When John Adams became President in March of 1797, the French had seized nearly 300 American ships bound for British ports. The French had ordered this retaliatory measure in response to the Jay Treaty, which the French considered as evidence of an Anglo-American alliance. Relations between France and the U.S. worsened when the Duc de Talleyrand, the French foreign minister, rejected the Federalist Charles C. Pinckney as America's minister to France. The French continued to seize American ships, and some Federalistss demanded war.
Despite strained Franco-American relations, President Adams, however, was determined to avoid war. Adams sent a three member commission consisting of Charles Cotesworth Pinckney, John Marshall, and Elbridge Gerry to Paris in order to avoid a conflict. When they arrived, they met with the French foreign minister Talleyrand, but then waited for several weeks before hearing from the French again.
Several weeks later, the three diplomats met with three French agents, known only as X, Y, and Z. The three agents demanded $250,000, a loan from the U.S, and a formal apology for comments made by Adams in order for negotiations to occur. The American delegates found this bribery unacceptable, and they are often cited as stating the famous slogan: "Millions for defense, sir, but not one cent for tribute!" as their rallying cry, though some recent evidence suggests that this was not the case.
The U.S. offered France many of the same provisions found in Jay's Treaty with Britain, but France countered with an order that Marshall and Pickney should leave the country, refusing any proposal that would involve these two. Gerry remained in France, thinking he could prevent a declaration of war, but did not negotiate any further.
President Adams released the report of the affair two weeks later. Many Americans, especially anti-French Federalists, were furious. In 1798, a declaration of war almost came about, but Adams prevented it from passing, prefering to stay with the diplomatic route. Adams appointed new diplomats including William Murray to handle the growing conflict, and eventually averted a war.