One of the basic principles of a commercial contract, such as a Contract of Sale, is that on its performance the parties thereto shall achieve the objects in respect of which they entered into the transaction. In the simplest form of Contract of Sale, the purchaser obtains what he wants to buy and the vendor receives the agreed purchase price. But if the goods are to be sold from one country into another, special attention will have to be paid to such matters as the law of the contract and the currency in which payment is to be made. This currency is usually “the currency of the Contract” (i.e., the currency in which offers were made, invoices made out and/or past payments made). Normally this is fairly easily ascertainable as the would-be vendor’s price-lists or offers will contain references to the offered goods in either the currency chosen by the vendor, the purchaser or a convenient and commercially suitable third denomination. In larger transactions the currency of the contract may be specially agreed between the parties and on some occasions the parties take care to include devaluation clauses to provide for contingencies such as devaluation. However, on most occasions the sale takes place on the purchaser’s acceptance of the vendor’s offer, or on the vendor’s compliance with the purchaser’s request and if the goods are in accordance with specification and payment is promptly made, one would expect few further monetary difficulties to arise.

Such, however, is not the case. Due to the floating of many of the world’s currencies and the widely varying exchange rates, even a comparatively slight passage of time between the conclusion of the contract and its resolution might have led to quite unexpected financial developments if the transaction was considered by an English Court.

The reason for this was that since the 17th century, the law of England had been to the effect that judgment could only be given in pounds and pence, a course of procedure in which the law of England differed from other commercially active countries. The original reason for this “rule” was said to have been the absolute belief in the firmness of the £ sterling vis-à-vis other currencies, so that the former had become a sort of sheet-anchor. It was considered in the highest degree unlikely that the position of the £ sterling, if it changed at all vis-à-vis another currency, would do so in favour of the latter.

In other trading nations it has for long been possible for the parties to decide between themselves as to the currency in which payment of the purchase price, damages, etc., should be made, but the English Courts continue to refuse such an option; indeed so firm was the belief in this rule that no requests were made to the Courts for any variation.