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Gold clauses in
216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co.
/ref>
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Contract clauses Gold
Gold clauses in contract
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...
s allow a creditor
A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some propert ...
the option to receive payment in gold or gold equivalent. A gold clause may prove valuable to the creditor in long term contracts, wherein questions may arise as to whether a currency
A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...
in use at the time the contract was entered into would still have the same value when payment is due. Creditor concerns in respect to inflation
In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...
, war
War is an armed conflict between the armed forces of states, or between governmental forces and armed groups that are organized under a certain command structure and have the capacity to sustain military operations, or between such organi ...
, changes in government, and any other uncertainty about the future value of currency would be common reasons for adopting a gold clause within a contract.
Overview
These clauses were common at the beginning of the 20th century. However, their use in theUnited States
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
was invalidated by
the Joint Resolution of June 5, 1933 (Pub. Res. 73–10) and the Gold Reserve Act
The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury. It also prohibited the ...
of 1934. Congress later rendered gold clauses again enforceable for contracts issued after October 28, 1977, as codified in (d)(2).
In 2008, the United States Court of Appeals for the Sixth Circuit
The United States Court of Appeals for the Sixth Circuit (in case citations, 6th Cir.) is a federal court with appellate jurisdiction over the district courts in the following districts:
* Eastern District of Kentucky
* Western District of K ...
affirmed the enforceability of such clauses in the decision ''216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co.''./ref>
See also
* Escalator clause *Gold Clause Cases
The ''Gold Clause Cases'' were a series of actions brought before the Supreme Court of the United States, in which the court narrowly upheld the Roosevelt administration's adjustment of the gold standard in response to the Great Depression.
Bac ...
References
{{reflistExternal links
Gold Appraiser
Contract clauses Gold