the money is advanced.12 Yet the consideration for the contract may be exactly the same without reserving the interest in advance. In either case the consideration for the promise to pay is the loan or forbearance of money at an excessive rate of interest.

The same principles govern a note given in renewal of a previous note or obligation to pay. The validity of the first note is determined by the lex considerationis, the law of the place where the money is advanced; and the validity of the renewal note is governed also by its own lex considerationis. But the consideration for the renewal note is the previous note, and if that is usurious and invalid by its proper law, so should the renewal note be, and vice versa.18

Sometimes the parties conduct the negotiations for the loan in one State, while the money is actually advanced in another. In such cases a question arises whether the law of the former or latter State is to govern the rate of interest. The consideration here supposed is not an executed loan, but an executory contract to loan the money at a certain rate of interest. If the loan is to be actually made in the State where the agreement to lend is entered into, there can be no question but that the law of that State should control.14

12 Tilden v. Blair, 21 Wall. 241; Akers v. Demond, 103 Mass. 318, 323; Kilcrease v. Johnson, 85 Ga. 600, 11 S. E. 870; Martin v. Johnson, 84 Ga. 481, 10 S. E. 1092, 8 L. R. A. 170; Buchanan v. Bank, 5 C. C. A. 83, 55 Fed. 223, 227; Sheldon v. Haxtun, 91 N. Y. 124. But see Dickinson v. Edwards, 77 N. Y. 573, 33 Am. Rep. 671; Wayne County Bank v. Low, 81 N. Y. 566, 37 Am. Rep. 533.

18 Wayne County Bank v. Low, 81 N. Y. 566, 37 Am. Rep. 533; Bowman v. Miller, 25 Gratt. (Va.) 331, 18 Am. Rep. 686. But some courts, relying on the principle that a renewal note given in exchange for a usurious note, after purging the latter of the excessive interest, is good, hold that the giving of a renewal note in a State by whose law the interest carried by the first usurious note is not excessive, operates in the same way to purge the usury and to make the renewal note good. See Jacks v. Nichols, 5 Barb. (N. Y.) 38; Sheldon v. Haxtun, 91 N. Y. 124, 131; De Wolf v. Johnson, 10 Wheat. 367. In the last case however there was an actual reduction of interest upon the renewal.

14 Martin v. Johnson, 84 Ga. 481, 10 S. E. 1092, 1093, 8 L. R. A. 170; Staples v. Nott, 128 N. Y. 403, 405–406, 28 N. E. 515; Wayne County Bank v. Low, 81 N. Y. 566, 571, 37 Am. Rep. 533; Berrien v. Wright, 26 Barb. (N. Y.) 208.

But if it is expressly or impliedly agreed that the money is to be actually advanced in another State, that is to say, if the executory consideration is to be performed in another State, the validity of its performance there must be determined by the lex solutionis of the consideration (the law of the place where the loan is to be made).15

pre

The case of Hubbell v. Morristown Land & Imp. Co.16 sents a good illustration of this principle. In that case the loan was originally agreed upon between Mrs. Hubbell and the borrower, in Connecticut, where Mrs. Hubbell was summering." The borrower was a Tennessee corporation, and it was agreed that the loan to be thereafter made should bear seven per cent interest and should be secured on the corporation's land in Tennessee. The note evidencing the loan was drawn in North Carolina and was made payable in New Jersey, where Mrs. Hubbell lived. This note was delivered and the money actually advanced in New Jersey, in pursuance of the contract to lend. By the law of Tennessee and of New Jersey the contract was usurious; by the law of Connecticut and of North Carolina it was valid. The trial court decided that the law of New Jersey should govern. The Tennessee Court of Chancery Appeals reversed this decision, and held in favor of the Connecticut law. This in turn was reversed by the Supreme Court of the State, which returned to the law of New Jersey as the place where the loan was finally consummated.

15 Hubbell v. Morristown Land & Imp. Co., 95 Tenn. 585, 32 S. W. 965; Sheldon v. Haxtun, 91 N. Y. 124, 128-129; Bascom v. Zediker, 48 Neb. 380, 67 N. W. 148; Coad v. Home Cattle Co., 32 Neb. 761, 49 N. W. 757. But see Mott v. Rowland, 85 Mich. 561, 48 N. W. 638; Scott v. Perlee, 39 Ohio St. 63, 48 Am. Rep. 421. Both of the last two cases go upon the theory that the law which the parties "had in mind" as governing the contract should control.

16 95 Tenn. 585, 32 S. W. 965.

CHAPTER XVIII.

OBLIGATION AND INTERPRETATION OF CONTRACTS.

§ 180. Obligation of a Contract. We have in the preceding chapter considered the "proper law" governing the validity of a contract. We will now suppose it to be established that the contract is valid in every particular, and will proceed to examine the law controlling the rights, duties, and liabilities of the parties under it.

1

The "obligation" of a contract is defined by Judge Story as "the duty to perform it." In reality, however, the term has a somewhat broader meaning than that ascribed to it by Story. It implies a duty on the part of the promisor to perform the contract in manner and form according to its terms or the true intent of the parties, and a corresponding right on the part of the promisee to expect such a performance.

The "obligation of the contract," as here used (excluding matters of validity, already discussed), has the same meaning as is attached to the same phrase found in that clause of the federal constitution which provides that no State shall pass any law impairing the obligation of contracts.2

1 Story, Confl. L. § 266. He proceeds to describe it further as follows: "It may be a moral obligation, or a legal obligation, or both. But when we speak of obligation generally we mean legal obligation, that is, the right of performance which the law confers on one party and the corresponding duty of performance to which it binds the other. . . . A contract may in its nature be purely voluntary and possess no legal obligation. It may be a mere naked pact (nudum pactum). It may possess a legal obligation; but the laws may limit the extent and force of that obligation in personam or in rem. It may bind the party personally, but not bind his estate; or it may bind his estate and not bind his person. This obligation may be limited in its operation or duration; or it may be revocable or dissoluble in certain future events or under peculiar circumstances.'

2 Hence, if the question in a particular case is whether the point before the

A practical test therefore by which to determine whether a particular matter relating to a contract constitutes a part of its "obligation" or a part of the remedy merely, is to examine whether the legislature of the State whose law governs the obligation of the contract could, by enactment subsequent to the execution of the contract, make applicable to it a law similar to that sought to be enforced in the forum. If such a retrospective law passed in the proper situs of the contract would not impair its obligation nor violate the provision of the constitution, the matter must be held to relate not to the obligation but to the remedy, and the lex fori will prevail. But if such a retroactive law as the lex fori, passed in the situs of the contract, would be unconstitutional as impairing its obligation, the same law in the forum cannot be held to apply, the question being one of obligation, not of remedy.

This may be illustrated by the case of Ruhe v. Buck,' in which the court was divided on the question whether a particular law of Missouri (the forum) related to the remedy or to the obligation of the contract in controversy. In that case, a contract to pay money was made in Dakota, to be performed there, by a married woman who was allowed by the law of Dakota to contract as a feme sole and to sue and be sued as such. She owned land in Missouri which the Dakota creditor sought to attach. By the law of Missouri, a married woman was competent to contract and be sued, but her property could not be attached. The question therefore arose whether the right to use the particular remedy of attachment related to the obligation of the contract or to the remedy. If to the former, the law of Dakota must govern; if to the latter, the law of Missouri. The majority of the court decided in favor of the law of Missouri (lex fori), holding the question to be one of the

court relates to the obligation of the contract or to the remedy, such as questions relating to exemptions, etc., cases of like sort involving this constitutional provision will be authority on the same point as it arises in private international law. See Edwards v. Kearzey, 96 U. S. 595; Coffman v. Bank, 40 Miss. 29, 90 A. Dec. 311.

8 124 Mo. 178, 25 L. R. A. 178, note. See also §§ 183, note 3, 209,

remedy; but there was strong dissent. Applying the criterion above mentioned, it would seem quite clear that the opinion of the majority was correct. If, after the execution of the Dakota contract, the legislature of Dakota had passed a retroactive law, providing that no attachment should thereafter issue against a married woman's property, but leaving untouched other remedies against her, it could scarcely be held that this would have impaired the obligation of the contract.

§ 181. Obligation of Contract dependent upon Intention of Parties. It is a point to be specially noted that the obligation of a contract depends primarily upon the understanding and intention of the parties. In this respect it differs materially from the element of validity.

In many instances we need look no further than to the terms of the contract itself to ascertain exactly what the promisor has obligated himself to do. But questions often arise which were not foreseen by the parties and for which no provision has been made in the contract; as where a bond or note is given which makes no provision for the payment of interest after maturity. Or the contract itself may be one wholly or in part implied by law, as in case of the implied contract to pay for services rendered, or the contract of an indorser of negotiable paper.

In all such cases the parties having failed for one reason or another to express their meaning fully, the law may presume from the circumstances that they intend to bind themselves to certain duties, and undertakes to fix the scope and extent of those duties accordingly, as to it may seem just, wise, and politic. In such cases the law does not seek to override the intention of the parties, but merely to supply what the parties have left unsaid. On the contrary, the parties may override the law in respect to such matters at any time, and regulate their own duties under the contract by an express agreement to that effect. In other words, the "obligation" of a contract (as here used) is a question of the intention of the parties. If that be expressed, it will prevail over any rule of law; if not expressed, an appeal must be made to the law to ascertain what the presumed intention is. In determining the obligation of a con