My sister’s a lawyer but she couldn’t answer me this. Not her field.
Let’s say I make a contract in the US with a European. I go to Europe often enough, so I’m happy to accept 100 euros as payment for services rendered instead of the green stuff. I finish the job, but he doesn’t have the money on him on that day. Well, what can I do? I shrug my shoulders and say, please pay it as soon as possible. We’ll say for convenience that the exchange rate on this day is 1 dollar for 1 euro.
A little bit of time passes. The dollar strengthens in an arithmetically convenient way for our hypothetical situation, so that now 1 dollar is worth 2 euros. It turns out he can’t find his stash of euros, but hey, US dollars are legal tender for all debts, public and private. He’s in debt to me, he wants to pay it back, and we’re in the US, so if he wishes, he should be able to discharge that debt with paying dollars. My question is, based on what exchange rate? How many dollars would he have to pay to discharge the debt?
Would it be the exchange rate on the day of payment, which would be 50 dollars? Or would the other person be able to point out that the market price on the original day he should’ve paid was different, meaning he should pay the full 100 bucks? I don’t care about complications like late fees or anything like that, I just want to know the basics. I’m most interested in the US answer, but if different countries have different methods, I’d be happy to know those, too.
I would guess it’s the exchange rate on the day of payment, but that’s just a hunch.
You decide this by referring to the terms of the contract. If it says “100 euros”, then the number of dollars necessary to satisfy the debt is the number it takes to buy 100 euros on the day payment is made.
Agreed.
A contract for payment will always (almost always?) specify the currency for payment in order to avoid exactly this type of problem.
If, for some reason, the contract is silent on the question, then a US court would try to determine the intent of the parties at the time they made the contract. Under these circumstances, the court might look to (1) other communications between the parties, e.g. emails discussing the contract, and/or (2) common practice in the particular industry. If the court still couldn’t determine the right number, the court might instead look to the reasonable value of the services performed.
The only way I can see for a contract not specifying the currency is if doesn’t specify a cost at all, or if it specifies more than one currency. “For a total cost of 100.00 USD / 574.50 NOK”
In the second case you’d pay whatever the contract specifies for the currency you use to complete payment. In the first case the question becomes “What’s on the bill?”
Another possibility is if they are in different countries. If party A is in Canada, and party B is in Australia, and the contract says that “A will buy 100 widgets from B at a price of 10 dollars per widget”, are the dollars CAD or AUD?
This depends on the intent of the parties. If they can’t agree what they intended, a judge will determine thier intent for them.
If I go to an Australian web site from here in Canada, and the price quoted is $10, unless it’s a super fancy web site that automatically quotes in local currency based on my location, it’s indicating $A.
In the OP, it sounds like they agreed the price is Euros, so payment that equates to Euros (plus whatever service charge it costs to convert, I assume) will be fair payment.
Any enterprise that deals in multiple currencies has to take the changeable rates into account when doing their books. Odds are, on a really big deal, they buy hedging contracts to cover serious fluctuations in exchange rates.