It has already been observed1 that one of the most important functions of money is to serve as a general medium of exchange or payment. Money, where it is legal tender, serves as the means of fulfilling many obligations, whether compulsorily imposed or voluntarily contracted. Furthermore, in the context of almost any claim (contractual, tortious, or otherwise) the defendant must ultimately discharge his obligations by means of a monetary payment.2
With these general considerations in mind, it is necessary to attempt a formulation which defines a monetary obligation or which at least describes those characteristics which distinguish it from other forms of obligation.
Monetary obligations3 primarily exist where the debtor is bound to pay a fixed, certain specific, or liquidated sum of money. This definition presupposes that money is to be paid in the sense of a medium of exchange or in a similar monetary context, for example, where a bank advances a loan to its customer.4
Monetary obligations of the type now under discussion exist principally where:
(a) a party incurs an obligation to pay a stated sum of money, for example, £100. Such an obligation remains a monetary obligation even though the parties may make more detailed provision as to its performance (for example, by requiring that payment be made in £20 notes, or by stipulating payment by way of credit to a particular bank account);5
(b) a party incurs an obligation to pay an unascertained—but ascertainable—sum of money, for example, where a party agrees to pay an amount equal to the closing price of a listed security on a specified date. This is a monetary obligation even though its amount is uncertain as at the date on which the obligation is incurred, for the amount will have been ascertained by the date on which the obligation falls due for performance; or
(c) a party incurs an obligation to pay damages as a result of a breach of a non-contractual obligation in a contract, or as a result of a breach of a non-monetary obligation. Damages involve a duty to pay money, and the resulting obligation is therefore a monetary one. The monetary character of the obligation is in no way impaired by the fact that it is unliquidated or unascertained or that the payment obligation has come into being to substitute for the debtor’s failure to perform a non-monetary obligation. It is true that the debtor, though bound to pay, cannot be said to be indebted to the creditor until the amount of the compensation is agreed or settled by the court. It is likewise true that, as a result of those characteristics, the debtor cannot tender payment and many rules relating to ‘debts’ cannot be applied.6 But these distinctions between debt and damages should not be allowed to overshadow the fact that, in both cases sums of money are to be paid, that in both cases alike, the court has power to award interest for the whole or any part of the period between the date when the cause of action arose and the date of judgment, and that, in any event, the meaning of the word ‘debt’ depends on the context and that there is therefore justification for uniting both under the heading of monetary obligations.