NS AN PN RN SN Se Sous Rees Ah SN SS i Ree oe y cass sie peat eae i Oe > Pa a ae * * Waarats ee Se ™. SN pore 4 sh a * aS ae . rts OO ee aa ROP riee wy SAS See . SO eon ya htaty a poe ene CA ORR SR a Uv AR a ake Nora's NS ‘ Bea sen uaaanaanaanunnn en eee IT hook : ISLS, A Wy yyy Vy Y YE if SIPIL IESE ILLS, YY fj A os CS pf ESE YY is ie ee ey ee gol A&é foFS Cid CORNELL UNIVERSITY LAW LIBRARY. THE GIFT OF 125? Ope Ben oe PRINCIPLES OF THE ENGLISH LAW OF CONTRACT AND OF AGENCY IN ITS RELATION TO CONTRACT PRINCIPLES OF THE ENGLISH LAW OF CONTRACT AND OF AGENCY IN ITS RELATION TO CONTRACT ® BY SIR WIL Tee SS ANSON, Barr., D.C.L. or tad TEMP S., Pankitren- -AT-LAW WARDEN OF EL Sauue COLLEGE, OXFORD Lighth Bvition FIRST AMERICAN COPYRIGHT EDITION EDITED WITH AMERICAN NOTES BY ERNEST W. HUFFCUT PROFESSOR OF LAW IN THE CORNELL UNIVERSITY SCHOOL OF LAW Neto Bork MACMILLAN AND CO. AND LONDON 1895 All rights reserved LAist -CopyRiecHt, 189 By MACMILLAN AND CO. Norbyoot Wress J. S. Cushing & Co. — Berwick & Smith Norwood Mass. U.S.A. NOTE TO THE AMERICAN EDITION. THE object of this authorized American edition of Sir William Anson’s well-known treatise, is to give parallel references to selected American authorities where the American law corresponds with the English law as stated by the author, and to indicate clearly the points at which the American authorities either disagree wholly with the English law, or are strongly divided among themselves. No attempt at exhaustive citation of authorities has been made. The simplicity and conciseness of the author’s treatment would be marred by a large citation of cases, and the book would be to that extent less useful to the student. If the editor’s citations exceed in amount those of the author, it is only because the American law is the law of upwards of fifty jurisdictions, while the English law is the law of but one. The abbreviation, “H. & W.,” following the citation of cases, refers to “ Huffeut and Woodruff’s American Cases on Contract,” a volume prepared especially to accompany Sir William Anson’s text. Statutory changes have generally been indicated by references to Stimson’s American Statute Law, a work of great service to American students and practitioners. v vi NOTE TO THE AMERICAN EDITION. It is hoped that this edition may serve to increase the usefulness of a book which is already the univer- sally acknowledged model of what a student’s book should be. CorneLL University, ScHoor or Law, October, 1895. PREFACE TO THE SIXTH EDITION. —_+>—_- WHEN the subject of Contract was first introduced into the School of Jurisprudence at Oxford, in the year 1877, teachers of Law had to consider the books which their pupils might best be directed to read. Some works on the subject of acknowledged value to the practising lawyer were hardly suitable for beginners, and the choice seemed to lie between the works of Mr. Leake, Sir Frederick Pollock, and the late Mr. Smith. Of these, Mr. Smith alone wrote expressly for students, and I had, as a student, read his book with interest and advantage. But I thought that it left room for an elementary treatise worked out upon different lines. Neither Sir Frederick Pollock nor Mr. Leake wrote for beginners, and I feared lest the mass of statement and illustration which their books contain, ordered and lumi- nous though it be, might tend to oppress and dishearten the student entering upon a course of reading for the School of Law. Being at that time the only public teacher of English Law in the University, I had some practical acquaintance with the sort of difficulties which beset the learner, and I endeavoured to supply the want which I have described. In working out the plan of my book I necessarily studied the modes of treatment adopted by these two "writers, and I became aware that they are based on two totally different principles. Mr. Leake treats the con- vi viii PREFACE tract as a subject of litigation, from the point of view of the pleader’s chambers. He seems to ask, What are the kinds of contract of which this may be one? Then— What have I got to prove? By what defences may I be met? Sir Frederick Pollock regards the subject ab extra; he inquires what is the nature of that legal relation which we term contract, and how it is brought about. He watches the parties coming to terms, tells us how the contract may be made, and by what flaws in its structure it may be invalidated. Mr. Leake treats the subject from every point of view in which it can interest a litigant. Sir Frederick Pollock wrote a treatise on the Formation of Contract: only in later editions has he introduced a chapter on Performance. To both these writers I must own myself to be under great obligations. If I try to apportion my gratitude, I should say that perhaps I obtained the most complete information on the subject from Mr. Leake, but that Sir Frederick Pollock started me on my way. The object which I set before me was to trace the principles which govern the contractual obligation from its beginning to its end; to show how a contract is made, what is needed to make it binding, whom it may affect, how it is interpreted, and how it may be discharged. I wished to do this in outline, and in such a way as might best induce the student to refer to cases, and to acquire the habit of going to original authorities instead of taking rules upon trust. So I have cited few cases: not desiring to present to the reader all the modes in which principles have been applied to facts, and perhaps imperceptibly qualified in their application, but rather to illustrate general rules by the most recent or most striking decisions. In successive editions I have made some changes of arrangement, and have tried to keep the book up to date. Since it first appeared, in 1879, the Legislature has been TO THE SIXTH EDITION. ix busy with the law of Contract. The law relating to Married Women’s Property, to Bankruptcy, to Bills of Exchange, to Partnership, to Mercantile Agency, has either been recast or thrown for the first time into statu- tory form: the effects of the Judicature Act in the general application of equitable rules and remedies have become gradually apparent in judicial decisions. Thus it has been necessary to alter parts of my book from time to time, but in this, the sixth, edition I have made many changes for the sake of greater clearness and better ar- rangement. The whole of the chapters on Offer and Ac- ceptance, on the Effects of Ilegality, on the Discharge of Contract by Breach, and a great part of the chapters on Mistake and Fraud, Infants and Married Women, have been re-written, and the rest of the book has undergone many minor alterations as the result of a general revision. I should add one word as to the place assigned to Agency. It is a difficult subject to put precisely where the reader would expect to find it. It is a mode of form- ing the contractual relation: it is also a form of the Con- tract of Employment. From the first of these points of view it might form part of a chapter on Offer and Accept- ance, regarding the agent as a mode of communication ; or it might form part of a chapter on the Capacity of Parties, regarding Representation as an extension of con- tractual capacity; or, again, it might form part of a chapter on the Operation of Contract, regarding Agency as a means whereby two persons may make a contract binding on a third. But upon the whole I think it is best to try and make the student understand that the agent represents his prin- cipal in virtue of a special contract existing between them, the Contract of Employment. ‘There isa disadvantage, no doubt, in introducing into a treatise on the general prin- ciples of contract a chapter dealing with one of the special sorts of contract, but I believe that the student will find x PREFACE TO THE SIXTH EDITION. less difficulty in this part of the law if he is required to understand that the agent acquires rights and incurs liabilities for his principal, not in virtue of any occult theory of representation, but because he is employed for the purpose, by a contract which the law recognizes. I should not close this Preface without an expression of thanks to the friends who from time to time in the last ten years have helped me with suggestions or corrections of this book. To his Honour Judge Chalmers, to Sir Frederick Pollock, and in especial to the Vinerian Professor, Mr. Dicey, I owe much in the way of friendly communication on points of novelty or difficulty. Nor should a teacher of law be unmindful of his debt to the student. The process of explaining a proposition of law to a mind unfamiliar with legal ideas, necessitates a self-scrutiny which is apt to lead to a sad self-conviction of ignorance or confusion of thought ; and the difficulties of the learner will often pre- sent in a new light what had become a commonplace to the teacher. Therefore I would not seem ungrateful to the law students of Trinity College, past and present, whom I have tried, and sometimes not in vain, to interest in the law of Contract. I hope that the present edition of this book may be a little shorter than the previous one. I strongly desire to keep it within such limits as is proper to a statement of elementary principles, with illustrations enough to explain the rules laid down, and, as I hope, to induce the student to consult authorities for himself. W.R. A. ALL Souts CoLLEGE, January, 1891. PREFACE TO THE SEVENTH EDITION. In this, the seventh edition, I have tried to improve my book in various ways, and have made such changes as are rendered necessary by legislation and judicial decisions. These last have been numerous and important during the last year. I must record the thanks which I owe to my friend Mr. F. F. Liddell, of All Souls College and of the Inner . Temple, for his assistance in revising the proof sheets, and for many suggestions and corrections which may, I hope, make this edition more clear and useful than its prede- cessors. W.R. A. ALL Souts CoLLEGE, May, 1893. PREFACE TO THE EIGHTH EDITION. THERE have not been many decisions of importance or interest since the last edition of this book was published, but the Married Women’s Property Act of 1898, and the Sale of Goods Act have necessitated some changes in the text. The latter Act is of especial interest, for it gives statu- tory force, in respect of the Contract of Sale, to principles and a terminology which are of general application. W.R. A. ALL SouLS COLLEGE, September, 1895. TABLE OF CONTENTS. PART I. PLACE OF CONTRACT IN JURISPRUDENCE. Outline of subject ‘ Nature of contract: agreement anti ebligation 1. Analysis of agreement Requisites of agreement Distinguished from contract 2. Analysis of obligation Requisites of obligation Distinguished from duty Sources or forms of obligation Definition of contract . PART Ii. FORMATION OF CONTRACT. CHAPTER I. Offer and Acceptance. 1. Contract springs from offer and acceptance Agreement traceable to question and answer Forms of offer and acceptance . Unilateral and bilateral contracts Executed and executory consideration 5 2. Offer and acceptance may be made by words or oonituet Difference between express and implied contracts Inferences deducible from conduct 3. Offer must be communicated . Ignorance of offered promise Ignorance of offered act Ignorance of offered terms 4, Acceptance must be communicated or manitested . xiii i] & OrPrN Nr es eS HON 13 13 14 16 16 17 . 17n 18 19 19 20 21 23 xiv TABLE OF CONTENTS. 5. Acceptance manifested in manner prescribed by offer Requisites of communication of acceptance Acceptance by post or telegraph Offeror may prescribe mode of acceptance Can acceptance be revoked ? 6. Offer may lapse or be revoked Lapse of offer: forms of . i Revocation of offer ‘ # Valid before acceptance . ‘i Useless after acceptance Offer under seal irrevocable Must revocation be communicated ? . Cook v. Oxley Dickinson v. Dodd 7. Offer made to all the world .. Offers of rewards Invitations to treat 8. Offer must contemplate legal icigtlone ‘ 9. Acceptance must be absolute . . . 2 i . CHAPTER II. Form and Consideration. Necessity of form or consideration in valid contract . : History of formal contract . ‘ a : : 7 History of informal contract . “ js : a a History of consideration ‘i 3 3 : ‘ . Classification of contracts in English law ‘ , ‘i . Formal Contract. 1. Contracts of record . a és a 2 : 7 5 2. Contracts under seal ‘ 2 : ‘ ‘ How made ‘ ‘ ‘ ‘ 2 ‘ Characteristics . i ‘ i ‘ ‘ When seal essential . w a 5 i Simple Contract. 1. Simple contracts required to be in writing 2. The Statute of Frauds: Fourth section . ‘ Provisions of the section Requirements of form ‘ Effect of non-compliance . ; - 3. The Statute of Frauds: Seventeenth sation ‘ Provisions of the section Requirements of form Effect of non-compliance PAGE 25 25 27 31 382 382 82 34 35 35 36 37 38 39 42 43 47 48 50 50 52 54 56 57 59 60 61 66 67 69 70 15 80 83 84 87 88 TABLE OF CONTENTS. XV Consideration. PAGE Definition . 3 ; : 3 : = : . 5 . 88 (7) Necessity of . ; 5 ; ; : . 89 (it) Need not be adequate, but cust ue veal : : ‘ - 90 First test of reality: adetriment . 2 : . . 98 Motive to be distinguished 2 ¢ 4 3 . 98 Must it move from promisee? . ‘; 5 ‘ » 95 Second test of reality: ascertainable value . ‘ . 96 Impossible, uncertain or vague promises . i . 96 Forbearance to sue and compromise of suit . ¢- | OT Gratuitous undertakings . : 100 Third test of reality: more than discharge of sxisting obligation . ‘ 5 2 , . 102 Performance of public duty 6 F 102 Promise to perform or rea of existing contract 7 . 102 Payment of smaller sum in " gatistaotion of larger . ‘ . ‘ - . 104 Composition with eaten: ‘ 3 “ . 107 Contract with third person , 5 é . 109 (iti) Must be legal a‘ : : . ‘ : : ; » iit (i) Must not be past . é 4 ‘ a : » 112 Executory and executed consideration ‘ 4 . 112 General rule: Past consideration is no sauslderation: . 114 Exceptions apparent and real . : ; é j . 115 Consideration moved by previous request . - . 115 Voluntary discharge of another’s liabilities . . 121 Revival of obligation barred by rule of law A . 124 Additional security by debtor . ‘ ‘ 5 . 1270 CHAPTER III. Capacity of Parties. 1. Political or professional status. 5 ‘ : ‘ . 128 2. Infancy : void, voidable, and binding oe . . 181 Ratification of voidable contracts: common law and etatate . 131 Liability for necessaries . ‘i : , . 140 Liability for torts ees in rare a ‘ A . 148 8. Corporations. és f ‘ ‘ 5 ; ‘ . 144 4. Lunatics and drunken oukeone 4 4 ‘i : A é . 147 5. Married women . : a ‘i 7 . . 149 Contracts void at common ie gacoptibud * : . . 149 Married Women’s Property Acts . a : : z 161 Married Women’s Contract Acts. : 3 : . "1540 xvi TABLE OF CONTENTS. CHAPTER IV. Reality of Consent. 1. Mistake. PAGE Non-operative mistake . i 5 ¥ . . . . 157 Operative mistake . : a ‘ 7 . 158 As to nature or existence of siosienaet é : ‘ . 159 As to identity of contracting party . ‘ $ . . 163 As to identity of subject matter : soos 2 . 165 As to existence of subject matter . . ‘ 7 . 166 As to intention known to other party. i 7 . 168 Effects of mistake . ‘ 5 . . 2 - e . il4 2. Misrepresentation. General considerations . é a 3 2 . 174 Distinguished from fraud ‘ ; . : : s . 176 Distinguished from terms i é a . : . 179 Effects of misrepresentation genoralty { : . 184 Effects of non-disclosure in contracts uberrime fidei 2 - 192 Remedies for misrepresentation . ; > . ‘ . 199 No action for damages: exceptions . s i - . 199 Estoppel . ‘ si . . " a 5 . 201 3. Fraud. Essential features . a . 3 Fi : a : . 208 A false representation . . : : . 3 . 203 Of a material fact . : . ‘ F 2 . 206 Made intentionally or recklessly - . 207 With intent that it be acted upon i the injured cons . 218 Which actually deceives . : ‘ . 214 Effects of fraud : f ‘ ss F , - - . 215 Remedies ex delicto . . ‘ ‘ . . ‘ . 215 Remedies ex contractu . 3 ‘ o 2 . 216 4. Duress. Its nature and effect ‘ 3 ‘ r 3 s . . 218 5. Undue Influence. How distinguished from fraud 3 3 ‘ ‘ H . 219 When presumed. J i . é ‘ ‘ ‘ . 220 When to be proved . ‘ 3 . ‘ ‘i s , . 222 Effect of undue influence x ‘ 3 ‘ 3 Ss . 224 TABLE OF CONTENTS. xvii CHAPTER V. Legality of Object. PAGE 1. Nature of illegality 3 ‘ ‘ : : . 7 . 225 (2) Contracts illegal by statute : : . ; . . 226 General rules of construction . ‘3 . : A . 226 Sunday statutes i 3 e : ‘ s . 228% Wagering contracts . g , é 5 . @ . 228 Definition . : . : . - . 228 History : common law and statute F 7 ‘ . 231 On rise and fall of prices . 5 : 3 5 . 236 Insurance . 3 5 3 ‘ : . 287 (it) Contracts illegal at common lage ‘ 3 F : . 239 Agreements to commit crime or civil wrong . : . 239 Agreements against public policy . i . . 241 Affecting interstate relations . ‘ ; ‘ . 242 Injuring public service 5 : Z ‘ é . 243 Perverting course of justice - ‘ . , . 245 Abusing legal process ‘ , z 5 : . 246 Against good morals . ‘ ‘5 i . 248 Affecting freedom or security of stteeeetae S . 248 In restraint of trade . . F és ‘ : . 249 2. Effect of illegality . i . ‘ : : . 258 (7) When the contract is rdigieiule. : . ; : . 254 (it) When the contract is indivisible. ; : . 255 (iit) Comparative effect of avoidance and illegality . ‘ . 256 (iv) The intention of the parties. ; . . . 260 (v) Securities for money due on illegal eontrant a8 . 262 Securities under seal . 3 ‘i ‘ ‘ . - 262 Negotiable instruments. ‘ : 6 ‘ . 263 (vt) Relief from illegal contract. * ‘ 3 : . 266 General rule. 5 , : . 266 Exceptions: parties not in niet satbees é > . 266 Exceptions : contract executory “ : . . 268 The locus penitentie . - - 5 5 . 268 Money in hand of stockholder . ‘ ‘ . 269 8. Meaning of terms void, voidable, unenforceable . : ; s 271 xviii TABLE OF CONTENTS. PART III. THE OPERATION OF CONTRACT. CHAPTER I. The Limits of the Contractual Obligation. General rule as to privity of contract Trust obligations no real exception 1. Third party incurring liabilities No contractual obligation But non-contractual duty é . 4 . 2. Third party acquiring rights . ¥ ‘ : . . Promise for benefit of third party . § : . One joint-party representing many . z . . ‘ CHAPTER II. The Assignment of Contract. 1. Assignment by act of the parties . Liabilities cannot be assigned . Assignment of rights At common law : P In equity: notice; title . ‘ Z . 5 By statute ‘ * By the law snes niegatiability 2. Assignment by operation of law By transfer of interest in land In case of leasehold interests In case of freehold interests By marriage By death . ‘i : ‘i 3 ‘ 5 5 . By bankruptcy 3 : i : ‘ q . ni PART IV. THE INTERPRETATION OF CONTRACT. CHAPTER I. Rules relating to Evidence. Province of court and jury 7 Difference in proof of formal and whips elas ‘ 1. Proof of document purporting to be contract PAGE 275 275 276 276 277 279 279 284 287 287 289 289 291 294 295 305 306 306 308 309 310 311 314 315 316 TABLE OF CONTENTS. 2. Evidence as to fact of agreement . 3. Evidence as to terms of contract . Supplementary or collateral terms . Explanation of terms Usage 2 In equitable porocelipde, CHAPTER II. Rules relating to Construction. 1. General rules 3 2. Rules as to time and panaities PART V. DISCHARGE OF CONTRACT. CHAPTER I. Discharge of Contract by Agreement. 1. Waiver . 2. Substituted poutiact 8. Provisions for discharge Discharge optional on non- falitiment of (erm. Discharge on condition subsequent Discharge optional on notice . 4. Form necessary for discharge CHAPTER II. Discharge of Contract by Performance. When performance discharges . Payment as a mode of discharge Tender as a mode of discharge . Substantial performance Performance to satisfaction of other satin CHAPTER II. Discharge of Contract by Breach. Breach gives right of action, but not always discharge 1. Position of party discharged by breach Exonerated from further performance xix PAGE 318 819 320 321 823 825 327 328 333 335 3388 338 839 841 342 344 344 347 . 848n . 3482 349 350 350 ue TABLE OF CONTENTS. May sue for breach of contract : - May sue for benefits conferred . : ‘ 2. Forms of discharge by breach (¢) Renunciation before performance die 5 (it) Impossibility created by one party before pextoumanies due ‘ (wit) Renunciation in course of perfertanee (iv) Impossibility created by one party in course of ce ance ‘ ; . : (v) Failure of performance 3 aA discharge if promises dependent Not if promises independent . Three tests to determine dependence or tndeens dence a, Are the promises absgiate or ais they eenalis tute concurrent conditions b. Is the broken promise divisible or indivisi- ble 3 c. Is the ee piomnise ‘site or epalieer< conditions and warranties - 8. Remedies for breach Damages: rules for mesearng Specific performance and injunction P 3 4. Discharge of right of action arising from bead, Z . By consent of the parties ‘ 5 : 5 3 ‘ Release 4 2 ‘ 2 Accord and eatiefaction : . : . é By judgment . é é : , 5 Fe 7 By lapse of time . 5 F . s . CHAPTER IV. PAGE 352 350 353 353 356 357 358 559 359 361 361 361 363 369 374 375 378 382 383 383 383 384 386 Discharge of Contract by Impossibility of Performance. Impossibility distinguished from unreal consideration and mistake . Subsequent impossibility pone no discharge Exceptions Legal impossibility: Destruction of subject-matter . Incapacity for personal service CHAPTER V. Discharge of Contract by Operation of Law. 1. Merger . 2. Alteration or loss of sititi dsbrancitoad 3. Bankruptcy . 390 391 392 393 304 395 896 397 398 TABLE OF CONTENTS. PART VI. AGENCY. It now springs from contract of employment . ‘ a . Outline of subject . CHAPTER I. xxi PAGE 400 401 Mode in which the Relation of Principal and Agent is created. Capacity of parties How their agreement is Seid Form of mandate. Power of attorney. eee suthority Authority from conduct Authority of necessity Authority by ratification . CHAPTER II. Effect of Relation of Principal and Agent. Their rights and liabilities inter se: Duties of principal Duties of agent . Must use diligence . Must make no profit other Bans tia commission . Must not take up contract himself Compare sale, commission agency, brokerage Must not delegate his authority . Relations of parties where agent contracts for a somali prineipal : Agent acting within his powers incurs no liability Kinds of agents and their authority . Cases where agent is personally liable Effect of agent acting without authority Remedies when the agent is not liable on the contrat Relations of parties where principal is unnamed : Extent of agent’s liability . Relations of parties where existence of principald is smnidinoloaadls Alternative liability of principal and agent Principal’s right to intervene ; Determination of alternative liability Liability of principal for fraud of agent How far knowledge of agent is knowledge of prinatpal 402 402 408 403 405 405 409 409 410 410 411 411 414 415 416 419 420 420 422 424 425 425 427 429 xxii TABLE OF CONTENTS. CHAPTER III. Determination of Agent’s Authority. By agreement . Right to revoke limited ity inierest of third pareies . Right to revoke limited by interest of agent By change of status . By death of principal CONTRACT AND QUASI CONTRACT. Historical connection of the two legal relations Debt and assumpsit . The indebitatus counts Legal relation arising from ‘storia Legal relation arising from account stated Legal relation arising from money paid by plaintiff for dstendant Legal relation arising from money received by defendant to plain- tiff’s use APPENDIX. Form of charter-party Form of bill of lading , : Form of policy of marine insurance . 2 Forms of bill of exchange and promissory note InDEX PAGE 430 430 432 434 435 436 436 437 438 439 439 440 448 444 445 446 447 INDEX OF ENGLISH CASES. THE NUMBERS REFER TO SIDE PAGINGS. CASE, Adams v. Lindsell Alleard v. Skinner Allen v. Rescous Alliance Bank v. Broom . Anderson v. Pacific Insurance Co. Angus v. Clifford Appleby v. Myers Archer v. Hudson .. Arkwright v. Newbold Armstrong v. Stokes Arundel v. Trevillian Ashbury Carriage Co. v. Riche Asiatic Banking Corp., Ex ial a Astley v. Weldon Atherfold v. Beard .. Atkins vy. Banweil Atkinson v. Denby .. Atlee v. Backhouse .. Avery v. Bowden Ayerst v. Jenkins .. Aylesford (Karl of) v. Morris Babcock v. Lawson .. Baguely v. Hawley .. Baily v. De Crespigny Bainbridge v. Firmstone . . Bainbrigge v. Browne Baines v. Geary a Baker v. Hedgecock... .. Bank of England, Fx parte Bannerman v. White Barclay v. Pearson .. Barrow v. Dyster Barry v. Croskey Barter, Hx parte Barwick v. Eng. Ji oint Stock Bank A. DATE. REFERENCE. *PAGE (1818) 1B. & Ald. 681 .. .. 24 (1887) 386 Ch. D. 145 .. 182 (1687) 2Lev.174 .. .. . 195 (1864) 2 Dr. & Sm. 289.. .. 838 (1872) L.R.7C.P.65.. .. .. 156 (1891) 2Ch.449.. . 164, 172 (1867) L.R.2C. P. 651 .. 824 (1844) 7 Beav. 560 . se «x 180 (1881) 17 Ch. D. 320 . 144, 174 (1872) L.R. 7 Q. B. 598 346, 850, 852 (1634) Rep. in Chancery, 47 ». 202 L. R. 9 Exch. 264 (1874) {i ey 653 ¢ 119, 207, 229 (1867) 2Ch. 397 .. .. 289 (1801) 2B. & P. 346 .: 270 (1788) 2T.R. 610. .. 215 (1802) 2 East, 505 . . 101 (6HL& 'N. 778 (1861) y 7 H.&N. 934 . 217 (1838) 3M. & W. 633 .. 178 (1855) 5 KE, & B. 714 2d > aie DO) (1873) 16 Eq. 275 ,. 202, 213 (1878) 8 Ch. 484 » ve 18 B. (1879) 4Q.B.D.394 .. .. 177, 222 (1867) L. R.2C. P. 625 .. 2. 806 (1869) L. R. 4 Q. B. 180 . 323, 324 18388) 8A.&E.743 .. .. 76 1881) 18 Ch. D. 196 . 181 (1887) 385 Ch. D. 154 . 207 (1888) 39 Ch. D. 520 . 207 (1895) 1 Ch. 37 317 (1861) 10C.B.,N. s. 844 "150, 151, Bee (1898) 2Ch.154 .. . 3 (1884) 13 Q. B. D. 685... .. * 360 (1861) 2J.&H.1.. 5 174, 175 1884) 26Ch. D. 510 .. .. 196 £1867) L. R. 2 Ex. 259 .. . 358 xxiii Xxiv INDEX OCABE. Bawden v. London & ae Ass. Co. Baxter v. Burfield ; ‘i Bayley v. Homan .. a Beauchamp (Earl) v. Winn .. Beaumont v. Greathead . Beaumont v. Reeve .. Beckham v. Drake .. . a Begbie v. Phosphate Sewage Co cA Behn v. Burness Bellamy v. Debenham Bentley v. Vilmont .. Berkeley v. Elderkin Bettini v. Gye .. Beverley v. Lincoln Gas & Coke Co. Bickerton v. Burrell Bidder v. Bridges Bingham v. Bingham Birkmyr v. Darnell . Birm’gham Land Co. © Allday, In re Blachford v. Preston Blackburn v. Vigors Blades v. Free .. Blair v. Bromley Bloomer v. Bernstein Bloxam v. Sanders .. Bolton v. Madden ‘ Borries v. Imperial Ottoman Bank Boulton v. Jones ee 1 gene Bourne v. Mason Bowen v. Hall .. Bowman vy. Taylor .. Boyd v. Hind Boydell v. Drummond OF CASES. (1892) (1746) (1837) (1873) (1846) (1846) (1841) (1875) (1862) (1890) (1887) (1853) (1876) (1837) (1816) (1887) (1748) (1704) (1893) (1799) (1886) (1829) (1846) (1874) (1825) (1873) (1873) (1857) (1679) (1881) (1834) (1857) (1809) Bradford v. Roulston (1858) Bradlaugh v. Newdegate : (1882) Brashford v. Buckingham and wife _ (1605) Brayshaw v. Eaton .. 2. ee (1839) Brice v. Bannister (1877) Bridger v. Savage (1884) Britain v. Rossiter (1882) British and American ‘Telegraph 1871 Co. v. Colson sie “k ) British Waggon Co. v. Lea (1879) Brittain v. Lloyd (1845) Brogden v. pene Railway (1877) Brook v. Hook . oa .» (1871) Brown v. Byrne (1854) Brown v. Duncan (1829) Brownlie v. Campbell (1880) Bryant v. Herbert (1878) Budgett v. Binnington (1891) Burges v. Wickham (1863) Burgess v. Eve .. .. (1872) Burnard v. Haggis .. (1663) Burrell’s Case .. se (1876) Butler and Baker’s Case (1591) Buxton v. Rust . es (1872) Bryne v. Van Tienhoven (1880) “os Bw HOON c§tbd by REFERENCE, *PAGT Q. B. 5384... .. .. B54 Str.1266 ... .. 253 Bing. N. C. 920 .. 316 .R. 6 H. L. 282 . 266 C. B. 494 hey Ta 309 Q. B. 483 wes 202, 213 M.&W.95 .. .. 346 . R. 10 Q. B. 499 : 196, 216 B. & S. 877 147, 289, B. &S. 751} 306, 307 5 Ch. D. 481 ss «ws 42 2 App. Ca. 471 s TET 1E. & B. 805 .. 51 1Q. B.D. 183 & 187 | ; 304, 305 6A. & E. 829 288 5M. &S. 383 | 346 37 Ch. D. (C. A.) 406 . 316 1 Ves. Sent. 126 . .. 186 18m. L. C. 310, 1 Salkeld 27 62 1 Ch. 348 wy ay 252 8 T. R. 89 .. 198 17 Q. B. D. (C, A.) 558 {ig Dos tek ys 354 9B. &C. ie . 360 5 Hare, 559 .. .. 819 L. R. 9 C. P. 588 .. 300 4B&C. 941 , . 298 Lede See . 16 L. R.9C. P. 38. 351 2H. &N. 564 | 132, 133, 134 1 Ventr.6 .. .. ‘ . 229 6 Q. B. D. 333 . 22T 2 A. & E. 278 53 1H. & N. 938 90 11 East, 142.. 67 8 Ir. C. L. 468 .. 98 11Q. B.D. 5 . 201 Cro. Jac. 77 . 122 7 Scott, 187 oy: ae 3 Q. — D. 569 i ec OD 15 Q. B. D. (C. A.) 368 .. 210 11 Q. B.D. 123 . 69, 74 L. R. 6 Ex. 108 25 5 Q. B. D. 149 . 234 14M. & W. 762 .. ‘ = 2 App. Ca, 691 2, 22 L. R. 6 Ex. 89 .. 336 3 E. & B. 716 .. 265 10 B. & C. 93 .. 185 5 App. Ca. 950 . 172 3C. P. BS 389 . 45 1Q.B.3 oe oa B28 3B. &S. “on” .. 263, 264 13 Eq. 450. . a. 162 14C.B., N.S. 45_ .. 118 1 Ch, D? 552 be tick . 168 Coke, Rep. iii. 26.b . 32 TR 7 Exch. 1 & 279 65 6C. P. D. 344 33 INDEX OF CASES. XXV CASE. DATE, Caddick v. Skidmore .. .. .. (1857) Callisher v. Bischoffsheim .. .. (1879) Cannan v. Bryce .. .. «.. .. (1819) Cardv. Hope .. .. oe ae (1824) Carlill v. Carbolic Silty Ball Co. (1803) Carter v. Silber... se ale 3CE892) Cartwright v. Cartwright see. (1858) Cassaboglou v. Gibbs... .. =...) (1882) Castellain v. Preston 1. 0... (1883) Castlegate Steamship Co. v. Dempsey (1892) Chamberlain v. Williamson .. .. (1814) Chanter v. Hopkins... .. .. .. (1888) Charnley v. Winstanley .. .. .. (1804) Charter v. Trevelyan .. .. .. (1844) Clay v. Yates .. .. .. .. .. (1856) Clegg v. Hands .. .. (1890) Clements v. London & N. W.R. Co. (1894) Clifford v. Watts .. -» (1871) Clough v. London & N. W. R. Co. (1871) Colegate v. Bacheler .. .. .. (1596) Coles v. Trecothick .. .. .. .. (1804) Collen v. Wright .. .. .. .. (1857) { Collins vy. Blantern .. .. .. .. (1766) Collins v. Evans .. .. .. .. (1844) Collins v. Godefroy .. .. .. .. (1831) Colson’s Case .. sa ee (C1878) Conflans Quarry Co. ‘y. Parker. (1867) Cooch v. Goodman .. .. .. .. (1842) Cook v. Oxley .. .. .. «. «. (1790) Cooper v. Phibbs .. .. .. «. (1867) Cope v. Rowlands .. .. .. .. (1836) Corn v. Matthews .. .. .. .. (1893) Cornish v. Stubbs... .. (1870) Cort v. Ambergate Railway C Com ss (1851 Couturier v. Hastie .... »» (1856 Coverdale v. Eastwood .. .. .. (1872) Cowan v. Milbourn .. .. .. .. (1867) Cowan v.O’Connor.. .. .. .. (1888 Coxhead v. Mullis .. .. .. .. (1878) Crears v. Hunter... ». (1887) Crouch v. Credit Foncier ‘of if England (1878) Cumberv. Wane .. .. .. .. (1718) Cundy v. Lindsay .. .. .. .. (1878) Currie v. Misa .. .. .. «. «. (1875) Cutter v. Powell Sar cace! otue iae, EET9D) Cuxon y.Chadley .. .. .. .. (1824) D. Dalby v. The Lond. Life Assur. Co. (1854) Dalton v. Midland Coun. aay Co. (1853) Darrell v. Tibbitts .. .. .. .. (1880) Davey v.Shannon .. .. .. .. (1879) Davies v. Davies .. .. .. «+ (1887) Davis v. Foreman .. .. .. .. (1894) Debenham v. Mellon se ae oi (C1880) De Bussche v. Alt .. .. .. «. (1878) REFERENOE, *PAGE DeG.& J. 52 .. .. w. 66 L. R. 5 Q. B. 449 83 3B. & Ald.179.. 209 2B.&C.661 .. 198 2 Q. B. 484 : 1Q. B.(C. A.) oe 22, 30 2 Ch (C. A.) 278 114 3D. M. & G. 982 202 9 Q. B. D. 220 .. 340 11 Q, B.D. (C. A.) 380 - . 194 1Q. B. (C. A.) 854 .. 823 2M.&8.408° .. .. .. 258 4M. & W.404 .. .. 302, 306 5 Hast, 266 .. .. .. .. 359 VCL&BR714 .. 2... 177 1H.G&N.738 .. ww 1. 195 44 Ch. D. 503 . 250, 313 2Q. B. (C. A. 482 .. 112 L. R. 5 C. P. 577 . 306, 321 L. R.7 Ex. 35 .. .. .. 177 Cro. Fliz.872 .. .. .. 202 9 Ves, 234 & 246... .. 77,179 7 E. & B. 301 SE. &B 647, °° 306, 347, 360 18m. L. C. 398... .. .. «55 5 Q. B. 820 .. .. .. =... 170 1B.&A.950 .. .. .. 85 L.R. 6 Ex. 108 .. .. 1. 25 L: KR: 3G. P: 1, .. 328 2Q. B. 597 .. .. 62 3 T. R. 653 .. .. 33 L. R. 2 H. L. 170 136, 168 2M.& W. 158 .. .. 185 1Q.B.310 ..... . 112 L. R.5C. P. 339 . 250 17 Q. B. 127 289, 298 5 H. L. C. 673 185 15 Eq. 121 .. 146 L. R. 2 Exch. 230 212 20 Q. B. D. 640 . 26 3C. P. D. 439 115 19 Q. B. D. 345 .. 15 L. R. 8 Q. B. 374 288, 244 1Sm. L. C. 366 86 3 App. Ca. 459 . 133, 177; 221 L. R. 10 Exch. 162 ss 74, 717 6T. R.320.. .. .. .. 300 3B.&C.591 .. 1... 285 15 C. B. 365 «sw. 195 13.0. B. 478 .. .. =... 122 5Q. B.D. 560 .. 1... 194 4Ex.D.81.. .. .. .. 64 386 Ch. D. 859 .. .. =) 41, 81 3 Ch. 654 a eer) na) see SO 5 Q. B. D. 403 6 App. Ca. 24 .. 882, 355 8 Ch. D. 310 ae ae sw 84 XXV1 OASE, De Francesco v. Barnum . De Mattos v. Benjamin .. . Denton v. G. N. Railway Co.. Derry v. Peek .. De Wutz v. Hendricks Dickinson v. Dodds . ii Dickson v. Reuter’s Telegraph Co. Dimmock vy. Hallett . a é Ditcham v. Worrall . Dixon v. Clarke . Dobson v. Espie | 6 Doe d. Garnons v. Knight Donellan v. Read Drake v. Beckham .. Drewv. Nunn .. Dunean v. N. & S. Wales Bank Dunlop v. Higgins ‘ Durnford v. Messiter Dutton v. Poole .. Earle v. Oliver .. - Eastland v. Burchell _ Eastwood v. Kenyon Edgington v. Fitzmaurice Edmunds v. Bushell . , Edwards v. Aberayron Insur. Soc. Edwards v. Carter a Egerton v. Earl Brownlow Eicholz v. Bannister. . Elderton v. Emmens _.. Eley v. Positive Life Assur. Co. Eliason v. Henshaw .. Elsee v. Gatward Empress Engineering Co, ‘Inve England v. Davidson ak England v. Marsden . Erlanger v. Sombrero Phosphate Cc Co. Erskine v. Adeane Esposito v. Bowden .. Evelyn v. Chichester Exall v. Partridge Fairlie v. Denton Fairlie v. Fenton oe Farrington v. Forrester .. Faulkner v. Lowe Fawcett v. Holmes .. Fawcett v. Whitehouse .. Featherston v. Hutchinson Felthouse v. Bindley Ferguson v. Wilson .. Findon v. Parker Finley v. Chirney .. Firbank v. Humphreys Fisher v. Bridges : Fishmongers’ Co. v. Robertson (1890) (1894) (1856) (1889) (1824) (1876) (1877) (1866) (1880) (1848) (1857) (1826) (1832) (1843) (1879) (1880) (1848) (1816) (1688) E. (1848) (1878) (1840) (1885) (1865) (1876) (1893) (1853) (1864) (1847) (1876) (1819) (1793) (1880) (1840) (1866) (1878) (1878) (1875) (1765) (1799) F. (1828 (1870 (1893) (1848) (1889) (1829) (1590) (1862) (1866) (1843) (1887) (1886) (1854) (1843) INDEX OF CASES. REFERENCE. *PAGE 43 Ch. D. 165 . 112 63 L. J., Q. B. 248 . 191 5E. & B. 860. .. 39 14 App. Ca. 347 jist 2 Bing. 316 . .. 198 2Ch. D. 463 29, 34 38C.P.D.1 .. 169 2 Ch. 27 .. 156 5 C. P. D. 410 — . 116 5C.B.376 .. .. .. .. 285 2H. & N. 79 om ee an DIA 5B.&C.671 .. .. .. 81 8B.& A. 899... .. 64 11M. & W. 319 .. .. 254 4Q. B.D. 661 .. 859 6 App. Ca. 1 . 242 1H. L. C. 381 -. 25 5M. & S. 446 . 225 2 Lev. 210 80 2 Exch. 90 .. 103 3 Q. B. D. 4386 .. 384 11 A. & E. 438 80, 105 29 Ch. D. 483 .. 169 L. R., Q. B. 97 wee. 843 1Q. B. D. 587 . 200, 259 A.C. 360... .. 114 AH.LC. la. «x 2s va LOT 17 C. B., N. 8. 708 .. 306 4C. B. 496 = 30% 1 Ex. D. (Cc. ‘A. ) 88 . 229 4 Wheaton 225 .. 29 bT.R 143. . 84 16 Ch. wD. (C. A.) 125 > 230 11 A. & E. 856 . 17, 37, ‘85, 94 L.R.1C. P. 529 e -€% 364 3 App. Ca. 1279 . 163 8 Ch. 766... .. 262 7 E. & B. 763 .. 197 8 Burr. 1717 .. 109 8 T. R. 308 . 864 8B. &C. 400 +. 235 L. R. 5 Ex. 169 . 346 2 Ch. D. 461 . 114 2Exch.595.. .. .. 1.) 65 42 Ch. D. 160 . 160 1R. & M. 182 . 161 Cro. Eliz. 199 .. ..) .. 207 11C.B., N.S. 869 .. 1. 21 2 Ch. 89 wah. . 119 11M. & W. 682. 201 20 Q. B.D. aC A.) 404 253, 310 18 Q. B. D. 62 . 163, 348 3 E. &B. 642 ee . 218 5M. &Gr.192 .. 1. 1. 58 INDEX OF CASES. CASE, Fitch v. Jones .. Fitch v. Snedaker Fitch v. Sutton .. Fleet v. Murton.. Flight v. Bolland Flight v. Booth.. Flight v. Reed .. Flood v. Jackson Flower v. Sadler - .. Flower v. L. & N. W. Rly. Co. Foakes v. Beer .. .. . Ford v. Beech .. Foster v. Charles Foster v. Dawber Foster v. Mackinnon Fowkes v. Manchester Assur. Assoc. Fowler v. Fowler oo Ckesen cts Freeman v. Cooke Freeth v. Burr .. Frost v. Knight.. Fry, Inre .. Garrard v. Frankel .. Geipel v. Smith.. Gibbons v. Proctor .. Gibbs v. Guild .. Gibson v. Carruthers Gilbert v. Sykes... Glaholm v. Hayes Goddard v. O’Brien .. Godsall v. Boldero Goman v. Salisbury .. Good v. Cheesman Goode v. Harrison Goodman v. Chase .. Goss v. Lord Nugent. . Graham v. Johnson .. Graves v. Legg .. Gray v. Mathias Gray v. Pearson... . ‘i Great North. Rail. Co. v. Witham . ie Greaves v. Ashlin : Be ee Grebert-Borgnis v. Nugent Grisewood v. Blane . Gurney v. Behrend .. Guthing v. Lynn Gwilliam v. Twist Gylbert v. Fletcher .. Hadley v. Baxendale Haigh v. Brooks. . Halifax v. Barker Hall v. Ewin Hall v. Warren .. F Hamilton v. Kendall.. .. Hamilton v. Vaughan ‘Sherrin Elec- trical Co.. said DATE, (1855) (1868) (1804) (1871) (1828) (1834) (1863) (1895) (1882) (1894) (1884) (1848) (1830) (1851) (1869) (1863) (1859) (1848) (1874) (1872) (1888) G. (1862) (1872) (1892) (1882) (1841) (1812) (1841) (1882) (1807) (1684) (1831) (1821) (1818) (1833) (1869) (1854) (1800) (1870) (1873) (1813) (1885) (1851) (1854) 1831) 1895) (1629) H. (1854) (1839) (1600) (1887) (1805) (1879) °\ (ag04) REFERENCE. XXVIi *PAGE 5E. & B. 245... 214 38 N.Y. 248; jLangdell, 110° 16, 37 5 East, 230 . 89 LR. 7 Q. B. “126 1 345 4 Russ. 298 . .. 313 1 Bing. N. C. "370° . 160 1H. &C. 703... .. 103 2Q. B. (C. A.) 27 2.) ©. 227 10. Q. B.D. 572... .. 215, 248 2Q.B.65 .. .. .. 112 9 App. Ca. 605 .. . 89 11 Q. B. 866 .. 268 7 Bing. 105 .. .. 144 6 Exch. 839 14, 87, 275 L.R.4C. P.704 =... .. 181 3B. & S. 929 .. 269 4D. & J. 250 .. 267 2 Exch. 654.. .. 136 L. R.9C. P. 208 .. 299 L. R. 7 Exch. 114 . 291 40 Ch. D. 3824 . 183 30 Beav, 445 os all, 267 L. R.7 Q.B. 404... 278 64 Law Times Reportsé 594 17 , 87 9Q.B.D.66.. .. 319 8 M. & W. 339 247 16 East, 150 $8 | 189, 196 2M. & G. 257 .. 148, 304 9 Q. B. D. 37 . 88, 316 9 East, 72 .. .. 195 1 Vern. 239 .. 281 2B. & Ad. 828 90 5 B. & Ald. 159 110 1B. & Ald. 297 62 5B. & A. 65 281 8kq.36 .. 238 9 Exch. 709.. 807 5 Ves. 285 .. 202 L. R.5 C. P. 568 230 L. R.9C. P. 16 30 3 Camp. 426.. 67 15 Q. B. D. 85 310 11 C. B, 538 193 3 E. & B. 622 248 2B. & Ad, 232 41 43 W.R. 566. .. 834 Cro. Car.179 *.. . 112 9 Exch. 354.. .. .. 809 10 A. & E, 309 : a7, 269 3 Dyer, 272 a; Cro. Eliz. 741 99 37 Ch. D. (C. Ay) TH. . 252 9 Ves. 605 .. . .. 121 4 App. Ca. 514 .. . 852 8 Ch. 589 . 113 Xxvill INDEX OF CASES. CASE. DATE. REEERENCE. *PAGE Hammersley v. de Biel .. .. .. (1845) 12 Cl.FF. 62. . .. 16 Hampden v. Walsh... .. .. «. (1876) 1 Q. B. D. 189. .. 219 Hancocks v. Lablache .. .. .. (1878) 3C.P.D.197 . ai 124 Hansard v. Robinson we ae ee 6(1827) 7B. & C. 90 ‘i .. 328 Hardman v. Booth .. . (1863) 1H.&C. 803. .. 184 Harrington v. Vict. Graving “Dock Co. (1878) 3Q.B.D. 549 . . 838 Harris v. Brisco... .. . (1886) 17Q. B.D. 504.. . 201 Harris’ Case weve ne ee ee) 61872) L, R. 7 Ch. 587 « .. 25 Harris v. Nickerson... .. .. .. (1873) L.R. 8 Q. B. 286 .. 88 Harris v. Pepperell .. .. .. -. (1867) 5 Eq. 1.. ‘ .. 141 Harris v. Rickett .. .. .. .. (1859) 4H &N.1 oe «. 259 Hart y. Alexander .. .. .. .. (1887) 2M.& W. 484 .. svot WL Hart v. Miles .. .. .. .. «- (1858) 4C.B., N.S. 371 .. 84 Hart y. Mills .. .. .. .. .. (1846) 15M. & W. 87 .. 15, 94 Hartley v. Ponsonby we ae ee) 6(1857) 7 E. & B. 872 ax 86 Hartley v.Rice.. .. .. .. .- (1808) 10 East, 22 .. 202 Harvey v. Gibbons .. .. .. .. (1675) 2Lev. 161 .. 81 Harvey v. Young .. .. .. «- (1602) 1/Yelv.20 . 168 Hastelow v. Jackson.. .. .. .. (1828) 8B. & C. 225 220 Hawken v. Bourne .. .. .. .. (1841) 8M. & W. 710 338 Haydon v. Williams... .. .. .. (1830) 7 Bing.163 .. . « se 328 Hayes v. Warren. . (1781) 2S8tr.982 .. .. .. ., 362 Haywood v. Brunswick Build. Soc. (1881) 8Q.B.D.410 .. .. .. 262 Head v. Tattersall .. .. .. .. (1871) L. R.7 Exch. 7 a ton, EE Heather v. Webb .. .. .. .. (1876) 2C.P. D1... .. .. «. 828 Hebb’s Case.. .. - oo. «+ (1867) L. R. 4 Eq. 9 ae 27 Henderson v. Stevenson... .. .. (1875) L.R.2H.L. Se. App. “470 a Henkel v. Pape.. .. .. .. «. (1870) L. R.6 Exch. 7 Henthorn v. Fraser... .. (1892) 2 Ch. (C. A.) Wea aes 26, 33 Hermann v. Jeuchner .. .. .. (1885) 15Q. B.D. 561 . > oa 28 Hichens v. Congreve .. oe... (1829) 1R. & M. 150 .. 161 Hickman v. Haynes.. .. .. .. (1875) L. R. 10C. P. 606 . 276 Higgen’s Case .. .. .. «.. «- (1605) 6Co. Rep. 45b.. .. 326 Higgins v.Senior .. .. .. .. (1841) 8M. & W. 834 " 345, 351 Hill v. Wilson .. 2... .. «. «=(1878) ~L. R.8 Ch. 888... .. 3 Hills*¥.. vas: 2 «2 sm «a <4 Hee SLL Je CART ne an oe 285 Hills pS eae a (1846) 15M. & W.2538.. .. .. 821 Hirschfield v. Lon on, Bri hton, & Sour Ceavietiwar Ga “\ 4876) 50,7 ee ae xo 168 Hitchcock v. Coker .. .. ... .. (1887) 6A. &E.488 1. 2.) .. 205 Hoadley v. McLaine.. .. .. .. (1834) 10 Bing. 482.. .. .. 78, 98 Hoarev. Rennie... .. .. .. .. (1859) 5H. &N.19 .. .. .. 300 Hochster v. Delatour .. .. .. (1853) 2E.&B.678 .. .. .. 290 Hoghton v. Hoghton.. .. .. .. (1852) 15 Beav. 299 ai gs ses AED Hollins v. Fowler .. .. «.. .. (1874) L.R.7 4H. L. 757 . 134, 177 Holman v. Johnson .. .. .. .. (1875) Cowp.341 .. .. .. .. 198 Holmes v. Bell .. .. «. 2...) «. «(1841) 8M. &G. 213... .. .. 826 Holtby v. Hodgson .. .. .. .. (1889) 24Q.B.D.109 .. .. .. 126 Honck vy. Muller... «ww. «. 061881) 7Q.B.D.92 .. .. .. 800 Honeyman v. Marryat .. .. .. (1857) 6H.L.C.112 .. .. .. 42 Hood Barrs v. oe +s oe ee (1894) 2Q. B.(C. A.) 559... 125 Hopkins v. Logan... -. (1839) 5M. & W. 241 .. 2... 868 Horne v. Midland Railway Co. . (1873) L.R.8C. P. 181 ze 2x 310 Horsfall v. Thomas .. . (1862) 1H. & C.90 sa we xa D4 Houldsworth v. City of Glasgow Bk. (1880) 5 App.C. A. 317 .. .. 176 Household Fire Ins. Co. v. Grant. . (1879) 4 Ex.D.216.. .. .. 24, 25 Hoyle v. Hoyle... so: +» (808) 1@h.90 .. |) [. 6, 61 Hudson v. Revett .. .. .. .. (1829) 5 Bing. 387.. .. 1... ” 53 Huguenin v. Baseley +s ee 4. (1807) 14 Ves.273.. 1. 2, .. 181 Hulle v. Heightman.. .. .. .. (1802) 2East,145.. .. .. .. 288 INDEX OF CASES. CASE. Humble v. Hunter Hunt v. Bate .. Hunt v. Wimbledon Local Board . Hunter v. Walters ‘ Huscombe v. Standing Hussey v. Horne Payne .. Hutcheson v. Eaton.. Hutton v. Warren Hyde v. Wrench Imperial Loan Co. v. Stone Ionides v. Pacific Insurance Co. Jonides v. Pender Treland v. Livingston Irvine v. Watson Irving v. Veitch Jackson v. Colegrave Jackson v. Union Marine Ins. Co. Jakeman v. Cook St cathe James v. Kerr Jay v. Robinson Jenkins v. Betham .. Jennings v. Rundall.. Jervis v. Berridge Johnson v. Gallagher ‘ : Johnson v. Royal Mail Steam Co.. Johnstone v. Marks. i Johnstone v. Milling. . re Jones, Hx parte .. ‘ Jones v. Ashburnham Jones v. Daniel. . Jones v. Edney .. Jones v. Just Jones v. Lees Jones v. Morris .. Kaye v. Dutton .. Kearly v. Thomson .. .. Keates v. Lord Cadogan .. Keir v. Leeman.. .. Kekewich v. Manning Kelly v. Solari .. Kelner v. Baxter Kemble v. Farren Kemp v. Finden Kemp v. Pryor .. Kennedy v. Broun : Kennedy v. Panama Steam Co. Keppel v. Baily .. a Kibble’s Case King v. Gillett .. Kingsford v. Merry .. Kirkham v. Marter .. (1848) (1568) (1878) (1871) (1607) (1879) 1884) 1536) (1840) I. (1892) (1871) (1874) (1872) (1879) (1887) J. (1694) (1874) (1878) (1889) (1890) (1854) (1799) (1873) (1861) (1867) (1887) (1886) (1881) (1804) (1894) (1812) (1868) (1856) (1849) K. (1844) (1890) (1851) (1844) (1851) (1841) (1866) (1829) (1844) (1802) (1863) (1867) (1834) (1875) (1840) (1856) (1819) xxix REFERENCE, *PAGE 12 Q. B. 310 .. 288, 348, 351 Dyer, 272a.. .. .. .. 96 40. P2D..68 we as gs BB L. R. 7 Ch. 81 .. 180 Cro. Jac. 187 5 LNT. 4 App. Ca. 311 .. .. 42 13 Q. B. D. 861 .. .. 349 1M. & W. 466 . 264 83 Beav, 334 .. 42 1Q. B. 599 . .. 120, 359 L. R. 6 Q. B. 686 . .. 185 L. R. 9 Q. B. 587 ~ a2 LF L. R. 5 H. L. 407 839, 345 5 Q. B. D. 107 (C.A.) 414 352 38M.&W.106 .. . . 363 Carthew, 388 .. .. 189 L. R. 10 C. P. 148 . 801 4Ex.D.26.. .. . 103 40 Ch. D. 458 . 201 25 Q. B. D. 467 .. . 125 15 C. B. 168 . 8387 8 T. R. 335 .. . 117 8 Ch. 851 eo ss 26L 8D. F. & J. 494.. . 128 L.R.38C. P. 43.. . 863 19 Q. B. D. 509 .. . 117 16 Q. B. D. 460 .. . 291 18 Ch. D. 109 « 112 toe fear’ “Sere Pek? 3B 2Che332 2s «x ae vx 42 3 Camp. 285 . 160 L. R. 3 Q. B. 197 137, 301, 306 1H. &N. 189 . 208 8 Exch. 742.. . 864 7M. & Gr. 807 .. 97 24 Q. B.D. (C. A.) 742 218, 219 10 C. B. 591. 167 6 Q. B. 321 & &9 Q. “B. 395.. 200 1D. M. & G. 188 _ 179, 313 9M. & W. 58 142 L. R.2C. P. 174 999, 335, 360 6 Bing. 147... .. .. 270, 271 12M. & W. 421. . 363 7 Ves. 246 . 334 18 C. B., N. s. 677 .. 97, 108 L. R. 2 Q. B. 580 .. 146, 155 2 Mylne & ae 517... .. 261 10 Ch. 373 2 32 26 116 7™M.&W.55 . 274 LH. &N. 5038 .. .. 134 2B. & Ald. 618 .. 62, 63 XXX INDEX OF CASES. L. CASE. DATE. REVERENCE. *PAGE Lamarev. Dixon .. .. .. .. (1878) L.R.6H. Adc ans me a 100, Lampleigh v. Braithwait.. .. .. (1614) { Herat fog bP ggy’ Lancester vy. Walsh... .. .. .. (1838) 4M. & W. 16 37 Langridge v. Levy (1887) 2M. & W. 519 173 Law v. Local Board of Redditch . (1892) 1Q. B.127.. 270 Law v. London Indisputable Life EoGg 0b. aapee yam 1K. & J. 229 194 Leak v. Driffield 1. 1. 2, (1889) 24 Q. B. D. 98 . 124 Leask v. Scott .. (1877) 2 Q. B. D. 376 . 82 Le Blanche v. L. & N. W.R. Co.. (1876) 1C. P. D. 286 40, 305 Lee v. Griffin... .. (1861) 1B. &8. 272 . B Leev. Jones .. .. .. .. .. (1864) 17C. B., N.S. 482 . 161 Lee v. Muggeridge .. .. .. .. (1813) 5 Taunt. 36. 103, 104 Leeds Bank v. Walker .. .. .. (1888) 11Q. B.D. 84 .. 827 Le Lievre v.Gould .. .. .. .. (1898) 1Q. B. 491 .. 164 Lennard v. Robinson .. .. .. (1855) 52H. & B. 125 .. 346 Leroux v. Brown... .. .. .. (1852) 12 C. B. 801 .. 69 Leslie v. Fitzpatrick... .. .. .. (1877) 3Q. B.D. 229 .. 112 Louis v. Nicholson .. .. .. .. (1852) 18Q, B. 508 .. 346 Lickbarrow v. Mason .. »» (1893) 18m. L. C. 737 .. 247 Lindsay Petroleum Co. v. Hurd .. (1874) L.R. 5 P.C. 248 .. 168 Lister v. Stubbs op 8 .. (1890) 45 Ch. D. 15 .. 338 Littlefield v.Shee .. .. .. .. (1831) 2B. & Ad. 811 .. 104 Liversidge v. Broadbent... (1859) 4H. & N. 603, 610 235, 236 Llanelly | R. Co. v. L. & N. W. R. Co. (1875) L.R. 7H. L. 567 .. Bl7 London Assurance Co. v. Mansel... (1879). 11 Ch. D. 363 158, 159 London Joint Stock Bank v. Simmons(1802) A.C. 217... .. 244 Long v. Millar .. 1... .. (1879) 4C. P. D. 456 67, 259 Lovelock v. Franklyn .. .. .. (1846) 8Q.B. 371. . 292 Low v. Bouverie .. .. .. .. (1891) 3Ch. (C. A.) 82 164 Lowe v. Pears .. .. .. .. «. (1768) 4 Burr. 2225 202 Lucan, Inre .. «2 we a. «. )=(1890) 45 Ch. D. 470 313 Lumley v. Gye .. .. .. .. .. (1853) 2E. &B. 216 226, 227 Lumley v. Wagner .. .. .. .. (1852) 1D.M. & G. 604 . 313 Lumsden’s Case... .. .. .. .. (1868) 4Ch.31.. 110 Lynn v. Bruce .. .. .. .. .. (1794) 2H. Bl. 319 89 M. Macartney v. Garbutt .. .. .. (1890) 24Q. B.D. 368 -- 107 Macdonald v. Longbottom .. .. (1859) 1E.&E. 977 .. 263 McGregor v. McGregor .. .. .. (1888) 21Q. B.D. 424 . 123 Maclver v. Richardson .. .. .. (1818) 1M. &S. 557 .. 23 Mackenzie v. Coulson .. .. .. (1869) 8 Eq. 875 .. .. 267 McKinnell v. Robinson .. .. .. (1838) 3M. & W. 434 .. 209 McManus v. Bark .. .. .. .. (1870) L.R.5 Ex. 65 . 316 McManus v. Cooke ... .. .. «.. +=(1887) 385 Ch. D. 682 -. 70 McPherson v. Watt .. .. .. .. (1877) 3 App. Ca. 254 .. 840 Maddick v. Marshall +s ae 2 (1864) 16C. B., N.S. 393 .. 343 Maddison v. Alderson .. .. .. (1883) 8 App. Ca. 479 70, 74 Mallalieu v. Hodgson .. .. .. (1851) 16Q. B. 689 ‘ .. 195 11M. & W. 665, ‘653 Mallanv.May .. .. .. .. .. (1843) { ee ee \ 55, 268 Manby v. Scott.. .. .. .. .. (1659) 1 Sid. 129 ‘ xy 117 Mangles v. Dixon |. - (1852) 3H. L. C. 702 . 238 Mann v. Edinburgh Tramways Co. (1898) A.C. 79 a 336 Marriot v. eee . - (1796) 28m. L. C. 441, and notes 364 Matthews v. Baxter . -. .. (1873) L. R.8 Exch. 132 . il OASE, Mattock v. Kinglake Mavor v. Pyne .. Maxim-Nordenfelt Co. v. Nordenfelt { INDEX OF CASES. (1839) (1825) 1893) 1894) Mayor of Kidderminster v. Hardwick (18738) Mayor of Ludlow v. Charlton Melhado v. Porto Alegre Rail. Co. Mersey Steel & Iron Co. v. Naylor Meyer v. Dresser Mighell v. The Sultan of Johore .. Milnes vy. Dawson Minett v. Forester Minshull v. Oakes . Mitchell v. Homfray Molton v. Camroux .. Moore & De la Torre’s Case : : Morison v. Thompson Mortimore v. Wright Morton v. Lamb Moses vy. Macferlan .. Mountstephen v. Lakeman Moxon v. Payne Murray v. Flavell Murray v. Parker Musurus Bey v. Gadban . : Nash v. Armstrong . National Exchange Co. ve Drew o Newbigging v. Adam New Brunswick Railway Co. v. Muggeridge New York Bowery E Fire Tas. Co. v. New York Fire Ins. Co. . New Zealand Co. v. Watson . Nichol v. Bestwick .. Nichol v. Godts Nicholson v. Bradfield Union ; Noble v. Ward . Norden Steam Co. v. Dempsey Northcote v. Doughty N. W. Rail. Co. v. MeMichael Nowlan v. Ablett Nugent v. Smith Oakes v. Turquand .. Offord v. Davies Ogle v. Earl Vane Oldershaw v. King .. Oliver v. Hunting O’Mealey v. Wilson . O'Neil v. Armstrong _ Onward Building Society v. ‘Smithson O’Rorke v. Bolingbroke .. O’Sullivan v. Thomas (1840) (1874) (1884) (1864) (1894) (1850) (1811) (1858) (1881) (1848) (1874) (1874) (1840) (1797) (1760) (1871) (1873) (1883) (1854 (1894 N. (1861) (1855) (1886) 4 (1860) nl (1887) (1881) (1858) (1854) (1866) (1867) (1876) (1879) (1850) (1835) (1875) O. (1867) (1862) (1867) { (1857) (1890) (1808) (1895) (1893) (1877) (1895) XxXxX1 REFERENOE. *PAGE 10 A. & E, 50 . 298 3 Ae iets das 15, 288 1Ch. (C. A.) 665 ee } 197, 204, 207 L. R. 9 Ex. 24 58 6M. & W. 815 57 L. R. 9 C. P. 5038 229 9 App. Ca. 434 .. 300 16 C. B., N. S. 646 265 1Q. B. (C. A.) 149 107 5 Exch. 950... 245 4 Taunt. 541 359 2H. & N. 798 249 8 Q. B. D. 587 182 2 Exch. 487 & 4 Exch. G 121 18 Eq. 661 176 L. R.9 Q. B. 480 338 6M. & W. 482 79 7T. R. 125 298 2 Burr. 1005, 1010, 364 L. R. 7H. L. 17. 65 8 Ch. 881 183 25 Ch. D. 89 230 19 Beay. 305 ss 267 2 Q. B. (C. A.) 352 sts 318 10C.B., N.S. 259 .. .. 280 2 Macq. H. L. C. 146 .. 853 84 Ch. D. 582 : . 154, 163 1 Dr. & Sm. 381 .. . 160 17 Wend. 359 .. 158 se ae) .. 842 — 28 L. J. Exch.4.. .. .. 828 10 Exch, 191 . 802 L. R. 1 Q. B. 620 .. 57 L. R. 2 Exch. 135 .. 281 1C. P. D. 658 .. 265 4C. P. D. 385 .. 115 5 Exch. 114 .. .. 109 2C. M. &R. 54 .. 280 1C.P. D. 19, 423 . 279 L. R. 2 H. L. 325 .. 176 12 C. B., N.S, 748 29, 30 L. R. 2 Q. B. 275 276 L. R. 3 Q. B. 272 . 2H. &N. 517 16 44 Ch. D. 205 . 67 1 Camp. 483 .. 107 2Q.B.70 .. . 294 LOOT eer oa . 451 2 App. Ca. 814 180 1Q. B. 698 . ‘191, 220 XXxli INDEX OF CASES. P. CASE. : DATE. REFERENCE. *PAGE Paget v. Marshall .. .. (1884) 28Ch. D. 255 .. .. 141, 267 Palliser v. Gurney ‘ (1887) 19Q.B.D.519.. .. .. 124 Palmer v. Johnson .. (1884) 138Q. B.D. (C. A.) 351 .. 160 Palmer v. Temple (1839) 9A.&E.521 .. .. .. 817 Paradine v. Jane (1647) Aleyn,26 .. .. .. .. 822 Parker v. Ibbetson is (1858) 4C. B., N. 8.347... 280 Parker v. 8. E. Railway Co. |. 1877) 2C. P. D.416 .. 2... 19 Pattinson v. Luckley ee 1875) L.R. 10 Ex. 380.. .. ..°827 Payne v. Haine (1847) 16M.& W. 541 .. .. .. 264 Payne v. Mayor of Brecon (1858) 3H.&N.579 .. .. 214 Paynter v. Williams (1833) 1C. & M. 810 bl < seg 15, 101 Pearce v. Brooks (1866) L. R. 1 Exch. 213 202, 209, 212 Peek v. Derry (1888) 37 Ch. D. 541,565 .. .. 171 Peek v. Gurney .. (1878) ie a Pelee nes Bee hie Pelton v. Harrison (1892) 1Q.B.121.. .. .. .. 126 Perry v. Barnett (1885) 15Q. B.D. 888... .. .. 211 Peter v. Compton (1693) 1Sm. L. C. 359... .. 1.) «64 Phillips v. Foxall (1872) L.R.7Q.B. 666 .. .. 162 Pickard v. Sears be Ge (1837) 6A.& E. 469... 164 Pickering v. Busk .. (1812) 15 East, 38 .. .. | 833, 344 Pickering v. Ilfracombe Railway . (1868) L.R.3C.P. 250 .. «+ 207 Pigot’s Case : ele) ae (1614) 11 Co. Rep.27(b) .. .. 206 Pike v. Fitz Gibbon . (1881) 17 Ch. D. 459 1... .. 128 Pillans v. Van Mierop (1765) 3 Burr. 1663 oe ee 48, 75 Pinnel’s Case... (1602) 5Co. Rep. 117 .. we (BT Planché v. Colburn .. (1831) 8 Bing. 14 os | 289, 294 Polhill v. Walter (1832) 3B. & Ad. ti 2. 144, 172, 348, Potter v. Duffield (1874) 18 Eq. 4 ee pe Rs 66 Poulton v. Lattimore (1829) 9B.&C. 259° oe ae “ee 802 Powles v. Innes (1843) 11M.&W.10 .. .. .. 285 Price v. Easton .. (1883) 4B.& Ad. 483 .. 1. .. 228 Priestly v. Fernie SiG (1865) 3H. & C.984 .. .. .. 852 Printing Co. v. Sampson (1875) 19 Eg. 462 .. .. .. .. 196 Prosser v. Edmonds.. .. .. (1835) 1Y.&C.499 .. 1... 201 Protector Loan Co. v. Grice .. (1880) 5Q.B. D. (C. A.) 592, .. 271 Pust v. Dowie (1863) 32L.J.Q.B.179 .. .. 307 Pyke’sCase .. .. «se (1878) 8 Ch. D. 756 ie ee aa 210 Pymvy. Campbell .. .. .. (1856) 6E.&B. 370 .. .. 260, 261 R. Raffles v. Wichelhaus (1864) 2H. &C.906 .. 1... 185 Ramsgate Hotel Co. v. Montefiore (1866) L. R. 1 Exch. 109 .. 80 Rann v. Hughes soe. 4. (1778) 7T. R350 .. 48, 61, 75, 105 Rannie v. Irwine (1844) 7M. &G. 969. 203 : ; 10 Q. B. D. 100 ) 210, 216 Read v. Anderson (1882) {33 ¢ BDC. Am9 357, 868 Reader v. Kingham . (1862) 18C.B.,N.S. 3 * 61 Redgrave v. Hurd (1881) 20Ch. D.1.. 154, 159 Reese River Mining Co. v. Smith (1869) L. R.4H. L. 64 145 Reg. v. Wilson .. at (1879) 5Q. B.D. (C. C. RB.) 28 112 Reuss v. Picksley (1866) L. R. 1 Exch. 342 65 Reuter v. Sala .. (1879) 4C.P.D. (C. A.) 249 - 270 Reynell vy. Sprye .. (1852) 1D. M. & G. 660 vir ee BL Richards v. Delbridge »» (1874) 18 Eq ll .. 2. 1. 1. 230 Richards v. London, Brighton, ‘ BG, Halliday Go <. * (asso) FOB Bi cn au oy BO8 Richardson v. Williamson (1871) L.R.6Q.B.276.. .. ., 847 INDEX OF CASES. XXxili OASE. DATE, REFERENCE, *PAGE Ritchie v. Atkinson .. 1808) 10 East, 295.. .. 301 River Steamer Co., In re 1871) 6 Ch. 828 .. .. 819 Roberts v. Hardy 1815) 3M. &S. 5383 .. 107 Robinson v. Davison (1871) L.R. 6 Exch, 269 .. .. 325 Robinson v. Harman (1848) 1 Exch. 855 .. . 809, 311 Robinson v.. Mollet . (1874) L. R.7 H. L, 802 . 840, 341 Robinson v. Read .. .. (1829) 9B. & C, 455 284 Robson & Sharpe v. Drummond .. 1831) 2B. & A. 308 ‘ 238, 234 Rogers v. Parry oe 1613) Bulstrode, 186 . 202 Roper v. Johnson 1873) L. R.8C. P. 167 . dll Roscorla v. Thomas . (1842) 8Q. B, 284 .. 96. Rossiter v. Miller (1878) 8 App. Ca, 1124 .. 66 Rotheram Alum Co., In re (1888) 25 Ch. D. 103 . 230 Rothschild v. Brookman . 1831) 2 Dow & Cl. 188 .. 3840 Rousillon v. Rousillon 1880) 14 Ch. D. 351 . 205 Rowntree v. Richardson... .. (1898) 9 T. L. R. 297 «i 20: Rumball v. Metropolitan Bank .. (1877) 2Q.B. D. 194 . 241 Ryan v. Mutual Tontine Ass. Co. (1898) 1 Ch. (C. A.) 126 . 812: L. R. 3 Exch. 90 . Ryder v. Wombwell (1868) {i R. 4 Exch, 32 . 115 8. Sanderson v. Piper .. (1839) 5 Bing. N. C. 425 .. 264 Sard v. Rhodes (1886) 1M. & W.153 . .. 284 Sayer v. Wagstaff ‘ (1844) 5 Beay.423 .. .. .. 284 Schmaling v. “Thomlinson (1815) 6 Taunt. 147 .» 226 Schmaltz v. Avery (1851) 16 Q. B. 655 .. 850 Scotson v. Pegg .. (1861) 6H. &N. 295 91, 92 Scott v. Avery .. (1855) 5 H.L. C. 811 . 200 Scott v. Lifford .. (1808) 1 Camp. 246 .. 245 Scott v. Littledale (1858) 8E.&B.815 .. .. .. 189 Scott v. Morley .. (1887) 20Q.B.D.(C. A.) 120 .. 126 Seager, In re (1889) 60 Law ey Reports, 665 118 Seeger v. Duthie (1860) 8C.B., N.S. 45° .. 148 Seymour v. Bridge .. (1885) 14 Q. B. I D. 460 . . 211 Shadwell v. Shadwell (1860) 9C.B., & 159° 91, 92 Shardlow v. Cotterell (1881) 20 Ch. D 90 a4 -. 66 Simpson v. Crippin .. 1872) L.R.8Q.B.14 .. . 299 Simpson v. L. & N. W. R. Co. 1870) 1Q. B.D. 274 . 8ll Skeet v. Lindsay Bi ag (1877) 2 Ex. D. 317 . 820 Slade’s Case (1602) 4 Co. Rep. 92 . 862 Slater v. Jones .. 1873) L. R. 8 Ex. 193 . . 89 Smart v. Sanders ¥ 1848) 5B.C.917.. 857, 358 Smith v. Chadwick .. (1882) 20 Ch. D, 44 170 Smith v. Hughes (1871) L.R.6Q.B. 597 . . 136, 139, 175 Smith v. Kay (1859) 7H.L. C. 779 2 oe, PSL Smith v. King .. 1892) 2Q. B. 547.. -. 115 Smith v. Land & House Property C Co. 1884) 28Ch.D.7.. . 157 Smith v. Mawhood .. . (1845) 14M. & W. 468 . 185 Smith v. Wilson (18382) 3B. & A. 728 . 265 Smout v. Ilbery (1843) 10M. & W.1 . 860 Snook v. Watts... a (1848) 11 Beav. 107 . 121 South of Ireland Colliery 0. ee nm = pane L. RB. 3. C. P. 469 58 Southwell v. Bowditch (1876) 1C.P.D.(C. A. if 874 345, 349 Spencer’s Case .. (1583) 1Sm. L. C. 66,67 .. .. 249 Spencer v. Harding... . (1870) L. R.5C. P. 561 38 Spiller v. Paris Skating Rink | (1878) 7 Ch. D. 368 i .. 229 Stamford Banking Co. v. Smith (1892) 1Q. B. (C. ae 765 . 320 Stanley v. Jones - : (1831) 7 Bing. 869... .. » 201 XXXIV OABE. Startup v. Macdonald Stewart v. Casey Stewart v. Eddowes Stilk v. Myrick Stockport Waterworks Co. v. ’ Potter Stocks v. Dobson Street v. Blay .. Strickland v. Turner is Suffell v. Bank of England Sullivan v. Mitcalfe .. : Sutton & Co. v. Grey Synge v. Synge Tailby v. Official Receiver Tamplin v. James Tarrabochia v. Hickie Tatam v. Reeve Tate v. Williamson .. Taylor yv. Best .. th adie Taylor v. Bowers .. .. '.. Taylor v. Brewer .. Taylor v. Caldwell .. Taylor v. Laird . ‘Temperton v. Russell Temperton v. Russell Thacker v. Hardy Thatcher v. England Thiis v. Byers Thomas v. Hayward Thomas v. Thomas .. Thomson v. Davenport Thorne v. Deas : Thornett v. Haines .. Thornhill v. Neats Thoroughgood’s Case Thomkinson v. Balkis Co. Touche v. Metrop. Warehousing Cc Co. Townson v. Tickell . Truman v. Fenton Trueman v. Loder Tulk v. Moxhay Turner v. Owen , Tweedle vy. Atkinson Udell v. Atherton Valentini v. Canali .. Venezuela Railway Co. v. Kisch .. Wade.v. Simeon Wain v. Warlters Wake v. Harrop Wallis v. Smith INDEX OF CASES. (1843) (1892 B74) (1809) (1864) (1853) (1831) (1852) (1882) (1880) (1894) (1894) T. (1888) (1880) (1856) (1893) (1866) (1854) (1876) (1813) (1863) (1856) 1893) £3039 (1878) (1847) (1876) (1869) (18425 (1829) (1846) (1860) (1584) (1891 (1871 (1819) (1777) (1840) (1848) (1862) (1861) Uz (1861) . Vv. (1889 (1378) Ww. (1846) (1804) (1861) (1882) REFERENCE. *PAGE 6M. &G.593 .. .. .. 284 1Ch.115 .. .. .. .. 100 L. R. 9 C. P. 3814 icy vey OB 2 Camp. 317 to es) ee 186 8H. &C.300 .. .. .. 251 4D.M.&G.15... .. 237 2B. & A. 456 803, 306 7 Exch. 208... .. .. 321 a 555 oe cee BOT 5C. P. D. (C. A.) 455 -. 161 1Q. B. 285... vie -. 61 1Q. B. 466 15, 86, 293 13 App. Ca. 548 . 236, 239 15 Ch. D. 221)... .. .. 140 1H.&N.183 .. .. .. 148 1Q.B.44 .. .. .. .. 191 2 Ch. 55 “ -. 181 14 C. B. 487 eau sete cae LOT 1Q. B.D. (C. A.) 38.. .. 218 1M.&8.290 .. 41, 81 3B. &8. 826... .. 324 25 L. J. Ex. 329 .. 18, 93 1Q. B. (C. A.) 435 .. 231 1Q.B.(C. A.) 715 .. .. 227 4Q.B.D.685 .. ,. .. 198 38C.B.254 .. 1. 6... 88 1Q. B.D. 244 .. .. .. 328 L. R. 4 Exch. 311 250 2Q.B.851.. .. .. 1. 78 9B. & C. 78 cee we B49 4 Johnson (N. Y.) 84... 85 15 M. & W. 367 .. -. 39 8C. BN. 8.881 .. .. 276 2 Co. Rep. 9 ee aa x 1B0 2Q.B.614.. .. 1. .. 165 6Ch. 671 .. .. . 229 8B. &Ald.37 .. .. .. 18 2 Cowp. 544 .. 108 11 A. & E. 589 a 7 851 2 PH 774 2. ee ae oe BER 8EF.&F.176 .. .. 86 1B. &8. 393 .. 80, 228, 229 TH.&N.172) 1... 1. 858 24Q.B.D.166 .. .. .. 118 LR.2H.L.118 = .. .. 161 2C.B. 548 . 83, 86 5 East,10 .. . .. 67 6 H.& N. 768 257, 258, 263 21 Ch. D. 257 ee . 271 INDEX OF CASES. 5 XXKV CASE. DATE. REFERENOE, *PAGE Walton vy. Mascall .. .. .. .. (1844) 183M. & W.451.. .. .. 285 Ward v. Hobbs... .. .. .. .. (1878) 4 App.Ca.14 .. .. 166, 167 Ward v. Monaghan... .. .. .. (1895) 11T.L.R.529 .. .. .. 271 Ware v. Chappell .. .. .. .. (1849) Style, 186 .. .. .. 297, 298 Warlow v. Harrison se ee ee 6(1858) 1E. & E. 295 #38 39 Waters v. Tompkins se owe ee) 61885) 2 C.M. & R. 728 ie eee Watkins v. Rymill .. .. .. .. (1883) 10Q.B.D.178.. .. .. 18 Watson, Inve .. .. .. .. .. (1886) 18Q.B.D.116.. .. .. 385 Watson v. Swann .. .. .. .. (1862) 11C.B.,N.S. 764 .. 335 Watson v. Turner .. .. .. «. (1767) ae Nisi Prius, 147 100, 102 Watteau v. Fenwick .. .. .. (1892) 1Q.B.346 .. .. 1. .. 351 Waughv. Morris’ .. .. .. .. (1873) L.R.8Q. B. 202 ia 211 Webster v. Cecil .. .. .. .. (1861) 30Beav.62.. .. .. 140, 266 Week v. Tibold.. .. .. .. .. (1605) Roll. Abr. p.6 .. .. .. 40 Weirv. Bell .. .. .. ..) .. (1878) 3 Ex. DD. 248 1... .. 170 Wells v. Foster... .. (1841) 8M.&W.149 .. .. .. 198 Ve of wien (1875) L.R.100.P. 402 .. .. 87 Western Wagon Co. v. West... (1892) 1Ch.271 .. .. .. .. 286 Wettenhall v. Wood is as as 617938) LEsp. 16 2. 2. 4s) we 210 Wheelton v. Hardisty .. .. .. (1857) 8E.& B.282 .. .. .. 159 White v. Bluett.. ©... 2...) (1858) 281. J. Exch.36 .. .. 81 Whittaker, Fx parte... .. .. .. (1875) 10Ch. 446 .. .. 1... 168 Whittaker v. Howe .. .. .. .. (1841) 3 Beav. 883.. .. 1. .. 205 Whittingham v. Murdy .. (1889) 60 Law Times Rep. 986 .. 114 Whitwood Chemical Oo. v. Hardman (1891) 2Ch. (C. A.) 428 .. .. 314 Wigglesworth v. Dallison -. .. (1778) 18m. L. C. 569... .. .. 265 Wilkinson v. Byers... .. .. .. (1834) 1A.& E,106 .. .. 2. 88 Wilkinson v. Coverdale .. .. ., (i793) 1Esp.75 .. .. .. 84, 333 Wilkinson v. Johnson .. .. .. (1824) 3B. &C.428 .. .. .. 827 Wilkinson v. Oliveira .. .. .. (1835) 1Bing.N.C.490 .. .. 97 Williams v. Bayley .. .. .. .. (1866) L.R.1H.L. 220 .. .. 199 Williams v. Carwardine .. .. .. (1833) 4B.&A.621.. . 16, 37 Williams v. Jones .. .. .. .. (1845) 13M. & W.628.. .. 51, 363 Williams v. Jordan .. .. .. .. (1877) 6Ch.D.517) .. «ww. 66 Williams v. Lake .. .. .. .. (1859) 2E.& EF. 349... .. 66 Williams v. Moor .. .. .. .. (1843) 11M. & W. 256.. ; 103, 108 Williams v. Sorrell .. .. .. .. (1799) 4 Vesey, 389 bbs Ais . 237 Wilson v. Finch-Hatton.. .. .. (1877) 2 Ex. D. 336 ter ate LOT Wilson v. Glossop .. .. .. .. (1888) 20Q. B. D. (C. A.) 854 .. 334 Wilson v. Jones te ee ee ee) 61867) LL. R.2 Exch. 182... 188 Wilson v. Strugnell.. .. .. .. (1881) 7Q.B.D.548 .. .. .. 218 Wilson v. Tumman.. . »» (1843) 6M. &G. 2386 .. .. 334, 335 Windhill Local Board v. Vint -» (1890) 45 Ch. D. (C. A. ) 351 .. 200 Wingv. Mill .. ww. . . (1817) 1B.&A Ald. 105... .. 101 Withers v. Reynolds sit (1831) 2B. & A. 882 . 300 Wolverhampton Rlwy. Co. 7b. & , Ae a} (1873) 16 Eq. 439 .. . a 8B Wood v. Abrey.. .. .. .. (1818) 38 Maddock, 423 .. .. .. 179 Wolfe v. Horne... .. .. .. .. (1877) 2Q.B.D.355 ... .. .. 344 xX. Xenosv. Wickham... .. .. .. (1866) L.R.2H.L.296 .. 82, 52 Y. Yeoland’s Consols, Re .. .. .. (1888) 58 Law Times Reports, 922 114 SOME ABBREVIATIONS USED IN REFERENCE. 22 r REPORTS.1 A. & E. Adolphus and Ellis Q. B. 1834-1841 B. & Ad. Barnwall and Adolphus K. B. 18380-1834 B. & Ald. Barnwall and Alderson .. K. B. 1817-1822 B.&C... Barnwall and Cresswell K. B. 1822-1830 B.&P... Bosanquet and Puller +... ©. P. 1796-1804 Beav. . Beavan .. .. .. Rolls Court, 1838-1866 B.&S... Best and Smith et ies . B. 1861-1865 Bing. .. Bingham .. .... = Bing. N. C Bingham’s New oe} Ge Ey Teas teat Burr. . Burrows .. 2 a2 S8 wa ove ae, JK Be T75651772 Camp. . Campbell .. .. K. B. &C. P. nisi prius, 1807-1818 By. 3 Common Bench eS C.B.,N.S Common Bench, New Series Beis ledp tens CL & F. Clark & Finelly .. House of Lords, 1831-1846 C.&M Crompton and Meeson.. .. C.M.&R Crompton, Messon, and Roscoe Ex. 1834-1836 Co. Rep Coke’s Reports oy Eliz. and James COWDs 225 ove cc gen COWPER bs. sabe 9 ne Gow \ ade K. B. 1774-1778 Cro. Eliz. or 1 Cro. Croke, of the reign of Elizabeth . . Cro. Jac. or 2 Cro. 4 . James oe D.& J... De Gex and Jones .. .. .. Ch. App. 1857-1859 DF.&I. .. De Gex, Fisher, and Jones .. .. .. ee 1859-1862 D.M.&G... De Gex, Macnaghten, and Gordon .. ‘¢ 1851-1857 Dow. & Cl... Dow and Clark House of Lords, 1827-1832 Dr.& Sm. . Drewry and Smale V.C. Kindersley, 1859-1866 Dr. & War. .. Drury and Warren : Chancery, 1841-1848 L.& B... Ellis and Blackburn Q. B. 1852-1858 E.&E.. Ellis and Ellis .. tees ee 4. )6Q. B. 1859-1861 Esp. . Espinasse .. .. K. B. &C. P. nisi prius, 1793-1806 Exch. . Exchequer ae ee ee ee 1847-1856 F.&F... .. .. Fosterand Finlason .. Cases at Nisi Prius, 1856-1867 H. Bl... .. .. Henry Blackstone .. . ear) ose C. P. 1786-1788 H.L.C. .. .. House of Lords Cases 1846-1866 H.& C. -. .. Hurlstone and Coltman Ex. 1862-1865 H. &N. .. .. Hurlstone and Norman .. Ex. 1856-1862 ue — L. -. .. Irish Common Law Reports .& ' Johnson and Hemming V.C. Page Wood, 1859-1862 1 References to the Law Journal reports have not been given throughout the ensuing pages because the system of marginal references imposed certain limits as to space. The reports cited are accessible to any student at Oxford, and it is hoped that the information given as to the court in which the case was decided, and the date of the report to which reference is made, will enable those who can only refer to the Law Journal to discover the cases with little difficulty. XXxvi SOME ABBREVIATIONS USED IN REFERENCE. XXXVil K.&J... Kay and Johnson .. .. V.C. Page Wood, 1854-1856 L. J. Exch. Law Journal Exchequer | L. J. Q. B. eg ee Queen’s Bench 1828- L. J. Ch... ee ‘¢Chancery .. L.T. R. Law Times Hepers Lev. .. Levinz .. .. K. B. & C. P. 1660-1696 Mad. Maddock .. .. " Vice-Chancellor’ s Court 1817-1829 M.&G .. .. Manning and Granger .. .. .. C. P. 1840-1845 M.&S. .. .. .. MauleandSelwyn.. .. .. .. K. B. 1813-1817 M. & W Meeson and Welsby .. .. .. Ex. 1836-1847 Mer. . Merivale .. é Chancery, 1818-1817 Mod. Rep Modern Reports Common ‘Law and Chancery, 1660-1702 M. &K Mylmneand Keen .. .. .. Chancery, 1832-1837 Phe «4: PRUNPS: ek caves Sake, ewe i es us 1841-1849 Q. B. . .. .. Queen’s Bench bao Hees wat aay Cae gue HBETH1B52: Rep. i in Ch. .. .. Reportsin Chancery .. .. .. .. .. 1625-1688 Rolle Abr. .. .. Rolle’s Abridgment .. .. .. .. .. 1614-1625 Russ. so aa wes Tussell ae een “Be Chancery, 1826-1829 R.&M. .. .. .. Russell and Mylne ee 8%. We ee ae. ay 1829-1881 Salk. .. oe . Salkeld .. .. .. K.B.C. P. Ch. & Ex. 1689-1712 Sch.&L... .. .. Schoales and Lefroy | .. Trish Chancery, 1802-1806 Sid... .. .. .. Siderfin .. .. .. K. B.C. P. & Exch. 1657-1670 Sm.L.C... .. .. Smith’s Leading Cases. SIT ne. aa ae wee SUPAMBE: ae a Qs He ee ae Nae TD RT 184 Taunt. . -. Taunton .. .. ..C.P, 1807-1819 Term Reports, or Durnford ) nee ae T. R. i and East’s Reports .. «AK. B. 1785-1796 T.L.R. . .. Times Law Reports .. .. .. .. .. 1884+ Ventr. .. .. .. Ventris .. .. 4. .. 2. .. ..K. B. 1660-1685 Vern. wee, ee) WORNON: 228) har eh ek Chancery, 1680-1718 Ves... .. .. «. Wesey Junior .. .. .. .. Chancery, 1789-1816 Ves. Sent. .. .. Vesey Senior .. : Chancery, 1746-1755 Y¥.&C. .. .. .. Youngand Collyer .. V.C. ee 1834-1842 Yelv. ea at. ae Yelvertonus 2: «2 a4 .. ... B. 1601-1613 LAW REPORTS, 1865-1893. L. R. Q. B Queen’s Bench .. L.R. C. P Common Pleas .. 2% L. R. Ex Exchequer... .. .. .. Eq. .. Equity é sd 1865-1876 Ch. : Chancery Appeals ee Te, Bo He te English and Irish Appeals L. R. Sc. App. pe Hoe 0 oF Lords Scotch Appeals Q. B.D. Queen’s Bench Division .. .. 1875-1891 CDs Sake he. ane eat Da Common Pleas Division Ex.D. .. .. .. .. «. «. Exchequer Division © } -+ 1875-1891 Ch. De xs .. Chancery Division .. App. Ca. .. House of Lords and Privy Council Appeal Cozens 18i5-1891 (189-)Q.B. .. . -» Queen’s Bench Division .. .. 1891- (189-) Ch. .. Chancery Division .. .. 1891- (189-) A.C. House of Lords and Privy Council Appeal Cases .. 1891- TABLE OF AMERICAN Ackert v. Barker Adams v. Gay .. Adams v. Irving Nat. Bk. Adams v. Messinger .. Adams &c. Works v. Schnader, Ahearn v. Ayres Albany City Sav. Inst. v. Burdick, Alden v. Thurber Alexander v. Morgan .. Allen v. Baker .. Allen v. Brown .. Allen v. Bryson Allen v. Collier .. Allen v. Duffie .. Allen v. Hammond Aller v. Aller Allison v. Chandler Alvord v. Smith Anderson v. May Anderson v. Roberts .. Anderson v. Soward Anderson v. Spence Andrew v. Dyer es Angle v. Chicago &. Ry... Appleton Bank v. McGilvray.. Arkansas Valley Smelting Co. v. Belden Mining Co. 7 Armstrong v. Levan... Arnold v. Richmond Iron Works, Ashcroft v. Butterworth Ashley v. Dixon Askey v. Williams Atwood v. Chapman Auditor v. Ballard avs Auerbach v. Le Sueur Mill Co. bis Aultman v. Kennedy .. Ayer v. Kilner .. Babcock v. Hawkins Bach v. Tuch . Bagley v. Cleveland Rolling Mill Co., Bailey v. Austrian A Bailey v. Bussing xxxix CASES. A. PAGE 131 Mass. 486 247 19 Vt. 358 228 116 N. Y. 606 .. 218 147 Mass. 185 .. 96, 896 155 Pa. St. 894 .. 342, 348 88 Mich. 692 .. AT 87 N. Y. 40 oe -. 215 149 Mass. 271 105, 334, 384 31 Oh. St. 546 ea .. 3810 86 N.C. 91 395 44.N. Y. 228 .. 294 67 Iowa, 591 115, 120 70 Mo. 188 .. 3889 43 Mich. 1 228 11 Pet. (U.S.) 63 167 40 N. J. L. 446 .. 64 11 Mich. 542 377 68 Ind. 58 .. 229 50 Minn. 280... ay 158, 391 18 Johns. (N. Y.) 515.. w 22 40 Oh. St. 325 ‘ 185 72 Ind. 315 71 81 Me. 104 821 151U. 8.1 x 279 4 Gray (Mass.), 518 441 Vo baa7 U. 8. 379 288 109 Pa. St. 177 .. 388 1 Gray (Mass.), 434 148 186 Mass. 511 .. 47 48 N. Y. 430 279 74 Tex. 294 140 68 Me. 38 203 9 Bush. (Ky.) 572 20 28 Minn. 291. ‘ sits 145 33 Minn. 339... ie es 115 148 Mass. 468 338 B. 23 Vt. 561 384 126N.Y.538 .. 217 21 Fed. Rep. 159° 168, 184 19 Minn. 535 ; 36 28 Conn. 455 439 xl TABLE OF AMERICAN CASES. Baker v. Burton a5 Baker v. Holt Baldwin v. Barrows Ballou v. Earle .. Baltzen v. Nicolay Bank y. Johns .. ee Bank v. Railroad Co. .. Bank of Columbia v. Patterson, Bardwell v. Purrington Barker v. Dunsmore Barker v. Hibbard Barnes v. Shoemaker .. ee Barney v. Forbes $4 a6 Barrett v. Buxton Pa Barrie v. Earle . , Bartholomew v. Jackson Barton v. Capron Bassett v. Brown Bassett v. Hughes Basye v. Adams Bauer v. Samson Lodge .Bay v. Coddington Bayne v. Wiggins : sige Beach v. First M. E. Church . Beardsley v. Duntley . Beardsley v. Hotchkiss — Beck &c. Co. v. Colorado &c. Co., Bedell v. Wilder Beebe v. Johnson Beeman v. Banta Bellows v. Sowles ‘ zs Bell’s Gap R. R. v. Christy .. Bender v. Been Beninger v. Corwin Benjamin v. Dockham Bennett v. Mattingly .. Bernard vy. Taylor Bethell v. Bethell Beymer v. Bonsall Bibb v. Allen Bigelow v. Benedict Bird v. Munroe .. Birdsall v. Russell Bisbee v. McAllen Bishop v. Palmer Bixby v. Dunlap Bixby v. Moor .. Blade v. Noland 3 : Blaechinska v. Howard Mission, Blaisdell v. Ahern Blake v. Voigt .. Blakeman v. “Fonda Blaskower v. Steel Blewett v. Boorum Bloss v. Kittridge Blossom v. Dodd Bohonan v. Pope Boigneres v. Boulon Bollman v. Burt as Boothe v. Fitzpatrick .. 31 Fed. Rep. 401 56 Wis. 100 - 86 Ind. 351 17 BR. I. 441 53.N. Y. 467... 22 W. Va. 520 .. 5S. C. 156 : 7 Cranch (U. §.), "299 107 Mass. 419 72 Pa, St. 427 54.N. H. 539 112 Ind. 512 118 N.Y. 580 .. 2 Aik. (Vt.) 167. 143 Mass. 1 20 Johns. (N. ¥.) 28 y 171 3R.L 105 Mass. 551 .. 53 Wis. 319 81 Ky. 368 102 Ind. 262. 20 Johns. (N. Y.) 637 . 139 U. 8. 210... 96 Ill. 177 69 N. Y. 577 96N. Y.201... 10 U.S. App. 465 8. C. 52 Fed. Rep. 700 65 Vt. 406 19 Wend. (N. Y.) 500 . 118 N. Y. 538 57 Vt. 164 79 Pa. St. 54 78 Iowa, 283 : 24.N. J. L. 257... 134 Mass. 418 110 Ind. 197 23 Ore. 416 92 Ind. 318 79 Pa. St. 298 149 U. S. 481 70 N. Y. 202 66 Me. 387 29 N. H. 220 39 Minn. 1438 146 Mass. 469 56 N. Y. 456 51 N. H. 402 we 12 Wend. (N. Y.) 173 180 N. Y. 497 .. 144 Mass. 3938 134 N. Y. 69 41 Conn. 561 23 Ore. 106 142 N. Y. 857 5 Vt. 28 .. 43 N. Y. 264 42 Me. 93 54 Cal. 146 61 Md. 415 36 Vt. 681 PAGE te ee 227 ; 49 161 1. 22 200, 421 .. 161 1. 145 67, 144 : .. 131 165, 217, 272 : 140 163 Me che DO 148 1. 865 20, 113 .. 166 217 281 239 246 128 77 32 82 134 329 167 96 .. 877 70, 99, 106 .. 407 105 204 405 .. 272 | 282, 235, 269, 270 .. 207 426 409 L287 76, 88 . 397 227 255 1. 279 17, 255 .. 898 154 248 75 389 389 319 115 22 .. 282 112, 248 366 120 TABLE OF AMERICAN CASES. xh PAGE Borcherling v. Katz... .. 37 N. J. Eq. 150 is os .. 420 Borden v. Boardman .. we 157 Mass. 410 .. ee ais .. 280 Boston v. Farr .. es ae 148 Pa, St. 220 .. as a ae 72 Boston v. Simmons... se 150 Mass. 461 .. ws ae .. 410 Boston Ice Co. v. Potter Be 123 Mass. 28... bi 2a .. 163 Boston &c. R. v. Bartlett —.. 3 Cush. (Mass,) 224 .. ia ‘34, 39 Bourlier Brothers v.. Macauley, 91 Ky. 1385 «a a te .. 279 Bowery Nat. Bk. v. Wilson .. 122 N. Y. 478 .. es > .. 245 Bowker v. Hayt oe “3 18 Pick. (Mass.) 555 .. a .. 113 Boyden vy. Boyden... ea 9 Met. (Mass.) 519... he - 184 Boyer y. Berryman .. ese 123 Ind. 451... as te -. 148 Boylan v. Hot pee Re is 182 U.S. 146 .. dis ae ae 29 Boyle v. Adams i 8 & 9 Vict. c. 16. § 14, ¢17 & 18 Vict. c. 104. § 55. 4 29 Car. IL c. 3. §§ 1 & 2, and 8 & 9 Vict. c. 106. § 3. 1JIn general conveyances of interests in lands must be by deed. Stimson, Am. St. Law, § 1471. 2 Williams v. Forbes, 114 Ill. 167; Krell v. Codman, 154 Mass. 454. Chap. II. § 3. SIMPLE CONTRACTS IN WRITING. 67 Trading corporations may through their agents enter into simple contracts relating to the objects for which they were created. ‘ A company can only carry on business by agents, — managers and others; and if the contracts made by these persons are contracts which [*58] *relate to the objects and purposes of the company, and are not inconsistent with the rules and regulations which govern their acts, they are valid aud binding on the company, though not under seal.’ In addition to the common law exceptions to the gen- eral rule, the legislature has in some cases freed corpora- tions from the necessity of contracting under seal, and provided other forms in which their common assent may be expressed. It has been questioned whether, when a corporation enters into a contract not under seal, and the contract has been executed in part, such execution gives rights to the parties which they would not have possessed if the con- tract had remained executory. Where a corporation has done all that it was bound to do under a simple contract it may sue the other party for a non-performance of his part. But there is no doubt that a part-performance of a contract by a corporation will not take the case out of the general rule, and entitle it to sue. Nor can a corporation be sued on contracts not under seal of which it has enjoyed a partial benefit; indeed it would seem that entire performance by the plaintiff will only give him a remedy where the amount is small and the work necessary.? SIMPLE CONTRACT. § 3. Simple contracts required to be in writing. We have now dealt with the contract which is valid by reason of its form alone, and we pass to the contract which 1Jn the American States generally a corporation is required to use a seal only when a natural person would be so required. Bank of Columbia v. Patierson,' 7 Cranch (U. 8.), 299; Christian Church v. John- South of Ireland Colliery Co. v. Waddle, L. R30. P, 469. Effects of part-per- formance. Fish- mongers’ Company vy. Robertson, 5M. & Gr. 192. Mayor of Kidder- minster v. Hardwick, L. R. 9 Ex. 24, Per Bram- well, L.J., Hunt v. Wimbledon Local Board, 40. P. D.at p. 53. (3) Simple contracts. All require considera- tion. Some must also be ex- pressed in writing. See post, p. 75. Statutory require- ments 45 & 46 Vict. ©. GL § 1. 45 & 46 Vict. wc. 61, § 17, ‘30 Vict.c. 28. 68 FORMATION OF CONTRACT. Part IT. depends for its validity upon the presence of considera tion. In other words, we pass from the formal to the simple contract, or from the contract under seal to the parol contract, so called because, with certain exceptions to which I will at once refer, it can be entered into by word of mouth. Certain simple contracts cannot be enforced unless written evidence of the terms of the agreement and of the parties to it is produced; but form is here needed, not as giving efficacy *to the contract, but as evidence of its existence. Consideration is as necessary as in those cases in which no writing is required: ‘if con- tracts be merely written and not specialties, they are parol and consideration must be proved.’ These are therefore none the less simple contracts, because written evidence of a certain kind is required [*59] concerning them. The statutory requirements of form in simple contract are briefly as follows: — _ 1. A bill of exchange was required to be in writing by the custom of merchants, adopted into the common law. A promissory note was subject to a like requirement by 3&4 Anne, c. 9. Both documents are now governed by the Bills of Exchange Act, which further provides that the acceptance of a bill of exchange must also be in writing.! 2. Assignments of copyright must be in writing. This subject is dealt with by numerous statutes.” 3. Contracts of marine insurance must be made in the form of a policy.® son, 58 Ind. 278. Where a corporation has received a benefit under a contract ultra vires, it is liable in quasi-contract. Central Trans. Co. v. Pullman Car Co., 189 U.S. 24, 60, H. & W. 223 n. 1 Acceptance must be in writing in many American States. Stim son, Am. St. Law, § 4720. 2U.S. Rev. St., §§ 48958, 4955. 3 Insurance contracts ave good in parol unless required by statute to be in writing. Relief Fire Ins. Co. v. Shaw, 94 U. S. 574. Chap. I. §3. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. 69 4, The acceptance or transfer of shares in a company is usually required to be in a certain form by the acts of Parliament which govern companies generally or refer to particular companies.! 5. Anacknowledgment of a debt barred by the Statute of Limitation must be in writing signed by the debtor, or by his agent duly authorized.? 6. The Statute of Frauds, 29 Car. II. c. 3. § 4 requires that written evidence should be supplied in the case of certain contracts.? 7. The Sale of Goods Act, 1893, 56 & 57 Vict. c. 71. § 4 requires that, in default of certain specified condi- tions, written evidence should be supplied in the case of contracts for the sale of goods worth £10 or upwards.* The requirements of the Statute of Frauds and of the Sale of Goods Act are those which need special treat- ment, and with these I propose to deal. [*60] *29 Car. IT. ec. 3. 8. 4. STATUTE OF FRAUDS. § 4. ‘No action shall be brought whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate; or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person; or to charge any person upon any agreement made in consid- eration of marriage ; or upon any contract or sale of lands, tenements or hereditments, or any interest in or concerning them; or upon any agreement that is not to be performed within the space of one year from the making thereof; unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall 1 Stimson, Am. St. Law, § 8150. 2N. Y. Code Civ. Pro., § 395; Stimson, Am. St. Law, § 4147. 3 Re-enacted in some form in all the American States except Maryland, Louisiana, and New Mexico. Stimson, Am. St. Law, § 4140. 4929 Charles II. c. 3, § 17, is re-enacted in some form in most of the American States. Stimson, Am. St. Law, § 4144. Other contracts sometimes required to be in writing will be found in Stimson, Am. St. Law, §§ 4146-4148. Lindley on Companies, 467. 9 Geo. IV. ec. 14. § 1. 19 & 20 Viet ©. 97. § 13. Statute of Frauds. Sale of Goods Act Replacin i Gee ie ¢, 8. §17.] Statute of Frauds: Section 4. (¢) Provis- ions of section 4. (a) Exec- utors. Nature of executor’s liability. Rann v. Hughes, TT. BR. 350 (). 70 FORMATION OF CONTRACT. Part II. be in writing, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized.’ 1 As regards this section we have to consider three matters. (1) The nature of the contracts specified. (2) The form required. (3) The effect upon such contracts of a non-compliance with the provisions of the statute. e) We will first note the characteristics of the five sorts of contract specified in the section. Special promise by an executor or administrator to answer damages out of his own estate. The liabilities of an executor or administrator in respect of the estate of a deceased person are of two kinds. At common law he may sue and be sued upon obligations devolving upon him as representative of the deceased. In equity he may be compelled to carry out the directions of the deceased in respect of legacies, or to give effect to the | rules of law relating to the division of the estate of an intestate. In neither case is he bound to pay anything out of his own pocket: his liabilities are limited by the assets of the deceased. But if, in order to save the credit of the deceased, or for any other reason, he choose to promise to answer damages out of his own estate, that promise must be *in writing together with the con- sideration for it, and must be signed by him or his agent.? It is almost needless to add that in this, and in *61] 1 The language of this section varies greatly in the enactments of the American States. Some States omit one or more of the clauses. In most the section is broken up and the clauses incorporated under different heads. See Stimson, Am. St. Law, §§ 4140-4148. 2 But not where the promise is to pay money out of his own estate, not as damages for which the decedent’s estate is liable, but to sub- serve some end of his own. Bellows v. Sowles, 57 Vt. 164, H. & W. 110; Wales v. Stout, 115 N. Y. 688, Chap. II. § 8. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. 71 all other contracts under the section, the presence of writing will not atone for the absence of consideration. Any promise to answer for the debt, default, or miscar- riage of another person. The promise here described is a contract of guarantee or suretyship. The following points may be noted in the application of the statute. (a) The promise must be distinguished from an indem- nity, or promise to save another harmless from the results of a transaction into which he enters at the instance of the promisor. ‘Whether any dontract is the one or the other is often a very nice question. One test is if the promisor is totally un- connected with the transaction except by means of his prom- 12 ise to pay the loss, the contract is a guarantee: if he is to derive some benefit from it, his contract is an indemnity.’ A surer test is that there must be three parties in con- templation; MZ, who is actually or prospectively liable to X, and A, who in consideration of some act or forbearance on the part of X promises to answer for the debt, default, or miscarriage of A. X, a bailiff, was about to arrest MZ. A promised to pay a sum of £17 on a given day to X if he would forbear to arrest M. This was held an independent promise of in- demnity from A to X which need not be in writing. A promised a firm of which he was a member that if his son failed to pay a debt due to the firm he would pay it himself. This was held not to be a guarantee to the firm, for A could not make a promise to himself and he was a member of the firm. His promise was an indemnity to the other partners against loss which they might suffer from trusting his son. 1 This is followed in many American States. Anderson v. Spence, 72 Ind. 315. But the contrary doctrine is held in many others. May v. Williams, 61 Miss. 125, H. & W. 113. (b) Guar- antors. The prom- ise dif- fers from indem- nity. Lord Esher, M.R. Sutton & Co. v. Grey, [1894] . B. 288. Reader v. Kingham, 13C.B.,N.3. 844, and see In re Hoyle, [1898] 1 Ch. 98, 72 FORMATION OF CONTRACT. Part IT. Necessi- tates pri- mary lia- bility of third party, Per Curiam in Birkmyr v. Darnell, 1 $m.L.C. 310. and a real liability, Mount- stephen v. Lakeman, L.R.7H.L. 17, and see L. R.7Q. B. 202. Goodman v. Chase, 1B. & Ald. 297, and con- tinuous. May arise from wrong. *(6) There must be a liability, actual or prospec- tive, of a third party for whom the promisor under- takes to answer. If the promisor makes himself primarily liable the promise is not within the statute, and need not be in writing. ‘If two come to a shop and one buys, and the other, to gain him credit, promises the seller “ If he does not pay you, I will,” this is a collateral undertaking and void with- out writing by the Statute of Frauds. But if he says, “Let him have the goods, Iwill be your paymaster,” or “I will see you paid,” this is an undertaking as for himself, and he shall be intended to be the very buyer and the other to act as but his servant.’ } ° (c) The liability may be prospective at the time the promise is made, as a promise by A to X that if M employs X he (A) will go surety for payment of the services ren- dered. Yet there must bea principal debtor at some time: else there is no suretyship, and the promise, though not in writing, will nevertheless be actionable. Thus if X says to A ‘If I am to do this work for MI must be assured of payment by some one,’ and A says ‘do it; I will see you paid,’ there is no suretyship, unless M should incur lability by giving an order? (d) If there be an existing debt for which a third party is liable to the promisee, and if the promisor undertake to be answerable for it, still the contract need not be in writ- ing if its terms are such that it effects an extinguishment of the original liability. If A says to X, ‘give Ma receipt in full for his debt to you, and I will pay the amount,’ this promise would not fall within the statute. The lia- bility of the third party must be a continuing liability? (e) The debt, default, or miscarriage spoken of in the statute will include liabilities arising out of wrong as [*62] 1 Boston v. Farr, 148 Pa. St. 220; Peyson v. Conniff, 32 Neb. 269. 2 Maurin v. Fogelberg, 37 Minn. 23; Mead v. Watson, 57 Vt. 426. 8 Teeters v. Lamborn, 43 Oh. St. 144; Eden v. Chaffee, 160 Mass. 225. Chap. II. §8. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. 13 well as out of contract. So in Kirkham v. Marter, M wrongfully rode the horse of X without his leave, and killed it. .A promised to pay X a certain sum in consider- ation of his forbearing to sue M, and this was held a prom- ise to answer for *the miscarriage of another within [*63] the statute. (f) This contract is an exception to the general rule that ‘the agreement or some memorandum or note thereof,’ which the statute requires to be in writing, must contain the consideration as well as the promise: 19 & 20 Vict. c. o7..8 3." Agreement made in consideration of marriage. The agreement here meant is not the promise to mary, (the consideration for this is the promise of the other party,) but the promise to make a payment of money or a settlement of property in consideration of, or conditional upon a marriage actually taking place.** . Contract or sale of lands or hereditaments or any interest in or concerning them. The rules which govern the forms of sale or conveyance of land are to be found elsewhere than in the Statute of Frauds, and are nota part of the law of contract. But agreements made with a view to such sales may give rise to diffi- a Where such a promise is made by one of the parties to the engagement a question might arise which has never, so far as I know, been presented to the courts — What is the consideration for a promise, in such a case, to pay money or settle property? The promisee is already under a legal liability to carry out the promise to marry. 1 Combs v. Harshaw, 63 N. C.198; Duffy v. Wunsch, 42 N. Y. 248. 2In the United States this would depend upon considerations common to all the contracts included in this section or upon special statutes. 3 McAnnulty v. McAnnulty, 120 Ill. 26; White v. Bigelow, 154 Mass. 593. The agreement to settle property may be made at the same time as the agreement to marry and yet rest upon another consideration, so as to take the case out of the statute. Larsen v. Johnson, 78 Wis. 300. 2B. & Ald. 618, Considera.- tion need ° not be ex- pressed. See p. 62. (c) Mar- riage agree- ments. Not a promise to marry. (d) Land contracts. What is an interest in land. Fructus indus- triales et naturales. 56 & 57 Vict. c. 71. § 62. (e) Agree- ments beyond a year. Peter v. Compton, 18m. L. C. 859, 9th ed. Skinn, 358. 74 FORMATION OF CONTRACT. Part II. culty in defining an interest in land such as would fall within the section. We may say that contracts which are preliminary to the acquisition of an interest, or such as deal with a remote and inappreciable interest, are outside the section. Such would be an agreement to pay for an investigation of title; or to transfer shares in a railway company which, though it possesses land, gives no appreci- able interest in the land to its shareholders. Difficulties again have arisen in interpreting this section with reference to the sale of crops; and a distinction has been drawn as to these between what are called emble- ments, crops produced by cultivation, or fructus indus- triales, and grow-*ing grass, timber, or fruit upon trees, which are called fructus naturales.” Fructus industriales do not under any circumstances con- stitute an interest in land. Fructus naturales are consid- ered to do so if the sale contemplates the passing of the property in them before they are severed from the soil. Where property is to pass after severance both classes of crops are goods within the meaning of section 4 of the Sale of Goods Act. Where property in fructus industriales is intended to pass before severance, it seems now to be clear that they fall within the meaning of the Sale of Goods Act. [*64] Agreement not to be performed within the space of one year from the making thereof. Two points should be noted with regard to this form of agreement. (a) The fact that a contract may not be, or is not per- formed within the year does not bring it under the statute 1 Heyn v. Philips, 37 Cal. 529, H. & W.118; Horner v. Frazier, 65 Md. 1. ? Hirth v. Graham, 50 Oh. St. 57, H. & W. 124; Whitmarsh v. Walker, 1 Met. (Mass.) 318; Purner vy. Piercy, 40 Md. 212; Killmore v. Howlett, 48 N. Y. 569. Chap. II. § 3. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. 75 unless ‘it appears by the whole tenor of the agreement that it is to be performed after the year.’! On the other hand, where an agreement is clearly meant to last beyond the year, it is not taken out of the statute by the introduction of a condition subsequent, the happen- ing of which may bring it to an end within the year. (0) The contract does not fall within the section if that which one of the parties is to do, is all to be done within the year. A was tenant to X under a lease of 20 years and promised verbally to pay an additional £5 a year during the remainder of the term in consideration that X laid out £50 in alterations: X did this and A was held liable upon his promise, since the consideration for it had been executed within the year.’ ) The form required is the next point to be considered. What is meant by the requirement that ‘the agreement or some memorandum or note thereof shall be in writing and [+65] *signed by the party to be charged therewith or some other person thereunto by him lawfully author- ized’? We may, with regard to this part of the subject, lay down the following rules.* (a) The form required does not go to the existence of @ With the exception of rule (d), what is said under this head may be taken to apply to the 4th section of the Sale of Goods Act, as well as to the 4th section of the Statute of Frauds. 1 Kent v. Kent, 62 N.Y. 560; Peters v. Westborough, 19 Pick. (Mass.) 364. . 2 Wahl v. Barnum, 116 N. Y. 87. Cf. Blake v. Voigt, 134 N. Y. 69. 8 Accord: Piper v. Fosher, 121 Ind. 407; Smalley v. Greene, 52 Iowa, 241. Contra: Whipple v. Parker, 29 Mich. 369; Marcy v. Marcy, 9 Allen (Mass.), 8. A further point to be noted is that this provision has been held in this country to apply to contracts to marry. Nichols v. Weaver, 7 Kans. 873; Lawrence v. Cooke, 56 Me. 198. Contra: Brick v. Gannar, 36 Hun (N. Y.), 52. Davey v. Shannon, 4 Ex. D. 81 Donellan vy. Read, 3 B. & A. 899. (ii) Re- quire- ments of form. (a) The form is merely eviden- tiary. Illustra- tions. Stewart v. Eddowes, L. R.9 C.P. 311. Reuss vy. Picksley, L. R. 1 Exch. 342. Buxton v. Rust, L. R. 7 Exch. 1 & 279. (b) The parties must appear. 76 FORMATION OF CONTRACT. Part II. the contract. The contract exists though it may not be clothed with the necessary form, and the effect of a non- compliance with the provisions of the statute is simply that no action can be brought until the omission is made good. It is not difficult to illustrate this proposition. The note in writing may be made so as to satisfy the statute, at any time between the formation of the contract and the com- mencement of an action: or the signature of the party charged may be affixed before the conclusion of the contract. Thus one party to the contract may sign a rough draft of its terms, and acknowledge his signature by way of con- cluding the contract when the draft has been corrected. Again, an offer containing the names of the parties and the terms of an offer signed by the offeror will bind him though the contract is concluded by a subsequent parol acceptance. In the first of these cases the signature of the party charged — in the second not the signature only but the entire memorandum — was made before the con- tract was concluded. It may even happen that one of the parties to a contract which he has not signed may acknowl- edge it in a letter which supplies his signature and con- tains at the same time an announcement of his intention to repudiate the contract. He had then supplied the statutory evidence, and, as the contract had already been made, his repudiation is nugatory.? (6) The parties and the subject-matter of the contract must appear in the memorandum. The parties must be named, or so described as to be identified with ease and certainty. A letter beginning ‘Sir, *signed by the party charged but not contain- : *66 ing the name of the person to whom it is addressed, ' i _ 1 Bird v. Munroe, 66 Me. 387, H. & W. 92. C£ McAnnulty v. McAnnulty, 120 Tl. 26. 2 Louisville &c. Co. v. Lorick, 29 S. Car. 538. Chap. II. § 8. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. TT has more than once been held insufficient to satisfy the statute. Where one of the parties is not named, but is described, parol evidence will be admitted for the purpose of identi- fication if the description points to a specific person, but not otherwise. If A contracts with X in his own name, being really agent for M, X or M may show that M was described in the memorandum in the character of A? If property is sold by an agent on behalf of the owner or proprietor it may be proved by parol that X was the owner or proprietor; if the sale was made by the agent on behalf of the vendor, of his client, or his friend, there would be no such certainty of statement as would render parol evi- dence admissible. The same principle is applied to descriptions of the subject-matter of a contract. A receipt, signed by X for deposit money ‘on property purchased at £420 at the Sun Inn, Pinxton, on March 29,’ when taken together with conditions of sale connected with the receipt, was considered sufficiently definite to admit of the introduction of parol evidence to show what the specific property was; while a receipt for money paid by A to X ‘on account of his share in the Tividale mine’ was held to be too uncertain as to the respective rights and liabilities of the parties, to be identified by parol evidence.® (c) The memorandum may consist of various letters and papers, but they must be connected and complete.* The statute requires that the terms, and all the terms of the contract, should be in writing, but these terms need not appear in the same document: a memorandum may 1 Grafton v. Cummings, 99 U. S. 100. 2 Jones v. Dow, 142 Mass. 130. 3 Doherty v. Hill,144 Mass. 465; Ryanv. United States, 136 U.S. 68. 4 Bayne v. Wiggins, 189 U. S. 210; O'Donnell v. Leeman, 43 Me. 158, H. & W. 100. Williams v. Lake, 2 ki. & E. 349. Williams v. Jordan, 6 Ch, D. 51%. Trueman y. Loder, 111A. &E. 589. Rossiter v. Miller, 83 App. Ca. 1141. Potter v. Duflield, 18 Eq. 4. Shardlow v. Cottercll, 20 Ch. D. 90. Caddick v. Skidmore, 2DeG.& J. 52. (c) The terms may be col- lected from vari- ous docu- ments: but must be con- nected on the face of them ; 40.P.D. 454, 44 Ch. D. 205. 11 East, 142. Eee Bayley, must be complete. Greaves v. Ashlin, 3 Camp, 426. 78 ‘FORMATION OF CONTRACT. Part II. be proved from several papers or from a correspondence, but the connexion must appear from the papers them- selves. Parol evidence is admissible to connect two documents where each obviously refers to another, and where the two when thus connected make a contract without further ex- *planation. This is the principle laid down in Long y. Millar, and followed in the more recent case of Oli- ver v. Hunting. It is not inconsistent with the decision in the often-cited case of Boydell v. Drummond. There two forms of prospectus were issued by the plaintiff, inviting subscriptions to an illustrated edition of Shakespeare. Sub- scribers might purchase the prints only, or the work in its entirety. The defendant entered his name in a book in the: plaintiff's shop, entitled ‘Shakespeare Subscribers, their signatures,’ afterwards he refused to carry out his purchase. It was held that the subscription book and the prospectus were not connected by documentary evidence, and that parol evidence was not admissible to connect them. But though the rule as to the admission of parol evidence has been undoubtedly relaxed since 1809, it seems that Boydell v. Drummond would not now be decided differently, for the evidence sought to be introduced went further than the mere connexion of two documents and seems to have dealt with the nature and extent of the defendant’s liability. Again, the terms must be complete in the writing. Where a contract does not fall within the statute, the parties may either (1) put their contract into writing, (2) contract only by parol, or (3) put some of the terms in writing and arrange others by parol. In the latter case, although that which is written may not be varied by parol evidence, yet the terms arranged by parol are proved by parol, and they then supplement the writing, and so form one entire contract. But where a contract falls within the statute, all its terms must be in writing, and the offer of parol evidence of terms not appearing in the writing would [*67] Chap. II. § 8. SIMPLE CONTRACTS, 29 CAR. II. c. 3. § 4. 19 at once show that the contract was something other than that which appeared in the written memorandum.! (d) The consideration must appear in writing as well as the terms of the promise sued upon. This rule is not wholly applicable to the 17th section, but it has been set- tled with regard to the 4th since the year 1804.7 *But an exception has been made by the Mercan- tile Law Amendment Act, in the case of the ‘ promise to answer for the debt, default or miscarriage of another’: such a promise shall not be [*68] ‘Deemed invalid to support an action, suit, or other proceeding to charge the person by whom such promise shall have been made by reason only that the consideration for such promise does not appear in writing, or by necessary inference from a written document.’ @ (e) The memorandum must be signed by the party charged or his agent. The contract therefore need not be enforceable at the suit of both parties; it may be optional to the party who has not signed to enforce it against the party who has. The signature need not be an actual subscription of the party’s name, it may be a mark; nor need it be in writing, it may be printed or stamped; nor need it be placed at the end of the document, it may be at the Reginning or in the middle.* 1 O'Donnell v. Leeman, supra; Drake v. Seaman, 97 N. Y. 280. ? The American courts have differed widely as to the necessity of expressing the consideration. In some States the matter has been settled by statute either requiring or not requiring that the considera- tion be expressed. Stimson, Am. St. Law, § 4142. The better view seems to be that so far as the consideration is an executory term in the contract it must appear in the same way as all other essential terms. Drake v. Seaman, 97 N. Y. 230; Barney v. Forbes, 118 N. Y. 580. The phrase “ for value received” has been held sufficient. Osborne v. Baker, 34 Minn. 307. 8 So also in some American States. Davis v. Tift, 70 Ga. 52; Good- now v. Bond, 59 N. H. 150. * Clason v. Bailey, 14 Johns. (N. Y.) 484, H.& W. 102; Sanbornv. Flagler, 9 Allen (Mass.), 474. But where the statute requires the (d) Con- sideration must appear in writing. Wain v. Warlters, 5 East, 10. 19 & 20 Vict. ©. 97. § 8. (e) Signa- ture of party or agent. See Benja- min on 4th ed. [6th Am. ed. pp. 208-212.) (iii) Effect of non-com- pliance. Statute does not avoid con- tract, Supra, p. 65. 12 C. B. 801. 80 FORMATION OF CONTRACT. Part II. But it must be intended to be a signature, and as such to be a recognition of the contract, and it must govern the entire contract. These rules are established by a number of cases turning upon difficult questions of evidence and construction. The principal cases are elaborately set forth in Benjamin on Sales, pp. 230-240, but a further discussion of them would here be out of place. (3) It remains to consider what is the position of parties who have entered into a contract specified in section 4, but have not complied with the provisions of the section. Such a contract is neither void nor voidable, but it cannot be enforced by action because it is incapable of proof. I have show that a memorandum in the requisite form, whether made before or after the fact of agreement, will satisfy the requirements of the statute. But the nature of the disability attaching to parties who have not satisfied these requirements may be illustrated by cases in which they * have actually come into court without supply- ing the missing form. In the case of Leroux v. Brown, the plaintiff sued upon a contract not to be performed within the year, made in [*69] memorandum to be “subscribed,” the signature must be at the end of the memorandum. James v. Patten,6N. Y.9. The want of mutu- ality is generally held no objection to the enforcement of the contract against the party signing; but one or two jurisdictions hold otherwise. Wilkinson v. Heavenrich, 58 Mich. 574; Krohn v. Bantz, 68 Ind. 277. 1 The statute does not affect executed contracts. Brown v. Farmers’ Loan & Trust Co., 117 N. Y. 266. In executory contracts it affects the remedy only, and not the validity of the contract. Townsend v. Har- graves, 118 Mass. 825; Browning v. Parker, 17 R. I. 183. Some courts require it to be specially pleaded as a defence unless the complaint or declaration alleges a writing, in which case a general denial may be sufficient. Wells v. Monihan, 129 N. Y. 161; Crane v. Powell, 139 N. Y. 379; Graffam v. Pierce, 143 Mass. 386; McClure v. Otrich, 118 Il. 320: but see Dunphy v. Ryan, 116 U. 8. 491; Suman v. Springate, 67 Ind. 115. Chap. Il. 8. SIMPLE CONTRACTS, 29 CAR. Il. c. 3.§4. 81 France and not reduced to writing. French law does not require writing in such a case, and by the rules of private international law the validity of a contract, so far as regards its formation, is determined by the lez loci contractus. The procedure however, in trying the rights of parties under a contract, is governed by the lex fori,and the mode of proof would thus depend on the law of the country where action was brought. If, therefore, the 4th section avoided contracts made in breach of it, the plaintiff could have re- covered, for his contract was good in France where it was made, and the lex loci contractus would have been appli- cable. If, on the other hand, the 4th section affected pro- cedure only, the contract, though not void, was incapable of proof. Leroux tried to show that his contract was void by Eng- lish law. He would then have succeeded, for he could have proved, first, his contract, and then the French law which made it valid. Butthe court held that the 4th sec- tion dealt only with procedure, did not avoid his contract, but only made it incapable of proof, unless he could pro- “duce a memorandum of it. This he could not do, and so lost his suit.! The rule is further illustrated by the mode in which equity has dealt with such contracts. 1“ Matters bearing upon the execution, the interpretation, and the validity of a contract are determined by the law of the place where the contract is made. Matters connected with its performance are regulated by the law prevailing at the place of performance. Matters respecting the remedy, such as the bringing of suits, admissibility of evidence, statutes of limitation, depend upon the law of the place where the suit is brought.” Scudder v. Union Nat. Bk., 91 U.S. 406, 412, in which it was held that a bill drawn and accepted by parol in Illinois, but payable in Missouri, was enforceable in Illinois although the statute of Missouri required the acceptance to be in writing. So a parol contract made in Rhode Island to be performed in New York is enforceable in Rhode Island though not enforceable in New York. Hunt v. Jones, 12 R. 1.265. See also Downer v. Chesebrough, 36 Conn. 39. Contra: Decosta v. Davis, 24 N. J. L. 819; Denny v. Williams, 5 Allen (Mass.), 1. G but con- tract can- not be proved, The doc- trine of part-per- formance. 11. Q. B. D. 128. To what contracts applic- able. 85 Ch.D.697. 82 FORMATION OF CONTRACT. Part II. Where one of the parties had performed his part of the contract equity would admit parol evidence to show that a contract had been made! The Judicature Act enables all the divisions of the High Court to recognize and admin- ister equitable rights and remedies: and so in Britain v. Rossiter an action was brought for wrongful dismissal, in breach of a verbal contract of service not to be performed within the year. The court held that the rule of equity was inapplicable to contracts which did not relate to an interest in land. * The true ground of the doctrine,’ said Cotton, L.J., ‘is, that [*70] if the court found aman in occupation of land, or doing such acts with regard to it as would primé facie make him liable to an action of trespass, the court would hold that there was strong evidence from the nature of the user of the land that a contract existed, and would there- fore allow verbal evidence to be given to show the real circumstances under which possession was taken.’ But this limitation of the doctrine seems to be somewhat arbitrary, and is not fully borne out by earlier authorities : probably the true rule is that formulated by Kay, J., in McManus v. Cooke, after a careful examination of all the. cases bearing on the subject. ‘It is probably more accurate to say that the doctrine of part-per- formance applies to all cases in which a court of equity would enter- tain a suit for specific performance if the alleged contract had been in writing.’ 1 «Equity proceeds on the ground that it would be a fraud for the vendor to aliow the vendee to continue in possession and expend his money in improvements, so as to render it impossible for the parties to be restored to their original situations, confessedly on the faith of an agreement of sale, and then try to avail himself of the Statute of Frauds to avoid the contract.” Nibert v. Baghurst, 47 N. J. Eq. 201, 207; Morrison v. Herrick, 180 Ill. 631; Beardsley v. Duniley, 69 N. Y. 577. Some of the American States have special legislation on the subject. Stimson, Am. St. Law, § 4145. Owing to the peculiarities of the history of equity jurisdiction in some of the States, the doctrine has been denied or limited; it has only recently been adopted in some. Potter v. Jacobs, 111 Mass. 82; Niles v. Davis, 60 Miss. 750; Douglass v. Snow, 77 Me. 91. Chap. II. § 8. SIMPLE CONTRACTS, 56 & 57 VICT. c. 71.§ 4. 88 In the case of contracts to which the doctrine applies, it is not enough that services should have been rendered in consideration of a promise to grant lands, or even that the price should have been paid wholly or in part. ‘The acts relied upon as part performance, must be unequivocally and in their own nature referable to some such agreement as that alleged.’ Soin Maddison v. Alderson the House of Lords, affirm- ing the judgment of the Court of Appeal, held that where a promise of a gift of land was made to the plaintiff in con- sideration that she remained in the service of the promisor during his lifetime, the continuance of service for the re- quired period could not be regarded as exclusively refer- able to the promised gift. It might have rested on other considerations, and so the statute excluded the admission of parol evidence of the promise. 56 g 57 Vict. c. T1. § 4. Sale of Goods Act. (1) A contract for the sale of any goods of the value of £10 or up- wards shall not be enforceable by action unless the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment- or unless some note or memorandum in writing of the contract (*71] *be made and signed by the party to be charged or his agent in that behalf. (2) The provisions of this section apply to every such contract, notwithstanding that the goods may be intended to be delivered at some future time or may not at the time of such contract be actually made, procured, or provided, or fit or ready for delivery, or some act may be requisite for the making or completing thereof, or rendering the same fit for delivery.® (3) There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which @This sub-section contains the substance of § 17, now repealed, of the Statute of Frauds. The language is altered so as to leave no doubt that the effect of this section, both as to the form required and the effect of its absence, is identical with that of § 4 of the Statute of Frauds. % This sub-section embodies the section, now repealed, of Lord Tenterden’s Act, which settled the doubt as to the operation of the 17th section of the Statute of Frauds upon an agreement to sell. Per Lord Selborne, C., in Maddison ee pp. Ca. 479, 7Q.B.D.174. Statute of Frauds: Section 17. (i) What it includes. Sale and agreement to sell. 84 FORMATION OF CONTRACT. Part II. recognizes a pre-existing contract of sale, whether there be an ac- ceptance in performance of the contract or not.*} We have here to consider, as in the case of the 4th section of the Statute of Frauds — (1) The nature of the contract. (2) The form required. (8) The effect of non-compliance with these require- ments. e>) The statute just cited and the section of it which we have before us deal with two sorts of contract. It is important to understand the nature and effects of these not only in respect of the general law of contract, but also in order to appreciate the points arising in many of the cases which illustrate the law. The contract of sale includes two different things, a sale and an agreement to sell, and the 4th section deals with both. The essential difference appears in an earlier section of the act. ‘Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; 2 As to the law which this sub-section embodies, see Page v. Morgan, (1885) 15 Q. B. D. 228. Taylor v. Smith, (1893) 2 Q. B. (C. A.) 65. 1See Stimson’s Am. St. Law, § 4144. Sub-sections (2) and (3) of the statute as given above do not appear in the American statutes, except that a very few States have legislation upon the subject of goods not in esse or to be manufactured; where there is no legislation on that subject the cases are irreconcilable, as will appear hereafter. Sub-section (3) is believed not to accord with the American law as developed in the decisions. In the United States the statute is construed to cover choses in action. Greenwood v. Law, 55 N. J. L. 168, H. & W. 131. Some States include choses in action in the statute itself. As to whether the subject-matter of the sale is personalty, and so within this section allowing one of three alternative methods of satis- fying the statute and requiring that only if the article be above a cer- tain value, or whether it is realty, and so within the “ Fourth Section ” requiring a writing however small the value, has been discussed. See ante, pp. 73-4; Hirth v. Graham, 50 Oh. St. 57, H. & W.124; Higgins v. Kusterer, 41 Mich. 318; Northern v. Lathrop, 1 Ind. 118, H. & W. 123. Chap. Il. §8. SIMPLE CONTRACTS, 56 & 57 VICT. ¢. 71. § 4. 85 but where the transfer of the property in the goods is to take place at some future time, or subject to some condition thereafter to be fulfilled, the contract is called “an agreement to sell.”’ *A subsequent section of the act supplies us with the tests which determine whether a contract is a sale or an agreement to sell. To constitute a sale the goods sold must be specific, they must be in a deliver- able state, and the sale must be unconditional. If A orders any ten sheep out of X’s flock the goods are not specific. If he orders a table which he sees in course of making in X’s shop the goods are incomplete. If he buys X’s stack of hay at so much a ton, the price to be ascertained when the hay is taken down and weighed, there is yet something to be done to fix the price. But where the conditions of a sale are satisfied the contract operates as a conveyance. When, and so soon as, the parties are agreed the property in the goods passes to the buyer: he has the remedies of an owner in respect of the goods themselves besides an action ex contractu against the seller if the latter fail to carry out his bargain, or part with the goods toa third party: the goods stand at his risk, if they are destroyed the loss falls on him and not on the seller. It is further important to bear in mind, not only that the difference between a sale and an agreement to sell is the difference between conveyance and contract, but that an agreement to sell may become a sale on the fulfilment of the conditions on which the property in the goods is to pass to the buyer. As a rule there is no great difficulty in determining whether, as a fact, these conditions have been fulfilled. But questions sometimes arise which admit of some doubt, in cases where there is an agreement for the purchase of goods which are not specific, and the seller has to appro- priate the goods to the contract. Upon such appropriation the contract becomes a sale: it is therefore desirable to as- [*72] 56 & 57 Vict. e TL. § 1. sub-§ 3. Chalmers, Sale of Goods Act, pp. 41-43. Not work and labour. Lee v. Griffin, 1 B. & 8. 272. 86 FORMATION OF CONTRACT. Part II. certain the precise moment at which property and risk pass to the buyer. If the buyer selects the goods to be appropriated, if he approves the selection made by the seller, or if the goods are delivered to a carrier on the authority of the buyer the appropriation takes place at the moment of approval, or of delivery. *If, however, the seller has selected [73] the goods on the authority of the buyer, but without his express approval, doubts may arise whether his selec- tion is irrevocably binding upon him or whether it merely expresses an intention which he may alter. The ques- tion is one which I will not discuss here; it isa part of the subject of the special contract of sale.? A different sort of question has arisen in cases where skilled labour has been expended on the thing sold in pursuance of the contract, and before the property is transferred. It has been asked whether the contract is a contract of sale or for the hire of services. The law may be taken to be now settled, that, whatever the respective values of the labour and the material, if the parties con- template the ultimate delivery of a chattel the contract is for the sale of goods. ‘I do not think,’ said Blackburn, J., ‘that the test to apply in these cases is whether the value of the work exceeds that of the materials used in its execution: for if a sculptor was employed to execute a work of art, greatly as his skill and labour, supposing it to be of the highest description, might exceed the value of the marble on which he worked, the contract would in my opinion be nevertheless for the sale of a chattel.’ 2 1The questions raised by the author as to the time when the property in the goods passes do not affect the operation of the statute of frauds. The statute applies to all contracts which remain in any respect unperformed, so that the aid of a court is asked to compel performance or to adjudge damages for non-performance,, whether the property in the goods has already passed or not. Ben- nett’s notes to Benjamin on Sales (6th ed.), p. 104. But the statute does not apply to a fully executed contract. Brown v. Farmers’ $c. Co., 117 N. Y. 266. 2 In the United States the simple test established by the English Chap. II. §3. SIMPLE CONTRACTS, 56 & 57 VICT.c.71.§4. 87 @) As to the form, it is enough to say that where, in absence of a part acceptance and receipt or part payment, a note or memorandum in writing is required, the rules applicable to contracts under § 4 of 29 Car. II. c. 3 apply to contracts under the Sale of Goods Act with one exception. The consideration for the sale need not, under this sec- tion, appear in writing unless the price is fixed by the par- ties. It then becomes a part of the bargain and must appear in the memorandum. Since the enactment only applies to contracts for the sale of goods, it will be pre- sumed, if no consideration for the sale be set forth, that there is a promise to pay a reasonable price: but this pre- sumption may be rebutted by evidence of an express verbal agreement as to price, so as to show that a memorandum which does not contain the price is insufficient.! court in Lee v. Griffin, and embodied in the Sale of Goods Act, has not generally been adopted. It prevails, perhaps, in one or two states. Brown v. Sanborn, 21 Minn. 402; Hardell v. McClure, 1 Chandl. (Wis.) 271; Burrell v. Highleyman, 33 Mo. App. 188. Two opposing views divide generally the American decisions. (1) The New York rule is that if the article is in existence as a subject-matter of sale at the time of the formation of the contract, the contract is a sale and not. one for work and labor, although the seller is to do some work upon the article to adapt it to the uses of the purchaser. Cooke v. Millard, 65 N. Y. 352. But otherwise if the article be not so in existence at the time of the formation of the contract. Parsons v. Loucks, 48 N. Y.17. (2) The Massachusetts rule is that, “a contract for the sale of articles then existing, or such as the vendor in the ordinary course of his business manufactures or procures for the general market, whether on hand at the time or not, is a contract for the sale of goods, to which the statute applies. But on the other hand, if the goods are to be manufactured especially for the purchaser, and upon his special order, and not for the general market, the case is not within the statute.” Goddard v. Binney, 115 Mass. 450, H. & W.. 127; and see Pitkin v. Noyes, 48 N. H. 294. The English rule looks to the time of the performance of the contract. The New York rule looks to the time of the formation of the contract. The Massachusetts rule looks to the nature of the contract itself. 1 Tde v. Stanton, 15 Vt. 685. (ii) Differ- ence as to form from §4. Hoadley v. McLaine, 10 Bing. 482. (iii) Does § 17 differ in effect from § 4? (4) Con- sideration. Considera- tion de- fined. L. R. 10 Exch. 162. 1Q. B.D. 127. 8 App. Ca. 488 P 88 FORMATION OF CONTRACT. Part II. *@) [*74} It remains to note that if there be no acceptance and receipt, no part payment, and no memorandum or note in writing, the section declares that the contract shall not be ‘enforceable by action.’ The Sale of Goods Act has thus set at rest another ques- tion which, though practically settled, had remained for a long time uncertain in the case of the 17th section of the Statute of Frauds. Like the 4th section of that statute, the requirements of the Sale of Goods Act do not affect the validity of the contract but only the proof of it.*? § 4. Consideration. I have stated that consideration is the universal requisite of contracts not under seal, and this is true of all contracts, even when the law has prescribed a form in which they should be expressed, so long as the form is not that of a deed. There are exceptions to this rule, but they are of so marked and limited a character as not to detract from the generality of the principle upon which the rule is based. Consideration has been thus defined in the case of Currie v. Misa : — ‘A valuable consideration in the sense of the law may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.’ Consideration therefore is something done, forborne, or suffered, or promised to be done, forborne, or suffered by the promisee in respect of the promise. It must necessarily be in respect of the promise, since consideration gives to the promise a binding force.” 4 See the opinions expressed by Brett, L.J., in Britain v. Rossiter and by Lord Blackburn in Maddison v. Alderson. 1 Bird v. Munroe, 66. Me. 337, H. & W. 92; Townsend v. Hargraves, 118 Mass. 325. 2« A benefit to the party promising, or a loss to the party to whom the promise is made.” Cook v. Bradley, 7 Conn. 57, H. & W. 138. Chap. IL § 4. "CONSIDERATION. 89 We may now lay down some general rules as to consid- eration : — *1. It is necessary to the validity of every promise *75 [ Jot under seal. 2. It need not be adequate to the promise, but must be of some value in the eye of the law. 3. It must be legal. 4. It must be either present or future, it must not be past. 1. Consideration is necessary to the validity of every simple contract.} The case of Pillans v. Van Mierop would seem to show that the rule which I have laid down was not so formu- lated as to cover all cases of simple contract in the year 1765. Lord Mansfield held that consideration was only one of several modes for supplying evidence of the promisor’s intention to bind himself; and that if the terms of a con- tract were reduced to writing by reason of commercial custom, or in obedience to statutory requirement, such evidence dispensed with the need of consideration. The question arose again in 1778. In Rann v. Hughes, Mrs. Hughes, administratrix of an estate, promised in writing to pay out of her own pocket money due from the estate to the plaintiff. There was no consideration for the promise, and it was contended that the observance of the form required by 29 Car. II. c. 3. § 4 made consideration unnecessary. The case went to the House of Lords. The opinion of the judges was taken, and was thus delivered by Skynner, C.B.:— ‘It is undoubtedly true that every man is by the law of nature bound to fulfil his engagements. It is equally true that the law of this country supplies no means nor affords any remedy to compel the perform- ance of an agreement made without sufficient consideration. Such an agreement is “nudum pactum ex quo non oritur actio;” and whatso- 1 Cook vy. Bradley, supra; Burnet v. Bisco, 4 Johns. (N. Y.) 235; Conover v. Stillwell, 34 N. J. L. 54; Hess’s Estate, 150 Pa. St. 346. (i) Neces- sity of con- sideration. Supra, p. 48. TTR. 350 (n). Excep- tions to general rule. See pp. 838-4. See Part III. ch. ii. § 1. (ii) Ade- quacy of considera- tion : 90 FORMATION OF CONTRACT. Part II. ever may be the sense of this maxim in the civil law, it is in the last- mentioned sense only that it is to be understood in our law... . All contracts are by the law of England divided into agreements by spe- cialty and agreements by parol; nor is there any such third class as some of the counsel have endeavoured to maintain as contracts in writing. If they be merely written and not specialties, they are parol and a consideration must be proved.’} *I have said that there are a few exceptions to the universality of this rule. They are two. (1) The promise of a gratuitous service, although not enforceable as a promise, involves a liability to use ordinary care and skill in performance. (2) In dealings arising out of negotiable instruments, such as bills of exchange and promissory notes, a promise to pay money may be enforced though the promisor gets nothing and the promisee gives nothing in respect of the [*76] promise. These two exceptions represent legal obligations recog- nized in the courts before the doctrine of consideration was clearly formulated; they were engrafted upon the common law, in the first case from the historical ante- cedents of contract, in the second from the law merchant. It is better to recognize these exceptions, to define them and to note their origin, than to apply the doctrine of con- sideration by forced and artificial reasoning to legal rela- tions which grew up outside it. 2. Consideration need not be adequate to the promise, but must be of some value in the eye of the law.? Courts of law will not make bargains for the parties to 1A written unsealed contract (except it be negotiable) stands upon no different footing from a parol contract so far as concerns consider- ation. A negotiable instrument has a presumption of consideration, which, however, may be rebutted as between the parties. Townsend v. Derby, 3 Met. (Mass.) 3863; Williams v. Forbes, 114 Ill. 167. By statute in some of the States a like effect is given to all written instru- ments. Stimson, Am. St. Law, § 4121. 2 Brooks v. Ball, 18 Johns. (N. Y.) 837; Deveemon v. Shaw, 69 Md. 199, H. & W. 141; Worth v. Case, 42 N. Y. 362; Hamer v. Sidway, 124 Chap. II. § 4. REALITY OF CONSIDERATION. 91 a suit, and, if a man gets what he has contracted for, will not inquire whether it was an equivalent to the promise which he gave in return. The consideration may be a benefit to the promisor, or to a third party, or may be of no apparent benefit to anybody, but merely a detriment to the promisee: in any case ‘its adequacy is for the parties to consider at the time of making the agreement, not for the court when it is sought to be enforced.’ The following case will illustrate the rule. Bainbridge owned two boilers, and at the request of Firmstone allowed him to weigh them on the terms that they were restored in as good a condition as they were lent. Firmstone took the boilers to pieces in order to weigh them and returned them in this state, and for breach of his promise Bainbridge sued him. It was 297] argued that Bainbridge suffered *no detriment, nor did Firmstone get any benefit by the permission to weigh the boilers, and that there was no consideration for the promise to restore them in good condition. But the defendant was held liable. ‘The consideration is that the plaintiff, at the defendant’s request, had consented to allow the defendant to weigh the boilers. I suppose the defendant thought he had some benefit: at any rate there is a detriment to the plaintiff from his parting with the possession for ever so short a time.’ In Haigh v. Brooks, where the consideration for a prom- ise to pay certain bills of a large amount was the sur- render of a document supposed to be a guarantee, which turned out to be unenforceable, the worthlessness of the document surrendered was held to be no defence to an action on the promise. ‘The plaintiffs were induced by the defendant's promise to part with something which they might have kept, and the defendant obtained what he de- sired by means of that promise.’ N. Y. 588, H. & W. 148; Wolford v. Powers, 85 Ind. 294; Lawrence v. MeCalmont, 2 How. (U. 8.) 426; Churchill v. Bradley, 58 Vt. 403. Per Black- burn, J., Bolton v. Madden L.R.9 Q.B. 55. Bainbridge v. Firm- stone, 8 A. & B. 743. not re- garded by the courts, 10 A. & E. 309. except in granting equitable remedies. Coles v. Trecothick, 9 Ves. 234. Reality of considera- tion. L. R. 10. Exch. 162, Forms of considera- tion. 92 FORMATION OF CONTRACT. Part IT. Equity treats inadequacy of consideration as corrobora- tive evidence of fraud or undue influence, such as may enable a promisor to resist a suit for specific performance, or get his promise cancelled, in the Chancery Division of the High Court. But mere inadequacy of consideration, unless, in the words of Lord Eldon, it is so gross as ‘to shock the conscience and amount in itself to conclusive evidence of fraud,’ is not of itself a ground on which specific performance of a contract will be refused.t Though consideration need not be adequate it must be real. This leads us to ask what is meant by saying that consideration must be ‘something of some value in the eye of the law.’ I have said that the definition of consideration, supplied by the Court of Exchequer Chamber in Currie v. Misa, amounts to this — that consideration is something done, forborne, or suffered, or promised to be done, forborne, or suffered, by the promisee in respect of the promise. It is therefore of two kinds, (1) a present act, forbearance, or sufferance, *constituting either the offer or the accept- ance of one of the parties, and being all that can be required of him under the contract ; or (2) a promise to do, forbear, or suffer, given in return for a like promise. In the first case the consideration is present or executed, in the second it is future or executory.? The offer of a reward for information, accepted by the supply of the information required; the offer of goods, accepted by their use or consumption, are illustrations of executed consideration. Mutual promises to marry; a promise to do work in return for a promise of payment, are illustrations of executory consideration. The fact that the promise given for a promise may be dependent upon a condition does not affect its validity as [*78] 1 Erwin v. Parham, 12 How. (U.8.) 197; Ready v. Noakes, 29 N. J. Kq. 497; Hall v. Perkins, 3 Wend. (N. Y.) 626, H. & W. 811. 2 Funk v. Hough, 29 Ml: 145. Chap. IL. § 4. REALITY OF CONSIDERATION, 93 a consideration. A promises X to do a piece of work for which X promises to pay if the workmanship is ap- proved by M. The promise of X is consideration for the promise of A. When an action is brought upon a promise we have to ask : — (a) Did the promisee do, forbear, suffer, or promise anything in respect of his promise ? (6) Was his act, forbearance, sufferance, or promise of any ascertainable value ? (¢) Was it more than he was already legally bound to do, forbear, or suffer ? (a) Apart from the view entertained by Lord Mansfield as to the substitution of writing for consideration as evi- dence of the intention of the parties in commercial con- tracts, we find cases in comparatively modern times which have raised a doubt whether consideration, under certain circumstances, is necessary to make a promise actionable. The cases have resulted in the establishment of two rules ; — Motive is not the same thing as consideration. Consideration must move from the promisee. Motive must be distinguished from consideration. In Thomas v. Thomas, a widow sued her husband’s exec-. utor *for breach of an agreement to allow her to occupy a house, which had been the property of her husband, on payment of a small portion of the ground- rent. It appeared at the trial that the executor in making the agreement was carrying outa wish expressed by the de- ceased that his wife should have the use of the house. The court held that a desire on the part of an executor to carry out the wishes of the deceased would not amount to a con- sideration. ‘Motive is not the same thing with consideration. *79 1 Duplex Safety Boiler Co. v. Garden, 101 N. Y. 387, H. & W. 546; Ray v. Thompson, 12 Cush. (Mass.) 281, H. & W. 534. Tests of reality. (a) First test of teality. 2Q. B. 851. Motive and con- sideration. good con- sideration, Mortimore v. Wright, 6M. & W. 482, past con- sideration, 94. FORMATION OF CONTRACT. ‘Part II. Consideration means something of some value in the eye of the law, moving from the plaintiff.’ But it was fur- ther held that the undertaking to pay ground-rent by the plaintiff was a consideration for the defendant’s promise, and that the agreement was binding.’ The confusion of motive and consideration has appeared in other ways. The distinction between good and valuable consideration, or family affection as opposed to money value, is only to be found in the history of the law of real property.” Motive has most often figured as consideration in the form of a moral obligation to repay benefits received in the past. It is clear that the desire to repay or reward a benefactor is indistinguishable, for our purposes, from a desire on the part of an executor to carry out the wishes of a deceased friend, or a desire on the part of a father to pay the debts of his son. The mere satisfaction of such a desire, unaccompanied by any present or future benefit accruing to the promisor or any detriment to the promisee, cannot be regarded as of any value in the eye of the law.® At the end of the last and beginning of the present century, the moral obligation to make a return for past benefits had obtained currency in judicial language as an equivalent to consideration. The topic belongs to the discussion of past as distinguished from executed or pres- ent consideration, but it is well here to insist on the truth that past consideration is no consideration, and that what the promisor gets in such a case is the satisfaction of 1 Schnell v. Nell, 17 Ind. 29, H. & W. 138. ? Fink v. Cox, 18 Johns. (N. Y.) 145; Stovall v. Barnett, 4 Littell (Ky.), 208. 8 Cook v. Bradley, 7 Conn. 57, H. & W. 183; Mills v. Wyman, 3 Pick. (Mass.) 207, H. & W. 201. In a few States by statute and in some by judicial decision a strong moral obligation will support a promise. Gray v. Hamil, 82 Ga. 375; Robinson v. Hurst, 78 Md. 59; Holden v. Banes, 140 Pa. St. 63. And see the reasoning in Edwards v. Nelson, 51 Mich. 121. Chap. II. § 4. REALITY OF CONSIDERATION. . 95 motives of pride or gratitude. The *question was settled once for all in Eastwood v. Kenyon, and a final blow given to the doctrine that past benefits would support a subsequent promise on the ground of the moral obligation resting on the promisor. ‘The doctrine,’ says Lord Denman, ‘would annihilate the necessity for any consideration at all, inasmuch as the mere fact of giving a promise creates a moral obligation to perform it.’ [*80] Consideration must move from the promisee. It has been argued that where two persons make a con- tract in which one of them promises to confer benefits upon a third party, the third party can sue upon the con- tract for the money or other benefit which it is agreed that he should receive. The matter concerns mainly the operation of contract, but it is plain that if such a contention were well founded, aman could sue on a promise not made to him, nor sup- ported by any consideration which he had furnished. It was at one time held that where A made a binding promise to X to do something for the benefit of the son or daughter of X, the nearness of relationship, and the fact that the contract was prompted by natural affection, would give a right of action to the person interested. This however is no longer law. ‘It is now established that no stranger to the consideration can take advantage of a contract, though made for his benefit.’ 1 , So we may say that a promisor cannot be sued on his promise if he made it merely to satisfy a motive or wish, a As to the effect of a promise which amounts to a declaration of trust, see Part III. ch. i. § 2. 1«The right of a party to maintain assumpsit on a promise not under seal, made to another for his benefit, although much contro- verted, is now the prevailing rule in this country.” Mr. Justice Davis in Hendrick v. Lindsay, 93 U. S. 148, 149. See H. & W. Cases, pp. 420-437 and notes. 114A. &E. 438, Consider- ation moy- ing from stranger. Part III. ch. i. § 2. Dutton v. Poole, 2 Ley. 210. Tweddle yv. Atkinson, 1B. &8, 398. (b) Second test of reality. (a) Prima Sacie impossi- bility. Physical or legal. Harvey v. Gibbons, 2 Lev. 161. (8) Un- certainty. 96 FORMATION OF CONTRACT. Part II. nor can he be sued on it by one who did not furnish the consideration on which the promise is based. (6) We now come to the class of cases in which the consideration turns out to be of no ascertainable value. Physical or legal impossibility, obvious upon the face of the contract, makes the consideration unreal. The impossibility must be obvious, for if it is only a practical impossibility such *as would arise from the death or rer] destruction of the subject-matter of the contract, it would have a different effect. If existing, unknown to the parties when the promise was made, it might avoid the contract on the ground of mistake. If arising subse- quent to the contract, it might under certain circumstances be a ground of discharge. But a promise to pay money in consideration of a — promise to discover treasure by magic, to go round the world in a week, or to supply the promisor with a live pterodactyl, would be void for unreality in the considera- tion furnished. And an old case furnishes us with an instance of a legal impossibility. A bailiff was promised £40 in con- sideration of a promise made by him that he would dis- charge a debt due to his master. The court held that the bailiff could not sue; that the consideration furnished by him was ‘illegal,’ for the servant cannot discharge a debt due to his master. By ‘illegal’ it is plain that the court meant legally impossible.! Again, a promise which purports to be a consideration may be of too vague and unsubstantial a character to be enforced. A son gave a promissory note to his father: the father’s executors sued him upon the note, and he alleged that his 1 Beebe v. Johnson, 19 Wend. (N. Y.) 500, H.& W. 152; (cf. Adams v. Messinger, 147 Mass. 185, H. & W. 618) ; Stevens v. Coon, 1 Pinney (Wis.) 356, HW. & W.155; Merrill v. Packer, 80 Ia. 542, H. & W. 339 n. Chap. IT. § 4. REALITY OF CONSIDERATION. 97 father had promised to discharge him from liability in consideration of a promise on his part that he would cease from complaining, as he had been used to do, that he had not enjoyed as many advantages as his brothers. It was said that the son’s promise was no more than a promise ‘not to bore his father,’ and was too vague to form a con- sideration for the father’s promise to waive his rights on the note.! So too promises to pay such remuneration as shall be deemed right ; to retire from the practice of a trade so far as the law allows, have been held to throw upon the courts a responsibility of interpretation which they were not prepared to assume.? There are cases in which it is difficult to determine whether the consideration is real or not. A good illus- [+82] tration of such *cases is furnished by promises of forbearance to exercise a right of action, or agree- ments to compromise a suit. In Jones v. Ashburnham action was brought on a promise to pay the plaintiff a sum of money in consideration of his forbearance to sue for a debt alleged to be due to him from a third party deceased. The pleadings did not state that there were representatives of the estate of the deceased towards whom this forbearance was exercised, or assets out of which the claim might be paid. It was held that such a forbearance was no consideration for a promise made in respect of it. ‘How,’ said Lord Ellenborough, ‘does the plaintiff show any damage to himself by forbearing to sue, when there was no fund which could be the object of suit, where it does not appear that any person in rerum natura was liable to him?’ But where there is a definite person against whom a 1 Sherman v. Kitsmiller, 17 Serg. & Rawle (Pa.), 45, H. & W. 157. Cf. Long v. Battle Creek, 39 Mich. 328. 2 Fairplay School Tp. v. O’Neall, 127 Ind. 95. But that is certain which can be rendered certain. Caldwell v. School Dist., 55 Fed. Rep. 372. H White v. Bluett, 23 L, J. Exch, 36. Taylor v. Brewer, 1M. & 8. 290. Davies v. Davies, 36 Ch. D. 359. 4 East, 455. (y) For- bearance to sue. Extent of forbear- ance. 2 Dr. & Sm. 289. 98 FORMATION OF CONTRACT. Part IL. right of action exists, forbearance to sue, for however short a time, has been held to be consideration for an assignment or a promise to assign documents of title to goods.! In Leask v. Scott the consignee of a cargo obtained an advance of money on a promise to give security for the advance. Shortly after this he assigned a bill of lading of the cargo among other securities for the advance made. It was argued that the consideration for this assignment was past, and so unreal, but the Court of Appeal held that since action could have been brought at any time on the promise to give security, and was not brought, ‘the consideration for the assignment of the bill of lading was a forbearance to sue for an indefinite and unspecified time.’ The assignment ‘stayed the hand of the creditor.’ ¢ *In the Alliance Bank v. Broom, Mr. Broom being largely indebted to the bank was asked to give security for his debt. He promised to assign warrants for the delivery of certain goods, afterwards failed to do so, and the bank sought specific performance of the promise. It was argued that the existence of the debt was no consideration to support the agreement, but the court held, that though there was no promise on the part of the bank not to sue for the debt, ‘yet the effect was that the bank did give, and Broom received the benefit of [*83] « This case is a good illustration of forbearance as a consideration, but it is not free from difficulty of another sort. If the creditor was entitled to an immediate performance of the promise to give cover, the debtor, in indorsing to him the bill of lading, did no more than he was legally bound todo. Then there was no consideration for the forbearance, and the whole contract seems to fall to pieces. ; The indorsement was in truth a part performance of a promise to give cover, which promise was made in consideration of an advance. There really seems to have been no need to build up a new contract out of the indorsement and the forbearance. 1 Pennsylvania Coal Co. v. Blake, 85 N. Y. 226, H. & W. 162; Foster v. Metts, 55 Miss. 77, H. & W. 164; Mulholland v. Bartlett, 74 Ill. 58; Cline v. Templeton, 78 Ky. 550; Palfrey v. Portland R., 4 Allen (Mass.), 55. Chap. II. §4. REALITY OF CONSIDERATION. 99 some degree of forbearance, not indeed for any definite time, but at all events some extent of forbearance.’ The compromise of a suit is based upon the same con- sideration. A man may have no cause of action, but he may honestly think he has one, and mean to try and enforce it. If then the party threatened with legal pro- ceedings, though he may know that he has a good defence, in order to escape the inconvenience and anxiety of liti- gation, makes a compromise, he will be bound by its terms. But the plaintiff must believe that he has a case. ‘It would be another matter,’ said Cockburn, C.J., ‘if a person made a claim which he knew to be unfounded, and by a compromise derived an advantage under it: in that case his conduct would be fraudulent.’ So in Wade v. Simeon, where the plaintiff admitted on the pleadings that he knew his claim to be unfounded, the compromise was not held binding. 1 Russell v. Cook, 3 Hill (N.Y.), 504, H. & W. 165; Grandin v. Grandin, 49 N. J. L. 508; Good Fellows v. Campbell, 17 R. I. 402; Bellows v. Sowles 57 Vt. 164, H. & W. 110. It would seem that a compromise of a doubtful claim, (that is doubt- ful as to whether there is any claim or doubtful as to the amount of the claim,) should be distinguished from a forbearance to sue upon a claim of a definite amount. In forbearance the one forbearing simply postpones his suit; he does not agree to compromise on asmaller sum. In such acase it would seem that he must actually have a well-founded claim to forbear or the consideration is of no value. Foster v. Metts, supra; Mulholland vy. Bartlett, supra. In compromise there is doubt, followed by mutual concession. The doubt may be as to whether there is any claim, and the plaintiff may agree to take less than the sum claimed and the defendant to pay something where he believes ne owes nothing; or the doubt may be as to the amount due, and an amount somewhere between the two contended for may be agreed upon. In these cases it is enough if the plaintiff honestly believes that he has a well-founded claim, not because there is a real consideration, but because “the best interests of society require that such should be the effect.” Russell v. Cook, supra. Many cases, however, seem to make no distinction between mere forbearance and compromise. Hewett v. Currier, 63 Wis. 386 ; Parsons on Cont. (8th ed.), iii. *441-2, note. (8) Com- promise of suit. Callischer v. Bischoffs- heim, L. R.5Q. B. 449, 2 C.B. 548. (e) Gra- tuitous bailment. Hart v. Miles, 40.B., N.S. 371. Gratui- tous em- ployment. 100 FORMATION OF CONTRACT. Part II. In the contracts which arise from the gratuitous deposit of a chattel or from gratuitous employment, the considera- tion is not obvious. But the two cases are distinguishable. Where property is placed in the hands of a bailee or depositary, the mere parting with possession is detriment to the bailor, such as will support an implied promise by the bailee to use reasonable care in the custody of the property, or an *express promise to undertake ser- vices in respect of it. A allowed two bills of exchange to remain in the hands of X, and X promised to get the bills discounted and pay the money to A’s account; this promise was held to be made upon good consideration, namely, the permission given to X to retain the bills. But where A employs X to render services to him gratuitously the case is different. When X enters upon the employment he is bound to use reasonable care in the execution of it: till he has entered into the employment there is no consideration for his promise to execute it, and neither party is bound. It might be possible to frame a binding contract, though no reward was to be given for the work done. A promise by A to X, that if X would undertake certain work A would employ no one else, might be a consideration for a promise by X to undertake the work, for the court would probably decline to ask what advantage X anticipated from the exclusive right to do certain work for A. But this is not the case before us. There is no doubt that a mere request by A to X for services, assented to by &, creates a liability on the part of X to use due care when, and not before, the service is entered upon. A sued X for non-completion of a warehouse which X had under- taken to complete by a certain day: and also for having used new materials in the building instead of old materials which he was ordered to use as far as they would go. No consideration was alleged for the undertaking of X, and [*84] Chap. Il. §4. | REALITY OF CONSIDERATION, 101 the King’s Bench held that he was not liable for the non- feasance or non-completion of the building, but that he was liable for the mis-feasance in that having entered on the employment he increased the cost of the work by using new materials instead of old. ‘The defendant is bound in consequence of having entered on the work, and whether the work were or were not to be performed for hire, X was not to injure A.’ Again, A asked X to insure his house against fire, X undertook to do so, and effected the policy so carelessly [*85) that *A could not recover upon it when his house was burned down. X was held liable in damages to A: but if he had not insured at all A would have had no remedy.? Here is an agreement which when made gives no cause of action, but which is rendered actionable by performance; the employer is liable to indemnify the employed against loss or expense; the employed is liable if he fail to use reasonable care.? It is idle to say that the trust reposed in the person employed is the consideration for his promise to use reasonable care; for the promise becomes binding, not when it is made, but when performance has begun. Nor can we say that the liability arises ex delicto, for it springs from the undertaking or contract. The relation of the parties is nearer to that which was effected by the manda- tum of Roman law; it is an anomaly in the English law of contract.! @ See on this point Hare on Contract, 158-161; Parsons on Contract, ii. 103, and the case of Thorne v. Deas in the Supreme Court of New York. > Wilkinson v. Coverdale was decided at nisi prius, and the plaintiff ulti- mately failed to prove any promise by the defendant; but the case is the only one in which the point as to gratuitous employment is raised neatly; it is pretty fully set out in the note to Coggs v. Bernard, and is elsewhere cited with approval. 1 Thorne v. Deas, 4 Johns. (N. Y.) 84, H. & W. 167; McCauley v. Davidson, 10 Minn. 418; Melbourne &c. R. v. Louisville §c. R., 88 Ala. 443; Preston v. Prather, 187 U.S. 604; Isham v. Post, 141 N. Y. 100; Swentzel v. Penn Bank, 147 Pa. St. 140. Elsee y, Gatward, 5T. R. 148. Wilkinson vy. Coverdale, 1 Esp. 75. 4 Johns. 84. Smith, L. C. i, 220. (c) Third test of reality. (a, B) Per- formance of public duty. Collins v. Godefroy, 1B. G&A. 950. England vy. Davidson, 11A. & E. 856. 2C. B. 548. (y) Prom- ise to per- form exist- ing con- tract. 102 FORMATION OF CONTRACT. Part IT. (c) Does the promisee do, forbear, suffer, or promise more than that to which he is legally bound? If the promisor gets nothing in return for his promise but that to which he is already legally entitled, the consideration is unreal.} This may occur where the promisee is under a public duty to do that which he promises to do. Where a wit- ness has received a subpcena to appear at a trial, a promise to pay him anything beyond his expenses, is based on no consideration, the witness is bound to appear and give evidence.” But a police-constable who sued for a reward offered for the supply of information, leading to a conviction, was held entitled to recover, since the services rendered were outside the scope of his ordinary duties.? On the same principle a promise not to do what a man legally cannot do is an unreal consideration. The case of *Wade v. Simeon, cited in discussing forbearance as a consideration, is a sufficient illustration of this point.* Again, we find unreality of consideration where the promisee undertakes to fulfil the conditions of an existing contract.® : [*86] 1 Tolhurst v. Powers, 183 N. Y. 460, H. & W.174; Smith v. Whildin, 10 Pa. St. 39, H. & W. 176. 2 Dodge v. Stiles, 26 Conn. 463. 8 Harris v. More, 70 Cal. 502; McCandless v. Allegheny Bessemer Steel Co., 152 Pa. St. 139. ; * Tolhurst v. Powers, supra; McCaleb v. Price, 12 Ala. 753.. 5 Where A and B have a contract which A refuses to perform, and B promises A an additional sum to perform it, there are these possi- ble views of the situation: (1) That B’s promise is without cousider- ation in that he is simply doing what he was already bound to do. Lingenfelder v. Wainwright Brewing Co., 103 Mo. 578, H. & W. 181. (2) That A has an election to perform the existing contract or abandon it and pay damages, and that his giving up of this election furnishes a consideration for the new promise. Munroe v. Perkins, 9 Pick. (Mass.) 298; Connelly v. Devoe, 37 Conn. 570. (3) That the forming of the new contract is conclusive evidence that the parties have mutu- feefte Chap. II. § 4. REALITY OF CONSIDERATION. 103 In the course of a voyage from London to the Baltic and back two seamen deserted, and the captain, being unable to supply their place, promised the rest of the crew that if they would work the vessel home the wages of the two deserters should be divided amongst them. This promise was held not to be binding. ‘The agreement is void for want of consideration. There was no consideration for the ulterior pay promised to the mariners who remained with the ship. Before they sailed from London they had undertaken to do all they could under all the emergencies of the voy- age. ... The desertion of a part of the crew is to be considered an’ emergency of the voyage as much as their death; and those who remain are bound by the terms of their original contract to bring the ship in safety to her destined port.’ Here again it would have been otherwise if risks had Stilk v. My< rick, 2 Camp. 317. Hartley v. Ponsonby, arisen which were not contemplated in the contract. Such 7E.&B a contract as that which the seamen had entered into in the case just cited contains an implied condition that the ship should be seaworthy. So where a seaman had signed articles of agreement to help navigate a vessel home from’ the Falkland Isles, and the vessel proved to be unsea- worthy, a promise of extra reward to induce him to abide by his contract was held to be binding. The actual performance of that which a man is legally bound to do, stands on the same footing as his promise to do that which he is legally compellable to do.* The rule seems a logical deduction from the doctrine of considera- tion, but some applications of it have met with severe criticism. « The difficulty suggested rather than raised by the case of Synge v. Synge has been touched upon ina note to p. 15. ally agreed to rescind the old one, and the new contract therefore stands as if no previous one had been made. Coyner v. Lynde, 10 Ind. 282, H. & W. 177; Stewart v. Keteltas, 36 N. Y. 388. (4) That the new contract is to be treated as independent of the old one, and as an effort on the part of B to mitigate the damage he has suffered from the breach of the first. This would give validity to both con- tracts. A could sue on B’s promise contained in the second; B could sue on A’s promise contained in the first. Endriss v. Belle Isle Co., 49 Mich. 229, H. & W. 180. 872. Turner v. (8) Per- formance of existing contract. [1894] 1 Q. B. 466. What is done must be different: Pinnel’s ease, 5 Co. Rep. 117. else no considera- tion for the prom- ise to forego. Contract executory. 1Sm. L. C. 366. ed. 9. 104 FORMATION OF CONTRACT. Part 11. The payment of a smaller sum in satisfaction of a larger is not a good discharge of a debt. It is in fact doing no more than *a man is already bound to do, and it is no consideration for a promise, express or implied, to forego the residue of the debt. There must be some- thing different to that which the recipient is entitled to demand, in the thing done or given, in order to support his promise. The difference must be real, but the fact that it is slight will not destroy its efficacy in constituting a consideration, for if the courts were to say that the thing done in return for a promise was not sufficiently unlike that to which the promisor was already bound, they would in fact be determining the adequacy of the consid- eration. Thus, the giving a negotiable instrument for a money debt, or ‘the gift of a horse, a hawk or a robe, in satisfaction, is good. For it shall be intended that a horse, a hawk or a robe might be more beneficial to the plaintiff than money, in respect of some circumstance, or otherwise the plaintiff would not have accepted it in satisfaction.’ It would seem plain that if a man wishes to make a [*87] binding promise, otherwise than under seal, to forego legal rights, such a promise must needs depend for its validity upon the rules common to all promises. But we should look at a promise of this sort when it is made before, or again when it is made after, the contract is broken: for the general rule is subject to some variations of detail in the two cases. If a contract is wholly executory, and the liabilities of both parties as yet unfulfilled, it can be discharged by mutual consent, the acquittance of each from the other's @ It is strange that this rule should still be spoken of as the rule in Cumber v. Wane. In that case it was held that a promissory note for £5 was no satis- faction for a debt of £15, not because there was no consideration (for a nego- tiable instrument was given for a debt) but because the satisfaction was inadequate. Such adecision would hardly be supported now (see editor’s note to the case at p. 373). 1 Jaffray v. Davis, 124 N. Y. 164, H. & W. 187. Chap. IL §4. REALITY OF CONSIDERATION, 105 claims being the consideration for the promise of each to waive his own.} A contract in which A, one of the parties, has done his part, and X, the other, remains liable, cannot (except in the case of bills of exchange or promissory notes) be dis- charged by mere consent, but it may be discharged by the substitution of a new agreement. A has supplied X with goods according to *a contract. X owes A the price of the goods. If A waives his claim for the money, where is the consideration for his promise to waive it? If A and X substitute a new agreement, to the effect that X on paying half the price shall be exonerated from pay- ing the remainder, where is the consideration for A’s prom- ise to forego the payment of half the sum due to him? The new agreement needs consideration: there must be some benefit to A or detriment to X in return for A’s promise. Detriment to X there can be none in paying half of a sum the whole of which he may at any time be compelled to pay; and benefit to A there can be none in receiving a portion of a sum the payment of which he can at any time compel. Unless A receives something different in kind, a chattel, or a negotiable instrument, or a fixed for an uncertain sum, his promise is gratuitous and must be made under seal.” We now come to cases where the contract is broken and a promise made to forego the right arising from the breach. Where the right itself is in dispute the suit may be com- promised as already described.? Where the right is undisputed, the amount due may be uncertain or certain. [*88] 1 Cutter v. Cochrane, 116 Mass. 408. 2 Collyer v. Moulton, 9 R. I. 90, H. & W. 522; Bender v. Been, 78 Iowa, 283, H. & W. 87. 3 Russell v. Cook, 3 Hill (N. Y.), 504, H. & W. 165. See also Alden v. Thurber, 149 Mass. 271, H. & W. 630. Contract executed. Foster vy. Dawber, 6 Ex. 889. See Part V. ch. i. Goddard y. O’Brien, 9 Q. B. D.87, Contract broken : right in dispute. Right admitted: damages, uncertain. Wilkinson v. Byers, 1A. &E. 106. Right admitted: damages certain. Lynn v. Bruce, 2H. Bl. 819. Foskes e eer, 7 Ca. 605. ” 106 FORMATION OF CONTRACT. Part II. If it is uncertain, the payment of a liquidated or certain sum would be consideration for foregoing a claim for a larger though uncertain amount.1 If it is certain, the promise to forego the claim or any portion of it can only be supported by the giving of some- thing different in kind, or by a payment at an earlier date or in different manner to that agreed on.? And whether the sum due is of certain or uncertain amount the consideration for the promise to forego must be executed. The parties must not only have agreed, but their agreement must be carried out if it is to be an answer to the original cause of action. Where it has been carried out it is an accord and satisfaction, where it has not been carried out it is an accord executory. As is said in an old case, ‘accord executed is *satisfaction: accord execu- tory is only substituting one cause of action in the room of another, which might go on to any extent.’ 3 Some denunciation and some ridicule have been ex- pended on the rule that the payment of a smaller sum in satisfaction of a larger is not a good discharge of a debt. And yet, as was said in a judgment in which the House of Lords recently affirmed the rule, ‘it is not really unrea- sonable, or practically inconvenient, that the law should require particular solemnities to give to a gratuitous con- tract the force of a binding obligation.’ There seems to be no difference between a promise by A to X to give him £45 on demand, and a promise by A to X to excuse him £45 out of £50 then due. If con- sideration is needed in the one case, it is needed in the other, and there can be no reason why the law should favour a man who is excused money which he ought to [*89] 1 Bellows v. Sowles, 57 Vt. 164, H. & W. 110. 2 Jaffray v. Davis, 124 N. Y. 164, H. & W. 187; Kidder v. Kidder, 383 Pa. St. 268, H. & W. 625; Perkins v. Lockwood, 100 Mass. 249, H. & W. 197. , 3 Kromer v. Heim, 75 N. Y. 574, H. & W. 627. Chap. II. § 4. | REALITY OF CONSIDERATION. 107 pay, more than a man who is promised money which he has not earned.1 A composition with creditors appears at first sight to be an infraction of the rule, inasmuch as each creditor under- takes to accept a less sum than is due to him in satisfac- tion of a greater. But the promise to pay, or the payment of a portion of the debt, is not the consideration upon which the creditor renounces the residue. That this is so is ap- parent from the case of Fitch v. Sutton. There the defend- ant, a debtor, compounded with his creditors and paid them 7s. in the pound; he promised the plaintiff, who was one of the creditors, that he would pay him the resi- due when he could; but the plaintiff nevertheless gave him a receipt of all claims which he might have against him ‘from the beginning of the world to that day.’ The plaintiff subsequently brought an action for the residue of his claim; the defendant pleaded the acceptance of 7s. in the pound in full of all demands: but this was held to be no answer to the plaintiff's claim. ‘It is impossible,’ said Lord Ellenborough, ‘to contend that accept- ance of £17 10s. is an extinguishment of a debt of £50. *There must be some consideration for a relinquishment of the residue ; something collateral, to show a possibility of benefit to the party relin- quishing his further claim, otherwise the agreement is nudum pactum.’ [*90] The consideration in a composition with creditors must therefore be something other than the mere acceptance of a smaller sum in satisfaction of a larger: it is the substi- tution of a new agreement with new parties and a new consideration. The common law on this point (apart from the various bankruptcy acts) was settled in the case of Good v. Chees- man. There the defendant, a debtor who had compounded with his creditors, set up as against an individual creditor suing for the whole of his debt, not a separate promise by 1 Care should be taken to distinguish a contract to release a debtor from a gift of the debt to the debtor. Gray v. Barton, 55 N. Y. 68. (¢) Compo- sition with creditors. 5 East, 280. Considera- tion for composi- tion is a new agree- ment. 2B. & Ad. 328. Good v. Cheesman, 2B. & Ad. 385. Boyd v. Hind, 1H. & N. 938. Slater v. Jones, L. R. 8 Ex, at p. 198. 108 FORMATION OF CONTRACT. Part IL. that creditor to forego the residue, but a composition made with all the creditors. The composition was held to be a good defence to the action, and the consideration which supported each creditor’s promise to accept a lesser sum in satisfaction of a greater was thus stated by Parke, J.: —‘Here each creditor entered into a new agreement with the defendant (the debtor), the consideration of which, to the creditor, was a forbearance by all the other creditors, who were parties, to insist upon their claims.’ It is not the payment of a portion of the debt, which forms the consideration in the case of a composition with creditors, but the substitution of a new agreement with different - parties for a previous debt. The composition with creditors is therefore no exception to the general rule, inasmuch as the debtor not only pays the creditor a portion of the sum due, but procures a promise by each of his other creditors, or by a certain number of them, that each will be content with a similar proportionate payment if the others will forbear to ask for more. And creditor X not merely gets payment of 10s. in the pound from his debtor A, but a promise from credit- ors Y and Z that they too will be content with a payment of 10s. in the pound. 1 There are several possible views of the grounds for enforcing a composition with creditors. (1) That the consideration moves from the debtor, and consists in his procuring the promises of the other creditors. This is the view of the author. It is open to the objection that it is not always the case that the debtor procures these promises. The composition would be equally binding if the creditors first agreed among themselves and the debtor accepted their offer. (2) That the creditors mutually promise each other for the benefit of the debtor, the consideration moving from each creditor and consisting in the detriment he suffers in taking less than he is entitled to, relying on the promises of the other creditors to do the same. This view could not be pressed in jurisdictions where a stranger to the consideration can not enforce the promise. Wharton on Cont., § 527; Bishop on Cont., § 55. (3) That the promises are enforced on the ground of estoppel, * since it would be a fraud on the other creditors to permit one to. recover more than he has agreed to take when they have taken less Chap. II. § 4. REALITY OF CONSIDERATION. 109 It is not difficult to see that consideration is unreal if it consist in a promise given to perform a public duty ora con-*tract already made with the promisor. It is harder to answer the question whether the perform- ance or promise to perform an existing contract with a third party is a real consideration. We must note two cases dealing with this form of con- sideration. In Shadwell vy. Shadwell the plaintiff had promised to marry X: his uncle promised him in writing that if he married X he should receive £150 a year during the uncle’s lifetime. He married X; the annuity fell into arrear; the uncle died, and the plaintiff sued his executors. The court differed as to the existence of a consideration for the uncle’s promise. Erle, C.J.,and Keating, J., inclined to re- gard it as the offer of a promise capable of becoming a bind- [*91] ing contract when the marriage took place. Byles, J., dis- than they are entitled to, relying on his promise to do the same. Metcalf on Cont., p. 192. Sometimes one, and often all, of these reasons are assigned. Perkins v. Lockwood, 100 Mass. 249, H. & W. 197; Williams v. Carrington, 1 Hilt. (N. Y.) 515, H. & W. 195; Murray v. Snow, 37 Iowa, 410. Analogous to this question is the one as to the enforceability of mutual promises to subscribe money to a charitable object. Several views are taken of this subject. (1) That the subscription is an offer which becomes a contract by acceptance only when the trustees of the charity have entered upon the performance of the work contemplated in the subscription. Up to that time the subscription may be revoked, and is revoked, by the death of the subscriber. Pratt v. Trustees, 93 Ill. 475, H. & W. 35; Twenty-third Street Bp. Ch. v. Cornell, 117 N. Y. 601; Cottage St. Ch. v. Kendall, 121 Mass. 528; University of Des Moines v. Livingstone, 57 Iowa, 307. (2) That the promises of the subscribers mutually support each other. Thisg view implies that a stranger to the consideration may enforce the promise. Lathrop v. Knapp, 27 Wis. 214; Higert v. Indiana Asbury Univ., 53 Ind. 326; Christian Col- lege v. Hendley, 49 Cal. 347; Edinboro Acad. v. Bobinson, 37 Pa. St. 210. (3) That the acceptance by the trustees of the charity of the subscription implies a promise on their part to execute the work con- templated, and that these promises support each other. Trustees v. Haskell, 73 Me. 140; Collier v. Baptist Ed. Soc., 8 B. Mon. (Ky.) 68; Helfenstein’s Estate, 77 Pa. St. 328. (¢) Prom- ise to perform contract with third party. 9C.B.,N.38. 159, 6H. &N. 295. Difficul- ties pre- sented by Shadwell y. Shad- well and Scotson v. Pegg. 110 FORMATION OF CONTRACT. Part IL. sented, holding that the plaintiff had done no more than he was legally bound to do, and that his marriage was therefore no consideration for the uncle’s promise. In Seotson v. Pegg, Scotson promised to deliver to Pegg a cargo of coal then on board a ship belonging to Scotson, and Pegg promised in return to unload it at a certain rate of speed. This he failed to do, and when sued for breach of his promise, pleaded that Scotson was under contract to deliver the coals to X or to X’s order, and that X had made an order in favour of Pegg. Scotson there- fore in promising to deliver the coals promised no more than he was bound to perform under his contract with X, and Pegg alleged that there was no consideration for his promise to unload speedily. The court held that Pegg was liable, since it was not inconsistent with the pleadings that there might have been some dispute as to Pegg’s right to the coals, or some claim upon them foregone by Scotson: but Wilde, B., said, ‘If a person chooses to promise to pay a sum of money in order to induce another to perform that which he has already contracted with a third person to do, I confess I cannot see why such a promise should not be binding.’ In both these cases the decisions are reconcileable with the *doctrine of consideration, but not the dicta on which the decisions rest. In Shadwell v. Shadwell the original contract was execu- tory; the nephew and ©, to whom he was engaged, might have put an end to it by a mutual waiver of their re- spective promises. The nephew, at the request of his uncle, abandoned, or agreed to abandon, a right which he might have exercised in concurrence with M; and the abandonment of a right has always been held to be con- sideration for a promise. In Seotson v. Pegg the court clearly thought that the promise to deliver coals to the defendant might have been something more than a mere performance of an existing [*92] Chap. IT. § 4. LEGALITY OF CONSIDERATION. 111 promise to a third party; that there might have been a right waived or claim foregone which did not appear on the pleadings. So far the decisions are consistent with principle, but there are dicta which seem to show that two judges in the first case, and Baron Wilde in the second, thought that a promise given in consideration of the per- formance or promise to perform a contract with a third party was binding. Whether the promise is conditional on the performance of the contract made with the third party, or whether it is given in return for a promise to perform, does not seem to make any difference in principle. If we say that the con- sideration is the detriment to the promisee in exposing himself to two suits instead of one for the breach of con- tract we beg the question, for we assume that an action would lie on sucha promise. If we say that the considera- tion is the fulfilment of the promisor’s desire to see the contract carried out, we seem to confound motive and consideration. At least, one may say that on principle the performance or promise to perform an outstanding contract with a third party is not of itself consideration for a promise, and that the practical result of the cases is not inconsistent with this rule} 8. Consideration must be legal. This rule should be mentioned here, but we must deal with *it later when the time comes to consider, as an ele- *93 5 : (93) nent in the formation of contract, the legality of the 1 The decisions in this country clearly hold that the promise to perform an existing contract with a third person, or the performance of it, does not constitute a valuable consideration. Johnson’s Adm’r v. Sellers’ Adm’r, 83 Ala. 265, H. & W. 185; Schuler v. Myton, 48 Kans. 282; Gordon v. Gordon, 56 N. H. 170; Robinson v. Jewett, 116 N.Y. 40; Davenport v. First Cong. Soc., 33 Wis. 387; Brownlee v. Lowe, 117 Ind. 420; Merrick v. Giddings, 1 Mackey (D. C.), 394. The deci- sions con- sistent with prin- ciple. (iii) Le- gality. of con- sidera- tion. (iv) Past considera- tion. General tule. Considera- tion executory, executed, and past. Executory considera- tion: ante, p. 76. Executed considera- tion. Leake on Contracts, p. 36, ed. 8. Ante, pp. 12-14. Offer of an act for a promise. 112 FORMATION OF CONTRACT. Part IL. objects which the parties have in view when they enter into a contract. 4. Consideration may be executory or executed, it must not be past. We now come to deal with the relation of the considera- tion to the promise in respect of time. The consideration for a promise may be ezecutory, and then it is a promise given for a promise ; or it may be executed, and then it is an act or forbearance given for a promise, the act or for- bearance constituting at once the proposal or acceptance and the consideration for the promise given in respect of it; or it may be past, and then it is a mere sentiment of gratitude or honour prompting a return for benefits received; in other words, it is no consideration at all. As to executory considerations, nothing remains to be added to what has been said already. I have shown that a promise on one side is good consideration for a promise on the other. A contract arises upon executed consideration when one of the two parties has, either in the act which con- stitutes an offer or the act which constitutes an accept- ance, done all that he is bound to do under the contract, leaving an outstanding liability on one side only. These two forms of consideration are described by Mr. Leake as ‘acceptance of an executed consideration,’ and ‘ considera- tion executed upon request’: corresponding to the offer of an act for a promise, and the offer of a promise for an act. In the first case a man offers his labour or goods under such circumstances that he obviously expects to be paid ° for them ; the contract arises when the labour or goods are accepted by the person to whom they are offered, and he by his acceptance becomes bound to pay a reasonable price for them. ‘If I take up wares from a tradesman without 1 Boigneres v. Boulon, 54 Cal. 146, H. & W. 357. See H. & W. Cases, pp. 315-872. Chap. II. § 4. CONSIDERATION EXECUTED. 118 any agreement of price, the law concludes that I contracted to pay their real value.’ So in Hart v. Mills the defendant faba had *ordered four dozen of wine and the plaintiff sent eight, the defendant retained thirteen bottles and sent back the rest, and the plaintiff sued him on the origi- nal contract for the purchase of four dozen. It was held that the retention of thirteen bottles was not an acquies- cence in the misperformance of the original contract, but a new contract arising upon the acceptance of goods tendered, and that the plaintiff could only recover for thirteen bottles. ‘The defendant orders two dozen of Per Tindal, C. J., in Hoadley v. McLaine, 10 Bing, 482. Hart v. Mills, 15 M. each wine and you send four: then he had a right to send «& w'et back all; he sends back part. What is it but a new contract as to the part he keeps?’ It must, however, be borne in mind that where the per- son to whom such an offer is made has no opportunity of accepting or rejecting the things offered, an acceptance which he cannot help will not bind him. The case of Taylor v. Laird, already cited, illustrates this proposition. The difficulty which would arise, should such an enforced acceptance create a promise, is forcibly stated by Pollock, C.B.:— ‘Suppose I clean your property without your knowledge, have I then a claim on you for payment? One cleans another’s shoes; what can the other do but put them on? Is that evidence of a contract to pay for the cleaning ?’? The ‘consideration executed upon request,’ or the con- tract which arises on the acceptance by act of the offer of a promise is best illustrated by the case of an advertise- ment of a reward for services which becomes a promise to. give the reward when the service is rendered. In such cases it is not the offeror, but the acceptor, who has done his part at the moment when he enters into the contract. If A makes a general offer of reward for information and 1 Bowker v. Hoyt, 18 Pick. (Mass.) 555. 2 Bartholomew v. Jackson, 20 Johns. (N. Y.) 28, H. & W. 14. I BL. J. Exch. 829. Ante, p. 18. Offer of a promise for an act. England v. Davidson, 11 A, &E. 856, Brittain v. 18m, L. C. 153. Present distin- guished from past considera- tion. 114 FORMATION OF CONTRACT. Part II. X supplies the information, A’s offer is turned into a promise by the act of X, and X at one and the same time concludes the contract and performs his part of it.1 And this form of consideration will support an implied as well as an express promise where a man is asked to do some service which will entail certain liabilities and expenses. *The request for such services implies a promise, which becomes binding when the liabilities or expenses are incurred, to make good his loss to the promisee. A lady employed an auctioneer to sell her estate; he was compelled in the course of the proceed- ings to pay certain duties to the Crown, and it was held that the fact of employment implied a promise to indem- nify for money paid in the course of the employment. ‘Whether the request be direct, as where the party is expressly desired by the defendant to pay; or indirect, as where he is placed by him under a liability to pay, and does pay, makes no difference.’ ? It is probably on this principle, the implication of a promise in a request, that the case of Lampleigh v. Braith- wait is capable of explanation. If so, we do not need the theory that a subsequent promise to make a return for things done on request relates back to the request and is embodied in it. But of this we shall speak shortly. [*95] It remains to distinguish executed from past considera- tion. A past consideration is, in effect, no consideration at all; that is to say, it confers no benefit on the promisor, and involves no detriment to the promisee in respect of his promise. A past consideration is some act or forbear- ance in time past by which a man has benefited without thereby incurring any legal liability. If afterwards, whether from good feeling or interested motives it matters 1 Reif v. Paige, 55 Wis. 496. 2 Clark v. Randall, 9 Wis. 135. Chap. ITI. § 4. CONSIDERATION EXECUTED. 115 not, he makes a promise to the person by whose act or forbearance he has benefited, and that promise is made upon no other consideration than the past benefit, it is gratuitous and cannot be enforced; it is based upon motive and not upon consideration. The rule that a past consideration will not support a subsequent promise is only another mode of saying that every promise, whether express or implied, must, in order to be binding, be made in contemplation of a present or future benefit to the promisor. A purchased a horse from X, who afterwards, in con- sidera-*tion of the previous sale, promised that the horse was sound and free from vice. It was in fact a vicious horse. The court held that the sale created no implied warranty or promise that the horse was not vicious; that the promise must therefore be regarded as independent of the sale, and as an express promise based upon a previous transaction. It fell therefore ‘within the general rule that a consideration past and executed will support no other promise than such as would be implied by law.’ ? To the general rule thus laid down certain exceptions are said to exist; and it is proposed to endeavour to ascertain the nature and limits of these exceptions, which are perhaps fewer and less important than is sometimes supposed. (a) A past consideration will, it is said, support a sub- sequent promise, if the consideration was given at the request of the promisor. In Lampleigh v. Braithwait, which is regarded as the leading case upon this subject, the plaintiff sued the de- [*96] 1 Dearborn v. Bowman, 3 Met. (Mass.) 155, H. & W. 199; Mils v. Wyman, 3 Pick. (Mass.) 207, H. & W. 201; Allen v. Bryson, 67 Iowa, 591; Shepard v. Rhodes, 7 R. I. 470, H. & W. 210. 2 Bloss v. Kittridge, 5 Vt. 28; Summers v. Vaughan, 35 Ind. 323 Morehouse v. Comstock, 42 Wis. 626; Aultman v. Kennedy, 33 Minn. 339. . Roscorla v. Thomas, 3Q. B. 234. Excep- tions. (a) Consid- eration moved by previous request. Hobart, 105 ; and see 18m. L. C. 153. 5 Ir.C. 1.468, Langdell, oo Modern ihterpre- tations of t 7 he rule. M. & Gr. 07, 507 116 FORMATION OF CONTRACT. Part II. fendant for £120 which the defendant had promised to pay to him in consideration of services rendered at his request. The court here agreed that a mere voluntary courtesy will not have consideration to uphold an assump- sit. But if that courtesy were moved by a suit or request of the party that gives the assumpsit it will bind; ‘for the promise, though it follows, yet it is not naked, but couples itself with the suit before, and the merits of the party procured by that suit.’ The case of Lampleigh v. Braithwait was decided in the year 1615, and for some time before and after that decision, cases are to be found which go to show, more or less definitely, that a past consideration if moved by a previous request will support a promise. But from the middle of the seventeenth century until the present time no direct authority for the rule can be discovered, except the case of Bradford v. Roulston, decided in the Trish Court of Exchequer in 1858. The rule is laid down in text-books, but in the few cases in which *it is touched upon it is regarded as open to question, or as susceptible of a different interpretation to that which is placed upon it in the books. Thus in Kaye v. Dutton, Tindal, C.J., first lays down the rule that where a consideration executed implies a promise of a particular sort, a subsequent promise based on the same consideration is not binding. By this he means that when from the acceptance of consideration executed, the law implies a promise by the acceptor to make a [*97] return, the consideration is exhausted upon that promise. There is nothing further to support a subsequent and independent promise. He then goes on to say : — ‘The case may perhaps be different where there is a consideration from which no promise would be implied by law: that is, where the party suing has sustained a detriment to himself or conferred a 4 See cases collected in the note to Jfunt v. Bate, 3 Dyer, 272 a. Chap. II. § 4. CONSIDERATION EXECUTED. 117 benefit on the defendant at his request under circumstances which would not raise any implied promise. In such cases it appears to have been held in some instances that the act done at the request of the party charged is a sufficient consideration to render binding a . promise afterwards made by him in respect of the act so done..... But it is not necessary to pronounce any opinion upon that point.’ These words suggest that Tindal, C.J., regarded the old interpretation of the rule as open to question. Its appli- cation is further narrowed by Maule, J., in Elderton v. Emmens. ‘An executed consideration will sustain only such a promise as the law will imply.’ But in Kennedy v. Broun, Erle, C.J., puts the case of Lampleigh v. Braithwait from a modern point of view. ‘Tt was assumed,’ he says, ‘that the journeys which the plaintiff performed at the request of the defendant and the other services he rendered would have been sufficient to make any promise binding if it had been connected therewith in one contract: the peculiarity of the decision lies in connecting a subsequent promise with a prior consideration after it had been executed. Probably at the present day, such service on such a request would have raised a promise by implica- tion to pay what it was worth; and the subsequent promise of a sum certain would have been evidence for the jury to fix the amount.’ This would seem to be the ratio decidendi in Wilkinson v. * Oliveira, where the plaintiff at the defendant’s request gave him a letter for the purposes of a law-suit. The letter proved the defendant’s case, by which means he obtained a large sum of money, and he subsequently promised the plaintiff £1000. Here the plaintiff evidently expected some return for the use of the letter, and the defendant’s request for it was, in fact, an offer that if the plaintiff would give him the letter he would pay a sum to be hereafter fixed. Regarded from this point of view the rule which we are discussing is no departure from the general doctrine as to past consideration. Where a request is made which is in substance an offer of a promise upon terms to be afterwards ascertained, and services are rendered in pursuance of that request, a subsequent promise to pay a fixed sum may be [#98] Kaye y. Dutton, TM. & Gr, 816. 4C.B., atp. 46.07 13 C.B.,N.S. 6TT. p. 740. 1 Bing. N.C, 490. 118 FORMATION OF CONTRACT. Part IL regarded as a part of the same transaction, or else as evidence to assist the jury in determining what would be a reasonable sum. gir. 0. Te In opposition to this view stands Bradford v. Roulston, Langdell, the only case in modern times in which the rule. in Lampleigh v. Braithwait has come before the courts for - express decision. Bradford, who had a ship to sell, was introduced by Roulston to two persons who were willing to purchase it. At the time of the sale the purchasers were £55 short of the money agreed to be paid. Bradford nevertheless executed the bill of sale at the request of Roulston, and in consideration of this, Roulston upon a subsequent day guaranteed the payment of the balance of £55 still due. There seems to have been some evidence that the guarantee was given at the time of the sale and was subsequently put into writing, but the court felt it necessary to give an express decision, on the supposition that the consideration was wholly past, and held that the execution of the bill of sale to third parties upon the request of the defendant was consideration for a subsequent promise by him to answer for their default. The authorities were elaborately reviewed and the rule in Lampleigh v. Braithwait was adhered to in its literal sense. *This decision cannot be received without hesita- tion. The case of Wilkinson v. Oliveira was treated as a direct authority for the rule in its widest sense, a view which, upon the facts of that case, is certainly open to question; and the great gap in the chain of express decisions on the point does not appear to have impressed the court. Practical Obvious difficulties arise from such an interpretation ar of the rule. Is any limit to be assigned to the time by the which may elapse between the act done upon request and the promise made in consideration of it? This difficulty 3, pressed upon the court in one of the oldest cases upon note: Cro. . . . « fiz. 741. this subject, Halifax v. Barker, where a promise was [*99] Chap. II. § 4. CONSIDERATION EXECUTED. 119 held not to be binding which was given upon considera- tion of a payment made upon request a year before. The case confirms the view that the subsequent promise is only binding when the request, the consideration, and the promise form substantially one transaction. Another difficulty would arise as to the definition of ‘a request.’ Let us suppose that a man dangerously ill is informed by his physician that his state is so critical as to justify desperate remedies; the physician advises him to try a remedy which he believes may possibly restore him to health, but, if it does not do so, will probably kill him in a few hours; the remedy is of the physician’s own invention, and he asks the patient under the almost hopeless conditions of the case to allow him to make the experiment. The patient tries the remedy and is cured; the fame of the cure makes the fortune of the physician, and a few years afterwards, finding him- self in good circumstances, he promises to his former patient a sum of money in consideration of the use of his remedy at his request. One can hardly suppose that an action would lie upon sucha promise. Yet the judg- ment in Bradford v. Roulston is explicit ‘that where there is a past consideration, consisting of a previous act done at the request of the defendant, it will support a subsequent promise.’ I cannot avoid the conclusion that unless the request is *virtually an offer of a promise the precise extent of which is hereafter to be ascertained; or unless it contemplates a subsequent promise to be given by the maker of the request, so that such a promise may be re- garded as a part of the same transaction, the rule in Lamp- leigh v. Braithwait has no application. And this view is supported by the language of Bowen, L.J., in a recent case. [*100] ‘The fact of a past service raises an implication that at the time it was rendered it was to be paid for, and if it was a service which was Probable ex- lanation of ampleigh y. Braith- wait. Stewart v. 1 Casey , [1892] vs Ch 120 FORMATION OF CONTRACT. Part II. to be paid for, when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuner- ation on the faith of which the service was originally rendered.’ It may not therefore be presumptuous to say that in spite of the cases decided between 1568 and 1635, of the continuous stream of dicta in text-books, and of the decision in Bradford v. Roulston, the rule cannot be received in such a sense as to form a real exception to the principle that a promise, to be binding, must be made in contemplation of a present or future benefit to the promisor.? 1 There are three classes of cases on this subject in the United States. (1) Those where there was a previous request from which a promise would be implied, and the implied promise is fortified by a subsequent express one. Hicks v. Burhans, 10 Johns. (N. Y.) 242, H. & W. 205; Wilson v. Edmunds, 24 N. H. 517. The supposed diffi- culty in these cases lies only in the fact that the court allows the jury to imply a previous request from the beneficial nature of the transac- tion where there is nothing in the evidence negativing such a request. But if no promise could be implied from the request, as where the services were understood to be gratuitous, then a subsequent express promise is unavailing. Allen v. Bryson, 67 Iowa, 591. (2) Those where the courts adopt the broad doctrine that a moral obligation will support a subsequent promise, as in Georgia, Maryland, and per- haps Pennsylvania and Michigan. Ante, p. 94, note 3. See Pool v. Horner, 64 Md. 181. (3) Those where the courts adopt a modified doctrine that a moral obligation imposed by a consideration moving directly from the plaintiff to the defendant, and inuring to the bene- fit or enrichment of the defendant, will support a subsequent prom- ise. Boothe v. Fitzpatrick, 36 Vt. 681; Seymour v. Marlboro’, 40 Vt. 171; Doty v. Wilson, 14 Johns. (N. Y.) 878 (semble); Gleason v. Dyke, 22 Pick. (Mass.) 390, H. & W. 206; Goulding v. Davidson, 26 N.Y. 604, 611-612. ; The first class of cases simply supports the conclusion of the author. The secondary consideration as to whether the request must be proved affirmatively or may be implied from the beneficial nature of the transaction does not affect the main question. A considerable number of additional cases are often cited as sustaining Lampleigh y. Braithwait, but in every one the plaintiff was defeated and the remarks of the court are obiter dicta. Chaffee v. Thomas, 7 Cow. (N. Y.) 358; Goldsby v. Robertson, 1 Blackf. (Ind.) 247; Carson v. Chap. IT. § 4. CONSIDERATION EXECUTED, 121 (6) We find it laid down that ‘where the plaintiff voluntarily does that whereunto the defendant was legally compellable, and the defendant afterwards, in considera- tion thereof, expressly promises,’ he will be bound by such a promise. But I would submit that the authority for this rule wholly fails in so far as it rests on the cases which are habitually cited in support of it. Curiously enough, all the cases turn upon the liability of parish authorities for medical attendance upon paupers who are settled in one parish but resident in another. Watson v. Turner (1767) was decided on the ground that the moral obligation resting upon overseers of a parish to provide for the poor would support a promise Clark, 2 Ill. 118. In one case it is held that if the express promise is different in kind from the one the law would have implied, it is unenforceable. Merrick v. Giddings, 1 Mackey (D. C.), 394, 4138. The second class of cases must be regarded as exceptional and of no authority outside of the jurisdictions where they are decided. The third class of cases presents an interesting question. These cases seem to fall midway between real contracts and quasi-contracts. They are based on the notion that it is inequitable for the defendant to enrich himself unjustly at the expense of the plaintiff, a notion that is the distinguishing feature in a large class of quasi-contracts. Keener, Quasi-Cont., pp. 19, 8363-378. Every unjust enrichment, how- ever, will not found a quasi-contract. Some cases will do so; some cases are remediable only in equity; some cases are not remediable at all in contractual actions. Cook v. Doggett, 2 Allen (Mass.), 439; Welsh v. Welsh, 5 Ohio, 425; Schreve v. Grimes, 4 Litt. (Ky.) 220; cf. Clark v. Davidson, 53 Wis. 817; Phillips v. Homfray, L. R. 24 Ch. D. 439; Keener, pp. 164-165, 369-870. If there be an obligation of this sort enforceable either at law or in equity, and the defendant expressly promises to discharge the obligation, there would seem to be strong reasons for enforcing the promise. Cf. Bridges v. Bidwell, 20 Neb. 185; Starr v. Wright, 20 Oh. St. 97; Elliott v. Horn, 10 Ala. 348. The case is like the first class where an existing implied obligation is fortified by an express one. The difficulty is as to the cases where, although there is unjust enrichment, there is no legal obligation to repay. This presents an anomaly, and may be the one case where a moral obligation should be held to sustain a promise. Perhaps it might be possible to distinguish by calling this an ‘equitable’ con- sideration as opposed to moral considerations generally. (b) Volun- tarily do- ing what another was le- gally bound to do. Smith, L. C. 1. 148, Buller, Nisi Prius, p.147. But see 1 Selwyn’s Nisi Prius, p. 51.0. 11. 2 Hast, 505. 1B. & Ald, 105. See chapter on Quasi- Contract. 10.&M. 810. 122 FORMATION OF CONTRACT. Part IL. made by them to pay for services previously rendered to a pauper by a medical man. *In Atkins v. Banwell (1802) it was held that the moral obligation resting upon the parish in which a pauper is settled, to reimburse another parish, in which the pauper happened to be taken ill, for expenses incurred in medical attendance, is not sufficient to create a legal liability without an express promise. In Wing v. Mill (1817), the pauper was also residing out of his parish of settlement; but that parish acknowl- edged its liability for his maintenance by making him a weekly allowance. The pauper fell ill and died; during his illness he was attended by Wing, an apothecary, who, after the pauper’s death, was promised payment of his bill by Mill, the overseer of the parish of settlement. The court held the overseer liable. It is not easy to ascertain the grounds of their decision from the judgments of Lord Ellenborough, C.J., and Bayley, J. Some sentences suggest that they held, on the authority of Watson v. Turner, that a moral obliga- tion will support a promise; others suggest that they held that there was a legal obligation cast on the parish of residence to do that which the parish of settlement might legally have been compelled to do, and that a quasi-contractual relation thus arose between the parties; others again suggest that the allowance made to the pauper by the parish of settlement showed a knowledge that the pauper was being maintained at their risk, and amounted to an implied authority for bestowing the necessary medical attendance. This last is the view entertained as to the ratio decidendi in Wing v. Mill by _ the Court of Exchequer in the only case remaining for examination. In Paynter v. Williams (18338) the facts were similar to those in Wing v. Mill, with this very important excep- tion, that there was no subsequent promise to pay the [*101] Chap. II. § 4. CONSIDERATION EXECUTED. 123 apothecary’s bill. The defendant parish, the parish of settlement, was nevertheless held liable to pay for medi- cal attendance supplied by the parish of residence. The payment of an *allowance by the parish of settle- ment was held by Lord Lyndhurst, C.B., to amount ‘to a request on the part of the officers that the pauper shall not be removed, and to a promise that they will allow what was requisite.’ It would seem then that the promise in the cases cited to support this supposed rule, was either based upon a moral obligation, which, since the decision in Eastwood v. Kenyon, would be insufficient to support it, or was an acknowledgment of an existing liability arising from a contract which might be implied by the acts of the par- ties,—a liability which, as Paynter v. Williams shows, did not need a subsequent promise to create it. And this is stated on high authority to be the true ground upon which the decision in Watson v. Turner [*102] may be supported. ‘The defendants, being bound by law to provide for the poor of the parish, derived a benefit from the act of the plaintiff, who afforded that assistance to the pauper which it was the duty of the defendants to have provided: this was the consideration, and the subsequent promise by the defendants to pay for such assistance was evidence from which it might be inferred that the consideration was performed by the plain- liff with the consent of the defendants, and consequently sufficient to support a general indebitatus assumpsit for work and labour performed by the plaintiff for the defendants, at their request.’ The rule, as habitually laid down, if not non-existent, must be admitted to rest on scanty and unsatisfactory authority. One wonders that it should have been so often reiterated without examination. #1 «These eidola of the text-books have been stereotyped in the Indian Con- tract Act, s. 2. sub-s. (d) and s. 25. sub-s. 2. 1 This class of cases clearly falls within the third class discussed in the preceding note. The defendant has been enriched at the expense of the plaintiff, but under circumstances giving no remedy in equity 1A. &E, 438. 1 Selwyn’s Nisi Pius p. dln. 1, (c) Real exception to general rule: Re- viving ob- ligations barred by rule of law. Parke, B., in Earle v. Oliver, 2 Exch. 90. Williams v. Moor, 11 M. & W. 256. 37 & 88 Vict. ce. 62. Trueman v. Fenton, 2 Cowp. 544 12 & 18 Vict. c. 106, § 204. 124 FORMATION OF CONTRACT. Part IL. (c) A real exception to the general rule is to be found in the cases in which a person has been held capable of reviving an agreement by which he has benefited, although by rules of law since repealed, incapacity to contract no longer existing, or mere lapse of time, the agreement is not enforceable against him. The principle upon which these cases rest is, ‘that where the consideration was originally beneficial to the party *promising, yet if he be protected from liability by some pro- - vision of the statute or common law, meant for his advantage, pee he may renounce the benefit of that law; and if he promises to pay. the debt, which is only what an honest man ought to do, he is then bound by the law to perform it.’ The following illustrations of the principle are to be found in the Reports. (1) A promise by a person of full age to satisfy debts contracted during infancy was binding upon him before the Infants’ Relief Act made it impossible to ratify, on the attainment of majority, a promise made during infancy. (2) A promise made by a bankrupt, discharged from debts by a certificate of bankruptcy, to satisfy the whole or part of debts due to a creditor was binding before 1850.¢? 2 By 6 Geo. IV. c. 16. § 131 this promise had to be in writing. At the pres- ent day such a promise is only binding if there be new consideration. For the history and present state of the law on this point see Jakeman v. Cook, 4 Ex. D. 26. or in quasi-contract; he promises to pay for such enrichment; such promise is enforceable on the ground of ‘equitable’ consideration. Gleason v. Dyke, 22 Pick. (Mass.) 390, H. & W. 206; Doty v. Wilson, 14 Johns. (N. Y.) 878. Cf. Curtis v. Parks, 55 Cal. 106. Another ground suggested is that the defendant ‘ratifies’ the act of the plain- tiff who represented him in the transaction, and the ratification is equivalent to a prior authority. Gleason v. Dyke, supra. 1 Reed v. Batchelder, 1 Met. (Mass.) 559; Minock v. Shortridge, 21 Mich. 304; Stern v. Freeman, 4 Met. (Ky.) 309. 2 Dusenbury v. Hoyt, 53 N. Y. 521, H. & W. 208; Edwards v. Nel- son, 51 Mich. 121. Cf. Shepard v. Rhodes, 7 R. 1. 470, H. & W. 210; Wiggin v. Hodgdon, 63 N. H. 39. Chap. IL. § 4. CONSIDERATION EXECUTED. 125 (3) A debt barred by the Statute of Limitations is consideration for a subsequent promise to pay it. (4) In Lee v. Muggeridge a married woman gave a bond for money advanced at her request to her son by a former husband. Afterwards, when a widow, she prom- ised that her executors should pay the principal and interest secured by the bond, and it was held that this promise was binding.? (5) In Flight v. Reed bills of exchange were given by the defendant to the plaintiff to secure the repayment of money lent at usurious interest while the usury laws were in force. The bills were by those laws rendered void as between the plaintiff and defendant. After the repeal of the usury laws by 17 & 18 Vict. c. 90 the defendant renewed the bills, the consideration for renewal being the past loan, and it was held that he was liable upon them.3 There are certain features common to all these cases. In each the parties were clearly agreed: in each, one of the parties has got all that he bargained for, while the other cannot obtain what he was promised, either because (#108 he has *dealt with one who was incapable of con- tracting, or because a technical rule of law forbids the agreement to be enforced. If the party who has received the benefit which he expected from the agree- 1 [Isley v. Jewett, 3 Met. (Mass.) 489; Keener v. Crull, 19 Ill. 189. 2 Accord: Sharpless’ Appeal, 140 Pa. St. 63; Goulding v. Davidson, 26 N. Y. 604, where Balcom, J., says, “I will add that the fact is con- trolling with me, that the defendant personally received a valuable consideration for the money she has promised to pay, and this dis- tinguishes the case from some that seem to weigh against the conclu- sion that the defendant’s promise is valid.” Contra: Waters v. Bean, 15 Ga. 358; Kent v. Rand, 64 N. H. 45; Putnam v. Tennyson, 50 Ind. 456; Hayward v. Barker, 52 Vt. 429. Lee v. Muggeridge is generally disapproved in the United States, except where a moral consideration will support a promise. 3 Hammond vy. Hopping, 13 Wend. (N. Y.) 505. 5 Taunt, 36. 1H.&C,703, Common elements in all the cases. They do not rest upon moral obliga- tion. 126 FORMATION OF CONTRACT. Part II. ment afterwards acquires capacity to contract; or if the rule of law is repealed, as in the case of the usury acts; or, as in the case of the Statute of Limitations, admits of a waiver by the person whom it protects, then a new promise based upon the consideration already received is binding. The cases thus regarded seem a plain and reasonable exception to the general rule that a past consideration will not support a promise. Unfortunately, they were at one time based upon the moral obligation which was supposed to bind the person benefited and to give efficacy _ to his promise. 5 Taunt. 46, Littlefield v. Shee, 2 B. & A. S11. It would have seemed enough to have said that when two persons have made an agreement, and one has got all the benefit which he expected from it, and is protected by technical rules of law from doing what he had promised to do in return, he will be bound if, when those rules have ceased to operate, he renews his original promise. But when once the law of contract was brought into the cloudland of moral obligation, it became extremely hard to say what promises might or might not be enforced. The phrase was far larger than the circumstances needed, and the language used in some of the cases cited above was calculated to make the validity of contracts turn upon a series of ethical problems. In Lee v. Muggeridge, Mans- field, C.J., says, ‘It has long been established, that where a person is bound morally and conscientiously to pay a debt, though not legally bound, a subsequent prom- ise to pay will give a right of action. The only question therefore is whether upon this declaration there appears a good moral obligation.’ In no case did ‘moral obligation’ play a more promi- nent part than in Lee vy. Muggeridge ; but the doctrine, after it had undergone some criticism from Lord Tenter- den, was finally limited by the decision in Eastwood v. Kenyon. The sufficiency of moral obligation to support a Chap. II. § 4. CONSIDERATION EXECUTED, 127 promise was there definitely *called in question. Eastwood had been guardian and agent of Mrs. Kenyon, and; while she was a minor, had incurred expenses in the improvement of her property: he did this voluntarily, and in order to do so was compelled to borrow money, for which he gave a promissory note. When the minor came of age she assented to the transac- tion, and after her marriage her husband promised to pay the note. Upon this promise she was sued. The moral duty to fulfil such a promise was insisted on by the plaintiff’s counsel, but was held by the court to be insufficient where the consideration was wholly past. ‘Indeed,’ said Lord Denman in delivering judgment, ‘the doctrine would annihilate the necessity for any considera- tion at all, inasmuch as the mere fact of giving a promise creates a moral obligation to perform it.’ Thus was finally overthrown the doctrine formulated by Lord Mansfield that consideration was only one of various modes by which it could be proved that parties intended to contract: a doctrine which, in spite of the decision in Rann v. Hughes, survived in the theory that the existence of a moral obligation was evidence that a promise was intended to be binding. Consideration is not one of several tests, it is the only test of the intention of the promisor.! [*105] 1 The general doctrine of promises which operate as waivers of a technical bar interposed by law, is well stated and discussed in Smith v. Tripp, 14 R. 1.112. Another instance of such waivers is the case of a promise by an indorser or drawer of a negotiable instrument, who has been discharged for want of due notice of dishonor. Siger- son v. Mathews, 20 How. (U. 8.) 496; Ross v. Hurd, 71 N. Y. 14; Hobbs v. Straine, 149 Mass. 212. Such subsequent promises: are in some cases, particularly in the case of infants, bankrupts, and debtors discharged by the Statute of Limitations, required to be in writing. N. Y. Code Civ. Pro., § 895; L. of N. Y. 1882, c. 324; Stimson, Am. St. Law, § 4147. Another exception to the rule that a past consideration will not support a promise exists in the case where a debtor gives additional 11 A. & E. 450. TT. RB, 350, (n). Further subjects of inquiry. Capacity of parties. How it may be affected. CHAPTER III. Capacity of Parties. In the topics which we have hitherto discussed we have dealt with the primary elements of contract. The parties must be brought together by offer and acceptance, and they must make an agreement which the courts will regard as a legal transaction either by reason of its form, or because of the presence of consideration. But such a transaction may take place between parties, one or both of whom are under some disability for mak- ing a valid contract: it is therefore necessary to deal with these disabilities: in other words with the capacity of parties. Certain persons are by law incapable, wholly or in part, of binding themselves by a promise, or of enforcing a promise made to them. And this incapacity may arise from the following causes: — (1) Political or professional status. (2) Youth, which, until the age of 21 years, is sup- posed to imply an immaturity of judgment needing the protection of the law. security to his creditor, or a principal to his surety, on a pre-existing debt, without any new consideration. “No case can be found in which a man’s own debt has been ruled to be an insufficient consid- eration between him and his creditor, for a mortgage or other security received by the latter from the debtor.” Turner v. McFee, 61 Ala. 468; Paine v. Benton, 32 Wis. 491; Duncan v. Miller, 64 Iowa, 228; Williams v. Silliman, 74 Tex. 626. So the transfer of a negotiable in- strument as security for a pre-existing debt is on a sufficient consider- ation as between the parties; whether it is as to third parties the American cases are not agreed. Bay v. Coddington, 20 Johns. (N. Y.) 6387; Oates v. Nat. Bk., 100 U. S. 239. Chap. III. § 1. POLITICAL OR PROFESSIONAL STATUS. 129 (8) Artificiality of construction, such as that of cor- porations, which, being given a personality by law, take it upon such terms as the law imposes. (4) The permanent or temporary mental aberration of lunacy or drunkenness. (5) Until the 1st of January 1883 marriage effected a merger of the contractual capacity of the wife in that of her husband, subject to certain exceptions. The Married [#207] *Woman’s Property Acts of 1882 and 1893 have greatly changed the law in this respect. § 1. Political or professional status. An alien has the contractual capacity of a natural-born British subject, except that he cannot acquire property in a British ship. An alien enemy, or British subject adhering to the king’s enemies,* cannot, without license from the crown, make any fresh contract or enforce any existing contract during the continuance of hostilities; but his rights as to contracts made before the commencement of war are sus- pended, not annulled, and can be enforced (subject to the effect of the Statute of Limitations) upon the conclusion of peace.? Foreign states and sovereigns and their representatives, the officials and household of their representatives, are not 2It does not seem to be clearly settled that anything short of residence in a hostile country for trading purposes constitutes adherence to the king’s enemies. The case of Roberts v. Hardy, 3 M. & 8. 533, exhibits the reluctance of the courts to draw conclusions from the mere fact that a man was resident in a hostile country when it was possible for him to have removed. 1See Stimson, Am. St. Law, §§ 102, 5286, 6010-19; U. S. Rev. Stat., § 4131, and index, title “ Aliens;” Taylor v. Carpenter, 3 Story (U. S.), 458. 2 United States v. Grossmayer, 9 Wall. (U. S.) 72, H. & W. 215; Kershaw v. Kelsey, 100 Mass. 561; Griswold v. Waddington, 16 Johns. (N. Y.) 438. There is a possible exception in the case of contracts for necessaries. Crawford v. The William Penn, 3 Wash. C. C. (U. 8.) 484. (1) Political status. An alien. An alien enemy. O’Mealey v. Wilson, 1 Camp. 481 Foreign sove- reigns. Taylor vy. Beet 14C.B. Macartney v.Garbutt,24 Q. B. D. 368, Mighell v. The Sultan of Johore, lead 1. Q: B. A.) 149. Felon un- dergoing sentence. 38 & $4 Vict. c. 28. 888, 9, 10. Barrister. Kennedy v. Broun, 13 C. B., N, 8. 677. Physician. 49 & 50 Vict. c. 48, § 6. 130 FORMATION OF CONTRACT. Part IL. subject to the jurisdiction of the courts of this country unless they submit themselves to it. Their contracts can- not therefore be enforced against them unless they so choose, although they are capable of enforcing them. This immunity extends to a British subject accredited to Great Britain by a foreign state. A recent case illustrates the rule. A foreign sovereign residing in this country as a private person, made a promise of marriage under an assumed name. He did not thereby subject himself to the jurisdiction of our courts. A person convicted of treason or felony cannot, during the continuance of his conviction, make a valid contract; nor can he enforce contracts made previous to conviction: but these may be enforced by an administrator appointed for the purpose by the crown.? *A barrister cannot sue for fees due to him for services rendered in the ordinary course of his profes- sional duties, whether the action be framed as arising upon an implied contract to pay for services rendered on request, or upon an express contract to pay a certain sum for the conduct of a particular business. A physician, until the year 1858, was so far in the posi- tion of a barrister that the rendering of services on request raised no implied promise to pay for them, though the patient might bind himself by express contract. The Act 21 & 22 Vict. c. 90. § 81 enabled every physician to sue on such an implied contract, subject to the right of any college of physicians to make by-laws to forbid the exercise of this privilege by their fellows. And this is re-enacted in substance by the Medical Act 1886.3 | #108] 1 King of Prussia v. Kuepper’s Adm’r, 22 Mo. 550. 2 Not so generally in the United States. Estate of Nerac, 35 Cal. 392. 8 In the United States lawyers and physicians who are duly licensed are under no such disability. Vilas v. Downer, 21 Vt. 419. Chap. IIL. § 2. INFANTS. 131 § 2. Infants.) The rights and liabilities of infants under contracts entered into by them during infancy rest upon common law rules which have been materially affected by statute. I will first state the common law upon the subject. Common law treated an infant’s contract as being void- able at his option, either before or after the attainment of his majority.? But the rule was thus limited: — (1) The contract ceased to be voidable if ratified upon the attainment of 21 years of age. (2) The contract was not voidable if it were for neces- saries, or, in certain cases, if it were for the infant’s benefit. (1) Ratification, and the Infants’ Relief Act. Sir F. Pollock, in an exhaustive argument, shows clearly that by the rules of common law the contract of an infant was not void but voidable at his option even though it were not for the infant’s benefit. Being so voidable, the infant might (apart from statutory restrictions) affirm and ratify his contract when he attains his majority, and thus assume the rights and liabilities arising from it. It may 256 1 The age of majority for women is fixed at eighteen in some States. Stimson, Am. St. Law, § 6601. Majority is reached on the first minute of the day preceding the twenty-first birthday. Bardwell v. Purrington, 107 Mass. 419; Hamlin v. Stevenson, 4 Dana (Ky.), 597. Some States provide that emancipation may hasten the age of majority. Stimson, Am. St. Law, § 6606. 2TIn the United States it has been held that an infant’s contracts fall into three classes: (1) The contract for the appointment of an agent, which is void; (2) the contract for necessaries, which is bind- ing; (3) all other contracts, which are voidable at his election. Fetrow v. Wiseman, 40 Ind. 148. The first proposition is sustained by some authorities in general terms. TJrueblood v. Trueblood, 8 Ind. 195, H. & W. 218. But it is confined by others to the appointment of an attorney in fact by a formal power of attorney. Hastings v. Dollar- hide, 24 Cal. 195; Hardy v. Waters, 38 Me. 450; Huffcut on Agency, § 15. The matter is sometimes regulated by statute. Stimson, Am. St. Law, § 6602. An unexecuted contract of marriage may be avoided. Rush v. Wick, 81 Oh. St. 521. So also an executory con- tract for necessaries. Gregory v. Lee, 64 Conn. 407. (2) Infants. General rule of common law. Infant’s contract voidable. Pollock on Contracts, pp. 58-60, 5th ed. (é) Ratifi- cation. Williams v. Moor, 11M. & W. Ante, p. 103. Ratifica- tion of two kinds. Contracts valid until rescinded. Interests in realty, Rolle, Abr. 731. in corpo- rate pro- perty, Evelyn v. Chichester, 8 Burr. 1717. N.W.R. Co. v. Me- Michael, 5 kx. 114. 132 FORMATION OF CONTRACT. Part IL. be well to *remind the reader that such a ratification is, or was, an illustration of the limited class of cases in which a past consideration has been allowed to support a subsequent promise. Some contracts were invalid unless ratified, others valid unless disaffirmed within a reasonable time. It would seem that where an infant acquired an interest in permanent property to which obligations attach, or en- tered into a contract which involves continuous rights and duties, benefits and liabilities, and took some benefit under the contract, he would be bound unless he ex- pressly disclaimed the contract. On the other hand, a promise to perform some isolated act, ora contract wholly [*109] ‘executory, would not be binding upon the infant unless he expressly ratified it upon coming of age. Illustrations of contracts requiring a special disclaimer to avoid them — valid unless rescinded — may be found in the following cases. These do not appear to be affected by recent legislation. An infant lessee who occupies until majority is liable for arrears of rent which accrued during his minority. Shareholders who became possessed of their shares during infancy are liable for calls which accrued while they were infants. ‘They have been treated therefore as persons in a different situa- tion from mere contractors, for then they would have been exempt: but in truth, they are purchasers who have acquired an interest, not in a mere chattel, but in a subject of a permanent nature, either by con- tract with the company, or purchase or devolution from those who have contracted, and with certain obligations attached to it which they were bound to discharge, and have been thereby placed in a situ- ation analogous to an infant purchaser of real estate who has taken possession, and thereby becomes liable to all the obligations attached to the estate; for instance, to pay rent in the case of a lease render- ing rent, and to pay a fine due on the admission in the case of a copy- hold to which an infant has been admitted, unless they have elected to waive or disagree the purchase altogether, either during infancy or after full age, at either of which times it is competent for an infant to do 80.’ Chap. III. § 2. INFANTS. 133 Similarly an infant may become a partner, and at common *law may be entitled to benefits, though not liable for debts, arising from the partnership during his infancy. Equity however would not allow an infant, in taking the partnership accounts, to claim to be credited with profits and not debited with loses. But [*110] what is important for our present purpose to note is, that 7 unless on the attainment of majority there be an express rescission and disclaimer of the partnership, the partner will be liable for losses accruing after he came of age. Where an infant held himself out as in partnership with .X, and continued to act as a partner till shortly before he came of age, and then, though ceasing to act as a partner, did nothing to disaffirm the partnership, he was held liable on debts which accrued, after he came of age, to persons who supphed X with goods. ‘Here,’ said Best, J., ‘the infant, by holding himself out as a partner, contracted a continual obligation, and that ob- ligation remains till he thinks proper to put an end to it. If he wished to be understood as no longer con- tinuing a partner, he ought to have notified it to the world.’ And so where shares were assigned to an infant who attained his majority some months before an order was made for winding up the company, it was held that in the absence of any disclaimer of the shares the holder was liable as a contributory. Although the liabilities incurred by the infant are somewhat different in these different cases, yet there is this feature common to all of them, that nothing short of express disclaimer will entitle a man, on attaining his majority, to be free of obligations such as we have described. It is otherwise in contracts which are not thus continuous in their operation. The infant was not bound unless he expressly ratified them.! 1 It is generally held that where an infant has taken personal prop- erty or a conveyance of real property under a contract, he must dis- in partner- ship. Lindley, ens Goode v. Harrison, 5 B. & Ald. 159, Lumsden’s Case, 4 Ch. 81. Contracts invalid until ratified. 9 Geo. iv. ¢. 14, Infants’ Relief Act. 87 & 88 Vict. e. 62. 134. FORMATION OF CONTRACT. Part II. Such was the common law upon the subject: let us consider how it has been affected by legislation. *Lord Tenterden’s act required that ratification should be in the form prescribed by the act. This enactment was rendered unnecessary by the In- fants’ Relief Act, and was repealed by the Statute Law Revision Act of 1875. The Infants’ Relief Act of 1874 appears to have been designed to guard not merely against the results of youthful inexperience, but against the consequences of honourable scruples as to the disclaimer of contracts upon the attainment of majority. Its provisions are as follows : — [#111] 1. ‘All contracts whether by specialty or by simple contract hence- forth entered into by infants for the repayment of money lent or to be lent, or for goods supplied or to be supplied (other than contracts for necessaries), and all accounts stated with infants, shall be abso- lutely void: provided always that this enactment shall not invalidate any contract into which an infant may by any existing or future statute, or by the rules of common law or equity enter, except such as now by law are voidable. 2. ‘No action shall be brought whereby to charge any person upon any promise made after full age to pay any debt contracted during infancy, or upon any ratification made after full age of any promise or contract made during infancy, whether there shall or shall not affirm within a reasonable time after reaching his majority, or he will be held to have ratified. Boyden v. Boyden, 9 Met. (Mass.) 519; Walsh v. Powers, 43 N. Y. 23; McClure v. McClure, 74. Ind..108. It is often held that the same rule applies to his own conveyance of prop- erty by deed to the adult; Hastings v. Dollarhide, 24 Cal. 195; Good- now v. Empire Lumber Co., 31 Minn. 468; but this is denied in other cases; Green v. Green, 69 N. Y. 553; Wells v. Seixas, 24 Fed. Rep. 82; although his silence coupled with other circumstances may amount to ratification. Irvine v. Irvine, 9 Wall. (U. S.) 617. The statement is sometimes made broadly that an infant’s executed contracts are good until disafirmed, while his executory contracts require express ratifi- cation; Leardsley v. Hotchkiss, 96 N. Y. 201; State v. Plaisted, 43 N. H. 418; Minock v. Shortridge, 21 Mich. 304; but this statement is not sustained by the adjudicated cases. Green v. Green, supra. Chap. III. § 2. INFANTS. 135 be any new consideration for such promise or ratification after full age.’ 1 The act suggests some points of difficulty: its precise meaning, if indeed a precise meaning was present to the minds of its framers, must be sought with care; we must examine the two sections and the constructions which have been placed on them by the courts. The first section applies only to contracts of a certain class, and these it makes void. But to this rule there are two specified exceptions. (1) Contracts for neces- saries are binding on the infant although they may take the form of a loan of money or supply of goods. (2) Contracts into which an infant may enter ‘by any existing or future statute, or by rules of common law or equity,’ and which were not voidable at the date of the enactment, are not affected by the act. *This second exception needs an explanation. [#112] . Before the act of 1874 an infant’s contracts for 1 In the United States an infant may ratify, but in some States his ratification must be in writing. Stimson, Am. St. Law, § 4147. The deed of an infant is void in at least one. Jb. §§ 6602-3. Unless the statute requires a writing, the ratification may be by express words or may be inferred from conduct. In the case of an unexecuted promise it is generally held that the words relied upon as a ratifica- tion must be something more than a mere acknowledgment of the debt, and must import a promise to pay it; Hale v. Gerrish, 8 N. H. 374; Ford v. Phillips, 1 Pick. (Mass.) 202; Fetrow v. Wiseman, 40 Ind. 148; though there is authority to the contrary. Henry v. Root, 33 N. Y. 526. Conduct, however, may be equivalent to an express promise, as by bringing suit against the other party, by accepting the consideration, or by a sale of the consideration already received. Middleton v. Hoge, 5 Bush (Ky.), 478; (cf. Burdett v. Williams, 30 Fed. Rep. 697); Keegan v. Cox, 116 Mass. 289; Minock v. Short- ridge, 21 Mich. 304; Clark v. Van Court, 100 Ind. 113; Miller v. Sims, 2 Hill (8. C.), 479. It is generally stated that the ratification must be made with knowledge that there is no legal liability; Turner v. Gaither, 83 N. C. 357; Trader v. Lowe, 45 Md.1; Hatch v. Hatch, 60 Vt. 160; Hinely v. Margaritz, 3 Pa. St. 428; though there is authority to the contrary. Clark v. Van Court, 100 Ind. 118; Anderson v. Soward, 40 Oh. St. 325. ; The first section. 48 & 44 Vict. e. 42. Leslie y. Fitzpatrick, 3 Q.B.D.229. Decisions on § 1. 136 FORMATION OF CONTRACT. ; Part II. necessaries were binding, and his other contracts were as a rule voidable. We must therefore look for con- tracts which were not for necessaries and yet were not voidable. Such are to be found where an infant enters into a contract of service so as to provide him with the means of self-support. ‘Tt has always been clearly held that contracts of apprenticeship and with regard to labour are not contracts to an action on which the plea of infancy is a complete defence. The question has always been whether the contract, when carefully examined in all its terms, is for the benefit of the infant. If so the court will not allow the infant to repudiate it.’ Here an infant entered into a contract of service with a railway company, promising to accept the terms of an insurance against accidents in lieu of his rights of action under the Employers’ Liability Act. It was held that the contract was for his benefit and that he was bound by his promise. And an infant may be held liable for the breach of such a contract under the Employers and Workmen Act 1875.? Apart from the two exceptions aforesaid the section seems clear, and has been strictly construed. An infant who had contracted trading debts was con- victed on an indictment charging him with having defrauded his creditors within the meaning of the Debtors’ Act 1869. The conviction was quashed on the | ground that the transactions which resulted in debts were void under the Infants’ Relief Act. There were consequently no creditors to defraud. On the same reasoning an infant cannot be made a bankrupt in respect of such debts. - See the recent cases Corn v. Matthews, (1893) 1 Q. B. 310, and Flower v. L. & N. W. Railway Co., (1894) 2 Q. B. 65. > 38 & 39 Vict. c. 90. No civil proceedings can be taken against an infant on an apprenticeship deed; though if he misbehave he may be corrected by his master, or brought before a justice of the peace. De Francesco v. Bar- num, 43 Ch. D.165. Gylbert v. Fletcher, Cro. Car. 179. Chap. III. § 2. INFANTS. 137 But, it may be asked, can an infant who has received *goods and paid their price recover his money, or the tradesman his goods, on the ground that the transaction is void? [*113] This much is clear, that if an infant has paid money and taken benefit under the contract he cannot recover the money so paid. An infant hired a house and agreed to pay the land- lord £100 for the furniture. He paid £60 and gave a promissory note for the balance. After some months’ use of the house and furniture he came of age, and then took proceedings to get the contract and the promissory note set aside, and to recover the money which he had paid. He obtained relief from future liabilities on the contract and note, but could not recover money paid for furniture of which he had enjoyed the benefit. On the other hand, although there is no authority precisely in point, the case of Hamilton v. Vaughan- Sherrin Electrical Engineering Co. shows that an infant who has bought shares on which no dividend has been paid, may within a reasonable time repudiate the shares and recover the money. In this case six weeks had elapsed, and the infant had not attended any meeting or otherwise affirmed his position as a shareholder. Al- though the purchase of shares in a company is not a transaction which would fall under § 1 of the Infants’ Relief Act, the language of the court is so full and explicit as to suggest a general rule, that where benefit has been received the infant cannot recover money paid; that where no benefit has been received he can. The second section would seem to deal with all con- tracts except those which are excluded from the operation of §1. A man of full age cannot make himself liable upon a contract entered into during infancy, even though there be fresh consideration for his ratification of such liability. Valentini v. Canali, 24 Q. B. D. 166. Goods paid for and used. [1894] Ch, 589, The second section, Infant's right of action. Implied ratifica- tion. In re Yeoland’s Consols, 58 L. T. 922. Whitting- ham v. Murdy, 60 L. T. 956. Carter v. Silber, [1892] 2 Ch. (C. A.) 278. Edwards v. Farrington y. Forrester, [1893] 2 Ch. D. 461. 138 FORMATION OF CONTRACT. Part II. But we must note some points which are not quite obvious in reading the section. The contract cannot be enforced against the party who *contracted during infancy, but he may sue upon it. The words of the section do not avoid the contract; they only make it unenforceable against one of the par- ties. But though damages may be recovered, specific performance cannot be obtained for the reason that the contract cannot be mutually enforced. Next we must take note of the fact that the old dis- tinction still exists between contracts which needed ratification to affirm them and contracts which needed renunciation to avoid them. Three cases establish this important distinction. An infant received an assignment of shares in 1883: he said he would repudiate them, but did not do so. He reached full age in 1886: in 1887 the company was wound up and he was not permitted to take his name off the list of contributories. An infant became a member of a building society, received an allotment of land, and for four years after he came of age paid instalments of the purchase money. Then he endeavoured to repudiate the contract. He was not permitted to do so. An infant became a party to a marriage settlement, under which he took considerable benefits. Nearly four years after coming of age he repudiated the settlement. It was held that a contract of this nature was binding unless repudiated within a reasonable time of the attain- ment of majority, and that he was too late. Reasonableness in respect of time must depend entirely on the circumstances of each case. A lapse of more than thirty years has been held not to bar the right to avoid a settlement made during infancy, but in that case the settlement had remained inoperative during the whole time, and the infant had been ignorant of its provisions. [*114] Chap. IIT. § 2. INFANTS, 139 On the other hand, the courts have been strict in their application of § 2 to contracts of the sort that, before the act, were invalid unless ratified. King, an infant, became liable to a firm of brokers for Express *£547: after he came of age they sued him, and he Tite compromised the suit by giving two bills of ex- change for £50. The firm endorsed one of the bills to Smith, who sued upon it. The Queen’s Bench Division held that the bills were a promise, based on a new con- sideration, to pay a debt contracted during minority, that here was a ratification of the sort contemplated by the act, and that Smith could not recover. [#115] “We have in the present case,’ said Charles, J., ‘first a promise by King during his minority to pay a sum of money; secondly, a promise by him after full age to pay a portion of that sum. It is said that the forbearance of the then plaintiffs to carry on their action afforded a new consideration and a good consideration for King’s promise to pay the bills of exchange. In my opinion, however, that case is amply provided for by § 2 of the act. I think that there was here a new consideration for the defendant’s promise; but the section ex- pressly says that no action shall be brought on such a promise even where there is a new consideration for it. The case of ex parte Kibble L. B. 10 seems strongly to support that view. In that case the plaintiff had ani obtained a judgment by default for a debt incurred by the defendant during infancy, and the judgment had been followed by a judgment debtor summons and a petition for an adjudication in bankruptcy. The court inquired into the consideration for the judgment, and finding that it was a debt contracted during infancy held that § 2 gmitn y. applied to the case, and dismissed the petition for adjudication.’ Fon eae But there are cases in which it has been found difficult Ratifica- to distinguish between the ratification of an old promise, "2 84 new prom- and the making of a new one. ise. Where the parties to mutual promises of marriage remain on the footing of an engaged couple after the Coxhead v. promisor has attained his majority, the maintenance of 3.¢. P. D. the engagement has been held to be a ratification, and to be insufficient to sustain an action for breach of the promise. But where the mutual promises made during Northeotev. infancy are conditional on consent of the man’s parents, 46. P. ; Ditcham y. Worrall, 5 0, P. D. 410, (ii) Neces- saries — what are they? L.R.3 Exch. 90. L.R. 4 Exch, 382, 140 FORMATION OF CONTRACT. Part IT. and the promise is renewed by him after majority with their consent; or where an engagement is made during minority with no date fixed for the marriage, and after the man comes of age the parties agree *to name a day on which it shall take place, the promises so made have been held to be new promises, and the breach of them is actionable. (2) Necessaries. We must now consider what are ‘necessaries’; and what is the liability of an infant in respect of them.? It has always been held that an infant may bind himself by contract for the supply to him not merely of the neces- saries of life, but of such things as are suitable to his station in life and to his particular circumstances at the time.2 The locus classiews on this subject is the judgment of Bramwell, B., in Ryder v. Wombwell,—a judgment the conclusions of which were adopted by the [*116] 1 The modern American cases tend to hold that an infant’s liability for necessaries rests upon the doctrines of quasi-contract. He is liable not because he agreed to be, but because it is good public policy that he should be. “The obligation of an infant to pay for necessaries actually furnished him does not seem to arise out of a contract in the legal sense of that term, but out of a transaction of a quasi-con- tractual nature; for it may be imposed on an infant too young to understand the nature of a contract.” Gregory v. Lee, 64 Conn. 407, 413; Trainer v. Trumbull, 141 Mass. 527, H. & W. 220. So he is compelled to pay, not what he promised, but what he ought to pay; and he is not liable upon a partly executed contract for necessaries beyond the value of what he has received, for as to the rest he may avoid the contract. Gregory v. Lee, supra. 2 These have been held necessaries: dentistry, — Strong v. Foote, 42 Conn. 203; attorney’s services for personal defence, — Barker v. Hibbard, 54 N. H. 539; Askey v. Williams, 74 Tex. 294; but not for defence of estate, — Phelps v. Worcester, 11 N. H. 51; cf. Epperson v. Nugent, 57 Miss. 45; a bridal outfit, — Jordan v. Coffield, 70 N.C. 110; and, in general, board, lodging, clothing, medical attendance, etc., — Saunders v. Ott, 1 McCord (S. C.), 572; Price v. Sanders, 60 Ind. 310. These have been held not necessaries in particular cases: a buggy, — Howard v. Simpkins, 70 Ga. 322; a bicycle, — Pyne v. Wood, 145 Mass. 558; college education, — M/iddlebury College v. Chandler, Chap. IIL § 2. INFANTS. 141 Exchequer Chamber. The main difficulty is to deter- mine the provinces of the court and the jury in ascer- taining what are necessaries; but we may venture to state the following rules: — (a) Evidence being given of the things supplied and of the circumstances of the infant, the court determines whether the things supplied can reasonably be considered necessaries at all; and if it comes to the conclusion that they cannot, the case may not even be submitted to the jury. Things may obviously be incapable of being neces- saries. A wild animal, or a steam roller, could hardly, under any circumstances, be considered to be such. Things may be of a useful character, but the quality or quantity supplied may take them out of the character of necessaries. Elementary text-books might be a neces- sary to a student of law, but not a rare edition of ‘Littleton’s Tenures,’ or eight or ten copies of ‘Stephen’s Commentaries.’ Necessaries also vary according to the station in life of the infant or the peculiar circumstances in which he may be placed. The quality of clothing suitable to an Eton boy would be unnecessary for a tele- graph clerk; the medical attendance and diet required by an invalid would be unnecessary to one in ordinary health. It does not follow therefore that, because a thing is of *a useful class, a judge is bound to allow a jury to [*117] © cee 4 say whether or no it is a necessary. 16 Vt. 683; professional education, — Turner v. Gaither, 83 N. C. 357. These are held generally not to be necessaries: services or sup- plies for the benefit of the estate of the infant, — Decell v. Lewenthal, 57 Miss. 331; House v. Alexander, 105 Ind. 109; money, — Randall v. Sweet, 1 Denio (N. Y.), 460; Price v. Sanders, supra. Some States by statute exempt students in colleges and academies from liability for necessaries. Stimson, Am. St. Law, § 6605. 1 There is some confusion in the cases on this point, but the fol- lowing propositions may be justified by authority and on principle: (1) It is for the court to say whether the consideration furnished is Provinces of judge and jury: Brayshaw y. Eaton, 7 Scott, at p. 187. Johnstoney. Marks, 19Q. B.D. 509. of Court of Appeal. 142 FORMATION OF CONTRACT. Part II. (6) If the judge conclude that the question is an open one, and that the things supplied are such as may reason- ably be considered to be necessaries, he leaves it to the jury to say whether, under the circumstances of the case, the things supplied were necessaries as a fact. And the jury determines this point, taking into consideration the character of the things supplied, the actual circumstances of the infant, and the extent to which the infant was already supplied with them. I say ‘actual circumstances,’ because a false impression which the infant may have con- veyed to the tradesman as to his station and circumstances will not affect his liability: if a tradesman supplies expen- sive goods to an infant because he thinks that the infant’s circumstances are better than in fact they are, or if he sup- plies goods of a useful class not knowing that the infant is already sufficiently supplied, he does so at his peril. ‘It lies upon the plaintiff to prove, not that the-goods supplied belong to the class of necessaries as distinguished from that of luxuries, but that the goods supplied, when supplied, were necessaries for the infant. The fact that the infant was sufficiently supplied at the time of the additional supply is obviously material to this issue as well as fatal to the contention of the plaintiff in respect of it.’ 1 (c) The ruling of the court and the finding of the jury ever a necessary for any infant. (2) If it may be a necessary, it is for the court to say whether there is any evidence proper to submit to the jury that it isa necessary in the particular case at bar. The first proposition is applied in distinguishing between articles fur- nished for the benefit of the person and those furnished for the benefit of the estate of the infant; Tupper v. Caldwell, 12 Met. (Mass.) 559; Decell v. Lewenthal, 57 Miss. 331; House v. Alexander, 105 Ind. 109; though it has been applied in somewhat general terms to personal benefits, as a college education. Middlebury College v. Chandler, 16 Vt. 683; Turner v. Gaither, 83 N.C. 857. The second proposition is merely the application of a general rule of procedure. Rohan v. Hanson, 11 Cush. (Mass.) 44; Pyne v. Wood, 145 Mass. 558. 1Jt is settled law that one who supplies an infant with ‘neces saries’ acts at his peril. Trainer v. Trumbull, 141 Mass. 527, H. & W. 220; McKanna v. Merry, 61 Ill. 177. Chap. III. § 2. INFANTS. 143 are alike subject to review by successive courts of ap- peal. An infant is liable for wrong: but a breach of contract may not be treated as a wrong so as to make the infant liable ; the wrong must be more than a misfeasance in the performance of the contract, and must be separate from and independent of it.! Thus where an infant hireda mare to ride and injured her by over-riding, it was held that he could not be made liable upon the contract by framing the action in tort for negligence. Nor can an infant be made liable for goods sold and delivered by charging him in trover and con-*version: and yet the Infants’ Relief Act makes a sale of goods to an infant absolutely void, and would so appear to prevent any property from passing to him. But when an infant hired a horse expressly for riding and not for jumping, and then lent it to a friend who jumped the horse and killed it, he was held liable: for ‘what was done by the defendant was not an abuse of the contract, but was the doing of an act which he was expressly forbidden by the owner to do with the animal.’? A butcher boy appropriated some of the meat which he was employed to carry to his master’s customers: he sold it and kept the money. He was detected, an account was made of the money due from him which he acknowledged to be correct, and when he came of age he gave a promis- sory note for the amount. He was held liable for the amount. It was argued that the liability arose on an account stated, which was void under § 1, or on a [*118] 1 Eaton v. Hill, 50 N. H. 235. Whether an infant is liable in tort for a false representation as to his age there is disagreement. ice v. Boyer, 108 Ind. 472; Nash v. Jewett, 61 Vt. 501. Some States make such misrepresentation a ground of estoppel to deny the contract. Stimson, Am. St. Law, § 6602. 2 Freeman v. Boland, 14 R.1. 89; Homer v. Thwing, 3 Pick. (Mass.) 492; Towne v. Wiley, 23 Vt. 355. Infant may not be charged upon con- tract framed as a tort, Jennings v. Rundall, 8 T. BR, 335. 1. Siderfin, 129. but may for actual tort, though originat- ing in contract. Burnard v. Haggis, 14 C.B.,N.S.45. In re Seager, 60 L. T. 665. (8) Corpora- tions. 1. Neces- sary limits to its con- tractual capacity. Must con- tract. through an agent. Ferguson v. Wilson, 45 & 46 Vict. ©. 61. 8. 91, 144 FORMATION OF CONTRACT. Part IT. ratification which was unenforceable under § 2. But the court held that he was liable to an action ex delicto, and that his promise to pay when he came of age was the com- promise of a suit, for which, being of age he was compe- tent to contract. § 3. Corporations. A corporation is an artificial person created by law. Hence the limitations to the capacity of a corporation for entering into a contract may be divided into necessary and express. The very nature of a corporation imposes some necessary restrictions upon its contractual power, and the terms of its incorporation may impose others. A corporation is an artificial entity, apart from the per- sons who compose it; their corporate rights and liabilities are something distinct from their individual rights and liabilities, and they do not of themselves constitute the corporation, but are only its members for the time being. Since then a corporation has this ideal existence apart from *its members, it follows that it cannot person- ally enter into contracts, it must contract by means of an agent. It ‘cannot act in its own person, for it has no person.’ It follows also that a corporation must give some formal evidence of the assent of its members to any legal act which, as a corporation, it may perform. Hence the requirement that a corporation must contract under seal.? By the law merchant an instrument under seal is not negotiable, but the Bills of Exchange Act makes an excep- tion in favour of the negotiable instruments of corpora- [#119] 1 Ray v. Tubbs, 50 Vt. 688. 2Jn the United States a corporation need use a seal only where a natural person is required to use one. Bank of Columbia v. Patterson, 7 Cranch (U. S.), 299; Mott v. Hicks, 1 Cow. (N. Y.) 518; Hamilton v. Lycoming §c. Co., 5 Pa. St. 339. Chap. III. § 3. CORPORATIONS. 145 tions... Before this act a trading corporation whose business it might be to make such instruments could sign them by an agent duly appointed. Their validity must always depend on the capacity of the corporation to make them.? The express limitations upon the capacity of corporate bodies must vary in every case by the terms of their incor- poration. Much has been and still may be said as to the effect of these terms in limiting the contractual powers of corporations, but it is outside the purpose of this book to discuss the doctrine of ‘ultra vires.’ The question whether the terms of incorporation are the measure of the contracting powers of the corporation, or whether they are merely prohibitory of contracts which are inconsistent with them, was discussed in the much litigated case of the Ashbury Carriage Company v. Riche, and the question was thus stated and answered by Blackburn, J.: — ‘T take it that the true rule of law is, that a corporation at com- mon law has, as an incident given by law, the same power to contract, and subject to the same restrictions, that a natural person has. And this is important when we come to construe the statutes creating a corporation. For if it were true that a corporation at common law has a capacity to contract to the extent given it by the instrument creating it and no further, the question would be, Does the statute creating the 2. Express limita- tions. corporation by express provision or necessary implication show an in- . 1A negotiable instrument executed by a corporation under seal is not thereby rendered unnegotiable unless such was the intent of the corporation in affixing the seal. Therefore unless the instrument itself contains a recital as to the seal, or it is shown by extrinsic evi- dence that the seal was affixed by authority for the purpose of creat- ing a specialty, the negotiable character of the instrument is not affected. Bank v. Railroad Co.,58.C. 156; Mackay v. Saint Mary’s Church, 15 R. I. 121; Jones v. Homer, 60 Pa. St. 214; Weeks v. Esler, 68 Hun (N. Y.), 518. 2In the United States a corporation has the implied power to make negotiable paper as evidence of any debt which it has authority to contract. Moss v. Averell, 10 N. Y. 449; Comm. v. Pittsburgh, 41 Pa. St. 278; Rockwell vy. Elkhorn Bk., 13 Wis. 731; Auerbach v. Le Sueur Mill Co., 28 Minn. 291. L 146 FORMATION OF CONTRACT. Part II. tention in the legislature to confer upon this corporation capacity to make the contract? But if a body corporate has, as incident to it, a general capacity to contract, the question is, Does the statute creating the corporation by express *provision or necessary implication [#120 Gh, show an intention in the legislature to prohibit, and so avoid ] 264, ’ the making of a contract of this particular kind?’ The House of Lords appear not to have dissented from this view of the general powers of corporations, though they placed a different interpretation upon the statute in question, holding that a company incorporated under the Companies Act of 1862 is bound by the terms of its mem- orandum of association to make no contracts inconsistent with, or foreign to, the objects set forth in the memo- randum.? Contracts A contract made ultra vires is void; but not on the carbs ground of illegality. Lord Cairns in the case above cited for ile: takes exception to the use of the term ‘illegality,’ pointing oe but out that it is not the object of the contracting parties, but capacity. the incapacity of one of them, that avoids the contract.” 5B & Dt The Companies Act of 1890 enables such a company to Vict. c. 62. alter its memorandum under certain conditions and for 1«“Tn respect of the power of corporations to make contracts, two . propositions may be stated: — (1) That they have, by mere implication of law and without any affirmative expression to that effect in their charters or governing statutes, and of course in the absence of express prohibitions, the same power to make and take contracts, within the scope of the purposes of their creation, which natural persons have; (2) That this power, on the other hand, is restricted to the purposes for which the corporation has been created, and cannot be lawfully exercised by it for other purposes.” 4 Thompson on Corp., § 5645, and cases there cited. 2Tn the United States if either party has had the benefits of a con- tract ultra vires, an action will lie in favor of the other party. The better view is that this liability is quasi-contractual, and that the suit is for benefits conferred, and not on the original contract. Central Trans. Co. v. Pullman Car Co., 1389 U. S. 24; Brunswick Gas Light Co. v. United Gas Fuel & Light Co., 85 Me. 532; Slater Woollen Co. v. Lamb, 143 Mass. 420, H. & W. 222. Some courts put the decision on the ground of equitable estoppel. Denver Fire Ins. Co. v. McClel- land, 9 Colo. 11. Chap. III. § 4. LUNATIC AND DRUNKEN PERSONS. 147 certain objects. The assent of a court which has jurisdic- tion to make an order for winding it up, and notice to the parties interested, are the chief conditions. The objects are the furtherance of its business, the addition of cognate business or the abandonment of some of its original objects. § 4. Lunatie and drunken persons. The contract of a lunatic is binding upon him unless it can be shown that at the time of making the contract he was absolutely incapable of understanding what he was doing and that the other party knew of his condition. ‘When a person enters into a contract and afterwards alleges that he was so insane at the time that he did not know what he was doing and proves the allegation, the contract is as binding upon him in every respect, whether it is executory or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understanding what he was about.’ This decision enables us to dispense with the distinction *between executory and executed contracts made *121 ao with lunatics which issuggested in Molton v.Camrouz. 1 The American cases are in great confusion. ' The following prop- ositions may be regarded as fairly sustained by the weight of au- thority: (1) Where the sane person does not know of the other person’s insanity, and there has been no judicial determination of such insanity, and the contract is so far executed that the parties can not be put in statu quo, the contract is binding upon the lunatic. Gribben v. Maxwell, 34 Kans. 8, H. & W. 224; Young v. Stevens, 48 N. H. 133; Brodrib v. Brodrib, 56 Cal. 563; Copenrath v. Kienby, 83 Ind. 18. (2) The contract is voidable if the sane person knew of the other’s insanity; Crawford v. Scovell, 94 Pa. St. 48; or if it has been judicially declared; Wadsworth v. Sharpsteen, 8 N. Y. 388; Carter v. Beckwith, 128 N. Y. 312; or if the lunatic can be put in statu quo. Burnham v. Kidwell, 113 Tl. 425. (8) The contract is void if so declared by statute; Stimson, Am. St. Law, § 6701; in some States if it be a deed of lands; Van Deusen v. Sweet, 51 N. Y. 378; Brig- ham v. Fayerweather, 144 Mass. 48; by high authority if it be a power of attorney; Dexter v. Hall, 15 Wall. (U. S.) 9. Some cases recog- Ibid. § 1 (5). (4) Luna- tic and drunken persons. The con- tract voidable : Imperial Loan Co. y. Stone, [1892] 1Q. B. 601. whether of lunatic: 2 Exch. 487; 4 Exch. 17. Snook v. Watts, 11 Beay, at p. 107. Hall vy. War- ren, 9 Ves. 605. ordrunken person. Matthews v. Baxter, L.R. 8 Exch. 182. 148 FORMATION OF CONTRACT. Part IL. A lunatic, so found by commission,“ is not therefore incapable of contracting, but the presumption is very strong in such a case that the contract was not made during a lucid interval, and that the other contracting party was aware of the mental condition of the lunatic. A contract made by a person in a state of intoxication may be subsequently avoided by him, but if confirmed is binding on him. A man, while drunk, agreed at an auc- tion to make a purchase of houses and land. Afterwards, when sober, he affirmed the contract, and then repented of his bargain, and when sued on the contract pleaded that he was drunk at the time he made it. But the court held that although he had once had an option in the matter and might have avoided the contract, he was now bound by his affirmation of it. ‘I think,’ said Martin, B. ‘that a drunken man, when he recovers his senses, might insist on the fulfilment of his bargain, and therefore that he can ratify it so as to bind himself to a performance of it/ 1 The rules of equity are in accordance with those of ¢Commissions de lunatico inquirendo are no longer issued specially in each case of alleged insanity A general commission is now, by 53 & 54 Vict. ce. 5, issued from time to time, under the Great Seal, to Masters in Lunacy appointed by that act, who conduct an inquiry in each case in a manner prescribed by the act. nize no distinction as to whether the sane person knows of the other’s insanity or not. Seaver v. Phelps, 11 Pick. (Mass.) 304. If the lunatic becomes sane, he may ratify or disaffirm all voidable contracts ; Arnold v. Richmond Iron Works, 1 Gray (Mass.), 434; but he may be required to return the consideration. Boyer v. Berryman, 1238 Ind. 451. A lunatic is liable in any event for necessaries. Sceva v. True, 53 N. H. 627; Sawyer v. Lufkin, 56 Me. 308. And it would seem that in all cases the courts proceed upon equitable grounds. Mutual Life Ins. Co. v. Hunt, 79 N. Y. 541; Carter v. Beckwith, 128 N. Y. 312, 321. 1 Barrett v. Buxton, 2 Aik. (Vt.) 167, H. & W. 228; Reinskopf y. Rogge, 37 Ind. 207; Joest v. Williams, 42 Ind. 565; Van Wyck v. Brasher, 81 N. ¥. 260; Bush v. Breinig, 113 Pa. St. 310; Carpenter v. Rodgers, 61 Mich, 384. Chap. ITI. § 5. MARRIED WOMEN. 149 common law in this respect. Under such circumstances as we have described, courts of equity will decree specific performance against a lunatic or a person who entered into a contract when intoxicated, and will on similar grounds refuse to set aside their contracts. § 5. Married Women. Until the 1st of January, 1883, it was true to state that as a general rule, the contract of a married woman was void.! Yet there were exceptions to this rule: in some cases a married woman could make a valid contract, but could not sue *or be sued apart from her husband; in others she could sue but could not be sued alone; in others she could both sue and be sued alone. (_) A married woman might acquire contractual rights [#122] by reason of personal services rendered by her, or of the assignment to her of a chose in action. In such cases the husband might ‘reduce into possession’ rights of this nature accruing to his wife, but unless he did this by some act indicating an intention to deal with them as his, they did not pass, like other personalty of the wife, into the estate of the husband. They survived to the wife if she outlived her husband, or passed to her repre- sentatives if she died in his lifetime.” (2) The wife of the king of England ‘is of capacity to grant and to take, sue and be sued as a feme sole, at the common law.’ (3) The wife of a man civiliter mortuus* had similar rights.’ 2 Civil death arises from outlawry: it seems doubtful whether there are any other circumstances to which the phrase is now applicable. 1 Subject to some of the exceptions indicated below, all contracts of married women in this country are absolutely void in the absence of statutory modifications. Flesh v. Lindsay, 115 Mo. 1. 2 Miller v. Miller, 1 J. J. Marsh. (Ky.) 169; Standeford v. Devol, 21 Ind. 404; Pierson v. Smith, 9 Oh. St. 554. 3 Metcalf on Cont., pp. 83, 84; Stimson, Am. St. Law, §§ 2513, 6353. (5) Married women. (i) Before 1883 their contracts void. Excep- tions. Brashford v. Bucking- ham and wife, Cro. Jac. 17. Dalton v. Mid. Coun. R. Co. 13 C. B. 478. Co. Litt. 138 a, 20 & 21 Vict. e. 85. Divorce, judicial separa- tion, desertion. Contract for separa- tion. McGregor v. McGregor, 21Q. B.D. 424. Separate estate in equity. 150 FORMATION OF CONTRACT. Part IL (4) The custom of the city of London enabled a mar- ried woman to trade, and for that purpose to make valid contracts. She could not sue or be sued upon these (except in the city courts) unless her husband was joined with her as a party, but she did not thereby involve him in her trading liabilities. (5) A group of exceptions to the general rule was created by the Divorce and Matrimonial Causes Act.? A woman divorced from her husband is restored to the position of feme sole. Judicial separation, while it lasts, causes the wife ‘to be considered as a feme sole for the purpose of contract, and wrongs and injuries, and suing and being sued in any judicial proceeding.’ §§ 25, 26. And a wife deserted by her husband, and having ob- tained a protection order from a magistrate or from the court, is ‘in the like position with regard to property and contracts, and suing and being sued, as she would be under this act if she had obtained a judicial separation.’ § 21. *(6) Akin to the last exception, though not rest- ing upon statute, is the capacity of a married woman to make a contract with her husband that they should live apart, and to compromise proceedings commenced or threatened in the divorce court. For all contracts in- cident to such a transaction the wife is placed in the position of a feme sole (7) The separate estate of amarried woman has in various degrees, in equity and by statute, been treated as a prop- erty in respect of which and to the extent of which she can make contracts. The doctrine arose in the chancery. Property, real and personal, might be held in trust for the separate use of a [*123] 1 For special statutes regulating trading contracts, see Stimson’s Am. St. Law, § 6520-3. 2 See Stimson, Am. St. Law, §§ 6240-54, 6306-9, 6352-9. 8 Gaines’s Adm’x v. Poor, 3 Mete. (Ky.) 503. Chap. ITI. § 5. MARRIED WOMEN. 151 married woman independent of her husband. Sometimes this property was settled on her with a ‘restraint upon anticipation’: in such a case she could use the income, but could neither touch the corpus of the property, nor create future rights over the income. But where it was not so restrained, then to the eatent of the rights and interests created, 2 married woman was treated by courts of equity as having power to alienate and contract.1 But she could not sue or be sued alone in respect of such estate, nor could she bind by contract any but the estate of which she was in actual possession or control at the time the liabilities accrued. The Married Women’s Property Acts of 1870 and 1874 specified various forms of property as the separate estate of married women, enabled them to sue for such property and gave them all remedies, civil and criminal, for its protection that an unmarried woman would have had under the circumstances. Under this act a married woman might make a contract for the exercise of her personal skill or labour, and maintain an action upon it in her own name. Thus was constituted a new legal separate estate, not vested in trustees, and in respect of which a married woman could sue apart from her husband. But this estate was limited in character, and the married woman could not defend alone any *action brought concerning it : it was necessary that her husband should be joined as a party. The Married Women’s Property Act of 1882 repeals the acts of 1870 and 1874, except as regards all rights acquired or acts done while those statutes were in force.? It affects : — [*124] 1 Jaques v. Methodist Church, 17 Johns. (N. Y.) 548; Kantrowitz v. Prather, 31 Ind. 92. 2 Married Women’s Property Acts are found in some form in all the American States. The earliest is believed to be that of Missis- Johnson v. Gallagher, 8D. FL. &J, 494, Pike v. FitzGibbon, 17 Ch. D. 454. Separate estate by statute. 88 & 84 Vict. ce. 98. 87 & 88 Vict. ec. 50. Hancocks v. Lablache, 8 C. P. D. 197. (iz) Mar- ried Women’s Acts. 45 & 46 Vict. ec. 75. 1882. 152 FORMATION OF CONTRACT. Part II, (1) Every woman married after 1882. (2) Every woman married before 1883 as respects prop- erty and choses in action acquired after 1882. We may summarize its effect, so far as it relates to our present purpose, as follows :— g1.sub-s.1. All property, real and personal, in possession, reversion or remainder, vested or contingent, held by a woman before, or acquired after marriage, is her separate property. She can acquire, hold, and dispose of it by will or otherwise, ‘as her separate property in the same manner as if she were a feme sole without the intervention of any trustee.’ gi.subs.2. ‘In respect of and to the extent of her separate property’ "a married woman may enter into contracts, and render herself liable thereupon, as though she were a feme sole. On such contracts she may sue and be sued alone. ss&s7vict. By the Married Women’s Property Act 1898, every con- e. 68. tract made by a married woman since December 5, 1893, binds her separate estate, and binds separate estate acquired after the contract was made though she possessed none at the time of making the contract. : gi.subs.3. Lhe last enactment extends in two ways the operation este: of the act of 1882. (1) By that act the court might draw QB p88 inferences as to the intention of a married woman to bind or not to bind her separate estate. Since 1893 the ex- istence of an intention to bind such estate is presumed and Palliser v, cannot be negatived. (2) The act of 1882 had been Gurney, 19, : ‘519. interpreted to mean that the power of a married woman to sippi in 1839, but the most effective and most widely copied was that of New York, passed in 1848 (L. 1848, c. 200, as amended by L. 1849, c. 875), which, though not repealed, was practically superseded by the act of 1860 (L. 1860, c. 90, as amended by L. 1862, c. 172). For legis- lation in other States see Stimson, Am. St. Law, §§ 6420-22, 6450-60; 1 Parsons on Cont. (8th ed.), pp. 371-82; 2 Bishop on Married Women, §§ 588-829. In some States a married woman is empowered to convey directly to her husband or a husband to his wife. N. Y. L. 1887, c. 5387. See Wells v. Caywood, 3 Colo. 487, H. & W. 233. Chap. III. § 5. MARRIED WOMEN. 153 bind her separate estate depended on the existence of such estate at the date of the contract. The amending act, as regards all *contracts made after December 5, 1893, binds separate estate when acquired, whether or no the married woman possessed any at the date of the contract.! Property may be settled upon a married woman in trust, and she may be restrained from anticipation of property so settled, and from rendering it liable in advance to satisfy her contracts.¢ But an unmarried woman possessed of property and debts, cannot upon marriage evade her debts by settling her property upon herself without power of anticipation. Property owned before marriage is liable to debts con- Jay v. Rob- tracted before marriage, however the property may be QB.'D. 461 settled upon marriage. On the same principle, where debts are incurred by a married woman on the faith of her separate estate, they bind her estate when coverture has ceased by reason of widowhood or dissolution of marriage. [*125] ¢ An illustration of the nature of this restraint is afforded by the case of ee Hood-Barrs vy. Cathcart. A judgment recovered against a married woman ) 59. who has separate estate which she is restrained from anticipating can only affect such estate as is in her hands at the time: it cannot affect income from such estate, coming into her hands after the date of the judgment. It will be noticed therefore that income arising from separate estate which may not be anticipated does not follow the rule as to after-acquired free separate estate, laid down in the act of 1893. 1 Under the New York Married Women’s Property Acts the con- clusion was reached by successive decisions that a married woman’s contracts could be enforced against her separate estate in three cases : (1) When created in or about carrying on a trade or business of the wife; (2) when relating to or made for the benefit of her separate estate; (3) when the intention to charge the separate estate was expressed in the instrument or contract by which the liability was created. Manhattan Brass §c. Co. v. Thompson, 58 N. Y. 80 (1874). If she had no separate estate or was not carrying on a separate busi- ness, she could not contract. Linderman v. Farquharson, 101 N. Y. 434. But later legislation has empowered her to contract for all pur- poses as fully as an unmarried women. See next note. Liability of married woman, not personal. 8. 15. 32 & 88 Vict. ec. 62. Scott v. Morley, 20 Q. B. D. 120. §1. sub-s. 2. Holtby v. Hodgson, 24 Q. B.D. 109. Pelton v. Harrison, {1892]1Q. B. 121, Results of the statute. 154 FORMATION OF CONTRACT. Part II. But the liability to which a married woman can thus subject herself possesses some peculiar features. It is not a personal liability. It cannot come into existence unless there is separate estate, and it does not extend beyond the separate estate. Thus where a joint judgment is given against husband and wife, it is to be given against the husband personally, and against the wife as to her separate property.! Again, a married woman cannot be made a bankrupt or committed to prison under § 5 of the Debtors’ Act 1869, for non-payment of a sum for which judgment has been given against her, under § 1, sub-s. 2 of the act of 1882. The Debtors’ Act relates to persons from whom a debt is due, and *damages or costs recov- ered against a married woman do not constitute a debt due from her, but ‘shall be payable out of her separate estate, and not otherwise.’ Beyond this a judgment against a married woman ‘is precisely the same as a judgment against an unmarried woman.’ The judgment is against her: ‘the fact that execution is limited to her separate property does not make it any the less a judgment against her.’ Thus the acts of 1882 and 1893 increase in two ways the powers of contracting possessed by a married woman. Marriage no longer involves any proprietary disability. All the property which a woman owns when she marries [#126] 1JIn some American States a married woman is personally liable on all her contracts to the same extent as if unmarried. “A married woman may contract to the same extent, with like effect and in the same form as if unmarried, and she and her separate estate shall be liable thereon, whether such contract relates to her separate business or estate, or otherwise, and in no case shall a charge upon her sep- arate estate be necessary.” L. of N. Y. 1884, c. 881. Stimson, Am. St. Law, § 6482. The New York statute excluded contracts between husband and wife. See Blaechinska v. Howard Mission, 1830 N. Y 497. But a subsequent statute (L. 1892, c. 594) empowers her to contract with her husband also except as to contracts affecting the Chap. III. § 5. MARRIED WOMEN. 155 remains hers, and all property which she may subse- quently acquire becomes hers, unless it is placed in the hands of trustees with a restraint upon anticipation. The area of separate estate is immensely extended, and therewith the contractual capacity of the woman. Full effect is given to this extension by the provision in the act that future as well as existing separate estate is ren- dered liable to satisfy the contract. And the rights and liabilities thus increased are ren- dered more easy of enforcement by the provision which enables the married woman to sue and be sued alone.! marital relation or his liability for her support. The legislation of some other States also permits contracts between husband and wife. Stimson, Am. St. Law, § 6480. 1In many States a married woman may sue and be sued without joining her husband. Stimson, Am. St. Law, §§ 6453-4. Consent: vitiated by mistake, misrepre- sentation, fraud, duress, undue influence. CHAPTER IV. Reality of Consent. THE next feature in the formation of contract which has to be considered is genuineness or reality of consent; and here the same question recurs in various forms: Given an apparent agreement, possessing the element of form or consideration, and made between parties capable of contracting, was the consent of both or either given under such circumstances as to make it no real expres- sion of intention? This question may have to be answered in the affirma- tive for any one of the following reasons. CG) The parties may not have meant the same thing; or one or both may, while meaning the same thing, have formed untrue conclusions as to the subject-matter of the agreement. This is mistake. (ii) One of the parties may have been led to form untrue conclusions respecting the subject-matter of the contract by statements innocently made, or facts inno- cently withheld by the other. This is misrepresentation. Gii) These untrue conclusions may have been induced by representations of the other party made with a knowl- edge of their untruth and with the intention of deceiving. This is fraud. (iv) The consent of one of the parties may have been extorted from him by the other by actual or threatened personal violence. This is duress. *(v) Circumstances may render one of the par- ties morally incapable of resisting the will of the other, so that his consent is no real expression of inten- tion. This is undue influence. [*128] 156 Chap. IV. § 1. REALITY OF CONSENT. 157 § 1. Mistake. The confusion which attends all discussions on mistake makes it important to strike off at once all topics which, though superficially connected with the subject, are not relevant to mistake as invalidating a contract. First then we must distinguish mistake of intention from mistake of expression. There are cases where the parties are genuinely agreed, though the terms in which their agreement is expressed will not convey their true meaning. In such cases they are permitted to explain, or the courts are willing to correct their error; but mistake of expression is part of the interpretation of contract. Next, we must strike off all cases in which offer and acceptance never agreed in terms, and so there was never the outward semblance of agreement.? Thirdly, we must strike off all cases in which the assent of one party has been influenced by a false state- ment, innocent or fraudulent, made by the other; by violence, or by oppression on the part of the other. Lastly, we must strike off all cases in which a man is disappointed as to his power to perform his contract, or in the performance of it by the other. This last topic relates to the performance of contract, and should not be mentioned here, but for a practice, common even to learned and acute writers, of blending mistake and fail- ure of consideration. Ifa man alleges that a contract to which he was a party has not been performed as he expected, or has altogether failed of performance, the question is not whether he contracted at all, but whether the terms of the contract justify his contention. A man 1 Page v. Higgins, 150 Mass. 27; Snell v. Atlantic Ins. Co., 98 U.S. 85. 2 Rovegno v. Defferari, 40 Cal. 459, H. & W. 261; Rupley v. Dag- gett, 74 Ill. 851; Rowland v. New York §c. R., 61 Conn. 103; Greene vy. Bateman, 10 Fed. Cas. 1126. (1) Mistake. Mistake of intention differs in effect from mistake of expres- sion, want of mutuality, false state- ment, failure of considera- tion. Pollock, 465 Ed. 6. Failure of considera- tion is not mistake. Cases of operative mistake. 158 FORMATION OF CONTRACT, Part LL. who knows with whom he is dealing, and the nature of the contract which he desires to effect, has only himself to blame, if the terms of the contract do not bind the other *party to carry out the objects of agreement, peas or pay damages for default. And though the terms may not express what he intended them to express, his failure to find words appropriate to his meaning is not mistake; if it were so a contract would be no more than a rough draft of the intention of the parties, to be ex- plained by the light of subsequent events, and corrected by the court and the jury. We are bound to assume that the terms of the contract correspond to the intention of the parties. If performance does not correspond to the terms of the contract, or if the subject-matter of the contract, or the conditions under which it has to be performed are not such as the parties contemplated, still we cannot say that the rights of the parties are affected by mistake. Every honest man, mak- ing a contract, expects that he and the other party will be able to perform and will perform his undertaking. If the disappointment of such expectations were called mistake, then mistake would underlie every breach of contract which had not been deliberately intended by the parties before the contract was made.! The cases in which mistake affects contract are excep- tions to an almost universal rule that a man is bound by an agreement to which he has expressed a clear assent, uninfluenced by falsehood, violence, or oppression. If he exhibits all the outward signs of agreement the law will hold that he has agreed. Thus it will appear that operative mistake is very rare, and that the cases of genuine mutual mistake are rarer still. The circumstances under which it is permitted to invalidate a contract arise in one of three ways. 1 Rice v. Grange, 181 N. Y. 149; Anderson v. May, 50 Minn. 280, H. & W. 639. Chap. IV. § 1. MISTAKE, 159 Two parties are brought into contractual relations by the fraud or negligence of a third, inducing one to enter into a transaction which he did not contem- plate, or deal with a party unknown or unacceptable to him. . Or again, one of two parties allows the other to agree with him in terms, knowing that the other thinks him to be a different person from what he is, or knowing well that he *attaches one meaning to the terms while the other party attaches to them another and different meaning. Or lastly, there are cases of genuine mutual mistake where parties contract for a thing which has ceased to exist, or are in error as to the identity of the subject of contract or of one another. These three forms of mistake may be illustrated, though not amply, from the reports. Beyond these the law will not assist people whose judgment leads them astray, unless their judgment was influenced by the fraud or misrepresentation of the other party to the contract. It will be found that the cases which follow fall under one or other of these three heads. [*130] Mistake as to the nature, or as to the existence of the contract. It is hard to suppose that this can arise, except from the falsehood or carelessness of a third party. The courts would not permit one who had entered into a con- tract to avoid its operation on the ground that he did not attend to the terms which were used by himself or the other party, or that he did not read the document con- taining the contract, or was misinformed as to its con- tents, or that he supposed it to be a mere form. In like manner one may suppose, though the case has never arisen, that a man who posts a letter of acceptance, which he had written and addressed, would not be excused from Act of third party. Dis- honesty of one party. Mistake of identity or existence of subject. (2) Mis- take in- duced by fraud of third party. Hunter y. Walters, 7 Ch, 84. Act of third party fraudu- lent. 2Co. Rep, 9. Tilustra- tion. Foster y. Mackinnon, L. R.4.C. P. 711, 160 FORMATION OF CONTRACT. Part IL. his contract on the ground that he had changed his mind after writing the letter, and had posted it from inad- vertence. The only cases furnished in the reports are cases in which by the fraud of a third party the promisor had been mistaken as to the nature of the contract into which he was entering, and the promisee has in consequence been led to believe in the intention of the other party to con- tract when he did not so intend. In Thoroughgood’s Case, an illiterate man executed a deed, which was described to him as a release of arrears of rent: in fact it was a release of all claims. The deed was not read to him, but when told that it related to arrears of rent, *he said, ‘If it be no otherwise, I am content,’ and 7 executed the deed. It was held that the deed ae was void. In Foster v. Mackinnon, Mackinnon who was a very old man was induced to endorse a bill of exchange for £3000, being told that it was a guarantee. The bill was subsequently endorsed for value to Foster, who sued Mackinnon on the bill; the jury found that there was no negligence on the part of Mackinnon, and though Foster was innocent of the fraud, it was held that he could not recover. ‘It seems plain on principle and on authority that if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pre- tended to be read from the paper, which the blind or illiterate man afterwards signs; then, at least if there be no negligence, the signature so obtained is of no force. And it is invalid, not merely on the ground of fraud, where fraud exists, but on the ground that the mind ~ of the signer did not accompany the signature ; in other words, that he never intended to sign, and therefore in contemplation of law never did sign, the contract to which his name is appended.’ In these two cases it has fallen to the court to say Chap. IV. § 1. MISTAKE. 161 which of two innocent parties is to suffer for a mistake occasioned by the fraud of a third.? The same question arises where the act of the third party is merely officious or careless. It has been held that a man is not bound by an offer wrongly transmitted by a telegraph clerk and accepted by the offeree.2 The post office had no authority to convey the message except in the form presented to it. But the question might assume a more difficult aspect. 1“ The party whose signature to such a paper is obtained by fraud as to the character of the paper itself, who is ignorant of such character, and has no intention of signing it, and who is guilty of no negligence in affixing his signature, or in not ascertaining the character of the instrument, is no more bound by it than if it were a total forgery, the signature included.” Dixon, C.J., in Walker v. Ebert, 29 Wis. 194, H. & W. 238. See also De Camp v. Hamma, 29 Oh. St. 467; Gibbs vy. Linabury, 22 Mich. 479. “When a purchaser of a negotiable promissory note takes it for value before maturity without notice of any fraud in its execution, unless at the time it was so purchased by him it was absolutely void, he will recover on such note against the maker, although the maker was induced by fraud to sign it, not intending to sign such a note, but a paper of an entirely different character, and in such case the question of negligence in the maker forms no legitimate subject of inquiry.” Johnson, Pres., in Bank v. Johns, 22 W. Va. 520, 535. While the American cases do not generally follow the stringent rule last quoted, they are disposed to turn the equities against the de- fendant upon slight proof of negligence. Chapman v. Rose, 56 N. Y. 137; Baldwin v. Barrows, 86 Ind. 351; Ort v. Fowler, 31 Kans. 478. And also in cases of innocent purchasers who rely upon documents of title. Gavagan v. Bryant, 83 Ill. 876. Where A signs a note for $195 believing that he is signing one for $65, query as to whether he can set up any defence against an innocent purchaser for value. Fayette County Sav. Bk. v. Steffes, 54 Iowa, 214. As between the original parties fraud in procuring the contract may always be shown. Trambly v. Ricard, 130 Mass. 259. But mere ignorance or mistake on the part of the one signing will not invalidate the contract in the absence of fraud. Phillip v. Gallant, 62 N. Y. 256; Johnston v. Patterson, 114 Pa. St. 398. 2 Accord: Pepper v. Tel. Co., 87 Tenn. 554. Contra: Western Union Tel. Co. v. Shotter, 71 Ga. 760. A ‘central’ telephone operator is held to be the agent of both parties in repeating the conversation. Oskamp v. Gadsden, 35 Neb.-7. M Officious, or careless act. Henkel v. Pape, L. R. 6 Exch. 7. 162 FORMATION OF CONTRACT. Part IT. A writes to X, a broker, an order to buy certain shares, that is, he makes an offer to buy shares importing a promise to pay their market price. After the letter is written and directed, he receives intelligence which causes him to change his mind, and he takes other letters to the post, leaving this on his table. A servant or a friend, seeing the letter, thinks it has been forgotten, and posts it. The shares are bought just *before a commercial panic, which causes them to fall heavily in value. Is A or X to lose by the interference of A’s friend or servant? Or suppose that A has given the letter with others to a friend, requesting him to post the others, but only to read the letter to the broker, and advise him upon it. The friend carelessly posts all the letters and the shares are bought at a loss. It may be said for A in both these cases that the mind of the offeror did not accompany the offer: just as in Foster v. Mackinnon the mind of the signer did not accompany the signature. It might be said on X’s be- half that A was negligent in his dealings with an impor- tant letter, but unless he left it in a place where his letters were usually collected for the post, or dropped it in the street, I find a difficulty in supposing that the mere fact that it lay on his table could furnish an authority to any one to communicate it to X by the post.? This much seems clear, that mistake as to the nature of the transaction entered into, or as to the intention of the other party to make a contract, must be mutual mis- [#132] 1 Where A makes and signs a negotiable instrument, but without intending to deliver it, and it is taken from his possession and put into circulation, it has been held that he is liable upon it to a bond Jide holder for value. Worcester County Bank v. Dorchester §c. Bank, 10 Cush. (Mass.) 488; Shipley v. Carroll, 45 TL. 285. Contra: Burson y. Huntington, 21 Mich. 415; Salander v. Lockwood, 66 Ind. 285 (sem- ble). Chap. IV. § 1. MISTAKE, 163 take; that it must arise from some deceit which ordinary diligence could not penetrate, or some accident which or- dinary diligence could not avert; that it must be brought about by the act of a third party, otherwise the contract, if affected at all, would be voidable for misrepresentation or fraud, and would not be void on the ground of mistake. Mistake as to the identity of the person with whom the contract 1s made. Mistake of this sort can only arise where A contracts with X, believing him to be J: that is, where the offeror has in contemplation a definite person with whom he in- tends to contract. It cannot arise in the case of general offers, which any one may accept, such as offers by adver- tisement, or sales for ready money. In Boulton v. Jones, Boulton had taken over the busi- ness *of one Brocklehurst, with whom Jones had been used to deal, and against whom he had a set- off. Jones sent an order for goods to Brocklehurst, Boulton supplied them without any notice that the busi- ness had changed hands; when Jones learned that the goods had not come from Brocklehurst, he refused to pay for them, and it was held that he need not pay. ‘In order to entitle the plaintiff to recover, he must show that there was a contract with himself.’ + In Cundy v. Lindsay, a person named Blenkarn, by [#133] 1 Accord: Boston Ice Co. v. Potter, 123 Mass. 28, H. & W. 248. It would seem that if the goods have been consumed in ignorance of the mistake, the consumer is liable to no one. But if he deals with them after notice of the mistake, he becomes liable either in trover after demand or in assumpsit upon an implied ‘ratification’ of the substi- tution of parties. Randolph Iron Co. v. Elliott, 34 N. J. L. 184; Barnes v. Shoemaker, 112 Ind. 512. These cases should be carefully distinguished from those where B deals with A, supposing A to be acting for himself, when in fact A is acting for an undisclosed principal, X. In such case, subject to cer- tain qualifications, X may sue or be sued upon the contract. Hub- bard v. Tenbrook, 124 Pa. St. 291; Huntington v. Knox, 7 Cush. (Mass.) 371; Huffeut on Agency, Ch. X. (ii) Mis- take as to party: known to offeree ; Boulton v. Jones, 2 H. & N, 566. 3 App. Cas. 450) produced by fraud of third party. At p. 465, 2H. &N. 564, 164 FORMATION OF CONTRACT. Part IT. imitating the signature of a respectable firm named Blen- kiron, induced AB to supply him with goods which he afterwards sold to X. It was held that an innocent pur- chaser could acquire no right to the goods, because as between AB and Blenkarn there was no contract. ‘Of him,’ says Lord Cairns, ‘they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never even for an instant of time rested upon him, and as between him and them there was no consensus of mind, which could lead to any agreement or contract whatever. As between him and them there was merely the one side to a contract, where in order to produce a contract, two sides would be required.’ The case of Boulton v. Jones is not a case of an offer made by sending goods, and accepted by the use of them. The offer proceeded from the intending purchaser. Boul- ton knew that it was not addressed to him, but thought that Jones might not care whether Brocklehurst, or Brocklehurst’s successor supplied the goods: as events showed Jones did care, and had reasons for dealing with Brocklehurst, rather than with Boulton. The result of the two cases is no more than this,— that if a man accepts an offer, which is plainly meant for another, or if he becomes party to a contract by falsely representing himself to be another,® the contract in either 2 Cundy v. Lindsay is a sufficient illustration of the rule which I have laid down: but there is a mass of authority to the effect that where a man induces another to contract with him or to supply him with goods by falsely repre- senting himself to be some one else than he is, or to have an authority which he does not possess, no contract is made, and no property in the goods passes. Hardman v. Booth, 1 H. & C. 803; Kingsford v. Merry, 1H. & N. 503; and Hollins v. Fowler, L. R. 7 H. L. 757, where all or nearly all.the cases bearing on the subject are reviewed. 1In a case similar to Cundy v. Lindsay, the Massachusetts court, without deciding the point raised in that case, held that the seller had. no action against the common carrier who delivered the goods to the imposter. Samuel v. Cheney, 135 Mass. 278; Edmunds v. Merchants’ &c. Co., 1b, 283. But where the imposter represents himself as the Chap. IV. § 1. MISTAKE. 165 case is void. In *the first case one party takes advantage of the mistake, in the other he creates it. The reports furnish us with no case of genuine mis- take, in which A makes an offer to MW believing him to be X, and © accepts believing the offer to be meant for him. If in Boulton v. Jones the plaintiff had succeeded a predecessor in business of the same name, he might reasonably have supposed that the order for goods was meant for him. If the order had been given to Boulton (A), and accepted by Boulton (X), it is very doubtful whether Jones could have avoided the contract on the ground that though he obtained the goods he wanted from the man to whom his order was addressed, the Boulton whom he had addressed was not the Boulton whom he intended to address. Circumstances might indicate to the offeree that the offer was intended for a different person. An offer of marriage falling into the hands of a lady for whom it was not intended, where two ladies chanced to have the same name and address, might or might not be turned into a promise by acceptance, according as the terms of acquaint- ance, or age of the parties might justify the recipient in supposing that the offer was meant for her. An offer for the purchase of goods might not call for the same nicety of consideration on the part of the offeree. [*134] Mistake as to the subject-matter. Mistake of identity as to the thing contracted for. A contract may be void on the ground of mistake, if two things have the same name, and A makes an offer to X concerning M, thinking that X is referring to M, agent of a reputable merchant, there is no contract and the seller may recover the goods from innocent purchasers. Barker v. Dins- more, 72 Pa. St. 427; Edmunds v. Merchants’ Se. Co., supra. Cases of mutual error. 2H. &N. 564. s (iii) Mis- take as to subject- matter. (a) Mis- take of identity. 2H. &C 906.. Tonides v. Pacific In- surance Co., L. R.6Q.B. 686. (b) Mis- take and impossi- bility. 5 Tf. L. C. 673. 166 FORMATION OF CONTRACT. Part II. which offer X accepts concerning m, thinking that A is referring to m. If *there is nothing in the terms of the contract to point to M, or m, as its subject- matter, evidence may be given to show that the mind of each party was directed to a different object: that A offered one thing, and X accepted another. In Raffles v. Wichelhaus the defendant agreed to buy of the plaintiff a cargo of cotton ‘to arrive ex Peerless from Bombay.’ There were two ships called Peerless, and both sailed from Bombay, but Wichelhaus meant a Peerless which arrived in October, and Raffles meant a Peerless which arrived in December. It was held that there was no contract. But if Wichelhaus had meant a ship of a different name, he would have had to take the consequences of his care- lessness in not expressing his meaning properly. Nor could he have avoided the contract if its terms had con- tained such a description of the subject-matter as would practically identify it.? [*135] Mistake as to the existence of the thing contracted for. It is doubtful whether this can be regarded as mistake at all, or whether we may not regard the parties to a con- tract as acting on an assumption or implied condition that the subject-matter of the contract is in existence.* The topic really belongs to impossibility of perform- ance: but whereas impossibility arising after the contract is made can only under certain circumstances effect a dis- charge, antecedent impossibility arising from the non-exist- ence of the thing contracted for prevents the formation of a contract. In Couturier v. Hastie, a contract was made for the sale aBy 56 & 57 Vict. c.71.§ 6 such a condition is implied in every sale of goods. 1 Kyle v. Kavanagh, 103 Mass. 856, H. & W. 246; Barton v. Capron, 3 R. 1.171; Irwin v. Wilson, 45 Oh. St. 426. Chap. IV. § 1. MISTAKE. 167 of a cargo of corn, which the parties supposed to be on its voyage from Salonica to England: it had in fact, before the date of sale, become so heated that it was unloaded at Tunis and sold for what it would fetch. The court held that the contract was void, inasmuch as ‘it plainly imports that there was something to be sold, and something to be purchased, whereas the object of the sale had ceased to exist.’ ! *The same rule applies where parties contract under a mutual belief that a right exists, which in fact is non-existent. If A agrees with X to hire or buy an estate from him which both believe to belong to X, but which is found to belong to A, the contract will not be enforced. And this is not, as would at first sight appear, an infringe- ment of the maxim ‘ignorantia juris haud excusat.’ [*136] ‘In that maxim,’ said Lord Westbury, ‘the word jus is used in the sense of denoting general law, the ordinary law of the country. But R when the word jus is used in the sense of denoting a private right, that maxim has no application. Private right of ownership is a matter of fact; it may be the result also of matter of law; but if parties contract under a mutual mistake, and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake.’ 1 Allen v. Hammond, 11 Pet. (U. 8.) 63; Gibson v. Pelkie, 37 Mich. 380, H. & W. 247; Riegel v. American Life Ins. Co., 140 Pa. St. 193; s.c. 153 Pa. St. 184; Duncan v. New York Mut. Ins. Co., 188 N. Y. 88; Bedell v. Wilder, 65 Vt. 406; Sherwood v. Walker, 66 Mich. 568, H. & W. 249. That mistakes as to quality will not avoid a contract, see Hecht v. Batcheller, 147 Mass. 335, H. & W. 255; Wood v. Boynton, 64 Wis. 265, H. & W. 257. But there seems to be a class of cases lying midway between mistakes as to existence and mistakes as to quality, where the mistake is as to the existence of some fundamen- tal quality, the presence or. absence of which is regarded by the parties as a material element in the contract: as the sterility or non- sterility of a cow, Sherwood v. Walker, supra; the productiveness or non-productiveness of land, Irwin v. Wilson, 45 Oh. St. 426; Thwing yv. Hall &c. Co.. 40 Minn. 184; the denominational value of a coin, Chapman v. Cole, 12 Gray (Mass.), 141; Pollock on Cont. (6th ed.), p. 465. Mistake as to exist- ence of a right. Bingham y. Bingham, 1 Ves. Senr. 126, Cooper v. Phibbs, L. 2H. L. 170. (iv) Mis- take coupled with fraud. 1 Exch. 663. Smith v. Hughes, L. R. 6 Q. B.at p. 607. Responsi- bilities of parties. Rule of implied warranty. Jones v. Just, L. R. 8 Q. B. 203. 168 FORMATION OF CONTRACT. Part IT. Mistake by one party as to the intention of the other, known to that other. We come here to the limits of operative mistake in regard to the subject-matter of a contract, and must be very care- ful to define them so as to avoid confusion. A general rule laid down in Freeman v. Cooke, and often cited with approval, may be taken to govern all cases in which one of two parties claims to repudiate a contract on the ground that his meaning was misunderstood, or that he misunderstood that of the other party. ‘If whatever a man’s real intention may be he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agreé to the other party’s terms.’ As regards the quantity and the price of the subject- matter concerned, a man’s statement must usually be taken to be conclusive against himself. As regards the quality of a thing sold, or the general circumstances of a contract entered into, a man must use his own judgment, or if he cannot rely upon his judgment, *must take care that the terms of the contract se- cure to him what he wants.1 In two cases the law will protect one of the parties to [#137] a contract. Where a man buys goods which he has no opportunity of inspecting, the law introduces into the contract of sale certain implied warranties, that the goods supplied shall correspond in description to the goods promised, and shall be of a marketable character.? 1 That caveat emptor is the general rule, see Beninger v. Corwin, 24 N. J. L. 257; Wheat v. Cross, 31 Md. 99. 2 So, in some cases, if an inspection would be fruitless. Wolcott v. Mount, 36 N. J. L. 262, H. & W. 598; Bagley v. Cleveland Rolling Mill Co., 21 Fed. Rep. 159. Chap. IV. § 1. MISTAKE, 169 And again, in certain contracts said to be ‘uberrimae fidei,’ in which one of the two parties is necessarily at a disadvantage as to knowledge of the subject-matter of the contract, the law requires the other to disclose every material fact, that is, every fact which might have influenced the mind of a prudent person. Beyond this, where the terms of a contract are clear, the question is, not what the parties thought, but what they said and did. Suppose that A sells to X, and X believes that he is buying, a bar of gold: the bar turns out to be brass. The parties are honestly mistaken as to the subject-matter of the contract, both believed the bar to be gold. But their rights are not affected by their state of mind; they depend on the answer to the question — Did A sell to X a bar of metal, ora bar of gold? A contract for a bar of gold is not performed by the delivery of a bar of brass; a contract for a bar of metal is performed by the delivery of a bar of metal. It does not matter what the metal may be, nor does it mat- ter what the parties may have thought that it was.? There are two things which have to be considered by one who is entering into a contract. The first is the qual- ity of the thing, or circumstance of the transaction: the matter of his bargain. The second is the statements, promises, and conditions of which the contract consists: the terms of his bargain. As to these things, and subject to the exceptions which I have mentioned, a contracting party must take care *of himself; he cannot expect the other party to correct his judgment as to the matter of his bargain, or ascertain by cross-examination whether he understands its terms. But the law will not allow a man to make or accept a promise, which he knows that the other party understands [*138] 1 Walden v. Louisiana Ins. Co., 12 La. 134, H. & W. 278; Grigsby v. Stapleton, 94 Mo. 423, H. & W. 285. - 2 Wood v. Boynton, supra; Chapman v. Cole, supra. Rule of non-dis- closure. post, *p, 157, Tlustra- tions. Mistake as to thing. Mistake as to promise. Mistake as to intention. 170 FORMATION OF CONTRACT. Part II. in a different sense from that in which he understands it himself. We can best illustrate these propositions by an imagin- ary sale. , A sells X a piece of china. (a) X thinks it is Dresden china, A thinks it is not. Each takes his chance. X may get a better thing than A intended to sell, or a worse thing than he intended to buy ; in neither case is the validity of the contract affected. (8) X thinks it is Dresden china. A knows that X thinks so, and knows that it is not. The contract holds. A must do nothing to deceive X, but he is not bound to prevent X from deceiving himself as to the quality of the article sold. (y) X thinks that it is Dresden china and thinks that A intends to sell it as Dresden china; and A knows it is not Dresden china, but does not know that X thinks that he in- tends to sell it as Dresden china. The contract says noth- ing of Dresden, but is for a sale of china in general terms. The contract holds. The misapprehension by X of the extent of A’s promise, unknown to A, has no effect. It is not A’s fault that X omitted to introduce terms which he wished to form part of the contract. (8) X thinks it is Dresden china, and thinks that A intends to sell it as Dresden china. A knows that X thinks he is promising Dresden china, but does not mean to promise more than china in general terms. The contract is void. X’s error was not one of judg- ment, as in (8), but regarded the intention of A, and A, knowing that his intention was mistaken, allowed the mistake to continue.* 1 Wood v. Boynton, supra. 2 Peoples’ Bank v. Bogart, 81 N. Y. 101; Laidlaw’ v. Organ, 2 Wheat. (U. 8.) 178, H. & W. 282 (belief as to extrinsic fact). 8 Wheat v. Cross, 31 Md. 99. 4 Parrish v. Thurston, 87 Ind. 437 ; Shelton v. Ellis, 70 Ga. 297, H. & W. 262; Harran v. Foley, 62 Wis. 584. These are generally treated as cases of fraud. Stewart v. Wyoming Ranch Co., 128 U.S. 388. Chap. IV. § 1. MISTAKE. 171 The last instance given corresponds to the rule laid down *in Smith v. Hughes. In that case the defendant was sued for refusing to accept some oats which he had agreed to buy of the plaintiff, on the ground that he had intended and agreed to buy old oats, and that those sup- plied were new. The jury were told that if the plaintiff knew that the defendant thought he was buying old cats, then he could not recover. But the Court of Queen’s Bench held that this was not enough to avoid the sale; that in order to do so the plaintiff must have known that the defendant thought he was being promised old oats. It was not knowledge of the misapprehension of the quality of the oats, but knowledge of the misapprehension of the quality promised, which would disentitle the plaintiff to recover. [*139] Blackburn, J., said, ‘In this case I agree that on the sale of a spe- cific article, unless there be a warranty making it part of the bargain that it possesses some particular quality, the purchaser must take the article he has bought though it does not possess that quality.’ (This is instance a.) ‘And I agree that even if the vendor was aware that the purchaser thought that the article possessed that quality, and would not have entered into the contract unless he had so thought, still the purchaser is bound, unless the vendor was guilty of some fraud or deceit upon him, and that a mere abstinence from disabusing the purchaser of that impression is not fraud or deceit; for whatever may be the case in a court of morals, there is no legal obligation on the vendor to inform the purchaser that he is under a mistake, not induced by the act of the vendor.’ (This is instance 8.) And Hannen, J., said, ‘It is essential to the creation of a contract that both parties should agree to the same thing in the same sense. But one of the parties to an apparent contract may, by his own fault, be precluded from setting up that he had entered into it ina different sense to that in which it was understood by the other party. Thus in a case of sale by sample where the vendor, by mistake, exhi- bited a wrong sample, it was held that the contract was not avoided by this error of the vendor.’ Scott v. Littledale.s (This corresponds to instance y.) «This case puts, from the seller's point of view, the principle which we have been illustrating from the point of view of the buyer. The seller means to promise one thing; he in fact promises another; the fact that he thinks he is promising something less than he does promise has no effect on the validity of the sale. L. R.6Q. B. 597. ” Mistake of buyer as to quality not known to seller. Mistake of buyer as to quality known to seller. Mistake of buyer as to quality promised not known to seller. SE. & B. 815, Mistake of buyer as to quality promised known to seller. Applica- tion of rule in equity. 30 Beay, 62. Per James, L.J., Tam- plin vy. James, 15 Ch. D. 221. Rectifica- tion in 172 FORMATION OF CONTRACT. Part IL And further he says, ‘If, in the present case, the plaintiff knew *that the defendant, in dealing with him for oats, did so on [140 the assumption that the plaintiff was contracting to sell him ] old oats, he was aware that the defendant apprehended the contract in a different sense to that in which he meant it, and he is thereby deprived of the rightto insist that the defendant shall be bound by that which was the apparent, and not the real bargain.’ (This corre- sponds to instance 6.) ‘ Smith v. Hughes only tells us what is necessary to con- stitute such mistake as will enable one party successfully to resist an action brought by the other for non-perform- ance of a contract which is not in its terms ambiguous. But a series of equity cases illustrates the rule that when one man knows that another understands his promise in a different sense from that in which he makes it the trans- action will not be allowed to stand. In Webster v. Cecil specific performance of a contract was refused on the ground of mistake of this nature, al- though it was suggested that damages might be recovered in a common law court for non-performance. The parties were in treaty for the purchase of some plots of land belonging to Cecil. Webster, through his agent, offered £2000, which was refused. Afterwards Cecil wrote to Webster a letter containing an offer to sell at £1200; he had intended to write £2100, but either cast up the figures wrongly or transposed the first two. Webster accepted by return of post. Cecil at once tried to correct the error, but Webster, though he must have known from the first that the offer was made in mistaken terms, claimed that the contract should be performed and sued for specific performance. This was refused: the plaintiff was left to such action at law as he might be advised to bring. The case was described later as one ‘where a person snapped at an offer which he must have perfectly well known to be made by mistake.’ The power of the Court of Chancery in former times, of the Chancery Division now, to rectify deeds or written in- Chap. IV. § 1. MISTAKE. 173 struments is as a rule reserved for cases where the parties had agreed and the terms of the agreement, by fault of neither, failed to express their meaning. *But it is sometimes used where mistake is not mutual. In such cases, and they are not numerous, one of the parties being at the time cognizant of the other’s error as to the nature or extent of his promise seeks to take advantage of it. Or an offer is made in terms which, from the tenor of previous negotiations, the offeree, when he accepts, must know to include more than the offeror meant to include. The court then tells the offeree, in substance, that his agreement must be either rectified or cancelled, and that he may take his choice. A and X signed a memorandum of agreement by which A promised to let certain premises to X at the rent of £230, in all respects on the terms of the within lease: and this memorandum accompanied a draft of the lease referred to. A, in filling in the blank in the draft for the amount of rent to be paid, inadvertently entered the figures £130 instead of £230; and the lease was engrossed and exe- cuted with this error. The court was satisfied, upon the evidence, that X was aware of the discrepancy between the rent which she was promising to pay and the rent which A believed her to be promising to pay; and she was given the option of retaining the lease, amended so as to express the real intention of the parties, or giving it up, paying at the rate of £280 per annum for such use and occupation of the premises as she had enjoyed. Harris v. Pepperell and Paget v. Marshall were cases in which the defendant accepted an offer which he must have known to express something which the offeror did not intend to express. The defendant was offered the alternative of cancellation or rectification. In these cases the promise was sought to be set aside, in Webster v. Cecil it was sought to be enforced. Otherwise the circum- stances are the same. [#141] Chancery Division. Gerrard vy. Frankel, 30 Beay. 445, L.R.5. Eq. 98 Ch. D. 256. Effects of mistake, Kelly v. Solari, 9M. & W. 58. Webster v. Cecil, 30 Beay, 62, Paget v. Marshall, 25 Ch. D,225, (2) Misrep- resenta- tion. Distinc- tions. 174 FORMATION OF CONTRACT. Part II. The effect of mistake, where it has any effect at all, is to avoid the contract. The common law therefore offers two remedies to a person who has entered into an agree- ment void on the ground of mistake. If it be still execu- tory he may repudiate it and successfully defend an action brought *upon it;! or if he have paid money under [14g] the contract, he may recover it back upon the general principle that ‘where money is paid to another under the influence of a mistake, that is, upon the supposition that a specific fact is true which would entitle the other to the money, but which fact is untrue, an action will lie to recover it back.’ ? In equity the victim of mistake may resist specific per- formance of the contract, and may sometimes do so suc- cessfully when he might not have been able to defend at law an action for damages arising from its breach. He may also as plaintiff apply to the Chancery Division of the High Court to get the contract set aside and to be freed from his liabilities in respect of it.8 § 2. Misrepresentation. In dealing with misrepresentation as a circumstance invalidating contract we must keep before us two dis- tinctions. We must carefully separate misrepresentation or innocent misstatement of fact, from fraud or wilful mis- statement of fact: and we must separate with equal care representations, or statements which induce a contract, from terms, or statements which form part of a contract. With these distinctions in view, we may hope to 1 Gibson v. Pelkie, 37 Mich. 380, H. & W. 247; Sherwood v. Walker, 66 Mich. 568, H. & W. 249. 2 Recovery of money paid by mistake. Wood v. Sheldon, 42 N. J. L. 421; McGoren v. Avery, 837 Mich. 120. Recovery of property delivered under contract entered into through mistake. Rodliff v. Dallinger, 141 Mass. 1. 8 Snell y. Atlantic Ins. Co., 98 U.S. 85; Shelton v. Ellis, 70 Ga. 297, H. & W. 262. Chap. IV. § 2. MISREPRESENTATION. 175 encounter successfully the difficulties which meet us in determining the effect of misrepresentation in contract. (1) We must, firstly, distinguish misrepresentation from fraud, and must consider whether honesty of motive or ignorance of fact can remove a false statement from the category of fraud. (2) We must, secondly, bear in mind that if a repre- sentation forms an integral part of a contract it becomes a promise. If it is false, its untruth does not affect the formation of the contract but operates to give a discharge, or a right of action, or both, to the party injured by the falsehood, such falsehood being in truth the breach of a promise. So we must dis-*tinguish representation, whether innocent or fraudulent, which brings about a contract and so affects its formation, from representation which introduces terms or promises into a contract and so affects its performance. The terminology of this part of the subject is extraordinarily confused. Representation, condition, warranty, independent agreement, implied war- ranty, warranty in the nature of a condition, are phrases which it is not easy to follow through the various shades of meaning in which they are used. (3) We must, thirdly, take note of the effect of the Judicature Act, combined with recent decisons, in modify- ing the rules of common law and expanding those of the chancery in respect of innocent misrepresentations made prior to the formation of a contract. The common law may be said to have attached no weight to a representation unless it was (1) fraudulent, or (2) a term in the contract, or (3) made by way of induce- ment to enter into a contract, in which, because it belonged to a special class, the utmost good faith and accuracy of statement was required. Chancery, on the other hand, would refuse specific per- formance where an innocent misrepresentation could be shown to have induced a contract, though it seems doubtful [*143] Misrepre- sentation and Fraud. State- ments which are promises and state- ments which are not. The law before and since the Judi- cature Act. Effect of decisions since the Judi- cature Act. (i) Distin- guished from fraud. Fraud as @ wrong. 176 FORMATION OF CONTRACT. Part IL. whether, except in contracts of the special class alluded to, a contract might be set aside on such grounds. The Judicature Act, 386 & 87 Vict. c. 66.8. 24. sub-ss. 1 & 2, provides that the High Court of Justice, and the Court of Appeal and every judge thereof, shall give such effect to any equitable claim, remedy or defence as the Court of Chancery ought to have given if the matter had come before it. The common law rule has therefore been modified by chancery decisions given before the Judicature Act; and not only so, but since the passing of that act a broad rule has been laid down in the Court of Appeal that material misrepresentation, though innocent, affords a ground for relief from the liabilities of a contract into which such a representation *has induced a man to enter. A rule applicable only to special contracts has become a general rule so far as concerns misrepresentation, while certain contracts are still distinguishable from others in this — that in the making of them the utmost fulness of statement is required. So we may now say that material misrepresentation is an invalidating circumstance in all contracts, while non-dis- closure of fact will only affect contracts of a special sort. I will deal with these difficulties in order. [#144] (1) Misrepresentation distinguished from fraud. The practical test of fraud as opposed to misrepresenta- tion is that one does, and the other does not give rise to an action ex delicto. Fraud is a wrong, and may be treated as such, besides being a vitiating element in con- tract. Misrepresentation may invalidate a contract but will not give rise to an action ex delicto, the action of deceit.} 1 This distinction is generally observed throughout the United States. Cowley v. Smyth, 46 N. J. L. 880; Da Lee v. Blackburn, 11 Kans. 190; Tucker v. White, 125 Mass. 344; Wakeman v. Dalley, 51 Chap. IV. § 2. MISREPRESENTATION, 177 ‘Tt must be borne in mind,’ says Cotton, L.J., ‘that in an action for setting aside a contract which has been obtained by misrepre- sentation, the plaintiff may succeed though the misrepresentation was innocent; but in an action of deceit, the representation to found the action must not be innocent, that is to say it must be made either Arkwright with a knowledge of its being false or with a reckless disregard as to 17 cep whether it is or is not true.’ a But knowledge that a statement is false may not be in- Fraud consistent with honesty of motive in making it: on the Without dishonest other hand, there may be no clear knowledge that the motive. statement made is false, but a dishonest or at any rate self- seeking motive for wishing that it should be believed by the party to whom it is made. Let us take the first of these cases. ‘Tt is fraud in law if a party make representations which he knows Per Tindal, to be false and injury ensues, although the motives from which the hai representations proceeded may not have been bad.’ 7 Bing, 107. In Polhill v. Walter, Walter accepted a bill of exchange BB. & A, drawn on another person: he represented himself to have *authority from that other to accept the bill, honestly 145]... : believing that the acceptance would be sanctioned, and the bill paid by the person for whom he professed to act. The bill was dishonoured at maturity, and an in- dorsee, who had given value for the bill on the strength of Walter’s representation, brought against him an action [* N. Y. 27. But in at least two jurisdictions an action for damages will lie for innocent misrepresentations. “The doctrine is settled here, by a long line of cases, that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequences to the plaintiff being as serious as though it had pro- ceded from avicious purpose, he would have a right of action for the damages caused thereby, either at law or in equity.” Morse, J.,in Hol- har PS saeteon comb v. Noble, 69 Mich. 396; and so also, Davis v. Nuzum,72 Wis. 439.- > $46 VEC. TIP And a few jurisdictions, while denying an independent action in such cases, allow the defendant to set up the damages by way of counter- claim to an action for the price. Mulvey v. King, 39 Oh. St. 491; Loper v. Robinson, 54 Tex. 510; but see AfeIntyre v. Buell, 132 N. Y. 192; King v. Eagle, 10 Allen (Mass.), 548; First N. Bk. v. Yocum, 11 Neb. 328. N At p. 124, Derry v. Peek, 14. App. Ca. 387, Reckless misstate- ment. 178 FORMATION OF CONTRACT. Part II. of deceit. He was held liable, and Lord Tenterden in giving judgment said: — ‘If the defendant, when he wrote the acceptance, and, thereby, in substance, represented that he had authority from the drawee to make it, knew that he had no such authority (and upon the evidence there can be no doubt that he did), the representation was untrue to his knowledge, and we think that an action will lie against him by the plaintiff for the damage sustained in consequence.’ 1! It will be observed that in this case there was a repre- sentation of facts known to be false; that the knowledge of the untruth of the statement was the ground of the decision: it is therefore clearly distinguishable from a class of cases in which it has been held, after some con- flict of judicial opinion, that a false representation be- lieved to be true by the party making it will not give rise to the action of deceit. On the other hand it is not necessary, to constitute fraud, that there should be a clear knowledge that the statement made is false. But statements which are intended to be acted upon, if made recklessly and with no reasonable ground of belief, may furnish such evidence of dishonest motive as to bring their maker within the remedies appropriate to fraud.? Where directors issue a prospectus setting forth the advantages of an undertaking into the circumstances of which they have not troubled themselves to inquire, intending to induce those who read the prospectus to 1 An action against an agent for an innocent misrepresentation by words or conduct as to his authority, is, in effect, though not always in form, an exception to the general rule that an action for damages will not lie for an innocent misrepresentation. In order to avoid the recog- nition of the exception, the courts invent the fiction of an “implied warranty of authority” and allow an action for the breach of this warranty. Kroeger v. Pitcairn, 101 Pa. St. 311; White v. Madison, 26 N. Y.117; Huffcut on Agency, § 183. 2 Chatham Furnace Co. v. Moffatt, 147 Mass. 403, H. & W. 298; Lynch v. Mercantile Trust Co. 18 Fed. Rep. 486; Bullitt v. Farrar, 42 Minn. 8. | Chap. IV. § 2. MISREPRESENTATION. 179 incur liabilities in respect of the undertaking, they commit a fraud if the statements contained in the pro- spectus turn out to be untrue; they represent themselves to have a belief which they know they do not possess. And so neither the intent to defraud nor deliberate assertion of untruth are necessary elements in fraud. And the best *distinction which we can make be- tween misrepresentation and fraud is that the former is a misstatement of facts not known to be false or a non- disclosure of facts not intended to deceive; while the latter consists in-representations known to be false, or made with no real belief in their truth or falsehood, and entitles the injured party to the action of deceit. [#146] (2) Representations distinguished from terms. Equally important with the distinction between mis- representation and fraud is the distinction between state- ments which are terms in a contract and statements which are inducements to enter into a contract. Much subtlety of reasoning has been wasted because, where a man has in good faith made a promise which he is ultimately unable to perform, it has been said that his promise was misrepresentation, or was made under a mistake of fact, and so questions proper to the perform- ance or breach of contract have been mixed with questions relating to the formation of contract. And other difficulties have arisen from a view at one time entertained by courts of equity, that there may be representations which are not terms in a contract but which ought nevertheless to be made good by the party “ responsible for them. Such representations, in the cases where they occur, can all be resolved into terms of a contract. 2T touch at the close of this chapter on representation which creates an estoppel, and so may prevent the disproof of an alleged right, but this is a different thing from the theory advanced in Coverdale v. Eastwood. Reese River Mining Co. y. Smith, L.R.4H.L. 64, (ii) Repre- sentations distin- guished from terms. Kennedy v.. Panama Steam Co., L. R.2Q. B. 580. Coverdale vy. Eastwood, 15 Eq. 121. Pollock on Contract, 507, and App. N. Explanation in Bebn vy. Burness, 8B. & 8. 751. Bebn v. Burness, 1B. &S8. Bit; 8B. & 8. 753. 180 FORMATION OF CONTRACT. Part IL. We must bear in mind, first, that a representation which is embodied in a contract ceases to be a represen- tation and becomes a promise that a certain thing is or shall be; and next, that, unless a representation is so embodied, it cannot of itself confer any right of action with a view to its realization. At common law if a representation was not part of a contract, its truth, except in the excepted cases and apart *from fraud, was immaterial. If it be part of a contract (and this proposition is still undoubtedly true) it receives the name of a condition or a warranty, its untruth does not affect the formation of the contract but operates to discharge the injured party from his obligation, or gives him a right of action, ex contractu, for loss sustained by the untruth of a statement which is regarded in the light of a promise. We shall get a clearer notion of these various phases of representation from the case of Behn v. Burness. Action was brought upon a charter party dated the 19th day of Oct. 1860, in which it was agreed that Behn’s ship then in the port of Amsterdam should proceed to Newport and there load a cargo of coals which she should carry to Hong Kong. At the date of the contract the ship was not in the port of Amsterdam and did not arrive there until the 28rd. When she reached Newport, Burness refused to load a cargo and repudiated the con- tract, upon which action was brought. The question for the court was whether the words now in the port of Amster- dam amounted to a condition the breach of which entitled Burness to repudiate the contract, or whether they only [#147] gave him aright, after carrying out the contract, to sue for such damages as he had sustained. Williams, J., in giving judgment in the Exchequer Chamber, thus dis- tinguishes the various parts or terms of a contract: — ‘Properly speaking, a representation is a statement or assertion, made by one party to the other, before or at the time of the contract, Chap. IV. § 2. MISREPRESENTATION. 181 of some matter or circumstance relating to it. Though it is some- times contained in the written instrument, it is not an integral part of the contract; and, consequently, the contract is not broken though the representation proves to be untrue; nor (with the exception of the case of policies of insurance, at all events, marine policies, which stand on a peculiar anomalous footing) is such untruth any cause of action, nor has it any efficacy whatever unless the representation was made fraudulently, either by reason of its being made with a knowledge of its untruth, or by reason of its being made dishonestly, with a reckless igno- rance whether it was true or untrue. ... Though representations are not usually contained in the written instrument of contract, yet they sometimes are. But it is plain that their insertion therein cannot alter their *nature. A question however may arise whether a [*248) descriptive statement in the written instrument i rep- escriptive statement in the written instrument is a mere rep resentation, or whether it is a substantive part of the contract. This is a question of construction which the court and not the jury must determine. Ifthe court should come to the conclusion that such a statement by one party was intended to be a substantive part of his con- tract, and not a mere representation, the often-discussed question may, of course, be raised, whether this part of the contract is a condition precedent, or only an independent agreement, a breach of which will not justify a repudiation of the contract, but will only be a cause of action for a compensation in damages. ‘In the construction of charter parties, this question has often been raised, with reference to stipulations that some future thing shall be done or shall happen, and has given rise to many nice distinctions. Thus a statement that a vessel is to sail, or be ready to receive a cargo, on or before a given day, has been held to be a condition, while a 45 stipulation that she shall sail with all convenient speed, or within a reasonable time, has been held to be only an agreement. ‘But with respect to statements in a contract descriptive of the ‘subject-matter of it, or of some material incident thereof, the true doctrine, established by principle as well as authority, appears to be, generally speaking, that if such descriptive statement was intended to be a substantive part of the contract, it is to be regarded as a war- ranty, that is to say, a condition on the failure or non-performance of which the other party may, if he is so minded, repudiate the con- tract in toto, and so be relieved from performing his part of it, pro- vided it has not been partially executed in his favour. If, indeed, he has received the whole or any substantial part of the consideration for the promise on his part, the warranty loses the character of a condition, or, to speak perhaps more properly, ceases to be available as a condition, and becomes a warranty in the narrower sense of the word, viz. a stipulation by way of agreement, for the breach of which a compensation must be sought in damages.’ Represen- tation, fraudu- lent, innocent. Descrip- tive statement. Condition precedent. Independ- ent agree- ment. Glaholm v. Hays, 2M. &@G. 257. Seeger v. Duthie, 8C.B.,N.8. Tarrabochia v. Hickie, 1H. &N. 183, : Various senses of condition and war- ranty. Represen- tation. Condition. 182 FORMATION OF CONTRACT. Part II. The court dealt with the statement that the ship was in the port of Amsterdam at the date of the contract as being intended by the parties to be a condition; and the breach of it was held to discharge the charterer from the obligation to perform his promise.! T have cited the judgment of this case at length, partly because it is the fullest judicial analysis of the terms of a contract, partly also because it affords a good illustra- tion of *the provoking confusion of the terminology of this part of the subject. It will be observed that condition is used in two senses, as meaning a statement that a thing is, and a promise that a thing shall be; in either case the statement or promise is of so important a nature that the untruth of the one, or the breach of the other, discharges the contract. Warranty is used in three senses. It is first made a convertible term with a condition; it is then used ‘in the narrower sense of the word,’ in which sense it means (1) an ‘independent agreement’ or subsidiary promise in the contract, the breach of which can only give rise to an action for damages, and (2) a condition, the breach of which might have discharged the contract had it not been so far acquiesced in as to lose its effect for that purpose, though it may still give rise to an action for damages. Yet in spite of this verbal confusion the judgment [*149] gives us a clear idea of the various terms in a contract. (a) Representations, made at the time of entering into the contract, but not forming a part of it, may affect its validity in certain special cases, but are otherwise inop- erative. When they do operate, their falsehood vitiates the formation of the contract and makes it voidable. (8) Conditions are either statements, or promises which 1 Davison v. Von Lingen, 118 U.S. 40, H. & W. 265; Wells, Fargo § Co. v. Pacific Ins. Co., 44 Cal. 397; Morrill v. Wallace, 9 N. H. 113; Wolcott v. Mount, 36 N. J. L. 262, H. & W. 598. Chap. IV. § 2. MISREPRESENTATION. 183 form the basis of the contract. Whether or not a term in the contract amounts to a condition must be a question of construction, to be answered by ascertaining the inten- tion of the parties from the wording of the contract and the circumstances under which it was made. But when aterm in the contract is ascertained to be a condition, then, whether it be a statement or a promise, the untruth, or the breach of it, will entitle the party to whom it is made to be discharged from his liabilities under the contract." (y) Warranties, used in ‘the narrower sense,’ are independent subsidiary promises, the breach of which does not discharge the contract, but gives to the injured party a right *of action for such damage as he has sustained by the failure of the other to fulfil his promise.” (6) A condition may be broken and the injured party may not avail himself of his right to be discharged, but continue to take benefit under the contract, or at any rate to act as though it were still in operation. In such a case the condition sinks to the level of a warranty, and the breach of it, being waived as a discharge, can only give a right of action for the damage sustained.® [#150] 1“ statement descriptive of the subject-matter, or of some ma- terial incident, such as the time or place of shipment, is ordinarily to be regarded as a warranty, in the sense in which that term is used in insurance and maritime law, that is to say, a condition precedent, upon the failure or non-performance of which the party aggrieved may repudiate the whole contract.” Mr. Justice Gray in Norrington v. Wright, 115 U. S. 188, 208, H. & W. 584. 2« A warranty is a separate, independent, collateral stipulation . for the existence or truth of some fact relating to the thing sold. It is not strictly a condition, for it neither suspends nor defeats the completion of the sale, the vesting of the thing sold in the vendee, nor the right to the purchase money in the vendor.” Shaw, C.J., in Dorr v. Fisher, 1 Cush. (Mass.) 271, 273-4. 3 In the United States such conditions are generally termed implied warranties from their inception, and the rule is that the contract may be rescinded for the breach of an implied warranty, but if not re- Warranty ab initio. Warranty ex post Sacto. (iit) Bifects of misrep- Trescuta- tion. (a) Con- tracts gen- erally. Common law treat- ment of represen- tation an- terior to contract ; 10 6.B.,N.8. 844. 184 FORMATION OF CONTRACT. Part IL. (8) Effects of misrepresentation. In order to ascertain the effect of misrepresentation or non-disclosure upon the formation of contract, I propose first to compare the attitude of common law and of equity towards misrepresentation before the Judicature Act, and then to consider how far the provisions of the Judicature Act, interpreted by recent decisions in the Court of Appeal, enable us to lay down in general terms a rule which was previously applicable only to a special class of contracts. The case of Behn v. Burness shows that in the view of the common law courts a representation was of no effect unless it was either fraudulent, or a term in the contract: the case of Bannerman v. White shows that the strong tendency of judicial decision was to bring any statement which was material enough to affect consent, if possible, into the terms of the contract. Bannerman offered hops for sale to White. White asked if any sulphur had been used in the treatment of that year’s growth. Bannerman said ‘no.’ White said that he would not even ask the price if any sulphur had been used. They then discussed the price, and White ultimately purchased by sample the growth of that year; the hops were sent to his warehouse, were weighed, and the amount due on their purchase was thus ascertained. He afterwards repudiated the contract on the ground that sulphur had been used in the treatment of the hops. scinded the warranty survives and an action may be brought for the breach. This merely amounts to a difference in nomenclature. Bag- ley v. Cleveland Rolling Mill Co., 21 Fed. Rep. 159; Wolcott v. fount, 36 N. J. L. 262, H. & W. 598. But one or two States hold that in a sale by description, the condition that the goods shall answer the description is solely a condition and will not survive acceptance as an implied warranty; Coplay Iron Co. v. Pope, 108 N. Y. 232, H. & W. 597; though the condition that goods shall equal the sample will survive. Zabriskie v. Central Vi. R., 181 N.Y. 72. Chap. IV. § 2. MISREPRESENTATION, 185 Bannerman sued for their price. It *was proved that he had used sulphur over 5 acres, the entire growth consisting of 300 acres. He had used it for the purpose of trying a new machine, had afterwards mixed the whole growth together, and had either forgotten the matter or thought it unimportant. The jury found that the representation made as to the use of sulphur was not wilfully false, and they further found that ‘the affirmation that no sulphur had been used was intended by the par- ties to be part of the contract of sale, and a warranty by the plaintiff.” The court had to consider the effect of this finding, and held that Bannerman’s representation was a part of the contract, a preliminary condition, the breach of which discharged White from liability to take the hops. Erle, C.J., said: — [#151] ‘We avoid the term warranty because it is used in two senses, and the term condition because the question is whether that term is appli- cable. Then, the effect is that the defendants required, and that the °° plaintiff gave his undertaking that no sulphur had been used. This undertaking was a preliminary stipulation; and, if it had not been given, the defendants would not have gone on with the treaty which resulted in the sale. In this sense it was the condition upon which the defendants contracted ; and it would be contrary to the intention expressed by this stipulation that the contract should remain valid if sulphur had been used. ‘The intention of the parties governs in the making and in the con- struction of all contracts. If the parties so intend, the sale may be absolute, with a warranty super-added; or the sale may be condi- tional, to be null if the warranty is broken. And, upon this state- ment of facts, we think that the intention appears that the contract should be null if sulphur had been used: and upon this ground we agree that the rule should be discharged.’ Note that in this case the representation was made before the parties commenced bargaining; whereas the representation in Behn v. Burness was a term in the charter party. Note further that the actual legal transaction between Bannerman Equitable treatment of misrep- resen- tation anterior to contract. 186 FORMATION OF CONTRACT. Part II. the parties was an agreement to sell by sample a quantity of hops, a contract which became a sale,* so as to pass the property, *when the hops were weighed and their price thus ascertained. The contract of sale contained no terms making the acceptance of the hops conditional on the absence of sulphur in their treatment; and the language of Erle, C.J., shows that he felt it difficult to apply the terms ‘condition’ or ‘warranty’ to the representation made by the plaintiff. ‘The undertaking,’ he says, ‘was a preliminary stipu- lation;’ and clearly the court felt that its introduction into the contract was only to be effected by an extension of the terms of the contract, so as to include the discus- sion preliminary to the bargain. What really happened was that Bannerman made a statement to White, and then the two made a contract which did not include this statement, though but for the statement the parties would never have entered on a discussion of terms. The con- sent of the buyer was, in fact, obtained by a misrepre- sentation of a material fact, and was therefore unreal, but the common law courts had precluded themselves from giving any effect to a representation unless it was a term in the contract, and so in order to do justice they were compelled to drag into the contract terms which it was never meant to contain.! [#152] In considering the principles on which equity has dealt with misrepresentation and non-disclosure of fact we must bear in mind that certain classes of contracts have always been regarded as needing more exact and full statement than others, and that some of, these were « For the distinction between a sale, and an agreement to sell, see *p. 71 supra, and Sale of Goods Act, 1893, 56 & 57 Vict. c. 71. § 1. 1 School Directors v. Boomhour, 83 Ill. 17, H. & W. 271; Wickham v. Grant, 28 Kans. 517; Woodruff v. Saul, 70 Ga. 271, H. & W. 272. Ct. Gregory v. Schoenell, 55 Ind. 101. Chap. IV. § 2. MISREPRESENTATION, 187 of a sort with which the Court of Chancery was more particularly concerned —contracts to take shares in companies — contracts for the sale and purchase of land. We must also remember that judges in the Court of Chancery never had occasion to define fraud with pre- cision as an actionable wrong. They therefore, not unnaturally, used the term ‘fraudulent’ as applicable to all cases in which they refused specific performance or set aside an instrument on the ground that one of the parties [153] had not acted in good *faith; and somewhat unfor- tunately they applied it also to representations which were made in good faith though they afterwards turned out to be untrue. ; But we find no general rule as to the effect of innocent misrepresentation until 1878, when, in a case precisely similar to Bannerman v. White, a similar result was reached by the application of a different principle. Lamare, a merchant in French wines, entered into nego- tiations with Dixon for a lease of cellars. He stated that it was essential to his business that the cellars should be dry, and Dixon assured him, to his satisfaction, that the cellars would be dry. He thereupon made an agreement for a lease, in which there was no term or condition as to the dryness of the cellars. They turned out to be extremely damp. Lamare declined to continue his occu- pation, and the House of Lords refused to enforce specific performance of the agreement, not because Dixon’s state- ment as to the dryness of the cellars was a term in the contract, but because it was material in obtaining consent and was untrue in fact. ‘I quite agree,’ said Lord Cairns, ‘that this representation was not a guarantee. It was not introduced into the agreement on the face of it, and the result of that is that in all probability Lamare could not sue in a court of law for a breach of any such guarantee or undertaking: and very probably he could not maintain a suit in a court of equity to cancel the agreement on the ground of misrepre- sentation. At the same time if the representation was made and if Lamare y. Dixon, L. R. 6H. L. 414. Misrepre- sentation @ ground for refusing specific perform- ance, at p. 428. 86 &387 Vict c. 66. § 24. sub-s. 1. 2, and for rescinding contract. 20 Ch. D. 1. Growth of modern rule. 188 FORMATION OF CONTRACT. Part Il. that representation has not been and cannot be fulfilled, it appears to me upon all the authorities that that is a perfectly good defence in a suit for specific performance, if it is proved in point of fact that the representation so made has not been fulfilled.’ Thus it appears, that up to the passing of the Judicature Act the Court of Chancery would refuse specific per- formance of a contract induced by innocent misrepresen- tation, and that in transactions of certain kinds it was prepared to set contracts aside on the same grounds. The latter remedy had not by express decision been limited to transactions of the kind I have *mentioned, while on the other hand no general rule had been laid a down which might apply to all contracts. The Judicature Act provides that a plaintiff might assert any equitable claim and the defendant set up any equitable defence in any court, and in their treatment of this pro- vision there is no doubt that the court has extended the application of equitable remedies and altered the character of the common law rule. Innocent misrepresentation which brings about a contract is now a ground for setting the contract aside, and this rule applies to contracts of every description. The case of Redgrave v. Hurd was a suit for specific performance of a contract to buy a house. Redgrave had induced Hurd to take, with the house, his business as a solicitor, and it was for misstatement as to the value of this business that Hurd resisted specific performance, and set up a counter-claim to have the contract rescinded and damages given him on the ground of deceit practiced by Redgrave. The Court of Appeal held that there was no such deceit, or statement false to Redgrave’s knowledge, as would entitle Hurd to damages; but specific performance was refused and the contract rescinded on the ground that defendant had been induced to enter into it by the mis- representation of the plaintiff. The law on this subject is thus stated by Jessel, M.R.: — Chap. IV. § 2. MISREPRESENTATION. 189 ‘As regards the rescission ‘of a contract there was no doubt a difference between the rules of courts of equity and the rules of courts of common law —a difference which of course has now dis- appeared by the operation of the Judicature Act, which makes the rules of equity prevail. According to the decisions of courts of equity it was not necessary, in order to set aside a contract,* obtained by material false representation, to prove that the party who obtained it knew at the time that the representation was made that it was false.’ In Newbigging v. Adam the plaintiff had been induced to enter into a partnership with one Townend by statements made by the defendants who were either the principals or concealed *partners of Townend. The Court of Appeal held that ‘there was a substantial misstate- ment though not made fraudulently, which induced the plaintiff to enter into the contract.’ The contract was set aside, and the general rule laid down in Redgrave v. Hurd is adopted without qualification or limitation to cases of a particular class. Bowen, L.J., quotes in extenso the passage set forth above from the judgment of Jessel, M.R., and says further : — [#155] ‘If the mass of authority there is upon the subject were gone through, I think it would be found that there is not so much differ- ence as is generally supposed between the view taken at common law and the view taken in equity as to misrepresentation. At common law it has always been considered that misrepresentations which strike at the root of a contract are sufficient to avoid the con- tract on the ground explained in Kennedy v. Panama, New Zealand and Royal Mail Co.’ Now this case was one of cross actions by a shareholder, to recover calls paid, and by a company, to recover calls due. The shareholder contended that he had been in- duced to take shares on the faith of a statement in the prospectus, which turned out to be untrue; and that this statement was so vital to the contract that its untruth @This statement is not quite in accord with Lord Cairns’ view of the rules of equity, as set out on p. 153 in Lamare v. Dixon. It has nevertheless be- come the accepted rule, though it may have been an exaggeration in 1881. Redgrave v. Hurd, 20 Ch. D, 12. 84 Ch. D. 582. at p. 592. L. R.2Q, B. 580. Compari- son of legal and equitable rules. L. R.2Q. B. 580. 14 App. Ca, 847, Result. 190 FORMATION OF CONTRACT. Part II. amounted to a total failure of consideration, and entitled him to be discharged from his liability to calls. - The position of the Court of Queen’s Bench in this case was very similar to that of the Court of Common Pleas in Bannerman v. White. A court of equity might or might not have set the transaction aside on the ground that con- sent had been obtained by a material misrepresentation made prior to the contract. A court of common law could only deal with the matter by incorporating the representa- tion with the contract, and then asking whether its un- truth amounted to a total failure of consideration or the breach of a condition vital to the contract. In Bannerman vy. White the court held that the repre- sentation was a vital condition: in Kennedy v. Panama Company the court held that it was not a vital condition. Equity *would give or withhold the same relief, but upon a different and more intelligible principle. This principle is clearly stated by Lord Bramwell in Derry v. Peek, speaking of the various rights of one who has been injured by the untruth of statements inducing a contract: —‘To this may now be added the equitable rule that a material misrepresentation, though not fraudulent, may give [#156] a right to avoid or rescind a contract where capable of such rescission. Thus a general rule is settled; innocent misrepresenta- tion, if it furnishes a material inducement, is ground for resisting specific performance of the contract or for asking to have it set aside; this relief is of general application, and is not peculiar to the contracts described as uberrimae fideis 1 The view of the author as to equitable relief for innocent mis- representations is supported by various American authorities. Wil- cox v. lowa Wesleyan University, 32 Iowa, 367, H. & W. 268; Doggett v. Emerson, 3 Story (U. 8. C. C.) 700; s. c. 7 Fed. Cas. 804; Spurr v. Benedict, 99 Mass. 463; Hammond v. Pennock, 61 N. Y. 145; Taylor v. Leith, 26 Oh. St. 428; Bigelow on Fraud, pp. 410-18, where the Chap. IV. § 2. MISREPRESENTATION, 191 But the representation must form a real inducement to the party to whom it is addressed. A mere expression of opinion is not a statement which, if it turns out to be false, invalidates a contract. In effecting a policy of marine insurance the insured communicated to the insurers a letter from the master of his vessel stating that in his opinion the anchorage of the place to which the vessel was bound was safe and good. The vessel was lost there: but the court held that the insured, in reading the master’s letter to the insurers, communicated to them all that he himself knew of the voyage, and that the letter was not a representation of fact, but of opinion, which the insurers could act upon or not as they pleased.! Nor are commendatory expressions such as men habitually use in order to induce others to enter into a bargain dealt with as serious representations of fact. A certain latitude is allowed to a man who wants to gain a purchaser, though it must be admitted that the border line of permissible assertion is not always discernible. At a sale by auction land was stated to be ‘very fertile and improvable:’ it was in fact partly abandoned as useless. This was held to be ‘a mere flourishing description by an auctioneer.’ But where in the sale of an hotel the occupier was stated to be ‘a most desirable *tenant,’ whereas his rent *157 5 7 Be : pate was much in arrear and he went into liquidation learned author says, “The general rule of equity is that... any contract may be rescinded for innocent misrepresentation, which was sufficient. inducement thereto.” But there is strong authority to the effect that equity will interfere by way of rescission only where the “representation was not actually believed by the defendant, on rea- sonable grounds, to be true.” Southern Development Co. v. Silva, 125 U. 8. 247, 250, where the requisites for rescission are all explicitly stated, though, perhaps, without a keen discrimination between the requisites for equitable relief and the requisites for an action for deceit. And see 2 Pomeroy’s Equity Jurisp., § 888; Pollock on Cont. (6th ed.), pp. 503-7. 1 Fish v. Cleland, 33 Ill. 237, H. & W. 288. Expres- sion of opinion. Anderson v. Pacific In- surance Co., L. R.7C. P, 65. Commen- datory ex- pressions. Dimmock vy. Hallett,2 Ch. at p. 27, Smith v. Land & House Pro- perty Co., 28 Ch. D. 7. (db) Con- tracts uber- rimae fidei. Marine insurance. 192 FORMATION OF CONTRACT. Part II. directly after the sale, such a statement was held to entitle the purchaser to rescind the contract.! Non-disclosure of material fact. Contracts uberrimae fidei. There are some contracts in which more is required than the absence of misrepresentation or fraud. These are contracts in which one of the parties is presumed to have means of knowledge which are not accessible to the other, and is then bound to tell him everything which may be supposed likely to affect his judgment. In other words, every contract may be invalidated by material misrepre- sentation, and some contracts even by non-disclosure of a material fact. Contracts of marine, fire, and life insurance, contracts for the sale of land, for family settlements, and for the allotment of shares in companies, are of the special class affected by non-disclosure. To these are sometimes added, in my opinion erroneously, contracts of suretyship and partnership. (a) Contracts of marine insurance.” In the contract of marine insurance the insured is bound to give to the underwriter all such information as would be likely to determine his judgment in accepting the risk; and misrepresentation or concealment of any such matter, though without fraudulent intention, avoids the policy. In Jonides v. Pender goods were insured upon a voyage for an amount largely in excess of their value; it was held that although the fact of over-valuation would not affect the risks of the voyage, yet, being a fact which 1 Tuck v. Downing, 76 Tl. 71. 2« Every fact and circumstance which can possibly influence the mind of the insurer, in determining whether he will underwrite the policy, or at what premium, is material to be disclosed, and a conceal- ment thereof will vitiate the policy.” Ely v. Hallett, 2 Caines’ Rep. (N. Y.) 57; Lewis v. Eagle Ins. Co. 10 Gray (Mass.), 508; Hart v. British Ins. Co., 80 Cal. 440. Chap. IV. § 2. MISREPRESENTATION, 193 underwriters were in the habit of taking into considera- tion, its concealment vitiated the policy. ‘It is perfectly well established that the law as to a contract of insurance differs from that as to other contracts, and that a conceal- ment of a material fact, though made without any fraudulent inten- tion, vitiates the policy.’ Nor is the liability of the insured, in this respect, con- fined to facts within his own knowledge. ‘It is a condi- tion of *the contract,’ said Lindley, L.J., in a die- tum quoted with approval in the House of Lords, ‘that there is no misrepresentation or concealment either by the insured or by any one who ought, as a matter of business and fair dealing, to have stated or disclosed the facts to him or to the underwriter for him, (PB) Contracts of fire insurance.! The description of the premises appears to form a [*158] 1 Tt may be safe to conclude that the duty to disclose in fire insur- ance differs from the duty to disclose in marine insurance only in de- gree and not in kind; and that the difference, such as it is, arises from the better opportunity of the insurer to observe for himself in ordinary fire insurance cases, and, perhaps, from some historical accidents in the development of the doctrine. In the American cases holding that a fire insurance policy is vitiated by an innocent non-disclosure the fact so undisclosed has usually, if not always, been some extrinsic fact which could not have been discovered by an examination of the prop- erty, and of so extraordinary a nature that the insurer would not have been likely to inquire concerning it. Walden v. Louisiana Ins. Co., 12 La. 134, H. & W. 273; Hartford Protection Ins. Co. v. Harmer, 2 Oh. St. 452; Burritt v. Saratoga Ins. Co., 5 Hill (N. Y.), 188; Clark v. Ins. Co., 8 How. (U. S.) 235. As to those matters that may be discov- ered by an examination of the property, innocent concealment has no effect; and even innocent misrepresentation may have none where an actual examination is made, or is required by law to be made. Con- tinental Ins. Co. v. Kasey, 25 Gratt. (Va.) 268; Insurance Co. v. Leslie, 47 Oh. St. 409. It is now usual for insurers to make specific inquiries, and where these are answered correctly, an innocent non-disclosure as to other matters will not affect the policy. Washington Mills Mfg. Co. v. Weymouth Ins. Co., 185 Mass. 503; Short v. Home Ins. Co., 90 N.Y. 16. But an innocent misrepresentation will avoid the policy. God- dard y. Monitor Ins. Co., 108 Mass. 56. Oo Per Black- burn, J., in Tonides v. Pender,L.R. 9 Q. B. 587. Blackburn v. Vigors, 17 Q.B C. Be De tC. A.) at p. 578. Fire in- surance. New York Bowery Fire Insurance Co. v. New York Fire Insurance Co., 17 Wend. 859. L. R.9Q. B. 538. 11 Ch. D. 363. Life in- surance. 194 FORMATION OF CONTRACT. Part II. representation on the truth of which the validity of the contract depends. American authorities go further than this, and hold that the innocent non-disclosure of any material facts vitiates the policy. In an American case, referred to by Blackburn, J., in the judgment above cited, ‘the plaintiffs had insured certain property against fire, and the president of the company heard that the person insuring with them, or at least some one of the same name, had been so unlucky as to have had several fires, in each of which he was heavily insured. The plaintiffs reinsured with the defendants, but did not inform them of this. A fire did take place, the insured came upon the plaintiffs, who came upon the defendants. The judge directed the jury, that if this information given to the president of the plaintiff company, was intentionally kept back, it would vitiate the policy of reinsurance. The jury found for the plaintiffs, but the court, on appeal, directed a new trial on the ground that the concealment was of a material fact, and whether intentional or not, it vitiated the insurance.’ (y) Contracts of life insurance. In The London Assurance v. Mansel an action was brought to set aside a policy of life insurance on the ground that material facts had been concealed by the party effecting the insurance. He had been asked and had answered questions as follows :— your life at other offices? If so, where ? Insured now in two offices Has a proposal ever been made on Was it accepted at the ordinary | for £16,000 at ordinary rates. premium or at an increased premium | Policies effected last year. or declined? *The answer was true so far as it went, but the defendant had endeavoured to increase his insurance at one of the offices at which he was already insured, and to effect further insurances at other offices, and in all these cases he had been refused. The contract was set aside, and Jessel, M.R., thus laid [#159] Chap. IV. § 2. MISREPRESENTATION. 195 down the general principle on which his decision was founded. ‘Tam not prepared to lay down the law as making any differ- ence in substance between one contract of assurance and another. Whether it is life, or fire, or marine assurance, I take it good faith is required in all cases, and though there may be certain circumstances, from the peculiar nature of marine insurance, which require to be disclosed and which do not apply to other contracts of insurance, that is rather, in my opinion, an illustration of the application of the principle than a distinction in principle.’ 1 But where A is effecting an insurance on the life of X, and X makes false statements as to his life and habits which A in good faith passes on to the insurance office, such statements have been held not to vitiate a policy. The ground of the decision was (1) that the statements were not conditions on the truth of which the validity of the contract depended, and (2) that X was not the agent of A for the purpose of effecting the policy, so that the fraud of X was notimputable to A under the rule that the principal is liable for the fraud of his agent. It is possible that if such a case were to occur since equitable remedies for misrepresentation have become general it might be decided otherwise. It precisely cor- responds to the case described in Redgrave v. Hurd: ‘where a man having obtained a beneficial contract by a statement which he now knows to be false, insists upon keeping that contract.’ 1Jn a somewhat similar case where there were four interrogatories printed under one number, and the insured answered one of them correctly but did not answer the other three, the Supreme Court of the United States held that by issuing the policy the insurer waived the answers to the other three, distinguishing the case cited by the author, and criticising some portions of that decision. Phenix Life Ins. Co. v. Raddin, 120 U.S. 183, H. & W. 275. But if there be a misrepresentation, however innocent, it avoids the policy, where by the terms of the policy the answers are made material. Clemans v. Supreme Assembly §c., 131 N. Y. 485; McCoy v. Metropolitan Ins Co., 133 Mass. 82; New York Life Ins. Co. v. Fletcher, 117 U.S. 519. Cf. Gray v. National Benefit Assoc., 111 Ind. 531. London As- surance Co, v. Mansel, 11 Ch. D. 367, Wheelton v. Hardisty, 8E. & B. 293. 20 Ch. D. 1, Sale of land. 1 Bing. N.C. 370. 8 Camp. 285. Flight v. Booth, 1 Bing. N.C. 870. In re Faweett & Holmes, 42 Ch. 1D. 156. Pollock, 519-528. 196 FORMATION OF CONTRACT. Part II. (6) Contracts for the sale of land. In agreements of this nature a misdescription of the premises sold or of the terms to which they are subject, though made without any fraudulent intention, will vitiate the contract. In Flight v. Booth, leasehold property was agreed to be purchased by the defendant. The lease contained restrictions *against the carrying on of several trades, of which the particulars of sale mentioned only a few ; Tindal, C.J., held that the plain- tiff could recover back money paid by way of deposit on the purchase of the property. [#160] ‘We think it isa safe rule to adopt, that where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far affecting the subject-matter of the contract that it may reasonably be supposed that, but for such misdescription, the purchaser might never have entered into the contract at all, in such cases the contract is avoided altogether, and the purchaser is not bound to resort to the clause of compensation. Under such a state of facts, the pur- chaser may be considered as not having purchased the thing which was really the subject of the sale; as in Jones v. Edney, where the subject- matter of the sale was described to be “a free public-house,” while the lease contained a proviso, that the lessee and his assigns should take all their beer from a particular brewery; in which case the misdescrip- tion was held to be fatal.’ The Court of Appeal has lately accepted with approval this statement of the law.! Equitable remedies however are given subject to the materiality of the misdescription. The purchaser may be entitled to refuse to conclude the sale; or,if the misde- scription is a matter of detail, may be compelled to con- clude the sale subject to compensation to be made by the vendor. 1 The American cases are fully in accord upon the effect of a mis- description. Rayner v. Wilson, 43 Md. 440; Stevens v. Giddings, 45 Conn. 507; King v. Knapp, 59 N. Y. 462. But, as stated in the prin- cipal case, this is rather because the purchaser does not get what he bargains for, than because the contract is wberrimae fidei. Chap. IV. § 2. MISREPRESENTATION, 197 The parties may also provide in the contract of sale for compensation in case of misdescription, and this right, if so expressed, will not merge in the deed of conveyance but may be exercised after the property has passed. (e) Contracts for the purchase of shares in companies. The rules with respect to the candour and fulness of statement required of projectors of an undertaking in which they invite the public to join cannot be better stated than in the judgment of Kindersley, V.C., in the case of the New Brunswick and Canada Railway Company v. Muggeridge. ‘Those who issue a prospectus holding out to the public the great advantages which will accrue to persons who will take shares in a pro- posed undertaking, and inviting them to take shares on the faith of *161 the representations therein contained, are bound to state [ J *everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature, or extent, or quality of the privileges and ad- vantages which the prospectus holds out as inducements to take shares.’ These dicta are quoted with approval by Lord Chelms- ford in The Venezuela Railway Company v. Kisch. In a later case Lord Cairns points out the distinction between fraud and such non-fraudulent misrepresentation as makes a contract of this nature voidable. He inti- mates that mere non-disclosure can never amount to fraud unless accompanied with such substantial represen- tations as give a false air to facts, but that ‘it might be a ground in a proper proceeding and at a proper time for setting aside an allotment or purchase of shares.’ We should distinguish this right of avoidance for non- disclosure, from the remedy in deceit for actual fraud; from the remedy in tort given by the Companies Act against directors for non-disclosure of contracts made by a company or its promoters, and open to persons who take shares on the faith of a prospectus in which such contracts are not set out or referred to; and thirdly from Pa.mer v. Johnson, 13 Q. B. D. (C. A.) 351. Purchase of shares influenced by pro- jectors’ state- ments. 1 Dr, & Sn. at p. 381. L.R.2H.L, at p. 113. Peek v. Gurney, L. R. 6H. L. 403. 30 & 31 Vict. c. 131, § 88. Sullivan vy. Mitcalfe, 5C. P. D. (C. A.) 455. & 54 Vict. 64, eS Surety- ship is not uberrimae fidei Lee v. Jones, 17 C.B.,N.S. 482. until the contract is made: L. R.7Q. B. 666. 1B. &M. 150; ib. 182. 198 FORMATION OF CONTRACT. Part 11. the right to compensation given by the Directors Liabil- ity Act (1890) to persons who have sustained loss by purchasing shares on the faith of an untrue statement in the prospectus of a company.! Suretyship and partnership are sometimes described as contracts needing a full disclosure of all facts which might affect the judgment of the intending surety or partner. : There seems no authority* for this view; either con- tract would be invalidated by material though- innocent misrepresentation, or by such non-disclosure of a fact as would amount to an implied representation that the fact did not exist; but neither requires the same fulness of disclosure which is *necessary to the contract to sell land or to allot shares. The intending surety and the intending partner cannot claim the protection accorded to the intending insurer, investor or buyer of land.? But when once the contract of suretyship has been entered into, the surety is entitled to be informed of any agreement which alters the relations of creditor and debtor, or any circumstance which might give him a right to avoid the contract. So in Phillips v. Fozall, the defendant had guaranteed the honesty of a servant in [*162] @ The only authorities cited in Lindley on Partnership, p. 303 (ed. 5), are Hichens v. Congreve and Fawcett v. Whitehouse. But both are cases of actual fraud. 1 Tt is held here that the relation of the promoters to those who are induced by them to take stock is one of trust and confidence, and that stockholders may recover damages sustained through the failure of the promoters to disclose all material facts. Brewster v. Hatch, 122 N. Y. 349. 2«The rule which prevails in contracts of marine insurance that all material circumstances known to the assured must be disclosed, and that the omission to do so avoids the policy, though the conceal- ment is not fraudulent, does not apply to an ordinary guaranty.” Howe Machine Co. vy. Farrington, 82 N. Y. 121, 126. Chap. IV. § 2. MISREPRESENTATION. 199 the employ of the plaintiff; the servant was guilty of dishonesty in the course of his service, but the plaintiff continued to employ him and did not inform the defend- ant of what had occurred. Subsequently the servant committed further acts of dishonesty. The plaintiff required the defendant to make good the loss. It was held that the defendant was not liable. Such conceal- ment released the surety from all liability for the subse- quent loss. It would seem that if the surety knew that the servant had committed acts of dishonesty which #° would justify his dismissal, he would be entitled to withdraw his guarantee.! And so with partnership. The relation of partners inter se is that of principal and agent, so that one partner can bind the firm in transactions concerning the partner- ship. Thus, when the contract of partnership has been formed, the utmost good faith is required in the dealings of partners with one another in all that relates to their common business. Remedies for misrepresentation. A statement upon the faith of which one man induces another to contract, may, if it prove to be false, give a right of action for damages in two cases, (1) ex contractu if it is a term in the contract, (2) ex delicto if it is false to the knowledge of the party making it. But if the statement does not satisfy either of these conditions it can do no more than furnish a defence to an action brought upon the contract, and entitle the injured party 1 Roberts v. Donovan, 70 Cal. 108. A distinct class of contracts uberrimae fidei is that where there is an existing fiduciary relation between the parties, as between principal and agent, trustee and ward ; it is to this class that the relationship of partners belongs, and it is on this ground that the relationship of promoters to investors is brought within the class requiring the highest good faith. Brewster v. Hatch, supra. Burgess y. Eve, 18 Eq. nor part- nership. (iv) Reme- dies. General tule, Newbigging y. Adam, 84 Ch, D. 589. Excep- tions. Warranty of author- ity. Firbank v. Humphreys, B.D. 62. . 80 & 81 Viet. c. 181, § 88. Companies Act. 53 & 54 Vict. oc. 64. g Directors’ liability. 3 App. Ca. 1279. 200 FORMATION OF CONTRACT. Part II. to take proceedings to get the contract set *aside, subject to such limitations as to rescission as are set forth at the conclusion of the next chapter. The relief thus given may include an indemnity ‘against the obligations which he has contracted under the contract which is set aside’: it cannot include damages for loss sustained.¢ To this rule that no damages can be obtained for inno- cent misrepresentation there are three exceptions. (a) The first is where an agent in good faith assumes an authority which he does not possess and induces another to deal with him in the belief that he has the authority which he assumes.? } (6) The Companies Act 1867 requires that a pro- spectus of a company should contain the date of any contract entered into by the company before the issue of the prospectus and the names of the parties. Otherwise, as between the directors, promoters or officers of the [*163} company, and persons who subscribe for shares on the faith of the prospectus, it is fraudulent. (¢) The Directors Liability Act 1890 gives a right to any person who has been induced to subscribe for shares in a company by untrue statements in a prospectus, to obtain compensation from the directors for loss sustained, unless they can show that they had reasonable ground to believe the statement and continued to believe it till the shares were allotted, or that the statement was a fair account of the report of an expert or a correct represen- tation of an official document. « The extent of the remedy, and the conditions under which it is granted, are most clearly set forth in the judgment of Lord Blackburn in Erlanger v. Sombrero Phosphate Co. » See as to this form of liability, Part vi. ch. ii. § 2. 1 Kroeger v. Pitcairn, 101 Pa. St. 311; Baltzen v. Nicolay, 53 N. Y. 467; Farmers’ §c. Co. v. Floyd, 47 Oh. St. 525. Chap. IV. § 2. MISREPRESENTATION. 201 From the cases in which innocent misrepresentation gives rise to a liability in damages we must carefully distinguish the sort of liability which is supported rather than created by estoppel. ‘Estoppel is a rule of evidence,’ and the rule may be stated in the words of Lord Denman: — ‘Where one by his words or conduct wilfully causes another to [164] *believe the existence of a certain state of things, and induces him to act on that belief so as to alter his own previous posi- tion, the former is concluded from averring against the latter a dif- ferent state of things as existing at the same time.’ Where a defendant is forbidden to disprove certain facts, and where on the assumption that such facts exist the plaintiff would have a right, then estoppel comes in aid of the establishment of the right by preventing the denial or disproof of these facts. But an estoppel can only arise from words or conduct which are clear and unambiguous. This rule, and the effect of estoppel, may be illustrated by the case of Low v. Bouverte. Low was about to lend money to X on the security of X’s share of a trust fund, of which Bouverie was trustee. He asked Bouverie whether this share was mortgaged or otherwise encumbered, and if so to what extent. Bou- verie named such charges as occurred to him but did not name all. In fact the interest of X was heavily encum- bered, and when the action was brought he was an undis- charged bankrupt. Low claimed that Bouverie, the trustee, was liable to make good the loss. The Court of Appeal held (1) that Bouverie’s statement could not be construed as a warranty, so as to bind him by contract to Low; (2) that the statement was not false to his knowl- 1 Stevens v. Ludlum, 46 Minn. 160, H. & W. 280; Leather Manufact- urers’ Bank vy. Morgan, 117 U. 8. 96. Estoppel. Pickard v. Sears, 6A. &E 469, ba 91) 8 Ch Per Lindley, L.J., p. 108. p. 106, Tomkinson y. Balkis Co., [1891] 2 Q. B. 614. 14 App. Ca. 347. a 202 FORMATION OF CONTRACT. Part II. edge; (8) that the misrepresentation, being innocent, could not give rise to an action for damages, unless a duty was cast upon Bouverie to use care in statement; * (4) that no such duty rested upon a trustee, requiring him to answer questions concerning the trust fund to strangers about to deal with the *cestui que trust ; (5) that therefore Bouverie could only be held liable if he was estopped from contending that there were other encumbrances upon the trust fund than those which he had mentioned to Low. If he had been so estopped he might have been ordered to pay to Low the trust fund, subject only to the encum- brances disclosed in his letters: and, as there were other charges in abundance, he would have had to make good the deficiency out of his own pocket. But the court held that the letters upon which Low sought to make Bouverie liable could not be construed as explicitly limiting the charges on the trust fund to those specified in the letters. ‘An estoppel,’ said Bowen, L.J., ‘that is to say, the language on which the estoppel is founded, must be precise and unambiguous.’ Instances of such precise and unambiguous statement may be found in the cases of companies which issue cer- tificates stating that the holders are entitled to shares. If the certificate is obtained by means of a deposit with the company of a forged transfer of shares, the company [*165] * The mention of this duty would seem to be an excess of judicial . caution, for it is hard to see how such a duty could arise so as to give a right of action for negligent, as distinct from fraudulent misrepresen- tation. Such a liability may exist in the case of employer and em- ployed, where the person employed acquires and gives information on which the employer will act. But a failure to use due care in the supply of such information would be a breach of the contract of em- ployment, creating a liability ex contractu not ex delicto. In cases turning on negligent statement, the duty, since Derry v. Peek, has been held, in each case, not to exist, and it is probably apart from con- tract altogether non-existent. See Angus v. Clifford, [1891] 2 Ch. 449, and Le Lievre v. Gould, [1893] 1 Q. B. 491. Chap. IV. § 3. FRAUD. 203 are nevertheless estopped from disputing the title to shares which their certificates confer. § 3. Fraud. Fraud is an actionable wrong. As such it is suscepti- ble of fairly precise definition; and as such I treat of it here. Fraud which gives rise to the action of deceit is a very different thing from the sharp practice or unhand- some dealing which would incline a court of equity to refuse the remedy of specific performance, or to grant relief by the cancellation of a contract. It represents the reasoned, logical conclusions of the common law courts as to the nature of the deceit which makes a man liable in damages to the injured party. Fraud is a false representation of fact, made with a knowledge of its falsehood, or recklessly, without belief in its truth, with the intention that it should be acted upon by the complaining party, and actually inducing him to act upon it.} [*166] *Let us consider these characteristics in detail. Fraud is a false representation.” 1 Compare this with the enumeration of elements said to be neces- sary for rescission as given in Southern Development Co. v. Silva, 125 U.S. 247. See also Hotchkin v. Third N. Bk., 127 N. Y. 329, 337. 2The American courts recognize three distinct classes of cases under this head: (1) Cases where there is an actual false representa- tion; (2) Where there is active or artful concealment, as in Croyle v. Moses, 90 Pa. St. 250; (3) Where there is a suppression of truth amounting to a suggestion of falsehood, as explained in Stewart v. Wyoming Ranche Co., 128 U. 8. 383, and illustrated in the following cases: Maynard v. Maynard, 49 Vt. 297; Brown v. Montgomery, 20 N. Y. 287; Atwood v. Chapman, 68 Me. 38; Grigsby v. Stapleton, 94 Mo. 423, H. & W. 285. It is admitted that the limits of the third class of cases are not clearly defined, and there is much conflict in the application of the doctrine. Graham v. Meyer, 99 N. Y. 611. As to the duty to disclose extrinsic facts affecting the transaction, see Laid- law v. Organ, 2 Wheat. (U. S.) 178, and the criticism in Lapish v. Wells, 6 Me. 175, 189, and Paddock v. Strobridge, 29 Vt. 470. (3) Fraud. Its essen- tial feat- ures. (a) There must be a represen- tation. L.R.6H.L. p. 408. Non-dis- closure is not fraud. Ward y. Hobbs, 3Q. B.D. (C, A.) 150. 32 &33 Vict. ce. 70. § 57. 204 FORMATION OF ‘CONTRACT. Part II. It differs here from non-disclosure such as may vitiate a contract uberrimae fidei ; there must be an active attempt to deceive either by a statement which is false, or by a statement not untrue in itself but accompanied with such a suppression of facts as to convey a misleading ,impres- sion. Concealment of this kind is sometimes called ‘active,’ ‘aggressive,’ or ‘industrious;’ but perhaps the word itself, as opposed to non-disclosure, suggests the active element of deceit which constitutes fraudulent misrepresentation. The distinction between misrepre- sentation by non-disclosure, which can only affect con- tracts uberrimae fidei, and misrepresentation which gives rise to an action of deceit, is clearly pointed out by Lord Cairns in the case of Peek v. Gurney. ‘Mere non-disclosure of material facts, however morally censur- able, however that non-disclosure might be a ground in a proper pro- ceeding at a proper time for setting aside an allotment or a purchase of shares, would, in my opinion, form no ground for an action in the nature of an action for misrepresentation. There must, in my opinion, be some active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact, as that the withholding of that which is not stated makes that which is stated absolutely false.’ Caveat emptor is the ordinary rule in contract. A vendor is under no liability to communicate the existence even of latent defects in his wares unless by act or impli- cation he represents such defects not to exist.} Hobbs sent to a public market pigs which were to his knowledge suffering from typhoid fever; to send them to market in this state was a breach of a penal statute. Ward bought the pigs, ‘with all faults,’ no representa- tion being made as to their condition. The greater number died: other pigs belonging to Ward were also infected, and so were the stubble-fields in which they were turned out to run. It was contended that the exposure of the pigs in the market amounted to a repre- 1 Beninger v. Corwin, 24 N. J. L. 257. Chap. IV. § 3. FRAUD. 205 sentation, under the circumstances, that they were free of *any contagious disease. The case went up to the House of Lords, where Lord Selborne thus states the law on this point: — [#167] ‘Upon the question of implied representation I have never felt any doubt. Such an implication should never be made without facts to warrant it, and here I find none except that in sending for sale (though not in selling) these animals a penal statute was violated. To say that every man is always to be taken to represent in his deal- ings with other men, that he is not, to his knowledge, violating any statute, is a refinement which (except for the purpose of producing some particular consequence) would not, I think, appear reasonable to any man.’? In Keates v. Lord Cadogan, the plaintiff sued for damages arising from the defendant’s fraud in letting to the plaintiff a house“ which he knew to be required for immediate occupation, without disclosing that it was in a ruinous condition. It was held that no such action would lie. ‘It is not pretended,’ said Jervis, C.J., ‘that there was any war- ranty, expressed or implied, that the house was fit for immediate occupation : but, it is said, that, because the defendant knew that the plaintiff wanted it for immediate occupation, and knew that it was in an unfit and dangerous state, and did not disclose that fact to the plaintiff, an action of deceit will lie. The declaration does not allege that the defendant made any misrepresentation, or that he had rea- son to suppose that the plaintiff would not do, what any man in his senses would do, viz. make proper investigation, and satisfy himself as to the condition of the house before he entered upon the occupa- tion of it. There is nothing amounting to deceit.’ ? * The house was leased for a term of years. The law is otherwise where a furnished house is hired for a short period, as for instance the London season. In such a case immediate occupation is of the essence of the contract, and if the house is uninhabitable the lessee is discharged, not on the ground of fraud, but because ‘he is offered something substantially different from that which 336 was contracted for.’ This undertaking as to sanitary condition is extended by the Housing of the Working Classes Act to small tenements of a specified-value. 53 & 54 Vict. c. 70. s. 75. 1Compare Grigsby v. Stapleton, supra. 2 Accord: Lucas v. Coulter, 104 Ind. 81; Libbey v. Tolford, 48 Me., 316. 4 App. Ca. a PP. 10 C. B. 591, Wilson v. Finch-Hat- ton, 2 Ex. D. 206 FORMATION OF CONTRACT. Part II. (b) A rep- * . Smee Pp The representation must be a representation of fact. tion of A mere expression of opinion, which turns out to be aoa unfounded, will not invalidate a contract. There is a opinion; Wide *difference between the vendor of property Young,” Saying that it is worth so much, and his saying 1 Yelv. 20. . . noe Lindsay Pe) that he gave so much for it. The first is an opinion vitor, which the buyer may adopt if he will: the second is an atp. 248, assertion of fact which, if false to the knowledge of the seller, is also fraudulent.! pressionof 82in, we must distinguish a representation that a intention. thing is from a promise that a thing shall be: neither a pueaiés, Statement of intention nor a promise can be regarded as po a statement of fact except in so far as a man may know- ingly misrepresent the state of his own mind. Thus there is a distinction between a promise which the prom- isor intends to perform, and one which the promisor intends to break. In the first case he represents truly enough his intention that something shall take place in the future: in the second case he misrepresents his exist- ing intention; he not only makes a promise which is ultimately broken, but when he makes it he represents his state of mind to be something other than it really is. Witcwen’ Thus it has been laid down that if a man buys goods, not intending to pay for them, he makes a fraudulent misrep- [*168] 10 Ch. 446. resentation.? Again, it is said that misrepresentation of law does 1 Gordon v. Butler, 105 U.S. 553; Cummings v. Cass, 52 N. J. L. 77. But the wilful misstatement of an opinion by an expert may constitute fraud. Conlan v. Roemer, 52 N. J. L. 53. To say that a building is fire-proof is to state a fact and not an opinion. Hickey v. Morrell, 102 N. Y. 454. ? A false statement which is promissory in character is not fraudu- lent. Dawe v. Morris, 149 Mass. 188, H. & W. 292; Sheldon v. David- son, 85 Wis. 138, H. & W. 295. An insolvent purchasing goods knowing he cannot pay for them and concealing his insolvency, is guilty of fraud; but not if he intends to pay for them. Talcott v. Henderson, 31 Oh. St. 162; Devoe v. Brandt, 58 N. Y.462; Hotchkin v. Third N. Bk., 127 N. Y. 329. Chap. IV. § 3. FRAUD. 207 not give rise to the action of deceit, nor even make a contract voidable as against the person making the state- ment. There is little direct authority upon the subject, but it may be submitted that the distinction drawn in Cooper v. Phibbs between ignorance of general rules of law and ignorance of the existence of a right would apply to the case of a fraudulent misrepresentation of law, and that if a man’s rights were concealed or misstated know- ingly, he might sue the person who made the statement for deceit. A decided opinion has been expressed in the Queen’s Bench Division, that a fraudulent representation of the effect of a deed can be relied upon as a defence in an action upon the deed. The representation must be made with knowledge of its falsehood or without belief in its truth.? 1 A misrepresentation of law is not generally actionable, or in any way remediable, because it is the statement of an opinion, or, at least, it should ordinarily be so understood by the reasonable man. Fish v. Cleland, 33 Il. 237, H. & W. 288; Duffany v. Ferguson, 66 N. Y. 482; Upton v. Tribilcock, 91 U. 8. 45. This general rule is subject to some qualifications. (1) If the parties stand in a fiduciary or confidential relation, a misrepresentation of law may be fraudulent. Sims v. Fer- rill, 45 Ga. 585. (2) If, although the parties do not stand in a fidu- ciary relation, the one making the representation has such superior means of knowledge that the one deceived may reasonably rely upon the representation, some courts hold that a misrepresentation of law by which an unconscionable advantage is obtained is fraudulent. Westervelt v. Demarest, 46 N. J. L. 87; Moreland v. Atchison, 19 Tex. 303; Cooke v. Nathan, 16 Barb. (N. Y.) 342. This doctrine is not susceptible of accurate definition and must be cautiously applied. (3) If the representation, although involving a matter of law, can be resolved into a representation of fact, it will be treated as a represen- tation of fact instead of law. Ross v. Drinkard’s Adm’r, 35 Ala. 434, H. & W. 291; Burns v. Lane, 1388 Mass. 350. (4) A representation as to a foreign law is a representation of fact. Bethell v. Bethell, 92 Ind. 318. As to relief in equity for mistake as to the existence of private and personal legal rights, see 2 Pomeroy’s Eq. Jurisp., § 849. 2(1) No action of deceit will lie where the false statement is made by one believing it to be true; Cowley v. Smyth, 46 N. J. L. L.R.2H.L. 170. Hirschfield v. London, Brighton, and South Coast Rail- way Co., 2Q. B. D.1. (c) There must be knowledge of false- hood ; Dickson v. ae a elegra a 3 . P. 14 App. Ca. p. ara 208 FORMATION OF CONTRACT. Part II. *Unless this is so, a representation which is wes false gives no right of action to the party injured | : by it. A telegraph company, by a mistake in the trans- mission of a message, caused the plaintiff to ship to England large quantities of barley which were not required, and which, owing to a fall in the market, resulted in a heavy loss. It was held that the represen- tation, not being false to the knowledge of the company, gave no right of action to the plaintiff.! ‘The general rule of law,’ said Bramwell, L.J.; ‘is clear that no action is maintainable for a mere statement, although untrue, and although acted on to the damage of the person to whom it is made, unless that statement is false to the knowledge of the person mak- ing it.’ This rule is to be supplemented by the words of Lord Herschell in Derry v. Peek : — ‘First, in order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is 380; Cowley v. Dobbins, 136 Mass. 401; Wakeman v. Dalley, 51 N. Y. 27; except in Michigan and Wisconsin; Holcomb v. Noble, 69 Mich. 896; Davis v. Nuzum, 72 Wis. 439. (2) An action will lie where the statement is made by one who knows it to be false or who has no knowledge either of its truth or falsity. Litchfield v. Hutchinson, 117 Mass. 195; Chatham Furnace Co. v. Moffatt, 147 Mass. 403, H. & W. 298; Lynch v. Mercantile Trust Co., 18 Fed. Rep. 486; Dulaney v. Rogers, 64 Mo. 201; Haven v. Neal, 43 Minn. 315. (8) An action will not lie merely because the defendant had no reasonable grounds for his belief ; want of reasonable grounds for the belief has only an evidential force. McKown v. Furgason, 47 Iowa, 636, H. & W. 301; Salisbury v. Howe, 87 N.Y. 128. 1 The result in the United States is otherwise, though not on the ground of deceit. In this country the one to whom a telegraph mes- sage is addressed may generally maintain an action for damages for negligence, although he is not a party to the contract. “While it may be difficult to reply to the criticisms of the grounds upon which the American decisions rest, it must be regarded as settled by an almost unbroken current, that the telegraph company is under respon- sibility to the sendee, at least in those cases in which injury results from the delivery of an altered message.” Western Union Telegraph Co. v. Allen, 66 Miss. 549; New York &c. Co. v. Dryburg, 35 Pa. St. 298; Pearsall v. Western Union Tel. Co., 124 N. Y. 256. Chap. IV. § 3. FRAUD. 209 proved when it is shown that a false representation has been made, (1) knowingly, or (2) without belief in its truth, or (8) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.’ Therefore if a man makes a false statement, honestly believing it to be true, he cannot be rendered liable in an action of deceit. It is fraudulent to represent yourself as possessing a belief which you do not possess. This is the ground of liability in the case of reckless misstatement of fact. The maker of the statement represents his mind as cer- tain in the matter, whereas in truth it is not certain. He says that he believes, when he really only hopes or wishes. It is just as fraudulent for a man to misrepresent wilfully his state of mind as to misrepresent wilfully any other matter of fact. ‘The state of a man’s mind,’ said Bowen, L.J., ‘is just as much a fact as the state of his [9170] digestion;’ and the rule as *to reckless misstate- ment laid down by Lord Herschell does not in any way widen the definition of fraud. But from time to time attempts are made to extend the results of fraud, and to make men liable not merely for wilful misstatements of fact or of belief, but for misstate- ments of fact made in the honest belief of their truth, but not based upon reasonable grounds. The rule was settled in the common law courts, as long ago as 1844, that a misstatement of fact made with an honest belief in its truth was not a ground for an action of deceit, and that ‘fraud in law’ or ‘legal fraud’ is a term which has no meaning as indicating any ground of liability. But shortly after the Judicature Act came into effect judges whose experience had lain chiefly in courts of equity came to deal with the common law action of P or disre- gard of truth. Edgington v. Fitzmau- rice, 29 Ch. D, 483. Want of reasonable ground for belief ; Collins v. Evans, 5 Q. B. 820." 8 Ex. D. 242, its effect doubtful * p. 248. 20 Ch, D. 44. till settled in Derry v. Peek, 14 App. Ca. 337. 210 FORMATION OF CONTRACT. Part II. deceit, and applied to it from time to time the somewhat ill-defined notions of fraud, which had prevailed in the equity courts.* In Weir v. Bell the dissenting judg- ment of Cotton, L.J., contains a dictum that a man is liable for deceit, ‘if he has made statements which are in fact untrue, recklessly, that is, without any reasonable grounds for believing them to be true.’ This view of liability for deceit was not accepted by the majority of the court, and the case is remarkable for an emphatic condemnation by Bramwell, L.J., of the use of the term ‘legal fraud: ’ — ‘To make a man liable for fraud, moral fraud must be proved against him. I do not understand legal fraud; to my mind it has no more meaning than legal heat or legal cold, legal light or legal shade.’ Nevertheless in Smith v. Chadwick the view of fraud expresed by Cotton, L.J., was adopted and extended by Sir G. Jessel. He there says that a misstatement made care-*lessly, but with a belief in its truth and with ae no intention to deceive, renders «the maker liable to c J an action for deceit. Evidently a confusion was growing up between mis- representation which is a ground for rescinding a contract, and misrepresentation which is a ground for an action of deceit. The matter came to an issue in Peek v. Derry. The defendants were directors of a tramway company, which had power by a special act to make tramways, and with the consent of the Board of Trade to use steam power to move the carriages. In order to obtain the special act the plans of the company required the approval of the Board of Trade, and the directors assumed, that as their plans had been approved by the Board before their act was passed, the consent of the Board to the use of steam power, « Thus Sir E. Fry (Specific Performance, p. 324) speaks of fraud as includ- ing ‘not only misrepresentation when fraudulent, but also all other uncon- scionable or deceptive dealing of either party to any contract.’ Chap. IV. § 3. FRAUD, 211 ~ which they had to obtain after the act was passed, would be given as of course. They issued a prospectus in which they called attention to their right to use steam power, as one of the important features of their under- taking. The consent of the Board of Trade was refused: the company was wound up, and a shareholder brought an action of deceit against the directors. Stirling, J., found as a fact that the defendants ‘had reasonable grounds for the belief’ expressed in the pro- spectus, and that they were innocent of fraud. The Court of Appeal held that although the prospectus expressed the honest belief of the directors, it was a belief for which no reasonable grounds existed, and that the directors were therefore liable. The House of Lords reversed the decision of the Court of Appeal. The cases are exhaustively discussed in the judgment of Lord Herschell, and the conclusion to which he comes is thus expressed : — ‘In my opinion making a false statement through want of care falls far short of, and is a very different thing from, fraud, and the same may be said of a false representation honestly believed, though on insufficient grounds. ... At the same time, I desire to say dis- tinctly that when a false statement has been made, the questions whether there were reasonable grounds for believing it, *and what were the means of knowledge in the possession of the person making it, are most weighty matters for consideration. The ground upon which an alleged belief was founded is a most important test of its reality. I can conceive many cases where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really entertained, and that the representation was a fraudulent one.’ The rule may therefore be regarded as settled that a statement made with an honest belief in its truth cannot render the maker liable for deceit,“ though the absence of reasonable grounds for belief may go to show that the [#172] @It is stated on high authority that a representation, believed to be true when made, but afterwards discovered to be false, amounts to fraud if the transaction is allowed to continue on the faith of it. If this means that an action of deceit would lie, there must be something said or done confirmatory of the statement after it is known to be false. Peek v. Derry, 37 Ch. D. 541, 565. Absence of reasonable ground for belief not a cause of action, Derry v. ters 14 pp. Ca. 375. but may suggest dishonest motive. Lord Black- burn in Brownlie v. Campbell, 5 App. Ca, p. 950. Angus v. Clifford, [1891] 2 Ch. C. A. 468, Dishonest motive need not be present, p. 144. L.R. 6H. L. 409, if state- ment known to be false. 212 FORMATION OF CONTRACT. Part IL. belief expressed was not really entertained, in other _words that the man who made the statement represented himself to possess a belief which he did not possess. It may well happen in the course of business that a man is tempted to assert for his own ends that which he wishes to be true, which he does not know to be false but which he strongly suspects to have no foundation in fact. If he asserts such a thing with a confident assurance of belief, or if he neglects accessible means of information, his statement is not made in an honest belief of its truth; he may have taken care not to acquaint himself with inconvenient facts. ‘But Peek v. Derry has settled once for all the controversy which was well known to have given rise to very considerable difference of opinion as to whether an action for negligent misrepresentation, as distinguished from fraudulent misrepresentation, could be main- tained.’ There is another aspect of fraud in which the fraudu- lent intent is absent but the statement made is known to be untrue. Such is the case of Polhill v. Walter, cited above. That decision is confirmed by the judgment of Lord Cairns in Peek v. Gurney. The plaintiff in that case had purchased shares from an original allottee on the faith of a prospectus *issued by the directors of a company, and he brought an action of deceit against the directors. Lord Cairns compared the statements in the prospectus with the circumstances of the company at the time they were made, and came to the conclusion that the statements were not justified by facts. He then proceeded to point out that though these statements were false, yet the directors might well have thought, and probably did think, that the undertaking would be a profitable one. [*173] ‘But,’ he says, ‘in a civil proceeding of this kind all that your Lordships have to examine is the question, Was there or was there not misrepresentation in point of fact? And if there was, however inno- Chap. IV. § 3. FRAUD. 213 cent the motive may have been, your Lordships will be obliged to arrive at the consequences which would properly result from what was done.’ There is good reason for such a rule: if a man chooses to assert what he knows or even suspects to be false, hoping, perhaps believing, that all will turn out well, he cannot be permitted to urge upon the injured party the excellence of the motives with which he did him a wrong, but must.submit to the natural inferences and results which follow upon his conduct.? The representation must be made with the intention that at should be acted upon by the injured party. We may divide this proposition into two parts. (1) The representation need not be made to the injured party; (2) it must be made with the intention that he should act upon it. (1) Levy sold a gun to the father of Langridge for the use of himself and his sons, representing that the gun had been made by Nock and was ‘a good, safe, and secure gun:’ Langridge used the gun; it exploded, and so injured his hand that amputation became necessary. He sued Levy for the false representation, and the jury found that the gun was unsafe, was not made by Nock, and found generally for the plaintiff. It was urged, in arrest of judgment, that Levy could not be liable to Langridge for a representation not made to him; but the Court of Exchequer held that, since *the gun was sold to the father to be used by his sons, and the false representation made in order to effect the sale, and as [*174] ‘there was fraud, and damage, the result of that fraud, not from an act remote and consequential, but one contemplated by the defendant at the time as one of its results, the party guilty of the fraud is responsible to the party injured.’ ? 1 Judd y. Weber, 55 Conn. 267. 2 This class of cases, based on deceit, should not be confounded with those anomalous cases based on the doctrine of sending immi- (d) Made with inten- tion that it be acted upon by injured party. Langridge v. Levy, 2M & W. 519. The state- ment need not be made to the injured party, p. 582. L. R.6H.L. p. 377, but must be made with the intention that he should act upon it. L. R. 6H. L. p. 410. Barry v. Croskey, 2J.&H.1. p. 22. (e) Must actually deceive. Arkwright vy. Newbold, 17 Ch. D. 324, Horsfall v. Thomas, 1H. &C.90. 214 FORMATION OF CONTRACT. Part IT. (2) In Peek v. Gurney directors were sued by persons who had purchased shares in a company on the faith of false statements contained in a prospectus issued by the directors. The plaintiffs were not those to whom shares had been allotted on the first formation of the company ; they had purchased their shares from such allottees. It was held that the prospectus was only addressed to the first applicants for shares; that the intention to deceive could not be supposed to extend to others than these: and that on the allotment ‘the prospectus had done its work ; it was exhausted.’ The law had been so stated in an earlier case. ‘Every man must be held responsible for the consequences of a false representation made by him to another upon which a third person acts, and so acting is injured or damnified, provided it appear that such Salse representation was made with the intent that it should be acted upon by such third person in the manner that occasions the injury or loss. . . .. But to bring it within the principle, the injury, I apprehend, must be the immediate and not the remote consequence of the repre- sentation thus made.’ } The representation must actually deceive. ‘In an action of deceit the plaintiff cannot establish a title to relief simply by showing that the defendants have made a fraudulent state- ment: he must also show that he was deceived by the statement and acted upon it to his prejudice.’ - Thomas bought a cannon of Horsfall. The cannon had nently dangerous articles negligently into the market. Thomas v. Winchester, 6 N. Y. 397; Schubert v. Clark Co., 49 Minn. 331. Nor with those cases generally in which the defendant is held to have undertaken a duty wider than contract and to have performed it negligently. Ante, p. 208, note 1; Savings Bank v. Ward, 100 U. S. 195, 205-6. The doctrine as applicable to deceit is illustrated by representa- tions to a commercial agency which mislead patrons of the agency; Eaton v. Avery, 83 N.Y. 31; Stevens v. Ludlum, 46 Minn. 160, H. & W. 280; or to a trustee of a bond issue which mislead those pur- chasing from the trustee. Nash v. Minnesota Sc. Co., 159 Mass. 437. 1 Hunnewell v. Duxbury, 154 Mass. 286, H. & W. 303. Chap. IV. § 3. FRAUD. 215 a defect which made it worthless, and Horsfall had en- deavoured to conceal this defect by the insertion of a metal plug into the weak spot in the gun. Thomas never in- spected the gun; he accepted it, and upon using it for the purpose for which he bought it the gun burst. It was held that the attempted fraud, having had no operation upon his mind, did not *exonerate him from paying for the gun. ‘If the plug, which it was said was put in to conceal the defect, had never been there, his position would have been the same; for, as he did not examine the gun or form any opinion as to whether it was sound, its condition did not affect him.’ This judgment has been severely criticised by high authority, but it seems to be founded in reason. Deceit which does not affect conduct cannot create liabilities; and it would seem as reasonable to defend an action brought for the price of goods on the ground that the seller was a man of immoral character, as to maintain that a contract was voidable by reason of a deceit practised by one party but in no way affecting the judgment of the other.? [*175] We may now consider the effect of fraud such as we have described it to be, upon rights ea contractu. Apart from contract, the person injured by fraud, such as we have described, has the common law action for deceit, and may recover by that means such damage as he has sus- tained; an analogous remedy exists in equity where the plaintiff would otherwise, as in cases of fraud by directors, have to bring a number of separate actions of deceit, or would for some reason be destitute of legal remedy. ‘These remedies are not confined to fraud as affecting the forma- tion of contract; they apply to any fraudulent statement 1 Slaughter’s Adm’r v. Gerson, 13 Wall. 379; Sheldon v. Davidson, 85 Wis. 138, H. & W. 295; Long v. Warren, 68 N. Y. 426; (cf. Albany City Sav. Inst. v. Burdick, 87 N. Y. 40; Schumaker v. Mather, 133 N.Y. 590); Lewis v. Jewell, 151 Mass. 345, H. & W. 306. Per Bram- well, B., 1H. &C, 99, See dicta of Cockburn, Smith v. Hughes, L. R.6Q.B. at p. 605. Deceit which does not deceive is not fraud. Effects of fraud. Remedies ex delicto. Peek v. Barry vy. Croskey, 2J3.& H. 30, Remedies ex con- tractu. ante, p. 164. Houlds- worth v. City of Glasgow Bank, 5 App. Ca. 817. Right of rescission. L. R. 18 Eq. Gét, 216 FORMATION OF CONTRACT. Part II. which leads the person to whom it is made to alter his position for the worse. But we have to consider fraud and its effects in relation to contract. We must therefore ask what are the remedies ex contractu open to one who finds that he has been induced to enter into a contract by fraud. 1. He may affirm the contract and ask for a fulfilment ~ of its terms or damages for such loss as he has sustained by their non-fulfilment. He cannot, however, enforce a fulfilment of the terms of the contract unless the false statement by which he has been deceived is of such a character as to take effect by way of *estoppel. The nature of the liability which may : Ste : : [*176] arise from the application of this rule of evidence has been explained elsewhere, and is not limited to cases in which the relations of the parties originated in con- tract.* In like manner one who has been induced to purchase a chattel by fraud may retain the chattel and sue for loss sustained by the fraud. But the exercise of this right must depend on the nature of the contract. A man cannot remain a shareholder and sue the company of which he is a member, though he was induced to purchase shares by the fraud of the directors. Nor can he divest himself of the character of a shareholder, and so put himself in a position to sue, after the company has gone into liquidation. 2. He may avoid the contract, either by taking active steps to get it cancelled in the Chancery Division on the ground of fraud, or by resisting a suit for specific per- formance, or an action for damages brought in respect of it. 3. If after becoming aware of the fraud he does not «Ina previous edition I cited Moore and De la Torres case as an illustra- tion of the right of the defrauded person to have the false statement fulfilled. But I believe that if that case were to be decided now it would be decided on the ground of estoppel. ‘ Chap. IV. § 8. FRAUD. 217 give notice of his intention to avoid the contract, he may lose his option to affirm or avoid the contract, and may be thrown back upon the action for deceit. This loss of his right to affirm or avoid may accrue — firstly, if he takes any benefit under the contract or does any act which amounts to an affirmation of it.! Or secondly, if before he makes his choice circumstances have so altered that the parties can no longer be replaced in their former position. Such would be the case of a shareholder induced to take shares by false statements in Limits of right to rescind. Oakes v. Turquand, 2H. L. a prospectus, if the company should go into liquidation LR? before he can disaffirm.? Or thirdly, since the contract is voidable, not void, — is valid until rescinded, —if third parties bond fide and for value acquire *property or possessory rights in goods obtained by fraud, these rights are valid against the defrauded party? There is now but one exception to this rule. If the fraud take the form of personation; if A obtains goods from X by falsely representing himself to be C’ or C’s agent, and then sells the goods to M, M acquires no [#177] title though he is ignorant of the fraud and has paid for 7 the goods.* By 24 & 25 Vict. c. 96, s. 100, if goods were obtained by false pretences, the title of the defrauded owner re- vested in him if the swindler was prosecuted to convic- 1“ The invariable rule is that the right to rescind may be exercised upon discovery of the fraud; but any act of ratification of a contract, ° after knowledge of the facts authorizing a rescission, amounts to an affirmance, and terminates the right to rescind.” Crooks v. Nippolt, 44 Minn. 239; Bach v. Tuch, 126 N. Y. 53. 2A court of equity is always reluctant to rescind, unless the parties can be put back in statu quo.” Grymes v. Sanders, 93 U. 8. 55; Bassett v. Brown, 105 Mass. 551. ® Rowley v. Bigelow, 12 Pick. (Mass.) 307; Dettra v. Kestner, 147 Pa. St. 566. , 4 Barker v. Dinsmore, 72 Pa. St. 427. 395. Rights of third parties. Babcock y. Lawson, 4 Q.B. D. 394, Cundy y. Lindsay, 8 App. Ca. 459. Hollins v. Fowler, L.R.7 HLL. 5T. Bentley v. Vilmont, 12 App. Ca. 471. Charter v. Trevelyan, 1101 &F. T14, Clough v. L.&N.W.R. Co., L. R. 7 Ex. 85. (4) Duress. In what it consists. 1 Rolle, Abr. 688. Must affect promisor, Huscombev. Standing, Cro.Jac. 187. See ante, p. 84. Atlee v. Backhouse, 3M. & W. 633. and must be per- sonal. 218 FORMATION OF CONTRACT. Part II. tion by or on behalf of the owner, and he might recover them from an innocent purchaser for value. The Sale of Goods Act, 56 & 57 Vict. c. 71, s. 24 (2) overrides this provision. The title to goods thus obtained does not revest upon conviction, though the convicting court may make an order for their restitution. Lapse of time has of itself no effect in determining the rights of the defrauded party. But lapse of time coupled with knowledge of the fraud may furnish evidence of intention to affirm, and will in any event increase the chance that by change in the position of the parties or the acquisition of rights by a third party the right to rescind may be lost. § 4. Duress. A contract is voidable at the option of one of the parties if he have entered into it under duress. Duress consists in actual or threatened violence or imprisonment; the subject of it must be the contracting party himself, or his wife, parent, or child; and it must be inflicted or threatened by the other party to the con- tract, or else by one acting with his knowledge and for his advantage. A contract entered into in order to relieve a third person from duress is not voidable on that ground; though a simple contract, the consideration for which was the discharge of a third party by the promisee from an illegal imprisonment, would be void for unreality of consid- eration. Nor is a promise voidable for duress which is made in *consideration of the release of goods from deten- tion. If the detention is obviously wrongful the promise would be void for want of consideration ;? if the [*178] 1 Morse v. Woodworth, 155 Mass. 233, H. & W. 308; Brown v. Pierce, 7 Wall. (U. 8.) 205; .tdams v. Irving Nat. Bk., 116 N.Y. 606; Morrill v. Nightingale, 93 Cal. 452. 2 Tolhurst v. Powers, 133 N. Y. 460, H. & W. 174. Chap. IV. § 5. UNDUE INFLUENCE. 219 legality of the detention was doubtful the promise might be supported by a compromise. But money paid for the release of goods from wrongful detention may be recovered back in virtue of the quasi-contractual relation created by the receipt of money by one person which rightfully belongs to another.? § 5. Undue influence. I have mentioned that this use of the term Fraud has been wider and less precise in the chancery than in the common law courts. This followed necessarily from the remedies which they respectively administered. Common law gave damages for a wrong, and was com- pelled to define with care the wrong which furnished a cause of action. Equity refused specific performance of a contract, or set aside a transaction, where one party had acted unfairly by the other. Thus ‘fraud’ at common law is a false statement such as is described in the pre- ceding section: ‘fraud’ in equity has often been used to mean unconscientious dealing. One form of such dealing is commonly described as the exercise of ‘undue influence.’ The subject can only be dealt with here in outline. Whether or no relief is granted in any given case must often depend on the view taken by the court of the character or tendency of a number of transactions extending over a considerable time. But we must find a definition of undue influence before we proceed to consider and classify the circumstances which create it, and we may find assistance towards this process of classification in certain principles which equity judges have laid down as to the enforcement of promises or gifts made for no consideration or for a consideration wholly disproportionate to the value of the thing promised or given. 1 Lonergan v. Buford, 148 U.S. 581. See post, Quasi-Con- tract. (5) Undue dnfluence : arisesfrom a course cf conduct or circum- stances or the rela- tions of the parties ; not from definite statement. Definition of undue influence. &Ch. 490. Presump- tion of undue influence Kekewich v. Manning, 1 D. M. G.18 Hoghton vy. Hoghton, 15 Beay. 299. Wood v. Abrey, 3 Maddock, 423, Coles v. Trecothick, 9 Ves. 246. from in- equality of parties: 220 FORMATION OF CONTRACT. Part II. Lord Selborne supplies a definition in The Karl of Aylesford v. Morris. Speaking of the cases ‘which, in the language of *Lord Hardwicke, raise from the etreumstances and conditions of the parties peenaenG a presumption of fraud,’ he says: — [*179] ‘Fraud does not here mean deceit or circumvention ; it means an un- conscientious use of the power arising out of these circumstances and condi- tions ; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been, in point of fact, fair, just, and reasonable.’ The principles to which I alluded are these : — (a) that equity will not enforce a gratuitous promise 8. even though it be under seal; (8) that the acceptance of a voluntary donation throws upon the person who accepts it the necessity of proving ‘that the transaction is righteous ; - (y) that inadequacy of consideration is regarded as an element in raising the presumption of undue influence or fraud ; (6) but that mere inadequacy of consideration will not (according to the strong tendency of judicial opinion) amount to proof of either. So the question which we have to discuss may be put thus: — When a man demands equitable remedies, either as plaintiff or defendant, seeking to escape or avoid a grant or promise made gratuitously or upon a very inade- quate consideration, what must he show in addition to this in order to raise the presumption that undue influence has been at work ? We must first ask whether the parties were upon equal terms as to knowledge and capacity in respect of the trans- action. They cannot be so if one is in present need or is uneducated or inexperienced. Chap. IV. § 5. UNDUE INFLUENCE. 221 ‘In ordinary cases each party to a bargain must take care of his own interest, and it will not be presumed that undue advantage or contrivance has been resorted to on either side; but in the case of “the expectant heir,” or of persons under pressure without adequate [*180] protection, and in the case of dealings with uneducated, *igno- rant persons, the burden of showing the fairness of the trans- action is thrown on the person who seeks to obtain the benefit of the contract.’ Such persons were formerly protected in two modes which are no longer available. Usury laws avoided promises to pay interest beyond a certain rate per cent., and thus prevented extortionate loans of money.! And the Court of Chancery adopted a rule that the purchaser of a reversionary interest might always be called on to show that he had given full value for his bargain, and thus a man was protected against the risk that the pressure of poverty might compel him to take an inadequate sum for the prospects of future wealth. The usury laws are repealed, and the rule framed by the Court of Chancery is set aside by 31 & 82 Vict. c. 4. But a catching bargain or an exorbitant rate of interest is none the less liable to be set aside by the Chancery Divis- ion where two parties deal on unequal terms as to age, knowledge, or position. Such a transaction is assumed to be unfair unless the party who has received benefit is able to show that it is in fact fair and reasonable? Where the party who seeks redress is of full capacity, has been within reach of good advice, and is in no such immediate want as would put him at the mercy of an unscrupulous speculator, the exercise of undue influence will not be assumed; it must be proved, and this proof is supplied if it is shown that the donor understood what he 1 For usury laws see Stimson, Am. St. Law, §$ 4830-37; 3 Parsons on Cont. (8th ed.), p.* 153. 2 For a discussion of the principles governing the cases where one party is incapacitated by his mental condition or necessities from giving a real consent, see 2 Pomeroy, Eq. Jurisp., §§ 944-54. O’Rorke y. Bolingbroke, 2 App. Ca. at p. 828. from special relation : Hoghton v. Hoghton, 15 Beay, 299 Archer vy, Hudson, T Beav. 560. parental ; spiritual ; 14 Vesey, 273. p. 300. 18 Ch. D. 196. Tate v. Williamson, fiduciary. ‘Where no presump- tion, in- fluence 222 FORMATION OF CONTRACT. Part II. was doing. But where certain relations, parental or con- fidential, exist between the parties, a presumption of influ- ence arises unless it be proved that the donor or promisor has been ‘placed in such a position as will enable him to form an entirely free and unfettered judgment independent altogether of any sort of control. The court will not necessarily set aside a gift or prom- ise made by a child to its parent, by a client to his solicitor, by a patient to his medical man, by a cestut que trust to his trustee, by a ward to his guardian, or by any person to his *spiritual adviser; but such relations call for proof that the party benefited did not take advantage of his position. As was said by Lord Eldon in Huguenin v. Baseley, where a lady made over her property to a clergyman in whom she reposed confidence, [#181] ‘The question is not whether she knew what she was doing, had done, or proposed to do, but how that intention was produced: whether all that care and providence was placed around her, as against those who advised her, which from their situation, and relation in respect to her, they were bound to exert on her behalf,’ The law as laid down by Lord Eldon has been followed in a long series of decisions, of which one of the latest is Bainbrigge v. Browne, where a transaction between a father and children was set aside on the ground that the father had failed to show, as he was bound to do, that his children had independent advice in the matter, and full knowledge of the contents of the documents which ey were signing. Nor is it enough that independent advice should be secured for the person subject to the influence arising from fiduciary relations. A knowledge of any material fact possessed by the buyer or donor and withheld by him is sufficient to vitiate the transaction. Where there are no such relations between the parties as give rise to a presumption of influence, the burden of proof rests on the donor or promisor to show that undue Chap. IV. § 5. UNDUE INFLUENCE. 223 influence was, in fact, exercised. If this can be shown the courts will give relief. ‘The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed. The relations with which the Court of Equity most ordinarily deals are those of trustee and cestui que trust, and such like. It applies specially to those cases, for this reason and for this reason only, that from those relations the court presumes confidence put and influence exerted. Whereas in all other cases where those relations do not subsist, the confidence and the influence must be proved extrinsically; but where they are proved extrinsically, the rules of reason and common sense and the technical rules of a court of equity are just as applicable in tr the one case as the other.’ *The words quoted are those of Lord Kingsdown: the case was one in which a young man, only just of age, had incurred liabilities to the plaintiff by the con- trivance of an older man who had acquired a strong influ- ence over him, and who professed to assist him in a career of extravagance and dissipation. It was held that influ- ence of this nature, though it certainly could not be called parental, spiritual, or fiduciary, entitled the plaintiff to the protection of the court. Similar in character is the recent case of Moreley v. [*182] Loughnan, an action brought by executors to recover money paid by the deceased to a man in whose house he had lived for some years. Wright, J., in giving judg- ment for the plaintiffs, said that it was unnecessary to decide whether a fiduciary relation existed between the deceased and Loughnan, or whether spiritual influence had determined the gifts. ‘The defendant took posses- sion, so to speak, of the whole life of the deceased, and ‘ the gifts were not the result of the deceased’s own free will, but the effect of that influence and domination.’ 1 1 For a discussion of the principles governing the cases where the parties are in a fiduciary relation, see 2 Pomeroy, Eq. Jurisp., §§ 955- 63; Bigelow on Fraud, pp. 261 et seg. See also Hall v. Perkins, 3 Wend. (N. Y.) 626; Leighton v. Orr, 44 Iowa, 679; Connor v. Stanley, 72 Cal. 556; Cowee v. Cornell, 75 N. Y. 91. may be proved. Smith v. Kay, TH.L.C. [1808] 1Ch 36. Rescission. Presumed affirma- tion 8 Q. B.D. 587, 36 Ch. D. 145. depends on cessa- tion of influence. & Ch. 881. In re Fry, 40 Ch. D. at p. 324, 224. FORMATION OF CONTRACT. Part II. The right to rescind contracts and to revoke gifts made under undue influence is similar to the right of rescinding contracts induced by fraud. Such transactions are void- able not void. So soon as the undue influence is with- drawn, the action or inaction of the party influenced becomes liable to the construction that he intended to affirm the transaction. Thus in Mitchell v. Homfray a jury found as a fact that a patient who had made a gift to her physician determined to abide by her gift after the confidential relation of physician and patient had ceased, and the Court of Appeal held that the gift could not be impeached. In Alleard vy. Skinner the plaintiff allowed five years to elapse before she attempted to recall gifts made to a sister- hood from which she had retired at the commencement of that time; during the whole of the five years she was in communication with her solicitor and in a position to know and exercise her rights. In this case also the Court of Appeal held *that the conduct of the donor amounted to an affirmation of the gift. But the affirmation is not valid unless there be an entire cessation of the undue influence which has brought about the contract or gift. The necessity for such a com- plete relief of the will of the injured party from the dominant influence under which it has acted is thus set forth in Moxon v. Payne : — [*183] ‘Fraud or imposition cannot be condoned; the right to property acquired by such means cannot be confirmed in this court unless there be full knowledge of all the facts, full knowledge of the equi- table rights arising out of those facts, and an absolute release from the undue influence by means of which the frauds were practised.’ The same principle is applied where a man parts with a valuable interest under pressure of poverty and without proper advice. Acquiescence is not presumed from delay: on the contrary, ‘it is presumed that the same distress which pressed him to enter into the contract prevented him from coming to set it aside.’ CHAPTER V. Legality of Object. THERE is one more element in the formation of contract which remains to be considered — the object of the parties. Certain limitations are imposed by law upon the freedom of contract. Certain objects of contract are forbidden or discouraged by law; and though all other requisites for the formation of a contract be complied with, yet if these objects are in contemplation of the parties when they enter into their agreement the law will not enforce it. Two matters of inquiry present themselves in respect of this subject. The first is the nature and classification of the objects regarded by law as illegal. The second is the effect of the presence of such objects upon the contracts in which they appear. § 1. Nature or ILLEGALITY IN CONTRACT. The objects of contract may be rendered illegal by express statutory enactments or by rules of common law. And the rules of common law may be more or less pre- cisely defined. We may arrange the subject in the following man- ner: — A contract may be illegal because (1) its objects are forbidden by statute ; (2) its objects are defined by the common law as constituting an indictable offence or civil wrong; (8) its objects are discouraged by the common law as contrary to public policy. *But the two latter heads of illegality are in fact two forms, one more and one less precise, of com- Q 225 [*185] Two sub- jects of in- quiry: (1) the nature, (2) the effects of illegality. (1) What is illegal- ity? (®) Statu- tory ille- gality. (a) Effects of statu- tory prohi- bition. Brown v. Duncan, 10 B.& CG. 98, Cope v. Rowlands, 2M. &W. 158. Smith v. Mawhood, 14M. & W. 464, 226 FORMATION OF CONTRACT. Part II, mon law prohibition. The broad distinction is between contracts illegal by statute and contracts illegal at common law, and it is thus that I propose to treat the subject. CG) Contracts which are made in breach of statute. A statute may declare that a contract is illegal or void. There is then no doubt of the intention of the legislature that such a contract should not be enforced. The differ- ence between an illegal and a void contract is important as regards collateral transactions, but as between the parties the contract is in neither case enforceable. But a statute may impose a penalty on the parties to a contract, without declaring it to be either illegal or void. In such a case we have to ascertain whether the legisla- ture intended merely to discourage the contract: by making it expensive to both parties; or to avoid it, so that parties would acquire no legal rights under it; or to prohibit it, so that any transactions entered into for its furtherance would be tainted with an illegal purpose. If the penalty was imposed for the protection of the revenue, it is possible that the contract is not prohibited, that the legislature only desired to make it expensive to the parties, in proportion as it is unprofitable to the revenue.! The soundness of this distinction has however been called in question. A better test is to be found in the continuity of the penalty. If the penalty is imposed once for all, and is not recurrent on the making of successive contracts of the kind which are thus penalised, or if other circumstances would make the avoidance of the contract a punishment disproportionate to the offence, it may be argued that such contracts are not to be held void. But where the penalty recurs upon the making of every con- 1 Larned vy. Andrews, 106 Mass. 435. Chap. V. § 1. LEGALITY OF OBJECT. 227 tract of a certain sort, we may assume (apart from revenue cases, as to which there may yet be a doubt) that the . contract thus penalised is avoided as between *the [*186] ‘ ae ; parties. Whether it is rendered illegal, so as to taint collateral transactions, must be a question of the construction of the statute. I will not discuss here in any detail the various statutes by which certain contracts are prohibited or penalised. They relate (1) to the security of the revenue; (2) to the protection of the public in dealing with certain articles of commerce, (8) or in dealing with certain classes of traders; (4) to the regulation of the conduct of certain kinds of business. An excellent summary of statutes of this nature is to be found in the work of Sir 1« While, as a general rule, a penalty implies a prohibition, yet the courts will always look to the language of the statute, the subject matter of it, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and if, from all these, it is manifest that it was not intended to imply a pro- hibition or to render the prohibited act void, the courts will so hold, and construe the statute accordingly.” Pangborn v. Westlake, 36 Iowa, 546, H. & W. 315, where a statute imposing a penalty for the sale of each and every lot in any addition to a city unless the plan of such addition was duly recorded, was held not to render such sales illegal. It will be observed that this case escapes the test proposed by the author. There are many other American cases where statutes penal- izing or even forbidding certain transactions have been construed to the same effect. Harris v. Runnels, 12 How. (U. 8.) 79; Wheeler v. Hawkins, 116 Ind. 515, 520; National Bank v. Matthews, 98 U.S. 621; Niemeyer v. Wright, 75 Va. 239. The following statutes have been construed as rendering contracts made without compliance with the statute void: requiring a license as a condition precedent to engaging in a specified vocation, Gardner vy. Tatum, 81 Cal. 370 (physician); Hittson v. Browne, 3 Colo. 304 (lawyer, cf. Harland v. Lilienthal, 53 N. Y. 438); Buckley v. Humason, 50 Minn. 195 (broker); Wells v. People, 71 Ill. 532 (public school teacher) ; requiring weights and measures to be sealed as a condition precedent to sale of goods by merchant, Bisbee v. AfeAllen, 39 Minn. 143; cf. Eaton v. Kegan, 114 Mass. 433; requiring goods to be in- spected, labelled, or stamped, Baker v. Burton, 31 Fed. Rep. 401; Braunn vy. Keally, 146 Pa. St. 519. (6 Objects of statu- tory prohi- bition. Pollock, 704, ed. 6. (e) Illus- trations. Wagering contracts. What isa wager? 228 FORMATION OF CONTRACT. Part II. F. Pollock, and it is not proposed to deal further with them here.! There is however a kind of contract, the wager, which needs special attention. Its peculiar character calls for analysis, and the modes in which it has been dealt with by the legislature require to be traced. Confusion has arisen from the use of the word ‘wager’ as a term of reproach; hence some contracts not permitted by law have been called wagers, while others, precisely similar in their nature but enforced by the courts under certain conditions, are not so called. A wager is a promise to give money or money’s worth upon the determination or ascertainment of an uncertain event; the consideration for such a promise is either something given by the other party, or a promise to give upon the event determining in a particular way.7? 2 It would seem that to constitute a wager there must be mutual chances of gain and loss. A so-called bet of £— to nothing might be an offer of reward for the exercise of skill, as if X should bet his jockey £100 to nothing that he did not win a race which XY desired to win; or it might be a gratui- tous promise to pay money on a condition, as if X should bet £5 to nothing that it rained in 24 hours. 1 The construction of the “Sunday statutes” which are in force in most of the American States has resulted in some conflict of authority. These statutes commonly prohibit work, labor, and business on Sunday. In such cases a contract to perform work or labor on Sunday is illegal. Handy v. St. Paul Globe Publishing Co., 41 Minn. 188, H. & W. 318. Is a contract made on Sunday, but to be performed on a secular day, also illegal? This depends upon whether the courts construe the making of a contract to be work, labor, or business; some courts do, Reynolds v. Stevenson, 4 Ind. 619, H. & W.322 ; Cranson vy. Goss, 107 Mass. 439 ; Costello v. Ten Eyck, 86 Mich. 348; Troewert v. Decker, 51 Wis. 46; some courts do not, Merritt v. Earle,29 N. Y. 117; Moore v. Mur- dock, 26 Calif. 514; Richmond v. Moore, 107 Ill. 429. Those courts that do, except the making of a contract for a charitable purpose; Bryan v. Watson, 127 Ind. 42; Allen v. Duffie, 43 Mich. 1; but they are not agreed as to whether taere can be a subsequent ratification on a secular day. Adams v. Gay, 19 Vt. 358; Day v. McAllister, 15 Gray (Mass.), 438. Of course the phraseology of a particular statute may be decisive. See generally Ringgold, Law of Sunday (1891); Green- hood, Public Policy, pp. 546-66. 2 The force of the second part of the above definition is well illus- Chap. V. § 1. LEGALITY OF OBJECT. 229 The event may be uncertain because it has not hap- pened, or because it is not ascertained, at any rate to the knowledge of the parties. Thus a wager may be made upon the length of St. Paul’s, or upon the result of an election which is over, though the parties do not know in whose favour it has gone. The uncertainty then resides in the minds of the parties, and *the subject of the wager may be said to be rather the accuracy of each man’s judgment than the determination of a particular event. But the parties must contemplate the determination of the uncertain event as the sole condition of their contract. One may thus distinguish a genuine wager from a condi- tional promise or a guarantee.“ 1 If A promises to paint a portrait of X and X promises to pay £100 if MZ approves the likeness —this is a con- tract for the sale of a chattel, the payment to depend upon a condition. A agrees to do a piece of work, for which he is to be paid in the uncertain event of M’s approval. If A, wishing to be sure that he gets something, promises D to pay him £20 if MZ approves, in considera- [*187] « The definition of a wagering contract cited by Professor Holland, in the French Code, seems faulty. It is said to be ‘one the effects of which, as to both profit and loss whether for all the parties or for one or several of them, depend on an uncertain event.’ This would include any agreement in which the profit and loss of one party depended on a contingency. trated in cases where premiums or prizes are offered to successful competitors in contests of skill, speed, etc. It is generally held that such transactions are not wagers, although the competitors pay an entrance fee which goes to make up the purse, provided they are not the sole contributors and the transaction is not a subterfuge to cover awager. Porter v. Day, 71 Wis. 296; Harris v. White, 81 N. Y. 582; Alvord v. Smith, 63 Ind. 58; Delier v. Plymouth &c. Soc., 57 Towa, 481. 1A and B agreed to exchange property on terms to be fixed by X, and if either refused to abide by X’s decision, he should pay the other ten dollars. A refused to abide by the decision. It was held that the agreement was one for liquidated damages for breach of contract and not a wager. Parsons v. Taylor, 12 Hun (N. Y.), 252. it differs from con- ditional promise: Jurispru- dence, 259, ed. 5. Art. 1964, and guarantee. Marine in- surance is a wager, though there be “insurable interest.’ 230 FORMATION OF CONTRACT. Part IL. tion that D promises to pay A £10 if M does not approve —this is a wager on the uncertain event of M’s decision. A bets D 2 to 1 that M does not approve. Again, if A desires X to advance £500 to MZ, and promises that if at the end of three months M does not pay he will—this is a promise to answer for the debt or default of another. If A, wishing to secure himself against the possible default of M, were to promise D to pay him £100 if M satistied his debt at the end of three months, in considera~- tion that D promised him £250 if M did not satisfy his debt — this would be a wager upon the solvency of M. It is obvious that a wager may be a purely gambling or sporting transaction, or it may be directed to commercial objects. A man who bets against his horse winning the Derby is precisely in the same position as a man who bets against the safety of his own cargo. Yet we call the one a wager, while the other is called a contract of marine insurance. A has a horse likely to win the Derby, and therefore *a prospect of a large return for money laid out in rearing and training the horse, in stakes and in bets; he wishes to secure that he shall in no event be a loser, and he agrees with X that, in consid- eration of X promising him £4000 if his horse loses, he promises X £7000 if his horse wins. The same is his position as owner of a cargo: he has a prospect of large profits on money laid out upon a cargo of silk; he wishes in no event to be a loser, and he agrees with X, an underwriter, that in consideration of his paying X £—, X promises to pay him £— if his id is lost by certain specified perils. The law forbids A to make such a contract unless he has what is called ‘an insurable interest’ in the cargo, and contracts in breach of this rule have been called mere wagers, while those which conform to it have been called contracts of indemnity. But sucha distinction is mislead- [*188] Chap. V. § 1. LEGALITY OF OBJECT. 231 ing.* It is not that one is and the other is not a wager: a bet is not the less a bet because it is a hedging bet; nor yet because the stake is limited to the amount of loss sustained; it is the fact that one wagering contract is and the other is not permitted by law which makes the distinction between the two. A life insurance is in like manner a wager. Let us compare it with an undoubted wager of a similar kind. A is about to commence his innings in a cricket match, and he agrees with X that if X will promise to give him £1 at the end of his innings, he will pay X a shilling for every run he gets. A may be said to insure his innings as a man insures his life; for the ordinary contract of life insurance consists in this, that A agrees with X that if X will promise to pay a fixed sum on the happening of an event which must happen sooner or later, A will pay to X so much for every year that elapses until the event 189) happens. In each of these cases A *sooner or later becomes entitled to a sum larger than any of the individual sums which he agrees to pay. On the other hand, he may have paid so many of these sums before the event takes place that he is ultimately a loser by the transaction. We may leave here the analysis of a wager, and look at the history of the law respecting wagering contracts. They fall into two groups: wagers on the happening or ascertainment of an uncertain event, made entirely for sport; and wagers in which the uncertain event affects or results from a business transaction —in other words, hedging bets by which a man protects himself from a trade risk. I will first deal with sporting wagers, premising that at common law all wagers were enforceable, and, until 2 In Wilson v. Jones such a distinction is drawn by Willes and Blackburn, Life insur- ance isa wager. History of the com- mon law as to wagers ; L. R. 2 Ex. J.J. But though the propriety of a wager may be affected by the existence 139 of an ulterior object in the mind of one of the parties, the nature of the transaction remains the same. Jackson v. Colegrave (1694), Car- thew, p. 388, Gilbert v. Sykes(1812), 16 East, 150. Bayley, J., in Gilbert v. Sykes, p. 162. of statute as to wagers. 16 Car. II. ce. T. 232 FORMATION OF CONTRACT. Part II. the latter part of the last century, were only discouraged by some trifling difficulties of pleading.! But the courts found that frivolous or indecent matters were brought before them for decision, and a rule came to be established that a wager was not enforceable if it could not be proved save by indecent evidence, or such as was calculated to injure or pain a third person; in some cases it was laid down as a rule of public policy that any wager which tempted a man to offend against the law was illegal. Strange, and even ludicrous results followed from these efforts of the courts to discourage the litigation of wagers. A bet upon the duration of the life of Napoleon was held to be unenforceable, as tending, on the one side, to weaken the patriotism of an Englishman, on the other, to encourage the idea of the assassination of a foreign ruler, and so to provoke retaliation upon the person of our own sovereign. But it is evident that the substantial motive which pressed upon the judges was ‘the incon- venience of countenancing idle wagers in courts of jus- tice,’ the feeling ‘that it would be a good rule to postpone the trial of every action upon idle wagers till the court had nothing else to attend to.’ Meantime the legislature had begun to deal with such *wagering contracts. It was enacted by 16 Car. II. c. 7, that any sum exceeding £100 lost in play- ing at games or pastimes, or in betting on the players, should be irrecoverable, and that all forms of security [#190] 1 In the United States some courts have followed the English law in holding wagers legal unless prohibited by statute, or, for special . reasons, promotive of improper results. Campbell v. Richardson, 10 Johns. (N. Y.) £06; Trenton §c. Ins. Co. v. Johnson, 24 N. J. L. 576. But the strong tendency is to declare all wagers (save those for com- mercial objects) contrary to public policy aud void. Love v. Harvey, li4 Mass. 80, H. & W. 324; Bernard v. Taylor, 23 Ore. 416, H. & W. 407; Eldred v. Malloy, 2 Colo. 320; Wilkinson vy. Tousley, 16 Minn. 299, Chap. V. § 1. LEGALITY OF OBJECT. 233 given for money so lost should be void. The law was carried a stage further by 9 Anne, c. 14, whereby secu- rities of every kind, whether given for money lost in playing at games, or betting on the players, or knowingly advanced for such purposes, were rendered void; and the loser of £10 or more was enabled to recover back money so lost and paid, by action of debt brought within three months of payment. Cases of hardship resulted from the working of this act. Such securities might be purchased from the holders of them by persons ignorant of their illegal origin. These persons, when they sought to enforce them against the giver of the security, discovered, too late, that they had paid value for an instrument which was void as against 9 Anne, c. 14, Will. IV. the party losing at play. The Act 5 & 6 Will. IV. c. 41 win therefore repealed the Act of Anne so far as regarded the avoidance of securities therein specified, and provided that they should henceforth be taken to have been orig- inally given upon an illegal consideration. The holder of such an instrument may enforce it, if after proof of its illegal inception, he is able to show that he gave value for it and was ignorant of its origin: in other words — that he was a bond fide holder for value. The next step was to make all wagers void: this was done by 8 & 9 Vict. c. 109, s. 18, which enacts : — ‘That all contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void; and that no suit shall be brought or maintained in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made. Provided always that this enactment shall not be deemed to apply to any subscription or contribution or agreement to subscribe or contribute for or towards any plate, prize, or sum of money to be awarded to the winner or winners of any lawful game, sport, pas- time, or exercise.’ } 1 Gaming contracts are void by the statutes of most States. Stim- son, Am. St. Law, § 4132. Most States have constitutional prohibi- e. 41. See Part IIL ch. ii. 8 & 9 Vict. c. 109. § 18, 55 Vict. ¢. 9. Tatam v. Reeve, [1893] 1Q. B, 44. 234 FORMATION OF CONTRACT. Part II. *It remained to deal with agreements arising out of wagers or made in contemplation of them. Wa- gers were only void, so that no taint of illegality attached to transactions collateral to wagers, except in the case of se- curities given for payment of money due in respect of such as fell under the Acts of Charles II. and Anne. Money lent to make or to pay bets could be recovered, and if one man employed another to make bets for him the ordinary [*191] rules prevailed which govern the relation of employer and employed. The Gaming Act of 1892 alters the law in this respect. ‘Any promise, express or implied, to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by 8 & 9 Vict. c. 109, or to pay any sum of money by way of commission, fee, reward, or otherwise in respect of any such contract, or of any services in relation thereto, or in connex- ion therewith, shall be null and void, and no action shall be brought or maintained to recover any such sum of money.’ 4 This act makes it impossible for a man to recover any commission or reward promised to him for making or pay- ing bets. It also prohibits the recovery of money paid in discharge of the bets of another, whether this is done in virtue of a casual request, or in pursuance of the contract of employment existing between a betting commissioner and the man on whose behalf he makes bets.1 But a man may still recover money received on his @ The act is not retrospective: Knight v. Lee, [1893] 1 Q. B. 41. tions against legalizing lotteries. Ibid., § 426. In New York the legislature is forbidden to legalize any kind of gambling. Const. Art. I. § 9 (1895). 1Jn the United States if money is lent with the intention of enabling the borrower to make a wager it cannot be recovered, since wagers are illegal and not merely void; but mere knowledge or belief that the money is to be used for an illegal purpose will not prevent a recovery. Tyler v. Carlisle, 79 Me. 210, H. & W. 390; White v. Buss, 8 Cush. (Mass.) 448. Chap. V. § 1. LEGALITY OF OBJECT. 235 behalf by another on account of bets made and won; and if he has deposited money with a stakeholder to abide the event of .a wager he may change his mind and recover it back at any time before the money is paid, because the words of the act ‘promise ... to pay any person any sum of money paid by him, which might be supposed to apply to the liability of the stakeholder, have beén held to relate only to money paid out and out, and not to a deposit of money to await the result of an event.! The Act of 1845 repealed the Acts of Charles IT. and Anne, *so that, apart from acts forbidding lotteries and certain games, and acts regulating insurance, we now have three statutes relating to wagers —5 & 6 Will. IV. c. 41, s. 1, as to securities given for money lost on cer- tain kinds of wager; 8 & 9 Vict. c. 109, s. 18, as to wagers m general; 55 Vict. c. 9, as to collateral transactions, other than securities, arising out of wagers. Securities given for money lost on wagers still fall into two classes, because 5 & 6 Will. IV. c. 41, s. 1, retains the distinction between wagers which fell under the Acts of Charles and Anne and those which do not. A promissory note given in payment of a bet made upon a cricket match is given for an illegal consideration; not only is it void as between the original parties to it, but every subsequent purchaser may be called on to show that he gave value for the note; and if he can be proved to have known of the illegal consideration for which it was first given, he may still be disentitled to recover upon it. A promissory note given in payment of a wager upon the result of a contested election would, as between the parties to it, be given on no consideration at all, inasmuch as it is given in discharge of an obligation which does not exist. But the wager is not illegal, it is simply void; [*192] 1See Bernard v. Taylor, 23 Ore. 416, H. & W. 407: Tyler v. Car- lisle, supra. De Mattos v. Benjamin, xT. LR. 221. 63 L. J. (Q. B.) 248. O'Sullivan v. Thomas, [1895] 1Q. B. 698. The Gaming Acts. Securities. Considera- tion illegal. Promise void. Fitch v. Jones, 5 E. & B. 245. Commer- cial wagers. 7 Geo. IL¢.8. Stock ex- change transac- tions. 236 FORMATION OF CONTRACT. Part II. and if the note be endorsed over to a third party, it matters nothing that he was aware of the circumstances under which the note was originally given; nor does it lie upon him to show that he gave value for the note.! As regards wagering contracts entered into for commer- cial purposes, there are three important subjects with which the legislature has dealt. These are stock ex- change transactions, marine insurance, and insurance upon lives or other events. Sir John Barnard’s Act (1784) dealt with ‘the infa- mous practice of stockjobbing,’ and was more particularly directed to wagers on the price of stock, or, as they are sometimes called, ‘agreements to pay differences.’ These originate in some such transaction as this: A contracts with X for the *purchase of fifty Russian bonds at £78 for every £100 bond. The contract is to be exe- cuted on the next settling day. If by that date the bonds have risen in price, say to £80, -X, unless he has the bonds on hand, must buy at £80 to sell at £78; and if he has them on hand, he is obliged to part with them below their market value. If, on the other hand, the bonds have gone down in the market, A will be obliged to pay the contract price which is in excess of the market value. It is easy to see that such a transaction may be a wager and nothing more, a bet on the price of stock at a future day. A may never intend to buy nor X to sell the bonds in question; they may intend no more than that the winner should receive from the loser the difference between the contract price and the market value on the settling day. And yet such a payment of differences may [*193] 1 Negotiable instruments given in payment of wagers may be declared void by statute. Stimson, Am. St. Law, § 4132. If not so declared by statute, they follow the general rule as to illegal considera- tion and are valid in the hands of bond fide holders for value; but the holder has the burden of showing that he took without notice and for a valuable consideration. Vosburgh v. Diefendorf, 119 N. Y. 357. Chap. V. § 1. LEGALITY OF OBJECT. 237 be perfectly bond fide ; A may have found so much better an investment for his money between the date of the con- tract and the settling day that it is well worth his while to pay a difference in X’s favour to be excused perform- ance of the contract. Sir John Barnard’s Act has been repealed; contracts of this nature, if proved to be simple wagers, fall under the 8 & 9 Vict. ¢. 109, § 18." But it is hard to prove that they are so. Shares may be bought on the terms that no shares are to change hands; then the transaction is a wager on their price at a future day. But if the purchase is the result of one agreement and the payment of the difference is the result of another, it is impossible to say that either is a wager, and not easy to construct a wager by combining the two transactions.! Marine insurance is dealt with by 19 Geo. II. c. 87, the effect of which is to avoid all insurances on British ships or merchandise laden on board such ships unless the person effecting the insurance is interested in the thing insured. What is an insurable interest, that *194) ; . need is to say such an interest *as entitles a man to effect «The effect of 8 & 9 Vict. c. 109. § 18 upon stock exchange transactions is well summarized in the Appendix to the Report of the Stock Exchange Commission, 1878 [2157], p. 356. 1 Wagers on the rise and fall of prices, or dealings in ‘futures,’ are illegal. Mohr v. Miesen, 47 Minn. 228, H. & W. 825; Harvey v. Mer- rill, 150 Mass. 1, H. & W. 383. These and other cases support the following conclusions: (1) Contracts for future delivery are valid, whether the seller has the goods or not; (2) option contracts, whether ‘puts,’ ‘calls,’ or ‘straddles,’ are not per se gambling contracts; (3) where there is nothing on the face of the contract to show that it is a wagering contract, it will be presumed to be valid and the burden of proving its illegality is upon him who alleges it; (4) its illegality is shown by satisfactory proof that neither party intended an actual sale followed by delivery, but intended a settlement of the difference between the contract price and the future market price in money. Bigelow v. Benedict, 70 N. Y. 202; Story v. Salomon, 71 N.Y. 420; Irwin v. Williar, 110 U. S. 499. 23 & 24 Vict. ec. 28. Grizewood v. Blane, 11 C, B. 5388. Thacker y. Hardy, 4Q. B.D 685. Marine insurance. Insurance generally. Darrell v. Tibbitts, 5 Q. B. D. 560. Life insur- ance differs from other contracts of insur- ance. 238 FORMATION OF CONTRACT. Part II. an insurance, is a question of mercantile law with which we are not here concerned.! The Act 14 Geo. III. ¢. 48 deals with insurance gen- erally (marine insurance excepted), and forbids insurances on the lives of any persons, or on any events whatsoever in which the person effecting the insurance has no inter- est. It further requires that the names of the persons interested should be inserted in the policy, and provides that no sum greater than the interest of the insured at the time of insurance should be recovered by him. A creditor may thus insure the life of his debtor, and a lessee for lives may insure the lives upon which the continuance of his lease depends. But life insurance differs in an important respect from marine or fire insurance. The latter contemplate a speci- fied loss, they are essentially contracts of indemnity, and if the insured recovers the amount of his loss from any other source the insurer may recover from him pro tanto.? ‘Policies of insurance against fire or marine risk are contracts to recoup the loss which parties may sustain from particular causes. When such loss is made good aliunde, the companies are not liable for a loss which has not occurred; but in a life policy there is no such provision. The policy never refers to the reason for effecting it. « The fact that the amount recoverable by the insured is thus limited by the amount of his loss does not alter the character of insurance as a wager. For a wager is not necessarily a gambling transaction; it is only a certain form of contract. > This right is called the ‘subrogation’ of the insurer into the rights of the insured. Its nature is most clearly set forth in Castellain v. Preston, 11 Q. B.D. (C. A.) 380. 1A few of the American States held marine insurance policies valid though the insured had no insurable interest. Buchanan v. Ins. Co., 6 Cow. (N. Y.) 318, and see Trenton §c. Ins. Co. v. Johnson, 24 N. J. L. 576. But the strong tendency has been to hold illegal all wagering contracts upon matters in which the parties have no interest. Ante, p. 232, note 1. Such contracts are now generally forbidden by statute. For a discussion of the meaning of the term ‘insurable in- terest,’ see Greenhood, Public Policy, pp. 238-91. Chap. V. § 1. LEGALITY OF OBJECT. 239 It is simply a contract that in consideration of a certain annual payment, the company will pay at a future time a fixed sum, cal- culated by them with reference to the value of the premiums which are to be paid, in order to purchase the postponed payment.’ Thus, though in a life policy the insured is required to have an interest at starting, that interest is nothing as between him and the company who are the insurers. ‘The policy never refers to the reason for effecting it.’ The insurer promises to pay a large sum on the happening of a *given event, in consideration of the insured paying lesser sums at stated intervals until the happening of the event. Each takes his risk of ultimate loss, and the statutory requirement of interest in the insured is no part of the contract. And so if a creditor effects an insurance on his debtor’s life, and afterwards gets his debts paid, yet still continues to pay the insur- ance premiums, the fact that the debt has been paid is no answer to the claim which he may have against the com- pany. This rule was established, after some conflict of judicial opinion,? in Dalby v. The India and London Life Assurance Company.} [#195] (ii) Contracts illegal at common law. (a) Agreements to commit an indictable offence or civil wrong. It is plain that the courts would not enforce an agree- ment to commit a crime or an indictable offence; but the «See Godsall v. Boldero, 9 East, 72, where Lord Ellenborough treated life insurance as a contract of indemnity. 1 Accord: Corson’s Appeal, 113 Pa. St. 438; Ritiler v. Smith, 70 Md. 261. So, also, if one having an insurable interest take out a policy in good faith and assign it to one not having an insurable interest, the latter may recover the full amount of the policy. Clark v. Allen, 11 R. I. 439. Mutual Life Ins. Co. v. Allen, 1388 Mass. 24; Martin v. Stubbings, 126 Ill. 887. Contra: Warnock v. Davis, 104 U. 8. 775, H. & W. 333; Basye v. Adams, 81 Ky. 368. Law vy. London Indisputable Life Policy Co., 1K. & J. 228, 14 Geo. III. ce. 48, § 2. 15 C. B. 365. (ti) Com- mon law illegality. (a) Indict- able offence, or civil wrong. 2 Ley. 174. Mallalieu v. Hodgson, 16 Q. B. 689. Ex parte Barter, 26 Ch. D. 510. Begbie v. Phosphate Sewage Co., L.R.10 Q. B. at p. 499. 240 FORMATION OF CONTRACT. Part IT. ground here is almost entirely covered by statutes in which the criminal law has been embodied. Nor again will the courts enforce an agreement to commit a civil wrong.! An agreement to commit an assault has been held to be void, as in Allen v. Rescous, where one of the parties undertook to beat a man. So too has an agreement involving the publication of a libel. Frauds upon credit- ors in view of bankruptcy afford a common illustration of this sort of illegality. A debtor making a composition with his creditors of 6s. 8d. in the pound, entered into a separate contract with the plaintiff to pay him a part of his debt in full. This was held to be a fraud on the other creditors, each of whom had promised to forego a portion of his debt in consideration that the others would forego theirs in a like proportion. ‘Where a creditor in fraud of the agreement -to accept the composition stipulates for a preference to himself, his stipulation is altogether void.’* On the same ground the courts will not support a condition *in a contract that in the event of a man’s becom- ing bankrupt certain articles of his property should be taken from his creditors and go to the promisee. Thus too ‘where the plaintiff purchased from the defendants an exclusive right to use a particular scien- tific process, and it turned out that they had no such exclusive right as they professed to sell, it was held that the plaintiff could not recover because, to the knowledge of both parties, the purchase was made in order to start a company out of which the plaintiff expected to make a profit by defrauding the shareholders. [*196] 1 Materne v. Horwitz, 101 N. Y. 469, H. & W. 338; Merrill v. Packer, 80 Iowa, 542, H. & W. 339 n. 2 White v. Kuntz, 107 N. Y. 518; Kullman v. Greenebaum, 92 Cal. 408; Cheveront v. Teztor, 53 Md. 295. Chap. V. § 1. LEGALITY OF OBJECT. 241 Fraud is a civil wrong, and an agreement to commit a fraud is an agreement to do an illegal act. But fraud as a civil wrong must be kept apart from fraud as a vitiating element in contract. If A is induced to enter into a contract with X by the fraud of X the contract is voidable because A’s consent is not genuine; and if A does not discover the fraud in time to avoid the contract he may sue in tort for such damage as he has sustained. If A and X make a contract the object of which is to defraud M the contract is void, be- cause A and X have agreed to do what is illegal. We must not confuse reality of consent with legality of object. (6) Agreements to do that which it is the policy of the law to prevent. The policy of the law, or public policy, is a phrase of common use in estimating the validity of contracts. Its history is obscure; most likely agreements which tended to restrain trade or to promote litigation were the first to elicit the principle that the courts would look to the interests of the public in giving efficacy to contracts. Wagers, while they continued to be legal, were a frequent provocative of judicial ingenuity on this point, as is suffi- ciently shown by the case of Gilbert v. Sykes quoted above: but it does not seem probable that the doctrine of public policy began in the *endeavour to elude their binding force. Whatever may have been its origin, it was applied very frequently, and not always with the happiest results, during the latter part of the last and the commencement of the present century. Modern decisions, however, while maintaining the duty of the courts to consider the public advantage, have [*197] @ Sir Frederick Pollock holds that the discouragement of wagers was the foundation of the doctrine of ‘public policy,’ but restraint of trade has a prior claim: see Year Book, 2 Hen. V. pl. 26, and the comment of Lord St. Leonards in Egerton v. Earl Brownlow. R Fraud and illegality. Asin Smith on Con- tracts, Lect. vi. (b) Public policy. General applica- tion. 16 East, 150, Egerton v. Earl Brown- low, 4H.L.0.1. Contract, ed. 6, p. 298. 4H. LC. p. 287. Printing Co. v. Sampson, 19 Eq. 465. Maxim-Nor- denfelt Co. v. Norden- felt, [1888] 1Ch. (C, A.) at p. 665. (a) Inter- national relations. Contract with alien enemy, TE. &B. 763. 242 FORMATION OF CONTRACT. Part IT. tended to limit the sphere within which this duty has been exercised, and the modern view of the subject is perhaps best expressed by Jessel, M.R.: ‘You have this paramount public policy to consider, that you are not lightly to interfere with the freedom of contract.’ The policy of the law has then, on certain subjects, been worked into a set of tolerably definite rules, differing from the rules of common law only in the greater ease with which they can be moulded to meet changed condi- tions of society or to admit of exceptions required by public convenience. Contracts which are void as contrary to public policy differ from those with which I have just dealt in this way, that the objects aimed at in the latter would, if carried out, constitute an actionable wrong or an indictable offence, whereas that which is against public policy is for the most part not illegal but void, or illegal in the sense that it is contrary to public morals. We may arrange such contracts under certain heads. Agreements which injure the state in its relations with other states. These fall under two heads, friendly dealings with a hostile state, and hostile dealings towards a friendly state. Not only is it unlawful to enter into contracts with an alien enemy, but it is unlawful to purchase goods in an enemy’s country without license from the crown. Thus in the case of Esposito v. Bowden a contract of charter- party, in which an English subject chartered a neutral ship to bring a cargo of corn from Odessa, was avoided by the outbreak of hostilities between England and Russia. * For a British subject (not domiciled in a neutral country) [198] to ship a cargo from an enemy’s port, even in a neutral vessel, without license from the crown, is an act prima facie and under all circumstances a dealing and trading with the enemy, and therefore forbidden by law.’ But the sovereign who has the right to proclaim war Chap. V. § 1. LEGALITY OF OBJECT. 243 may, by order in council, suspend the effect of such proclamation for a time so as to allow the performance of subsisting contracts within that time.? An agreement which contemplates action hostile to a friendly state is unlawful and cannot be enforced. So the courts will afford no assistance to persons who ‘set about to raise loans for subjects of a friendly state to enable them to prosecute a war against their sovereign.’ ? There seems no authority as to the lawfulness of a contract to break the law of a foreign country but the opinion of writers on the subject that such a contract could not be enforced. Nor does there seem to be author- ity for a dictum of Lord Mansfield that ‘no country ever takes notice of the revenue laws of another.’ It must be considered very doubtful whether an agreement to break the revenue laws of a friendly state would now furnish a cause of action.® Agreements tending to injure the public service. The public has an interest in the proper performance of their duty by public servants, and is entitled to be served by the fittest persons procurable. Courts of law hold contracts to be illegal which have for their object the sale of public offices or the assignment of the salaries of such offices.* 1 Contracts with alien enemies which involve any communication across the lines of hostilities are illegal. United States v. Grossmayer, 9 Wall. (U. 8.) 72, H. & W. 215; Kershaw v. Kelsey, 100 Mass. 561; Woods v. Wilder, 43 N. Y. 164. 2 Pond v. Smith, 4 Conn. 297; Kennett v. Chambers, 14 How. (U. S.) 38. 3 Contracts looking to the breach of the laws of a sister State of the Union are illegal. Graves v. Johnson, 156 Mass. 211, H. & W. 391. 4 The following contracts are illegal: agreements to appoint to public office, Robertson v. Robinson, 65 Ala. 610; to sell, procure, or exchange a public office, Martin v. Royster, 8 Ark. 74; Meguire v. Corwine, 101 U. S. 108; Stroud v. Smith, 4 Houst. (Del.) 448; or any or hostile to friendly state. De Wutz v. Hendricks, 2 Bing. 316. Holman v. Johnson, Cowp. 348. (8) Public. service. Sale of offices. 2B.&C, 661. Blachford v. Preston, 8T. R. 89. 5 &6Ed. VI. ec. 16. 49 Geo. III. ec. 126. 31 Eliz. c. 6. 18 Anne,c, 6. Egerton v. Brownlcw, 4.1L. C, 1. Assign- ment of salaries, 8M. &W. 151 or pen- sions. 244 FORMATION OF CONTRACT. Part II. In Card v. Hope, which is perhaps an extreme case, a deed was held to be void by which the owners of the majority of shares in a ship sold a portion of them, the purchaser acquiring the command of the ship for himself and the nomination to the command for his executors. The ship was in the service of the East India Company, and this had been held equivalent to being in the public service, but the judgment proceeded on the ground that the public had a right to the exercise by the *owners of any ship of their best judgment in selecting officers for it. The principle on which both statute and common law deal with this subject is that the public has a right to some better test of the capacity of its servants than the fact that they possess the means of purchasing their offices. Statute forbids contracts for valuable consideration to present to a vacant benefice or the purchase by a person in orders of a next presentation to a benefice which is not vacant. Thus too ‘the policy of the law’ will not uphold a disposition of property which was made conditional on the holder procuring a title of honour. On a somewhat different principle the same rule applies to the assignment of salaries or pensions. ‘It is fit,’ said Lord Abinger in Wells v. Foster, ‘that the public servants should retain the means of a decent subsistence without being exposed to the temptations of poverty.’ And in the same case, Parke, B., lays down the limits within which a pension is assignable. ‘Where a pension is [#199] position of trust and confidence, Forbes v. McDonald, 54 Cal. 98; to influence legislative action by ‘lobbying,’ Trist v. Child, 21 Wall. (U. S.) 441, H. & W. 340; to influence executive action improperly, Tool Co. v. Norris, 2 Wall. (U. 8.) 45; Oscanyan v. Arms Co., 103 U.S. 261; (but see Lyon v. Mitchell, 36 N. Y. 235; Southard v. Boyd, 51 N. Y. 177, H. & W. 847); to influence corporate or other fiduciary action, Woodstock Iron Co. v. Richmond §c. Co., 129 U. 8S. 648; to quiet competition for public contracts, Brooks v. Cooper, 50 N. J. Eq. 761; Boyle v. Adams, 50 Minn. 255; to aid the election of a candidate contrary to the convictions of the one so aiding, Nichols v. Aludgett, 32 Vt. 546. Chap. V. § 1. LEGALITY OF OBJECT. 245 granted, not exclusively for past services, but as a con- sideration for some continuing duty or service, then, although the amount of it may be influenced by the length of the service which the party has already performed, it is against the policy of the law that it should be assignable.’ } Agreements which tend to pervert the course of justice. These most commonly appear in the form of agreements to stifle prosecutions, as to which Lord Westbury said, ‘You shall not make a trade of a felony. If you are aware that a crime has been committed you shall not convert that crime into a source of profit or benefit to yourself.’ ? An exception to this rule is found in cases where civil and criminal remedies co-exist: a compromise of a prose- cution is then permissible. The exception and its limits are thus stated: — ‘We shall probably be safe in laying it down that the law will permit a compromise of all offences though made the subject of *a criminal prosecution, for which offences the injured party might sue and recover damages in an action. It is often the only manner in which he can obtain redress. But, if the offence is of a public nature, no agreement can be valid that is founded on the consideration of stifling a prosecution for it.’ [#200] In a recent case the Court of Appeal has accepted this statement of the law as authoritative.? Agreements to refer matters in dispute to arbitration have been regarded as attempts to ‘oust the jurisdiction of the courts,’ and are not necessarily enforced. The Common Law Procedure Act, 1854, gave the courts a 1 Unearned salaries cannot be assigned; Bowery Nat. Bk. v. Wilson, 122 N. Y. 478; nor the unearned fees of an executor, Matter of Wor- thington, 141 N. Y. 9. Pensions granted by the United States to sol- diers and sailors are by statute unassignable. L. of U.S. 1888, c. 58; 22 St. at L. 431. 2 Partridge v. Hood, 120 Mass. 403, H. & W. 348. 3 See Nickelson v. Wilson, 60 N. Y. 362; Taylor v. Cottrell, 16 Ill. 93. The matter is often regulated by statute. (y) Jus- tice. Stifling criminal proceed- ings, Williams vy. Bayley, L. RL HLL. 220, except where civil and criminal remedies co-exist. Keir v. Leeman, 6 Q. B. 821, and see 9 Q. B. 395. Windhill Local Board vy. Vint, 45 Ch. D. (©. A.) 851. Civil pro- ceedings. Reference to arbitra- tion. 17 & 18 Viet. c. 125. § 11, 52 & 58 Vict. ce. 49. Scott v. Avery, 5H. L. C. 811. Edwards v. Aberayron insurance Society, 1Q. B.D. (6) Abuse of legal process : champerty and main- tenance. Com. Dig. vol. v. p. 22. 246 FORMATION OF CONTRACT. Part II. discretionary power to stay proceedings pending an arbi- tration, where there was an agreement to refer an existing dispute, and the rules on the subject are now consolidated in the Arbitration Act, 1889. But when a contract contains a term providing that disputes arising out of it shall be referred to arbitration, the validity of such a condition depends upon the mode in which it is expressed. Where the fact of breach or the amount of damage is to be ascertained by arbitration before a right of action arises, the condition is good: where all matters in dispute, of whatever sort, are to be referred to arbitrators and to them alone, such a condition is no answer to an action on the contract. The one imposes a condition precedent to a right of action accruing, the other endeavours to prevent any right of action accruing at all.? Agreements which tend to abuse of legal process. Under the old names of maintenance and champerty two objects of agreement are described which the law regards as unlawful. They tend to encourage litigation which is not bond fide but speculative. It is not thought well that one should buy an interest in another’s quarrel, or should incite to litigation by offers of assistance for which he expects to be paid. Maintenance has been defined to be ‘when a man main- tains a suit or quarrel to the disturbance or hindrance of right.’ Champerty is where ‘he who maintains another is to have by agreement part of the land, or debt, in suit.’ *Maintenance is a civil wrong which does not ie0r] 1 Condition precedent to right of action: Hamilton v. Liverpool Ins. Co., 136 U. 8. 242, H. & W. 351; but the agreement to arbitrate may be an independent promise. Hamilton v. Home Ins. Co., 187 U. S. 370, H. & W. 353. Attempt to prevent right of action accruing: Bauer v. Samson Lodge, 102 Ind. 262. Chap. V. § 1. LEGALITY OF OBJECT. 247 often figure in the law of contract. It is thus defined by Lord Abinger: — ‘The law of maintenance, as I understand it upon modern con- structions, is confined to cases where a man improperly and for the purpose of stirring up litigation and strife encourages others to bring + actions or to make defences which they have no right to make.’ Lord Coleridge held that this definition was applicable to the giving of an indemnity to an informer against costs incurred in endeavouring to enforce a statutory penalty. But it is not wrongful to provide the means by which a poor man may maintain a suit, even though the charity may be misguided and the action groundless, and the same principle applies with greater force to the case of a kinsman or servant.! Champerty, or the maintenance of a quarrel for a share of the proceeds, has been repeatedly declared to avoid an agreement made in contemplation of it. Its most obvious form, a promise to supply evidence or the costs of a suit in consideration of receiving a portion of the money or property to be recovered, has been held illegal. Its less obvious form, a purchase out and out, of a right to sue has been regarded as an assignment of a chose in action,® a matter with which we shall presently come to deal. Such an agreement is binding if the purchase includes any substantial interest beyond a mere right to litigate. If property is bought to which a right to sue attaches, that fact will not avoid the contract, but an agreement to purchase a bare right of action would not be sustained.? «The old books suggest that it is not maintenance to start an action. ‘A maintenance cannot be, unless he has some plea pending at the time.’ So unreasonable a distinction appears to have been dropped in modern decisions. > T have dealt on a later page with the meaning of this term so far as it concerns the law of contract. 1 Thallhimer v. Brinckerhoff, 3 Cow. (N. Y.) 628. 2 There is disagreement in the American courts as to what consti- tutes champerty. (1) Some courts hold that an agreement to look to the proceeds of the suit for compensation is champerty. Ackert v. Findon y. Parker, 11. M. & W. 682. Bradlaugh v. Newde- gate, 11 Q. B. D.5. Harris v. Brisco, 17 Q. B. D. 504. Cham- perty. Stanley v. Jones, 7 Bing, 369. James v. Kerr, 40 Ch. D. 458 Prosser v. Edmonds, 1Y.&C. 499. Viner, Abridg., Tit. Main- tenance. (©) Good morals generally. Ayerst v. Jenkins, 16 Eq. 275. Gray v. Mathias, 5 Ves. 285. a. Beaumont y. Reeve, 8 Q. B, 488. Pearce v. Brooks, 1 Exch. 218. (¢) Mar- riage. Restraint of mar- riage, 248 FORMATION OF CONTRACT. Part IL. Agreements which are contrary to good morals. The only aspect of immorality with which courts of law have dealt is sexual immorality; and the law upon this point may be shortly stated. *A promise made in consideration of future illicit cohabitation is given upon an immoral con- sideration, and is unlawful whether made by parol or under seal.} A promise made in consideration of past illicit cohabita- tion is not taken to be made on an illegal consideration, [*202] but is a mere gratuitous promise, binding if made under seal, void if made by parol.? And an agreement innocent in itself will be vitiated if intended to further an immoral purpose and known by both parties to be so intended.® Agreements which affect the freedom or security of mar- riage. Such agreements, in so far as they restrain the freedom of marriage, are discouraged on public grounds as injuri- Barker, 131 Mass. 486, H. & W. 354. (2) Some courts hold that in addition the attorney must prosecute the suit at his own cost and expense to constitute champerty. Phillips vy. South Park Com’rs, 119 Ill. 626. (8) Some courts hold even in a case like (2) that there is no champerty. Taylor v. Bemiss, 110 U. S. 42. (4) Some courts declare that maintenance and champerty are unknown to the common law of such States. J/athewson v. Fitch, 22 Calif. 86. (5) Some States regu- late the matter by statute. Fowler v. Callan, 102 N. Y. 395. (6) All authorities agree that a contract for a contingent fee is not champerty if it is not to be paid out of the proceeds of the suit. Blaisdell v. Ahern, 144 Mass. 393. (7) There is a marked tendency to narrow the doctrines of champerty or to evade them. Reece v. Kyle, 49 Oh. St. 475; Dunne v. Herrick, 37 Tl. App. 180; Manning v. Sprague, 148 Mass. 18; Richardson v. Rowland, 40 Conn. 571. 1 Boigneres v. Boulon, 54 Calif. 146, H. & W. 357; Brown v. Tuttle, 80 Me. 162. Cf. Kurtz v. Frank, 76 Ind. 594, H. & W. 358. 2 Brown v. Kinsey, 81 N. C. 245, H. & W. 395. 3 Ernst v. Crosby, 140 N. Y. 864; Graves v. Johnson, 156 Mass. 211, H. & W. 391. Chap. V. § 1. LEGALITY OF OBJECT. 249 ous to the moral welfare of the citizen. So a promise under seal to marry no one but the promisee on penalty of paying her £1000 was held void, as there was no promise of marriage on either side and the agreement was purely restrictive. So too a wager in which one man bet another that he would not marry within a certain time was held to be void, as giving to one of the parties a pecuniary interest in his celibacy.? What are called marriage brocage contracts, or promises made upon consideration of the procuring or bringing about a marriage, are held illegal on various social grounds.? Agreements providing for separation of husband and wife are valid if made in prospect of an immediate sep- aration. But if such agreements provide for a possible separation in the future they are illegal, whether made before or after marriage, because they give inducements to the parties not to perform ‘duties in the fulfilment of which society has an interest.’ Agreements in restraint of trade. The law concerning restraint of trade has changed from time to time with the changing conditions of trade, but with trifling exceptions these changes have been a contin- uous development of a general rule. *The early cases show a disposition to avoid all contracts ‘to prohibit or restrain any, to use a law- ful trade at any time or at any place,’ as being ‘against [#203] 1 Sterling v. Sinnickson, 2 Southard (5 N. J. L.), 756, H. & W. 359; Chalfant v. Payton, 91 Ind. 202. 2 Duval v. Wellman, 124 N. Y. 156, H. & W. 402. 3 Randall v. Randall, 37 Mich. 563. Agreements for collusive divorce are illegal. Cross v. Cross, 58 N. H. 373, H. & W. 361. As to an agreement of a wife to return to her marital relations under circumstances where she is entitled to a divorce, see Merrill v. Peaslee, 146 Mass. 460. Lowe v. Peers, 4 Burr. 2225 Hartley v. Rice, 10 East, 22. or of free- dom of choice. Arundel vy. Trevillian, Rep. in Ch. 47. Agree- ments for separa- tion. Cartwright v. Cart- wright, 8D. M. &G. 989. (7) Re- straint of trade. Colegate v. Bacheler, Cro. Eliz. S872, 1596. Bulstrode, 186, 1618. Permis- sible re- strictions, 1H. &N. 199. 7M. &G. 969. extended by public policy. 250 FORMATION OF CONTRACT. Part IT. the benefit of the commonwealth.’ But soon it became clear that the commonwealth would not suffer if a man who sold the goodwill of a business were able to bind himself not to enter into immediate competition with the buyer, and so it was laid down in Rogers v. Parry that ‘a man cannot bind one that he shall not use his trade generally,’ ‘but for a time certain, and in a place certain, a man may be well bound and restrained from using of his trade.’ Thus we get an established rule, a contract in general restraint of trade is contrary to public policy, a contract in partial restraint will be upheld. Henceforth, as trade expands and the dealings of an individual cease to be confined to the locality in which he lives, the construction of agreements in partial restraint of trade expand also. A man may limit his freedom as regards the persons with whom he will trade, as in Rannie v. Irvine, or the mode in which he will trade, as in Jones v. Lees, but the most common form of restriction was restriction as to place. Hence the distinction between general and partial restraints became confused with a distinction between restraints unlimited as to place and restraints unlimited as to time, and it was laid down that a man might not contract himself out of the right to carry on a certain trade anywhere, for ten years, though he might contract himself out of the right ever to carry on a trade within ten miles of London. The rule as thus expressed was inapplicable to the modern conditions of trade. In the sale of a goodwill or a trade secret the buyer might in old times have been sufficiently protected by limited restrictions as to the place or persons with whom the seller should hence- forth deal. This is not so where an individual or a com- pany supplies some article of commerce to the civilized world. Chap. V. § 1. LEGALITY OF OBJECT. 251 The old distinction between *general and partial restraints was more flexible, and its application is well illustrated by The Maxim-Nordenfelt Gun Co. v. Nordenfelt. Nordenfelt was a maker and inventor of guns and ammu- nition: he sold his business to the company for £287,500, and agreed that for twenty-five years he would cease to carry on the manufacture of guns, gun-carriages, gun- [*204] powder, or ammunition, or any business liable to compete with such business as the company was carrying on for the time being. He retained the right to deal in explo- sives other than gunpowder, in torpedoes or submarine boats, and in metal castings or forgings. After some years Nordenfelt entered into business with another company dealing with guns and ammunition; the plaintiffs sought an injunction to restrain him from so doing. The Court of Appeal exhaustively reviewed the cases bearing on the subject, and held: — (1) that the covenant not to compete with the com- pany in any business which it might carry on was a general restraint of trade, that it was void, but that it was distinct and severable from the rest of the con- tract. (2) that the sale of a business accompanied by an agreement by the seller to retire from the business, is not a general restraint of trade, provided it is reasonable between the parties, and not injurious to the public. This restraint was reasonable between the parties, because Nordenfelt not only received a very large sum of money, but retained considerable scope for the exercise of his inventive and manufacturing skill, while the wide area over which the business extended necessitated a restraint coextensive with that area for the protection of the plaintiffs. Nor could the agreement be said to be injurious to the public interest since it transferred to an [1898] 1 Ch. (C. A.) 630. General restraint void. Partial restraint good, if reason- able be- tween the parties, and not injurious to public. Is general restraint always void? Nordenfelt Maxim Gun Co., [1894] A. C. 548. 252 FORMATION OF CONTRACT. Part II. English company the making of guns and ammunition for foreign lands. But it should be observed that the very elaborate judg- ment of Bowen, L.J., seems to lay down a hard and fast rule that *agreements in restraint of trade are divis- ible into two classes— general, and partial or par- ticular: that the former are necessarily void and do not even admit of discussion as to their reasonableness, while the latter may be sustained subject to the conditions of reasonableness and public interest above mentioned. The House of Lords when reviewing the judgment of the Court of Appeal held that, whether or no such a distinction had existed as a rule of common law, it was no longer tenable. [#205] ‘Whether the cases in which a general covenant can now be sup- ported are to be regarded as exceptions from the rule which I think was long recognized as established, o1 whether the rule itself is to be treated as inapplicable to the altered conditions which now prevail, is probably a matter of words rather than of substance. The latter is perhaps the sounder view. . When once it is admitted that whether the covenant be general or particular the question of its validity is alike determined by the consideration whether it exceeds what is necessary for the protection of the covenantee, the distinction between general and particular restraints ceases to be a distinction in point of law.’ 1 But the reasonableness of the transaction is not the only . matter into which the courts will inquire, though equity judges seem to have, not unnaturally, confined themselves 1“ Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other requires, the contract may be sustained.” Mr. Chief Justice Fuller in Fowle v. Park, 131 U. 8. 88, 97. The general tendency of modern American decisions is to make the test whether the restraint is rea- sonably necessary for the protection of the covenantee. Diamond Match Co. v. Roeber, 106 N. Y. 473, H. & W. 362; Herreshoff v. Bouti- neau, 17 R. 1.38; National Benefit Co. v. Union Hospital Co., 45 Minn. 272. But a few courts still apply the older English test as to space. Gamewell Fire Alarm Tel. Co. v. Crane, 160 Mass. 50. Chap. V. § 2. LEGALITY OF OBJECT. 253 in some cases “ to the equities of the matter as between the parties. A covenant might be fair as between the parties and yet injurious to the public interest. In such a case it would be held void.! It remains to note that at one time it was thought that the courts would inquire into the adequacy of the con- sideration given for the promise not to trade. But this was disavowed by the Exchequer Chamber in Hitchcock v. Coker, and seems to resolve itself into the rule which requires the promisee to satisfy the court that the trans- action is reasonable. *§ 2. Errect or ILLEGALITY UPON CONTRACTS IN WHICH IT EXISTS. [*206] The effect of illegality upon the validity of contracts in which it exists, must needs vary according to circumstances. It may affect the whole or only a part.of the contract, and the legal part may or may not be severable from the illegal. One of the parties may be ignorant of the illegal object which the contract is intended to serve, or both may be ignorant of any illegal intention. The contract may be discouraged in the sense that the law will not enforce it, or prohibited in such a way as to taint collateral contracts and securities given for money advanced to promote an illegal transaction or paid to satisfy a claim arising out of such a transaction. + Note the comments of Bowen, L.J., in the Nordenfelt case, upon the judg- ments in Whittaker v. Howe, and Rousillon v. Rousillon, and the rejoinder to these comments by Lord Macnaghten, [1894] A. C. p. 5638 et sq. 1 Such are cases where the covenantor is exercising a public fran- chise or engaged in a business ‘impressed with a public trust.’ Gibbs v. Consolidated Gas Co., 130 U. S. 396, 408-9. Agreements to combine for the purpose of lessening competition are illegal as opposed to the public welfare. Oliver v. Gilmore, 52 Fed. Rep. 562; Santa Clara &c. Co. v. Hayes, 76 Calif. 887, H. & W. 376; Richardson v. Buhl, 77 Mich. 682; More v. Bennett, 140 Ill. 69. Cf. Central Shade Roller Co. v. Cushman, 148 Mass. 353. See 26 U.S. St. at L. 209. [1894] A. ©. (2) What is the effect of illegality. 3 Beay. 883, 14 Ch. D. 351. (i) Divis- ible con- tract. Legal parts of contract to be severed if possible from illegal. Pigot’s Case, Co. Rep. 11. 27 b. Maleverer v. Redshaw, 1 Mod. 35. Per Willes, J.,in Picker- ing v. Ilfra- combe Railway, L. Rk. 3C.P. 250. L, R. 7H. L. 653, 254 FORMATION OF CONTRACT. Part LL. I will endeavour to state some rules which may enable the reader to work his way through a complex branch of the law. (i) When the contract is divisible. A contract may consist of several parts ; it may be divis- ible into several promises based on several considerations, and then the illegality of one or more of these considera- tions will not avoid all the promises if those which were made upon legal considerations are severable from the others. This is an old rule and is set forth in Coke’s Reports, ‘That if some of the covenants of an indenture or of the conditions endorsed upon a bond are against law, and some good and lawful; that in this case the covenants or conditions which are against law are void ab initio, and ‘the others stand good.’ The rule holds whether the illegality exist by statute or at common law, though at one time the judges thought differently, and fearing lest statutes might be eluded, laid it down that ‘the statute is like a tyrant, where he comes he makes all void, but the common law is like a nursing father, makes only void that part where the fault is and preserves the rest.’ *The rule in its modern form may be thus stated: — pr207] ‘Where you cannot sever the illegal from the legal part of a cove- nant the contract is altogether void, but where you can sever them, whether the illegality be created by statute or common law, you may reject the bad part and retain the good.’ Illustrations of the rule are to be found in cases where a corporation has entered into a contract some parts of which are ultra vires, and so, in a sense, unlawful; or @ These cases may serve as an illustration of the proposition before us, but it must be borne in mind that Lord Cairns, in The Ashbury Carriage Co. v. Riche, has pointed out that contracts of this nature are invalidated not so much by the illegality of their object as by the incapacity of the corporation to bind itself by agreement for purposes beyond its statutory powers. Chap. V. § 2. LEGALITY OF OBJECT. 255 where it is possible to sever covenants in restraint of trade either as regards the distances within which the restraint applies, or the persons with whom the trade is to be car- ried on. Recent decisions furnish instances of covenants of this nature which are, and of covenants which are not severable.! (ii) When the contract is indivisible. Where there is one promise made upon several con- siderations, some of which are bad and some good, the promise is wholly void, for it is impossible to say whether the legal or illegal portion of the consideration most affected the mind of the promisor and induced his prom- ise. An old case which may be quoted in its entirety will illustrate this proposition : — ‘Whereas the plaintiff had taken the body of one H. in execution at the suit of J. 8. by virtue of a warrant directed to him as special bailiff; the defendant in consideration he would permit him to go at large, and of two shillings to the defendant paid, promised to pay the plaintiff all the money in which H. was condemned. Upon non assumpsit it was found for the plaintiff. It was moved in arrest of judgment, that the consideration is not good, being contrary to the 1 Tf there are two promises, one legal and one illegal, resting upon one legal consideration, the promisee may waive the illegal promise and enforce the legal one. Erie Railway Co. v. Union Loc. and Exp. Co., 85 N. J. L. 240, H. & W. 373; United States v. Bradley, 10 Pet. (U. 8.) 348, 360-64; Gelpcke v. Dubuque, 1 Wall. (U. 8.) 221; Dean vy. Emerson, 102 Mass. 480; Peltz v. Eichele, 62 Mo. 171; Smith’s Appeal, 113 Pa. St. 579. But nov, it would seem, if the illegal act is highly immoral or highly detrimental to the public good. Lindsay v. Smith, 78 N. C. 828; Santa Clara &c. “'o. v. Hayes, 76 Calif. 387, H. & W. 376. 2 Tf there is one legal promise resting upon two considerations, one of which is legal and the other illegal, the promisee cannot enforce the promise, for he cannot (legally) perform the consideration. Bixby v. Moor, 51 N. H. 402, H. & W. 878; Bishop v. Palmer, 146 Mass. 469, H. & W. 380; Handy v. St. Paul Globe Co., 41 Minn. 188, H. & W. 318. It will be observed that an illegal contract might be enforced, so far as legal, by one party, but not by the other. Bishop v. Palmer, supra. Baines v. Geary, 85 Ch. D. 154. Baker vy. Hedgecock, 89 Ch.D.520 Maxim Gun Co. v. Nor- denfelt, 62 L.J.Ch.282. (ii) Indi- visible contract. Fetherston v. Hutchin- son, Cro. Eliz. 199. (iti) Avoid- ance and illegality distin- guished. A contract may be penalised, avoided, forbidden. 256 FORMATION OF CONTRACT. Part II. statute of 23 Hen. VI., and that a promise and obligation was all one. And though it be joined with another consideration of two shillings, yet being void and against the statute in part it is void in all.’ *Gii) Comparative effects of avoidance and ille- gality. When there is no divisibility of promises or considera- tion, we have to consider first what was the attitude of the law towards the transaction contemplated, and next what was the mind of the parties towards the law. The law may deal with a contract which it would discourage in one of three ways. It may impose a penalty without avoiding the contract. It may avoid the contract. It may avoid, and penalise or prohibit. In this last case we must take the word ‘penalise’ to mean not merely the imposition of a penalty, but the liability to damage for a wrong, or to punishment for a crime. A statutory penalty is merely a suggestion of prohibition. Whether it is prohibitory or not is, in every case, a question of construction. Thus we may suppose the state to say to the parties as regards these three kinds of transactions : — (4) You may make the contract if you please, but you will have to pay for it. (6) You may make the agreement if you please, but the courts will not enforce it. (e) You shall not make the agreement if the law can prevent you. With the first case we are not concerned. There is a valid contract though it may be expensive to the parties. As to the second and third, difficulties can only arise as regards collateral transactions, for in neither case can the contract be enforced. The intentions of the parties we will postpone for the present. They must be assumed to know the law. [+208] Chap. V. § 2. LEGALITY OF OBJECT. 257 It may be stated at once that there is a clear distinction between agreements which are illegal and agreements which are merely void: between agreements which the law will not aid, and agreements which the law desires to prohibit: and that this distinction comes out, not in the comparative validity *of the two, for both are void, but in the effect which their peculiar character imparts to collateral transactions. No contract, however innocent in itself, is good, if designed to promote an illegal transaction, whether the illegality arises at common law, or by statute. In Pearce v. Brooks a coach-builder sued a prostitute for money due for the hire of a brougham, let out to her with a knowledge that it was to be used by her in the furtherance of her immoral trade. It was held that the coach-builder could not recover.! In McKinnell v. Robinson the plaintiff lent money to the defendant to play at hazard, knowing that the money was to be so used. Hazard is forbidden,? and the players rendered subject to a penalty by 12 Geo. II. c. 28. It was held that the lender could not recover.? Nor is a contract valid which is intended to carry into effect a prohibited transaction. Cannan was the assignee of a bankrupt, and sued Bryce to recover the value of goods given to him by the bankrupt in part satisfaction of a bond, which in its turn had been given to Byrce by [*209] «Certain games with cards or dice are forbidden by 12 Geo. II. c. 28 and by 18 Geo. II. c. 34; these are, Ace of Hearts, Hazard, Pharaoh, Basset, and Roulet, otherwise Roly Poly. These acts are prohibitory and penal: they do not merely make winnings at such games irrecoverable or invalidate securi- ties given for money lost. They forbid the games and penalise the players. 1 Ernst v. Crosby, 140 N. Y.364. But mere knowledge is generally held insufficient; there must be an intent to aid in the accomplishment of the illegal purpose. Tyler v. Carlisle, 79 Me. 210, H. & W. 390. Cf. Graves v. Johnson, 156 Mass. 211, H.& W. 391. Unless the known object is of a heinous nature. Hanauer v. Doane, 12 Wall. (U.S.) 342. 2 Tyler vy. Carlisle, supra. 8 Ilegal agree- ments taint collateral trans- actions. L. R. 1 Ex. 213. Cannan y. Bryce, 3 B. & Ald. 179. 7 Geo. I. e. 8. § 5. Void agree- ments. Per Bowen, L.J., 15 Q. B. D. 867. Wettenhall v. Wood, 1 Esp. 17. Pyke’s case, 8 Ch. D. 756. Bridger v. Savage, 15 Q. B.D. Read v. Anderson,18 Q. B. D. 719. 258 FORMATION OF CONTRACT. Part II. the bankrupt to secure the payment of money lent by Bryce to meet losses which had been incurred by the stock-jobbing transactions of the bankrupt. The Act 7 Geo. II. c. 8 forbade not only wagers on the price of stock, but advances of money to meet losses on such transac- tions, and Bryce had lent money knowing that it was to meet such losses. Therefore his bond was void, and no property passed to him in the goods given in satisfaction of it, and Cannan was able to recover their value. The difference between the effect of illegality and of avoid-*ance is clear when we look at transactions arising out of wagers before the passing of 55 Vict. c. 9. [*210] ‘The original contract of betting is not an illegal one, but only one which is void. If the person who has betted pays his bet, he does nothing wrong, he only waives a benefit which the statute has given to him, and confers a good title to the money on the person to whom he pays it. Therefore when the bet is paid the transaction is completed, and when it is paid to an agent it cannot be contended that it is not a good payment for his principal.’ And so it followed: — (1) That money lent to make bets might probably have been recovered. (2) That money lent to pay bets was recoverable. (8) That as between employer and betting commis- sioner the ordinary relations of employer and employed held good. The commissioner was bound to pay over money received on account of bets won by him on behalf 363. of his principal. And the ordinary liability of an em- ployer to indemnify the person whom he employs against loss or risk, which may accrue to him in the ordinary course of the employment, holds good, though the employ- ment is to make void contracts. Anderson employed Read to make bets for him, and after the bets had been made and lost, revoked the authority which he had given to Read to pay the bets. Chap. V. § 2. LEGALITY OF OBJECT. 259 Read was a turf-commissioner and a member of Tatter- salls. If he had failed to pay the bets he would have been expelled from Tattersalls, and have lost his business as a turf-commissioner. He paid the bets and sued Anderson for their amount. The principle on which the Court of Appeal affirmed the liability of Anderson to repay Read, was that though Read could not have been compelled to pay the bets, yet the loss of character and business which he would have sustained if he had failed to pay, was a risk against which his employer was bound to indemnify him. It was a risk known to both parties and contemplated in the contract of employment. The Gaming Act, 1892, has destroyed the authority of *these cases as regards their subject-matter, but not as to the principle which they illustrate. Seymour v. Bridge was decided on the same principle. An investor employed a broker to buy shares for him according to the rules of the stock exchange. The stock exchange enforces among its members, under pain of expulsion, agreements made in breach of Leeman’s Act. This act avoids contracts for the sale of bank shares without specifying their numbers, or the name of the registered proprietor. Bridge knew of the custom, but endeavoured to repu- diate the purchase on the ground that it was not made in accordance with the terms of the statute. The case was held to be governed by Read v. Anderson. The employer is bound to indemnify the employed against known risks of the employment. If the risks are not known to both ‘parties, and might reasonably be unknown to the employer, [#211] «In an earlier edition I stated erroneously that it was a misdemeanour on the part of the broker to make such contracts. It is a misdemeanour to insert false numbers or false names. 1In the United States, wagers are both illegal and void, and an agent cannot recover advances or commissions. Harvey v. Merrill, 150 Mass. 1, H. & W. 383. Em- ployer’s liability to indemnify. 14Q. B.D. 460. 80 & 81 Vict.. ec. 29. 18 Q. B.D. 779. Perry v. Barnett, 15 Q. B. D. 338. 14Q. B.D. 460. (iv) Inten- tion of par- ties: as arule immaterial Waugh vy. Morris, L, R.8 Q. B. 202. Under 32 & 33 Vict. c. 70. § TS. unless contract can be and is legally per- formed. L. BR. 8 Q. B. p. 208. Or where illegal in- tent is of one only; 260 FORMATION OF CONTRACT. Part II. he is not so bound. Thus where an investor did not know of the custom, he was held, under circumstances in other respects precisely similar to those of Seymour v. Bridge, not to be bound to pay for the shares. (iv) The intention of the parties. Where the object of the contract is an unlawful act the contract is void, though the parties may not have known that their act was illegal or intended to break the law. But if the contract admits of being performed, and is performed in a legal way, the intention of the parties may become important. Morris chartered a ship belonging to Waugh to take a cargo of hay from Trouville to London. It was agreed that the hay should be unloaded alongside ship in the river, and landed at a wharf in Deptford Creek. Un- known to the parties an order in council had forbidden the landing of French hay. Morris, on hearing this, took the cargo from *alongside the ship without landing it, and exported it. The vessel was delayed beyond the lay-days, and Waugh sued for damages arising from the delay. Morris set up as a defence that the con- tract contemplated an illegal act, the landing of French hay contrary to the order in council. But the defence did not prevail. [*212] ‘Where a contract is to do a thing which cannot be performed without a violation of the law, it is void whether the parties knew the law or not. But we think that in order to avoid a contract which can be legally performed, on the ground that there was an intention to perform it in an illegal manner, it is necessary to show that there was the wicked intention to break the law; and if this be so the knowledge of what the law is becomes of great importance.’ 1 Again, the general rule needs modification where only one of the parties had the intention to break the law. 1 Favor v. Philbrick, 7 N. H. 326, e Chap. V. § 2. LEGALITY OF OBJECT. 261 Such a case could only arise where the contract was to do a thing innocent in itself, but designed to promote an illegal purpose. We may perhaps lay down with safety the following rules. Where the innocent party knows nothing of the illegal object throughout the transaction, he is entitled to recover what may be due to him. If the plaintiff in Pearce v. Brooks had known nothing of the character of his cus- tomer, it cannot be supposed that he would have been unable to recover the hire of his brougham.! Where the innocent party becomes aware of the illegal purpose of the transaction before it is completed or while it is still executory he may avoid the contract. Milbourn let a set of rooms to Cowan for certain days; then he discovered that Cowan proposed to use the rooms 1. R.2 for the delivery of lectures which were unlawful because blasphemous within the meaning of 9 & 10 Will. III. ec. 32; he refused, and was held entitled to refuse, to carry out the agreement.? If the innocent party to the contract discover the illegal purpose before it is carried into effect, it would seem that he could nos recover on the contract if he allowed it to be performed, and that the defendant in Cowan v. Mil- bourn could not *have recovered the rent of his rooms, if, having let them in ignorance of the plaintiff’s intentions, he allowed the tenancy to go on after he had learned the illegal purpose which his tenant contemplated. [*213] 1 Emery v. Kempton, 2 Gray (Mass.), 257. The American student should remember that in the United States mere knowledge that an illegal act is contemplated is not generally enough; there must be an intent to participate in or further it. Tyler v. Carlisle, 79 Me. 210, H. & W. 390. Cf. Graves v. Johnson, 156 Mass. 211, H. & W. 391. 2 Seemingly to the contrary is O’Brien v. Brietenbach, 1 Hilt. (N.Y. C. P.) 304. rights of innocent party to sue, L. R. 1 Ex. 213. to avoid. Cowan y. Milbourn, Ex. 280. How affected by knowl- edge. L. R, 2 Ex. 230. (v) Effect on secu- tities. Where transac- tion is past, Ayerst v. Jenkins, 16 Eq. 275. Beaumont v. Reeve, 8 Q. B. 483. where it is future. (a) Secu- rity under seal, Fisher v. Bridges, 3E. GB. 642. 262 FORMATION OF CONTRACT. Part IT. (v) Securities for money due on illegal transactions. The validity of bonds or negotiable instruments given to secure the payment of money due or about to become due upon an illegal or void transaction, does not depend entirely upon the distinction which I have drawn between transactions which are illegal and those which are void.} A security may be given in consideration of a transac- tion which is wholly past. Here comes in the elemen- tary rule that gratuitous promises are not binding unless they are under seal. Applying this rule to bonds and negotiable instruments, we may say that a bond given in return for services rendered in a past transaction would be a valid promise, and that being wholly gratuitous, and founded on motive, a court of law would not inquire into the character of the motive. Thus a bond given in consideration of past illicit cohabitation is binding;? a negotiable instrument given on such consideration would, as between the immediate parties, be invalid, not on the ground that the considera- tion was immoral, but because there was no consideration at all.8 ‘< As regards transactions which are pending or contem- plated, we are met by an anomalous distinction which divides securities for our present purpose into three groups. (1) Let us deal first with securities under seal. If given for money due in respect of a prohibited trans- action they are void. Fisher conveyed land to Bridges in order that it might be resold by lottery, a transaction forbidden under strin- gent penalties by 12 Geo. II. c. 28. After the land 1Jt is questionable whether any such distinction is taken in the American decisions. 2 Brown v. Kinsey, 81 N. C. 245, H. & W. 395. 3 Embrey v. Jemison, 181 U. 8. 336. -Chap. V. § 2. LEGALITY OF OBJECT. 263 was conveyed, Bridges covenanted to pay a part of the purchase money by a fixed date, or failing this, by half yearly instalments. On this covenant an action was brought. The Exchequer *Chamber reversing the judgment of the Queen’s Bench, held that the cov- enant could not be enforced. It was given to secure a payment which became due as the result of an illegal transaction, and the bond was tainted with the illegality of the purpose it was designed to effect.? A transaction may be unlawful in the sense that it is avoided. In that case a security given in respect of it is on the same footing as a security given in respect of a transaction which is wholly past. It is valid if under seal; otherwise void as between the immediate parties. A corporation borrowed money on mortgage without first obtaining the leave of the Lords of the Treasury; this was declared to be ‘unlawful’ by the Municipal Corporations Act. But as they had received the money, and promised under seal to repay it, they were held bound by their promise. [*214] ‘Is there anything in the act which prohibits a corporation from entering into a covenant to pay its lawful debts? It is argued that § 94 renders this covenant void. But that section only says that it shall not be lawful to mortgage any lands of the corporation except with the approbation of the Lords of the Treasury, which was not obtained in this case; and although the mortgage may be invalid, that is no reason why the corporation should not be liable on their covenant to repay the mortgage money.’ ? (2) We now come to negotiable instruments. In dealing with these we have to consider the effect of 1 Griffiths v. Sears, 112 Pa. St. 523. 2 National banks are forbidden to loan money on real estate security. They may nevertheless enforce such securities against cne who has had the benefit of the loan. This does not seem to proceed, however, upon the ground that the security is under seal, but upon the ground transac- tion pro- hibited. Security under seal, transac- tion void. Payne v. Mayor of Brecon, 3 H. & N. 579, (0) Secu- tities not under seal, that the statute does not in terms make the transaction void. National . Bank v. Matthews, 98 U. S. 621. void as between immediate parties. Fitch v. Jones, 5E. & B. 245, Right of subse- quent holder. Effect on subse- quent holder. Flower y. Sadler, 10 Q. B. D. 572. 264 FORMATION OF CONTRACT. Part IT. a flaw in their original making not only as between the immediate parties but as affecting subsequent holders of the instrument. And we may lay down the following rules : — A negotiable instrument made and given as security for a void, or illegal transaction, is, as between the immediate parties, void. A promissory note was given in payment of a bet made on the amount of the hop duty in 1854. The bet was void by 8 & 9 Vict. c. 109, and the court was clear that as between the original or immedi- ate parties the note was void also. There was no liability to pay the lost bet, and therefore no consideration for the note given to secure its *payment.! The position of the indorsee who brought the action shall be explained presently. [#215] If the instrument is made and given to secure payment of money due or about to become due upon an ddlegal transaction a subsequent holder loses the benefit of the rule, as to negotiable instruments, that consideration is presumed till the contrary is shown: he may be called upon to show that he gave consideration, and even then if it can be shown that he was aware of the illegality, he will be disentitled to recover.” If the instrument has an honest origin the maker or acceptor cannot set up, as a defence against a subsequent indorsee, that the indorsement was made for an illegal consideration, unless he can show that he is injuriously affected by the transaction between indorser and indorsee. If the instrument is given to secure payment of money due or about to become due upon a void transaction, it is as between the immediate parties void, but a subsequent 1 Embrey v. Jemison, 131 U.S. 336. 2 Vosburgh v. Diefendorf, 119 N. Y. 357. There seems to be no distinction between void and illegal consideration, though there is between these and failure of consideration. Little v. Mills, 98 Mich. 423. Chap. V. § 2. LEGALITY OF OBJECT. 265 holder is not prejudiced by the fact that the original trans- action was avoided by statute.! In Fitch v. Jones, above cited, the action was brought by the indorsee of a promissory note given in payment of a bet on the amount of the hop duty. The main question for the court was ‘whether the plaintiff was bound on proof of the origin of the note to show that he had given consideration for the note, or whether it was for the de- fendant to show that he had given none.’ ‘I am of opinion,’ said Lord Campbell, ‘that the note did not take its inception in illegality within the meaning of the rule. The note was given to secure payment of a wagering contract, which, even before stat. 8 & 9 Vict. c. 109, the law would not enforce: ¢ but it was not illegal: there is no penalty attached to such a wager; it is not in violation of any statute, nor of the common law, but it is simply void, so that the consideration was not an illegal consideration, but equiva- lent in law to no consideration at all.’ *(3) It remains to note the effect upon certain transactions of 5 & 6 Will. IV.c.41. This act deals with securities given for money or valuables lost at any game or in bets on the sides or players in any game, or for money lent either to make or to pay such bets. The Act of Anne had made such securities wholly void, and this was hard on such persons as bought them at their ostensible value in ignorance of their origin. The Act of Will. IV.2 enacts that such securities should be deemed to [*216] 2 It had been held in a previous case, Atherfold v. Beard, that a wager on the amount of hop duty was against public policy because the evidence at the trial would expose to the world the state of the public revenue. + By § 2 of this act the maker of such a security, if he is compelled to pay its value to a subsequent bond fide purchaser, may recover the amount from the person to whom it was originally given. 1 A bond fide holder for value may enforce a negotiable instrument given upon an illegal or void consideration, unless the statute declares that such instrument shall be void. New v. Walker, 108 Ind. 365, H. & W. 399; Cranson v. Goss, 107 Mass. 489; Traders’ Bank v. Alsop, 64 Iowa, 97; Glenn v. Farmers’ Bank, 70 N. C. 191. But he must show that he is a bond fide holder for value. Vosburgh v. Diefendorf, supra. 9 Anne, c. 14. 2T. BR. 610, Read v. Anderson, 18 Q. B. D. (C, A.) 779. (vi) Relief from ille- gal con- tracts. Tlegality known at the time, no ground for avoid- ance, Begbie v. Phosphate Sewage Co., L. R. 10 Q. B. 499. unless plaintiff be not in part delicto. 1D.M. &@. 660. 266 FORMATION OF CONTRACT. Part I. have been made on an illegal consideration. This places wagers on games in a peculiar position. A wager is not in itself unlawful, it is only void: but securities given for money due on wagers of a certain sort are in a worse position than the wagers. The consideration for them is illegal: thus they are not merely void as between the original parties; the taint of illegality affects a subse- quent holder, who although the original transaction was only void, must show that he gave consideration for the security, and may yet be disentitled to recover, if it is proved that he knew of its origin. (vi) Can a man be relieved from a contract which he knew to be unlawful ? It remains to consider whether a party to an illegal contract can under any circumstances make it a cause of action. The rule is clear that a party to such a contract cannot come into a court of law and ask to have his illegal objects carried out; nor can he set up a case in which he must necessarily disclose an illegal purpose as the ground- work of his claim. The rule is expressed in the maxim, ‘in pari delicto potior est conditio defendentis.’ But there are exceptional cases in which a man may be relieved of an illegal contract into which he has entered ; cases to which the maxim just quoted does not apply. They fall into two classes: (1) the plaintiff may have been induced *to enter into the contract by fraud or strong pressure ; (2) the contract being unperformed, money paid or goods delivered in furtherance of it may be recovered. The first class of cases is best illustrated by two deci- sions. In Reynell v. Sprye Sir Thomas Reynell was [*217] 1 Negotiable instruments given for gambling debts are void by statute in many States. Stimson, Am. St. Law, § 4132. Lagonda N. B. vy. Portner, 46 Oh. St. 381. Chap. V. § 2. LEGALITY OF OBJECT. 267 induced, by the fraud of Sprye, to make a conveyance of property in pursuance of an agreement which was illegal on the ground of champerty. He sought to get the con- veyance set aside in chancery. It was urged that the parties were in pari delicto, and that therefore his suit must fail; but the court was satisfied that he had been induced to enter into the agreement by the fraud of Sprye, and considered him entitled to relief. ‘Where the parties to a contract against public policy, or illegal, are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the transaction, relief is given him.’ In Atkinson v. Denby, the plaintiff, a debtor, offered his creditors a composition of 5s. in the pound. The $,! defendant was one of the creditors, and his acceptance or rejection of the offer was known to be certain to deter- mine the decision of several other creditors. He refused to assent to the composition unless the plaintiff would make him an additional payment of £50, in fraud of the other creditors. This was done: the composition arrange- ment was carried out, and the plaintiff sued to recover the £50, on the ground that it was a payment made by him under oppression and in fraud of his creditors. It was held that he could recover; and the Court of Ex- chequer Chamber, affirming the judgment of the Court of Exchequer, said, — ‘It is said that both parties are in pari delicto. It is true that both are in delicto because the act is a fraud upon the other creditors: but it is not par delictum because one has power to dictate, the other no alternative but to submit.’ 1 1 Fraud, duress, or undue influence practised by one party upon the other may entitle the latter to relief from an illegal contract. Duval y. Wellman, 124 N. Y. 156, H.& W. 402; Harrington v. Grant, 54 Vt. 236; Poston v. Balch, 69 Mo. 115. Parties not in pari de- licto, 1D.M.&4@. p. 679. 6H. &N. 178. TH &N. 1Q. B.D. (C. A.) 800. or there is locus poeniten- tiae. Hermann v. Jeuchner, 15 Q. B.D. 361. 268 FORMATION OF CONTRACT. Part IL. The second exception relates to cases where money has been paid or goods delivered for an unlawful purpose, which has not been carried out. *The law cannot be said to be satisfactorily settled on this point, but its present condition may be thus stated. We must separate the cases into two groups: (1) those in which money or goods have been delivered by one party to the other, and (2) those in which money has been placed in the hands of a stakeholder. (1) In Taylor v. Bowers it was held by Mellish, L.J., that — [*218] ‘If money is paid or goods delivered for an illegal purpose, the person who had so paid the money or delivered the goods may recover them back before the illegal purpose is carried out: but if he waits till the illegal purpose is carried out, or if he seeks to enforce the illegal transaction, in neither case can he maintain an action.’ The case to which these words applied was a fictitious assignment of goods in fraud of creditors; before anything had been done in respect of the contemplated fraud, the assignor desired to have his goods back; he was held entitled to recover their value from one to whom they had been transferred under a bill of sale. In a later case a man procured another to go bail for him on the terms that he deposited the amount of the bail in the hands of his surety as an indemnity against his possible default. He sued his surety for the money on the ground that his contract was illegal, that no illegal purpose had been carried out, that the money was still intact, and that he could recover it. The Court of Appeal“ held that the illegal object was carried out when by reason of the plaintiff’s payment to his surety, the surety lost all interest in seeing that the conditions of the recognizance were performed. * Overruling Wilson v. Strugnell, in which the facts were precisely similar. Chap. V. § 2. LEGALITY OF OBJECT. 269 In Kearley v. Thomson, the Messrs. Thomson, a firm of #9. B.D. solicitors acting for the petitioning creditor of Clarke, a bankrupt, agreed with Kearley, a friend of Clarke, that in consideration of the payment of their costs they would not appear at the public examination of Clarke, nor oppose the order for his discharge. They carried out the first part of the agreement, but before any application was made for Clarke’s discharge *Kearley sought to Limita- recover the money which he had paid on the ground oe that it was the consideration for a promise to pervert the course of justice, and that the contract was not wholly [*219] carried out. The Court of Appeal held that Kearley could not recover. ‘Suppose a payment of £100 by A to B on a contract that the latter shall murder C and D. He has murdered C' but not D. Can the money be recovered back? In my opinion it cannot be. I think 2a. B.D. that case illustrates and determines the present one.’ bas Thus it would appear that where an illegal contract has been in part performed, money paid or goods delivered in pursuance of it cannot be recovered: where no such part performance has taken place we have the conditions to which Zaylor v. Bowers would apply. But the authority of this case is much shaken by the opinion expressed by the Court of Appeal in Kearley v. Thomson that ‘the application of the principle laid down in Taylor v. Bowers and even the principle itself, may at sometime hereafter require consideration, if not in this court, yet in a higher tribunal.’ ? (2) There are numerous cases in which money has been placed in the hands of a stakeholder to abide the result of 24.Q. B.D. (C. A.) 746, 1 Bernard v. Taylor, 23 Ore. 416, H. & W. 407; Tyler v. Carlisle, 79 Me. 210, H. & W. 390; Spring Co. v. Knowlton, 103 U. S. 49, citing with approval Taylor v. Bowers. Cf. Knowlton v. Congress Spring Co., 57 N. Y. 518. Supra, p.191. Hampden v. Walsh, 1Q.B.D. 189. Barciay v. Pearson, al 2 Ch. 54. 270 FORMATION OF CONTRACT. Part II. a wager; in such cases the money has been held to be recoverable from the stakeholder either before or after the determination of the wager, and even after the money has been paid to the winner if the authority to pay was with- drawn before payment by the party seeking to recover. It does not appear to matter whether the wager turns on the result of an unlawful transaction, or not: as between the parties the wager is no more than a void transaction. Nor does the Gaming Act of 1892 affect the rights of the parties. Two cases will illustrate the law on this point. Hampden put £500 into the hands of Walsh to abide the result of a bet that the earth was flat. He lost the bet, and before the money was paid he reclaimed his stake from Walsh. Walsh paid it to the winner and was held liable to repay the amount to Hampden. *Pearson started a lottery styled ‘The Missing eae Word Competition.” A sentence was published, omitting the last word, and an invitation was issued to the public, any one of whom might send a shilling and a word suitable to fill the vacant place in the sentence. Those who guessed the right word shared the sum thus collected. The determination of the right word was reduced to an absolute uncertainty. From a number of sealed packets, each containing a word suitable to fill the gap, one was taken at hazard, and opened when all the competitors had sent in their guesses. This was the missing word. To hold such a lottery was unlawful, and Pearson exposed himself to a penalty under 42 Geo. III. c. 119; but as between the various contributors the transaction was a simple wager in which each man deposited a shil- ling with a stakeholder to abide the chance of his guess. 1 Fisher v. Hildreth, 117 Mass. 558; Lewis v. Bruton, 74 Ala. 317; Bernard v. Taylor, supra; Love v. Harvey, 114 Mass. 80, H. & W. 824. Chap. V. § 2. LEGALITY OF OBJECT. 271 The payments in one competition amounted to £23,000, and those who guessed the right word were 1358 in num- ber: but before their shares could be paid over to them the competition was alleged to be illegal, and the money was paid into court. Stirling, J., found that the transac- tion was a lottery, and was unlawful; that the court could not aid in the distribution of the fund, but that each con- tributor might recover his shilling from Pearson, to whom he ordered the entire sum to be repaid in order that he might meet any legal claim. These cases do not conflict with the principle of Read v. Anderson, nor with the decision in Kearley v. Thomson. The person employed is only a stakeholder and cannot suffer by the revocation of his authority; the wager which is the object of the transaction is only void, not illegal, and so would not be affected by the unlawfulness of the event which is the subject of the wager; nor does the Gaming Act of 1892 affect the liabilities of a stakeholder.? *THE MEANING OF THE TERMS ‘VOID,’ ‘ VOID- [*221] : ; ABLE,’ ‘ UNENFORCEABLE. In concluding the subject of the formation of contract we may ask what is the meaning of the terms which we use to indicate flaws or defects in a contract. ‘ Void’ means destitute of legal effect. An alleged contract may be void on the face of it, or proof may be needed that it is void. Where offer and acceptance do not correspond in terms, or where there is an agreement to commit a crime, no proof is required; where there is a mistake as to the identity of the thing contracted for, or an agreement to buy goods other than necessaries is made by an infant, the mistake, or the 1 The distinction between void and illegal contracts seems not to be recognized in this country. Harvey v. Merrill, 150 Mass. 1, H. & W. 883. Hastelow v. Jackson, 8B. &C, 225. O'Sullivan vy. Thomas, [1895] 1 Q.B. 698. Void, void- able, and unenforce- able con- tracts. Contracts void, voidable. Ilustra- tions. Cundy v. Lindsay, 3 App. Ca. 450. Babcock vy. Lawson, 4Q. B.D. 394. 272 FORMATION OF CONTRACT. Part I. infancy must be proved: otherwise the parties might be bound by a transaction which was good on the face of it. But this does not alter the character of the transaction, as appears when we compare that which is void with that which is voidable.! ‘Voidable’ means capable of affirmation or rejection at the option of one of the parties. A void contract, when shown to be void, can create no legal rights, the whole transaction is null and falls to the ground. A voidable contract is a contract with a flaw, of which one of the parties may, if he please, take advantage. If he do not use this right within a reasonable time, so that the position of parties is altered, or if he take benefit under the contract, or if third parties acquire rights under it, his power of avoidance ceases, and he is bound by the contract. An illustration will show the essential difference between what is void and what is voidable : — (a) A sells goods to X, being led to think that X is Y; Xsells the goods to M. The contract is void on the ground of mistake, and M acquires no right to the goods. (8) A sells goods to X, being led by the fraud of X to *think that the market is falling. X resells the [#222] goods to M, an innocent purchaser for value. M acquires a good title to the goods, and A is left to his remedy against X by the action of deceit. 1 The term ‘void’ is frequently used in statutes and contracts, and in the decisions of the courts, where the term ‘voidable’ would be more accurate. In such cases the latter term is to be substituted in determining the meaning of the statute, contract or decision. Van Shaack v. Robbins, 36 Iowa, 201; Ewell v. Daggs, 108 U. S. 148; Bennett v. Mattingly, 110 Ind. 197; Somes v. Brewer, 2 Pick. (Mass.) 183; Anderson v. Roberts, 18 Johns. (N. Y.) 515; Pearsoll v. Chapin, 44 Pa. St. 9. ? Barker v. Dinsmore, 72 Pa. St. 427; Rodliff v. Dallinger, 141 Mass. 1 Ci. Edmunds v. Merchants’, &c. Co., 185 Mass. 283. 8 Rowley v. Bigelow, 12 Pick. (Mass.) 307. Chap. V. § 2. LEGALITY OF OBJECT. 273 In the first of these cases the complete nullity of the contract prevents any rights arising under it if the mis- taken party choose to avoid it. In the second there isa contract, and one capable of creating rights, and the per- son defrauded has but a limited right to set it aside. Next we must distinguish that which is voidable from that which is unenforceable. The contract of an infant under § 2 of the Infants’ Relief Act may be said to be voidable, though it has not all the features of a voidable contract. The infant may sue but cannot make himself liable. The difference between that which is voidable and that which is unen- forceable is a difference between substance and procedure. ‘Unenforceable’ is a term used of a contract which has no flaw of substance, is not affected by the fraud or incapacity of one of the parties, or the mistake or the unlawful object of both. The contract is good but it cannot be proved either by reason of lapse of time, or want of written form, or the affixing of a stamp. The Statute of Limita- tions may bar the remedy, or the Statute of Frauds affect the proof, but the deficiency can be satisfied by acknowledg- ment of the right affected by lapse of time, or by writing where the Statute of Frauds is in question, or by the sup- ply of the missing stamp: the infant cannot make himself liable. Contracts unenforce- able. PART IIL THE OPERATION OF CONTRACT. WE come now to deal with the effects of a valid con- tract when formed, and to ask, To whom does the obliga- tion extend? Who have rights and liabilities under a contract? And then this further question arises, Can these rights and liabilities be assigned or pass to others than the origi- nal parties to the contract? In answer to these questions we may lay down two general rules. (1) No one but the parties to a contract can be bound by it or entitled under it. (2) Under certain circumstances the rights and liabili- ties created by a contract may pass to a person or persons other than the original parties to it, either (a) by act of the parties, or (8) by rules of law operating in certain events. These two rules seem at first to look like one rule sub- ject to certain exceptions, but they are in fact distinct. The parties cannot, by their agreement, confer rights or impose liabilities, in respect of the agreement, upon any but themselves. But they may by certain methods and under certain circumstances drop out of the obligation so created, and be replaced by others who assume their rights or liabilities under the contract. Thus— (1) If John Doe contracts with Richard Roe, their contract cannot impose lhabilities or confer rights upon John Styles. (2) But there are circumstances under which John Doe or Richard Roe may substitute John Styles for himself as a party to the contract, and there are circumstances under which the law would operate to effect this substitution. 274 CHAPTER I. The Limits of the Contractual Obligation. THE general rule that a person who is not a party to a contract cannot be included in the rights and liabilities which the contract creates — cannot sue or be sued upon it —is an integral part of our conception of contract. A contract is an agreement between two or more persons, by which an obligation is created, and those persons are bound together thereby. If the obligation takes the form of a promise by A to X to confer a benefit upon J, the legal relations of Mare unaffected by that obligation. He was not a party to the agreement; he was not bound by the vinculum juris which it created; the breach of that legal bond cannot affect the rights of a party who was never included in it. Nor, again, can liability be imposed. on such a third party. Itis an essential feature of contract as opposed to other forms of obligation, that the restraint which it imposes on individual freedom is voluntarily created by those who are subject to it—that it is the creature of agreement. The relation of principal and agent may from one point of view be held to form an exception to these rules. It needs at any rate a separate chapter. A trust has this in common with contract, that it originates in agreement, and that among other objects it aims at creating obligations. If we could place a trust upon the precise footing of contract we might say that it formed a very real and substantial exception to the general rule *which we have laid down. Doubtless the creator of a trust and the trustee do, by agreement, 275 [#225] Contract cannot confer rights or liabili- ties on a third party. Trustee and cestui que trust. (1) Con- tract can- not impose liability upon a third party. (i) Paying another’s debt. Durnford v. Messiter, 5 8. 446. M.& 276 OPERATION OF CONTRACT. Part III. bring rights into existence which a third party, the cestui que trust, may enforce. But we will set aside trusts from the discussion, and with reason. For contract differs from other forms of agreement in having for its sole and direct object the creation of an obligation. The contractual obligation differs from other forms of obligation mainly in springing from the voluntary act of the parties obliged. A trust and the obligations resulting from a trust corre- spond to neither of these characteristics. The agreement which creates a trust has many other objects besides the creation of obligations, and these objects may include con- veyance, and the subsequent devolution of property. The obligation which exists between trustee and cestur que trust does not come into existence by the act of the parties to it. It is better therefore, having noted the similarities between the contractual and the fiduciary obligation, to dismiss the latter altogether from our inquiries. § 1. A man cannot incur liabilities from a contract to which he was not a party. This proposition is a part of a wider rule to the effect that liability ex contractu or quasi ex contractu cannot be imposed upon a man otherwise than by his act or consent. A cannot by paying X’s debts unasked, make X his debtor ; ‘a man cannot, of his own will, pay another man’s debt without his consent and thereby convert himself into a creditor.’ And in like manner A and M&M cannot, by any contract into which they may enter, thereby impose liabilities upon 1 South Scituate v. Hanover, 9 Gray (Mass.), 420. But the debtor may plead the payment as an estoppel against the creditor. Crum- lish’s Adm’r v. Central Improvement Co., 38 W. Va. 390, H. & W. 412; ef. Muller v. Eno, 14 N. Y. 597, 605-6. Though if he does so, it seems he thereby ratifies the payment as one made in his behalf and be- comes liable to the one paying. Neely v. Jones, 16 W. Va. 626. Chap. I. § 1. LIMITS OF CONTRACTUAL OBLIGATION. 277 X. The Messrs. Thomlinson employed X, a firm of brokers, to transport goods from London to Amsterdam. X agreed with Schmaling to put the whole conduct of the transport into his hands; he did the work and sued the Messrs. Thomlinson for his expenses and commission. It was held that they were not liable, inasmuch as there was no privity between them and Schmaling; that is to say, that there was nothing either by *writing, words, or conduct to connect them with him in the transac- tion. X had been employed by them to do the whole work, and there was ‘no pretence that the defendants ever author- ised them to employ any other to do the whole under them: the defendants looked to X only for the performance of the work, and X had a right to look to the defendants for payment, and no one else had that right.” 1 A contract cannot impose the burdens of an obligation upon one who was not a party to it; yet a duty rests upon persons, though extraneous to the obligation, not to inter- fere, from interested or malicious motive, with its due performance. I speak of duty as that necessity which rests upon all alike to respect the rights which the law sanctions ; and reserve the term obligation for the special tie which binds together definite, assignable members of the community. In Lumley v. Gye, the plaintiff, being the manager of an opera house, engaged a singer to perform in his theatre and nowhere else. The defendant induced her to break her contract. Lumley sued Gye for procuring this breach, and the questions raised took the following form. It was [*226] 1 An agent cannot render his principal liable to a sub-agent, or the sub-agent to the principal, unless the principal has authorized the appointment of a sub-agent. Fairchild v. King, 102 Calif. 320. It is often a nice question as to whether there is such authority to create a contract for the principal with the sub-agent. Exchange Nat. Bk. v. Third Nat. Bk., 112 U.S. 276; Guelich v. National State Bank, 56 Towa, 434; Dun v. City Nat. Bk., 58 Fed. Rep. 174; Huffeut on Agency, §§ 92-95. Schmaling v. Thomlin- son, 6Taunt. 147. (ii) But does a contract impose a duty on third par- ties? In- ducing breach of contract. 2E. & B. 216. Peculiar relations of master and ser- vant. How far applicable to case of Lumley v. Gye? 6 Q. B.D. 333. 2E. &B. 216. [1893] 1 Q.B. (C. AL) 715, 278 OPERATION OF CONTRACT. Part III. argued that one party to a contract might sue any one who induced the other party to the contract to break it. And if that were not so, it was argued that an action would still lie for inducing a servant to quit the service of his master. The relations of master and servant have always given the master a right of action against one who enticed away his servant, and so the court was called upon to answer two questions: Does an action lie for procuring a breach of any contract? if not, then does the special rule applicable to the contract of master and servant apply to the manager of a theatre and the actors whom he engages? The majority of the court answered both these questions in the affirmative.“ *No similar case arose until 1881, when Bowen v. Hall came before the Court of Appeal, offering pre- cisely the same points for decision as Lumley v. Gye. The majority of the court, setting aside the question whether the relation of master and servant affected the rights of the parties, laid down a broad principle that a man who in- duces one of two parties to a contract to break it, intending thereby to injure the other, or to obtain a benefit for him- self, does that other an actionable wrong. This decision set- tled a question which, despite the case of Lumley v. Gye, must be considered to have remained open till 1881. The parties to a contract enjoy rights in rem as well as rights in personam. The obligation binds the parties; the duty to respect the contractual tie rests upon all the world. Temperton v. Russell carries the law a stage further. This was an action brought against the officers of certain trades unions for procuring the breach of contracts made with the plaintiff, and further for inducing persons not to [#227] 2 In the elaborate dissenting judgment of Coleridge, J., the exception which the law of master and servant seems to have engrafted upon the common law is traced by the learned judge, in a detailed historical argument, to the Stat- utes of Labourers, and is held to be inapplicable to the case of a theatrical performer. Chap. I. §2. LIMITS OF CONTRACTUAL OBLIGATION. 279 make contracts with the plaintiff. The first of these causes of action differs only from the cases already cited in the fact that the defendants’ object was not to benefit them- selves but solely to injure the plaintiff. The second takes us outside the law of contract. The Court of Appeal held that both causes of action were good, and we may now regard it as settled that an actionable wrong is committed by one who, with intent to injure, induces others not to enter into contracts with the party complaining or to break contracts made.} § 2. A man cannot acquire rights under a contract to which he is not a party. This rule needs fuller explanation than the one which we have just been discussing. It is contrary to the com- mon sense of mankind that M should be bound by a con- tract made between X and A. But if A and X make a contract in which X promises to do something for the benefit of YW, all three may be willing that M@ should have all the rights of an actual *contracting party; or if A, and a group of persons which we will call X, enter into a contract, it might be convenient that M should be 4 [#228] 1 The American cases generally agree that inducing a servant to quit his employment is actionable; and many cases support the broader doctrine that unjustifiably inducing the breach of any con- tract is actionable, although what would amount to justification is uncertain. Angle v. Chicago §&c. Ry., 151 U. 8. 1, 18-15; Jones v. Stanly, 76 N. C. 855, H. & W. 418; Walker v. Cronin, 107 Mass. 555, H. & W. 416; Chipley v. Atkinson, 23 Fla. 206; Bixby v. Dunlap, 56 N..H. 456. But some authorities hold that, aside from the case of master and servant under the statutes, there is no action for inducing breach of contract unless unlawful means are used, as threats, violence or fraudulent misrepresentations, so that the breach is involuntary on the part of the one committing it; and that it is not sufficient to show that the defendant acted maliciously. Bourlier Brothers v. Macauley, 91 Ky. 185 (actress); Chambers v. Baldwin, Ib. 121 (con- tract of sale); Boyson v. Thorn, 98 Calif. 578 (contract for lodgings) ; Ashley v. Dixon, 48 N. Y. 430 (contract for sale of land). Flood v. Jackson, 1895] 2 Q.B. C. A.) 27. (2) Con- tract can- not confer rights on a third party. 280 OPERATION OF CONTRACT. Part IIL. able to sue on behalf of the multitude of which X con- sists. If A makes a promise to -X, the consideration for which is a benefit to be conferred on M by X, this cannot confer a right of action on M. Such is the rule of English law. Easton promised X that if X would work for him he would pay a sum of money to Price. The work was done and Price sued Easton for the money. It was held that he could not recover because he was not a party to the contract. The judges of the Queen’s Bench stated in different forms the same reason for their decision. Lord Denman, C. J., said that the plaintiff did not ‘show any consideration for the promise moving from him to defendant.’ Littledale, J., said, ‘No privity is shown between the plaintiff and the defendant.’ Taunton, J., that it was ‘consistent with the matter alleged in the declaration that the plaintiff may Price v. have been entirely ignorant of the arrangement between 4B. eas. X and the defendant:’ and Patteson, J., that there was no promise to the plaintiff alleged.’ } 1 PROMISE FOR BENEFIT OF A THIRD PERSON. There are at least two distinct holdings upon this vexed question in the United States. (1) Massachusetts rule. The later Massachusetts cases practically adopt the English rule that no action is maintainable by one for whose benefit a promise is made. Exchange Bank v. Rice, 107 Mass. 37; Marston v. Bigelow, 150 Mass. 45; Borden v. Boardman, 157 Mass. 410, H. & W. 435. So also Michigan. Linneman v. Moross, 98 Mich. 178. (2) New York rule. The conclusion reached in New York by suc- cessive decisions may be thus stated: a third person (X) for whose benefit a promise is made by A, upon a consideration moving from B, the promisee, may maintain an action upon the promise, provided he was the person directly intended to be benefited, and provided the promisee was, at the time the promise was given, under an existing duty or obligation to X which he is seeking to discharge by giving X the benefit of A’s promise. Lawrence v. Fox, 20 N. Y. 268, H. & W. 422; Vroomanv. Turner, 69 N. Y.280. This rule with the first limita- tion has been generally adopted throughout the United States. It is almost universally held that if the benefit is only incidental the third Chap. I. §2. LIMITS OF CONTRACTUAL OBLIGATION. 281 Doubts have been thrown on this rule in two sorts of case, and these we will consider, premising that the rule itself remains unshaken. person cannot maintain an action. Burton v. Larkin, 36 Kans. 246; Howsnon v. Trenton Water Co., 119 Mo. 804; National Bank v. Grand Lodge, 98 U.S. 128. Perhaps the only case to the contrary is Padu- cah Lumber Co. v. Paducah Water Supply Co., 89 Ky. 840. The second limitation has also been expressly approved. Jefferson v. Asch, 53 Minn. 446. But many cases state the rule in the broadest possible terms without reference to this limitation. Grant v. Diebold Safe and Lock Co., 77 Wis. 72; Hendrick v. Lindsay, 93 U. 8. 143, 149. It is believed, however, that with few exceptions the decided cases which apply the rule apply it to facts well within the second limitation. The following are illustrations of its application: a promise by A to pay B’s creditor (X) in place of paying B himself, Lawrence v. Fox, supra; Wood v. Moriarty, 15 R. I. 518, H. & W. 430; a promise by an incoming partner (A) to pay the creditors (X, Y, etc.) of the firm of which the promisee (B) is an outgoing partner; Lehow v. Simonton, 3 Colo. 346, H. & W. 420; Claflin v. Ostrom, 54 N. Y. 581; Shamp v. Meyer, 20 Neb. 223; a promise by a purchaser or grantee of property to pay a mortgage or lien against the property for which the seller or grantor was personally liable; Burr v. Beers, 24 N. ¥.178; Thorp v. Keokuk Coal Co., 48 N. Y. 253; Hallenbeck v. Kindred, 109 N. Y. 620; Dean v. Walker, 107 Ill. 540; but not where the grantor was not personally liable; Vrooman v. Turner, supra; Durnherr v. Rau, 135 N. Y. 219; ef. Keller v. .lshford, 183 U. S. 610; a promise made to a father for the benefit of a minor child. Gooden v. Rayl, 85 Iowa, 592; Strong v. Marcy, 33 Kans. 109. (8) Statute of Frauds. It is generally held that the promise does not fall within the Statute of Frauds, since it is given to the debtor and not to the creditor. Wood v. Moriarty, supra. Contra: Clapp v. Lawton, 31 Conn. 95. (4) Sealed instruments. Itis also generally held that the case escapes the technical rule that only the parties to a sealed instrument can sue or be sued upon it, since the promise actually declared upon is one created bylaw. Bassett v. Hughes, 53 Wis. 319, H. & W. 428; Hughes v. Oregon Ry. & Nav. Co., 11 Ore. 437. Cf. Harms v. McCormick, 132 Til. 104. (5) Right of promisee to release promisor. It is held that if the third party has accepted or acted upon the promise, the promisee cannot afterward release the promisor from it. Gifford v. Corrigan, 117 N. Y. 257; Bassett v. Hughes, supra. It has been held that the promisee may release the promisor at any time before the third party accepts or acts upon the promise. Trimble v. Strother, 25 Oh. St. 378. Suggested modifica- tions, (a) near- ness of kin to promisee. 1B. &§.393, 1 Ventr. 6. 1B. &S§. 397. 282 OPERATION OF CONTRACT. Part III. (a) It was at one time thought that if the person who was to take a benefit under the contract was nearly related by blood to the promisee a right of action would vest in him. The case of Tweddle v. Atkinson is conclusive against this view. Mand N married, and after the marriage a contract was entered into between A and -X, their respective fathers, that each should pay a sum of money to Mf, and that M should have power to sue for such sums. After the death of A and X, M sued the executors of X for the money promised to him. It was held that no action would lie. Wightman, J., said : — ‘Some of the old decisions appear to support the proposition that a stranger to the consideration of a contract may maintain an action *upon it, if he stands in such a near relationship to the party from whom the consideration proceeds, that he may be con- sidered a party to the consideration. The strongest of those cases is that cited in Bourne v. Mason, in which it was held that the daughter of a physician might maintain assumpsit upon a promise to her father to give her asum of money if he performed a certain cure. But there is no modern case in which the proposition has been supported. On the contrary, it is now established that no stranger to the consideration can take advantage of a contract, although made for his benefit.’ 4 [#229] (6) Effect upon promisee’s liability. It has been held that if the third party elects to avail himself of the promise, he thereby releases the promisee from further liability and must look to the promisor alone. Bohanan v. Pope, 42 Me. 93; Wood v. Moriarty, supra. (7) Statutory provisions. Some States provide by statute that one for whose benefit a promise is made may maintain an action upon the promise. Stimson, Am. St. Law, §§ 4117, 4128. Most States having the reformed procedure provide that all actions shall be brought in the name of the real party in interest. It has been inferred that this provision “places the matter beyond all doubt, for the person for whose benefit the promise is made is certainly the real party in inter- est.” Pomeroy, Rem. and Rem. Rights, § 139; Stevens v. Flannagan, 131 Ind. 122; Ellis v. Harrison, 104 Mo. 270. It is difficult to see, however, in what manner this provision as to procedure can have affected the question as to whether the third person has any legal or equitable interest in the contract. 1See Marston v. Bigelow, 150 Mass. 45, 58. Cf. Strong v. Marcy, 38 Kans. 109; Gooden v. Rayl, 85 Towa, 592. Chap. I. §2. LIMITS OF CONTRACTUAL OBLIGATION. 288 (6) Equity judges have used language, sometimes very explicit, to the effect that ‘where a sum is payable by A B for the benefit of CD, C D can claim under the contract as if it had been made with himself.’ The question has most frequently arisen in cases where contracts have been made or work done on behalf of a company which has not yet come into existence. The company when formed cannot ratify such transactions ¢ and attempts have been made to bind it by introducing into the articles of association a clause empowering the directors to fulfil the terms of the contract, or to repay those who have given work or advanced money to promote the existence of the company. Common law judges have uniformly held that no right of action accrues to the beneficiary under such a provision ; and recent decisions put this matter on a plain footing and tell us when a third party may or may not sue. The articles of association of a company provided that the plaintiff should be employed as its permanent solicitor. He sued the company for a breach of contract in not employing him. Lord Cairns explains the nature of the articles of associa- tion and their relation to the memorandum of association. The memorandum contains the terms which confer and limit the corporate powers of the company. The articles provide for the rights of the members of the company inter’ se. ‘They are an agreement inter socios, and in that view if the intro- ductory words are applied to article 118, it becomes a covenant between the parties to it that they will employ the plaintiff. Now so far as that is concerned it is res inter alios acta, the plaintiff is no *party to it. This article is either a stipulation which would bind the members, or else a mandate to the directors. In either case it is a matter between the directors and shareholders, and not between them and the plaintiff.’ [*230] 2See, as to the rules which govern ratification, Part VI. c.i. The doc- trine in equity. Touche v. Metropoli- tan Ware- housing Co., 6 Ch, 671. Spiller v. Paris Skat- ing Rink, Ch. D. 868. Kelner v. Baxter, L.R.2C. P. 174. Melhado v. Porto Alegre Railway Co., L. R.9C. P. 503. Eley v. Positive Assurance Co.,1 Ex. D. (C. A.) 88, See Ashbury Carriage Co. y. Riche, L.R.7H.L. at p. 667, 2 «), at yar weet Sp 16 Ch. D. (C. A.) 125. ‘Third party only entitled as cestui que trust. Attempts to enable a third party to sue for many joint con- tractors L.R.5 C. P. 568. have uni- formly failed. L. R. 18 Eq. 11. 284 OPERATION OF CONTRACT. Part III. Articles of association, therefore, only bind the parties to them. In the case of the Empress Engineering Com- pany, A, professing to act on behalf of the company as yet unformed, made a contract with X which was after- wards introduced into the company’s articles of association. But the Court of Appeal held that this gave no rights to X against the company. Sir G. Jessel, M.R., pointed out in the course of the argument that an agreement between two parties might well be so framed as to make one of them trustee for a third; and that some cases of this nature have created an impression that a third party who is to be benefited by a contract acquires equitable rights ex contractu. But if a trust is to be created in favour of a third party, there must be words amounting to a declaration of trust* by one of the contracting parties. It is not enough that one should promise the other to pay money to a third.’ It has been attempted, without success, to break the general rule in the case of unincorporated companies and societies who wish to avoid bringing action in the names of all their members. To this end they introduce into their contracts a term to the effect that their rights of action shall be vested in a manager or agent. Thus in Gray v. Pearson, the managers of a mutual assurance company, not being members of it, were authorized, by powers of attorney executed by the members of the com- pany, to sue upon contracts made by them as agents on behalf of the company. They *sued upon a con- tract so made, and it was held that they could not maintain the action, ‘for the simple reason,—a reason not [#231] 4 See Richards v. Delbridge as to what constitutes a declaration of trust. A transaction which is intended to operate as a transfer of property will not import a trust merely because it is ineffectual as a transfer, nor will a contract import a trust because its terms cannot operate as a contract. ® For illustrations see Murray v. Flavell and Rotheram Alum Co., 25 Ch. D. 89; 103. In the first case an agreement between two parties for the benefit of a third created a trust in favour of the third party. In the second case the third party acquired no rights. Chap. I.§ 2. LIMITS OF CONTRACTUAL OBLIGATION. 285 applicable merely to the procedure of this country, but one affecting all sound procedure,— that the proper person to bring an action is the person whose right has been violated.’ The inconvenience under which bodies of this descrip- tion labour has been met in many cases by the legislature. Certain companies and societies can sue and be sued in the name of an individual appointed in that behalf,«1 and the Judicature Act has laid down a general rule that — ‘Where there are numerous parties having the same interest in one action, one or more of such parties may sue or be sued, or may be authorized by the court to defend in such action on behalf of all parties so interested.’ But this rule is not of such general application as would at first sight appear. It is intended to apply the former practice of the Court of Chancery to actions brought in any division of the High Court. The words ‘having the same interest’ must therefore be construed in accordance with this practice. The rule in chancery was that where a number of persons were interested in ‘some beneficial proprietary right, one of them might be chosen to repre- sent the rest for the purposes of the suit.’ The rule made under the Judicature Act does not go beyond this, nor does it apply to cases where the chancery would have had no jurisdiction before the act. Thus it has been held that one of several parties to a wrong cannot be made a representative defendant in order that the plaintiff may ¢ Statutes of this nature are — 7 Geo. IV. c. 46, relating to Joint Stock Banking Companies; 7 Will. IV. and 1 Vict. c. 73, relating to companies formed under letters patent ; 34 & 35 Vict. c. 31, relating to Trades Unions ; 38 & 39 Vict. c. 60, relating to Friendly Societies; and in many cases companies formed by private acts of Parliament possess similar statutory powers. 1 See N. Y. Code Civ. Pro., § 1919; Goodsell v. Western Union Tel. Co., 180 N. Y. 430. Per Willes, J., at p. 574. Statutory relaxa- tions of the rule. Order XVI. rnd. Temperton y. Russell, [1898]1 Q.B. (C. A.) 485. Agency postponed. 286 OPERATION OF CONTRACT. Part III. have a wide field for the recovery of damages without the trouble of suing all the wrong-doers. *But although A cannot by contract with X con- fer rights or impose liabilities upon MZ, yet A may represent M, in virtue of a contract of employment sub- sisting between them, so as to become his mouthpiece or medium of communication with X. This employment for the purpose of representation is the contract of agency. I have described elsewhere the difficulty of assigning to agency a fit place in a treatise on the law of contract. I regard it as an extension of the limits of contractual obliga- tion by means of representation, but, since its treatment here would constitute a parenthesis of somewhat uncouth dimensions, I will postpone the treatment of it to the conclusion of my book. [*232] CHAPTER II. The Assignment of Contract. WE have seen that a contract cannot affect any but the parties to it. But the parties to it may under certain cir- cumstances drop out and others take their places, and we have to ask how this can be brought about, first, by the voluntary act of the parties themselves, or one of them, secondly, by the operation of rules of law. § 1. Assignment by act of the parties. This part of the subject also falls into two divisions, the assigninent of liabilities and the assignment of rights, and we will deal with them in that order. Assignment of liabilities. A promisor cannot assign his liabilities under a contract. Or conversely, a promisee cannot be compelled, by the promisor or by a third party, to accept performance of the contract from any but the promisor. — The rule seems to be based on sense and convenience. A man is not only entitled to know to whom he is to look for the satisfaction of his rights under a contract; but, to use the language of Lord Denman in Humble v. Hunter, ‘he has a right to the benefit he contemplates from the character, credit, and substance of the person with whom he contracts.’ The case of Robson ¢ Sharpe v. Drummond illustrates the rule. Sharpe let a carriage to Drummond at a yearly rent [#294] *for five years, undertaking to paint it every year and keep it in repair. Robson was in fact the part- 287 Assign- ment of contract. (1) Assign- ment by act of par- ties. (4) Liabil- ities cannot be assigned. 12.Q.B. 317. 2B. & A. 303. Reason for rule. 2B. G&A. 307. Excep- tions to the rule. Dicey, Parties to Actions, 235. British Waggon Co. y. Lea, 5Q. B.D. 149. 288 OPERATION OF CONTRACT. Part III. ner of Sharpe, but Drummond contracted with Sharpe alone. After three years Sharpe retired from business, and Drum- mond was informed that Robson was thenceforth answer- able for the repair of the carriage, and would receive the payments. He refused to deal with Robson, and returned the carriage. It was held that he was entitled to do so. ‘The defendant,’ said Lord Tenterden, ‘may have been induced to enter into this contract by reason of the personal confidence which he reposed in Sharpe... . The latter, therefore, having said it was impossible for him to perform the contract, the defendant had a right to object to its being performed by any other person, and to say that he contracted with Sharpe alone and not with any other person.’ ! There are certain limitations to this rule. A liability may be assigned with the consent of the party entitled; but this is in effect the rescission, by agreement, of one con- tract and the substitution of a new one in which the same acts are to be performed by different parties. Or again, if A undertakes to do work for X which needs no special skill, and it does not appear that A has been selected with reference to any personal qualification, X cannot complain if A gets the work done by an equally competent person But A does not cease to be liable if the work is ill done, nor can any one but A sue for pay- ment.” Again where an interest in land is transferred, liabilities attaching to the enjoyment of the interest may pass with it. But this arises from the peculiar nature of obligations attached to land and will be matter for separate discus- sion. 1 Accord: Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. 8. 879, H. & W. 488. 2 A may delegate to B the performance of the duties and assign to A the right to payment, remaining liable to X for the manner in which the work is done. Devlin y. Mayor, 63 N. Y. 8. See also Rochester Lantern Co. v. Stiles §c. Co., 185 N. Y. 209, H. & W. 447; La Rue vy. Groezinger, 84 Calif. 281. Chap. II.§1. THE ASSIGNMENT OF CONTRACT. 289 Assignment of rights. G) At Common Law. At common law, apart from the customs of the law merchant, the benefit of a contract,,or of rights of action *arising from contract,” cannot be assigned so as to enable the assignee to sue upon it in his own name. He must sue in the name of the assignor or his representa- tives; or rather, the common law so far takes cognizance of such equitable rights as are created by the assignment that the name of the assignor may be used as trustee of the benefits of the contract for the assignee.! Practically the only way in which rights under a contract can be transferred at common law is, not by assignment at all, but by means of a substituted agree- ment. If A owes M £100, and M owes X £100, it may be agreed between all three that A shall pay X instead of M, who thus terminates his legal relations with either party. In such a case the consideration of A’s promise is the discharge by M; for M’s discharge of A, the extinguishment of his debt to X; for X’s promise, the substitution of A’s liability for that of M? [#235] @ This rule is sometimes expressed by saying that ‘a chose in action is not assignable.’ The term chose in action is one which writers have continued to use for a long time without inquiring precisely what it meant, and since, of late, inquiry has been made, there seems some doubt as to its meaning. (See Law Quarterly Review for 1893, 1894, 1895.) Whether chose in action comprises personal property of an intangible char- acter such as copyright, rights ex contractu before and after breach, and rights of action generally, is a matter which I will leave for the discussion of those whom it may concern. Whatever meaning is attached to the term by the disputants, it certainly includes rights under a contract and rights of action arising from breach of contract, and we have to consider how far, and under what conditions these were assignable. 1 And the assignor cannot control the suit, though he may demand an indemnity against costs. Webb v. Steele, 13 N. H. 230; Hough v. Barton, 20 Vt. 455, H. & W. 445; Fay v. Guynon, 1381 Mass. 31. 2 Heaton v. Angier, 7 N. H. 397, H. & W. 442. U (ii) Assign- ment of tights. (a) At com- mon law. Assign- ability of the benefit of a con- tract: Powles v. Innes, 11 M. and W. 10. at com- mon law only by sub- stituted agree- ment: Fairlie v. 400. in cases of debt ; Cuxon v. Liversidge Per Martin, B., Liver- sidge v. Broadbent, 4H. &N. 610. 290 OPERATION OF CONTRACT. Part III. But there must be ascertained sums due from A to MW and from M to X; and there must also be a definite agreement between the parties, for it is the promise of each which is the consideration of those given by the others. A promise by a debtor to pay a third party even though afterwards it be assented to by the creditor will not enable the third party to sue for the sum promised. Again, a written authority from the creditor to the debtor to pay the amount of the debt over to a third party, even though the debtor acknowledge in writing the authority given, will not entitle the third party to sue for the amount. *¢There are two legal principles,’ said Martin, B., ‘ which, so far as I know, have never been departed from: one is that, at common law, a debt cannot be assigned so as to give the assignee a right to sue for it in his own name, except in the case of a negotiable instrument; and that being the law, it is perfectly clear that M could not assign to the plaintiff the debt due from the defendant to him. ... The other principle which would be infringed by allowing this action to be maintained is the rule of law that a bare promise cannot be the foundation of an action. .. . No doubt a debtor may, if he thinks fit, promise to pay his debt to a person other than his creditor; and if there is any consideration for the promise, he is , bound to perform it. But here there was none whatever. There was no agreement to give time, or that the debt of M should be extinguished, — no indulgence to him or detriment to the plaintiff. There was nothing in the nature of a consideration moving from the plaintiff to the defendant, but a mere promise by the defendant to pay another man’s debt.’ [*236] It is thus apparent that a contract, or right of action arising from contract, cannot be assigned at common law except (1) by an agreement between the original parties to it and the intended assignee, which is subject to all the rules for the formation of a valid contract, and which is limited in its operation to the transfer of a debt; or (2) 1 McKinney v. Alvis, 14 Il. 33, H. & W. 443. 2 Jessel v. Williamsburgh Ins. Co. 3 Hill (N. Y.), 88, H. & W. 444. Chap. II. § 1. THE ASSIGNMENT OF CONTRACT. 291 by the rules of the law merchant under circumstances to be noted presently. Gi) In Equity. Equity permits the assignment of a chose in action, or the rights which a man possesses under a contract, so that the assignee may sue in his own name! But the rights must relate to money or property, specified or capable of being rendered specific. A right under a contract to lend money, not out of any particular fund, would seem not to be assignable, since it could only give rise to an action for unliquidated damages. A fortiort a contract for personal services would not be assignable.” But certain conditions affect the rights of the assignee. *(a) The assignment will not be supported un- less consideration has been given by the assignee. (8) It will not bind the person liable until he has received notice, although it is effectual as between assignor [#237] and assignee from the moment of the assignment. (y) The assignee takes subject to all such defences as might have prevailed against the assignor. In other words, the assignor cannot give a better title than he has got. . These last two propositions require some illustration. «This point is very fully discussed by Lord Macnaghten in Tailby v. Oficial Receiver, and the limits of assignability are indicated in Western Wagon Co. v. West. The cases were assignments under the Judicature Act, but assignability was assumed to be limited by previous equitable rules. 1 An assignment cannot be enforced in equity if the assignee can proceed at law in the name of his assignor, unless the legal remedy would be incomplete or inadequate. Carter v. United Ins. Co. 1 Johns. Ch. (N. Y.) 463, H. & W. 452; Walker v. Brooks, 125 Mass. 241; New York &c. Co. v. Memphis Water Co., 107 U. 8. 205. The two cases in which the assignment is most commonly enforced in equity are, first, the assignment of future interests, and, second, the assignment of part of a demand. Field v. Mayor, 6 N. Y. 179, H. & W. 453; James v. Newton, 142 Mass. 366. 2 Hayes v. Willio, 4 Daly (N. Y. C. P.), 259, H. & W. 451. or by cus- tom of mer- chants. (0) Assign- ability of contracts in equity is subject to certain condi- tions. 18 App. Ca. 543, [1892] 1 Ch. STL. i 292 OPERATION OF CONTRACT. Part IIT. Notice. Notice. It is fair upon the person liable that he should know to whom his liability is due. So if he receive no notice that it is due to another than the party with whom he originally contracted, he is entitled to the benefit of any payment which he may make to his original creditor. A convenient illustration is furnished in the case of cove- nants to pay interest on a mortgage debt. If the mort- gage be assigned by the mortgagee without notice to the mortgagor, and interest be afterwards paid by the mort- gagor to the duly-authorised agent of the mortgagee, the money so paid, though due to the assignee, cannot be Williams v. Tecovered by him from the debtor. We may put the case Vesey, thus: — Money is due at regular intervals from A to X, and is ordinarily paid by A to the agent of X: X assigns his interest in the debt to M. A receives no notice but continues to pay the money to X’s agent: the money so paid cannot be recovered by M from A. The rationale of the rule is thus expounded by Turner, L.J., in Stocks v. Dobson : — 4D.M.&G. ‘The debtor is liable at law to the assignor of the debt, and at law % must pay the assignor if the assignor sues in respect of it. If so, it follows that he may pay without suit. The payment of the debtor to the assignor discharges the debt at law. The assignee has no legal right, and can only sue in the assignor’s name. How can he sue if the debt has been paid? If a court of equity laid down the rule that the debtor is a trustee for the assignee, without having any notice of the assignment, it would be impossible for a debtor safely *to pay a debt to his creditor. The law of the court has therefore required notice to be given to the debtor of the aD. M, &G assignment in order to perfect the title of the assignee.’ } at p. 16. [*238} And the same case is authority for this further proposi- tion, that ‘equitable titles have priority according to the priority of notice.’ The successive assignees of an obliga- 1 Heermans v. Ellsworth, 64 N. Y. 159, H. & W. 457. Chap. IT. § 1. THE ASSIGNMENT OF CONTRACT. 293 tion rank as to their title, not according to the dates at which the creditor assigned his rights to them respec- tively, but according to the dates at which they gave notice to the party to be chargedt Title. ‘The general rule, both at law and in equity, is that no person can acquire title, either to a chose in action or any other property, from one who has himself no title to it.’ And further, ‘if a man takes an assignment of a chose en action, he must take his chance as to the exact position in which the party giving it stands.’ The facts of the case last cited are somewhat complex, and the rule is so clear that a complicated illustration would not tend to make it clearer. It is enough that the assignee of contractual rights must take care to ascertain the exact nature and extent of those rights; for he can- not take more than his assignor has to give, or be exempt from the effect of transactions by which his assignor may have lessened or invalidated the rights assigned.? In like manner, if one of two parties be induced to enter into a contract by fraud, and the fraudulent party assign his interest in the contract for value to X, who is wholly innocent in the matter, the defrauded party may get the contract set aside in equity in spite of the inter- est acquired in it by X.8 It is possible, however, that two parties to a contract may stipulate that if either assign his rights under it, 1The rule stated by the author is approved in Van Buskirk v. Hartford Fire Ins. Co., 14 Conn. 141; Clodfelter v. Cox, 1 Sneed (Tenn.), 380; Ward v. Morrison, 25 Vt. 598. But the rule that the one prior in time will be protected is sustained by Muir v. Schenck, 3 Hill (N. Y.), 228; Williams v. Ingersoll, 89 N. Y. 508; Thayer v. Daniels, 113 Mass. 129. 2 Warner v. Whittaker, 6 Mich. 133; Lane v. Smith, 108 Pa. St. 415. 3 Holbrook v. Burt, 22 Pick. (Mass.) 546. Assignee takes sub- ject to equities. Crouch v. Credit Fon- cier, L, R. 8 Q. B. 380. Mangles v. Graham vy. Johnson, 8 Eq. 36. This rule may be ex- cluded by express terms. Ex parte Asiatic Banking Corpora- tion, 2 Ch. 397. (c) Assign- ment of contract by statute. c. 66. § 25. sub-§ 6. Tailby v. Official ee pp. Ca. 528. » 294. OPERATION OF CONTRACT. Part III. such an assignment shall be ‘free from equities;’ that is to say, that the assignee shall not be liable to be met by such defences *as would have been valid against his assignor. It is questionable, however, whether such a stipulation would protect the assignee against the effects of fraud, or any vital defect in the formation of the original contract. [*239] Gii) By STature. It remains to consider, so far as mere assignment goes, the statutory exceptions to the common law rule that a chose in action is not assignable. (a) The Judicature Act of 1878 gives to the assignee of any debt or legal chose in action all legal rights and remedies. But (1) the assignee takes subject to equities ; (2) the assignment must be absolute; (3) must be in writing signed by the assignor; (4) express notice in writing must be given to the party to be charged, and the title of the assignee dates from notice.! The requirements of this section do not affect the rules of assignment in equity, or the rights thereby created. Here, as elsewhere, the Judicature Act has not created new rights, but has generalized equitable rules, and given legal remedies for rights which, previously, could only be enforced in the chancery. The rights which are assign- able under the Judicature Act are such rights as were previously assignable in equity (ante, p. 236 n.). But a compliance with the requirements of the section gives to 1In many States all choses in action arising from contract are ren- dered assignable so as to vest the legal title in the assignee. Stimson, Am. St. Law, § 4031. In States having the reformed procedure an assignee must sue in hisown name. IJb., § 4032. But he takes sub- ject to equities. Jb. The requirement that the assignment and notice must be in writing does not generally prevail in this country. See Allen v. Brown, 44 N. Y. 228, H. & W. 459; Walker v. Mauro, 18 Mo. 564. . Chap. IT. § 1. THE ASSIGNMENT OF CONTRACT. 295 the assignee legal as well as equitable rights and remedies. These requirements are more stringent since writing is not required either for the assignment or the notice in equity. It should be further noted that the assignment operates without the consent of the party liable. In Brice v. Bannister the defendant received express notice of the assignment of a debt accruing from him to the assignor. He refused to be bound by the assignment and paid his debt to the assignor. He was held liable notwithstanding to the assignees for the amount assigned. (8) By 30 & 81 Vict. c. 144, policies of life insurance are *assignable in a form specified by the act, so that the assignee may sue in his own name. Notice must be given by the assignee to the insurance company, and he takes subject to such defences as would have been valid against his assignor. (vy) By 31 & 82 Vict. c. 86, policies of marine insurance are similarly assignable; but this statute contains no [*240] requirement as to notice. (6) Shares in companies are assignable under the pro- visions of the Companies Clauses Act, 1845, and the Com- panies Act, 1862. . (e) Mortgage debentures issued by companies under the Mortgage Debenture Act are assignable in a form specified by the act. (iv) NEGOTIABILITY. So far we have dealt with the assignment of contracts by the rules of common law, equity and statute, and it would appear that under the most favourable circumstances the assignment of a contract binds the party chargeable to the assignee, only when notice is given to him, and subject always to the rule that a man cannot give a better title than he possesses in himself. We now come to deal with a class of promises the bene- fit of which is assignable in such a way that the promise 8Q. B.D. 569. Policies of life insur- ance. Policies of marine in- surance. Shares. 8 & 9 Vict. c. 89. § 22. Mortgage deben- tures, 28 & 29 Vict. ce. 78. (d) Nego- tiability. Assign- ability to be distin- guished from nego- tiability. Features of nego- tiability. Negotia- bility by custom, Rumball v. Metropol- itan Bank, 2Q. B.D. 194. by statute. 18 & 19 Vict. ec. 111 296 OPERATION OF CONTRACT. Part III. may be enforced by the assignee of the benefit without previous notice to the promisor, and without the risk of being met by defences which would have been good against the assignor of the promise. In other words, we come to consider negotiable instruments as distinguished from assignable contracts. The essential features of negotiability appear to be these. Firstly, the written promise gives a right of action to the holder of the document for the time being, though he and his holding may be alike unknown to the promisor.! Secondly, the holder is not prejudiced by defects in the title of his assignor; he does not hold subject to such defences as would be good against his assignor.? * Notice therefore need not be given to the party [241] liable, and the assignor’s ¢dt/e is immaterial. Certain contracts are negotiable by the custom of mer- chants recognized by the courts; such are foreign and colonial bonds expressed to be transferable by delivery, and scrip certificates which entitle the bearer to become a holder of such bonds or of shares in a company. Bills of exchange were negotiable by the law merchant ; promissory notes by 38 & 4 Anne, c. 9;° both classes of instruments are now governed by 45 & 46 Vict. c. 61. East India bonds have been made negotiable by 51 Geo. TII. c. 4. Bills of lading, which are affected both by the law mer- chant and by statute, possess some characteristics which will call for a separate consideration. 1 Odell v. Gray, 15 Mo. 337; Walker v. Ocean Bank, 19 Ind. 247. 2 New vy. Walker, 108 Ind. 365, H. & W. 399; Walker v. Ebert, 29 Wis. 194, H. & W. 238. 33 & 4 Anne,c. 9, has been re-enacted in substance in most Ameri- can States. Stimson, Am. St. Law, § 4701. Where not formally re-enacted it is in force as a part of our common law. 38 Kent, Comm. 72. Chap. II. § 1. THE ASSIGNMENT OF CONTRACT. 297 Bills of exchange and promissory notes figure so con- stantly in the law of contract, and are so aptly illustrative of the nature of negotiability, that we will shortly consider their principal features. A bill of exchange is an unconditional written order addressed by M to X directing X to pay a sum of money to a specified person or to bearer. Usually this specified person is a third person A, but M may draw a bill upon X in favour of himself. We must assume that the order is addressed to X either because he has in his control funds belonging to M or is prepared to give him credit; and since we are here dealing with bills of exchange merely as illustrative of negotiability, we'will adopt the most usual, as it is the most convenient form for illustration. M directs X to pay a sum of money to A or order, or to A or bearer. Mis then called the drawer of the bill, and by drawing it he promises to pay the sum specified to A or to any subsequent holder if X do not accept the bill or, having accepted it, fail to pay. Until acceptance, X, upon whom the bill has been drawn, is called the drawee. When X has assented to pay the sum *specified, he is said to become the ac- ceptor. Such assent must be expressed by writing on the bill signed by the acceptor, or by his simple signature. The holder is not bound to take anything but an uncon- ditional promise to pay the sum named when due. He may take an acceptance qualified by conditions as to amount, time, or place, but this releases the drawer or any pre- vious indorser from liability unless they assent to the qualification. If the bill be payable to A or bearer, it may be trans- ferred from one holder to another by mere delivery: if it is payable to A or order, it may be transferred by indorse- ment. Indorsement is an order, written upon the bill, and signed by A, in favour of D. Its effect is to assign to D [*242] Negotiable instru- ments. A bill of exchange. 45 é& 46 Vict. e. 61. § 3 (1). How drawn. How ac- cepted. §§ 19, 44, How in- dorsed: specially, in blank. A promis- sory note. Assign- ability distin- guished from nego- tiability. 6 App. Ca, 1. 298 OPERATION OF CONTRACT. Part III. the right to demand acceptance or payment of the bill from X when due, and in the event of default by X to demand it of M, the original drawer, or of A, against whom he has a concurrent remedy as being to all intents a new drawer of the bill, Every indorser therefore becomes an additional security for payment to the holder for the time being. If the indorsement be simply to D, or to D or order, the bill may be assigned by D to whomsoever he will in the same manner as it was assigned to him. If the indorsement be the mere signature of A, it is indorsed in blank, and the bill then becomes payable to bearer, that is, assignable by delivery. A has given his order and that addressed to no one in particular; the bill is in fact indorsed over to any one who becomes possessed of it. A promissory note is a@ promise in writing made by X to A that he will pay a certain sum, at a specified time, or on demand, to A or order, or to A or bearer. _X, the maker of the note, is in a similar position to that of an acceptor of a bill *of exchange; and the rules as to assignment by delivery or indorsement are like those relating to a bill of exchange. [*243] We may now endeavour to distinguish, by illustration from the case of instruments of this nature, the difference between assignability and negotiability. Let us suppose that X makes a promissory note payable to A or order, and that A indorses it over to D. D calls upon X to pay the value of the note, and sues him upon default. «This is exemplified in Duncan & Co. v. N.S. Wales Bank. The bank discounted acceptances of X and held securities from him for so doing. Duncan indorsed to the bank an acceptance of X which was dishonoured when it fell due. The holder, i.e. the bank, was not entitled to the security of the indorsement, if he had security from the acceptor; and Duncan, the indorser, was relieved p70 tanto from his liability to the bank. Chap. I. §1. THE ASSIGNMENT OF CONTRACT. 299 In the case of an ordinary contract, D would be called upon to show that he had given consideration to A for the assignment; that notice of the assignment had been given by him to X; and he would then have no better title than A. In the case of negotiable instruments consideration is presumed to have been given until the contrary is shown, aud notice of assignment is not required. But suppose it turn out that the note was given by X to A for a gambling debt, or was obtained from him by fraud. The position of D is then modified to this extent. As between A and X the note would be void or voidable according to the nature of the transaction, but this does not affect the rights of a bond fide holder for value, that is, a person who gave consideration for the note and had no notice of the vitiating elements in its origin. The pre- sumptions of law under these circumstances are, (1) that D did not give value for the bill, but (2) that he was igno- rant of the fraud or illegality; for fraud, or participation in an illegal act, is never presumed. It will be for D to show that he gave value for the bill, but for X to show that D knew that the bill was tainted in its origin. If D proves his point and X fails to prove his, then D can recover in spite of the defective title of A his assignor.! The effect of an illegal consideration for an indorsement should however be noticed. The indorsee cannot sue the indorser on the illegal contract made between them; but he can sue the acceptor, ahd probably a previous indorser who before the illegality had given value for the bill. A broker pledged his client’s bonds, which were nego- tiable *by the custom of merchants, with a bank, cer to secure advances made to himself. The bank had 1 Some American cases hold that the plaintiff must show that he paid value and, as further evidence of his good faith, the circum- stances under which he took the tainted paper. Canajoharie Nat. Bk. v. Diefendorf, 123 N. Y. 191. Considera- tion pre- sumed, Notice not needed. The as- signee may have a better title than the assignor. Illegal considera~ tion for making pill: Flower v. Sadler, 10 Q. B. D. 572. for indorse- ment. London Joint Stock Bank v. Sim- mons, [1892] A.C. 217. L. R.8Q. B. 374. An instru- ment under seal is not ne- gotiable. L. R. 8 Q. B. p. 882. 300 OPERATION OF CONTRACT. Part TIL. no notice that the bonds were not his own, or that he had no authority to pledge them: he became insolvent; the bank sold the bonds in satisfaction of the debt due, and the broker’s client sued the bank. The House of Lords held that he could not recover; for (1) the bonds were negotiable, and (2) being so negotiable ‘Tt is of the very essence of a negotiable instrument that you may treat the person in possession of it as having authority to deal with it, be he agent or otherwise, unless you know to the contrary: and are not compelled, in order to secure a good title to yourself, to inquire into the nature of his title or the extent of his authority.’ The case of Crouch v. Credit Foncier of England illus- trates not only the nature of negotiability but the limits within which the creation of negotiable instruments is permissible. A debenture assignable under the Companies Act and expressed to be payable to the bearer was stolen; the thief sold it to the plaintiff, and he sued the company for non- payment; the jury found that he was a bond fide holder for value of the debenture, but the court held that he could not recover, because, in spite of the wording of the deben- ture, it was an instrument under seal and therefore could not be, what it purported to be, a negotiable instrument assignable by delivery.1. The plaintiff therefore suffered for the defective title of his assignor. Had the debenture been a negotiable instrument, the plaintiff could have recovered; for, as Blackburn, J., said, in speaking of such contracts, — ‘ The person who, by a genuine indorsement, or, where it is payable to bearer, by a delivery, becomes holder, may sue in his own name on the contract, and if he is a bond fide holder for value, he has a good title notwithstanding any defect of title in the party (whether indorser or deliverer) from whom he took it.’ 1In the United States corporate bonds and notes under seal are gen- erally held to be negotiable. Mercer County v. Hacket, 1 Wall. (U.S.) 83; Stevens v. Philadelphia Ball Club, 142 Pa. St. 52. Ante, p. 145 h. Chap. II. § 1. THE ASSIGNMENT OF CONTRACT. 301 And the case further shows that a man cannot make an instrument negotiable merely by making it payable to bearer, nor can the custom of merchants make it negotiable by *treating it as such, if the law does not confer upon it the characteristics of negotiability. For the custom of merchants was to treat these debentures as assignable by delivery ; yet when one of them came before the courts it was at once denied the incidents of negotia- bility as incompatible with its character of an instrument under seal.¢ Before leaving this subject it is important to notice that the doctrine of consideration does not apply to negotiable instruments as to ordinary contracts. There is usually no consideration between remote parties to a bill, such as the acceptor and the payee: there need be none between the drawer and an indorsee when, either from acceptance being refused or the bill being dishonoured by the acceptor, recourse is had to the drawer. Moreover it is possible that A who has given no value for a bill may recover from X who has received no value, provided that some intermediate holder between A and X has given value for it. This is apparent if we look at [#245] the case of an ‘ accommodation bill.’ If A wants to raise money, and X is willing to lend the use of his name and credit, A draws a bill upon X payable to himself or order. -X accepts the bill and A negotiates it by indorsement to M who gives him value for it. MM, who has given value, can sue X who has received none; but this does not fully illustrate my proposition. I must take the matter a stage further. M, who has given value, indorses the bill to S who receives it as a present, giving no value for it. It would seem that, once value is given, any subsequent holder 2 But note the effect of § 91 of the Bills of Exchange Act in making valid the negotiable instruments of corporations issued under seal. Considera- tion and negotiable instru- ments. 45 & 46 Vict. c. 61. §38(2). Scott v. Lifford, 1 Camp. 246. 45 & 46 Vict. ec, 61, 5 Exch. 950. Original object of bills of exchange. 302 OPERATION OF CONTRACT. Part III. can sue the acceptor or any other party to the bill prior to the giving of value. And so S, who has given nothing, may sue X who has received nothing.’ An illustration is furnished by the case of Milnes v. Dawson, where the drawer of a bill of exchange indorsed it without *value to the plaintiff, and then received scrip in satisfaction of the bill from the acceptor, the defendant. [*246] ‘It would be altogether inconsistent with the negotiability of these instruments,’ said Parke, B., ‘to hold that after the indorser has transferred the property in the instrument, he may, by receiving the amount of it, affect the right of his indorsee. When the property is passed, the right to sue upon the bill follows also. A bill of exchange is a chattel, and the gift is complete by delivery coupled with intention to give.’ The rules of negotiability took their rise out of the custom of merchants, which assumed that the making of a bill or note was a business transaction. Value must be given at some time in the history of the instrument; but to insist that consideration should have passed between the holder and the party sued would have de- feated the object for which such instruments came into existence. For the object of a bill of exchange was to enable a merchant resident in one part of England to pay a creditor resident in another part of England, or abroad, without sending his debt in specie from one place to another. A, in London, owes £100 to X in Paris: A does not want to send gold or notes to France, and has no agent in Paris, or correspondent with whom he is in account, and through whom he can effect payment. But M, a merchant living in London, has a correspondent in Paris named S, who, according to the terms of business between them, will undertake to pay money on his 1 Grocers’ Bank v. Penfield, 69 N. Y. 502. Chap. II. § 1. THE ASSIGNMENT OF CONTRACT. 303 account at his direction. A therefore asks M, in con- sideration of £100, more or less according to the rate of exchange between London and Paris, to give him an order upon the correspondent S. Thereupon M draws a bill upon S for the required sum, in favour of A. A indorses the bill, and sends it to his creditor X. X pre- sents it for acceptance to S; if all goes well the bill is accepted by S, and in due time paid. Judge Chalmers thus compares the original object, and the modern English use, of bills of exchange : — *A bill of exchange, in its origin, was an instrument by which a trade debt, due in one place, was transferred to another. It merely avoided the necessity of transmitting cash from place to place. This theory the French law steadily keeps in view. In England bills have developed into a perfectly flexible paper cur- rency. In France a bill represents a trade transaction: in England it is merely an instrument of credit.’ [#247] It would not be well to leave the subject of negotiability without noticing the peculiar character of the instrument known as a ‘bill of lading.’ A bill of lading is called ‘a document of title,’ ‘a sym- bol of property ;’ and for the following reason. The bill of lading is a receipt by the master of a ship for goods bailed to him for delivery to X or his assigns. Of this receipt three copies are made, each signed by the master. One is kept by the consignor of the goods, one by the master of the ship, and one is forwarded to X, the con- signee, who on receipt of it acquires a property in the goods which can only be defeated by the exercise of the vendor’s equitable right of stoppage in transitu.? If a consignee assigns a bill of lading by indorsement to a holder for value, that holder has a better right than @ See form of bill of lading, Appendix, p. 364. + Stoppage in transitu is the right of the unpaid vendor, upon learning the insolvency of the buyer, to retake the goods before they reach the buyer’s possession. For the history of this right the reader is referred to the judgment of Lord Abinger, C.B., in Gibson v. Carruthers. Bills of Ex- change, ed. iv. Intro- duction, p. liv. Bill of lading. What it is. What rights its assign- ment con- fers. Chalmers, Sale of Goods, 58, 63-70. 8M. & W. 339. Lickbarrow By law merchant proprie- tary rights ; py 18 & 19 Vict. c. 111, con- tractual rights ; but not indepen- dent of as- signor’s title. Gurney v. Behrend, 3E. &B. at p. 684. 304 OPERATION OF CONTRACT. Part III. the consignee possessed. He has a title to the goods which overrides the vendor’s right of stoppage tn transitu, and can claim them in spite of the insolvency of the con- signee and the consequent loss of the price of his goods _ by the consignor. His right, however, which in this respect is based upon the law merchant, is a right of property only. The assign- ment of the bill of lading gives a right to the goods. It did not at common law give any right to sue on the con- tract expressed in the bill of lading. *The act 18 & 19 Vict. c. 111 confers this right. The assignment of a bill of lading thereby transfers to the assignee not only the property in the goods, but ‘all rights of suit’ and ‘all liabilities in respect of the goods, as if the contract contained in the bill of lading had been made with himself.’ ! But in respect of negotiability a bill of lading differs from the instruments with which we have just been dealing. [*248] Its assignment transfers rights in rem, rights to specific goods, and these to a certain extent wider than those pos- sessed by the assignor; therein it differs from negotiable instruments which only confer rights in personam. But though the assignee is relieved from one of the liabilities of the assignor, he does not acquire proprietary rights independently of his assignor’s title: a bill of lading stolen, or transferred without the authority of the person really entitled, gives no rights even to a bond fide indorsee. And again, the contractual rights conferred by statute are expressly conferred subject to equities. A bill of lading 1 Many statutes make bills of lading and warehouse receipts trans- ferable by indorsement in like manner as bills of exchange. Stimson, Am. St. Law, §§ 4343, 4872. These statutes have not been construed to mean that an indorsee of such a document gets thereby a better title than his indorser. Shaw v. Railroad Co., 101 U.S. 557, H. & W. 460. But see Tiedeman vy. Knox, 538 Md. 612. Chap. IT. § 2. THE ASSIGNMENT OF CONTRACT. 305 then is a contract assignable without notice; it so far resembles conveyance, that it gives a title to property, but it cannot give a better title, whether proprietary or con- tractual, than is possessed by the assignor; subject always to this exception, that one who takes from an assignor with a good title is relieved from liability to the vendor’s right of stoppage in transitu which might have been exer- cised against the original consignee. § 2. Assignment of contractual rights and liabilities by operation of law. So far we have dealt with the voluntary assignment by parties to a contract of the benefits or the liabilities of the contract. But rules of law may also operate to transfer these rights or liabilities from one to another. If A by purchase or lease acquire an interest in land of M, upon terms which bind them by contractual obliga- tions in respect of their several interests, the assignment (#249) by either *party of his interest to X will, within cer- tain limits, operate as a transfer to X of those obliga- tions. Marriage, which once transferred to the husband con- ditionally the rights and liabilities of the wife, has little effect since the Act of 1882. Representation, in the case of death or bankruptcy, effects an assignment to the executors or administrators of the deceased, or to the trustees of the bankrupt, of his rights and liabilities; but the assignment is merely a means of continuing, for certain purposes, the legal exist- ence of the deceased or the bankrupt. The assignees of the contract take no benefit by it, nor are they personally losers by the enforcement of it against them. They rep- resent the original contracting party to the extent of his estate and no more. x (2) As- signment by opera- tion of law. Assign- ment of interests in land. Marriage. Repre- sentation. (i) Inter- ests in land. Covenants affecting leasehold run with the land if they concern the thing demised, See cases collected in note to Spencer’s case, 1 8m. L. C. 66, 67. Minshull vy. not if purely personal. Covenants do not run with the reversion except by statute. 306 OPERATION OF CONTRACT. Part III. Assignment of obligations upon the transfer of interests in land. a. Covenants affecting leasehold interests. At common law these are said to ‘run with the land and not with the reversion’ —that is, they pass upon an assignment of the lease, but not upon an assignment of the reversion. If the lessee assign his lease, the man to whom he assigns it would be bound to the landlord by the same liabilities and entitled to the same rights as his assignor, subject to the following rules :— (1) Covenants in a lease which ‘touch and concern the thing demised’ pass to the assignee of the lessee whether or no they are expressed to have been made with the lessee ‘and his assigns.’ Such are covenants to repair, to leave in good repair, to deal with the land in a specified manner.t (2) Covenants in a lease, which touch and concern the thing demised, but relate to something not in existence at the time of the lease, are said to pass to the assigns only if named. There is little or no authority for this rule.? *(3) In no case does the assignee of the lessee acquire benefit ov liability from merely personal or collateral covenants made between his assignor and his landlord.? The reversioner or landlord does not, at common law, by the assignment of his interest in the land convey his rights and liabilities to the assignee. It was not till 32 Hen. VIII. c. 34 that the law in this respect was changed. By that act the assignee of the [#250] 1 Gordon v. George, 12 Ind. 408, H. & W. 468; Salisbury v. Shirley, 66 Cal. 223. 2 Thompson v. Rose, 8 Cow. (N. Y.) 266. 3 Newburg Petroleum Co. v. Weare, 44 Oh. St. 604. Chap. II. § 2. THE ASSIGNMENT OF CONTRACT. 307 reversion takes the benefits, and also incurs the liabilities, of covenants entered into with his assignor. These cove- nants must ‘concern the thing demised’ in accordance with the rules which govern covenants running with the land. The act only applies to leases under seal, but in the case of leases from year to year, payment and accept- ance of rent is held to be evidence from which a jury may infer ‘a consent to go on, on the same terms as before.’ 1 Two cases will illustrate the distinction between per- sonal, or collateral, covenants and those which concern, and are therefore assignable with, the thing demised. The first is a case of covenants running with the land, the second of covenants running with the reversion. Hayward leased a public-house to X, covenanting for himself and his assigns that he would not build or keep a public-house within half a mile of the premises. X assigned his lease to Thomas, and Hayward broke his covenant. The covenant was personal and did not pass to the assigns of X; Thomas had no remedy. Clegg, a brewer, leased the Alexandra Hotel to Hands, who covenanted for himself and his assigns that he would buy beer only from Clegg and his assigns. Clegg retired from business, closed his brewery, and assigned his interest in the premises to one Cain. Hands refused to buy beer of Cain, and Clegg obtained an injunction to restrain him from buying beer of any one else. The Court of Appeal held that the covenant touched and concerned the thing demised. *And the covenant was enforced for another rea- son founded on a rule which will be explained on the next page. The lessee had obtained his lease on lower terms because it was subject to a restrictive covenant, and, since the covenant was not necessarily personal or [#251] 1 Fisher v. Deering, 60 Tl. 114, H. & W. 470; Crawford v. Chapman, 17 Oh. St. 449. See Stimson, Am. St. Law, § 1352. Sm. L. C, 1. 74 (9th ed.). Per Willes, J., Cornish v. Stubbs, L. B.5C. P. 339. Personal, Thomas Haywar Lea Exch, 811. assignable covenants. Clegg v. Hands, 44 Ch.D.508. Covenants with owner. Dicey, Parties to Actions, 120-5. Covenants by owner. Stockport Waterworks Co.v. Potter, 3H. &C. 300. 2 Mylne & Keen, 535. Common law view. 308 OPERATION OF CONTRACT. Part IIT. unassignable, the court would have restrained him from departing from it even though it had not been held to run with the land. 8B. Covenants affecting freehold interests. At common law, covenants made with the owner of land, that is, promises under seal made to the owner of land, and for his benefit, pass to his assignees, provided they touch, and concern the land conveyed and are not merely personal.t X a vendor of land covenants with A the purchaser that he has a good right to convey the land; the benefit of such a covenant would pass from A to his assignees. Not so a covenant relating to some matter purely personal between A and X. But covenants entered into by the owner of land, restrict- ing his enjoyment of the land, do not at common law bind his assignees, except he thereby create certain well-known interests, as easements and profits, recognized by law. If a man endeavour to create restrictions on his land which are not included in the circle of rights in re aliend known to the common law, he cannot affix those rights to the land so as to bind subsequent owners. The cases which deal with attempts to create ‘an easement in gross’ illustrate this proposition, the principle of which is thus enunciated by Lord Brougham in Keppell v. Baily : — ‘It must not be supposed that incidents of a novel kind can be devised and attached to property, at the fancy or caprice of any owner.... Great detriment would arise and much confusion of rights, if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tene- ments a peculiar character, which should follow them into all hands however remote.’ 2 To this rule equity, regarding such covenants as 1 Shaber v. St. Paul Water Co., 30 Minn. 179, H. & W. 472. 2 Cole v. Hughes, 54 N. Y.444. Cf. Middlefield v. Church Mills Knit- ting Co., 160 Mass. 267, H. & W. 476; Conduitt v. Ross, 102 Ind. 166; Mott v. Oppenheimer, 135 N. Y. 312. Chap. II. § 2. THE ASSIGNMENT OF CONTRACT. 309 binding *the person not the land, has created a group of exceptions limited in character. Where a man sells lands and. covenants with the buyer that he will only use the adjoining land in a certain way, or where land has been bought or hired with similar cove- nants as to its use, such restrictive covenants will bind any one to whom the land is subsequently assigned with notice of their existence.” The covenants thus enforced are restrictive; they are covenants to use or abstain from using, and the result of the cases decided on the authority of Tulk v. Morhay is ‘that only such a covenant as can be complied with without expenditure of money will be enforced against the assignee on the ground of notice.’ Thus the principle cannot be applied so as to compel a lessee to enforce such covenants against his sub-tenant. The rule is thus stated by Lord Cottenham in the leading case on the subject: — [*252] ‘That this court has jurisdiction to enforce a contract between the owner of land and his neighbour purchasing a part of it, that the latter shall either use or abstain from using the land purchased in a particular way, is what I never knew disputed. ... It is said that the covenant, being one which does not run with the land, this court cannot enforce it; but the question is, not whether the covenant runs with the land, but whether a party shall be permitted to use his land in a manner inconsistent with the contract entered into by his vendor, and with notice of which he purchased.’+ Assignment of contractual obligation upon marriage. The effect of marriage, in this respect, is that if the separate estate of the wife be insufficient to satisfy her antenuptial contracts the husband is liable to the @ As to the rights conferred by such covenants upon purchasers inter se, and upon a purchaser against a vendor who retains a portion of the adjoining land, see In re Birmingham Land Co. and Aliday. 1 Tallmadge v. East River Bank, 26 N. Y. 105; Norcross v. James, 140 Mass. 188. Equitable enforce- ment of restrictive covenants. Haywood v. Brunswick Building Society, 8 Q. B. D. 410. Hall v. Ewin, 87 Ch. D. (C. A.) T4. ee Ooxha 2 Ph. TH. (ii) Mar- Tiage. 45 & 46 Vict. c. 75. §§ 13, 14, [1893], 1 Ch. 348, (iit) Death. Represen- tatives ac- quire all contract- ual rights which affect per- sonal estate, if not de- pendent _on per- sonal skill or service. Baxter v. Burfield, 2 Str. 1266, 2M. &8. 310 OPERATION OF CONTRACT. Part III. extent of all property to which he shall have become entitled through his wife.! Assignment of contractual obligation by death. Death passes to the executors or administrators of the deceased all his personal estate, all rights of action affect- ing *the personal estate, and all liabilities chargeable upon it. Thus covenants which are attached to leasehold estate pass, as to benefit and lability, with the personalty, to the representatives, while covenants affect- ing freehold, as covenants for title in a conveyance of freehold property, pass to the heir or devisee of the realty. But performance of such contracts as depend upon the personal services or skill of the deceased cannot be de- manded of his representatives, nor can they insist upon [*253] offering such performance. Contracts of personal service expire with either of the parties to them: an apprenticeship contract is terminated by the death of the master, and no claim to the services of the apprentice survives to the executor? Nor can executors sue for a breach of contract which involves a purely personal loss. In Chamberlain v. William- son, an executor sued for a breach of promise to marry the deceased. The promise had been broken and the right of action accrued in the lifetime of the testatrix. 1 Formerly he was liable absolutely, and this is still so unless changed by statute, even though the statute gives the wife the sole enjoyment of her separate estate. Platner v. Patchin, 19 Wis. 333, H. & W. 478; Alexander v. Morgan, 31 Oh. St. 546. But see Howarth v. Warmser, 58 Ill. 48, H. & W. 479; Wood v. Orford, 52 Calif. 412. Statutes now generally exempt the husband except to the extent of property received through the wife. Stimson, Am. St. Law, § 6402. ? Dickinson v. Calahan’s Adm’rs, 19 Pa. St. 227, H. & W. 479; Lacy v. Getman, 119 N. Y.109; Siler v. Gray, 86 N. C. 566. Cf. Billings’s Appeal, 106 Pa. St. 558; Drummond v. Crane, 159 Mass. 577. Statutes have very greatly enlarged the number of actions which survive. Chap. II. § 2. THE ASSIGNMENT OF CONTRACT. 311 But the court held that such an action could not be brought by representatives, since it was not certain that the breach of contract had resulted in damage to the estate. ‘Al- though marriage may be regarded as a temporal advantage to the party as far as respects personal comfort, still it cannot be considered as an increase of the transmissible personal estate.’ In Finlay v. Chirney, a converse proposition was laid 2 down, and the court held that no action would lie against the executors of a man who in his lifetime had broken a promise to marry. The court would not say that an action might not lie if special damage was proved, but the con- tract to marry was personal and did not survive to the representatives.1 Assignment of contractual obligation by bankruptcy. Proceedings in bankruptcy commence with the filing of a petition in the court of bankruptcy either by a creditor alleging acts of bankruptcy against the debtor or by the. debtor alleging inability to pay his debts. Unless this *petition prove unfounded the court makes a receiv- ing order and appoints an official receiver who takes charge of the debtor’s estate and summons a meeting of [#254] . creditors. If the creditors decide not to accept a composition, but make the debtor bankrupt, he is adjudged bankrupt and a trustee appointed. To the trustee passes all the property of the bankrupt vested in him at the time of the act of bankruptcy or acquired, by him before discharge, and the capacity for taking proceedings in respect of such property; but all that we are concerned with in respect of the rights and liabilities: of the trustee is to note that — (i) where any part of the property of a bankrupt 1 Wade v. Kalbfleisch, 58 N. Y. 282; Chase v. Fitz, 1382 Mass. 359. ib. p. 416. . B. D. (Oa) 494, (iv) Bank- ruptcy. Trustee’s powers: their ex- tent, and limits. 46 & 47 Vict. 0.50. § 52 (5). 46 & 47 Vict, e, 52, § 55. 53 & 54 Vict. c. TL. § 18, Drake v. Beckham, 11 W. 3819. M.& 312 OPERATION OF CONTRACT. Part IIL. consists of things in action, such things shall be deemed to have been duly assigned to the trustee : (ii) he may, within twelve months of his appointment, disclaim, and so discharge unprofitable contracts : (iii) he is probably excluded from suing for ‘ personal injuries arising out of breaches of contract, such as con- tracts to cure or to marry,’ even though ‘a consequential damage to the personal estate follows upon the injury to the person.’ ! 1 No general bankruptcy act has been in force in the United States since September 1, 1878. See 20 U.S. St. at L., 99. Insolvency acts appear upon the statute books of the various States, but these have no exterritorial effect. Gilman v. Lockwood, 4 Wall. (U. S.) 409, H. & W. 683; Guernsey v. Wood, 180 Mass. 508, H. & W. 685. PART IV. THE INTERPRETATION OF CONTRACT. AFTER considering the elements necessary to the forma- tion of a contract, and the operation of a contract as regards those who are primarily interested under it, and those to whom interests in it may be assigned, it seems that the next point to be treated is the mode in which a contract is dealt with when it comes before the courts in litigation. In considering the interpretation of contract we require to know how its terms are proved; how far, when proved to exist in writing, they can be modified by evidence extrinsic to that which is written; what rules are adopted for construing the meaning of the terms when fully before the court. The subject then divides itself into rules relating to evi- dence and rules relating to construction. Under the first head we have to consider the sources to which we may go for the purpose of ascertaining the expression by the parties of their common intention. Under the second we have to consider the rules which exist for construing that intention from expressions ascertained to have been used. — 313 Interpre- tation of contract. In what the subject consists. Rules re- lating (1) to evi- dence and (2) to con- struction. Provinces of court and jury. See p. 128, Why oral contracts need not be dis- cussed. CHAPTER I. Rules relating to Evidence. Ir a dispute should arise as to the terms of a contract made by word of mouth, it is necessary in the first instance to ascertain what was said, and the circumstances under which the supposed contract was formed. These would be questions of fact to be determined by a jury. Whena jury has found, as a matter of fact, what the parties said, and that they intended to enter into a contract, it is for the court to say whether what they have said amounts to a contract, and, if so, what its effect may be. When a man is proved to have made a contract by word of mouth upon certain terms, he cannot be heard to allege that he did not. mean what he said. The same rule applies to contracts made in writing. When men have put into writing any part of their contract they cannot alter by parol evidence that which they have written. When they have put into writing the whole of their contract they cannot add to or vary it by parol evidence. Contracts wholly oral may, as regards this part of my subject, be dismissed at once. For the proof of a contract made by word of mouth is a part of the general law of evidence ; the question whether what was proved to have been said amounts to a valid contract must be answered by reference to the formation of contract: the interpreta- tion of such a contract when proved to have been made may be dealt with presently under the head of rules of construction. 314 Chap. I. RULES RELATING TO EVIDENCE. 315 *All that we are concerned with here is to ascer- tain the circumstances under which extrinsic oral evidence is admissible in relation to written contracts and contracts under seal. Such evidence is of three kinds: — (1) Evidence as to the fact that there is a document purporting to be a contract, or part of a contract. (2) Evidence that the professed contract is in truth what it professes to be. It may lack some element neces- sary to the formation of contract, or be subject to some parol condition upon which its existence as a contract depends. (8) Evidence as to the terms of the contract. These may be incomplete, and may need to be supplemented by parol proof of the existence of other terms; or they may be ambiguous and then may be in like manner explained ; or they may be affected by a usage the nature of which has to be proved. We thus are obliged to consider — (1) evidence as to the existence of a document; - (2) evidence that the document is a contract ; ’ () evidence as to its terms. We must note that a difference, suggested some time back, between contracts under seal and simple contracts, is illustrated by the rules of evidence respecting them. A contract under seal derives its validity from the form in which it finds expression: therefore if the instrument is proved the contract is proved, unless it can be shown to have been executed under circumstances which preclude the formation of a contract, or to have been delivered under conditions which have remained unfulfilled, so that the deed is no more than an escrow. But ‘a written contract not under seal is not the con- [257] tract itself, but only evidence, the record of the contract.’ 6H Even where statutory requirements for writing exist, as under 29 Car. II. c. 8. § 4, the writing is no more than evidentiary of a previous or contemporaneous agreement. Three matters of inquiry. 1. Proof of existence of docu- ment; 2. Of fact of agree- ment; 3. Of terms of contract. Difference between formal and simple contract. p. 52. In the first the instru- ment is the con- tract, Wake v. Harrop, . GN. In the second the writing is only evi- dence of the con- tract. Wake v. Harrop, &N. 15. (1) Proof of docu- ment. Proof of contract under seal. 17 & 18 Vict. c. 125. § 26. ante, p. 50. Of simple contract. 316 INTERPRETATION OF CONTRACT. Part. IV. A written offer containing all the terms of the contract signed by A and accepted by performance on the part of B, is enough *to enable B to sue A under that sec- tion. And where there is no such necessity for writing, it is optional to the parties to express their [*258] agreement by word of mouth, by action or by writing, or partly by one, and partly by another of these processes. It is always possible therefore that a simple contract may have to be sought for in the words and acts, as well as in the writing of the contracting parties. But in so far as they have reduced their meaning to writing, they cannot adduce evidence in contradiction or alteration of it. ‘They put on paper what is to bind them, and so make the written document conclusive evidence between them.’ § 1. Proof of document A contract under seal is proved by evidence of the seal- ing and delivery. Formerly it was necessary to call one of the attesting witnesses where a contract under seal was attested, but the Common Law Procedure Act, 1854, en- acted that this should no longer be required save in those exceptional cases in which attestation is necessary to the validity of the deed. A warrant of attorney and a cognovit afford instances of instruments to which attestation is thus necessary.? In proving a simple contract parol evidence is always necessary to show that the party sued is the party making the contract and is bound by it.¢ And oral evidence must 2 As a matter of practice, written contracts are commonly admitted by the parties, either upon the pleadings, or upon notice being given by one party to the other to admit such a document. Such admissions are regu- lated by the Judicature Act, 1875, Order xxxii. Or one party may call upon the other to produce certain documents, and upon his failing to do so, and upon proof having been given of the notice to produce, the party ealling for production may give secondary evidence of the contents of the document. 1 This is now regulated largely by statute. Even in the absence of statutes some States allow the document to be proved without Chap. I. § 1. RULES RELATING TO EVIDENCE. 8317 of course supplement the writing where the writing only constitutes a part of the contract. For instance: AB in Oxford writes to X in London, ‘I will give £50 for your horse; if you accept send it by next train to Oxford. (Signed) AB.’ To prove the conclusion of the contract it *would be necessary to prove the despatch of the horse. And so if A puts the terms of an agreement into a written offer which X accepts by word of mouth; or if, where no writing is necessary, he puts a part of the terms into writing and arranges the rest by parol with X, oral evidence must be given in both these cases to show that the contract was concluded upon those terms by the accept- ance of X. So too where a contract consists of several documents which need oral evidence to show their connexion, such evidence may be given to connect them.1 This rule needs some qualification as regards contracts of which the Statute of Frauds requires a written memorandum. The documents must in such a case contain a reference, in one [*259] or both, to the other, in order to admit parol evidence to 4¢ explain the reference and so to connect them.? In contracts which are outside the statute evidence would seem to be admissible to connect documents without any such internal reference. ‘I see no reason,’ says Brett, J.,‘ why parol evidence should not be admitted to show what documents were intended by the parties to form an j alleged contract of insurance.’ There are circumstances, such as the loss or inaccessi- bility of the written contract, in which parol evidence of the testimony of attesting witnesses where the attestation is not necessary to the operative effect of the instrument. Sanborn v. Cole, 63 Vt. 590. But some cases adhere strictly to the common law rule. Story v. Lovett, 1 E. D. Smith (N. Y. C. P.), 158, H. & W. 500. 1 Colby v. Dearborn, 59 N. H. 826, H. & W. 501; Wilson v. Tucker, 10 R. I. 578. 2 Coe v. Tough, 116 N. Y. 2738; O'Donnell v. Leeman, 43 Me. 158, H. & W. 100. Supple- mentary oral evi- dence where contract written only in part, Harris y. Rickett, 4H. &N. 1. or where connexion of parts do not appear from docu- ments. Long v. Millar, b PDs 456. ante, p. 67. Edwards vy. Aberayron Mutual Insurance Society. Q. B.D. 587. (2) Proof of fact suspend- ing opera- tion of document. Evidence of con- dition sus- pending operation of con- tract. In the case of a deed: See p. 52. of asimple contract. Pym ¥ Campbell, 6E. & B. 370. . 318 INTERPRETATION OF CONTRACT. Part IV. the contents of a document is allowed to be given, but these are a part of the general law of evidence, and the rules which govern the admissibility of such evidence are to be found in treatises on the subject. § 2. Evidence as to fact of agreement. Thus far we have dealt with the mode of bringing a © document, purporting to be an agreement, or part of an agreement, before the court. But extrinsic evidence is admissible to show that the document is not in fact a valid agreement. It may be shown by such evidence that the contract was invalid for want of consideration, of capacity of one of the *parties, of genuineness of consent, of legality of object. Extrinsic evidence is used here, not to alter the purport of the agreement, but to show that there never was such an agreement as the law would enforce. It may also be shown by extrinsic evidence that a parol condition suspended the operation of the contract. ‘Thus a deed may be shown to have been delivered subject to the [*260] happening of an event or the doing of an act. Until the event happens or the act is done the deed remains an escrow, and the terms upon which it was delivered may be proved by oral or documentary evidence extrinsic to the sealed instrument. In like manner the parties to a written contract may agree that, until the happening of a condition which is not put in writing, the contract is to remain inoperative. Campbell agreed to purchase of the Messrs. Pym a part of the proceeds of an invention which they had made. They drew up and signed a memorandum of this agree- ment on the express verbal understanding that it should not bind them until the approval of one Abernethie had been expressed. Abernethie did not approve of the in- vention, and Campbell claimed that there was no contract. Chap. I. § 8. RULES RELATING TO EVIDENCE. 319 Pym contended that the agreement was binding and that the verbal condition was an attempt to vary by parol the terms of a written contract. But the court held that evidence of the condition was admissible, not to vary a written contract but to show that there had never been a contract at all. The law was thus stated by Erle, J.: — ‘The point made is, that this is a written agreement, absolute on the face of it, and that evidence was admitted to show it was con- ditional: and if that had been so it would have been wrong. But I am of opinion that the evidence showed that in fact there was never an agreement at all. The production of a paper purporting to be an agreement by a party, with his signature attached, affords a strong presumption that it is his written agreement; and if in fact he did sign the paper animo contrahendi, the terms contained in it are con- clusive, and cannot be varied by parol *evidence: but in the present case the defence begins one step earlier: the parties met and expressly stated to each other that, though for convenience they would then sign the memorandum of the terms, yet they were not to sign it as an agreement until Abernethie was consulted. I grant the risk that such a defence may be set up without ground; and I agree that a jury should therefore always look on such a de- “fence with suspicion ; but, if it be proved that in fact the paper was signed with the express intention that it should not be an agreement, the other party cannot fix it as an agreement upon those so signing. The distinction in point of law is, that evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is not an agreement at all is admissible.’ [*261] § 8. Evidence as to the terms of the contract. When we come to extrinsic evidence as affecting the terms of a contract, the admissibility of such evidence is narrowed to a small compass ; for ‘according to the gen- eral law of England the written record of a contract must not be varied, or added to by verbal evidence of what was the intention of the parties.’ 1 Reynolds v. Robinson, 110 N. Y. 654, H. & W. 502; Westman v. Krumweide, 30 Minn. 318; Blewitt v. Boorum, 142 N. Y. 357. Pym v. Campbell, 6E. & B.874, (8) Evi- dence as to terms. General rule, Blackburn, J., Burges v. Wickham, 3B. &S. 696. Excep- tions. (a) Sup- plement- ary terms. Jervis v. Berridge, 8 Ch. 851. Collateral terms. 320 INTERPRETATION OF CONTRACT. Part IV. We find exceptions to this rule — (a) in cases where terms are proved supplementary, or collateral to so much of the agreement as is in writing; (6) in cases where explanation of the terms of the contract is required ; (ce) in the introduction of usages into the contract ; (d) in the application of special equitable remedies in the case of mistake. (a) It may happen that the parties to a contract have not put all its terms into writing. Evidence of the sup- plementary terms is then admissible, not to vary but to complete the written contract. Jervis agreed to assign to Berridge a contract for the purchase of lands from M. The assignment was to be made upon certain terms, and a memorandum of the bargain was made in writing, from which at the request of Berridge some of the *terms were omitted. In fact the memorandum was only made in order to obtain a conveyance of lands from M. When this was done and Berridge had been put in possession he refused to fulfil the omitted terms which were in favour of Jervis. On action being brought he resisted proof of them, con- tending that the memorandum could not be added to by parol evidence. Lord Selborne however held that the memorandum was ‘a mere piece of machinery obtained by [*262] - the defendant as subsidiary to and for the purposes of the verbal and only real agreement under circumstances which would make the use of it, for any purpose inconsistent with that agreement, dishonest and fraudulent.’ ! Again, evidence may be given of a verbal agreement collateral to the contract proved, subjecting it to a term unexpressed in its contents. Such a term however can 1 Wood v. Moriarty, 15 R. 1. 518, H. & W. 480; Chapin v. Dobson, 78 N. Y.74; Wood Mowing §c. Co. v. Gaertner, 55 Mich. 453; Brad- shaw v. Combs, 102 Til. 428. Chap. 1.§8. RULES RELATING TO EVIDENCE. 321 only be enforced if it be not contrary to the tenor of the written agreement. Thus, where a farmer executed a lease upon the promise of the lessor that the game upon the land should be killed down, it was held that he was entitled to compensation for damage done to his crops by a breach of such a verbal promise, though no reference to it appeared in the terms of the lease.! Mellish, L.J., in giving judgment said : — ‘No doubt, as a rule of law, if parties enter into negotiations affecting the terms of a bargain, and afterwards reduce it into writing, verbal evidence will not be admitted to introduce additional terms into the agreement; but, nevertheless, what is called a collat- eral agreement, where the parties have entered into an agreement for a lease or for any other deed under seal, may be made in considera- tion of one of the parties executing that deed, unless, of course, the stipulation contradicts the terms of the deed itself. I quite agree that an agreement of that kind is to be rather closely watched, and that we should not admit it without seeing clearly that it is substan- tially proved.’ (6) Evidence in explanation of terms may be evidence of the identity of the parties to the contract, as where two persons have the same name, or where an agent contracts [#268] in his own *name but on behalf of a principal whose name or whose existence he does not disclose.? Or it may be a description of the subject-matter of the contract, as in a case in which A agreed to buy of X certain wool which was described as ‘your wool,’ and the right of X to bring evidence as to the quality and quantity of the wool was disputed. The court held that it was admissible.? Or such evidence may be an explanation of some word not describing the subject-matter of the contract but the 1 Thurston v. Arnold, 43 Towa, 43 H. & W. 515; Van Brunt v. Day, 81 N. Y. 251; Naumberg v. Young, 44 N. J. L. 831; Green v. Batson, 71 Wis. 54. 2 Andrews v. Dyer, 81 Me. 104; Byington v. Simpson, 1384 Mass. 169. 3 Bulkley v. Devine, 127 Ill. 406; Clark v. Coffin Co., 125 Ind. 277. VY Erskine v. Adeane, 8 Ch. at p. 766. (b) Ex- planation of terms; to identify parties, Wake y. Harrop, 6H. & N. 768. or subject- matter, Macdonald v. Longbot- tom, 1E, & E, 977, to show applica- tion of phrases. 8B. &S. 669. 822 INTERPRETATION OF CONTRACT. Part IV. nature of the responsibility which one of the parties assumes in respect of the conditions of the contract. Where a vessel is warranted ‘seaworthy,’ a house prom- ised to be kept in ‘ tenantable’ repair, a thing undertaken to be done in a ‘reasonable’ manner, evidence is admis- sible to show the application of these phrases to the subject-matter of the contract, so as to ascertain the intention of the parties. In Burges v. Wickham, a vessel called the Ganges, intended for river navigation upon the Indus, was sent upon the ocean voyage to India, having first been tem- porarily strengthened so as to be fit to meet the perils of such a voyage. Her owner insured her, and in every policy of marine insurance there is an implied warranty by the insured that the vessel is ‘seaworthy. The Ganges was not seaworthy in the sense in which that term would be ordinarily applied to an ocean-going vessel, but her condition was made known to the underwriters, and though the adventure was more dangerous than an ordinary voyage to India, there was a reasonable prob- ability that it would be brought to a safe ending. At any rate, the underwriters took the risk at a higher premium than usual, and in full knowledge of the facts. The Ganges was lost, and the owner sued the under- writers; they defended the action on the ground that the vessel was unseaworthy in the sense in which the word was applied to an ocean voyage, and they resisted the admission of evidence to show that, with reference to this particular vessel and voyage, the term was under- stood in a modified sense. The evidence was *held to be admissible on grounds which are stated with the utmost clearness by Blackburn, J.: — [#264] 1 Ganson vy. Madigan, 15 Wis. 144, H. & W. 504; Afanchester Paper Co. v. Moore, 104 N. Y. 680. If the parties have used the term in different senses, the contract is voidable for mistake. Hazard v. New England Marine Ins. Co., 1 Sumner (U.S. C. C.), 218. Chap. I.§ 3. RULES RELATING TO EVIDENCE. 323 ‘It is always permitted to give extrinsic evidence to apply a written contract, and show what was the subject-matter to which it refers. When the stipulations in the contract are expressed in terms which are to be understood, as logicians say, not simpliciter, sed secundum quid, the extent and the obligation cast upon the party may vary greatly according to what the parol evidence shows the subject- matter to be; but this does not contradict or vary the contract. For example, in a demise of a house with a covenant to keep it in tenantable repair, it is legitimate to inquire whether the house be an old one in St. Giles’s or a new palace in Grosvenor-square, for the purpose of ascertaining whether the tenant has complied with his covenant; for that which would be repair in a house of the one class is not so when applied to a house of the other (see Payne v. Haine). ‘Tn these cases you legitimately inquire what is the subject-matter of the contract, and then the terms of the stipulation are to be understood, not simpliciter, but secundum quid. Now, according to the view already expressed, seaworthiness is a term relative to the nature of the adventure, it is to be understood, not simpliciter, but secundum quid.’ Cases such as we have just described are cases of latent ambiguity: they may be distinguished from patent ambiguities, where words are omitted, or contradict one another; in such cases explanatory evidence is not admissible. Where a bill of exchange was expressed in words to be drawn for ‘two hundred pounds’ but in figures for ‘245,’ evidence was not admitted to show that the figures expressed the intention of the parties1 (ec) The usage of a trade or of a locality may be proved, and by such evidence a term may be annexed to a written contract or a special meaning may be attached to some of its provisions. Parol evidence of a usage which adds a term to a written contract is admissible on the principle that — ‘There is a presumption that in such transactions the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but to contract with reference to those known usages.’ 1 Ganson v. Madigan, supra. 16M. & W. 541, Burges v. Wickham, 3 B, & S. 696. Latent and patent am- biguity. Saunderson v. Piper, 5 Bing. N.C. 425, (c) Usage. Hutton v. Usage. supra, p.263. Wiggles- worth v. Dallison, 18m. L. C. 569. Norden ao Co. v. empsey, 10. P. D 658. Smith v. Wilson, 3B. & Ad. 728. Hills v. Evans, 31 L. J. Ch. 457. Per Erle, C. J., in Meyer v. Dresser, 16 C. B., N. 8. 660. 324 INTERPRETATION OF CONTRACT. Part IV. *By way of illustration of a commercial usage we may take the warranty of seaworthiness which is held to be included in a contract of marine insurance, [*265] though not specially mentioned. For a local usage we may take the right of a tenant quit- ting his farm at Candlemas or Christmas to reap corn sown in the preceding autumn, a right which the custom of the country annexed to his lease, though the lease was under seal and contained no such term.! Parol evidence of usage to explain phrases in contracts, whether commercial, agricultural, or otherwise subject to known customs, is admissible on the principle that — “Words perfectly unambiguous in their ordinary meaning are used by the contractors in a different sense from that. In such cases the evidence neither adds to, nor qualifies, nor contradicts the written contract; it only ascertains it by expounding the language.’ Thus in the case of a charter-party in which the days allowed for unloading the ship are to commence running ‘on arrival’ at the ship’s port of discharge; if by custom ‘arrival’ is understood to mean arriving at a particular spot in the port, evidence may be given to show what is commonly understood to be the port. And so where the lessee of a rabbit warren covenanted that he would leave 10,000 rabbits on the warren, parol evidence was admitted that, by local custom, 1000 meant 12002 Closely connected with the principle that usage may explain phrases is the admissibility of skilled evidence to explain terms of art or technical phrases when used in documents.’ But in order that a usage thus proved may enlarge or explain a contract it must satisfy two requirements. It 1 Cooper v. Kane, 19 Wend. (N. Y.) 386. 2 Soutier v. Kellerman, 18 Mo. 509, H. & W. 508. Cf. Sweeney v. Thomason, 9 Lea (Tenn.), 359; Walls v. Bailey, 49 N. Y. 464. 8 Welsh v. Huckestein, 152 Pa. St. 27. Chap. I.§ 3. RULES RELATING TO EVIDENCE. 325 must be consistent with general rules of law, and it must not be inconsistent with the terms of the contract. For no usage can prevail against a rule of common law or statute ;“ and *it is open to parties to exclude the usage either by express terms or by framing their contract so as to be repugnant to its operation.! (d) In the application of equitable remedies, the grant- ing or refusal of specific performance, the rectification of documents or their cancellation, extrinsic evidence is more freely admitted. [*266 Thus, though, as we have seen, a man is ordinarily bound by the terms of an offer unequivocally expressed, and accepted, evidence has been admitted to show that the offer was made by inadvertence and was not accepted in good faith. The case of Webster v. Cecil is here in point. A offered to X several plots of land for a round sum; immediately after he had despatched his offer he discov- ered that by a mistake in adding up the prices of the plots he had offered his land for a lower total sum than he intended. He informed X of the mistake without delay, but not before X had concluded the contract by accept- ance. In resisting specific performance he was permitted to prove the circumstances under which his offer had been made. Again, where a parol contract has been reduced to writ- ing, or where a contract for a lease or sale of lands has been performed by the execution of a lease or conveyance, evidence may be admitted to show that a term of the con- tract is not the real agreement of the parties And this @ Nevertheless the usage of a society to compel its members to carry out contracts avoided by statute may constitute a risk against which the person employed to make such contracts is indemnified by his employer, where both know of the usage. 1 Walls vy. Bailey, supra. ? But parol evidence cannot be heard to enlarge a conveyance, though it may to diminish it. Glass v. Hulbert, 102 Mass. 24. Cf. Gillespie vy. Moon, 2 Johns. Ch. (N. Y.) 585. Con- ditions under which usage operates. (d) Proved mistake a ground for refusing specific perform- ance. 30 Beav. 62. ante, p. 140. supra, pp. 209, 210. Rectifica- tion of docu- ments. Ear] Beau- at p. 282. Murray v. Parker, 19 Beav. 305. 8 Eq. 875. 4D.& J.250. See Pollock, 492-501. Correction of mistake which is not mutual. 30 Beav. 445, 28 Ch.D.255, ante, p. 141. 36 & 87 Vict. e. 66. § 84, 326 INTERPRETATION OF CONTRACT. Part IV. is done for two purposes and under two sets of circum- stances. Where a contract has been reduced into writing, or a deed executed, in pursuance of a previous agreement, and the writing or deed, owing to mutual mistake, fails to express the intention of the parties, the Chancery Division will rectify the written instrument in accordance with their true intent. This may be done even though the parties can no longer be restored to the position which they occupied at the time when *the contract was made. Should [9267] the original agreement be ambiguous in its terms, extrinsic, and, if necessary, parol evidence will be ad- mitted to ascertain the true intent of the parties. But there must have been a genuine agreement (Mac- kenzie v. Coulson): its terms must have been expressed under mutual mistake (Mowler v. Fowler): and the oral evidence, if the only evidence, must be uncontradicted. Where mistake is not mutual, extrinsic evidence is only admitted in certain cases which appear to be regarded as having something of the character of fraud, and is admitted for the purpose of offering to the party seeking to profit by the mistake an option of abiding by a cor- rected contract or having the contract annulled. Instances of such cases are Garrard v. Frankel, or Paget v. Marshall cited in the chapter on Mistake. They are cases in which the offeree knows that an offer is made to him in terms which convey more than the offeror means to convey, and endeavours by a prompt acceptance to take advantage of the mistake. | It would seem that, in such cases, these corrective powers are not used unless the parties can be placed in the same position as if the contract had not been made. The Judicature Act reserves to the Chancery Division of the High Court a jurisdiction in ‘all causes for the recti- fication or setting aside or cancellation of deeds or other written instruments.’ CHAPTER II. Rules relating to Construction. $1. General rules. We have so far considered the mode in which the terms of a contract are ascertained: we have now to deal with the rules which govern the construction of those terms. (1) Words are to be understood in their plain and literal meaning. This rule may lead to consequences which the parties did not contemplate, but it is followed, subject always to admissible evidence being adduced of a usage varying the usual meaning of the words. (2) ‘An agreement ought to receive that construction which will best effectuate the intention of the parties to be collected from the whole of the agreement ;’ ‘Greater regard is to be had to the clear intention of the parties than to any particular words which they may have used in the expression of their intent.’ Rules (1) and (2) might seem to be in conflict, but they come substantially to this;— men will be taken to have meant precisely what they have said, unless, from the whole tenor of the instrument, a definite meaning can be collected which gives a broader interpretation to spe- cific words than their literal meaning would bear. The courts will not make an agreement for the parties, but will ascertain what their agreement was, if not by its general purport, then by the literal meaning of its words.1 Sub- 1 Reed vy. Insurance Co.,95 U. S. 28, H. & W. 511; Roberts v. Bona- parte, 73 Md. 191; Detroit Stove Works v. Perry, 7 Fed. Cas. 555. 327 (1) General tules of construc- tion. (1) Words to be un- derstood in their plain meaning. Mallan vy. May, 18 M. & W. 517. Ford v. Beech, 11 Q. B. 866. (2) Subject to infer- ence of intention from the whole document. General purport of rules of construc- tion. Haigh v. Brooks, 10 A, & E. 809. Fowkes v. Manchester Assurance Association, 3B. &8. at p. 929, (2) Time and penalties. Stipula- tions as to time: at com- mon law: in equity: 328 INTERPRETATION OF CONTRACT. Part IV. sidiary to these main rules there are various others, all tending to the same end, the effecting of the intention of the parties so far as it can be discerned. *Obvious mistakes in writing and grammar will be corrected by the court. The meaning of general words may be narrowed and restrained by specific and particular descriptions of the subject-matter to which they are to apply. Words susceptible of two meanings receive that which will make the instrument valid. Where a document was expressed to be given to the plantiffs ‘in consideration of your being in advance’ to J. S., it was argued that this showed a past consideration; but the court held that the words might mean a prospective advance, and be equiva- lent to ‘in consideration of your becoming in advance,’ or ‘on condition of your being in advance.’ Words are construed most strongly against the party using them. ‘This rule is based on the principle that a man is responsible for ambiguities in his own expression, and has no right to induce another to contract with him on the supposition that his words mean one thing, while he hopes the court will adopt a construction by which they would mean another thing, more to his advantage. [#269] § 2. Rules of law and equity as to time and penalties. Where a time was fixed for the performance of his un- dertaking by one of the parties to a contract, the common law held this to be ‘of the essence of the contract.’ If the condition as to time were not fulfilled, the other party might treat the contract as broken and discharged. Equity did not so regard conditions as to time, but inquired whether the parties when they fixed a date meant anything more than to secure performance within a rea- sonable time. If this was found to be their intention the contract was not held to be broken if the party who was Chap. II. § 2, RULES RELATING TO CONSTRUCTION. 329 bound as to time did perform or was ready to perform his contract within a reasonable time.} The Judicature Act provides that stipulations as to time *‘shall receive in all courts the same con- struction and effect as they would have heretofore received in equity.’ But the effect of this enactment is confined to such contracts as fell under the cognizance of the chancery courts before the Judicature Acts. These had to do with the sale and purchase of lands. In mercantile contracts, stipulations as to time are still ‘of the essence of the con- tract. To treat them otherwise would be dangerous and unreasonable.” Where the terms of a contract specify a sum payable for non-performance, it is a question of construction whether this sum is to be treated as a penalty, or as liqui- dated damages. The difference in effect is this.— The amount recoverable in case of a penalty is not the sum named, but the damage actually incurred. The amount recoverable as liquidated damages is the sum named as such. In construing such terms a judge will not accept the phraseology of the parties: they may call the sum specified ‘liquidated damages,’ but if the judge finds that _it is in fact a penalty, he will treat it as such. A bond raises no difficulties of construction. It is in form a promise to pay a penal sum on non-performance of the condition of the bond. Beyond this we may state these general rules. (1) If a contract is for a matter of uncertain value, and a fixed sum is to be paid for the breach of one or [*270] 1 Thurston v. Arnold, 43 Towa, 43, H. & W. 515; Beck &c. Co. v. Colorado &c. Co., 10 U.S. App. 465; s. c. 52 Fed. Rep. 700; Coleman v. Applegarth, 68 Md. 21, H. & W. 57 2 Norrington v. Wright, 115 U.S. 188, H. & W. 584; Davison v. Von Lingen, 118 U. S. 40, H. & W. 265. 8 Streeper v. Williams, 48 Pa. St. 450, H. & W. 517. by statute. 86 & 87 Vict. Reuter v. Sala, 4C.P.D. (C, A.) 249. Penalties. Law v.Local Board of Redditch, [1892]1Q.B. 127. Astley v. Weldon, 2 B. & P. 846. Kemble v. Farren, 6 Bing. 147. ao f onaghan. 17.1. R (C. A.) 529. Protector Loan Co. v. Grice, 5Q. B.D. (C. A.) 592. Wallis v. Smith, 21 Ch. D. at p. 257. 6 Bing. 141. 330 INTERPRETATION OF CONTRACT. Part IV. more of its provisions, this sum may be recovered as liquidated damages. (2) If a contract is for a matter of certain value, and on breach of it a sum is to be paid in excess of that value, this is a penalty and not liquidated damages. (8) If a contract contains a number of terms some of which are of certain and some of uncertain value, and a fixed sum is to be paid for the breach of any of them, this is a penalty. An illustration of (1) is afforded by clauses in building contracts to pay a fixed sum weekly or per diem for delay ; or, in the case of a tenant of a public-house, to pay to the land-*lord a fixed sum as penalty on conviction for a breach of the licensing laws. An illustration of (2) would be a promise to pay a larger sum if a smaller were not paid by a fixed day. The rule is hardly reasonable, for a man might well suffer serious loss by the non-receipt of an expected payment. But the rule is fixed. On the other hand, it is no penalty to provide that if a debt is to be paid by instalments the entire balance of unpaid instalments is to fall due on default of any one payment, or that a deposit of purchase money should be forfeited on breach of any one of several stipulations, some important, some trifling. An illustration of (8) is offered by Kemble v. Farren. Farren agreed to act at Covent Garden Theatre for four consecutive seasons and to conform to all the regulations of the theatre; Kemble promised to pay him £8 6s. 8d. for every night during those seasons that the theatre should be open for performance, and to give him one benefit night in each season. For a breach of any term [#271] 1 Hall v. Crowley, 5 Allen (Mass.), 304. Cf. Patent Brick Co. v. Moore, 75 Calif. 205. 2 Waggoner v. Cox, 40 Oh. St. 539; Mathews v. Sharp, 99 Pa. St. 560. Cf. Chaude v. Shepard, 122 N. Y. 397. Chap. II. §2. RULES RELATING TO CONSTRUCTION. 3381 of this agreement by either party, the one in default prom- ised to pay the other £1000, and this sum was declared by the said parties to be ‘liquidated and ascertained dam- ages and not a penalty or penal sum or in the nature thereof.’ Farren broke the contract, the jury put the damages at £750, and the court refused to allow the entire sum of £1000 to be recovered.t If the penal clause had been limited to breaches uncer- tain in their nature and amount, it might, as was thought, have had the effect of ascertaining the damages, for the reason above cited.? But this was not so in the present case. ‘Tf, on the one hand, the plaintiff had neglected to make a single payment of £3 6s. 8d. per day, or on the other hand, the defendant had refused to conform to any usual regulation of the theatre, how- eyer minute or unimportant, it must have been contended that the clause in question, in either case, would have given the stipulated damages of £1000. But that avery large sum should become immedi- ately payable, in consequence of the non-payment of a very small sum, and that the farmer should not be considered as a penalty appears to be a contradiction in terms.’ 1 Lansing v. Dodd, 45 N. J. L. 525. 2 Cotheal v. Talmage, 9 N. Y. 551. Kemble v. Farren, 6 Bing. 148, Discharge of con- tract, how effected. Agree- ment. Perform- ance, Breach. Impossi- bility. Operation of law. PARTY, DISCHARGE OF CONTRACT. WE have now dealt with the elements which go to the formation of contract, with the operation of contract when formed, and with its interpretation when it comes into dispute. It remains to consider the modes in which the contractual tie may be loosed, and the parties wholly freed from their rights and liabilities under the contract: And in dealing with this part of the subject it will be proper to consider, not merely the mode in which the original contract may be discharged, but, in case of its being discharged by breach, the mode in which the right of action arising thereupon may be extinguished. The modes in which a contract may be discharged would seem to be these. (a) It may be discharged by the same process which created it, mutual agreement. (8) It may be performed; and all the duties under- taken by either party may be thereby fulfilled, and all the rights satisfied. (y) It may be broken; upon this a new obligation con- nects the parties, a right of action possessed by the one against the other. (6) It may become impossible by reason of certain circumstances which are held to exonerate the parties from their respective obligations. (e) It may be discharged by the operation of rules of law upon certain sets of circumstances to be hereafter mentioned. 332 CHAPTER I. Discharge of Contract by Agreement. CoNTRACT rests on the agreement of the parties: as it is their agreement which binds them, so by their agree- ment they may be loosed. And this mode of discharge may occur in one of three forms: waiver; substituted agreement; condition subse- quent. § 1. Waiver. A contract may be discharged by agreement between the parties that it shall no longer bind them. This is a waiver, or rescission of the contract. Such an agreement is formed of mutual promises, and the consideration for the promise of each party is the aban- donment by the other of his rights under the contract. The rule, as often stated, that ‘a simple contract may, before breach, be waived or discharged, without a deed and without consideration,’ must be understood to mean that, where the contract is executory, no further consideration is needed for an agreement to rescind than the discharge of each party by the other from his liabilities. There seems to be no authority for saying that a contract, executed upon one side, can be discharged before breach, without consideration ; that where A has done all that he was bound to do and the time for X to perform 1 An agreement for rescission of contract requires all the elements of an agreement for formation of contract. Wheeler v. New Bruns- wick &c. R., 115 U.S. 29, 34. 333 Forms of discharge by agree- ment. (1) Waiver. Mere waiver of contract- ual rights invalid. Bullen and Leake, Prec. of Pleadings, (ed. 3), Tit. Waiver ; Rescission. 7M.&W.55, ib. p. 99. Dobson vy. Espie, 2 H. &N.79. 334 DISCHARGE OF CONTRACT. Part V. his promise has not yet arrived, a bare waiver of his claim by A would be an effectual discharge to X. *In fact, English law knows nothing of the aban- donment of such a claim, except by release under seal, or for consideration. The plea of ‘ waiver’ under the old system of pleading was couched in the form of an agreement between the parties to waive a contract, an agreement consisting of mutual promises, the considera- tion for which is clearly the relinquishment of a right by each promisee. Where a discharge by waiver is alleged as a defence in an action for breach of contract, the cases tend to show that the defendant must set up, in form or substance, a mutual abandonment of claims, or else a new consideration for the waiver.t In King v. Gillett, the plaintiff sued for breach of a promise of marriage; the defendant pleaded that before breach he had been exonerated and discharged by the plaintiff from the performance of his promise. The court held that the plea was allowable in form; ‘yet we think,’ said Alderson, B., ‘that the defendant will not be able to succeed upon it, ... unless he proves a proposition to exonerate on the part of the plaintiff, acceded to by himself; and this in effect will be a rescinding of the [#274] contract.’ Dobson sued Espie for non-payment of deposit money due upon a sale of land. Espie pleaded that, before breach of his promise to pay, Dobson had given him leave and license not to pay. The court held that such a plea was inapplicable to a suit for the breach of a con- tract, and that the defendant should have pleaded an exoneration and discharge; but it is difficult to see why the pleader should not have adopted the latter form of plea, unless it were that (according to the reasoning 1 Collyer v. Moulton, 9 R. I. 90, H. & W. 522; Alden v. Thurber, 149 Mass. 271, H. & W. 630; Kelly v. Bliss, 54 Wis. 187. Chap. I. § 2. BY AGREEMENT. 335 of Alderson, B., in Aing v. Gillett) an exoneration means a promise to exonerate, which like any other promise needs consideration to support it. It is clear that in Dodson v. Espie the plaintiff was to obtain nothing for his alleged waiver: neither the relinquishment of a claim, nor any fresh consideration. Finally, we have the express authority of Parke, B., in Foster v. Dawber, for saying that an executed contract, i.e. *a contract in which one of the parties has per- formed all that is due from him, cannot be dis- charged by a parol waiver. [#275] ‘It is competent for both parties to an executory contract, by mutual agreement, without any satisfaction, to discharge the obligation of that contract. But an executed contract connot be discharged except by release under seal, or by performance of the obligation, as by payment, where the obligation is to be performed by payment. But a promissory note or a bill of exchange appears to stand on a different footing to simple contracts.’ This last sentence deals with an exception to the prin- ciple just laid down, for it was a rule of the law merchant imported into the common law that the holder of a bill of exchange or promissory note might waive and discharge his rights. Such waiver needed no consideration, nor did it need to be expressed in any written form.? The Bills of Exchange Act has given statutory force to this rule of common law, subject to the provision that the waiver must be in writing or the bill delivered up to the acceptor. § 2. Substituted contract. A contract may be discharged by such an alteration in its terms as substitutes a new contract for the old one: 1 No such exception is recognized in the United States unless the note or bill is surrendered. Bragg v. Danielson, 141 Mass. 195; Craw- ford v. Millspaugh, 13 Johns. (N. Y.) 87. The surrender of the note or bill operates by way of an executed gift. Slade v. Mutrie, 156 Mass. 19. See the matter of waiver discussed at large in Jaffray v. Davis, 124 N. Y. 164, H. & W. 187. 6 Exch. 851. Peculiar- ity of bills of ex- change and prom- issory notes. 45 & 46 Vict. ©. 61. § 62, (2) Substi- tuted con- tract: may be an implied discharge ; but the implica- tion must be clear: not a post- ponement of per- formance. Hickman v. Haynes, L. R, 10C,P. 606. Ogle v. Earl Vane, L.R.2 Q. B. 275, &8Q.B. 272.4 L.R.8 Q. B. 279, 836 DISCHARGE OF CONTRACT. Part V. and this new contract may include an express waiver of the old one, or may imply a waiver, by the introduction of new terms or new parties. But the intention to discharge the first contract must be made clear in the inconsistency of the new terms with the old. A mere postponement of performance, for the conven- ience of one of the parties, does not discharge the contract. This question has often arisen in contracts for the sale and delivery of goods, where the delivery is to extend over some time. The purchaser requests a postponement of delivery, then refuses to accept the goods at all, and then alleges that the contract was discharged by the alter- ation of the time of performance ; that a new contract was thereby created, and that the new contract is void for non- compliance with statutory requirements as to form. *But the courts have always recognized ‘the dis- tinction between a substitution of one agreement for another, anda voluntary forbearance to deliver at the request of another,’ and will not regard the latter as affecting the rights of the parties further than this, that if a man asks to have performance of his contract postponed, he does so at his own risk. For if the market value of the goods which he should have accepted at the ealier date has altered at the latter date, the rate of damages may be assessed, as against him, either at the time when the performance should have taken place, and when by non-performance [#276] @Willes, J., in giving judgment in the Exchequer Chamber in the case of Ogle v. Earl Vane, holds that by the forbearance on the part of the plaintiff, at the request of the defendant, to insist upon delivery of the goods at and after the time for the performance of the contract, an agreement arose which, though for want of consideration for the forbearance it could not furnish a cause of action, was nevertheless capable of affecting the measure of damages. He calls it an accord without a satisfaction. As to the nature of accord and satisfaction, see Part V. ch. iii. § 4 (a). 1 McCreery v. Day, 119 N. Y.1, H. & W. 524. The reader will remember that this is one of the grounds on which a promise to pay for the performance of an existing contract is sometimes enforced. Ante, p. 102, note 5. Chap. I. § 2. BY AGREEMENT. 337 the contract was broken, or when he ultimately exhausted the patience of the vendor, and definitely refused to per- form the contract.! A contract may be discharged by substantial alteration of its terms. A undertook certain building operations for X, which were to be completed by a certain date, or a sum to be paid as compensation for delay. While the building was in progress an agreement was made between the parties for additional work, by which it became impossi- ble that the whole of the operations should be concluded within the stipulated time. It was held that the subse- quent agreement was so far inconsistent with the first, as to amount to a waiver of the sum stipulated to be paid for delay.” A contract may be discharged by the introduction of new parties. If A has entered into a contract. with X and M, and these two agree among themselves that VW shall retire from the contract and cease to be liable upon it, A may (1) insist *upon the continued liability of MM, or (2) he may treat the contract as broken and discharged, or (8) by continuing to deal with X after he becomes aware of the retirement of M he may enter into a new contract to accept the sole liability of X; he cannot then hold to the original contract. ‘If one partner goes out of a firm and another comes in, the debts of the old firm may, by the consent of all the three parties —the creditor, the old firm, and the new firm —be transferred to the new firm,’ and this consent [*277] 1“ Where a fixed time has ceased to be an element in the contract, neither party can put the other in default without some notice or demand of performance.” Lawson v. Hogan, 93 N. Y. 39, 44. ? Lawson v. Hogan, supra. Z Substi- tuted terms. Thornhill y. Neats, 8C.B.,N.8. 831. Substi- tuted par- ties. ante, p. 285. Hart v. Alexander, 2M. & W. 484, Per Parke, B. (3) Provis- ions for discharge. (a) Dis- charge optional on non- fulfilment of a term. Head v. Tattersall, L. R. T Exch. 7. 338 DISCHARGE OF CONTRACT. Part V. may be implied by conduct, if not expressed in words or writing. § 3. Provisions for discharge. A contract may contain within itself the elements of its own discharge, in the form of provisions, express or implied, for its determination under certain circumstances. These circumstances may be the non-fulfilment of a con- dition precedent; the occurrence of a condition subse- quent; or the exercise of an option to determine the contract, reserved to one of the parties by its terms. The first of these three cases is somewhat near akin to discharge of contract by breach. But there is a difference between a non-fulfilment contemplated by the parties, the occurrence of which shall, it is agreed, make the contract determinable at the option of one, and a breach, or non- fulfilment not contemplated or provided for by the parties. Head bought a horse of Tattersall. The contract of sale contained, among others, these two terms: that the horse was warranted to have been hunted with the Bices- ter hounds, and that if it did not answer to its description the buyer should be at liberty to return it by the evening of a specified day. The horse did not answer to its de- scription and had never been hunted with the Bicester hounds. It was returned by the day named, but it had in the meantime been injured, though by no fault of Head. Tattersall disputed Head’s right to return it. But he was held entitled to do so. *¢The effect of the contract,’ said Cleasby, B., ‘was to vest the property in the buyer subject to a right of rescission in a pares 1 Collyer v. Moulton, 9 R. I. 90, H. & W. 522; Millerd v. Thorn, 56 N. Y¥. 402. The assent of the creditor to the substitution must be established. Ayer v. Kilner, 148 Mass. 468. The reader will again recall that it is on the ground of substituted contract that a promise to pay an additional sum for the performance of an existing con- tract is sometimes sustained. Ante, p. 102, note 5. Chap. L. § 3. BY AGREEMENT. 339 particular event, when it would revest in the seller. I think in such a case that the person who is eventually entitled to the property in the chattel ought to bear any loss arising from any depreciation in its value caused by an accident for which nobody is in fault. Here the defendant is the person in whom the property revested, and he must therefore bear the loss.” 1 In the second case the parties introduce a provision that the fulfilment of a condition or the occurrence of an event shall discharge them both from further liabilities under the contract. Such a provision is called a condition subsequent; it is well illustrated by a bond, which is a promise subject to, or defeasible upon, a condition expressed in the bond. It may be further illustrated by the ‘excepted risks’ of a charter-party. The shipowner agrees with the char- terer to make the voyage on the terms expressed in the contract, ‘the act of God, the Queen’s enemies, restraints of princes and rulers, fire, and all and every other dangers and accidents of the seas, rivers and navigation, of what- soever nature or kind, during the said voyage, always excepted. The occurrence of such an excepted risk Head y. Tattersall, LR 7 Exch. 14. (b) Occur- rence of a specified event. Condition of bond. Excepted risks of charter- party. releases the shipowner from a strict performance of his contract; and if it should take place while the contract is wholly executory, and amount to a frustration of the entire enterprise, the parties are altogether discharged. Geipel chartered a vessel belonging to Smith to go toa spout, load a cargo of coals, and proceed thence to Ham- burg: the contract contained the usual excepted risks. « For the form of acharter-party, see Appendix. 1 The vendee may refuse to receive the chattel at all under such a contract if he discovers that the term is not fulfilled. Ganson v. Madigan, 13 Wis. 67. If he receives it he may return it upon discover- ing the non-fulfilment; but if he has by his own fault injured the chattel he is not entitled to return it. Ray v. Thompson, 12 Cush. (Mass.) 281, H. & W. 534. Such a transaction may be a sale with a right to return, or a bailment with a right to purchase. Hunt vy. Wyman, 100 Mass. 198; Sturm v. Boker, 150 U. 8. 312. Geipel v. Smith, L. R.7Q.B. 404, Limita- tions of carrier’s liability. Nugent v. Smith, 10. P. D. 423. 1¢. P. D. 423. Meaning of phrase ‘Act of God.’ 1C.P.D.19. Per Brett, J., p. 484. 340 DISCHARGE OF CONTRACT. Part V. Before anything was done under it a war broke out be- tween France and Germany, and the port of Hamburg was blockaded by the French fleet. Thereupon Smith, regarding a blockade as a ‘ restraint of princes,’ refused even to load a cargo, and treated the contract as discharged. Geipel sued him for not having fulfilled such of the terms as would not have involved the risk; but the court held that the occurrence of an ex-*cepted risk had made performance impossible, and that the shipowner was not bound to fulfil his preliminary undertaking. Similar conditions enter into the contract made by a common carrier. Such a carrier is said to warrant or insure the safe delivery of goods entrusted to him; and by this we mean that he makes an almost unqualified promise to bring the goods safely to their destination or to indem- nify the owner for their loss or injury. But his promise is defeasible upon the occurrence of certain excepted risks, — ‘the act of God and of the Queen’s enemies,’ and injuries arising from defects inherent in the thing carried. This qualification is implied in every contract made with a carrier, and the occurrence of the risks exonerates him from liability for loss thereby incurred. The ‘ Act of God’ is a phrase which needs explanation. Its meaning is to some extent defined in Mugent v. Smith. The defendant, a common carrier by sea, received from the plaintiff a mare to be carried from London to Aber- deen. In the course of the voyage the ship met with rough weather, and the mare, being much frightened and struggling violently, suffered injuries of which she died. No negligence was proved against the defendant. It was held in the Common Pleas that to constitute the ‘Act of God’ a loss must arise from ‘such a direct and violent and sudden and irresistible act of nature’ as could [#279] 1 Graves v. The Calvin S. Edwards, 50 Fed. Rep. 477; Brauer v. Campania Navigacion La Flecha, 66 Fed. Rep. 776; The Edwin I. Morrison, 153 U. S. 199. Chap. I. § 3. BY AGREEMENT. 341 not be foreseen, or if foreseen prevented; and the carrier was held liable on the ground that the weather, though rough, was not so violent and unusual as to amount to an act of God thus defined, nor was the struggling of the mare of itself enough to show that she was injured from her own inherent vice. The Court of Appeals reversed this decision. The carrier is discharged if he show that the loss could by no per Metish, reasonable precaution under the circumstances have been Began prevented. This exception from the general liability of the carrier of *goods is a known and understood term in every contract which he makes. The discharge hence arising must be distinguished from discharge arising from a subsequent impossibility of performance not expressly provided against in the terms of the contract. With Part v., cb. this we shall deal hereafter.! [*280] Thirdly, a continuing contract may contain a’ provision (c) Dis- making it determinable at the option of one of the parties aoa upon certain terms. Such a provision exists in the with ordinary contract of domestic service; the servant can ek terminate the contract by a month’s notice, the master aot oP by a month’s notice or the payment of a month’s wages. oe And similar terms may be incorporated with other contracts between employer and employed, either expressly or by the jike.v- 40. B.,N.8. usage of a trade.? a 1 Railroad Co. v. Reeves, 10 Wall. (U. 8.) 176. Provisions are usually inserted in insurance policies that in case of the increase of the risk by any act of the insured, as by leaving the property unoc- cupied, the policy shall be discharged. Moore v. Phenix Ins. Co., 62 N. H. 240, H. & W. 531; Ayte v. Commonwealth Union Ins. Co., 149 Mass. 116. Insolvency of a buyer gives a seller an option to terminate a contract for sale on credit. Rappleye v. Rucine Seeder Co., 79 Iowa, 220. 2 No such provision attaches to contracts of service in this country. But the principle is applicable to various states of fact. Such are contracts that a party shall be ‘satisfied.’ Ray v. Thompson, supra; 4 Form of discharge by agree- ment. (1) In case of contract under seal. Effect of parol contract at variance “with deed. Nash v. Armstrong, N. 8. 259. Per Willes, J., p. 262. (2) In case of parol] 342 DISCHARGE OF CONTRACT. Part V. As regards the form needed for the expression of an agreement which purports to discharge an existing con- tract, there is a general rule. A contract must be dis- charged in the same form as that in which it is made. A contract under seal can only be discharged by agreement expressed under seal: a parol contract may be discharged by parol. Parties to a deed can only discharge their obligations by deed; but they may make a parol contract which creates obligations separate from the deed ; substantially at variance with the deed: giving a right of action to which the deed furnishes no answer. M and X entered into a contract under seal, by which J let to X certain rooms for a certain time at a rent to be ascertained in a certain way. M died, and A, his administrator, agreed with X by parol, that in consideration of £70 to be paid by X and to be taken as a reasonable rent, neither party should be called upon to perform his part under the deed. X failed to make the payment agreed upon, and A sued him upon the parol contract. It was urged on behalf of X that this was an attempt to vary a deed by a parol contract, the performance of which, being no discharge of the deed, would leave X liable to his previous obligation. But the *court held that the parol contract created a new and distinct obligation; that a performance of this contract would furnish an equitable answer to an action brought upon the deed; and that therefore A was entitled to sue upon it.t A parol or simple contract, whether it be in writing [*281] Adams §c. Works v. Schnader, 155 Pa. St. 394, H. & W. 549. Or that a third party shall be satisfied. Geiger v. Western Maryland R., 41 Ma. 4. 1 A parol contract which operates as a discharge of a specialty is effective if acted upon. Munroe v. Perkins, 9 Pick. (Mass.) 298; McCreery v. Day, 119 N. Y. 1, H. & W. 524; McKenzie v. Harrison, 120 N. Y. 260; Canal Co. v. Ray, 101 U. S. 522; Herzog v. Sawyer, 61 Md. 344. Chap. I. § 3. BY AGREEMENT. 343 or no, may be discharged by writing or by word of mouth. The writing is not the agreement but the evidence of it. The essentials of agreement lie in the expressed intention of the parties, not in the writing which is the instrument of that expression, and the contract may be discharged ‘eo ligamine quo ligatum est,’ by a valid expression of the intention to put an end to it. Where statute requires a contract to be in writing there is authority for saying that waiver may take place by word of mouth. But if the discharge be not a simple rescission, but such an implied discharge as arises from the making of a new agreement inconsistent with the old one, then there must be writing in accordance with the requirements of the statute.” A contract for the sale of goods, in writing under 29 Car. II. c. 8. § 17, provided for the delivery of the goods within a certain time. A verbal agreement to extend the time of delivery was held to be invalid, either to make a new contract or to rescind the old one. ‘No rescission could take place by an invalid contract.’ And the same rule is applied to contracts under § 4 of the Statute of Frauds. 1 Wulschner v. Ward, 115 Ind. 219. 2 Accord: Burns v. Real Estate Co., 52 Minn. 31; Hill v. Blake, 97 N. Y. 216; Swain v. Seamens, 9 Wall. (U. 8.) 254, 271-2. Contra: Cummings vy. Arnold, 3 Met. (Mass.) 486; Stearns v. Hall. 9 Cush. (Mass.) 31. But if the new contract is performed and the perform- ance accepted, the question of the Statute of Frauds cannot be raised. Long v. Hartwell, 34 N. J. L. 116. contracts. Goman v. Salisbury, 1 Vern. 240, Goss v. Lord Nugent, 5B. GA, 66, Noble v. Ward, L. R. 2 Exch. 185. Goss v. Lord Nugent, 5B. & A. 65. Kinds of ‘ perform- ance: where promise is given for executed considera- tion: where promise is given for promise. (1) Pay- ment as a mode of discharge, CHAPTER II. Discharge of Contract by Performance. We must distinguish performance which discharges one of two parties from his liabilities under a contract, and performance which discharges the obligation in its entirety. Where a promise is given upon an executed considera- tion, the performance of his promise by the promisor dis- charges the contract: all has been done on both sides that could be required to be done under the contract. Where one promise is given in consideration of another, performance by one party does no more than discharge him who has performed his part. Each must have done his part in order that performance may be a solutio obliga- tionis, and so if one has done his part and not the other, the contract is still in existence and may be discharged in any one of the ways we have mentioned. Whether the alleged performance is a discharge to the party concerned must be a question to be answered, first by ascertaining the construction of the contract, so as to see what the parties meant by performance, and then by ascertaining the facts, so as to see whether that which has been done corresponds to that which was promised. But two sorts of performance should be briefly noticed: these are payment and tender. PAYMENT. Payment may be a discharge of the original contract between the parties, or of an agreement substituted for such contract. 344 Chap. II. BY PERFORMANCE. 345 *If in a contract between A and X the liability of X consists in the payment of a sum of money in a certain way or at a certain time, such a payment discharges X by the performance of his agreement. Or if X being liable to perform various acts under his contract, wishes instead to pay a sum of money, or, hav- ing to pay a sum of money, wishes to pay it in a manner at variance with the terms of the contract, he must agree with A to accept the proposed payment in lieu of that to which he may have been entitled under the original con- tract. The new contract discharges the old one, and payment is a performance of X’s duties under the new contract, and, for him, a consequent discharge. Again, where one of two parties has made default in the performance of his part of the contract, so that a right of action accrues to the other, the obligation thus formed may be discharged by accord and satisfaction, an agreement the consideration for which is usually a money payment, made by the party against whom the right exists, and accepted in discharge of his right by the other. Payment, then, may be performance (1) of an original contract, or (2) of a substituted contract, or (8) of a con- tract in which payment is the consideration for the re- nunciation of a right of action. [*283] A negotiable instrument may be given in payment of asum due, whether as the performance of a contract or in satisfaction for the breach of it; and the giving of such an instrument in payment of a liquidated or unliquidated claim is the substitution of a new agreement for the old one, but it may affect the relations of the parties in either one of two different ways. The giver of the instrument may be discharged from his previous obligation either absolutely or conditionally. A may take the bill or note, and promise, in considera- tion of it, expressly or impliedly to discharge X altogether of original contract, of substi- tuted con- tract, of liability arising from breach of contract. Payment is per- form- ance. Negotiable instru- ment as payment ; may be an absolute, Sard v. Rhodes, 1M.& Wz. 158. or con- ditional discharge. Sayer y. Wagstatf, 5 Beav. 423, See judg- ment of Parke, B. Robinson vy. Read, 9B. &C, 455. Sayer v. Wagstaff, 5 Beav. 423. ~oured, must sue on it, and cannot revert to the 346 DISCHARGE OF CONTRACT. Part V. from his existing liabilities. A then relies upon his rights con-*ferred by the instrument, and if it be dishon- eat original cause of action. But the presumption, where a negotiable instrument is taken in lieu of a money pay- ment, is, that the parties intended it to be a conditional discharge. Their position then is this: A having certain rights against X, has agreed to take a negotiable instru- ment instead of immediate payment, or immediate enforce- ment of his right of action; so far X has satisfied A’s claim. But if the bill be dishonoured at maturity, the considera- tion for A’s promise has wholly failed and his original rights are restored to him. The agreement is ‘ defeasible upon condition subsequent;’ the payment by X which is the consideration for the promise by A is not absolute, but may turn out to be, in fact, no payment at all. Payment then consists in the performance either of an original or substituted contract by the delivery of money, or of negotiable instruments conferring the right to receive money; and in this last event the payee may have taken: the instrument in discharge of his right absolutely, or sub- ject to a condition (which will be presumed in the absence of expressions to the contrary) that, if payment be not made when the instrument falls due, the parties revert to their original rights, whether those rights are, so far as the payee is concerned, rights to the performance of a contract or rights to satisfaction for the breach of one.! 1Tt is a question of intent as to whether a negotiable instrument is taken as absolute payment. In general the American courts follow the English in holding that the presumption, in absence of proof to the contrary, is that the instrument is taken conditionally. Ford v. Mitchell, 15 Wis. 304, H. & W. 536; The Kimball, 3 Wall. (U. 8.) 37; Cheltenham &c. Co. v. Gates Iron Works, 124 Tll. 623. A few States hold that the presumption is that it is taken absolutely. Smith v. Bettger, 68 Ind. 254; Dodge v. Emerson, 181 Mass. 467. But in either case if there is any evidence of intent the question becomes one of fact for the jury; if there is no evidence the presumption must con- trol. Cheltenham §e. Co. v. Gates Iron Works, supra; Briggs v. Chap. IT. BY PERFORMANCE. 347 TENDER. Tender is attempted performance; and the word is applied to attempted performance of two kinds, dissimilar in their results. It is applied to a performance of a prom- ise to do something, and of a promise to pay something. In each case the performance is frustrated by the act of the party for whose benefit it is to take place. Where in a contract for the sale of goods the vendor satisfies all the requirements of the contract as to delivery, and the purchaser nevertheless refuses to accept the goods, [+285] *the vendor is discharged by such a tender of per- formance, and may either maintain or defend suc- cessfully an action for the breach of the contract. But where the performance due consists in the payment of a sum of money, a tender by the debtor, although it may form a good defence to an action by the creditor, does not constitute a discharge of the debt. The debtor is bound in the first instance ‘to find out the creditor and pay him the debt when due’: if the creditor will not take payment when tendered, the debtor must nevertheless continue always ready and willing to pay the debt. Then, when he is sued upon it, he can plead that he tendered it, but he must also pay the money into court. : If he proves his plea, the plaintiff gets nothing but the money which was originally tendered to him, the defend- ant gets judgment for his costs of defence, and so is placed in as good a position as he held at the time of the tender. Holmes, 118 Pa. St. 283; Hall v. Stevens, 116 N. Y. 201. The last case cited intimates that a bank draft stands upon a different footing from other instruments, but this is doubtful. Many cases hold, how- ever, that when a third person’s negotiable obligation is taken for a contemporaneous debt, the presumption is that there was a barter or exchange of property. Whitbeck v. Van Ness, 11 Johus. (N. Y.) 409; Noel v. Murray, 13 N. Y. 167. (2) Tender is of two kinds. Tender of goods. Startup vy. Macdonald, 6M. &G. 593. 56 & 57 Vict. c. 71. 37. Tender of payment. Walton vy. Maseall, 18M. & W. 458. » Dixon y. Clarke, 5 0. B. 877. 348 DISCHARGE OF CONTRACT. Part V. Tender, to be a valid performance to this extent, must observe exactly any special terms which the contract may contain as to time, place, and mode of payment. And the tender must be an offer of money produced and accessible to the creditor, not necessarily of the exact sum, but of such a sum as that the creditor can take exactly what is due without being called upon to give change.7! « The statutes which define legal tender are these: 3 & 4 Will. IV. c. 98. § 6, enacts that Bank of England notes are legal tender for any sum above £5, ex- cept by the bank itself. 29 & 30 Vict. c. 65, gives power to the Queen to proclaim that gold coinage of colonial mints should be legal tender throughout any part of her dominions specified in the proclamation. 33 & 34 Vict. c. 10. § 4, enacts that the coinage of the mint shall be legal tender as follows:—gold coins, to any amount; silver coins, up to forty shil- lings; bronze coins, up to one shilling. 1 For illustration of tenders held invalid see Knight v. Abbott, 30 Vt. 577; Waldron v. Murphy, 40 Mich. 668; Noyes v. Wyckoff, 114 N. Y. 204. SUBSTANTIAL PERFORMANCE. Performance of a contract need not be literal and exact. Slight deviations not wilful may be an offset but will not defeat a recovery. Nolan v. Whitney, 88 N. Y. 648, H. & W. 648; Natz v. Bedford, 77 Cal. 819; Hayward v. Leonard, 7 Pick. (Mass.) 180; Crouch v. Gutmann, 184 N. ¥. 45. But deviations which are more than slight or trivial, or which are the result of wil- fulness, will defeat a recovery as for substantial performance. (rilles- pie Tool Co. v. Wilson, 123 Pa. St. 19, H. & W. 544; Elliott v. Cald- well, 43 Minn. 357; Van Clief v. Van Vechten, 180 N. Y. 571. PERFORMANCE TO SATISFACTION OF OTHER PARTY. If A agrees to perform to the satisfaction of B, he cannot recover without fulfill- ing the terms of the contract. But these propositions are applicable : (1) In matters of personal taste B is the sole judge as to whether he is or ought to be satisfied. Brown v. Foster, 113 Mass. 136; Zaleski v. Clark, 44 Conn. 218; Adams §c. Works v. Schnader, 155 Pa. St. 394, H. & W. 549.. (2) In sales of goods where A can be put sub- stantially in statu quo B is the sole judge. Walter A. Wood Sc. Co. v- Smith, 50 Mich. 565; Exhaust Ventilator Co. v. Chicago §c. Ry., 66 Wis. 218. (3) In contracts for work and labor other than to satisfy a matter of personal taste, where the work and labor would be wholly lost to A, the courts tend to administer a kind of ‘common law equity’ and to hold that B must be satisfied when he ought to be satisfied. Duplex Safety Boiler Co. v. Garden, 101 N. Y. 387, H. & W. 546; Hawkins v. Graham, 149 Mass. 284. CHAPTER III. Discharge of Contract by Breach. Ir one of two parties to a contract breaks the obliga- tion which the contract imposes, a new obligation will in every case arise, a right of action conferred upon the party injured by the breach. Besides this, there are cir- cumstances under which the breach will discharge the injured party from such performance as may still be due from him. But, though every breach of the contractual obligation confers a right of action upon the injured party, it is not every breach that will discharge him from doing what he has undertaken to do under the contract. The contract may be broken wholly or in part; and if in part, the breach may or may not be sufficiently important to operate as a discharge ; or, if it be so, the injured party may choose not to regard it as a breach, but may continue to carry out the contract, reserving to himself the right to bring action for such damages as he may have sustained. It is often very difficult to ascertain whether or no a breach of one of the terms of a contract discharges the party who suffers by it. By discharge we must understand, not merely the right to bring an action upon the contract because the other party has not fulfilled its terms, but the right to consider oneself exonerated from any further performance under the contract, — the right to treat the legal relations aris- ing from the contract as having come to an end, and given place to a new obligation, a right of action. 349 Breach of contract. Its result. Breach always gives right of action, not always a dis- charge. ‘ Discharge indicated by old forms of pleading. (1)Results of breach. Exonera- tion from perform- ance. Right to sue in indebita- tus as- sumpsit. Nature of the indebi- tatus counts. 350 DISCHARGE OF CONTRACT. Part V. *The discharge of contract is indicated with some precision by the pleadings in use before the Judica- ture Acts. Many of the cases which illustrate this part of the subject turn upon questions of pleading, and we shall find that the understanding of the remedy, as often hap- pens, is a material assistance to the ascertainment of the right. At the risk of a digression I will turn for a mo- ment to this aspect of the question before us. [*287] § 1. Position of parties where a contract is discharged by breach. In a contract between A and X,a breach by X might be considered to be a discharge of the contract if A, in bringing action upon it, was not required to allege that he had performed or endeavoured to perform that which was still due from him under the contract; or if X could not successfully use such non-performance by A either as a cause of action or a ground of defence. And the test of such discharge by the default of X was the acquisition of a right by A to sue for the value of what he had done, using the form of pleading known as indebitatus assumpsit. By this was set up a new contract arising from the use of money, goods, or services offered by the plaintiff and accepted by the de- fendant. This needs a short explanation. Before the Judicature Acts came into operation, it was possible for a plaintiff who sued on a contract arising on consideration executed, that is a promise, acted or uttered, to pay for money, goods, or services offered and accepted, to state his case in certain short forms known as the indebitatus counts. These, which were an adaptation of the action of assumpsit to the subject-matter of the action of debt, merely stated a money claim existing for money due, goods supplied, or services rendered. Chap. IIT. § 1. BY BREACH. 351 In certain cases these counts were applicable to a claim *arising out of a special contract, that is a contract arising upon express promises made upon either side, but they were so applicable only where the contract was discharged by breach. If A had performed his promise in a contract made with X and nothing more remained for him to do, and if X made default in the performance due from him, either wholly or in a vital term of his promise, A might sue X not only upon the promise broken but upon a new and distinct contract arising upon the offer of that which he had done and its acceptance by X. The form of this last cause of action was indebitatus assumpsit, X being indebted must be taken to have promised. And this form was only applicable to a special contract when performed wholly or in part by one side and absolutely broken and so dis- charged on the other. [*288] Where A had done a part, though not all that he was bound to do under the contract, and X committed a breach which amounted to a discharge, if that which A had done could be represented in a claim for money payment, he was entitled to sue, not only on the special contract, but in indebitatus assumpsit, for a quantum meruit or the value of so much as he had done. ‘If a man agrees to deliver me one hundred quarters of corn, and after I have received ten quarters, I decline taking any more, he is at all events entitled to recover against me the value of the ten that I have received.’ But the right to sue in this form on a quantum merutt is frequently and emphatically stated to depend on the fact that the contract has been discharged. ‘It is said to be an invariably true proposition, that wherever one of the parties to a special contract not under seal has in an unqualified manner refused to perform his side of the contract, or has disabled himself from performing it by his own act, the other party has thereupon a right to elect to rescind it, and may, on doing When applicable to special contract. Beverley v. Lincoln Gas Light and Coke Co., 6A. & EL. 829. A quan- tum me- ruit. Best, C.J., in Mavor v. Pyne, 3 Bing. 288. When it may be sued upon. Hulle vy. Heightman, 2 East, 145. 2 8m. L. 0. 21. Rules of Supreme Court. Rights of party dis- charged. Behn v. Burness, 3B, & 8.751. Cort v. Am- bergate Rail- way Co. 17 Q. B. 127. Planché v. Colburn, 8 Bing, 14. 352 DISCHARGE OF CONTRACT. Part V. 80, immediately sue on a quantum meruit, for anything which he had done under it previously to the rescission.’ It is possible that A may have done nothing under the *contract which can be estimated at a money value, or that the default made by X is not such as can be stated in the form of a money claim. Then if the breach amount to a discharge, A is exonerated from such per- formance as may still be due from him, and is entitled to sue at once upon the special contract for such damages as he has sustained. The rules of pleading which have been issued under the Judicature Act do not alter the relations of the parties, though the forms of pleading are shortened and a simple indorsement on the writ of summons may be substituted for the old indebitatus counts. [*289] Thus where a contract between A and X is discharged by the default of X, A may — (a) Consider himself exonerated from any futher per- formance which may have been due on his part; and suc- cessfully defend an action brought for non-performance: 1 (8) Sue at once upon the contract for such damages as he has sustained by its breach, without being obliged to show that such performance has been done or tendered by him.1 : (vy) If he has done all or a portion of that which he promised, so as to have a claim to a money payment for such performance, he may treat such a claim as due upon a new contract arising upon the promise which is under- stood from the acceptance of an executed consideration.? 1 Both of these propositions are illustrated in Davison v. Von Lingen, 118 U. 8S. 40, H. & W. 265. The second proposition is exhaustively discussed in Lake Shore &c. Ry. v. Richards, 152 Ill. 59. 2 See Dermott v. Jones, 2 Wall. (U. 8S.) 1, H. & W. 641; Hale v. Trout, 35 Calif. 229, H. & W. 561; Derby v. Johnson, 21 Vt. 17, H. & W. 568. It should also be noted that A may elect to keep the contract alive Chap. IL. §2. BY BREACH. 353 § 2. Forms of discharge by breach. We are now in a position to ask, What are the circum- stances which confer the rights just mentioned? What is the nature of the breach which amounts to a discharge? A contract may be broken in any one of three ways: a party to a contract (1) may renounce his liabilities under it, (2) may by his own act make it impossible that he should fulfil them, (3) may totally or partially fail to perform what he has promised. Of these forms of breach the first two may take place *while the contract is still wholly executory, ice. before either party is entitled to demand a perform- ance by the other of his promise. The last can, of course, only take place at or during the time for the per- formance of the contract. We will therefore deal first with renunciation and im- possibility created by the act of one party before and in the course of performance, and then with simple failure in performance. [#290] (1) Discharge by renunciation before performance is due. The parties to a contract which is wholly executory have a right to something more than a performance of the contract when the time arrives. They have a right to the maintenance of the contractual relation up to that time, as well as to the performance of the contract when due. The renunciation of a contract by one of the parties before the time for performance has come, discharges the other, if he so choose, and entitles him at once to sue for a breach. for the benefit of both parties, thus giving V a period for repentance. Kadish v. Young, 108 I. 170; Davis v. Bronson, 2 N. Dak. 800. But he cannot thereby increase the damages. Clark v. Aursiglia, 1 Denio (N. Y.), 817; Dillon v. Anderson, 43 N. Y. 231. 1 This is the general rule in the United States. JWindmuller v. Pope, 107 N. Y. 674, H. & W. 555; Kurtz v. Frank, 76 Ind. 594, H. & W. 358; Remy v. Olds, 88 Calif. 537; Kadish v. Young, 80 Il. 170. Contra: Daniels v. Newton, 114 Mass. 580. 2a (2) Forms of breach. Modes in which those rights may arise. (i) Renun- ciation before per- formance is due 2E.&B, 678, p. 689. Frost v. Knight, L.R. 7 Exch, 114. is a dis- charge even if perform- ance be con- tingent. L. R.7 Exch. at p. 114, 354 DISCHARGE OF CONTRACT. Part V. Hochster v. Delatour is the leading case upon this sub- ject. A engaged X upon the 12th of April to enter into his service as courier and to accompany him upon a tour; the employment was to commence on the 1st of June, 1852. On the 11th of May A wrote to X to inform him that he should not require his services. X at once brought an ac- tion, although the time for performance had not arrived. The court held that he was entitled to do so. ‘ Where there is a contract to do an act on a future day, there is a relation constituted between the parties in the meantime by the contract, and they impliedly promise that in the meantime neither will do anything to the prejudice of the other inconsistent with that relation.’ It would seem needless to imply a promise in order to give the plaintiff a right of action. A contract is a con- tract from the time it is made, and not from the time that performance of it is due; if this is so, it is needless and clumsy to introduce’ into every contract an implied promise that, up to a certain period of its existence, it shall not be broken. *The sense of the rule is very clearly stated by Cockburn, C.J., in a case which goes somewhat fur- ther than Hochster v. Delatour. In that case the time was fixed for performance, and before it arrived the defendant renounced the contract. In Frost v. Knight performance was contingent upon an event which might not happen within the lifetime of the parties. A promised to marry X upon his father’s death, and during his father’s lifetime renounced the contract; X was held entitled to sue upon the grounds explained above. ‘The promisee,’ said Cockburn, C.J., ‘has an inchoate right to the performance of the bargain, which becomes complete when the time for performance has arrived. Inthe meantime he has a right to have the contract kept open as a subsisting and effective contract. Its unim- paired and unimpeached efficacy may be essential to his interests.’ [*291] Chap. ITT. § 2. BY BREACH. 355 There are two limitations to this rule.! The first is that the renunciation must deal with the entire performance to which the contract binds the promisor. In Johnstone v. Milling, a landlord covenanted to repair the premises at a certain period of the tenancy. Before this period arrived he repudiated the covenant, and the tenant at once claimed damages for breach of contract. The Court of Appeal doubted whether the rule in Hochster v. Delatour was applicable to cases where the renunciation did not go to the whole of the contract. ‘The contract,’ said Lord Esher, M.R., ‘was the whole lease. The covenant in question is a particular covenant in the lease, not going to the whole consideration. If there were an actual breach of such a covenant at the time fixed for performance, such breach would not, according to the authorities, entitle the tenant to throw up his lease. That being so, I do not hesitate to say, though it is not necessary in this case to decide the point, that an anticipatory breach would not entitle him to do so, and that it does not appear to me that he could elect to rescind part of the contract.’ The second is that if the promisee will not accept the renunciation, and continues to insist on the performance of the promise, the contract remains in existence for the benefit *and at the risk of both parties, and if any- thing occur to discharge it from other causes, the promisor may take advantage of such discharge. Thus in Avery v. Bowden, A agreed with X by charter- party that his ship should sail to Odessa, and there take ‘a cargo from X’s agent, which was to be loaded within a certain number of days. The vessel reached Odessa, and her master demanded a cargo, but X’s agent refused to supply one. Although the days within which A was [#292] 1(1) The renunciation must be unequivocal and absolute; (2) it must be so understood and acted upon by the other party; (3) it must terminate the entire contract. Dingley v. Oler, 117 U.S. 490, H. & W. 556; Roebling’s Sons Co. v. Lock Stitch Fence Co., 180 Ill. 660; Davis v. Bronson, 2 N. Dak. 300. But must go to the whole per- formance, 16 Q. B. D. 460. 16 Q. B. D. 468. and must be treated asa discharge. 5E, & B. 714. Avery v. Bowden, 5E.&B. 714. (ti) Impos- sibility created before per- formance. Lovelock v. Franklyn, 8 Q. B. 871. [1894] 1Q.B. 466, 356 DISCHARGE OF CONTRACT. Part V. entitled to load the cargo had not expired, his agent, the master of the ship, might have treated this refusal as a breach of contract and sailed away. A would then have had a right to sue upon the contract. But the master of the ship continued to demand a cargo, and before the running days were out — before therefore a breach by non- performance had occurred—a war broke out between England and Russia, and the performance of the contract became legally impossible. Afterwards A sued for breach of the charter-party, but it was held that as there had been no actual failure of performance before the war broke out (for the running days had not then expired), and as the agent had not accepted renunciation as a breach, X was entitled to the discharge of the contract which took place upon the declaration of war. (2) Impossibility created by one party before perform- ance is due. If A, before the time for performance arrives, make it impossible that he should perform his promise, the effect is the same as though he had renounced the contract.1 A promised to assign to X, within seven years from the date of promise, all his interest in a lease. Before the end of seven years A assigned his whole interest to another person. It was held that X need not wait until the end of seven years to bring his action. ‘The plaintiff has a right to say to the defendant, You have *placed yourself in a situation in which you cannot perform what you have promised; you promised to be ready during the period of seven years, and during that period I may at any time tender you the money and call for an assignment, and expect that you should keep yourself ready; but if I now were to tender you the money, you would not be ready; this is a breach of the contract.’ [#293] The recent case of Synge v. Synge affirms this rule. 1 Wolf v. Marsh, 54 Calif. 228, H. & W. 560; United States v. Peck, 102 U. S. 64. Chap. ITI. § 2. BY BREACH. 357 (8) Renunciation in the course of performance. If during the performance of a contract one of the parties by word or act openly and clearly refuses to con- tinue to perform his part, the other party is forthwith exonerated from any further performance of his promise, and is at once entitled to bring action.! In Cort v. The Ambergate Railway Company, Cort contracted with the defendant company to supply them with 3900 tons of railway chairs at a certain price. The chairs were to be delivered in certain quantities at speci- fied dates. After 1787 tons had been delivered, the company desired Cort to deliver no more, as they would not be wanted. He brought an action upon the contract, averring readiness and willingness to perform his part, and that he had been prevented from doing so by the company. He obtained a verdict, but the company moved for a new trial on the ground that Cort should have proved not merely readiness and willingness to deliver, but an actual delivery of the chairs. The Court of Queen’s Bench held that where a con- tract was renounced by one of the parties the other need only show that he was willing to have performed his part. ‘When there is an executory contract for the manufacturing and supply of goods from time to time, to be paid for after delivery, if the purchaser, having accepted and paid for a portion of the goods contracted for, gives notice to the vendor not to manufacture any more as he has no occasion for them and will not accept or pay for them, the vendor having been desirous and able to complete the 1 Hale v. Trout, 35 Calif. 229, H. & W. 561; Derby v. Johnson, 21 Vt. 17, H. & W. 568; United States v. Behan, 110 U.S. 338; Lake Shore §c. Ry. v. Richards, 152 Ill. 59. If A is notified by B that the latter renounces the contract, 1 cannot go on to completion if so doing would increase the damages. Clark y. Marsiglia, 1 Denio (N. Y.) 317, H. & W. 572; Davis v. Bronson, 2 N. Dak. 3800; Hosmer v. Wilson, 7 Mich. 294; Tufts v. Lawrence, 77 Tex. 526. (iii) Re- nunciation during per- formance. 17 Q. B. 127. Cort v. The Amber- gate Railwa; Co., 17Q. B. 148. (iv) Im- possibility created during per- formance. Planché v. Colburn, 8 Bing. 14. 8 Bing. 16. 358 DISCHARGE OF CONTRACT. Part V. contract, he may, without manufacturing and tendering the rest of the goods, maintain an action against the purchaser for breach of contract.’ *(4) Impossibility created by one party in the course #294 of performance. C ] The rule of law is similar in cases where one party has by his own act made the contract impossible of perform- ance.t Planché was engaged by the Messrs. Colburn to write for £100 a treatise on ‘Costume and Ancient Armour’ to be published in a serial called ‘The Juvenile Library.’ He prepared his work at some expense and actually com- pleted a portion of it, but before it was delivered the Messrs. Colburn had abandoned the ‘Juvenile Library’ on the ill-success of its first numbers. He sued them on the contract and also on a quantum meruit for the work and labour expended by him on his treatise. He thus set up two distinct contracts, the original executory contract for the breach of which he claimed damages, and a con- tract arising from the execution of work upon request, under which he claimed the value of so much as was done before the contract was put an end to by the plaintiff. It was argued that he could not recover upon the latter of these claims because, his part being unperformed, the original contract was not wholly at an end: but the court held that the abandonment of the publication in question did put an end to the contract and effect a discharge. ‘I agree,’ said Tindal, C.J., ‘that, when a special contract is in existence and open, the plaintiff cannot sue on a quantum meruit; part of the question here, therefore, was whether the contract did exist or not. It distinctly appeared that the work was finally abandoned; and the jury found that no new contract had been entered into. Under these circumstances, the plaintiff ought not to lose the fruit of his labour.’ 1 Woodberry v. Warner, 53 Ark. 488, H. & W. 574; Chicago v. Tilley, 103 U. 8. 146; Western Union Tel. Co. v. Semmes, 73 Md. 9. Chap. III. § 2. BY BREACH. 359 In a very recent case an Englishman was engaged by the captain of a war-ship owned by the Japanese Govern- ment to act as fireman on a voyage from Tyne to Yokohama. In the course of the voyage the Japanese Government declared war with China, and the Englishman was informed that *a performance of the contract would bring him under the penalties of the Foreign Enlistment Act. It was held that he was entitled to leave the ship and sue for the wages agreed upon, since the act of the Japanese Government had made his performance of the contract legally impossible. [#295] (5) Breach by failure of performance. When one of two parties to a contract declares that he will not perform his part, or so acts as to make it impossible for him to do so, he thereby releases the other from the contract and its obligations. One of two parties should not be required to tender performance when the other has by act or word indicated that he will not or cannot accept it, or will not or cannot do that in return for which the performance was promised. Nor will the courts hold him any longer bound. But one of the parties may claim that though he has broken his promise wholly or in part the contract is not thereby brought to an end nor the other party discharged from his liabilities. We have then to ascertain whether the promise of the party injured was given conditionally on the performance by the other of that in which he has made default. If it was, he is discharged from his promise: if it was not, he must perform his promise, and bring an action for the damage occasioned by the default of the other. O'Neil v. Armstrong, [1806] 2Q.B. (v) Fail- ure of per- formance. Breach may dis- charge, or only give right of action. Herein lies the distinction between conditional and inde- . pendent promises. A condition may affect the performance of a promise, as a condition subsequent, concurrent, or precedent. Condi- tions subse- quent, ante, p. 278. concur- rent, ' precedent, (a) sus- pensory, (b) vital. 360 DISCHARGE OF CONTRACT. Part V. If two parties agree that the promise of one shall cease to bind him on the happening of a given event the promise is defeasible or liable to be annulled by a condition subsequent. The excepted risks of a charter-party, the condition of a bond, are the best illustration of conditions of this character. If two parties agree that the performance of their respective promises shall be simultaneous, or at least that each shall be ready and willing to perform his promise at the same time, *then the performance of each promise is conditional on this concurrence of readi- ness and willingness to perform. In a sale of goods where no time is fixed for payment, the buyer must be ready to pay and the seller ready to deliver at one and the same [#296] time. Lastly, when two parties make mutual promises the per- formance of one or both may depend upon a condition precedent. And here we must distinguish the condition the non-fulfilment of which suspends the operation of a promise, and the condition the non-fulfilment of which discharges the promisor from liability. A may promise X for a certain consideration that he will do some act or make some payment on the happening of a certain event. Until the event happens A remains bound by his promise, though not liable to its performance while the condition is unfulfilled.* Or A may promise X that he will do or pay something in consideration that X promises to do or pay something, and the act or payment of X may be a condition precedent to the act or payment of A. Then, if X fails to do what he has promised, not only can A sue him for his breach of 2 Illustrations of such suspensory conditions are to be found in promises dependent on the act of a third party — building to be paid for upon archi- tect’s certificate: or in promises which await the lapse of a certain time—a debt with a fixed period of credit: or in promises which depend upon some act of the promisee — demand or notice. Chap. III. § 2. BY BREACH. 361 contract, but, since his promise was conditional on the performance by X of his undertaking, A is discharged from doing or paying that which he had promised. So we shall find that the discharge of contract by failure of performance involves questions of three sorts. (a) Two promises may each form the entire consideration for the other — payment and delivery of goods; payment and conveyance of land. Are they independent of one another, so that if A fails to convey, X must still pay the purchase-money and sue for damage arising from the breach? Or are they *conditional upon one another, so that if A fails to convey, X may refuse to pay, and also sue for damages? (8) Promises may be capable of more or less complete performance. Any failure of performance by X would give a right of action to A; but would every failure, or what extent of failure, entitle A to say that the condi- tions under which he made his promise are broken, that the consideration for it has wholly failed, and that he will not on his part perform that which he had undertaken to [#297] perform? (vy) The contract may be made up of several promises on each side. Which of them, if any, do the parties consider to be vital to the contract? If A breaks one of these promises is X entitled to say that the performance which he promised was conditional on the fulfilment of the broken promise of A? We have to ascertain by the construction of the contract whether this contract was a condition or a warranty. Absolute promises and concurrent conditions. An absolute promise means a promise made by A to X in consideration of a promise made by X to A, and in such a manner that the total failure in the performance of one promise does not discharge the other promisor. He must perform or tender performance of his promise and bring Discharge by failure of concur- rent con- dition ; by virtual failure of considera- tion; by breach of condi- tion pre- cedent. (a) Abso- lute prom- ises and concurrent conditions. es be appell, Style, 186. Style, 186. Tendency of modern decisions. 862 DISCHARGE OF CONTRACT. Part V. an action for such loss as he has sustained by the breach of the promise made to him.? We may take an illustration from a case of the year 1649 : — ‘Ware brought an action of debt for £500 against Chappell upon an indenture of covenants between them, viz. that Ware should raise 500 soldiers and bring them to such a port, and that Chappell should find shipping and victuals for them to transport them to Galicia; and for not providing the shipping and victuals at the time appointed was the action brought. The defendant pleaded that the plaintiff had not raised the soldiers at that time; and to this plea the plaintiff de- murs. Rolle, C.J., held that there was no condition precedent, but that they are distinct and mutual covenants, and that there may be several actions brought for them: and it is not necessary to give notice of the number of men raised, *for the number is known [+298] to be 500; and the time for the shipping to be ready is also known by the covenants ; and you have your remedy against him if he raise not the men, as he hath against you for not providing the shipping.’ By the words ‘several actions’ is meant that the breach of either covenant was a separate cause of action, each being an absolute promise, independent of the other. “Modern decisions incline against the construction of promises as independent of one another. Where a time is definitely fixed for the performance of one promise and no date assigned for the performance by the other —if A and X agree that A will buy X’s property and pay for it on a certain day and no day is fixed for the conveyance by X — then X may sue for the money in default of payment on the day named, and need not aver that he has conveyed or offered to convey the lands. But on the whole it is safe to say that, in the absence of clear indications to the 1 The promises may be mutually independent, or one may be a con- dition precedent to the performance of the other. Northrup v. Northrup, 6 Cow. (N. Y.) 296, H. & W. 576; Tracy v. Albany Ex- change Co., 7 N. ¥. 472, H. & W. 579; Hamilton v. Home Ins. Co., 187 U.S. 370, H. & W. 353 n.; McRanen v. Crisler, 53 Miss. 542, H. & W. 577; Hill v. Grigsby, 35 Calif. 656, H. & W. 580; Brusie v. Peck Bros. & Co., 14 U. S. App. 21, H. & W. 582; Loud v. Pomona Land and Water Co., 153 U. S. 564. Chap. III. § 2. BY BREACH. 363 contrary, promises, each of which forms the whole consid- eration for the other, will be held to be concurrent conditions. These are the antithesis of absolute promises. In the contract for the sale of goods, the rule of common law, now embodied in the Sale of Goods Act, was that, unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions.! Morton agreed to buy a certain quantity of corn from Lamb at a fixed price, the corn to be delivered in one month. It was not delivered and Morton sued for damages, alleging that he had been always ready and willing to receive the corn. But the court held that this was not enough to make a cause of action. He should have alleged that he was always ready and willing to pay for the corn; he might, for aught that appeared on the pleadings, have discharged the defendant by his non-readiness to pay. Thus Bayley, J., in Bloxam v. Sanders, says: — ‘Where goods are sold, and nothing is said as to the time of the delivery or the time of payment, and everything the seller has to [#299] *do with them is complete, the property vests in the buyer, so as to subject him to the risk of any.accident which may hap- pen to the goods, and the seller is liable to deliver them whenever they are demanded upon payment of the price; but the buyer has no right to have possession of the goods till he pays the price.’ Divisible promises and virtual failure of consideration. We now come to cases in which it is alleged by one party to a contract that he is discharged from the per- formance of his part by the fact that the other party has failed to do his, either wholly or to such an extent as to defeat the objects for which the contract was made. It is plain that a total failure by A to do that which was the entire consideration for the promise of X, and 1 Hapgood v. Shaw, 105 Mass. 276. Mattock v. Kinglake, 10 A.& E.50. Concur- rent con- ditions. 56 & 57 Vict. ¢. 71. s. 28. Morton vy. Lamb, TT. R, 125. 4B.&C, 941. at p. 948. (b) Divis- ible promises. Delivery and pay- ment by instal- ments. Simpson vy. Crippin, L. R.8 Q. B. 14. Failure to accept: L. R.9C.P. 208. failure to pay: 9 App. Ca 434, failure to deliver. 364 DISCHARGE OF CONTRACT. Part V. which should have been done before the performance of X’s promise fell due, will exonerate X. But it may be that A has done something, though not all that he prom- ised. Or the performance of a contract may extend over a considerable time during which something has to be done by both parties, as in the case of delivery of goods and payment of their price by instalments. In these cases we have to consider whether one party has so far made default that the consideration for which the other gave his promise has wholly failed. The best illustrations of divisible promises are to be found in contracts to receive and pay for goods by instalments. Where the instalments are numerous, extending over a considerable period of time, a default either of delivery or payment would not appear to dis- charge the contract, though it must necessarily give rise to an action for damages. Where 6000 to 8000 tons of coal were agreed to be delivered in twelve monthly instalments, the buyer to send waggons to receive them, a default by the buyer who sent waggons for only 158 tons in the first month, was held not to entitle the seller to rescind the contract. In Freeth v. Burr there was a failure to pay for one instalment of several deliveries of iron under an erroneous *impression on the part of the buyer that he was entitled to withhold payment as a set-off against damages for non-delivery of an earlier instalment. In the Mersey Steel and Iron Co. v. Naylor there was a similar failure to pay for an instalment under an impression that the appellant company having gone into liquidation there was no one to whom payment could safely be made at the time the instalment fell due. In neither case was the seller held entitled to repudiate the contract by reason of the default. On the other hand, where iron was to be delivered in four monthly instalments of about 150 tons each, a failure [#300] Chap. IIL § 2. BY BREACH. 365 to deliver more tnan 21 tons in the first month was held Haire, to discharge the buyer. DHL &N. 19. Again, where 2000 tons of iron were to be delivered in three monthly instalments, failure to accept any during Mates e the first month discharged the seller. = The question to be answered in all these cases is one of Questions fact; the answer must depend on the circumstances of etd each case. The question assumes one of two forms — does the failure of performance amount to a renunciation on his part who makes default? or does it go so far to the root of the contract as to entitle the other to say, ‘I have lost all that I cared to obtain under this contract; further performance cannot make good the past default’? The answer to the question may be provided by the Withers v. Reynolds, parties themselves. The party who makes the default 23-&4 @ This is substantially the mode in which the legislature has stated the problem in the Sale of Goods Act, § 31. See Chalmers, Sale of Goods Act, p. 64, 1The English and American cases are fully reviewed in Norring- ton v. Wright, 115 U. S. 188, H. & W. 584, and the conclusion is reached that such contracts are entire; that the subsidiary provisions as to periodical delivery or payment do not render the contract di- visible; and that the seller’s failure to ship or deliver the first instal- ment gives the buyer the right to rescind the whole contract. The case of Hoare v. Rennie is approved as applicable to such a state of facts, and Simpson v. Crippin is disapproved. To the same effect are King Philip Mills v. Slater, 12 R. I. 82, which speaks of Simpson v. Crippin as “a strained construction” and expressly disapproves it; Pope v. Porter, 102 N. Y. 866, which expressly adopts the reasoning and conclusion of Norrington v. Wright; Barrie v. Earle, 143 Mass. 1; Rugg v. Moore, 110 Pa. St. 236. To the contrary is Gerli v. Poide- bard Silk Mfg. Co. (N. J.) 81 Atl. Rep. 401, where the court holds such contracts severable, and rejects the doctrine that a breach as to the delivery of the first instalment stands on any different footing from a breach as to any subsequent instalment; and see Myer v. Wheeler, 65 Towa, 390. These cases of delivery by instalments are to be distinguished from cases where the contract is divisible because the consideration is apportioned to different items. (ill v. Johnstown Lumber Co., 151 Pa. St. 584; Wooten v. Walters, 110 N. C. 251. Bloomer v. Bernstein, L, R.9 C. P. 588. Cutter v. Powell, 6 T. R. 820. Incom- plete per- formance. Ritchie v. Atkinson, 10 East, 308. Jackson v. Union Marine Insurance Co., L. R. 10 C. P. 148. Sale of goods: failure of considera- tion, where goods are not specific. 366 DISCHARGE OF CONTRACT. Part V. may so act as to leave no doubt that he will not or cannot carry out the contract according to its terms.! Or again, the parties may expressly agree that though the promises on both sides are in their nature divisible, nothing shall be paid on one side until after entire per- formance has taken place on the other. In such case the courts are relieved of the task of interpretation. *But the difficulty may present itself in other forms. Ina charter-party containing a promise to load a complete cargo the contract is not discharged because the cargo loaded is not complete. The charterer must pay freight for so much as has been delivered. [*301] ‘The delivery of the cargo is in its nature divisible, and therefore I think it is not a condition precedent, but the plaintiff is entitled to recover freight in proportion to the extent of such delivery; leaving the defendant to his remedy in damages for the short delivery.’ ? Again, a term in a contract of charter-party that a ship should arrive at a certain place at a certain day, or should use all due diligence to arrive as soon as possible, is one which admits of greater or less failure in performance, and according to the circumstances such failure may or may not discharge the charterer. ‘Not arriving with due diligence or at a day named is the subject of a cross-action only. But not arriving in time for the voyage con- templated, but at such a time that it is frustrated, is not only a breach of contract but discharges the charterer.’ The contract for the sale of goods furnishes further illustrations, though the matter is somewhat complicated by the distinction between the bargain and sale of specific goods and the executory contract of sale. In a contract for the sale of goods which are not specific the buyer may protect himself by express conditions ¥ 1 Gibney v. Curtis, 61 Md. 192; Bollman v. Burt, Ib., 415. 2 Gill v. Johnstown Lumber Co., supra. Chap. IIL. § 2. BY BREACH. 367 precedent as to quality and fitness of the goods, and with these we are not here concerned. But he is also protected by implied conditions which secure him, if he has been unable to inspect the goods, from being required to accept an article different to that which he bargained for, or practically worthless and unmarketable.! The common law on this subject has now been super- seded by the Sale of Goods Act, §§ 13, 14. Where goods are sold by description there is an implied condition that they should correspond to the description;“? where they -are bought for *a particular purpose communicated by the buyer to the seller there is an implied condi- tion that they are reasonably fit for that purpose:? where the buyer has no opportunity of examining the goods there is an implied condition that they are of a mer- chantable quality.* These ‘implied conditions’? go to the root of perform- ance, and their non-fulfilment is a virtual failure of con- sideration. It A agrees to buy beef of X the contract is not performed by the supply of mutton, or of an article unfit for human food. Where specific goods are sold, that is to say, ‘goods identified and agreed upon at the time the contract of sale is made,’ the property passes to the buyer; he cannot thereafter reject the goods for non-conformity to the [*302] 2 Chalmers, Sale of Goods Act, pp. 27, 28. Where the sale is by sample and the contract contains a description of the article sold, the description and not the sample is the test of performance. If sample and description differ, the buyer may reject the goods, though they correspond with the sample if they do not correspond with the description. >The Act has happily superseded the use for this purpose of the term ‘implied warranty,’ a use long ago emphatically condemned by Lord Abin- ger, though it survived till 1894, to the confusion of all terminology relating to the contract of sale. 1 Pope v. Allis, 115 U. S. 363, H. & W. 595. 27d, 3 Kellogg Bridge Co. v. Hamilton, 110 U. 8. 108. 4 Murchie v. Cornell, 155 Mass. 60. Jones vy. Just, L. R. 3 Q. B. 205. 56 & 57 Vict. e. TL. Where goods are specific. Nichol v. odts, 10 Exch. 191. Chanter v. Hopkins, 4M.&W. 404, 368 DISCHARGE OF CONTRACT. Part V. description given at the time of sale. He is left to obtain such damages as he may have suffered by the seller’s default; and this, if the goods should prove wholly value- emt. s33” less, may represent the whole amount of the price paid.} The position of the buyer is the same if he has accepted goods which at the time of the sale were not specific, and which he might therefore have rejected if their worthless- ness had been apparent. Such would be the case of seed sold as ‘new growing seed,’ which turned out wholly Hua te unproductive when sown. The buyer in such a case was B.&0.259. held entitled to recover the whole price.” Where the property in the goods has not passed to the buyer he is discharyed by failure of any of the ‘implied conditions,’ that is, by virtual failure of consideration. He may reject the goods, and may further bring an action for such damage as he has sustained.® Where the property in the goods has passed to the mise *he is not discharged though the goods turn out to be worthless; he must keep the goods, but he may bring an action for money paid under the contact in so [*303] 1The American cases are not agreed upon this proposition. Ac- cord: Freyman v. Knecht, 78 Pa. St. 141, H. & W. 607, and cases there cited. Contra: Bryant v. Isburgh, 13 Gray (Mass.), 607, H. & W. 609, and cases there cited. , 2 Wolcott v. Mount, 36 N. J. L. 262, H. & W. 598. 5 Pope v. Allis, supra. Whether the buyer must reject the goods in order to take advantage of the breach of the warranty or condition, the American cases do not agree. It is held on the one hand that he has an election either to reject the goods and recover damages for breach of the contract to deliver, or to accept the goods and recover damages for the breach of the implied warranty. Pope v. Allis, supra; English v. Spokane Comm. Co., 57 Fed. Rep. 451; Wolcott v. Mount, supra. On the other hand, it is held that the implied condition or warranty will not survive the acceptance of the goods. Haase v. Nonnemacher, 21 Minn. 486; McClure v. Jefferson (Wis.), 54 N. W. Rep. 777. In New York an implied condition or warranty arising from sale by description will not survive acceptance. Coplay Iron Co. v. Pope, 108 N. Y. 232, H. & W. 597; though one arising from sale by sample will survive. Zabriskie v. Central Vt. R., 131 N. Y. 72 Chap. III. § 2. BY BREACH. 369 far as it is in excess of the value of the goods, and for any further damage occasioned by the breach of warranty.! Conditions and warranties, or vital and subsidiary promises. Under the previous heading I have shown that where promises admit of more or less complete performance, and default is made on one side, the courts must determine whether or no that default amounts to a renunciation of the contract by the party making it, or so frustrates the objects of the contract as to discharge the party injured from his labilities. But contracts are often made up of various statements and promises on both sides, differing in character and in importance; the parties may regard some of these as vital, others as subsidiary, or collateral to the main purpose of the contract. Where one of these is broken the court must discover, from the tenour of the contract or the expressed intention of the parties, whether the broken term was vital or not. If the parties regarded the term as essential, it is a condition: its failure discharges the contract. If they did not regard it as essential, it is a warranty: its failure can only give rise to an action for such damages as have been sustained by the failure of that particular term. A condition precedent, in this sense, may be defined as a statement or promise, the untruth or failure of which discharges the contract. A warranty is a more or less unqualified promise of indemnity against a failure in the performance of a term in the contract.¢ * This view of the distinction between condition and warranty is substan- tially adopted in the Sale of Goods Act, 1893, so far as that particular species of contract is concerned. See §§ 10-15, and Chalmers, Sale of Goods Act, Appendix ii. 1 Ante, p. 368, note 1; Underwood v. Wolfe, 181 Ill. 425; Wiley v. Athol, 150 Mass. 426. 2B Street v. (c) Con- ditions and warran- ties. Condition precedent. Warranty. Vital statement. 8B. &8.751. 2M. &G&. 257. Vital condition. Glaholm y. Hays, 2M. &G, 268. Warranty. 1Q. B.D. 183. Condition and warranty. 370 DISCHARGE OF CONTRACT. Part V. *Warranty and condition alike are parts, and only parts, of a contract consisting in various terms. Bearing in mind that a condition may assume the form either of a statement or of a promise, we find a good illus- tration of such a vital term in Behn v. Burness, where a ship was stated in the contract of charter-party to be ‘now in the port of Amsterdam,’ and the fact that the ship was not in that port at the date of the contract discharged the charterer.1 A promise vital to the contract is illustrated by the case of Glaholm v. Hays. A vessel was chartered to go from England to Trieste and there load a cargo, and the charter-party contained this clause: ‘the vessel to sail from England on or before the 4th day of February next.’ The vessel did not sail for some days after the 4th of February, and on its arrival at Trieste the charterer refused to load a cargo and repudiated the contract. The judg- ment of the court was thus expressed : — [#304] ‘Whether a particular clause in a charter-party shall be held to be a condition upon the non-performance of which by the one party the other is at liberty to abandon the contract and consider it at an end, or whether it amounts to an agreement only, the breach whereof is to be recompensed by an action for damages, must depend upon the inten- tion of the parties, to be collected in each particular case from the terms of the agreement itself, and from the subject-matter to which it relates. . . . Upon the whole, we think the intention of the parties to this contract sufficiently appears to have been, to insure the ship’s sailing at latest by the 4th of February, and that the only mode of ef- fecting this is by holding the clause in question to have been a condi- tion precedent.’ 2 The nature of a warranty as compared with a condition precedent is illustrated by the case of Bettini v. Gye. Bettini entered into a contract with Gye, director of the Italian Opera in London, for the exclusive use of his services as a singer in operas and concerts for a consider- 1 Davison v. Von Lingan, 113 U. 8. 40, H. & W. 265. 2 Lowber v. Bangs, 2 Wall. (U. 8.) 728, where a promise that a ves- sel shall proceed “with all possible despatch ” was held vital. Chap. IIL. § 2. BY BREACH. 371 able time and on a number of terms. Among these terms was an undertaking that he would be in London six days at least before the commencement of his engagement, for rehearsals. He *only arrived two days before his engagement commenced, and Gye thereupon threw up the contract. Blackburn, J., in delivering the judgment of the court described the process by which the true meaning of such terms in contracts is ascertained. First he asks, does the contract give any indication of the intention of the parties ? [*305] ‘Parties may think some matter, apparently of very little impor- _ tance, essential; and if they sufficiently express an intention to make the literal fulfilment of such a thing a condition precedent, it will be igs % one: or they may think that the performance of some matter ap- 1.9.8. D. parently of essential importance and prima facie a condition prece- — ~ dent is not really vital, and may be compensated for in damages, and if they sufficiently expressed such an intention, it will not be a con- dition precedent.’ He finds in the contract no such expression of the intention of the parties; this being so, the interpretation of the disputed term remained for the court. It was held that the term as to rehearsals was not vital to the contract, and was not a condition precedent: its breach did not operate as a discharge and could be compensated by damages. I have called a warranty ‘a more or less unqualified Warranty. promise.’ The phrase can be illustrated by the contract between a railway company and its passengers. It is sometimes said that a railway company as a common car- rier warrants the safety of a passenger’s luggage, but does not warrant his punctual arrival at his destination in ac- cordance with its time tables. In the true use of the term warranty, as distinct from condition, the company warrants the one just as much as it warrants the other. In each 1See Mill-Dam Foundery v. Hovey, 21 Pick. 417, 486. For distine- tion between condition and warranty, see ante, p. 188, notes. Richards v. L. B. & 8. C. Railway Co., TC. B. 839. Le Blanche v. L. & N. W. Rail- way Co., 1 o P.D. 286. piece v. (2 OB & A. 456. Jones v. Just, L. R. 3 Q. B. 197. 56 & BT Vict. c. TL. § 12. Collen y. Wright, TE. & B.301. 8E.& B.647, Clifford _v. Watts, L. R. 50. P. 577. 3tZ DISCHARGE OF CONTRACT. Part V. case it makes a promise subsidiary to the entire contract, but in the case of the luggage its promise is qualified only by the excepted risks incident to the contract of a common carrier; in the case of the time table its promise amounts to no more than an undertaking to use reasonable dili- gence to ensure punctuality. The answer to the question whether a promise is or is not a warranty does not depend on the greater or less degree *of diligence which is exacted or undertaken in the performance of it, but on the mode in which the breach of it affects the liabilities of the other party. It is right to observe that the word warranty is used in a great variety of senses,* but I would submit that its [#306] 2 For the purposes of the contract for the sale of goods the sense in which I have used the word warranty is adopted in the Sale of Goods Act, § 62, but it may be worth setting out some of the uses of the term to be found in the reports : — (1) It is used as equivalent to a condition precedent in the sense of a descriptive statement vital to the contract. Behn v. Burness, 3 B. & 8. 751. (2) It is used as equivalent to a condition precedent in the sense of a promise vital to the contract. Behn v. Burness. (8) It is used as meaning a condition the breach of which has been acqui- esced in, and which therefore forms a cause of action but does not create a discharge. Behn v. Burness. (4) In relation to the sale of goods it is used as an independent subsidiary promise, ‘collateral to the main object of the contract the breach of which gives rise to a claim for damages, but not to a right to reject the goods.’ Chanter v. Hopkins, 4 M. & W. 404. (5) In relation to the sale of goods, warranty is used for an express prom- ise that an article shall answer a particular standard of quality; and this promise is a condition until the sale is executed, a warranty after it is executed. , : (6) Implied warranty is a term used very often in such a sense as to amount to a repetition by implication of the express undertaking of one of the con- tracting parties. Thus there was said to be an implied warranty in an execu- tory contract of sale that goods shall answer to their specific description and be of a merchantable quality. This is now an implied condition. Sale of Goods Act, §§ 13, 14. Implied warranty of title has been a vexed question, and there are con- flicting cases. (Hicholz v. Bannister, 17 C. B., N. 8.708; Baguely v. Hawley, L. R. 2 C. P. 625.) In the contract of sale of goods, the undertaking of title is now an ‘implied condition.’ Implied warranty of authority is the undertaking which a professed agent is supposed to give to the party with whom he contracts, that he has the authority which he professes to have. Implied warranty of possibility is a supposed undertaking that a promise is not impossible of performance. Chap. III. § 2. BY BREACH. 373 primary meaning is that which I have assigned to it. ‘A warranty is an expressly implied statement of something which the party undertakes shall be a term in the contract and though part of the contract collateral to the express object of it.’ One cause of the confusion which overhangs the use of the *term warranty arises from the rule that a con- dition may change its character in the course of the performance of a contract; and that a breach which would have effected a discharge if treated as such at once by the promisee, ceases to be such if he goes on with the contract and takes a benefit under it. It is then called a warranty.“ This aspect of a condition precedent is pointed out by [#307 Williams, J., in Behn v. Burness, where he speaks of the 38 right of the promisee, in the case of a broken condition, to repudiate the contract, ‘provided it has not already been partially executed in his favour;’ and adds that if after breach the promisee continues to accept performance, the condition loses its effect as such, and becomes a warranty in the sense that it can only be used as a means of recovering damages. The case of Pust v. Dowie illustrates this rule. A ves- sel was chartered for a voyage to Sydney; the charterer promised to pay £1550 in full for this use of the vessel on condition of her taking a cargo of not less than 1000 tons weight and measurement. He had the use of the vessel as agreed upon; but she was not capable of holding so large a cargo as had been made a condition of the contract. He refused to pay the sum agreed upon, plead- ing the breach of this condition. The term in the con- tract as to weight and bulk of cargo was held to have amounted, in its inception, to a condition. Blackburn, J., said: — @ See 56 & 57 Vict. c. 71. §§ 11, 53, and Chalmers, Sale of Goods Act, pp. 23, _ 24, 99, 100. Lord Abin- ger, O.B., in Chanter y, Hopkins, 4M. & W. 404, A breach of condi- tion turns it intoa warranty. Graves v. Legg, 9 Exch, 717. 32L.J.Q. B. 179, ib, 181. (3) Reme- dies for breach. 3874 DISCHARGE OF CONTRACT. . Part V. ‘If when the matter was still executory, the charterer had refused to put any goods on board, on the ground that the vessel was not of the capacity for which he had stipulated, I will not say that he might not have been justified in repudiating the contract altogether; and in that case the condition would have been a condition precedent in the full sense.’ But he adds: — ‘Ts not this a case in which a substantial part of the consideration has been received? And to say that the failure of a single [*308] *ton (which would be enough to support the plea) is to pre- vent the defendant from being compelled to pay anything at all, would be deciding contrary to the exception put in the case of Behn v. Burness.’} § 8. Remedies for breach of contract. Having endeavoured to ascertain the rules which govern the discharge of contract by breach, it remains to consider the remedies which are open to the person injured by the breach. If the contract be discharged by the breach, the person injured acquires or may acquire, as we have seen, three distinct rights: (1) a right to be exonerated from further performance; (2) a right, if he has done anything under the contract, to sue upon a quantum meruit, a cause of action distinct from that arising out of the original con- tract, and based upon a new contract originating in the ? Where the plaintiff has in good faith attempted to perform the conditions of his contract he is generally permitted to recover for benefits conferred less the damages suffered from non-performance of the whole. Gove v. Island City Co., 19 Ore. 363; Dermott v. Jones, 2 Wall. (U.S.) 1, H. & W. 641. Contra: Catlin vy. Tobias, 26 N. Y. 217. See as to substantial performance, ante, p- 348, note. Some jurisdictions allow a recovery where the non-performance is wilful. Britton v. Turner, 6 N. H. 481; Duncan v. Baker, 21 Kans. 99; Parcell v. MeComber, 11 Neb. 209; Fuller v. Rice, 52 Mich. 485. But this is contrary to the weight of authority. Stark vy. Parker, 2 Pick. (Mass.) 267; Peterson v. Mayer, 46 Minn. 468; Lawrence v. Miller, 86 N. Y. 181; Thrift v. Payne, 71 Il. 408. Chap. III. § 3. BY BREACH. 375 conduct of the parties; (8) a right of action upon the contract, or term of the contract, broken. But we have done with breach of contract as effecting a discharge. We may now consider generally what are the remedies open to a person who is injured by the breach of a contract made with him, whether or no that breach discharges him from further performance. The remedies are of two kinds: he may seek to obtain damages for the loss he has sustained; or he may seek to obtain a decree for specific performance, or an injunction, to enforce the promised acts or forbearances of the other party. But there is this difference between the two remedies: every breach of contract entitles the injured party to dam- ages, though they be but nominal; but it is only in the case of certain contracts and under certain circumstances that specific performance or an injunction can be obtained. The topic is one which barely comes within the scope of this work: but I will endeavour to state briefly some elementary rules which govern the two remedies in question. [#309] * Damages. When a contract is broken and action is brought upon it, —the damages being unliquidated, that is to say un- ascertained in the terms of the contract, — how are we to arrive at the amount which the plaintiff, if successful, is entitled to recover ? (1) ‘The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.’ : Where no loss accrues from the breach of contract, the plaintiff is nevertheless entitled to a verdict, but for nomi- nal damages only, and ‘nominal damages, in fact, mean a sum of money that may be spoken of, but that has no exist- Damages Specific perform- ance. (i) Dam- ages. Parke, B., in Robinson vy. Harman, 1 Exch. 855. Damages should represent loss sus- tained; 376 DISCHARGE OF CONTRACT. Part V. Maule J. ence in point of quantity.’ And so in an action for the y-Greathead, non-payment of a debt, where there is no promise to pay interest upon the debt, nothing more than the sum due can be recovered; for the possible loss arising to the creditor from being kept out of his money is not allowed to enter into the consideration of the jury in assessing damages, unless it was expressly stated at the time of the loan to be within the contemplation of the parties. But by 3 & 4 Will. IV. c. 42. 8§ 28, 29 a jury may allow interest at the current rate by way of damages in all cases where a debt or sum certain was payable by virtue of a written instrument, or if not so payable was demanded in writing with notice that interest would be claimed from the date of the demand. sofarasit (2) The rule laid down by Parke, B., in Robinson v. viitem. 4rman roust be taken subject to considerable limitations plation in practice. tt i “ te The breach of a contract may result in losses which neither party contemplated, or could contemplate at the time that the contract was entered into. In such a case Hadley y. the damages to which the plaintiff is entitled are no more j'Exch. 351, than might have been supposed by the parties to be the natural *result of a breach of the contract. In de- ee . . [*310 termining the measure of damages — as in determin- : Grebert Nueuwe’ ing the meaning of a contract— where the parties have 3.” left the matter doubtful we ask what would have been in the contemplation of a reasonable man when the contract was made. Excep- A special loss which would not naturally and obviously aa flow from the breach, must, if it is to be recovered, be matter of matter of express terms in the making of the contract. ne In Horne v. Midland Railway Company, the: plaintiff Blackbun, being under contract to deliver shoes in London at an J., in Home v. unusually high price by a particular day, delivered them to Railway Co, the defendants to be carried, with notice of the contract Chap. IIL § 3. BY BREACH. 377 only as to the date of delivery. The shoes were de- layed in carriage, and were consequently rejected by the intending purchasers. The plaintiff sought to recover, besides the ordinary loss for delay, the difference between the price at which the shoes were actually sold and that at which they would have been sold if they had been punct- ually carried. It was held that this damage was not recoverable, unless it could be proved that the company undertook to be liable for the exceptional loss which the plaintiff might suffer from an unpunctual delivery. (8) Damages for breach of contract are by way of com- pensation and not of punishment. Hence a plaintiff can never recover more than such pecuniary loss as he has sustained, subject to the above rules. To this rule the breach of promise of marriage is an exception ; in such cases the feelings of the person injured are taken into account, in addition to such pecuniary loss as can be shown to have arisen. (4) The parties to a contract not unfrequently assess the damages at which they rate a breach of the contract by one or both of them, and introduce their assessment into the terms of the contract. Under these circumstances arises the distinction between penalty and liquidated damages, [#311] which *we have already dealt with in considering the construction of contracts. PEBY Difficulty in assessing damages does not disentitle ‘a plaintiff from having an attempt made to assess them. 1 Wolcott v. Mount, 36 N. J. L. 262, H. & W. 598; Rochester Lan- tern Co. v. Stiles &c. Co., 185 N. Y. 209, H. & W. 447 ; Allison v. Chand- ler, 11 Mich. 542; Fox v. Boston §c. R., 148 Mass. 220. 2 Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205; Beeman vy. Banta, 118 N. Y. 588; Swain v. Schieffelin, 184 N. Y. 471; United States v. Behan, 110 U.S. 338; Howard v. Manufacturing Co., 1389 U. S. 199. Damages for breach of contract not vin- dictive. Finlay v. Chirney. 20 Q. B. D. at p. 498, Assess- ment by parties. See p. 270. In Robinson y. Harman, 1 Ex. 855. Difficulty of assess- ment must be met by jury. Simpson v. L. & N. W. Railway Co., 1Q. B. D. 274. Roper v. Johnson, L. RB. 8 C, P. 167. (i) Spe- cific per- formance and injunc- tion. (a) Spe- cific per- formance. 378 DISCHARGE OF CONTRACT. Part V. A manufacturer was in the habit of sending specimens of his goods for exhibition to agricultural shows, and he made a profit by the practice. He entrusted some such goods to a railway company, who promised the plaintiff, under circumstances which should have brought his object to their notice, to deliver the goods at a certain town on a fixed day. The goods were not delivered at the time fixed, and consequently were late for a show at which they would have been exhibited. It was held that though the ascertainment of damages was difficult and speculative, the difficulty was no reason for not giving any damages at all. — And further, the plaintiff is entitled to recover for prospective loss arising from a refusal by the defendant to perform a contract by which the plaintiff would have profited. Thus where a contract was made for the supply of coal by the defendants to the plaintiff by monthly instalments, and breach occurred and action was brought before the last instalment fell due, it was held that the damages must be calculated to be the difference between the contract price and the market price at the date when each instalment should have been delivered, and that the loss arising from the non-delivery of the last instalment must be calculated upon that basis, although the time for its delivery had not arrived. Specific performance and injunction. Under certain circumstances a promise to do a thing may be enforced by a decree for specific performance, and an express or implied promise to forbear by an injunction. These remedies were once exclusively administered by As to the duty of the injured party to use reasonable care not to increase his own damages, see Mather v. Butler County, 28 Iowa, 253, H. & W. 612; Parsons v. Sutton, 66 N. Y. 92; Clark v. Marsiglia, 1 Denio (N. Y.), 817, H. & W. 572. Chap. III. § 3. BY BREACH. 379 the chancery. They supplemented the remedy in dam- ages offered by the common law, and were granted at the discretion of the chancellor acting as the adminis- trator of the king’s grace. *It will be enough here to illustrate the two main characteristics of these remedies — that they are sup- plementary — that they are discretionary. (1) Where damages are an adequate remedy, specific performance will not be granted. [*312] ‘The remedy by specific performance was invented, and has been cautiously applied, in order to meet cases where the ordinary remedy by an action for damages is not an adequate compensation for breach of contract. The jurisdiction to compel specific performance has always been treated as discretionary and confined within well-known rules.’ Damages may be a very insufficient remedy for the breach of a contract to convey a plot of land: the choice of the intending purchaser may have been determined by considerations of profit, health, convenience, or neigh- bourhood: but damages can usually be adjusted so as to compensate for a failure to supply goods. In the latter case, therefore, the chancery would decree the specific performance only in the case of chattels possessing a special beauty, rarity, or interest. It is only by statute, and in the case of a breach of contract to deliver specific goods, that the court may direct the contract to be performed specifically without allowing the seller an option to retain the goods and pay damages. (2) Where the court cannot supervise the execution of the contract specific performance will not be granted. If the court endeavoured to enforce a contract of 1 Adams v. Messinger, 147 Mass. 185, H. & W. 613; Johnson v. Brooks, 93 N. Y. 337; Rotholz v. Schwartz, 46 N. J. Eq. 477; Gott- schalk vy. Stein, 69 Md. 51; Singer v. Carpenter, 125 Ml. 117. A matter of grace. When refused. Ryan v. Mutual Tontine Association, [1898] 1 Ch. at p. 126. 56 & 57 Vict. c. 71. § 52. Wolver- hampton Railway Co. v. L. & N. Co., L.R.1 Eq. 489. Webster v. Cecil, 80 Beay. 62. Kekewich v. Manning, 1D.M. &@. at p. 188, In re Lucan, 45 Ch, D. 470. Flight v. Bolland, 4 Russ. 298. (b) Injunc- tion, ante, p. 251. Ww. Railway, 380 DISCHARGE OF CONTRACT. Part V. employment, or a contract for the supply of goods to be delivered by instalments, it is plain ‘that a series of orders and a general superintendence would be required which could not conveniently be undertaken by any court of justice,’ and ‘the court acts only where it can perform the very thing in the terms specifically agreed upon.’ (3) Unless the contract is ‘certain, fair, and just,’ specific performance will not be granted. It is here that the discretionary character of the remedy is most strongly marked. It does not follow that specific *performance will be granted although there may be a contract actionable at common law, and although damages may be no adequate compensation. The court will consider the general fairness of the transaction and refuse the remedy if there is any suspicion of sharp prac- tice on the part of the suitor. Akin to this principle is the requirement that there must be mutuality between the parties. This means that at the time of making the contract there must have been consid- [#313] eration on both sides or promises mutually enforceable by the parties. Hence specitic performance of a gratuitous promise under seal will not be granted; nor can an infant enforce a contract by this remedy. His promise is not en- forceable against himself, though he might bring action upon it in the Queen’s Bench Division of the High Court, and ‘it is a general principle of courts of equity to interfere only where the remedy is mutual.’ An injunction may be used as a means of enforcing a simple covenant or promise to forbear. Such would be the case of building covenants described earlier, restrain- 1 Butif a donee of lands goes into possession and makes valuable improvements in reliance upon the promise, equity will specifically enforce it. Freeman v. Freeman, 43 N. Y. 34; Irwin v. Dyke, 114 Il. 302; Manly v. Howlett, 55 Calif. 94; Smith v. Smith, 125 N. Y. 224. Chap. IIL. § 3. BY BREACH. 381 ing the use of property otherwise than in certain specified manner. Or it may be the only means of enforcing the specific when performance of a covenant where damages would be an or inadequate remedy, while to enforce performance of the covenant would involve a general superintendence such Close v. as the court could not undertake. Thus a hotel keeper D. 50s. who obtained a lease of premises with a covenant that he would buy beer exclusively of the lessor and his assigns was compelled to carry out his covenant by an injunction restraining him from buying beer elsewhere. Lumley v. Wagner is an extreme illustration of the 1D.M.&6. principle. Miss Wagner agreed to sing at Lumley’s theatre, and during a certain period to sing nowhere else. Afterwards she made a contract with another person to sing at another theatre, and refused to perform her contract with Lumley. The court *refused to enforce Miss Wagner’s positive engagement to sing at Lumley’s theatre, but compelled performance of her promise not to sing elsewhere by an injunction. Here there was an express negative promise which the or refused. court could enforce, and it has been argued that an express positive promise gives rise to a negative undertak- ing not to do anything which should interfere with the performance of this promise. But the court is apparently Fry, Specific disinclined to carry any further the principle of Lumley v. see, 8 560, Wagner. The case has been said to be ‘an anomaly to be followed in cases like it, but an anomaly which it would be very dangerous to extend.’ Where a person employed by a company as manager agreed to ‘give the whole of his time to the company’s business,’ and afterwards gave some of his time to another, [#314] 1 Daly v. Smith, 49 How. Pr. (N. Y.) 150. Cf. Cort v. Lassard, 18 Ore. 221, H. & W. 619. Whitwood Chemical Co. v. Hard- man, oa! 2 Ch. (C, A.) 428. Davis v. Foreman, [1894] 8 Ch. 654, Effect of- Judicature Acts. 36 & 87 Vict. c. 66, § 34. sub-§ 3. (+4) Dis- charge of tight of action. 382 DISCHARGE OF CONTRACT. Part V. and a rival, company, an injunction to restrain him from so doing was refused. ‘I think,’ said Lindley, L. J., ‘the court will generally do much more harm by attempting to decree specific performance in cases of personal service than by leaving them alone: and whether it is attempted to enforce these contracts directly by a decree for specific performance or indirectly by an injunction, appears to me to be immaterial. It is on the ground that mischief will be done at all events to one of the parties, that the court declines in cases of this kind to grant an injunction, and leaves the party aggrieved to such remedy as he may have apart from the extraordinary remedy of injunction.’ ; And this principle will be acted upon although a stipula- tion, affirmative in substance, is couched in a negative form. An employer stipulated with his manager that he would not require him to leave the employment except under certain circumstances. It was held that such an under- taking could not be enforced by an injunction to restrain the employer from dismissing the manager. Though an equitable claim or counter-claim may be as- serted in any Division of the High Court of Justice, there is assigned to the Chancery Division, as a special depart- ment of its *business, suits for ‘specific performance of contracts between vendors and purchasers of real estate, including contracts for leases.’ A suit for specific performance, if brought in any other than the Chancery Division, would be transferred to that Division by an order of the Court. [*315] § 4. Discharge of right of action arising from breach of contract. The right of action arising from a breach of contract can only be discharged in one of three ways :— . (1) By the consent of the parties. Gi) By the judgment of a court of competent jurisdic- tion. Gii) By lapse of time. Chap. IIT. § 4. BY BREACH. 383 (i) Discharge by consent of the parties. This may take place either by release or by accord and satisfaction ; and the distinction between these two modes of discharge brings us back to the elementary rule of con- tract, that a promise made without consideration must, in order to be binding, be made under seal. A release is a waiver, by the person entitled, of a right of action accruing to him from a breach of a promise made to him. In order that such a waiver should bind the per- son making it, it is necessary that it should be made under seal; otherwise it would be nothing more than a promise, given without consideration, to forbear from the exercise of a right. To this rule bills of exchange and promissory notes form an exception. We have already seen that these instruments admit of a parol waiver before they fall due. One who has a right of action arising upon a bill or note can discharge it by an unconditional gratuitous renun- ciation, in writing, or by the delivery of the bill to the acceptor.” Accord and satisfaction is an agreement, not necessarily under seal, the effect of which is to discharge the right of action possessed by one of the parties to the agreement. In order to have this effect there must not only be consid- eration *for the promise of the party entitled to sue, but the consideration must be executed in his favour. Otherwise the agreement is an accord without a satisfaction. The promisor must have obtained what he bargained for in lieu of his right of action, and must have [*316] 1 Kidder v. Kidder, 33 Pa. St. 268, H. & W. 625 ; Collyer v. Moulton, 9 R.1. 90, H. & W. 522; Hale v. Spaulding, 145 Mass. 482, H. & W. 487 ; Pierce v. Parker, 4 Met. (Mass.) 80. 2 Not so in the United States unless the bill or note be surrendered, in which case the transaction operates by way of executed gift. Slade v. Mutrie, 156 Mass. 19; ante, p. 335, note. (i) Dis- charge by consent of parties. (a) By re- lease, ante, p. 275. 45 & 46 Viel. c. 61. § 62. (b) By ac- cord and satisfac- tion. Bayley v. Homan, 8 Bing. N. C. at p. 920. McManus y. Bark, L. R.5 Ex. 65. "Goddard v. O’Brien, 9Q. B. D.40. Bidder v. 37 Ch. D. (C, A.) 406. and_see Sm. L. C, i. 877 (9th ed.). (ii) Dis- charge by judgment. See ch. v. le Effect of bringing action ; 384 DISCHARGE OF CONTRACT. Part V. obtained something more than a new arrangement as to the payment or discharge of the existing liability.’ The satisfaction may consist in the acquisition of a new right against the debtor, as the receipt from him of a nego- tiable instrument in lieu of payment;? or of new rights against the debtor and third parties, as in the case of a composition with creditors ;* or of something different in kind to that which the debtor was bound by the original contract to perform ;* but it must have been taken by the creditor as satisfaction for his claim in order to operate as a valid discharge. (ii) Discharge by the judgment of a court of competent jurisdiction. The judgment of a court of competent jurisdiction in the plaintiff's favour discharges the right of action arising from breach of contract. The right is thereby merged in the more solemn form of obligation which we have dealt with elsewhere as one of the so-called contracts of record.® The result of legal proceedings taken upon a broken contract may thus be summarised : — The bringing of an action has not of itself any effect in discharging the right to bring the action. Another action may be brought for the same cause in another court; and though proceedings in such an action would be stayed, if 1 The accord must be executed or satisfied to be binding. Aromer v. Heim, 75 N. Y. 574, H. & W. 627; Hosler v. Hursh, 151 Pa. St. 415. Cf. Babcock vy. Hawkins, 23 Vt. 561. When executed the accord is binding. Alden v. Thurber, 149 Mass. 271, H. & W. 630; McCreery v. Day, 119 N. Y. 1, H. & W. 524. 2 Babcock v. Hawkins, supra. Cf. Hosler v. Hursh, supra. 8 Ante, p. 108, note. 4 McCreery v. Day, supra. 5 Miller v. Covert, 1 Wend. (N. Y.) 487, H. & W. 631. But it must be the same right of action. Vanuxem v. Burr, 151 Mass. 386, H. & W. 632. Judgment of foreign court does not bar action. Ante, p. 58, note 1. Chap. III. § 4. BY BREACH. 885 they were merely vexatious, upon application to the sum- mary jurisdiction of the courts, yet if action for the same cause be brought in an English and a foreign court, the fact that the defendant is being sued in the latter would not in any way help or affect his position in the former. When judgment is given in an action, whether by consent, or by decision *of the court, such a judgment dis- charges the obligation by estoppel. The plaintiff cannot bring another action for the same cause so long as the judgment stands.2 The judgment may be reversed by the court, in which case it may be entered in his favour, or else the parties may be remitted to their origi- nal positions by a rule being obtained for a new trial of the case. But such estoppel can only result from an adverse judg- ment if it has proceeded upon the merits of the case. If a man fail because he has sued in a wrong character, as executor instead of administrator; or at a wrong time, as where action is brought before a condition of the contract is fulfilled, such as the expiration of a period of credit in the sale of goods, a judgment proceeding on these grounds will not prevent him from succeeding in a subse- [*317] quent action. Tf the plaintiff get judgment in his favour, the right of action is discharged and a new obligation arises, a form of the so-called contract of record. It remains to say that the obligation arising from judgment may be dis- charged if the judgment debt is paid, or satisfaction obtained by the creditor from the property of his debtor by the process of execution. 1 Pendency of action in one State does not bar an action in another State or in the Federal courts. Pierce v. Feagans, 39 Fed. Rep. 587; Stanton vy. Embrey, 93 U.S. 548; McJilton v. Love, 13 Il. 486. 2 Nashville §c. Ry. v. United States, 113 U. S. 261; Gould v. Stern- berg, 128 Tl]. 510. 8 Kittredge v. Holt, 58 N. H. 191 3, Wood v. Faut, 55 Mich. 185. 2¢ Judicature Acts, order 25. r, 4. of judg- ment, Ex parte Bank of England, [1895] 1 Ch. 3. by way of estoppel, Palmer y. Temple, 9A, &E, 821. by way of merger ; p. 49. 4&5 Anne, oe, 16. § 12. of execu- tion. (iti) Dis- charge by lapse of time. Per Lord x Selborne, _ Simple contract. p. 45. Special- ties. Disabili- ties sus- pending operation of stat- utes. 21 Jac. I. c. 16, § 7. 386 DISCHARGE OF CONTRACT. Part V. (iii) Lapse of time. At common law lapse of time does not affect contrac- tual rights. Such rights are of a permanent and indestruc- tible character, unless either from the nature of the contract, or from its terms, it be limited in point of duration. ‘But though the rights possess this permanent character, . the remedies arising from their violation are, by various statutory provisions, withdrawn after a certain lapse of time. The remedies are barred, though the rights are not extinguished.t It was enacted by 21 Jac. I. c. 16. § 8 that ‘All actions of account, and upon the case . . . all actions of debt grounded upon any lending or contract without specialty, and all actions of debt for arrearages of rent . . . shall be commenced and *sued within . . . six years next after the cause of such ac- 4 tion or suit and not after.’ [*318} It will be noted that ‘action upon the case’ includes actions of assumpsit, as was explained in an earlier chapter. The statute 3 & 4 Will. IV. c. 42. § 3 limits the bring- ing of actions upon any contract under seal to a period of twenty years from the cause of action arising. These statutes begin to take effect so soon as the cause of action arises, but there may be circumstances which suspend their operation. The statute of James provided that infancy, coverture, insanity, imprisonment, or absence beyond seas should, if the plaintiff was under any such disabilities when the cause of action arose, suspend the operation of the statute until the removal of the disability. 1 The English and American Statutes of Limitation will be found in Wood, Limitation of Actions, Appendix, pp. 629-864. In Wiscon- sin it is held that the statute extinguishes the right. Pierce v. Sey- mour, 52 Wis. 272. But the general holding is that the remedy is barred and that when the bar is removed either by act of the debtor or by law the right revives. Campbell v. Holt, 115 U. S. 620. Chap. IIL § 4. BY BREACH. 387 The statute of William IV applied the same rile, except in case of imprisonment, to actions on specialties. The Mercantile Law Amendment Act takes away the privilege of a plaintiff who is imprisoned or beyond seas in actions on simple contract or specialty. Where the defendant is beyond seas at the time the right of action accrues, the operation of the statute is suspended until he returns. But where one of two or more defendants is beyond seas, action brought against those who are accessible will not affect the rights of the plaintiff against such as may be beyond seas. In the case of Musurus Bey v. Gadban the defendant counter-claimed a debt due from the plaintiff as executor of Musurus Pacha, who had incurred the debt to Gadban twenty years before while he was Turkish ambassador in London. It was held that no right of action could accrue against Musurus Pacha while he was ambassador, nor within a reasonable time during which he remained in England after his recall; that thenceforward he was beyond seas, until his death in 1890, and that therefore the statute had not begun to take effect at that date, and the counter-claim was sustainable. *A disability arising after the period of limitation has begun to run will not affect the operation of the statute: nor will ignorance that a right of action existed. But where that ignorance is produced by the fraud of the defendant, and no reasonable diligence would have enabled the plaintiff to discover that he had a cause of action, the statutory period commences with the discovery of the fraud. This is an equitable rule generalized in its appli- cation by s. 24. sub-s. 1 of the Judicature Act (1873).1 [#319] Statutes of Limitation may be so framed as not merely 1 Wood, Limitation of Actions, p. 586. 3&4 Will. TV.c. 42. §4. 19 & 20 Viet. c. 97.§ 10. 3 & 4 Will. IV. ¢, 42. § 4. 4 Anne, ce. 16, § 19. 19 & 20 Vict. c. 97. § 11. Blair v. Bromley, 5 Hare, 559. Gibbs y. Guild, 9Q. B. D. 66. Revival of right of action. In case of specialty. 3&4 Will. IV. ¢. 42. 85. Of simple contract. By promise. 9 Geo. IV. e. 14. § 1. 19 & 20 Vict. ce. 97. 19 & 20 Vict. ©. 97. § 13. In re River Steamer Co., 6 Ch. 828. 388 DISCHARGE OF CONTRACT. Part V. to bar the remedy, but to extinguish the right: such is the case as to realty under 3 & 4 Will. IV. c. 27: but in con- tract the remedy barred by 21 Jas. I. c. 16 may be revived. Where a specialty contract results in a money debt, the right of action may be revived for the statutory period of limitation, (1) by an acknowledgment of the debt in writing, signed by the party liable, or his agent; or (2) by part payment, or part satisfaction on account of any principal or interest due on such a specialty debt. Such a payment if made by the agent of the party liable will have the effect of reviving the claim. Where a simple contract has resulted in a money debt the right of action may also be revived by subsequent ac- knowledgment or promise, and this rule is affected by two statutes, Lord Tenterden’s Act, which requires that the acknowledgment or promise, to be effectual, must be in writing ; and the Mercantile Law Amendment Act, which provides that such a writing may be signed by the agent of the party chargeable, duly authorized thereto, and is then as effective as though signed by the party himself? The sort of acknowledgment or promise which is req- uisite in order to revive a simple contract debt for another period of six years, is thus described by Mellish, L.J.:— ‘There must be one of three things to take the case out of the Statute (of Limitation). Either there must be an acknowledgment 1 The effect of an acknowledgment or promise in reviving a cause of action is confined to actions in assumpsit unless the statute gives a broader scope. Jb. p.188 et sg. Buta promise held out for a fraud- ulent purpose may work an estoppel- Armstrong v. Levan, 109 Pa. St. 177. 2 Generally in the United States an acknowledgment must be in writing signed by the party to be charged or his authorized agent. Stimson, Am. St. Law, § 4147; Wood, Limitation of Actions, p. 209. But these statutes do not generally prevent the proof of acknowledg- ment by part payment. Jb.; though the construction is otherwise in some States. Perry v. Ellis, 62 Miss. 711; Hale v. Wilson, 70 Ia. 311. Chap. IIL. § 4. BY BREACH. 389 *of the debt from which a promise to pay is implied; or, secondly, there must be an unconditional promise to pay the debt; or, thirdly, there must be a conditional promise to pay the debt, and evidence that the condition has been performed.’ [*320] This being the principle, its application in every case must turn on the construction of the words of the alleged promisor. And ‘When the question is, what effect is to be given to particular words, little assistance can be de- rived from the effect given to other words in applying a principle which is admitted.’ The debt, however, may be revived otherwise than by express acknowledgment or promise. A part payment, or payment on account of the principal, or a payment of interest upon the debt will take the contract out of the statute2 When this is so Lord Tenterden’s Act provides that nothing therein contained ‘shall alter, or take away, or lessen the effect of any payment of any principal or interest made by any person.’ But the payment must be made with reference to the original debt, and in such a way as to amount to an acknowledgment of it. Payment to a third party is insufficient. Where the maker of a promissory note made a payment on account of the original payee after six years had expired, the note having, in the meantime, been indorsed to a third party, the payment was not an acknowledgment which revived the rights of the indorsee. 1 An order or bill of exchange drawn by the debtor in favor of the creditor is an acknowledgment of the debt. Manchester v. Braedner, 107 N. Y. 346, H. & W. 635. But an acknowledgment in an unde- livered instrument is insufficient. Allen v. Collier, 70 Mo. 138, H. & W. 637. See for words held a sufficient acknowledgment, Schmidt v. Pfau, 114 Tl. 483; Blakeman v. Fonda, 41 Conn. 561; Weston v. Hodgkins, 136 Mass. 326. 2 Blaskower vy. Steel, 23 Ore. 106. Cleasby, B., in Skeet vy. Lindsay, 2 Ex. D. 817. By pay- ment, Waters v. ae 2C.M. R. 728. Stamford Banking Co. v. Smith [iso] 1Q.B. C.A.) 765. Unreality of con- sideration. p. 80. Mistake. Strickland vy. Turner, 7 Exch. 208, ante, p. 184. 15M. &W. 283. L. R.5C. P. 577. 15M. & W. 258. L.R.5C. P. 517. CHAPTER IV. Impossibility of Performance. ImpossIBILITy of performance may appear on the face of the contract, or may exist, unknown to the parties, at the time of making the contract, or may arise after the contract is made. It is with this last sort of impossi- bility that we have to do. Where there is obvious physical impossibility, or legal impossibility apparent upon the face of the promise, there is no contract, because such a promise is no real considera- tion for any promise given in respect of it. Impossibility which arises from the non-existence of the subject-matter of the contract avoids it. This may be based on mutual mistake,« for the parties have contracted on an « There are two irreconcileable cases on this subject. In Hills v. Sughrue, Sughrue agreed with Hills by charter-party to take Sughrue’s ship to the island of Ichaboe and there load a complete cargo of guano and return with it to England, being paid a high rate of freight. There was so little guano at Ichaboe that the performance of Sughrue’s promise to load a complete cargo was impossible. Hills sued him for dam- ages for failure to bring home a cargo, and was held to be entitled to recover: Impossibility of performance was held to be no answer to an absolute promise such as Sughrue had made. In Clifford v. Watts the parties were landlord and tenant. Clifford, the landlord, sued upon a covenant in the lease in which Watts undertook to dig from the premises not less than 1000 tons of potter’s clay annually, paying a royalty of 2s. 6d. per ton. Watts pleaded that there never had been so much as 1000 tons of clay under the land. The court held that the plea furnished a good answer to the plaintiff’s claim. ‘Here,’ said Brett, J., ‘both parties might well have supposed that there was clay under the land. They agree on the assumption that it is there; and the covenant is applicable only if there be clay.’ The cases are indistinguishable, and the conflict of judicial opinion would be perplexing if it were not that the Court of Common Pleas, in dis- tinguishing Hills v. Sughrue from Clifford v. Watts, curiously misappre- hended the point of the earlier case. It is clear that Willes, J. (p. 586, and Brett, J., p. 589), thought the action was brought by the shipowner against 390 Chap. IV. IMPOSSIBILITY OF PERFORMANCE. 8391 rien *assumption, which turns out to be false, that there is something to contract about.! Impossibility which arises subsequently to the forma- tion of a contract does not, as a rule, excuse from perform- ance. T have spoken of what are termed ‘conditions subsequent,’ or ‘excepted risks,’ and what was then said may serve to explain the rule now laid down. If the promisor make the performance of his promise conditional upon its continued possibility, the promisee takes the risk. If performance should become impossible, the promisee must bear the loss. If the promisor makes his promise unconditionally, he takes the risk of being held liable even though perform- ance should become impossible by circumstances beyond his control. Paradine sued Jane for rent due upon a:lease. Jane pleaded ‘that a certain German prince, by name Prince Rupert, an alien born, enemy to the king and his kingdom, had invaded the realm with an hostile army of men; and with the same force did enter upon the defendant’s posses- sion, and him expelled, and held out of possession ...... whereby he could not take the profits.” The plea then was in substance that the rent was not due, because the lessee had been deprived, by events beyond his control, of the profits from which the rent should have come. the charterer for not furnishing a cargo, whereas it was brought by the char- terer against the owner for not loading a cargo which the owner, contrary to the ordinary practice in charter-parties, undertook to do (see dicta of Parke, B., 15 M. & W. 258-9). It seems that they unintentionally decided contrary to Hills v. Sughrue. By the Sale of Goods Act, § 5, a contract for the sale of specific goods is avoided if the goods have perished unknown to the seller at the time the contract is made. 1 Ante, p. 167, note; Brick Co. v. Pond, 38 Oh. St. 65. 2 Anderson v. May, 50 Minn. 280, H. & W. 639 ; Dermott v. Jones, 2 Wall. (U. S.) 1, H. & W. 641. (1) General tule. p-Bt8, Subse- quent impossi- bility no excuse, unless a condition of the contract. Paradine v. Jane, Aleyn, 26. See Appen- dix. Thiis v. Byers, 1Q. B.D. 244, Budgett v. Binnington, [1891]1Q. B. 35. (2) Excep- tions. Actof God. Castlegate Steamship Co. v. Demp- sey, [1892 coe (C. A.) 854. 392 DISCHARGE OF CONTRACT. Part V. But the court held that this was no excuse; ‘and this difference was taken, that where the law creates a duty or charge and the party is disabled to perform it without any default in him, and hath no *remedy over, there the law will excuse him. As in the case of [#323] waste, if a house be destroyed by tempest, or by enemies, the lessee is excused... . But when the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. And therefore if the lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.’ Modern illustrations of the rule are to be found in the promise made by the charterer of a vessel to the ship-owner that the cargo shall be unloaded within a certain number of days or payment made as ‘demurrage.’ A cargo of timber was agreed to be made up into rafts by the master of the ship, and in that state removed by the charterer. Storms prevented the master from doing his part, but this default did not release the charterer from his promise to have the cargo unloaded within the time specified. So too a dock strike affecting the labour engaged both by ship-owner and charterer does not release the latter. He makes ‘an absolute contract to have the cargo unloaded within a specified time. In such a case the merchant takes the risk.’ 7! To the general rule there is a group of exceptions, in which subsequent impossibility discharges the contract. These we must distinguish from cases in which the Act of God is said to discharge a contract ; for this use of the «Compare this case with one in which the charter-party does not fix a definite time for unloading the cargo. In such cases a reasonable time is allowed, and the event of a dock strike would extend the time which should be regarded as reasonable. 1 But if the carrier is under no express absolute obligation a strike will excuse delay beyond what would otherwise be reasonable. Geis- mer v. Lake Shore §c. R., 102 N. ¥. 563 ; Pittsburg &c. R. v. Hollowell, 65 Ind. 188. Chap. IV. IMPOSSIBILITY OF PERFORMANCE. 393 term ‘Act of God’ has been condemned by high authority. The Act of God, as we have seen, is intro- duced into certain contracts as an express, or, by cus- tom, an implied condition subsequent absolving the - promisor. But there are also forms of impossibility which are said to excuse from performance because ‘they are not within the contract, that is to say, that neither party can reason- ably be supposed to have contemplated their occurrence, so that the promisor neither excepts *them specif- ically, nor promises unconditionally in respect of them. With these we will deal seriatim. [#324] (i) Legal impossibility arising from a change in the law of our own country exonerates the promisor Baily was lessee to De Crespigny, for a term of 89 years, of a plot of land: De Crespigny retained the adjoining land, and covenanted that neither he nor his assigns would, during the term, erect any but ornamental buildings on a certain paddock fronting the demised premises. A rail- way company, acting under parliamentary powers, took the paddock compulsorily, and built a station upon it. Baily sued De Crespigny upon the covenant: it was held that impossibility created by statute excused him from the observance of his covenant. ‘The legislature, by compelling him to part with his land to a rail- way company, whom he could not bind by any stipulation, as he could an assignee chosen by himself, has created a new kind of assign, such as was not in the contemplation of the parties when the contract was entered into. Tohold the defendant responsible for the acts of such an assignee is to make an entirely new contract for the parties.’ 1 Cordes v. Miller, 39 Mich. 581, H. & W. 645; Hughes v. Wam- sutta Mills, 11 Allen (Mass.), 201, H. & W. 647; People v. Globe Mut. Life Ins. Co., 91 N. Y. 174; Jamieson v. Indiana Natural Gas Co., 128 Ind. 555. Per curiam in Baily v. De Cres- pigny, .R.4 Q. B. at p. 185, - Real ex- ceptions. (i) Where there be change of the law. L. R,4Q. B. 180. ibid. p. 186. ( Ss of subject- it) De- truction matter. 3 B.& 8. 826. L. R.2C. P. 651. 5i 6 & 57 Vict. TL. § 7. e. 71 394 DISCHARGE OF CONTRACT. - Part V. (ii) Where the continued existence of a specific thing is essential to the performance of the contract, its destruction, from no default of either party, operates as a discharge. In the case of Taylor v. Caldwell the defendant agreed to let the plaintiff have the use of a music hall for the pur- pose of giving concerts upon certain days : before the days of performance arrived the music hall was destroyed by fire, and Taylor sued Caldwell for losses arising from the consequent breach of contract. The court held that, ‘In the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive con- tract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.’ The same principle was applied in Appleby v. Myers. The *plaintiffs undertook to erect certain ma- chinery upon the defendant’s premises and keep it in repair for two years. While the work was in progress the premises were wholly destroyed by fire. It was held that there was no absolute promise by Myers that his premises should continue in a fit state for Appleby’s work, that the fire was a misfortune equally affecting both parties, and discharging the contract. By the Sale of Goods Act an agreement to sell specific goods is avoided if, before the risk has passed to the buyer, by fault of neither party the goods perish. [*325] 1 Dexter v. Norton, 47 N. Y. 62, H. & W. 649; Stewart v. Stone, 127 N. Y. 500; Walker v. Tucker, 70 Ill. 527; The Tornado, 108 U. S. 342; Huguenin v. Courtenay, 21 8. Car. 408. Where the contract contem- plates work on a chattel or building the destruction of the latter dis- charges the contract, but recovery may be had for the work performed. Cleary v. Sohier, 120 Mass. 210; Butterfield v. Byron, 153 Mass. 517; Niblo v. Binsse, 3 Abb. App. Dec. (N. Y.) 375. If one contract against loss or destruction he is bound by the stipulations. Wilming- ton Transportation Co. v. O’ Neil, 98 Calif. 1, H. & W. 654. Chap. IV. IMPOSSIBILITY OF PERFORMANCE. 895 Gii) A contract which has for its object the rendering of (#i) Inca- personal services is discharged by the death or incapacitat- ing illness of the promisor 3 In Robinson v. Davison, an action was brought for damage sustained by a breach of contract on the part of an eminent pianoforte player, who having promised to perform at a concert, was prevented from doing so by dangerous illness. , The law governing the case was thus laid down by Bramwell, B. : — ‘This is a contract to perform a service which no deputy could perform, and which in case of death could not be performed by the executors of the deceased; and I am of opinion that, by virtue of the terms of the original bargain, incapacity of body or mind in the performer, without default on his or her part, is an excuse for non-performance. Of course the parties might expressly contract that incapacity should not excuse, and thus preclude the condition of health from being annexed to their agreement. Here they have not done so; and as they have been silent on that point, the contract must, in my judgment, be taken to have been conditional and not absolute.’ 1 Spalding v. Rosa, 71 N. Y. 40, H. & W. 655; Lacy v. Getman, 119 N. Y. 109; Johnson v. Walker, 155 Mass. 253; Allen v. Baker, 86 N.C. 91. An unforeseen peril, as the prevalence of cholera, may work a dis- charge of contract. Lakeman v.’ Pollard, 43 Me. 463. But see Dewey v. Union School District §c., 43 Mich. 480. pacity for personal service. L. R. 6 Exch, 269. ibid. p. 277. (1) Mer- ger. General doctrine. See p. 317. Higgen’s case, 6 Co. Rep. 45 b. Holmes v. Bell, 3M. &@. 213. CHAPTER V. Discharge of Contract by Operation of Law. THERE are rules of law which, operating upon certain sets of circumstances, will bring about the discharge of a contract, and these we will briefly consider. Merger. If a higher security be accepted in the place of a lower, the security which in the eye of the law is inferior in operative power, ipso facto, whatever may be the intention of the parties, merges and is extinguished in the higher. We have already seen an instance of this in the case of judgment recovered which extinguishes by merger the right of action arising from breach of contract. And, in like'manner, if two parties to a simple contract embody its contents in a deed which they both execute, the simple contract is thereby discharged.t The rules governing this process may be thus sum- marized : — (a) The two securities must be different in their legal operation, the one of a higher efficacy than the other. A second security taken in addition to one similar in charac- ter will not affect its validity, unless there be discharge by substituted agreement. (8) The subject-matter of the two securities must be identical. (vy) The parties must be the same. 1 Clifton v. Jackson Iron Co., 74 Mich. 188, H. & W. 659. 396 Chap. V. DISCHARGE OF CONTRACT. 397 (*327] * Alteration or loss of a written instrument. If a deed or contract in writing be altered by addition or erasure, it is discharged, subject to the following rules: —1 (a) The alteration must be made by a party to the contract, or by a stranger while the document is in the possession of a party to the contract and for his benefit. Alteration by accident or mistake occurring under such circumstances as to negative the idea of intention will not invalidate the document. (8) The alteration must be made without the consent of the other party, else it would operate as a new agree- ment. ; (vy) The alteration must be made in a material part. What amounts to a material alteration must needs depend upon the character of the instrument, and it is possible for the character of an instrument to be affected by an alteration which does not touch the contractual rights set forth in it. In a Bank of England note the promise to pay made by the bank is not touched by an alteration in the number of the note; but the fact that a bank note is a part of the currency, and that the number placed on it is put to important uses by the bank and by the public for the detection of forgery and theft, causes an alteration in the number to be regarded as material and to invalidate the note.? 1 Wood v. Steele, 6 Wall. (U. S.) 80. It is a disputed point whether an action can be brought upon the original contract. It is generally held that if the alteration was made with a fraudulent in- tent no action will lie upon the original consideration. Smith v. Mace, 44 N. H. 553, H. & W. 660." But if it was made with an inno- cent intent a recovery may be had on the original contract. Clough v. Seay, 49 Iowa, 111, H. & W. 675; Owen v. Hall, 70 Md. 97; Sav- ings Bank v. Shaffer, 9 Neb. 1. ? Contra: Commonwealth v. Emigrant Bank, 98 Mass. 12; Birdsall v. Russell, 29 N. Y. 220; Elizabeth v. Force, 29 N. J. Eq. 587. (2) Altera- tion or loss of instru- ment. (i) Altera- tion, Pattinson y. Luckley, L. R. 10 Ex. 330. Wilkinson y. Johnson, 3B. &C. 428. materi- ality. Suffell v. Bank of England, 9Q. B.D. 555. 46 & 47 Vict. c. 61. § 64. ibid. § 89. Leeds Bank v. Walker, 11 Q. B. D. S4. (ii) Loss. Hansard v. Robinson, 7B. &C. 90. Conflans Quarry Co. v. Parker, L. R. 80. P.1. (3) Bank- tuptcy. 398 DISCHARGE OF CONTRACT. Part V. An alteration, therefore, to effect a discharge of the contract, need not be an alteration of the contract, but must be an ‘alteration of the instrument in a material way.’ The Bills of Exchange Act 1882 provides that a bill shall not be avoided as against a holder in due course, though it has been materially altered, ‘if the alteration is not apparent:’ and the provisions of the Act respecting bills apply to promissory notes ‘with the necessary modifi- cations.” These last words have been held to exclude Bank of England notes, and therefore do not affect the decision in Suffell’s case. The loss of a written instrument only affects the rights *of the parties in so far as it may occasion a diff- [#328] culty of proof;* but an exception to this rule exists in the case of bills of exchange and promissory notes. If the holder of the instrument lose .it, he loses his rights under it, unless he offer to the party primarily liable upon it an indemnity against possible claims.} Bankruptcy. ’ Bankruptcy effects a statutory release from debts and liabilities provable under the bankruptcy, when the bank- rupt has obtained from the court an order of discharge.? « Where the documents are proved to be lost, parol evidence may be given of the contents of a written acknowledgment of a debt barred by the Statute of Limitation (Haydon v. Williams, 7 Bing. 163). In the case of a memoran- dum under the Statute of Frauds the matter is not clear (Nichol v. Bestwick, 28 L. J. Exch. 4). 1If the instrument is wilfully destroyed no action can be main- tained. Blade v. Noland, 12 Wend. (N. Y.) 178, H. & W. 666. Cf. Steele v. Lord, 70 N. Y. 280. ? A State bankruptcy discharge has no effect upon debts contracted prior to the passage of the statute. Sturges v. Crowninshield, 4 Wheat. (U. 8.) 122, H. & W.674. Nor upon the claims of foreign creditors unless the creditors become parties to the proceedings. Gil- man v. Lockwood, 4 Wall. (U. 8.) 409, H. & W. 683; Guernsey v. Wood, 130 Mass. 503, H. & W. 685. As to what claims are provable see Reed v. Pierce, 36 Me. 455, H. & W. 669. Chap. V. DISCHARGE OF CONTRACT. 399 It is sufficient to call attention to this mode of discharge, without entering into a discussion as to the nature and effects of bankruptcy, or the provisions of the Bankuptcy Act of 1883, or the amending Act of 1890. When a man becomes bankrupt his property passes to _ his trustee, who can, as far as rights ex contractu are concerned (and we are not concerned with anything else), exercise the rights of the bankrupt, and can do what the bankrupt could not do, since he can repudiate contracts if they appear to be unprofitable. When the bankrupt obtains an order of discharge he is discharged from all debts provable under the bankruptcy, whether or no they were proved, and even if the creditor was in ignorance of the bankruptcy proceedings. But this general discharge is subject to exceptions. The court may require that the bankrupt should consent to judg- ment being entered against him for debts unsatisfied at the date of the discharge: and execution may be issued on such judgment with leave of the court. In no case is the bankrupt discharged from lability incurred by fraud or fraudulent breach of trust exercised by him. 46 & 47 Vict. e, 52. 53 & 54 Vict. ce. TL. supra, p. 254. 46 & 47 Vict. c. 52, § 28. Heather v. Webb, 20. P.D.1. Sub-$. 6. Agency a form of employ- ment; PART VI. AGENCY. WHEN dealing with the operation of contract we had to note that although one man cannot by contract with another confer rights or impose liabilities upon a third, yet that one man might represent another, as being employed by him, for the purpose of bringing him into legal relations with a third. Employment for this pur- pose is called agency. The subject of agency is interesting as a matter of legal history, as well as of practical importance, but we can only deal with it in outline here, in its relation to contract. English law, though it leaned strongly against the assignment of contractual or other rights of action, found no difficulty in permitting the representation of one man by another for purposes of contract or for wrong. And it seems that this liability of one for the act or default of another springs universally from the contract of employ- ment.“ The liability of the master for the negligence of his servant is the undesigned result of such a contract; the liability of the principal for the act of his agent is its designed or contemplated result. But the master is not liable for the act of his servant done outside the scope of his employment, nor the principal for the act of his agent done outside the limits of his authority. To discuss the law of master and servant from this point of view is out of place here, otherwise it might be @ Writers on agency seem loth to recognize that agency is a form of employ- ment. Yet in dealing with the principal’s liability for the agent’s wrong, they always introduce large selections from the law of master and servant. 400 AGENCY. 401 — interesting *to inquire how far the doctrine of rep- resentation in such cases is of modern origin. It may be that the form which the employer’s liability has assumed in English law is an application to modern society of rules properly applicable to the relation of master and slave, where the master is liable for injury caused by that which is a part of his property. But agency for the purpose of creating contractual relations retains no trace in English law of its origin in status. Even where a man employs as his agent one who is incapable of entering into a contract with himself, as where he gives authority to his child, being an infant, the authority must be given, it is never inherent. There must be evidence of intention on the one side to confer, on the other to undertake, the authority given, though the person employed may, from defective status, be unable to sue or be sued on the contract of employment. From this rule we must, however, except that form of agency known as ‘agency of necessity,’ a quasi-contract- ual relation formed by the operation of rules of law upon the circumstances of the parties, and not by the agreement of the parties themselves. The rules which govern the relation of principal and agent fall into three chapters. 1. The mode in which the relation is formed. 2. The effects of the relation when formed; and here we have to consider — (a) The contract of employment as between principal and agent. (8) The relations of the parties where the agent con- tracts for a principal whom he names. (y) The relations of the parties where the agent con- tracts as agent, but without disclosing the principal’s name: or in his own name, without disclosing his prin- cipal’s existence. 3. The mode in which the relation is brought to an end. 2D except agency of necessity . Outline of subject. (1) Capac- ity of parties. (2) Forma- tion of relation. () Em- ployment. By offer of a promise for an act. ante, p. 95. ante, p. 84. CHAPTER I. The Mode in which the Relation of Principal and Agent is created. FULL contractual capacity is not necessary to enable a person to represent another so as to bring him into legal relations with a third. An infant can be an agent, although he could not incur liability under the contract of employment. But no one can appoint an agent who is not otherwise capable of entering into contracts.! Employment for the purpose of agency is brought about like any other contract by offer and acceptance. (a) This may take the form of consideration executed upon request, or the offer of a promise for an act. Such are all cases of requests for services, which, even if gra- tuitously rendered, entitle the person employed to an indemnity for loss, risk, or expense, and the employer to the exercise of reasonable diligence on the part of the employed. Care should be taken to distinguish a contract of this nature, which only comes into existence upon the render- ing of the service demanded, from the anomalous contract of gratuitous employment, based on mutual promises, which becomes actionable when the service is entered upon. Lampleigh v. Braithwait is an illustration of the first, Wilkinson v. Coverdale of the second. But we must bear in mind that ‘agency’ is not co- 1On competency of agent see Lyon v. Kent, 45 Ala. 656. On com- petency of principal see Patterson v. Lippincott, 47 N. J. L. 4573; ante, p. 181 note 2 (infants); Matthiessen &c. Co. v. McMahon’s Adm’r, 38 N. J. L. 536 (insanity); Flesh v. Lindsay, 115 Mo. 1 (married women). See generally Huffcut on Agency, §§ 14-25. 402 Chap. I. FORMATION OF AGENCY. 403 extensive with ‘employment,’ though writers careless of terminology are apt to speak generally of a person employed as the agent of the employer. By agency I ,mean employment for the *purpose of bringing the “ employer into legal relations with a third party. (8) Or secondly, the relation may be created by the acceptance of an executed consideration. Such is the case where A ratifies a contract which X, without any antecedent authority, has made on his behalf. A accepts the bargain and thereby takes over its liabilities from X. (y) Or thirdly, the relation may be created by mutual promises, to employ and remunerate on one side, and to do the work required on the other. We will now speak no longer of employer and employed, but of principal and agent. The authority given by the principal to the agent, enabling the latter to bind the former by acts done within the scope of that authority, may be given by writing, words, or conduct. In one case only is it necessary that the authority should be given in a special form. In order that an agent may make a binding contract under seal it is neces- sary that he should receive authority under seal. Such a formal authority is called a power of attorney. Nothing need be said as to the formation of the contract by writing or words which has not been said in the chap- ter on offer and acceptance. As regards its formation by conduct the inference of intention may be affected by the relation in which the parties stand to one another. If a master allows his servant to purchase goods for him of X habitually, upon credit, X becomes entitled to look to the master for payment for such things as are supplied in the ordinary course of dealing. [*332 1 Parol authority is sufficient if the seal is unnecessary to the oper- ative effect of the instrument. Wagoner v. Watts, 44 N. J. L. 126. Or if the instrument be executed in the presence of the principal. Gardner v. Gardner, 5 Cush. (Mass.) 483. Employ- menta wider term than agency. By offer of an act for a promise; as by rati- fication. By offer of a promise for a promise. Formal grant of authority requisite for con- tract under seal. (it) Con-. duct : in case of master and servant: 1 Shower, 95, of hus- band and wife: Debenham vy. Mellon, Thesiger, L. J., 5 Q. B. D. 408. different rule for partners. 53 & 54 Vict. ce. 89. § 5. Hawken v. Bourne, 8M. & W. 710. 15 East, 88. ibid. 43. 404 AGENCY. Part VI. So too with husband and wife. Cohabitation does not necessarily imply agency. But if the wife is allowed to deal with a tradesman for the ordinary supplies of the household, the husband will be considered to have held her out as his agent and to be liable for her purchases. Yet there is nothing in the relations of master and servant *or husband and wife, to give any inherent authority to the servant or the wife. The authority can only spring from the words or conduct of the master or husband. We can see this more clearly, if we contrast these relations with that of partnership. Marriage does not of itself create the relation of agent and principal: partner- ship does. The contract of partnership confers on each partner an authority to act for the others in the ordinary course of the partnership business. And each partner accepts a corresponding liability for the act of his fellows. The relations above described, marriage and employ- ment, enable an authority to be readily inferred from conduct. But apart from these, the mere conduct of the parties may create an irresistible inference that an author- ity has been conferred by one upon the other. In Pickering v. Busk the plaintiff allowed a broker to purchase for him a quantity of hemp, which by the plain- tiff’s desire was entered in the place of deposit in the broker’s name. The broker sold the hemp and it was held that the conduct of the plaintiff gave him authority to do so. [#333] ‘Strangers,’ said Lord Ellenborough, ‘can only look to the acts of the parties and to the external indicia of property, and not to the private communications which may pass between a principal and his broker: and if a person authorize another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority.’ We may, if we please, apply to these cases (excepting, of course, partnership) the term agency by estoppel. They Chap. I. FORMATION OF AGENCY. 405 differ only in the greater or less readiness with which the presumption will be created by the conduct of the parties. For estoppel means only that a man may not resist an inference which a reasonable person would necessarily draw from his words or conduct.! Circumstances operating upon the conduct of the parties may create in certain cases agency from necessity. *A husband is bound to maintain his wife: if therefore he wrongfully leave her without means of subsistence she becomes ‘an agent of necessity to supply her wants upon his credit.’ A carrier of goods, or a master of a ship, may under certain circumstances, in the interest of his employer, pledge his credit, and will be considered to have his authority to do so. It has even been held that where goods are exported, unordered, or not in correspondence with samples, the consignee has, in the interest of the consignor, an authority to effect a sale of them. But here the relation of principal and agent does not arise from [*334] (iti) Ne- cessity : Eastland v. Burchell, 3Q. B.D. at p. 486; and see Wilson v, Glossop, 20 Q. B.D. may create agency quasi ex contractu. Kemp v. Pryor, 7 Ves, 246. Gwilliam v. ‘wist, agreement, it is imposed by law on the circumstances of #.W.® the parties. The agent occupies the position of the negotiorum gestor of Roman law.? It remains to consider ratification, or the adoption by A of the benefit and liabilities of a contract made by X on his behalf, but without his authority. The rules which govern ratification may be stated thus : — The agent must contract as agent, for a principal who is in contemplation, and who must also be in existence at the time, for such things as the principal can and lawfully may do. 1 Martin v. Webb, 110 U.S. 7; Johnson v. Hurley, 115 Mo. 5138. 2 Benjamin v. Dockham, 184 Mass. 418; McCready v. Thorn, 51 N.Y. 454; Terre Haute &c. R. v. McMurray, 98 Ind. 358. Cf. Sevier v. Birmingham §c. R., 92 Ala. 258. Huffcut on Agency, §§ 54-59. 566.) (iv) Rati- fication : rules which govern it. Wilson v. Tumman, 6M. &G. 242, Agency must be declared, See post, Pp. B20. : for a con- templated principal, Wilson v. Tumman, 6M. &G. 242, Watson v. 406 AGENCY. Part VI. ‘An act done for another, by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him. In that case the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be in tort or in contract.’ (a) The agent must contract as agent. He must not incur a liability on his own account and then assign it to some one else under colour of ratification. If he has a principal and contracts in his own name he cannot divest himself of the liability to have the contract enforced against him by the party with whom he dealt, who is entitled under such circumstances to the alternative liability of the agent and principal. If he has no prin- cipal and contracts in his own name he can only divest himself of his rights and *liabilities in favour of another by assignment to that other; subject to the rules laid down in Part II. ch. ii. § 1. (6) The agent must act for a principal who is in con- templation.! He must not make a contract, as agent, with a vague expectation that parties of whom he is not cognizant at the time will relieve him of its liabilities. The act must be ‘done for another by a person not assuming to act for himself but for such other person.’ This does not prevent ratification in the case of a broker who makes contracts, as agent, expecting that customers with whom he is in the habit of dealing will take them off his hands. Thus, in contracts of marine insurance, persons ‘who are not named or ascertained at the time the policy is effected are allowed to come in and take the benefit of the insurance. But then they must be persons who were contemplated at the time the policy was made.’ So too where work is done on behalf of the estate of a [#335] 1 Hamlin v. Sears, 82 N. Y. 327; Western Pub. House v. District Tp. of Rock, 84 Iowa, 101. Chap. I. FORMATION OF AGENCY, 407 deceased person, if it is done by order of one who after- wards becomes administrator and ratifies the contract for the work so done, such a ratification creates a binding promise to pay for the work. Here there is a principal contemplated and existent, though he has no title to act’ as principal until he has obtained letters of administration. (c) The principal must be in existence.! This rule is important in its bearing on the liabilities of companies for contracts made by the promoters on their behalf before they are formed. In Kelner v. Baxter the promoters of a company as yet unformed entered into a contract on its behalf and the company when duly incorporated ratified the contract. It became bankrupt and the defendant who had contracted as its agent was sued upon the contract. It was argued that the liability had passed, by ratification, to the company and no longer attached to the defendant, but the court held that this could not be. ‘Could the “company,”’ said Willes, J., ‘become liable by a mere ratification? Clearly not. Ratification can only be by a [#336] *person ascertained at the time of the act done, —by a per- son in existence either actually or in contemplation of law, as in the case of the assignees of bankrupts, or administrators whose title for the protection of the estate vests by relation.’ (d) The agent must contract for such things as the principal can, and lawfully may do. There can be no ratification of a void act. And so if an agent enter into a contract on behalf of a principal who is incapable of making it, or if he enter into an illegal contract, no ratification is possible. The transaction is void, in the one case from the incapacity of the principal, in the other from the illegality of the act.? 1 McArthur v. Times Printing Co., 48 Minn. 319; Bell’s Gap R. R. v. Christy, 79 Pa. St. 54. ? Milford v. Water Co., 124 Pa. St. 610. In re Wat- son, 18 Q. B. D. 116. who is in existence. L. R. 2 ¢. P. 174, ibid. p. 184. Mannv. Edinburgh Northern Tramways Co., [1893] A. ©, 19. 408 AGENCY. Part VI. pane ¥-, On this last ground it has been found that. a forged 6 Exch. 8. signature cannot be ratified, but ratification is not here in question. For one who forges the signature of another is not an agent, actually or in contemplation. The forger does not act for another, he personates the man whose signature he forges.} And the principal who accepts the contract made on his behalf by one whom he thereby undertakes to regard as his agent, may, as in the acceptance of any other simple contract, signify his assent by words or by conduct. He may avow his responsibility for the act of his agent, or he may take the benefit of it, or otherwise by acquiescence in what is done create a presumption of authority given. Where conduct is relied upon as constituting ratification the relations of the parties and their ordinary course of dealing may create a greater or less presumption that the principal is liable. 1 Accord: Henry v. Heeb, 114 Ind. 275; Workman v. Wright, 33 Oh. St. 405. Contra: Greenfield Bank v. Crafts, 4 Allen (Mass.), 447; Hefner v. Vandolah, 62 Ill. 488. CHAPTER II. Effect of the Relation of Principal and Agent. THE effects of the relation of principal and agent when created as described above may be thus arranged. 1. The rights and liabilities of principal and agent inter se. 2. The rights and liabilities of the parties where an agent contracts as agent for a named principal. 3. The rights and liabilities of the parties where an agent contracts for a principal whose name, or whose existence, he does not disclose. 1. Tor RicgHts AND LIABILITIES OF PRINCIPAL AND AGENT inter se. The relations of principal and agent inter se are made up of the ordinary relations of employer and employed, and of those which spring from the special business of an agent- to bring two parties together for the purpose of making a contract —to establish privity of contract be- tween his employer and third parties. The principal must pay the agent such commission, or reward for the employment, as may be agreed upon be- tween them. He must also indemnify the agent for acts lawfully done and liabilities incurred in the execution of his authority. The agent is bound, like every person who enters into a contract of employment, to account for such property of 1 Bibb v. Allen, 149 U. S. 481. 409 (1) Princi- pal and agent. Relations of princi- pal and agent. (2) Duty of principal: to indem- nify or reward. (i) Duty of agent: (a) ac- counting ; (b) dili- gence; (c) skill; Jenkins v. Betham, 15 C. B. 168. (d) good faith. Bad faith: by taking reward from others; Harrington v. Victoria Graving Dock Co., 3 Q. B. D. 549. L. B.9Q. B. 480. 410 AGENCY. Part VI. his employer as comes into his hands in the course of the employment; to use ordinary diligence in the discharge of his duties; to display any special skill or capacity which he may profess for the work in hand. *The agent must make no profit out of transactions into which he may enter on behalf of his principal in the course of the employment beyond the commission [*338] agreed upon between them. Where an agent is promised a reward which might induce him to act disloyally to his employer, he cannot recover the money promised to him. An engineer in the employ of a railway company was promised by the defendant company a commission the consideration for which was, partly the superintendence of their work, partly the use of his influence with the rail- way company to obtain an acceptance by them of a tender made by his new employers. He did not appear in fact to have advised his first employers to their prejudice, but it was held that he could not recover in an action brought for this commission. ‘It needs no authority to show that, even though the employers are not actually injured and the bribe fails to have the intended effect, a contract such as this is a corrupt one and cannot be enforced.’ The agent, if he obtains money by a transaction of this nature, is bound to account for it to his principal, or pay it over to him. If he does not do so the money can be recovered by the principal as a debt due to him? In Morison v. Thompson the defendant was employed as broker by the plaintiff to purchase a ship from X. X had promised his broker that he would allow him to keep any excess of the purchase money over £8500. The defend- ant bought the ship for his employer for £9250, and 1 Page v. Wells, 87 Mich. 415; Laverty v. Snethen, 68 N. Y. 522; Kiewert v. Rindskopf, 46 Wis. 481. 2 Boston v. Simmons, 150 Mass. 461. Chap. Il. RELATIONS OF PRINCIPAL AND AGENT. 411 received by arrangement with the broker of XY the sum of £225, a portion of the excess price. The plaintiff dis- covered this and sued his agent for £225 as money received to his use, and it was held that he could recover the money. But the agent is his principal’s debtor, not his trustee for money so received. If the money is invested in land Ch.D or securities these cannot be claimed by the principal, any more than he can claim profits made out of the sums thus *received. They constitute a debt due to him, and [*339] this he can recover. The agent may not depart from his character as agent and become a principal party to the transaction even though this change of attitude do not result in injury to his employer. Ifa man is employed to buy or sell on behalf of another he may not sell to his employer or buy of him.! Nor if he is employed to bring his principal into con- tractual relations with others may he assume the position of the other contracting party. In illustrating these propositions we may usefully distin- guish employment to buy upon commission, from employ- ment to represent a buyer or seller: the one is commission agency, which is not agency in the strict sense of the word, the other is genuine agency. (1) A may agree with X to purchase goods of X at a price fixed upon. This is a simple contract of sale and each party makes the best bargain for himself that he can. (2) Or A may agree with X that X shall endeavour to procure certain goods and when procured sell them to A, receiving not only the price at which the goods were pur- chased but a commission or reward for his exertions in procuring them. 1 Davis v. Hamlin, 108 Ill. 39; Gardner v. Ogden, 22 N. Y. 327; Geisinger v. Beyl, 80 Wis. 448. Lister & Co. v. Stubbs, 45 15. by becom- ing princi- pal as against his employer. See Story on Agence gg 210, 211° Compare: sale, com- mission agency, Treland v. Livingston, .R.5 H. L. 407. Cassaboglou v. Gibbs, Rothschild v. Brook- man, 2 Dow & Cl, 188. brokerage. 412 AGENCY. Part VI. Here we have a contract of sale with a contract of em- ployment added to it, such as is usually entered into by a commission agent or merchant, who supplies goods to a foreign correspondent. In such a case the seller procures and sells the goods not at the highest but at the lowest price at which they are obtainable: what he gains by the the transaction is not a profit on the price of the goods but a payment by way of commission, which binds him to sup- ply them according to the terms of the order or as cheaply as he can. If a seller of goods warranted them to be of a certain quality he would be liable to the buyer, on the non-fulfil- ment of the warranty, for the difference in value between the goods promised and those actually supplied. If a com- mission agent undertakes to procure goods of a certain quality and fails to *do so the measure of damages is the loss which his employer has actually sustained, not the profit which he might have made. A seller of goods with a warranty promises that they shall possess a certain quality. A commission agent only undertakes to use his best efforts to obtain goods of such a quality for his employer. And here the person employed has no authority to pledge his employer’s credit to other parties, but under- takes simply to obtain and supply the goods ordered on the best terms. Yet it would seem that he might not, without his employer’s assent, supply the goods himself, even though they were the best obtainable and supplied at the lowest market price. This is an implied term in his contract of employment. (8) Or thirdly, A may agree with X that in consider- ation of a commission paid to X he shall make a bargain for A with some third party. X is then an agent in the true sense of the word, a medium of communication to establish privity of contract between two parties. Under these circumstances it is imperative upon X that [#340] Chap. II. RELATIONS OF PRINCIPAL AND AGENT. 413 he should not divest himself of his character of agent and become a principal party to the transaction. This may be said to arise from the fiduciary relation of agent and principal: the agent is bound to do the best he can for his principal; if he put himself in a position in. which he has an interest in direct antagonism to this duty, it is difficult to suppose that the special knowledge, on the strength of which he was employed, is not exercised to the dis- advantage of his employer. Thus if a solicitor employed to effect a sale of property purchase it, nominally for another, but really for himself, the purchase cannot be enforced. But we may put the rule on another ground. If A employs X to make a bargain for him with some third party, the contract of employment is not fulfilled if X make the bargain for himself. The employer may sustain no loss, but he has not got what he bargained for. Thus in Robinson v. Mollett the defendant gave an order to *the plaintiff, a broker in the tallow trade, for the purchase of a quantity of tallow. In accordance with the custom of the market the broker did not establish privity of contract between the defendant and a seller, but simply appropriated to him an amount of tallow, corre- sponding to the order, which he had purchased from a sell- ing broker. It was held that the defendant could not be required to accept goods on these terms, and that he was not bound by acustom of the market of which he was not aware and which altered the ‘intrinsic character’ of the contract. The broker was employed to make a contract on behalf of his principal, he had in fact made a sale to him, and the House of Lords held that such a transaction could not be supported.? [*341] 1Cf. Terry v. Birmingham Nat. Bk., 99 Ala. 566; Skiff v. Stoddard, 63 Conn. 198. Agent to make a contract must remain agent. McPherson ae . Ca. o54)P L. RB. 7H. L. 802. Robinson v. Mollett, L. R. 7H. LL. 802. (e) Not to delegate authority. 8 Ch. D. 810. New Zea- land Co. v. Watson, 7Q. B.D. (C. A.) 874. 414 AGENCY. Part VI. The agent may not, as a rule, depute another person to do that which he has undertaken to do. The reason of this rule, and its limitations, are thus stated by Thesiger, L.J., in De Bussche v. Alt. ‘As a general rule, no doubt, the maxim delegatus non potest delegare applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person; but this maxim when analyzed merely imports that an agent cannot, without authority from his principal, devolve upon another obligations to the principal which he has himself undertaken personally to fulfil; and that inasmuch as confidence in the particular person employed is at the root of the contract of agency, such authority cannot be implied as an ordinary incident to the contract.’ The Lord Justice points out that there are occasions when such an authority must needs be implied, occasions springing from the conduct of the parties, the usage of a trade, the nature of a business, or an unforeseen emergency, ‘and that when such implied authority exists and is duly exercised, privity of contract arises between the principal and the substitute, and the latter becomes as responsible to the former for the due discharge of the duties which his employment casts on him, as if he had been appointed agent by the principal himself.’ 4 *But where there is no such implied authority and [842] the agent employs a sub-agent for his own conven- ience, no privity of contract arises between the principal and the sub-agent. On default of the agent the prin- cipal cannot intervene as an undisclosed principal to the contract between agent and sub-agent. Nor can he treat the sub-agent as one employed by him, and fol- low and reclaim property which has passed into the sub- agent’s hands.? 1 Harralson v. Stein, 50 Ala. 8347; Grady v. American Cent. Ins. Co., 60 Mo. 116; Newell v. Smith, 49 Vt. 255. 2 Exchange Nat. Bk. v. Third Nat. Bk., 112 U. 8. 276. Chap. II. CONTRACTING FOR NAMED PRINCIPAL. 415 Il. RigHts AND LIABILITIES OF THE PARTIES WHERE AN AGENT CONTRACTS FOR A NAMED PRINCIPAL. Where an agent contracts, as agent, for a named princi- pal, so that the other party to the contract looks through the agent to a principal whose name is disclosed, it may be laid down, as a general rule, that the agent drops out of the transaction so soon as the contract is made. Where the transaction takes this form only two matters arise for discussion: the nature and extent of the agent’s authority ; and the rights of the parties where an agent enters into contracts, either without authority or in excess of an authority given to him. Much trouble has been wasted in distinguishing general from special agents as though they possessed two sorts of authority different in kind from one another. But there is no such difference. If John Styles, having authority to act on behalf of Richard Roe and describing himself as agent for Richard Roe, makes a contract on Roe’s behalf with John Doe, he brings Roe and Doe into the relation of two contracting parties, and himself drops out. The authority may have been wide or narrow, general or special, but the difference is only one of degree. For instance, X sends A to offer £100 for M%’s horse Robin Hood, or to buy the horse for a price not exceeding £100, or for as low a price as he can, or to buy the best horse in *M’s stable at the lowest price, or _X sends A to London to get the best horse he can at the lowest price, or X agrees with A that A shall keep him supplied with horses of a certain sort and provide for their keep: all these cases differ from one another in nothing but the extent of the authority given, there is no difference in kind between any one of the cases and any other: in none of them does A incur any personal liability to 7 or any one with whom he contracts on behalf of X so long as he acts as agent, names his principal, and keeps within the limits of his authority. [#343] (2) Dis- closed principal. (i) Au- thorized contract. (a) Agent for named principal drops out when contract made, whether authority is general OF special... . ante, p. 383. Maddick v. Marshall, 16C. B., N. 8. 893. Edmunds v. Bushell and Jones, L. R. 1Q. B. 97. Auc- tioneer. 416 AGENCY. Part VI. It should be observed —indeed it follows from what has been said, that X cannot by private communications with A limit the authority which he has allowed A to assume. ‘There are two cases in which a principal becomes liable for the acts of his agent — one where the agent acts within the limits of his authority, the other where he transgresses the actual limits but acts within the apparent limits, where those apparent limits have been sanctioned by the principal.’ Jones employed Bushell as manager of his business, and it was incidental to the business that bills should be drawn and accepted from time to time by the manager. Jones however forbade Bushell to draw and accept bills. Bushell accepted some bills, Jones was sued upon them and was held liable. ‘If a man employs another as an agent in a character which involves a particular authority, he cannot by a secret reservation divest him of that authority.’ ! We may note here the sort of authority with which certain kinds of agents are invested in the ordinary course of their employment. (a) An auctioneer is an agent to sell goods at a public auction. He is primarily an agent for the seller, but, upon the goods being knocked down, he becomes also the agent of the buyer; and he is so for the purpose of the signatures of both parties within the meaning of the 4th section of the Statute of Frauds and of the Sale of Goods Act. He has not merely an authority *to sell, but actual possession of the goods, and a lien upon them for his charges. He may sue the purchaser in his own name, and even where he contracts avowedly as agent, and for a known principal, he may introduce such terms [*344] 1 Hatch v. Taylor, 10 N. H. 588; Howell v. Graff, 25 Neb. 180; Butler v. Maples, 9 Wall. (U. S.) 766. Chap. I. CONTRACTING FOR NAMED PRINCIPAL. 417 into the contract made with the buyer as to render him- self personally liable.t (0) A factor by the rules of common law and of mer- cantile usage is an agent to whom goods are consigned for the purpose of sale, and he has possession of the goods, authority to sell them in his own name, and a gen- eral discretion as to their sale. He may sell on the usual terms of credit, may receive the price, and give a good discharge to the buyer. He further has a lien upon the goods for the balance of account as between himself and his principal, and an insurable interest in them. Such is the authority of a factor at common law, an authority which the principal cannot restrict, as against third parties, by instructions privately given to his agent. By the Factors Act 1889% the presumed authority of the factor is extended. Persons who, in good faith, advance money on the security of goods or documents of title are thereby given assurance that the possession of the goods, or of the documents of title to them, carries with it an authority to pledge them. And so long as the agent is left in possession of the goods revocation of authority by the principal does not prejudice the right of the buyer or pledgee if the latter has not notice of the revocation at the time of the sale or pledge.? (c) A broker is an agent primarily to establish privity of contract between two parties. Where he is a broker for sale he has not possession of the goods, and so he has not the authority thence arising which a factor enjoys. Nor @ This act consolidates the four previous acts of 1823, 1825, 1842, 1877. 1 Walker v. Herring, 21 Gratt. (Va.) 678; Thompson v. Kelly, 101 Mass. 291. 2 For Factors Acts see Stimson, Am. St. Law, §§ 4380-88. 25 Factor. Pickering v. Busk, 15 East, 88, 52 & 53 Vict. c, 44, Broker. Forms of bought and sold notes. Fairlie v. Southwell v. Bowditch, 1C0.P.D. (C, A.) 874. Fleet v. Murton. L.R.7Q.B. 126. Higgins v. Senior, 8M. & W. 884, Commis- sion agent, 418 AGENCY. Part VI. has he authority to sue in his own name on contracts made by him. *The forms of a broker’s notes of sale may be use- ful as illustrating what has hereafter to be said with reference to the liabilities of parties where an agent con- tracts for a principal whose name or whose existence he does not disclose. When a broker makes a contract he puts the terms into writing and delivers to each party a copy signed by him. The copy delivered to the seller is called the sold note, that delivered to the buyer is called the bought note. The sold note begins ‘Sold for A to X’ and is signed ‘M broker,’ the bought note begins ‘ Bought for X of A’ and is signed ‘M broker.’ But the forms may vary and with them the broker’s liability. We will follow these in the sold note. G) ‘Sold for A to X”’ (signed) ‘J broker.’ Here the broker cannot be made liable or acquire rights upon the contract: he acts as agent for a named principal. Gi) ‘Sold for you to our principals’ (signed) ‘MW broker.’ Here the broker acts as agent, but for a prin- cipal whom he does not name. He can only be made liable by the usage of the trade if such can be proved to exist. Gii) ‘Sold by you to me’ (signed) M. Here we suppose that the broker has a principal, though his existence is not disclosed, nor does the broker sign as agent. He is personally liable, though the seller may prefer to take and may take the liability of the principal when disclosed; and the principal may intervene and take the benefit of the contract. [*345] (d) A commission agent is, as was described above, a person employed, not to establish privity of contract 1 Darrow v. Horne Produce Co., 57 Fed. Rep. 463. Chap. II. CONTRACTING FOR NAMED PRINCIPAL. 419 between his employer and other parties, but to buy or sell goods for him on the best possible terms, receiving a commission as the reward of his exertions. (¢) A del credere agent is an agent for the purpose of sale, and gives, besides, an undertaking to his employer that the parties with whom he is brought into contractual relations will perform the engagements into which they enter. *He does not guarantee the solvency of these par- ties, or promise to answer for their default: his undertaking does not fall under 29 Car. II. ¢. 3. § 4, but is rather a promise of indemnity to his employer against his own inadvertence or ill-fortune in making contracts for him with persons who cannot or will not perform them.! [#346] I have said that the agent contracting within his authority for a named principal drops out of the trans- action. As a rule he acquires neither rights nor liabilities on a contract so made. Plainly he cannot sue; for the party with whom he contracted has been induced by him to look to the named principal, and cannot, unless he so choose, be made liable to one with whom he dealt merely as the mouthpiece of another. And this is so though the professed agent be the real principal. If John Styles agrees to sell his goods to John Doe describing himself as the agent and the goods as the property of Richard Roe, he cannot enforce the contract, for it was not made with him.? With a few exceptions he cannot be sued.¢ 2 Parol contracts have been framed so as to leave it uncertain whether the agent meant to make himself personally liable. But these do not affect the tule. 1 Lewis v. Brehme, 33 Md. 412; Wolff v. Koppel, 5 Hill (N. Y.), 458. 2 Dicey on Parties (Am. ed. 1879), 165. ante, p. 340. Ireland vy. Livingston, L.R.5 HL. 407. Del cre- dere agent. (b) Agent cannot sue or be sued. Bickerton v. Burrell, 5M. &S. 383. Lewis v. Nicholson, 18 Q. B. 503. Excep- tions. Lennard v. Robinson, 5E. & B.125. Deed. Beckham v. Drake, 9M. &W. 95. Foreign principal. Armstrong vy. Stokes, L. R.7 Q. B. 605. Non- existent principal. L. R. 20. P. 175. (ii) Un- authorized contract. -Remedies against agent. 420 AGENCY. Part VI. An agent who makes himself a party to a deed is bound thereby, though he is described as agent. This arises from the formal character of the contract, and the technical rule that ‘those only can sue or be sued upon an indenture who are named or described in it as parties.’ ? An agent who contracts on behalf of a foreign principal has, by the usage of merchants, no authority to pledge his employer’s credit, and becomes personally liable on the contract.? If an agent contracts on behalf of a principal who does not exist or cannot contract, he is liable on a contract so made.® *The case of Kelner v. Baxter was cited above to show that a company cannot ratify contracts made on its behalf before it was incorporated: the same case estab- lishes the rule that the agent so contracting incurs the liabilities which the company cannot by ratification assume. ‘Both upon principle and upon authority,’ said Willes, J., ‘itseems to me that the company never could be liable upon this contract, and construing this document ut res magis valeat quam pereat, we must assume that the parties con- templated that the persons signing it would be personally liable.’ [*347] If a man contracts as agent, but without authority for a principal whom he names, he cannot bind his al- leged principal or himself by the contract: but the party whom he induced to contract with him has one of two remedies. (a) If the alleged agent honestly believed that he had 1 Briggs v. Partridge, 64 N. Y. 857; Borcherling v. Katz, 87 N. J. Eq. 150. ? The presumption is otherwise in the United States. Kirkpatrick v. Stainer, 22 Wend. (N. Y.) 244; Oelricks v. Ford, 23 How. (U. 8.) 49. 8 Patrick v. Bowman, 149 U. 8. 411; Lewis v. Tilton, 64 Iowa, 220. Chap. Il. CONTRACTING FOR NAMED PRINCIPAL. 421 an authority which he did not possess he may be sued upon a warranty of authority This is an implied promise to the other party that in consideration of his making the contract the professed agent undertakes that he is acting with the authority of a principal. Directors of a building society borrowed money on its behalf, which the society had no power to borrow, and the lender, being unable to recover the loan from the society, sued the directors. They were held liable ez contractu as having impliedly undertaken that they had an authority to bind the society. ‘Persons who induce others to act on the supposition that they have authority to enter into a binding contract on behalf of third persons, on it turning out that they have no such authority, may be sued for damages for the breach of an implied warranty of authority. This was decided in Collen v. Wright and other cases.’ It would be satisfactory to find a better ground for the agent’s liability in such cases than the creation of a warranty or promise which is never contemplated by the parties at the time when it is supposed to be made. Indeed the doctrine of the warranty of authority was only admitted in the leading *case on the subject under protest from a very high authority. The difficulty is occasioned by the common law rule that no action lies for damages caused by innocent misrepresentation. But the Court of Appeal has lately placed the liability of the professed agent on this very ground, describing it as an exception to the general rule of law that ‘an action for damages will not lie against a person who honestly makes a misrepresentation which misleads another.’ If this may be accepted as the true ground of action we are well rid of a grotesque legal fiction. [+348] 1 Kroeger v. Pitcairn, 101 Pa. St. 311; Baltzen v. Nicolay, 53 N. Y. 467. (a) War- ranty of authority. Richardson v. Wil- liamson, L.R.6Q.B 276, Cockburn, C.J., in Collen v. Wright. Firbank’s seek Humphreys, Lindley, | L.J. 18Q. B. D. (C, A.) 62. (b) Action of deceit. 8B. &A. 114. (3) Undis- closed principal. Denman, C.J., in Humble v. Hunter, 12 Q. B. 817. (i) Where principal’s name is undis- closed. 422 AGENCY. Part VI. () If the professed agent knew that he had not the authority which he assumed to possess, he may be sued by the injured party in the action of deceit. The case of Polhill v. Walter is an illustration of this. The defendant accepted a bill as agent for another who had not given him authority to do so. He knew that he had not the authority but expected that his act would be ratified. It was not ratified, the bill was dishonoured, and the defendant was held liable to an indorsee of the bill as having made a representation of authority false to his knowledge, and falling under the definition of fraud given in a previous chapter. The reason why the alleged agent should not be made personally liable on such a contract is plain. The man whom he induced to enter into the contract did not contemplate him as the other party to it, or look to any one but the alleged principal. His remedy should be, as it is, for misrepresentation, innocent or fraudulent. III. Riguts anp LIABILITIES OF THE PARTIES WHERE THE PRINCIPAL IS UNDISCLOSED. Where the name of the principal is not disclosed. A man ‘has a right to the benefit which he contemplates from the character, credit and substance of the person with whom he contracts;’ if therefore he enters into a contract with an agent who does not give his principal’s name, the *presumption is that he is invited to give credit to the agent. Still more if the agent do not disclose his principal’s existence. In the last case invari- ably, in the former case within certain limits, the party who contracts with an agent on these terms gets the benefit of an alternative liability and may elect to sue agent or principal upon the contract.? [*349] 1 Noyes v. Loring, 55 Me. 408. 2 Byington v. Simpson, 184 Mass. 169; Cream City Glass Co. v. Friedlander, 84 Wis. 53. Chap. II. THE UNNAMED PRINCIPAL. 423 An agent who contracts as agent but does not disclose the name of his principal, is said to render himself per- sonally liable if the other party to the contract choose to treat him so, but this must depend on the construction of terms. The exceptions to the general rule are wide and its application in reported cases is not as frequent as might be expected. We may state two propositions, which must be taken subject to exceptions to be hereafter mentioned: — ’ (1) An agent who contracts for an unnamed principal, as agent will not be personally liable. The agent who describes himself as such in the contract, and signs himself as such, if the contract be in writing, protects himself against liability. ‘There is uo doubt at all in principal,’ said Blackburn, J., in Fleet v. Murton, ‘that a broker as such, merely dealing as broker and not as purchaser, makes a contract, from the very nature of things, between the buyer and seller, and is not himself either buyer or seller, and that consequently where the contract says “sold to AB” or “sold to my principals” and the broker signs himself simply as broker he does not make himself by that either the purchaser or seller of the goods.’ _ (2) An agent who contracts for an unnamed principal, without expressly contracting as agent, will be personally liable. In the absence of words indicating agency, the word ‘broker’ attached to a signature is merely descriptive and does not limit liability, so that if the agent do not by words exclude himself from liability, it may be assumed that one who deals with an agent for an unnamed princi- pal expects and is entitled to the alternative liability of the principal and the agent. [#350] *Even where the agent is distinctly described to be such, the usage of a trade, as in Fleet v. Murton, 1 Johnson v. Armstrong, 83 Tex. 825. Cf. Byington v. Simpson, supra. Liability of agent: Thomson v. Davenport, 9B. & C. 78. contract- ing as agent ; L.B.7Q.B. 126, and see Southwell v. Bowditch, 10. P.D. (C, A.) 374. not con- tracting as agent. Hutcheson y. Eaton, 18 Q. B. D. 861. Thomson v. Davenport, 9B. & OC, 78. Excep- tions. L. R. 7Q. B. 126. Armstrong v. Stokes, L. R.7 Q. B. 605. 16 Q. B. 655. (it) Where principal’s existence is undis- closed. Both principal and agent liable. 13Q. B. D. 635. 424 AGENCY. Part VI. may make him liable: so too may the general rule that an agent acting for a foreign principal has no authority to pledge his credit. Where a man has under these circumstances contracted as agent, he may declare himself to be the real principal. The other party to the contract does no doubt lose the alternative liability of the agent or the unnamed principal. Yet, if he was willing to take the liability of an unknown person, it is hard to suppose that the agent was the one man in the world with whom he was unwilling to con- tract; and at any rate the character or solvency of the unnamed principal could not have induced the contract. Thus in Schmaltz v. Avery, Schmaltz sued on a contract of charter-party into which he had entered ‘on behalf of another party’ with Avery. He had named no princi- pal and it was held that he might repudiate the character of agent and adopt that of principal. Where the existence of the principal is undisclosed. If the agent acts on behalf of a principal whose exist- ence he does not disclose, the other contracting party is entitled to elect whether he will treat principal or agent as the party with whom he dealt. The reason of this rule is plain. If A enters into a contract with X he is entitled at all events to the liability of the party with whom he supposes himself to be contracting. If he subsequently discovers that X is in fact the representative of WM he is entitled to choose whether he will accept the actual state of things, and sue M as principal, or whether he will 2 Barrow v. Dyster is an instance of conflict between the terms of a con- tract and the custom of a trade. Hides were purchased through brokers who did not disclose the name of their principals. The selling brokers were to arbitrate in case of difference under the contract. Evidence of a custom of the hide trade which would make them personally liable, was rejected, as inconsistent with the arbitration clause, which would thus have made them judges in their own cause. Chap. II THE UNNAMED PRINCIPAL. 425 adhere to the supposed state of *things upon which he entered into the contract, and continue to treat X as the principal party to it.2 I have stated the rule of evidence by which a man who has contracted as principal may be shown to be an agent. Where a contract is ostensibly made between A and _X, A may prove that X is agent for M with a view of fixing W [*351] supra, p. 268. Higgins v. Senior, with the liabilities of the contract. But X cannot, by 8M. &W proving that M is his principal, escape the liabilities of a contract into which he induced A to enter under the a supposition that he (X) was the real contracting party. Neither party may escape any liability which he assumed under the contract, but A may show that his rights are wider than they appeared.! Though the real principal is entitled to sue upon such a contract, A may set up as against him any defence which he might have used against the agent. Thus where a principal sells goods through a factor who has authority to effect sales in his own name: if he intervene and sue a purchaser for the price he may be met by any set-off which the purchaser may have against the factor in the course of his transactions with him.? But the right of the other contracting party to sue agent or principal —to avail himself of an alternative liability — may, in various ways, be so determined, that he is limited to one of the two and has no longer the choice of either liability. (a) The agent may contract in such terms that the idea of agency is incompatible with the construction of the contract.® @ If the other party elect to treat the agent as agent the principal will be bound by all acts which fall within the authority usually conferrcd upon an agent of the character in question. He cannot set up any instructions limiting the ostensible character of the agency. 1 Byington v. Simpson, 134 Mass. 169. 2 Taintor v. Prendergast. 8 Hill (N. Y.), 72. 3 Winchester v. Howard, 97 Mass. 308. 834. Trueman v. Defence against agent available against principal. Borries v. Imperial Ottoman Alterna- tive liabil- ity, how concluded. Watteau v. supra, p. 343. Humble v. Hunter, 12 Q. B. 310. Per Lord Cairns, Hamilton v. el 4 App. Ca. 514, Priestly v. Fernie, 3H. &C. 984, Armstrong y. Stokes, L.R.7Q. 598. 426 AGENCY. Part VI. Thus where an agent in making a charter-party described himself therein as owner of the ship it was held that he could not be regarded as agent, that his principal could not intervene, nor could, by parity of reasoning, be sued. *(6) If the other party to the contract after hav- ing discovered the existence of the undisclosed ! >! principal do anything which unequivocally indicates the adoption of either principal or agent as the party liable to him, his election is determined and he cannot after- wards sue the other. So too if, before he ascertain the fact of agency, he sue the agent and obtain judgment, he cannot afterwards recover against the principal.?- Merely to bring an action under these circumstances would not determine his rights. ‘For it may be that an action against one might be dis- continued and fresh proceedings be well taken against the other.’ § (ce) Again, if, while exclusive credit is given to the agent, the undisclosed principal pays the agent for the price of goods sold to him, he cannot be sued when he is discovered to be the purchaser. If A buys goods from X on behalf of M whose existence he does not disclose, and M before he is known to be principal pays the price to A, ®. M cannot be sued by X.4 The position of the parties is clearly different to that which they occupy where the existence of a principal is known, though his name is not disclosed. There the other contracting party presumably looks beyond the agent to the credit of the principal. ‘The essence of such a 1 Kingsley v. Davis, 104 Mass. 178. 2 Contra: Beymer v. Bonsall, 79 Pa. St. 298; Maple v. R. Co., 40 Oh. St. 318. 3 Cobb v. Knapp, 71 N. Y. 348. 4 Fradley v. Hyland, 37 Fed. Rep. 49; Thomas y. Atkinson, 88 Ind. 248. Chap. II. LIABILITY FOR AGENT’S FRAUDS. 427 transaction,’ said Bowen, J., in Irvine v. Watson, ‘is that the seller as an ultimate resource looks to the credit of some one to pay him if the agent does not.’ If therefore the principal settles accounts with his agent before the ordinary period of credit has expired the seller would be deprived of the liability to which he was induced to look when he entered into the contract.} IV. LIABILITY OF PRINCIPAL FOR FRAUD of AGENT. A principal is liable to an action for deceit for the fraud of his agent, if the fraud was committed in the ordinary course of his employment. The liability of the principal is in *no wise different from that of an employer who is responsible for wrongful acts done by those in his service, within the scope of their employ- ment. A man is equally liable for the negligence of his coachman who runs over a foot passenger in driving his master’s carriage from the house to the stables, and for the fraud of his agent who, being instructed to obtain a pur- chaser for certain goods, obtains one by false statements as to the quality of the goods.? But if the person employed act beyond the scope of his employment he no longer represents his employer to make him lable in tort or contract. An agent was employed to sell a log of mahogany; he was not authorized to war- rant its soundness, but he did so knowing it to be unsound. Barons Bramwell and Martin held that the employer was not liable for deceit: nor could the contract be avoided, because the parties could no longer be replaced in their previous positions, for the log had been sawn up and partly used. [*353] 1 See Huffcut on Agency, § 125. 2 Jeffrey v. Bigelow, 13 Wend. (N. Y.) 518; Peebles v. Patapsco Guano Co. 77 N. C. 233; Haskell v. Starbird, 152 Mass. 117; New York §c. R. v. Schuyler, 34 N. Y. 30. 5Q. B.D. 107. (OC. A.) 414, (4) Fraud of agent within scope em- ployment; Barwick y. English Joint Stock Bank, L. R. 2 Ex. 259. beyond scope of employ- ment. Udell v. Atherton, TH. &N. 172. Liability ex delicto; ex con- tractu. National Exchange Co. of Glas- gow v. Drew, 2 Macq. H. L. 6. 146, Liability for non- disclosure. Blackburn vy. Vigors, 17Q. B. D. (C, A.) 553, 12 App. Ca. 531. 428 AGENCY. Part VI. The rights of the parties may be thus stated. If the agent commits a fraud in the course of his employment, he is liable, and so is his principal. If he commits a fraud outside the scope of his authority he would be liable, but not his principal. In the first case the other party might sue upon the contract, and in either case he would be entitled to avoid the contract upon the conditions described on page 176. Where a principal allows his agent to make a statement which he knows, but which the agent does not know, to be false, it would seem difficult to sue either principal or agent for deceit; for the one did not make the statement, and the other honestly believed it to be true. But the contract could be set aside or resisted on the ground of material misrepresentation if not on the ground of fraud: and it would be strange if the consequences of fraud did not attach to a principal who knowingly employed an ignorant agent in order to profit by his misrepresentations. In the case of a contract uberrimae fidet, the principal *would seem to be liable to have his contract inval- idated if his agent conceals a material fact. It is said that ‘the knowledge of the agent is the knowledge of the principal,’ and this doctrine has been carried so far that, in the Court of Appeal, a principal was held to be unable to recover on a policy of insurance because an agent whom he had employed, but who had not effected the insurance, knew of facts, materially affecting the risk, which he did not communicate to his employer, and of which the employer was unaware. The House of Lords overruled this decision. The agent is employed to represent the principal for one or more transactions with more or less discretionary power. What he does in the course of the transaction is the act of his principal; what he knows and does not tell is —if he ought to tell it and if the transaction is carried out —a non-disclosure which would affect his principal’s [#354] Chap. IT. LIABILITY FOR AGENT’S FRAUD. 429 rights. But he represents his principal for the purpose of the transaction in question, and if, before it is effected, his authority is revoked, the relation of employer and employed ceases to exist. In fact the knowledge of the agent is the knowledge of When the principal when, and only when, it is imparted to the ree as principal, or the transaction to which the knowledge is agent is material is carried out.! Hence it follows that if the nay a agent knows that the principal is being defrauded, the principal. principal cannot set aside the contract on the ground of fraud. An agent of an insurance company obtained a proposal for insurance from a one-eyed man who, being also illiter- ate, signed at the request of the agent a form stating among other things that he was free from any physical infirmity. The agent knew that the insured had but one eye. The insurance was against partial or total disable- ment; after a while, the insured lost his second eye, and claimed the amount due under the policy for a total disablement. The company resisted the claim, on the ground of the falsehood contained in the proposal; but it Bawaen v. London & was held that the knowledge of the agent was their , Assur. knowledge and that they were lable. oe 534, 1See Constant v. University of Rochester, 111 N. Y. 604; Trentor v. Pothen, 46 Minn. 298. (1) Agree- ment. Revoca- tion a condition subse- quent. Limits of right to revoke. Rights of third parties. 5Q. B.D. 394. 6 App. Ca, 24, Tlustra- tion from case of CHAPTER III. Determination of Agent’s Authority. AN agent’s authority may be determined in any one of three ways: by agreement; by change of status; or by death. G) Agreement. The relation of principal and agent is founded on mutual consent, and may be brought to a close by the same process which originated it, the agreement of the parties. p Where this agreement is expressed by both parties, or where, at the time the authority was given, its duration - was fixed, the matter is obvious and needs no discussion. Where authority is determined. by revocation it must be borne in mind that the right of either party to bring the relation to an end by notice given to the other is a term in the original contract of employment. But the principal’s right to revoke is affected by the interests (1) of third parties, (2) of the agent. (1) A principal may not privately limit or revoke an authority which he has allowed his agent publicly to assume. He will be bound by the acts of the agent which he has given other persons reason to suppose are done by his authority. The case of Debenham v. Mellon is a good illustration of the nature and limits of this right of revocation. A husband who supplied his wife with such things as might be considered necessaries for her forbade her to 430 Chap. III. DETERMINATION OF AUTHORITY. 481 pledge *his credit; any authority she might ever have enjoyed for that purpose was thereby deter- mined. She dealt with a tradesman who had not before supplied her with goods on her husband’s credit and had no notice of his refusal to authorize her dealings. He supplied these goods on the husband’s credit and sued him for their price. It was held that the husband was not liable, and the following rules were laid down in the judgments given. (a) Marriage does not of itself create by implication an authority from the husband to the wife to pledge the husband’s credit; except in such cases of necessity as we have described above. The wife therefore can only be constituted her hus- band’s agent by express authority or by such conduct on his part as would estop him from denying the agency. (6) Where the husband has habitually ratified the acts of his wife in pledging his credit, he cannot, as regards those whom he has thus induced to look to him for pay- ment, revoke her authority without notice. [*356] ‘Tf a tradesman has had dealings with the wife upon the credit of the husband, and the husband has paid him without demur in respect of such dealings, the tradesman has a right to assume, zn the absence of notice to the contrary, that the authority of the wife which the husband has recognized continues. The husband’s quiescence is in such cases tantamount to acquiescence, and forbids his denying an authority which his own conduct has invited the tradesman to assume.’ (c) In the absence of such authority arising from con- duct the husband is entitled as against persons dealing with his wife to revoke any express or implied authority which he may have given her, and to do so without notice to persons so dealing. ‘The tradesman must be taken to know the law; he knows that the wife has no authority in fact or in law to pledge the husband’s credit even for necessaries, unless he expressly or impliedly gives it her, and that what the husband gives he may take away.’ husband and wife. Marriage no author- ity. supra, p. 834. But may raise a pre- sumption from con- duct. 5Q.B.D. 403. Otherwise wife’s authority revocable without notice. Per The- siger, L.J., 5Q. B.D 408. Rights of agent. _ Whatis an interest ? 5C. B. 917. ibid. 895. 432 AGENCY. Part VI. The case of husband and wife is perhaps the best, as it *is the strongest, illustration of the limits within which the principal may revoke an authority con- sistently with the rights of third parties.1 [*357] (2) If the employment is in its nature such that the authority cannot be revoked without loss to the agent, the principal may not revoke. : This rule has recently been treated as identical with a rule of a more limited significance, that ‘an authority coupled with an interest is irrevocable.’ Authorities given to an agent to pay to a third party a debt which he owes to his principal, or to sell lands and pay himself a debt due to him out of the proceeds, are instances in which an authority has been held to be irrevo- cable by reason of interest. The ‘result appears to be,’ said Wilde, C.J., in Smart v. Sandars, ‘that where an agree- ment is entered into on sufficient consideration, whereby an authority is given for the purpose of conferring some benefit on the donee of that authority, such an authority is irrevocable. That is what is usually meant by an authority coupled with an interest.’? It may be well to compare the rule in Smart v. Sandars with the wider rule which I have laid down above. In Smart v. Sandars a factor who had made advances on account of his principal sold goods of the latter, contrary to his ordérs, in order to repay himself. He alleged that he was given in the first instance authority to sell; that he had an interest in the proceeds, arising from the ad- vances; and so, an irrevocable authority. It was held that he had no such authority. 1 Notice of revocation is necessary to protect third parties. Claflin v. Lenheim, 66 N. Y. 301. But if the agency be for a single act, notice is unnecessary after the performance of that act. Watts v. Kavanagh, 35 Vt. 34. 2 Hunt v. Rousmanier, 8 Wheat. (U. 8.) 174. Chap. ITIL DETERMINATION OF AUTHORITY. 433 In Read v. Anderson an agent made bets on account of his principal and paid the bets, contrary to orders, to avoid Toye Be De being noted as a defaulter at Tattersall’s. He alleged an - authority to make and pay bets; an interest arising from his liability incurred at Tattersall’s ; and so, an irrevocable authority. *Hawkins, J., held that the liability incurred was an ‘interest’ which made the authority irrevocable. The Court of Appeal upheld his decision, but not on this ground. One may put the decisions in this way. Ifin Smart v. Sandars the principal had said to the factor to whom he was in debt, ‘sell the goods when an opportunity offers and repay yourself out of the proceeds,’ this would answer to the description of an ‘ authority coupled with an interest’ and would be irrevocable. It would in fact be a special contract between employer and employed as to the mode of satisfying a debt ; and this I believe to be the real meaning of a phrase to which some mysterious significance has been [*358] supposed to attach. As the case stood in Smart v. Sandars the fact that the principal owed money to his factor did not prevent him from revoking an authority which had not been given in con- nexion with the debt. The creditor had no right to help himself, contrary to his orders, out of his debtor’s property, even though he had once been employed to sell that property. In Read v. Anderson the agent had been employed to make a contract ; the employer endeavoured to revoke his authority, not to make similar contracts in the future, but to perform a contract already made, the non-performance of which would have exposed the agent to loss in his business. The Gaming Act of 1892 has made it impossible for such an action to be maintained henceforth by one who is em- ployed to make bets ; but the principle of Read v. Anderson still holds good as expressed by Bowen, LJ. | , 2¥ 18 Q. B. D. 779, 5C. B. 895, 18 Q. B. D. 779. ibid. 782. (2) Change of status. Bank- ruptcy. Minett v. Forester, 4 Taunt. 541. Charnley v. Winstanley, 5 East, 266. 4Q.B.D. 661. Insanity. 1892 f Q. 4b. 599. 434 AGENCY. Part VI. ‘There is a contract of employment between the principal and the agent which expressly or by implication regulates their relations ; and if as part of this contract the principal has expressly or impliedly bargained not to revoke the authority and to indemnify the agent for acting in the ordinary course of his trade and business he cannot be allowed to break his contract.’? *(i) Change of status. [*359] Bankruptcy of the principal determines, and before 1883 marriage of the principal, if a woman, determined, an authority given while the principal was solvent, or sole. It is still open to question whether insanity annuls an authority properly created while the principal was yet sane. The latest case on this point is Drew v. Nunn. The defendant there, being at the time sane, gave an authority to his wife to deal with the plaintiff; he then became insane; the wife continued to deal with the plaintiff and gave no notice of the insanity of her husband ; the defend- ant recovered and resisted payment for goods supplied to his wife while he was insane. The court did not expressly decide how insanity affected the continuance of an authority, but held that ‘ the defend- ant by holding out his wife as agent, entered into a con- tract with the plaintiff that she had authority to act on his behalf, and that until the plaintiff had notice that this authority was revoked he was entitled to act upon the defendant’s representations.’ Since the decision in the Imperial Loan Co. v. Stone it might be said that one who contracts is entitled to assume that the other party is sane, unless the contrary should appear, nor would he be ex- pected when dealing with an agent to inquire whether the principal was of sound mind 1Jf the agent is intrusted with funds for a creditor of the principal, and has promised the creditor to pay, the agency is irrevocable, since the agent becomes liable to the creditor. Goodwin v. Bowden, 54 Me. 424. 2See Davis v. Lane, 10 N. H. 156; Matthiessen &c. Co. v. McMahon, 38 N. J. L. 536. Chap. ITI. DETERMINATION OF AUTHORITY 435 Knowledge of the defendant’s insanity would probably have disentitled the plaintiff to rely on the authority of the wife; for the decision in his favour rested mainly on the ground that the authority had been made known to him, but not the insanity which might have annulled it. In fact the defendant seems to have been held liable rather on the ground of his own representations than on the agency of his wife. It is possible that, since 1888, the wife who knowing that her husband was insane continued to exercise an authority once given by him, might be sued _ . on the so-called warranty of authority. [*360] *Gii) Death of principal. The death of the principal determines at once the authority of the agent,* leaving the third party withouta remedy upon contracts entered into by the agent when ignorant of the death of his principal. The agent is not personally liable, as in Kelner v. Baxter, as having con- tracted on behalf of a non-existent principal; for the agent had once received an authority to contract. Nor is he liable on a warranty of authority as in Collen v. Wright ; for he had no means of knowing that his authority had determined. Nor is the estate of the deceased liable; for the authority was given for the purpose of representing the principal and not his estate. The case seems a hard one, but so the law stands at present.1 It would appear probable however, from some expressions of Brett, L.J., in Drew v. Nunn, that the Court of Appeal might be disposed to attach liability to the estate of the deceased principal, should the question again arise. @This statement should be qualified in respect of powers of attorney expressed to be irrevocable under sections 8 and 9 of the Conveyancing Act of 1882. See 44 & 45 Vict. c. 41. § 47, and 45 & 46 Vict. c. 39. §§ 8,9. But these exceptions are of a very limited character and do not affect the principle laid down in the text. 1 Farmers’ §c. Co. v. Wilson, 139 N. Y. 284; Long v. Thayer, 150 U.S. 520. ante, p. 847. (3) Death. Smout v. Ilbery, 10M. &W.1. L. R.2C. P. 174, 8E.& B. 647. Blades v. Free, 9B. &C. 167. Assump- sit. Blackstone, Comm. iii. 341. Gaius, 3. § 91. CONTRACT AND QUASI CONTRACT. It is necessary to touch on some forms ‘of obligation, called quasi contract for want of a better name, because they acquired, for purposes of pleading, the form of agree- ~ ment.! In early notions of contract, whether in Roman® or in English law, we must not look for an analysis of agree- ment, as emanating from offer and acceptance. The fact that one man had benefited at the expense of another under circumstances which called for a readjustment of rights might give rise to the action of debt. And this was the remedy, not only for breaches of contract based on executed consideration where such breach resulted in an ascertained money claim, but for any case where statute, common law, or custom laid a duty upon one to pay an ascertained sum to another. The action of assumpsit, on the other hand, was pri- marily an action to recover an unliquidated sum, or such damages as the breach of a promise had occasioned to the promisee. But there were certain inconveniences attaching to the action of debt. The defendant might ‘ wage his law,’ and «Thus Gaius, after illustrating the nature of the contract Re, by the instance of Mutwum or loan for consumption, goes on to say, ‘is qui non debitum accepit ab eo qui per errorem solvit, re obligatur.’ By the time of Justinian this legal relation had been definitely assigned to the province of quasi contract. Institutes, iii. 27. 6. 1 For a discussion of the difference between a true contract resting on assent and a fictional contract created by law, see Hertzog v. Hertzog, 29 Pa. St. 465, H. & W.1; Dusenbury v. Speir, 77 N. Y. 144; Keener on Quasi-Contracts, Ch. I. 436 CONTRACT AND QUASI CONTRACT. 437 the action was then determined, not upon the merits, but by a process of compurgation, in which the defendant came into court and declared upon oath that he did not owe the debt, and eleven respectable neighbours also declared upon oath that they believed him to speak the truth. Again, the technical rules of pleading forbade the inclu- sion in the same suit of an action of debt and an action of 362] assump-*sit, an action for liquidated and one for unliquidated damages; for the one was based upon contract real or feigned, the other upon a form of wrong, the non-feasance of an undertaking. Assumpsit therefore was preferred to debt as a form of action, and, after a while, by the pleader’s art, a money debt was stated in the form of an asswmpsit, or undertaking to pay it. First it was decided in Slade’s case that an ac- tion might be maintained in asswmpsit, though the contract was a bargain for goods to be sold, resulting in a liquidated claim or debt. ‘Then where the breach of a contract re- sulted in such a claim the plaintiff was enabled to declare in the form of a short statement of a debt, based upon a request by the defendant for work to be done or goods to be supplied, and a promise to pay for them. This was set- tled in the last twenty-five years of the seventeenth cen- tury. Thenceforth a man might state claims arising from contract variously in the same suit — as a special agreement which had been broken —and as a debt arising from agree- ment and hence importing a promise to pay it. Such a mode of pleading was called an indebitatus count, or count indeditatus assumpsit ; the remedy upon a special contract which resulted in a liquidated claim was now capable of being stated as a debt with the addition of a promise to pay it. In this form it was applied to the kinds of liability which, though devoid of the element of agreement, gave rise to the action of debt, and thence to all cases where A was liable to make good to X a sum gained at X’s expense. Wager of law. 4 Co. Rep. 92, e Indebi- tatus counts. See expres- sions of Holt, C.J., uoted in ayes Vv. Warren, 2 Str. 982. Moses v. Macferlan, 2 Burr. 1005, 15 & 16 Vict. ec. 76, § 3. § 41. § 49. Judgment. 438 CONTRACT AND QUASI CONTRACT. Thus for the convenience of the remedy certain liabili- ties have been made to figure as though they sprang from contract, and have appropriated the form of agreement. The distinction between assumpsit and debt was practi- cally abolished by the Common Law Procedure Act (1852). The plaintiff was no longer required to specify the form in which his action was brought; he was allowed to join vari- ous forms of action in the same suit, and might omit the feigned promise from the statement of the cause of action. The form of pleading, in such cases as resolved themselves into *a simple money claim, was reduced to a short statement of a debt due for money paid or received ; and now the Judicature Act has abolished former pleadings, and has substituted for the indeditatus counts a simple in- dorsement upon the writ of summons. “Tn deference to their historical connexion with contract, I will notice legal relations which once, in the pleader’s hands, wore the semblance of offer and acceptance.! [*363] Such relations may arise from the judgment of a court of competent jurisdiction, or from the acts of the parties. As to the former, it is enough to say that the judgment of a court of competent jurisdiction, ordering a sum of money to be paid by one of two parties to another, is not merely enforceable by the process of the court, but can 1In the admirable treatise by Professor Keener on Quasi-Contracts, the author divides quasi-contracts into three groups: (1) those founded upon a record, as a‘judgment; (2) those founded upon a statutory, official, or customary duty, as the obligation to pay for a stat- utory service, like compulsory pilotage, the obligation of a sheriff, or the obligation of a common carrier or innkeeper; (3) those founded ° upon the doctrine that no one shall be allowed to enrich himself unjustly at the expense of another, as the obligation of an infant or lunatic to pay for necessaries, the obligation of a person to refund money paid under mistake or duress, the obligation of a person to pay for benefits conferred under a contract which through no fault of the plaintiff is incapable of full performance, the obligation of indemnity or contribution, and so on. Ch. I. : CONTRACT AND QUASI CONTRACT. 439 be sued upon as creating a debt between the parties, whether or no the court be a court of record.! The acts of the parties may bring about this obligation either (1) from the admission by A of a claim due to X upon an account stated, or (2) from the payment by A of a sum which X ought to have paid, or (8) from the acqui- sition by A of money which should belong to X. (1) An account stated is an admission by one who is in account with another that there is a balance due from him. Such an admission imports a promise to pay upon request, and creates an actionable liability ex contractu.? (2) It is a rule of English law that no man ‘can make himself the creditor of another by paying that other’s debt against his will or without his consent.’ But if A requests or allows X to take up a position in which he is compelled by law to discharge A’s legal liabilities, the law imports a request.and promise made by A to X, a request to make the payment, and a promise to repay. If one of several co-debtors pays the entirety of the debt he may recover from each of the others his proportionate share. In such a case a request to pay and a promise to. repay were feigned in order to bring plaintiff within the *remedy of asswmpsit, and he could recover his pay- [*364] : : : ment from his co-debtors as money paid to their use.3 A sub-tenant who pays the rent of his lessor to the 1A judgment is not a contract. O’Brien v. Young, 95 N. Y. 428, H. & W. 76; Morley v. Lake Shore Ry., 146 U. S. 162. 2 An account stated rests on assent, and is often in the nature of a compromise. Dunham v. Griswold, 100 N. Y. 224. If in parol it has no effect where the original claim is barred and the statute requires a written acknowledgment to revive it. Hoyt v. Wilkinson, 10 Pick. (Mass.) 31. The assent may be implied. Leather Mfrs. Bk. v. Morgan, 117 U.S. 96. ® Contribution and indemnity are not founded upon contract. Tobias v. Rogers, 13 N. Y. 59; Bailey v. Bussing, 28 Conn. 455. Williams v. Jones, 13M. & W. 628, Acts of parties. Account stated. Irving v. Veitch, 3M. & W. 106. Hopkins v. Logan, 5M. & W. 241. Per Willes, J., in John- son v. Royal Mail Steam Packet Co., L. 1.30. P. 43, Money paid by 4 for the use of X. Kemp v. Finden, 12M. &W. 421, Jones Vv. Morris, 3 Exch. 742. Exall v. Partridge, 8 T. R. 308. England v. Marsden, L. R.1C. P. 529, Money received by X for the use we A, Moses v. Macferlan, 2 Burr. 1010. 440 CONTRACT AND QUASI CONTRACT. superior landlord under a threat of distress to his goods,* may recover the amount so paid or deduct it from his rent; and a man who in the course of business leaves his goods on the other’s premises and has to pay the other’s debt to prevent distraint of his goods may in like manner recover his money. We might multiply instances of this kind of liability, but we must not forget that legal liability incurred by X on behalf of A without any concurrence or privity on the part of A, will not entitle X to recover for money which under such circumstances he may pay to A’s use. The liability must have been in some manner cast upon X by A. Otherwise the mere fact that X has paid under compulsion of law what A might have been compelled to pay, will give to X no right of action against A. Y may have been acting for his own benefit and not by reason of any request or act of A.? (8) There are many cases in which A may be required to repay to X money which has come into his possession under circumstances which disentitle him to retain it. This class of cases, though at one time in the hands of Lord Mansfield it threatened to expand into the vagueness of ‘moral obligation,’ is practically reducible to two groups of circumstances now pretty clearly defined. The first of these are cases of money obtained by wrong, such as payments under contracts induced by fraud, or duress;* the second are cases of money paid under such 2 The goods of a lodger are protected from distress by the Lodger Protec- tion Act, 34 & 35 Vict. c. 79. 1 Wells v. Porter, 7 Wend. (N. Y.) 119. 2 See criticism of England v. Marsden in Keener, Quasi-Contracts, pp. 390-395. 3 Carew v. Rutherford, 106 Mass. 1; Swift Co. v. United States, 111 U.S. 22; Cook v. Chicago R., 81 Iowa, 551; Duval v. Wellman, 124 N. Y. 156, H. & W. 402. CONTRACT AND QUASI CONTRACT. 441 mistake of fact as creates a belief that a legal liability rests Marriot v. ; Hampt on the payer to make the payment.?! Such cases lie out- 2 sm. 0, eos Sins ed.), side the limits of our subject. and notes > The liability to repay money paid for a consideration which has wholly failed is sometimes classed among the foregoing obligations, but is based upon genuine contract, though shortly stated in the form of an indebitatus count. 1 Appleton Bank v. McGilvray, 4 Gray (Mass.), 518; Mayer v. New York, 63 N. Y. 455; Wood v. Sheldon, 42 N. J. L. 421; McGoren v. Avery, 87 Mich. 120. APPENDIX. FORM OF CHARTER-PARTY. Charter-Party, 18 IT IS THIS DAY MUTUALLY AGREED, between of the Good Ship or Vessel called the of the measurement of Tons Register, or thereabouts, and Merchant, that the said ship being tight, staunch, and strong, and in every way fitted for the Voyage, shall with all convenient speed, sail and proceed to or as near thereunto as she may safely get, and there load from the factors of the said Merchant a full and complete cargo which is to be brought-to and taken from alongside at Merchant’s Risk and Expense, and not exceeding what she can reasonably stow and carry over and above her tackle, apparel, provisions, and furniture, and being so loaded shall therewith proceed to or as near thereunto as she may safely get, and deliver the same on being paid freight. Restraint of Princes and Rulers, the Act of God, the Queen’s Enemies, Fire, and all and every other Dangers and Accidents of the Seas, Rivers, and Navigation of whatever Nature and Kind soever, during the said Voyage, alwags excepted. Freight to be paid on the right delivery of the cargo. days to be allowed the said Merchant (if the Ship be not sooner despatched), for 7 and days on Demurrage over and above the said laying days at £ per day. Penalty for non-performance of this agreement, estimated amount of freight. Witness to the signature of Witness to the signature of @It is usual to fix a certain number of days, called the ‘lay days,’ for the loading and unloading of the ship. Beyond these the merchant may be allowed to detain the ship, if need be, on payment of a fixed sum per diem. The detention and the payment are called Demurrage. 443 444 APPENDIX. FORM OF BILL OF LADING FOR GOODS SHIPPED ON SAILING VESSEL?! Shipped in good Order and well conditioned by in and upon the good Ship called the whereof is Master for this present Voyage and now riding at Anchor in the and bound for to say being marked and numbered as in the Margin, and are to be delivered in the like good order and well conditioned at the aforesaid Port of (the Act of God, the Queen’s Enemies, Fire, and all and every other Dan- gers, and Accidents of the Seas, Rivers, and Navigation of whatever nature and kind soever excepted) unto or to Assigns he or they paying Freight for the said Goods with Primage and Average accustomed.” Tin @litness whereof the Master or Purser of the said Ship hath affirmed to Bills of Lading all of this Tenour and Date the one of which Bills being accomplished the other to stand void. Dated in ; @ A Bill of Lading for goods shipped on a steamship includes among the excepted risks those from ‘Fire, Machinery, Boiler, Steam,’ and all other dangers and accidents of steam navigation. - + Primage is a small customary payment to the master, and Average here means small necessary payments made by the master and repaid him by the merchant. Particular average means the incidence of loss from damage to any part of ship or cargo upon the individual owner or his insurer. : General average means the apportionment of the loss among all the parties inter- ested in ship or cargo in proportion to their interest where the loss is caused in tentionally and for the common safety, as by cutting away masts or throwing cargo overboard. 1 For uniform inland bill of lading see Porter, Law of Bills of Lading, § 553. APPENDIX. 445 FORM OF POLICY OF MARINE INSURANCE.1 ae Be it known that £ as well in own Name, as for and in the Name and Names of all and every other Person or Persons to whom the same doth, may, or shall appertain in part or in all, doth make assurance, and cause : ae and them and every of them, to be insured, lost or not lost, at and from upon any kind of Goods and_ Merchandises, and also upon the Body, Tackle, Apparel, Ordnance, Munition, Artillery, Boat and other Furni- ture, of and in the good Ship or Vessel called the whereof is Master, under God, for this present voyage, or whosoever else shall go for Master in the said Ship, or by whatsoever other Name or Names the same Ship, or the Master thereof is or shall be named or called, beginning the Adventure upon the said Goods and Merchandises from the loading thereof aboard the said Ship : upon the said Ship, &c. _, and shall so continue and endure, during her Abode there, upon the said Ship, &c.; and further, until the said Ship, with all her Ordnance, Tackle, Apparel, &c., and Goods and Merchandises what- soever, shall be arrived at upon the said Ship, &e., until she hath moored at Anchor Twenty-four Hours in good Safety, and upon the Goods and Merchandises, unti] the same be there discharged and safely landed; and it shall be lawful for the said Ship, &c., in this Voyage to proceed and sail to and touch and stay at any Ports or Places whatsoever without Prejudice to this Insurance. The said Ship, &c., Goods and Merchandises, &c., for so much as concerns the Assured, by Agreement between the Assured and Assurers in this Policy, are and shall be valued at Touching the Adventures and Perils which we the Assurers are contented to bear and to take upon us in this Voyage, they are, of the Seas, Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Countermart, Surprisals, Takings at Sea, Arrests, Restraints and Detainments of all Kings, Princes, and People, of what Nation, Condition, or Quality soever, Barratry of the Master and Mariners, and of all other Perils, Losses, Misfortunes that have or shall come to the Hurt, Detriment, or Damage of the said Goods and Mer- chandises and Ship, &c., or any Part thereof; and in case of any loss or Misfortune, it shall be lawful to the Assured, their Factors, Servants, and Assigns, to sue, labour and travel for, in, and about the Defence, Safeguard and Recovery of the said Goods and Merchandises, and Ship, &c., or any Part thereof, without Prejudice to this Insurance; to the Charges whereof we, the Assurers, will contribute, each one accord- ing to the Rate and Quantity of his Sum herein assured. And it is agreed by us the Insurers, that this Writing or Policy of Assurance shall be of as much Force and Effect as the surest Writing or Policy of Assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we the Assurers are contented, and do hereby promise and bind ourselves, each one for his own Part, our Heirs, Execu- tors, and Goods, to the Assured, their Executors, Administrators, and Assigns, for the true Performance of the Premises, confessing ourselves paid the Consideration due unto us for this Assurance by the Assured at and after the Rate of IN WITNESS whereof, we the Assurers have subscribed our Names and Sums assured in . : N.B.—Corn, Fish, Salt, Fruit, Flour, and Seed are warranted free from Average, unless general, or the Ship be stranded; Sugar, Tobacco, Hemp, Flax, Hides, and Skins are warranted free from Average under Five Pounds per Cent. ; and all other Goods, also the Ship and Freight, are warranted free from Average under Three Pounds per Cent. ; unless general, or the Ship be stranded. 1 See Richards on Insurance, p. 600. 446 APPENDIX. FORM OF INLAND BILL OF EXCHANGE. = OxFORD, Ist January, I891. Ss £100, ra Pe = g 2 s & & SS Three months after date = pay ~ to Mr.., JoHN STYLES or order the * = ss z x S < , sum of one hundred pounds. for ‘§ value ‘3 received. x ms & = 3 Joun Dor. LS To RicHAaRD Rog, Esq. FORM OF PROMISSORY NOTE. OxFoRD, 25th December, 1890. #100, I promise to pay to RIcHARD ROE or order at the Old Bank, Oxford, six months after date the sum of £100, for value received. JOHN Dog. INDEX. REFERENCES ARE TO Top PaAGINGS. A. Absolute promise: and concurrent condition, 361. Acceptance: 13-4). of offer of contract, 5, 13-24. must be absolute and unconditional, 23, its effect in concluding contract, 5, 28. must be communicated, 5, 19-23. in case of rewards, 19n. may be made by conduct, 17. in contracts by correspondence, 25-32. motive of acceptance immaterial, 43. of bill of exchange must be in writing, 68, 296. consideration for, 90, 299. Accommodation bill: its character, 301. Accord and satisfaction: how constituted, 106, 383. a er of discharge of right of action, 84. accord without satisfaction, effect of, 336. Account stated: with infant, void, 134. its general effect, 439. Acquiescence: how far equivalent to acceptance, 20. in fraud, affirms contract, 211. in breach of condition, 182, 373. in act of agent, a ratification, 408, 431. Act of God: definition of, 340. a condition subsequent, 340. an excepted risk, when, 339. Action: of assumpsit, 53, 54, 436, 437. of covenant, 52. of debt, 52, 436, 437. of detinue, 52. of deceit, 176, 203, 215. effect of bringing action, 387. : right of action, asa form of obligation, 9 springs from breach of contract, 350, 374. assignment of, 247, 289, 290. how discharged, 382-389. Adequacy: of consideration, how regarded at com- mon law, 90, 91 in equity, 92. Admission; of written contract, how made, 316. Advertisement : offer made by, 25, 43, 44. acceptance of by act, 112. Affirmation: right of in case of fraud, 216. Agency: 400-435; see Principal and agent. Agent: who may be an agent, 402. of necessity, 405. appointment of sub-agent, 277n. for Dunpones of 29 Car. II. ¢. 3. § 4., 67, 416. . of 9 Geo. IV. c. 14. § 1., 69, 388. Agreement: 12-49, 156-224. the origin of contract, 1, 8, 10. analysis of, 2, 3. definition of, 3. a source of obligation, 8. . assignment of contract by, 287, 288. discharge of contract by, 332-343. forms needed for discharge by agree- ment, 342, 343. determination of agency by, 480-434. Alien: his capacity to contract, 129. alien enemy, contract with, 129, 242, 243; 43. Alteration of instrument: when its effects discharge, 397. Ambiguity: latent and patent, 323. Apprenticeship: contracts of, 136. Arbitration : agreements to refer to, 245. Assignment: 287-312. a form of operation of contract, 274. of liabilities, 287. of rights—at common law, 245n, 289, 290. in equity, 291-294. by statute, 294, 295. of covenants affecting leasehold, 306, 380, 381. affecting freehold, 308, 309. of contract by marriage, 309. of contracts of deceased, 310. of bankrupt, 311. 447 448 Assumpsit: a form of trespass on the case, 53. its relation to action of debt, 350, 437. its application to rights quasi ex con- tractu, 438, 439. Attestation : when necessary to validity of a deed, 316. Auctioneer: his liabilities on advertisement, 44, 45. his position as a general agent, 416. Authority: see Agency. warranty of, 370, 371, 420. general and special, 415. coupled with an interest, 432. Average: general and particular, 444. Avoidance: right of, an infant’s contract, 131-140. in case of misrepresentation, 190. of non-disclosure, 192, 197. of fraud, 215, 216. B. Bailment : may give rise to action of detinue, 52. nature of consideration for, 100. Bankruptcy: ; its effect in assigning contract, 311. in discharging contract, 385. in determining authority, 434. constitutional limitations, 398n. Bankruptcy Act: see Statute. Barrister: his professional status, 130. Bill of exchange: 297-303. form of, 443. must be in writing, 68. consideration for it presumed, 90. how affected by want of consideration, 235, 264. by unlawfulness of consideration, 235, 263, 264, 299. discharge by waiver, 104, 105, 335, 383. negotiable by custom, 29 now by statute, 296. how drawn, accepted, and indorsed, 297, 2 8. Bill of Exchange Act: see Statute. Bill of lading : 303-305. consideration for its indorsement, 98. how far negotiable, 303, 304. effect of its assignment, 303-305. form of, 444. Bond: nature of, 65. penalties in, 56, 329. conditions subsequent in, 339. Breach of contract: 349-389; see Con- dition, Warranty, Independent promise. consideration for waiver of, 107, 108, 383. as a cause of action, 180, 181, 183, 349 as a form of discharge, 349 et sqq. rights conferred by it, 350, 374. repentance after breach, 352 n. modes in which it may take place, 353. renunciation before performance, 353. if accepted as a discharge by the other party, 355. renunciation during performance, 357. duty to keep down damages, 357 n. INDEX. Breach of contract: (ctd.) impossibility created by one party, 356, 358. failure in performance, 359-374. by breach of concurrent condition, 361. by total failure of consideration, 361. by breach of vital condition, 361. remedies for breach, 374-382. Broker: his rights and liabilities, 259, 417, 418, 423. Cc. Carrier: his promise as to safety of goods, 340, 371 when an agent of necessity, 405. Champerty: how it affects contract, 246, 247. Chancery Division: remedies obtainable in, 64, 326, 378-382. Charter-party : construction of, 180, 324, 366, 373. excepted risks in, 339. form of, 443. Chose in action: doubtful meaning of term, 289. cannot be assigned at common law, 289. how far assignable in equity, 291. ~ and by Statute, 294, 295. Civil death: meaning of term, 149. Cognovit actionem : nature of, 57. attestation necessary to its validity, 316. Cohabitation : illicit, is null as a consideration, 248. does not necessarily create agency, 404. Collateral promise: see Warranty. Commission agent: his relation to his employer, 412, 418. Company: 144-147. capacity of to contract, 144, 283. to ratify contracts made before its for- mation, 283, 407. to make negotiable instruments, 144, 301. to sue and be sued through an agent, 285. articles of association of, 283. memorandum of association of, 146, 283. Composition with creditors: 107-108. consideration for, 107, 384. fraudulent preference, 240, 267. Compromise of suit: as sc aaa for a promise, 99, 104, Concealment: how different from non-disclosure, 204. Condition: see Breach of contract. condition subsequent, 339. concurrent, 363. suspensory, 360. precedent, 338. a statement or promise, 182, 183, 210. implied in sale of goods, 366, 367. Tig distinguished from warranty, 183 n., when convertible with warranty, 372, 373. Consideration : 88-127. its Ld in English Law of Contract, 15, essential where contract is not under seal, 14, 52, 55, 63, 89, 334, 383. INDEX. Consideration: (ctd.) definition of, 88. executed and executory, 15, 16, 93, 112, 402, 403. history of, 50-55. is different from motive, 93, 94. must move from promisee, 95, 279, 280- 282 n. must not be past, 112, 114. adequacy of, 90. reality of, 92 et sqq. in cases of forbearance to sue, 97, 98, 104, of discharge of existing liability, 102, 103, 109. of composition with creditors, 107, 108. of waiver, 333, 334. when it must appear in writing Stat. of Frauds, § 4., 73, 78, 79. Sale of Goods Act, § 4., 86. exceptions to necessity for alleged, 89, 93, 115, 126. real, revived promise, 123, 124, 387, 389. additional security, 127 n. gratuitous employment, 100, 402. negotiable instrument, 301, 335. failure of a discharge, 157, 363. Construction: 327-331. of documents, rules as to, 315, 327. Contract in writing : 67-88. when writing is required, 67-70. See Statute. the writing is only evidence of the con- tract, 75, 315, 316. how proved, 317, 318. See Evidence. rectification of, in equity, 172, 326. how discharged by agreement, 342. Contract of record: 57-59. See Judg- ment. aform of obligation, 9-11. its forms and characteristics, 57, 58. is not a true contract, 58. Contract under seal: 59-69. offer under seal irrevocable, 23, 34. mode of execution, 60. characteristics, 61-65, 316. when necessary, 66, 67. illegality of consideration for, 262, 263. when negotiable, 144, 296. how it is proved, 316. how discharged, 344. promise for benefit of third party, 281 n. agent being a party to it contracts per- sonally, 420. Conveyance: how different from contract, 4. a sale is a conveyance, 85. its place in history of contract, 44. Convict: his incapacity to contract, 130. Copyholder: liable, though an infant, to pay fine, 1382. Corporations: 144-147. their contracts must be under seal, 66. exceptions to general rule, 66, 67 n., 144 n. necessary limits to their power to con- tract, 144, 146. express limits, 145. negotiable instruments, made by, 144, 145n., 301n. promoters of, 198. 26 449 Correspondence: contracts made by, 25-42. Covenant: action of, 52, 53. assignment of as affecting leasehold rights, 306. as affecting freehold rights, 308. Coverture: see Marriage, Custom: see Usage. custom of merchants, as to negotiable jnstruments, 296, 299. as to bills of lading, 303. as to agent’s liability where principal is unnamed, 423. of City of London as to contract of married women, 150. D. Damages: 375-378. rules relating to, 375-378. penny and liquidated damages, 328, interest by way of damages, 376. how different from indemnity, 200. Death: causes lapse of offer, 32. its effect in assigning contract, 310. in determining authority of agent, 435, civil death, in what it consists, 149. Debt: action of, 52. why supplanted by action of assumpsit, 36, 437 \ ‘ assignment of, 287, 288. Deceit: see Fraud. action of, 174, 203. Deed: see Contract under seal. Del credere agent: liabilities to his employer, 419. Delivery : of deed, 60, 61. of negotiable instruments transferable by delivery, 296. of goods, a form of tender, 347. Demurrage: for detention of ships, 443 n. Detinue: action of, 52. Discharge: 332-399; see Agreement, Breach, Impossibility, Opera- tion of law, Performance. Disclosure : duty of, in certain contracts, 169, 192. by agent, 354. Divisible contract: 368-374. where consideration partly void, 254, 361 where performance incomplete, 363, 369. Divorce: agreements for, illegal, 249n. makes woman a feme sole, 150. Drunken person: his contract voidable at his option, 147. Duress: 218-219. to person, 218. to goods, 218, 219. Duty: as distinct from obligation, 6. may be imposed by contract, 277, 278. 450 E. Election: to keep contract alive, 352 n. Equity: how different from common law in treatment — of gratuitous promise under seal, 63. of inadequate consideration, 90. of bonds and penalties, 65, 269. of misrepresentation, 186, 187. ‘of fraud and influence, 209, 219. of assignment of rights, 291, 292. of construction of time clauses, 329. its peculiar remedies, 64, 326, 381. when obtainable only in Chancery Divis- ion, 64, 326, 381. Escrow : a deed delivered under condition, 61. evidence that deed is an escrow, 315, 318. Estate: of deceased debtor, 62. of bankrupt, 311. ratification of contract made on behalf of, 405. Estoppel: by statements made in a deed, 61. by words or conduct, 201, 202, 404. the effect of, 201, 202. by judgment, 385. agency created by, 404-406. Evidence: 314-326. parol, inadmissible to prove contract under 29 Car. II. c. 3. §4., 68, 82. or to supplement its terms, 78. or to connect documents, 77, 78, 317. exception as to part performance, 77, 78 when admissible, 314. extrinsic — to prove document, 316. to prove or disprove agreement, 318. secondary — of contents of document, 317. of condition suspensory, 318. _ of supplementary terms, 320. explanatory of latent ambiguity, 323. of usage, 324. for purpose of equitable remedies, 326. Executed consideration: contracts arising from, 15, 16, 112, 113. promise implied from, 17, 114, 121. Executed contract: meaning of term, 16, 335. Execution: of a deed, 60. upon judgment, 58, 385. Executor: his duties and liabilities, 70, 310. his promise to answer damages out of his own estate, 70. Expectant heir: protected from undue influence, 221, Express and implied contracts: distinction lies in mode of proof, 17 n. Py Factor: his rights and liabilities, 417, 423, 424, 432, 433. Failure of consideration: ' a form of discharge, 366, 367. confused with mistake, 157, 158, 165, 166. with fraud, 212, 213. INDEX. Failure of consideration: (ctd. money paid for consideration which has failed is recoverable, 441 n. Forbearance: of a right as consideration for a promise, 97, 98, 104, 105. Foreign principal: liability of agent for, 420, 424. Foreign state: non-liability of its sovereign, 129, 387. or his representatives, 129, 387. agreements hostile to, 242, 243. its bonds negotiable, 296. Form: 50-67. its importance in legal] history, 50, 51. contracts valid by reason of, 56-61. when merely evidentiary, 70. of agreement for discharge, 342. Fraud: 203-218. a flaw in contract, 156. also a civil wrong, 176, 240, 241. definition of, 203. consistent with honest motive, 176-178, 211. with uncertainty of falsehood, 146, 179, 209 but not with honest belief, 208, 209. legal and equitable fraud, 187, 209. representation an essential element, 206. must be addressed to plaintiff, 213. and must deceive him, 214. its effects on contract, 215. how different from undue influence, 219. burden of proof lies on him who asserts fraud, 299. affects limitation of actions, 387. Frauds, Statute of, 67-88. See Stat- utes, Frauds, Sale of Goods Act. Fraudulent preference: an illegal consideration, 240, 241. money so paid, where recoverable, 268. Fructus industriales: ° not an interest in land under 29 Car. II. c. G. Gift: requires assent of donee, 4, 15. aelTe Sllgeeelve of undue influence, 219, Goods: see Sale. what are, under 56 & 57 Vict. c. 71. § 4., 74, 83. Gratuitous promise: void unless made under seal, 15, 63, 64, 84. never enforceable in Equity, 64, 220, 380. Gratuitous undertakings: when enforceable, 100. Guarantee: acceptance of, 27n. under 29 Car. II. c. 3. § 4., 71. consideration for, need not appear in writing, 73. uberrima fides, how far required, 192. H. Heir: liability of for debts of ancestor, 310. expectant, contracts with, 221. Husband and wife: see Marriage. INDEX. I. Ignorance of law: its effect in case of mistake, 167. its effect in case of fraud, 207. Mlegality : 225-273. a flaw in contract, 225. by statute, 226. by rules of common law, 239-241. by rules of public policy, 241, 242. contracts affecting foreign relations of State, 242. ae to public service, 243. affecting course of justice, 245. encouraging litigation, 246. contrary to good morals, 248. affecting marriage, 248. in restraint of trade, 249. its effect on contract, 253-273. when parties are not in pari delicto, 267. when there is a locus poenitentiae, 268. Immoral purpose: its effect upon contract, 248, 258. Implied promise: arising from conduct, 17. of sea-worthiness in contract of marine insurance, 322, 323. of indemnity in contract of employment, 114, 117, 403, 409, 433. of quality in executory sale of goods, 366-369. of title, 372n. of possibility, 372n. of authority, 200, 372n., 433. Impossibility : 390-395. on face of the contract, 96, 390. antecedent, a form of mistake, 166, 390. created by act of one party, a form of breach, 356, 358. subsequent, when a discharge, 391-395. Imprisonment: a form of duress, 218. Inadequacy of consideration: how regarded in equity, 92, 222. Indebitatus counts: their history, 437, 438. their object, 350, 351, 437. as applied to special contract, 351, 352. Indemnity: distinct from guarantee, 71. from damages, 200. in marine and fire insurance, 238. Indenture: as distinct from deed poll, 61. Independent promises: what are independent promises, 362. absolute promises, 361-363. promises divisible in respect of perform- ance, 363-369. subsidiary promises, 369. é warranty a subsidiary promise, 371. Indorsee: rights of, 264, 297, 301. where bona fida and for value, 299. Indorsement : special, and in blank, 298. a form of security, 298. of bill of lading, 98, 303. Infant: 131-144. his eet voidable at common law, 131 451 Infant: (etd.) when binding, 134, 135, 140. when void by Infants’ Relief Act, 134. ratification at common law, 131. when implied, 132, 138, 189. (134. as affected by Lord Tenterden’s Act, by Infants’ Relief Act, § 2., 134. liabilities for necessaries, 140, 141. for contract of service, 136. for wrong, 143. for breach of contract resulting in a wrong, 143. refused specific performance, 1388. infancy affects limitation of action, 386. Injunction: 380-382. when applicable, 380, 381. rules for granting it, 380. Insanity: see Lunatic. Insurance: fire insurance how affected by non-disclosure of ma- terial fact, 192, 193. dealt with by 14 Geo. III. c. 48., 238. life insurance disclosure of material fact required, 194, 195. is a form of wager, 231. hg Seale with by 14 Geo. III. c. 48., not a contract of indemnity, 238. policy of, assignable, 295. marine insurance must be in the form of a policy, 68. form of, 445. disclosure of material fact required, 181, 192. but not by expression of opinion, 200. is a form of wager, 230, 237. need of insurable interest, 237. dealt with by 19 Geo. II. ¢. 37., 287. differs from life insurance, 237. policy of, assignable, 295. contains implied warranty of sea- worthiness, 522, 323. Intention: distinctness of, necessary to agreement, 2. communication of, 3, 19, 20. statement of, as distinct from offer, 5, 44. representation of intention and of fact, 2 06. how it affects unlawful purpose, 260-262. of the parties to be gathered from con- struction of whole of contract, 325, 326, 370, 371. governs the construction of the contract, 185, 370, 371. Interest : insurable, when requisite, 237, 238. on debt, when it may be given by way of damages, 375. interest coupled with authority, 432, 433. J. Judgment: a form of contract of record, 9. its nature and characteristics, 57, 58. foreign, 58n. as a lien, 59n. a discharge of right of action, 384. its operation by way of estoppel, 385. its operation by way of merger, 385. 452 Judgment: (ctd.) how discharged, 384, 385. creates a debt, 438, 439, Judicature Act: see Statute. ii, Land: interest in, under Stat. Frauds, § 4., 73. wee jides in contract for sale of, 1 assignment of obligations on transfer of interest in, 306-309. specific performance of contracts for sale of, 379 Lease: assignment of, its effect on covenants, Legality: see Illegality, 225-273. Letter: contracts by, 27-32. Lex fori: determines procedure, 81. Lex loci: determines validity of contract, 81. License: license to break contract, a bad plea, 334. Lien: of auctioneer, 416. of factor, 417, 433. Limitation of actions: statutory, 386. in case of specialty, 63, 386, 387. of simple contract, 386. barred debt a consideration for promise to repay, 124. disability to sue, effect of, 386, 387. modes of reviving barred debt, 387, 388. form of reviving such debt, 67, 388, 389. Liquidated damages: differ from penalty, 329, 330, 377. Locus poenitentiae: in case of illegal contracts, 268. limitations of rule, 269-273, 433. Loss of written instrument: wherein it affects rights, 397, 398. Lunatic: 147-149. offer lapses by insanity, 32n. his executory contracts voidable, 147, 148. not so, when executed in part, 147. where so found by, commission, invalid- ity of contract is presumed, 148. insanity affects limitation of actions, 386. M. Maintenance: what it is, 246, 247. how it affects ‘contract, 247. Marriage: a form of agreement differing from con- tract, 4. promise in consideration of, 73. mutual promises to marry, 75n., 92. agreements affecting freedom of choice in marriage, 248. agreements for separation, 249. effect of marriage on contract made by wife dum sola, 309. Married woman: 149-155. her contract void at common law, 149. common law exceptions, 149. INDEX. Married woman: (ctd.) statutory exceptions, 150. doctrine of separate estate, 150. separate estate under Acts of 1882 and 1893, 151, 152. under Act of 1893, 152-155. can be agent for her husband of necessity, 405. by authority express or implied, 403, 431 Master and servant: liability for inducing servant to break contract, 277-279. contract terminable on notice, 341. Merchants, Custom of: as to foreign principal, 420. as creating negotiability, 295, 302, 303. Merger: of lesser security in a greater, 57, 62. a discharge of contract, 396. a discharge of right of action arising from contract, 384. Misrepresentation: 174-203. relates to formation of contract, 156, 174. how different from fraud, 174, 176-179. from non-disclosure, 176, 192. how regarded at common law, 184-186. in equity, 186, 209. effect of Judicature Act, 188-191. gives no right to damages, 200, 209. exceptions, 177 n., 200. of law, 207 n. may give aright to indemnity, 200. not actionable though negligent, 212. Mistake: 157-174. affects formation of contract, 157. may be of intention or of expression, 157. as to nature of transaction, 159-163, as to party to contract, 163-165. as ae of contract, 165, as to existence of thing contracted for, 166, 390, 391 as to existence of a right, 167. as to identity of. subject-matter, 165, 166. as _ gpaley of subject of contract, 168, its effect upon contract, 167, 174, 271, 273. confused with failure of consideration, 360, 361. Money paid: under mistake, recoverable, 172. for an illegal object, when recoverable, 258, 262, 268. to the use of another, when a cause of action, 438-440. Money received: to the use of another, when a cause of action, 440. Moral obligation: as consideration for a promise, 94, 126. settled not to be so, 102, 103, 127. Motive: of acceptance, immaterial, 19, 43. is no consideration for a promise, 93. its effect in illegal contract, 257. Mutual promises ; are consideration for one another, 92. Becta URIS of one is no discharge, ‘INDEX. N. Necessaries: for an infant, 131, 140. province of judge and jury in deciding what are necessaries, 141, 142. Necessity : -agent by, 405. Negligence: arising from mistake, 162. in statement, not actionable, 211, 212. of telegraph company, 208 n. in selling dangerous articles, 213 n. Negotiable instrument: see Bill of exchange. presumptive consideration, 90 n. when it can be made under seal, 144, 300. of corporation, 65, 144. as security for payment due on illegal or void contract, 235, 263, 295. how distinct from assignable contract, 205. negotiability by custom and _ statute, 295-305. effect of giving as payment, 346. consideration is presumed, 345, 346. Non-disclosure: contracts voidable on ground of, 192. how different from fraud, 204. by agent, 428. Notice: of acceptance of offer, 25, 26, 45, 46. of assignment of contract, 292, 400. of covenants binding land, 309. Nudum pactum: meaning of term in English law, 89. oO. Obligation : its definition, 6-10, 42. distinguished from duty, 7, 277. sources of, 8. limits of, 275, 276. Offer: 13-49. must be communicated, 19-23. must refer to legal relations, 22. how far revocable, 25, 32-42. how it may lapse, 32-34. to unascertained persons, 42, 43. Offer and acceptance: a necessary element in agreement, 12, 19. expressed in question and answer, 12. its various forms, 14, 15, 405, 406. ce: sale of, 243. Operation of law: discharge of contract by, 396, 397. Opinion: statement of, not a representation, 191. cannot amount to fraud, 206. P. Par delictum: in cases of illegal contract, 266, 267. Parol: see Evidence, Simple contract. Part performance: of contract under Statute of Frauds, 81-88. Parties: see Assignment. in contracts within 29 Car. II. c. 3. §4., their names must appear in writing, 453 Parties: (ctd.) only parties to a contract are liable under it, 274-278, who entitled at common law, 278-283. who entitled in equity, 283-286. third parties, when allowed to sue, 285. with common interest, 285. ee of, a mode of discharge, 337 Partner: infant partner, his rights, 132, 133. change of partners, its effects on contracts made with partnership, 338. Partnership: uberrimae fidei, how far a contract, 198. general agency as between partners, 199, 404, 405. Patent ambiguity: any ee be corrected by parol evidence, 23 Payment: of a smaller sum for a greater, 104. a form of discharge, 344. negotiable instrument as payment, 345. Penalty: rules of law and equity as to, 328. penalty and liquidated damages, 330, 377. Pension; assignment of, 244. Performance: see Payment, Tender. postponement of, at request of one party, 336, 387. discharge of one party by, 345. discharge of contract by, 345. Personal contract: does not pass to representatives of de- ceased or bankrupt, 310, 311. Physician: his professional status, 130. Post: contracts by, 27-32. Principal and agent: 400-435. their relation a form of employment, 286, 400. capacity of parties, 402. authority how given, 403-408. ratification of agent’s act, 405-408. duties of principal, 409. of agent, 409-411. special and general agency, 415. commission agency, 418. forms of professional agency, 416-419. restriction of authority, 415, 430. delegation of authority, 414. revocation of authority, 430-435. agent for named principal, 415-422. when liable on contract, 420. when liable otherwise, 420, 421. for unnamed principal, 422-424. for undisclosed principal, 424-427, principal when liable for agent’s fraud, 426, 427. for agent’s non-disclosure, 429. effect of principal’s change of status, or death, 434, 435. Promise: essential to contract, 5. part executed, when a cause of action, 53 to perform existing contract, 102. for benefit of third party, 95, 279-286. 454 Promise : (ctd.) implied: see Implied promise and Warranty. under seal: see Contract under seal, Promissory note: consideration for it presumed until the contrary is shown, 89, 299. negotiable by statute, "295, 296. rights of payee and indorsee, 298, 299. Public policy : ee in breach of it illegal, 224, . + possible origin of rules respecting, 241. limits of its operation, 242. kinds of contract affected by it, 242-253. Q. Quantum meruit: when it may be sued upon, 351, 352. Quasi-contract; 436-441. a source of obligation, 9, 120n., 123n., 140n., 146n., 148n assimilated to contract in pleading, 438~ 440. R. Railway company: nature of its offer to carry, 21, 44. how far liable on its time table, 44, 371. and for passenger’s luggage, 371. tickets, 21-23. Ratification: of infant’s contract, 124, 138, 139. by suffering judgment, 139. of agent’s act, rules respecting, 405-408. Real estate: assignment of contracts respecting, 308. Recognizance: a form of contract of record, 59. Rectification: of written instrument, 158, 326. Release: discharges right of action, 383. Remedies: for breach of contract, 374-389. discharge of, 382-389. revival of, 124-197, Renunciation of contract: before performance, 353-356. during performance, 357. Representation: a statement in a contract, 179-182. or inducing a contract, 181. its effect at common law, 179-186. in equity, 186. of intention, 5, 44. of opinion, 184, 205. when actionable if false, 200, 208, 213. not actionable if negligent, 211. of principal by agent, 286, 402. of deceased by executor or administrator, 310, 311. of bankrupt by trustee, 311, 399. Request: when it implies a promise, 115-119, 402. Rescission: see Agreement as a form of discharge. right of, in case of misrepresentation, 190 in case of fraud, 219, INDEX. Restraint of trade: 249-253, must be reasonable, 64, 249, 250. rules respecting, 250-253. Reversion : sale of, how regarded in equity, 221. Revocation: 32-42. of proposal, when possible, 32, 34-42. notice of, 37-42. of a impossible in English law, 5-32. not so by Indian Contract Act, 32n. of agent’s authority, 430. Rewards: offer and acceptance in, 19, 42-44. Ss. Sale: see Statute, Sale of Goods Act. of goods, 85. nee and executory, 16, 84, 85, 366- 69. under Infants’ Relief Act, 134. how affected by mistake as to party contracted with, 163, 217, 272. rule of caveat emptor, 170, 171. agreement for sale of land a contract uberrima fides, 196. specific performance of, 378, 379. Sample: sale of goods by, 367. Satisfaction: see Accord. payment of a smaller sum for a larger, 104-107. what satisfaction amounts to a discharge of right of action, 382. Sea-worthiness: implied warranty of, in contract of ma- rine insurance, 322, 323. Seal: see Contract under seal. what constitutes, 60 n. of corporation, why necessary to its con- tracts, 66. Separate estate: of married woman under 33 & 34 Vict. c. 93., 150. of married woman in equity, 150. under Acts of 1882 and 1893, "151-153. Separation: agreement between husband and wite to separate, 150. when valid, 249. Shares: transfer of, form required, 66, 69, 295. in railway company, not an interest in land under 29 Car. II. ¢. 3. § 4., 74. infant shareholder, 132, 183. sat ee of, is uberrimae Jidei, 197, Ship, British: transfer of British ship, 66. alien cannot acquire property in, 129. Signature: to contract under seal, 59. of panty ene under 29 Car. II. ¢. 3. Silence: does not give consent, 24. Simple contract, or parol contract: alas requires consideration, 54, 68, when required to be in writing, 67, 68. 4 INDEX, Solicitor and client: a relation which may suggest undue in- fluence, 222. Specialty: see Contract under seal. Specific performance: 378-382. of gratuitous promise under seal, 65, 380. of infant’s promise, 138, 380. of part-performed contract under 29 Car. IL. c. 3. §4., 81, 82. of oe made under mistake, 172, or under misrepresentation, 164, 188, 189. of contract obtained by fraud, 210. of sale of goods, 379 of contracts concerning land, 309, 379. of contracts for personal service, 381. general rules, 378-382. Stakeholder: liability for money in his hands, 234, 269. Statute: Bankruptcy, 46 & 47 Vict. c. 52., 311, 399. 53 & 54 Vict. c. 71., 311, 399. Bills of Exchange, 45 & 46 Vict. c. 61. §1., 68, 297, 301, 335. eS Lading, 18 & 19 Vict. c. 111., 296, Common Law Procedure Acts, 15 & 16 Vict. c. 76, and 17 & 18 Vict. c. 125: as to agreements to refer to arbitra- tion, 245. as to attesting witnesses, 316. as to pleading, 438. Companies, 30 & 31 Vict. c. 131., 200. Debtors’ Act, 32 & 33 Vict. c. 62., 154. Directors’ Liability, 53 & 54 Vict. c. 64., 200 Divorce and Matrimonial Causes Act, 20 & 21 Vict. c. 85., 150. Factors’, 52 & 53 Vict. c. 45., 417. Frauds, Statute of, 29 Car. II. c. 3., 69-88 ; contracts specified in § +., 69-75. form required by § 4., 75-80. effect of non-compliance with §4., 80-83. repeal of §17., 83n., 84n. § 17 in United States, 84n., 83-88. connexion of documents how to be shown under § 4., 77, 78, 317. contracts under §4., how discharged by agreement, 341, 342. Gaming: 16 Car. II. c. 7., 232. 9 Anne ec. 14., 233. 7 Geo. II. c. 8., 258. 12 Geo. II. c. 28., 257. 5 & 6 Will. IV. c. 41., 232. 8 & 9 Vict. c. 109., 233, 264. 55 Vict. c. 9., 285, 258. Infants’ Relief, 37 & 38 Vict. c. 62., 124, 134, 137. Insurance, 19 Geo. II. c. 37.; 14 Geo. III. c. 48., 238. Judicature Act, 36 & 37 Vict.c. 66: as to equitable rights and remedies, 188 as to right of parties interested in one action to sue or be sued in name of one, 285. as to assignment of contract, 294. 455 Statute: (ctd.) as to admission of documents, 316. as to rectification of documents, 326. as to provisions regarding time, 329. as to specific performance of contracts for sale of land and leases, 382. as to pleading, 350, 352, 438. Limitation, Statutes of, 21 Jac. I. c. 16; 3 & 4,Will. IV. ¢. 42: as to extinction of remedy, 386, 388. as to revival cf claim, 123, 388. ake ae Act, 34 & 35 Vict. c. 9., 4 Lord Tenterden’s Act, 9 Geo. IV. c. 14: as to executory contract of sale, 83n. aa ratification of infant’s contract, 34 as to acknowledgment of barred debt, 69, 387-8. Married Women’s Contract Acts, 154 n. Married Women’s Property Acts, 151- 155, 305. Medical Act, 49 & 50 Vict. c. 48., 180. Mercantile Law Amendment Act, 19 & 20 Vict. c. 97: as to consideration for guarantee, 73,79. as to specific performance of sale of goods, 382 as to disabilities to sue in respect of limitation of action, 387. as to agent’s signature of promise to pay barred debt, 388. Promise for benefit of third person, 282 n. Sale of Goods Act, 56 & 57 Vict. c. 71: as requirements for contract of sale, 3-88. nature of contract, 83. mistake as to existence of goods, 166. title to goods obtained by false pre- tence, 218. implied conditions, 365-368. condition and warranty, 372. specific performance, when granted, 379 79. destruction of goods by fault of neither party, 391 n. Stock-jobbing, 7 Geo. II. c. 8, Sir J. Barnard’s Act, 236, 258. 30 & 81 Vict. c. 29, Leeman’s Act, 259. Sunday Statutes, 228 n. Subrogation: of insurer into rights of insured, 238 n. Subscriptions: consideration for charitable, 109n. Sunday: 228n. See Statutes. Hips Telegraph: contract by, 31n. negligence of company, 208 n. Tender: a form of performance, 347. of goods, 347. of money, 347, 348. Time: of the essence of the contract at common law, 328. rules of equity as to, 328, 329. rules of Judicature Act, 329. lapse of, a form of discharge, 386. 456 INDEX. Title: of assignee of contract, 289-291; see Parties. Trust: how distinct from contract, 4, 10, 275, 276. declaration of, its effect in contract, 284. Uberrima fides: its meaning, 192. in what contracts required, 192-199. Ultra vires: contracts ultra vires relate to capacity of parties, 145. cannot be ratified, 407. Uncertainty : in offer or acceptance, 23. of consideration avoids promise, 96. Undue influence: 219-223. prevents reality of consent, 157. how distinct from fraud, 219. when it may be presumed, 220-222. right to rescind contracts affected by it, 224. Usage: evidence of, when admissible, 323, 324. Usury laws: promise after their repeal, to repay money lent at usury, 125. their place supalied by doctrine of undue influence, 221. NM Void and voidable: meaning of the terms, 271, 272. Wager: 228-239. definition of, 228-231. legislation respecting, 231-239. in contracts of insurance, 230, 231. Wager: (ctd.) in transactions on Stock Exchange, 236, 258. agreements to pay ee ae 236, 237. money lent to make, 257, 258, "O65. money advanced to pay, "934, "958. employment to make, 234, 258, 433. money received in payment of, 234. money deposited to abide the’ event of, 234, 269, 270. securities in payment of, 235, 263. Waiver: ; of rights under negotiable instrument, promissory note, 104, 105, 335. of statutory exemption from perform- ance of contract, 124, 125. of cop timIne contract by infant, 132, 133. as a form of discharge, 333-335. of executed as distinct from executory contract, 104, 333, 334. 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