This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If the consideration is estimated at a money value and provision is made for payment of such consideration in goods at an estimated value, the rights of the parties depend upon the true meaning of such provision. The terms of the contract, together with the surrounding circumstances, may show that the parties have inserted such valuation in money and such valuation of goods as a means of determining the amount of goods to be delivered under the contract, and not for the purpose of giving to the debtor the election to pay in one or the other at his option. In cases of this sort, the debtor has no election and the contract is in legal effect a contract to deliver the quantity of goods which is thus prescribed by the contract.1 Under a contract to excavate for a railroad for a certain sum, twenty-five per cent, of which is payable in the railroad's stock at par, does not create an election, and in case of breach, only seventy-five per cent, of the contract price, together with the market value of so much stock as at par would equal twenty-five per cent, of the contract price, can be recovered.2 A contract for paying for land, the purchase price of which is estimated in money, in wheat at a certain price, is held to be a contract for delivering a specific amount of wheat if the contract requires the delivery of a certain amount annually, and furthermore provides expressly that the purchaser of the land may make additional payments, and that such payments shall be in wheat or in cash at the option of the vendor of the land.3
12 "Stress is laid in the argument on the express provision of the policy that no action shall lie except for loss or expense 'actually sustained and paid in money/ but we think the payment In the sale of the property was equivalent to payment in money and fell within the terms of the policy. It is scarcely fair to construe the language to mean that it applied only to currency actually handed over and not to a bona fide payment made in other property. If that construction were put upon the policy it would be absolutely worthless to an assured who was unable to pay money and whoso property would be subjected to sale, and he would thus be deprived of the indemnity for which he had contracted. Such result should not be permitted to follow under the contract, unless the language admits of no other construction." McBride v. Aetna Life Ins. Co., 126 Ark. 528, 191 S. W. 5.
I Cummings v. Dudley, 60 Cal. 383, 44 Am. Hep. 58; Mason v. Warner, 43 Mich. 439, 5 N. W. 429.
See also on contracts of this sort, Reilly v. Reilly, 135 la. 440, 110 N. W. 445.
2 Butler v. Baker, 5 O. S. 584.
3 Guthrie v. Wickliffe, 6 Ky. (3 Bibb.) 81; Bond v. Jackson, 3 Tenn. (Cooke) 500.
In cases of this sort, the creditor, in case of default on the part of the debtor, can recover only the market value of the goods which were to have been delivered by the terms of the contract; and he can not recover the money value at which the consideration was estimated.4 On the other hand, the debtor can not discharge his obligation by a payment in money, even if the condition of the market is such as to make it advantageous for him so to do; but he must deliver the goods which he has agreed to deliver or he must pay the actual value thereof.5 Under a contract of sale, the purchase price to be paid partly in interest-bearing notes, a tender of the face of the notes in cash is not sufficient.6
In an action upon a contract of this sort, it is therefore necessary to set up the special contract and the breach thereof; and in most jurisdictions it is not sufficient to resort to the common counts.7
1 Wilson v. George, 10 N. H. 445; Cleveland & Pittsburgh Ry. v. Kelley, 5 O. S. 180; Starr v. Light, 22 Wia. 433, 09 Am. Dec. 55.
2 Cleveland & Pittsburgh Ry. v. Kelley, 5 O. S. 180.
3 Starr v. Light, 22 Wis. 433, 99 Am. Dec. 55.
4 0'Donaghue v. Jones, 37 Mo. 371.
5 Barbour v. Hickey, 2 D. C. App. 207,
24 L. R. A. 763; Morgan v. East, 126 Ind 42. 9 L. R. A. 558, 25 N. E. 867; Williams v. Gilbert, 0 Mart (La.) 553
6 Sale of land. Barbour v. Hickey, 2 D. C. App. 207, 24 L. R. A. 763.
Rale of cattle. Morgan v. East, 126 Ind. 42, 0 L. R. A. 558, 25 N. E. 867.
7 Bank of England v. Glover, 2 Ld Raym. 753; Bromley v. Goff, 75 Mich. 213, 42 N. W. 810; Cook v. Dade, 191
Even if the contract provides for faying an amount measured in money by delivering goods or performing services at a certain valuation, a minority of the courts treat such contract as merely one to deliver chattels, on the theory that the valuation of the consideration in money is introduced simply for determining the amount of the chattels which the debtor is to deliver.8 Where this view prevails the debtor has no election before breach to pay in money,9 and after breach the creditor can not recover the valuation of the consideration as estimated in money.10 His right of recovery is restricted to damages for non-delivery of the articles agreed to be delivered. Thus in a note "payable in Levee Bonds of Arkansas" at par, the word "payable*' means "to be paid," and not "which may be paid." Hence, after the note is due only the value of the bonds can be recovered.11 So he can recover the market value of the chattels of greater than the estimated amount in money.12 At common law, where this theory prevails, recovery must be had on the special contract, and can not be had on the common counts.13 On rescission of a contract under which A has delivered horses to B at an agreed valuation in payment for land, B, having sold the horses, must account for them at the market price and not at the agreed valuation.14 Under a contract to accept a certain number of shares of stock in a given corporation in payment of a note, such payment must be made in stock as existing at the time of such contract. Tender of the specified number of shares after the stock has been greatly inflated is not sufficient.15 A note payable in trucking in monthly payments due twenty-four months after date requires trucking to be done each month.16
Mich. 501, 158 N. W. 175; Thomas v. Mott, 78 W. Va. 113, 88 S. E. 661; Bradley v. Levy, 5 Wis. 400.
8 Mattox v. Craig, 5 Ky. (2 Bibb.) 584. (A contract for eighty-nine dollars "to be discharged" in brick at four dollars a thousand.)
For the view of the majority of the courts, see Sec. 2810.
9 Cole v. Ross, 48 Ky. (9 B. Mon.) 303, 50 Am. Dec. 517. (A contract for over three thousand dollars payable in pig metal at twenty-nine dollars per ton.)
10 Wilson v. George, 10 N. H. 445.
11 Johnson v. Dooley, 65 Ark. 71, 40 L. R. A. 74, 44 S. W. 1032.
12 McDonald v. Hodge, 8 Tenn. (5 Hay) 85. (A contract to pay a certain sum "in potash at the price of five dollars per hundred.'*)
13 A certain amount payable in work. Wilson v. George, 10 N. H. 445.
A certain amount payable in goods. Chickering v. Greenleaf, 6 N. H. 51.
14 Clover v. Gottlieb, 50 La. Ann. 568, 23 So. 450.
15 Tranter v. Hibberd, 108 Ky. 265, 56 S. W. 169.
16 Hobbs v. Moore, 86 Me. 517, 30 Atl. 110.