essential conditions of the authorization, since it allowed a small capitalist, by spending an insignificant sum, to take part in the drawings by lot, a privilege for which the Legislative Body had imposed the necessity of a serious outlay. But this opinion is now abandoned, and it is absolutely established by the courts and by text-writers, that the sale of lottery bonds by instalments is not forbidden by law. The division made infringes no essential condition. It in no way tampers with the value of the bond. The price alone is divided, and contracting parties are always at liberty to arrange the manner of payment.

The sale of lottery bonds by instalments is never lawful unless genuine and straightforward. If this manner of sale is valid under the penal law, it is simply because it does not, a priori, infringe the essential conditions of the law of authorization. It is usually vitiated, however, by the insertion of certain accessory clauses which have the effect of changing the legality of the transaction. The limits of this present essay do not permit us to give a sketch of these different clauses, which have occasioned heated polemics in theoretical discussions and provoked innumerable judicial decisions. It must now suffice to say that such abuses have arisen in the course of sales of lottery bonds by instalments, that the French Parliament is considering a statement of law upon the subject, which is to appear soon, and will cover sales of this kind with a strict legal regulation, too strict to suit many.

(3) Sales of lottery bonds on approval (à option). — The sale of lottery bonds on approval is a special kind of transfer which. appeared in France about 1883, and which is frequently employed there, especially at Paris and Marseilles. By virtue of this sale, effected a few days before a drawing of lots takes place, the purchaser can at his pleasure in the five or ten days which follow the drawing either keep the bond by paying the price agreed upon, or renounce his purchase. At the same time he abandons to the seller as forfeit the small sum originally paid on the face price of the bond when the bargain was arranged. The option thus left to the buyer has given the name to the contract. Certain writers have asserted that this is a transaction falling under the prohibition of the law of 1836. This contract, they say, simply disguises the sale of the lottery chance alone, separated from the interest and repayment of the capital. We however entertain the contrary opinion. It is merely a fair and open sale of the integral title without impairment. The purchaser becomes the owner of

the instrument in the correct form under which the issue has been authorized. The sale, it is true, is affected by a subsequent condition, but it is nowhere specified that the lottery bond should not contain a clause of this nature.

(4) Sales before the prizes are drawn, with permission for the purchaser to resell after the drawing, if desired. - Most financial establishments, large and small, have engaged in the sale of lottery bonds under a peculiar kind of arrangement, which up to the present date has not been made the subject of judicial action or of theoretical discussion. A fortnight before each drawing these establishments offer lottery bonds for sale, agreeing to retake them from the purchaser in the five days which follow the drawing, by paying a slight reduction (usually two or five francs) on the price of the original sale. For example, in this way a bond of Panama, sold for 122 francs before the drawing of the 15th of February, 1895, could be resold by the purchaser to the seller till the 20th of February, inclusive, for 120 francs. We regard the transaction as lawful, and not punishable, although after the sale and resale of the bond the buyer is in the same position as a person who would have bought the lottery ticket for two francs, with no bond attached. The fact remains, nevertheless, that the bond which has been the subject of these different transactions is the same integral instrument which the legislative body authorized. This circumstance in itself, as we think, insures its legality.

In the other countries of Europe, as well as in France, speculation has seized on the lottery bond. It is found usually under the two following forms, as we have already noted: Ist. Dismemberment of the bond. 2d. Sale of lottery bonds by instalments.

(1) Dismemberment of the bond. In Italy, as in France, it is not allowed to offer to the public unauthorized parts of bonds, or the simple chance at lottery, separated from the bond itself (Law of the 19th of July, and decree of the 21st November, 1880), and the same prohibition is found in Sweden. On the other hand,

in Germany, in Austria, in Hungary, in the Netherlands, and in Turkey, the sale of parts of lottery bonds is permitted, and the sale of all or a part of the chances at lottery which are attached to the instrument is the source of a profitable business. The latter arrangement is particularly common in the German speaking countries, where it is technically called Heuergeschäft or Promessengeschäft.

(2) Sale of lottery bonds by instalments. The sale of lottery

bonds by instalments is especially practised at the present time in Belgium, in Austro-Hungary, and in Switzerland. In Austria, the kinds of sale have been strictly regulated by the law of the 30th of June, 1878, and in Hungary by the law of the 5th of June, 1883. In Germany the sale of lottery bonds by instalments (Abzahlungsgeschäft) has been forbidden throughout the Empire by the Imperial law of the 16th of May, 1894.

IV.

Various and peculiar questions arise in connection with the payment of lottery bonds, and, in order to understand them, it is convenient to distinguish the two following: Ist. The payment normally effected. 2d. The payment effected before due.

(1) Case of normal payment. - Lottery bonds, in general, are paid gradually. The progressive liquidation is assured by periodic drawings by lot. Certain difficulties, however, occur in the practice, and we will consider some of these briefly:

a. It has happened by some mistake, or for some reason other than fraud, that two or more owners of the same number have come to claim the benefit of the same lot. The party issuing the loan was forced to pay the entire amount of the lot to each of the bearers of the successful number.1

b. It can also happen that the number of a bond be omitted at the time of a drawing, and that the holder proves that the number of his bond has not shared in the drawing. How is it possible to set a value in money on the loss occasioned by this omission! The holder has perhaps been deprived of a prize. At all events he has lost the chance to win one. By what rules is this chance to be valued? Different ways have been proposed, and the imagination of magistrates and jurists has been exercised on this question without restraint. Though the remedy appear perhaps empirical, we suggest the following solutions. Repeat the drawings in which the number in question was omitted, or give several chances in the following drawings for the benefit of the bondholder who was the sufferer before, by inserting in the wheel several lots containing the number of the omitted bond, etc.

(2) Case of anticipated payment. The payment of the bonds usually takes place at the times determined beforehand in the specifications of the loan, in such a way that all the bonds shall be

1 Cour d'Appel de Paris, 28th of May, 1853.

repaid within the limit fixed for the total payment. But the repayment does not always operate here in a normal manner. For different reasons the time may be advanced. For instance, the borrower may fail, or possibly desire to convert his loan. Let us then examine these two cases of anticipated repayment, and consider rapidly what is the right of the holder of the lottery bond in each of these hypotheses.

a. Failure. Some writers in France assert that it is essential in such cases to know the beneficiaries of the lots. Consequently, it is required to proceed immediately to all of the drawings. The winners will appear in the failure for the sums that the lot would have given them, and will obtain at least a dividend on the lots due them. This solution has been justly criticised. After the failure no such proceeding should be possible as the assignment of prizes by lot. The failure arrests everything. It fixes the situation of the creditors in statu quo. The failure, it might be said, acts as a veritable crystallization. No case of inequality should arise among the creditors after the declaration of the failure.1

The future drawings could not then be arranged on the day of the failure. It would appear that in all such cases the bondholders would have the right to claim damages. By his fault the borrower fails in an obligation to be performed, which he had assumed, his obligation to arrange drawings by lot. This obligation unexecuted sounds in damages according to common law. On the arrangement of these damages fresh difficulties arise, which, however, we may not consider here.

b. Conversion. This is a very grave question, and in France has just given rise to a notorious lawsuit still pending before the Court of Appeal. Is it permissible for the borrower who has issued bonds to assume the right to impose on his bondholders anticipated payment in order to liquidate his debt? Most of the courts and text-writers answer in the negative. Others think that the borrower enjoys this privilege. If this solution holds, however, it must be admitted that the existence of lottery chances attached to the bonds places the borrower in a singular embarrassment. In short, certain bonds, to be determined by lot extending through a number of years, should obtain a prize. Now it is self-evident

1 Art. 445. Code de Commerce Français.

2 Art. 1142 du Code Civil Français.

3 Compagnie d'Assurances generales v. Compagnie des Chemins de Fer de l'Est, Civil Court of the Seine, 1st Chamber, 18th of July, 1895.

that without a clause to the contrary the anticipated payment should not deprive the bondholders of the chances of lottery prizes. How are these rights to be respected?

An interesting discussion arose on this point in the Municipal Council of Paris. The controversy opened in 1880 and is still pending to-day. The enormous debt which the city of Paris carries consists of lottery bonds to which is attached a profitable interest. The city wishes to pay up its debt, but does not know how to indemnify the bondholders that are to be paid for the lottery chances of which they would be deprived. To effect this several plans have been suggested. It has been proposed to pay the bondholder for his deed, but leave him his number, which would continue to take part in the promised drawings; but this would infringe the law of 1836. As has been stated, the nature of the authorized bonds must not be changed. It has also been proposed to make all the drawings at once, but not to touch the prizes accruing to the holders favored by lot, except at the times when they would have been paid regularly, without the anticipated payment. It was then arranged that special acknowledgments should be given to the bondholders for the prizes which fell to them in order that they might have them discounted.

But all the solutions advanced are open to objections, so that even the partisan. of the conversion of loans realized by the issue of bonds must, we think, become the adversary of the conversion of lottery bonds.

Most of the questions which we have passed in review are present in many countries of Europe, as in France, where they have given rise to different arrangements. We recall only the celebrated conversions of the lottery bonds of Brussels and Anvers. The conversion of the city of Brussels was specially authorized by a royal decree dated the 24th of October, 1886. The bondholders were paid the nominal amount of their bonds; the drawings by lot were made at once, and special acknowledgments were given to the winners for the prizes accruing to them, with the opportunity of having them discounted at a rate of three per cent. Italy also offers us the example of numerous conversions of lottery loans. At the time of the conversion of the lottery bonds of the city of Naples, all the bondholders were presented with a ticket bearing the number of their former bond, and giving the right to be represented at the normal time in the drawings of the promised prizes.

1 Supra, III.