City of San Juan v. St. John's Gas Co.

Background

A Puerto Rican city and a private gas company contracted for the sale of gas works and for lighting street lamps. The contract and bidding papers referenced values in Porto Rican money but said payments would be made in "foreign current money." Over many years the city sometimes paid in Porto Rican money and sometimes in United States currency; the gas company often accepted payments "under protest," insisting the contract required foreign current money. A later written agreement involved a payment to Mullenhoff & Korber and whether that smaller payment in U.S. money extinguished a larger debt stated in Porto Rican money.

Reasoning

The Court addressed two questions: which currency the contract required, and what effect the later payment agreement had. It held that the contract required payment in foreign current money (not Spanish gold) and that the controlling currency is the one current when payment is due, not necessarily the one current when the contract was signed. The Court also found a bona fide, long-running dispute over the medium of payment. Because the parties reached an agreement about a payment in U.S. currency to settle a disputed claim, that payment could operate as a compromise that extinguished the larger Porto Rican-money claim. The trial court erred by refusing the city's requested instruction on that point.

Real world impact

The ruling clarifies which currency controls when contracts specify "foreign current money," makes clear that accepting payments under protest does not always waive rights, and confirms that a genuine settlement payment can discharge disputed debts. The case was sent back for a new trial to resolve remaining factual issues.