A contract for furnishing goods at a certain price, based on the
then value of gold, stipulated that such price should be increased
or reduced with the rise or the fall in that value, with a proviso,
however, that a rise or a fall of twenty-five percent, unless it
remained sufficiently long to affect the general price of
merchandise, should not change the contract price of the goods.
When they were delivered, gold had undergone a reduction of more
than twenty-five percent below its value at the date of the
contract.
Held that in a suit on the contract, the
purchaser was entitled to a corresponding reduction in the contract
price of the goods without showing that the decline in gold had
affected the general price of merchandise.
Quimby brought an action against Ames & Sons, upon the
following contract,
viz.,
"N. EASTON, Jan. 2, 1865"
"Mr. Ichabod L. Quimby agrees to furnish us, and we to take from
him, fifteen thousand dozen long shovel handles, to be of the best
quality of timber and workmanship, for the present year, the price
to be ($1.25) one dollar and twenty-five cents per dozen, basing
the price on the present price of gold, $2.25."
"If the price of gold goes up or down, then the price of handles
shall be advanced or reduced accordingly. But it is understood that
no advance or reduction of the price of gold of twenty-five percent
shall change the price of handles unless it shall remain at the
advanced or reduced rate sufficiently long to affect the general
price of merchandise."
"I. L. QUIMBY"
"OLIVER AMES & SONS"
Page 96 U. S. 325
Quimby, in the months of May and July, 1865, furnished the full
complement of shovel handles, and four hundred and fortyeight dozen
in excess of the requirements of the contract. There were delivered
nine thousand eight hundred and twelve dozen May 20, 22, and 23,
when gold was worth $1.31, one thousand one hundred and eightyeight
dozen May 25, when gold was worth $1.36, and four thousand four
hundred and fortyeight dozen July 29, when gold was worth
$1.45.
The price of gold having been reduced more than twentyfive
percent below $2.25, Ames & Sons claimed a corresponding
reduction in their price of the handles, which would bring those
delivered from May 20 to 23, inclusive, down to seventytwo and a
half cents, those delivered May 25, down to seventyfive and a half
cents, and those delivered July 29, down to eighty and a half cents
per dozen, but the court held that to entitle them to any
reduction, there must be proof that the decline in gold had at
those dates affected the general price of merchandise, and, there
being no such proof, judgment was given accordingly. Ames &
Sons thereupon sued out this writ of error.
MR. JUSTICE HUNT delivered the opinion of the Court.
The contract of the parties is in several particulars
susceptible of different constructions. Thus the price of the
articles to be delivered is fixed at $1.25 per dozen, to be
regulated, however, by the price of gold. "If the price of gold
goes up or down, the price of the handles shall be advanced or
reduced accordingly." If gold goes up in price, does the price of
the goods go up, or do they go down? Gold is here made the standard
of value, although it was not, at the time this contract was made,
the ordinary medium of circulation in this country.
Instead of saying that gold, the standard, goes up or down, it
would be more accurate to say that the depreciation of the paper in
circulation is greater or less.
The court below held that if gold should go up in price, the
price of the goods should be increased; if it should go down in
Page 96 U. S. 326
price, that of the goods should be diminished. In this we agree,
and, as the important question does not here arise, we dismiss this
branch of the case.
The contract has this further provision:
"No advance or reduction of the price of gold of twentyfive
percent shall change the price of handles unless it shall remain at
the advanced or reduced rate sufficiently long to affect the
general price of merchandise."
The price of gold having fallen, between the date of the
contract and the delivery of the goods, more than twentyfive
percent, did that fact of itself entitle the defendants to a
corresponding reduction in the price of the goods, or were the
defendants also bound to show that the general price of merchandise
had been thereby affected? In other words, was the qualification
that the changed rate should continue so long as to affect the
price of general merchandise applicable where the advance or
reduction in the price of gold had been twentyfive percent only, or
where it was twentyfive percent or more?
The court below held that it was applicable to the present case,
where the change in the price of gold had greatly exceeded
twentyfive percent.
In considering this contract, we are to place ourselves, as far
as may be, in the position of the parties, with the knowledge
possessed by them of former and present affairs. They were
practical businessmen. They had seen, during the previous four
years, an enormous advance -- extravagant and fictitious -- in the
price of everything, and understood it to be dependent upon the
character of the currency.
They intended to provide for the effect of an appreciation or
depreciation of the currency in circulation, called the price of
gold, and we think their evident knowledge of the principles
governing the subject bears strongly upon the precise point decided
by the court below.
While it cannot be denied that the language of the contract will
bear the construction put upon it by the court below, we are all of
the opinion that such construction is not in accordance with the
intention of the parties.
It will letter bear another interpretation, which is this --
gold
Page 96 U. S. 327
being at the price of $2.25, and having reference to that fact
as giving their value, the one party agrees to deliver and the
other to receive the goods at $1.25 per dozen. This price named
should not, however, be fixed and absolute. If the price of gold
shall change, the price of the goods shall also change. But they do
not propose to embarrass themselves about trifles, and the gold
regulation shall be modified by the extent of the change in its
price. If it varies more than twentyfive percent, we agree that
that shall be deemed an important change, and shall of itself work
a change in the price of the goods.
If the variation does not exceed twentyfive percent, it will not
necessarily be important, and we agree that it shall not affect the
price of the goods unless it continues so long as to affect the
general price of merchandise. If it does so continue and does so
affect general prices, then that variation shall also regulate this
contract.
The parties saw and knew that great changes in the value of gold
had taken place in former times and in their times by which the
purchasing power of the currency in circulation was greatly
affected. They knew also that a slight change produced but little
effect. To make them say, then, that a change of one hundred or one
thousand percent should not of itself change the price of the goods
to be delivered, but that a change of twentyfive percent only
should have that effect, is contrary to all reason. On the other
hand, to allow them to say that the large change in gold should of
itself change the price of the goods, but that a change of
twentyfive percent or under should not affect the price of the
goods unless it was so long continued as to affect the general
price of merchandise is in harmony with the whole transaction.
It is not necessary to pursue the illustrations which have been
or may be given of the effect of the different readings of the
contract. We are satisfied that there was error in its construction
by the circuit court, and that the case must be remanded for a new
trial, and it is
So ordered.
