1 On the subject of payment generally and for further case law, see Goode, Payment Obligations, ch 1; Goode, Commercial Law, ch 17; Brindle & Cox, chs 1 and 3. For detailed discussion of payments through the banking system, see Geva, The Law of Electronic Funds Transfers (M. Bender, 1992).
2 Indeed, as noted in Ch 1, the concept of payment is in many respects more important than the definition of money itself. It should not be overlooked that the expression ‘payment’—like ‘money’—may have different meanings in different contexts—see, eg, Kingsby v Sterling Industrial Securities Ltd  2 All ER 414 (CA), where the court had to consider the meaning of ‘actual payment’ where it appeared in a statutory instrument. Likewise in Hillsdown Holdings plc v IRC  STC 561 it was held that a ‘payment’ connotes a transfer of funds which has some real and effective value to the recipient, although that decision again depended on a specific, statutory context. The expression ‘payment’ does, however, necessarily connote the discharge of a monetary obligation: White v Elmdene Estates Ltd  1 QB 1. The same theme was taken up by the House of Lords in MacNiven (Inspector of Taxes) v Westmoreland Investments Ltd  UKHL 6. In that case, a taxpayer had made a payment of interest out of funds loaned to it by the original lender. The Crown claimed that this was a device to avoid tax, and that, for the purpose of the relevant statutory provisions, the payment should accordingly be disregarded on the basis of the approach adopted in WT Ramsay Ltd v IRC  AC 300. However, the House of Lords held that ‘payment’ ‘means an act, such as the transfer of money, which discharges the debt’ (per Lord Hoffman, at para 67). The words ‘paid’ and ‘payment’ were to be given their ordinary commercial meaning and it was not possible to adopt a different approach to that point merely because the question arose in the context of a taxing statute.
3 This language is employed by Goode, Commercial Law, 498, and is quoted with apparent approval by Brindle & Cox, para 1.1. It appears to be generally accepted that ‘payment’ requires some act of acceptance on the part of the creditor, whilst a valid tender is a unilateral act on the part of the debtor—the point is discussed at para 7.08. The formulation set out in this paragraph was approved by the Federal Court of Australia in ABB Australia Pty Ltd v Commissioner of Taxation  FCA 1063, at para 166. The case decides that, where A owes money to B but, at the direction of B, A makes payment to C, these arrangements constitute ‘payment’ of the debt owing by A to B. A similar approach was approved by the same court in Quality Publications Australia Pty Ltd v Commissioner of Taxation  FCA 256, para 48.
4 Thus, if the parties agree that the debtor shall hand over his car in discharge of a debt of £10,000, the car does not thereby become ‘money’ nor does the act of delivery amount to ‘payment’, for the parties have varied the original contract by discharging the monetary obligation without payment. This statement was approved by the New Zealand Court of Appeal in Trans Otway Ltd v Shephard  3 NZLR 678, para 27 (affirmed,  2 NZLR 289), and was noted with apparent approval by the High Court of New Zealand in Reynolds (liquidator of Southern HSE Holdings Ltd) v HSE Holdings Ltd  NZHC 1815, para 24. But a monetary obligation retains its original character even though it is subsequently discharged by the tender and acceptance of cash, cheque, by means of a bank transfer, by means of set-off, or by any other means which might ordinarily be described as ‘payment’: see Charter Reinsurance Co Ltd v Fagan  AC 313, 384 (noted by Brindle & Cox, para 1.1).
5 See Libyan Arab Foreign Bank v Bankers Trust Co  QB 728, 764.
6 Of course, and as noted in para 7.06, it must not be overlooked that in any particular case, the concept of payment must be defined by reference to the law applicable to the obligation at issue, for questions of performance are ascribed to that system of law by Art 12(1)(b) of Rome I. See the discussion at para 4.12.
7 Peterson v Commissioners of Inland Revenue  UKPC 5. In contrast, an amount is ‘payable’ if it can be made due by demand and even though no demand has yet been made: Thomas Cook (New Zealand) Ltd v Commissioners of Inland Revenue  STC 297 (PC).
8 Whether a particular transaction amounts to a ‘payment’ to an employee for the purposes of applicable tax legislation will often be a difficult issue and will depend upon the terms of the particular statute in question. For a recent case in which a transfer of shares did not have the effect of a ‘payment’ because it did not place funds unconditionally at the disposal of the recipient, see Aberdeen Asset Management plc v Commissioners for Her Majesty's Revenue and Customs  UKUT 43 (Upper Tribunal, Tax and Chancery Chamber).
9 See the discussion of Camdex International Ltd v Bank of Zambia (No 3)  CLC 714 at para 1.61.
10 Nicole Catala, La Nature Juridique du Paiement’ (Dalloz, 1961).
11 Grua, ‘L'obligation et son paiement’ in Aspects actuels du droit des affaires, mélanges en l’Honneur de Yves Guyon (Dalloz, 2003) 481; Rouverie, ‘L'envers du paiement’, D. 2006 481.
12 Cour de Cassation, decision of 16 September 2011. In this respect, it may be noted that the project for the preparation of the Code Monétaire et Financier had originally proposed that Art 1231 should read: ‘Le paiement se prouve par tous moyens’ (Payment can be proved by any means).
13 The distinction between liquidated and unliquidated sums will be discussed in more detail in the context of the nominalistic principle—see Chs 9 and 10.
14 On this point, see Chitty, para 22–012; British Russian Gazette and Trade Outlook Ltd v Associated Newspapers Ltd  2 KB 616, 643. The formulation in the text was noted with approval by the Supreme Court of New South Wales in Nab Ltd v Market Holdings Pty Ltd (in liquidation)  NSWSC, para 126.
15 An obligation to pay a liquidated amount may also arise in other ways, eg pursuant to statute, but for present purposes the discussion is limited to contractual claims.
16 Under English law, the debtor has the right of appropriation. But if he fails to communicate that appropriation to the creditor at the time of payment, then the creditor may instead exercise the right of appropriation—see Chitty, paras 21–059 and 21–061. The debtor's intention was important in The Turiddu  2 Lloyd's Rep 401 (CA).
17 For another formulation, see Goode, Payment Obligations, para 1.09. The point made in the text would also follow from the definition of ‘payment’ given at para 7.04, which refers to an act offered and accepted in discharge of a monetary obligation. The same point is emphasized in Brindle & Cox, para 1.1.
18 The requirement for the creditor's consent as a necessary ingredient of the payment process in a contractual case and the formulation of this rule in the sixth edition of this work were cited with approval in PT Berlian Laju Tanker TBK v Nuse Shipping Ltd  EWHC 1330 (Comm), para 67. The corresponding formulation in the fifth edition (at 75) was cited with approval in TSB Bank of Scotland v Welwyn & Hatfield DC  2 Bank LR 267 and in Commissioners of Customs and Excise v National Westminster Bank plc  EWHC 2204. Likewise, in The University of Arts London v Rule (Employment Appeal Tribunal, 5 November 2010, 2010 WL 5590230), the tribunal noted that the payment of an interim award (acceptance of which would relieve the employer from any obligation to make an additional, ‘uplift’ payment) had to be positively accepted (as opposed to merely received) by the claimant.
19 Cf Code Civil, art 1257 and German Civil Code, ss 293 and 294. Under the latter provisions, the debtor must tender payment in accordance with the terms of the contract, and the creditor who refuses to accept such performance is in default of his contract. So far as English law is concerned, the creditor's refusal to accept payment does not of itself appear to constitute a breach of contract, with the result that the debtor would not thereby become entitled to damages in respect of the non-acceptance (although note the suggestion to the contrary in Canmer International Inc v UK Mutual Steamship Assurance Association (Bermuda) Ltd  EWHC 1694 (Comm), at para 53). Even if it did constitute a breach, the debtor would usually find it difficult to show that he had suffered any loss as a result of the non-acceptance.
20 Civil Procedure Rules, r 37.3. Any claim for damages or interest will generally also be dismissed—Rourke v Robinson  1 Ch 480. However, an award of interest may be made if the debtor continues to make use of the money following the tender—Barratt v Gough-Thomas  2 All ER 48. It should be noted that the defendant will only achieve the position stated in the text if, in addition to making the payment, he also meets all of the notice and other, associated procedural requirements in full: see Greening v Williams  CP Rep 40 (CA).
21 See Chitty, para 21–039; Goode, Payment Obligations, para 1.13. Payment is consensual in the sense that the creditor must accept the payment, either expressly or by his conduct in treating the funds as his own: Canmer International Inc (n 19), at para 51. See also ABB Australia Pty Ltd v Commissioner of Taxation  FCA 1063 (Federal Court of Australia).
22 For cases in which this problem arose, see Stag Line Ltd v Tyne Shiprepair Group Ltd  2 Lloyd's Rep 211; Empresa Lineas Maritimas Argentinas v Oceanus Mutual Underwriting Association (Bermuda) Ltd  2 Lloyd's Rep 517. For a case in which the court had to decide whether a party was a ‘creditor’ for the purposes of serving a winding-up petition, see New Hampshire Insurance Co v Magellan Reinsurance Co Ltd (Privy Council Appeal No 50 of 2008).
23 See Seligman Bros v Brown Shipley & Co (1916) 32 TLR 549; The Chikuma  1 All ER 652 (HL). In the same sense, see China Mutual Trading Co Ltd v Banque Belge pour l’Etranger (1954) Hong Kong LR 144, 152—‘payment by a debtor into a blocked account cannot be a good discharge of a debt’.
24 A conditional tender will not usually suffice, since the creditor will normally expect unconditional access to the funds for his own use—see Re Steam Stoker Co (1875) LR Eq 416. For the same reason, a payment made on terms that seek to reserve an interest in the relevant funds to the payer will not amount to a valid tender or payment: Re Kayford Ltd  1 WLR 279, on which see Goode, Payment Obligations, para 1–18. However, where there is some doubt about the creditor's contractual entitlement to the payment, the debtor may elect to make payment ‘under reserve’, which—if accepted by the creditor—creates a right to reimbursement if the creditor's claim is ultimately held to be ill-founded—see Banque de I’ Indochine et de Suez v JH Rayner (Mincing Lane) Ltd  1 All ER 468. The offer of payment under reserve and its acceptance by the creditor thus effectively creates a collateral contract between the parties.
25 On the notes and coins which constitute legal tender in the UK, see Currency and Banking Notes Act 1954, s 1 and Coinage Act 1971, s 2 as amended by Currency Act 1983, s 1(3).
26 See, eg, the decision of the German Federal Supreme Court, 25 March 1983, BGHZ 87, 162.
27 Blumberg v Life Interests and Reversionary Securities Corp  1 Ch 171, affirmed  1 Ch 27.
28 Pollway Ltd v Abdullah  1 WLR 493, dealing with a sum of £555 and where (on the particular facts) the Court was justified in concluding that a requirement for payment ‘in cash’ involved an obligation to pay with legal tender.
29 Otago Station Estates Ltd v Parker  NZSC 16.
30 Thus, if a creditor objects to the amount of a tender but does not complain about its mode or form, then he will be taken to have waived any objection to the tender on the latter ground. The whole subject of tender is considered in Chitty, paras 21–083–21-096. In so far as those principles deal with a tender in physical cash, it will be noted that the English authorities there cited are of some antiquity; this perhaps reflects the realization that the courts cannot now be expected to lend their assistance to a vexatious creditor who refuses to accept a reasonable means of payment. To the collection of English cases cited by Chitty, there may be added the American decisions in Atlanta Street Railway Co v Keeny (1896) 25 SE 629; Jersey City and Bergen Railroad v Morgan (1895) 160 US 288; and US v Lissner (1882) 12 Fed Rep 840. Once again, these cases are largely of historical interest.
31 eg, as in Pollway Ltd v Abdullah  1 WLR 493.
32 The Brimnes  1 WLR 386, 400. This definition was approved by the Court of Appeal in the same case,  QB 929, 948, 963, and 968. It was also approved by the Court of Appeal in Mardorf Peach & Co Ltd v Attica Sea Carriers Corp of Liberia  QB 835, 849–54. The Court of Appeal's comments remain valid even though its decision was reversed by the House of Lords,  3 All ER 124. For a good example of the Court's attitude, see Farquharson v Pearl Assurance  3 All ER 124. Where the debtor has, with the creditor's approval, established a direct debit with his bank for payments to be made over an extended period, it may be that the existence of the direct debit mandate constitutes a sufficient tender in respect of each instalment, even though the creditor omits to collect the funds: Weldon v SRE Linked Life Assurance  2 All ER 914 (Comm).
33 In relation to the UK, it is an offence to be concerned in arrangements which assist in the retention or concealment of ‘criminal property’, a term which includes the monetary fruits of crime—see Proceeds of Crime Act 2002, Pt 7; some of the difficulties which can arise in this context are discussed and considered in Bowman v Fels  EWCA Civ 226 and see also the discussion of the decision in Tayeb v HSBC Bank plc at para 7.27. In the context of terrorist funds, see Anti-Terrorism, Crime and Security Act 2001, Pts 1 and 2. These UK measures reflect international trends in the same area.
34 Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. It will be necessary to return to this case in the context of the performance of foreign money obligations and the debtor's option to pay in sterling—see para 7.23.
35 That the offer of a cheque does not constitute a valid tender was decided in Re Steam Stoker Co (1875) LR 19 Eq 416 and in Johnson v Boyes  2 Ch 73; more recent authority to the same effect may be found in OK Bakery Co v Morten Milling Co (1940) 141 SW (Texas) 436. In many cases, the contract may stipulate for payment by cheque or the creditor may elect to accept it anyway, but that does not in any sense affect the statement in the text. A creditor is entitled to refuse a personal cheque where the contract provides for payment by means of ‘legal tender, bank cheque or other cleared funds’: see the decision of the New Zealand Supreme Court in Otago Stations Estates Ltd v Parker  2 NZLR 734.
36 Simmons v Swan (1927) US 113, where the creditor had rejected an instrument in the nature of a banker's draft. Mr Justice Holmes said: ‘If without previous notice he insisted upon currency that was strictly legal tender instead of what usually passes as money, we think that at least the plaintiff was entitled to a reasonable opportunity to get legal tender notes and as it was too late to get them that day might have tendered them on the next.’
37 See Mardorf Peach & Co Ltd v Attica Sea Carrier Corp of Liberia  AC 850. The very fact that the contract includes details of the creditor's bank account must surely imply that payment by means of a funds transfer is to be accepted in lieu of cash.
38 Thus where the creditor includes details of his bank account on notepaper or invoices, he must be taken to have consented to payment by way of transfer to that account: German Federal Supreme Court, 13 May 1953, NJW 1953, 897; contrast the decision in Commissioners of Customs & Excise v National Westminster Bank plc  EWHC 2204.
39 Official Solicitor to the Supreme Court v Thomas The Times, 21 February 1988.
40 The waiver may be an express or implied term of the contract or it might be derived from the subsequent conduct of the creditor.
41 For a telling example, see the decision of the Court of Appeal at Frankfurt, 22 September 1986, JZ 1986, 1072: a taxi driver may insist on payment in cash and refuse a euro-cheque.
42 In England, see Commissioners of Customs & Excise v National Westminster Bank plc  EWHC 2204; see also the decisions of the German Supreme Court, 25 March 1983, BGHZ 87, 163; 5 May 1986, BGHZ 98, 24, 29, 30. In relation to France, see Cass Civ, 12 February 1960, S 1960, 131; Cass Com, 19 July 1954, D 1954, 629, Cass Civ, 12 January 1985, D 1989, 80.
44 Nevertheless, in many cases it will remain important to scrutinize the terms of the contract in order to determine whether a particular transfer will amount to an effective payment and discharge of the obligation. In PT Berlian Laju Tanker TBK v Nuse Shipping Ltd  EWHC 1330 (Comm), the purchase price of a vessel was payable in full by credit to a bank account in Greece. A 10 per cent deposit had been credited to an escrow account in Singapore. The buyers intimated to the sellers that they would complete the transaction by paying 90 per cent of the price to the Greek bank account and releasing the escrow deposit to the sellers. Whilst this may appear to have been a reasonable approach in commercial terms, it did not accord with the contractual provision requiring full payment to the account in Greece. As the court observed, the buyers were effectively requiring the sellers to accept a funds transfer risk which was not contemplated by the terms of the contract. The sellers were therefore entitled to treat the buyers’ conduct as an anticipatory and repudiatory breach of the sale and purchase agreement.
45 Such instruments are ‘equivalent to cash’ in the sense that, in the absence of fraud, judgment must usually be given for the full face amount of the instrument, disregarding any counterclaims of the drawer. As noted previously, however, the creditor cannot be compelled to accept a cheque in the absence of a contractual obligation to do so, for he cannot be required to run the risk of dishonour. Consequently, a cheque is not ‘equivalent to cash’ in this latter sense. In Stirling Properties Ltd v Yerba Pty Ltd  73 ACTR 1, an Australian court noted that under modern commercial conditions, the parties may expect to make and receive payment by cheque, but that the entitlement to pay by cheque is not absolute and depends upon the acceptance of the tender by the creditor.
46 Re Romer & Haslam  2 QB 286; and see Michael Aronis & Aronis Nominees Pty Ltd (t/a Welland Tyrepower) v Hallett Brick Industries Ltd  SASC 92.
47 See, eg, Nova (Jersey) Knit v Kammgarn Spinnerei GmbH  2 All ER 463, HL. In the context of documentary credits, this rule is frequently referred to as the ‘autonomy’ principle. It now appears that similar treatment is to be accorded to a direct debit, on the footing that it is an assurance of payment which is separate from the commercial contract—see Esso Petroleum Ltd v Milton  1 WLR 938, CA, followed in Sankey v Helping Hands Group plc  CP Rep 11 and 3 Com Europe Ltd v Medea Vertriebs GmbH  UKCLR 356.
48 This is especially the case in the context of bills of exchange and documentary credits, which may have maturity periods of several months or even longer.
49 See Chitty, paras 21–073 and 21–084. English decisions on the subject include Marreco v Richardson  2 KB 584 Re Hone  Ch 85; ED & F Man Ltd v Nigerian Sweets and Confectionery Co Ltd  2 Lloyds Rep 50; Homes v Smith  Lloyd's Rep Bank 139. The same point arose for decision in WJ Alan & Co Ltd v El Nasr Export & Import Co  2 All ER 127 (CA), a case which has broader monetary law implications and will thus be referred to in other contexts. More recent confirmation of the same rule is provided by Day v Coltrane  1 WLR 1379. The position in the US is similar: Ornstein v Hickerson (1941) 40 F Supp 305. See also the remarkable decision of the Appellate Division of South Africa in Eriksen Motors (Wellcom) Ltd v Protea Motors, Warrenton and others (1973) 3 South African LR 685, 693. Since the payment ‘relates back’ to the date on which the instrument was given, it follows that any contractual right to interest cannot accrue from that date, even though the creditor may be out of funds for a few days pending presentation and clearance of the cheque. The French courts have likewise held that payment occurs on the receipt of the cheque, subject to clearance—Cour de Cassation, Ch Soc 17 May 1972, D 1973, 129, whilst the German courts seem to look to the date of the dispatch (not receipt) of the cheque—Federal Supreme Court, 7 October 1965, NJW 1966, 47 and 29 January 1969, NJW 1969, 875.
50 This was so decided by the Court of Appeal in Norman v Ricketts (1886) 3 TLR 182. It appears that the authorization to post the cheque must be explicit and cannot be derived from a previous course of dealing—Pennington v Crossley (1897) 77 LT 43. Both of these decisions merit reconsideration, but they were followed in Thairwall v Great Northern Railway Co  2 KB 509. As noted in the text, a cheque is treated as a payment, on condition that it is subsequently honoured; this must mean that the cheque must be paid when presented for payment by or on behalf of the creditor himself. Of course, if the paying bank becomes insolvent at this point, then the cheque will not be met and the creditor must pursue the drawer of the cheque, who will not have been discharged. For the position where the collecting bank becomes insolvent, see Re Farrow's Bank Ltd  1 Ch 41 and the discussion in Goode, Commercial Law, 577.
51 For an analysis of the obligations of the debtor, creditor, and card issuer, see Re Charge Card Services Ltd  Ch 497. For a discussion of some of the issues that may arise when a card payment is made over the internet, see Goode, Payment Obligations, para 4–22.
52 The means by which banks effect such transfers and the systems established for that purpose are discussed by Goode, Commercial Law, 501; Brindle & Cox, ch 3. For present purposes, it must, however, be noted that a payment by means of funds transfer will generally (although not invariably) involve the use of the payment and clearing systems in the country which issues the currency concerned—see the discussion of this difficult subject in Brindle & Cox, paras 3–24–3-293.
53 The expression ‘bank transfers’ is well understood in practice; the processes involved are well described in the note to Art 4A of the Uniform Commercial Code—the text is reproduced by Goode, Commercial Law, 503. The court in R v King  3 All ER 705 suggested that a payment order through the Clearing House Automated Payments System (CHAPS) operated to transfer a proprietary right in the chose in action represented by the bank credit. For the reasons just given, no assignment of the credit is involved, and the decision must be regarded as incorrect to that extent; this aspect of the decision does, in any event, seem to be nullified by the House of Lords’ analysis of bank transfers in the Preddy case—see the discussion in Brindle & Cox, para 1–006. That the use of the word ‘transfer’ may lead to confusion in this area was also noted by Staughton J in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728, 750.
54 It is no accident that a number of the cases which dealt with the precise time of payment involved shipowners who wished to terminate charterparties in order to obtain the higher returns then available in the market. Had the market been moving in the opposite direction, the owners would no doubt have contented themselves with payments which had been tendered, even though technically out of time.
55 See, eg, the discussion of TARGET 2 at para 33.58.
56 Settlement banks must meet a number of criteria in order to qualify for membership under the CHAPS Rules, including the ability to comply on a continuous basis with CHAPS technical and operational requirements.
57 CHAPS formerly also operated a system for transfers in euro, but this service was terminated in 2008 in view of the alternative payment methods available.
58 The present section draws on the writer's previous work in ch 4 of Goode, Payment Obligations.
59 Since the well-known decision in Foley v Hill (1848) 2 HL Cas 28, it has been established that a current or deposit account balance represents a debt and, in principle, is therefore capable of assignment. As a consequence, it has in the past been asserted that an instruction to a bank to transfer funds amounts to an assignment of the relevant balance in favour of the payee. However, for the reasons given in the text, this view cannot be accepted. See the discussion in Brindle & Cox, para 3–061. For essentially the same reasons, the payee cannot claim any security or beneficial interest over the funds contained in the payer's account, by reason only that the payer gives a transfer instruction to his bank. For an unsuccessful attempt to establish a claim of this type, see Triffitt Nurseries Ltd v Salads Etcetera Ltd (Court of Appeal, 18 April 2000).
60 For judicial discussion of the legal nature of a funds transfer and an analysis in terms of the law of agency, see Royal Products Ltd v Midland Bank Ltd  2 Lloyd's Rep 194.
61  AC 815 (HL). On this case, see Goode, Commercial Law, 493. The decision is unsatisfactory but the 1968 Act was subsequently amended to deal with the issue. Contrast the decision in R v Hilton The Times, 13 April 1997 (CA).
62 Chitty, para 21–043. Payment to an agent with no authority of any kind will clearly not discharge the debtor from his obligation to the ‘principal’: for an example of this problem that arose in a banking context, see Cleveland Manufacturing v Muslim Commercial Bank Ltd  2 Lloyd's Rep 646; and see also British Bank of the Middle East v Sun Life Assurance Co of Canada  2 Lloyd's Rep 9.
63 For a case in point, see Commissioners of Customs & Excise v National Westminster Bank plc  1 All ER (Comm) 327. See also Rick Dees Ltd v Larsen  NZCA 25.
64 This obvious point is illustrated by the decision in Razcom CI v Barry Callebaut Sourcing AG  EWHC 2598 (QB).
65 TSB Bank of Scotland v Welwyn Hatfield DC  2 Bank LR 267. But ratification is only effective if, at the time of making the payment, the bank purported to act on behalf of the principal: Keighley, Maxted & Co v Durant  AC 240; Owen v Tate  QB 402; Goode, Commercial Law, 500. For a case in which ratification was found to be ineffective, see Secured Residential Funding Ltd v Douglas Goldberg Hendeles & Co  NPC 47. The ingredients of an effective ratification are considered in SEB Trygg Liv Holding AG v Manches  1 Lloyd's Rep 318 (CA).
67 Of course, had the owner received notice of the payment and taken no steps to reject it, then this might amount to an implied acceptance: Suncorp Insurance & Finance v Milano Assicurazioni  2 Lloyd's Rep 225.
68 TSB Bank of Scotland plc v Welwyn Hatfield DC and Brent LBC  2 Bank LR 267; The University of the Arts London v Rule (Employment Appeal Tribunal, 5 November 2010, 2010 WL 5590230).
69 Mardorf Peach & Co Ltd v Attica Sea Carriers Corp of Liberia  AC 850 (HL); HMV Fields Properties Ltd v Bracken Self Selection Fabrics Ltd  SLT 31.
71 For other cases on this subject, see A-G for Ceylon v Silva  AC 461 (PC); Armagas Ltd v Mundogas SA  AC 717 (HL); First Energy (UK) Ltd v Hungarian International Bank Ltd  2 Lloyd's Rep 194 (CA).
72 Rome I, Art 12 (1)(a).
73 For examples, see Hughes v Lenny (1839) 5 M & W 183; The Tergeste  P 26.
74 See, eg, Law of Property Act 1925, s 41 and Sale of Goods Act 1979, s 10(1).
75 For the relevant rules in this area, see Chitty, paras 21–011 and 21–026. Time may also be of the essence in certain contracts of a financial nature where the only material obligations of both parties are of a monetary character, eg interest rate swaps, currency swaps, or similar transactions. The point will invariably be academic, since such contracts will usually contain express provisions dealing with the consequences of a payment default.
76 Mardorf Peach & Co Ltd v Attica Sea Carriers Corp of Liberia  AC 850. This would remain the case even if the law of the place of payment allowed for later payment as a result of the holiday, for the law applicable to the contract should be given effect where the contract stipulates for a specific date and makes it clear that nothing later will suffice. In each case, the express terms of the contract would appear to override the court's discretion to ‘have regard’ to the law of the place of payment: see Art 12(2) of Rome I.
77 RA Cripps v Wickenden & Son Ltd  1 WLR 944, 955.
78 See generally the Report and the proposed rules submitted by the Monetary Law Committee of the International Law Association, Warsaw Conference (1988).
79 Thus, while the receiving bank maintains a block or reservation that prevents access to the relevant funds by the account holder, the funds have not been ‘credited’ for these purposes: The Chikuma  1 WLR 314 (HL); In re Holmes  EWHC 2020 Admin.
80 On this formulation, see Goode, Commercial, 508.
81 On these points, see Momm v Barclays Bank International Ltd  QB 790. This case is of particular interest because both the creditor and the debtor had accounts at the same bank, and the transfer was thus to be achieved through actions to be effected entirely ‘in-house’.
82 This point, which might otherwise easily be overlooked, is made by Professor Goode in Commercial Law, 508. In many cases, the creditor's bank may not even expect to receive a directly corresponding and immediate payment from the debtor's bank. It may simply debit an account which the debtor's bank has with the creditor's bank and this may well happen after the creditor's own account has been credited.
83 This is the effect of the House of Lord's decision in The Chikuma  1 WLR 314. The decision itself may be criticized on the facts, because the ‘value date’ condition was stipulated as between the transferring and the receiving institutions, but does not appear to have been reflected as a condition of the credit to the creditor's own account. For criticism, see in particular the case note by Mann (1981) 97 LQR 379. Despite these criticisms, the decision does make it clear that in the context of a monetary obligation, performance must be complete, and not merely substantially complete. There is thus no room for the argument that payment of £999,990 constitutes substantial performance of an obligation to pay £1 million. This may be contrasted with other forms of obligation where, eg, a duty to deliver 12,600 tons of maize may be adequately performed by the delivery of 12,588 tons, if that would reflect the intention of the parties—see Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd  1 QB 300.
84  2 Lloyd's Rep 479. The decision in this case would seem to be inconsistent with the earlier decision in The Effy  1 Lloyd's Rep 18—see n 88.
85  WLR 195. It was suggested (at 204) that the practice of bankers should be regarded a decisive in this area, but this statement must be treated with some care given that it is the rights and obligations of non-bank parties which are at issue.
86 Delbreuck & Co v Manufacturers Hanover Trust Co (1979) 609 F 2d 1047. It should be said that this case involved an attempt by a debtor to revoke payment instructions given to its own bank; and it is fair to observe that (under the rules of systems which effect this type of payment) revocation of the instructions may become impossible some time before the funds are actually allocated to the creditor's account, ie revocation may become impossible whilst the payment is going through the system. Whilst the decision is an important one, it may not necessarily be of direct relevance in the context of payment as between the debtor and creditor themselves.
87  QB 929, 948, and 963.
88 In The Brimnes  1 WLR 386 the charterer's bank asked the owner's bank to make an internal transfer of the amount due in respect of hire to the owner's account. The telex which made this request arrived before the owner gave notice to terminate the charter, but that notice was given before the recipient bank had made the decision to allocate funds to the owner's account. The despatch of the telex could not be regarded as ‘payment’ because it did not create a source of immediately available funds so far as the owner was concerned. The decision in The Effy  1 Lloyd's Rep 18 was perhaps a little harsher from the perspective of the charterer, although it is entirely consistent with the principles just described. In that case, the necessary funds arrived at the owner's bank on the due date (5 October 1970) but, owing to the incompleteness of instructions given to one of the correspondent banks involved in the process, the payment was not actually credited to the owner until he had been given notice to terminate the charter. Once again, the notice was found to have been validly given, because the owner did not have unconditional access to the necessary funds on the due date.
89 This point has been decided by the German Federal Supreme Court, 25 January 1988, BGHZ 103, 143, which also confirms that notification to the creditor is unnecessary to complete the payment. The International Law Association (Warsaw 1988, Report of 63rd Conference) also regards an unconditional credit as both necessary in order to achieve payment, and sufficient for that purpose.
90 Directive 2000/35/EC of the European Parliament and of the Council on combating late payment in commercial transactions, OJ L 2000 8.8.2000, 35. This directive will be replaced by a new directive under the same title with effect from 16 March 2013 (OJ L 48, 23.2.2011, 1), but the language about to be discussed remains in the same form.
91 Case C-306/06,  All ER (D) 36 (Apr), at para 32.
92 Para 23 of the judgment.
93 A similar approach has been adopted by the Court in the context of late payment by Member States of their contributions to the EU budget: see Case C-363/00, Commission v Italy  ECR I-5767, and the earlier case law there discussed. It may be noted in passing that the decision has caused some difficulty in Germany in that the views expressed in the judgment are at odds with various German rules on payment: for discussion, see Zochling/Jud in Pruttig/Wegen/Winreich, BGB: Kommentar (Luchterhand, 6th edn, 2011), section 270, para 1.
94 The latter requirement should not be overlooked. The payee's bank may be entitled to reject the transfer if the stated account has been closed or, in some cases, is expressed in a currency that differs from that of the receipt. Where the remittance details are insufficient, it may be incumbent on the receiving bank to notify the sender: see, for example, the rules envisaged by Arts 10 and 11, UNCITRAL Model Law on International Credit Transfers. French law appears to be in line with these provisions and a receiving bank has been held liable for failure to seek clarification of payment instructions or to clarify inconsistencies: see, for example, BRED v CCF (Paris Commercial Court, 18 December 1992; French Supreme Court 29 January 2002, no 99–16.571).
95 See Tayeb v HSBC Bank plc  EWHC 1529 (Comm). The case contains a useful description of the practical operation of the Clearing House Automated Payments System (CHAPS) and an analysis of the bank's potential liability as a constructive trustee if it is found that a customer was not the true owner of the funds passed through his account.
96 See, eg, Mardorf Peach, n 76.
97 See the discussion at para 7.26 and the Deutsche Telecom case there noted.
98 See Com. 22 October 1996, Dalloz Affaires 1997, p 22, commentary by J Mazeaud and Com 3 February 2009, pourvoi No 06–21184, JCP E 2009, No 1227, commentary by J Stoufflet.
99 The present section works on the basis that England is the place of payment.
100 The nominalistic principle is considered generally in Part III.
101 Pyrmont Ltd v Schott  AC 145, 153 (PC).
102 If England is the place of payment, the debtor may have the option to pay in sterling in accordance with the principles outlined at para 7.41.
103 It must, however, be acknowledged that this statement is in some respects at odds with the decision in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728.
105 This point would now flow from the application of Art 4(1)(b) of Rome I, but it is also consistent with the pre-existing rules of private international law.
106 However, had the deposit contract been governed by New York law, then the Presidential Order would have formed a part of the law applicable to the contract. In the absence of some countervailing consideration of public policy, the English courts would then have to give effect to the blocking arrangements—see Libyan Arab Foreign Bank v Manufacturers Hanover Trust Co (No 2)  1 Lloyd's Rep 608.
107 This is the rule in Ralli Bros v Compania Naviera Sota y Aznar  2 KB 287. For a criticism of this rule, see para 16.38. The rule is now in some respects mirrored by the terms of Art 9(3), Rome I.
108 The suggestion was made in the fourth edition of this work, 193. It could be argued that this view derived some support from the decision in Re Banca Commerciale Italiana  2 All ER 208, but the point is not convincing.
109 The relative priority of the applicable law in this area is established by Art 12(1)(b) of Rome I, read together with 12(2).
110 For a discussion of the Libyan Arab Bank case, see Smedresman and Lowenfeld, ‘Eurodollars, Multinational Banks and National Laws’ (1989) 64 New York University LR 733. The authors are critical of the court's reasoning, on the ground that eurodollar deposits were always repaid via CHIPS, and never in cash (761), although they approve the result (801) on the basis that the law of the place where the deposit is maintained should govern. But the case was decided on the basis that English law alone was applicable to the London deposit. The issue was whether the English contract included an implied term that payment would not be made in cash. Since the authors believe that such a term ought to have been implied, the decision would not ‘have come out as it did’ (801).
111 The US Supreme Court has defined eurodollars as ‘United States dollars that have been deposited with a banking institution outside the US with a corresponding obligation on the part of the banking institution to repay the deposit in US dollars’ Citibank NA v Wells Fargo Asia (1990) 495 US 660. The legal nature of eurodollars has been considered at para 1.67.
112 In the fifth edition of this work, 200, it was suggested that the debtor's option to pay in sterling might be excluded in the case of a eurodollar deposit. However, this argument would likewise appear to be unavailable following the decision in the Libyan Arab Bank case; the court saw no objection to ordering payment in sterling if payment in US dollars proved to be impossible.
113 In cases in which there is no doubt that an obligation expressed in foreign money is required to be settled in that money, there will usually be no difficulty. If the debtor is to pay in cash, he must proffer whatever constitutes legal tender for the requisite amount in accordance with the lex monetae—see Marrache v Ashton  AC 311 and the discussion at para 7.09. If he is to transfer funds to the creditor's bank account, then the principles described at para 7.17 (in relation to sterling payments) will apply equally in this context.
114 It will be apparent that this type of problem arises only where the money of account differs from that of the place of payment.
115 This self-evident proposition finds judicial support in Société des Hôtels Le Touquet v Cummings  1 KB 451 (CA).
116 The statement in the text reflects the principle of nominalism.
117 This line of reasoning does, however, have its limitations—eg an international bank makes and receives countless payments on every business day. It would be very inconvenient if its borrowers or counterparties could all elect to meet their obligations in sterling instead of the stipulated currency. In practical terms, however, the point will arise only rarely; London will not usually be the place of payment for financial obligations expressed in US dollars (although, see the discussion of the Libyan Arab Bank litigation, at para 7.34).
118 This statement must, however, now be read subject to the provisions of Art 12(2) of Rome I. The relevance of this provision in the present context is discussed later in this section. It is the view of the present writer that the availability of this option should be reconsidered. Although the text follows the traditional line that payment at the rate of exchange on the due date should be acceptable where payment is made punctually, it should be appreciated that currencies can fluctuate against each other even on an intra-day basis. Consequently, if the creditor receives payment in sterling in respect of a US dollar debt at 10.00 am, he may well have suffered an exchange loss by 11.00 am. The debtor should be compelled to pay in sterling if payment in the foreign currency is unlawful for some reason, but it is not easy to see why a debtor should have the free right to pay in a currency that did not form the subject matter of the contract.
119 For an illuminating comparative survey, see Dach (1954) 3 AJCL 155. In relation to Germany, see sec 244, German Civil Code.
120 Section 3–107 of the Uniform Commercial Code reads: ‘A promise or order to pay a sum stated in a foreign currency is for a sum certain in money and, unless a different medium of payment is specified in the instrument, may be satisfied by payment of that number of dollars which the stated foreign currency will purchase at the buying sight rate for that currency on the day on which the instrument is payable or, if payable on demand, on the day of demand. If such an instrument specified a foreign currency as the medium of payment, the payment is payable in that currency.’
For a South African case which recognizes the right of conversion, see Barry Colne & Co (Transvaal) Ltd v Jacksons Ltd (1922) South African LR, Cape Prov Div 372.
121 Art 14 of the Uniform Law on Bills of Exchange and Notes (League of Nations Official Journal, xi (1930), 933) reads as follows: ‘When a bill of exchange is drawn payable in a currency which is not that of the place of payment, the sum payable may be paid in the currency of the country, according to its value on the date of maturity. If the debtor is in default, the holder may at his option demand that the amount of the bill be paid in the currency of the country according to the rate of the day of maturity or the day of payment.’
The usages of the place of payment determine the value of foreign currency. Nevertheless the drawer may stipulate that the sum payable shall be calculated according to a rate expressed in the bill.
The foregoing rules shall not apply to the case in which the drawer has stipulated that payment must be made in a certain specified currency (stipulation for effective payment in foreign currency).
In so far as it relates to foreign currency obligations payable in Germany, a similar rule is to be found in Art 244 of the German Civil Code. Art 244 was amended with a view to the introduction of the euro, but the precise scope of the article is disputed. For example, it is unclear whether it extends to contracts governed by a foreign law or payable outside the eurozone.
122 This state of affairs prompted the International Law Association to take up the subject and, in 1956, it accepted the ‘Dubrovnik Rules’ prepared by its Monetary Law Committee—Report of the 47th Conference (1956) 294. These rules were considered by the Council of Europe which, in 1967, opened for signature the European Convention on Foreign Money Liabilities (European Treaty Series No 60). However, the Law Commission rejected the Convention and the Government accordingly declined to sign it. The text is reproduced in Appendix IV to the fourth edition of this work.
123 As to the circumstances in which a claim for such damages may be made, see paras 9.36–9.45.
124 See Art 14, reproduced in n 121.
125 As mentioned previously, in the absence of some contrary stipulation, the creditor should have no objection to this arrangement, for he receives the value to which he is entitled.
126 For comparative materials, see the fifth edition of this work, 316–19.
128 At 80, emphasis added.
129 Deutsche Bank Filiale Nürnberg v Humphreys (1926) 272 US 517, 519. See also Sutherland v Mayer (1926) 271 US 272. These cases are noted in more detail at para 8.12.
130 For a more recent application of the rule, see Jamaica Nutrition Holdings v United Shipping (1981) 643 F 2d 376, although it is difficult to understand why the plaintiffs did not sue for the sum of US dollars with which they procured the Jamaican dollars.
131 Bills of Exchange Act 1882, s 72(4) formerly allowed for payment in the currency of the place of performance, but this provision was repealed by Administration of Justice Act 1977, s 4. Cases on s 72(4) include Syndic in Bankruptcy v Khayat  AC 507 and Barclays International Ltd v Levin Bros  QB 270.
132 In some countries, of course, the ability to tender foreign currency may be limited by exchange controls of the kind described in Ch 14, but this aspect has to be left out of account for the purposes of the present discussion.
133 As will be seen, however, the debtor may assume a contractual obligation to tender only the foreign currency in question—see para 7.43. It would be wrong to attach any weight to the mere assumption in Marrache v Ashton  AC 311, 317 that a debtor who tenders Spanish pesetas in Gibraltar would specifically perform his obligation to deliver a commodity, and that a breach of this duty involves a liability to pay damages. The notion of foreign currencies as ‘commodities’ must be regarded as suspect following the decision in Camdex International Ltd v Bank of Zambia (No 3)  CLC 714.
134 Again, not too much should be read into Lord Reid's observation that ‘all payments which had to be made in Melbourne must be made in Australian currency’: National Mutual Life Association of Australasia v A-G for New Zealand  AC 369, 389.
135 A further alternative might allow the creditor the option to require payment either in the foreign currency or in sterling. Whether or not the creditor enjoyed the right to demand payment in sterling in lieu of the stipulated foreign currency was left open by the court in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728, but it is suggested that this solution would be impracticable. It would, eg, be necessary to stipulate for the creditor to give a period of notice prior to the maturity date, so that the debtor would know what was expected of him and he would have adequate time to make the necessary arrangements. It must be said that the statement departs from the old decision in Willshalge v Davidge (1586) 1 Leon 41: the creditor was entitled to a payment in ‘ducats’ and ‘portugues’ and it was held that it was ‘in his election’ to demand payment either in the proper coin of the contract or in sterling. For the reasons just given, this solution is not practicable. As noted earlier, Art 244 of the German Civil Code allows a debtor to settle a foreign currency debt in Germany by payment in the domestic currency. It has been expressly decided that the option is that of the debtor, and the creditor has no right to demand that such a debt be paid in the domestic currency: German Federal Supreme Court, 7 April 1992, Praxis des Internationalen privat- und Verfahrensrecht 1994, 336, with note by Grothe (at 346).
136 Barclays International Ltd v Levin Bros  QB 270, 277. The reference to the rate of exchange at the due date is correct if payment is made on that date, and the court rightly emphasized the requirement for punctual payment. That the debtor enjoys this option is confirmed by some of the older cases, eg Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd  AC 111. The same rule has more recently been confirmed in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. If payment is delayed, see George Veflings Rederi A/S v President of India  1 WLR 59, considered at para 7.51.
137 Ralli Bros v Compania Naviera Sota y Aznar  2 KB 287, 291, 294, and 299; Rhokana Corp Ltd v IRC  1 KB 737, 797 (reversed on other grounds,  AC 380); New Brunswick Railway Co v British & French Trust Corp  AC 1, 23. If the debtor is for some reason prohibited from tendering the required amount of foreign money in England, then it seems that he must exercise the option to pay in sterling—see Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. In other words, the debtor has an option to pay either in sterling or the relevant foreign currency, but he cannot exercise that option in a manner which effectively deprives the creditor of the right to payment.
138 Anderson v Equitable Assurance Society of the United States of America (1926) LT 557, 562. See also the remarks of Warrington LJ at 564: ‘the payment having been made in London would be a payment in sterling’. The decision in this case was followed in Heisler v Anglo Dal Ltd  1 WLR 1273.
139 The rule deals with the mode of performance and regard may be had to that rule in accordance with Art 12(2) of Rome I. It is submitted that the provision applies even to foreign currency contracts made between persons in England governed by English law and requiring that payment is made in England. Similar questions have arisen in relation to Art 244 of the German Civil Code which, upon the introduction of the single currency, was amended to state that foreign currency obligations payable within Germany could be discharged by payment of the corresponding amount in euros, unless the parties have explicitly agreed to the contrary.
140 George Veflings Rederi A/S v President of India 1 WLR 59, 63, per Lord Denning MR. The full implications of the Miliangos case are considered in Ch 8. The same point also forms a part of the decision in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728.
141 Of course, the distinction is of no consequence if the contract is governed by English law. English law will usually apply the rate at the place of payment in any event: see para 18.10(3).
143 Civ 1ere, 20 May 2009, pourvoi no 07–21847. The same solution had been adopted on previous occasions: Civ 1ere, 18 December 1990, Bull Civ I, no 300; RTD Civ 1991, p 529, commentary by J Mestre.
144 Since the repeal of s 72(4) of the Bills of Exchange Act 1882, there is no express provision in England. The so-called ‘effective clause’ is, however, commonly seen in bills of exchange and means that payment must be made in the stipulated currency. The addition of such a clause does not deprive the instrument of its character as a bill of exchange; it remains an unconditional order to pay a fixed sum of money at a specified future date for the purposes of s 3 of the 1882 Act. According to Dicey, Morris & Collins, para 36–057, the validity of an ‘effective’ clause should be tested by reference to the law of the place of payment. However, since the ‘effective’ clause is intended to reflect the intention of the contracting parties, and may affect the amount which the debtor is required to pay, it is submitted that this question should be decided by the law applicable to the obligation. Certainly, such a clause is valid if governed by English law. Art 244(1) of the German Civil Code provides that in the case of a foreign currency debt payable within Germany, payment may be made in the local currency ‘unless payment in the foreign currency is expressly stipulated’. On the Supreme Court cases dealing with such a stipulation see Schmidt, Geldrecht (de Guyter, 1983) para 244, n 38.
145 See the discussion (para 7.49) of the decision in Anderson v Equitable Assurance Society of the United States of America (1926) LT 557. The nature of the contractual relationship between the parties may provide the solution. For example, an agent who collects a foreign currency debt for his English principal must pay over the foreign currency proceeds; he may not convert them into sterling. This perhaps flows from the fact that the relationship between the agent and his principal is not comparable with that which subsists between a creditor and his debtor; a duty to account is not necessarily identical to an obligation to pay.
146 An example is offered by the Italian Civil Code (trans Beltramo, 2001). Art 1278 provides that, in the case of a debt expressed in foreign money, ‘the debtor has the power to pay in legal money at the rate of exchange of the day when the sum is due and at the agreed place of payment’. Art 1270 then provides that the option to pay in local currency ceases to be available if the reference to foreign money is reinforced by the word ‘actual’ (effective) or other equivalent term. In many respects, English law adopts an essentially similar approach.
147 See the remarks of Somervell LJ in Heisler v Anglo Dal Ltd  1 WLR 1273. The rationale seems to be that the creditor would be particularly keen to receive the relatively scarce foreign currency under such circumstances. Yet it cannot always be so, for a person who received foreign currency during the era of exchange controls in the UK was legally obliged to surrender it in exchange for the sterling counter-value—see Ch 14.
148 The point would only occasionally arise in practice, for payment is usually made by credit to an account located in the country of issue. The court in the Libyan Arab Bank case held that eurocurrency and other foreign money obligations were to be treated on the same basis.
149  CLC 714. The decision has been noted at para 1.61.
150 Accord and satisfaction has been defined as ‘the purchase of a release from an obligation … not being the actual performance of the obligation itself’—British Russian Gazette and Trade Outlook Ltd v Associated Newspapers Ltd  2 KB 616, 643. This is an apt description, for the original obligation has not been crystallized into a specific amount and is thus itself incapable of being discharged by payment. In the present context, the point is that the debt obligation is performed (albeit after its due date), with the result that no ‘purchase of a release’ from the obligation is required. In New Brunswick Rly Co v British French Trust Corp  AC 1, the debtor repudiated a gold clause and it was said (at 29) that thereafter the debtor could ‘only tender damages’. But it is not possible to ‘tender’ damages in the formal sense; rather, the debtor could have elected to comply with the gold clause, even if belatedly.
151  1 KB 451. See also Beaumont v Greathead (1846) 2 CB 494, 499: ‘If a man being owed £50 receives from his debtor after the due date £50, what other inference can be drawn than that the debt is discharged?’ See, however, New Brunswick Railway Co v British and French Trust Corp  AC 1, 29.
152 In the absence of any evidence as to French law, the court was bound to proceed on the footing that the obligation was governed by English law. In Lloyd Royal Belge v Louis Dreyfus & Co (1927) 27 Ll LR 288, 293 and in Re Chesterman's Trust  2 Ch 466, 493, the court suggested that the contract was in every sense a French contract and that this was a distinguishing feature of the Le Touquet case. In truth, it was treated as an English contract.
154  1 KB 451, 456.
155 At 461. This, of course, is a clear application of the principle of nominalism.
157 In Lloyd Royal Belge v Louis Dreyfus & Co (1927) 27 Ll LR 288, 293, Scrutton LJ noted that ‘some doubt had been expressed in various quarters’ about the correctness of the Cummings decision.
158 There was therefore no basis for the suggestion that, if legal proceedings are instituted with respect to a foreign currency debt, it could ‘be said with force that an obligation to pay sterling equivalent arises on that date’: Cummings v London Bullion Co Ltd  1 KB 327, 335. Apart from other considerations, this would be contrary to the spirit of the Miliangos decision, which is considered in Ch 8.
159 See Transamerica General Corp v Zunino (1948) 82 NYS 2d 595. However, the decision of the US Court of Appeals for the Second Circuit in Competex SA (in liquidation) v La Bow (1986)783 F 2d 333 suggests a different approach. In that case, a broker had obtained an English judgment against his client for some £187,000 and started proceedings in New York for the enforcement of that judgment. The Court converted the English judgment into US dollars as of the date on which it was given. The Court found that the debt could no longer be discharged by payment of the sterling sum; so far as New York law was concerned, the debt had to be paid in accordance with the American judgment. This decision may be unfortunate but was perhaps inevitable, given that the process of enforcement had gone so far. In contrast, the defendant in the Le Touquet case had made payment before the case had been heard. The subject is discussed by Gold, Legal Effects of Fluctuating Exchange Rates (IMF, 1990) 348.
160 Thus, had the defendant in the Le Touquet case tendered 18,035 French francs in purported settlement of a claim for damages, this would not have discharged her obligation because there was no agreement to that effect and, so far as English law is concerned, the notion of ‘payment’ must be confined to debts; it is not possible to discharge a claim for damages merely by payment. See also the discussion in The Baarn (No 1)  P 215, 271.
161 Similar views are expressed by Wood, English and International Set-off (Sweet & Maxwell, 1989) 602.
162  1 Lloyd's Rep 618, 628. The formulation was adopted in The Transoceanica Francesca  2 Lloyd's Rep 155.
163 The point has, however, given rise to difficulty in Germany and continues to do so; see Schmidt, Geldrecht, 244, No 47 and, since then, the decision of the Court of Appeal, Berlin Recht den Internationalen Wirtschaft 1989, 815. More recently, the Court of Appeal of Koblenz (3 May 1991, RIW 1992, 59 or IPRspr 1991, No 174) has held that debts expressed respectively in marks and in a foreign currency may be extinguished by way of set-off provided that the latter currency was freely convertible into marks. On the other hand, the Municipal Court of Kerpen has decided that such a set-off is not permitted, because the claims lack the equivalence (Gleichartigkeit) which is a necessary requirement under Art 387 of the German Civil Code. If the parties have agreed an ‘effective’ payment clause, then this will serve to negate any possible right of set-off between different currency obligations, although set-off would remain possible in the event of insolvency: on these points, see Schluter, Muenchener Kommentar (Verlag C.H. Beck), sec 837, para 32.
164 The money of account is discussed in some depth at Chs 5 and 6. The points about to be discussed should not be allowed to obscure the fact that the usual method of discharging a monetary obligation will be by payment to the creditor of the amount stated in the contract in the currency in which the obligation is expressed. In other words, the money of account and the money of payment will coincide in the vast majority of cases.
165  2 QB 23, 54. The decision was affirmed by the House of Lords  AC 741, where the distinction between the money of account and the money of payment was recognized. Lord Denning's reasoning in this case has also been cited with approval by the Federal Court of Australia in Commissioner of Taxation v Energy Resources of Australia Ltd  FCA 1521. On the whole subject, see the Law Commission's Working Paper No 80, Private International Law: Foreign Money Liabilities and Report (Cmnd 8318, July 1981). As a matter of historical interest, it may be noted that France used to distinguish between the money of account and the money of payment even in a purely domestic context: ‘L’ ancienne France distinguait la monnaie de compte, qui servait à mesurer la dette (ex: la livre) et la monnaie de paiement (ex: l’ecu, le louis d'or) qui servait au paiement; le louis valait 20 livres’, Malaurie and Aynes, Les Obligations (Cujas Paris, 1994) para 985.
166 This is contrary to the suggestion of Robert Goff J in BP Exploration Co (Libya) v Hunt  1 WLR 783, 840, to the effect that on the maturity date, the money of account is converted into the money of payment, such that the debt is ‘crystallized’ into the money of payment on that date. In the event of delayed payment, ‘the parties will be taking the risk of fluctuation in the currency of payment’ rather than the money of account. It is submitted that this approach cannot be supported. Following the decision in Le Touquet (n 115), a debt expressed in a particular currency does not change its character merely because the maturity date has passed. Furthermore, the suggested formulation elevates the mode of performance over the substance of the monetary obligation itself.
167 The distinction between the money of account and the money of payment also arises in other contexts, eg where a loan is made in one currency but is expressed to be payable in another. Thus in Boissevain v Weil  AC 327, the borrower of 320,000 French francs, undertook to repay £2,000, so that the money of account was expressed in pounds sterling and French francs were the money of payment. For a similar set of facts, see the decision of the Supreme Court of Missouri in Re De Gheest's Estate (1951) 243 SW (2d) 83. In The Damodar General TJ Park  2 Lloyd's Rep 68 demurrage was expressed in terms of US dollars but payable ‘in external sterling in London’. It was held that demurrage was payable in sterling, although it is difficult to see why the point mattered, for by this time sterling was freely convertible into US dollars.
168  EWHC 498 (Ch).
169 Para 92 of the judgment.
170 Cass Civ I, 21 February 1989, pourvoi no 87–16394.
171 This and earlier cases are considered by Kleiner, La monnaie dans les relations privées internationales (LGDJ, 2010) 224.
172 Dicey, Morris & Collins, para 36–052, citing Re United Railways of Havana and Regla Warehouses Ltd  AC 1007, 1060; see also the discussion at para 4.13. In many respects, this point is now obvious; in the international financial markets, obligations will usually be governed by English or New York law, but will involve many different currencies.
173 There are numerous cases on this point. See, eg, Jacobs v Credit Lyonnais (1884) 12 QBD 859; Adelaide Electricity Supply Co v Prudential Assurance Co  AC 122 (HL); Auckland Corp v Alliance Assurance Co Ltd  AC 587 (PC); Mount Albert BC v Australasian Temperance and General Mutual Life Assurance Society Ltd  AC 224 (PC); and Bonython v Commonwealth of Australia  AC 201 (PC). The money of payment may be specifically agreed between the parties, and such an agreement would generally override any relevant provision of the law of the place of performance in this context. Thus, in Pennsylvania Railway Co v Cameron (1924) Pa 458, a bill of lading provided for payment in sterling, but then provided that ‘freight, if payable at destination (Philadelphia), to be at the rate of exchange of $4.866’. Since payment was to be made in Philadelphia, it could be inferred from this language that the US dollar was to be the money of payment in that case. For decisions to similar effect, see Brown v Alberta & Great Waterways Rly Co (1921) 59 DLR 520; Royal Trust Co v Oak Bay (1934) 4 DLR 697. These different cases involved an option of currency but involved wording which is now out of use; for discussion, see the fifth edition of this work, 215–17. In some cases, the parties may agree that the debtor has an option to pay in two or more moneys of payment. In the absence of contrary provision in the contract, the debtor may take advantage of such provisions and discharge his obligation by paying in the currency which is most favourable to him: Ross T Smyth & Co Ltd v WN Lindsay Ltd  2 All E R 1064; Booth & Co v Canadian Government  AMC 399.
175 As has been noted at para 7.42, (a) the amount of sterling to be so offered is to be determined by reference to a rate of exchange, and (b) since the amount to be paid is plainly a matter of substance, the identification of the required rate is a matter for the law applicable to the contract.
176 It may be that the rule is derived from periods in which the exchange control was more widespread and financial markets were less international than they are now. At such times, the rule may have been appropriate because of the practical difficulty involved in obtaining the necessary foreign currency in the place of payment. The payment of an equivalent amount in the local currency may well have reflected the parties’ expectations at that time. It is, however, perfectly sensible to argue to the contrary; if the relevant currency is difficult to obtain, then it may have been important to the creditor to receive that particular currency—see Heisler v Anglo Dal Ltd  1 WLR 1273.
177 See ‘The right of conversion’, para 7.41.
178 Thus if a US dollar obligation is payable in London but payment in that currency has become impossible, then payment should be made in sterling. This was the result in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. It was noted earlier that the option to pay in sterling instead of the foreign currency ought not to be conferred upon the creditor. The present suggestion is not inconsistent with this view, for the creditor receives local currency only because payment in the money expressed in the contract has become impossible; no true option arises in such a case.
179 Where, however, the contract at issue is governed by English law and exchange controls are imposed after the contract was made, it is suggested that payment in the contractual currency should be required to be made in another jurisdiction by virtue of an implied contractual term to that effect. The point is considered in the context of supervening exchange controls—see Ch 16.
181 Schreter v Whishaw, Cass Req 11 July 1917, Sirey, 1918, I, 125. The same approach was adopted in Pelissier du Besset, Civ 17 ma7 1927, Dalloz Permanent 1928, I, 125. On this subject, see Kleiner, La monnaie dans les relations privées internationales (LGDJ, 2010), 350.
182 Civ 3eme, 18 October 2005, pourvoi No 04–13930, Bull Civ III no 268.
183 Civ 1er, 15 June 1983, pourvoi no 82–11882.
184 See, eg, Art 7:109, European Principles on Contract Law; Arts 6.1.9 and 6.1.10, UNIDROIT Principles of International Commercial Contracts (2004).
185 The point is now beyond dispute in the light of Art 12(1)(b) of Rome I.
186 This rule has been expressly laid down in Ralli v Dennistoun (1851) 6 Ex 483.
187 The position may be slightly confused by the observation of Maugham LJ in The Baarn (No 1)  P 215, 271, where he noted that ‘if the defendant is defending on the grounds of accord and satisfaction he must prove accord and satisfaction according to our procedure’. It is necessary to emphasize the distinction between (a) the requirement for, and the content of, the accord and satisfaction, which are matters of substance governed by the applicable law; and (b) the means of proving that accord and satisfaction has occurred, which are procedural and evidential matters governed by the law of the country in which the proceedings occur. It seems that Maugham LJ was referring to the latter aspect, in which case his statement is consistent with the principle in the text.
188 In Re British American Continental Bank, Lisser & Rosenkranz's Claim  1 Ch 276, a tender of marks was made at Hamburg. However, the court did not discuss whether the effect of the tender fell to be determined by English or German law.
189 This point has been discussed at para 7.09.
190  AC 1 (HL) 23–4.
191 That Canada was entitled to legislate in this way in relation to gold clauses governed by Canadian law and that such legislation should have been recognized and applied by the House of Lords seems to be correct as a matter of principle and would also seem to follow from the decision in R v International Trustee for the Protection of Bondholders AG  AC 500 (HL).
192 For a comparative survey, see Max Planck Institute for Foreign and Private International Law: Comments on the European Commission's Green Paper on the Conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, RabelZ 2004, 1, at 81–6. For discussions of the law of set-off in a number of jurisdictions, see Wood, English and International Set-off (Sweet & Maxwell, 1989); Fountoulakis, Set-Off Defences in International Commercial Arbitration: A Comparative Analysis (Hart, 2010).
193 See, eg, the buyer's right to set off losses flowing from the delivery of defective goods: Sale of Goods Act 1979, s 53(1).
194 This is especially the case in the light of Art 12(1)(b) of Rome I. The applicable law must determine whether the set-off amounts to performance of the monetary obligation.
195 (No 1)  P 251; (No 2)  P 171.
196 The collision occurred on the high seas, with the result that the substance of the claim would be governed by English law—see the remarks of Scrutton LJ in The Baarn (No 2)  P 171, 176.
197 Chilean law plainly could not govern the discharge of an obligation which arose under English law.
200 The Baarn (No 2)  P 171, 176.
203 For a similar approach to these cases, see Dicey, Morris & Collins, para 36–058. The ‘blocked account’ reasoning may, however, be unjust to the defendants. The plaintiffs were a Chilean entity seeking reimbursement of expenses incurred in Chile. Since they were domiciled in Chile, the fact that the peso payment could not be transferred out of the country should not have affected them.
204 See Petroleo Brasiliero SA v ENE Kos I Ltd  1 All ER 1099.
205 Such cases should be distinguished from those in which the conversion has been carried out and produces a surplus, when it becomes necessary to determine which party is entitled to it. Such cases tend to turn either upon principles such as subrogation—see, eg, Yorkshire Insurance Co v Nisbet Shipping Co  2 All ER 487 or upon the interpretation of the contract at issue, eg Lucas Ltd v Export Credits Guarantee Department  1 WLR 914. Such cases do not involve principles of a specifically monetary law character.
206 ie, not as at the date when the hire is payable or paid—The Brunswode  1 Ll LR 501.
208 The Court would also have adopted the rate of exchange as at the date of payment in Noreuro Traders v Hardy & Co (1923)16 Ll LR 319, except that the rate was to be ascertained in Antwerp; this could not in fact be done at the relevant time in view of the German occupation. In a different context, a Canadian court dealing with the taxation of costs of the successful party held that disbursements incurred in a foreign currency should be converted into Canadian dollars on the date on which the bill of costs was certified by the court: Dillingham Corp Canada Ltd v The Ship Shiuy Maru (1980) 101 DLR (3d) 447.
209 This was the position reached by the German Administrative Court, 13 December 1973, RzW 1974, 186. Compare the decision of the German Federal Supreme Court, 12 June 1975, RzW 1975, 301; if a claimant is entitled to recover medical expenses incurred in a foreign currency, they were to be converted into the German unit at the rate on the day on which the expenses were incurred.
210 (1943) 139 F 2d 231 and  AMC 51 (CCA, 2d).
211 Rules of this kind may cause particular difficulty in the context of the administration of estates, where a significant period may elapse between the date of the death and the final distribution of the estate, thus enlarging the potential for significant exchange rate damages during the period at issue; eg see Re Heck's Estate (1952) 116 NYS 2d 255.
213 For conversion questions which arise or used to arise in relation to stamp duty, see Stamp Act 1891, s 6.
215  1 AC 362. Contrast the decision in Capcount Trading Ltd v Evans  2 All ER 125. Both cases were considered by the Federal Court of Australia in Commissioner of Taxation v Energy Resources of Australia Ltd  FCA 1521.
216 For similar cases in the US and Australia, see National Standard Co v Commissioner of Inland Revenue (1983) 80 TC 551; AVCO Financial Services Ltd v Commissioner of Taxation 56 ALJR 668 and Federal Commissioner of Taxation v Hunter Douglas Ltd  14 ATR 639. The cases are considered by Gold, SDRs, Currencies and Gold (IMF, Pamphlet Series No 44, 1987). For a more recent decision see Messenger Press Pty Ltd v Commissioner of Taxation  FCA 756.
217 See generally Chs 5 and 6.
218 If a rule it continues to be. It has been submitted at para 7.70 that the rule requires reconsideration in the light of Art 12(2) of Rome I.
219 A similar line of reasoning applies where a foreign money obligation is to be settled in England—see para 7.41. In the same sense see, Dicey, Morris & Collins para 36–056.
220 Thus, if payment is to be made by means of an international credit transfer, the place of payment is the place in which the bank branch holding the creditor's account is situate. The debtor may have to take preparatory steps to organize the payment from the country in which his own bank is situate, but that country does not thereby become the place of payment: Libyan Arab Foreign Bank v Bankers Trust Co  QB 728.
221 Chitty, para 21–054 and cases there noted. See in particular Robey v Snaefell Mining Co Ltd (1887) 20 QBD 152; Rein v Stein  1 QB 753, 758; The Eider  P 119 (CA), Drexel v Drexel  1 Ch 251; Bremer Oeltransport GmbH v Drewry  1 KB 753, 765; Gamlestaden PLC v Casa de Suecia SA  1 Lloyd's Rep 433; Definitely Maybe Ltd v Lieberberg GmbH  1 WLR 1745. A creditor under an English judgment has only the right to be paid in England, even though he resides abroad: Re a Debtor  1 KB 53. Conversely, an award ordering payment abroad is not to the same effect as a judgment to pay a sum of money here: Dalmia Coment v National Bank of Pakistan  QB 9, where it was suggested at 24 that an action claiming payment abroad was an action for damages. In Pick v Manufacturers Life Insurance Co (1958) 2 Ll LR 93, the contract required payment to be made to a foreign creditor by means of sterling banker's drafts drawn on a London bank. Somewhat surprisingly, London was held to be the place of payment. Based upon the principle outlined in the text, the place of payment was the creditor's country of residence, where the drafts would have to be tendered to him.
222 Otherwise, the creditor would unilaterally alter one of the debtor's obligations by moving abroad: The Eider  P 119.
223 Art 57 of the Convention. For similar approaches, see Art 59 of the Uniform Law on International Sales Act and Art 6.1.6 of the UNIDROIT Principles of International Commercial Contracts (2004).
224 Art 1247 of the Civil Code. In contrast to the position under English law, this refers to the domicile of the debtor at the time of payment, rather than as at the date of the contract: Cass Civ 9 July 1895, D 1896 I 349. It is understood that this approach is mirrored by the laws of Belgium and Luxembourg. For a reconciliation of some of the differing provisions to be found in the Civil Code and the Code Monétaire et Financier, see the decision of the Cour de Cassation, Civ 1ere, 22 February 2005, Bull Civ I no 93, Com 5 October 2004, Bull Civ IV no 179. In the United States, the situs of a debt is the place in which the debtor is located (Harris v Balk 198 US 215 (1905)), although the situs of a debt and the place in which payment is due will not necessarily coincide.
225 Art 12(2) of Rome I, which has already been noted on a number of occasions.
226 See the decision in Ralli Bros v Compania Naviera Sota y Aznar  2 KB 287. The rule appears to apply only to contracts governed by English law. It is thus a rule of English domestic law, rather than private international law. Nevertheless, the rule necessarily only applies in cases where the laws of more than one jurisdiction are invoked, and the application of the rule can only be considered once the place of payment has been identified. It is possible that the rule has been superseded by Art 9(3), Rome I. See further the discussion at para 16.38.
227 See Rossano v Manufacturers Life Insurance Co  2 QB 352.
228 See Pick v Manufacturers Life Insurance Co (1958) 2 Ll LR 93, where (even though the parties were respectively resident in Israel and Canada) London was held to be ‘the primary place of payment in the strict sense’ because payment was to be made by means of drafts on London.
229 Art 4(1)(b), Rome I and earlier decisions on this subject such as Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. For US authority to similar effect, see American Training Services Inc v Commerce Union Bank 415 F Supp 1101 (1976), aff'd 612 F 2d 580 (1979).
231 Joachimson v Swiss Bank Corp  3 KB 110; Arab Bank Ltd v Barclays Bank DCO  AC 495. In the US, the head offices of American banks are likewise not responsible for the ‘blocked’ obligations of their overseas branches if ‘the branch cannot repay the deposit due to (1) an act of war insurrection or civil strife or (2) an action by a foreign government or instrumentality (whether de jure or de facto) in the country in which the branch is located’. See US Code, Title 12, s 633, which allows the bank to negate this provision by contract. However, that legislation effectively reversed a line of decisions in which the head office had been held to be so responsible: Vishipco Line v Chase Manhattan Bank (1982) 660 F 2d 976; Trinh v Citibank (1988) 850 F 2d 1164; Wells Fargo Asia Ltd v Citibank (1988) 852 F 2d 657. In the last-mentioned case, the court drew a distinction between the place of repayment (‘location where the wire transfers effectuating repayment at maturity were to occur’) and the place of collection (‘the place or places where plaintiff was entitled to look for satisfaction of its deposits in the event that Citibank should fail to make the required wire transfers at the place of repayment’). For reasons given earlier, this distinction is of very doubtful value, and the decision of the Supreme Court which sent the case back to the Court of Appeals does not contribute to the clarification of the distinction: Citibank v Wells Fargo Asia Ltd (1990) 495 US 660. On remand, the Court of Appeals held that the deposit contract was governed by New York law and that a creditor could collect his debt at the agreed place for repayment. In the absence of any restriction on the situs of collection, the depositor could recover its deposit from Citibank in New York: see Wells Fargo Asia Ltd v Citibank NA (1991) 926 F 2d 273 (2nd Cir), cert denied (1992) 505 US 1204.
232 See, for example, Sokoloff v National City Bank 250 NY 69 (1928).
233 See, for example, Libyan Arab Foreign Bank v Bankers Trust Co  QB 728, n 229.
234 The various stages of the case are reported at 612 F Supp 351 (SDNY 1985), 660 F Supp 946 (SDNY 1987), 847 F 2d 837 (2nd Cir, 1988), 695 F Supp 1450 (SDNY 1988), 852 F 2d 657 (2nd Cir 1988), 110 S. Ct 2034 (1990), and 936 F 2d 723 (2nd Cir, 1991). Analysis of the case is not assisted by its rather tortuous procedural history.
235 Wells Fargo Asia Ltd v Citibank NA 936 F 2d 723 (1991).
236 In this respect, the court relied on Dunn v Bank of Nova Scotia 374 F 2d 876 (5th Cir, 1967) and Perez v Chase Manhattan Bank NA 61 NY 2d 460, cert denied 469 US 966 (1984).
237 See Art 4(1)(b), Rome 1.
238 Art 12, Rome I; Libyan Arab Foreign Bank v Bankers Trust Co  QB 729.