New York Central & Hudson River Railroad v. Gray

Background

In November 1900, a mapmaker agreed to make a large map for a railroad company for $750. He was to receive $150 in cash and the rest in railroad transportation between New York City and his farm in Girard, Pennsylvania. The map was made, delivered, and accepted. The cash was paid, and the company later provided only $55.77 worth of transportation. In September 1906 the company refused further transportation, citing a new federal law that barred carriers from giving transportation as payment.

Reasoning

The Central question was whether the federal law prevented the mapmaker from getting money when the company could no longer pay with travel. The Court explained that the Hepburn Act did forbid carriers from exchanging transportation for services after the law took effect. But because the mapmaker had fully performed the contract and the railroad had already received the benefit, state law principles required the company to pay an equivalent in money. The Court said enforcing that money judgment did not conflict with the federal statute and affirmed the state courts’ judgment.

Real world impact

The ruling means businesses cannot avoid paying for work already done simply because a new federal rule later makes the originally promised in-kind payment illegal. It leaves open a different result if a contract made after the law required illegal performance, but it protects people who completed work under valid earlier agreements.