Applying a combination of federal enactments arising from abolition of the gold standard during the Great Depression and current Ohio contract law, the Sixth Circuit today reversed a decision that struck down a lease clause requiring payment of rent "in gold coin of the United States of the present standard of weight and fineness."  Such gold clauses, the court noted, served as a hedge against inflation — especially, as in this case, the contract (a 1912 lease for downtown Cleveland property) provided for no escalation in (rent) payments above $35,000 per annum. 

The court recognized that a 1933 Act of Congress barred enforcement of gold clauses (and made ownership of the precious metal illegal) but also that a 1977 enactment revived enforceability for obligations that "issued" after the effective date.  Because predecessors to the current lessor and lessee entered into a "novation" of the original lease but adopted the original terms of it (including of course the gold clause), the court concluded, the lease entitled the landlord to demand and receive the 2008 equivalent of $35,000 in 1912 gold coin.  216 Jamaica Avenue, LLC v. S&R Playhouse Realty Co., No. 07-3967 (6th Cir. Aug. 27, 2008).

The court ended its discussion of the merits — which analysis Blawgetter found quite interesting — with an observation on the equities.  On the one hand, Their Honors said (per Judge Sutton), the landlord wanted many times the $35,000 that the previous owner collected for many decades, but on the other hand the tenant desired to pay but a small fraction of the leasehold’s present value.  "As a matter of sheer economics," the court wryly noted, "it is hard to say which party has the sharper elbows."  Id. slip op. at 7.

For avoidance of doubt, our feed supports sharp golden elbows.