Conversion of Foreign Money: A Comparative Study of Changing Rules

Abstract

t T FIRST SIGHT, THE CHANGES that have occurred in the rules fixing the date for the conversion of an unsatisfied foreign money obligation into domestic currency appear chaotic. Yet the problem of converting foreign money into domestic currency is an ancient one,' and one would expect to find well-settled rules of law to regulate the process. The present study began as an inquiry into the causes of this phenomenon. As a working hypothesis, it was assumed that the rules providing for conversion at the rate prevailing on any specific date (date of maturity, or when suit was commenced, or the day of judgment, etc.) are merely manifestations of a more general rule providing for conversion according to these various rates depending on the trend of foreign money rates: the rate prevailing on the due date in times of appreciation of the domestic money, the rate prevailing on the day of judgment (or day of payment where that is possible) in a period of appreciation of the foreign money. It was believed possible that the apparent changes in rules were actually applications of this general principle. Study of the American cases showed indications that the hypothesis is correct, but the dollar has been so persistently firm in terms of foreign money during the last quarter of a century that the theory could not be tested convincingly by recent American cases. The changes in the Continental European conversion rules, paralleling the sharp turns in the trends of foreign exchange rates, offered, however, a fruitful field of study. The rules of the European countries here analyzed have been the same as the American rules in at least one respect, namely, that they provided for conversion on a given date2: the breach day, or a