Gold Clause: A Comprehensive Guide to Its Legal Implications

Definition & meaning

A gold clause is a provision in a financial obligation that grants the creditor the right to demand payment in gold, a specific U.S. coin, or currency equivalent to gold. This type of clause is designed to protect creditors against potential declines in the value of currency due to inflation, war, or political instability. Although these clauses were common in the early twentieth century, their use was largely invalidated by the Gold Reserve Act of 1934. However, they were reinstated for obligations issued after 1977 under 31 U.S.C. § 5118.

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Legal use & context

Gold clauses are primarily used in contracts involving long-term financial obligations, such as loans or leases. They serve to protect creditors' interests in the face of economic uncertainties. Legal professionals may encounter gold clauses in various areas, including finance and contract law. Users can manage these agreements themselves with the right tools, such as templates provided by US Legal Forms, which are drafted by qualified attorneys.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A business enters into a ten-year loan agreement that includes a gold clause, allowing the lender to demand repayment in gold if the value of the dollar decreases significantly.
Example 2: An investor includes a gold clause in a lease agreement for a commercial property, ensuring that rent payments can be made in gold if inflation rises sharply. (hypothetical example)

Relevant laws & statutes

Key legislation related to gold clauses includes:

Gold Reserve Act of 1934: This act invalidated existing gold clauses in contracts.
31 U.S.C. § 5118: This statute reinstated the use of gold clauses for obligations issued after 1977.

Comparison with related terms

Term	Description	Key Differences
Gold Clause	A provision allowing payment in gold or equivalent.	Specifically tied to the value of gold.
Inflation Clause	A provision adjusting payments based on inflation rates.	Focuses on currency value changes, not specifically gold.

Common misunderstandings

What to do if this term applies to you

If you are considering a contract that includes a gold clause, it is advisable to:

Review the terms carefully to understand your rights and obligations.
Consult with a legal professional if you have questions about the implications of the clause.
Explore US Legal Forms for templates that can help you draft or review contracts involving gold clauses.

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Quick facts

Attribute	Details
Typical Use	Long-term financial contracts
Legal Basis	31 U.S.C. § 5118
Historical Context	Invalidated by the Gold Reserve Act of 1934