Page images

The Annotations are prepared by the following Editors and Assistants : Department of PRACTICE, PLEADING AND EVIDENCE.

Hon. George M. Dallas, Editor. Assistants: Ardemus Stewart, Henry N. Smaltz, John A. McCarthy, William Sanderson Furst. Department of CONSTITUTIONAL Law.

Prof. Christopher G. Tiedeman, Editor. Assistants: Wm. Draper
Lewis, Wm. Struthers Ellis.


Hon. John F. Dillon, LL. D., Editor. Assistant: Mayne R. Longstreth.

Department of EQUITY.

Richard C. McMurtrie, LL. D., Editor. Assistants: Sydney G. Fisher, John Douglass Brown, Jr., Robert P. Bradford. Department of TORTS.

Melville M. Bigelow, Esq., Editor. Assistants: Benjamin H. Lowry, Alex. Durbin Lauer, Patrick C. B. O'Donovan. DEPARTMENT OF CORPORATIONS.

Angelo T. Freedley. Esq., Editor. Assistants: Lewis Lawrence
Smith, Clinton Rogers Woodruff, Maurice G. Belknap, H.
Bovce Schermerhorn.

Department of CARRIERS AND TRANSPORTATION COMPANIES. Charles F. Beach, Jr., Esq., Editor. Assistants: Lawrence Godkin, Owen Wister, Victor Leovy, Cyrus E. Woods. Department of ADMIRALTY,

Morton P. Henry, Esq., Editor. Assistant: Horace L. Cheyney. Department of COMMERCIAL LAW.

Frank P. Prichard, Esq., Editor. Assistants: H. Gordon Mc-
Couch, Chas. C. Binney, Chas. C. Townsend, Francis H.
Bohlen, Oliver Boyce Judson.

Department of Insurance.

George Richards, Esq., Editor. Assistants: George Wharton Pepper, Luther E. Hewitt, Samuel Kahn Loucheim. Department of CRIMINAL LAW AND CRIMINAL PRACTICE. Prof. Geo. S. Graham, Editor. Assistants: E. Clinton Rhoads, C. Percy Wilcox. Department of PATENT LAW.

George Harding, Esq., Editor. Assistant: Hector T. Fenton. Department of Property.

Hon. Clement B. Penrose, Editor. Assistants: Alfred Roland
Haig, Wm. A. Davis, Jos. T. Taylor.

Hon. Marshall D. Ewell, LL. D., Editor. Assistants: Thomas
E. D. Bradley, Milton O. Naramore.


Hon. Wm. N. Ashman, Editor. Assistants: Howard W. Page, Charles Wilfred Conard, Joseph Howard Rhoads, William Henry Loyd, Jr., Edward Brooks, Jr., Samuel D. Matlack. Department of TRUSTS AND COMBINATIONS IN RESTRAINT OF TRADE.

H. La Barre Jayne, Esq., Editor. Assistants: George S. Patterson,
Charles F. Eggleston.



Assisted by



Dealing in Futures-Delivery-Validity of Contract-Evidence. When there is evidence that the defendant and his cousin bought a quantity of wheat through reputable members of the Chicago Board of Trade, which was delivered to them in the form of warehouse receipts; that actual delivery on demand was intended by all parties, and that they could have got the wheat on demand; that they carried it a while on margin with said dealers; that wheat depreciated, and they closed out at a loss, which was a paid by the cousin, defendant giving him the note in suit in settlement of his share-in view of these facts a finding that the uote was not founded on a gambling consideration will not be reversed.


No gambling device has ever afforded the votaries of fortune such opportunities or such incentives as the invention of "future" contracts; and at no time in the history of the world has gambling been carried to such ruinous excess. The tales of old-world extravagance and of ante-bellum recklessness fade into obscurity beside the millions that are staked on a single deal in wheat or corn; and no mania for cards could ever have wrought the widespread loss and suffering due to the cold-blooded manipulations of a Gould or of a Fisk. But the effects of such dealings belong to the domain of economic science; the law is only concerned with their validity.

The forms of these contracts are as numerous as the condi'Reported in 36 N. E. Rep. 296.

tions of human affairs; and their variety is bewildering to any one not to the manner born—or at least bred. Starting with a simple "option" (to buy or to sell) we are soon introduced into a labyrinth of "puts" and "calls," sales "short" and "long," and the like, until we reach the highest development of the stock gambler's inventive genius in the famous "straddle," that marvelous machine designed to rescue the unhappy operator from being impaled on either horn of a dilemma, though having a peculiar tendency to transfix him with both. But whatever the name, and whatever the outward form, a "future" contract means substantially a contract to buy or to sell, or to deliver or to receive commodities at some future time.

I. A contract to buy or to sell goods, the execution of which is postponed to some future time, is not necessarily invalid, even though the goods are not in the possession of the vendor, nor has he contracted to procure them from another, nor has any reasonable expectation of becoming possessed of them by the time appointed, otherwise than by purchasing them after the contract is made: Hibblewhite v. McMorine, 5 M. & W. 462; Ashton v. Dakin, 4 H. & N. 867; Bartlett v. Smith, 13 Fed. Rep. 263; White v. Barber, 123 U. S. 392; S. C., 8 Sup. Ct. Rep. 221; Bibb v. Allen, 149 U. S. 481; S. C., 13 Sup. Ct. Rep. 950; Wolcott v. Heath, 78 Ill. 433; Pixley v. Boynton, 79 Ill. 351; Logan v. Brown, 81 Ill. 415; Cole v. Milmine, 88 Ill. 349; Appleman v. Fisher, 34 Md. 540; Williams v. Tiedemann, 6 Mo. App. 269; Cassard v. Hinman, 1 Bosw. (N. Y.) 207; Tyler v. Barrows, 6 Robt. (N. Y.) 104; Kingsbury v. Kirwin, 43 N. Y. Super. Ct. 451; Kahn v. Walton, 46 Ohio St. 195; S. C., 20 N. E. Rep. 203; Brua's App., 55 Pa. 294; Smith v. Bouvier, 70 Pa. 325. Nor is a future sale, with the privilege reserved on either side to execute the contract or not, necessarily an illegal contract. "The vendee of goods may expect to produce or acquire them in time for a future delivery, and while wishing to make a market for them, is unwilling to enter into an absolute obligation to deliver, 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 beyond the consideration paid for the option, in case of his inability to take the goods. There is no inherent vice in such a contract:" Bigelow v. Benedict, 70 N. Y. 202; S. C., 26 Am. Rep. 573; Brown v. Hall, 5 Lans. (N. Y.) 177; Perryman v. Wolffe, 93 Ala. 290; S. C., 9 So. Rep. 148; Kirkpatrick v. Bonsall, 72 Pa. 155; Maxton . Gheen, 75 Pa. 166. It makes no difference that the transaction is a speculative one: Stewart v. Parnell, 147 Pa., 523; S. C., 29 W. N. C. 537; 23 Atl. Rep. 838. If the intention of the parties is to execute the contract, in case the option is exercised, by an actual delivery and receipt of the subject matter, the contract is valid: Sondheim v. Gilbert, 117, Ind. 71; Rumsey 7. Berry, 65 Me. 570; Farnum 7. Pitcher, 151 Mass. 470; S. C., 24 N. F. Rep. 590; Jones v. Shale, 34 Mo. App. 302; Noyes 7. Spaulding, 27 Vt. 420. The delivery need not be manual; it may be symbolical, by means of warehouse receipts, bills of lading, or the like: Fisher 7. Fisher (Ind.), the principal case, 36 N. F. Rep. 296; Farnum v. Pitcher, supra; Gregory v. Wendell, 39 Mich. 337.

II. If, however, there is no actual delivery intended, but the transaction is to be settled by the payment of the difference between the market price and that fixed by the contract, this amounts in legal effect to a mere wager on the price of the goods, and the contract is accordingly held void, at common law, as well as by statute in many States. "Such contracts are against public policy, because they tend to unsettle the natural course of trade, and tempt the parties to them to work for a rise or fall in the prices of the commoditics on which their wagers are laid, without regard to actual values, and by methods calculated to promote their own profit at the expense or ruin of others, without reciprocity of benefit, And, besides these evils, there are others, more immediate to the parties, culminating from time to time in loss of fortune and character, defalcations, crime and domestic misery, evils which, though they do not always follow, yet follow so often that they have not been overlooked by the courts:" Flagg v. Gilpin, 17 R. I. 10; S. C., 19 Atl. Rep. 1084; Grizcwood v. Blane, 11 C. B. 525;

Barry Croskey, 2 J. & S. 1; Bartlett v. Smith, 13 Fed. Rep. 263; Embrey v. Jamison, 131 U. S. 336; S. C., 9 Sup. Ct. Rep. 776; Cobb v. Prell, 16 Cent. L. J. 453; Justh v. Holliday, 17 Cent. L. J. 56; Lee v. Boyd, 86 Ala. 283; S. C., 5 So. Rep. 489; Pickering v. Cease, 79 Ill. 328; Cothran v. Ellis, 125 III. 496; S. C., 16 N. E. Rep. 646; Watte v. Costello, 40 Ill. App. 30; Beadles v. McElrath, 85 Ky. 230; Rumsey v. Berry, 65 Me. 575; Gregory v. Wendell, 39 Mich. 337; Waterman v. Buckland, 1 Mo. App. 45; Cockrell v. Thompson, 85 Mo. 510; Rudolf v. Winters, 7 Neb. 125; Yerkes v. Salomon, 11 Hun. (N. Y.) 471; Peck v. Doran, 46 Hun. (N. Y.) 454; Story v. Salomon, 71 N. Y. 420; Williams v. Carr, 80 N. C. 294; Lester v. Bucl (Ohio), 30 N. E. Rep. 821; Brua's App., 55 Pa. 294; North v. Phillips, 89 Pa. 250; Oliphant v. Markham, 79 Tex. 543; S. C., 15 S. W. Rep. 569; Everingham v. Meighan, 55 Wis. 354; S. C., 13 N. W. Rep. 269; Lowry v. Dillman, 59 Wis. 197.

A future contract is not illegal, however, merely because it is in fact settled by the payment of differences. It is the original intent of the parties that governs; and if that be for a bona fide execution of the contract by delivery, even though contemplating the possibility of a settlement by way of adjusting differences, the contract is valid in its inception, and either party may waive his right to actual execution, and make a settlement on the basis of differences in price, which will not render the contract void: Clarke v. Foss, 7 Biss. C. Ct. 540; Boyd v. Hanson, 41 Fed. Rep.174; Univ. Stock Exch. v. Stevens, 66 L. T. N. S. 612. The existence of the illegal intent is not necessarily to be inferred from the final settlemen: [though it would seem to be a strong indication of it]: Ware v. Jordan, 25 Ill. App. 534; sce Porter v. Viets, 1 Biss. C. Ct. 177.

Similarly, the fact that the transaction was carried on through a broker, by means of margins furnished him to secure him against any loss which he might suffer on his principal's account, is not an infallible sign of a wagering contract. The intent to deliver may exist in such a case, and the margin may be demanded only as an earnest to secure the delivery of

« PreviousContinue »