The seller.
But, now, to take the converse case of the seller, who has sold more stock than he can deliver. He has to apply to a dealer who will advance him the stock. The operation here effected is, the purchase of the stock for the current account at the “making-up price,” and its resale for the ensuing account. This resale may be at a lower price than the purchase, and the difference between the two prices being the premium paid to the dealer for the loan of the stock. It may, on the other hand, be effected at the same price, if the state of the market is such that the payment of the money is of itself an accommodation to the dealer sufficient to induce him to make arrangements, or if there is a large “bull” account open, he may be entitled to receive a “contango.” The premium, if any, received by the lender of the stock is called a “Backwardation.” But, as explained by a witness before the Stock Exchange Commissioners,[[266]] the payment of contango or backwardation depends upon whether the particular stock is overbought or oversold. If an enormous amount of stock is thrown upon the market more than it can take, there is a heavy contango; if, on the contrary, an enormous amount of stock is taken off the market, there is no contango, but a backwardation.
It is submitted that the following conclusions result from the foregoing cases:—
Results of the foregoing cases.
(1.) Bargains for mere differences are wagers within 8 & 9 Vict., c. 109, though contracts on the Stock Exchange never take that form.
(2.) That mere bargains for the future delivery of things not in possession and the value of which is uncertain at the time of the contract are not wagers.
(3.) That in determining whether a bargain be in the nature of a wager or not the substance of the agreement as understood by both parties at the time must be looked at.
(4.) That the question as to what were the real elements of the agreement is a question of fact for the jury, but that it is for the Court to decide on the nature of the agreement on the facts so found. Both these positions seem clear from the case of Grizewood v. Blane and the remarks of Turner, L.J., in ex parte Marnham.
(5.) That the absence, in fact, of a material element of the professed transaction is material as showing that the bargain was a mere cover for a wager, e.g., non-delivery of stocks or shares, as in Grizewood v. Blane ex parte Marnham.
(6.) That, as between the jobber and the broker’s principal, it is quite immaterial that the arrangement between broker and principal is for a wagering contract, unless the jobber is aware of it and so knowingly engages in a wagering transaction. This clearly appears from the remarks of the judges in Thacker v. Hardy[[267]] and Marten v. Gibbons.[[268]]