An agreement by the seller of stock to repurchase it at the end of three years for a sum equal to the original purchase price, with simple interest at 10 per cent, is not a gambling contract, under Ill. Rev. Stat., chap. 38, § 130, making it a penal offense to give an option to sell or buy stock, etc., at a future time.' But 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.'

On the Cotton Exchange, the transaction not contemplating present delivery, is called a "future." A contract with a broker to purchase for defendant "cotton futures" on a margin, by which the purchase or delivery of actual cotton was never contemplated by either party, but the settlement was to be made between the parties by one party paying to the other the difference between the contract price and the market price of said cotton futures, according to the fluctuations in the market,-is a wagering contract and void.'

In the Produce Exchange, the "option" is as to the day when the delivery may be made or demanded. On the Cotton Exchange, all stipulations or understandings that no actual delivery of cotton is to be made are forbidden. The rules provide, that deliveries of cotton shall be made in this manner: The seller must give written notice to the buyer that he will deliver on a day named. If the seller has resold the goods, he passes the notice to his vendee, accompanied with a transferable order, and so on, until it reaches a vendee who has not sold. The seller must then deliver to this buyer, an order on a warehouse or place of delivery before 12 M. of the day preceding that on which the delivery is due; if the buyer has not resold, he is bound to present the order and receive and pay for the goods. If he has sold, he passes the order to his vendee, and so on until it reaches a vendee who has not sold, and he is bound to receive and pay for the goods at the original contract price; the difference between that price and that of each subsequent sale being settled between the immediate par

'Richter v. Frank, 41 Fed. Rep. 859, 8 Ry. & Corp. L. J. 66.
Sampson v. Shaw, 101 Mass. 145; Raymond v. Leavitt, 46 Mich. 447, 13
Cent. L. J. 110; Morris Run Coal Co. v. Barclay Coal Co. 68 Pa. 173;
Arnot v. Pittston & E. Coal Co. 68 N. Y. 558.

Embrey v. Jemison, 131 U. S. 336, 33 L. ed. 172.

ties to each sale. Delivery orders must be received by any member of the exchange, to whom goods of the kind called for are due from another member. The equivalent of this system exists in most exchanges.

Among London bankers settlements are effected each day, through what is called the "Clearing House" through a committee appointed by the bankers. Each house transmits, during the day, the checks and bills which it receives on the others, and keeps a note of the obligations coming against itself. Accounts are closed at 4 o'clock in the afternoon. The bills and checks are classified at the "Clearing House" and at a later hour the accounts are adjusted; each bank paying or receiving the balance due by or to it.

The same system is adopted by the New York banks. And this system has been applied in the various stock exchanges, where the agency of a trust company is generally employed to adjust mutual accounts of the members of the exchange, who agree that deliveries shall be made under the superintendence of such trust company; deliveries being settled by delivery orders or certificates. This method of delivery by warehouse receipts, certificates or delivery orders has been recognized in the courts.' Many transactions are however settled outside the clearing houses. Take a transaction when a commission merchant is acting for two dealers. He sells, for present or future delivery, grain at 30 cents a bushel to A, while the latter has sold a like amount for 40 cents a bushel to B. And B it turns out has sold the same quantity for delivery to the commission merchant at 60 cents. Now, when the commission merchant on demand receives the grain from his principal, he delivers it to A, and receives the 30 cents per bushel. A delivers it to B and collects the 40 cents due, and B in turn delivers it to the commission merchant, and receives 60 cents per bushel, and then settles with his second principal and collects the 60 cents per bushel from him. On these transactions he charges his commissions.

If the details of this transaction are not literally worked out, the commission merchant will simply deliver the grain, or rather the warehouse receipt received from his first principal to his

'Sawyer v. Taggart, 14 Bush, 727; Wall v. Schneider, 59 Wis. 352; Gregory v. Wendell, 39 Mich. 337.

second principal, and pay to A 10 cents per bushel, and to B 20 cents per bushel, the amount of advance accruing to each, dispensing with the intermediate deliveries. This is styled "a ring" and the completion or settlement of the transaction a "ringing out." This method is used in settling accounts between commission merchants, where one has sold for one customer, and purchased a like amount, for an identical delivery, for another, dealing with some other commission merchant, who has been acting for other investors. This method of settlement cannot be enforced against the customers (unless they be held chargeable with knowledge of an existing rule), as they may demand the actual delivery of the grain, and thus defeat a "ring" settlement.

To meet the difficulty that a commission merchant may be "rung out" in a genuine transaction, where he has contracted to deliver the actual cotton to a particular customer, who desires to enforce the contract, the New York Cotton Exchange has adopted a new rule, declaring that all orders for future delivery transactions in cotton are understood to permit the commission merchant to substitute other contracts for like delivery, for contracts which have been "rung out," and this he may do without notification to his principal. As the commission merchant guarantees the contract personally, this can work no wrong to the customer, who is never known in the transaction except to his commission merchant, and who relies entirely on the broker and not on the party to the contract, who is unknown to him. The rule of the New York Cotton Exchange, enforces this "ring" method of settlement among its members, when any of them are found in a ring of contracts. Many of the stock exchanges, some of them in compliance with statute enactments, and some under their rules, require settlements through a clearing house.

It has been said that "ring" settlements are valid.' These settlements are but giving practical effect to the clearing house method, and it has been held, that the rule of a board of trade, where cross trades exist between the commission merchants under such circumstances that they can be canceled, that shall be done 1Clarke v. Foss, 7 Biss. 540; Kent v. Miltenberger, 13 Mo. App. 503; Ward v. Vosburgh, 31 Fed. Rep. 12; Oldershaw v. Knoles, 4 Ill. App. 63, 6 Ill. App. 325; Williar v. Irwin, 11 Biss. 57; Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225.

and the one shall be offset for the other, and a new contract shall be substituted must be known to a party, to be binding on him; but the knowledge of his broker is the knowledge of himself.1

The rules and regulations adopted by the New Orleans Cotton Exchange in the settlement and substitution of contracts for the future delivery of cotton, when not used to promote a gambling transaction, are valid and legal, and are binding upon all persons familiar with such rules and regulations, or chargeable with knowledge thereof, when they employ members of said exchange to buy or sell, on the floor of said exchange, cotton for future delivery, who in good faith buy and sell in accordance with the said rules and regulations."

Settlements of bona fide contracts for the sale of actual wheat by offsets, under the rules and regulations of a board of trade, do not affect the validity of the contract if the original intent was to purchase and receive the actual wheat.'

In the stock exchanges the call by either party for a margin of 10 per cent, and keeping this margin good, when from fluctations in the stock it is reduced below 5 per cent is authorized. So in produce exchanges the margin rate is fixed specially, upon various grains and upon pork, lard, etc. Upon this question the courts have ruled that if a contract for the future delivery is lawful, the putting up of margins to cover losses which may accrue from fluctuations in prices does not render it an unlawful transaction."

The burden of showing that no actual contract was contemplated, but a mere wager upon a future price of the commodities, rests upon the party asserting it. But where doubt is cast upon

Edwards v. Hoeffinghoff, 38 Fed. Rep. 635.

Lehman v. Feld, 37 Fed. Rep. 852.

Ware v. Jordan, 25 Ill. App. 534; Boyd v. Hanson, 41 Fed. Rep. 174. Boyd v. Hanson, 41 Fed. Rep. 174; Sondheim v. Gilbert, 5 L. R. A. 432, 117 Ind. 71; Cockrell v. Thompson, 85 Mo. 510; Wall v. Schneider, 59 Wis. 352; Gregory v. Wendell, 39 Mich. 337; Union Nat. Bank of Chicago v. Carr, 15 Fed. Rep. 438; Whitesides v. Hunt, 97 Ind. 191; Jones v. Marks, 40 Ill. 313; Lassen v. Mitchell, 41 Ill. 101; Sawyer v. Taggart, 14 Bush, 727; Rumsey v. Berry, 65 Me. 570; Bartlett v. Smith, 13 Fed. Rep. 263. Harris v. Tumbridge, 83 N. Y. 92; Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225; Whitesides v. Hunt, 97 Ind. 191; Rumsey v. Berry, 65 Me. 570; Wing v. Glick, 56 Iowa, 473; Sawyer v. Taggart, 14 Bush, 727; Gregory v. Wendell, 39 Mich. 337; Williams v. Tiedemann, 6 Mo. App. 369; Murray v. Ocheltree, 59 Iowa, 435; Kent v. Miltenberger, 13 Mo. App. 503.

the validity of a contract for the sale of grain, by the testimony, it rests upon the party claiming any rights under it to make it satisfactorily and affirmatively appear that the contract was made with the intention to deliver the grain.'

Where the statutes forbid short sales of stock, the seller, to enfore his contract, must show he was the owner at the time of sale.'

By the common law of England, wagers respecting matters which involve neither scandal nor matters inimical to good order were lawful; but the common law on this subject has never been adopted in most of the states, not harmonizing with colonial policy.❜

Generally, in this country, all wagering contracts are treated as illegal and void, as being against public policy.*

In England, since the statutes of 8 and 9 Vict., chap. 109, § 18, a contract in the form of a future sale of stocks, where neither party contemplated a real transaction, but simply intended to settle differences, is held a gambling transaction and not enforceable."

In Thacker v. Hardy, L. R. 4 Q. B. Div. 685, the court found that the plaintiff was employed to make contracts, and ruled that the understanding between the plaintiff and his customer, that the contract should be so managed that only differences in prices should be paid, did not violate this statute. Lindley, J., in giving the opinion at the trial, said: "What the plaintiff was employed to do, was to buy and sell in the stock exchange, and this he did; and everything he did was perfectly legal, unless it

'Sprague v. Warren, 3 L. R. A. 679, 26 Neb. 326. See Cobb v. Prell, 15 Fed. Rep. 774; Barnard v. Backhaus, 52 Wis. 593; Beveridge v. Hewitt, 8 Ill. App. 467.

Stebbins v. Leowolf, 3 Cush. 137.

Love v. Harvey, 114 Mass. 80. See Ball v. Gilbert, 12 Met. 399; Lewis v. Littlefield, 15 Me. 233; Perkins v. Eaton, 3 N. H. 152; Hoit v. Hodge, 6 N. H. 104; Collamer v. Day, 2 Vt. 144; West v. Holmes, 26 Vt. 530; Stoddard v. Martin, 1 R. I. 1; Wheeler v. Spencer, 15 Conn. 28; Edgell v. M'Laughlin, 6 Wart. 176; Rice v. Gist, 1 Strobh. L. 82; Bigelow v. Benedict, 70 N. Y. 202; Harris v. Tumbridge, 83 N. Y. 92; 3 Kent, Com. 277, 278; Metcalf, Cont. (Heard's ed.) 277.

4Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225; Grant v. Hamilton, 3 McLean, 100. See, however, Preston v. Cincinnati, C. & H. V. R. Co. 36 Fed. Rep. 54.

Grisewood v. Blane, 11 C. B. 526.