sale of things the vendor does not possess at the time, and which he does not expect to possess ; the contract in ssuch case only binding him to pay the dijBFerence in price in case the price of the article sold has risen at the time fixed, he being entitled to benefit by any fall of prices marked at the same period. This position is thus stated by Judge Love in the opinion above given. ' If it be not the honafide intention of the parties that the property shall be in fact delivered in fulfillment of the contract of sale, but that the seller may, at his election, deliver or not deliver, and pay the difference, then the contract is void.' In Illinois this is prescribed by a statute quoted by Judge Love, and though that statute is in terms so broad as to cover contracts which are not in any sense gambling, it is restricted by the State judiciary to cases where the transaction is to be ' adjusted only upon differences.' As going to the FACTS INDICATING INTENTION TO WAGBE. 105 same point may be cited Lyon v. Culbertson, 83 111. 33, and other Illinois cases cited "by me in the opening article in the Criminal Law Magazine for January, 1850. As the contract before u~s was an Illinois contract, it was governed by the Illinois law ; and (supposing that the Illinois statute was not repug- nant to the Federal Constitution) Judge Love had no alternative but to apply it as construed by the Illinois courts.-^ Whether such a statute conflicts with the clause in the Federal Constitution which provides that the State laws impairing the validity of contracts shall be inoperative, is an important ques- tion which has not yet been discussed ; and it may be in view of this question that Judge Love, in the opinion before us, rests liis conclusion, not merely on the statute, but on the general policy of the law. And there is no question that, irrespective of statute, it is settled that a contract to pay any rise on the price of a particular article, at a given future period, is void under the common law as gambling. It is not a contract for sale and delivery, for no delivery is contemplated. It is simply a bet as to what the market will be at a particular time. ' If prices are stationary, there will be nothing to pay. If prices rise, I pay you the rise. If they fall, you must pay me the fall.' Such a contract the courts will not enforce, as against the policy of the law." In this country there have been several statutes against " short sales," some of which are still in force.^ ' This statute is discussed by me in an article already referred to, published in the Criminal Law Mag. for Jan. 1883. " See Chap. I. 8 106 CONTRACTS FOR FUTURE DBLIVERT, MAEGINS. It is provided by the by-laws of the New York Stock Exchange, that "in any contract, either party may call, at any time during the continuance of the same, for a mutual deposit of ten per cent. And when the market price of the security shall change, so as to reduce the amount of said deposit either way below five per cent., either party may call for a deposit suffi- cient to restore the margin to ten per cent., and this may be repeated as often as the margin be so re- duced." In the New York Produce Exchange it is provided by the rules regulating the various departments of trade, that either party to a contract, prior to or upon signing the same, shall have the right to call an origi- nal margin of ten cents per bushel on wheat, rye, and barley, and five cents a bushel on corn aud oats, and two dollars per tierce on lard, and one dollar per bar- rel on pork, etc. ; and for a further margin from time to time to the extent of any variations in market values from the contract price, the margin to be deposited in a bank or trust company designated by the finance committee of the exchange. In the New York Cot- ton Exchange, the Chicago Board of Trade, and other exchanges throughout the country, similar pro- visions are made. It is a common thing for defendants who desire to show that contracts sued upon are wagers, to call them "marginal contracts," and claim the fact that margins are put up tends to show the contracts to be of that charac- FACTS INDICATING INTENTION TO WAGEK. 107 ter. If, however, by the terms of a contract, eifher party does or may call for a margin, this fact can have no ten- dency to show that a contract in the form of a sale is, in fact, a wager. A margin is simply a protection against fluctuations in the market price of the article dealt in, and this is so whether the contract to which it relates be a bona fide sale or a bet upon the price. As we shall see further on, margins are used without regard to the character of the transactions, and are useful both in wagers regarding the price of commodities and in bona fide sales. Margins have no necessary connection with contracts for future delivery. It is quite com- mon, however, in contracts of this character, to re- quire margins; but it is purely a matter of credit, and a party, even though he may be speculating in futures or options, if his credit and character are good, would not necessarily be required to put up margins. By the rules of the different exchanges the members are not obliged to put up margins unless they are called for, nor do members in dealing for their outside customers as a matter of course require them. Whether or not they are called for depends upon the confidence the broker has in his principal's ability to reimburse him in case of loss. In the case of Markham v. Jaudon,^ the relation of the parties to an ordinary speculation in stocks in Wall street was considered, and Ch. J. Hunt, in analyzing the contract between the broker and his principal, stated, that the contract on the part of the customer was to pay a margin of ten per cent, on the current market value of the shares, and to keep good > 41 N. T. 235. 108 CONTEACTS FOB FUTURE DELIVERY. such margins according to the fluctuations of the mar- ket; and on the part of the broker to advance all the money required for the purchase beyond the ten per cent, furnished by the customer, and to carry or hold such stocks for the benefit of the customer so long as the margin of ten per cent, is kept good, or until notice is given by the other party that the transaction must be closed. This case did not turn upon the question whether the speculation was a wager ; and no one in New York would, think of claiming that, because the speculation was upon margins, it was therefore invalid. Such contracts have been sustained and enforced re- peatedly in that ^ and other States.^ In Hatch v. Douglass,* being an action brought to recover a balance claimed by brokers in an ordinary stock speculation for their principal, the court said : " It is probably true that dealing in stocks ' on margins,' as it is called, is fraught with much evil. It encourages speculation, and induces many to engage in it who would not otherwise have the requisite means. In ' Staples V. Gould, 9 N. Y. 529; Milliken v. Dehon, 27 N. T. 364 Stewart v. Drake, 46 N. Y. 449; Lawrence ». Maxwell, 53 N. Y. 19 Stenton v. Jerome, 54 Barb. 480 ; Cameron v. Durkheim, 55 N. Y. 425 Baker v. Drake, 66 N. Y. 518; White v. Smith, 64 N. Y. 523; Knoltons. Fitch, 52 N. Y. 288 ; Wicks v. Hatch, 62 N. Y. 585 ; White v. Baxter, 71 N. Y. 254; Gruman v. Smith, 81 N. Y. 25; Ritter «. Cushman, 85 How. Pr. 284; Hanks v. Drake, 49 Barb. 186; Clarke v. Meigs, 10 Bosw. 337; Brass v. Worth, 40 Barb. 648; Frost v. Clarkson, 7 Cowen, 24. ' Hatch «. Douglass, 48 Conn. 116 ; Smith v. Bouvier, 70 Pa. St. 825 ; Wynkoop «. Seal, 64 Pa. St. 861; Esser v. Linderman, 71 Pa. St. 76; Gheen v. Johnson, 90 Pa. St. 38; Child v. Hogg, 41 Cal. 519; Durant v. Burt, 98 Mass. 16; Gregory d. Wendell, 89 Mich. 337; McGinnis v. Smythe, 4 N. E. E. 759. ' 48 Conn. 116. FACTS INDICATING INTENTION TO WAGER. 109 that way many people and business generally suffer more or less. But it is an evil that the existing laws do not reach. No case has been cited which declares such a contract illegal. If we should so hold it would be diflScult, if not impossible, to draw the line between legal and illegal transactions." In Pennsylvania^ and New Jersey^ contracts of pre^ cisely the same character have been held to be wagers ; much stress being laid upon the fact that the contracts were for differences, the only amounts of money really involved being the margins. These Pennsylvania de- cisions are illogical, and have been severely criticised by the courts^ and law writers ;* the decisions in the New Jersey case, and in Justh v. Holliday® being the only ones following them.® In Moeller v. McLagon,'' a party residing at a dis- tance from the city of Chicago employed a commission merchant in that city to purchase for him a quantity of wheat to be delivered at a subsequent day. He agreed to allow the commission merchant one-haJf of a cent per bushel as a compensation for purchasing, and to advance ten cents per bushel as a margin, and to keep it good at that sum. The original margin, as agreed upon, was paid to the commission merchant. Soon after the price of wheat began to decline, of which ' Maxton v. Green, 75 Pa. St. 166 ; Fareira v. Gabell, 89 Pa. St. 89 ; North V. Phillips, 89 Pa. St. 350 ; Buchizky v. De Haven, 97 Pa. St. 303 ; Dickson v. Thomas, 97 Pa. St. 378. " Flagg V. Baldwin, 38 N. J. Eq. 319. ' Kent V. Miltenberger, 13 Mo. App. 503. * Dos Passos, 433; Lewis, 109; Law of the Produce Exchange, 363. . ' 11 Wash. K. 418. ' For full statement of all these cases, see Chap. V, Rule I. ' 60 111. 307. 110 CONTRACTS FOR FUTURE DELIVERY. the commission merchant. advised the party for whom he had made purchases, and asked for instructions in regard to the sale of the wheat. Subsequently the latter was advised that the margin had already been absorbed by the farther decline in the market, and was requested to put up more margin, which he failed to do ; and thereupon the commission merchant sold the wheat at a considerable loss. It was held that tke margin not being kept good the commission merchant had the right to sell the grain upon the notice given. In Sawyer v. Taggart,^ it was decided that the pur- chaser of goods for future delivery — thirough a commis- sion merchant who deposits margins — who orders a resale before the time of delivery, is liable for all losses thereby sustained ; and the rules of the New York Cotton Exchange providing for the putting up of margins, was held to have no bearing upon tbe ques- tion of whether the transactions on the Cotton Ex- change were wagers. In Eumsey v. Berry ,^ the plaintiffs, at the request and for the benefit of the defendant, made an agree- ment for the sale of wheat to be delivered within a certain time at the option of the defendant, wbo was to furnish sufficient margin to secure them against loss. The defendant failed to comply with his part of the contract, and the wheat was closed out at a loss. The court said that under such a contract the law will give the plaintiffs a remedy for their loss. The plaintiffs were personally responsible for the performance of this agreement, and the defendant on his part was under ' 14 Bush, 737. » 65 Me. 570. FACTS INDICATING INTENTION TO WAGER. Ill obligation to furnish sufficient margin to secure them against loss in case of a rise in wheat. This he failed to do. In Wall V. Schneider/ the court said : " True, the contract provided, in effect, that the plaintiff should be secured by a margin of ten per cent, on the contract price, and for an additional margin in case such barley should go down on the market ; but this does not seem to be enough, especially when taken with other evidence in the case, to authorize a finding that neither party intended to perform the contract." Bartlett v. Smith * was an action brought by com- mission merchants and members of the Milwaukee Chamber of Commerce to recover for services and advances made for the defendant's account in the pur- chase and sale of wheat for future delivery, and it was claimed by the defendant that the rules of the Cham- ber of Commerce requiring margins to be put up stowed the contracts made to have been wagers. The court said : " It is not an unusual thing, where parties enter into contracts for the delivery of personal prop- erty at a future time, to put up earnest money for the fulfillment and performance of those contracts. Under these rules, what is called a margin is required for the faithful performance pf the contract that is entered into. It may be that parties under these rules — mem- bers of the Chamber of Commerce — may engage in illegitimate trade, but I cannot, from reading the rules, construe them (taking them together) to intend that all contracts which are entered into by members of the chamber are gambling transactions. * * * Where • 17 Rep. 700. M3 Fed. Rep. 263. 112 CONTEACTS FOR FUTURE DELIVERY. the earnest money is put up in that way, and the par- ties agree that in case of a rise or fall in the market they may call for further security, and if that security has not been put up, the party may go into the market and buy, * * * he can recover the difference be- tween the contract price and the price that he paid in the market." In Whitesides v. Hunt,^ it was claimed by the de- fendant that the advancement of margins made, were to keep the payment of differences secure. The court said : " But if it be the honafde intention of the seller to deliver, and the buyer to pay, and the option con- sists merely in the time of delivery within a given time, the contract is valid, and the putting up of margins to cover losses which may accrue from the fluctuations of prices, it is legitimate and proper. * * * It is a legal and valid transaction, and the fact that the purchaser is required to deposit a margin, and increase the same at any time the market requires it, in order to secure the payment at maturity, or that the seller shall deposit a margin and increase the same like the purchaser to secure the delivery at maturity, does not vitiate the contract. But if at the time of the contract, it is mutually understood and intended by all the parties, whether expressed or not, that the commodity said to be sold was not to be paid for, or to be delivered, but that the contract was to be settled and adjusted by the payment of differences in price, * * * in such a case it would be a gambling con- tract and void, and the deposits of margins are only to be considered as attempting to secure the terms of the bet on the prices at some future time." ■ 97 Ind. 191. FACTS INDICATING INTENTION TO WAGER. 113 In the case of the Union National Bank of Chicago V. Carr/ it was held that " option contracts are not necessarily illegal, and the incident of putting up mar- gins amounts to nothing unless the contract itself is illegal. * * * If the contract itself is lawful, the putting up of margins to cover losses which may accrue from the fluctuations of prices, and the final settlement of the transactions according to the usages and rules of the board of trade, are entirely legitimate and proper." By these cases it clearly appears that the giving or requiring margins in legitimate transactions is valid.* It is to be remarked also that margins are not confined to speculative transactions. In sales to arrive they are frequently required to protect the parties against the fluctuations of the market price and against default by either party. On the part of the seller they would be considered as a protection to the buyer in case the seller should not deliver as he agreed, and the buyer should be obliged to go into the market and purchase ; and on the part of the buyer they would be considered as a payment on account. So also where shipments are made to commission merchants, and the shipper is allowed to draw against the shipments to an amount nearly equal to the value of the articles shipped, the difference between the amount drawn and the market price is a margin. If the value of the articles shipped should depreciate so as to make the goods worth less than the advances, the commission merchant would have the right to demand a payment to make ' 15 Fed. Rep. 238. " See also Jones i;. Marks, 40 111. 313; Lassen v. Mitchell, 41 111. 101. 114 OONTRAOTS rOR FUTURE DELIVERY. his margin good. So when goods are bought and kept in store by a commission merchant, margins are fre- quently required and paid. Margins may be and frequently are put up between the parties to wagers, where there is a cover in the form of a sale. In the case of Waterman v. Buckland,^ the parties admitted that the real contract between them was a wager upon market prices of pork, and each party placed his check in the hands of a stakeholder for one thousand dollars. The deposits might be called margins. The transaction was in the form of what is called an option sale. Waterman purported to be the vendor, and Buckland the purchaser of the pork. It was agreed that if at the end of sixty days the price had fallen from what it was on the date of the transaction. Waterman should receive the difference from Buckland. If it had risen he was to pay the dif- ference to Buckland. It was averred that it had fallen, and Waterman claimed five hundred dollars as the difference in price, and brought his action to recover it. The court decided that by the laws of Missouri wagers between the parties were void, and that the plaintiff could not recover. So in bucket shop busi- ness margins are always required from the party dealing with the bucket shop, but the real trans- actions between the parties have been decided to be nothing but wagers.^ In Kirkpatrick v. Bonsall,^ the court said : " When ventures are made upon the turn of prices alone, with ' 1 Mo. App. 45. 'Bryant ®. Western Un. T. Co., 17 Fed. Rep. 835. ' 73 Pa. St. 155. FACTS IKDIOATING INTENTION TO WAGER. 115 no bona fide intent to deal in the article, but merely to risk the differences between the rise and fall of the prices at a given time, the case is changed. The purpose then is not to deal in the article, but stake upon the rise or fall of its price. No money or capital is invested in the purchase, but so much only is required as will cover the differeuces^a margin, as it is figuratively termed. Then the bargain repre- sents not a transfer of property, but a mere stake or wager upon its price. The difference requires only the ownership of a few hundred or thousand dollars, while the capital to complete an actual purchase or sale may be hundreds of thousands or millions." This was quoted with approval in Gregory v. Wendell.^ In Melchert v. American Union Telegraph Co.,^ the court said : " It it be not the hoTia fide intention of the parties that the property shall be in fact delivered in fulfillment of the contract of sale, but that the seller may, at his election, deliver or not, and pay differences, then the contract is void. Such a dealing amounts to a mere speculation upon the rise and fall of prices, which requires no capital except the small sum demanded to put up margins and pay differences." WHERE VENDEE INTENDS TO RESELL BEFORE DELIVERY. The fact that a purchaser of stocks or other articles for future delivery intends at the time of the ' 39 Mich. 337. See also Shaw v. Clark, 49 Mich. 384; and Lowry ». Dillman, 18 N. W. B. 4. * 11 Fed. Eep. 193. 116 CONTEAOTS FOR FUTURE DELIVERY. purchase to resell before the time for delivery ar-j rives, does not vitiate the sale, or convert the transac- tion into a wager. It makes no difference whether the purchases are made directly or through a broker or commission merchant. It is always the intention of a merchant when he buys goods to resell them at a profit, and of a speculator in stocks or securities to hold them for an increase in value and then resell. This intention is the very essence of speculation, and there is no sound reason why any distinction should be made between contracts where the delivery is in presenti, and where it is to take place at a future time. In the latter case the articles bought are not to be delivered to the purchaser, but delivery is to be made to the party to whom the purchaser transfers his rights under the contract, and if there should be a hundred transfers it could make no difference with the character of the transaction. Notwithstanding these propositions seem so plain, it is constantly claimed that this intention, especially where the purchases and sales are made through a broker or commission merchant, shows the transactions to have been wagers. This intention is, however, the strongest possible proof that a sale was bona fide, for otherwise how would it be possible for a person to intend to resell an article that he did not really buy ; and if he really bought, then, as has been clearly shown, the contract could not have been a wager. There are two strong English authorities upon this point. In the case of Ashton v. Dakin,^ the facts were > 4 N. & H. 867 ; s. c. 33 Law Times, 300. FACTS INDICATING INTENTION TO WAGER. 117 these : The plaintiff was a broker, and was directed by the defendant to buy for him certain stock for future delivery. The plaintiff bought the stock through another broker who made a contract in his own name, and became liable for its performance. Before the day ■ of delivery the defendant ordered the stock to be sold, and it was sold at a loss, which the broker paid. The plaintiff repaid the broker, and brought his action for the amount. The defendant pleaded that the transac- tion was a mere wager on the market price of the stock. The defendant, in fact, never intended a transfer of the stock, and the plaintiff was fully aware of this when the orders were given ; and they were given and accepted on the implied terms and under- standing that the plaintiff should not be called on by the defendant to deliver the stock or any part thereof, and that the defendant should not be called on to receive or pay for it, but that it should be resold by the plaintiff before the time of payment arrived, and the defendant should on the resale either pay or receive the difference after debiting him with the plaintiff's charges on the purchase and sale. This was held not a gaming transaction. Pollock, C. B., said : " I can see no objection to a man who has great confidence in the judgment of another, saying to him, ' will you undertake to buy for me corn, or any other article, not to be paid for till a certain time ? ' and then directing him to sell it again a little before that date." This case was cited with approval in the case of Sawyer v. Taggart,^ which will be hereafter referred to. In Thacker v. Hardy ,^ the plaintiff was a stock ' 14 Bush, 727. s 37 Weekly Reporter, 158; s. c. L. R. 4 Q. B. D. 685. 118 OONTEAOTS FOB FUTURE DELITERY. broker, and was employed by the defendant in specu- lating for him on the London stock exchange. The defendant never expected or intended to receive actual delivery of what the plaintiff might buy for him, and the plaintiff knew that the defendant never expected or intended so to do, and the plaintiff knew that unless he could arrange matters as expected, that is, to sell out where he had bought, or to buy in where he had sold short, that the defendant would be utterly unable to pay for what was bought for him or deliver what was sold for him. It was understood that the plaintiff should so manage the speculation as to render nothing but differences payable to or by him as the case might be. Cotton, L. J., said: "The contract was this, that the defendant authorized the plaintiff, as his agent, to enter into contracts for the purchase of stock of siich an amount that the parties must have known that de- fendant never intended to take them up, and could not do so, and all that he intended was that he should never be called upon to take them up, but that the matter should be arranged in another way. That, in my opinion, does not establish any such contract (a wager) as was suggested by Mr. McKenzie. It is only this, as Mr. Justice Lindley finds, that both parties knew that defendant never intended to take up the stock he had authorized the plaintiff to purchase, and that the only contract was that the business should be conducted in such a way that, so far as possible, the defendant should not be liable for anything but the differences." The plaintiff had a judgment. In this country the case of Sawyer v. Taggart^ is a leading authority. In this case Hamilton & Bros. • 14 Bush, 737. FACTS INDICATING INTENTION TO WAGER. lliT were pork packers and commission merchants in the city of Louisville, and the plaintiffs, commission mer- chants in New York and members of the New York cotton and produce exchanges. Hamilton & Bros, from time to time directed the plaintiffs to buy for their account for future delivery certain specified quantities of cotton, pork, and lard. As the time approached wken, according to the terms of the contract of pur- chase, the goods were deliverable, Hamilton & Bros, directed the purchases to be transferred to subsequent months. This, as the evidence shows, was intended and understood to be a direction to sell the goods, and purchase a like quantity for delivery in the months designated. The evidence also showed that, before the maturity of each contract, Hamiltons directed the goods contracted for on their account to be resold. One of the members of the firm of Hamilton Bros, testifies that his firm never intended to receive the goods which they directed the plaintiffs to buy, but that their in- tention was to resell them before the time arrived for delivery. This intention was known to the plaintiffs. It was held that contracts for the sale of goods, to be delivered at a future day, are not invalidated by the circumstances that, at the time of making the contract, the purchaser intended to resell before the time ap- pointed for delivery. The court said : " There cannot, in the very nature of things, be any valid reason why one who buys for future delivery may not resolve, be- fore making the purchase, that he will resell before the day of delivery, and especially when, by the rules of trade and the terms of his contract, the person to whom he sells will be bound to receive the goods from the original seller, and pay the contract price." 120 COKTEACTS FOB FUTUBB DELIVERY. In the case of Gregory v. Wendell/ the plaintiffs directed the defendant to purchase for them two thou- sand bushels of corn deliverable at Chicago in June following, and placed in the hands of defendant one thousand dollars as a margin. An action was brought, among other things, to recover back this margin on the ground that the contract was a wager and invalid. In the course of the opinion the learned Judge said : "The vendee under such an agreement may, before the time of delivery to him has arrived, agree to sell or transfer his right to the goods, or under the contract, to some one else, who, should he retain the same, would be entitled to receive possession thereof at the time agreed upon by the parties through whom he claimed title." * FINANCIAL STATUS. It has been frequently said that the financial ina- bility of a party to a contract for future delivery to perform it, is an indication that it was a mere cover for a wager. The theory upon which these cases pro- ceed is, that a man of small means would not under- take to perform contracts requiring large amounts of money to buy the commodities which he had sold short, or to pay for those which he had purchased, but that he would make a bet on the price, as he would then have to pay only differences if he lost. This reasoning may be sound, but it is to be observed that, ' 39 Mich. 337. ^ See also as possibly opposed to these cases the later Pennsylvania cases of Fareira «. Gabell, 89 Pa, St. 89; North v. Phillips, 89 Pa. St, 250 ; Ruchizky v. De Haven, 97 Pa. St. 203 ; Dickson ®. Thomas, 97 Pa. St. 278 ; and the case of Flagg ». Baldwin, 38 N. J. Eq. 219. FACTS INDICATING INTENTION TO WAGER. 121 Tinder the present methods of doing business, a man with a very limited amount of actual cash can and does manage very large amounts of property. Care should be taken in applying this proposition that a man's credit and ability to borrow money on the goods he deals in, or contracts which he makes, should be takeu into account. Stocks, grain, cotton, and other commodities are just as good as cash. The object of all trade is to make money; and the man who can make the most upon the least amount invested, is to be encouraged rather than hampered by narrow views of law and morals. Let us examine a few of the cases in which this proposition is stated. In Colderwood v. McCrea,^ we have a decision, which, if law, would effectually prevent speculation of every kind unless the party speculating had the means of paying for the articles which he bought, and would prevent him from using his credit or the money or credit of others. In this case the court says ; " It appears that McCrea & Co. commenced dealing for Colderwood on the board of trade about August, 1878. The exhibits show that during the ensuing five months they made fifty-nine different purchases and fifty-five sales, aggregating 600,000 bushels of wheat and 10,000 bushels of corn. During the period of about four months, in 1879, they made twenty-four purchases and twenty-six sales, aggregating 380,000 bushels of grain, mostly wheat, and 1,000 barrels of pork, making a total of 990,000 bushels of grain, and 1,000 barrels of pork. Here were purchases and sales which, if real and made with a bona fide intention and expectation that the property was to be delivered or received, ■ llBradw. 543. 122 CONTRACTS FOE FUTURE BELIVBKT. would have necessitated the use of a large amount of capital. McCrea & Co. knew that Colderwood had no means other than a moderate salary. It is testified by Colderwood, and not denied by Young, that he repeat- edly informed the latter as to his financial condition, and told him he had no business to gamble on the board of trade, and that Young coincided with him in thinking that he would do well to keep away, that it was a dangerous place, etc. Is it within the range of probability that a man thus situated, with very small means, and engaged in a wholly distinct avocation, should go outside his ordinary business, and contract for the purchase of one half a million dollars worth of grain and pork, in the space of nine months, with any ■ idea or expectation of receiving or paying for it on delivery ? It is argued by counsel that only a small percentage of the purchase-money is required to be paid in cash, as upon the payment of a margin other parties are readily found who will carry the goods, or before the expiration of the time for delivery a like amount can be sold, and the deal be closed by the pur- chaser paying the loss, if any. In other words, he gets rid of it by paying the difference; and what, we ask, is that but dealing in differences ? Nor does the suggestion of counsel, that banks and capitalists furnish money to move the commodities, and thus necessitate the use of but little money of the dealer, lend support to his theory; since, as is well known, the money in such cases is not advanced upon mere outstanding contracts for the purchase and sale, but upon ware- house receipts and bills of lading, which represents goods actually on hand." For these and other reasons the court reversed the decisions of the superior court FACTS INDICATING INTENTION TO -WAGER. 123 of Cook county, where judgmeut had been given for the plaintiff. In the case of North v. Phillips/ the court, in con- sidering the facts which would determine the question, whether the stock transactions in which the parties were engaged were bona fide or not, said : " That the shares belonged to Phillips. He had neither paid for nor intended to pay for any of them. They were worth about this time $52,000, and Phillips himself, being judge, was not worth half that amount." In the case of Patterson's Appeal,^ it was deter- mined, from the fact that the purchaser was not able to take and pay for the stocks bought for his account, that the transactions were wagers. The court said : " We are not able to distinguish this adventure from that class of cases which we have frequently designated as gambling transactions. The magnitude of the pur- chases made and the limited amount of money ad- vanced, all lead to one conclusion only. The contract is unmistakably stamped with a character which the law designates gambling and will not be enforced." In the case of Flagg v. Baldwin,* which was an action to foreclose a mortgage given by Flagg and his wife to secure losses in stock speculations through a broker on the New York Stock Exchange, the defend- ant pleaded that the transactions were wagers. The court, in speaking of the transactions out of which the losses grew, said that " in less than fourteen months, purchases aggregating over a million dollars were made. According to Flagg's statement, the account once held 1,300 shares of a par value of over $130,000. ' 89 Pa. St. 350. ' 10 Reporter, 59. '38N. J. Eq. 319. 124 CONTRACTS FOR FUTURE DELIVERY. * * * These enormous transactions were far beyond the ability of appellants at any time, and were known to be so. It appears that respondent was notified that the first advance was all that the Flaggs had to specu- late with. The wife's note, and consequently her bond and mortgage, were resorted to with the avowed pur- pose of binding her separate estate. Respondent admits that he was informed and knew that Flagg was speculating for all that Mrs. Flagg and he had in the world. Under such circumstances, it is idle to pretend that there was or could be any hope or ex- pectation that appellants were to take, or could be required to take these vast amounts of stock. For respondents to have tendered them, and demanded payment of them, would have been absurd in the ex- treme. The whole circumstances show that no such right to tender entered into the transaction. On the contrary, the contract plainly was, that if the stocks bought advanced, the profit was to be realized by a sale. If they declined, the remedy of the respondent was to save himself by a sale. The settlement was to be the profits and losses thus ascertained." In Justh V. Holliday,^ the action was brought upon a note which Greneral Custer had given to the plaintiffs in settlement of losses, which the plaintiffs had paid for him as his brokers in stock speculation, and the defense of wager was interposed. It appeared that the aggregate amount of the value of the stocks dealt in during the period covered by the account, was $389,983. The court said: "The disparity between the ability of Custer and this immense amount of pur- chases and sales within a half a year's time would ' 11 Wash. R. 418. FACTS rNDlOATINft INTENTION TO WAGER. 125 certainly be regarded by business men as a circum- stance in contradiction of the idea that he intended to make actual contracts so much beyond his means of payment." In Beveridge v. Hewitt/ the court said : " What the real intention of the parties was, and whether the form was merely colorable, and adopted for the pur- pose of covering up a series of gambling transactions, must be determined from all the circumstances of the case as disclosed by the evidence. McCurdy, at the time these dealings were being carried on, was a young man of twenty-five years of age, entirely without prop- erty or financial responsibility. He came to Chicago from Geneseo, 111., about three years previously, and the first year after his arrival served as clerk in the office of his father at twenty-five dollars per month, and afterwards at seventy-five dollars per month, and was receiving wages at that rate at the time these dealings were in progress. He had never been in business except as clerk in the office of McCurdy See page 21. '' 27 Weekly Reporter, 158; s. c. L. R. 4 Q. B. D. 685. FACTS INDICATING INTENTION TO WAGER. 131 Large amounts of stock were bought and sold for the defendant's account. He knew that he incurred a risk of having to accept or deliver the stock as the case might be, but was content to run the risk in the ex- pectation and hope that the plaintiff would be able to arrange matters so as to render nothing but differences payable to or by him ; and unless the plaintiff could arrange matters as expected the defendant would be unable to pay for wliat was bought or deliver what was sold. There was evidence showing that the de- fendant was a reckless speculator, and that the plaintiff knew it. After a very elaborate argument and discussion by counsel and the court it was decided that the plaintiff was entitled to recover what he had paid out for the defendant's account. And this seems to be the better doctrine, notwithstanding the many American authorities opposed to it. THAT THE PARTIES WERE ENGAGED IN A LARGE NUMBER OF MERE SPECULATIVE TRANSACTIONS. In Irwin v. Williar,^ the court said : " It might therefore be the case that a series of transactions such as that described in the present record might present a succession of contracts perfectly valid in form, but which on the face of the whole, taken together, and in connection with all the attending circumstances, might disclose indubitable evidence that they were mere wagers. The jury would be justified in such a case, without other notice than that of the nature of the transaction, in reaching and declaring such a conclu- sion." ' 110 U. S. 499. 132 OONTEACTS FOE FUTUEE DELIVEET, In Beveridge v. Hewitt/ it appeared that between the first of January and sometime in April following, forty-four different deals were made, and the court said : " Perhaps the most significant proof on this subject is to be derived from the manner in which the business itself was conducted. Forty-four different purchases were made, also the same number of sales, yet no property was in fact delivered, or offered to be delivered. Instead of this every deal was closed out long before the period of delivery arrived, by a counter purchase or sale." In Fareira v. Grabell,* the court said : " Let us sup- pose that A. agrees with B. to buy a thousand bushels of wheat, at two dollars per bushel, to be paid for and delivered at the end of thirty days. If wheat rises in value, A. will be the gainer, and if it goes lower he will lose; but inasmuch as the apparent objSct of the contract is an actual purchase of the wheat, it is not a gaming contract. Nor could such a contract be justly regarded as a wager, although when the time for the delivery of the wheat arrived, it was agreed that B. should, instead of forwarding the wheat to A., pay him the damages to which he would be legally entitled for the refusal to deliver ; that is to say, the difference between the stipulated price and the actual value of the wheat at the time fixed for the fulfillment of the contract. Such a settlement of the difference would not, if there was nothing more, be a sufficient ground for inferring that the contract was a gambling contract, or contrary to law. But the case would be materially different if the evidence, taken as a whole, showed that A. and B. did not really intend to buy and sell ; that 1 8 Bradw. 467. ' 89 Pa. St. 89. FACTS INBICATING INTENTION TO WAGER. 133 there was no intention on the one hand to deliver, or on the other to receive, the wheat, and that their real purpose was to make a wager in the form of a contract of sale. Hence, if A. and B. were to deal with each other in the way supposed, during a series of months or years, and it appeared in evidence that B. did not, in any single instance, forward the wheat, or have it in readiness for delivery, and that when the time arrived for the fulfillment of the successive contracts, they were always settled by the payment of a sum of money answering to the rise and fall in the price, the question would then be one of fact for the jury, whether the parties really intended to buy and sell, or to make a wager on the price of the grain." In Kirkpatrick v. Bonsall/ it was said : " If besides this contract it should be shown that many others of a similar kind were entered into by the same man, at and about the same time, certainly it would strengthen the conviction that the plaintiff was not a bona fide con- tractor in a legitimate business." It is difficult to understand how any number of speculative transactions can make the last one invalid. It may tend to show that the party speculating does not intend to receive or deliver personally or by his agent the articles speculated in. But this, it is per- fectly clear by reason and authority, does not make a contract in the form of a purchase or sale a wager. It is perfectly lawful to make such a contract, the pur- chaser intending at the outset to transfer all rights in it to another before the time for delivery arrives, and so avoid the necessity of delivery and payment between > 72 Pa. St. 155. 134 CONTRACTS FOR TUTCRR BBLIVBRY. tbe original parties, and, if it is lawful to do this once, it is lawful to do it any number of times. If, in the case supposed in Fareira v. Grabell,^ all of the transactions were between the same principals, the fact that they were always settled by the payment of differences would be strong evidence that it was under- stood in the beginning that the contracts were not to be enforced. But such cases are extremely rare. If the principal is dealing through a commission merchant or broker, and real contracts are made by the latter, the fact that all of the transactions were settled be- tween the commission merchant or broker and his prin- cipal, can have no tendency whatever to prove that any given transaction made by the commission merchant with other parties was a wager. In cases of this char- acter a wrong test is frequently employed. The only accurate test of any given transaction is to inquire if it understood that neither party to it may enforce the contract in the form in which it was made. The fact that the commission merchant so manages the business of his principal that he is enabled to transfer the prin- cipal's rights under the contracts to other parties, and thus leave differences in his own hands which he pays over to his principal, even though it be repeated hun- dreds of times, does not make the contracts, entered into by the commission merchant for his principal, wagers. In Sawyer v. Taggart,^ the court said : " It is next contended that such understanding is shown by the fact that in the whole course of dealing between Saw- yer, Wallace & Co. and Hamiltons, extended over a period of about two years, and amounting in the ag- ' 89 Pa. St. 89. » 14 Bush, 737. FACTS INUICATING INTENTION TO WAGER. 135 gregate to several hundred thousand dollars, no goods were ever actually received by either on account of any of said transactions. This argument would have much force but for the fact that all these transactions were had with the same intention to resell, and the further fact that sales were actually made in all instances, just as in those we are considering. If one such transac- tion might be legally had, then many made with the same object in view would be equally lawful. But instead of furnishing evidence of a tacit understanding that the contract was to be settled by the payment of differences, this long course of dealing, in which it does not appear that any contract was so settled, rather conduces to disapprove the existence of such an understanding." PRIOR CONVERSATIONS— PRIOR DEALINGS. In Brand v. Henderson,^ the action was to recover the price of wheat, bought by the plaintiff as factor of the defendant for future delivery. The defense was that the transaction was a gambling contract, and that no delivery of the wheat was intended, but only an adjustment of differences in price was to be made. It was held error to refuse to let the defendant testify as to conversations had by him with the plaintiff before the orders for the purchases were actually given. The conversations were admissible as throwing light upon the nature of the contract, and as part of the res gestCB; it not being the last word spoken, which in all cases gives character to the transaction. ■ 107 111. 141. 136 CONTKACTS FOR FUTURE DELIVERY. In Colderwood v. McCrea/ the court said: "In order to ascertain tlie intention of the parties to this particular transaction, it was competent to show how they were in the habit of dealing together in respect to like transactions, prior to the one in controversy." RULES OF THE EXCHANGES- USAGES. It is not proposed in this section to speak of the rules of the exchanges except so far as they have been the subject of controversy in the courts upon the ques- tion of whether they indicated that transactions con- ducted in accordance with them were wagers. In Wall V. Schneider,* the action was brought to recover damages for the breach of a contract for the future delivery of warehouse receipts for barley. In the court below a judgment was directed for the plain- tiif, and upon appeal the learned judge said : " It is urged that the written contract, with the rules and regulations of the Chamber of Commerce, which are made a part of it, is upon its face a gambling contract, and hence void. In order to so hold, we first find, as a matter of fact, that at the time of making the con- tract the plaintiff had no intention of selling or de- livering the warehouse receipts as therein stated, and also that the defendant had no intention of buying or receiving such receipts. Can we so find upon the evidence in this case ? True, the contract provided, in effect, that the plaintiff should be secured by a margin of ten per cent, on the contract price, and for the addi- tional margin in case such barley should go down on ' 11 Bradw. 543. » 17 Rep. 700. FACTS INDICATING INTENTION TO WAGER. 137 the market ; and also provided a summary method for closing out the transaction in case the defendant failed to pay the money and take the warehouse receipts at the time designated. But this does not seem to be enough, especially when taken with other evidence in the case, to authorize a finding that neither party intended to perform the contract. Under one of the rules of the Chamber of Commerce, made a part of the contract, a failure on the part of the plaintiffs to de- liver the warehouse receipts, as agreed in the contract on the receipt of the price, would have subjected them to suspension and expulsion from the Chamber of Com- merce. By another rule the defendant, making default in the payment of the money and receiving warehouse receipts for the^pace of one month, thereby subjected him to being barred from any right to representation upon the fl.oor of the Chamber of Commerce for any business, object, or purpose whatever. Thus the rules and regulations contemplated the enforcement of the contract, as well as the putting up of margins and the settling of differences. * * * Is the contract in ques- tion to be condemned as illegal, mei'ely because it pro- vided, in effect, that in case it should be broken by either party the measure of damages should be the difference between the contract price and the price on the Chamber of Commerce at the time of the breach ? Assuming that such price on the Chamber of Commerce at the time of such breach would be the true market value, then it is manifest that the amount of damages thus stipulated for was precisely the measure of dam- ages which the law would have given for such breach without any stipulation." The judgment was affirmed. 10 138 OONTEAOTS FOE FUTURE DELIVERY. In Sawyer v. Taggart/ it was contended that the rules of the New York Cotton Exchange are so formed, and the course of dealing there is such, that deliveries cannot be enforced, and that this proves, or tends to prove, that the parties understood the contracts were not to be enforced. Rules four, six and eight of the Cotton Exchange, as they were then numbered, were indicated as establishing this view. The court said : " Rule four provides that either party to a contract may close or cancel it upon notice, in writing, to the opposite party at any time before notice of delivery. But how ? the rule goes on to provide ' that the party to whom notice is given has the option either to make settlement (*. e., to pay or receive differences), or to receive a satis- factory contract made equal to that held by him.' Upon such a notice being given, the party receiving it is not compelled to accept settlement by payment of differ- ences. He has, by the express language of the rule, the * option ' to demand another contrast equal to that held by him. The only effect of the rule is, that if the party giving the notice can procure a party satisfac- tory to him to whom notice has been given to take his place and perform the contract, the contract of such person must be accepted in lieu of the original con- tract. This is but a reasonable regulation, which, while it does not deprive the party receiving the notice of the right to demand the thing purchased, or to deliver and receive payment of the thing sold, may be, and doubtless is, of great practical value and impor- tance to trade, and in no way tends to facilitate fictitious trading or gambling on market prices. Practically, the rule amounts to this, that the party to whom notice ' 14 Bush, 737. FACTS INDICATING INTENTION TO WAGER. 139 is given must pay, or accept payment of the difference, or accept a satisfactory person in the room and stead of tlie party giving the notice, and discharge him, and look to his substitute for performance of the contract. Rule six relates to margins, and we do not perceive that it has any bearing upon the question in this case. Rule eight relates to settlements when there has been a default in delivering or receiving cotton due on the contract. It provides, that in such cases the seller making default shall settle at one quarter of a cent per pound above the average quotations for spot cot- ton on tbe day of delivery, and that a buyer making default shall settle at the average quotation for spot cotton on the following day with the addition of one quarter of one cent per pound in favor of the seller ; and it also provides ' tbat no defaulting party can claim settlement under this rule except upon evidence that the default was unintentional, and not premedi- tated.' Liability for such a penalty for default, and a provision for this summary mode of making settle- ments in such cases, would seem to be a sufficient and salutory guaranty for the performance of contracts, and instead of affording facilities for, or furnishing evidence of, gambling on the turn of prices, seems well calculated to insure that good faith and promptness so indispen- sable in commercial transactions. Without noticing other provisions of the rules, it may be remarked that they seem to provide for real and not fictitious trade ; that they provide against unreal transactions ; and that so large a portion of the real business in the great cities is done on 'change as to wholly forbid the conclusion that all contracts made on them are unlaw- ful, and unless such conclusion could be reached, the 140 . OONTBAOTS FOR PUTtJEE DELIVERY. contracts involved here must be held to have been valid and lawful." In the Union National Bank of Chicago, Illinois, v. Carr,^ the court said : " If the contract itself is lawful, the putting up of margins to cover losses which may accrue from the fluctuations of prices, and the final settlement of the transactions according to the usages and rules of the Board of Trade, are entirely legitimate and proper." The case of Williams v. Carr** involved the legality of the transactions on the New York Cotton Exchange. Written contracts were made between Williams, Black & Co. and the defendant's intestate, and by the terms of the contract they were made in view of, and in all respect subject to the rules and conditions estab- lished by the New York Cotton Exchange. The court said : "The Cotton Exchange is a corporate institution with authority to make rules and regulations for the government of the cotton trade in the city, and not inconsistent with the laws of the State and of the United States. * * * Looking into the pamphlet which accompanies the case and contains the charter and regulations of the Cotton Exchange, by which, in the absence of express provisions, the contract is to be interpreted and executed, we find nothing inconsistent with entire good faith or casting suspicion upon the in- tegrity of the transaction. Rule eight of the association is framed to insure delivery and acceptance of the subject of traffic, and imposes upon the defaulting party a penalty of one-quarter of a cent per,pound in addition to the difference between the contract price and market value of the cotton at the time when it should be de- ■ 15 Fed. Rep. 338. ' 80 N. 0. 294. EA0T8 INDICATING INTENTION TO WAGEK. 141 livered or received. Now while it is true the form of the contract may cover and conceal an understanding between the parties to it, that the payment of differ- ences in the price, as the case may be, on the day of delivery shall discharge the obligation, and such un- derstanding if found to exist would render it illegal as a wagering contract, no such intent can be gathered from its terms, nor from the rules of the Cotton Ex- change applicable to it. It would be a singular cir- cumstance if its rules were such that contracts made pursuant to them could be avoided for illegality, in a State whose laws as expounded by the courts are as stringent and relentless in the condemnation of wager or other contracts contravening public policy, as those of any other. These rules and the series of minute regulations by which the cotton trade is controlled, appear obnoxious to no just criticism, but on the con- trary calculate to secure the faithful execution of en- gagements, and the obtaining of just compensation for their breach. from the party in default." The case of Bartlett v. Smith ^ involved the con- sideration of the rules of the Chamber of Commerce of Milwaukee. When the plaintiff's testimony was closed the defendant moved the court to instruct the jury to find a verdict for the defendant, but the judge declined to do this. It was held that contracts, made subject to these rules, were not upon their face gam- bling contracts. The court said : " Now, the first part of this section 5 of rule 9, provides that — ' any party who shall contract to buy or sell property, and who shall fail to respond within the next one and one-half banking hours, after having been called on for security • 15 Fed. Rep. 263. 142 CONTRACTS FOK FUTURE DELIVERY. (margins, in case the property rises or falls), as herein- before provided, shall be adjudged to have defaulted on his contract ; and in case of such default, the party who has called for such security shall have the right to buy or sell (as the case may be) the property named in said contract, in the quantity and for the time of de- livery specified in said contract, and all differences between the contract price and the price at which the property may have been sold or bought (as the case may be), in consequence of such default, shall constitute the rule and measure of damages against the party in default ; provided, that in case the party calling for security shall elect not to buy or sell the property, as hereinbefore provided, he may have the right, by giving notice to the delinquent (as provided by section 6 of this rule), to consider the contract then terminated at the market price of the property named for the deliv- ery specified in the contract. And the party so ter- minating the contract may forthwith proceed against the party so defaulting for the collection or enforcing payment of all damages sustained by reason of such default; and the rule and measure of such damages shall be the difference between the contract price and the market price (at the time of giving such notice) of the property named for the delivery specified in the contract.' * * * These contracts were entered into for the purchase or sale of a certain amount of wheat at seller's option for future delivery. Now, suppose A. had sold B. 5,000 bushels of wheat to be delivered in August, seller's option at $1 ; the wheat falls off five cents, and B. calls for further security (under these rules and regulations), which is not put up by A. Now, under this rule, A. having failed to put up further se- FACTS INDICATING INTENTIOi^T TO WAGEK. 143 curity has defaulted. Now, then, B. can go into the market and buy 5,000 bushels of wheat at the market price (that is, it must be an actual purchase), and in case he brings suit against A., what is the measure of damages? It would be the diflPerence between the price which he paid when he went into the market, and the contract price. That is the legal rule of damages. Where the earnest money is put up in that way, and the parties agree that in case of a rise or fall in the market they may call for further security, and if that security has not been put up, the party may go into the market and buy 5,000 bushels of wheat (in this instance, say), he can recover the difference between the contract price and the price that he paid in the market for the wheat. It may be this is all sham. It may be these parties have entered into contracts of this character, and instead of going into the market, have merely drawn up between third parties and themselves contracts, which upon their face purported to be the purchase and sale of wheat, when it is never intended that there shall be an actual delivery of wheat at all. If this is so, then it is a gambling transaction. * * * Now, the proviso to section 5, which is read by counsel here, is one under which gambling contracts might be entered into, but it does not necessarily follow that when a contract like this in evidence is entered into by a member of that cham- ber, although providing that it is subject to the rules and regulations of the Chamber of Commerce, there shall be no actual delivery of wheat. * * * I shall leave it to the jury, gentlemen, to determine whether there has been, in the first instance, any actual sale and delivery of wheat." 144 CONTRACTS FOB FUTUKB DELIVERY. The deliveries by notices of delivery and warehouse receipts, provided by the rules of the New York Cotton Exchange, were approved in Sawyer v. Taggart.^ In Clarke v. Foss,^ in speaking of the rules of the Chicago Board of Trade, the court said : " It appearing in evidence that if any member fails or refuses to per- form his contract by delivery or receiving grain he had agreed to deliver or receive, he is subject to the discipline of the body; and if the offending member is still refractory and contumacious, he is suspended or finally dismissed from the board ; thus adding to the penalties which the law attaches to a violation of con- tracts, the sanction of a wholesome family discipline." In Bartlett v. Smith,* the court said : "The jury- may look to the usages of the trade or the business to learn the real intentions of the parties." RINGS.— RINGING OUT. "What is a " ring," and what does " ringing out " mean ? Let us suppose that commission merchant A. has sold a certain quantity of grain for future delivery for one customer, and bought for another customer a like amount for like delivery, but at a different price, and the purchase and sale were made with another commission merchant, B., dealing for different custom- ers. The two commission merchants then make a set- tlement between themselves, one paying the difference to the other, as the case may be. This is called a " direct settlement," but it is also a small " ring." The result of such a transaction is this : The contracts which the ' 14 Bush, 727. ' 7 Biss. 540. ' 13 Fed. Rep. 363. FACTS INDICATING INTENTION TO WAGEK. 145 commission merchants have made with each other are cancelled, and the contracts of the two principals of each commission merchant are substituted each for the other. The substituted contracts would be executed as follows : When the grain is delivered by the selling customers to the commission merchants, they deliver it over to the customers who have bought. The differ- ence between the two prices is precisely the same that one commission merchant has paid to or received from the other. The first advantage of such an adjustment of the accounts between the two commission mer- chants, is that several deliveries are avoided. If the grain had followed the course of the original contracts it would have been delivered to A. by the customer who has sold it, and by A. delivered to B., and B. would have delivered it to the customer for whom he has bought. On the other hand, the . customer for whom B. has sold would have delivered it to B., B. would have delivered it to A., and A. would have de- livered it to his purchasing customer. A " direct set- tlement " obviates this roundabout course of deliver- ies with precisely the same result to all parties. The second advantage accruing is that margins put up by the commission merchants between themselves are released as soon as the settlement is made. This is of considerable importance to them, because in a great number of transactions the margins would amount to quite a large sum of money. Both of these advantages result very greatly to the benefit of the customers, because, otherwise, so many deliveries having to take place, and so much money being re- quired to be kept up as margins, it would be impossi- ble to do business at the rates now charged as commis- 146 CONTRACTS FOR FUTURU DELIVERY. sions. One has but to watch for a few moments the course of business on one of the large exchanges to ap- preciate this. The illustration shows very clearly that a " ring" is simply a plan devised to make quick and in- expensive deliveries, and dispenses with useless and re- peated deliveries of the same article. Again, let us suppose that A. has sold to B. grain for future delivery at forty cents a bushel, and B. has sold a like quantity to C. for the same delivery at for- ty-five cents, and C. has sold a like quantity for the same delivery to A. for fifty cents. A. is a commission merchant dealing for two separate principals. Now, let us follow the course this grain would take when the time for delivery arrives. A. having received it from his selling principal, delivers it to B., and B, pays him forty cents ; B. delivers it to C, and receives forty-five cents ; C. delivers it to A. and receives fifty cents ; A. delivers it to the customer to whom he has sold it, and receives back the fifty cents. Now, what is the result of this roundabout delivery ? A. has sold for one customer at forty cents, and he has bought for another at fifty cents, The only advantage to him is his commissions, because the forty cents he receives from B. he pays over to his selling customer, and the fifty cents he pays to C. he receives from his buying customer. But of what possible use is it to the com- mission merchant, or to the customers he represents and does business for, to require that the grain should follow this course of delivery, when the same result can be accomplished in a much easier way ? This grain was gold by A. for forty cents, and was finally bought again by A. for fifty cents, being a difference of ten cents. Inasmuch as B. bought the grain at forty FACTS INBIOATING INTENTION TO WAGEK. 147 cents, and sold it at forty-five cents, he has made a profit of five cents ; and as C. has bought it at forty- five cents, and sold it again to A. at fifty cents, he has also made a profit of five cents. These two profits make the ten cents. Now, if these three parties come together, and agree that A. shall take the grain which he has sold for one customer, and deliver it to the cus- tomer for whom he has bought, in that way leaving in his hands ten cents, five of which he gives to B. and five to C, precisely the same result follows as by the roundabout delivery. Bringing these parties together is called forming a " ring," and the mutual settlement between the parties is called " ringing out." A "ring" may contain three or more persons, and i& usu- ally formed by runners from the different offices, who find out the members of the exchange having con- tracts for like deliveries. No person has a right to de- mand that a ring should be made, and it frequently happens that a party, who might form one of a ring, declines to do so.^ The arrangement is simply one for saving trouble and expense, and relates solely to the method of settling the mutual accounts of commission merchants with each other. They have no effect whatever upon the rights of the customers of the commission merchants, because the commission mer- chants in all cases guarantee that the contracts which they make for their principals shall be faithfully executed, and this is universally understood on the exchanges and considered a part of the agreement between the customers and the commission mer- chants; and the customers look to no one but their ' By the laws of the New York Cotton Exchange a member who Is discovered to be in a " ring " is compelled to " ring out." 148 CONTRACTS FOR FUTURE DELIVERY. respective commission merchants as the responsible parties in their dealings.^ If the " ring " is formed between principals only, the element of final manual delivery of the commod- ity by one customer to the other through a commis- sion merchant would not take place. In such a case the whole line of transactions would be settled without actual manual delivery. The fact, however, that such a combination might be made, certainly can have no tendency to prove that any of the contracts when made were not bona fide. "Kinging out" is not confined to contracts for future delivery ; " rings '' are often formed to facilitate the delivery of goods sold for present delivery.^ Sub- stantially that is done by the system of delivery by warehouse receipts described in the section on sym- bolical delivery. A '' ring " is a small temporary clear- ing-house, and "ringing" is conducted on precisely the same principle as the clearing-houses are. What tendency does the fact that "rings" are made and contracts " rung out " have as showing any given transaction or series of transactions to be wagers ? Manifestly, if what has been before stated is true, it can have none, but has, in fact, quite the reverse effect. Parties would not " ring out " bets, nor would accounts be adjusted through clearing-houses if they ' In mating this statement the author has not overlooked the cases of Irwin ». Williar, 110 U. S. 499, and Higgins v. McCrea, 116 U. 8. 671 ; but he believes that the true relation of the modern commission merchant — a member of an exchange— with his principal, is more ac- curately shown in the case of Gregory ®. Wendell, 40 Mich. 432. Considered in reference to the subject of wager, the text is accurate. ' This was done in Clarke v. Foss ; see following page. FACTS INDICATING INTENTION Tu WAGER. 149 were mere wagers, as there could be nothing gained thereby. In the case of Clarke v. Foss/ the court, in speaking of how certain contracts for the future delivery of corn, made on the Chicago Board of Trade, were executed, said : " At about the time or a little before these contracts were matured, as they did on the last day of November, the defendants performed a part of them on behalf of C. B. Stevens & Sons by a purchase and actual delivery of the corn to the paities to whom the sales were made. The evidence shows that as to 20,000 bushels of corn there was an actual delivery of corn, and as to 10,000 more a delivery of warehouse receipts for that amount. As to the balance of the corn contracted to be sold, the defendants went upon the market and purchased it of different parties, and had it ready for delivery ; and then, finding other parties, who had similar deals for November purchases and sales, formed rings or temporary clearing-houses through which, by means of a system of mutual off- sets and cancellations that had grown up on the board, the contracts were settled by an adjustment of differ- ences, saving an actual delivery and change of posses- sion." And quoting from the testimony of the wit- nesses the court said that " this adjustment of differ- ences is a mere matter of convenience to the members of the board and to their customers; no person is under the least obligation to settle in that way ; that dealers may and often do insist upon actual delivery of the grain; and that settlement frequently saves to their customers the costs of insurance and storage. The object of forming these rings or clearing-houses is to ' 7 Biss. 540. 150 CONTRACTS FOR FUTURE DELIVERY. close out the transactions and get them off their books, and this is what they call ringing it out. But that, it frequently happens, cannot be done in that way, as if, for any reason, one whose assistance is essential to complete the circle prefers an actual delivery, in which case the ' ring ' is burst, and then each must perform iis agreement by actual delivery of the grain. Their testimony is full, and fair, and intelligent, upon the questions at issue, and they are corroborated by several other witnesses, ex-presidents, ex-directors, and ex- commissioners of appeal, and present members of the board of trade. The testimony is conclusive that this business is done much in the same way that all the other business of the board is done respecting eon- tracts for the future delivery of grain. * * * The seller is bound not only by the contract, but by the rules of the board to which it is made subject, to perform his contract by an actual delivery, unless excused from performance by the acts of the other party ; and for a violation of this rule he is subject to the discipline of the board, and to be dismissed therefrom, if he insists upon the violation of his contract." And further on the court says : " If the transactions disclosed by this case were illegal, then the greater part of the banking and clearing-house transactions in our great commercial centres are illegal also. I am pursuaded that to hold them so would be trenching too severely upon the business of the commercial world without any corresponding benefit to be expected from it." In the case of Kent v. Miltenberger/ the ordinary contract for future delivery used in the Chicago Board ' 13 Mo. App. 503. FACTS INDICATING INTENTION TO WAGER. 151 of Trade, was under consideration, and while an excel- lent case in many respects a wrong meaning is given to the words "ring" and " ringing out." The court said, in reference to these contracts, that " delivery is always contemplated, not as a thing which will be necessarily insisted upon, but as a thing which the purchaser may insist upon. It sufficiently appears that this is the one thing which gives vitality to such contracts and which enables those who, during a particular month are on the successful side of them, to get up what is known as a ' corner.' This happens when a much larger amount of any given commodity has been sold for future de- livery within a given period than can be purchased in the market. The buyers, who are called in the slang of the exchanges the ' longs,' then insist upon delivery, and by this means succeed in running up the prices to a fictitious point, at which the ' deals ' are ' rung out,' between the dealers by payment of differences, or, where the purchaser insists upon it, by actual delivery." The court then considering how such a contract valid on its face might be a wager, said : " This agreement, contemporaneous with the contract, that it may be dis- charged, not by actual delivery, but by the payment of differences, or by ' ringing out,' as it is expressed in the slang of the exchanges, is therefore the one thing which renders the contract void." It is possible, if a member of an exchange should agree with his principal that the contracts made for his account should be rung out, so that nothing but differences would be received or paid by the principal, this would make the contract of agency a cover for wagering. This is discussed else, where.^ In such a case the broker would take the ' See Chap. V, Rule V. 152 CONTRACTS FOR EUTURE DELIVERY. ctance of being able to "ring out" his contracts; but no member of an exchange could with safety make such an agreement, because he could never know whether rings could be formed, as that depends upon the right combination of members to form them. The opinion is hazarded that a cont mporaneous agreement, such as is mentioned in this case, was never made. In Melchert v. American Union Telegraph Co.,^ the character of transactions, claimed to have been sales of rye to A. M. Wright & Co. and others for future delivery, made on the Chicago Board of Trade by one Gerstenberg, the factor of the plaintiff, was con- sidered in relation to their being wagers, and the court said: "There is no evidence that either Gerstenberg or Wright . Baldwin, 30 N. J. Eq. 219. BVIDESrCB. 205 contract to buy them, nor had any reasonable expecta- tion of becoming possessed of them at the time ap- pointed for delivery, otherwise than by purchasing them after making the contracts; that margins were or might be required ; that the purchaser at the time of purchase intended to resell before the time for de- livery arrived ; the financial status of the parties ; that the parties were engaged in a large number of specu- lative transactions ; that the party was not a dealer in the commodities bought or sold ; and prior conversa- tions and dealings ; third, those which are imposed by the rules of the exchanges ; including usages, margins, rings, symbolical delivery and clearing-houses ; fourth, the fact that there are more sales than goods in the market ; and fifth, the acts and omissions of the parties after the contracts are made ; including subsequent settlements ; contra transactions ; transfers before tbe time of delivery arrived ; no grain offered or demanded ; contracts closed the same day; no deal lasting through tbe option ; no preparation made for delivery ; covet-s ; symbolical delivery ; original entries not produced ; inability of broker to give the names of the parties with whom he dealt for his principal's account, or to state where the articles were at the time ; inadequacy of consideration ; correspondence ; the identical goods not delivered ; two different forms of statement used. Options. — In reference to the first class it has been de- termined by a large number of decisions, that the mere fact of either party having by the terms of a contract the option to deliver the goods between certain days, did not make the contract unlawful. If the action was between the principals to the contract, and was 206 ' CfOKTEAOTS FOR FUTURE DELIVERY. brought for its breach, no question of evidence could arise, as this feature would be shown by the statement of the case. So it would be in the case of a pure op- tion contract. On demurrer to such a complaint the court would surely overrule it, except in States where the latter contracts are made illegal or void by statute. Where money has been paid on account of such con- tracts no action could be sustained to recover it back ; and a complaint based on this fact alone would un- doubtedly be determined, on demurrer, as not setting forth a good cause of action. In Kent z^. Miltenberger,^ the validity 6f the ordi- nary grain option contract fdr future delivery used on the Chicago Board of Trade was considered. The court said : " It is perceived that these contracts were what are known in the slang of the exchange as ' op- tion deals,' the seller having the option to make de- livery of the commodity sold within certain days. There is much evidence in the record as to the general character of these contracts and the manner in which they are executed and discharged. It appears that delivery is always contemplated, not as a thing which will be necessarily insisted upon, but as a thing which the purchaser may insist upon. It sufficiently appears that this is the one thing which gives vitality to such contracts and which enable those who, during . a particular month, are on the successful side of them, to get up what is known as a ' corner.' A very large majority of these contracts are, no doubt, merely spec- ulative, but many of them are actual purchases by manufacturers and exporters. From what has been ' 13 Mo. App. 503. EVIDENCE. 207 said concerning them, it appears that there is no essen- tial difference between thein and the numerous con- tracts of the same kind which have been before the courts in England and in this country, and which have been almost universally upheld as valid contracts. All these decisions unite upon the proposition that these contracts are presumptively valid, but though valid on their face, they may be shown by extrinsic evidence to have been intended by the contracting parties, not as commercial transactions, but as mere wagers on the future state of the market ; that the one thing which makes them wagers and renders them invalid is an agreement between the contracting parties made at the time of the contract and understood as part thereof, that it may be discharged by the seller, not by actual delivery of the commodity sold, but by the payment of a difference. * * * There is no evidence in this case of such an agreement, either between the plaint- iff and defendant, or between the plaintiff and the parties to whom they sold the wheat for the defendant. There was, therefore, no question to go to the jury as to whether or not this was a gambling contract." All the cases, except Barnard v. Backhaus,^ Cobb V. Prell,* Beveridge v. Hewitt,* Stebbins v. Leowolf,* and possibly Chandler's case,^ hold that these contracts are presumed to be bona fide, and in order to show them to have been used as covers for wagers, an agree- ment to that effect must appear to have been made. According to these excepted cases option contracts are presumed to be invalid, ind proof must be made that they are bona fide. ' 53 Wis. BOB. ' 15 Fed. Rep. 774. ' 8 Bradw. 467. - 3 Cush. 137. ' Ex parte Young. 6 Biss. 53. 208 - CONTEAOTS FOE FUTUEE DECIVEET. In reference to the second class, they all, with the exception of the last two, relate to speculation exclu- sively, and have no tendency to prove an intention to gamble on the market price. Not Owning or having Possession of the Goods Sold. — It has been repeatedly decided that the fact of the seller not owning or having possession of the articles sold, or in other words, selling " short," has no ten- dency to prove a wager. In Kent v. Miltenberger,^ the action was brought to recover a sum of money claimed to be due to the plaintiffs from the defendant on account of certain sales of wheat for future delivery made by the former as broker for the latter on the floor of the Merchants' Exchange of St. Louis. The defendant was also a member of the exchange. He was not, however, a dealer in grain, but he dealt in liquors. He had no wheat to sell in the sense of having it in his actual possession or expecting to have it in his 9,ctual posses- sion, and he did not wish to buy any wheat in the sense of receiving it in kind for any purpose connected with the business in which he was engaged. He sim- ply bought and sold, as hundreds do^ for speculation. The court said: "There is nothing unlawful in this. The law puts no restraint upon trade which makes it unlawful for a member to buy or sell commodities in which he does not generally deal, if he thinks he can catch a favorable turn in the market, and make money by 30 doing. What one man is at liberty to do in this respec^t, another man is equally at liberty to do. ' 13 Mo. App. 503. EVIDENCE. "209 Furthermore, the fact that a man does not have on hand the commodity which he undertakes to sell for future delivery at the time when he makes the sale, and that he does not expect to have it on hand until the time arrives for delivery, but that he expects then to go upon the market and purchase to fill the de- livery in pursuance of his contract, does not in any degree impair its validity. What he may do by him- self in this respect he may obviously do by the agen- cy of another. He may employ a broker to make the contract for him and to execute it for him, in any manner in which it would be lawful for him to make it and execute it if acting for himself in per- son. Any man, though not a dealer in wheat, may therefore lawfully employ a broker on exchange to sell wheat for him for future delivery at a future time, and execute contracts for him by purchasing upon the market the wheat for delivery, when the time arrives for its delivery, or by settling with the purchaser by the payment of the difference between the contract price and the market price, if the pur- chaser shall waive the execution of the contract by the delivery of the wheat, according to its terms. Now, that was precisely the contract which the de- fendant made with the plaintiffs in each of the transactions involved in this suit. There was not only no agreement th^t the contracts which the plaintiffs made for the defendant should be settled without delivery, but the contracts on their face pur- ported the contrary, and not a word was written or said indicating that it was the intention that the contracts should be in any respect different from what they purported to be on their face. Both the 210 C0NTEACT8 FOK FUTUKB DELIVERY. plaintiffs and defendant, being members of the ex- change, knew that contracts of this kind, made on the floor of the exchange, and subject to the rules of the exchange, would liave to be executed by actual delivery, if delivery should be insisted upon. They moreover knew that the plaintiffs, placing themselves under the rules of the exchange, toward th.e pur- chasers of the wheat, in the position of principal contracting parties, would have to make good the contracts upon their own responsibility if necessary, and would, if delivery should be demanded, when the time came, have to go upon the market and purchase the wheat for delivery. They not only knew that this would have to be done, but the evidence shows that, as to a part of the transactions, it actually was done. That the plaintiffs, in the execution of the contracts involved in this suit, actually purchased and delivered twenty-five thousand bushels of wheat for the defendant. The fact that the contracts for the delivery of the remaining thirty-five thousand bushels were settled by the payment of differences, upon a subsequent waiver of actual delivery by the purchaser, neither rendered them unlawful in their inception nor in their final execution ; for it has never been held that a lawful contract cannot be discharged by the voluntary act of the other in ac- cepting the pecuniary equivalent for its performance. In this state of facts, what is the evidence upon which the defendant seeks to impeach its validity? It is his own testimony to the effect that although the contract was such as is above named, yet his intention was not to buy or sell, but to gamble, and that the plaintiffs knew that this was his intention and made EVIDENCE. 211 themselves the instruments for carrying out the same. He simply says in his testimony that these transactions were ' option dealings ; ' and by ' option dealings ' he means selling or buying wheat with the expectation of catching an advance or decline — betting that the price will go up or down, and that plaintiffs were apprised of his intention in these matters. This, in connection with the fact that he was not a dealer in wheat, and had never bought or sold wheat for use or exportation, which fact was known to the plaintiffs, is the ground on which the court was asked to give the following in- struction : ' The court instructs the jury, that if they believe from the evidence that defendant, in all the transactions in question, had no expectation or inten- tion of delivering the wheat alleged to be sold by the plaintiffs on his behalf, but only contemplated in such transactions speculative wagers upon the changes in the market prices of wheat, to be settled by the pay- ment of differences only, and that the plaintiffs were at the time of said transactions fully cognizant of and participated in this expectation and intention, and actually abetted, with such knowledge, said purpose of defendant, then it is immaterial that, as to parts of said transactions, plaintiffs made sales to third parties as agents or brokers, and your verdict must be for the de- fendant.' We think the court committed no error in refusing this instruction. * * * The law distinctly defines the characteristics of a gambling contract when it takes the outward form of buying or selling for fu- ture delivery. To that definition we must adhere. * * * The one thing which makes them wagers and renders them invalid is an agreement between the contracting parties, made at the time of the con- 212 CONTRACTS FOR FUTURE DELIVERY. tract, and understood as part thereof, that the contract may be discharged by the seller, not by delivery of the commodity sold, but by paying to the purchaser the difference between the market price on the last day of the performance of the contract, and the price at which the sale was made. * * * There was therefore no question to go to the jury as to whether or not this was a gambling contract." In the case of Rumsey v. Berry ,^ the action was larought to recover a balance alleged to be due from defendant to the plaintiff upon the following facts : The defendant, a resident of Bangor, Me., was in Chicago, 111., and there met the plaintiffs who were commission merchants and members of the Board of Trade of Chicago. He authorized them to sell for him ten thousand bushels of wheat to be delivered at any time he, the defendant, pleased during the month following. The plaintiffs thereupon, in their own name, contracted to deliver said wheat to third parties. By custom and law at Chicago, so long as the defendant furnished to the plaintiffs sufficient margins to secure them against loss in the event of a rise in the price of wheat, the plaintiffs must carry said contract along, upon, and under the di- rection of the defendant until the last of May ; but if on demand for additional margins upon the rise in the price of wheat the margins were not furnished within a reasonable time, then the plaintiffs had a right at any time to purchase wheat at the market price to fill such contract, or to settle upon the best terms possible with the parties with whom they had contracted to deliver the wheat, and claim of the de- I 65 Me. 570. EVIDENCE. 213 fendant reimbursement for any loss incurred. Soon after the order was given the wheat commenced to rise in price, and upon demand the defendant furnished seven hundred dollars as a margin ; but wheat con- tinuing to advance, upon further demand for margin and the defendant failing to furnish it, the contract was cancelled by the plaintiffs and the parties with whom they had contracted, at a loss of about three thousand dollars, only seven hundred dollars of which was covered by the margin so deposited. This suit was to recover the difference, and the verdict of the jury was for the full amount claimed. The defendant testified on the trial that at the time the plaintiffs and defendant entered into this contract the defendant had no wheat and that the plaintiffs knew it, but it was proved, and admitted by the defendant, that, in pursu- ance of the agreement of the plaintiffs to sell wheat for the defendant, the plaintiffs did contract with certain persons at Chicago, and became personally responsible to deliver to them ten thousand bushels of wheat on some day in May at the seller's option, and that they actually delivered the wheat, or made satisfactory settlement with the parties, at a loss of about three thousand dollars. Hence the defendant claimed at the trial, and his counsel asked the presiding judge to in- struct the jury, that said contract was merely betting upon the price of wheat during the balance of the month of April and the month of May, and therefore a wagering contract illegal and invalid as a foundation of an action. This instruction the presiding justice refused to give, but did instruct the jury that such a contract would be valid under the laws of Maine, and, in the absence of proof to the contrary, would be pre- 214 CONTRACTS FOB FUTUKE DKLIVERY. sumed to be vMid under the laws of Illinois where the contract was made. Upon appeal the court said: " "We utterly fail to discover any wrong on the part of the plaintiffs. It is true they were aware that the defendant at the time had no wheat. But the fact itself being immaterial their knowledge of it is equally so. It is not only fair but perfectly legal, and some- times necessary, to contract for the future sale and de- livery of the article which at the time has no existence, but which afterwards is to be purchased, raised, or manufactured." In Yerkes v. Salomon,^ the action was brought to recover an agreed amount of damages for the breach of certain " put " and " caU " contracts for railroad secu- rities. Upon cross-examination of the plaintiff he was asked whether at the date of the contracts he had the stocks referred to in them. This was objected to as immaterial, and was excluded. The court said upon this point : ''The contracts were not assailable as in contravention of law because the plaintiffs, assuming such to be the fact, had not at the time they were made the certificates of stock in his possession." Margins.— In the case of Sawyer v. Taggart,** it was contended that the rules of the New York Cotton Ex- change were so framed, and the course of dealing there such, that they proved or tended to prove that the parties understood the contracts, between members of the exchange, Avere not to be enforced. Among the rules referred to was one requiring- margins to be put up between the members. Upon this point the court said: "Rule six relates to margins, and we do not " 11 Hun, 471. ' 14 Bush, 737. EVIDENCE. 215 perceive that it has auy bearing upon the question in this case." Certainly if a rule requiring margins to be put up has no bearing upon the question of wager, the fact of putting them up could not have any. This is the only decision which might be considered as determining "the question of admissibility of evi- dence of the fact that margins were or might be required. In most cases the fact would appear as a part of the res gestcB, but undoubtedly if the legality of transactions should be claimed to depend upon the fact of margins being put up or required, the court would hold evidence of this to be inadmissible. Where the Purchaser at the Time of Purchase in- tends to Kesell before the Time for Deliyery Arrives.— " There does not appear to have been any decision where a question purely of the admissibility of evi- dence upon this point was decided. Yet inasmuch as almost universally this intention has been held to be lawful, it is believed that courts would undoubtedly reject testimony offered to prove it. As we have seen, selling " short " is lawful, and evidence to prove the fact, that the party did not, at the time of the sale, have the articles which he sold, but intended to pur- chase them at or before the time of delivery arrived, is inadmissible. It is apparent that a person selling " short " must intend to speculate, because in order to complete the sale he must go into the market and buy the article which he has sold ; the result of such a transaction being the difference between the two prices, which the speculator makes or loses. If he buys intending to resell, and does resell, the same re- sult foUows. The rule governing the admissibility of 216 CONTRACTS FOR FUTDBE DELIVERY. evidence to prove one of these facts would apply to the other. Financial Status.— In the case of Kirkpatrick v. Bonsall/ it was decided that evidence to show the financial inability of a party purchasing options for large quantities of oil to pay for it, was admissible to show that the purchases were not made in good faith and for a business purpose. The other cases, while not determining directly questions of evideace, are substantially to the same effect. These cases have been fully examined in the section on this subject in the preceding chapter. It remains here only to be said, that proof of this fact would have the tendency stated where the transactions were between principals to the contracts, but it is plain that where a person is speculating through a broker or commission merchant, it is manifestly wrong to test his good faith by his ability to pay the full value of the articles speculated in. It clearly appears by the better authorities^ that a person may speculate through a broker or commis- sion merchant, intending to receive from or pay to his commission merchant or broker the differences only between the purchasing and selling prices. Practi- cally, as business is now done, the chances of his having personally to take or deliver the commodities which he buys or sells, are so small that he is morally certain of being required to pay only the losses resulting from ' 55 Pa. St. 155. " Sawyer v. Taggart, 14 Bush, 727; Thacker v. Hardy, 27 W. R. 158; s. c. L. R. 4 Q. B. D. 685; Hatcli v. Douglass, 48 Conn. 116; and authorities, paadm, in preceding chapter. BVIDBKOE. 217 a purchase and sale, and unless tte fluctuations are extremely violent, this would require only a very small proportion of the actual value of the commod- ities speculated in. It becomes apparent, therefore, that the fact that he has not means sufficient to tak& and pay for the articles he purchases, or to purchase- and pay for the articles he has sold " short," is no proof that he has not means sufficient to carry on his specu- lations, nor does it prove or tend to prove that the contracts made by the broker or commission merchant for his account, are not real. The cases considered in the previous chapter were mostly cases of speculations through brokers or com- mission merchants, but, notwithstanding this, it is be- lieved that the true view is stated above. Where the Parties were engaged in a large number of Speculative Transactions.— This head-note means, as an examination of the authorities cited in the preceding chapter will show, that a large number of transactions between the parties had been settled upon the pay- ment of differences. Where such settlements had taken place between principals to a series of transactions, evidence of the settlements would be clearly admissible to prove that the parties were wagering, instead of be- ing engaged in legitimate transactions.^ If, however, the settlements were between a principal and agent, growing out of contracts made by the agent for and on account of the principal, it is apparent that any number of such settlements would have no tendency ' Fareira v. Gabell, 89 Pa. St. 89. 15 218 CONTEACTS FOR FUTURE DELIVERY. to prove that the contracts made by the agent were wagers.-' Prior Conversations and Dealings.— Evidence of con- versations and dealings between the parties, prior to the making of a contract, which throw light upon the intention of the, parties as to whether it shall be con- sidered as a real contract, is admissible.^ That the Party was not a Dealer in the Commodities Bought or Sold.— In Kent v. Miltenberger,^ the defend- ant was engaged through the plaintiffs, who acted as his commission merchants, in buying and selling wheat for future delivery with the expectation of catching an advance or decline in the market price. It was claimed that this, in connection with the fact that he was not a dealer in wheat and had never bought or sold wheat for use or exportation, which fact was known to the plaintiffs, proved the transactions to be wagers, but the court said that there was no question to go to the jury as to whether or not the contracts made by the commission merchant were wagers. Bnles of the Exchanges ; Usages.— In reference to the third class, it has been decided that the rules and customs of the exchanges may be shown when bearing upon the question of unlawful intention. In Lowry V. Dillman,* the contracts were made subject to the 1 Sawyer v. Taggart, 14 Bush, 727 ; Thacker «. Hardy, 27 W. R. 158; s. c. L. R. 4 Q. B. D. 685. See also Chap. V, Rule 1, passim. " Brand v. Henderson, 107 111. 141 : Colderwood v. McCrea, 11 Bradw. 543. = 13 Mo. App. 503 ; 1 Greenleaf, sec. 58. ' 18 N. W. R. 4. EVIDENCE. 219 rules and regulations of the Chamber of Commerce of Milwaukee, and the court thought it was a suspicious circumstance that what these rules and regulations were did not appear in the case. By the rules of most, if not all of the exchanges, it is provided that each party to a contract for future delivery may be required to deposit a margin to secure the other against fluctuation in the price of the articles dealt in. It is because of this lia- bility, and because also that as between members of the exchanges, they are in all cases required to con- tract as principals with each other, that they, in turn, require their principals to deposit margins on their contracts. So some exchanges require by the rules that contracts shall be rung out, and others that all contracts shall be executed through a clearing-house. It is obvious that these facts would appear as part of the res gestae. Margins would appear as money ad- vanced as security or as credited on account, and as rings and clearing-houses are methods of delivery, anything concerning them would be admissible in evidence. The effect of these facts has already been discussed at considerable length, and it remains here only to say that it is the duty of the court to instruct the jury, that rules requiring or permitting them do not tend to prove that parties, operating under the rules, were gambling, and if nothing else appears to impeach the good faith of the parties, a verdict should be directed. Settlements through rings and clearing- houses, as has been said, show conclusively that the parties were not wagering, and courts should not allow a case to go to the jury upon these facts alone. In those cases where the courts have characterized these 220 CONTRACTS FOE FUTURE DEMVERY. facts as the methods of gamblers, it is very apparent that they were not fully understood. No one ever heard of contracts in bucket shops, or transactions which were admitted to be wagers on the market price, ever being rung out or settled through clearing- houses. More Goods Sold than in the Market.— From what has been said in the previous chapter, it is apparent that evidence of the fact that there is more of a given commodity sold than there is in the market, can have no tendency to prove that any given purchase or sale was not made in good faith, and evidence offered for that purpose should be excluded. Acts and Omissions of the Parties after the Contracts are made.— In reference to the facts of the fifth class it may be said, that anything done or omitted by the par- ties subsequent to the making of a contract in the form of commercial transactions, which tends to show that their real intention in making it was that it should be a cover for a wager, may be shown in evidence. That any given sale was settled between the parties by the payment of difference in prices, is no proof that when they made the contracts they intended to so set- tle. This has been decided in a number of cases.^ If, however, the parties had been in the habit of so set- ' Clarke v. Foss, 7 Biss. 540 ; Sawyer v. Taggart, 14 Bush, 737 ; Gil- bert V. Gauger, 8 Biss. 314 ; Fareira v. Gabell, 89 Pa. St. 89 ; Melchert v. Western Union Tel. Co. 11 Fed. Rep. 193 ; Williams v. Tiedman, 6 Mo. App. 369; Kent v. Miltenberger, 13 Mo. App. 13; Roundtree v. Smith, 108 U. S. 369. EVIDENCE. 221 tling their contracts, this would be strong evidence of such an intention as to any given contract.^ As has ah'eady been said, the fact that a purchase or sale by a broker or commission merchant has been settled by a contra transaction, proves that it was a real purchase and sale. This fact would appear, how- ever, as a part of the res gestae, but it would be the duty of the court to instruct the jury that it was per- fectly legal to settle the transactions between the prin- cipal and his agent in that way. In bucket shops, where the forms of legitimate bus- iness are simulated, the business may be done in the form of a sale, and closed by what might be called a oontra transaction in the form of a purchase, or vice versa; but in this case the relation between the parties and the contra transaction itself are fictitious. In the cases cited in the previous chapter the contra transac- tions were real, and made simply so that one of them might offset the other, and allow the commission mer- chant to settle with his principal. Such a plan of op- eration proves the contracts to have been made bona jids? Between principals contra transactions would be evidence of an intention to wager.* In reference to the facts that transfers of the com- modities bought or sold were made before the time of delivery arrived, that no grain was offered or demand- ed, that contracts were closed the same day, that no deal lasted through the time limited for exercising the option, that no preparation was made for delivery, and ' Bryant v. Western Union Telegraph Co. 17 Fed. Rep. 825. = Thacker «;. Hardy, 27 W. R. 158; s. c. L. R. 4 Q. B. D. 685. See also Chap. V, Rule 1, passim. ^ Byers v. Beattie, 16 Weekly Reporter, 279. 222 CONTRACTS FOR PUTUKB DBlilVERY. that one contract was made to cover another, it is to be observed that in all the cases these facts were considered in reference to the conduct of the princi- pal who was speculating through a commission mer- chant or broker, and none of them decided questions purely of evidence. These facts are stated by the courts as inducing them to arrive at the conclusion that the parties were dealing in differences. If it is claimed the contract between the principal and his agent was simply formal and a cover for wagering transactions between themselves, evidence of these facts would be admissible. It is perfectly apparent, however, that if the principal has bought with an in- tention to close out his trades before the time for delivery arrived, all of these facts would be perfectly immaterial as tending to show that the contracts made for the principal's account were fictitious. A specu- lator who had bought or sold any commodity, ex- pecting to transfer his interest in the contract, or to make a contra transaction, and thus make differ- ences only payable to him, would not make any prep- aration for delivery, and there would be no grain offered or demanded so far as he was concerned, and of course he would make transfers before the time for delivery arrived, and the fact that he did this on the same day the contract was made, or at any time before the option expired, would be in keeping with his original intention, which, as we have seen, is per- fectly lawful. The error which seems to have been made in all of the cases considered in the preceding chapter, was in treating the question as though the plaintiff and defendant were dealing with each other,, EVIDENCE. 223 instead of one of them dealing for the other as his agent. From what has already been said in the preced- ing chapter it is apparent that symbolical delivery, as by warehouse receipts, ringing out, and delivering through clearing-houses, is perfectly legal, and proof of such delivery is equivalent in law to actual man- ual delivery, and instead of showing the contracts to have been wagers, proves them conclusively to have been made honafide. Of course, it would be permis- sible to show that the deliveries were made in any one or more of these methods, biit the court should instruct the jury that such deliveries were lawful, and did not in themselves tend to prove that the parties were wagering. Inability of a commission merchant to produce the original entries of the transactions made by him for his principal's account, or to give the names of the persons with whom he dealt, if not explained, would be strong evidence of the fact that the trans- actions were fictitious ; ^ but his inability to state where the articles were at the time of the sale could have no tendency to show that the parties intended a wager, for, as has already been clearly shown, a person may sell that which at the time has no existence even.^ Inadequacy of consideration has been fully dis- cussed, and that subject does not present any question of evidence. Correspondence of the parties, if it con- tained statements which had a tendency in law. to prove an unlawful intention, would be admissible.^ ' Gregory v. Wendell, 39 Mich. 337. 2 Ante, p. 95 et seq. ' Cobb V. Prell, 15 Fed. Rep. 774; Clarke v. Foss, 7 Biss. 540 ; Justh V. HoUiday, 11 Wash. R. 418. 224 CONTRACTS FOR FUTURE DELIVERY. It is plain, bearing in mind the distinction between speculation and gambling, that the second form of ac- count described in Cobb v. Prell ^ is adapted to specula- tion, when the articles speculated in were to be, and were closed out before the time for delivery arrived, and so its use alone could have no tendency to prove that the parties were wagering, and if they were of- fered for such a purpose, should be excluded. They might be admissible as a part of the res gestae. We have considered in this chapter all of the im- portant facts and circumstances whicb have been claimed in any of the cases to indicate that the parties who made contracts in the form of commercial transac- tions, designed them as covers for wagers, so far as the question of admissibility of evidence is concerned. Intention is a mental fact — a determination of the mind^ — an effect produced by the operation of the mind,^ and as the fact is hidden from the direct knowledge of other men, the only way of determining its existence is from a consideration of all the collat- eral facts and circumstances surrounding a given case. From the very nature of the fact, it is not probable that the collateral facts and circumstances whicli we have considered are all that might exist to show an unlawful intention between parties to con- tracts for future delivery, but we have examined them as far as they have arisen and been considered in the courts. There seems to be a little looseness in the applica- tion of the rules as to what facts should be allowed to go to the jury to show this intention. The rule that ' 15 Fed. Rep. 774. = 1 Bouvier, 730. ' Earn on Facts, 1. EVIBENOE. 225 tMs is to be determined in view of all the surrounding facts and circumstances is undoubtedly correct ; and it is also true that evidence of facts which happened before and after the principal transactions, may be shown to determine the intention of the parties ; ^ and of course every fact belonging to the res gestOB would be admissible. It is believed that here the special latitude allowed in the introduction of testimony to prove intention ceases. In many of the cases here- tofore cited it seems as though the courts were will- ing to admit and consider evidence of almost any fact claimed to show that the parties were wagering in the forms of legitimate trade, or of facts which, considered alone, could have no such tendency on the theory that they would, when considered to- gether, prove or tend to prove that the parties were wagering. This is undoubtedly error. It has been held repeatedly that the several facts of selling short, buying with the intention to resell before the time for delivery arrived, that the parties at the time of the sale did not have the articles sold, and had no means of obtaining them except by subse- quently purchasing in the market, and that margins were put up between the parties to the contract, were perfectly legal and had no tendency to show that the parties were wagering on the market price. How, then, could a combination of all these facts show such an intention? In Sawyer v. Taggart,^ a well consid- ered case, the court examined a great variety of facts and circumstances, and concluded that neither of them nor all of them comVnned proved that the contracts made by Sawyer, Wallace & Co., for Hamiltons, on the ' 1 Greenleaf, sec. 53. " 14 Bush, 737. 226 CONTRACTS FOR FUTURE DELIVERY, New York Cotton Exchange, were wagers, and gave judgment for the plaintiffs. On the other hand, there may be facts of very little importance when considered alone which would, when taken in connection with other facts, tend to show, and be suflScient to justify a jury in concluding that the parties intended to wager. In such a case it is clear that the judges have nothing whatever to do with the weight of the evidence offered, but should, if any fact or combination of facts appear having this tendency, send the whole case to the jury. As an instance of a combination of facts of little importance, which would raise a suspicion and justify the inference that the transactions between the parties were not bona fide, and make it proper to send the whole case to the jury, might be cited the case of Lowry v. Dillman.-' This action was brought on a note, and the defense was that it was given to the plaintiffs in settlement of differences on gambling contracts in barley which the plaintiff had made with the defendant, or with others at his request. At the close of the testimony the learned circuit judge directed the jury to return a verdict in favor of the plaintiff for the amount of the note. The sole question considered in the case was whether there was sufficient evidence to carry the case to the jury on the point, whether or not the note was given for differences or losses in gambling contracts, and the court was clearly of the opinion that the case should have been submitted on the evidence, and that it was error to withdraw it from the consideration of the jury. The defendant was engaged in the business of keeping a saloon in the city of Milwaukee, and the ' 18 N. W. R. 4. EVIUBNOE. 227 plaintiff was a commission merchant doing business in the Chamber of Commerce in that city. There was a violent conflict between the principal parties as to what the agreement was. The evidence given on the part of the plaintiff was that defendant came to the plaintiff's office about the 20th of October, and gave an order to buy for him fifteen thousand bushels of barley to be delivered in November. Thereupon the plaintiff purchased for the defendant this quantity of barley, and paid for it. The defendant had put up a margin of eight hundred dollars. The purchase was made, and the barley was all delivered by the sellers. The plaintiff had the barley ready for delivery to the defendant in November. The defendant, however, was not ready to receive it then, but ordered the plaintiff to carry it through the month of December. The plaintiff did so, and continued to carry the barley, or the most of it, for the defendant until it was finally sold in March by the defendant's order. The note in suit was given in part payment of the actual difference between the price at which the barley was originally purchased and paid for, and what was realized from the sales with the carrying charges and commissions earned in doing the business. This, in substance, was the nature of the transaction which the plaintiff's testimony tended to prove. The court said : " If this is a correct version of the matter the contracts were relieved from all taint of illegality ; for actual trades were made, property was actually bought and paid for, and was ready for delivery to the buyer on the contracts when they matured. The transaction was valid ; so far, at least, as the plaintiff was concerned. But it cannot fairly be claimed that the evidence 228 CONTRACTS FOR FUTUBR DELIVERY. which was introduced on the part of the plaintiff proves any such facts or course of dealings between the parties clearly and satisfactorily. On the contrary, there are many suspicious circumstances surrounding the transactions, even in the light of the plaintiff's own testimony. For instance, he attempts to explain the monthly statements which he rendered the defendant from time to time, and which, as we have said, pro- fessed to show purchases and sales of barley on de- fendant's account, and he is forced to admit that these statements are not accounts of actual purchases and sales. Of course, it is not easy to explain to a person of ordinary intelligence and business experience why the plaintiff, if he really purchased the barley for the defendant as he said he did, and had it on hand, should resort to the idle ceremony of selling the grain, then buying it back again in a day or two at an advanced price, the grain to be delivered by the pur- chasers within the month, and repeat this same thing several times. The plaintiff claims that this is an expedient resorted to by the dealers in the Chamber of Commerce, to fix charges for the storage of grain for the month, insurance, interest, etc. This may all be so, but the reason or necessity of doing business that way, instead of doing it in a direct, plain manner, is not obvious. Why it should be necessary to resort to the market reports of the Chamber of Commerce at a particular day, to ascertain the amount of carrying charges, we fail to comprehend. If the transaction was reallj'^ legitimate, one would naturally suppose tliat it would be easy to render an account for interest, stor- age, insurance, etc., according to the facts, than to make such statements as were rendered. But, if the trans- EVIDENCE. 229 action was in fact a mere wager or bet upon the rise or fall in the price of barley, then these statements- would be the direct way of showing how the deals stood each month. Again, the plaintiff attempted to show what the contract was which .he made with the defendant for the purchase and delivery of the grain. Ordinarily, the purchase and sale of a quantity of grain, where the seller holds it for delivery, is not a very complicated matter, or one difficult to be under- stood. But after carefully reading over more than once the testimony of the plaintiff and his clerk, not a member of the court is certain that he understands how the business was transacted. It is doubtless our fault and want of knowledge as to the method of doing business by the members of the Chamber of Com- merce. Be this as it may, the original contract be- tween the parties was not produced on the trial, not being found. But the blank form of a contract, similar to the one which it was claimed was made, was intro- duced. According to this form the plaintiff sold and agreed to deliver, and the defendant bought and agreed to receive and pay for on delivery, the barley at a stipulated price ; the grain to be delivered in ware- house receipts at such times in tlie month of as the seller might elect. Then comes the provision that the contract is subject to the rules and regulations of the Chamber of Commerce of Milwaukee, which rules and regulations were made a part of the contract. Now, what these rules and regulations are does not appear in tbe case, and we do not understand they were introduced on the trial, though they were a part of the contract out of which the note originated. We must say there is a mystery about the whole trans- 230 CONTRACTS FOE FUTUKE DELIVERY. action which does not usually attend an actual, bona \fide purchase and sale of property. These fictitious sales and purchases which were resorted to, what do they mean ? Were they mere devices to cover up the real nature of the transactions ? There are many cir- cumstances that are suspicious, and which tend to sus- tain the claim of the defendant that the contracts were mere gambling transactions, consequently illegal. The jury might have inferred from all the evidence that the parties never intended or expected that there should be an actual delivery or acceptance of property, but that the whole ' deals ' were nothing but wagers or bets on the rise or fall of the price of barley. The case should have been submitted to the jury under proper instructions." But a case should not be sent to the jury upon evidence of trifling circumstances. In the case of Kumsey v. Berry ,^ the court said : " While it might indeed appear a little singular, and even suspicious, that a man residing in Bangor, having no wheat of his own, should undertake to sell wheat in Chicago ; still we cannot assume that any one has violated the law, and been guilty of immoral and corrupting prac- tices in his business transactions, without proof, even though he may ask it himself, for the purpose of being absolved from the obligation of a losing contract." ' 65 Me. 570. CHAPTER V. WAGERS CONSIDERED IN REFERENCE TO BROKERS AND COMMISSION MERCHANTS. Up to this point we have considered the sub- ject mainly in relation to the principals to the con- tracts. We now propose to examine it as it affects brokers and commission merchants. Between mem- bers of the same exchange the question seldom arises, and if it does, like their otter controversies, it is usu- ally settled by arbitration and rarely comes into the courts ; but the claim that transactions in the form of purchases and sales made for the account of outside principals by members of exchanges are in fact wagers, is frequently made. The law governing the relation between principal and agent is well settled; but much confusion has arisen in applying it in cases affecting members of the exchanges, owing largely to the failure to discriminate between the rights of the parties to the contract creating the relation of principal and agent, and the rights of the principals dealing through the broker or commission merchant. Whatever doubt there may be about th.e accurate statement of the reciprocal rights and duties of principals and brokers or commission merchants, members of exchanges, all of the author- ities are agreed that the latter are agents and as such are entitled to indemnity and compensation so long as they act within their instructions, in good faith, ' and the services they perform are not unlawful. 232 CONTRACTS FOR FUTURE DELIVERY. The author has reduced the law applicable to this subject to the following rules : Role I. Where a beokee oe commission merchant, in puesuance of inbtetrctions feom his peincipal, buys oe sells, oe both, foe future deliveet, and in so doing makes conteacts in his own name which mat be enfoeced against him, he is enti- tled to his commissions and to indemnity for his disburse- ments, including losses paid, and may maintain an action theeefoe. There is a distinction between a commission mer- chant and a broker. The term commission merchant is the modern name for the common law factor, the latter term having gone almost out of use in this country. If there is any distinction between a factor and a commission merchant, it is that the former acts for a foreign principal, and the latter for one in his own country ; but the rules of law governing both are the same. A factor or commission merchant is an agent to whom goods are consigned for sale, or who is author- ized to purchase goods for his principal. He is in- trusted with the possession, management, control, and disposition of the goods bought or sold. He has a right to conduct his principal's business in his own name, and usually does so. If he wishes to free him- self from liability he must disclose the fact that he is dealing as an agent and give the name of his prin- cipal ; otherwise he will be held to all the responsi- bilities of a principal. Without regard, however, to the relations he as- sumes to third parties he is an agent in respect to his BROKERS AND COMMISSION MERCHANTS. 233 own principal, and he is bound to obey instructions and to account to him. A broker stands in a different position. He is not ordinarily intrusted with the possession or control of the goods, and has no interest in them. His only office is to find parties to deal with Ms principal, and having done this his function ceases. He does not deal in his own name, but acts in the name of his principal. With these distinctions the rules of law governing the relation of broker and commission merchant with his principal are the same. The precise relation which members of the differ- ent exchanges hold to their principals, has not been fully determined. They are sometimes brokers, some- times commission merchants, and often both. The courts have imposed obligations, and given rights that are foreign to botb characters. In fact the relation is sui generis. For the purpose, however, of discussing the question of wager they are either brokers or com- mission merchants, and the distinction is unimportant, especially as the rules of all the exchanges require them to assume the obligations of principals to each other, and they in turn guarantee to their customers the performance of all contracts made for them. The test whether a case comes within this rule, is to inquire whether the broker or commission merchant was employed to make real lawful contracts which could be enforced against him, and if he was, he is entitled to indemnity, and it makes no difference what other facts or circumstances wei-e connected with the transactions in which they were engaged. 16 234 CONTRACTS FOR FUTURE DELIVERY. English Authorities. — The case of Ashton v. Dakin^ is a strong authority for this rule. In the case of Mc parte Godefroi in re Hart,^ ttere was an application by a stock-broker to have the de- fendant adjudicated a bankrupt. The debt arose from transactions which the respondent had authorized the petitioner to effect on the Stock Exckange, the money due on such transactions from the respondent having been paid by the petitioner. It was argued on behalf of the respondent that the debt arose out of a gaming contract within the meaning of the statute of Victoria,* and therefore not recoverable at common law, or provable in bankruptcy. The chief judge held tkat the petitioner was merely an agent, and since the respondent must be taken to have known that by the rules of the Stock Exchange the petitioner was bound to pay the members of the same any sums of money which, might be due from the respondent to them in regard to the transactions, a request to repay such sums must be implied. In Cooper v. Niel,^ the defendant employed Bayley, a broker, to enter into contracts upon the Stock Ex- change for the purchase of shares. Bayley knew the defendant did not intend to accept the shares, but only to receive or pay the differences according to the rise or fall of the market price of the same, and entered into contracts with jobbers for the purchase of shares in pursuance of the defendant's instructions. Upon these contracts, according to the rules of the Stock Exchange, Bayley became personally liable. He after- ' See full statement of (he case, ante, p. 116. " Weekly Notes, 95 (1870). = 8 & 9 Vict. c. 109, § 18. " 13 Weekly Notes, 138. BROKERS ANB COMMISSION MERCHANTS. 235 wards became insolvent, and the plaintiff, as his trustee, sued on the implied contract of indemnity against the claims of the jobbers. At the trial the jury found that the contracts with the jobbers were mere " time bargains," and judgment was given for the defendant. The court considered the verdict of the jury unsatis- factory, and directed a new trial, on the ground that the jury had found that the contracts made by the broker were " time bargains," and it was doubtful whether such bargains were really made. In the sub- sequent case of Thacker v. Hardy ,^ referring to this case, the court said : " A time bargain merely, because it is one, is not invalid. If a man were to undertake to sell me a crop of apples for next year that is not invalid. But when, by a time bargain, you understand something different in reality from what it purports to be, and that whereas it purports to be an agreement to deliver and sell an article on a particular day, it is really no such agreement, but is an agreement to pay what shall be the difference between the price when the bargain was made and the price at the time they name ; such an arrangement is something in the nature of a wager or gaming on the question of what shall be the price. * * * It is obvious that the meaning of a ' time bargain ' in that case was not merely a contract for the future delivery of stock to or by the plaintiff, as the case might require, but what the jury meant to find was that the plaintiff had been instructed to make bargains which would make him liable to pay the persons with whom he made the bargain the differ- ence in the price of the stock, according to the rise or ' 37 Weekly Reporter, 158 ; s. c. L. R. i Q. B. D. 685. 236 CONTBACTS FOE FUTURE DELIVERY. fall of the market, at a future day, and that he had made such bargains." Lindley, J., said : " What are called time bargains are, in fact, the result of two distinct and perfectly legal bargains, namely, first, a bargain to buy or sell, and, secondly, a subsequent bargain that the first shall not be carried out ; and it is only when the first bargain is entered into with the understanding tbat it is not to be carried out that a time bargain, in the sense of an unenforceable bargain, is entered into. Such bargains are very rare, and this is what I understand the witnesses to mean when they say that there are no such things as time bargains on the Stock Exchange." The case was sent back for a new trial, so that the jury might consider whether the plaintiif was instructed to make " time bargains " in the objectionable sense. In the case of Thacker v. Hardy,^ this subject was fully discussed. The plaintiff was a stock-broker, and was employed by the defendant to buy and sell stocks upon the London Stock Exchange. The action was brought for plaintiff's commissions and for indemnity for losses paid by him. The defendant pleaded that the claim was founded on wagering transactions, which were illegal at common law, and under the Stat. 8 and 9 Vict. c. 109, § 18. This case with two others of a similar nature were tried together, and Mr. Ju&tice Lindley found the following facts : " (1) That the defendants are speculators, and that the plaintiff knew them to be so; (2) that the de- fendants employed the plaintiff to speculate for them on the Stock Exchange; (3) that they knew, or must be taken to have known, that in order to carry out ' 37 Weekly Reporter, 158 ; 8. c. L. R. 4 Q. B. D. 685. BROKERS AND COMMISSION MERCHANTS. 237 their transactions the plaintiff would have to enter into contracts to buy or sell, as the case might be, and, in order to protect himself and the defendants, to enter into other contracts to sell or buy respectively ; {4) that there was, in fact, no other way in which the plaintiff could speculate for the defendants as they desired; (5) that the plaintiff did buy and sell ac- cordingly; (6) that the defendants never expected or intended to accept actual delivery of what the plaintiff might buy for them, nor actually to deliver what he might sell for them, and that the plaintiff knew that the defendants never expected or intended so to do; (7) that the defendants nevertheless knew that they incurred the risk of having to accept or deliver, as the case might be, but were content to run the risk in the expectation and hope that the plaintiffs would be able so to arrange matters as to render nothing but differ- ences payable to or by them as the case might be ; (8) that unless the plaintiff could arrange matters as ex- pected, the defendants would be wholly unable to pay for that which was bought for them, or deliver what was sold for them, and that the plaintiff knew per- fectly well that the defendants would be unable to do so." The court then discussed the question whether, under the statute, or at common law, wagering con- tracts were illegal, and decided that they were not, but were simply void under the statute ; and then proceeds to say, in answer to the argument that a contract which is void and unenforceable cannot be made the founda- tion of a promise to indemnify, that "it appears suffi- cient to me to say that an obligation to indemnify is created when one person employs another to do a lawful act, which exposes him to liability, and that in 238 COKTBACTS FOR FDTURE DELIVERY. view of the evidence the defendants did authorize the plaintiff to incur risk by buying and selling as above described." Judgment was given for the plaintiff, and upon appeal these views were fully sustained. Brett, L. J., in the Appellate Court said: "The real grounds of the action of the plaintiff against the defendant are, first of all, to recover commissions for acting as agent of the defendant and in making contracts of purchase and sale for him, and, secondly, for indemnity against the liability that the plaintiff had incurred with the authority, and for the benefit of, the defend- ant ; and Mr. Justice Lindley said that the contracts of the plaintiff and defendant (being one of employment only) was not a contract within the 8 and 9 Vict. c. 109, § 18, and that there was nothing illegal in it, and that, therefore, according to law, the plaintiff is enti- tled to recover in respect of both claims." Bramwell, L. J., after discussing the question whether a single order to buy or sell includes the right to the services of a broker in making a counter transaction, said: " But I will suppose that that was the bargain between the two parties, and that the principal would have the right to say to the broker, ' the transaction you have entered into is for a purchase, and accordingly I am bound to receive the stock and pay for it ; but I call upon you by virtue of the bargain you and I made when I employed you, to sell that stock for me, so that, instead of my taking and paying for it, I shall only have to take or pay the difference.' In my opinion there is nothing in that transaction within the gaming and wagering act, for it is quite clear that even in a bargain like that the principal would have a right to say, ' I will not go on with these speculations, but I BBOKEBS AND COMMISSION MEEOHANTS. 239 will take the article purchased and hold it as an in- vestment.' I have no doubt that that does continually happen, and that men who have bought with the hope of a rise, intending to sell again, having met with a fall, and have become so disgusted at having to end the matter by reselling, or continuing it on and paying continuations and backwardations as the case might be, that they have under such circumstances found the money and taken the stock and paid for it ; and so in that case the transaction comes to this, that the prin- cipal has a right to say, ' well, I will take the stock I have bought (if it was a purchase), or deliver the stock ' (if it was a sale), or a right to say, ' you must try to end the transaction by buying or selling again.' I say ' try,' for the broker might be unable to do so, and all he would be bound to do would be to endeavor to buy or sell again. What is there illegal in that ? I employ you to buy with a right to call on you to sell if it does not suit me to take the article ; what gam- bling or wagering is there between a broker or a jobber in that case? Absolutely none. The broker can say it does not matter to me if the thing goes up or down ; but in a case of wagering as to the price of stock it does matter to him. In Grizewood v. Blane it mattered to both parties if the thing went up or down, but in the case I put that is not so, and there is no wagering or gaming at all." And Cotton, L. J., said : " First of all, it is not contended that, if these findings are right, there is any ground of appeal. Cooper V. Niel, by which we are bound, would pre- vent another argument of that kind; and I still remain of the opinioji expressed by me and the other members of the court in that case. The case came to 240 CONTRACTS FOR FUTURE DELIVERY. this : that the defendant employed the plaintiff as his agent to enter into transactions on the Stock Exchange in respect of which, in accordance with the rules of the Stock Exchange, the plaintiff was liable or compellable to pay the price of the stock to the person with whom he dealt, and though the defendant never intended these transactions, as far as he was concerned, to be bargains for the real purchase or real sale of stock, yet having employed the plaintiff as his agent to enter into transactions, by which the agent incurred liability, he was bound to indemnify him for such liability, * * * The essence of gaming or wagering is that both parties stand to lose or gain on the happening of some event at the time unknown to them, that is to say, if the event is one way A. shall win, and if the other way B. will win ; but there is no such element as that here. There will be no such gain to the plaintiff. His gain will not depend on how the differ- ence in price went. If he was to have a commission he would make it either way. If the difference were in favor of the transaction he would not win, and if the difference were against the transaction he would not lose." In this case th* court clearly makes the distinction, which is so often lost sight of, between applying the test to the contracts made by the broker, and the con- tract between the principal and agent. Lindley, J., said : " But the plaintiff did not agree to buy or sell from or to the defendants, and I have the authority of Lord Justice Brett for saying the statute only affects the contract which makes the bet or wager." And Cotton, L. J., said : " Here the case is not that the plaintiff was a person purporting to sell to or buy BROKERS AND COMMISSION MBRCHAKTS. 241 from the defendant, as in Grizewood v. Blane; here the material difference is that this plaintiff is purport- ing to buy for and sell for the defendant." In the case of Eoc parte Rogers in re Rogers,^ it ap- peared that C. T. Evans, a stock-broker in the city of London, was instructed to buy and sell stock and shares for Rogers on the Mining Stock Exchange. The contracts were for the next account day, and were expressly made subject to the rules and regulations of the Stock Exchange, by virtue of which Evans was a principal as between himself and the jobbers with whom he dealt, and was liable to pay differences to them if there was a loss on the transactions, and if on account day the jobbers refused to cat-ry over the trans- actions to the next account day, they could compel Evans to take delivery of the stock, and if he did not do this he was declared a defaulter on the Stock Ex- change. It was understood between Evans and Rogers that the latter was only speculating for the rise of the stocks which he bought, and that he never intended to accept delivery of them, but meant to sell them again before account day, and receive or pay the differences between the prices at which he bought and sold. On the 26th of February, 1880, an account was rendered by Evans to Rogers showing that a balance of £2,275 would be due from him on the following day, which was the account day. On the 27th of February Rogers went to Evans' office just before four o'clock in the afternoon, and gave his note for five hundred pounds. Evans told him he should have to pay the jobbers that afternoon or be declared a defaulter the next day. Rogers said he would have the rest of the ' 15 L. R. C. L. Div. 307. 242 OONTEAOTS FOR FUTURE DELIVERY. money the next day, and told Evans to get it where he could. Evans accordingly borrowed the money and paid the jobbers. Rogers afterwards paid him five hundred pounds. On a petition to have Rogers de- clared a bankrupt, because of his failure to pay the amount due to Evans, it was claimed that he had not committed an act of bankruptcy, as the debt arose out of illegal, gambling, and wagering transactions. Col- lins, L. J., said : " That so far as the point of law is con- cerned it must be taken to be concluded by Thacker V. Hardy. The debt is in respect of sums of money paid by the petitioner for the appellant at his request." And James, L. J., said : "This is the ordinary common case of a broker employed by a person who is specu- lating on the Stock Exchange, and authorized by his client to pay the losses and actually paying them." American authorities —Federal decisions. — In the United States courts, Lehmann v. Strassberger ^ is a leading case. Lehmann Brothers were cotton factors in the city of New York, and as such were employed by Strassberger of Mobile to buy and sell cotton for future delivery. They had been so employed for several years. It was the understanding between Strassberger and Lehmann Bros., that in all sales or purchases of cotton by them for him there was to be no delivery, but differences should be paid, except when special instructions were given to receive or de- liver the cotton. The contracts were made by Lehmann Bros, in the city of New York, according to the rules of the Cotton Exchange in that city. By these rules an actual delivery is provided for, and required in ' 3 Woods C. C. 554. BROKERS AUD COMMISSIOK MBKOHANTS. 243 every contract, unless waived in some mode by the subsequent conduct or assent of both parties, or unless the party having the option to make or require an actual delivery, fails or declines to exercise his option, or to insist upon delivery. Losses were made and paid by Lehmann Bros., and for the amount of them and plaintiffs' commissions Strassberger gave his note for one thousand dollars, and afterwards verbally and by letter promised to pay the same. The note was not paid, and the question in the case was whether Strass- berger had committed an act of bankruptcy in not paying it ; he claiming that the note was void because executed and payable in New York, and based on the contracts made there, and that the transactions were wagers under the statutes of that State. Upon this question the court below charged the jury as follows : " If you believe from the testimony that it was never intended there should be an actual delivery of cotton in the future, but the understanding and agreement were, that upon the day the delivery was to be made the person agreeing to sell should pay to the person agreeing to purchase the difference between the price at which the cotton was agreed to be sold and the price current on the day when it was agreed to be de- livered, then you will find that the defendant has not committed any bankruptcy." The defendant had a verdict, but upon appeal the judgment was reversed. In discussing the question whether the contracts made by Lehmann Bros, with parties upon the Cotton Ex- change in New York were lona fide, the court said : "Strassberger testifies, and in this he is uncontradicted, that it was the understanding between him and Leh- mann Bros., that in all purchases and sales of cotton 244 CONTRACTS FOR FUTURE DELIVERY. by them for him for future delivery, no cotton should be actually received or delivered, but only the differ- ences paid, except when special instructions were given to receive or deliver cotton ; and the record shows that he did, on one or more occasions, elect to deliver cot- ton. If he reserved the option to receive or deliver, the contract was legal in all respects, even though he might have had a purpose in his own mind not to re- ceive or deliver, and had communicated that purpose to his agents. The question is, did he communicate that purpose to the parties not named, with whom he contracted ? There is no evidence that he did. On the face of his contract he binds himself to deliver cotton, and the other party binds himself to receive it. Here is no bet or wager." In Clarke v. Foss,^ the action was brought by an assignee to set aside and cancel six promissory notes and a mortgage to secure the same, executed by C B. Stevens & Sons to the defendants, on the ground that they were void, as being given to secure a consider- ation of certain option contracts, which, it was claimed, were wagering contracts under the Illinois statutes Stevens & Sons were for many years previous mer- chants and dealers in grain and produce in De Sota, Wisconsin, and had shipped wheat and other grain to the defendants, who were commission merchants at Chicago, and had also from time to time speculated in grain in the Milwaukee market, through the defend- ants, acting as their factors at that place. In October, 1874, Stevens & Sons ordered the defendants at differ- ent times by telegraph to make sales of grain for them upon the Chicago market for November delivery ' 7 Biss. 540. BROKERS AND OOMMISSIOK MERCHANTS. 245 amounting in the aggregate to seventy thousand bushels of corn and five or ten thousand bushels of wheat. The defendants, upon receiving these orders, went upon the market in Chicago, and executed them by making, as was the custom, contracts generally in writing and in their own names with different parties, and immediately notified Stevens & Sons by telegraph and by letter what they had done, and their acts were fully ratified and approved by them. At about the time, or a little before these contracts matured, as they did on the last day of November, the defendants per- formed a part of them on behalf of Stevens & Sons by a purchase and actual delivery of the corn to the par- ties to whom- the sales were made. Twenty thousand bushels of corn were actually delivered, and as to ten thousand more there was a delivery of warehouse re- ceipts for that amount. The balance of the grain sold the defendants purchased upon the market of different parties, and had it ready for delivery, and then, finding other parties who had similar deals for November pur- chases and sales, formed rings or temporary clearing- houses through which, by means of a system of mutual offsets and cancellations that had grown upon the board, the contracts were settled by an adjustment of differences, saving an actual d.elivery and change of possession. There were losses in these transactions of over one thousand dollars, which the defendants paid. The notes and mortgage in the suit were given for a portion of this and the defendants' commissions. Stevens & Sons expected that the defendants would make the contracts much as they did, in fact, make them, and in about the same manner as they did, take care of them, by a delivery of the grain or by a settle- 246 CONTRACTS FOE FUTURE DELIVERY. ment and adjustment of differences according to the circumstances, and whatever the profits were, Stevens But see McLean v. Stuve, 15 Mo. App. 317; and Ream v. Hamilton, 15 Mo. App. 377. BROKERS AND COMMISSION MERCHANTS. 287 ginning to pay whatever loss may occur and be paid by the agent cannot be enforced. It has been said, it is true, in some of the cases, that the money having been paid after the transactions were ended, the agent can recover it, but there is no case known to the author where the time of the promise to reimburse an agent engaged in making wagers which were simply void was considered material. In Jackson v. Foote,^ it appeared that Hooker &, Co. were employed by the defendant to buy and sell grain, pork, and lard for future delivery on the Chicago Board of Trade for the defendant's account, under an agreement that Hooker &, Co. were not to take in or carry the commodities bought, but defendant was only to pay or receive the differences between the selling and buying, or buying and selling prices of the com- modities dealt in. The transactions, when closed, showed a balance of $22,000 against the defendant, in settlement of which they gave Hooker & Co. four notes of the Couch estate for $5,000 each, the payment of which the defendant guaranteed. Two of these notes were transferred to the Third National Bank as security for a loan made to Hooker &, Co., upon which were the written guarantees of the defendant. The receiver of the bank brought action upon these guar- antees, and the defense made was that the transactions between Hooker & Co. were option contracts and pro- hibited by the statute of Illinois. The court held, however, that the transactions were not of this char- acter, and said, at most, they were transactions where it was not intended any commodity should be actually received or delivered, but they were to deal in differ- ' 13 Fed. Rep. 37. 288 CONTRACTS FOB FUTURE DELIVERY. ences only, and that such transactions were wagers at common law. The court said : " Assuming then, that the defendant, by his agreement with Hooker & Co., intended to deal only in differences, and that the bulk of the debt against him on the books of the firm accrued for differences paid by the firm on the trades made for him in pursuance of this agreement, the only question is, do these facts so taint the paper as to make this guaranty thereon void in the hands of this bank ? There is no dispute but that the bank is a bona fide holder of these notes with defendant's guar- anty thereon, taken for value before due and without notice of any defense, * * * They may have been, as 1 have already said, gambling or wager con- tracts at common law, to such an extent that if Hooker & Co. had sued the defendant he could have successfully defended ; but the common law will not help either party to the gambling contract ; it simply leaves them where it found them, * * * It seems to me to follow, then, as a necessary conclusion, that the defendant, having delivered these notes with his guaranty on them to Hooker & Co, in settlement of their demand against him, even though their demand was tainted as a gambling claim at common law, he cannot be allowed to set up the illegality of the deal- ings between himself and Hooker & Co. as a defense to these guarantees in the hands of a bona fide holder," It is true that in this case there is one element not stated in the rule ; the notes had been passed one step beyond the brokers, but it is thought this makes no difference, as if the consideration of the notes had been illegal they would have been void in the hands of all parties. Indeed the court said : " It is ex- tremely doubtful in my mind, even if suit had been BROKERS AND COMMISSION MERCHANTS. 289 brought by Hooker & Co. against the defendant, he could, upon the showing now made upon this trial, have successfully defended against this claim." American authorities — State decisions.— In Wyman v. Fiske,^ the mutual accounts of the parties were re- ferred to an auditor, and in respect of one item it was proved : that one Wheelock, a broker, contracted to sell on time for the plaintiff certain stocks which he did not own, and of which he had no control; that Wheelock purchased other stocks in order to fulfill this contract ; that this transaction resulted in a loss, and the defendant, knowing the facts, paid this sum to Wheelock for the defendant and took his note therefor. The plaintiff contended that this transaction was in violation of the Massachusetts statute which provided in substance, that all contracts for the sale or transfer of stock shall be absolutely void, unless the party contracting to sell or transfer is, at the time of making the contract, the owner or assignee of the stock, or authorized by the owner or assignee or his agent to make the sale. The auditor allowed the credit to the defendant, and on appeal the court said: " The statute does not make the act penal. * * * It merely denies to the parties all legal aid in enforcing such contracts; and this places them on similar grounds with oral agreements that are within the Statute of Frauds. It is not criminal to make them ; they are merely deprived of legal validity. It is clear that the plaintiff's contract, which he made through his broker, Wheelock, was within that statute. * * * If the plaintiff chose to reimburse him, he had a legal right ' 85 Mass. 334. 290 CONTRACTS FOR FUTURE DELIVERY. to do SO, The payment would at least be legal as a gift; and the plaintiff, having a legal right to make voluntary payment, had a right to procure a third person to make it, and such payment would be a valid consideration for a note. The note in question has such a consideration, and is therefore valid, and the auditor properly allowed it." Even if the statute made short sales unlawful, the money having V^een lent to pay the loss after the transaction had been completed, the claim should have been allowed, under Rule VI, unless the statute also made such payment itself unlawful. In Durant v. Burt,^ the defendant, who was a stock-broker in Boston, requested the plaintiffs, who were also stock- brokers and members of the Stock Board in Boston, to buy for him a hundred shares of the Hancock Mining Co., to be delivered at buyer's option in ten days. The plaintiffs purchased the shares on the board from one Gilley, also a member of the Stock Board, notified the defendant that he had done so, and the latter signified his assent. Before the end of ten days the stock declined in price, and the plaint- iffs notified the defendant that he required a margin, which the defendant did not furnish, but said it was all right. Subsequently the plaintiffs received and paid for the stock, and notified the defendant that they should sell the stock if he did not pay for it. This the defendant never did, and finally the plaintiffs sold the stock for twenty-one hundred dollars, and brought this action for the difference with interest and brokerage. The Massachusetts statutes provide that a contract for the sale of stock where the seller does not ' 98 Mass. 161. BROKERS AND COMMISSION MERCHANTS. 291 own it, or is authorized to transfer it at the time the sale is made, is void ; in other words, " short sales "" are not allowed. The point chiefly insisted upon was that the bargain made for tBe stock could not be enforced because it was not shown that it was owned by the party who agreed to deliver it, or that he was authorized to sell it ; and that no facts were shown proving that the requirements of tlie Statute of Frauds in making the sales had been complied with. There was no evidence otherwise than by inference from the relation of the parties and their previous transactions with each other of a similar description, and the fact of the transaction being at the brokers' board, whether or not Gilley was on the 29th of August owner or as- signee of any stock in the Hancock Mining Co., or agent to sell or transfer a certificate or other evi- dence of any shares therein, or that the defendant up to the time of the sale of said stock knew who was the owner or whether or not Gilley had or could give any valid title to the stock. The court on this point said : " The case of Stebbins v. Leowolf, 3 Cush. 137, decides that a vendor seeking to enforce a con- tract for the sale of stock must show that he owned it when he made the bargain. But this doctrine has no application to a case like the present, in which an agent has paid money for his principal and seeks reim- bursement. * * * The evidence tended to show that the plaintiffs made a bargain for the stock, by the defendant's request, and just such an one as he author- ized ; that the defendant was notified of the fact and the terms of the purchase, and signified his assent thereto ; that, before the ten days of credit expired, the plaintiffs requested the defendant to advance money, called a ' margin ' to secure them against loss 292 CONTEACTS FOB FUTUBE DELIVEBY. by the fall Id the market value of the stock, and the defendant said ' it would be all right.' " The charge to the jury on the trial below was " that if the jury shall be satisfied that the plaintiffs purchased this stock as they allege, at the request, upon the terms requested, and for the account of the defendant, notified him that they had so done and the terms, and the defendant assented thereto, afterwards carried the stock at the defendant's request, until the defendant had notice from the vendor that it must be sold, and then, at the defendant's request, express or implied, took and paid for the stock, they should render a verdict for the amount paid, with interest, less the net proceeds of a sale which was made without any unreasonable delay after the refusal of the defendant." And this was sus- tained as correct. In Warren v. Hewitt,^ Hewitt brought an action to recover two thousand dollars on a due bill for money loaned, and two thousand dollars paid to War- ren, Lane COMMISSION MERCHANTS. 303 gaming contracts, they must be held to have advanced the money for margins to make them, and their claim for repayment falls within the prohibited class men- tioned in the act. They made the illegal contracts, and advanced the money required to give them color- able validity. To take this case out of the statute would be establishing a most flagrant evasion of its provisions." In Cobb V. Prell,-' the plaintiff was a commission merchant at St. Louis, and was employed by the defendant, who was a grain dealer of Columbia, Kansas, to sell for him certain quantities of corn to be delivered to the parties, to wbom the p]aintifif might sell the same, at the option of the defendant during the month of May, 1881. The plaintiff made contracts in his own name for the sale of corn, which the defendant did not deliver, and the plaintiff was obliged to, and did pay the damages resulting from such failure, to wit: the difference between the price at which the sales were made, and the price on the last day upon which the defendant could have delivered the corn, according to the contract made by him for the defend- ant. It was not disputed that the sales were made by the plaintiff, or that they were properly settled ; but it was claimed that the defendant never intended to deliver the corn, and that the plaintiff knew this when the sales were made, but that the defendant expected to pay any losses or receive any gain that the plaintiff might make in speculating on the defendant's account. A jury was waived, and the case was tried by the court who said : " The case turns upon the question whether or not it was the intention of the parties that ' 15 Fed. Kep. 774. 304 CONTRACTS FOR FUTURE DBLIVBRT. the corn should be delivered ? " Upon this point the parties flatly contradicted each other, and the court, following Barnard v. Backhaus, said that the burden of proof was on the plaintiff, and at the same time proceeded to examine the evidence, and found, as a fact, from the circumstance of the case that no deliv- ery was intended. There is a statute in Kansas which make's gambling by any device whatever a misde- meanor. This case is, however, very unsatisfactory, as it has been clearly shown that the mere fact of the defendant's not intending to deliver and the plaintiff's knowledge of the same did not make the contracts made by the plaintiff for the defendant wagers. The " fundamental error " of treating the question of wager as one between the plaintiff and defendant was made? whereas the true test was as to the character of the con- tracts made by the plaintiff with third parties. The facts show that the sale of corn was a real sale, and that the plaintiff paid the damages for the failure of the de- fendant to deliver. In Bartlett v. Smith,^ the defendant, who was a wheat dealer, miller, and warehouseman, employed the plaintiffs to deal for him in the Milwaukee Chamber of Commerce. The losses amounted to about thirteen thousand dollars, to recover which the action was brought. Judge Nelson left it to the jury to say whether the contracts made for the defendant were real and honafide, or merely wagers, and said, " if the jury find from the evidence that the plaintiffs, in the transactions in controversy, were brokers or factors of the defendant, and that in said transactions no actual sale and delivery of grain was contemplated, but ' 13 Fed. Rep. 263. BKOKERS AND COMMISSION MERCHANTS. 305 merely the payment of differences according to the rise and fall of the grain market, and that the plaintiffs performed services for the defendant, and supplied him with funds, and made advances for the express purpose of enabling defendant to engage in such transactions, and if they, as agents of the defendant, conducted such illegal ventures in their own name, they became 'pa/r- ticeps Griminis, and the law will not aid them to re- cover moneys advanced for such purpose, or commis- sions earned in such transactions, and your verdict must be for the defendant." In Irwin v. Williar, the court ^ said : " We are also of the opinion that when the broker is privy to the unlawful design of the parties, and brings them to- gether for the very purpose of entering into an illegal agreement, he is particeps oriminis, and cannot recover for services rendered, or losses incurred by himself on behalf of either in forwarding the transaction," ^ American authorities— State decisions.— In the case of Teuney v. Foote,® the suit was brought against Foote as guarantor of a note for five thousand dollars made by the trustees of the Couch estate, payable to Foote, and by him transferred to S. Gr. Hooker & Co., and by them to the plaintiff. The defense was that the consideration for the guarantee by the defendant was an account of S. G. Hooker & Co. against him, which arose out of the following facts : In the latter part of 1874, S. Gr. Hooker & Co. were commission merchants in Chicago, doing business on the Board of ' 110 U. 8. 499. 2 See also Third Nat. Bank v. Harrison, 10 Fed. Rep. 340. ' 4 Bradw. 594. 306 CONTRACTS FOE FUTURE DELIVERY. Trade in that city. Foote was a meclianic and ap- parently rather ignorant and inexperienced in matters outside of his own business. He had been seized with a desire to make money fast and easy, and. had. em- ployed one Adams as a factor to buy a quantity of oats for him. The oats were received and carried for some time. A loss ensued, and Foote had recourse to S. G. Hooker & Co. to act for him and adjust the matter. They did so, and the loss was adjusted at twenty-five hundred dollars, which Foote paid. Where- upon Hooker began, to solicit Foote, if he wanted to deal any more, to employ him, saying that he would make some money for him. Foote, fresh from his recent experience, declared that he would handle no more grain ; that he had no more money to put up, but if he would deal for him in options, and settle upon differences, he thought he would employ him. Hooker replied that he would, and an agreement was concluded to the effect that Hooker should go on and deal for Foote on the Board of Trade, but with the distinct understanding that it should be only in options, and that no property should be delivered or received on his account, but the transaction, should be settled on differences. This contract was fully proved, and without any conflict in the evidence with reference to it. Section 130 of the Statutes of Illinois against gambling provides as follows : " Whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain or other commodity, stock of any railroad or other company, * * * shall be fined not less than $10 nor more than $1,000, or confined in the county jail not exceeding one year, or both ; and all contracts made in violation of this sec- tion shall be considered gambling contracts and shall BROKERS AND COMMISSION MERCHANTS. 307 he void." The court, after tracing the history of op- tions, and naaking the distinction between what is called in a previous chapter " pure options," being simply the right or privilege of buying or selling, and what is called a buyer's or seller's option, being the privilege of delivering or requiring a delivery within a certain specified time, the delivery being certain and the only option being as to the time of it, said : " The word ' option ' as used in statutes here, taken with the con- text, means a mere choice, right, or privilege of selling or buying ; and it is the contracting for such choice, right, or privilege of selling or buying at a future time any commodity the statute was intended to prohibit, as contradistinguished from an actual sale or purchase with the intention of delivering and accepting the com- modity specified." The question then to be deter- mined was whether the employment of Hooker & Co. was to deal in the options prohibited by the statute, or in options merely as to the time of delivery, and concluded from the fact that there was to be no de- livery, in any event, of the articles dealt in, that the contracts were of the former class, and thus a mere engagement on the part of Hooker & Co. to gamble for Foote. A judgment was therefore rendered for the defendant. This decision was approved in 95 Illinois, 99. This case, upon the facts as found, was undoubt- edly correctly decided, but in the case of Jackson v. Foote,^ where the same transactions were considered in an action to recover upon the guarantee of another note, founded on precisely the same consideration, which had been transferred as security to a bank by the defendant, it was found by the court that this ' 12 Fed. Rep. 37. 308 CONTRACTS FOR FUTURE DELIVERY. employment of Hooker & Co. was to purchase and sell for the defendant goods for future delivery, where the only option was as to the time within certain limits, within which the seller was to deliver the goods sold. Such contracts did not come within the Illinois statute against options, and were not illegal, and judgment was given for the plaintiff. In the case of Webster v. Sturges,^ the action was brought to recover damages for the breach of an alleged contract for the sale and delivery of corn by the de- fendant to the plaintiff, entered into by the parties on the Board of Trade in Chicago. At the time of the transaction in question, the plaintiff and defendant were both members of the Board of Trade, and doing business thereon by way of buying and selling com for future delivery. On the last of October, 1877, the plain- tiff and defendant met after the conclusion of business of the board in an alley adjoining the Board of Trade building or in the hall of said building, and the plaintiff then and there sold to the defendant for the sum of twenty-five dollars an option to deliver to the plaintiff within one day twenty-five thousand bushels of corn at forty-ifive and seven-eighth cents per bush«l. On tbe day following, the market going somewhat against the plaintiff, the said parties met on the Board of Trade, and thereupon agreed to change the option con- tract into a contract of sale, by which the defendant agreed to sell to the plaintiff twenty-five thousand bushels of corn, deliverable at any time within said month of November, at the defendant's option, at forty- three and seven-eighths cents per bushel. On the 26th of November, the market price of corn having advanced ' 7 Bradw. 56. BROKERS AND COMMISSION MERCHANTS. 309 considerably, the plaintiff demanded of the defendant, in accordance with tlie rules of the Board of Trade, that he deposit a margin on said contract, and the de- fendant having failed to comply with said demand, the plaintiff on the following day, in accordance with the rules, bought in for and on account of the defendant twenty-five thousand bushels of corn at forty-nine cents per bushel, the then current price, charging the defendant with the difference between the price so paid and. the price so fixed by the contract. Judg- ment was rendered for the plaintiff. The court said : " It is well settled that contracts, by which either party is given an option to buy or sell at a future time grain or other commodities, are gambling contracts, repugnant alike to good morals and good policy, and forbidden by the criminal statute under pain of fine or imprisonment. It is conceded that the original contract between the parties to this suit was one of the latter character. In consideration of $25, paid by "Webster to Sfcurges, Webster sold an option or privi- lege to Webster to deliver to Sturges, within a fixed period of time, 25,000 bushels of corn at 43^ cents per bushel. This contract was utterly void, illegal, and criminal. It was a contract from which no rights could spring, but whose baleful and poisonous influ- ence must necessarily taint and corrupt every other contract into which it was allowed to enter as an in- gredient. Undoubtedly the parties, after having made such illegal contract, were at liberty to enter into another contract in relation to the same subject-matter, precisely the same as if no former contract existed. But the new contract must in no sense be a contin- uation or modification of the old. The old contract 310 CONTRACTS FOE FUTURE DELIVERY. must be utterly abandoned, so that neither its terms nor its consideration, nor any claim of right springing out of it shall enter into the new. The evidence, how- ever, furnishes reasonable grounds for the conclusion that the price agreed upon in the contract of sale was merely an adoption of the prices previously agreed upon in the option contract, and that so far as the price was concerned, one contract was merely a con. tinuation of the other." And for this reason judgment was reversed. In Barnard v. Backhaus,^ the action was brought upon a note the defendant had given to the firm of Bartlett & Mohr, through whom it came by endorse- ment to the plaintiff. The defendant had employed the said company, who were commission merchants in the city of Milwaukee, to buy and sell grain as his factors, and as a result losses were made, and the note sued on was given by the defendant in settlement of the same. It was claimed by the defendant, that this note, with three others, was given to the said firm^ upon the following considerations, to wit : in settle- ment of a balance stated by the firm against the de- fendant for the differences in gambling contracts in grain, made by the said firm for the defendant with others at his request, which contracts made by said firm were in violation of the statute of gaming, and were false and feigned, and by which they undertook in form, to buy and sell grain for the defendant, with- out intending thereby either to receive or deliver the grain, but solely to wager on the market price of the same at the Chamber of Commerce, intending not to receive or deliver the grain, but to pay or receive the ' 53 Wis. 593. BEOKBES AND COMMISSION MEEOHAHXS. 311 difference between prices named in the contract and the market rate, whichever way the same would be, and in which contract, said Bartlett & Mohr pre- tended to the defendant they had lost the balance in the statement set forth. Judgment was given for the plaintiff in the court below. But on appeal the court found, as a matter of fact, that some of the transactions were of the character claimed by the de- fendant, and, upon the theory that where a part of the consideration is invalid the whole is tainted, reversed the judgment below. The court, in its opinion, says: " Now, what Bartlett & Mohr were employed to do — what the evidence shows they did do — was to enter into these gambling transactions for Backhaus. They were engaged equally with him in the transaction of illegal business ; and the fact that they were executing the orders of their principal does not render their con- duct any the less blameworthy. All were engaged in the furtherance of illegal objects — making contracts which were unlawful ; consequently a note given for money which they paid in settlement of their contracts is tainted with illegality. A very satisfactory answer to the argument of counsel on this point is given by Judge Hopkins in Tn re Green, 7 Biss. 338, in the fol- lowing language : ' They advanced the margins at the time to make the gaming contract, and without their aid in that respect the contrafcts would not have been made. So, if these contracts are gaming contracts, they must be held to have advanced the money for margins to make them, and their claim for repayment falls within the prohibited class mentioned in the act. They made the illegal contracts and advanced the money required to give them colorable validity. To 312 CONTRACTS FOR FUTURE DELIVERY. take their case out of the statute would be establish- ing a most flagcant evasion of its provisions.' " The section of the statute referred to in this case, is as follows: "Any person who shall lose or win any money, property, or thing, by gambling in any manner, by any means, or by betting upon any game, election, race, or sport or pastime, or on the issue of event thereof, or on any future contingency, or unknown re- sult or occurrence, in respect of anything whatever, shall be punished by fine of not less than five times the value of the money, property, or thing in action so lost or won." ^ This case was approved in Ever- ingham v. Meighan.^ In the case of Beveridge v. Hewitt,* the firm of Hewitt, Bliss & Co., of Chicago, brought their action against Beveridge for a balance of account, growing out of a series of transactions on the Board of Trade, in which they acted as the agents of Beveridge &, McCurdy. The said account, with the exception of certain moneys furnished Hewitt, Bliss & Co. as mar- gins, was made up exclusively of credits arising out of settlements of various deals and commissions for con- ducting the business. Between January, 1879, and April following, the plaintiffs took and closed out forty-four different deals for the defendant, involving the purchase of eight thousand seven hundred and fifty barrels of pork, eight thousand bushels of wheat, five thousand bushels of corn, and two hundred tierces of lard, and sale of a like quantity of the same commodities ; such purchases and sales aggregating in value over two hundred thousand dollars. In no case ' Stat, of Wis. sec. 4535. » 55 Wis. 355. ' 8 Bradw. 467. BROKERS AND COMMISSION MERCHANTS. 313 was any property covered by these contracts actually delivered, but in every instance the deal was closed out by a counter contract in the form of a sale or purchase of the same commodity for the same delivery. The defense was that the claim grew out of these transactions carried on by Hewitt, Bliss & Co. on the Chicago Board of Trade, as the agents and brokers of Beveridge & McCurdy, and that they were unlawful and gambling. Upon these facts this case should have been decided in favor of Hewitt, Bliss & Co. under rule second, inasmuch as in Illinois there is no statute that makes wagers illegal. The most that can be said of the case in the favor of Beveridge is, that the brokers were employed to and did make wagering contracts. The court makes the " fundamental error " referred to by the court in Warren v. Hewitt,^ as the evidence in this case and in that shows conclusively that the parties making the transactions on the Exchange were acting as agents and brokers, and not as principals. But the court said that the precise question involved in this case, arose in the case of Tenney v. Foote ; * and so the case was brought within the operation of section 130 of the Illinois statute^ against options and of the rule we are now considering. But it is submitted that the facts of this case are very different from those of Tenney v. Foote. There the principal employed the broker to deal in options which were prohibited by the statute. Here the broker was to make wagers for his principal. This whole case is very unsatisfactory and contradictory. The law is correctly stated but improperly applied, and the facts found are not justified by the evidence. Still, how- ' 45 Geo. 501. ' 4 Bradw. 494 = Ante, p. 21. 31 314 CONTRACTS FOE FUTURE DELTYEKY. ever, the facts as found by the court make the case an authority for this rule. In the case of Whitesides v. Hunt/ the appellees were commission merchants in Indianapolis, and sued the appellant for money advanced and commissions in the purchase and sale of five thousand bushels of wheat through commission merchants in Chicago. The defendant answered that no wheat was actually purchased or sold, and that the transaction was a con- tract upon margins and gaming upon the future price of wheat, to be settled by paying or receiving at a future day the difference between the price of wheat then, and at the date of the contract ; that the ad- vancement of margins made were to keep the payment of differences secure, and that the contract was con- trary to public policy, illegal, and void. The plaintiffs claimed $12.50 as their commissions and $287.56, the difference between the loss which accrued upon the purchase and sale of the wheat after allowing $200 which had been paid by appellant as margins. Judg- ment was given for the plaintiff, and upon appeal the court examined the subject in detail and with great care, and, in the course of his opinion, said : " It is insisted by the appellees that they only acted as agents of the appellant in the premises, and as such agents they paid the money at the request of appellant, and that they have a right to recover the same back, regardless of the question as to whether the contract for the purchase of wheat was legal or illegal. * * * They claimed to be commission merchants, doing busi- ness in the Chamber of Commerce at Indianapolis and through commission merchants in Chicago, under the ' 97 Ind. 191. BROKERS AND COMMISSION MERCHANTS. 315 rules and regulations of the Board of Trade at Chi- cago ; they purchased for the appellant 5,000 bushels of wheat, and paid to the said commission mei'chant^ in Chicago $200, that appellant had deposited with them as a margin. The price of wheat declined, and the defendant refused to deposit further margins to carry the ' deal ;' appellees closed him out, and settled with the commission merchants at Chicago by paying them the further sum, for differences in the price, of $287.50 ; hence the appellees participated in, and were the chief manipulators of, the whole transaction, and well knew all the facts. If it was a valid and legal transaction they would have a right to recover back the money, which they had paid for appellant; but if the transaction was a gaming one, illegal and void, they would not have a right to recover; for if illegal, they were in pari delicto^ and will not be aided by the court in profiting by their own wrong. They will be left where they are found, to abide the consequences of their own illegal transaction." There are some authorities opposed to this rule. In the early case of Faikney v. Reynous,'' the plaintiff and one Richardson were jointly concerned in illegal stock jobbing, and upon a settlement of the transactions the defendant gave Faikney a bond for Richardson's share of the losses which Faikney had voluntarily paid. It does not appear that Richardson was the principal on this bond ; but it is assumed that he was, and it is admitted that the payment of the losses being to compound differences, was unlawful under the English statute.^ The statute was pleaded, but the court held on demurrer that the bond was ' 4 Burr. 3069. " Sir John Barnard's Act, cmte, p. 14. 316 CONTRACTS FOR FUTURE DELIVERY. good, and likened the case to money lent in order to pay a play debt, or to pay off an usurious contract, or even to lend upon usury. Grreat stress was laid upon the distinction between an offense malum in se and one malum prohiiitum,. This case has not been dis- tinctly overruled, but parts of it have, and it has been so criticised and doubted that it has little weight as an authority. The distinction made between an offense malum in se and m,alum prohibitum has been ex- ploded. " Indeed, we think no such distinction can be allowed in a court of law ; the court is bound, in the administration of law, to consider every act to be un- lawful which the law has prohibited to be done." ^ That the action was on a bond, and therefore imported a consideration, or even if there had been one dollar paid, on the principal, that being voluntary even if it could be enforced, will not sustain this case in view of the late authorities,^ for the fact remains that Faikney did an unlawful thing for Richardson, and that was the main consideration for the bond. In the recent case of Lehmann v. Strassberger,* the distinction between an act malum in se and one malum prohibitum, was clearly recognized. The defendant had given the plaintiffs a note for losses paid and for commissions in speculative transactions on the New York Cotton Exchange. In discussing the question of the validity of the note, while admitting that the pur- chases and sales were wagers under the New York statute, and that after they had been closed the defendant promised to pay, the court, upon the claim ' Cannon «. Bryce, 3 B. & A. 179; Aubert v. Maze, 3 B. & P. 371; Farmer v. Russel, 1 B. & P. 375 ; Woodworth v. Bennett, 43 N. T. 373 ; Seneca Co. Bank •;. Lamb, 36 Barb. 595. » 8 Woods C. C. 554. BROKERS AND COMMISSION MERCHANTS. 317 that the services at least were unlawful, said : " The fact that the agent includes in the note given for money paid by him for losses in an illegal transaction compensation for his services, does not taint the note. Such commissions would not avoid the note unless given for services as agent in a transaction which is not merely malum prohibitum but malum in seP It is submitted that the case did not call for the remark of the able judge who delivered the opinion, and so it is obiter dictum, and believed not to be law. If wagers were prohibited by the statute, the value of services in making them could no more be recovered than the losses themselves. The case of Petrie v. Hannay^ followed Faikney v. Reynous. The facts were as follows : The plaintiffs testator. Page, Keeble, the defendant, and two others, were jointly interested and engaged together in stock speculations. The whole of them were illegal except a transfer of one thousand dollars. They employed a broker by the name of Portis who had paid all the differences for them.* They came to a settlement with their broker, and Keeble paid the whole sum except eight hundred and eleven pounds, which was part of the defendant's share in the losses, and for which Keeble drew a bill on him in favor of Portis, which the defendant accepted. An action was brought on this bill against the plaintiff and he paid it. Two hundred and sixty-four pounds, part of the eight hun- dred and eleven pounds, was for the defendant's share of the one thousand pounds. Action was brought by the plaintiff to recover the eight hundred and eleven pounds for money paid to the defendant's use. The 1 3 Term R. 418, ' This was illegal by sec. 5, Sir John Barnard's Act, vide p. 15, ante. 318 CONTRACTS FOR FUTURE DELIVERY. plaintiff obtained a verdict for the whole amount, and a rule was obtained to show cause why the verdict should not be set aside in toto, or at least be reduced to the sum of two hundred and sixty-four pounds. The verdict was allowed to stand. The court could not distinguish the case from Faikney v. Reynous, and laid great stress upon the distinction between an ex- press promise by one partner in an illegal business and an implied one to repay money paid for his account ; and found the fact that the defendant, by accounting and accepting the bill, had expressly authorized the payment of the money for his account, and that he was bound to repay it. BuUer, J., says : " I think suffi- cient is stated to warrant the court in drawing this inference, that the defendant consented and requested Portis to pay the difference in the stocks. And here I agree that, in the case of an illegal transaction, if one person pay money for another without an express authority he cannot recover it back. For there is a wide difference between the case of partners engaged in legal and illegal contracts. In the former, if one of the partners pay the whole of a partnership debt with- oiTt any express promise from the other, the law gives him the right to recover it back in an action for money paid to the use of that other partner ; and it proceeds upon this ground, that both are liable to pay. But in the case of illegal contracts, as they are not bound to pay, one of them cannot acquire a right of action against the other by paying the whole without his consent ; in such cases it is necessary to have the con- sent and direction of that other. The question, there- fore, here is, whether the court cannot infer from the evidence that the money was paid within the knowl- BROKERS AND COMMISSION MERCHANTS. 319 edge, consent, and authority of the defendant ; and I am of the opinion that the court are bound to draw that conclusion." This distinction has been repudiated in several subsequent cases.^ In Aubert v. Maze,^ it was decided that money- paid by one of two partners for the other, on account of losses incurred by them in partnership insurance, cannot be recovered in an action brought by him against the other partner : and Sampson v. Shaw ^ de- cided that " an agreement to make a corner in stock by buying it up so as to control the market, and then purchasing for future deliveries, is illegal, and the parties thereto are not partners. It can hardly be denied that such a contract would be illegal and fraudulent. No association to carry out such a pur- pose would be recognized at law as having any legal incidents of a copartnership." The case of Norton v. Blinn * states the law to some extent contrary to this rule. Blinn placed in the. hands of Norton at Toledo five hundred dollars to be by him invested as agent for Blinn in options on wheat in Milwaukee or Chicago. Norton purchased through his brokers five thousand bushels of wheat, and made a profit of three hundred and twenty-five dollars, which was paid to him. The transaction was merely a speculation or venture on the future price of wheat, without any intention that the wheat should be either ' Aubert v. Maze, 3 B. & P. 371 ; Mitchell v. Cockburne, 2 H. P. B. 380 ; Steers i>. Lashley, 6 Term R. 61 ; Brown v. Turner, 7 Term R. 630 ; Woodworth «. Bennett, 43 N. Y. 273; Grey v. Hook, 4 N. Y. 449; Samp- son V. Shaw, 101 Mass. 145, = 3B. &P. 371. = 101 Mass. 145. ' 39 Ohio, 145. 320 CONTRACTS FOR FUTURE DELIVERY. paid for or delivered, but with the intention that settle- ments between the buyer and seller would be made on the differences between the price stated in the contract and the market price at the day named for delivery. Such transactions were unlawful in the States of Ohio, Illinois, and Wisconsin. An action was brought to recover this three hundred and twenty-five dollars from Norton by Blinn, and the defendant claimed that, as he had received the money, and used the same as the agent of the plaintiff in an illegal transaction, he was not bound to account for it. The question, then, for the court was, whether an agent who had trans- acted illegal business for his principal, and had received money belonging to his principal from such business, may defend himself in a court of law against liability to account therefor by showing such unlawful busi- ness, and his connection therewith as such agent. The court, in answering the question, said : " In the first place, the rule which denied civil remedies in such cases applies only to the parties to the illegal transaction. Public policy does not require that one engaged in an unlawful enterprise should, by pleading it, shield him- self from liability for the wages of his employees, agents, or servants. It is enough that the rule should be enforced as between those who have some interest in the enterprise as principals." While doubtless it is contrary to public policy to permit employees, agents, and servants to seize or retain the property of their principals, although employed in an illegal busi- ness, we submit that that part of the opinion quoted, to the effect that the principal would be liable for wages, was obiter dictum^ and would not, even in Ohio, BROKERS AND COMMISSION MERCHANTS. 321 "be sustained when that precise question comes up for determination.^ EULE IV. Wheee a commission meechant ageees with his pein- cipal that he will deal foe his accottnt, but that in no event is the pbincipal to accept oe make deliveet of the aeticles bought ok sold, and that only diffeeences will have to be accounted foe between them, this would be a wagek, and the commission meechaut cannot ee- covee losses paid, oe his commissions, even though, to peo- tect himself, he made eeal conteacts with othees. Contracts such as are described in this rule are sometimes made, though they are not common ; and it is to be observed that in reality the relation created by the contract between the parties, is not one of prin- cipal and agent, and so does not entitle the former to compensation and indemnity as an agent. The relation between them is really that of parties to a wager. The form of principal and agent which they assume, is fictitious ; and it is clear that a contract, creating the relation of principal and agent, may be made the cover of a wager, as well as the contract of purchase and sale between principals. English authorities.— In Cooper v. Niel,^ a case coming within the rule, was supposed by way of argu- ment, and reference is made to it in the opinion of Brett, L. J., in Thacker v. Hardy,^ as follows: "In Cooper V. Niel, another supposititious case was put ' See also Marshall v. Thurston, 3 Lea, 741; Justh v. Holliday, 11 Wash. R. 418. " 13 Weekly Notes, 128. ' 37 W. R. 158; s. c. L. R. 4 Q. B. D. 685. 322 CONTRACTS VOTS. FUTURE DELIVERY. before us, and I, at all events, and I think my learned brothers, dealt with it. It was suggested that the plaintiff, who was a broker, and the defendant, came to an express agreement that the broker should enter into transactions on the Stock Exchange, which might end in a gain or loss, but that, whatever happened to the broker on the Stock Exchange, he (the broker) would only obtain the differences from, or pay the dif- ference to, the defendant. So that an express agree- ment was suggested between the broker and the prin- cipal to this effect : I will go to the Stock Exchange and make bargains. I knovy^ they will be real bar- gains, for I can only make such bargains ; on them I shall be liable, though acting as your broker, for I am a prin- cipal with regard to the person with whom T deal, and I shall be obliged to pay in the end to him the real loss, or, on the other hand, entitled to receive from him the real gain, but this I will make the bargain with you, that whatever happens to me I will never make you (though in the end I may be obliged to take the shares) liable for more than the difference in price — that is, that my bargains with you shall be a gambling on the mere rise or fall in price, though I must, in order to do that, deal in the Stock Exchange in another way. I thought such a bargain as that might be within the gaming and wagering stat- ute." In the case of Byers v. Beattie,^ the plaintiffs were stock-brokers, and they agreed with the defendant that they would buy and sell such stocks and shares as the defendant should require, as and when the de- fendant should direct, and on the terras that in case ' 16 "Weekly Reporter, 379. BEOKBKS AND COMMISSION MERCHANTS. 323 the price for which the shares and stock should be sold, should be greater than those for which the same should have been bought, the plaintiffs should pay the defendant the difference between said price, less the plaintiffs' commissions and charges. The defendant agreed that in case the prices for which said stock and shares should be sold, should be less than the price for which the same should have been bought, that he, the defendant, would pay the plaintiffs the difference between the last mentioned price together with the plaintiffs' commissions and charges. In pursuance of said agreement, the plaintiffs bought and sold for the defendant, as he directed, certain shares and stocks which the plaintiffs sold at prices less than the prices for which they were purchased, and brought their action to recover the differences and their commissions. The defense was that the plaintiffs never made any payment for the defendant, and it was claimed that the agreement was a wager, and void by the Statute of Victoria. Fitzgerald, B., said : " I can see nothing but a wager. * * * Xhe sole consideration for the defendant's promise to pay the difference between the price of the sale, and the price of the purchase, in case the latter should be the greater, was the plaintiffs' promise to pay the difference, in case the former should be the greater. It seems to me that if we could imply (which I do not think we can) that the plaintiffs did, in effect, render themselves liable to the vendors or vendees, the result would be the same." American authorities.— In this country, the later Pennsylvania cases^ and the New Jersey case^ are strong authorities for this rule. ' Ante, p. 268 et seq. ' Ante, p. 274. 324 CONTRACTS FOK FUTURE DELIVERY. Rule V. WhEEE the EELATIOlf OF PRINCIPAL AND AGENT 18 CLEARLY SHOWN, AND THE LATTER GUARANTEES A MARKET TO THE FORMER, AND AGREES THAT HE WILL BO CONDUCT AND ARRANGE HIS principal's business THAT THE LATTER WILL NOT HAVE TO MAKE OR EEOEITE DELIVERY OF THE ARTICLES BOUGHT OR SOLD, THE AGENT CAN RECOVER HIS COMMISSIONS AND LOSSES PAID. There is no decision known to the author fully establishing this rule, yet it is believed to be correct. Let us suppose a commission merchant to be author- ized to buy grain for immediate delivery, and it is delivered. The fact that he has agreed to sell it, and guarantees a market, cannot make the transaction a wager. The fact that the purchase was for future delivery, cannot make any difference. There are cases justifying the rule. English authorities.— In the case of Thacker v. Hardy,^ Cotton, L. J,, in reference to the claim of counsel for defendant, that the facts had been wrong- fully found from the evidence, said : " Mr. Mackenzie said that the plaintiff's employment was not merely of the kind which exists on the findings of this case, but that the plaintiff and defendant agreed that the plain- tiff should enter into these transactions, and that, whatever happened in the result, the defendant would be only liable for the difference, and Mr. Mackenzie contended that if that was the bargain it would be within the gaming and wagering act, and null and void, and that therefore, as it is in respect of that bar- gain that the plaintiff claims, he could not recover in this action. Even assuming that in that bargain the ' 27 W. R. 158 ; s. c. L. R. 4 Q. B. D. 085. BEOKERS AND COMMISSION MERCHANTS. 325 plaintiff is not to be treated as acting as agent, but in a certain sense as a principal, still, what gaming or wagering is there in it ? The essence of gaming or wagering is that both parties stand to lose or win on the happening of some event at the time unknown to them — that is, that if the event is one way A. shall win, and if the other way that B. shall win ; but there is no such element as that here. There will be no such gain to the plaintiff; his gain will not depend on how the difference in price went. If he was to have a commission, he would make it either way. If the differences were in favor of the transaction he would not win, and if the differences were against the trans- action he would not lose. In my opinion, therefore, the whole element, and necessary element, of gaming and wagering is absent in any such contract as the present." The fact that a broker or commission mer- chant guarantees a market does not make him a prin- cipal, or the transactions gambling; because the con- trol of the principal, a fact so much relied upon by the court in Thacker v. Hardy^ still remains. The relation of principal and agent cannot exist, and at the same time the parties be principals to each other in a wager. In Ashton v. Dakin,^ the plaintiff was a stock- broker in London, and the defendant, a tea dealer in the same town. The former was employed by the latter to purchase stock for him for future delivery un- der the implied agreement and understanding that the plaintiff should not be required to deliver the stocks sold, or the defendant to pay for the same, but that they should be sold by the plaintiff before the • 37 W. R. 158; s. c. L. R. 4 Q. B. D. 685. ' 33 Law Times, 300. 326 CONTRACTS FOE FUTURE DELIVBRT. time for delivery arrived, and that on the resale, the defendant should only pay or receive the differences. The plaiatiflP bought and sold stocks upon the defend- ant's order, making the purchases and sales through members of the London Stock Exchange, upon vrhich there were losses paid by the plaintiff. The plaintiff was allowed to recover these losses and his commis- sions. The facts of this case do not bring it precisely within the rule ; but the agreement which the plaint- iff made was in substance the same as guaranteeing a market. The guaranty being not that in any event a market shall be found, but that there will -be one if the plaintiff wishes to sell. If the market should in either case absolutely fail, then the commission mer- chant would have to take the goods himself if the plaintiff required it. American authorities. — In Jackson v. Foote,^ the facts were that Foote had purchased oats for future delivery, as a speculation, dealing through a member of the Chicago Board of Trade, who took tliem in at the time for delivery, and afterwards sold them, and in making settlement with his agents had some diffi- culty with them. It was not stated in this case, but was in another ^ involving the same transactions, that the defendant's losses were quite large. The defend- ant availed himself of the services of Mr. Hooker of the firm of Messrs. S. G. Hooker & Co., also members of the board in settling the difficnlty. Mr. Hooker advised the defendant, if he wished to speculate or deal any more on the Board of Trade, that he had ' 13 Fed. Kep. 37. " Tenney v. Foote, 4 Bradw. 594. BKOKEES AND COMMISSION MERCHANTS. 327 better do it with his, Hooker's, firm. The defendant assented to this, provided he would only trade or deal in diflferences between the selling and buying, or buying or selling prices, of the commodities dealt in. In pursuance of this agreement the defendant, from time to time, gave orders to Hooker & Co. to buy or sell grain, pork, and lard, on the Board of Trade. These orders were executed by Hooker & Co. by making the ordinary option trades where the seller had the option of delivering the goods sold within cer- tain months. These dealings continued for some time, Hooker & Co. buying and selling as directed by the plaintiff, and settling the differences, paying the money when the market was against the defendant, and re- ceiving it when the market was in his favor. They charged the defendant whatever sums were paid in settling differences when they were against him, and gave him credit when they had received differences in his favor. In two or three transactions the firm seemed to have taken in, and paid for grain, and pro- visions bought for the defendant, and then sold them, charging the defendant with interest, storage, etc., incident to such transactions. At the time the deal- ings for the defendant were closed he stood debited to the firm in the sum of twenty-two thousand dollars. In payment of this the defendant transferred and de- livered to Hooker & Co. four notes of five thousand dollars each, held by him against the Crouch estate, the payment of which notes he guaranteed. Hooker & Co. deposited two of these notes with the Third National Bank of Chicago as collateral security for a loan made the firm by the bank. The action was brought by the receiver of the bank on this guaranty, 328 CONTRACTS POE FUTURE DEIJVBKY. and the defense was that the transactions between the defendant and Hooker & Co. were gamWing and illegal under the Illinois Statute against options. The court, after remarking that he was satisfied that Hooker & Co., were not employed to deal in the kind of options prohibited by the Illinois statute, but in "time contracts," in which the seller had the option to deliver within certain limited time, said that Mr, Hooker " seemed to have explained to the defendant, how by reason of his many customers, some of whom were sellers and others buyers on the market, he could so manage the defendant's deals that he need not take any commodity bought, but could settle simply the difference between the purchase price and the market price. * * * He intended, without doubt, that his broker would so manage his trades that differences would be paid or collected instead of his taking or holding the article dealt in, or having his brokers do it for him and at his expense." The decision did not turn, how- ever, on this question. The plaintiff was held entitled to recover on the ground that the bank was a bona fide owner of the notes, and at most the transactions between the defendant and Hooker &, Co. were merely void, but the court said : " It is extremely doubtful in my mind, even if suit had been brought by Hooker & Co. against the defendant, he could, by the showing now made upon this trial, have successfully defended against this claim." If this case had turned upon the rights of Hooker & Co., it is evident that the court would have fully sustained the rule we are now con- sidering, inasmuch as the original agreement was that thei defendant should only deal in differences, and at the same time it is clear that Hooker . Hook, 4 N. Y.491 ; Seneca' Co. Bank v. Lamb, 26 Barb. 295 ; Sampson v. Shaw, 101 Mass. 145. ' Ante, p. 14. » 7 Biss. 540. ' 8 Biss. 314. ' 11 Wheaton, 358. 6 2 Woods C. C. 554. ' 15 C. B. (N. 8.) 316. BROKERS AND COMMISSION MERCHANTS. 331 land, where wagers were simply void, Earle, C. J., said : *' I am of opinion that our judgment upon this demurrer must be for the plaintiff. He sues the defendant for money which he alleges he paid for the defendant at his request. * * * I am clearly of opinion, that, if a man loses a wager, and gets another to pay the money for him, an action lies for the recovery of the mouey so paid. In Jessopp v. Lutwyche,^ and Knight V. Cambers,* the Court of Exchequer and this court both say that the plaintiff was entitled to judgment on the ground that the money was alleged to have been paid at the request of the defendant. * * * I should incline to think, that, if one requests another to make a wagering contract on his account, and pay the loss, if loss happens, that would be a continuing request to pay until revoked, * * * It is sufficient to say that there is nothing upon the face of this plea to exclude the notion of a subsequent request to pay. * * * Whether the request to pay was after the loss was ascertained, it must have the same obligatory force." In the case of Jessopp v. Lutwyche,^ Parke, B., in the course of the argument, said : "The plea does not negative the fact of a third party having won the money, and that the defendant requested the plaintiff to pay the amount over to him. The plea therefore is not inconsistent with the state of facts which entitle the plaintiff to recover." And in giving judgment he said : " It is consistent with the plea that the defend- ant requested the plaintiff to pay over the money for ' 10 Exch. R. 614. M5 C. B. 563. 332 COKTEACTS FOB FUTURE DEMVEBY. him to a third party, and that in fact it was so paid ; in which case the defendant has no defense." Knight V. Cambers ^ was substantially the same as Jessopp V. Lutwyche. There it was held that it was no answer to an action for money paid by the plaintiff for the defendant's use at his request, that the money was paid in respect to losses on wagering contracts made void by the Statute of Victoria,* and Maule, J., said : "Assuming the original contracts to have been void, there is nothing to prevent the plaintiff from re- covering money afterwards paid by him at the de- fendant's request." In Read v. Anderson," it was decided that if a person employ another to make bets in the other's name, an implied authority to pay, if the bets are lost, is coupled with the employment ; and the mo- ment the bet is made the authority to pay it, if lost, becomes irrevocable. In Rosewarne v. Billing,* the same thing is suggested. In Oldham v, Ramsden,* an action was brought to recover money paid for bets, where it appeared that the plaintiff, a betting agent, made bets on horse races at the request of the defendant. The bets were lost and paid by the plaintiff. It was held that he could recover. In Mo parte Pyte, in re Lyster,* it was held that money lent to enable the borrower to pay a bet which he had already lost, could be proved against the borrower in bankruptcy proceeding. In Bubb v. Yelverton,^ it appeared that a testator had requested " 15 C. B. 562. " Ante, p. 13. » 33 Weekly Reporter, 950. * 15 C. B. (N. S.) 316. - 44 L. J. C. P. 309. e L. R. 8 Ch. D. 754. ' 24 Law Times, 822. BROKERS AND COMMISSION MERCHANTS. 333 a friend to bet for him on certain horse races, and the friend had paid the amount lost by the bets. It was held that the request to bet implied an authority to pay the bets if lost, and that the friend was entitled to prove his claim against the testator's estate for the amounts paid by him in respect to the bets. And in Thacker v. Hardy,^ it was said that money paid in discharge of a bet is a good consideration for a bill of exchange. American authorities— Federal decisions. — In Leh- mann v. Strassberger,^ the court said : " This is the case, to put it in its strongest light for the defendant, of an agent who advances money to his principal to pay losses incurred in an illegal transaction, and takes his note for the money so advanced. In such a case, the contract between the principal and agent, made after the illegal transactions are closed, although it may spring from them and be the result of them, is a bind- ing contract." In Warren v. Hewitt,^ the court stated the law to be that where one, acting as an agent in making wager- ing contracts, made advances, he may recover the same where the contracts are executed and the principal ratified them. In the case of Armstrong v. Toler,* it was held that where a contract grows immediately out of, and is con- nected with, an illegal or immoral act, a court of justice will not lend its aid to enforce it. So if a contract be in part only connected with the illegal contract and 1 27 W. R. 158 ; s. c. L. R. 4 Q, B. D. 685. ' 3 Woods C. 0. 554. ' 45 Geo. 501. ' 11 Wheat. 258. 334 OONTRxVCTS FOR FUTURE DELIVERY. growing immediately out of it, though it be in fact a new contract, it is equally tainted by it ; but if the promise be entirely disconnected from the illegal act, and is founded in a new consideration, it is not affected by the act, although it was known to the party to whom the promise was made, and although he was the contriver and conductor of the illegal act. In Clarke v. Foss,^ the court said : " If the original contracts for the sale of grain were liable to the-taint of illegality as charged, it does not necessarily follow that the notes and the mortgages executed by one of the principals in the transactions, to secure the pay- ment of money previously advanced by their agent to pay losses springing out of, and resulting from those original transactions, are tainted with the same vice." And in Gilbert v. Ganger,* it was said : " While it may be well, as a matter of public policy, to prevent parties from gambling hj refusing to enforce gambling contracts between them, yet it is at least doubtful whether they should be allowed to gamble at the ex- pense of others, and not pay those whom they employ to do the work, and advance money for them." In the case of In re Green,^ where a claim was made against a bankrupt estate for money paid out by a broker in gambling wheat transactions, as it was claimed, the court said : " If the bankrupt had requested the party to pay the differences for him after the loss, and such party had not been an actor, nor aided or assisted in the unlawful dealings out of which the loss grew> there would be some reason in allowing him to re- ' 7 Biss. 540. = 8 Biss. 214. » 7 Biss. 338. BROKERS AND CO]\tMISSION MERCHANTS. 335 cover. He would be an innocent party. In such case the consideration would not, as to him, be illegal." American authorities— State decisions. — In Duranfe V. Burt/ an action was brought by a broker against his principal for money paid at the principal's request. The. evidence showed that the plaintiff received an order from the defendant to buy stock on time for the defendant, and that the plaintiff bargained with third parties for the stock so as to render himself personally liable for the price thereof, and then gave notice of the purchase and price to the defendant, who signified his assent thereto, and afterwards, before the end of the time limited in the contract for delivery, in reply to- the plaintiff's requests for the advance of money due himself as a margin for security against loss by a de. preciation of the market price of the stock, the defend- ant said it would be all right. This was held sufficient to warrant a finding that the defendant knew the plaintiff had rendered himself liable for the contract price, and ratified the arrangement. At the end of the time limited in the contract, the plaintiff took and paid for the shares, the principal having failed to do so, and then, after informing the principal, and vainly requesting him to take the shares and pay for them he sold them, the defendant at no time repudiating his agency or objecting to his proceedings. It was ob- jected that it did not appear that the party, of whom the shares were bought, was at the time of such bar- gain the owner or assignee of the shares, or author- ized by the owner or assignee or his agent to sell or ' 98 Mass. 161. 336 CONTRACTS FOR FUTURE DELIVERY. transfer the same. By the Massachusetts statute against short sales it is provided that a party selling shares must own them or be authorized to sell them by some one else who has them. But the court said that " this doctrine had no application to a case like the present one, in which the agent had paid money for his principal at his request and seeks reimburse- ment." In the case of Wyman ■y. Fiske/ where the mutual accounts of the parties were adjusted by an auditor, it appeared in reference to one of the items that the plaintiff, through a broker, sold stock contrary to the statute of Massachusetts against short sales, and made a loss. The defendant paid the same and took the plaintiff's note therefor. It was admitted the transac- tions of the plaintiff through his broker were illegal, but having made the loss and chosen to reimburse his broker, it was held he had a perfect right to do so, and if he procured another person to pay the loss, and gave his note in consideration thereof, that the note was valid and properly allowed by the auditor. Where the payment is itself made unlawful by a statute, the money paid or loaned for the purpose of payment cannot be recovered. An instance of this is to be found in Sir John Barnard's Act,* where the pay- ment and compounding of differences in stock jobbing transactions is prohibited under severe penalties.^ ' 85 Mass. 234. ^ Ante^ p. 14. ' The cases cited under rule II are authorities also for this rule. BROKERS AJSD COMMISSION MERCHANTS. 337 Rule VII. Monet advai^cei>, loaked, oe paid foe the expeess purpose of being applied to an illegal object, cannot be eecovered. English authorities — In Petrie v. Hannay/ the court said: "If one of two partners advance money in a smuggling transaction, he cannot recover his propor- tion of it against his partner, because the transaction is prohibited. In the case of Aubert v. Maze,^ the parties were engaged in illegal insurance business, and an arbitra- tor found " that the plaintiff is indebted to the defend- ant in the sum of £680, 2s., being a moiety of divers sums of money paid by the defendant for and on account of losses on policies of insurance, underwritten by agreement between the said plaintiff and the de- fendant at their joint risk and for their joint benefit." On a rule nisi to set aside this award, it was held that this item could not be allowed in favor of the defend- ant, on the ground that the money was paid in further- ance of an illegal purpose. In Cannan v. Bryce,* it was decided that money lent and applied by the borrower for the express pur- pose of settling losses on illegal stock jobbing transac- tions, to which the lender was no party, cannot be recovered by bim. Amos, one of the partners, on his personal account, had made losses in stock jobbing transactions, and the defendant loaned him the money for the purpose of paying them. The two partners ' 3 Term R 418. » 3 B. & P. 371. » 3 B. & A. 179. 338 CONTRACTS FOR FUTURE DELIVERY. joined in a bond to repay this money loaned. After- wards cargoes of goods were assigned to the defendant to be applied by him on the bond, and were so applied. Afterwards the defendants committed acts of bank- ruptcy, and an action was brought by their assignee to recover the proceeds of the cargoes. By the statute against stock jobbing the payment of differences for not transferring public stock was prohibited under a penalty. The court decided that the plaintiff must recover, and said : " It will be recollected that I am speaking of a case wherein the means were furnished with a full knowledge of the object to which they were to be applied, and for the express purpose of ac- complishing that object." In Steers v. Lashley,^ the defendant had engaged in unlawful stock jobbing transactions through a broker who had paid the losses. A dispute as to the account having arisen between the defendant and the broker, the matter was referred to the plaintiff and two others who awarded the broker £306, 12s. 6d. For a part of this the broker drew his bill of exchange on the defendant, and it was endorsed over to the plaintiff. It was held that, as the money had been paid to settle differences in stock jobbing operations, and as the plaintiff knew this he could not recover.*^ American authorities. — Where money was volunta- rily paid on account of an unlawful business, it cannot be recovered. In Wyman v. Fiske,^ the mutual accounts of ' 6 Term R. 61. ' Sed vide Farmer v. Russell, 1 B. & P. 396. = 85 Mass. 334. BROKERS AND COMMISSION MERCHANTS. 339. the parties were investigated by an auditor. It appeared that in one transaction a note was given by the plaintiff, and it was claimed by the plaintiff that it was for the balance of short sales of stock con- trary to the Massachusetts statute which, made such sales unlawful, and that the plaintiff had directed the defendant to apply on account of said note, money that he, the defendant, had in his hands, and that this note could not be allowed in favor of the defendant, and that the plaintiff should be credited with the sums which he had directed applied to this note, but the court said : " Money thus paid cannot be recovered back, either at common law or by the provisions of the statute, and that the appropriation of the money by the defendant's consent was equivalent to a volun- tary payment." In Ruckman v. Bryan,-' and in Peck v. Borgie,^ it was decided that money knowingly lent to be staked upon the event of a horse race cannot be recovered. And in White v. Buss,* it was held that money loaned for the purpose of gaming at cards could not be re- covered in an action at law.* Mere knowledge that money was borrowed to be used for an illegal purpose will not defeat a right of recovery.® ' 3 Denio, 340. ' 3 Denio, 107. ' 57 Mass. 448. * The cases cited under Rule III are authorities also for this rule. ° Marshall v. Thurston, 3 Lea, 741. 340 OONXEAOTS FOR FUTUEB DELIVERY. Ktjle VIII. If an agent m the peoseoittion of an illegal enteepeise EECEIVES MONET OE OTHEE PEOPEETY BELONGING TO HIS PEIN- CIPAL, HE IS BOUND TO ACCOITNT AND TUEN IT OVEE TO THE PEIN- CIPAL, and cannot SHIELD HIMSELF FEOM LIABILITY THEEEFOE ON THE GEOUND OF THE ILLEGALITY OF THE BUSINESS IN WHICH HE IS EMPLOYED. English authorities.— A leading authority for this rule is Tenant v. Elliott,^ where the defendant, a broker, effected an illegal insurance for the plaintiff on a ship, and after the loss the underwriters paid the amount of insurance to the defendant, who refused to pay the same to the plaintiff on the ground that the insurance contract was illegal. Judgment was given for the plaintiff, and Buller, J., said : " Is the man who paid over the money to another's use to dispute the legality of the original consideration ? Having once waived the illegality, the money shall never come back into his hands again. Can the defendant then in con- science keep the money so paid ? For what purpose should he retain it ? To whom is he to pay it over to ? "Who is entitled to it but the plaintiff? " In the case of Farmer v. Russell,^ the defendant was a common carrier, and agreed to carry and deliver to a third party goods not to be delivered till paid for, and the carrier was to receive two cents on the pound on the goods carried as a commission. The goods were coun- terfeit half pence, and designed for circulation. The defendant collected the money and accounted to the plaintiff for all excepting £13, the subject of this suit, and claimed that he was not bound to account for it on the ground that the sale of the counterfeit money ' 1 B. & P. 3. " 1 B. & p. 295. BROKERS AND COMMISSION MERCHANTS. 341 was unlawful. The verdict was given for the defend- ant. There was some evidence to show that the de- fendant knew the character of the goods which he transported. On appeal, Buller, J., said : " I think the knowledge and participation of the defendant is not made out by the evidence reported, nor indeed if it had been would it have made any difference in the case of an action for money had and received, which is not founded on an illegal contract, but on a ground totally distinct from it." The judgment was reversed. Beeston v. Beeston ^ was an action on a check, and the defendant pleaded that he had delivered the check to the plaintiff in respect of money alleged to be due from the defendant to the plaintiff upon a contract made between them by way of wagering, wherein it was agreed that the plaintiff should pay to the de- fendant certain money, and that the defendant should employ it and certain money of his own in making bets and wagers upon the result of certain horse races, and should pay to the plaintiff a certain proportion of the winnings. It was held that the plaintiff was entitled to recover. Cleasby, B., after remarking that the Statute of Victoria ^ made contracts of bets only void, said : " Now the cause of action here, whether on the check or on the account stated, is that the de- fendant had received money for which he ought to account, because he has agreed to do so. "Why is he not bound to account ? It is said that the statute prohibits such an agreement as the present, but all that it professes to deal with are contracts for wager- ing. I think, therefore, that this is not an attempt to recover under a contract by way of wagering, and that the plaintiff is not precluded from recovering." ' L. K. 1 Exch. D. 13. " Ante, page 13, 342 CONTRACTS FOB FUTURE DELIVERY. American authorities.— Norton^. Blinn ^ is a leading authority for this rule. In that case the plaintiff employed the defendant to invest five hundred dollars in unlawful wheat options, and the defendant did so, making a profit of three hundred and twenty-five dol- lars. Upon an action for this money it was held that he could recover, and the court said: " It is contrary to public policy and good morals to permit employees, agents, or servants to seize or retain the property of their principals, although it may be employed in illegal business and under their control. No consideration of public policy can justify a lowering of the standard of moral honesty required of persons in those relations. In Brooks v. Martin, 2 Wall. TO, it was held by the Supreme Court of the United States ' that after a part- nership contract confessedly against public policy has been carried out, and money contributed by one of the partners was passed into other forms — the results of the contemplated operations completed, a partner in whose hands the profits are cannot refuse to account for and divide them on the ground of the illegal character of the original contract.' In Baldwin v. Potter, 40 Ver- mont, 402, it was held : ' That an agent is bound to account to his principal for money received in the course of his agency for goods sold by his principal on orders obtained by him as such agent on commission, although such sales as between the principal and pur- chaser be illegal and void.' In Evans v. Trenton, 3 Zab. 764, it was held 'the mere agent of a party to an illegal transaction cannot set up the illegality of the transaction in a suit by his principal to recover money that has been paid to such agent for his principal on ' 39 Ohio, 145. BEOKERS AND COMMISSION MERCHANTS. 343 account of the illegal transaction. This defense can be set up only by a party to the illegal transaction.' In this case the illegal transaction was accomplished through the agent. See also Wood on Masters and Servants, section 202, where it is held : ' While the courts will not enforce an illegal contract, yet, if a servant or agent of another has, in the prosecution of an illegal enterprise for his master, received money or other property belonging to the master, he is bound to turn it over to him, and cannot shield himself from liability therefor upon the ground of the illegality of the original transaction.' " In Woodworth v. Bennett,^ the court says : " It has been settled that a party who pays money to a third person for the use of another, which, on account of the illegality of the transaction he was not obliged to pay, such third person cannot interpose the defense of illegality. This principle is based upon the un- doubted right of a person to waive the illegality and pay the money ; and when once paid, either to a third party directly or to a third person for his use, it cannot be recalled ; and that the third person, who was in no way connected with the original transaction, cannot avail himself of a defense which his principal saw fit to waive." In Warren v. Hewitt,^ the court says, in considering whether the plaintiff could recover for money paid in settlement of contracts void in law, that " had a profit been made on the transaction, it is clear that Hewitt would have been compelled to pay it over to him." ' 43 N. T. 273. " 45 Geo. 501. INDEX. ACCEPTANCES— given on account of wagering transactions, actions on, cannot be sustained, 61. ACCOUNT STATED— action on, in -wagering transaction, cannot be sustained, 60. ACT OF CONGRESS— in reference to sales of coin and bullion for future delivery, 17. ACTION - cannot be sustained to recover money back paid out at the beginning of wagering transactions, 60. on notes or bonds given as security or margins at the begin- ning of wagering transactions, cannot be sustained, 60. after wagering transactions are closed amount due either par- ty cannot be recovered in an, 60. on account stated in wagering transactions cannot be sus- tained, 60. on notes given in the beginning or settlement of wagering transactions cannot be sustained, 61. on due bills in settlement of wagering transactions cannot be sustained, 61. on acceptances given on account of wagering transactions can- not be sustained, 61 . ©n guarantees of third parties' notes.made on account of wag- ering transactions cannot be sustained, 61. on mortgages given in wagering transactions cannot be main- tained, 61. upon bonds given on account of wagering transactions cannot be maintained, 61. commission merchant may maintain, for commissions and in- demnity, 232. founded on breach of law cannot be maintained, 301. ACTS AND OMISSIONS— of the parties after the contracts are made admissible in evi- dence to show intention to wager, 220. 23 346 INDEX. AGENT— of incorporated produce exchanges, chambers of commerce, and boards of trade not liable under Ohio statute, 23. entitled to indemnity and compensation, 231. receiving money of his principal in an unlawful business must account for and pay it over, 340. receiving money from his principal in an illegal business must account, 296, 340. contracts made by, in the form of purchases and sales, but in fact unlawful wagers, cannot recover for disbursements, commissions or losses paid, 299. engaged in the furtherance of illegal objects cannot recover on notes given for services, 311. making wagering transactions and paying losses, if ratified, may recover the losses from his principal, 333. cannot seize or retain property of his principal, though en- gaged in an unlawful business, 342. AUTHORITY— to pay bet, if lost, irrevocable where authority is given to bet in the name of another, 332. ARBITRATION— controversies between members of exchanges usually settled by, 231. BANK— clearing-house in New York described, 162. clearing-house in London described, 164. BARNARD— Sir John. See Sib John Baenard. BET— a wager is a, 9. distinguished from commercial wager, 31. in the form of a contract, 57. person authorized to make, in his own name for another, au- thority to pay losses is irrevocable, 332. promise to pay, after loss, action can be sustained on, 332. money loaned to pay, can be recovered, 333. BILL OF EXCHANGE— money loaned to pay bet, good consideration for, 332. BOARD OF TRADE— Ohio statute not applicable to, 23. INDEX. 347 BOND— action on, given as security or margin at the beginning of wagering transactions, cannot be sustained, 60. secured by mortgage given as security or margin in the be- ginning of wagering transactions cannot be foreclosed, and may be set aside, 60. given on account of wagering transactions cannot be enforced, 61. judgment on, founded on a wagering transaction, set aside, 61. BREACH OF LAW— action to enforce contract founded on, cannot be maintained, 301. BROKER— wagers considered in reference to, 231. entitled to his commissions and indemnity, 233. distinction between, and commission merchant, 232. not intrusted with the possession or control of goods, and has no interest in them, 232. only office is to find parties to deal with his principal, 233. does not deal in his own name, 233. making wagering transactions which are simply void may re- cover commissions, losses paid, and disbursements, 297. on contracts in form of purchases or sales, but in fact, unlaw- ful wagers, cannot recover disbursements, commissions, or losses paid, 299. bringing parties together for an illegal purpose particeps criminis, 305. BUCKET SHOP— business defined, 33, 35. transactions in the form of purchases and sales, 57. what are called commissions charged in, 57. the relation of principal and agent assumed in business of, 57. business of, true character shown, 57. margins required on transactions in, 114. transactions settled in, by contra transactions, 221. what are called contra transactions are made in, 221. BULLION— act of Congress in reference to sales of, for future delivery, 17, J8. 348 INDEX. BURDEN OF PROOF— upon the party pleading wager, 46. upon the party alleging violation of New York stock jobbing act, 46. that contracts for future delivery are made in good faith is upon the party claiming under them — Wisconsin rule, 47. under Massachusetts statute against short sales to show that the vendor did not own the stock which he sold, is upon the party alleging it, 48. BUYER'S OPTION— defined, 26. BY-LAWS— See Rules of Exchanges. CALIFORNIA— wagers in, valid at common law, 12. CALL— English statute against, Sir John Barnard's act, 14. contract for stock, form of, 27. defined, 27. contract in petroleum sustained, 85. not gambling on its face, 85. contract for oil, form of, 86. may be for a legitimate business purpose, 87. always an element of speculation and uncertainty in, 91. not necessarily a bet or wager, 91. is an ordinary business contract, 91. sustained, 92. CHAMBER OF COMMERCE— Ohio statute not applicable to, 23. of Milwaukee, rules of providing for payment of differences upon breach of contract, valid, 177. CHANDLER'S CASE, 36, 191. CHICAGO BOARD OF TRADE— provisions of by-laws of, in reference to margins, 106. option deals on, same as universally upheld as valid in En- gland, 207. CIRCUMSTANCES— intention determined from, 52. See Facts and Cieoumstancbs ; Suspicious Circum- stances. IKDEX. 349 CLEARING-HOUSE— a ring is a small, 148. conducted on the same principle as rings, 148. wagers and bets would not be adjusted through, 148. object of, is to close out transactions and get them off the books, 149. in the consolidated stock and petroleum exchange of New York described, 161. of New York banks described, 1 62. of exchanges work in the same manner as bank clearing- house, 164. bank, in England, 164. railroad, in Ireland, 1 64. deals in differences only, 164. settlement through, a demonstration that transactions were bona fide, 165. referred to, 167. New York petroleum laws require settlements through, 166. in settlements through, symbolical delivery takes place, 167. system of settlements by, criticised in Dickson v. Thomas, 167. rules of some exchanges require contracts to be settled through, 219. settlements through, show parties were not wagering, 219. settlements through, in cases where held to indicate intention to wager, not fully understood, 220. bucket shop transactions not settled through, 220. delivery through, evidence of good faith, 223. CLOSING OUT— sometimes called a cover, 189. COKE— Lord Coke's dictum that contracts are presumed to be valid, 45. COLLATERAL FACTS AND CIRCUMSTANCES— confusion in regard to decisions relating to, 200. COMMERCIAL WAGER— distinguished from ordinary bets, 31. may assume other forms than sales, 31, COMMISSIONS— what are called, charged in bucket shops^ 57. broker and commission merchant entitled to, 232. 350 INDEX. COMMISSIONS— continued. made by brokers or commission merchant in contracts which are simply void may be recovered, 277. where agent guarantees a market he can recover, 324. COMMISSION MERCHANT— party dealing with, looks to no one else as to the i-esponsibil- ity, 147. between members of the same exchange question of wager seldom arises, and when it does, usually settled by arbitra- tion, 231. wagers considered in reference to, 231. entitled to his commissions and indemnity, 232. modern name for common law factor, 232. distinction between, and factor, 232. an agent to whom goods are consigned for sale, or who is authorized to purchase goods, 232. is intrusted with possession, management, control, and disposition of goods bought and sold, 232. conducts business usually in his own name, 232. may escape personal liability, how, 232. is an agent, 232. bound to obey instructions and to account to his princi- pal, 233. in making wagering contracts which are simply void may recover commissions, losses paid, and disbursements, 277. making contracts in the form of purchases and sales, but in fact unlawful wagers, cannot recover disbursements, com- missions, or losses paid, 299. agreement that differences only shall be paid between, and his principal, is a wager, 321. See Factor. COMMON LAW- wagers valid at, 10-12. COMPENSATION— agents entitled to, 231. COMPLAINT— based on option contract would be sustained on demur- rer, 206. demurrer to, in action to recover money paid on account of option contract would be overruled, 206. COMPOUNDING DIFFERENCES— English statute against — Sir John Barnard's Act, 14. unlawful by Sir John Barnard's Act, 300. INDEX. 351 COMPROMISE— of amount due on unlawful transaction does not make, a valid claim, 58. OONGRESS— act of, in reference to short sales of coin and bullion for future delivery, 17. CONSIDERATION— of a wager is the mutual promise of each party to pay in case of loss, 9. inadequacy of, indicating want of good faith, 39. negotiable instruments founded on illegal, void in the hands of all parties, 61. if illegal in part, whole contract is void, 62. inadequacy of, considered as indicating an intention to wager, 191. where part of, is invalid, whole contract is tainted, 311. money loaned to pay a bet good, for bill of exchange, 332. CONSOLIDATED STOCK AND PETROLEUM EXCHANGE OF NEW YORK— clearing-house in, described, 161. laws of, forbid fictitious sales, 165. CONSTRUCTION— one preferred which will support a contract, 45. courts will not deprive a contract of all force by, 45. CONTEMPORANEOUS AGREEMENT— unless there is, that a contract is a mere cover, idle to talk about gambling intent, 79. CONTRA BONOS MORES. See Public Policy. CONTRA TRANSACTION, 173-183. is best proof that the first transaction was bona fide, 181. spoken of as a cover, 182. that, was made by a commission merchant for his principal a demonstration of good faith, 182. between principals, evidence of intention to wager, 182. sometimes called a cover, 189. made by an agent for his principal, proof of real purchase and sale, 221. what is called a, made in bucket shops, 221 . between principals shows intention to wager, 221. CONTRACT— for future delivery, 9. 352 INDEX. CONTRACT— continued. sale where there is a concurrent agreement that no delivery- is to be made, destroys its character as a sale altogether and makes it a wager, 30. of sale which each party intended to break is a wager, 32. in the nature of wagers, statutes against, 14. presumed to be valid, 45. made by either party in good faith, valid, 51. secret intention by one party to wager, will not invalidate, 51. partly illegal, is wholly void, 62. can a written, be shown to be wager by parol evidence 1 62. not obnoxious because speculative, 78. parties may, for future delivery, 98. subsequent settlement of, does not make it void, 170. valid in inception not affected by subsequent settlement, 171. for future delivery presumptively valid, 174. cannot be enforced when growing immediately out of or connected with an illegal or immoral act, 333. CONTRACTS CLOSED THE SAME DAY— considered as indicating intention to wager, 183. CONTRACTS FOR FUTURE DELIVERY— options defined, 26. futures defined, 26. pure options defined, 27. calls defined, 27. puts defined, 27. straddles or spread eagles defined, 27. not a contract of sale, but a contract to sell, 30. no right or title follows from the contract, the right is purely in the fulfillment of an executory contract, 30. coupled with the express agreement that the commodities sold shall not be delivered or paid for, but shall be settled by the payment of differences in price, not a contract of sale at all, 42, 44. where it is contemplated by the parties to, that payment of the difference in the market price shall be made, is a wager, 42. if void at all must be void when made, 43. agreement may be implied from the understanding and inten- tion of the parties that, is to be settled by payment of differences, 44, INDEX. 353 CONTRACTS FOR FUTURE DELIVERY— co»i!mMerf. ill Wisconsin burden of proof that, are made in good faith is upon the party claiming under them, 47. duty of courts to scrutinize very closely, 47. written, can they be shown to be wagers by parol evi- dence ? 62. where the seller does not have the articles sold, are not prohibited by law, 76. courts will compel parties to abide by, 77. margins not necessary connection with, 107. presumptively valid, 174. may be shown to be wagers by extrinsic evidence, 174. CORNER— Illinois statute against, 21. Chandler's case, 36. attempted, 36. made possible by option deals, 206. agreement to make, illegal, 319. CORPORATION— New York Cotton Exchange a, created and recognized by law, 176. CORRESPONDENCE— of parties admissible to show intention to wagers, 195, 223. COTTON EXCHANGE OF NEW YORK— provide that all contracts for future delivery shall be binding until performed, 1 65. compels members to ring out their contracts, 147, 166. actual delivery provided for by the rules of, 242. provision in regard to delivery, 256. form of agreement used in contracts for future delivery on, fair and reasonable, 259. COTTON FUTURES— See Futures. COVER— for wagers in the form of sale, no difficulty where agreement is expressed, 43. that contract of sale may be a, for a wager may be implied from extrinsic circumstances, 43. contract in the form of a sale; where there is a concurrent 354 INDEX. COVER — con tinned. agreement that no delivery is to be made is a, for a wa- ger, 30. that contract of sale is designed as a, need not be by express agreement, 43. the relation of principal and agent assumed as a, by parties in bucket shop business, 57. relation of principal and agent assumed as a, in Pennsylvania cases, 59. relation of principal and agent assumed as a, in Flagg v. Baldwin, 59. contra transaction spoken of as a, 182. relation between principal and agent may be a, for gambling intent, 183. considered as indicating intention to wager, 183. contra transaction sometimes called a, 189. sometimes called a " closing out," 189. CRIMINAL ACTS— wagering contracts by margins and futures or offering to make same by principal or agent declared to be, by Ohio stat- ute, 22. CUSTOM. See Usages. DAMAGES— difference between the contract and market price provided as, upon breach of contract by the rules of the chamber of commerce of Milwaukee, 177. DEFENSE— of wager must be affirm.atively pleaded, 46. that pure option contract is a wager is a matter of, 89. of wager frequently made in actions between commission merchants and outside parties, 231. DEFINITIONS— bucket shop, 33-35. buyer's option, 26. call, 27. future, 26. intention, 224. option, 26. put, 27. pure option, 27. INDEX. 355 DEFI NATIONS— continued. of public policy, courts have never given, 194. ring, 144. seller's option, 26. spread eagle, 27. straddle, 27. ticker, 33. time bargain, 40, 41. transfer, 255. wager, 9, 55. DELAWARE— wagers in, valid at common law, 12. DELIVERY— in option contracts always contemplated by the rules of the several exchanges, 26. that there is to be no, in a wager in the form of a sale, is a result rather than an element, 29. whether there is to be, not true test for wager, 30. agreement that there should be no, destroys the character of a sale and makes it a wager, 30. where a contract of sale is fictitious and formal only -no, understood, 43. agreement or understanding that there is to be no, may be implied, 44. agreement for future, valid, 96. a ring is a plan to make quick and inexpensive, 146. rings are formed to facilitate present, 148. when insisted upon by one in a ring, ring is burst, 150. symbolical, equivalent to actual manual delivery, 223. symbolical, proves contracts to have been rnade bonajide and not as wagers, 223. rules of the New York Cotton Exchange provides for actual, 242. provisions as to, by rules of New York Cotton Exchange, 256. in New York Cotton Exchange by delivery orders described, 257. DEMURRER— to complaint founded on option /jontract should be over- ruled, 206. to complaint in States where options are made void or illegal by statute would be sustained, 206. 356 INDEX. DICTUM— Lord Coke's, that contracts are presumed to be valid, 45. DIFFERENCES— statute against compounding. Sir John Barnard's act, 14, 15. agreement for the payment of, one essential of a wager in the form of a sale, 29. where each party agrees to hreak contract and pay, is wager- ing, 32. agreement to pay, gambling, 56. settlement by payment of, gambling, 56. dealing in, under the form of purchasers and sales, is gam- bling, 60. payment of, between stock-broker 'and principal valid, 80, clearing-houses deal in, 164. waiver of performance and settlement by payment of, valid, 173. agreement to settle by payment of, makes contract of sale a wager, 174. provision in contract that damages shall be, in price not in- valid, 176. rules and regulations of the chamber of commerce of Mil- waukee providing for payment of, on breach of contract, legal, 177. settlement of any given contract by payment of, not proof of intention to wager, 220. payment of, unlawful by Sir John Barnard's act, 299. compounding of, unlawful by Sir John Barnard's act, 300. DIRECT settlement- Is a small ring, 144. illustration of, 144. advantages of, 145. DISBURSEMENTS— made by broker or commission merchant in wagering trans- actions which are simply void, may be recovered, 277. made by broker, commission merchant, or other agent in making wagers which are unlawful cannot be recovered, 299. DUE BILL— given in settlement of unlawful wagering transactions, actions on cannot be sustained, 61. ELEMENTS— of a wager in the form of a sale, 29. INDEX. 357 EMPLOYEES— of incorporated produce exchanges, chambers of commerce, and boards of trade not liable under Ohio Statute, 23, cannot seize or retain property of their principals, although engaged in unlawful business, 342. ENGLAND— railroad clearing-houses in, 164. Eule II of Chapter V applies to contracts made in, 277. option contracts on Chicago Board of Trade same as held valid in, 207. ESSENTIAL ELEMENTS— of a wager in the form of a sale, 29. EVIDENCE— can a written contract of sale for future delivery be shown to be a wager by parol, 62. of what parties did, evidence of what they intended, 170. of habit of settling by payment of differences evidence of in- tention to wager, 175. of a large number of contracts being settled, no -tendency to prove any given contract was to be settled, 176. of intention to wager, 200. different conclusions reached by different judges upon the same, 201. weight of, not for the court, 201. whole case to go to the jury upon the, 201. of any suspicious circumstances appearing, the whole case to go to the jury, 201. on intention to speculate merely not to go to the jury, 202. of certain facts and circumstances claimed to show an inten- tion to wager in the forms of commercial transactions, to wit: options, 205. vendor at the time of sale not owning or having posses- sion of the goods sold. Short sales, 208. margins, 214. where the purchaser at the time of the sale intends to resell before the time for delivery arrives, 216. large number of speculative transactions, 217. prior conversations and dealings, 218. the party not a dealer in the commodities bought or sold, 218. rules of the exchanges, 218. usages, 218. 358 INDEX. 'EVIDENCE— continued. more goods sold than in the market, 220. acts and omissions of the parties after the contracts are made, 220. settlement of contracts, 220. contra transactions, 221. transfers of the commodity bought or sold before the time of delivery arrived, 221. no grain offered or demanded, 221. contracts closed the same day, 221. no deal lasting through option, 221. no preparation made for delivery, 221. covers, 222. symbolical delivery, 223. warehouse receipts, 223. rings and ringing out, 223, clearing-houses, 223. inability to produce original entries, 223. inability to give names of the parties dealt with, 223. inadequacy of consideration, 223. correspondence, 223. two forms of account, 224. of delivering through rings and clearing-houses equivalent to actual manual delivery, 223. EXCHANGES— by the rules of, delivery must be made in option contracts, 26. in New York created and recognized by law, 176. margins required to be deposited by the rules of, 219, rules of some, require contracts to be rung out, 219. rules of some, require contracts to be settled through clearing- houses, 219. relation of principal and agent exists between members of, and their outside principals, 231. between members of the same, question of wager seldom arises, 231. between members of, controversies usually settled by arbi- tration, 231. precise relation of members of, to their principals not fully determined, 233. members of, sometimes brokers, sometimes commission mer- chants, 233. relation of members of, to their principals sui generis, 233. INDEX. 359 EXTRINSIC FACTS— option deals may he shown to be wagers by, 174, 207. See Facts and Circumstances. FACTORS— commission merchant the modern name for, 232. distinction between, and commission merchant, 232. See Commission Merchant. FACTS AND CIRCUMSTANCES— which have been considered by the courts as indicating inten- tion to wager, 76. evidence of, claimed to show intention to make contracts in the form of commercial transactions wagers, considered, 200-230. evidence of, which raise a suspicion of good faith admissible, 201. evidence of, which show intention to speculate only not ad- missible, 203. evidence of, which show intention to wager admissible, 204. FICTITIOUS SALE— New York Stock Exchange* laws provide that, shall not be made, 165. rules of the New York Cotton Exchange provide that, shall not be made, 165. laws of the New York Stock Exchange prqhibit, 165. forbidden by the New York Consolidated Stock and Petro- leum Exchange, 165. prohibited by laws of New York Cotton Exchange, 165. FINANCIAL STATUS— inability of party to perform contract is an indication that it was intended as a wager, 120-131. inability of purchaser to pay makes contract criminal by Ohio Statute, 22, 130. correct rule stated in Thacker v. Hardy, 130. evidence of inability of purchaser to pay for the article bought or sold admissible to show wager, 216. FLAGG V. BALDWIN— case of, criticised, 274. FLUCTUATION— margins designed to secure against, in the market price, 107. 360 INDEX. FORESTALLING— Illinois Statute against, 21. FORM— of stock call, 27. of stock put, 27. of stock straddled or spread eagle, 27, 90. of grain put contract, 37. intention determined without regard to, 54. not regarded, 54, 55. makes no difference where the real intention of the parties is to gamble, 54. not conclusive, 55. too much weight or importance not to be attached to, 55. of relation of principal and agent assumed as a cover for a wager, 59. of oil call, 86. of gold put, 88. of ordinary grain option contract, 261. FUNDAMENTAL ERROR— of considering principal and agent as principals, 183. referred to, 294, 304. FUTURE DELIVERY— contract for, 9, 26, 27. sales of gold and silver coin, and bullion for, act of congress referring to, 17. Pennsylvania statute against contracts for, 20. sales for, always recognized where the seller had possession or owned the goods sold, 25. gales for, formerly held not valid where the party did not have the possession or ownership of the goods sold, 25. contracts for, 26. options, 26. futures, 26. pure options, 27. calls, 27. puts, 27. straddles or spread eagles, 27. contract for, not a contract of sale but a contract to sell, 30. party may agree for, 98. INDEX. 361 FUTURES— declared to be gambling and criminal by Ohio statute, 22. defined, 26. erroneously defined as wagers, 40. cotton, form of, used on New'York cotton exchange, fair and reasonable, 259. GAMBLING— distinction between, and speculation, 76. ■ a misdemeanor by statute of Kansas, 304. , . guaranteeing a market by agent does not make a transac ■— . tion, 324. owner of building who permits, liable under Ohio statute, 23. GAMBLING CONTRACT— contracts originally valid not made wagers by subsequent settlements, 171. ^ See Wager. GAMBLING INTENT— useless to talk about, unless there is a contemporaneous agree- ment that contracts of sale shall be settled, ndt by delivery, but by payment of differences, 79. See Wager ; Intention. GAMING— money loaned for the purpose of, cannot be recovered, 339. See Wager. GAMING DEBT— judgment founded on, may be set aside, 61. GOLD— act of congress relating to sales of, for future delivery, 17. GOOD FAITH— if either party contracted in, he is entitled to the benefit of his contract, 51. intention toresell the best possible proof of, 116. settlement through clearing-houses demonstration of, 165. if contract is made in, no subsequent settlement can make it void, 172. %.. shown by contra transaction, 181. evidence of facts and circumstances which raise a suspicion of, admissible in evidence, 201. 24 362 INDEX. GOOD FAITR— continued. evidence of facts which show intention to speculate merely, not admissible to show bad faith, 203. eviden^ce of facts consistent with, not admissible to prove wager, 204. shown by symbolical delivery, 223. shown by delivery of warehouse receipts, 223. delivery through clearing-houses evidence of, 223. GUARANTEE— action on, given on account of wagering transactions cannot be sustained, 61. of commission merchant that agreements made for his princi- pal shall be performed, considered part of the agreement between commission merchant and principal, 147. of a market, by an agent to his principal, not a wager, 324. of a market by agent does not make him a principal, 325. HORSE RACE— money loaned to pay bet on, may be recovered, 332. money loaned to be staked on, cannot be recovered, 339. IDENTICAL GOODS SOLD NOT DELIVERED— considered as indicating intention to wager, 195. ILLEGAL BUSINESS— agents, employees, or servants cannot seize or retain property of principals in, 342. ILLEGAL CONSIDERATION— contract is void when upen, 62. ILLEGAL CONTRACT— is one which the law prohibits and punishes the parties to, 277. distinction between, and void contract, 277. agreement to make a corner is an, 319. money paid to third party on account of, cannot be recalled, 343. See Contract ; Wagee ; Insurance. ILLINOIS— wagers in, valid at common law, 12. statutes of, against options, forestalling the market and cor ners, 21. I5IDEX. 363 INABILITY TO STATE WHERE THE ARTICLE WAS AT THE TIME OF CONTRACT— considered as indicating intention to wager, 189. INADEQUACY OF CONSIDERATION— considered as indicating want of good faith, 39. considered m reference to intention to wager, 19L INDEMNITY— agents entitled to, 231. commission merchants entitled to, 232. INSTANCES— of commercial wagers, 81 . INSURANCE— partner in illegal, business cannot recover share of losses paid, 301, 337. INTENTION— evidence of, to wager in the forms of commercial transactions considered in reference to the following subjects : options, 82, 205. notowning or having possession of the goods sold; short sales, 95, 208. margins, 106, 214. where vendee intends to resell before delivery, 115,215. financial status 120, 216. that the parties were engaged in a large number of spec- ulative transactions, 131, 217. prior conversations, 135, 218. prior dealings, 135, 218. where the party was not a dealer in the commodity bought or sold, 198, 218. rules of the exchanges, 136, 218. usages, 136, 218. more goods sold than in the market, 169, 220. acts and omissions of the parties after contracts were made, 2--i0-230. settlement of contracts, 170, 220. contra transactions, 178, 221. transfers before time for delivery arrived, 183, 221. no grain offered or demanded, 183, 221. contracts closed the same day, 183, 221. no deal lasting through option, 183, 221. 364 INDEX. INTENTION -continued. no preparation made for delivery, 183, 221. covers, 183, 222. symbolical delivery, 159, 223. warehouse receipts, 223. rings — ringing out, 144, 223. clearing-houses, 159, 223. original entries not produced, 189, 223. inability of commission merchant to give names of persons with whom he dealt, 189, 223. inability of commission merchant to state where the articles were at the time of contract, 189,223. inadequacy of consideration, 191, 223. correspondence, 195, 223. two different forms of statement, 196, 224. identical goods not delivered, 195. subsequent conduct of the parties may be considered as evi- dence tending to show, as to what the real contracts were when entered into, 43. that a contract in the form of a sale is in fact intended as a ' wager may be implied and inferred from the circum- stances, 43. gives character to a transaction, 45. illegal, not inferred, 46. a question of fact, 48. a party may be interrogated directly as to, 49. error to withdraw question of, from the jury, 49. unlawful, must be mutual, 50. mental, to wager not known to the other party does not make contract a wager, 51. secret, of one party to wager does not make contract unlaw- ful, 51. secret, not communicated to the other party not sufficient to invalidate a contract, 51 . determined from all the circumstances, 52, 54. to wager determined without regard to form of contract, 54. a question for the jury, 54. to deal in differences in the form of purchase and sale, wagers, 60. every, to speculate becomes, in the opinion of some, gam- bling, 79. illegal, in the use of a pure option contract not inferred, 91. INDEX. 365 INTENTION— continued. ' , to resell strongest possible proof of good faith, 116, to wager may be shown by agreement to pay diiferences, 174. evidence of, 200-231. '• determined at inception of the contract, 172. evidence of, to speculate not admissible to show wager, 203. evidence which shows, to speculate merely, not admissible, 303. evidence of facts and circumstances to prove, to wager admis- sible in evidence, 203. to resell before the time for delivery arrives is not unlawful, 215. defined, 224. limitation of special latitude of evidence to show, 225. evidence of trifling circumstances not admissible to prove, 230. IRELAND— railroad clearing-houses in, 164. JUDGMENT— founded on gaming debt may be set aside, 57, 61. JURY— illegality of pure option contracts must be found by, 89. question of wager to go to, where any fact appears raising question of good faith, 201. KANSAS— statute of, makes gambling a misdemeanor, 304. KNOWLEDGE— mere, that money was borrowed for an illegal purpose will not defeat right of recovery, 339. LAISSEZ FAIRE— doctrine discussed by Francis Wharton, 101. LEGAL CONTRACT— distinction between, and void contract, 277. LONDON BANK— clearing-house described, 164. LONDON STOCK EXCHANGE— clearing-house described, 163. 366 INDEX. LORD COKE— dictum of, that contracts are presumed to be valid, 45. LORD TENTERDEN— dictum of, that short sales should not be encouraged, 95. LOSSES— paid by broker or commission merchant on wagers which are simply void, may be recovered, 177. made by broker or commission merchant may be recovered, 232. paid on illegal wagers by brokers, commission merchants, or other agents, cannot be recovered, 299. paid by commission merchants where agreement is that their principal shall in no event make or accept delivery, cannot be recovered, 321. paid by agent, where a market is guaranteed, can be recov- ered, 324. . paid by agent, in wagering contracts ratified by principal, may be recovered, 333. MAINE— wagers in, void at common law, 13. MALUM IN SE— distinction between, and malum prohibitum, 316. " " " " " exploded, 316. " " " " « sustained, 316. MALUM PROHIBITUM— distinction between, and malum in se, 316. " " " « " exploded, 316. « " " " " sustained, 316. MARGINAL CONTRACT— contracts for future delivery sometimes called, 106. MARGINS— contracts upon, made criminal in Ohio by statute, 22. money given for, in wagering transactions cannot be recov- ered, 60. notes or bonds given as, in the beginning of wagering trans- actions, no action can be sustained on, 60. notes or bonds given as security for, at the beginning of wag- ering transactions, no action can be sustained on, 60. stock speculations upon, sustained, 79, 107. by-laws of the New York stock exchange in relation to, 106 INDEX. 367 MARGINS — continued. by-laws of the New York produce exchange in reference to, 106. by-laws of the Chicago board of trade and other exchanges in reference to, 106. provision of the New York cotton exchange in reference to, 106. a common thing to call contracts for future delivery marginal contracts, 106. right to call for, no tendency to prove wager, 107. are simply a protection against fluctuation in the market price, 107. used without regard to the character of the transactions, 107. have no necessary connection with contracts for future de- livery, 107. whether called for or not a matter purely of confidence, 107. right to call for, a part of the contract of the broker in stock speculations, 107. stock speculations upon, held invalid in Pennsylvania and New Jersey, 109. in wagering transactions used to secure the payment of a bet, 112. if contract is lawful putting up of, is lawful, 113. not confined to speculative transactions, 113. are used in sales to arrive, 1 13. diiference between the value of shipment and amount drawn is a, 113. are used between parties to wagers, 113. instances of, when used in wagers, 114. are used in bucket shops, 114. use of, in wagering transaction, 115. put up or required, not evidence of wagering intent, 214, 215. required to be deposited by the rules of the exchanges, 219. MASSACHUSETTS— wagers in, void at common law, 13. in, statute against short sales burden of proof to show that the seller owned the stock is upon him, 48. statute referred to, 336. MEMBERS OF THE EXCHANGES— precise relation of, to their principals, not fully determined, 233. 368 INDEX. MILWAUKEE CHAMBER OF COMMERCE— rules of, providing for payment of differences upon the breach of the contract, valid, 177. MISSOURI— wagers in, void at common law, 13. MONEY— cannot be recovered back when paid on account of wagering transactions, 60. action cannot be susta,ined to recover, paid as security in the beginning of wagering transactions, 60. loaned for the purpose of paying a wager can be recovered, provided the person paying is not a principal or agent en- gaged in the wager, and provided, also, that the payment itself is not prohibited by law, 329. loaned to pay bets may be recovered, 332. due on stock jobbing account cannot be recovered, 336. loaned or paid for the express purpose of being applied to an illegal object cannot be recovered, 337. share of, paid by one of two parties in illegal business cannot be recovered from the other, 337. advanced to pay losses on illegal transactions cannot be re- covered, 337. loaned to pay losses on illegal stock jobbing cannot be recov- ered, 337. loaned to be staked on horse races cannot be recovered, 339. MORE SALES THAN GOODS IN THE MARKET— no tendency to prove wager, 169-220. MORTGAGE— notes and bonds secured by, given in wagering transactions as security, cannot be foreclosed, and may be set aside, 60. MUTUAL INTENTION— in order to make transactions legitimate on their face, wagers, there must be a, to that effect, 50. NAME— commission merchant contracts in his own, 222. broker contract in his principal's, 223. NEGOTIABLE INSTRUMENT— founded upon illegal wagering considerations, void in the hands of all parties, 61. INDEX. 369 NEGOTIABLE INSTRUMENTS— conimwerf. distinction in position of holder of, founded on wagering transactions in a State where the latter are void, and in a State where they are unlawful, 61. NEW HAMPSHIRE— wagers in, valid at common law, 1 3. NEW JERSEY— wagers in, valid at common law, 12. stock speculations on margins held to be wagers in, 109, 323. case of Flagg v. Baldwin criticised, 109, 274. NEW YORK— early decisions of, sustain wagers, 12. statute of, against wagers, 13. statute of, against short sales, 18. bank clearing-house described, 162. NEW YORK COTTON EXCHANGE— provisions of by-laws of, relating to margins, 106. symbolical delivery by means of delivery orders in, de- scribed, 159. rules of, provide that all contracts for future delivery shall be binding until performed, 165. method of delivery by warehouse receipts in, approved, 166. NEW YORK PETROLEUM EXCHANGE— by-laws of, relating to margins, 106. by laws of, members settle through clearing-house, 166. NEW YORK PRODUCE EXCHANGE— provisions of by-laws of, relating to margins, 106. NEW YORK STOCK EXCHANGE— by-laws of, relating to margins, 106. laws of, provide that no fictitious sales shall be made, 165. NO DEAL LASTING THROUGH OPTION— considered as indicating intention to wager, 183. NO GRAIN OFFERED OR DEMANDED— considered as indicating intention to wager, 183. NOTE— given at the beginning of wagering transactions, no action can be sustained on, 60. given as security or margins, action cannot be sustained on, 370 INDEX. NOTE — continued. given as security at the beginning of wagering transactions, no action can be sustained on, 60. secured by mortgage given in the beginning of wagering transactions, mortgage cannot be foreclosed and may be set aside, 60. given on account of wagering transactions cannot be sus- tained on, 61. given in consideration of payment of loss in illegal transac- tions, after they were closed, is a binding contract, 333. given in settlement of unlawful stock jobbing transactions is void, 388. OHIO— statute of, against options, margins, short sales, futures, etc , 22, 130. OPTIONS— English statute against — Sir John Barnard's act, 14. Illinois statute against, 21. , buyer's, 26. seller's, 26. as to time of delivery only defined, 26. pure options defined, 27. as to the time of delivery and pure options distinguished, 27. call, defined, 27. put, defined, 27. straddle or spread eagle defined, 27. form of pure, 27. held to be lawful, 28. good illustration of wager in the form of, 32. word used erroneously to designate wagers in grain, 40. delivery always contemplated in ordinary grain, 26, 41. as to time of delivery, 82. pure options, 82. distinction between, as to time of delivery and pure options 82. as to time of delivery universally held legal, 84. considered as wagers in Illinois, 95. as to time of delivery are lawful, 205. demurrer to complaint or declaration founded on, overruled 206. INDEX. 371 OPTIONS— continued. in action to recover money paid on account of, demurrer to complaint would be overruled except in States where made void or illegal by statute, 206. contracts presumed to be invalid, 207. must be shown to be for a valid purpose, 207. ordinary form of grain option contract, 261. OPTION DEALS - many of them actual purchases by manufacturers and ex- porters, 206. corners made possible by, 206. delivery in, may be insisted upon, 206. that delivery may be insisted upon is the one thing which gives vitality to, 206. delivery always contemplated in, 206. defined, 206. presumed to be valid, 207. presumed to be invalid, 207. must be shown to be for a valid purpose, 207. on Chicago board of trade same as universally upheld in England, 207. a large majority of, merely speculative, 207. PAROL EVIDENCE— can a written contract of sale for future delivery be shown to be a wager by, 62. PARTNERSHIP— in illegal insurance, business one partner cannot recover from the other a portion of the losses paid, 319. agreement to make a corner in stock does not constitute a, 319. in illegal business partners bound to account, 342. distinction between implied promise to reimburse one partner paying the whole of a legal debt and an illegal one, 318. distinction between legal and illegal, debt repudiated, 319. PENNSYLVANIA— wagers in, void at common law, 12. stock speculations on margins held to be wagers in, 109. cases criticised, 109. 372 INDEX. PENNSYLVANIA— co«i!mMerf. cases in reference to clearing-house criticised, 166. cases authorities for rule 4, 323. PETROLEUM EXCHANGE— of New York forbids fictitious sales, 165. PHILADELPHIA BOARD OF BROKERS— system of clearing-house of, criticised, 167. PLEADING— defense of wager must be affirmatively pleaded, 46-92. PRESUMPTION— contracts presumed to be valid, 45. option deals presumed to be valid, 207. PRIOR CONVERSATIONS— intention to wager may be shown from, 135. PRINCIPALS— wagers between, considered, 25. commission merchant or factor held to all the liabilities of , unless he discloses the name of his principal, 232. PRINCIPAL AND AGENT— in bucket shop business parties assume the relation of, 57. law governing the relation of, well settled, 201. relation of, exists between members of exchanges and parties they deal for, 231 . money received by agent in unlawful business must be ac- counted for and paid over to his principal, 296. agreement between, that differences only shall be paid is a wager, 321. relation of, does not exist where parties agree to deal in dif- ferences, 321. agreement to provide a market by an agent not a wager, 324. PRIOR CONVERSATIONS AND DEALINGS— evidence of, admissible to show intention, 135, 218. PRIOR DEALINGS— intention to wager may be shown from, 135. PRODUCE EXCHANGES— Ohio statute not applicable to, 23. PUBLIC POLICY— courts have never defined, 194. courts are adverse to holding contracts illegal on the ground of, 194. INDEX. 373 PUBLIC FOnCY— continued. will not permit agents, employees, or servants to seize or re- tain property of their principals, 342. PURCHASE AND SALE— business in bucket shops is in form of, 57. commission merchants and brokers may recover commis- sions, losses, and disbursements in making wagers in the form of, when they are simply void, 277. agents cannot recover disbursements, losses paid, or commis- sions in making contracts in form of, but really unlawful wagers, 299. PURE OPTIONS— form of, 27, 28, 37, 90. delivery not necessarily intended in, 30. object of, 30. presumed to be legal, 45. illegality of, must be proved, 46. ease involving, 52, 78. validity of, tested in the same manner as other contracts for future delivery, 84, 93. good faith in, to be determined by question whether delivery in any event could be compelled, 85. never made in New York produce and cotton exchanges, 85. recognized in England and in this country by the stock ex- changes, 85. no adjudication concerning, in England, 85. sustained in this country, 85. some statutes against, 85. some decisions against, 85. quite common in Wall street, 85. not infrequent, 89. no inherent vice in, 89. may be resorted to as a mere cover for betting, 89. illegality of, a matter of defense, 89. an element of speculation and uncertainty always in, 91. value of, depends upon fluctuations of the market, 92. not of necessity wagering contracts, 92. in some cases held contrary to public policy, 93. may be shown to be for a lawful purpose, 94. presumed to be wagers, 95. contracts void at common law in Illinois, 95. 374 INDEX. PUT— English statute against— Sir John Barnard's act, 14. defined, 27. form of stock, 27. form of, 37, 88. contract sustained, 88. are ordinary business transactions, 91. an element of speculation and uncertainty always in, 91. supposed instances of legal and proper use of, 94. not of necessity void, 94. contracts harmless, 94. presumed to be a wagers, 95. may be shown to be for a lawful purpose, 95. QUESTION OF FACT— intention is a, 48. QUOTATIONS— furnishing, of prices of margins, futures, or options made criminal by Ohio statute, 23. RAILROAD— clearing-house in England, 164. clearing-house in Ireland, 164. RATIFICATION— where principal ratifies wagers made by agent, he is liable, 333. REQUEST— to pay wager continuing until revoked, 331. action may be maintained on, to pay losses on wagers void by statute of Victoria, 332. action can be maintained on, to pay differences after loss is made, 334. RING— direct settlement is a small, 144. explanation of, 144, 146. advantages of, 145. is a plan devised to make quick and inexpensive delivery, 146. dispenses with useless and repeated delivery of the same ar- ticle, 146. INDEX, 375 RING — continued. may contain three or more persons, 147. how formed, 147. saves trouble and expense, 147. relates solely to methods of settling mutual accounts, 147. has DO effect upon the rights of third parties, 147. not confined to contracts for future delivery, 148. may be formed to facilitate delivery of goods sold for pres- ent delivery, 148. is a small temporary clearing-house, 148. has no tendency to show transactions to be wagers, 148. object of a, is to close out transactions and get them off the books, 149. wrong meaning given to, 151. settlements through a, show parties are not wagering, 219. bucket shop transactions not settled through, 220. RINGING OUT-- mutual settlement of accounts between commission mer- chants is called, 147. compelled by the laws of the New York cotton exchange, 147, 166. conducted on precisely the same principle as clearing-houses, 148. saves expense, 149. not obligatory, 149. approved, 149, 159. a matter of convenience, 149. disapproved, 152, 153. wrong meaning given to, 151. delivery by, evidence of good faith, 223. RULES OF THE EXCHANGES— in relation to putting up of margins, 107, 219. providing for the putting up of margins, no bearing upon the question of wager, 110. may be considered as showing intention to wager, 136, 144. prohibit fictitious sales, 165. in some cases provide that settlements shall be made through clearing-houses, 166, 219. in some cases require contracts to be rung out, 166, 219. not produced in evidence when made part of a contract sued upon held to be a suspicious circumstance, 219. 376 INDEX. SALE— without intention to deliver, void and criminal by Ohio stat- ute, 22. where purchaser has not the means to pay, void and criminal by Ohio statute, 22. a cover for a wager, 28. a wager in the form of, 29. essential elements of wager in form of, 29. contemporaneous agreement that a, is not to be enforced in a wager, 29. where it is to be settled by a payment of differences is a wager, 29. no delivery in a, not an essential element of wager, 29. mutual intention to break contract of, a wager, 32. good illustration of a wager in the form of an option, 32. that a, is a cover for a wager, will be implied from extrinsic circumstances, 43. coupled with an express agreement that the property sold is not to be received or paid for is no sale at all, 44. can a written contract of, be shown to be a wager by parol evidence, 62. where the seller at the time of, did not own or have posses- sion of the articles sold, considered as tending to show in- tention to wager, 95. short sales universally held valid in this country, 97. short, not vicious, 98. short, enforceable, 98. fictitious, forbidden by the laws of the New York exchanges, 165. SALES FOR FUTURE DELIVERY— of frequent occurrence, 25. always recognized where the seller had the possession or ownership of the goods sold, 25. See Options; Puts; Calls; Futures; Straddles; Time Bargains and Short Sales. SELLER'S OPTION— defined, 26. SELLING SHORT— knowledge broker or commission merchant that party was, immaterial, 99. iiifDBX. 377 SERVANTS— cannot seize or retain property of their principals although engaged in an unlawful business, 342. SETTLEMENT— direct, small ring is a, 144. through clearing-house saves costs of insurance and storage, 149. of contracts originally valid are not thereby made void, 170. by payment of differences upon waiver of performance law- ful, 172. through rings and clearing-houses show that parties are not wagering, 219. appearing to have been made through rings and clearing- houses, case should not be sent to the jury, 219. of any given case by payment of differences in prices no proof of intention to wager, 220. a habit of, between principals indicates intention to wager, 220. SHORT SALES— English statute against, 14, 16. New York statute against, 18. in New York not now prohibited, 19. Massachusetts statute against, 19. Georgia statute against, 21. Ohio statute against, 22. formerly invalid, 25. legality of, not now disputed, 26. under Massachusetts statute against, burden of proof of own- ership is upon seller, 48. of stocks not objectionable, 78. considered as indicating intention to wager, 95. sometimes called time bargains, 95. should not be encouraged — Lord Tenterden's dictum, 95. early English decisions against, 95. Lord Tenterden's dictum against doubted, 96. held valid in Hibblewhite v. McMorine, 96. have no tendency to injure third parties, 97. universally held valid in this country, 97. sustained, 98. not vicious, 98. formerly held illegal, 98. 35 378 INDEX. SHORT SALES— continued. held to be unla>v^ful, 99. laisses faire doctrine concerning, 101. SIR JOHN BARNARD— act of, against stock jobbing, short sales, compounding differ- ences, etc., 14. act of, compared with the statute of Victoria as to distinction between illegal and void contracts, 277. payment of differences, unlawful by act of, 299. compounding differences unlawful by act of, 300. SPECULATION— distinction between, and gambling, 76. contracts not obnoxious because speculative, 78. in stocks upon margins sustained, 79. not illegal or immoral, 81. line drawn between, and unlawful wagering, 81. line between, and gambling difficult to draw, 109. an evil that existing laws do not reach, 109. unlimited opportunity for, given under the clearing-house system, 165. difference between, and wagering, 203. evidence of facts which show intention to speculate merely not admissible to prove wager, 203. SPECULATIVE TRANSACTIONS— settlement of, by payment of differences between principals evidence of intention to wager, 217. settlement of, by payment of differences between principal and agent not evidence of intention to wager, 217. SPREAD EAGLES— defined, 27. form of stock, 27. STATUTE— against wagers, 13. 23 and 24 Vict., 13, 17. of New York against wagers, 13. of England against wagers, 13. of other States against wagers, 13. English, against short sales, compounding differences, options, etc., 14. 7 Geo. II, 14. against peculiar forms of gambling, 14. INDEX. 37ft STATUTE— continued. against contracts in the nature of wagers, 14. of New York against short sales, 18. of Massachusetts against short sales, 19. of Pennsylvania against sales for future delivery, 20. of Illinois against options, 21. of Georgia against short sales, 21. of Ohio against short sales, margins, futures, etc., 21. of Victoria compared with Sir John Barnard's act as to the distinction between illegal and void contract, 277. of Victoria, wagers not unlawful by, 299. of Wisconsin against wagers, 312. of Massachusetts against short-sales referred to, 336. STOCK EXCHANGE— of New York provide by its by-laws that fictitious sales shall not be made, 165. STOCK JOBBING— English statute against, 14. burden of proof is upon the party alleging violation of act against, 46. made unlawful by Sir John Barnard's act, 299. money loaned for the express purpose of settling losses on, cannot be recovered, 300. money loaned to pay on account of, may be recovered, 329. money loaned for the express purpose of paying losses on, cannot be recovered, 337, 338. STRADDLE— defined, 27. form of, 27, 90. sustained, 90, 92. not of necessity a wagering contract, 92. SUBSEQUENT REQUEST— to pay money lost on a wager, action founded on, may be sus- tained, 331. SUBSEQUENT SETTLEMENT— of contracts, 170, 178. SUSPICIOUS FACTS AND CIRCUMSTANCES-^ evidence of admissible, to prove wager, 201. weight of evidence concerning, n t for the court, 201. that rules of the exchanges made part of the contracts were not produced in evidence, 219. See Facts and Circumstances. 380 INDEX. SYMBOLICAL DELIVEEY— by means of delivery orders described, 159. method of, pursued in the New York cotton exchange ap- proved, 166. by warehouse receipts approved, 166, 1 67. takes place in rings and clearing-houses, 167. equivalent to actual manual delivery, 223. proves contracts to have been made bona fide, 223. TEXAS— wagers in, valid at common law, 12. TICKER— defined, 33. TIME BARGAINS— term used in England erroneously to designate wagers upon the price of stock, 40. defined, 40, 41. consist of two distinct and perfectly legal contracts, 40. are very rare, 41. no such thing as, on the London stock exchange, 41 . merely because the sales are for future delivery not invalid, 41. sometimes called short sales, 95. TIME CONTRACTS— duty of courts to scrutinize carefully, 201. TRANSFERS— before the time for delivery arrives considered as indicating intention to wager, 183. defined, 225. TRUE TEST— whether contract in the form of a sale is a wager, 28, 31. whether sale is a cover for a wager is determined by intention whether it is to be enforced or toot, 44. whether case comes within Rule I, 233. UNITED STATES COURTS— wagers held valid in, 12. UNLAWFUL INTENTION— must be, mutual, 50. USAGES— intention may be shown from, 144, 218. INDEX. 381 VERMONT— wagers in, void at common law, 13. VICTORIA— statute of, 13. statute of, compared with Sir John Barnard's act as to the distinction between illegal and void contracts, 277. wagers not unlawful by statute of, 299. VOID CONSIDERATION— distinction between the position of a bona fide holder of a negotiable instrument upon, and an illegal consideration, 61. WAGERS - definition of, 9. peculiarity of, 9. must be a risk on both sides, 9. a bet is a wager, 9. have all the rec[uirements of legal contracts, 9. evil influence of, 10. no mutual advantage in, 10. at common law with certain exceptions valid, 10. are perfect contracts in law, 10. unlawful in some States, 10, 13. regret of courts of having entorced, 11. sustained by the United States courts, 12. valid by common law of New Yoric and other States, 12. invalid by the common law of Pennsylvania and other States, 13. statutes against, in England, 13. statutes against, in. New York, 13. statutes against, in other States, 13. invalid as a general rule, 14. unlawful in many States, 14. statutes against peculiar forms of, 14. contracts in the nature of, 14. between principals, 25. true test as to whether contracts in the form of a sale are, 28. in the form of sales, pssential elements of, 29. in the form of sales where there is concurrent agreement that there is to be no deliverry, 30. 382 INDEX. WAGERS— continued. instances of commercial, 31. in the form of sales cover brushed away and parties left to whatever right they may have under the contracts of wa- ger, 31. where each party intends to break contracts of sale and pay differences to each other are, 32. in the form of option sales, good illustration of, 32. erroneously called " time bargains," " options," and " fu- tures," 40. in the form of a sale, the intention that such transaction shall he mere bet on the market price, an integral part of the contract, 43. defense of, must be affirmatively alleged, 46. defense of, must be affirmatively proved, 46. made in the form of sales, 57. agreement to pay differences is wagering, 56. compromise of amount due on, cannot create a valid claim, 59. relation of principal and agent assumed as cover for, 59. purchases and sales in the form of, where there is no intention to deliver or receive the commodities purchased and sold are, 60. sales with contemporaneous agreement that they are not to be enforced are, 79. difficulty to draw lines between legitimate speculation and, 81. certain facts and circumstances claimed to indicate an inten- tion to wager in the form of commercial transactions — options, 82, 205. where the seller did not at the time of sale own or have possession of goods sold, 95, 208. short sales, 95, 208. margins, 106, 214. where the vendee intends to resell before delivery, 115,215. financial status, 120, 216. that the parties were engaged in a large number of mere speculative transactions, 131, 217. prior conversations, 135, 218. prior dealings, 135, 218. rules of the exchanges, 136, 218. usages, 136, 218. rings — ringing out, 144, 223. IKDBX. 383 WAGERS — continued. symbolical delivery, 159, 223. clearing-houses, 159, 223. more sales than goods in the market, 169, 220. subsequent settlement of contracts, 1 70, 220. contra transactions, 178, 221. transfers before the time of delivery arrived, 183, 221. no grain offered or demanded, 183, 221. contracts closed the same day, 183, 221. no deal lasting through option, 183, 221. no preparation made for delivery, 183, 221 . covers, 183, 222. original entries not produced, 189, 223. inability of commission merchant to give names of persons with whom he dealt, 189, 223. inability of commission merchant to state where the article was at the time of contract, 189, 223. . inadequacy of consideration, 191, 223. correspondence, 195, 223. the identical goods sold not delivered, 195. two different forms of statement used, 196, 224. where the party was not a dealer in the commodities bought or sold, 198, 218. stock speculation in Pennsylvania and New Jersey on mar" gins held to be, 109. margins are frequently used between parties to, in the form of sales, 1 14. instances of, where margins were used, 114, 115. parties to, would not ring out, 148. would not be settled through clearing-houses, 148, evidence to show contracts in the form of commercial trans- actions to be, 200, 231. contracts for future delivery may be shown to be, by ex- trinsic evidence, 174. agreements to settle contract of sale by payment of differences are, 174. in determining whether contracts are, distinction made be- tween applying test to the contracts made by broker and the contract between principal and agent, 183, 240, 304. evidence which shows intent to speculate merely not admis- sible to prove, 203. 384 INDEX. WAGERS — continued. evidence of intention to speculate merely not admissible to prove, 203. option deals may be shown to be, by extrinsic facts, 207. indication to wager shown by a combination of circumstances in Lowry v. Dillman, 226. evidence of trifling circumstances not admissible to show, 230. in, made by agent for his principal the former can maintain action for services, commissions, and losses, 277. where unlawful, agents cannot recover for disbursements or losses paid, 299. under the statute of Victoria not unlawful, 299. statute of Wisconsin against, 312. relation between principal and agent may be a cover for, 321. agreement by agent that he will provide a market for his principal not a wager, 324. money paid by third party upon request of the loser on, can be recovered back, provided the person paying the money is not a principal or agent, and provided also that the pay- ment itself is not prohibited by law, 329. money loaned to pay losses on, at request of the loser, may be recovered, 331. person authorized to make, in his own name for another, au- thority to pay losses irrevocable, 332. See Evidence ; Intention. WAGEEING INTENT— useless to talk about, unless there is a contemporaneous agreement that contracts of sale shall not be executed by delivery, but by payment of differences, 79. WAGERING TRANSACTIONS— money paid out at the beginning of, cannot be recovered back, 60. actions on due bills given in settlement of, cannot be sus- tained, 61. actions on account stated for, cannot be sustained, 60. actions upon notes given in the beginning or in settlement of, cannot be sustained, 6 1 . actions upon due bills given in the settlement of, cannot be sustained, 61. actions upon acceptances given on account of, cannot be sus- tained, 61. INDEX. 385 WAGERING TRANSACTIONS— cow^mwerf. actions upon guarantees of third party's notes made on ac- count of, cannot be sustained, 61. mortgages given on account of, cannot be enforced, 61. actions upon bonds given on account of, cannot be main- tained, 61. WISCONSIN— in, burden of proof that contracts for future delivery are made in good faith is upon the party claiming under them, 47. ^^^z