an intent to actually deliver the stock, and at common law, they are legal and valid.' Such contracts, although entered into for pure purposes of speculation, however censurable, are, nevertheless, not prohibited by law unless, as in some states, by special statute; even though the seller has not the goods nor any other means of getting them than to go into the market and buy them.' The law is now well settled that the sale of goods to be delivered in the future is valid. Such a contract is valid, although there is an option as to the time of delivery and though the seller has no other means of acquiring than to go upon the market and order them; but if, under the guise of such a contract, valid on its face, the real purpose and intention of the parties is merely to speculate on the rise or fall of prices, and the goods are not to be delivered, but the difference between the contracts and market price only paid, then the transaction is a wager, and the contract is void. It is not enough, however, to render the contract void that only one party intends by it a speculation in prices; it must be shown that both parties did not intend a delivery of the goods, but contemplated and intended a settlement only of differences. The burden of showing the invalidity of the contract rests upon the party asserting it.* This is the law of England since the Statute of 8 and 9 Vict. chap. 109, § 18.° 'Irwin v. Williar, 110 U. S. 499, 508, 28 L. ed. 225, 229; Cook, Stock and Stockholders, 352–361. Smith v. Bourier, 70 Pa. 325; Kirkpatrick v. Bonsall, 72 Pa. 155; Hatch v. Douglas, 48 Conn. 116; Flagg v. Baldwin, 38 N. J. Eq. 219; Kent v. Mil· tenberger, 13 Mo. App. 503. Clarke v. Foss, 7 Biss. 540. Cockrell v. Thompson, 85 Mo. 510; Crawford v. Harlow, 10 West. Rep. 78, "Grizewood v. Blane, 11 C. B. 538. Where the parties intend to speculate upon the future market and to settle the profit or loss upon the differences, there can be no recovery.' In Iowa and in Maine the same doctrine is held.' Losses sustained by buying and selling what is commonly called "futures," cannot be recovered in a court of law.' While the courts recognize the legitimacy of these transactions, both in the raw material for manufacturing, and in stock transactions,* yet, where the form of a future sale is resorted to, the real purpose and intention of the parties being merely to speculate on the rise and fall of the prices, and the goods are not to be delivered, but the difference between the contract and market price only to be paid, then the transaction is a wager, and the contract will not be enforced. A contract with a broker to purchase "cotton futures" on a margin, by which the purchase or delivery of actual cotton is not contemplated by either party, but the settlement is to be made between the parties by one party paying the other the difference between the contract price and the market price of such "cotton future," according to the fluctuations in the market,--is a wagering contract." Where the real intent is, that no property shall pass, but mere differences in price, between the value at the date of the contract and the time stipulated for delivery shall be paid, no matter how formal the contract of sale may be, it is a mere wager and void." 1Cobb v. Prell, 15 Fed. Rep. 774. First Nat. Bank v. Oskaloosa Packing Co. 66 Iowa, 44; Rumsey v. Berry, 65 Me. 570. Lawton v. Blitch, 83 Ga. 663. *Sterling v. Jordan, 48 Barb. 459; Richter v. Frank, 41 Fed. Rep. 859; Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225. Embrey v. Jemison, 131 U. S. 336, 33 L. ed. 172. *Irwin v. Williar, 110 U. S. 499, 28 L, ed. 225; Mutual L. Ins. Co. of New York v. Watson, 30 Fed. Rep. 653; Melchert v. American U. Teleg. Co. 3 McCrary, 521; Re Green, 7 Biss. 338; Ex parte Young, 6 Biss. 53; Cobb v. Prell, 15 Fed. Rep. 774; Sawyer v. Taggart, 14 Bush, 727; Kirkpatrick v. Bonsall, 72 Pa. 155; North v. Phillips, 89 Pa. 250; Thompson's Estate, 15 Phila. 532; Bigelow v. Benedict, 70 N. Y. 202; Gregory v. Wendell, 39 Mich. 337; Lyon v. Culbertson, 83 Ill. 33, 38; Beadles v. McElrath, 85 Ky. 230; Cockrell v. Thompson, 85 Mo.510; Cunningham v. Augusta Nat. Bank, 71 Ga.400; Rudolf v. Winter, 7 Neb. 125; Rumsey v. Berry,65 Me.570; Heman v. Hurdie, 12 Ct. of Sess. Cas. (S. C.) 406; Seeligson v. Lewis, 65 Tex. 215; Lowry v. Dillman, 59 Wis. 197; Crawford v. Harlow, 10 West. Rep. 78, 92 Mo. 498; But the intention of one party to settle by payment of difference in value between the dates will not render the contract void if the other party has contracted, intending to execute the contract legally.' Where one of the parties has purchased stock on a margin, an agreement to share profits or losses on sale of the stock is not illegal as a wager or stock-jobbing contract." The fact that the vendor does not then own the property will not render its sale for future delivery a wager or void contract, unless it was intended by both parties as a mere speculation on the future price.' It is not enough to render the contract void, that only one party intends by it a speculation in prices. It must be shown that neither party intends a delivery of the goods, but contemplates and intends a settlement only, of differences.* Where there is a mutual intent that the purchase shall never be consummated, that there shall be no delivery, and that the transaction shall be merely a gambling or wagering transaction, to win or lose money according to the advance or decrease of the price of the article, the contract is invalid as a gambling contract. But an intention of one of the parties only that it shall be a gambling transaction will not make it so, if the other party acts in good faith, and carries out the contract by buying and selling as instructed, and renders himself liable." A broker who makes a valid contract knowing that his principal intends a wager, and who at his principal's directions, pays the First Nat. Bank of Lyons v. Oskaloosa Packing Co. 66 Iowa, 41; Flagg v. 'Bartlett v. Smith, 4 McCrary, 388; Clarke v. Foss, 7 Biss. 540; Sawyer v. Taggart, 14 Bush, 727; Wall v. Schneider, 59 Wis. 352; Murray v. Ocheltree, 59 Iowa, 435; Pixley v. Boynton, 79 Ill. 351. 2 Bullard v. Smith, 139 Mass. 492. 3 Conner v. Robertson, 37 La. Ann. 814, 55 Am. Rep. 521; Bangs v. Hornick, 30 Fed. Rep. 97. 4Sondheim v. Gilbert, 5 L. R. A. 432, 117 Ind. 71. Benson v. Morgan, 25 Ill. App. 22; Jones v. Shale, 34 Mo. App. 302; Carroll v. Holmes, 24 Ill. App. 453. 6 Edwards v. Hoeffinghoff, 38 Fed. Rep. 635. money in closing it out, can recover the money paid and commis sions.' In transactions upon the stock exchanges, where the sale of futures in stock securities are contemplated, there have grown up various forms of contracts in sellers' or buyers' "options," which are designated by appropriate names. Among these are what are styled "puts" and "calls." A "put" being the privilege, for a certain consideration, of delivering, or not delivering, personalty within a certain time at a specified price. The person who makes such a contract and receives the consideration, contracts that he will accept and pay for the specified articles. A "call" is the privilege of calling or not calling for the subject matter of the contract. The one receiving the consideration agrees to deliver, at the option of the party to whom it is given or his order, at a time named, certain stocks, securities or goods, at a certain price. "Puts" and "calls" are merely options to sell or buy. The true idea of an option is impressed within the terms "puts" and "calls," the former being the privilege of delivering or not delivering the thing sold; the latter, being the privilege of calling or not calling for the thing bought." A contract for the sale of corporate stock to be delivered at the expiration of twelve months, with the seller's option to deliver at any time during that period, is prima facie valid, and not founded on a gambling consideration so as to render it void under Ala. Code, § 1742.* A contract reciting that for a certain consideration one agrees to sell to another certain stock for a certain sum, "if taken on or before" a certain future day, is a contract to give the latter the option to buy stock at a future time." Where the double privilege of a "put" and "call" is given, securing to the holder the right to demand of the seller at an agreed price, within given time, a certain number of shares of specified stock, or to require him to take within the time, the same shares of stock, it is called a "straddle" or "spread eagle."' The form of the latter, is usually: For value received, the bearer may call on the undersigned, for..... shares of common stock, of the..... Co., at.... ...... . per cent, at any time in ..days from date. Or, the bearer may, at his option, deliver the same to the undersigned, at........ per cent, any time within the period named. All dividends and extra dividends declared within 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. Expires,. A "call" is contained in the first clause of this agreement, and a "put" in the second. Under the "call" the bearer is entitled to all dividends or extra dividends declared during the time, which fact is specified in the "call." Whereas, in the "put," the one who agrees to receive, is entitled to all dividends or extra dividends declared during the time. No fictitious sales of stock can be made under the rules, but actual delivery of stock must be made. An "option," "put," "call," "straddle," or other similar stock exchange contract may be made with an intent to actually deliver the stock, and, if so, is unobjectionable and is enforceable.' The question for the jury to determine is whether the contracts made on the board of trade were valid, or whether they were pure options, that is, "puts" and "calls," or agreements, whereby one party pays another for the privilege of delivering to him or not a certain kind of merchandise at a future time at a certain price.' 1Harris v. Tumbridge, 83 N. Y. 95. Bigelow v. Benedict, 70 N. Y. 202; Harris v. Tumbridge, 83 N. Y. 92; Story v. Saloman, 71 N. Y. 420; Ex parte Young, 8 Biss. 53; Webster v. Sturges, 7 Ill. App. 560; Tenney v. Foote, 4 Ill. App. 594; Lyon v. Culbertson, 83 Ill. 33; Gilbert v. Gaugar, 8 Biss. 214; Maxton v. Gheen, 75 Pa. 166; Hess v. Rau, 95 N. Y. 359; Knowlton v. Fitch, 52 N. Y. 288; White v. Smith, 54 N. Y. 522; Cameron v. Durkheim, 55 N. Y. 425; Third Nat. Bank v. Harrison, 10 Fed. Rep. 243. 3 White v. Barber, 123 U. S. 392, 409, 31 L. ed. 243, 249. |
