Money serves as a medium of exchange. It is a key characteristic of money that it is accepted in settlement of debts, without question. It serves as a standard for value by reference to which, the comparative value of goods may be measured. It is a unit of account in which debts and liabilities are expressed. It is a store of purchasing power.
The precise meaning of money is determined by the context. Money in a concrete tangible sense includes banknotes and coins that are legal tender in the relevant place at that time. Money in a broader sense includes the right to receive cash including sums standing to the credit of a customer in a bank account. In some contexts, it may be said to include investment in liquid securities.
The means by which a debt is to be discharged is by payment at the agreed time and place. It is presumed that payment is to be in accordance with the law of that place, and in what is legal tender in that place. Where an obligation or debt is expressed in a foreign currency, this may indicate the means by which it is to be discharged and the unit of account with reference to which it is to be measured.
Where on the proper interpretation of the contract, payment is in a particular currency or unit of account, measurement is made by reference to the time of payment according to the law of the place concerned. It is payable according to the nominal amount of the value of the currency, regardless of any rise and fall in the real exchange rates relative to the home currency, since the date of contract. Where common currency in terms of name is referred to, such as dollars, pounds, francs, it is interpreted as referring to the currency of the place of payment, unless the contrary is shown.
Historically, domestic courts could only give judgment in domestic currency. However, in England and later in Ireland, the relevant cases were overruled and now a judgment can be given in a foreign currency.
Interest is compensation or a return for the use of money. It accrues daily, even if payable at intervals. Debts do not generally carry interest as such. At common-law, interest is payable where there is an express agreement to pay it, where it can be implied from a course of dealing or from the nature of a transaction or by custom or usage in the relevant trade or business.
Compound interest may apply where there is an express or implied agreement to pay it or if it is applicable in accordance with the custom or usage in the particular trade or business.
A right to interest may arise in equity where there is a particular relationship between debtor and creditor. This arises in the case of mortgagor and mortgagee, obligor and obligee on a bond, personal representative and beneficiary, principal and surety, vendor and purchaser, principal and agent and as between trustee and client. It arises generally where a debtor is in a fiduciary position relative to a creditor or where money has been obtained by fraud.
Interest is allowed where the defendant ought to have done something which would have entitled the plaintiff to interest at common law or where the defendant has wrongly prevented the claimant from doing something which would have entitled him to interest. Interest is allowed on pecuniary legacies if not paid within a certain period, on the dissolution of a partnership and on arrears of an annuity.
Interest by Law
Interest is provided for by statute in a number of cases. Under European Union regulations, there is provision for interest on late payment of commercial debts. Judgments for debts, carry interest a statutorily appointed rate. This is set and varied by ministerial order from time to time.
A number of other statutes provide for payment of interest for sums due in particular contexts. Interest, for example, arises in relation to bankruptcy and winding up. Arbitrators and umpires have powers to award interest, subject to the terms of their appointment.
A court has discretion to grant interest at such rate as it determines on the whole or part of any debt or damages. This power may be exercised whether or not a claim is made for interest in the pleadings. It does not apply where interest is applicable as of right on a monetary sum.
Regulation of Interest
Formerly, statutes restricted the charging of interest. The so-called Usury Acts were repealed by the Usury Laws Repeal Act, 1854. Apart from consumer protection and moneylenders legislation, there is no power for a court to set aside or vary a transaction, which provides for an excessive rate of interest. Parties are free to agree and set such rate of interest as they may. Agreements for the payment of interest are valid, notwithstanding that the interest rate is not fixed, provided that it is as least measurable by reference to some benchmark.
The rate of interest is governed by the proper law of the contract. Accordingly, the practice in the place of payment is usually applicable, subject to the contract providing otherwise. Where a contract provides for the payment of a sum of money on a specified day with interest at a fixed rate to that date, then if default is made, that rate of interest is generally also allowed as and from the time of default.
Interest may be recovered separately from the principal. Accordingly, summary proceedings may issue to collect arrears of interest, without demanding or pursuing the principal sum. In contrast, interest by way of damages is not a debt and must be assessed in proceedings for payment of the principal sum due.
If the principal is paid or tendered, then interest ceases to run. Arrears of interest may be claimed. If a principal sum is statute-barred, then the interest is generally statute-barred as well.
Nature of Loan
A loan generally creates a debt. There is no obligation to return specific coins or notes. The debt is “fungible”. Exceptionally, monies may be traced into other property and into the hands of third parties. See the sections on tracing.
A loan made for an illegal purpose can generally be recovered after the purpose has been carried into effect. Loans made knowingly for unlawful gaming are irrecoverable. Loans made for paying betting debts are generally irrecoverable.
A loan to a minor is absolutely void under the Infants Relief Act. A guarantee for such a loan, where the fact of the infancy is known to the parties, is void. An agreement made by the former minor, after he comes of full age, which amounts to an agreement to pay the void loan, is itself void (under the Betting and Loans (Infants) Act 1892). A person, who for the purpose of earning interest, commission, reward or profits sends or causes to be sent to a minor, a circular, notice, advertisement or other document inviting him to borrow money or enter a transaction involving lending or security, is guilty of an offence.
It is an offence for an undischarged bankrupt to obtain a loan, without disclosing his status to the lender, where the loan in excess of [ ]
Prior to 1993, an elaborate system of exchange controls existed. The legislation dated from the Second World War. The Exchange Control Act 1954 updated wartime and post-war emergency legislation and placed it on a permanent footing. The legislation was renewed periodically until 1992. It was administered by the Central Bank.
The consent of the Minister for Finance was required for purchase or sale of gold or foreign currency, other than by or from authorised dealers. Buying, borrowing, selling and lending of gold or foreign currency by an authorised dealer was subject to directions and regulation by the Minister. The authorised depositories and dealers comprised of the principal banks and merchant banks.
A person was not entitled without consent to make or commit himself to make any payment to or to the order of any person resident outside the “scheduled territories” or to place or to promise to place any sum to the credit of a person so resident. There were some restrictions on payments to persons resident in the scheduled territories. The schedule territory is referred to as the State, Great Britain, Northern Ireland, the Channel Islands, the Isle of Man and such territories as might be prescribed.
Consent was required to transfer any security, policy of insurance or rights to a person resident outside the scheduled territories, or to a person who is a nominee of a person so resident. Consent was required for the transfer of any security, annuity or policy or right of interest in a security from a person who was resident outside the scheduled territories or who is a nominee of such person. A person could not issue bearer certificates or coupons or alter them so that it becomes a bearer security, under the legislation.
Consent was required to make any capital payment on a security registered in the scheduled territories, to a person outside the scheduled territories. Where a certificate of title to the security was in the scheduled territories, capital monies payable on the security could not be paid outside the territories without the production of the certificate to the person making the payment.
Duties were imposed on persons keeping registers, in regard to entries on the register of persons outside the scheduled territory.
Importation of any title to a reserved security or coupon required consent. Exportation of gold or certificate of title to security or a coupon required consent.
Exportation of goods of any class or description to a destination, in a territory outside the scheduled territories, was prohibited without the consent of the Minister, unless certain exceptions applied. Evidence could be produced in the prescribed form, that payment for the goods had been made to a person in the State provided that Revenue were satisfied that the amount was adequate. Payment for prescribed classes of goods could be made, if it was shown to the Revenue’s satisfaction, that it was to be made to a person in the State within six months after exportation, and that the amount of the payment is to be adequate.
The Customs Act applied to exchange control legislation and regulations. They were administered by the Central Bank. A complex series of exchange control notices prescribed exceptions and general consents for particular types of trading and other transactions. Other transactions and transactions above higher limits, outside the scope of the general consents in the exchange control notices, required consent.
The European single market was completed on 1 January 1993. An integral part of the single market was the removal of controls on capital. The exchange control legislation was allowed lapse. The Financial Transfers Act was passed to deal with occasional emergency controls on transfer.
The legislation allows the Minister to restrict financial transfers between the state and another country. And order must be in conformity with the European Union legislation and on such terms may be as prescribed.
Contravention of the legislation is an offence. A person guilty of an offence is subject on summary conviction to a fine of €1270 or up to 12 months imprisonment or both. A fine on indictment is €1,270,000 or twice the capital of the convicted entitiy, in respect of which the offense is committed or 10 years imprisonment, whichever is greater.
In practice the use of legislation has been made in the case of sanctions imposed by the EU against various countries for political reasons as part of the international scheme of sanctions.
Ireland imposed exchange controls on the United Kingdom in 1979 when the Irish pound broke from sterling.
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