(JJornpU ICaui i>rl|onl Slibrary Cornell University Library KD 1554.A96 Principles of the English law of contrac 3 1924 022 213 684 Hontion MACMILLAN AND CO. PUBLISHERS TO THE UNIVERSITY OF ©xforir PRIKOIPLES OF THE ENGLISH LAW OF CONTRACT s»- '. BY , SIR WILLIAM R. ANSON, Baet., M.A., B.C.L. OF THE IHNEB TEMPLE, BAEEISTEK AT LAW TIKEEIAN SEACEE OP ENGLISH LAW PELLOW 01 ALL SOULS' COLLEGE, OXPOED AT THE CLARENDON PRESS 1879 [All rights reserved] PEEFACE. This book is an attempt to draw such an outline of the principles of the law of Contract as may be useful to students, and, perhaps, convenient to those who are engaged in the teaching of law. To some of those who are so engaged it has seemed that there is need of an elementary treatise which should deal with the subject of Contract in its entirety; and the existence of such a need is my excuse for the production of the present work. The main object with which I have set out has been to delineate the general principles which govern the contractual relation from its beginning to its end. I have tried to show how a contract is made, what is needed to make it binding, what its effect is, how its terms are interpreted, and how it is discharged and comes to an end. In thus sketching the history of a contract, I have striven to maintain a due proportion in my treatment of the various parts of the subject, and to avoid entering into the detail of the special kinds of contract. The history and antiquities of the subject have, of necessity, been dealt with only so far as was absolutely necessary to explain existing rules, and I have placed in Appendices what I have to say on two matters the treatment of which seemed to be unavoidable and yet out of place in any part of a merely general outline. One of these is the ' contract implied in law,' or quasi- contract. The effect of this legal relation has been fully explained by Mr. Leake (part i.e. i. e. 2), and it seemed to VI PEEFACE. be only necessary to point out the general cliaracter of the obligation which it creates, and to sketch the history of the mode in which, for the convenience of pleading, it figured for a while in the outward form of contract. The other subject is the special contract of Agency : this too I regarded as a matter alien to a general discussion of the principles of contract, but the constant recurrence of the relation of Principal and Agent made it needful to give a brief outline of the chief rules regarding Agency. On one or two points, interesting in themselves, or open to discussion, I have dwelt at a length disproportionate perhaps to my general plan. The somewhat slender authority for some of the often-quoted rules relating to past considera- tion, the various effects of innocent misrej)resentation, the questionable validity of a bare waiver of contractual rights, are points to which I have called the attention of the reader. The intricate subject of the discharge of contract by breach, and its effects, together with the kindred subject of con- ditional and independent promises, would seem to need a fuller analysis than it has yet received in the books on Con- tract. Conditions are usually dealt with in connection with the promise when made, whereas their full effect can only be ascertained when they are regarded as affecting the promise when broken. Another object which I have striven to attain is that of inducing the student to refer to the cases cited in illustration of the rules laid down, and to form for himself a clear notion of the law as it has been expounded from the Bench. The law of contract so far as its general principles go has been happily free from legislative interference : it is the product of the vigorous common sense of English Judges ; and there can hardly be a healthier mental exercise than to watch the PREFACE. Vll mode in which a judicial mind of a high order applies legal principles to complicated groups of fact. The student, to whom a text-book is not, as it is to the practising barrister, a repository of cases for reference, but a collection of rules and principles which he desires to learn, is too apt to take these upon trust unless the cases from which they are drawn are thrust upon his notice. For this reason I have avoided the citation of numerous cases, I have endeavoured to select such as form the most vivid illustrations of the rules which I have laid down, and I have placed the references to those which I have cited — where I thought they would be most conspicuous — in the margin. This is my excuse for a departure from the ordinary arrangement of references, in foot-notes. To the able Treatise of Mr. Pollock and the exhaustive Digest of Mr. Leake I have made frequent references, but these do not express the extent of my obligations to those learned authors. Their books must needs enter largely into the composition of such a work as mine professes to be. I have also occasionally referred the reader to works of a more special character, and in particular to the great work of Mr. Benjamin for all points connected with the contract of Sale of Personalty. But for the reason which I stated above I have avoided the accumulation of a mass of authority, and have often run the risk of seeming to dogmatise lest a numerous collection of references should disincline the stu- dent to the process of verification. W. R. A. 7 Bkiok Couet, The Temple. The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924022213684 TABLE OF CONTENTS. PAET I. PLACE OF CONTRACT IN JtrEISERUDBNCB. PAGE Outline of subject ......... i Analysis of Agreement ........ 2 Distinction of Contract from Agreement ..... 3 Analysis of Obligation ........ 4 Distinction of Duty from Obligation ...... 6 Forms of Obligation 7 PART II. FOEMATION OP CONTRACT. CHAPTER I. Proposal and Acceptance. Agreement traceable to Question and Answer Forms in which Contract may originate Requirements in Proposal .... Requirements in Acceptance Proposal inoperative till accepted Under what circumstances may Proposal be revolted How Proposal may lapse otherwise than by revocation Contract may arise from Conduct Proposal by Advertisement .... Representation of Intention as distinct from Proposal 12 14 14 15 17 22 23 24 26 CHAPTER II. Perm and Consideration. Form or Consideration necessary marks in a valid Contract . Historical outline of the subject ....-• Classification of English Contracts 29 29 36 X CONTENTS. PAGE Formal Contracts. Contract of Record 37 Contract under Seal .... . 39 How made ....... ■ i9 Its characteristics ...... -40 When a Deed is essential to validity of a Contract . . 44 Simple Contract. Simple Contracts required to be in writing ... 46 The Statute of Frauds -47 The Fourth Section 47 Its requirements as to form . , . . 4^ The Contracts included under it . . . . .52 The effect of a breach of its provisions . . ■ 5^ The Seventeenth Section of the Statute of Frauds .:; 7 Its requirements as to form . . 58 Nature of Contract specified ... 58 Effect of a breach of its provisions 60 Consideration. Definition of Consideration . . 61 Consideration necessary to validity of every Simple Con- tract ..... . 62 Consideration need not be adequate to the promise 63 In what Consideration may consist . . 65 Mutual promises . . 66 Contingent or conditional promises 66 Forbearance to sue . .67 Compromise of suit . ... 68 Bailment . 70 Consideration which has been held unreal . 7 1 Motive . . . 71 Impossibility and Vagueness . 74 Performance or promise to perform existing legal duty 75 Apparent exceptions, composition with creditors 79 Promise to perform existing contract . 80 Shadwell v. Shadwell discussed 80 Legality of Consideration . Si Executory and executed Consideration . .82 Past Consideration is no Consideration . . 85 First alleged exception to this rule, Consideration exe- cuted upon request ... 85 The rule in Lawpleigk v. Braithwait discussed . 86 CONTENTS. xi PAGE oeooiid exception, revival of Promise . . . 90 Third alleged exception, voluntary discharge of another's legal liability ... . . 92 Review of cases ... -93 CHAPTER III. Capacity of Parties. 1. Political or Professional Status . . . 97 2. Infancy. Ratification at Common Law . . . 98 Ratification of Infant's Contract as affected by Statute . loi Infant's Relief Act ...... . loi Effect of first section of Infant's Relief Act . . 102 Of second section . . 103 Necessaries, what they are, and how ascertained . 104 Liability of Infant for wrong arising from Contract . . 105 Or apart from Contract . . 106 3. Married Women . . . . 106 Their Contracts void aa a general rule . 106 Exceptions ... . ... 106 4. Corporations . .... .111 Necessary limits to their capacity to Contract . .111 Express limitations . . ... 112 5. Lunatics and Drunken Persons ... 113 Their Contracts voidable, not void . . . 113 CHAPTER IV. Reality of Consent. 1. Mistake of intention as distinct from expression . Ii6 „ as to nature of transaction . , . . .116 „ as to persons with whom the contract is made 118 „ as to subject-matter of Contract, generally in- operative . 120 „ as to existence of subject-matter . . .121 „ as to identity of subject-matter . 122 ,, as to extent of promise as to subject-matter . 123 Effect of Mistake is to avoid contract . . .127 2. Misrepresentation; difficulty attending its discussion . 128 Misrepresentation as distinguished from fraud . 129 Innocent Misrepresentation is inoperative . .132 CONTENTS. PASE Unless it be a tenn in the contract . ... 13^ Or occur in contracts itien-imae^dei . . • .133 If a term in the contract, it is then a form of discharge . 138 Contracts uberrimae fidei .139 Marine and iire insurance . . . . .140 Sale of land 141 Prospectus inviting pxirchase of shares . . 142 Contract of suretyship is not uherrireiae fidei . . . 143 In its inception, but becomes so when made . . . 144 Expressions of opinion are not representations . . 144 Nor are conamendatory expressions . . . . .144 3. Fraud. Its essential features ...... 145 It is a false representation .... 145 It is a representation of fact ..... 147 Intentionally false, or reckless 148 Intended to be acted upon by the person injured . 151 It must actually deceive . . . . . .152 Its eflfect, it giyes rise to action ea; (ZeKcfo . . .163 ,, it makes contract voidable .... 154 „ limits of right to affirm and avoid . . .154 4. Duress, its nature and effect . . . . . .155 5. ?7jitZ«e /?7^«mce, how distinct from Fraud , . .156 Circumstances under which it is presumed . -157 Suggested by personal influence ..... 158 Or by the circumstances and relations of the parties . 160 Its effect ; bow different from that of Fraud . .161 CHAPTER V. Legality of Object. Nature of illegality ..... Contracts in breach of Statute ; effect of penalty "Wagering contracts .... A wager defined and described History of legislation on the subject Contracts in breach of rules of Common Law Agreements to commit a crime or wrong Contracts in breach of the policy of the laio Public policy; its general application . Agreements tending to injure public service 164 164 165 i66 168 172 173 174 174 CONTENTS. Xlll PAGE Agreements tending to pervert the course of justice . 176 „ tending to encourage litigation . , 177 „ contrary 'to good morals . . . .178 in restraint of marriage . . 179 „ in restraint of trade . . . . • 1 79 3. Effect of illegality 180 Where the contract is divisible 181 Where the contract is indivisible . . . . 182 • Where direct object is unlawful but intention innocent 182 Where direct object is innocent but intention unlawful 183 Where the unlawful intention is on one side only 186 Securities given for money due on illegal transactions 1 86 Distinction between illegal and void contracts . .187 Effect of parties not being in pari delicto . 1 89 Effect of locus poenitentiae while the contract is executory ....... 191 PAKT III. THE OPERATION OF CONTEACT. CHAPTER I. The Limits of the Contractual Obligation. A contract only affects the legal relations of the parties to it . 195 Agency and Trust no real exceptions to this rule . . 196 1. Contract cannot impose an obligation on a third party . . 197 Can it impose a du^j/ ? Lumley v. Gye discussed . .198 2. Contract cannot confer rights on a third party . -199 Though expressed so to do by the contracting parties . . 199 CHAPTER ir. The Assignment of Contract. I. Assignment by act of the parties .... .204 Liabilities cannot be assigned 204 Rights may be assigned at Common Law only by sub- stituted agreement in case of debt ..... 200 Or by custom of merchants ....... 200 Rights may be assigned in Equity . . . • 208 XIV CONTENTS. But notice must be given to persons liable . . . 20S And the assignment ' is subject to equities' . . ■ 209 Rights may be assigned by Statute in certain cases '211 Negotiability, its characteristics . . . . .212 Illustrated by bills of exchange and promissory notes . 213 Illustrated by bills of lading 216 Assignment by operation of law . ... 217 Obligations assigned on transfer of interests in land . .218 In the case of leasehold interests . . . 218 In the case of freehold interests ... 218 Obligations of wife assigned by marriage . .221 Obligations assigned by death ... .222 Obligations assigned by bankruptcy or liquidation . . 223 PAET IV. THE INTERPRETATION OP CONTRACT. CHAPTER I. Eulea relating to Evidenee. Provinces of Court and Jury ....... 226 Difference in proof of formal and simple contract . 1. Proof of document purporting to be a contract 2. Evidence as to fact of agreement . .230 3. Evidence as to terms of contract . . . . 233 Collateral promise ...... 234 Explanation of terms 235 Usage 237 Equitable rules as to rectification and avoidance . . 239 CHAPTER II. Bules relating to Construotion. General rules . . 241 Rules as to Time and Penalties 242 CONTENTS. XV PART V. DISCHAEGB 01" CONTRACT. . PAGE Modes in wnich it may take place . ... 246 CHAPTER I. Discharge of Contract by Agreement. 1 . Waiver as a mode of discharge Only applicable to executory contracts . And to bills of exchange and promissory notes 2. Substituted contract : How different from postponement of rights Substituted terms ...... Substituted parties 3. Provisions for discharge ..... • 247 . 248 - 249 250 251 252 (i) Promise subject to right of rescission in a certain event 253 244 254 255 • 256 257 • 257 (2) Conditions subsequent Excepted risks ..... Act of God ...... (3) Provisions making contract determinable at option Form of discharge by agreement .... In case of contract under seal . In case of ^aroZ contract .... 258 CHAPTER II. Discharge of Contract by Performance. Performance when a complete discharge . . . . 261 Payment as a discharge ....... 262 Tender as a discharge ........ 264 CHAPTER III. Discharge of Contract by Breach. Breach of Contract always give a right of action, not always a discharge ...... ... 266 I. Position of party discharged by Breach .... 267 He is exonerated from further performance .... 267 May sue as upon a contract arising from conduct . . . 268 Even if his performance be only partial — a quMntum meruit . 269 XVI CONTENTS. 2. Forms of Disotarge by Breach 270 Renunciation before performance is due . . . .271 Impossibility created by one party before performance is due 273 Renunciation in the course of performance . . . .274 Impossibility created by one party in the course of per- formance .... .... 279 Failure of performance, when a discharge . . . ,277 Independent promises of three kinds . . . . .277 (.i) Absolute promises ... ... 278 (2) Promises admitting of more or less complete per- formance . . 281 (3) Subsidiary promises ... . 284 Conditional promises — nature of conditions . . . .286 Suspensory conditions . . . . . . . .287 Conditions which determine discharge .... 288 (1) Concurrent conditions ..... . 289 (2) "Virtual failure of consideration . . 290 (3) Conditions precedent . . . . . 294 How distinguished from Warranty ..... 295 Acquiescence in breach of a condition turns it into a War- ranty ex 'poat facto .... , . 297 But not if the breach be of an essential term .... 299 3. Remedies for Breach ..... . . 300 Damages, rules governing their application , . .301 Specific performance, when decreed ..... 304 By what Courts administered ..... 305 4. Discharge of Right of Action arising from Breach . . 306 By consent of parties. Release .... . 306 By consent of parties. Accord and Satisfaction . . . 307 By judgment 307 By lapse of time . ....... 308 Revival of barred right of action . . . . . .310 CHAPTER IV. Discharge of Contract by Impossibility of Performance. Phases of Impossibility of Performance . . 312 Difficulties presented by Clifford v. Watts . . . -313 Subsequent Impossibility as a rule is no discharge . . 314 Unless it be created by law of England . . . . .315 CONTENTS. XVU PAGE Or by destruction of a thing the continued existence of which is contemplated . . .... . . 316 Or by incapacity for personal service . . . . • 3'7 CHAPTER V. Disoliarge of Contract by Operation of Law. Merger . . . . 318 Alteration of a written instrument 319 Bankruptcy . . . . . 319 APPENDIX A. Contract and Quasi-Coutraet. Historical connection of the two legal relations . 321 Legal relation arising from Judgment ... 325 „ „ ,, accounts stated . . . 325 „ „ ,, money paid by plaintiff for defendant 325 „ „ „ money received by defendant to plain- tiff's use . . 326 APPENDIX B. Agency. Agency not a question of capacity of parties . . 328 Modes of creating relation of agent and principal 330 Kinds of agency . . . 33i Kestriction and revocation of agency . . . . 334 Effect of agent's contract upon himself, his principal, and third parties ........... 335 INDEX OF CASES. CASE. Adams v. Lindsell... Adamson v. Jarvis Allen V. Eescous ... Anderson v. Pacific Insurance Co Archer v. Hudson Armstrong v. Stokes Arundel v. Trevilian Ashbury Carriage Co. v. Riche Asiatic Banking Corp. Ex 'parte Atherfold v. Beard Atkins V. Banwell... Atkinson .v. Denby Atlee V. Backhouse Avery v. Bowden ... Ayerst v. Jenkins ... Aylesford (Earl of) v. Morris Azemar v. CaseUa BErBBENCE. 1 B. & Aid. 68 1 4 Bing. 66 2 Lev. 174 L. R. 7 C. P. 65 7 Beav. 560 L. R. 7 Q. B. 603 Rep. in Chancery, 47 JL. R. 9 Exch. 224 i IL. R. 7 H. L. 653 ( L. R. 3 Ch. 397 2 T. R. 610 ... 2 East, 504 6 H. & N. 778-1 7 H. & N. 934J 3 M. & W. 633 6E.&B. 714 ... L. R. 16 Eq. 275 L. R. 8 Ch. 490 L. R. 2 C. P. 191 & 677 112, 336 144 158 337 179 182, 201 • ■• 93 ... 190 ... 156 272,273 ... 178 157.16: 291, 293 Bailey v. de Creapigny Bailey v. Sweeting Bannerman v. White Baring v. Corrie ... Barry v. Croskey ... Baxter v. Buifield... Bayley v. Homan . . . Beauchamp (Earl) v. Winn . . . Beaumont v. Greathead Beaumont V. Reeve Beckham V. Drake Begbie v. Phosphate Sewage Co. Behn v. Burness Bettini v. Gye Beverley v. Lincoln Gas & Coke 1 Beynon V. Cook Birkmyr v. Darnell B. L. R. 4 Q. B. 180 9 C. B. N.S. 843 10 C. B. N.S. 844 2 B. & Aid. 143 2j. &H. I ... 2 Str. 1266 3 Bing. N. C. 920 L. R. 6 H. L. p. 23 2 C. & B. 494 ... 8 Q. B. 4S3 ... 9M. & W. 98 ... L. R. 10 Q. B fiB.&S. 877I t3B.&S.7.^i/- 32. 499 r L. R. I Q. B. D. 187 Co. 6 A. & E. 837 L. R. 10 Ch. 389 .. I Sm. L. C. 310 b 2 133. 286 ... 315 ... 5° 136, 137 ... 332 ... 151 ... 222 ... 307 ... 239 ... 301 179,189 ... 337 174,190 139. 270. . 295. 297 284, 297 ... 268 ... 161 ... 53 INDEX OF CASES. CASE. Blades r. Free Blair v. Bromley ... Blatchford v. Preston ' Bloomer v. Bernstein Bloxam v. Sanders Bolton V. Madden... Boone v. Eyre Boulton V. Jones ... Bourne v. Mason . . . Bowman v. Taylor. . . Boyd V. Hind Boyd V. Mangles . . . BoydeU v. Drummond Bradford v. Koulston Brady T.Todd Brashford v. Buckingham and wife Brayshaw v. Eaton Bret V. J. S. and wife British and American Telegraph Co. V. Colson Brictain T. Lloyd ... Brogden v. Metropolitan Railway Brown v. Byrne . . . Brown v. Duncan . . , Burges v. Wickham Burgess v. Eve Burnard v. Haggis Burrell's Case Butler and Baker's Case Buxton V. Rust EEFEEBNCE. PAGE. 9B. &C. 167 335 6 Hare, 559 310 8 T. E. 89 176 L. R. 9 C. P. 588 283 4B. & C. 941 286,289 L. R. 9 Q. B. 55 64 : H. Bl. 273 n 290 2 H. &N. 564 119 I Ventr. 6 200 ^ A. & E. 278 40- iH. &N. 938 79 3 Ex. 395 210 u East, 142 50, 229 [8 Ir. C. L, 468, 1 g \LangdeU Contr. 450J 9 C. B. N.S. 592 331 Cro. Jac. 77 107 7 Scott, p. 187 105 I Cro- 755 72 j-L. R. 6 Ex. 108 21 14M. &W. 762 84 L. R. 2 App. Ca. 691 2, 15 3E. &B. 716 238 loB. &C. 43 ... 164 3 B. & S. 669 234, 235, 237 L. R. 13 Eq. 457 144 14C. B. N.S. 45 106 L. R. I Ch. D. 552 147 Coke, Rep. ill. 26 b 16 L. R. 7 Exoh. 279 49 Cannan v. Brye© Card V. Hope Cartwright v. Cartwright Chamberlain v. Williamson, Chanter v. Hopkins Charnley v. Winstanley Clay V. Yates CUfford V. Watts ... Clough V. London & N. W. R. Co, Coggs V. Bernard ... Coles V. Treoothick Collen V. Wright ... Collins V. Blantem Cnnflans Quarry Co. v. Parker Cook v. Oxley Cook V. Wright , . . C. . 3 B. & Aid. 179 . 2 B. & C. 661 ... . 3 D. M. & G. 982 . 2 M. & S. 408 ... . 4 M. & W. 399 . 5 East, 266 . I H. &N. 73 ... L. R. 5 C. P. 577 L. R. 7 Ex. 36... iSm. L. C. ... 9 Ves. 234 [7 E. & B. 301] is E. & B. 647/ I Sm. L. C. 369 L. R. 3 C. P. 1 3T. R. 653 ... iB. &S. 559 ... ... 184.185 17s 179 223 • •■ 293,295 335 ... 173. 1S6 74, 295,313 154 335 - 65> 158 ■■• 295,338 42 319 18 69 INDEX OF CASES. CASE. Cooper V. Phibbs Cope V. Rowlands Cornish v. Stubbs Cert V. Ambergate Railway Co. Couch V. Goodman Couturier v. Hastie Cowan V. Milboum Crouchv.CreditFoncierofEngland L. E,. 8 Q. B. 380 .. Cumber V. Wane i Sm. L. C. sfli RBFEEENOE. L. E. 2 H. L. 170 2 M. & W. 149 L. E. 5 C. P. 339 17Q. B. 127 ... 2 Q. B. 597 ... 5 H. L. C. 673 L. R. 2 Exch. 230 .. Cundy v. Lindsay . . Currie v. Misa Cutter V. Powell . . Cuxon V. Chadley . , ... L. R. 3 App. Gas. 465 ... ... L. E. 10 Exch. 162 ... 6 T. E. 320 &Sm.L. C. ii ... 3B. &C. 591 PAGE. 12 2, 148 ... 164 ... 219 270, 274 • •• 39 ... 121 186, 187 209, 2 1 5 ... 307 ... 119 ... 61 I... 283 ... 206 D. Dalby v. The Lond. Life Assur. Co. Daltori V. Mid. Coun. Railway Co. De Bussche V. Alt Denton v. Great Northern Eailway Dickenson v. Dodds Dickson v. Eeuter's Telegraph Co. Dimmock v. HaUett Dixon V. Clarke Dobell V. Hutchinson Dobson V. Espie Doe d. Garnons v. Knight Donellan v. Eead Drake v. Beckham Dresser v. Norwood Dunlop V. Higgins Durnford v. Messiter Dulton V. Poole mC. B. 36s ... . 13C.B. 478 ,., . L. E. 8 Ch. D. 310. 5 E. &B. 860... , L. E. 2 Ch. D. 463 . 475 • L. R. 3 C. P. D. I . L. R. 2 Ch. 27... . 5 C. B 376 .- . 3A.&E. 355... . 2 H. & N. 79 ... . 5 B. &C. 671 ... . 3 B. & Ad. 899 II M. & W^ 319 . 14 C. B. N.S. 674 . 1 H. L. C. 381... . SM. &S. 446... . 2 Lev. 210 ... 172 ... 107 • •■ 335 ... 28 ... 18 ... 23 ... 148 ... 144 ... 264 ... 49 ... 248 ... 16 ... 56 ... 234 ... 337 ... 21 ... 197 ... 72 Earle v. Oliver Eastland v. Burchell Eastwood V. Kenyon Edwards v. Aberayron Insur. Soo. Egerton v. Brownlow Eioholz V. Bannister Elderton v. Emmens Eley V. Positive Life Assur. Co. . . , Eliason v. Henshaw Ellen v.Topp England v. Davidson England v. Marsden Erskine v. Adeane Evans v. Collins Exall V. Partridge E. . 2 Exch. 71 90 . L. R. 3 Q. B. D. 432 108 . iiA. &E. 446 ... 73,92,94 L. R. I Q. B. D. 596 ... 177, 230 4n.L. C. I 175 17 C. B. N.S. 708 295 4C. B. 493 87 L. E. I Ex. D. 88 (C. A.) ... 201 4 Wheaton, 225 , 23 6 Exch. 424 299 iiA. &E. 857 84 L. R. I C. P. 529 326 L. E. 8 Ch. 766 234 5 Q. B. 804, 820 149 8T. E. 308 326 xxn INDEX OF CASES. CASE. Fairlie V. Denton Faulkner V. Lowe Featherstone v. Hutchinson Felthouse v. Bindley Ferguson v. Wilson Findon v. Parker Fisher V. Bridges Fishmonger's Co. v. Robertson . . . Fitch V. Jones Fitch V. Sutton Fleet V. Murton Fleet V. Perriu Flight V. Bolland ].. .'.'.' Flight V. Booth Flight v.Eeed Ford V. Beech Foster v. Bates Foster Y. Charles Foster v. Dawber Foster V. JoUy Foster V. Mackinnon Foster V. Wells Fowkes V, Manchester A.ssur. Asso. Fowler V. Fowler Freeth v. Burr Frost V. Kniarht EEFEKENOE. 8B. & C, 400 ... 2 Exch. 695 ... Cro. Eliz. 199 ... II C. B. N.S. 869 L. E. 2 Ch. 89... 11 M. & W. 682 3 E. &B. 642 ... 5 M. & Gr. 192 5 E. & B. 245 ... 5 East, 230 L. E. 6 Q. B. 131 L. E. 4 Q. B. 500 4 Euss. 298 I Bing. N. C. 370 I H. & C. 703 ... iiQ. B. 866 ... 12 M. & W. 226 7 Bing. 105 ... 6 Exch. 839 ... I G. M. & E. L. E. 4 G. P. 8 M. & W. 149 3B&S. 929 ... 4 D. & J. 250 ... L. E. 9C. P. 214 L. E. 7 Ex. 114 708 704 PAGE. .. 206 .. 5 .. 182 .. 15 .. Ill .. 178 .. 187 .. 46 ... 336 ... 222 ... 304 ... 141 ... 91 ... 241 ... 331 ... 130 77, 249 ... 230 ... 117 ... 176 ... 242 ... 240 ... 282 G. Gardner V. Walsh Gamons Doe d. v. Knight Garrard v. Frankel Geipel v. Smith Gervas v. Edwards Gibson v. Carruthers Gilbert V. Sykes Glaholm v. Hayes Glazebrook v. Woodrow Godsall V. Boldero Good V. Cheesman Goode V. Harrison Goodman V. Chase Gomau v. Salisbury Goss V. Lord Nugent Graham v. Johnson Grant v. Johnson Graves v. Legg Gray v. Mathias Gray V. Pearson Great North. Ead. Co. v. Witham 6 E. &B. 89 319 5 B. &C. 671 16 30 Beav. 445 127, 240 L. E. 7 Q. B. 404 255 2 Dr. & War. 80 305 8M. & W. 339 216 1 6 East, 150 168,175 2 M. & G. 257 134 8T. E. 366 280 9 East, 72 172 2B. &Ad. 528 .,. 79 5 B. & Aid. 159 100 I B. & Aid. 297 54 I Vern. 240 258 5 B & Ad. 65 259 L. E. 8 Eq. 38 210 Ijangd. Cases on Contract, 620 280 9 Exch. 716 285,298 6 Ves. 2S6 179 L. R. 5C. P. 568 202 L. E. 9C. P. 16 66 INDEX OF CASES. CASE. Gregory v. Williams Grisewood v. Blane Gurney v. Behrend Guthing V. Lynn . . . EEFEKENOE. . 3 Mer. 582 . iiC.B. 538 ... . 3 E. &B. 622 ... ,. 2 B, & Ad. 232 H. Hadley v. Baxendale Haigh V. Brooks Halifax v. Barker Hall V. Warren Hamilton v. Watson Hamlin v. Great North. Rail. Co. Hampden v. Walsh Hancock v. Lablache Hansard v. Robinson Harris's Case Harris v. Nickerson Harris v. Pepperell HaiTis V. Rickett Hart V. Alexander Hart V. Miles Hart V.Mills Hartley v. Ponsonby Hartley V. Rice Harvey v. Gibbons Harvey v. Mount Harvey V. Young Hawk en v. Bourne Hayes v. Warren Head V. Tattersall Henderson v. Stevenson Hickman v. Haynes Higgen's Case Higgins V. Senior Hill V. Wilson Hills V. Evans HiUs V. Sughrue Hirschfield f. London, Brighton and South Coast Railway Co. Hitchcock V. Coker Hoadley V. M^Laine Hochster v. Delatour Hoghton V. Hoghton Holmes V. Bell Honeyman v. Marryat Hopkins V. Logan Home V. Midland Railway Co. Horsfall V. Thomas Hudson V. Revett Huguenin v. Bazely Hulle V. Heightman PAGE. .. 201 .. 171 .. 217 .. 14 302 9 Exeh. 354 .. „ 10 A. & E. 309 64, 242 3 Dyer, 272 a; Cro. EUz. 741 89 9 Ves. 60,5 iiA 12 CI. &E. 109 I H. & N. 408... L. R. I Q. B. D. T. Tt -, n p n L. R. 3 C. P. D. 7 B. & C. 90 L. R, - ^' 189 197 L. R. 7Ch. 587 ... L. R. 8 Q. B. 286 ... L. R. 5 Eq. I 4H. &N. 1 2M. &W. 484 4C. B. N.S. 371 ... 15M. &W. 87 7 E. &B. 872 10 East, 22 2 Lev. 161 8 Beav. 439 1 Telv. 21 8M. &W. 708 3 Str. 933 L. R. 7 Exch. 7 ... L. R. 2 So. App. 470 L. R. 10 C. P. 606.,. 6 Co. Rep. 45 b 8M. &W.834 .. L. R. 8 Ch. 888 .. 31 L. J. Ch. 457 ... .. 15 M. & W. 253 ... "'JL. R. 2 Q. B. D. I ... '.'. 6 Ad. & E. 438 .. 10 Bing. 482 2 E. & B. 678 15 Beav. 299 3 M. &G. 213 6H. L. C. 112 SM. &W. 241 L. R. 8 0. P. 131 ... 1 H. &C. 90 6 Bing. 387 ... ■•■ 14 Ves. 273 2 East, 145 114 143 302 ... 192 no 319 21 27 240 229 2i;2 70 ... 23.83 76 179 74 159 147 333 323 253, 264, 284 24 251 318 49. 51. 336 3 238 313 148 . ... 180 ... 58,83 271 ' 157 318 15 325 302 152 40 159 XXIV INDEX OF CASES. CASE. Humble v. Hunter Hunt V. Bate Hunt V. Wimbledon Local Board Hunter v. Walters Huscombe V. Standing Hussey v. Home Payne Hutton V. Warren Hyde v. Wrench EBrERBNOB. 12 Q. B. 317 ^ Dyer, 272 a L. E. 3 C. P. D. 214 L. E. 7Ch. 84 Cro. Jac. 187 L. K. 8 Ch. D.670... iM. &W. 466 SBeav. 336 2°4. 337 ... 86 ... 46 118 155 15 238 15 "7, Imperial Gas Co.v. London Gas Co. 10 Exeh. 39 lonides v. Pacific Insurance Co. ... L. E. 6 Q. B. 686 lonides v. Pender L. E. 9 Q. B. 537 Ireland V. Livingston L E. 5 H. L. 408 Irving V. Veitch 3 M. & W. 106 .. 310 .. 125 .. 140 ■ . 333 .. 325 (1694) Carthew, p. 338 L. E. 10 C. P. p. 148 8T. E. 335 L. E. 8 Ch. 351 ... 3D. P. & J. 494 ... Jackson v. Colegrave Jackson v. Union Marine Ins. Co, Jennings V. Eundall Jervis v. Berridge Johnson V. Gallagher Johnson v. Eoyal Mail Stearal t t» ^ t. Packet Co.... jL.E. 3C.P. 43 Jollyv.Eees 15 C. B. N.S. 628 Jones V. Ashburnham 4 East, 463 Jones V. Edney 3 Camp. 285 ... Jones V. Just L. E. 3 Q. B. 197 Josling V. Kingsford 13 C. B. N.S. 447 124, 291, ... 167 ... 294 ... 105 232. 233 ... no • ■■ 325 ■ •■ 334 ... 67 ... 142 293 293 Kaye v. Dutton Keates v. Lord Cadogan Keir v. Leeman Kekewich v. Manning ... Kelly V. Solari Kelner V. Baxter Kemble v. Farrin Kemp V. Findon Kennedy v. Broun Keppel V. BaUy Kibble's Case King V. Gillett Kirkham v. Marter K. ,. 7M. &Gr. 807 ,. 10 C. B. 591 . 6 Q. B. 321 & 9 Q. B. 395 . I D. M. G. 188 . 9M. & W. 58... ., L. E. 3C. P. 628 . 6 Bing. 147 ,. 12 M. & W. 423 .. 13C. B. N.S. 677 ... '..', . 2 Mylne & Keen, 517 . L. E. 10 Ch. 373 . . ,. 7 M. & W. 65 . 2 B. & Aid. 613 157, 244, 86 1 46 177 304 128 334 -45 325 7, 98 220 102 24S 54 Laing v. Pidgeon Lampleigh v. Braithwait L. . 6 Taunt. 108 ... fi Sm. L. C. I4ii ■ l.Hobart, 105 J ... 291 §4, 86 INDEX OF CASES. XXV _ CASE. EEFEHENOE. liangridge V. Levy 2 M. & W. 519 -Law V. London Indisputable Life! -r^ . -, Policvfio. fi K. & J. 229 ... Policy Co. Leask v. Soott Le Blanche v. L. & N. W. k! Co! Lee V. Griffin Lee V. Jones ... Lee V. Muggeridge Lennou v. Napper Leroux v. Brown ., Lewia t. Nicholson Lickbarrow v. Mason Lindsay Petroleum Co. v. Hurd Littlefield t. Shee Liversidge V. Broadbent Llanelly Railway Co. v. London & N. W. Railway Co. Lovelock V. Frauklyn Lowe V. Pears Lumley v. Gye Lumley v. Wagner "^} L. R. 2 Q. B. D. ^•j6 L.R.iC.P. D. 286,311 1 B. &S. 272 ... 17 C. E. N.S. 503 5 Taunt. 36 2 Sch. & L. 684 12 C. B. 801 ... 18Q. B. 503 ... 2 Sm. L. C. 825 L. E. 6 P. C. 243 2 B. & Ad. 811 4 H. & N. 603... L. E. 7 H. L. 567 ... 8Q. B. 371 ... ... 4 Burr. 2225 ... ... 2 E. &B. 216 ... ... I D. M. (StG. 604 26, 27, PAGE. .. 151 .. 172 69 ,96 59 .•■ 143 90, 92 ■ ■•- 243 ... S6 ... 337 ... 216 ... 147 ... 92 206, 207 ... 308 273. 274 ... 179 ... 198 ... 305 M" Andrew v. Chappie... . Macdonald v. Longbottom . Mackenzie v. Coulson ... M<:Kinnell v. Robinson M"Manus v. Bark Maddick V. Marshall ... . Mahony v. Kekuli Makin v. Watkinson ... Mallalieu v. Hodgson ... MaUan v. May Manby V. Scott Mangles v. Dixon Marriott v. Hampton ... Martin V. Hewson Matthews v. Baxter Mattock V. Kinglake ... Mavor v. Pyne Mayor of Kidderminster v. Hard "wicke Melhado v. Porto Alegre Rail. Co, Meyer v. Drener Minett v. Forester MinshuU v. Cakes Mody V. Gregson Mollett V. Robinson Molton V. Camroux Morgan v. Birnie M. L. R. I C. P. 643 1 E. &E. 977 ... L. R. 8 Eq. 375 3 M. & W. 435 L. R. 5 Ex. 65 16 C, B. N.S. 387 14C.B. 398 ... L R. 6 Ex. 25... 16 Q. B. 689 ... II M. & W. 665 2 Smith, L. C. ... 3H.L.C. 735... 2 Sm. L. C. 356 10 Exch. 737 ... L. R. 8 Ex. 132 10 A. & B. 50... 3 Bing. 285 ... L. R. 9 Ex. 24 L. R. 9 C. P. 503 16 C. B. N.S. 646 4 Taunt. 54 2 H. & N. 808... L. R. 4 Ex. 49... JL. R. 7 C. P. Ill ) \L. R. 7 H. L. 802 I 2 Exch. 489 & 4 Exch. I 9 Bing. 672 ... 294 ... 235 ... 240 ... 184 ... 307 ... 334 ... 329 ... 288 ... 173 180, 241 ... 334 209, 210 ... 327 ... 192 ... 114 280, 281 24, 269 46 201 238 335 219 293 238, 333 "3. "9 ... 287 XXVI INDEX OP CASES. CASE. BEFERENOE. PAGE. Mortimore V. Wright 6M. &W. 482 73 Morton V. Lamb 7 T. E. 135 380,289 Moses V. Maoferlan ,. 3 Burr. 1 108, mo 334,326 Mountstepheu V. Lakeman IT R?HLi7^f ^^ Moxon V.Payne L, B. 8 Oh. 881 163 Murray V. Parker 19 Beav. 305 340 N. Nasli V. Armstrong 10 C. B. N.S. 259 358 New Brunswick Railway Co. ^-l^ j)^, g, Sm. 381 143 Mu^geridge J New York Bowery Fire Ins. Co. V.I ^, j.^ New York Fire Ins. Co |I7 wena. 359 4 Nichols V. Golds 10 Exch. 191 291 Nicholson V. Bradfield Union ... L. E. i Q. B. 620 45 Noble V.Ward L. E. 2 Bxoh. 135 259 Norden Steam Co. v. Dempsey ... L, E. i C. P. D. 658 238 North British Ins. Co. V. Lloyd .. . 10 Exoh. 533 143 N. W. Eail. Co. V. McMichael ... 5 Ex. 114 100 Nowlan V. Ablett 3 C. M. & E. 54 256 Nugent V. Smith L. E. I C. P. D. 19, 423 ... 255,256 Nunn V. Fabian L. E. i Ch. 35 67 0. Ogle V. Earl Vane {l! E." 3 q! R 272} '^' Oldershaw V. King 2 H. & N. 517 69 O'Mealy V. Wilson i Camp. 483 97 O'Eorke V. Bolingbroke L.E. 2 App. Ga. 814, 823.,. 157,161 Ormrodv. Huth 14 M. & W. 650 149 P. Palmer V. Temple 9 A. & E. 521 288,308 Paradine V. Jane Aleyn, 26 314 Parker V. Ibbetson 4 C. B. N.S. 347 257 Pattinson V. Luokley L. E. 10 Ex. 330 319 Payne V. Haine 16 M. & W. 541 236 Payne V. Mayor of Brecon 3 H. & N. 579 188 Paynter V. Williams i C. & M. 810 23,94 Pearce T. Brooks L. E. I Exoh. 313 179,185 f T E 6 TT T T Peekv. Gumey l'403&377'j ^43, I45, 150, 152 Peter V. Compton i Sm. L. C. 335 55 PhUlips V. FoxaU L. E. 7 Q. B. 666 143 Picardv. Hine L. E. 5 Ch. 277 no Pickering V. Ilfracombe Eailway, . . L. E. 3 C. P. 250 182 Pigot's Case II Co. Eep. 27 181 Pilkington V. Scott 15 M. & W. 660 63 Pillans V. van Mierop 3 Burr. 1672 & 1663 ... 35.^2 INDEX OF CASES. xxvn CASE. Piunel's Case Planch^ V. Colbum Polhill V. Walter ... ".. Potts V. Bell Poulton V. Lattimore ... Powles V. Inties Price V. Easton Printing Co. v. Sampson Pro.sser V. Edmonds Piilsford V. Richards ... Pust V. Dowie Pyke's Case Pym V. Campbell Raffles V. Wickehaus Ramsgate Hotel Co. v. Montefiore Rann V. Huglies Reader v. Kingham Reese River Mining Co. v. Smith Reg. V. Downes Reuss V. Picksley Rejnell V. Sprye Richards v. Richards Richards v. London, Brighton, & S. C. Railway Ritchie V. Atkinson River Steamer Co. in re Roberts v. Hardy Robinson V. Davison Robinson v. Harman Robinson v. Reaile Robson & Sharpe v. Drummond . , . Rogf rs V. Spence Roper V. Johnson Roscorla v. Thomas Rumball v. Metropolitan Bank ... Ryder v. Wombwell EEFEEBNOE. . 5 Co. Rep. 117... . 8 Bing. 14 & 24 . 3 B & Ad. 114 . 8Tr. 548 . 9B. & C. 259 ... , . II M. & W. 10 . 4 B. & Ad. 433 . L. R. 19 Eq. 462 . . I Y. & C. 499... . . 17 Beav. Q5 . 32 L. J. Q.'B. 179 . . L. R. 8 Ch. D. 756 , . 6E. &B. 370&374. R. 2 H. & C. 906 L. R. I Exoh. 109 ... 7 T. R. 3.SO 13 C. B. N.S. 344 ... L. R. 4 H. L. 6+ & 79 L. R. I Q. B. D. 24... L. R. I Exch. 342 ... I D. M. & G. 660 ... 2B. &Ad. 452 7C. B. 839 10 East, 295 2i L. R. 6 Ch. 828 3M. &. S. 533 L. R. 6 Exch. 269 ... 1 Ex. 8.55 9B,. &C. 455 2 B. & Ad. 303 13M. &W. 580 ... L. R. 8C. P. 167 ... 3 Q. B. 234 L. R. 2 Q. B. D. 194 L. R. 3 Exch. 90I PAGE. 77 ... 270, 276 ... 130, 150 173 392 206 200 175 178 I.S3 298 185 231. 232, 233 ... 122 ... 22 35. 62 ••■ 53 131. 149 • •• 73 ... 48 ... 190 ... 221 L. R. 4 Exch. 32J Sanderson v. Piper Sanger v. Sanger Sard V. Rhodes Sayer V. Wagstafife Schmaling v. Thomlinson Scotson V. Pegg Scott V. Avery Scott V. Littledale Seeger V. Duthie Semple v. Pink S. . 5 Bing. N. C. 425 . L. R. II Eq. 470 . I M. & W. IS3 . 5 Beav. 423 ... . 6 Taunt. 147 ... . 6H. & N". 295... . 5H. L. C. 811... . 8 E. &B. 8iii ... . 8 C. B. N.S. 45 , I Exch. 74 ... 296 282, 293 ... 316 ... 97 - 317 ... 301 ... 264 ... 205 ... 233 - 303 ... 85 ... 212 ... 104 ... 237 ... 222 ... 263 263, 264 ... 197 80,81 ... 177 ... 126 ... 134 ... 69 XXVUl INDEX OF CASES. CASE. EEFBRENOE. PAGE. ShadweU V. ShadweU 9 C. B. N.S. 159 80 Simpson V. Crippin L. R. 8 Q. B. 14 282 Simpson v. L. & N. W. E. Co. ... L. E. i Q. B. D. 274 303 Skeet V. Lindaay L. E. 2 Ex. D. 317 311 Slade's Case 4 Co. Eep. 92 323 Slater V. Jones L. E. 8 Ex. 193 79 Slim V. Croucher I D. F. & J. pp. 523, 524 ... 153 Smith V. Hughes L.R.6Q.B. 605,607... 120, 125, 152 Smith V.Kay 7 H. L. C. 750, 779 ... 159,160 Smith V. Mawhood 14 M. & W. 463 164 Smithv.WUson 3 B. & Ad. 728 238 Snook V. Watts 11 Beav. 107 114 South of Ireland Colliery Co. v.\-f -d „ n tj .«„ ac Waddle |L. E. 3 C. P. 469 45 Southwell V. Bowditoh L. R. I C. P. D. 374 336 Spencer's Case i Sm. L. C. i, 73, 74 218 Sprye T. Porter 7 E. & B. 81 178 Stanley v. Jones 7 Bing. 369 178 Startup V. Macdonald 6 M. cSi G. 593 264 Stavers T. Curling 3 Bing. N. C. 355 296 Stewart V. Eddowes L. E. 9 C. P. 314 .., 48 Stilk V. Meyrick 2 Comp. 317 76 Stockport Waterworks Co. V.Potter 3 H. & C. 300 220 Stocks V. Dobson 4 D. M. & G. 15 & 17 209 Street V. Blay 2 B. & Ad. 456 295 Strickland V. Turner 7Exch. 217 121,312 T. Tarrabochia V. Hickie i H. & N. 183 134 Taylor V. Best 14 C. B. 487 97 Taylor V. Bowers L. E. i Q. B. T>. 300 191 Taylor V. Brewer I M. & S. 290 14 Taylor V. Caldwell 3 B. & S. S26 316 Taylor V. Laird 25 L. J. Ex. 329 16,24,83 Taylor v. Merchant's Eire Ins. Co. 9 Howard, 390 20 Thomas v. Cadwallader Willes, 496 2 79 Thomas V. Hayward L. R. 4 Exoh. 311 219 Thomas V. Thomas 2 Q. B. 851 7i> 73 Thompson V. Davenport 2 Smith, L.C. 379 337 Thornett V. Haines 15 M. & W. 367 27 ThornhiU V. Neats 8 C. B. N.S. 831 251 Thornton V. Kempster 5 Taunt. 786 123 Thoroughgood's Case 2 Co. Rep. 9 117 Thorpe V. Thorpe 12 Mod. Rep. 455 278 Touchev. Metrop.WarehousingCo. L. R. 6 Ch. 67 c 201,202 Townson V. Tickell 3 B. & A. 37 12 Trueman V. Loder iiA. &E. 589 49,336 Truman V. Eenton Cowp. 544 90 Tulk V. Moxhay 2 Ph. 774 221 Turner V.Owen 3E. &F. 177 76 Tweddle V. Atkinson i B. & S. 39S 72,200,201 INDEX OF CASES. CASE. Vamey v. Hickman Venezuela Kailway Co. v. Kisch, V. BEFEEENCB. . 5C. B. 271 ,. L. E. 2 H. L. p. 113 W. Wade V. Simeon Wain V. Warlters Wake V. Harpop Ward V. Byrne Ward V. Hobbs Ware v. Chappell Warlow v. Harrison Waters v. Tompkins Watson V. Swann Watson V. Turner Waugh V. Morris Webster v. Cecil Weekv. Tibold Weir V.Bell Wells V. The Mayor of Kingston- upon-Hull Western Bank of Scotland t. Addie Wheelton v. Hardisty White r. Bluett Whittaker ex parte Wigglesworth v. Dallison Wilkinson v. Johnson Wilkinson V. Oliveira Williams v. Bayley Williams V. Carwardine Williams v. Jones Williams v. Lake WiUiams v. Moor Williams V. Sorrell Williams v. Wheeler Wilson v. Finch-Hatton Wilson V. Tumman Wing V. Mill Withers v. Reynolds Wolverhampton Railway Co. London and N. W. Rail. Co. Wood V. Abrey Woolfe V. Home 150 147 ;} 2 C. B. 548 5 East, 10 6 H. & N. 768, 775.., 227, 5M. &W. 561 L R. 3 Q. B. D. Style, 186 1 E. &E. 295 ... 2 CM. &R. ... II C. B. N.S. 769 Buller, Nisi PriuS; L. R. 8 Q. B. 202 30 Beav. 62 Roll. Abr. p. 6... L. R. 3 Ex. D. 243 II. R. 10 C. P. 402 L. R. I Scotch App. 145... 8 E. & B. 232, 299 23 L. J. Exch. 36 L. R. 10 Ch. 446 I Sm. L. C. 598 3B. & C. 42S ,. 1 Bing. W. C. 490 L. R I H. L. 220 4B. &Ad. 621 13 M. & W. 628 2 E. &B. 349 II M. & W. 263 4 Vesey, 389 8C. B. N.S. 316 L. R. 2 Ex. D. 336 6M. &G. 236 2 B. & A. 105 2B. &Ad. 882 L. R. 16 Eq. at p. 439 ... 3 Maddock, 423 L. R. 2 Q. B. D. 355 ... 123, I2t PAGE. ... 191 68, 76 50.64 228, 235 ... 180 ... 146 278, 279 ... 27 ... 3" ... 3,?i ..• 93 ... 183 ,2.^9 14 149 ... 4.5 ... 131 ... 141 ... 7.S ... 148 ... 237 ... 319 ... 87 ... 176 ... 26 38. 325 ... 49 90,99 ... 268 ... 260 ... 147 ... 330 ... 93 ... 282 ... 305 ... 15S ... 332 X. Xenos V. Wickham L. E. 2 H. L. 296 ... 12,16,39 Young V. Cole Y. .. 3 Bing. N. C. 724 ... 292 SOME ABBKEVIATIONS USED IN EEFERENCE. A. &E. B. & Ad. B. &'AId. B. & C... B. &S. ... Beav. . . . Bing. Bing. N. C. Burr. Camp. . . . C. B. ... C. B. N.S. CI. & F. C. &M. C. M. & E. Co. Bep. Cowp. . . . Cro. Bliz. or i Cro. Cro. Jac. or 2 Cro, D. & J. D. F. & J. D. M. & G. Dr. & Sm. Dr. & War. E. &B... E. &E... Exch. .. F. & F. . H. Bl. ., H. & C... H. &N. H. L. C. Ir. C. L. J. &H. C. P. K. B. Ex, EEPOETS'. Adolphus and Ellis Q. B. BarnwaU and Adolphus K. B. Bamwall and Alderson K. B. Barnwall and Cresswell K. B. Best and Smith Q. B. Beavan EoUs Court, Bingham Bingham's New Cases Burrows Campbell ... K. B. & C. P. nisi prius. Common Bench ) „ p Common Bench.New Series j Clark and Finelly . . . House of Lords, Crompton and Mee.'^on . . . Crompton, Meeson, and Eoscoe Coke's Eeports Eliz, Cowper ... ' K. B. Croke, of the reign of Elizabeth. „ „ James. De Gex and Jones Ch. App. 1857-1859 De Gex, Fisher, and Jones „ 1859-1862 De Gex, Macnaghten, and Gr rdon „ 1851-1857 Drewry and Smale ...V. C. Kindersley, 1859-1866 Dniry and Warren Chancery, 1841-1843 Ellis and Blackburn Q. B. 1852-1858 Ellis and EUis Q. B. 1S59-1861 Exchequer 1847-1856 Foster and Finlason Cases at Nisi Prius, 1856-1867 Henry Blackstnne C. P. 1786-1788 Hurlstone and Coltman Ex. 1862-1865 Hurlstone and Norman Ex. 1856-1862 House of Lords' Cases 1 846-1 866 Irish Common Law Eeports. Johnson and Henuning v. C. Page Wood, 1 859-1 S62 1834-184I 1830-1834 1817-1822 1822-1830 1861-1865 1838-1866 1 8 24-1 840 1756-1772 1807-1818 1845-1865 1831-1846 1834-1836 and James 1774-1778 ^ Eeferences to the Law Journal reports have not been given through- out the ensuing pages because the system of marginal references impo.sed certain limits as to space. The reports cited are accessible to anv 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 dis- cover the cases with little difficulty. SOME ABBEEYIATIONS USED IN EEFEEENCE. xxxi K. & L.J. L.J. J. E. R. K. B. R. L.R. L.R. L.R. L.R. L.R. L.R. L.R. L.R. Lev. Mad. M. & M. & M. & Mer. Mod. J. Exch. Q.B. Ch. Q.B. C.P. Ex. Eq. Ch. H. L. Sc. App. Q. B. D, C.P.B Ex.D. Ch. D. App. Ca P.O. G. S. w. Rep. M. &K. Ph. Q.B. ... Rep. in Ch. RoUe Abr. Rusa. Sch. & L. Sm. L. C. Str. T. R. ... Ventr. ... Vern. . . . Y. &C.... Yelv. ... 1828- Kay and Johnson V. C. Page Wood, 1854-1856 Law Journal, Exchequer ) „ „ Queen's Bench I „ „ Chancery J Law Reports, Queen's Bench ,. ,, Common Pleas „ „ Exchequer „ ., Equity „ „ Chancery Appeals „ ,, English and Irish Appeals „ „ Scotch Appeals „ „ Queen's Bench Division „ „ Common Pleas Division „ „ Exchequer Division „ „ Chancery Division f, „ Appeal Cases Privy Council Cases K. B. & C. P. 166&-1696 Vice-Chancellor's Court, 1817-1839 C. P. 1 840-1 845 K. B. 1813-1817 1865- Levinz Maddock Manning and Granger Maule and Selwyn J Ex. 1836-1847 Chancery, 1813-1817 Meeson and Welsby Meiivale Modern Reports Common Law and Chancery, 1660-1702 Mylne and Keen Chancery, 1832-1837 Phillips „ 1841-1849 Queen's Bench 1841-1852 Reports in Chancery 1625-1688 Rolle's Abridgment. Russell Chancery, 1826-1829 Schoales and Lefroy... Irish Chancery, 1802-1806 Smith's Leading Cases. Strange 1727-1748 Term Reports, or Dumford 1 -n- t> ,^o, ,k„<; and East's Reports ... [ - ^- ^- '?86-i796 Ventris K. B. 1660-1685 Vernon Chancery, 1680-1718 Young and CoUyer V. C. Knight-Bruce, 1834-1842 Yelvertou K. B. 1601-1613 Sav. Syst Sav. Obi Pollock Benjamin on Sale. Leake Langdell TEXT-BOOKS. Savigny, System des heutigen Romisohen Rechts. Savigny, Obligationenrecht. Pollock on the Principles of the English Law of Contract. Second edition, 1878. Second edition, 1873. ( Leake's Elementary Digest of the Law of Contract. I 1878. I Selection of Cases on the Law of Contract, by I C. C. Langdell. ADDENDA ET CORRIGENDA. p. 15, marginal reference to Boneyman v. Manyat, for 'H. & C read ' H. L. C p. 57, 1. 1, for 'it' read 'the section' p. 62, marginal reference to Rann v. Hughes, for '8 T. R.' read ' 7 T. E.' p. 136, 1. 14, /or 'from' read 'and' p. 141, note, in quaUficatiou of the statement, supported by Wheelton v. Hardisty, that the contract of life insurance is not uberrimae Jidei, the judgment of the Master of the Rolls in The London Assurance v. Mansel, reported in the Times of Feb. 23nd, 1879. ' The M, R. was of opinion that there was no difference in principle between a case of life insurance, and tire, marine, or any other insurance, and that in all the greatest good faith was required on the part of the proposer, and that in the case of the concealment of any material fact on his part the con- tract would not be binding on the assurers.' p. 147, marginal reference to BiirrelVs case, /or '0. D.' read ' Ch, D.' p. 228, marginal reference to C. L. P. Act, 1854, for ' c. 26' read 'c. 125. s. 26.' p. 303, 1. 27, for 'defendant' read 'plaintiff' PART I. INTRODUCTION. THE PLACE OF CONTEACT IN JURISPRUDENCE. In commencing an inquiry into the principles of the law Outline of of Contract it is well to consider what are the main objects ^^ ^'^'^ ' of the inquiry and in what order they arise for discussion. It would seem that the first thing to be considered is the Nature of relation of contract to other legal conceptions : if this can be ascertained, we get some definite notion of the nature of the subject of our inquiries. Having ascertained what a contract is, we next ask how its forma- it is made ; in other words, what are the various elements necessary to the Formation of a valid contract 1 The next question should be, Whom does a contract, when Its opera- made, afi'ect ; or what is the Operation of contract 1 After this we shall consider the Interpretation of contract. Its inter- or the mode in which the terms of a contract are dealt with when they come before the Courts for consideration. It will then remain to deal with the Discharge of contract. Its dis- the various processes by which the contractual tie is loosed "^ ^''^^' and the parties restored to their former position as regards their legal relations to one another. We will begin then by considering the nature of Contract. We may regard Contract as a combination of the two Contract is ideas of Agreement and Obligation. It is that form of Agree- ^" ° spnng- ment which directly contemplates and results in an Obliga- >ng f™" ^ ^ , agreement, tion. We should therefore try to get at the meanmg of 2 INTRODUCTION. ■ Part I. Agreement and Obligation ; and Savigny's analysis of these two legal conceptions may with advantage he considered here with reference to the rules of English Law. § I. Agreement. Nature of I. Agreement requires for its creation at least two parties. sav. System There may be more than two, but inasmuch as agreement is "" '''° ■*■ necessarily the outcome of consenting minds, the idea of plurality is essential to it. 2. The parties must have a distinct intention, and that intention must be common to both. Where there is doubt, or difference, there cannot be agreement. Such communi- cations as these will illustrate the proposition : — Doubt. ' Will you buy my horse if I am inclined to sell itr ' Very possibly.' Difference. ' Will you buy my horse for .£50 1 ' ' I will give you £20 for the horse.' 3. There must be a communication by the parties to one another of their common intention. A secret acceptance of a proposal cannot constitute an agreement. For instance, A writes to X proposing to buy X's horse for £50. X makes |e<= dicta of up his mind to accept but never tells A of his intention. He App.'ca. feii^i. cannot complain if A buys a horse elsewhere. 4. The intention of the parties must refer to legal rela- tions. The assumption of legal rights and duties must be the object of agreement, as distinguished from a dinner en- gagement or a promise to take a walk. For the purposes ' In the cuss of Brogdeti v. Metropolitan Bailwa;/ Company in the House of Lords. The ease is not reported in the Courts below, but it appears, from the report referred to, that Lord Coleridge, C. J., and Brett, J., had, in giving judgment in the Common Pleas, used language which might tuggest that a mere mental consent uncorainunicated to the other party mi,;ht create a binJing agreement. Lords Selborne and Blackburn express their dissent from such a proposition, the latter very fully and decidedly. § I. PLACE OF CONTBACT IN JURISPRUDENCE. 3 of English law we may take it, as a test of this reference to legal relations, that the intention of the parties must have to do with ' something which is of some value in the eyes of the law,' something which can be assessed at a money value. 5. The consequences of Agreement must affect the parties themselves. Otherwise the verdict of a jury or the decision of a Court sitting in banc would answer the foregoing re- quisites of agreement. Agreement then is the expression by two or more persons of a common intention to affect the legal relations of those persons. But this would clearly include much more than Contract. Agreement Under the definition of Agreement at which we have arrived term than would fall— contract. ( 1 ) Agreements "which pass property from one of two par- ties to another ■ simultaneously with the expression of their common consent. Such are conveyances, and gifts, where as m cifts, the agreement of the parties operates at once as a transfer g™^"^^- "^^ of rights in rem, and leaves no obligation subsisting between them. (2) Agreements which effect a change of status immedi- ately upon the expression of the consent of the parties, such as Marriage, which, when consent is expressed before a competent authority, alters at once the legal relations of the parties in many ways. (3) Agreements which, though intended to affect legal re- lations, are nevertheless not enforceable at law. Such would be a gratuitous promise to transfer property. It would seem then that Agreements the effect of which is immediate in creating rights in rem, or in effecting a change of status, are not such as we ordinarily term Contracts. Nor, again, are Agreements to be called Contracts which, though intended to affect legal relations, fail to do so, because they do not fulfil some requirements of the positive law of the country in which they are made. 4 INTEODUCTION. Part I. Agreement being a term of wider meaniag than Contract, we have to ascertain the characteristic of Contract as distin- guished from other forms of Agreement. A promise We are always in the habit of considering that an essential an essential « . feature in a leature of a con-tract is a promise by one party to another, contract. ^j. -^^ ^^^ parties to one another, to do or to forbear from Jurisprudence, doing somc Specified acts. Austin in fact speaks of a con- tract as a promise, meaning thereby an accepted promise, as distinguished from that which he calls a pollicitation, an unaccepted promise, or offer. A promise which a man is legally bound to perform creates an obligation or right in personam against him in favour of the party to whom the promise is made. It follows there- fore that we should consider the nature of Obligation and try to distinguish the contractual from other forms of Obli- gation. § 2. Obligation. Nature of Obligation is a power of control, exerciseable by one person sav. obi. ^^^^ another, with reference to future and specified acts or cii. z. ss. =-4. forbearances. The characteristics of Obligation would seem to be these : — I. Two I. There must be two persons, or groups of persons, on-e or or both in- ^°*^ °f whom is invested with a controlling power which he vested witli ig capable of exercising over the acts of the other, while that control over °_ * actions of other SO far suffers a diminution of his ordinary freedom of action. These persons or groups are thus bound to one another by this peculiar and special relation ; they are con- nected by what the Koman lawyers called vinculum juris, a legal tie." It is obvious that such a relation necessitates two parties ; a man cannot be under an obligation to himself, nor even to himself in conjunction with others. Where a man borrowed money from a fund in which he and others were jointly in- terested, and covenanted to repay the money to the joint § 2. PLACE OF CONTRACT IN JUEISPKUDENCE. 5 account^ it was held that he could not be sued upon his covenant. ' The covenant to my mind is senseless,' said Pollock, C. B. 'I do not know what is meant in point of Fauikner v. Lowe, z Ex. law by a man paying himself.' 59s- 2. The second feature of an Obligation is that it relates 2. The to certain definite acts. The freedom of the person bound is i^atesTo'^'^ not generally curtailed, but is limited in some special matters definite and with reference to some particular act, or series, or class of acts. To use Savigny's illustration. Obligation stands in a relation to individual freedom similar to that in which servitude stands to dominium or the indefinite rights of ownership. For instance, I am owner of a field ; my pro- prietary rights are general and indefinite : my neighbour has a right of way over my field ; my rights are to that extent curtailed by his, but his rights are very definite and special. So with Obligation. My individual freedom is generally un- limited and indefinite. As with my field so with myself : I may do what I like with it so long as I do not infringe the rights of others. But if I enter into a contract to do a work for J. by a certain time and for a certain reward, my general freedom of action is abridged bj' the special right of A to the performance by me of the stipulated work ; and A again is similarly obliged to receive the work, and to pay the reward. q. The thing to be done must be such as possesses, or is 3. And these reducible to, a pecuniary value. This is needed in order to ducible to a distinguish legal from moral and social relations. If a man P^^™"^"'' saves me from drowning I am under a moral obligation to him, but neither my life nor my gratitude can be esti- mated at a money value. If two friends agree to pursue certain studies together, it is again impossible to estimate in money the advantage which they may derive from their mutual employment, or the disappointment which one may experience if the other should break his promise. These then are the principal features of Obligation. It INTRODUCTION. Part I. Distinguish two senses of obliga- tion. (i) General duty. (2) Special tie. Kinds of obligation. T. Ex con- tractu. gives to one man a control over the actions of another, defi- nite in character, and capable of being reduced to a pecuniary value. But before discussing the various kinds of Obligation it is well to note the double meaning in vfhich the term is used by Austin and Bentham, and the desirability of keeping clearly before the mind the sense in which it is most con- venient that it should be employed for our present pur- poses. Obligation is indiscriminately used (i)^as meaning any Duty imposed by law, (2) as meaning that special Eight and Duty which create a vinculum juris between two persons or groups of persons. It is in the second sense only that the word should be employed. In its first sense it merely means the general duty which the law imposes, to respect such rights as the law sanctions. This duty is not an obligation, for no two definite persons or groups are bound together by it. I have a right to my good name, a right in rem, against all persons subject to the laws which sanction my right. But I am not thereby bound in any special manner to the individuals con- stituting the political society in which I live. I cannot be bound to a whole community. If X libels me, my right is broken by a definite individual; an obligation at once springs up and binds us to one another; a vinculum juris encircles us, and is not loosed till my injured right is made good. It will very much assist the consideration of Contract? if we keep always before us this conception of a legal tie binding the parties to certain definite acts, and binding them, once it is truly formed, until the obligation is discharged. Having thus obtained a general idea of Obligation, we may try to distinguish the various modes in which Obli- ' gation originates. I. Obligation may originate in Agreement. Here we find that form of agreement which constitutes a contract ; a § 2. PLACE OF CONTRACT IN JURISPRUDENCE. ' 7 voluntary consent to the creation of an Obligation by the parties who are to be bound. The agreement, being such as we have described it, has for its object the ci-eation of an Obligation, a legal tie by which the parties to the agree- ment are bound to one another in respect of some future acts or forbearances. 2. Obligation may arise from Delict. This occurs where 2. Ex de- a right has been violated and the wrong-doer is bound to the injured person to make good the consequences of his breach of Duty. Such an obligation is not created by the free-will of the parties, but springs up immediately upon the occur- rence of the wrongful act or omission. 3. Obligation may arise from Quasi Contract, a convenient 3. Quasi tenn for a multifarious class of legal relations possessing this common feature, that one of two parties has obtained some pecuniary advantage, to which he is not entitled, at the ex- pense of the other. The process by which this advantage has been gained is, roughly speaking, that A has made a payment which X ought to have made, or that X has re- ceived money which A ought to have received. The modes in which this relation arises in English law will be dealt with briefly at a later stage. It is enough to note here that the law imposes upon the parties the contractual relation, assuming a binding promise by X to make good to A the advantage which he has gained at .4's expense. 4. Again, Obligation may arise from a breach of Contract. 4- On ^ = ' "= ■' ■ 1 ■ A breach of While A is under promise to X, X has a right against A contract. to the performance of his promise when performance be- comes due, and to the maintenance up to that time of the contractual relation. But if A breaks his promise, the right of X to the performance has been violated, the contract is discharged, and a new obligation springs up, a right of Action, exactly similar in kind to that which arises upon a delict or breach of a Duty. 5. The judgment of a Court of competent jurisdiction, s- Judg- 8 INTEODUCTION. Part I. ordering something to be clone or forborne by one of two parties towards the other, is also a source of Obligation. It is an Obligation of this character which is unfortunately styled a ' Contract of Kecord ' in English law. Unfortu- nately, because the Obligation does not spring directly from Agreement, but is imposed on the parties ah extra. 6. Miscel- 6. Lastly, there is a class of Obligation which it is some- times hard to distinguish from Contract. A trustee and his cestui que trust, a husband and wife, an executor and legatee have rights one against the other which are, strictly speaking, obligations or jura in personam. The real dis- tinction between these cases and the contractual obligation is twofold. In the case of the trustee and the executor, the acceptance of the obligation, though voluntary on the part of him on whom the bulk of its duties fall, need not, or cannot, be the result of an agreement between the parties bound. Even where the obligation springs from Agreement, its creation is not the direct object of the transaction. The object of the creation of a trust is to transfer rights in rem as well as to create rights in personarru The object of marriage is to effect a change of status. The object of becoming an executor or administrator is to acquire in great measure the legal, existence of the deceased, and not merely obligations towards legatees. Obligations of this kind are merely incidental to a creation or transfer of a group of rights and duties. The creation of an obligation is the one object which the parties have in. view when they enter into that form of Agreement which is called Contract. Attempted We may now attempt to define Contract, or the result of of contract ^^^^ concurrence of Agreement and Obligation. Contract is an Agreement enforceable at law, made be- tween two or more persons, by which rights are acquired by one or both to acts or forbearances on the part of the other. And it may be as well to add that there are agreements, such as marriage, the creation of a trust, a conveyance of § 2. PLACE OF CONTRACT IN JURISPRUDENCE. 9 land with covenants annexed, a sale of a chattel with a war- ranty, in which contractual obligations arise incidentally to the main purposes of the transaction. Where the contrac- tual obligation can be easily severed from the bulk of the rights and duties created by the Agreement it is possible to regard it as a part of our subject : the warranty or the covenants may be so dealt with. But in the other cases the obligation is so involved in the mass of rights and duties created, and so entirely incidental to the rest of the trans- action, that it is better to exclude it from the present dis- cussion. lO FORMATION OF CONTBACT. Part 11. PART II. THE FORMATION OF CONTRACT. Elements necessary to a valid contract. Results of their ab- sence. Havlng ascertained the particular features of contract as a juristic conception, the next step is to ascertain how con- tracts are made. A part of the deiinition of contract is that it is an agreement enforceable at law : it follows therefore that we must try to analyze the elements of a contract such as the law of England will hold to be binding between the parties to it. These elements appear to consist : — 1. In a distinct communication by the parties to one another of their intention ; in other words, in Proposal and Acceptance. 2. In the possession of one or other of those marks which the law requires in order that an agreement may aflFect the legal relations of the parties. These marks are Form, and Consideration. 3. In the Capacity of the parties to make a valid contract. 4. In the Genuineness of the consent expressed in Pro- posal and Acceptance. 5. In the Legality of the objects which the contract proposes to effect. Where all these elements co-exist, a valid Contract is the result : where any one of them is absent, the agreement is in some cases merely unenforceable, in some voidable at the option of one of the parties, in some absolutely void. Chap. I. PROPOSAL AND ACCEPTANCE. II CHAPTER I. Proposal and Acceptance. Evert expression of a common intention arrived at by Agreement two or more parties is ultimately reducible to question and ™Jg in'^jfro- answer. In speculative matters this would take the form, P°^^' ^""^ , ^ acceptance. 'Do you think so and soV 'I do.' In practical matters and for the purpose of creating obligations it may be represented as, ' Will you do so and so 1' 'I will.' If ^ and X agree that A shall purchase from X a property worth £50,000, we can trace the process to a moment at which X says to A, ' "Will you give me £50,000 for my pi-opertyf and A replies, '1 will.' If A takes a sixpenny book from A'''s book-stall the process may be represented thus. X in displaying his wares says in act though not in word, 'Will you buy my goods at my price V and A, taking the book with X's cogni- zance, virtually says ' I will.' And so the law is laid down by Blackstone : ' If I take up wares from a tradesman cm without any agreement of price, the law concludes that I contracted to pay their real value.' In order to create a voluntary obligation there must be a promise binding the person subject to the obligation ; and in order to give a binding force to the promise the obligation must come within the sphere of Agreement. There must be an acceptance of the promise by the person to whom it is made, so that by their mutual consent the one is bound to the other. A Contract then springs from the offer of a promise and its acceptance. Let us now see what forms this process may assume. Comm. bk. . c. 30. I'i POEMATION OF CONTRACT. Part II. How pro- posal and acceptance must be made in order to form a contract. Illustra- tions. See on this point Xenos ^ Wickliam, L. R. 2 H. L 296. Townson v. Tickell, 3 B & A. 37. The simple and obvious form just described is applicable in English law only to such contracts as are made under seal. Tor in English law no promise, which is not under seal, is binding unless the promisor obtains some benefit in return for his promise, and this benefit is called ' Consideration.' Bearing this necessity in mind, we may say that proposal may assume two forms, the offer of a promise, and the offer of an act. Acceptance may assume three forms, simple assent, the giving of a promise, or the doing of an act. And thus a contract may originate in one of four ways. 1. In the offer of a promise and its acceptance by simple assent : which in English law applies only to contracts under seal. 2. In the offer of an act for a promise, as if a man offers services which when- accepted bind the aeoeptor to reward him for them. 3. In the offer of a promise for an act, as when a man offers a reward for the doing of a certain thing, wliich being done he is bound to make good his promise to the doer. 4. In the offer of a promise for a promise, in which case when the offer is accepted by the giving of the promise, a contract arises consisting in outstanding obligations on both sides. Some simple illustrations will explain these forms of pro- posal and acceptance. 1. A promises A' under seal that he will do a certain act or pay a certain sum. When X has assented to the proposal both are bound, and there is a contract. Till he has assented there is an offer, which, as will be noted presently, is irre- vocable so far as A is concerned, owing to the particular form in which it was made, but which cannot bind A until he has assented to it. For a man cannot be forced to accept a benefit. 2. A man gets into a public omnibus at one end of Oxford Street and is carried to the other. The presence of the Chap. I. PROPOSAL AND ACCEPTANCE. I3 omnibus is a constant offer by its proprietors of such services uijon certain terms ; they offer an act for a promise ; and the man who accepts these services promises by his acceptance to pay the fare at the end of the journey. 3. A man who loses his dog offers by advertisement a reward of £5 to any one who will bring the dog safe home ; he offers a promise for an act ; and when X brings the dog safe home the act is done and the promise becomes binding. 4. A offers X to pay him a certain sum of money on a future day if X will promise to perform certain services for him before that day. When X makes the promise asked for, he accepts the promise offered, - and both parties are bound, the one to do the work, the other to allow him to do it and to make the payment. It will be observed that cases ,2 and 3 differ from 4 in Difference an important respect. In 2 and 3 the contract is formed contracts by one party to it doing all that he can be required to do on executed under the contract. It is performance on one side which tory con- makes obligatory the promise of the other,; the outstanding obligation is all on one side. In 4 each party is bound to some act or forbearance which, at the time of entering into the contract, is future : there is an outstanding obligation on each side. Where the benefit, in return for which the promise is given, is done contemporaneously with the promise ac- quiring a binding force; where it is the doing of the act which concludes the contract, then the act so done is called an executed or present consideration for the promise. Where a promise is given for a promise, each forming the considera- tion for the other, such a consideration is said to be executory or future. We may now lay down briefly the rules which govern Proposal and Acceptance, or the communication of the com- mon intention to create an obligation. 14 FORMATION OP CONTKACT. Part II. Rule I. § I. The ^proposal must he intended to affect, and ca2>able Proposal - «. . , - , . must be in- of ajjecting, legal relations. affect legal ^ proposal to be made binding by acceptance, must be relations, made in contemplation of legal consequences; a mere state- ment of intention made in the course of conversation will not constitute a binding promise, though it be acted upon by the party to whom it was made. Thus in the case of Roll. Abr. p. 6. Week V. TiboU, the defendant told the plaintiff that he would give £ioo to him who married his daughter with his con- sent. Plaintiff married defendant's daughter with his con- sent, and afterwards claimed the fulfilment of the promise and brought an action upon it. It was held not to be reasonable that a man 'should be bound by general words spoken to excite suitors.' And a proposal must be capable of affecting legal relatione, that is to say it must not be so indefinite or illusory as to make it hard to say what it was that was promised. cuthingv. Thus where A bouarht a horse fi'om X and promised that Lynn, 2 B & ° -*■ Ad. 232. 1 jf ^jjg ]jorse was lucky to him he would give £5 more or the buying of another horse,' it was held that such a promise was too loose and vague to be considered in a court of law. And so where A agreed with X to do certain services for such remuneration as should be deemed right, it was held that there was no promise on the part of X which was B?ewe"i M Sufficiently definite to be capable of enforcement. ' It seems ^ ^- '^"^ to me,' said one of the judges, ' to be merely an engagement of honour.' § 2. Acoejjtance must he ahsolute, and identical with the terms of the proposal. Acceptance Unless this is so the intention expressed by one of the ^"ute '^ ^ ' parties is either doubtful in itself or different from that of the other. If A offers to X to do a definite thing and X accepts conditionally, or introduces a new term into the Chap. I. §§ 1-3. PROPOSAL AND ACCEPTANCE. 15 acceptance, his answer is either a mere expression of willing- ness to treat, or it is in effect a counter proposal. A proposed to sell a property to X, X accepted ' subject Honeyman v. Marryat, to the terms of a contract being arranged ' between his solicitor '> «• & c. na. and A's. Here it was held that there was no agreement, for the acceptance was not final, but subject to a discussion to take place between the agents of the parties. A proposed to sell a farm to ^Y for Xiooo, X said he would Hyde v. n A ro Wrench, give ±950. A refused this offer, and then X said that he^seav. 336. was willing to give, £1000. A was no longer ready to and iden- adhere to his original proposal and X endeavoured to obtain thif terms specific performance of the contract. But it was held that °f ^^^ Pro- posal. his offer to buy at £950 in answer to A's, offer to sell for £1000 was a refusal of the offer of A and a counter-proposal, and And see ... Husseyv. that he could not after this hold A to his original offer. !^°!?'„%°?!. 670. § 3. ^ ^proposal luhich has not been accepted does not affect the Till accept- rights of the parties. ri^hts"arise. If a qualified acceptance does not make a proposal binding it would seem to follow naturally that a proposal which was not accepted at all will not bind either the proposer or the person to whom his offer is addressed. In the case of con- tracts which are made by the acts of the parties, and not by proposal and acceptance in words, it would appear that silence must give consent, but then it must be silence coupled see dicta of ^ Lord Selborne, with some overt acquiescence. ca.^°.^''''' The two following cases will serve to illustrate the rule. A offered by letter to buy X's horse for £30 15s., adding ' if Feithouse v. •f •' ^ xj ^ Bmdley, ii I hear no more about him I consider the horse is mine at f^- ^- ^-^^ ^■ £30 15s.' No answer was returned to the letter and it was held that thei'e was no contract. A person making a pro- see post, p. 23. posal may, as it will appear, prescribe a form of acceptance, but he may not turn the absence of communication into an acceptance, and compel the recipient of his offer to refuse it at peril of being construed to have accepted it. l6 FORMATION OF CONTKACT. Part II. A very similar case, in which the offer was acted and not ■25 L. J. Ex. written, was the case of Taylor v. Laird. There the plaintiff, unasked, helped to- work the defendant's vessel home. When he came home he claimed reward for his services. But it was held that since the defendant had never had the option of rejecting the services while they were being rendered, and did in fact repudiate them when he became aware of them, he was not liable for their value. The plaintiff had in fact made an offer which, uncommunicated and unaccepted, could give him no rights against the party to whom it was ad- dressed. The cases just quoted show that a man cannot by any form of offer bind the person to whom it is made before he Except in has expressed his assent. It is almost equally true to say an offer that his proposal until it is accepted does not bind himself, under seal. ^„j^ ^jj^g \^^^ proposition must be taken subject to some reser- vations in the case of promises made under seal. Doe d. Gar- There is no doubt that a grant under seal may be binding nons V. Knight, o ./ o 5 B. & c. 671. Qjj ^]^g grantor and those who claim under him, though it has never been communicated to the grantee, if it has been duly delivered to a third party. And it would seem that a deed purporting to create an outstanding obligation would stand on the same footing. ' If A make an obligation to B and deliver it to C, this is the deed of A presently. But if C Butler and offers it to B, then B may refuse it in pais, and thereby the Baker's Case, •' i- ' J f6?b°' ^''^' "'■ obligation will lose its force.' The position of the parties, where the obligation is not communicated to the party in whose favour it is made, is a somewhat curious one. Agree- ment there can be none, for there is no mutual assent, and it is open to the one to refuse the obligation which the other would create in his favour. It would seem that he who has made and delivered the deed is in the position of a man who has made an offer of a promise which he may not revoke, but which is not a contract till it is assented to by the promisee. r,. R. 2 H. l; The point was much discussed in Xenos v. WickJiam, in Chap. I. §§ 3, 4- PKOPOSAL AND ACCEPTANCE. 1 7 which a policy of marine insurance ' signed, sealed and de- livered' by the defendants, the insurers, was never accepted by the plaintiff, the insured, but remained in the defendant's office. It was held in the House of Lords that the assent of the person insured at the time of delivery was not neces- sary to entitle him, when he became aware of the loss of his ship, to the benefit of the policy. ' The efi&oacy of a deed depends on its being sealed and delivered by the maker of it ; not on his ceasing to retain possession of it. ' § 4. J. proposal may he revoked hefore acceptance but not Revoca- - ..77 bility of after ; an acceptance is irrevocable. proposal. This rule follows from what has gone before. A proposal creates no legal rights; an acceptance of a proposal makes a binding contract, unless there be wanting some of the elements already mentioned as necessary to the Formation of Contract. As a proposal creates no legal rights, it is obvious that it may be withdrawn before acceptance ; but as respects the communication of the withdrawal or revoca- tion to the party to whom the offer is made, a distinction exists which needs to be noted, and which may be stated thus : — (a) Where the parties are in immediate communication a proposal may be revoked without notice to the person to whom it has been made^. {h) Where the parties communicate by correspondence, notice of revocation, in order to be valid, must reach the person to whom the proposal is made before he has accepted. {a) Two cases will illustrate the rule that when the parties Where par- are in immediate communication no notice of revocation is mediate ■ Mr. Pollock, in his work on Contract, p. 10, lays it down that 'a proposal is revoked only when the intention to revoke it is com- municated to the other party." We venture however to think that this rule must be received with the limitations suggested by the oases cited in the text. C lo POBMA.TION OF CONTEACT. Part II. communi- necessary. The first is the well-known case of Cook v. Oxley. notice' The case was decided on the pleadings. Oxley offered to needed. ggjj goods to Cook, and promised to keep his offer open till 4 o'clock in the afternoon. Cook signified his acceptance before 4 o'clock, and when Oxley failed to deliver the goods brought an action against him. But it was held that if he sued on a promise to keep the offer open tUl 4 o'clock he must fail, because there was no consideration for the pro- mise ; and that if he relied on his acceptance as constituting a binding contract he must fail, because he did not state in his declaration that Oxley had not sold the goods, and so substantially revoked his offer, before the time of accept- ance. The Court thus clearly contemplated a revocation of the offer of the defendant as possible at any time before acceptance, and did not regard notice to the plaintiff as Cook V. Oxley, essBntial to the validity of the revocation: T. R. 653. ..... L. R. 2 ch. D. Similar in point is Dickinson v. Dodds, which was an at- tempt to obtain specific performance of a contract under the following circumstances. The defendant on June loth, 1874, gave the plaintiff a memorandum in writing as follows : — 'I hereby undertake to sell to Mr. George Dickinson the whole of the dwelling-houses, gaz-den ground, stabling, and out- buildings thereto belonging, situate at Croft, belonging to me, for the sum of £800. As witness my hand this loth day of June, 1874. £800. (Signed) John Dodds.' ' P.S. This ofier to be left over until Friday, 9 o'clock, a.m. J. D. (the twelfth) 12th Jime, 1874. (Signed) J. Dodds.' On the nth of June he sold the property to another person without notice to the plaintiff. The plaintiff gave notice before the stipulated time, but after the sale, that he accepted the offer to sell, and sued for specific performance of what he alleged to be a binding contract. But the Court of Appeal, reversing the judgment of Bacon, V. C, held that no contract had been concluded. James, L. J., deals thus with the promise to keep Chap. I. §4. PROPOSAL AND ACCEPTANCE. 1 9 the offer open, and with the fact that no notice had been given of its revocation: — 'It is clear settled law, on one of the clearest principles of law, that this promise being a mere nudum pactum was not binding, and that at any moment before a complete acceptance by Dickinson of the offer, Dodds was as free as Dickinson himself. "Well, that being the state of things, it is said that the only mode in which Dodds could assert that freedom was by actually and dis- tinctly saying to Dickinson, "Now I withdraw my offer." I apprehend that there is neither prfnciple nor authority for the proposition that there must be an express and actual withdrawal of the offer, or what is called a retractation. It must, to constitute a contract, appear that the two minds were at one at the same moment of time, that is, that there was an offer continuing up to the moment of acceptance. If there was not such a continuing offer, then the acceptance comes to nothing.' (6) Where the parties are at a distance from one another Where par- and communicate their intention by correspondence a dif- miuiicate ferent rule prevails. Unless the acceptor has received fr""" ^ ^'^' ^ ^ ^ ^ tance, notice of revocation before his acceptance, the revocation notice must is inoperative. This is perhaps a broader statement of the ceptor rule than actual decisions in English Courts may justify ; before ae- but it is a fair inference from the language of the Court in the leading case upon the subject, and is supported by an American case which is directly in point. Two illustrations will show in what respect the rule as laid down exceeds the limits of the English cases : — On the ist of January A writes to X offering to sell goods : on the 3rd he writes to revoke his offer, but X has already written on the 2nd a letter of acceptance which A receives on the 4th. Here there is no doubt that A would be bound by the acceptance. On the ist of January A writes to X offering to sell goods : on the 2nd he writes to revoke his offer, but, before c 2 & Aid. 30 FORMATION OF CONTEACT. Part 11- his letter reaches X, X has written to accept. Here the intentions of the parties are not ad idem, at the moment LiMTsdri B °^ acceptance, but it is nevertheless probable that ' A would be regarded in law as making, during every instant of the time his letter was travelling, the same identical offer ' to X, and that he would be bound by the acceptance though made SftFir""" ^^^^^ ^^ ^^d changed his mind. There is no doubt that by 9How"?d,'^9o. the rules of American law such an acceptance would be binding. Irrevoca- The reasons for this rule are obvious. It is necessary, bility of ac- , . . t i ^ ceptance. where parties are contracting at a distance, to nx some moment of time when the contract should be complete, for otherwise a man who accepted an offer made to him and acted upon it immediately might be exposed to serious loss if the proposer could revoke his offer at any moment before the actual receipt of the acceptance. Nor, on the other hand, would it conduce to the conduct of business if the acceptor was forced to postpone acting upon the con- tract until he heard that his letter had reached the proposer. It is necessary therefore to fix a moment for the conclusion of the contract ; this moment is the moment when he to whom the offer is made signifies his acceptance ; and the acceptance is signified when the acceptor has done all that he can to communicate his intention. In other words, the moment of acceptance is the moment of despatch. An acceptance once despatched is irrevocable, for the contract is then made. iB. &Aid. The leading case on this subject is Adams v. lAndsell. In that case the defendant offered to sell wool to the plaintiff by letter dated Sept. 2nd, 18 17. The letter was misdirected, and so did not reach the plaintiff till Sept. gth : he accepted by letter posted that evening, but the defendant had in the meantime sold the wool to others. The plaintiff sued for non-delivery of the wool, and it was argued on behalf of the defendant that no contract could arise until the plaintiff's Chap. I. §4. PKOPOSAL AND ACCEPTANCE. 21 answer reached him. But the Court said ' that if that were so no contract could ever be completed by the post. For if the defendants were not bound by their offer, when ac- cepted by the plaintiffs, till the answer was received, then the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum. The defendants must he considered in law as mahing, during every instant of the time their letter was travelling, ike same identical offer to the plaintiffs; and then the contract is concluded by the acceptance of it by the latter.' The law as laid down in this case has been followed in several others down to the present time. But the rights of the parties, where the letter of acceptance is lost or unreasonably delayed,, are not altogether satisfactorily settled. In Dunlop v. Higgins Lord Cottenham appears to have i h- l. c. 581. held, though the point was not necessary to the decision of the case, that the posting of an acceptance absolutely con- cluded the contract, whatever might afterwards become of the letter. This view was discussed and some limitations to it suggested by the Court of Exchequer in the British l. r. « Ex. and American Telegraph Company v. Golson. But the law on the subject perhaps finds its best expression in the judgment of Mellish, L. J., in Harris' Case, in which he l. E.7CI1.587. says that 'although the contract is complete at the time when the letter accepting the offer is posted, yet it may be subject to a condition subsequent, that if the letter does not arrive in due course of post, then the parties may act on the assumption that the offer has not been accepted.' The framers of the Indian Contract Act do not appear to have thought it necessary that the moment of acceptance should be fixed as that at which the contract acquires an irrevocably binding force. Section 4 of that Act ijrovides as follows : — 23 FOEMATION OF CONTEACT. Part II. Indian Con- 'The communication of a proposal is complete when it sec*^ [^' comes to the knowledge of the person to whom it is made. down a 'The communication of an acceptance is complete as different against the proposer, when it is put in a course of trans- mission to him, so as to be out of the power of the acceptor ; as against the acceptor, when it comes to the knowledge of the proposer. ' The communication of a revocation is complete as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it ; as against the person to whom it is made, when it comes to his knowledge.' It is perhaps sufficient to note the divergence from English law without commenting on its propriety; but it may be worth while to consider whether, from a practical as well as from a scientific point of view, it is desirable that in the formation of a contract there should be a period in which one party is bound while the other remains free. Other § 5- -^ projMsal may la2)se othermse than hy revocation as modes in /. 77 which pro- JoUows :— lapse. ™^^ (a) By lapse of a prescribed time for acceptance. An offer to sell goods ' receiving your answer in course of post ' would lapse upon failure to accept in course of post, i. e. by return of post, and the proposer would be relieved from liability upon a subsequent acceptance. (&) By lapse of a reasonable time for acceptance. What is a reasonable time must needs depend on the nature of the pro- posal. The best illustration of the rule is the Bamsgate Hotel Company v. Montefiore. The defendant offered to purchase shares by letter on the 28th of June; no communication was made to him until the 23rd of November, when he was informed that shares were allotted to him. He declined to accept them, and it was held that the proposal had lapsed, without notice of revocation, by efflux of a reasonable time for acceptance. L. R. I Exch. 109. Chap. I. §1 5, 6. PROPOSAL AND ACCEPTANCE. 23 (c) By failure to comply with a condition in the proposal as to the mode of acceptance. A offered to sell flour to X, the answer to be sent by return of the wagon which brought the offer : X sent a letter of acceptance by mail to another place, which was not the destination of the wagon, having reason to think that so his answer would reach A more speedily. It was held that EUason v. Hen- . ill, shaw,4Wl,ea. A was not bound by an acceptance so sent. '""• ===• (d) By death of the proposer before acceptance. This operates as an absolute revocation, so that even though the acceptor has acted upon the contract before he Per Meiiish, knew of the death of the proposer he cannot acquire rights d|,^J3/l k against the representatives of the proposer. ^ '^'' °' *"■ (e) By death of the acceptor before acceptance. The representatives of a person to whom an offer is made are not capable of acting upon it, if the deceased had not accepted it in his lifetime. § 6. Proposal and Acceptance need not necessarily be written Contracts or spoken, hut may he acted, wholly, or in part. condiK:t'^ "" If A sends goods to X's house and X accepts and uses the goods, X will be liable on an implied contract to pay for them. The proposal is made by sending the goods, the «»« v. mius. '^ '- •' . ° . r . IS M. & w. 87. acceptance by their use or consumption, which is in fact a promise to pay their price. Similarly, if A ask X to work for him for hire, X may accept simply by doing the work, unless A has in his pro- posal prescribed any form of acceptance. Or, again, if A allows X to work for him under such circumstances that no reasonable man would suppose that X meant to do the work for nothing, A will be liable to pay. The doing of Paynter ir. , Williams. the work is the proposal, the permission or acquiescence in • c. & m. sm. the doing it is the acceptance. And this rule has been applied to cases where there has been a verbal offer and acceptance which is invalid for non- 24 FOEMATION OF CONTKACT. Part II. compliance with the requirements of the Statute of Frauds. A part performance of such an agreement has been held to create a binding contract to pay for so much as has been accepted of the pei'formance. The original agreement is invalid ; the performance under it creates a fresh proposal ; the acquiescence in such performance a fresh acceptance, so "lyof '• Pyne. far as the performance has gone; and a new and binding contract thus takes the place of the first invalid agreement. But it must be remembered that contracts of this nature are subject to the same rules as to Proposal and Acceptance, as those which govern contracts made in words or writing. Taylor V. If the acts which constitute the proposal by A are not Laird, 25 L, J. 1 i ./ Exch.329. brought to the knowledge of X, there is no communicated offer. If so soon as he knows of them, he repudiates liability in respect of them, there is no acceptance. And the same rule applies to cases such as the contract between a passenger and a railway company, which arises from an acceptance by Henderson v. conduct of au offer comprised in various written terms. The Stevenson, -•■ Ap^flo."' acceptor is not bound by terms as to which he has received no notice. § 7. j1 proposal need not he made to an ascertained person, hut no contract can arise until it has been accepted by an ascertained person. An offer The proposition is best understood by an illustration, made to aU '^''^^ proposal by way of advertisement of a reward for the A contract '"^'^'^^^g °f certain services, addressed to the public at large, cannot becomes a contract to pay the reward so soon as an individual arise from j ,, . i j. j. 1 r it, till it is renders the services, but not before. accepted ij^ jjold that any contractual obligation exists before the services are rendered^ would amount to saying that a man may be bound by contract to an indefinite and unascertained body of persons, or, as it has been expressed, that a man may have a contract with the whole world. This would be contrary to the notions both of Agreement and Obligation, Chap. I. § 7. PEOPOSAL AND ACCEPTANCE. 25 ■whicli we liave ascertained to co-exist in Contract. Agreement is the expression of a common intention, and there can be none while intention is expressed on one side only ; nor can we say that Obligation in the sense of a vinculum juris exists between a definite proposer, and the indefinite mass of persons to whom it is open to accept his proposal. The matter would have seemed beyond doubt if it were Savigny's not that Savigny considered that an obligation of this in- definite character was created by such a proposal as we have described. From the difiiculties which would arise, owing to the obligation being incurred to unascertained persons, he would allow no right of action to accrue, but, upon the performance of the condition, he put the promisor in the position of a man who. owes a debt of honour which is notsav. obL=. ^ sect. 61. recoverable in a Court of Law. This view has never been seriously entertained in English law; the promise is re- garded as being made, not to the many who might accept the offer, but to the person or persons who do accept it. One may think, with submission to the great authority of Savigny, that his mode of dealing with this subject arises from a disregard or forgetfulness of the princijple that the pre-eminent feature of Obligation is the binding together of definite persons by a vinculum juris ^ that until the parties have emerged from the mass of mankind the bond cannot attach to them. The difficulties which have arisen in English law are Difficulties of a somewhat different character, but are capable, it should ^^^^ seem, of a satisfactory solution. They spring from two sources, (i) The acceptor may not, at the time of his doing what amounts to an acceptance, realise all the terms of the offer : can he afterwards take advantage of them 1 (2) It is sometimes difficult to distinguish representations of intention to act in a particular way, from invitations which, if accepted, become binding promises. . 1 1 II ^ (i) Motive The first difficulty is well illustrated by the case of of accept- 26 FOEMATION OP CONTRACT. Part II. 4 B. & Ad. 6=1. Williams v. Carwardine. Reward was offered by the de- fendant for information which the plaintiff supplied, though not with a view to the reward. It was held that the defendant was liable as upon a contract concluded by the supply of the information asked for. If it appeared clearly from the facts of this case as re- ported that the plaintiff was unaware of the defendant's offer, it might be asked, whether that could be an agreement in which one of the parties knew nothing of the intention of the other. But the only point urged in the argument for the defendant was that the reward was not the motive which induced the plaintiff to supply the information, and the Court held that the motive was immaterial, and that 'there was a contract with the person who performed the con- dition mentioned in the advertisement.' Intimation The second difficulty has been suggested as arising in of course of -, i t i i . t. • i i •^ conduct as cases where a public body, or an individual ; a railway distinct company, or the manager of a theatre, makes a standing tion. offer to the public at large to carry them, or to entertain coMra«!"i8i. thcm ui a certain manner and subject to certain terms. And it has been asked, in substance, whether an acceptance of the general offer in such a case binds the proposer to fulfil all his terms. Railway For instance, does the existence of its published time- ime- a e. ^^^\q bind a railway company to carry passengers according to its terms ? p. i3i. The answer is that the time-table is not, as Mr. Pollock seems to suggest, the offer of a separate promise, but a term in the general contract to carry : and the judicial interpre- tation put upon this term is, that when a passenger has Le Blanche v. acccpted the general offer by demanding a ticket, he becomes L.&. N. W.R. / ° . m' ' ''■ ''" °' entitled to reasonable efforts being made on the part of the company to ensure punctuality. Announce- Similarly it might be said, though the question may perform- probably never arise, that the manager of a theatre offers Chap. I. § 7. PROPOSAL AND ACCEPTANCE. 27 to any one who takes tickets for a particular play, that ance at a reasonable diligence shall be used to secure the performance of the piece advertised. If the disappointed playgoer can show a failure of such diligence, and should think it worth while to sue for the price of his ticket, it is not impossible that he might recover upon the principle laid down in Le Blanche v. London and North- Western Railway Gompany. ^^- ' '-■ ^- °' But there are some cases of more real difficulty than these ; cases in which it is hard to distinguish general offers the acceptance of which by individuals constitutes a contract, from declarations of intention upon which persons may act without affecting their legal relations. The two following cases will well illustrate the fineness of a sale by of the distinction. In Harris v. Nicherson an advertisement l r s o b by an auctioneer, that a sale of certain articles would take '^' place on a certain day, was held not to bind the auctioneer to sell the goods, nor to make him liable upon a contract to idemnify persons who were put to expense in order to attend the sale. Blackburn, J., said : ' Unless every declara- tion of intention to do a thing creates a binding contract with those who act upon it, and in all cases after advertising a sale the auctioneer must give notice of any articles that are withdrawn, we cannot hold the defendant liable.' On the other hand, the advertisement of a sale without reserve was held, in Warlow v. Harrison, to create a binding i e. & e. =95. contract between the auctioneer and the highest bidder that the goods should be knocked down to him. ' The sale,' said Martin, B., ' was announced by them (the auctioneers) to be "without reserve." This, according to all the cases both at law and in equity, means that neither the vendor nor any person in his behalf shall bid at the auction, and that the property shall be sold to the highest bidder, whether the sum bid be equivalent to the real value or not : Thornett -s m. & w. V. Haines. "We cannot distinguish the case of an auctioneer putting up property for sale upon such a condition from I E. & E. 316. 28 FORMATION OF CONTRACT. Part II. the case of the loser of property offering a reward, or that of a railway company publishing a time-table stating the times when, and the places to which, the trains run. It has been decided that the person giving the information adver- tised for, or a passenger taking a ticket, may sue as upon 5 E. & E. 860. a contract with him : Denton v. Great Northern Railway Company. Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue the auctioneer as upon a contract that the sale shall be without Hai™ "■ reserve.' Such was the opiaion of the majority of the Court of Exchequer Chamber. The substantial difference between the cases seems to lie in this, that not merely the number, but the intentions of the persons who might attend the sale must be unascertain- able, nor could it be certain that their legal relations would be eventually altered by the fact of their attendance. A might come intending to buy but might be out-bid, B might come with a half-formed intention of buying if the goods went cheaply, C might come merely for his amusement. It would be impossible to hold that an obligation could be established between the auctioneer and this indefinite body of persons, or that their losses could be ascertained so as to make it reasonable to hold him liable in damages. The highest bidder, on the other hand, is an ascertained person, fulfilling the terms of a definite offer. The distinction therefore bears out the proposition, laid down at the commencement of this discussion. Chap. II. FORM AND CONSIDERATION. 39 CHAPTER II. Form and Consideration. We have now dealt witli the mode in which the common Necessity intention of the parties should be communicated by the one (^,,,55 marks to the other so as to form the basis of a contract. But it |" English law. is not enough that such communication should be made as we have described, or even that the parties should intend it to refer to legal consequences. Most systems of law re- quire certain marks to be present in the agreements which they will recognise as contracts, and, if those marks are absent, the intention of the parties will not avail to create an obligation between them. In English law there are two such marks — Form and Consideration ; sometimes one, sometimes the other, sometimes both are required to be present in a contract to make it enforceable. By Form we may be taken to mean some peculiar solemnity attaching to the expression of Agreement which of itself gives efficacy to the contract; by Consideration some gain to the party making the promise, arising from the act or forbearance, given or promised, of the promisee. In English, as in Eoman, law, Form, during the infancy History of of the system, is the most important ingredient in Contract. ^ ""'' ^'^' Consideration is an idea which, though not unknown, is at any rate imperfectly developed. It would not be desirable here to enter upon an antiquarian discussion, which is never- theless of considerable interest. It is enough to say that Common English law, and also, we may venture to say, Eoman law, history of 30 FORMATION OF CONTBACT. Part II. Roman and starts with two distinct conceptions of Contract. One is, that law. Form of a certain kind will make any promise binding ; the other is, that the acceptance of benefits of a certain kind will imply such a promise to repay them as the law will enforce. The theory that the Roman Contracts developed out of Con- veyance in an order of moral progression seems to rest on no sure evidence ; and there is reason to believe that the Sttpulatio, or solemn promise elicited by a formal question, and the informal contract Be, which arose from the lending or deposit of money, or goods, were the most ancient of the See App. A. coutracts known to Eoman law. At any rate, in English law we find that before the end of the thirteenth century two kinds of contract were enforceable : one Formal, the contract under seal, answering to the Stipulatio; one informal, arising from sale and delivery of goods, loan of money, and the like, in which the consideration had been executed upon one side, and an implied or express promise to repay would support an action of Debt. Except in these limited cases, the idea of enforcing an informal promise, simply because a benefit was accruing or was about to accrue to the promisor by the act or forbearance of the promisee, does not appear to have been entertained before the middle or end of the fifteenth century. The Formal Contract of English law is the Contract under Seal. In no other way than by the use of this Form could validity be given to executory contracts, until the doctrine of consideration began to make way. "We have to bear in mind that it is the Form which makes this contract binding ; the consensus of the parties has not emerged from the ceremonies which surround its expression. Courts of Law will not trouble themselves with the inten- tions of parties who have not couched their agreement in the solemn Form to which the law attaches legal conse- quences. Nor, on the other hand, where Form is present will they ask for further evidence as to intention. Later Chap. II. FOEM AND CONSIDERATION. 3 1 on, owing in great measure we may suspect to the influence of the Court of Chancery, the intention of the parties begins to engage the attention of the Courts, and the idea of the importance of Form undergoes a curious change. When a contract comes before the Courts, evidence is required that it expresses the genuine intention of the parties ; and this evidence is found either in the solemnities of the Contract under Seal, or in the presence of Consideration, that is to say, in some benefit to the promisor or loss to the promisee, granted or incurred by the latter in return for the promise of the former. Gradually Consideration comes to be re- garded as the important ingredient in Contract, and then the solemnity of a deed is said to make a contract binding because it 'imports consideration,' though in truth it is the Form which, apart from any question of consideration, carries with it legal consequences. Before considering in detail the classes of contract which English law recognises, it is well to conclude the historical outline of the subject of Form and Consideration. We have stated that the only contracts which English law originally recognised, were the Formal contract under Seal, and the informal contract in which Consideration was exe- cuted upon one side. How then do we arrive at the modem breadth of doctrine that any promise based upon Considera- tion is binding upon the promisor 1 This question resolves itself into two others. How did informal executory con- tracts become actionable at all? How did Consideration become the universal test of their actionability 1 To answer the first question we must look to the remedies which, in the early history of our law, were open to persons complaining of the breach of a promise, express or implied. The only actions of this nature, during the thirteenth and fourteenth centuries, were the actions of Covenant, of Debt, and of Detinue. Covenant lay for breach of promises made under seal : Debt for liquidated or ascertained claim. 32 FORMATION OP CONTEACT. Part II. Spence, Chancery Jurisdict. 1. 241, Origin of action of assumpsit. Reeves, cd. Finlason, ii. 395. 396. arising either from breach of covenant, or from non-payment of a sum certain due for goods supplied, work done, or money lent : Detinue' lay for the recovery of specific chattels kept back by the defendant from the plaintiff. These were the only remedies based upon contract. An executory agree- ment therefore, unless made under seal, was remediless. The remedy by which such promises were eventually enforced is a curious instance of the shifts and turns by which practical convenience evades technical rules. The breach of an executory contract, until quite recent times, gave rise to a form of the action of Trespass on the case. This was a development of the action of Trespass : Trespass lay for injuries resulting from immediate violence : Trespass on the case lay for the consequences of a wrongful act, and proved a remedy of a very extensive and flexible character. This action came to be applied to contract in the follow- ing way. It lay originally for a malfeasance, or the doing an act which was wrongful ah initio : it next was applied to a misfeasance, or improper conduct in doing what it was not otherwise wrongful to do, and in this form it applied to pro- mises part-performed and then abandoned or negligently ex- ecuted to the detriment of the promisee : finally, and not without some resistance on the part of the Courts, it came to be applied to a non-feasance, or neglect to do what one was bound to do. In this form it adapted itself to executory con- tracts. The first reported attempt so to apply it was in the reign of Henry IV, when a carpenter was sued for a non-feas- ance because he had undertaken, quare assumpsisset, to build a house and had made default. The judges in that case held that the action, if any, must be in covenant, and it did not appear ' The Court of Appeal has very recently decided that the action of Detinue is founded in tort, Bryant v. Herbert, But though the wrong- ful detention of goods is the cause of action, the remedy may apply to cases in which the possession of the goods originated in the contract of Eailnient. [See judgment of Brett, L. J., at p. 392.] Chap. II. FORM AND CONSIDERATION. 33 that the promise was under seal. But in course of time the Reasons for desire of the King's Bench to extend its jurisdiction, the-sion. fear that the Common Pleas might develope the action of Debt to meet the case of executory promises, or that the Court of Chancery might extend its extraordinary powers, and by means of the doctrine of consideration, which it had already applied to the transfer of interests in land, enlarge its jurisdiction over contract, operated to produce a change in the attitude of the Common Law Courts. Before the end of the reign of Henry VII it was settled that the form of Trespass on the case known henceforth as the action of Assumpsit would lie for the non-feasance, or non-perform- ance of an executory contract; and the form of writ by which this action was commenced, continued to perpetuate this peculiar aspect of a breach of a promise until recent enactments for the simplification of procedure. It is not at alll improbable that the very difficulty of obtaining a remedy for breach of an executory contract led in the end to the breadth and simplicity of the law as it stands at present. If the special actions ex contractu had been developed to meet purely executory informal engage- ments, they would probably have been applied only to en- gagements of a particular sort, and a class of contracts similar to the consensual contracts of Eoman law, privi- leged to be informal, might have been protected by the Courts, as exceptions to the general rule that Form or executed Consideration was needed to support a promise. But the conception that the breach of a promise was some- thing akin to a wrong, the fact that it could be remedied only by a form of action which was originally applicable to wrongs, had a somewhat peculiar result. The cause of action was the non-feasance of that which one had undertaken to do, not the breach of a particular kind of contract ; it was therefore of universal application. Thus all promises would become binding, and English law was saved 34 FORMATION OF CONTRACT. Part II. Origin of considera- tion as a test of ac- tionability is uncer- tain. Gradual grovvtli of doctrine. the technicalities which must needs arise from a classifica- tion of contracts. Where all promises may be actionable it follows that there must be some universal test of action- ability, and this test was supplied by the doctrine of Con- sideration. It is no easy matter to say how Consideration came to form the basis upon which the validity of informal promises might rest. It is sufficient for the purposes of the present work to say that the idea of Consideration, or a ' quid pro quo ' as it is styled in some of the early reports, was probably borrowed ' by the Common Law Courts from the Chancery. For the Chancellor was in the habit of enquiring into the intentions of the parties beyond the Form, or even in the absence of the Form in which, by the rules of Common Law, that intention should be displayed, and he would find evi- dence of the meaning of men in the practical results to them of their acts or promises. It was thus that in the region of conveyance, the Covenant to stand seised and the Bargain and Sale of Lands came to be enforced in the Chancery before the Statute of Uses, and the doctrine once applied to simple contract was found to be of gi-eat practical con- venience. When a promise came before the Courts they asked no more than this, ' "Was the party making the promise to gain anything from the promisee, or was the promisee to sustain any detriment in return for the pro- mise % ' if so, there was a ' quid pro quo ' for the promise, and an action might be maintained for the breach of it. So silent was the development of the doctrine that Consideration was the universal requisite of contracts not under seal, and so marked was the absence of any express authority for the rule in its broad and simple application, that Lord Mansfield was able in tlie middle of the last cen- tury to raise the question whether, in the case of commercial contracts made in writing, thei-e was any necessity for Con- Chap. II. FORM AND CONSIDERATION. 35 sideratibn to support the promise. In the case of Pillans v. Fan Mierop he held, and the rest of the Court of King's Bench 3 Burr. 1672. concurred with him, that the custom of merchants would give efficacy to a written promise for which no consideration could be shown. The case was decided on another point, and the doctrine was emphatically disclaimed in the opinion of the Judges delivered not long afterwards in the House of ? t. r. 350. Lords, in Rann v. Huglies ; but the question raised serves to show that the breadth ' of the law upon this subject was, until comparatively recent times, hardly realised by those who had to administer it. J> 2 3^ FORMATION OF CONTRACT. Part IT. CLASSIFICATION OF CONTRACTS. Contracts There k but one Formal Contract in English law, the or Simple. ' Deed or Contract under seal ; all others are simple contracts dependi.ng for their validity upon the presence of Considera- tion. The Legislature has, however, imposed upon some of these simple contracts the'necessity of some kind of Form, and these stand in an intermediate position between the Deed to "which its Form alone gives legal force, and the Simj)le Contract which rests upon Consideration and is free from the imposition of any Statutory Form. In addition to these a certain class of Obligation has been imported into the Law of Contract under the title of Contracts of Record, and though these obligations are wanting in the principal features of Con- tract, it is necessary, in deference to established authority, to treat o'f them here. The Contracts known to English law may then be divided thus : — Classifica- A. Formal. TO "tr°acts. i- «• dependentfor their validity upon their Form. B. Simple. i. e. dependent for their validity upon the pre- sence of Con- sideration. 1. Contracts of Eecord. 2. Contract under Seal. 3. Contracts required by law to be in some form othei' than un- der Seal. 4. Contracts for which no form is required. It will be best to deal first with the essentially formal contracts, then with those forms which are superimposed upon simple contracts, and then with Consideration, the requisite common to all simple contracts. Chap. II. § ,. FORM. CONTRACTS OF RECORD. 37 Formal Contbact. § I . Contracts of Record.. The obligations which are styled Contracts of Record are Contractsof Judgment, Recognizance, Statutes Merchant and Staple, and ^^'^°'"^- Recognizances in the nature of Statute- Staple. And first as to Judgment. The proceedings of Courts of (i) Judg- Record are entered upon parchment roll's, and upon these '"'^"'■ an entry is made of the judgment in an action when that judgment is final. A judgment awarding a sum of money to one of two litigants, either by way of damages or for costs, lays an obligation upon the other to jmy the sum awarded. This obligation may come into existence as the final result How it of litigation when the Court pronouooes judgment, or it may °'''S'"'' be created by agreement between the parties- before litigation has commenced, or during its continuance. In such cases the obligation results from a contract for the making of which certain formalities are required ; this contract is either a warrant of attorney, by which one party gives authority 10 the other to enter judgment upon terms settled, or a cognovit actio7iem, by which the one party acknowledges the right of the other in respect of the pending dispute and then gives a similar authority. The characteristics of an- obligation of this nature may be its charac- shortly stated as follows : — 1. Its terms admit of no dispute, but are conclusively proved by production of the record. 2. So soon as it is created the previously existing rights with which it deals merge, or are extinguished in it : for instance, A sues X for breach of contract or for civil injury: judgment is entered in favour of X either by consent or after trial : A has no further rights in respect of his cause of action, he only becomes creditor of X for the sum awarded. 3. The creditoi-, as we may conveniently call the party in 38 FORMATION OF CONTRACT Part 11, Jones, (2) Recog- nisance. (3) Statutes merchant and staple. whose favour judgment is given, has certain advantages which an ordinary creditor does not possess. He has a double remedy for his debt ; he can take out execution upon the judgment and so obtain directly the sum awarded, and he can also bring an action for the non-fulfilment of the obligation. For this purpose the judgment not only of a 'Court of Record, but of any Court of competent jurisdiction, British or foreign, is treated as creating an obligation upon which an action may be brought for money due. He had also before 27 and 28 Vict. c. 112 a charge upon the lands of the judgment debtor during liis lifetime ; but since the passing of that Statute lands are not affected by a judgment until they have been formally taken into execution. Recognizances have been aptly described as ' contracts made with the Crown in its judicial capacity.' A recognizance is a writing acknowledged by the party to it before a judge or officer having authority for the purpose, and enrolled in a Court of Record. It may be a promise, with penalties for the breach of it, to keep the peace, or to appear at the fissi/.es. Statutes Merchant and Staple and Recognizances in the nature of a Statute Staple are chiefly of interest to the student of the history of Real Property Law. They have long since become obsolete, but they were once important, inasmuch as they were acknowledgments of debt which, when made in accordance with Statutory provisions and enrolled of Record, created a charge upon the lands of the debtor. It will easily be seen how little there is of the true nature of a contract in the so-called Contracts of Record. Judg- ments are obligations dependent for their binding force, not on the consent of the parties, but upon their direct promulgation by the sovereign authority acting in its judi- cial capacity. Recognizances are promises made to the sovereign with whom, both by the technicixl rules of English Chap. II. § 2. . FOKM. CONTRACT UNDER SEAL. 39 Law and upon the theories of Jurisprudence, tlie subject cannot contract. Statutes Merchant and Staple share the characteristics of judgments. We may therefore dismiss these obligations altogether from our consideration. § 2. Contract under Seal. The only true Formal Contract of English law is the Contract Contract under Seal, sometimes also called a Deed and some- '^"°'^'' ''''''''• times a Speciality. It is the only true Formal Contract, because it derives its validity from its Form alone, and not from the fact of agreement, nor from the consideration which may exist for the promise of either party. It will be con- venient in dealing with the Contract under Seal to consider (r) how it is made; (2) what are its chief characteristics as distinguished from simple contracts ; (3) under what cir- cumstances it is necessary to contract undei- seal. (i) A deed must be in writing or printed on paper or How made, parchment. It is often said to be executed, or made con- xShttme.sa. elusive as between the parties, by being ' signed, sealed, and Signed. delivered.' Of these three the signature is a matter as to the necessity of which there is some doubt, though no one, cooch v. go«i- unless ambitious of giving his name to a leading case, would 5"- omit to sign a deed. But that which ider tifies a party to a deed with the execution of it is the presence of his seal ; Sealed, that which makes the deed operative, so far as he is concerned, is the fact of its deliver^/ by him. Delivery is eifected either Delivered, by actually handing the deed to the other party to it, or to a stranger for his benefit, or by words indicating an inten- tion that the deed should become operative though it is retained in the possession of the party executing. In the ^9'°'^';;^ execution of a deed under ordinary circumstances, seals are j^'*- = "■ '-■ affixed beforehand, and the party executing the deed signs his name, places his finger on the seal intended for him, and 4° FORMATION OF CONTRACT. Part II. Escrow. utters tlie words ' I deliver this as my act and deed.' Thus he at once identifies himself with the seal, and indicates his intention, to deliver, that is, to give operation to the deed. A deed may be delivered subject to a condition, it then does not take effect until the condition is performed : during this period it is termed an escrow, but immediately upon the fulfilment of the condition it becomes operative shepp. Touch, and acquires the character of a deed^ There is an old rule that a deed, thus conditionally delivered, must not be delivered to another party to it, else it takes effect at once, on the ground that a delivery in fact outweighs verbal conditions. But the modern cases appear to show that this technical rule will not be adhered to, if the intention of the parties is clear that the deed should be delivered conditionally. The distinction between a Deed Poll and an Indenture is no longer important since 8 and 9 Vict. c. 106. s. 5. For- merly a deed made by one party had a polled or smooth-cut edge, a deed made between two or more parties was copied for each on the same parchment, and the copies cut apart with indented edges, so as to enable them to be identified by fitting the parts together. Such deeds were called Inden- tures. The statute above mentioned provides that an in- dented edge shall not be necessary to give the effect of an Indenture to a deed purporting to be such. Hudson V. Rewett, S Bing. 387. Indenture and deed poll. (2) A contract under seal differs from a simple contract in many ways. (a) Statements made in a simple contract, though strong evidence against the parties to the contract, are not abso- lutey conclusive against them. Statements made in a deed are absolutely conclusive against the parties to the deed in any legal proceedings between them taken upon the deed. ' The principle is that where a man has entered into a solemn s'a "I-'e: 278. engagement by and under his hand and seal as to certain Charac- teristics of contract under seal. (a) Estop- pel. Per Taunton, J., in Bowman Chap. II. § 2. FORM. CONTEACT UNDER SEAL. 4I facts, he shall not be permitted to deny any matter he has so asserted.' Such a prohibition to deny facts is termed an estoppel. (6) Where two parties have made a simple contract for {ii) Merger. any purpose, and afterwards have entered into an identical engagement by deed, the simple contract is merged in the deed and becomes extinct. This extinction of a lesser in a higher security, like the extinction of a lesser in a greater interest in lands, is called merger. (c) A right of action arising out of simple contract is (c) Limita- barred if not exercised within, six: years. actions. A right of action arising out of a contract under seal is barred if not exercised within twenty years. These general statements must be taken with some quali- see Pan v. ° _ ^ ch. iii. fications to be discussed hereafter. (d) Eemedies have been and are possessed by the creditor {d) Reme- by deed against the estate of the debtor, which are not dLbto^s possessed by the creditor of a simple contract debt, and e^'^''^- which mark the importance attached to the Formal con- tract. In administering the personal estate of a testator or intestate person, creditors by speciality were entitled to a priority over creditors by simple contract. Their privilege in this respect is taken away by 3,2 & 33 Vict. c. 46. As regards the real estate of a debtor, the creditor by speciality was also preferred. If the debtor bound himself and his heirs by deed, the Common Law gave to the creditor a right to have his debt satisfied by the heir out of the lands of his ancestor ; the liability thus imposed on the heir was extended to the devisee by 3, & 4 Will. & Mary, c. 14. s. 2. This statute was repealed by 11 Geo. IV. & i Will. IV. c. 47, only for the purpose of extending the creditor's remedy to some cases not provided for by the previous Act. During the present century, however, creditors by simple contract have also acquired a right to have their debts satisfied out of the lands of the debtor ; but it should be noted that the 42 FOKMATION OF COXTEACT. Part 11. creditor by speciality can claim against heir or devisee of real estate without the intervention of the Court of Chan- cery, the creditor by simple contract mu&t get the estate admiuistere=t=r v.^comp- it is to be performed after the year.' ^ ^- ^^^ (6) The agreement does not fall within the section if that and by both which one of the parties is to do, is all to be done within tlie P"""^' year. So where A being tenant to X under a lease of 20 Ad. 899. 56 FOBMATION OF CONTBA.CT. Part II. years promised verbally to pay an additional £5 a-year during the remainder of the term in consideration that X laid out £50 in alterations, A was held liable upon his pro- KeSd"^V'& ™ise, the consideration for it having been executed within the year. (a) 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 its provisions. The terms of the section do not render such a contract void, but they prevent it being enforced by action. The contract therefore, though it cannot be sued upon, is yet available for some purposes. Two illus- trations will suffice to explain this. In the case of Leroux v. Brown, the plaintiff sued upon a contract not to be performed within the year, made in France and not reduced to writing. Trench 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 lex 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 recovered, for his contract was good in France where it was made, and the lex loci contractus would have been applicable. If, on the other hand, the 4th section affected procedure only, the contract, though not void, was inca- pable of proof. The plaintiff tried to show that his con- tract was void by English law, in which case he would have been successful, for there would have then been nothing to hinder his proving first the contract, and then the French law which made it valid. But the Court of Common Pleas held that the 4th section dealt with procedure only, that Chap. II. § 3. SIMPLE CONTRACTS, 29 CAE. II. C. 3. § 17. 57 the existence of the contract was not aflfected by it, but that it was rendered incapable of proof, and the plaintiff therefore could not recover. For some purposes therefore the contract is in existence, and if one party should do all that he is bound to do under the contract, equity will consider that such part performance takes it out of the operation of the statute, and will grant specific performance of the residue. ' It is every dav's Honyman ^ ^ arguendn in practice in the courts of equity to enforce the performance Brown"" '' of contracts not in writing where there has been part per- formance.' So in Nunn v. Fabian. A landlord agreed by word of l R ■ ci., ,5 mouth with his tenant to grant him a lease for 2 1 years at an increased rent upon certain terms. The landlord died before the lease was executed, but the tenant had previously paid a quarter's rent at the increased rate. It was held that he was entitled to an execution of the lease on the ground that a part performance had taken place, although the contract would otherwise have been unenforceable as not satisfying the Statute of Frauds. Contracts witliin the seventeenth section. The seventeenth section enacts 'that no contract for the Section 17. sale of any goods, wares, and merchandises for the price of £10 sterling or upwards shall be allowed to be good, except the buyer shall accept part of the goods so sold and actually receive the same, or give something in earnest to bind the bargain, or in part of payment, or that some note or me- morandum in writing of the said bargain be made and signed by the parties to be charged by such contract, or their agents thereunto lawfully authorised.' The same questions present themselves here as presented themselves under the fourth section, (i) What is the form required, (2) what are the contracts for which such form is required, and (3) what are the effects of the absence of the statutory requirements. 58 FORMATION OF CONTRACT. Part II. (I) Uiffeience AVith regard to the form required, where, in absence of from sec. 4. ^ P'^rt acceptance and receipt or part payment, a note or memorandum in writing is resorted to, it is sufficient to say that the rules applicable to contracts under section 4 apply to contracts under section 17, with this exception, that it is not necessary under section 17 that the consideration for the sale should appear in writing. Since the 17th section only applies to contracts for the sale of goods, it will be presumed, in the absence of a specified consideration for the sale, that -there is a promise or undertaking to pay a reasonable price, provided always that there has been no ii'^i'li'Se"' ex;press verbal agreement as to price which would rebut the ,0 li.iig. 482. presumption of a promise to pay what was reasonable. Nature of The question as to the nature of a contract for the sale of Contract of i jit it t i Sale. goods, wares, and merchandise can only be answered bj' a discussion on the Contract of Sale in English law which would not be in place here. These points however must be borne in mind. The Contract of Sale in English law has the effect of a conveyance, it passes the property in the thing sold ; but in order to have tbis effect, it must be a contract for the sale of a specific chattel to which nothing remains to be done by the vendor by way of completion, weighing, mea- suring, or testing. Such a contract is called an executed contract of sale. Sale of It is quite possible, however, that t\ contract may be made specific, for the sale of goods which are not specific — ^-1 may agree °Iete°"'°'"' *° "'"y '^^y ^° ^'^'^'^P °^ -^'^ ^°°^- ^^ °°^ complete—.! orofunas- orders a table which he sees making in X's shop. Or of value. goods to which something remains to be done by way of Chap. 11. § 3. SIMPLE CONTKACTS, 29 CAR. II. C. 3. § 17. 59 ascertainment of price — A buys A"s stack of hay, the price to be determined as the hay is talceu down and weighed. In these cases the property does not pass, the buyer does not acquire a right in rem to the thing agreed to be sold, but only a right in personam against the seller. In like manner, the seller holds at his own risk the chattels sold, lie is not divested of his property. This is called an executory contract of sale. It was long questioned whether the 17th section applied Does sec. to the executory contract of sale, and the matter was not execmory'" set at rest till more than 150 years after the passing of the contracts of Statute of Frauds. Lord Tenterden's Act, 9 Geo. IV. c. 1 4. s. 7, recites, 'That it has been held that the said recited enactments (29 Car. II. c. 3. s. 17) do not extend to certain execu- tory contracts for the sale of goods, which nevertheless are within the mischief intended to be remedied ;' and then enacts that the provision of s. 17 ' shall extend to all contracts for the sale of goods of the value of ten pounds sterling and upwards, notwithstanding 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 lit for delivery.' The effect of this clause is to bring executory contracts for the sale of goods within the 17 th section of the Statute of Frauds. A further question has arisen, in cases where skilled Difference labour has to be expended upon the thing sold before the contracts of contract is executed and the property transferred, whether ^^'s, aid foi' . work and the contract is one for work and labour, which would not fall labour. under the 1 7th section ; or for goods, wares, and merchandise within the meaning of the section. After some conflict of • judicial opinion it has been laid down in Lee v. Griffin that i b. & s. 272. where the contract is ' such that a chattel is ultimately to 6o FORMATION OF CONTRACT. Part II. be delivered by the plaintiff to the defendant, when it has been sent, then tlie cauBe of action is goods sold and de- livered,' (per Crompton, J). And Blackburn said, ' If the work and labour be bestowed in such a manner as that the result would not be anything which would properly be the subject of sale, then an aetion for work and labour is the proper remedy. ... I do not think that the relative value of the labour and of the materials on which it is bestowed can in any case be the test of what is the cause of action ; and that if Benvenuto Cellini had contracted to execute a work of art for another, much as the value of the skill might exceed that of the materials, the contract would have been none the less for the sale of a chattel.' (3) It remains to not« that if there be no acceptance and receipt, no part payment, and no memorandum or note in writing of a sale falling within the section, the effect of the section is to avoid the contract altogetlier, and not merely, as in the case of the 4th section, to bar the remedy of the party wishing to enforce the contract. As we are here dealing with the Form of contracts it is not necessary or desirable to speak of acceptance, receipt, and part payment, for these are strictly part of a separate subject, the formation of a special contract — the Contract of Sale. Chap. II. §4- SIMPLE CONTRACT. CONSIDERATION. 6 1 § 4. COXSIDEEATIOS. Consideration has already been touclied upon so far as regards the history of the doctrine in Enghsh law, and it has been stated that it is the universal requisite of contracts not under seal. "What has now to be said must therefore be understood to apply to those contracts the discussion of which has just been concluded, those contracts which, though not under seal, are required by law to be expressed in certain forms. It will be well perhaps to take some general definition of Definition consideration which may serve to explain in outline what it jideiation. is which we are now proposing to discuss, and then to lay down certain principles upon which the- doctrine has been dealt with in English law. The fullest definition of con- sideration is that given by the Court of Exchequer Chamber in Currie V. Misa. ' A valuable consideration in the sense l. r. 10 excIi. 162. of the law may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detri- ment, loss, or responsibility given, suffered, or undertaken by the othei'.' Such being the definition of consideration, we may pro- ceed to state — 1. That consideration Is necessarj^ to the validity of every General rules as to promise not under seal. considera- 2. That Courts of law will not inquire whether the ''°"- consideration is adequate to the promise, but will insist that it should be something of some value in the eye of the law. 3. That consideration must be legal. 62 FORMATION OF CONTBACT. Part II. 4. That consideration may be present or future, executed or executory, but must not be past. Consider- ation neces- sary to every simple contract. 3 Burr. 1663. Doubt as to the doc- trine. Settled in Rann v. Hughes. s T. R. 350. I . Consideration simple contract. necessary to tlie validity of ever e T. R. 350. The peculiar case of Pillans v. Van Mierop has already been noticed, and it will be remembered that Lord Manf- field, C. J., and Wilmot, J., there ex])ressed an opinion that, among merchants, a promise put in writing was binding Avithout consideration. That case was decided in 1765 ; and not many years afterwards, in 1778, a somewhat similar point arose in the case of Rann v. Hughes. There the defendant, as administratrix of the estate of one J. Hughes, promised in writing ' to answer damages out of her own estate.' There was no consideration for the pron)ise, and it was contended that the writing required by 29 Car. II. c. 3. s. 4 rendered consideration unnecessary. The view encou- raged by Lord Mansfield in Pillans v. Van Mierop appears^ to have been, that the presence of consideration was one mode among others for supplying evidence of the intention of the parties to form a contract ; and that if the terms of the contract were reduced to writing either by reason of commercial custom or of statutory enactment, that evidence was sufficient withovit consideration. But this view of the law was, once for all, declared to be incorrect by Skynner. C. B., delivering the opinions of the judges in the House of Lords in Rann v. Hughes. ' 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 sv.pplies no means nor affords; any remedy to compel the performance of an agreement made without sufficient consideration. Such agreement is " nudum pactum ex quo non oritur actio ; " and whatever may be the sense of this maxim in the civil law, it is in the last sense Chap. II. § 4. SIMPLE CONTRACT. CONSIDERATION. 63 only tliat it is to be understood in our law All contracts are by tlie laws of England distinguished into agreements by specialty and agreements by pai-ol ; nor is there any such third class as some of the counsel have en- deavoured to maintain, as contracts in writing. If tliey he merely written and not specialties, they are parol and a con- sideration must he proved.^ Bills of exchange and promissory notes are an apparent Bills of ex- but not a real exception to the universality of this rule. In LoJJ^ssotv contracts of this nature consideration is presumed to exist "o'es no real excep- and need not be proved by the plaintiflf. The burden of tion. proof rests on the party disputing the validity of the con- tract. If, however, he ca.n show that, as between himself and the party suing, no consideration was given for the making or indorsement of the bill or note, the promise fails, as it would do in any other case of simple contract under like circumstances, 2. Courts of law vjtll not inquire whether or no tlie con- Considera- sideration he adequate to the promise, hut they loill insist ^^^?ue'^„_ that it he something of some value in the eye of the laiu. quate, but .. liiTxii. rnust be In other words, consideration need not be adequate, but real. must be real. So long as a man gets what he has bargained for. Courts of law will not ask what its value may be to him, or whether its value is in any way proportionate to his act or promise given in return. This would be ' the law making the bar- Per AWcrson. gain, instead of leaving the parties to make it.' Further ',°"J; |'=^^'; than this, they will not ask whether the thing which forms the consideration does in fact benefit the promisor, or a third party, or is of any substantial value to any one. It is enough that something is promised, done, forborne, or suffered Adequacy , , • • 1 -J i- of con- by the party to whom the promise is made, as cousicleration sjderation. for the promise made to him. 64 FORMATION OF CONTRACT. Part 11. The following cases will illustrate this principle. den'T^R"^''' ■^ ^^^ -^ were both subscribers to a charity. The objects 9 y. B. 53. p£ ^jjg charity were elected by the subscribers, and each subscriber possessed votes proportionate to the amount of his subscription. A and X agreed that if at the next elec- tion A would give 28 votes to a candidate favoured by X, X would at the succeeding election give 28 votes to a can- didate favoured by A. A fulfilled his promise, but X when called on to vote for A's candidate declined to do so. A thereupon increased his subscription to such an extent as would give him 28 additional votes, and sued X for the amount he had thus been compelled to pay. It was argued that the promises of A and X were no consideration for one another, inasmuch as a man must be supposed to give his votes to the candidate whom he thought the beet ; and that if A did so he sustained no detriment. But the Court appears to have thought that as a subscriber to a charity may give his votes as he pleases, so the limi- tation of the choice of each promisee formed an appreciable consideration, and laid it down that 'the adequacy of the consideration is for the parties to consider at the time of making the agreement, not for the Court when it is soughi to be enforced.' ,0 A & E. 305. A stronger authority is the case of Eaigh v. Brooks. The defendant in that case promised payment of certain bills accepted by M in consideration that the plaintiff would return to the defendant a guarantee which he had given for the payment of £10,00,0 by If to the plaintiff. The guarantee was returned : it then turned out to be unen- forceable under 29 Car II. c. 3. s. 4, and the defendant argued that it was therefore no consideration for his promise. Lord Denman however, in giving judgment for the plaintiff, said, 'Whether or no the guarantee could have been avail- s East, 10. able within the doctrine of Wain v. Warllers, ihe plaintiffs were induced by the defendant's promise to part -with some- Chap. II. § 4. SIMPLE CONTRACT. CONSIDERATION. 6^ tiling whicli they might have kept, and the defendant ob- tained what he desired by means of that promifse. Both being free and able to judge for themselves, how can the defendant be justified in breaking this promise, by discover- ing afterwards that the thing in consideration of which he gave it did not possess that value which he supposed to belong to it 1 It cannot be ascertained that that value was what he most regarded : he may have had other motives aud objects, and of their weight he was the only judge.' Equity so far takes adequacy of consideration into account Inadequacy in dealing with contracts, that if a contract is sought to be sideration avoided on the ground of Fraud or Undue Influence, inade- '" equ'V- quaoy of consideration will be regarded as strong corrobo- rative evidence in support of the suit. It has even been held that inadequacy of consideration is a ground upon which specific pei'formance may be resisted. But in spite of some conflict of judicial opinion upon this point, it is probably safe to adopt the view of Lord Eldon, that mere inadequacy coies v. Tre- ^ 1 ./ cnthick, 9 \ es. of consideration, unless so gross as ' to shock the conscience ^^''' and amount in itself to conclusive evidence of fraud,' is not alone a sufficient ground for refusing specific performance. fo"^'"''-.''"''' ' Although Courts of Law will not inquire into the adequacy Consider- of consideration, they will insist that it should not be illu- ^.g ^eal. sory or unreal. At first sight this looks like saying that a consideration must be a consideration ; but it may not be useless to inquii'e into some of the various forms which con- sideration may assume, and to note the grounds upon which certain alleged considerations have been held to be of no real value in the eye of the law. The consideration for a promise may be an act or a for- Consider- , ■ , T L e 1 ation is an bearance, or a promise to do or to lorbear. act, for- When a promise is given for a promise the contract is bearance, r & •^ or promise. said to be made upon an executory consideration ; the obli- a promise, gations created by it rest equally upon both parties ; each j^j.^"^™; p sideration. 66 FOBMATION OF CONTRACT. Part II. is bound to a future act. The simplest illustration of such a contract is the case of mutual promises to marry, in which the consideration for A's promise to marry X is X's promise to marry A, while A's promise forms in like manner the consideration for X'a. All act or AVhen the consideration for a promise is an act or for- ance or bearanoe, the contract is said to be mads upon consideration considera- executed. This arises when either the offer or the accept- tion exe- . , ■ . cuted. auce is signified by one of the parties doing all that he is bound to do under the contract so created. The validity of consideration, as regards its relation to the promise in time, may be discussed presently. We are at present concerned with the nature of consideration, and will note some of its aspects which are worth observation. . Contingent "Where the consideration for a promise is a proini.se, the whole contract may be contingent and may never come into effect save at the will of one of the parties. For instance, A offers X to supply at a certain price such goods as X may choose to order. X accejDts this offer. If X calls upon .1 to supply goods on the terms fixed, A cannot refuse to do so on the ground that X is not bound to order any goods G N. Railway at all. Tlic contract may be put in this form : — In consider- Co. V. Witliam, ^ ^ L. R. 9 c. P. atiojj ^;}jat X promises to pay A a certain price for his goods if he requires them, A promises to supplj- goods at that price if called upon to do so ^. The peculiarity of the case just cited consists in the option given to one of the parties to briug the, contract into opera- tion, or to leave it dormant irrespective of the wishes of the other. But the consideration is not altogether illusory. " The American law is different to ours upon this point (see Benjamin upon Sales, p. 55). It is noticeable that Brett, J., in his judgment in the case cited in the text leaves it uncertain whether he regards the contract as based upon mutual promises dependent upon a contingency for their coming into effect, or whetlier lie rests it upon an outstanding- offer to supply goods which each successive order accepts and so turns into a contract pro ta.do. Mr. Leake, ed. .;, ji. 46, takes the latter view. Chap. II. § 4. CONSIDEBATION. 67 The promisee need not bring tlie contract into effect at all, but, if he do so, he is bound by its terms as to price. Similar in character are the considerations which consist in conditional promises. A promises to do something for reward, but X only binds himself to pay for it upon ihe happening of an event which may not be under the control of either party. Such would be the case in a building con- tract, where the promise to pay for work to be done is made conditional on the certified approval of an architect. Or again, the promise may be conditional on something not happening ; such are the promises in a charter party which are not to take effect if certain specified risks occur. In the one case the promise depends upon a condition precedent, in the other it is liable to be defeated by a con- dition subsequent : in neither case does its contingent or conditional character prevent it from forming a good con- sideration for promises given in return. The abandonment of a right, or a promise to forbear from Forbear- exercising it, is good consideration for a promise. The right may be legal or equitable, certain or doubtful ; it may exist against the promisor, or against a third party. But the right forborne or agreed to be forborne must at least be doubtful ; forbearance to enforce an unenforceable claim can be no con- sideration for a promise. The case of Jones v. AshburnJiam 4East, 4'>3- is an illustration of this principle. There the plaintiff sued on a promise to pay money, the consideration being a pro- mise by him not to sue for a debt due from a third party who had died leaving no assets. ' How,' said Lord Ellen - borough, ' 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 ? No right can exist in this vague abstract way.' The commonest form in which a forbearance appears as Compro- consideration for a promise is in the compromise of an action. sujjs_ F 2 lifvf in his case. 2 C. B. 54P, 68 FORMATION OP COXTRACT. Part II. A the plaintiff promises A' the defendant that in consider- ation of certain things to be done by X he will forbear to prosecute his suit ; and this is good consideration for the Plaintiff act or promise by X. But here, in order to make the for- bearance a consideration, the plaintiff must believe in his case. In Wade v. Simeon, the plaintiff sued upon a promise by the defendant to pay £2000, with interest and costs, in consideration of the abandonment by the plaintiff of an action brought to recover that surn. It appeared, from the mode in which the case came before the Court, that the plaintiff admitted that he knew he had originally no cause of action m respect of the £2000 ; and Tindal, C. J,, said : — ' It is almost contra hones mores, and certainly contrary to all the principles of natural justice, that a man should institute legal proceedings against another when he is conscious that he has no cause of action. In order to show a binding promise the plaintiff must show a good consideration, something beneficial to the defendant or detrimental to the plaintiff. Detrimental to the plaintiff it cannot be if he has no cause of action, and beneficial to the defendant it cannot be, for in contemplation of law the defence upon such an admitted state of facts must be successful ; and the defendant will recover costs, which must be assumed to be full compen- sation for all the legal damage he sustains. The consider- ation therefore altogether Mis.' It is not necessary that the plaintiff should have a good case, but he must believe that he has a case and must intend hand fide to maintain it by action. If he does so, the fact that he has in truth no cause of action, and that the de- fendant knows that he has none, will not invalidate a compro- mise, whether made before or after the commencement of litigation. Where a man was threatened with legal proceed- ings because the plaintiff believed that he was liable, and he, though he knew that he was not liable, gave promissory notes to avoid being sued, he was held to be bound by his promise. Cliap. II. § 4. CONSIDERATION. 69 The plaintiff had abandoned a claim which he believed to be enforceable and meant to try and enforce : the defendant escaped the inconvenience and anxieties of litigation, and the compromise was deemed to be a sufficient consideration for the notes. Cook v. Wright. ■ b, .t s. 559. Questions have been raised as to the length of time over which a forbearance to sue must extend in order to consti- tute a consideration. It has even been held that a promise of forbearance for an unspecified time was no consideration, as in Semple v. Pink. But it may now be regarded as ■ escii. 7+ settled that a promise of forbearance, in order to form a consideration, need not be a promise of absolute forbearance, nor even of forbearance for a definite time ; where no time is mentioned, a reasonable time will be implied, Oidershaiu 2 h. s: n. ,,, V. Khiff ; and where no express promise is made, an actual ' staying of the hand of the creditor' is consideration for the transfer of documents of title. The most recent authority for this pro]iosition is the case of Leask v. Scott. l R sQ b-u- The defendants were vendoi's of a cargo of nuts. X, the purchaser of the cargo, was indebted in large sums to the plaintiffs, and, on applying for a further advance, he was told that it could only be made if he would promise to give cover, i. e. security. X promised cover, received an advance, and some days after dejxisited with the. plaintiff, among other securities, the bill of lading for the cargo of nuts. X became insolvent, and the defendants sought to stop the nuts in transitu. The right of stoppage in transitu cannot be exer- cised against the transferee of a bill of lading for considera- tion. It was urged for the defendants that the consideration in this case was past, being the advance made some days previous to the assignment of the bill of lading : but the Court of Appeal held that there was a present consideration for the assignment. ' An action would lie for not covering. Therefore the assignor for such a consideration as this always gets the benefit of performing his contract and so saving 70 FORMATION OF CONTEACT. Part 11. liirnself from a cause of action.' The consideration for the assignment of the bill of lading was in effect a forbearance to sue for an indefinite and unspecified time : the assignment being part performance of a contract on which action might be brought at any time, ' it stayed the hand of the creditor \' Bailment. Among cases where an act is the consideration for a promise, it is worth while to notice the kind of contract which arises upon the mere placing or leaving of property in the hands of a bailee or depositary. This will create an implied promise to use reasonable care in the safe custody of the property, and will support an express promise to under- take certain sei-vices in respect of it. Thus, where A allowed two bills of exchange to remain in the hands of X, and X promised to get the bills discounted and to pay the money to ^'s account, this promise was held to be made upon good consideration, namely the permission given to the defendant 4C. B. N.s. to retain the bills. Hart v. 21 lies. To discuss further the forms which consideration may as- sume would be to enter upon an analysis of the possible subjects of contract. An attempt has been made to point out some of the forms which be&t illustrate the nature of Unreal con- consideration in general ; it remains to point out certain semblances of consideration which the Courts have refused to allow to support a promise. They may be said to fall, roughly speaking, under three heads. ^ The case cited, though a good illustration of forbeaa'ance as a con- sideration, is by no means free from difficulty. If *tlie 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 to do. If this be so, there was no consideration for the forbearance, and the whole of the contract, in which the forbear- ance is the consideration for the assignment of the bill of lading, seems to fall to piece.^. It might have seemed a more simple solution of the difficulty to have regardid the performance of the promise to give cover as a part of the consideration for the advance, for although it took place as a matter of fact on a later day, it was substantially part of the same transaction. siderations. Chap. 11. §4- UNREAL CONSroEEATION". 7 1 (a) Cases in wliicli motive has been confounded with con- (a) Motive. sideration, that is to say, cases where a man has promised to do a thing, not for any benefit to himself, but because he wished it to be done or thought that it ought to be done. (6) Cases in whicli the alleged consideration has been a (b) Impos- promise to do a thing obviously impossible in fact or in law; vagueness or a promise the performance of which, from its vague and illusory character, it is impossible to secure. (c) Cases in which the alleged consideration has been the (c) Offering doing or promising to do what a man was already bound to ^e™™ * ^ do, so that the promisor got nothing but what he was already legally already entitled to get before the consideration was offered, demand. (a) Cases have arisen which make it necessary to distiu- (a) Motive. guish motive from consideration. 'Motive is not the same Patteson, j., iti "" Thomas v. thing %Aith consideration, consideration means something Jq°b'''85,. which is of some value in the eye of the law, moving from the plaintiff.' The confusion between motive and considera- tion has taken two forms ; the distinction which once existed between good and valuable consideration ; and the view once maintained that a moral obligation was sufficient to support a promise. The first of these probably originated in the Chancery, Good con- where a covenant to stand seised was held (before the Statute of Uses) to raise a use, if the person in whose favour the a?"™- viii. covenant was made stood within a certain degree of consan- guinity to the covenantor. Such relationshij) was of itself a In the case .. 1111 7 • 1 of covenant consideration for the covenant, and blood or good considera- to stand tion came to be distinguished from money or valuable con- seised. sideration which supported the use arising from Bargain and Sale. At the present day, although a covenant to stand seised would, by virtue of the Statute of Uses, create a legal estate, an estate cognisable by the Common Law Divisions of the High Court, the consideration of blood or good consideration Hayes on con- is still required to support the covenant. '■*'"■ "]% FOKMATION OF CONTEACT. Part II. As applied In some early cases it was attempted to extend this prin- to con ract. gjp|g ^^ ^j^^g j^^^ ^^ contract. The mere existence of natural affection as a motive for a promise was never held to amount Bret V. J. s. to a Consideration : ' natural affection is not sufficient to raise and wife, I cro. 755. ^jj assumpsit without a qudd fro quo.' But it was at one time laid down that where A made a binding promise to X to do something for the benefit of X's son or daughter, the p.'oi'eViev nearness of relationship would entitle the person in whose "°' favour the contract was made to sue upon it. This however is no longer law. Nearness of relationship to one of two contracting parties, and the fact that the con- tract was made for the benefit of the plaintiff, give no cause Tweddie v. of action if the plaintiff was no party to the contract. imi s«^' ^'^' The point is connected rather with the effect of a contract, than with the nature of consideration, but it serves to illus- trate the form which the doctrine of good consideration took in the Common Law Courts, and to explain the saying quoted above, that consideration must move from, the flaintiff. The phrase means no more" thau this, that when a man sues upon a promise he must show that the consideration for which the promise was made was some benefit conferred or detriment sustained by himself; in other words, that strangers to a contract acquire no right to sue upon it simply because the}' are interested in its performance. Moral obli- Moral obligation, under certain aspects, was once regarded as a consideration for a promise. A man may believe himself to be under a moral obligation either because he has received actual benefits in the past, or from motives of piety, delicacy, or friendship. Now a past consideration is in truth no consideration at all, inasmuch as the pro- misor does not receive either a benefit, or the prospect of arising from a benefit, in return for his promise. There are certain cases }j^ ' however in which an advantage derived in the past will support a subsequent promise. These shall be dealt with when we come to draw the distinction between executed Chap. II. 5 4. UNEEAL CONSIDBKATION. 73 and past consideration. It is sufficient to say here that ses p. 92. the validity of such ijromises will be found to rest upon another basis than that of moral obligation, and that the phrase, which was of common use in the Common Law Courts at the end of the last and beginning of the present century, has had an unhappy and obscuring influence upon this branch of the law of contract. The question was settled once for all in the case of Eastwood v. Kenyan, and a final blow given to " a. & e. 43s. the doctrine that past benefits would support a subsequent promise on the ground of the moral obligation which rested on the promisor. 'The doctrine,' said Lord Denman, 'would annihilate the necessity for any consideration at all, inasmuch as the mere fact of giving a promise creates a moral obliga- tion to perform it.' If the actual receipt of a benefit in the past does not con- arising from stitute consideration for a subsequent promise, still less will or con- such duties of honour, conscience, or friendship as a man 5"™"™^ may conceive to be incumbent on him. A man may be said to be morally bound to support his children in a manner suited to his own condition and expenditure, but the law Mortin.orc v. . . WriiiJit, 6 M. creates no such obligation, and it is conceived that a promise | Vj^wnes. by a father to his son to pay the son's debts would not be =4. binding. A man is bound in honour to pay money lost in a wager, but inasmuch as the law has declared wagers to bea&gvict. c. 109. s. 18- void, a promise to pay such a debt would be unenforceable for want of consideration : and in like manner a pious wish on the part of executors to carry out what they knew to be the intentions of the testator, affords no consideration for a Pattcson, j.,in ' _ ThomiibV. promise made by them for such an object. Jq°'b'."85i. It is worth noting that the Indian Contract Act, in dealing with this subject, differs from the rule of English law in two particulars. It upholds promises made in consideration of Indian con- ^ ^ ^ triict Act, s 25. natural love and affection where the parties are nearly related and the promise written and registered. It also upholds in- formal promises to make compensation to persons who have 74 FORMATION OF CONTRACT. Part II. already conferred some benefit upon the promisor, or volunta- rily done something which the promisor was legally com- pellable to do. It thus recognises the motives of natural affection (subject to certain forms,) and gratitude as forming consideration for a promise. In French law, cause, the equivalent for consideration, has a yet wider meaning; it includes not merely motives baiioz. Eeper- of gratitude, but sentiments of honour and Bci-uples of con- toire, VOL 33. ^ ^ '' '^'- science. It may however be regarded as certain that, in English law, motive, whether it take the form of natural affection, gratitude for past services, feelings of honour or of piety, is in no case such consideration as will support a simple contract. Impossi- (5) Courts of law will also hold a consideration to be un- vagueness. '"ef^l if it be impossible upon the face of it or so vague in its terms as to be practically impossible to enforce. I'er Brett.J., Cliflbrd V. Watts, L. K. SC.P. 583. In dealing with impossibility regarded from this point of view, we must guard agaiust being understood to mean any- thing more than a priinA facie legal impossibility, or a thing physically impjossible ' according to the state cf knowledge of the day.' Pi'acticid impossibility unknown to the parties when they entered into their contract may avoid it on the ground of Mistake. Impossibility of performance arising subsequent to the making of the contract may under certain circumstances operate as a Discharge. But we are here con- cerned with promises to do a thing so obviously impossible that the promise can form no real consideration. For a legal impossibility we may take the case of Harvey V. Gibbons. There the plaintiff was bailiff to J. S. and the defendant was debtor to J. S. to the amount of £20. The defendant in consideration that the plaintiff would discharge him the .£20 due to J. S. promised to lay out £40 on a barge of the plaintiff. The Court held that the consideration Chap. II. § 4. UNREAL CONSIDERATION. 75 was 'illegal,' for the seiTant cannot discbarge a debt due to bis master. By illegal we must understand legally impos- sible, for illegality, in the strict sense of the term, there was none. Of conti-acts void because the consideration for the promise involves a physical impossibility we can furnish no decided case. Gains gives us as good an illustration as any : ' Si quis caius, 3. 97. rem quae in rerum natura non est aut esse non potest velut hippocentaurum stipuletur, inutilis est stipulatio.' The Indian Contract Act supplies another. A agrees with X to discover treasure by magic. The ind.cont.Act. agreement is void. Again, a consideration may be unreal on the ground of Vaguenuss. imijossibility where it is a promise so vague as to be virtually unenforceable. The case of WAife '». i?ZtteH exemplifies this 23 1- J- e.xcii. rule. This was an action brought by executors ujjon a promissory note made payable to the testator by his son, the defendant in the action. The son pleaded a promise made by his father to discharge him from all liability in respect of the note in consideration of his ceaeing to make certain complaints, which he had been in the habit of making, to the effect that he had not enjoyed as many advantages as the other children. It was said by the Court that the promise given by the son was no more than a promise ' not to bore For Parke, b. his father,' and was too vague to support the father's promise to discharge the son from liability on the note. ' A man might complain that another person used the highway more than he ought to do, and that other might say " do not com- plain and I will give you £5." It is ridiculous to suppose that such promises could be binding.' Per Pollock, C. E. (c) Another form of unreality of consideration has arisen Promise 1 where the alleged consideration is the promising to do, or ^j^jj jg actually doing what a man is already bound by law to do for bound to the promisor. The promisor thus gets nothing more than he 76 FORMATION OF CONTRACT. Part 11. Stilk V. Mey- rick, 2 Camp. Hartley v. Ponsoiiby, 7 H. & B. 872. Turner v. Owen, 3 F. & F. 177. Promise not to do what a man legally can- not do. Doing that which a man is is already entitled to. Tlius where 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 among them, this promise was held not to be binding. ' The agreement,' said Lord EUenborough, '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 voyage. . . . The desertion of a part of the crew is to be considered aa 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 then there was a promise on the part of the sailors to do what their contract already bound them to do. It would have been otherwise if risks had arisen which were not contemplated in the contract. For instance, such a contract as that which the seamen had entered into in the case just cited contains an implied condition that the ship shall be seaworthy. So that where a seaman had signed articles of agreement to help navigate a vessel home from the Falkland Isles, and it turned out that the vessel was not seaworthy, a promise of extra reward to induce him to abide by his contract has been held to be binding. We have .spoken hitherto of cases in which a man has promised to do that which he is already under contract or otherwise legally bound to do : it must be borne in mind that a promise not to do what a man legally cannot do is an equally bad consideration for a promise. The case of ]r<(Je V. Simeon, cited in discussing forbearance as a consideration, is a sufficient illustration of this point. It is somewhat more difficult to deal with the same rule when it has to be applied to the doing of that which you are Chap, II. § 4. UNREAL CONSIDERATION. 77 legally bomid to do. The simplest illustration of the rule is bound to that which has been most severely commented upon, and is the one \yhioh we will use for the purpose of discussion. The. fayraent of a smaller sum in satisfaction 0/ a larger is not a good discharge of a debt. It is iu 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 something different to that which the That ^\hich recipient is entitled to in the thing done or given in order ^^^^^ ^^ to support his promise. The difference must be real, but differ^"' '• the fact that it is slight will not destroy its efficacy in making the consideiation good, for if the Courts were to say that the tiling 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 considera- tion. Thus, the giving a negotiable instrument for a money debt, or 'the gift of a horse, a hawk or a robe, iu satisfaction, is good. For it shall be intended that a horse, a hawls; or a robe might be more beneficial to the plaintiff than money, in pinnevs rase, respect of some circumstance, or otherwise the plaintiff would not have accepted it in satisfaction.' The application of this rule, as described, has been said to involve ' an absurd paradox,' but it seems in truth to be a poiiock, p. 164- necessary result of the doctrine of consideration. A contract if not, may be discharged by the consent of the parties in one of two considera- ways. ''°" f°' '''= •' promise to If it is wholly executory, if the liabilities of both parties forego? remain unfulfilled, it can be discharged by mutual consent, the acquittance of each from the other's claims being the consideration for the promise of each to waive his own. A contract in whicli A, cue 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 discharged by mere roster v. consent, but it maybe discharged by the substitution of a^Ex.s.^. n€vv agreement. A has supplied X with goods according to a ='■■ '■ 78 FORMATION OF CONTEACT. Part II. Apparent exceptions. Composi- tion witli creditors. 5 East, 230. 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 agree- ment, to the effect that X on paying half the price shall be exonerated from paying the remainder, the same question must be repeated ; where is the consideration for A's promise to waive the payment of half the sum due to him t The new agreement must have a 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 wliioh 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. There are some apparent exceptions to this rule which it may be well to discuss, if for no other reason, on the ground that they illustrate the rule itself. A composition with creditors appears at first sight to be an infraction of the rule, inasmuch as each creilitor under- takes to accept a less sum than is due to him in satisfaction of the greater. But the promise to paj-, or the payment of a portion of the debt, is not the consideration upon which the creditor renounces the residue. That this is so i^' apparent from the case of FitcJi, v. Sutton. There the defendant, 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 residue 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 'js. in the pound in full of all demands : but this was held to be no answer to the plaintiff''s claim. Chap. II. § 4. UNREAL CONSIDEEATION. 79 'It is impossible,' said Lord Ellenborougli, 'to contend that acceptance of £17 los. is an extinguishment of a debt of £50. There must be some consideration for a relinquisli- ment of the i-esidue; something collateral, to show a possi- bility of benefit to the party relinquishing his further claim, otherwise tlie agreement is nudum pactutn.' The consideration in a composition with creditors must Considera- therefore be something other than the mere acceptance of a composi- smaller sum in satisfaction of a lare-er : it is the substitution "°" '1,™. ^ agreement of a new agreement with new parties and a new consideration, between The Common Law on this point (apart from the Bankruptcy parties. Acts of 1861 and 1869) was settled in the case of Good v. = b. & aci. 3=8. Cheesman. There the defendant, a debtor who had com- pounded with his creditoi'S, set up as against an individual creditor suing for the whole of his debt, not a separate pro- mise by 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 Good •■•■ ^ Clieesman, 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 in effect the substitution of a new agreement with different parties for a previous debt, and not the payment of a portion of the debt, se.= Boyd v^ which forms the consideration in the case of a composition g,,g„ j^„^,^ With creditors. 193- 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 jjromise 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 los. in the pound from his 8o FORMATION OF CONTRACT. Part II. Promise to perform existing contract. 1 Scotson Pegg. 6 H. & Pollock. 163. debtor A, but gets a promise from creditors Y and Z that they too will be content with a payment of los. in t!ie pound. A more difficult class of cases to reconcile with the general rule are those in which it has been held that a contract is binding which is made in consideration of a performance or promise of performance by one of the parties, of a contract already subsisting between himself and a third party. • The circumstances under which such a case may ari^e may be stated thus : — ' A man may be bound by his contract to do a particular thing ; but while it is doubtful whether or no he will do it, if a third person steps in and says " I will pay rvr wikie. B., you if vou will do it," the performance is a valid considera- 11 Scotson V. " .* ' ^ tion for the payment.' The matter is not very easy to understand upon principle ; it has been said that the promise is based on the creation ' of a new and distinct right ' for the promisor, in the per- formance of the contract between his promisee and the third party. But this is in fact to assume that a right is created, which would not be the case if the consideration for the promise were bad. In ShadweU v. Sljad-weU the question arose thus : — The plaintiff had been under promise of marriage to X: his uncle promised in writing that if he would peiform his en- gagement he should receive during his (the uncle's) lifetime .£150 a year. The plaintiff married X; the annuity fell into arrear ; the uncle died, and the plaintiff sued his execu- tors. The Court differed as to the existence of the con- sideration for the uncle's promise. Erie, C. J., and Keat- ing, J., thought that the marriage would support the promise, which was in fact an offer capable of becoming a binding contract when the marriage took place. Byles, J., held that the plaintiff had olily done what he was legally bound to do, in performing his promise to marry ; that this was no con- sideration for the uncle's promise; and he dissented from the majority of the Court 9 C. a. N.S. Chap. II. §4- UNREAL CONSIDERATION. 8 1 Whether the promise is conditional on the performance of the contract, or whether it is given in return for a promise to perform, does not seem to make any difference in prin- ciple. If we say that the consideration for it is the detri- ment to the promisee in exposing himself to two suits instead of one for the breach of his contract, we beg the question, for we assume that an action would lie on such a promise. If we say that the consideration is the promisor's desire to see the contract carried out, we run the risk of confounding motive and consideration. The judgment of Wilde, B., in Scotson V. Pegg, seems to leave no doubt that in the opinion e h. & n. 39s- of the learned Baron a promise is binding which is made on such a consideration ; the difficulty is to reconcile these decisions with the general principle laid down above and constantly affirmed by the Courts. The case may however be put in this way : that an executory Possible ex- contract may always be discharged by agreement between the of shadweil parties ; that A and M, parties to such an agreement, may "'■ Shadweil, thus put an end to it at any time by mutual consent ; that if X says to A, ' do not exercise this power ; insist on the performance by M of his agreement with you, and I will give you so and so,' the carrying out by A of his agreement, or his promise to do so, would be a consideration for a promise by X. A in fact agrees to abandon a right which he might have exercised in concurrence with M, and this, as we have seen, has always been held to be consideration for a promise, see ante, p. 67. 3. Consideration must he legal. It is well to state this rule, as indicating a necessary ele- Legality of ment in consideration, but inasmuch as the consideration for \°^^] ^'^^' a promise is the object for which, one of the parties makes the contract, the legality of consideration must form a part of a subsequent discussion, and will be treated when we come to consider, as an element in the Formation of Contract, the G 83 FOKMATION OF CONTRACT. Part 11. legality of the objects for whicli the parties to a contract enter into it. Considera- tion executory, executed, and past. Executory considera- tion : see ante, p, 65. Executed considera- tion. Leake on Contracts, p. 23- See, on Proposal and Acceptance, ante, p. 13. Offer of an act for a promise. 4. Consideration may he executory or executed, it must not he past. We now come to deal with the relation of the consideration to the promise in respect of time. The consideration for a promise may be executory, 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 forbearance consti- tuting 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 con- sideration at all. As to executory considerations, nothing remains to be added to what has been said with regard to the nature of considera- tions in general. It has been 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 amounts to a proposal or the act which amounts to an acceptance done . all that he is bound to do under the contract, leaving an outstanding liability on one side only. The two forms of consideration thus -suggested are described by Mr. Leake as ' acceptance of an executed consideration,' and ' consideration executed upon request.' They arise when, as described above, the proposal is an offer of an act for a promise, or an 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 coutract arises when the labour or goods are ac- cepted 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 any Chap. II. § 4. COKSIDERATION EXECUTED. 83 agreement of price, the law concludes that I contracted to p^r Tindar, pay their real value.' So in Hart v. Mills the defendant had S^LaSi,"' 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 original contract for the purchase of four dozen. It was held that the retention of thir- teen bottles was not an acquiescence in the misperformanoe 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 each wine and you send four : then he had a right to send JJ"^} & w" s 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 person to whom such an offer is made has no opportunity of ac- cepting or rejecting the things offered, an acceptance which he cannot help will not bind him. For instance, A agreed with X to command his ship during a voyage ; in the course of the voyage he threw up his command but helped to work the vessel home. Afterwards he sued X, among other things, for service thus rendered in bringing back the ship. But the Court would not admit a claim for such services : evidence of ' a recognition or acceptance of services may be sufficient Tayior v. . . . . LsM. 25 L. J. to show an implied contract to pay for them if at the time ^'"='^''- 33- ■ the defendant had power to accept or refuse the services. But in this case it was not so. The defendant did not know of the services until the return of the vessel, and it was then something past which would not imply — perhaps would not support — a promise to pay for it.' And the difficulty wliich 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 1 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?' G 2 84 FOEMATION OF CONTRACT. Part II. Enjjland v. Davidson, II A. it E. Offer of a The ' consideration executed upon request,' or the contract an act. which arises on the acceptance by act of the offer of a pro- mise, is best illustrated by the case of an advertisement of a reward for services which makes a binding promise to give the reward when the service is rendered. Under these cir- cumstances it is not the proposer, but the acceptor, who has done his part as soon as he becomes a party to the contract. Thus if A makes a general offer of reward for information and X supplies the information, jI's offer is turned into a binding promise by the act of X, and X at once concludes the contract and does all that he is bound to do under it. 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. In such a case the request for such services implies a pro- mise, which becomes binding when the liabilities or expenses are incurred, to make good his loss to the promisee. Thus where the defendant employed an auctioneer to sell her estate, and the auctioneer was compelled in the course of the proceedings to pay certain duties to the Crown, it was held that the fact of employment implied a promise by the de- fendant to repay the amount of the duties, and entitled the auctioneer to recover them. ' 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 lia- bility to pay, and does 'pay, makes no difference.' It is probably on this principle, the implication of a pro- mise in a request, and not on the theory that a subsequent and distinct promise to make a return for things done on a mere request relates back to the request, that the case of iSm. L. C.141. Lampleigh v. Braithwait is capable of explanation. But this falls to be dealt with shortly. Present dis- tinguished Having explained the nature of an executed consideration. from past ..... considera- it remains to distinguish present from past consideration. tion. Brittain v. Lloyd, 14 M. & W. 762. Chap. II. § 4. CONSIDEKATION EXECUTED. 85 A past consideration is, in effect, no consideration at all ; that is to say, it confers no benefit on the promisor, and in- volves no detriment to the promisee in respect of his promise. A past consideration is some act or forbearance 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 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, and afterwards, in considera- tion of the previous sale, promised that the horse was sound and free from vice. It was in fact a vicious horse. It was held that the sale' created no implied warranty or promise that the horse was not vicious ; that the promise must there- fore 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 exe- cuted will support no other promise than such as would be • Til 1 J Roscorla v. implied by law. Thomas, 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 subse- Consider- quent promise, if the consideration was given at the request by°prev'icius of the promisor. request. 86 FOBMATION OF CONTRACT. Part II. Hjbart, 105- See cases col- lected in the note to Hunt V. Bate. Dyer, 272 a. I Sin. L. c. 67. In Lanvpleigh v. Braitliwait, which is regarded as the leading case upon this subject, the plaintiff sued the de- 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 assumpsit. 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 otLampleigh v. Braithivait 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, with the exception of the case of Bradford V. Rouhton, decided in the Irish Court of Exchequer in 1858. The rule is frequently mentioned as existing, but in the few modern cases which have incidentally dealt with it, it appears to be regarded as open to question or to be susceptible of a different interpretation to that which is placed upon it in text-books. 7 M. & Or, 807. 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 where, from the acceptance of consideration executed, the law im- plies a promise by the acceptor to make a return, the con- sideration is exhausted upon that promise. There is nothing further to support a subsequent and independent promise. He then goes on to say, ' The case viay perhaps be dif- ferent 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 benefit Chap. ri. § 4. CONSIDEEATION EXECUTED. 87 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 con- sideration 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 on that point.' The interpretation of the rule which Tindal, C. J., regarded as open to question is further narrowed by Maule, J., in Elderton v. Emmens. ' An executed consideration will sus- < c. b. 493. tain only such a promise as the law will imply.' And again in Kennedy v. Broun, Eide, C. J., puts the case of Lampleigh 13 c. b. n.s. V. Braithwait from a modern point of view. 'It 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 implication 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. i Bing;. n. c. 490. Oliveira, where the plaintiff at the defendant's request gave him a letter for the purposes of a lawsuit. 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 something in return for giving up the letter, and the defendant's request for it amounted in effect to 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 amounts to this ; where a request is made which is in substance an offer of a promise upon terms to be after- 8 Ir. C. L. ^ I-angdell Contr. 450. 88 POEMATION OF CONTKACT. Part II. wards ascertained, and services are rendered in pursuance of that request, a subsequent promise to pay a fixed sum is either to be regarded as a part of the same transaction, or as evidence to assist the jury in determining what would be a reasonable sum. In opposition to this view stands the case of Bradford v. Roulston, the only case in modern times in which the rule in Lampleigh v. Braithwait has come before the Courts for express decision. In that case Bradford, who had a ship to sell, was introduced by Koulston to two persons who were willing to purchase it. At the time of executing the bill of sale of the ship the purchasers were £55 short of the money agreed to be paid. Bradford nevertheless executed the bill of sale at the request of Eoulston, and in consideration of this, Koulston upon a subsequent day guaranteed the pay- ment 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, to the effect 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 Lam- pleigh v. Braithwait was adhered to in its literal sense. It is submitted, however, that this decision must be received with some hesitation. The dictum of Erie, C. J., in Kennedy V. Brown, was not adverted to ; the case of WilMnson i\ OUveira was regarded as a direct authority for the rule in its most extended 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. The practical difficulties to which such an interpretation of the rule would give rise are obvious. Is any limit to be Chap. II. § 4. CONSIDERATION EXECUTED. 89 assigned to the time wlaich may elapse between the act done upon request and the promise made in consideration of it ? This difficulty pressed upon the Court in one of the oldest cases upon this subject, Halifax v. Barker, where a promise l^''':\^\^''"^ was held not to be binding which was given upon con- ^"'' ^'"' '""■ sideration of a payment made upon request a year before. This suggests that the true solution is to be found in the supposition that the subsequent promise is only binding when the request, the consideration, and the promise form sub- stantially 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 in view of his desperate condition to allow him to make the experiment. The patient takes it and is cured ; the fame of the cure makes the fortune of the physician, and a year or two afterwards, finding himself in good circumstances, he promises to his former patient a sum of money in consideration of the acceptance of his remedy at his request. It is hardly possible to suppose that an action would lie upon such a promise. Yet it is a logical deduction from the decision of the Court in Bradford v. Roulston, and from the statement therein contained ' 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.' And so we are driven to the conclusion that, unless the request is virtually an offer of a promise the precise extent of which is hereafter to be ascertained, or is so clearly made in contemplation of a promise to be given by the maker of the request that a subsequent promise may be regarded as a part of the same transaction, the rule in Lampleigh v. Braithwait 90 FOBMATION OF CONTEACT. Part 11. has no application. And it may not 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 de- cision 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 contem- plation of a present or future benefit to the promisor. Real excep- (h) A more substantial exception to the general rule is to general ^^ found in the cases in which a person has been held capable rule. of reviving an agreement by which he has benefited, but which by rules of law since repealed, incapacity to contract no longer existing, or mere lapse of time, 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 provision of the statute or common law, meant for his advantage, he may renounce the benefit of that law; and if he promises to pay the debt, which is only what Per Parke, E„ an honest man ought to do, he is then bound by the law to Earle v, Oliver, *' = Eich. 71. perform it.' The following illustrations of the principle are to be found in the Reports. Illustrative A promise by a person of full age to satisfy debts con- tracted during infancy was binding upon him before 37 and iiM. &w. 263. 38 Vict. c. 62, Williams v. Moor. 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 1 2 and 1 3 "Vict. cowp. S44. c. 102. § 204. Truman 1}. Fenton. A debt barred by the Statute of Limitations is considera- tion for a subsequent promise to pay it. s Taunt. 36. 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 promised that her Chap. II. §4. CONSIDERATION EXECUTED. 9 1 executors should pay the principal and interest secured by the bond, and it was held that this promise was binding. In Flight v. Reed bills of exchange were given by the i h. & c. 703. defendant to the plaintiff to secure the repayment of money lent at usurious interest while the usury laws were in force. The bills were therefore void as between the plaintiff and defendant. After the repeal of the usury laws by 17 and 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. There are certain features common to all these cases. Common Each in its origin presents the essential elements of agree- ^^^ ^^^ ment, and in each of them one of the parties has got all cases. that he bargained for. The other party cannot obtain what he was promised, either because he made an agreement with one who was incapable of contracting, 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 agreement 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 rule thus regarded seems a plain and reasonable ex- They do rot ception to the general doctrine that a past consideration will J^ora/obh- not support a promise. Unfortunately, while the rule was gation. in the course of establishment it rested for a time upon the support of the moral obligation which was supposed to bind the person benefited and to give efficacy to his promise. It would have seemed enough to have said that when two per- sons 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, be renews his original promise. But when once the law of 93 FORMATION OF CONTKACT. Part 11. 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 circum- stances 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, Per Mansfield, Mansficld, 0. J., says, ' It has long been established, that where 5 tS.'*!' S' person is morally and conscientiously bound to pay a debt, though not legally bound, a subsequent promise to pay will give a right of action. The only question therefore is whether u23on this declaration there appears a good moral obligation.' This case affords perhaps the strongest example of the mode in which the phrase was employed. Its effect, after it had uttiefieidv. Undergone some criticism from Lord Tenterden, was finally Shee. = B. & . . ° ... Ad. 8ii. limited by the decision in Eastwood v. Kenyon. The doctrine II A. & E. 446. "^ . . . * of the suflBciency of moral obligation to support a promise was there definitely called in question. The plaintiff, as guaidian and agent of the defendant's wife, had, while she was a minor, laid out money upon the im]provement 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 transaction, and after her marriage her husband promised to pay the note. Upon this promise he 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 Den- man in delivering judgment, 'the doctrine 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.' ' Voluntarily (c) There is but one other so-called exception to the general anmLTwas ^1^. We find it laid down that ' where the plaintiff' volun- legaiiy tarily does that whereunto the defendant was legally compel- Chap. II. § 4. CONSIDEBA.TION EXECUTED. 93 lable, and the defendant afterwards, in consideration thereof, bound to expressly promises,' he will be bound by such a promise. ^^^^^ ^ ^ It is submitted that the authority for this rule fails alto- "^' gether so far as it rests on the cases which are habitually cited in support of it. Curiously enough, all 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 suiier, Nisi ... . ' Prius, 147. the moral obligation resting upon overseers of a parish to provide for the poor would support a promise made by them But see sei- . , , - wyn's Nisi to pay for services previously rendered to a pauper by a f""^. p- 51. medical man. In Atkins v. Banwell (1802) it was held that the moral = East. 504. 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 ib. &a .oj of his parish of settlement ; but that parish acknowledged its liability for his maintenance by making him a weekly allow- ance. The pauper fell ill and died : during his illness he was attended by the plaintiff, an apothecary, who, after the pauper's death, was promised payment of his bill by the defendant, overseer of the parish of settlement. The Court » held the defendant liable. It is not easy to collect from the judgments of Lord Ellenborough, C. J., and Bayley, J., what were the grounds of their decision. 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 resi- dence to do that which the parish of settlement might legally have been compelled to do, and that a quasi-contractual see ante, p. 6. 94 FORMATION OF CONTRACT. Part II. 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 autho- rity 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 remain- ing for examination. sc. &M. 8i8. In Paynter V. Williams (1833) the facts were similar to those in Wing v. Mill, with this very important exception, that there was no subsequent promise to pay the apothe- cary's bill. The defendant parish, the parish of settlement, was nevertheless held liable to pay for medical attendance supplied by the parish of residence. The payment of an allowance by the parish of settlement 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 pro- mise that they will allow what was requisite.' It would seem then, that in the cases which are said to furnish this supposed rule the promise was either based upon II A, & E. 446. a moral obligation, which, since the decision in Eastwood V. Kenyan, would no longer be sufficient to support it, or was merely an acknowledgment of an existing liability arising from a contract which might be implied by the acts of the parties, — a liability which, on the authority of Paynter V. Williams, existed apart from the fact of a subsequent promise. And this is stated to be the true ground upon which the decision in Watson v. Turner may be supported, in the note to p. 51 n. II. Selwyn's Nisi Prius above referred to. ' 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 assist- ance 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 wai Chap. II. § 4. CONSIDERATION EXECUTED. 95 evidence from which it might be inferred that the consideration was performed by the plaintiff with the consent of the de- fendants, and consequently sufficient to support a general indebitatus assumpsit for work and labour performed by the plaintiflfybi- the defendants, at their request^ It may not be safe to say that the rule as habitually laid down is non-existent, but the cases cited in support of it seem to fail, on examination, to bear it out. It seems strange that it should have been so often reiterated upon such scanty and unsatisfactory authority. It has however been adopted in the Indian Contract Act, s. ss- subs. =. which also, in its definition of consideration, includes the s. z. subs. (di. 'consideration executed upon request' oi Lampleigh v. Braith- wait. It is perhaps unfortunate that the framers of that Act should have so readily abandoned so satisfactory a test of the validity of simple contracts as the English doctrine of Consideration has proved itself to be. g6 FORMATION OF CONTBACT. Part II. CHAPTER III. Capacity of Parties. Further Wb have hitherto dealt with the Contract itself and those inqmnf! ° dements in its structure which are essential to give it even a prima facie validity. Definite Proposal and Acceptance, and Form, or Consideration are necessary to an agreement, the effect of which is to be entertained by courts of law ; but when we have constructed an apparently binding contract, it is necessary, before we can pronounce finally upon its validity, that we should look to the parties to it, and ask who made it, under what circumstances, and with what object. In other words, we have to enquire whether the parties were capable of contracting, whether their apparent consent was genuine, and whether their objects were such as the law will admit. Capacity of And, first, as to the capacity of parties. Howkmay There are certain persons whom the law regards as in- be affected, capable, wholly or in part, of binding themselves by a pro- mise, or of enforcing a promise made to them. And this incapacity may arise from the following causes : — (i) Political or professional status. (2) Youth which, until the age of 21 years, is supposed to imply an immaturity of judgment which the law will protect. (3) The merger or absorption, at any rate for contractual purposes, of the status of one person in that of another, which arises in the case of a married woman upon and during her marriage. Chap. III. § I. POLITICAL OR PROFESSIONAL STATUS. 97 (4) Artificiality of construction, such as that of corpora- tions, which being given a personality by law, take it upon such terms as the law imposes. (5) The permanent or temporary mental aberration of lunacy or drunkenness. § I. Political or Frofessional Status. An alien has all power of contracting which a natural-born An alien. British subject has, except that he cannot acquire property in a British ship. An alien enemy, or British subject adhering to the king's An alien enemies ', cannot, without license from the Crown, make any ^'^^'"y- fresh contract or enforce any existing contract during the cMeaiy v. continuance of hostilities ; but his rights as to outstanding ' ^amp. 483- contracts made before the commencement of war are sus- pended, not annulled, and can be enforced upon the con- clusion of peace. Foreign States and sovereigns and their representatives, Foreign and the officials and household of their representatives, are an™their^ not subject to the jurisdiction of the Courts of this country representa- unless they submit themselves to it. A contract entered xayior v. Best, 14 C. B. p. 487. into with such persons cannot therefore be enforced against them unless they so choose, although they are capable of enforcing it. A person convicted of treason or felony cannot, during the Felon un- contiuuance of his conviction, make a valid contract ; nor sentence. can he enforce contracts made previous to conviction ; but 33 & 34 vict. ^ c. 23.SS. 8, 9, 10. these may be enforced by an administrator appointed for the purpose by the Crown. ' It does not seem to be clearly settled that anything slort of resi- dence in a hostile country for trading purposes constitutes adherence to the king's enemies. The case of Roberts v. Hardy, 3 M. & S. 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. 98 FORMATION OP CONTRACT. Part II. Barrister. A barrister cannot sue for fees due to him for services rendered in the ordinary course of his professional duties, Kmneiiyv. whether the action be framed as arising upon an implied N. s. 677. 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. Physician. A physician, until the year 1858, was so far in the position of a barrister that the rendering of service on request raised no implied promise to pay for them, though the patient might bind himself by express contract : but now, by 2 1 & 22 Vict. o. 90, every physician may sue on such an implied contract, subject to the right of the College of Physicians to regulate this right by law. 21 & 22 Vict, c. ga s. 31. § 2. Infants. The rules of law relating to the rights and liabilities of infants upon contracts entered into by them during infancy have been considerably modified by recent legislation. It will therefore be well to state the rules of Common Law upon the subject, and then to consider the modifications in historical order. General The general rule of Common Law is, that an infant's con- mon Law " tract is voidable a't his option, either before or after he has Infant's attained his maiority. And this rule is thus affected : — contract / % m voidable. (i) The Contract ceases to be voidable if it be ratified upon the attainment of 2 1 years of age. (2) The contract cannot be avoided if it be for neces- saries. We will deal with these two exceptions in order. (l) Ratification. (i) Ratifica- Mr. Pollock, in an exhaustive and convincing argument. Pollock on li^s shown clcarly that the better opinion has ever been that vt>. ,!4, 41.' the contract of an infant is not void but voidable at his option. Being so voidable, the infant may (apart from Chap. III. § 2. INFANTS. 99 statutory restrictions) ratify his contract when he attains- his majority, and assume the rights and liabilities arising from it. 'The general doctrine is,' said the Court in IFiWiams "M.&w. 256, V. Moor, ' that a party may, after he attains the age of 2 1 years, ratify and so make himself liable on contracts entered into during infancy.' It may 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. But it would seem that ratification is of two kinds. And Ratification it may perhaps be said that, before the Infant's Belief Act, j-jn^s the ratification required to make the infant liable upon con- 37 & 38 vkt. tracts entered into by him during infancy differed, in corre- spondence with a certain difference in kind in the contracts to which he became a party. Some of these are valid unless Contracts rescinded, others invalid until ratified. It would seem that rgscin^"^ where an infant acquires an interest in jDerraanent property to which obligations attach, or enters into a contract which involves continuous rights and duties, benefits and liabili- ties, and has taken benefits under the contract, he would be bound unless he expressly disclaimed the contract. On the other hand, a promise to perform some isolated act, or a contract wholly executory, would not be binding upon the infant unless he expressly ratified it upon coming of age. Illustrations of contracts which required a special dis- claimer to avoid them — which were valid unless rescinded — may be found in the following cases. Interests m An infant lessee who occupies until majority is liable for Rone, ibr. 731. arrears of rent which accrued during his minority. Share- holders 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 in corporate situation from mere contractors, for then they would have P''°P'''''y' been exempt : but in truth, they are purchasers who have acquired an interest, not in a mere chattel, hut in a subject H 2 lOO FOEMATION OF CONTRACT. Part II. of a 'permanent nature, either by contract 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 thereby been placed in a situ- ation analogous to an infant purchaser of real estate who has taken possession, and thereby becomes liable to all the obli- gations attached to the estate ; for instance, to pay rent in the case of a lease rendering rent, and to pay a fine due on 3 Burr. 1717. -[lie admlssiou in the case of a copyhold to which an infant has been admitted, unless they have elected to waive or disagree to the purchase altogether, either during infancy or at full McMichaS"' "■ ^S^' ^^ either of which times it is competent for an infant 5 Ex.''.r ■ to do so.' in partner- Similarly an infant may become a partner, and at Com- mon 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 Lindiey, i. Si. and uot debited with losses. But what is important for our present purpose to note is, that unless there be an ex- press rescission and disclaimer of the partnership which was entered into after infancy, 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 ris°o°n''YB'&" ^'^ debts which accrued, after he came of age, to persons AM. 159. ^^^Q supplied X with goods. ' Here,' said Best, J., ' the infant, by holding himself out as a partner, contracted a continual obligation, and that obligation remains till he thinks proper to put an end to it. ... If he wished to be understood as no longer continuing a partner, he ought to have notified it to the world.' Although the liabilities incurred by the infant are some- Chap. III. § 2. INFANTS. lOI what different in these different cases, yet there is this feature common to all of them, that nothing short of express dis- claimer will entitle a man, on attaining his majority, to be free of obligations such as we have described. It is otherwise Contracts in contracts which are not thus continuous in their operation, ratified. The infant is not bound unless he expressly ratify them. Such being the rules of Common Law upon the subject, let us consider how they have been affected by legislation. Lord Tenterden's Act requires that ratification, upon the Lord Ten- attainment of majority, of contracts entered into during in- ]^^ Ratmca- fancy should be in the form prescribed by the Act, enacting, t'o"- ' That no action shall be maintained whereby to charge 9 Geo. iv. c. any person upon any promise made after full age to pay any debt contracted during infancy, or upon any ratification after full age of any promise or simple contract made during infancy, unless such promise or ratification shall be made by some writing signed by the party to be charged therewith.' The Infant's Relief Act of 1874 went much further in the infant's attempt to protect infants from the consequences of their ^*^'"^f ^'^'■ attempts to bind themselves by contract. It 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. 'I. All contracts whether by specialty or by simple con- 37*38 vkt. tract henceforth entered into by infants for the repayment of money lent or to be lent, or for goods supplied or to be sup- plied (other than contracts for necessaries), and all accounts stated with iniants, shall be absolutely void : provided al- ways 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 103 FOKMATION OF CONTKACT. Part II. Effect of Infant's Relief Act. Of sect. I, infancy, whether there shall or shall not be any new con- sideration for such promise or ratification after full age.' The effect of this enactment is — (a) To make certain sorts of contract absolutely void if entered into with infants. '((3) To prevent any contract with an infant from becoming actionable as against him, by subsequent ratification. And the second section must be taken to override the effect of 9 Geo. IV. c. 14. s. 5. It has been pointed out before now that the first section of this somewhat off-hand piece of legislation is not very clear. If a contract for goods supplied or to be supplied is void, the consequence would be that no property in the goods would pass, at any rate under the contract. If an infant pays for goods which have not been delivered, he can probably^ recover his money back, and so he could have done previous to the Act by avoiding the contract. But if the infant receives the goods and pays the price, can the tradesman recover the goods, and the infant his money, on the ground that the contract was void 1 We must take it that delivery of the goods with intention to pass the property would pass it ; and that money paid for the goods (although, the contract being void, the pay- ment is necessarily made without consideration) could not be recovered back because paid with full knowledge of facts. Hence it may be said that the transaction would stand, though it must be regarded as a gratuitous delivery of goods on the one side, and a voluntary payment of money on the other. ' It is difficult to suppose that no remedy would be available to the infant under such circumstances, but it is hard to see how any remedy is available ex contractu. If a contract had ever been in existence the infant could avoid it while still executory, and recover back money which he had paid under it ; or he might recover the money as paid on a consideration which had wholly failed. But, since the Act, the contract is void; it never had an existence; and it would seem as though money paid under it was paid voluntarily, and could only be recovered if paid upon fraudulent representation, or possibly by an application of the equitable machinery of trusts. Chap. III. § 2. INFANTS. I03 The second section requires also to be considered with Of sect. a. reference to the class of contracts which have been described as ' valid unless rescinded.' It can hardly be supposed that such an implied ratification as continuance in a partnership, or retention of shares, would be affected by the provisions of the section ; but the question must be regarded as open until it receives a judicial interpretation. That the section is strong against ratification, such as makes the infant liable, appears from the decision in Kibble's case. l. r. ro. mi . . . Ch. 373. There an infant drew a bill of exchange in favour of one of his creditors, and was sued upon it after he had attained his majority. He allowed judgment to go by default, and thus created a debt in the form which we have described as a Contract of Record, as solemn a form of ratification as well could be. The bill had been drawn before the Infant's Relief Act came into operation, the judgment was obtained after. The case came before the Court of Appeal in Bank- ruptcy, the question being whether the judgment debt so created was one upon which a man could be made a bank- rupt. The Court held, ist, that sitting in Bankruptcy it could look behind the judgment and enquire into the con- sideration for the debt; and, 2ndly, that the consideration being a contract entered into during infancy, and the judg- ment beinsr in effect a ratification oi the -contract, the Infant's 37 & 38 vict, o ' c. 62. Relief Act prevented such ratification, although it had been entered into before the Act was passed. ' The effect of the 2nd section,' said Mellish, L. J., ' was to prevent any action being brought on the bill, although it might have been rati- fied after the infant came of age. For I am of opinion that that section applies to all contracts made by any infants, provided the ratification is made after the passing of the Act, and that it is to be understood as saying that a debt contracted in infancy shall not in future in any case form a valid consideration upon which an action can be brought.' It must be borne in mind that the section does not 104 FOEMATION OF CONTBACT. Part II. The infant prevent an infant from enforcing a contract (other than those the con- included under sec. i ) ; the contract is not void but void- tract, j^jjjg ^^ jjjg option. His ratification does not give any right to the party who has contracted with him, but his power of benefiting by the contract, if he choose, is not taken away. Equity however will not grant specific performance of a contract in which only one side is bound. ' (2) Necessa- (2) We must now consider the liability of an infant for ries — what are they, necessaries. And we must first ascertain what are ' necessaries.' It has always been held that an infant may bind himself by contract for the supply to him not merely of the necessaries of life, but of such things as are suitable to his station in life and to his particular circumstances at the time. The best discussion of the subject of necessaries is L. R. 3 Exch. to be found in the judgment of Bramwell, B., in Ryder v. Wombwell, — a judgment the conclusions of which were I.. R. 4 Exch. adopted by the Exchequer Chamber. The diificulty which has arisen in respect of them consists mainly in determining the provinces of the Court and the Jury in ascertaining them, and the rules applicable to the matter may perhaps be stated thus : — (a) Evidence being given of the things supplied and 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 were not, the case may not be submitted to the jury at all. Things may obviously be incapable of being necessaries. 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 necessai-y to a student of law, but not a rare edition of 'Littleton's Tenures,' or eight or ten copies of ' Stephen's Commentaries.' Chap. III. § 3. INFANTS. I05 Things necessary to a person in one station of life would not be necessary to a person in a different station ; or, again, things not usually necessary may become so from the circum- stances of the infant. Medical attendance and expensive articles of food may ordinarily be dispensed with, but may become necessary in case of ill-health. It does not follow therefore that, because a thing is of a useful class, a judge is bound to allow a jury to say whether or no it is a necessary under all the circumstances of the case. (b) If the judge conclude that the question is an open Provinces one, and that the things supplied are such as may reason- andju^ ■ ably be considered to be necessaries, be 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 extent to which the infant was already supplied with them, and the actual circumstances of the infant. "We say ' actual circumstances,' because a false impression which the infant may have conveyed to the tradesman as to his station and circumstances will not affect his liabilitv. If a tradesman supplies expensive goods to an srayshawv. •^ ^ ^ -^^ , Eaton. 7 Scott, infant because he thinks that the infant's circumstances are ^' p- '^'• better than in fact they are, he does so at his jjeril. (c) The ruling of the Court and the finding of the jury of Court in are both alike subject to review by a Divisional Court sitting of App'Ll. in banc and by successive Courts of Appeal. An in&nt is liable for wrong, but a breach of contract infant may- may not be treated as a wrong so as to make the infant chari^ed liable : the wrong must be more than a misfeasance in the upon con- ' ^ tract framed performance of the contract, and must be separate from and as a tort, independent of it. Thus where an infant hired a mare to EnS "' ride and injured her by over-riding, it was held that he could I06 FOEMATION OF CONTRACT. Pait II. 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 conversion, a rule which it is not unimportant to bear in mind, inasmuch as the Infant's Relief Act makes a sale of goods to an infant absolutely void, and so would appear to prevent any property from passing to him. but may for But when an infant hired a horse expressly for riding and though ' ^ot foJ" jumping, and then lent it to a friend who jumped originating ^he horse and killed it, he was held liable : for ' what was in contract. done by the defendant was not an abuse of the contract, but Bumard V. was the doing of an act which he was expressly forbidden 14C.E. N.S.4S. by the owner to do with the animal.' § 3. Married women. Their con- It may be stated as a general rule that the contract of a tracts are „ ■ j ■ • j yojj married woman is void. Exceptions The exceptions to this rule vary in the extent to which eive various ^^^ affect the capacity of married women to contract ; and degrees of they vary in this way : — In some cases a married woman capacity. can make a valid contract, but she cannot sue or be sued apart from her husband ; in others she can sue, but cannot be sued alone; in others she can both sue and be sued alone. A married (i) There is a group of exceptions which go to this extent, acquire ™^^ that a married woman can under certain circumstances ac- chose in quire contractual rights, which may be taken advantage of by the husband alone, or, if the husband please, by the joint action of husband and wife : these rights, unless the husband has BO dealt with them as to have made them his own, sur- vive to the wife and do not pass to his executors. Such rights appear .to arise where a promise is made to the wife in consideration of her personal services, or where a chose in action has been assigned to her which the husband does not Chap. III. § 3. MAERIED WOMEN. I07 ' reduce into possession ' or make his own by some act evi- dencing his intention to deal with the right as his. Thus, in an old case, a married woman was promised £10 When she in consideration of her curing a wound. She effected the lorbu's"''"" cure, and an action was brought for the money by her hus- <=a".se of band and herself. It was objected that she should not have been joined, as having no rights independent of her husband during coverture: but the Court of Exchequer Chamber Brashford v. ■^ Buckingham held ' that she was the cause of the action, and so the action c"o."ac: 77. brought in both their names is well enough; and such an action shall survive to the Feme.' So again, where a married women has received a pro- Where a missory note, it can be sued upon jointly by herself and her action is husband, and will survive to her unless reduced into posses- assigned to sion by the husband in his lifetime. The woman is not a party to the original contract, but the rights arising under it are assigzied to her, and she is thus capable of acquiring them, and, subject to the exercise of her husband's rights in the matter, of enjoying them. Similarly, a married -woman can become a registered holder of shares, and has a right of action jointly with her husband, if he choose to join her, and a right to the ahose in action after her husband's decease if he have not previously reduced it into possession. ' It is settled law, that a married woman, Daiton v. Mid. ■^ . . . . Coun, R. Co. though incapable of makiug a contract, is capable of having '3 '^^ ^- «^- a chose in action conferred upon her, which will survive to her on the death of her husband unless he shall have inter- fered by doing some act to reduce it into possession.' It would seem from this case that, when a married woman has acquired a negotiable instrument or assignable chose in action, the Courts do not look further into the matter and ask whether she obtained it in virtue of a contract which she was incapable of making. They regard it as her property, subject always to the right of her husband to make it his if he choose to do so. Io8 FOBMATION OF CONTRACT. Part II. (2) A married woman can stand to her husband in the relation of agent to principal, so as to bind him by contracts which she may make under certain circumstances. Implied au- Where husband and wife are living together the wife has a wife an implied authority to bind her husband by contract for necessaries for lierself and her household. The rules for the interpretation of necessaries are similar in principle to those which govern the meaning of the term in the case of an Special au- infant. Beyond this the wife has no presumed authority as an agent. « vn/e, though she may receive an express or implied au- thority for the purposes of trade or otherwise to act as agent for her husband. But this is a part of the general law of agency, and has no special relation to the status of married women. Husband Where husband and wife are living apart there is no such livingapart. presumption of authority in favour of the wife as was de- scribed above, and a tradesman who supplies her with goods Eastland V. uudcr suoh ciroumstances does so at his own risk. For if Burchell, L,_^R. 3Q.E.D. gjjg |jg supplied by her husband with an adequate allowance (the adequacy of which is a question for the jury) ; or if she have made terms with her husband upon separation, or if she be living apart by her own fault, her husband is not liable upon any contract she may make, even for necessaries. Wife of the (3) 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 Co. Litt. 133. a. ^ ' J J common law.' Wife of a (4) Tlie wife of a man civiliter mortuus has similar rights. dead.'^"' ^ Civil death arises from outlawry, or from being under con- viction for felony, and formerly from being 'professed in religion.' Custom of (5) By the custom of the City of London a married woman London ™^y trade, and may for that purpose make valid contracts. She cannot bring or defend an action upon these, unless her 3 Burr. 1776. husband is joined with her as a party, but she does not thereby involve her husband in her trading liabilities. Chap. III. § 3. MARRIED WOMEN. IO9 (6) The Divorce and Matrimonial Causes Act has created =0 & 21 vict. ^ ' c. 85. a group of exceptions to the general rule. (a) A woman divorced from her husband is restored to the Woman • , • ly _c 7 divorced : position 01 &jeme sole. (/3) A wife judicially separated from her husband shall, judicially- separated ; ' whilst so separated, be considered as a feme sole for the purpose of contract, and wrongs and injuries, and suing and being sued in any judicial proceeding.' § 26. (■y) A wife deserted by her husband can get a protection deserted. order from a Metropolitan Police Magistrate, from Justices in Petty Sessions, or from the Court for Divorce and Matrimo- nial Causes, which protects all property, acquired by her since the commencement of the desertion, from her husband and all persons claiming under him. She acquires in respect of such property the rights of a feme sole, and during the continuance of the desertion is — ' in the like position in all respects with regard to pro- perty, and contracts, and suing and being sued as she would be under this Act if she obtained a decree of judicial separa- tion.' § 21. (7) The Married "Women's Property Act (1870) specifies 33 & 34 vict. various forms of property which are to be regarded as the Separate separate estate of married women, — their earnings, deposits created by placed by them in savings banks, property in the funds, etc. ^0™^^.^ And the nth section of the Act gives power to a married Property woman 'to maintain an action in her own name for the recovery of any wages, earnings, money, and property by the Act declared to be her separate property,' and gives her all remedies, civil and criminal, for its protection which an unmarried woman would have had under the circumstances. A married woman may therefore make a contract for the exercise of her personal labour or skill, and maintain an action upon it alone. The Act therefore gives to married women a certain power to contract in respect of the separate estate which the no FORMATION OF CONTEACT. Part II. Act creates. And this separate estate being created by tbe Act, becomes liable, as does the equitable estate of which we are about to speak, for the engagements of a married woman entered into upon the faith of it. But with certain excep- tions specified in the Act, a married woman cannot be sued apart from her husband in respect of the separate property created for her by the Act ; nor can claims upon the separate estate, arising from engagements entered into by her upon the faith of it, be enforced by an action to which the wife Hancock V. aloue is made defendant. The wife rnay sue alone for her ^^^■ic.r.D. separate property, she cannot, with some minor exceptions, defend alone any action brought in respect of it. Separate (8) Property may, in equity, be settled upon a married equity"^ Woman for her separate use. Such separate estate becomes liable upon separate engagements entered into by the married woman with reference to it : and the presumption appears to be extremely strong that every engagement entered into by a ricard V. Hine, married woman is entered into with reference to her separate L. R. s '■ <^''- =="■ estate. The law upon this subject is exhaustively set forth in the 3 D. F. & J. judgment of Turner, L. J., in Johnson v. GallagTtei: ' Courts of Equity,' he says, 'have through the medium of trusts created for married women rights and interests in property, both real and personal, separate from and independent of their husbands. To the extent of tlie rights and interests thus created a married woman has, in Courts of Equity, power to alienate, to contract, to enjoy. She is considered a fenie sole in respect of property thus settled or secured to her separate use.' It is only to the extent of the rights and interests which are created for her, that a married woman can bind herself, or rather her estate, for equity does not, any more than law, allow her to bind herself by contract. The remedy given to the creditor is not given against her but against her estate. ' When she by entering into an agreement allows the 49+ Chap. III. §4- CORPOEATIONS. Ill supposition to be made that she intends to perform the agreement out of her property, she creates a debt which may Per Lord . •' Hatherleyin be recovered, not by reaching her but by reaching her froferty! ^^^^ "■ "'"'^' The liabilities, therefore, -which attach to the separate estate i_Jow far of married women are hardly to be numbered among the a real ex- genuiue exceptions to the incapacity of married women to bind themselves by contract. But the separate estate, whether statutory or equitable, does furnish an exception to the general rule to this extent, that in virtue of it a married woman can by her independent agreement create an obligation, although the obligation binds her property and not herself. § 4. 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 i. Neces- restrictions upon its contractual power, and the terms of its to its con- incorporation may impose others. tractual ^ . . capacity. A corporation is an artificial entity, apart from the persons 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 cor- Must con- poration has this ideal existence apart from its members, it through an follows that it cannot personally enter into contracts, it must agent. . T- . . Per Lord contract by means of an agent. It ' cannot act m its own caims in fct- person, for it has no person.' chl'st' ''' ° And the Common Law rule that a corporation can only Cannot contract under seal puts this further limit upon its contractual ^j^^j^ j^J= powers, that it cannot as a rule make negotiable instruments, struments. For by the law merchant an instrument under seal is not negotiable, and therefore, unless the making of bills of ex- change and promissory notes be part of the ordinary business 224- Iia FOEMATION OF CONTRACT. Part II. of a trading corporation, they cannot be made by these artificial persons. 2. Express The express limitations upon the capacity of corporate bodies must vary in every case by the terms of their incorporation. 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 not a part of the objects of this book to discuss the L.^R. 7, H. L. ^Qg^j.jjjg p£ I 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 Ashhury Carriage Company v. Eiche, and the question was thus stated and answered by inExch.ch Blackburn, J. :— L. R. 9. Exch. ' ' I take it that the true rule of law is, that a corporation at Common 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 corporation by express provision or necessary implication show an intention 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 show an intention in the legislature to prohibit, and so avoid the making of a contract of this particular kind V The House of Lords appear not to have dissented from the view of the general powers of corporations expressed by Blackburn, J., but they differed from him and overruled his judgment upon the interpretation of the statute under con- sideration ; holding that a company incorporated under the Chap. III. §5- LUNATIC AND DRUNKEN PERSONS. II3 Companies Act of 1862 is so far bound by the terms of its memorandum of association that it may make no contracts wliich are either inconsistent with or foreign to tlie objects expressed in that memoi'andiim. A contract made ultra vires is void ; it is sometimes said Contracts to be void on the ground of illegality, but Lord Cairns in ^gt ^oid fo,. the case above cited takes exception to this use of the term illegality, . . °^^ 1^1" iH" ' illegality,' pointing out that it is not the objects of the capacity, contracting parties, but the incapacity of one of them, that avoids the contract. § 5. Lunatic and dnmhcn persons. The law with regard to contracts made with lunatics and The con- persons m a state oi mtoxication may be said to be now voidable : settled as follows. The contract of a lunatic or drunken person is voidable at his option if it can be shown that at the time of making the contract he was absolutely in- capable of understanding what he was doing and that the other party knew of his condition. It seems doubtful, even in the case of executory contracts, whether the transaction can be avoided on the ground of lunacy or drunkenness as against a contracting party who had no reason to suppose that he was dealing with an incapable person. But it seems settled that where a contract has been executed in part, so that the parties cannot be restored to their former positions, proof of the actual insanity of one of the parties at the time of making the contract, unaccompanied by any proof that the other knew of his condition, will not suffice to avoid the contract. Thus in Molton v. Gamroux, a lunatic purchased annuities of a society, paid the money, and died. His administratrix =gci.. 489; sued the society to recover back the money on the ground whether of that the contract was void. The jury found that at the time of the purchase the vendee was insane, and incompetent to manage his affairs, but that there was nothing to indicate this to the Company, and that the transaction was land fide I 114 FOEMATION OF CONTEACT. Part. 11. < Exch. 19. It was held that the money could not be recovered. ' The modern cases show,' said Patteson, J., ' that when that state of mind was unlcnown to the other contracting party, and no advantage was taken of the lunatic, the defence cannot pre- vail, especially where the contract is not merely executory, but executed in the whole or in part, and the parties cannot be restored to their original position.' Per Lord A lunatio, SO found by commission ^, is not therefore ab- Langdale, v'wMt?°°°'^ solutely incapable of contracting, but the presumption is o Beay. at ygry stroug iu such a case that the contract was not made "vis.'e^""'"' during a lucid interval, and that the other contracting party Was aware of the mental condition of the lunatic, or dranken A contract made by a person in a state of intoxication person. ^^^^ ^^ subsequently avoided by him, but if confirmed is L. R. 8 binding on him. In the case of Matthews v. Baxter, a man, Exch. 132. while drunk, agreed at an auction 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.' The rules of equity are in accordance with those of 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. ' Comniissions cle lunatico inquirendo are no longer issued specially in each case of alleged insanity. A general commission is now, by , 16 and 17 Vict. c. 70, 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. Chap. IV. REALITY OF CONSENT. II5 CHAPTEE IV. Reality of Consent. The next feature in the Formation of Contract which has to be considered is Genuineness or Eeality of Consent ; and the question which, under this head, recurs in various forms is this : 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 expression of intention ? And where this question has to be answered in the affirma- tive there may be various causes for unreality of consent. (i) The parties may not have meant the same thing ; or Mistake. 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 Misrepre- conclusions respecting the subject-matter of the contract by statements innocently made, or facts innocently withheld by the other. This is Misrepresentation. (iii) These untrue conclusions may have been induced by Fraud, representations of the other party made with a knowledge of their untruth and with the intention of deceiving. This is Fraud. (iv) The consent of one of the parties may have been ex- Duress. torted from him by the other by actual or threatened personal violence. This is Duress. (v) One of the parties may from circumstances be morally Undue incapable of resisting the will of the other, so that his '" "^"'^''' i]6 FORMATION OF CONTKACT. Part II. consent is no real expression of intention. This is "Undue Influence. And first let us deal with Mistake. I. Mistake. Mistake of intention distinct from mis- take of ex- pression. "We must preface our remarks on Mistake by calling atten- tion to a division of the subject which makes it fall into two distinct chapters of the law of Contract. Mistake may be Mistake of intention, or Mistake of expression. With the latter we have nothing to do here. As a general rule men are bound by what they say or write, and cannot be heard afterwards to say that their intentions were wrongly ex- pressed ; but in certain cases, where the parties have been genuinely agreed, and the terms in which their agreement is couched would hinder or pervert its operation, they are permitted to explain, or the Courts are willing to correct, the error. This is however a part of the Interpretation of Contract. "We are here concerned with its Formation, and have to consider how far Mistake will vitiate an apparently valid agreement. The cases in which Mistake has this effect are exceptions to the general rule that a man is bound by an agreement to which he has expressed his assent in unequivocal terms un- influenced by falsehood, violence, or oppression. And it is perhaps safe to say that unless Mistake goes to the root of the contract, and is such as to negative the idea that the parties were ever ad idem, it will be inoperative. The cases in which Mistake does invalidate a contract may be con- veniently dealt with under the following heads. Mistake as to the nature of the transaction. Mistake as This must needs be of rare occurrence, for men are not transaction. ^'Pt to enter into engagements as to the nature of which they Chap.IV. §1. MISTAKE. II 7 are wholly in the dark. It must also arise almost of necessity from the misreisresentation of a third party. For if a man What be capable of understanding the nature of a document, he ^^erative cannot avoid its operation by saying that he did not apply Hunter v. his mind to its contents, or that he did not suppose that it ' '^''- «■»•' would have any legal effect. He must therefore have been induced to contract by some deceit which ordinary diligence could not penetrate. And this, in order to result in Mistake, and distinct must, ex m termini, proceed from some third party, for other- wise the contract would be voidable for misrepresentation or fraud, and would not be void on the ground of Mistake. The two following cases will be found to furnish the best Illustra- illustrations of Mistake of this nature. In Thoroughgood's ^^^^^^ ^ case the plaintiff executed a deed which he was told was a release of arrears of rent, though in fact it was a release of all claims. He was an illiterate man, the deed was not read to him, and when its effect was misrepresented to him in the manner described, he said, ' if it be no otherwise I am con- tent,' and executed the deed. It was held that the deed was void. In Foster v. Maekinnon the acceptor of a bill of exchange l. r. 4 c. p. induced the defendant to indorse it, telling him that it was a guarantee. The plaintiff was a subsequent bond fide indorsee of the bill, for value. It was held that the defendant's signature did not bind him. , The Court said that it was ' 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 pretended 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 groimd that the mind of the Il8 FORMATION OF CONTKACT. Part II. 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.' But it will be noted that the absence of negligence is strongly dwelt upon by the Court, and that the jury had expressly negatived its existence in the circumstances of this L. R. 7 ch. Si. particular case. Hunter v. Walters seems to show that if a man executes a deed which he might have read and was capable of understanding, he cannot avoid it on the ground that he did not read it or was misinformed of its contents and intended application, or that he understood that it was a mere form. Mistake as to the person with whom tlie contract is inade. Mistake of Mistake of this nature arises where A enters into a contract with X under the belief that he is entering into a contract with M. It can only arise where A has in contemplation a definite person with whom he desires to contract, it naturally cannot affect general offers which any one may accept, as, for instance, contracts by advertisement, or sales for ready money. why it in- But where A intends to contract with J/, X cannot give him- contract. ^^^^ ^ right under the contract by substituting himself for M. And the reason for this rule is tolerably clear. When one man enters into a contract with another, he generally has some reason for dealing with that man in preference to others; his character, his solvency, or the convenience of dealing with him, may be important elements in the motive which induced the contract. If, then, where A intends to contract with J/, X substitutes himself for M, A not only loses whatever advantages he expected to gain by dealing with M in preference to others, but he is not a consenting party to the contract. Chap. IV. § I. MISTAKE. II9 Thus in a case in which X, by imitating the bignsiture of M, induced A and B to supply him with goods under the belief that they were supplying M, it was held that no contract had ever arisen between A and B and X. ' Of him,' says Lord Cairns, 'they knew nothing, and of him they never cundyv. thought. With him they never intended to deal. Their ^^f-^i App. 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 he required.' In the case referred to, the mistake was induced by fraud, but the case of Boulton v. Jones shows that innocent mistake = h. & n. 564. may produce the same effects. There the plaintiff suc- ceeded to the business of one Brocklehurst with whom the defendant had been accustomed to deal. The defendant sent an order for goods to Brocklehurst, and the plaintiff supplied the goods without any notification of the change. It was held that he could not recover their price. ' In order Per chaimeii. to entitle the plaintiff to recover he must show that there was a contract with himself And it will be remarked that this was not like a case of an offer made by sending the goods and accepted by the use of them, else the defendant would have been liable for their price : but it was the acceptance by the plaintiff of a proposal addressed to Brocklehurst, so that the de- fendant had not the option of refusing an offer made by the plaintiff, but was allowed by him to act upon an acceptance which he supposed to have proceeded from Brocklehurst. It may therefore be laid down that where X, without any fraudulent intention, substitutes himself for M so that A contracts with X under the belief that he is con- tracting with M, the contract is void. If the Mistake be induced by the fraud of X, certain consequences flow from it, I30 FOBMATION OF CONTBACT. Part II, other than those in ordinaiy cases of fraud, and these shall be noticed hereafter, Mistake as to subject- matter : why gene- rally in- operative. per Blackburn J., in Smith v. Hughes, L. R. 6Q. B., at p. 607. Mistake as to the subject-matter of the contract. It is in cases of Mistake of this nature that really difficult questions arise. If a man can show that, without any fault of his own, he has entered into a contract of a nature wholly different to anything that he intended, it is not difficult to see that the element of consent is entirely wanting in such a transaction. If, while intending to contract with A, he has been subjected to a substitution of JT for A as the party with whom the contract is made, it is again obvious that there has been no community of intention between him and X. But when two persons, intending to bind themselves to one another by a contract of a particular kind, caiTy out that intention. Mistake as to the subject-matter of the contract can seldom affect their rights. Where a man has entered into an explicit agreement the nature of which he understood, he cannot be heard to say that his meaning is not expressed by his words, and that he intended and expected to bargain for something different to that which his words would naturally indicate. Contracts would never be concluded if indefinite variations of meaning could be introduced by subsequent explanation, and so it may be taken to be a general rule that the unconditional accept- ance of an explicit proposal binds both parties, even though they may show that they meant something different to what they said or wrote, ' 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 agree to the other party's terms.' Chap.IV. §1. MISTAKE. 121 Mistake as to the subject-matter of a contract will only avoid it in three cases. (a) Mistake as to the existence of the subject-matter. (&) Mistake as to the identity of the subject-matter. (c) Mistake of one party known to the other, as to the quality of the thing promised. (a) Mistake as to the existence of the subject-matter of a Mistake as to existence contract. of subject- nifitter If A agrees with X in respect of a thing which, unknown to both parties, is non-existent at the time of entering into the contract, the mistake goes to the root of the matter and avoids the contract. Such mistake is in fact a phase of the subject may of impossibility of performance. But, inasmuch as the thing antecedent agreed upon has ceased to be possible before the agreement was 1^™?°^^'' made, such impossibility prevents a contract from ever having arisen and does not operate, as impossibility arising subsequent to the contract will sometimes operate, as a form of discharge. One of the leading cases on this subject is Couturier v. Hastie, s h. l. c. 673.; arising out of the sale of a cargo of corn which was supposed by the parties to be, at the date of sale, on its voyage from Salonica to England, but which had in fact, prior to the date of sale, become so heated on the voyage that it had to be unloaded and sold. It was held that the contract was void, inasmuch as it ' plainly imports that there was something which was to be sold at the time of the contract and something to be purchased,' whereas the object of the sale had ceased to exist. So too in Strickland v. Turner, the plaintiff purchased 7 exch. =17. an annuity which at the time of purchase had ali-eady failed owing to the death of the annuitant. It was held that he could recover the price which he had paid for the annuity. In cases where the non-existence of a right is concerned, it Mistake as to Gxistcncc may be suggested that mistake of this nature is mistake of of a right is law, and that to allow a man to avoid a contract on the ^°|^'^^'S^°" ground that he mistook his right is an infringement of the law.' L. R, a H. L. 132 POEMATION OF CONTRACT. Part II. rule ignoraniia juris Tiaud exausat. But a distinction is drawn by Lord "Westbury in Cooper v. Phibbs, which was a case of mistaken rights, between two senses in which the word jus is used with reference to that rule. ' It is said ignorantia juris liaud excusat ; but in that maxim the word jus is used in the sense of denoting general law, the ordinary law of the country. But when the word jus is used in the sense of denoting a private right, that maxim has no applica- tion. 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 nmtual 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.' ' (6) Mistake as to the identity of the subject-matter of a contract. Mistake of An agreement may be void on the grouud of mistake ^" ' y- whei'e two things have the same name, and the two parties enter into a contract in which each means a different thing, while, owing to the identity of the names of the things, the same terms apply to the meaning of each party. Under such circumstances there is a mistake in the iden- tity of the thing contracted for, the minds of the parties never really meet, and there is no true consent. Thus where Raffles V. A agreed to buy of X a cargo of cotton 'to arrive ex Wickehaus, 2 H. * c. 906. Peerless from Bombay,' and there were two ships of that name, and the buyer meant one and the seller the other, it was held that there was no contract, and that the buyer was not bound to accept a cargo which, though it came ' ex Peerless from Bombay,' did not come in the vessel of that name which was present to his mind when he made the agreement, distinct It is clear that if the buyer had meant a ship of a different confusion name he would be bound by the terms of his contract ; for Chap. IV. §1. MISTAKE. 1 23 unless the description of the subject-matter of the contract admits of more meanings than one, the party setting up mistake can only do so by showing that he meant something other than that which he said; and this, as we have seen, he may not do. On the other hand, the case of lonides v. the or mis- Pacjfio Insurance Company shows that a mere misnomer of l. k. 6 q. b. the subject of the contract will not entitle either party to avoid it if the contract itself contains such a description of its subject-matter as practically identifies it. (c) Mistake as to the quality of the thing promised, known to the party promising. This is the only form in which mistake as to the quality Mistake as or quantity of the thing promised can affect the validity of ^f t|,ing a contract. All other instances in which a contract has ^'''"""^'^■ been avoided at law, or refused specific performance in equity, seemingly on the ground of mistake as to quantity or quality of the thing promised, are either cases in which the proposal and acceptance never agreed in terms ; or cases Thornton v. in which equity will not exact the performance of a promise 5 t^""' '"■■ offered in terms which are the result of a manifest inad- vertence, but leaves the parties to their legal rights and reme- dies. Thus where A offered to sell an estate to X, but by a mistake in adding up the prices of the various plots offered it for £1000 less than he meant, the Court would not en- websterv. Cecil, 30 Beav. force the contract. But it does not follow from this that '"■ the plaintiff could not have recovei'ed at law such damages as he might have sustained. The quantity of an article bought, or the price to be paid for it, are points not usually misstated by contracting parties, but their statements must be taken to be con- clusive against themselves. The quality of the article is a matter which the parties must look to for themselves : they cannot ask courts of law to correct their errors of judgment. 134 FOEMATION OP CONTRACT. Part II. Responsi- bilities of buyer as to quality, Jones V. Just, L. R. 3 Q. B. at p. 205. and as to quality promised. Illustra- tions. That an article should come up to a certain standard of quality must be the subject of express warranty. Where the buyer is unable to inspect the thing purchased, the law protects him by the introduction of implied warranties, which secure to him in substance that he shall obtain the kind of thing he bargained for, and that of a marketable quality; but anything more than this must be a question of terms. If the buyer cannot inspect the article before purchase, he must protect himself by the terms of his bargain ; if he can inspect it, he must exercise his judgment ; and if he has no confidence in his own judgment, he may further seek to bind the seller by terms. A seller is not bound to depreciate his wares even though he knows that the buyer is forming an undue estimate of their quality. Nor is the seller affected by such impressions as the buyer may form of the nature of his promise. If the buyer thinks he is being promised a quality of article which the seller does not intend to warrant, the contract will nevertheless hold. If the buyer wants to bind the seller to supply an article of a particular quality he should make it a term of the contract. But if the seller knows that the buyer under- stands his promise in a different sense from that in which he gives it, the case is different. The contract is void be- cause the apparent consent indicated by the agreement of the parties to common terms is shown to be unreal, by the fact that one of the parties knew of the difference of inten- tion between himself and the other. Let us illustrate these propositions by an imaginary Bale. A sells X a piece of china. (a) X thinks it is Dresden china, A thinlvS it is not. Each takes the consequences. X may get a better thing than A intended to sell, or he may get a worse thing than he intended to buy, and in neither case is the validity of the contract affected. Chap. IV. § I. MISTAKE. 125 (/3) X thinks it is Dresden china. A knows that X thinks so, and knows that it is not. The contract holds. So long as A does nothing to de- ceive X, he is not bound to prevent X from deceiving him- self as to the quality of the article sold. (y) X thinks it is Dresden china and thinks that A in- tends to sell it as Dresden china ; and A knows it is not Dresden china, but does not know that X thinks that he intends to sell it as Dresden china. The contract says nothing of Dresden china, 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 eflPeot. 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, 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 judgment, as in (/3), but regarded the intention of A, and A, knowing that his intention was mistaken, allowed the mistake to continue. The last instance given corresponds to the rule laid down in Smith v. Hughes. In that case the defendant was sued l. r, 6 c . 597- 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 supplied were new. The jury were told that if the plaintiff knew that the de- fendant thought lie was buying old oats, 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 mis- apprehension of the quality of the oats, but knowledge of the misapprehension of the quality promised, which would disentitle the plaintiff to recover. ia6 FOEMATIOK OF CONTEACT. Part II. Mistake of In his judgment in this case, Blackburn, J., lays down the quality not l^w upon the subject thus : — ' In this case I agree that on the seller" '° ®^^® °^ ^ specific 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.) Mistake of ' And I agree that even if the vendor was aware that the quality purchaser thought the article possessed that quality, and known to -jv^ould not have entered into the contract unless he had so seller, 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 0.) Mistake of And Hannen, J., said, ' It is essential to the creation of quality pro- ^ contract that both parties should agree to the same thing loiovm'to' ^^ *'^® same sense But one of the parties to an seller. apparent contract may, by his own fault, be precluded from setting up that he had entered into it in a 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, exhibited a wrong sample, it was held that the contract was 8 E. & B. Bis. not avoided by this error of the vendor.' Scott v. Littledale ^■ (This corresponds to instance y.) Mistake of And further he says, ' If, in the present case, the plaintiff quality pro- knew that the defendant, in deahng with him for oats, did known to ®° ""^ ^^® assumption that the plaintiff was contracting to seller. sell him old oats, he was aware that the defendant appre- hended the contract in a different sense to that in which he ^ 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. Chap. IV. § I. MISTAKE. lij meant it, and he is thereby deprived of the right to insist that the defendant shall be bound by that which was the apparent, and not the real bargain.' (This corresponds to instance S.) In the case of Garrard v. Franhel the point insisted on 3° seav. 44s in Smith v. Hughes arose in equity. The plaintiff and de- Application fendant signed a memorandum of agreement by which the equity plaintiff promised to let certain premises to the defendant 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. The plaintiff, in filliiig 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 en- grossed and executed with this error. The Court was satis- fied, upon the evidence, that the defendant was aware of the discrepancy between the rent which she was promising to pay and the rent which the plaintiff 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 .£230 per annum for such use and occupation of the premises as she had enjoyed. The rule which these two cases establish comes in sub- stance to this : that where there is mistake, not as to the subject-matter of the contract, but as to the terms of the con- tract, and one party ' heing at the time cognizant of the fact Per Rommy, of the error, seeks to take advantage of it,' the contract will ■"■•dv.Frankei. J 1 O ' 30 Beav. 451. be treated as void both in law and equity. The effect of Mistake, where it has any operation at all, is Effects of to avoid the contract. The Common Law therefore offers two remedies to a person who has entered into an agreement void on the ground of Mistake. If it be still executory he may repudiate it and successfully defend an action brought upon it ; or if he have paid money under the contract, he may recover it back upon the general principle that ' where money Webster v. Cecil, 30 Beav. 138 FORMATION OF CONTRACT. Part 11. 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 Kelly V. soiari, action will lie to recover it back.' 9 M. & W. 58. In equity the victim of mistake may resist specific perform- ance of the contract, and may sometimes do so successfully when he might not have been able to defend at law an action for damages arising from his breach. He may also as plaintiff apply to the Chancery Division of the High Court to get the contract declared void and to be freed from his liabilities in respect of it. § 2. Misrepresentation. Misrepre- The subject of misrepresentation is beset with various dif- not easy to fi^ulties. One difficulty arises from the wide use of the term distinguish Fraud to cover misrepresentations of fact which vary very from fraud :.■,,.,,.,, ^ ' Widely m their nature and consequences. or from Another difficulty arises from the desire of the Courts to condition. , , . n • i i , /. exclude mere representations which do not form part of the terms of a contract from all effect upon its validity. If a representation is to affect the formation or discharge of a contract it must either be made with a fraudulent motive, or it must occur in the case of certain special contracts, or it must be a term or integral part of the contract. And this brings us to the third difficulty. If a repre- sentation forms an integral part of the contract it is virtually placed on a level with a promise. If it turns out to be false its untruth does not affect the formation of the contract, but operates either to discharge the injured party from his liabilities or to give him a right of action as upon the failure of a promise. We have therefore to distinguish representation, whether innocent or fraudulent, which affects the validity of a con- tract, from representation which affects the performance of a contract. And the terminology of this part of the subject Chap. IV. §2. MISBEPEESENTATION. I29 IS extraordinarily confused. Representation, Condition, ^yar- ranty, independent agreement, implied warranty, 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. It will perhaps clear the ground if we begin with three general statements which attempt to meet the three difficulties suggested. (a) The practical test of fraud as opposed to misrepresenta- General tion is that the first does, and the second does not, give rise to an action ex delicto. The first is a wrong, and may be treated as such, besides being a vitiating element in contract. The second may invalidate a contract but will not give rise to the action ex delicto, the action of deceit. (6) Misrepresentation made prior to the formation of a contract, not constituting a term in the contract, will only affect its validity in certain special cases. These are contracts of marine or fire insurance, contracts for the sale of land, and contracts for the purchase of shares in companies. (c) Where representations made prior to the conclusion of a contract have any effect, they affect the formation of the contract and make it voidable. Where statements which form part of the contract turn out to be false they entitle the party to whom they were made, either to rescind the con- tract and be discharged from it, or to bring an action for a breach of one of its terms. In the one case the contract has never been effectually formed, in the other it has been formed and broken. Let us now consider these statements more in detail. (i) The distinction which has been suggested between fraud How to dis- and misrepresentation is practical rather than scientific : we misrepre- describe them not by their nature but by their results. The f^m ^J.™^ procedure open to the injured party is made the test of the character of the act by which he is injured. But rights are 13° POBMATION OF CONTRACT. Part If. Per Tindal, C. J., Foster T. Charles, 7 Bing. 105. 3 E. & Ad. 114. Fraud without dishonest motive. sometimes to be found most clearly defined in the remedies which exist for the breach of them ; and the exactitude of the pleadings now disused is often a valuable aid to the ascer- tainment of the legal relations of the parties. Fraud is a wrong apart from contract, and damages arising from it may be recovered in the action of deceit. But fraud which gives the action of deceit need not involve dishonest motive where there is a knowledge that the statement made is false ; nor if dishonest, or at any rate self-seeking, motives be present is it necessary that there be a clear knowledge that the statement made is false. ' It is fraud in law if a party makes representations wliich he knows to be false and injury ensues, although the motives from which the representation proceeded may not have been bad.' Thus in Polhill v. Walter the defendant accepted a bill of exchange drawn on another person representing him- self to have authority from that other to accept the bill, and honestly 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 indorsee, who had given value for the bill on the strength of the defendant's representation, brought against him an action of deceit, or in the more familiar language of modern pleading, sued him for ■false and fraudulent misrepresentation. It was held that he was 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.' It will be observed that in this case there was a representation 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 distinguish- Chap. IV. §2. MISREPKESENTATION. I3I able from a class of cases in ■which it has been held, after sce Eenjamin on Sales, 360 E. some conflict of judicial opinion, that a false representation believed to be true by the party making it will not give rise to the action of deceit. It is not necessary, however, to constitute fraud that there Reckless should be a clear knowledge that the statement made is false, ment. Statements which are intended to be acted upon, if made recklessly and with no reasonable ground of belief, bring their maker within the remedies appropriate to fraud. The Western Bank of Scotland v. Acldie was an action of l. k. i scotch App. 145. deceit brought against a company by a shareholder who had been deceived by a report of tlie directors and suffered loss. The House of Lords held that such an action must be brought against the directors and could not be brought against the company, for a reason to be explained hereafter; but Lord see A|,i. i;. Chelmsford held that ' if the directors took upon themselves to put forth in their report statements of importance in regard to the afiairs of the bank, false in themselves, and which they did not believe or had no reasonable ground to believe to be true, that would be a misrepresentation and deceit.' Lord see p. i6s. Cranworth, in giving judgment in the same case, qualifies the force of this proposition, expressing an opinion that it goes too far, but it is substantially confirmed by Lord Cairns in a later case, in which he lays it down as the ^fjf.fj,'^;!;", settled rule of law that if persons take upon themselves to 4'&'."l.'6'4.'*' make assertions as to which they are ignorant whether they are true or not, they must in a civil point of view be held as responsible as if they had asserted that which they knew to be untrue.' If then neither the intent to defraud nor deliberate asser- tion of untruth are necessary elements in fraud, the nearest approach which we can make to a distinction between mis- representation and fraud is that the former is an innocent misstatement of facts, while the latter consists in representa- tions known to be false, or made in such reckless ignorance 132 FORMATION OF CONTRACT. Part if. of their trutli or falsehood as to entitle the injured party to the action of deceit. Innocent (2) In dealing with innocent misrepresentation and non- ment'do'es disclosure of fact, we may say generally that unless they not inva- occur in the particular kinds of contract already mentioned 1 j^p t^ con'— tract unless they do not affect the validity of consent. The strong tract be'^o"' tendency of the courts has been to bring, if possible, every a special statement which, from its importance, could affect consent, class ; . into the terms of the contract. If a representation cannot be shown to have had so material a jsart in determining consent as to have formed, if not the basis of the contract, at any rate an integral part of its terms, such a representation is set aside altogether. Most contracts are of a somewhat complex character, and consist of statements that certain things are, and promises tiiat certain things shall be. It is here that diificulties begin. If a representation is not part of a contract, its truth, except in the excepted cases and apart from fraud, or (2) it is immaterial. If it be part of a contract it receives the name a condition °f ^ 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 repre- 3 B. & s. 751. sentation from the case of Belin v. Burness. The action was brought upon a charter party dated the 19th day of Oct. i860, in which it was agreed that the plaintiff's ship tlien 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 23rd. When she reached Newport the defendant refused to load a cargo and repudiated the contract, upon which action was brought. The question for the Court Chap. IV. §2. MISBEPKESENTATION, X33 was whether the words now in tJte port of Amsterdam amounted to a condition the breach of which entitled the plaintiff to repudiate the contract, or whether they only gave him a right, after carrying out the contract, to sue for such damages as he had sustained. Williams, J., in giving judg- Behnv. ment in the Exchequer Chamber, thus distinguishes the ' g; 1 1; J^J." various parts or terms of a contract : — ' Properly speaking, a representation is a statement or as- Represen- sertion, made by one party to the other, before or at the time a^JgrJ^'j'n'^'^ of the contract, of some matter or circumstance relating to it. contract. Though it is sometimes 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 sveh 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 dis- honestly, with a recldess ignorance whether it was true or untrue. . . . Though representations are not usually coutained 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 descriptive statement in the written instrument is a mere representation, 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. If the Court should come to the conclusion that such a statement by one party was intended to be a sub- stantive part of his contract, 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. 134 FORMATION OF CON'FEACT. Part 11- ' In the consti'uction of charter parties, this question has often beeft 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 •ciahoimv. vessel is to sail, or be ready to receive a cargo, on or before a -ss^K* ?: °^'' given day, has been held to be a condition, while a Stipulation 3 c. b.'n.s. «. that she shall sail with all convenient speed, or within a TarrabocMa reasonable time, has been held to be only an agreement. 7 H. & N. 18,. ' But With respect to statements in a contract descnptive 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 desci'iptive statement was intended to be a substantive part of the con- tract, it is to be regarded as a warranty, 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 contract in tdto, and so be relieved from performing his part of it, pro- vided it has not been partially executed in his favour. If, indeedj be 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 iu the narrower sense of the word, viz., a Stipu- lation by way of agreement, for the breach of -whiGb a compensation must be sought in damages.' The Court ultimately held that the statement that the ship was in the port of Amsterdam at the time of Uiakitig the eontract was intended by the parties to be a Condition, and that the breach of it discharged the charterer from the obligation to perform what he had promised. The judgment in this case has been cited at some length, not only because it is the fullest judicial analysis of the terms of a contract, but alsd because it affords a good illustration of the provoking confusion of the terminology of this part of the subject. Chap. IV. §3. MISREPKESENTATION. 135 It will be observed that Condition is used in two Various senses, as meaning a statement that a thing is, and a condition promise that a thing shall be ; in either case the state- ^"'^ ™''" Blent or promise is of so important a nature that the untruth of the one or the breach of the other discharges the contract. "Warranty also is used in several 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 (i) a subsidiary promise in the contract, the breach of which could under no circumstances do more than 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 give rise to an action for damages. Yet in spite of this verbal confusion the judgment gives us a clear idea of the various terms in a Contract. (u) Representations, made at the time of entering into the Represen- contraet but not forming a part of it, may affect its validity '^''°"- in certain special cases but are otherwise inoperative. When they do operate their falsehood prevents the contract from ever having been effectually formed. (8) Conditions are either statements, or promises which Condition, 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 intention of the parties from the wording of the contract and the circum- stances under which it was made. But when a term 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 inde- Warranty pendent subsidiary promises, the breach of which does not "^ "'''"" discharge the contract, but gives to the injured party a right 136 FORMATION OP CONTRACT, Part II. Warranty ex post facto. Baniiennan V. White, loC.B. N.S. 844. Represen- tation made anterior to contract : held a con- dition. of action for such damage as he has sustained by the failure of the other to fulfil his promise. (8) 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 con- dition 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. We have dwelt thus at length upon a subject which would seem to be more appropriately discussed under the head of Discharge of Contract, because it appeared necessary to point out the distinction between the Eepresentation which in special cases affects the validity of a contract, from Statements which are introduced into the terms of the contract as Conditions, the untruth of which operates as a discharge. And it will be well before leaving this part of the discussion to illustrate by another case the desire of the Courts to include within the terms of the contract every statement of fact, which, apart from fraud, is in any way to affect it. The case of Bannerman v. White arose out of a sale of hops by the plaintiff to the defendant. Before commencing to deal for the hops the defendant asked the plaintiff if any sulphur had been used in the treatment of that year's growth of hops. The plaintiff said ' no.' The defendant said that he would not even ask the price if any sulphur had been used. After this the parties discussed the price and the defendant agreed to purchase the growth of that year. He afterwards repudiated the contract on the ground that sulphur had been used in the treatment of the hops. The plaintiff sued for their price. It was proved that sulphur had been used by the plaintiff over five aci-es, 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 Chap. IV. §2. MISREPRESENTATION. I37 or thought it unimportant. The jury found that the repre- sentation made by the plaintiff 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 parties 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 came to the conclusion that the representation of the plaintiff was a part of the contract and a preliminary con- dition, the breach of which entitled the defendant to be discharged from liability, Erie, C. J., said, ' We avoid the term warranty because it Bannerman . , V. White, IS used in two senses, and the term condition because the " '^- b- n.s. question is whether that term is applicable, then, the effect is that the defendants required, and that the plaintiff gave his undertaking that no sulphur had been used. This under- taking 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 construction of all contracts. If the parties so intend, the sale may be absolute, with a warranty super- added; or the sale may be conditional, to be null if the warranty is broken. And, upon this statement 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.' It is worth noticing with regard to these words — Firstly, that the Chief Justice notes the confusion which has arisen from the double meaning of the word Warranty ; and further expresses a doubt whether the term Condition is applicable to a statement such as the one in question. Secondly, that the introduction of the representation into the contract 138 FOKMATION OF CONTBACT. Part li- as one of its conditions shows more markedly than the judg- ment in Behn v. Burness that statements, which go to the validity of a contract, are placed on a level with promises. For in the one case the statement was definitely introduced into the charter party, in the other it was made even before the parties commenced bargaining. Reasoa for The determination of the Courts to exclude representa- effect"(ff ^ tions from affecting a contract unless they form a part of its represen- terms, is an instance of the practical wisdom which marks tations. ' _ '■ the English Law of Contract. The process of coming to an agreement is generally surrounded by a fringe of statement and discussion, and the Courts might find their time occu- pied in endless questions of fact if it were permitted to a man to repudiate his contract, or bring an action for the breach of it, upon the strength of words used in conversation preceding the agreement. When, therefore, the validity of a contract is called in question, or the liabilities of the parties said to be affected by reason of representations made at the time of entering into the contract, the effect of such representations may be said to depend on the answer that can be given to three questions-^ i. Were the statements in, question a part of the terms of the contract. ? 2. If not, were they made fraudulently ? 3. If neither of these, was the con- tract, in respect of which they were made, one of those which we will call for convenience contracts uberrimae Jidei % If all these questions are answered in the negative, the repre- sentation goes for nothing. Its effect in (3) One result of this introduction into the body of a con- misrepre- ^^'•^? Beav. 95. distinction between the cases where the person deceived is at liberty to avoid the contract, or where the Court will affirm 154 FOEMATION OF CONTEACT. Part II. it, giving liim compensation only, are not very clearly defined. The question usually arises on the specific performance of contracts for the sale of property; and the principle which I apprehend governs the cases, although it is in practice of very difiicult application, and leads to refined distinctions, is the following, viz. that if the representation be one that can be made good, the party to the contract shall be compelled, or may be at liberty to do so ; but if the re- presentation made be one which cannot be made good, the person deceived shall be at liberty, if he please, to avoid the contract.' But if the contract be affirmed, the aflfirmation brings with it all the liabilities of the contract, and the fraud can no longer be set up as a ground of relief. Right to rescind. (2) He may avoid the contract, andso may (a) resist an action brought upon it at Common Law; (/3) resist specific performance when sought in Equity ; (y) obtain a judicial avoidance of the contract in Equity. Limits of right to rescind. Clouffh V. London & N. W. R. Co., L. R, 7 Ex. 35. (3) His right to avoid the contract is limited in certain ways. It is true that a man may keep the contract open till he is sued upon it, and that a plea of fraud then set up is a sufficient rescission of the contract ; but so long as he keeps it open he does so at his own risk. His right to avoid it may be determined either by his accepting some benefit under the contract, or otherwise acting upon it after he has become aware of the fraud ; or by the subject-matter of the qontract being so dealt with that the parties cannot be reinstated in their former position ; or by innocent third parties acquiring an interest for value under the contract. And lapse of time, although it does not otherwise affect Chap. IV. § 4. DUEESS. 155 liis right to rescind, is evidence to show that he intended to affirm, increasing in strength as the rescission is de- layed. It must be borne in mind that the contract, until the defrauded party has made his election, is voidable, and not void. It is therefore possible for innocent third parties to acquire rights under it of which they cannot be deprived by a subsequent avoidance on the part of the person de- frauded. A sale of goods procured by fraud cannot be rescinded so as to revest the property in the vendor if in the mean time the goods have been sold to a hon& fide purchaser. If, for the reasons described, the person upon whom the fraud has been practised has lost his right of avoidance, he must then be left to his action ex delicto. An exception to this rule occurs when the fraud goes not to the quality of goods, or circumstances of the sale, but to the identity of the person contracted with. The case of see ante. Cund]j V. Lindsay, cited above, shows that where A is induced to send goods to B under the impression that he is contracting with X the transaction is absolutely void, and a bond fide purchaser from B acquires no property in the goods. § 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 impri- In what it sonment; 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 contract, or else by i^"^^"' Abr- one acting with his knowledge and for his advantage. A contract entered into in order to relieve a third person Must affect from duress is not voidable on that ground ; though a simple Husralb°e'^v contract, the consideration for which was the discharge of a cSTjac'is? 156 FOKMATION OF CONTRACT. Part II. seemie, third party by the promisee from an illegal imprisonmeiit, would be void for unreality of consideration. Nor is a jwomise voidable for duress which is made in Atiee V. Back- Consideration of the release of goods from detention. If the house, 3 M. & ^ w. 633. detention is obviously wrongful the promise would be void and must j o x be personal, for want of consideration ; if the legality of the detention was doubtful the promise might be supported as a compro- mise. But money paid for the release of goods from wrongful detention may be recovered back in virtue of the quasi-con- see App. A. tractual relation created by the receipt of money by one person which rightfully belongs to another. § 5. Undue Influence. Undue We have described the kind of Fraud which gives rise to the action of deceit and the effect of Fraud of that de- scription upon the validity of a contract. But it may well be that persons may be induced to enter into contracts not by any specific statement of a fraudulent character, but by reason of circumstances placing it in the power of others to engage them in disadvantageous bargains or pro- mises. arises from Courts of Equity have always gone further than Courts of a course of . . . ° conduct or Law in the interpretation which they have given to the stances ot"" ^^^^ Fraud. Looking beyond definite false and fraudulent the rela- statements, they have inferred from a long course of conduct, tions of the . , , • , • /• , . ,. , . parties, not from the peculiar relations 01 the parties, or from the cir- nite'state" cumstances of one of them, that an unfair advantage has ""^"'- been taken of the promisor, and that his promise ought not in equity to bind him. The taking of such an unfair advantage is sometimes called Fraud ; but it is more con- venient, for the purpose of distinguishing it from the kind of Fraud with which we have already dealt, to call it the exercise of ' Undue Influence,' Chap. IV. § 5. UNDUE INFLUENCE. 157 The subject is one which can only be dealt with in the most general way; it depends upon the view taken by a Court of Equity of the general tendency of transactions, often extending over some time, and consisting of many details, whether or no relief is granted. It is significant of the nicety of the questions of fact involved in cases of this de- scription, that in a recent judgment of the House of Lords cRorke v. Bolingbrnke, on appeal from the Irish Court of Chancery, Lord Hatherley ^■^\'^''^'- differed from Lords Blackburn and Gordon as to the pro- priety of granting relief, and the whole Court differed from Lord Justice Christian as to the moral character of the acts complained of. It is well to try to obtain some sort of definition of Undue Definition Influence before endeavouring to classify the sets of circuni- influence, stances which have been held to suggest its existence. The best is to be found in the judgment of Lord Selborne in The Earl of Aylesford v. Morris. In speaking of the sort of i- R- s ch. cases ' which, according to the language of Lord Hardwicke, raise from the circumstances and conditions of the parties contracting a presumption of Fraud,^ he says, ' Fraud does not here mean deceit or circumvention ; it means an uncon- scientious use of the power arising out of these circuinstances and conditions ; and when the relative position of the parties is such as primd facie to raise this presumption, the trans- action 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.' In attempting to ascertain the principles upon which this presumption is raised, we may note at starting — (a) that equity will not enforce a gratuitous promise even Kske™<:i' v. though it be under seal ; ' °- "■ ^- '° (/3) that the acceptance of a voluntary donation throws 2C|m: „ ;on V. Hoghton, 15 Beav. 299. 158 rOEMATION OP CONTEACT. Part II. Woodv. Abrey, 3 Maddock, 423- Coles V. Treco thick, 9 Ves. 246. Certain re- lations of parties ; 7 Beav. 560. parental ; upon the person who accepts it the necessity of proving ' that the transaction is righteous ; ' (7) that inadequacy of consideration is regarded as an element in raising the presumption of Undue Influence or Fraud ; (S) hut that mere inadequacy of consideration will not (according to the strong tendency of judicial opinion) amount to proof of either. We may therefore frame the question which we have to discuss somewhat in this way : — When a man appears in a Court of Equity, either as plaintiff or defendant, seeking to escape the effects of a grant which he has made gi'a- tuitously or a promise which he has given upon a very inadequate consideration, what must he show in addition to this in order to raise the presumption that Undue Influence has been at work 1 One class of circumstances calculated to raise this pre- sumption appears to he that the party benefited stood in some such relation to him as to render him peculiarly subject to influence. Parental or quasi-parental relations subsisting between promisor and promisee will raise this presumption. In Archer v. Hudson, a young lady who had just attained her majority became security for her uncle who was desirous of overdrawing his account at his banker's. The Master of the Kolls, adverting to the fact that the security was obtained through the influence of a person standing in loco parentis from the object of his protection and care, said, 'This is a transaction which under ordinary circumstances this Court will not allow This Court does not interfere to prevent an act even of bounty between parent and child, but it will ■ take care (under the circumstances in which the parent and child are placed before the emancipa- tion of the child) that such child is placed in such a position as will enable him to form an entirely free and unfettered judgment, independent altogether of any sort of control.' Chap. IV. §5- UNDUE INFLUENCE. 1 59 And one may extend the term ' parental relations ' to all cases in which one member of a family exercises a substan- tial preponderance in the family councils either from age or Mo^TsBeav from character or from circumstances. ''^'' The power which a spiritual adviser may acquire over spiritual ; T • , T ' ' n • 1 1 T 1 • • Hugenin v- persons subject to ms influence is also looked upon as raising sazeiy, .+ the presumption of mala fides ; and to this may be added a number of relations which it is somewhat hard to define, but which may generally be termed ' confidential.' Solicitor confiden- or advocate and client, guardian and ward, doctor and patient, trustee and cestui que trust, are some of these. But the Courts have shown themselves unwilling to limit Or influ- GTICG hoW" or define the relations which they will regard as raising the ever'ac- presumption of influence, being more inclined to reserve to rrise^p'r™^^ themselves the power of enquiring whether influence was in sumption • 1 1 • 1 -1 •!■ n 1 • of unfair fact exercised, than to reject the possibility of such exercise dealing. because the parties did not stand in certain special rela- comrac^s"! tions. The principle applies to every case where 'influence "" " "''''"'''■ is acquired and abused, where confidence is reposed and betrayed.' In Smith v. Kay, the defendant, who had barely attained 7h. l. €.75". his majority, had incurred liabilities to the plaintiff by the contrivance of an older man who had acquired a strong in- fluence over him, and who professed to assist him in a career of extravagance and dissipation. It was held that influence of this nature, though it certainly could not be called parental, spiritual, or fiduciary, entitled the plaintiff to the protection of the Court. ' It is not,' said Lord Kingsdown, ' the relation of solicitor and client, or trustee and cestui que trust, which constitutes the sole title to relief in these cases, and which imposes upon those who obtain such securities as these the duty, before they obtain their confirmation, of making a free disclosure of every circumstance which it is important that the indi- vidual who is called upon for the confirmation, should be l6o FORMATION OF CONTRACT. Part II. apprised of. 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 Chan- cery 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 influeoice exerted. "Whereas in all other cases where those relations do not sub- sist, the confidence and the influence m,ust he proved extrinsi- cally ; but wliere 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 the one case as the 1 H. L. c, 779. other.' Or personal The doctrine has been extended to a class of cases from may be ab- which the element of personal influence is altogether absent. sent, j^ remains to consider the characteristics of these cases. as in catch- They all appear to possess these common features : the gains. promisor encumbers himself with heavy liabilities for the sake of a small, or, at any rate, an inadequate present gain ; and the promisee takes advantage either of the improvidence and moral weakness, or else of the ignorance and unprotected situation, of the promisor. Attempts I^ former times the law attempted to guard in two ways '° ?iy*^"' against advantage being taken of persons in such a situation. gains : Usury Laws provided that a promise to pay interest beyond by statute ; ^ certain rate per cent, should be void, and thus prevented by judicial extortionate loans of money. And the Court of Chancery adopted a rule that the purchaser of any reversionai-y interest might always be called upon to show that he had given full value for his bargain, so that he might not take advantage of a man's present necessities to deprive him of his future estates without reasonable return. The Usury Laws are repealed, and the 31 Vict. c. 4 abro- gates the rule of law as to reversionary interests in all cases Chap. IV. §5. UNDUE INFLUENCE. l6l of purchases made bond fide and without fraud or unfair dealing. But if a man takes advantage of the present Modern poverty of an expectant heir to extort from him an exorbi- fects 'ex- tant and ruinous rate of interest, he is liable to have the pectant r . ... heir, bargain set aside, and to be remitted to his claim for so LordAyies- 1 11 111 I'liii ^°^'^ ^' ^^^'■'■'Si much money as he has actually advanced, with the legal l. r. s cii. rate of interest upon it. And, on similar groimds, a man who bargains on terms of inequality as to age or knowledge with the promisee is considered to be entitled to the protection of the Court of Chancery. ' In ordinary cases each party to a bargain must take care of his own interest, and it will not be pre- person in sumed that undue advantage or contrivance has been resorted tress, to on either side ; but in the case of " the expectant heir,'' or of persons under pressure without adequate protection, and in the case of dealings with uneducated, ignorant persons, or ignorant the burden of showing the fairness of the transaction is advised. thrown on the person who seeks to obtain the benefit of the ?=■■ L°r'' . ^ Hatnerley in contract.' 'soungbiok.. The Court will look not merely to the acts of the parties, ck. at p. 8^=3! but to the reasonableness of the transaction under all the circumstances of the case; and if it appear that one has taken advantage of the unprotected condition of the other to drive a hard bargain, the transaction will not be allowed to Beynon ■,. ° ' Cook. L. R. stand. " "^- 3'^- The rules respecting the right to rescind contracts entered Limits of into under Undue Influence follow, so far as equity is con- rescind, ; cerned, the rules which apply to Fraud, but with one notice- able qualification. In the case of Fraud, so soon as the Fraud is discovered the parties are placed on equal terms, and an affirmation of the contract binds the party who was originally defrauded. But in the case of Undue Influence it is not a particular statement, but a combination of circumstances which constitutes the vitiating element in the contract ; and unless it is clear that the will of the injured party is l62 FOEMATION OF CONTEACT. Part II. relieved from the dominant influence under which it has acted, or that the imperfect knowledge with which he entered into the contract is supplemented by the fullest K.",'™,- r. assistance and information, an affirmation will not be allowed '"^'^^'- to bind him. Chap. V. § I. LEGALITY OF OBJECT. 1 63 CHAPTER V. Legality of Object. Theeb 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 Two sub- this subject. The first is the nature and classification of the quiry : obiects regarded by law as illegal. The second is the effect (i) the / 1 1 • ■ 1 ■ 1 nature, of the presence of such objects upon the contracts m winch (2) the ttey appear. ^^_ § I. Nature oe Illegaiitt in Contract. The modes in which the law expresses its disapproval of i- What is certain objects of contract may roughly be described as follows : — (i) Prohibition by Statute. (ii) Prohibition by express rules of Common Law. (iii) Prohibition through the interpretation by the Courts of what is called ' the policy of the law.' So that illegal agreements may be (i) agreements in breach of Statute, (2) agreements in breach of express rules of Com- mon Law, (3) agreements contrary to public policy, M 2 164 FOBMATION OF CONTKACT. Part II. These two last are not always very easy to distinguish, for frequent decisions upon certain matters of public policy have caused tolerably definite and express rules regarding them to grow up ; and these are in effect rules of Common Law as express, or nearly so, as those with which we shall deal under class 2. (i) Contracts which are made in breach of Statute. Illegality from statu- tory pro- hibition. Illegality from impo- sition of a penalty, how ascer- tained. Brown v. l>uncan, 10 B. & C. 43. Is penalty imposed for revenue purposes ? Per Parke, B., in Cope v, Rowlands, 2 M. & W. 149, Is it con- tinuous ? Smith V, Mawhood. 14 M. & W. 463. A statute may render an agreement illegal in one of two ways — by express prohibition, or by penalty. It may say, in so many words, that contracts of a certain sort are illegal, or void, or both ; and where it thus expressly avoids a contract or makes it illegal, no doubt can arise as to the intentions of the Legislature. But where the statute does no more than impose a penalty upon the carrying out of the objects of a contract, a question may arise whether or no the penalty amounts to a prohi- bition. Two marks may assist us to determine the intention of the Legislature. The first of these is the object of the penalty. If it be ' a protection to the public as well as the revenue,' if it be designed to further objects of public policy in relation to some trade or business, then a penalty amounts, without doubt, to a prohibition. If it be solely to facilitate and secure the collection of the revenue, then it is possible that the contract, though penalised, is not prohibited. The soundness of this distinction has however been called in question, and a more important mark is to be found in the continuity of the penalty. "Where a statute forbids the carrying on of a trade except under certain conditions, on pain of incurring a specified penalty once for all, it has been held that contracts made in breach of such provisions are not vitiated. But where the penalty is recurrent upon every breach of the provisions of the statute, then there can be no doubt that the objects Chap. V. I I. LEGALITY OF OBJECT. 1 65 of the contract are intended to be regarded as illegal, and the contract itself void. The law upon this point may then be conveniently sum- Result of marfsed thus. Where a penalty is inflicted by statute upon '^^^^ the carrying on of a trade or business in a particular manner, we may assume primd facie that contracts made in breach of such statutory provisions are illegal and void. But if it appear that the penalty is imposed, not for the benefit of the public in general, but for the security of the revenue, it is possible that the contract was only intended to be penalised and not prohibited. And if, in addition to this, it appear that the penalty is imposed once for all upon the offending trader, and not upon each successive contract continuously, it is highly probable, if not certain, that contracts so made are not in- tended to be vitiated. It is not necessary or desirable to discuss here in any Objects of detail the various statutes by which certain contracts are prohiMon. prohibited or penalised. They relate (i) to the security of the revenue; (2) to the protection of the public in dealing with certain articles of commerce, (3) or in dealing with certain classes of traders ; (4) to the regulation of the con- duct of certain kinds of business. An excellent summary of statutes of this nature is to be found in the work of Mr. Pollock, and it is not proposed to deal further with them Poiiock, pp. 342-J45- here. There is however one class of contracts which, from its peculiar character, and from the various forms in which it has been dealt with by the Legislature, it is worth while to examine more particularly. These contracts are Wagering Wagering Contracts. The subject has been somewhat confused by the use of the word wager as a term of reproach, so that some contracts not permitted by law have been called wagers, as opposed to others which, while precisely similar in their nature, comply with certain special conditions and so enable Courts of Law to enforce them. i66 FORMATION OF CONTKACT. Part II.- What is a wager ? Marine in- surance is a wager, A wager is a promise to pay money, or transfer property upon the determination or ascertainment of an uncertain event; the consideration for such a promise is either a present payment or transfer by the other party, or a pro- mise to pay or transfer upon the event determining in a particular way. The event may be uncertain because it has not happened, or it may be uncertain 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 has already happened, though the par- ties do not know in whose favour it has gone. The uncer- tainty then resides in the minds of the parties, and the sub- ject of the wager may be said to be rather the accm-acy of each man's judgment than the determination of a particular event. 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 should not hesitate to 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 consideration 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 : here too he has a prospect of large profits on money expended upon a cargo of silk, here too he wishes in no event to be a loser, and he agrees with X, an underwriter, that in con- sideration of his paying X £ — , X promises to pay him £ — if his cargo is lost by certain specified perils. Chap. V. §1. LEGALITY OF OBJECT. 167 The law forbids A to make such a contract unless he has though what is called ' an insurable interest ' in the cargo, and con- ■ insurable tracts in breach of this rule have been called mere wagers, '"'s'^^^'- while those which conform to it have been called contracts of indemnity. But such a distinction is misleading. 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; it is the fact that one wagering contract is and the other is not permitted by law which makes the distinction between the two. Apart from this there is no real difference in the nature of the contracts. A life insurance is in like manner a wager. Let us com- Life insu- pare it with an undoubted wager of a similar kind. A is ^ager about to commence his innings in a cricket match, and he agrees with X that if X will promise to give him £i 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 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 j>ay. 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. Let us now turn to the history of the law respecting History of , , the com- wagermg contracts. ^ „„„ la„ ^s At Common Law wagers were enforceable, and, until the to wagers ; latter part of the last century, were only discouraged by the co'epave Courts by the imposition of some trifling difficulties of ""="■■'?• 338. pleading. Gradually however the Courts, iinding that fri- volous and sometimes indecent matters were brought before them for decision, established the rule that a wager was not 1 68 FOEMATION OF CONTRACT. Part 11. enforceable if it led to indecent evidence, or was calculated to injure or pain a third person ; and in some cases general notions of public policy were introduced to tbe effect that any wager which tempted a man to offend against the law was illegal. Strange, and sometimes ludicrous, results fol- lowed from these efforts of the Courts to discourage the liti- gation of wagers. A bet upon the duration of the life of sykeTd'sia) Napoleou was held to be unenforceable, as tending, on the 16 East, 150, p^g g^(jg^ ^Q 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 inconvenience of countenancing idle wagers in courts of justice,' the feeling ?"(.Egyiey, J; 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.' of statute as Meantime the Legislature dealt with various forms of wagering contracts. As regards purely sporting wagers the history of legislation extends over a century and a half. The i6Car. II. c. 7 16 Car. II. c. 7 enacted that any sum exceeding Xioo lost in playing at games or pastimes, or in betting on the players, should be irrecoverable, and that all forms of security given Anne, c. 14. for ffloucy SO lost should be void. The 9 Anne, c. 14 carried the law upon this point a stage further, enacting that secu- rities of every kind, given for any sum lost in playing at games, or betting on the players, or knowingly advanced for such purposes, should be void ; and that the loser of £10 or more might recover it back, if paid, by action of debt brought within three months of payment. The working of this Act was found to produce consider- able hardship. It often happened that securities thus avoided were 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 Chap. V. §1. LEGALITY OF OBJECT. 1 69 late that they had paid value for an instrument which was void as against the party losing at play. The 5 & 6 Will. IV. c. 41 therefore repealed the Act of Anne so far as regarded the avoidance of securities as specified in that Act, and pro- vided that they should henceforth be taken to have been originally given upon an illegal consideration. The effect of s & 6 wiu. iv. this was, that the holder of such an instrument, if it were established, after proof of its illegal inception, that he was a ' bond fide holder for value,' could enforce it even against see Pan in. _ ch. il the man who had given the security in payment of an illegal bet. The last enactment relating to wagers of this class is the 8 & 9 Yict. c. 109, which provides, ' 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 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 contri- bution or agreement to subscribe or contribute for or towards any plates, prizes, or sum of money to be awarded to the winner or winners of any lawful Game, Sport, Pastime, or Exercise.' s & 9 vict. c. 109. s. 18. The 8 & 9 Vict. c. 109 further repeals so much of the statutes of Charles and Anne as was not modified by 5 & 6 Will. IV. c. 41, and wagers are thus divisible into two classes : those which are illegal under the old statutes Effect of adopted into 5 & 6 Will. lY. c. 41, and those which are s^JataJ^" simply void under the Act of Victoria. The difference is best illustrated in the case of securities given in payment of wagers of those two kinds. A promissory note given in payment of a bet made upon Consider- a cricket match is tainted with illegality at the outset ; not fj^'""^] only is it void as between the original parties to it, but every 1 70 FOKMATION OF CONTRACT. Part II. subsequent purchaser may be called on to show that he gave value for the note ; and if it can be shown that he knew of the illegal consideration for which it was first given, he may be disentitled to recover upon it. Promise 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 ; and if the note be endors'ed 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 Fitch V. Jones, gave value for the note. 5 E. i B. =43. " As regards wagering contracts entered into for commer- cial purposes, there are three important subjects with which the Legislature has dealt. These are Stock Exchange trans- actions, marine insurance, and insurance upon lives or other events. The first of these subjects was dealt with by Sir .Tohn 7 Gen. II. c. 8 Barnard's Act, V Geo. II. c. 8, which was more particularly (Sir John Bar- ' ' ' r J nard's Act), directed to wagers on the price of stock, or, as they are some- times called, ' agreements to pay differences.' These originate in some such transaction as this : A contracts with X for the purchase of fifty Kussian bonds at ^£78 for every £100 bond. The contract is to be executed 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 made the medium of purely wagering speculations ; that A may never intend to buy nor X to sell the bonds in question ; that they Chap. V. §1. LEGtALITY OF OBJECT. 17I 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 pay- ment of differences may be perfectly bond fide ; A may have found so much better an investment for his money between the date of the contract and the settling day that it is well worth his while to pay a difference in X's favour to be ex- cused performance of the contract. Sir John Barnard's Act was repealed by 23 Vict. c. 28, and contracts of this nature, if proved to be simple wagers, fall under the 8 and 9 Vict. '^^^^""^ "■ C. 109. § 18 \ Iic\s38. Marine insurance is dealt with by 19 Geo. II. c. 37, the Marine effect of which is to avoid all insurances on British ships or ^^ ^^^ ,j merchandise laden on board such ships unless the person '' ^'' effecting the insurance is interested in the thing insured. What is an insurable interest, that is to say such an interest as entitles a man to effect an insurance, is a question of mer- cantile law with which we are not here concerned. The subject of insurance generally was dealt with by 14 Insurance Geo. III. c. 48, from which Act, however, marine insurance ,4Ceo. in. is excepted. The Act forbids insurances on the lives of any "' persons, or on any events whatsoever in which the person effecting the insurance has no interest ; 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 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. ' Transactions on the Stock Exchange are not in practice so simple as they are here described. The interposition of a broker, and the peculiar relations of the principal, broker, and jobber, make the law on this subject extremely intricate. The effect of 8 and 9 Viot. c. 109. § 18 upon Stock Exchange transactions is well summarised in the Appendix to the Eeport of the Stock Exchange Commission, 1878 [2157]. P- 356. 173 FORMATION OP CONTRACT. Part II. Life insur- But a policy of life insurance differs in an important ance differs , • t r • n ■ ^ -r> i- • from other respect irom a policy 01 marine or fare insurance. rolicies contracts of gf insurance against fire or marine risk are contracts to insurance. ° ^ ^ recoup the loss which parties may sustain from particular causes. "When such a loss is made good alivfnde, the com- panies are not liable for a loss which has not occurred ; but in a life policy there is no such provision. TTie policy never refers to the reason for ejecting it. It is simply a contract that in consideration of a certain annual payment, the com- perwoodj^ pauy will pay at a future time a fixed sum, calculated by jTutabieSfe^" them with reference to the value of the premiums which ik;.'^&j°229- are to be paid, in order to purchase the postponed pay- ment.' Thus, though in a life policy the insured is required by 14 Geo. III. c. 48 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 has nothing to do with the contract. And so if a creditor effects an in- surance on his debtor's life, and afterwards gets his debt paid, yet still continues to pay the insurance premiums, the fact that the debt has been paid is no answer to the claim which he may make against the company. This rule has been IS c. B. 36s. established in Balhy v. The London Life Assurance Com- 9 East, 72. pany, overruling Godsall v. Baldero, in which Lord Ellen- borough had held that a contract of life insurance, like one of marine or fire insurance, was a contract of indemnity, and that it could not be enforced if the loss insured against had not in fact occurred. Chap. V. § I. LEGALITY OF OBJECT. 1 ^3 (ii) Contracts which are made in breach of definite rules oj Common Law. It is hardly necessary to state that an agreement to Agreement commit a crime or indictable offence would be made on an ^ crime ■ illegal consideration : but it is diflficult to find an instance which is not at the same time a breach of some statutory prohibition. Again, a contract with an alien enemy is illegal and void, to trade and is stated, in the leading case upon the subject, to be enemies ; void, not on any ground of public policy, but because ' it was \°^^^ ^|"' a principle of the Common Law that trading with an enemy without the king's license was illegal in British subjects.' The commonest form of contracts in breach of rules of to commit Common Law is an agreement to commit a civil wrong. Thus ^o^e in Allen v. Rescous an agreement in which one of the parties 2 Lev. 174. undertook to beat a man was held void. An agreement which involves the publication of a libel is in like manner void, ^'^l^^^'"^' Agreements to commit a fraud upon a third party have not unfrequently come before the Courts. Thus in the case of MaUalieu v. Hodgson, a debtor making a composition with 16 o- b. 689. his creditors of 6s. 8c?. 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 of the others foregoing theirs in a like pro- portion. ' Where a creditor in fraud of the agreement to accept the composition stipulates for a preference to himself, his stipulation is altogether void.' Thus too where the plaintiff purchased from the defendants an exclusive right to use a particular scientific 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, upon his own showing, it appeared that he had purchased this right in order to float a company 174 FORMATION OF CONTEACT. Part II. BeRbiev, froin wliich he expected to make a profit by defrauding the !.°¥^£i°B. shareholders. ^' , It is worth noticing here a difficulty sometimes introduced illegality, into this part of the law of contract arising from a confusion of illegality and fraud. Fraud is a civil wrong, and an agree- ment 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. Fraud may vitiate a contract for a reason other than the fact that it constitutes a civil wrong : as between the parties to a contract the fraud of one prevents the consent of the other from being genuine. If the fraud is discovered and the discovery acted upon in time, the contract can be avoided, not because the fraud is an illegality, but because the consent of the defrauded party was unreal : if the contract has been executed, the defrauded party must rely upon his remedy in tort and can sue for damages for the wrong he has sustained. But as between the parties to a contract, while still executory, the fraud of one affects it because the consent of the other is not genuine. We may say then that if A is induced to enter into a con- tract with X by the fraud of X the contract is voidable, because A's consent is not genuine. If A and X make a contract the object of which is to defraud M the contract is void, because A and X have agreed to do what is illegal. As in Smith Tho subjoct would be much obscured if we allowed ourselves on Contracts, 7 • j* 'it Lect. vi. to confuse reality of consent with legality of object. (iii) Contracts which are made in breach of the policy of the law. Public The policy of the law, or public policy, is a phrase of policy- frequent occurrence and somewhat attractive sound, but it is very easily capable of introducing an unsatisfactory vague- General ap- ness into the law. It would be difficult to find its earliest application ; most likely agreements which tended to pro- mote litigation, or to restrain trade or marriage were the first Chap. V. § !. LEGALITY OP OBJECT. 175 to elicit tlie 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 doubtless a frequent provocative of judicial ingenuity on this point, as is suffi- ciently shown by the case of Gilbert v. Sykes quoted above : i^ East. 150. but it cannot be said with confidence that the doctrine of public policy originated in the endeavour to elude their binding force. Whatever may have been the origin of the doctrine, 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. Modem decisions, Egenon v. Ean ^ "^ ^ Brownlow. however, while maintaining the duty of the Courts to consider 4 h. l. c. i. the public advantage, have 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. E. ; ' You have this paramount public policy to consider, that you are Printing co. v. not lightly to interfere with the freedom of contract.' ^J^' "' ^''' There are some subjects, however, which have fallen under tolerably definite rules making agreements of certain kinds illegal, not as breaking express rules, but as infringing established principles or tendencies of the law. We will endeavour to arrange them under a few convenient heads. Agreements tending to injure the public service. The public has an interest in the proper performance of their duty by public servants, and Courts of Law hold con- tracts to be illegal which have for their object the sale of Sale of public offices or the assignment of the salaries of such offices. This principle was carried so far that in Card v. Hope a deed = e. & c. m. was held to be void by which the owners of the majority of shares in a ship sold a portion of them, a part of the con- sideration for the sale being a covenant that the purchaser should have the command of the ship at sea, and that in the event of his death the sellers would appoint on the nomina- tion of his executors. The judgment proceeded not merely 176 POKMATION OF CONTKACT. Part II. on tlie ground that the ship was in the service of the East ftest'oS"' '■ Ii'^ia Company, which had been held equivalent to being in s T, R. 89. ^jjg public service, but 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. This, is perhaps an extreme case. But there can be no doubt that the sale of public oflSces is contrary to the rules of s&^6Ed. VI. Common Law, as it is also subject to statutory prohibition, 49 Ceo. III. pj^ ^j^g ground that the public has a right to some better test of the capacity of its servants thau the fact that they pos- sess the means of purchasing their offices. Assignment On a somewhat different principle the same rule applies ' to the assignment of salaries or pensions. ' It is fit,' said 8 M. & w. Lord Abinger . in Foster v. Wells, ' that the public servants should retain the means of a decent subsistence and not be exposed to the temptations of poverty.' And in the same or pensions, case, Parke, B. lays down the limits within which a pension is assignable. ' When a pension is granted, not exclusively for past services, but as a consideration for some continuing duty or service, then, although the amount of it may be influenced by the length of 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. Stifling pro- These most commonly appear in the form of agreements to ' stifle prosecutions, and we can hardly do better than adopt Lord "Westbury's statement of the law in one of the latest cases on the subject. ' You shall not make a trade of a Williams V. felonv. If YOU are aware that a crime has been committed Bayley, L. R. .* '^ I H. L. 220. yp^ gi^g^jj jjQ^ convert that crime into a source of profit or except benefit to yourself.' But the rule thus laid down must be and'crimi- taken Subject to this qualification, that where civil and criminal nai reme- remedies co-exist, a compromise of a prosecution is permis- exist. sible. ' "We shall probably be safe in laying it do^vn that the Chap. V. §1. LEGALITY OF OBJECT. 1 77 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. Per Lord It is often the only manner in which he can obtain redress. mS/ea^B. But, if the offence is of a public nature, no agreement can be fa a sit" valid that is founded on tlie consideration of stifling a prose- cution for it.' Again, agreements to refer matters in dispute to arbitra- Reference tion are regarded as attempts to ' oust the jurisdiction of the tion!^ Courts,' and are not necessarily enforced. Under the Common Law Procedure Act, 1854, the Courts have a discretionary jy^'svict. power to stay proceedings pending an arbitration, where there has been an agreement to refer an existing dispute. But when a contract contains a condition which provides that disputes arising out of it shall be referred to arbitration, the validity of such a condition depends upon rather a fine dis- tinction. Where the amount of damage sustained by a breach of the contract is to be ascertained bv specified arbitration scott v. Avery. . . . SH. L. C. 811. before any right of action arises, the condition is good ; but where all matters in dispute, of whatever sort, are to be re- ferred to arbitrators and to them alone, such a condition is illegal. The one imposes a condition precedent to a right of Edwards v. action accruing, the other endeavours to prevent any right of g'^^^-I^JJ!'^' action accruing at all. ' ^' ^' °' ^^' Contracts which tend to encourage litigation. The rules respecting maintenance and champerty are really based upon this consideration of public policy. 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 Com. Dig. right. vol. V. p. 33. 178 FOEMATION OF CONTEACT. Part n. Main- tenance. Champerty, 7 Bing. 369. 7 E. & B. 81 Prosser v. Edmonds, I Y. & C, 499. Cluimperty is where ' he who maintains another is to have by agreement part of the land, or debt, in suit.' Maintenance, as above described, hardly appears in the reports of recent times. The mere maintaining or assisting another person in a suit would not now avoid a contract entered into for such a purpose unless there were something vexatious in the maintenance. ' The law of maintenance,' . 6S2. says Lord Abinger in Findon v. Parker, ' as I understand it upon the modern constructions, is confined to cases where a man improperly arid for the purpose of stirring up liti- gation and strife encourages others either to bring actions or to make defences which they have no right to make.' But 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 conduct a suit in con- sideration of receiving a portion of the money or property to be recovered, was held illegal in Stanley v. Jones and Sfrye V. Porter. Its less obvious form, a purchase, out and out, of a right to sue has been placed on the footing of an assign- ment of a chose in action, invalid at Common Law but enforceable in Equity under certain circumstances. The en- forceability of such an agreement would depend upon the purchase including 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 would not be sustained. Ayerst v. Jenkins, 16 Hq 375. Agreements loliich are contrary to good rtioraJs. The only aspect of immorality with which Courts of Law have dealt is sexual immorality ; and the law upon this point maj' be shortly stated. A promise made in consideration of future illicit cohabita- tion is given upon an immoral consideration, and is void whether made by parol or under seal. Mathias, Ves. 286. ;eaumont v. Reeve, Chap. V. §1. LEGALITY OF OBJECT. 1 79 A promise made in considei-ation of past illicit cohabitation crayy. ^ ^ Mathia is not taken to be made on an illegal consideration, but is a I, mere gratuitous promise, binding if made under seal, void if 8 a a' 483. made by parol. And an agreement innocent in itself will be vitiated if intended to further an immoral purpose and known by both g^^'jf^^L, r. parties to be so intended. ' ^"'' "^ Agreements which affect the freedom or security of marriage. Such agreements, in so far as they restrain the freedom of Restraint of marriage, are discouraged on political grounds as injurious to the increase of the population and the moral welfare of the citizen. So a promise under seal to marry no one but lowcv. Pears. -^ , ^4 Burr. 2225. 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 Hartley v. 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 or of free- , . . 1 , dom of made upon consideration of the procurmg or brmgmg about choice. a marriage, are held illegal on various social grounds. Tr^vluian!' Agreements providing for separation of husband and wife A^eements are valid if made in prospect of an immediate separation, for separa- . , . . tion. But if such agreements provide for a possible separation m, 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 cartwri|htv. . , , , 3 D. M. & G. interest. 982- Agreements in restraint of trade. It is against the policy of the law that a man should deprive Restraint , . -. -11 n • -L- of trade. himself of the means of exercising his skill and earning his living. The trade of the country and the individual himself may alike be sufferers. The law upon this subject would fill H* 2 l8o FOBMATION OF CONTRACT. Part 11, a considerable space, but it is enough for our present pur- poses to give the simplest and naost general rules to which it can be reduced. Rules re- (i) Consideration is required to support a promise in gar ing i . j.ggj^j.g^jjj^ ^^ trade, even though the promise be made under ti K. & w. 66s. seal. Mallanv. May. Indeed it was at one time thought that the Courts would inquire into the adequacy, as well as the existence of the consideration, but this has been settled 6Ad.&E.43s. not to be so since the case oi Hitchcock v. Coker (1837). (2) The restraint may be unlimited as to time, but must not be unlimited as to space. A man may promise that he will never carry on a certain trade within ten miles of London and the promise would be good ; but if he promised that he would not carry on the trade anywhere for five years Ward V.Byrne, it WOuld UOt bc UphcM. 5 M. & W. 561. , ^ ^ (3) The restriction as to space must be reasonable in the judgment of the Court. Beyond this no definite rule as to the extent of restriction permissible can be laid down. The cases since 1854 turning upon this point have been excellently Pollock, 313. summarised by Mr. Pollock. § 2. Effect of Illegality upon Conteacts in which it exists. What is the We now come to the second branch of the subiect of effect of . . . illegality. Illegality in Contract, its effect upon the validity of a con- tract. The effect of illegality upon the validity of contracts in which it appears must of necessity vary according to circumstances. It may affect the whole, or only a part of a contract, and the legal and illegal parts may or may not be capable of separation. The direct object of a contract may be the doing of an illegal act, or the direct object may be innocent though the contract is designed to further an illegal purpose. The parties may both be ignorant, or both be aware of the illegality which remotely or directly affects the Chap. V. §2. LEGALITY OF OBJECT. lOl transaction, or one may be innocent of the objects intended by the other. Securities may be given for money due upon or money advanced for an illegal purpose, and the validity of such securities depends upon various considerations. The most that can be done here to elucidate a very complex and lengthy branch of the law is to lay down some rules which will answer roughly, but it is hoped not inaccurately, the questions thus suggested. When the contract is divisible. (i) "Where the contract consists of several pai-ts, so that Legal parts J I 1 -IT 1 ■ 1 . • of contract there are several promises based on several considerations, ^^ {,£ sever- the fact that one or more of these considerations is illegal ^^}^ P°^' ^ sible from will not avoid all the promises if those which were made upon illegal, legal considerations are severable from the others. This is an old rule of law explicitly laid down in Coke's Reports, peo^s case, ' 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 con- ditions which are against law are void ah initio, and the others stand good.' The rule applies whether the illegality exist by Statute or at Common Law, though at one time tlie judges held dif- ferently, 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.' This distinction has however been held in several modem cases to be without foundation. The most frequent illustrations of the general proposition 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. In such cases it has always been held that ' where you cannot sever the illegal from the legal l8a FORMATION OF CONTRACT. Part II. ?n°pkkS ■'v' P^'^*' °^ ^ covenant the contract is altogether void, but where Ra'itway,'"' jou Can sevcr them, whether the illegality be created by L, R. 3 C, P. 350- ' statute or common law, you may reject the bad part and retain the good^.' When the contract is indivisible. (ii) "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 promise. An old case which may be quoted in its entirety will illustrate this proposition. Feathersione The grounds of aotiou were stated to be, ' That whereas the V. Hutchinson, ^ ^ ° . . t cro. Eiiz. 199. plaintiff had taken the body of one H. in execution at the suit of J. S. 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 : and upon assumjisit it was found for the plaintiff : and it was moved in arrest of judgment, that the consideration is not good, being contrary to the statute of 23 H. 6, 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.' Wliere the direct object is unlawful but the intention innocent. Direct ob- (iii) "Where the direct object of the parties is to do an iueraf'the illegal act the contract is void. It does not matter whether ^ These cases may serve as an illustration of the proposition before us, L. R. 7 H. L. but it must be borne in mind that Lord Cairns, in The Askhury Car- ^^^' riage Co, v. Eiche, has pointed out that contracts of this nature are invalidated not so much by the illegalUy of their object as by the incapacity of the curporation to bind itself by agreement for purposes beyond its statutory powers. Chap. V. §2. LEGALITY OF OBJECT. 1 83 or no tliey knew that their ohject was illegal, ' ignorance of contract is the law excuseth none.' ™"^' But the knowledge of the parties may become important unless if the contract admits of being performed, and is in fact per- int^t be formed in a leajal manner, though the performance unknown ^^tisent and . " . . the con- to the parties would have directly resulted in a breach of tract can be the law. In Waugh v. Morris the defendant chartered the fofmed.^^"^" ■ plaintiff's ship to take a cargo of hay from Trouville to London, l. r. s q. b. The cargo was to be taken from the ship alongside, and was intended to be landed at a wharf in Deptford Creek. Un- known to the parties an Order in Council had forbidden the under 32 & 33 Vict. C, 70 landing of French hay. The defendant, on learning this, ^-^Tf-^ .^^J^ took the cargo from alongside the ship without landing it, (Anfmak) Act, and exported it. The vessel was delayed beyond the lay- days and the plaintiff sued for the delay. The defendant set up the illegal intention as avoiding the contract, but without success. ' We agree,' said Blackburn, J., in delivering the judgment of the Court, 'that 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.' Where the direct ohject is innocent hut the intention unlawful. (iv) Where the object of a contract is innocent in itself but IllegaUty of is designed to further an illegal purjjose, the contract is void avoids an if both parties knew of the illegal purpose at the time the p'herwise '■ _ o X i innocent contract was'entered into. contract. There is nothing illegal in a loan of money or a supply of goods ; but if these are known to be intended to further an 184 FORMATION OF CONTEACT. Part 11. illegal purpose, neither the money lent nor the goods sup- plied can form the subject of an action. The whole transaction is void. The law upon this subject rests mainly upon three cases which will furnish convenient illustrations of the rule. 3B. &Aici. 179. The first of these is Cannan v. Bryce (18 19), in which the assignees of a bankrupt sued for the proceeds of goods which they asserted to be a part of the bankrupt's property. The goods had been assigned by the bankrupt to the defendant in part satisfaction of a bond which was to secure to the defendant the payment of money lent by him to the bank- rupt to meet losses arising from stock-jobbing transactions which were illegal under 7 Geo. II. c. 8. It was held that the lending of the money, the bond, and the assignments under the bond (which were made after bankruptcy) were all alike void, and that the plaintiffs could recover the pro- ceeds of the goods. There was no doubt that the defendant knew the illegal object to which his money was to be applied ; and Abbott, C. J., in giving judgment, said, ' Then as the statute has absolutely prohibited the payment of money for compounding differences, it is impossible to say that the making such payment is not an unlawful act : if it be un- lawful in one man to pay, how can it be lawful for another to furnish him with the means of payment 1 It will be recollected that / am speaking of a ease wherein the meana were furnished with a full hnowledge of tlie object to which they were to he applied, and for the ex2>ress 2>iir2>ose of accom- 2>lishing that ohject.^ M.&W.43S. The second case is M'^Kinnell v. Jiohiiison (iS^S). Here an action was brought to recover a sum of money lent, as the plaintiff knew, for the purjaose of playing at ' Hazard,' a game which, apart from 9 Anne, c. 14, is prohibited by 12 Geo. II. c. 28. It was held that the plaintiff could not recover, on the principle ' that the repayment of money lent for the express purpose of accomplishing an illegal object cannot be enforced.' Chap. V. §2. LEGALITY OF OBJECT. 185 The third case is Pearce v. Brooks (i866). The action l. r. i excl. was brought by coach-builders to recover payment for the hire of a brougham engaged by a prostitute. Evidence was given that the plaintiffs knew the character of the defendant, and from this, and from the nature of the article supplied, the jury found that the plaintiffs knew that it was supplied for the furtherance of an immoral purpose. Upon this it was held that the plaintiffs could not recover. ' My diffi- p- ==»■ culty was,' said Bramwell, B., ' whether, though the defend- ant hired the brougham for that purpose, it could be said that the plaintiffs let it for the same purpose. In one sense it was not for the same purpose. If a man were to ask for duelling pistols, and to say " I think I shall fight a duel to- morrow," might not the seller answer, " I do not want to know your purpose ; I have nothing to do with it ; that is your business ; mine is to sell the pistols, and I look only to the profit of trade." No doubt the act would be immoral, but I have felt a doubt whether it would be illegal ; and I should feel it still but that the authority of Cannan v. Bryce and M^Kinnell v. Rohinson concludes the matter.' These words exactly indicate the distinction between this . class of contracts and those described in (iii). It is not necessary that the parties to a contract primd facie innocent should bind themselves to adapt it to an illegal purpose in order to avoid it. It is enough that the one party knows the unlawful intent of the other, and knows that the contract is intended to be applied to carry it out. But a loan of money, designed to satisfy debts arising Distinction from a past illegal transaction, is distinguishable from the j^g.^ '^^j cases just cited. In Cannan v. Bryce the statute had for- '^bP|^^2ij , bidden, not only stock -jobbing transactions of a certain sort, 7 ceo. 11. c. e. but advances of money to pay debts arising from them : in the other two cases the illegality was still in contemplation when the contract was made. And so in Fyke's case a loan of money intended to pay lost '-^^- " ^'^^ "• 1 86 FORMATION OF CONTKACT. Part II. bets was held to be recoverable from the estate of the bank- rupt borrower. ' The mischief had been completed,' said Jessel, M. E., ' the illegal act had been carried out, before the money was lent. The money was advanced to enable the borrower to pay the bets which he had already made and lost, which seems to me an entirely different thing from a loan of money to enable a man to make a bet.' Where the unlaiuful intention is on one side only. (v) Where one of two parties intends a contract, innocent in itself, to further an illegal purpose, and the other enters into the contract in ignorance of his intention, the innocent party may, while the contract is still executory, avoid it at his option. In Cowan v. Milbovni, the plaintiff sued L. R. 2Excii the defendant for breach of an agreement to let him a set of rooms. It appeared that the plaintiff intended to use the rooms for the purpose of delivering lectures which were unlawful, as being blasphemous within the meaning of 9 & lo Will. III. c. 32. The defendant was not aware of the use to which the plaintiff meant to put the rooms at the time the agreement was made ; and he subse- quently refused to allow the plaintiff to use them, though he did not at first allege the character of the lectures as the ground of his refusal. It was held that he was entitled to avoid the contract, and was not bound to give his reasons. Innocent party may avoid con- tract. and see Clay V. Ya'es, I H. & N.78 Securities for money due on illegal transac- tion. Securities for money due on illegal transactions. (vi) Where a promise has been given to secure the pay- ment of money due or about to become due upon an illegal transaction, the validity of such a promise is based upon two considerations : — u. Whether the transaction is illegal or void. /3. Whether or no the promise is made under seal. Where the promise is given in the form of a negotiable instrument, a further question arises as to its value in the Chap. V. §2. LEGALITY OS" OBJECT. 187 hands of third parties, and this is affected by the answer to the first of the considerations above stated. There is a difference, not very easy to analyse but of con- siderable practical importance, between cases in which Com- mon Law or Statute make an object illegal, and cases in which they make a transaction void. The distinction has been thus stated : ' A thing may be unlawful in the sense Per Emmiveii, that the law will not aid it, and vet that the law will not ?• '■^J,'"'""™', immediately punith it ; ' but this dictum does not exactly o'Jstinction describe the difference between the cases, inasmuch as it does between not cover all the cases in which the difference exists. A bet,and°void.' upon a cricket-match, for example, is not punishable, but it is more than merely void, ab has already been explained. The effect of the difference is this, that in the one case the The ' taint promise is regarded as given upon an illegal consideration, ° ' "^^^ ' ^' in the other upon no consideration at all ; in the one case Per curiam in Fislier V. everything connected with the transaction is ' tainted with '^m'^ . •^ "^ 3 t. & B, 64a. illegality,' in the other collateral contracts arising out of the avoided transaction are under certain circumstances sup- ported. In cases where the transaction is illegal, a promise under Effect of seal given to secure the payment of money due upon it is bein? void. This was decided in the case of Fisher v. Bridges by 'hegal. the Court of Exchequer Chamber, reversing the judgment of the Court of Queen's Bench. The plaintiff sued the defendant upon a covenant to pay a sum of money. The defence was, that the covenant was security for the payment of a sum of money due upon a purchase of land agreed to be sold for a purpose declared to be illegal by Statute. The izceo.ii.c.sa. Court of Queen's Bench held that the defendant was bound, inasmuch as there was nothing unlawful in a simple promise to pay money. The Court of Exchequer Chamber held that the illegality when proved tainted the subsequent promise, and that this was not a simple promise to pay money, but Io8 FOEMATION OP CONTRACT. Part II. that it ' sprang from and was the creature of an illegal trans- action.' If a promise under seal would be void under these circum- stances, it is obvious that a parol contract, even if based in part upon some new consideration, would be void also. Negotiable In the case of negotiable instruments we have to consider merits, how i^ot only the effect of the illegality as between the original contract ''^ parties to the contract, but its effect upon subsequent holders being of the instrument. In these cases, as we have already ° ' noticed, the ordinary presumption in favour of the holder of such an instrument does not exist. Ujoon proof of the illegality which tainted the instrument in its inception, the holder is liable to have to show that he is a holder for value; that is to say, that he gave consideration for the bill : and even then, if he can be proved to have been aware of the illegality, he will be disentitled to recover. EiTect of Where the consideration is not illegal but the transaction contract . . -. . . ^ , , , beino- void, ^^ void, a promise given to pay money due upon such a trans- action is based upon no consideration at all. If made under seal it is binding, if by parol it is void. A good illustration of this rule is to be found in the case of contracts from which some formality necessary to the validity of the contract has been omitted. A covenant to pay money due upon a a. on pro- Contract of this nature is binding. Thus where a corporation sea?;"" ^'^ borrowed money upon mortgage without having first ob- tained the approbation of the Lords of the Treasury, they 5 &6 Will. IV. did what the Municipal Corporations Act declared to be ' unlawful ; ' but having received the mortgage money and entered into a covenant to repay it, they were held bound Payne V, Mayor by their covenaut : 'Although the mortffage may be invalid, , of Brecon, _ o o .? ? 3 H. & N. 579. ii^Q^^ [g J2Q reason why the corporation should not be liable upon their covenant to repay the mortgage money.' So too in the case of promises of payment made in consideration contract™ "^ P^^^ illicit cohabitation, such promises are invalid if made Chap. V. §2. LEGALITY OF OBJECT. I89 by parol, not on the ground that the considersitiou is illegal, Beaumont v. , Reeve, but because there is in fact no consideration at all. But a * 2' ^ '^^ Ayerst v. bond given ujjon such past consideration would be binding, {^"^"fe nq. Negotiable instruments given upon such considerations 'J'\,^ neeo- are, as between the original parties to them, void, for the tiable in- 1 1 1 • 1 .7-1 struments. reason just stated, that they are simple contracts in which the promise is made in consideration of a transaction which raises no legal obligation, and therefore cannot support it. But where the negotiable instrument has passed into the hands of a subsequent holder, such a holder is not affected by the fact that as between the original parties the joromise is voluntary. In Fitch v. Jones, a promisory note was given s e. & b. 245. ' by the defendant to X in payment of a bet made on the amount of hop duty in the year 1854. X indorsed the note to the plaintiff. 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 defendant 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 wager- ing 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 is simply void, so that the consideration was not an illegal consideration, but equivalent in law to no consideration at all.' Can a man he relieved from a contract which he knew to be unlawful ? (vii) It remains to consider whether a party to an illegal Illegality, contract can under any circumstances make it a cause of the time, ' It had been held in a previous case, Atherfold v. Beard, that a 2T. R. 610. wager on the amount of hop duty was against public policy ; because 190 FORMATION OP CONTBACT. Pattll. ro ground action. We may lay down without hesitation the rule that ance, a party to such a contract cannot come into a Court of Law phMiihat'c ^iid a,sk to have his illegal objects carried out ; nor can he ?!'r'.^io'q:'b, set up a case in which he must necessarily disclose an illegal 499- purpose as the groundwork of his claim. The general rule is well expressed in the maxim, ' in 2>(^t-i delicto 2}otior est conditio defendentis.' But there are some exceptional cases in which a rnan may be relieved of an illegal contract into which he has entered, cases to which the maxim just quoted does not apply. These unless would appear to group themselves in two classes: (i) cases notfl^p^H "1 ■«'l"oh the plaintiff has been induced to enter into the lieHcto, contract under the influence of fraud or strong pressure ; or a. locus (2) cases in which, the contract being unperformed, money remains'. ^'^^ V^^^ "I" goods delivered in furtherance of it have been held recoverable. The first class of cases are best illustrated by the decisions 1 D. M. & G. in Reynell v. Sprye and Atkinson v. Denhy. In the first 6H. &N. 778. case the plaintiff had been induced, by the fraud of the defendant, to make a conveyance of property in pursuance of an agreement which was illegal on the ground of cham- perty. He sought to get the conveyance set aside in Chan- cery. It was urged that the parties were in -pari delicto, and that therefore his suit must fail ; but the Court being satisfied that he had been induced to enter into the agree- ment by the fraud of the defendant, considered that he was 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 ad- vanced by allowing eitlier, or at least the more excusable of I p. M. u the two, to sue for relief against the transaction, relief is p. 669. given him.' 6 11. &N. 778. The case of Atkinson v. Denhy is a peculiar one, and 7 H. &N. 934. the evidence at tlie trial woiikl expose to the world the amount of the pulillc revenue. Chap. V. §2. LEGALITY OF OBJECT. I9I appears almost to indicate an approach on the part of the Common Law Courts to the equitable doctrine of Undue Influence. The plaintiff, a debtor, ofiered his creditors a composition of 5«. in the pound. The defendant was one of the creditors, and his acceptance or rejection of the offer was known to be certain to determine 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 arrangement 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 tlje Court of Exchequer Chamber, in 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 the one has power to dictate, tlie other no alternative hut to submit.' The second exception to the general rule may best be stated in the words of Mellish, L. J., in Taylor v. Bowers. ' If q.^j ''i; "^^ money is paid or goods delivered for an illegal purpose, the While the person who had so paid the money or delivered the goods may po^sf^is''"'^' recover them back before the illegal purpose is carried out ; executory but if he waits till the illegal purpose is carried out, or if he locus poeni- seeks to enforce the illegal transaction, in neither case can he maintain an action ; the law will not allow that to be done.' The case was one of a fictitious assignment of goods to a third party with a view to defraud the creditors. The goods were then assigned to the defendant, and the plaintiff, the debtor, demantled them back. Nothing had been done towards caii-ying out the fraudulent intention of the parties, and the plaintiff was held entitled to recover. The rule seems to come to this, that until an illegal purpose is carried out there is a locus poenitentiae for one who has contributed 193 FORMATION OF CONTBACT. Part II. Dh's"*" '^' ^' ' SOO<^s or money for such a purpose. The case of Hampden V. Walsh is another illustration of the same rule. The plaintiff and another person each deposited X500 with the defendant to abide the decision of two scientific men as to the shape of the earth ; the decision went against the plaintiff, hut before the money was paid over he claimed it back, and it was held that he was entitled to recover it. He had repu- diated the wager before the money had left the hands of the variieyv. stakeholder, and the Court held, on the authority of several Hickman, ' ' •' liirtfaT' cases, that the 8 & 9 Vict. c. 109. s. 18 did not deprive a 10 Ex. 737. party to a contract, thereby rendered void, from repudiating the contract and recovering the money advanced before it had been paid. Part III. OPERATION OF CONTEACT. I93 PAET III. THE OPERATION OF CONTBACT. We have now concluded the subject of the Formation of Contract. We have noted the various elements which must needs co- exist in a valid contract, and we have further noted the effect which the absence of one of such elements pro- duces upon the validity of a contract ; making it void, as in the case of a mistake, or voidable, as in the case of fraud, or simply unenforceable, as in the case of the neglect of certain statutory forms. t?^"' "''^' We come now to deal with the effects of a valid contract when formed. We have to regard the contract as possessing the needed elements of agreement and obligation, and we have to ask. To whom does the obligation extend 1 Who have rights and liabilities under a contract t And then this further question arises. Can these rights and liabilities be assigned or pass to others than the original parties to the contract 1 We may lay down two general rules, which we will proceed to explain and illustrate. (i) No one but the parties to a contract can be bound by it or entitled under it. (2) Under certain circumstances the rights and liabilities created by a contract may pass to a person or persons other than the original parties to it, and this may take place, either (a) by act of the parties, (/3) by rules of law operating in certain events. o 194 OPEKATION OF CONTKACT. Part III. These two rules seem at first to look like one rule subject to certain exceptions, but they are in fact distinct. The obligation binds only the parties to the agreement ; but these parties, having created the obligation which binds them to one another, may in certain ways and under certain circum- stances be replaced by others who assume their rights or liabilities under the contract. The rules may perhaps be made clearer by an illustration. (i) If John Doe make a contract with Eichard E,oe, that contract cannot impose liabilities or confer rights upon John Styles. (2) But there are circumstances under which John Doe or Eichard Eoe may substitute John Styles for himself as a party to the contract, and there are circumstances under which, given certain relations between John Doe and John Styles, the latter would acquire the rights and liabilities of the former by operation of law. Chap. r. LIMITS OF CONTRACTUAL OBLIGATION. 1 95 CHAPTER I. The Limits of the Contractual Obligation. We may safely lay down the general rule that a person, Contract who is not a party to a contract, cannot be included in the confer rights and liabilities which the contract creates so as to enable him to sue or be sued upon it. This is not only established by decided cases, but seems to flow from the very conception which we form 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 rights ; the obligation takes the form of a promise by .4 to X to confer a benefit upon M, the legal relations of M are never- theless unaffected by that obligation. He was not a party to the agreement. He was not bound by the vinculum juris which it created, and 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 or habilities unless he be a party to the contract. One characteristic of party. the contractual as opposed to other forms of obligation consists in this, that the restraint which it imposes on individual freedom is voluntai'ily created by those who are subject to it, is, in fact, the creature of agreement. To this rule there are some apparent exceptions which it Apparent may be well to dismiss before proceeding to illustrate the rule from decided cases. The relation of principal and agent forms an apparent Principal exception to the rule just laid down. The principal incurs liabilities and acquires rights under contracts which are o 2 ig6 OPERATION OF CONTRACT. Part III. made between his agent and other parties. But the excep- tion is no more than apparent. The agent is, in reality, only the servant, or the mouthpiece of the principal. The prin- cipal acquires his rights and liabilities because he authorised the contract before, or ratified it after the agent made it. If the agent exceeds such authority as is actually or presumably given, he cannot bind the principal without ratification, nor then unless he has acted professedly as agent. It is true that if the agent contracts in his own name he may be made liable upon the contract, but so may his principal, and it would seem in cases of this nature that it is the principal who is the primary contracting party, but that the agent See App. B. has by his conduct entitled the person with whom he dealt on Ajjency. to affix upon him the liabilities of the contract. In the case of principal and agent therefore we must regard the two as one in the eye of the law, and the apparent exception which they present to the rule as having no real existence. Trustee and A trust has this in common with contract, that it originates trust. in agreement, and that among its other objects it aims at creating obligations. If we could really place a trust upon the footing of a contract we might say that it formed a very real and substantial exception to the general rule which we have laid down. There can be no doubt that the creator of a trust and the trustee do, by agreement, bring rights into existence which a third party, the cestui que trust, may enforce. But it is better at once to set aside trusts from the discussion, and for this reason. 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 taking its origin in the voluntary act of the parties obliged. A trust and the obligations resulting from a trust correspond to neither of these characteristics. The agreement which creates a trust has many other objects besides the creation of Chap. I. § I. LIMITS OF CONTRACTUAL OBLIGATION. jgj- obligations, these objects may include conveyance, and tbe subsequent devolution of "property. The obligation which exists between trustee and cestui 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 contrac- tual and the fiduciary obligation, to dismiss the latter alto- gether from our inquiries. We may now proceed to illustrate the general proposition laid down at the commencement of this chapter : and it will appear from what has gone before that the proposition is susceptible of a twofold division. A man cannot incur liabilities, and again, a man cannot acquire rights, from a contract to which he was not a party. § I. j1 man cannot incur liabilities from a contract to Contract 7.77 . . catinot im- which he was not a imrty. ^ \\-s!a\- This proposition is a part of a wider rule to the effect that third party, 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 Dumfordv. cannot, of his own will, pay another man's debt without his |„'^5* App'' consent and thereby convert himself into a creditor.' ' "■ ^°^' And in like manner A and M cannot, by any contract into which they may enter, thereby impose liabilities upon X. An illustration of this rule is afforded in the case of Schmaling v. e Taunt. 147. Thomlinson. The defendants in that case employed X, a firm of brokers, to transport a quantity of cocoa from London to Amsterdam. X agreed with the plaintiff to put the whole conduct of the transport into his hands, he did the work and sued the defendants for his expenses and commission. It was held that the defendants were not liable, inasmuch as there was no privity between them and the plaintiff; that is to say, that there was nothing either by writing, words, or con- duct to connect them with the plaintiff in the transaction. X was employed by the defendants to do the whole work for them, 198 OPEEATION OP CONTRACT. Part III. and there was held to be ' no pretence that the defendants ever authorised them to employ any other to do the whole under them : the defendants looked to X only for the per- formance of the work, and X had a right to look to the defendants for payment, and no one else had that right.' But does a A contract then cannot impose the burdens of an obligation impose a upon one who was not a party to it, but the case of Lumley flif'd"" "■ ^y^ raises the question whether it can impose a dmty, upon ties ? persons extraneous to the obligation, not to interfere with its due performance. We use the term duty as opposed to obligation as signifying that necessity which rests upon all alike to respect the rights which the law sanctions, while obligation signifies a special tie binding together definite and assignable members of the community. 2 E. & E. 216. In Lumley v. Gye the plaintiff, being the manager of an opera house, engaged a singer to perform in his theatre. The defendant induced her to break her contract. The plaintiff sued the defendant for procuring this breach, and the ques- tions raised took the following form. It was argued that an action would lie against one who procured the breach of any kind of contract, but that if that were not so an action would lie, at any rate, for inducing a servant to quit the service of his master. Peculiar It may be taken that the relations of master and servant m!Ster"and ^^^^ always been held to involve a right on the part of the servant. master to bring an action against any one who enticed away his servant, and so the Court was called upon to answer two How far questions : Does an action lie for procuring a breach of any to'case of contract 1 if not, then does the exceptional rule applicable to r.umley v. the Contract of master and servant apply to the manager of tiVC. a theatre and the actors whom he engages to perform ? The majority of the Court answered both these questions in the affirmative. Coleridge, J., in an elaborate dissenting judgment answered both in the negative, holding that the action ' could not be maintained, because, first, merely to Chap. I. § 2. LIMITS OF CONTE ACTUAL OBLIGATION. I99 induce or procure a free contracting party to break his covenant, whether done maliciously or not, to the damage of another is . . not actionable; second, that the law with regard to seduction of servants from their masters' employ, in breach of their contract, is an exception, the origin of which is known \ and that that exception does not reach the case of a theatrical performer.' The case stands alone (it was decided in 1853), and no Singularity reported attempt has since been made to bring an action for a like cause. But it is important to bear in mind that a considered judgment of the Court of Queen's Bench has laid it down that a contract confers upon the parties to it rights in rem as well as rights in personam ; that it not only binds together the parties by an obligation, but that it imposes upon all the world a diity to respect the contractual tie. \ 2. A man cannot acquire rights under a contract to which he is not a party. This is a rule which admits of fuller illustration than the Contract one which we have just been discussing. It is contrary fg^ rights to the cdmmon sense of mankind that M should be bound by °" ^ *"''^ "^ party, a contract made between X and A . But if A and X make a contract in which X promises to do something for the benefit of M, 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 able to sue on behalf of the multitude of which X consists. Where a contract is made by A and X for the benefit of at Common M it is certain that M cannot sue at Common Law ; and the current of judicial opinion runs strongly against his being able to sue in equity. ' The exception which the law of Master and Servant seems to have engrafted upon the Common Law in this matter is traced by the learned Judge, in a detailed historical argument, to the Statutes of Labourers. 200 OPEEATION OF CONTRACT. Part III. 4 B. & Ad. 433 In Price v, Easton the plaintiff sued upon a promise made by the defendant to X that in con&ideratiou that X would work for him he would pay the plaintiff a sum of money. It was held by the Court of Queen's Bench that the plaintiff could not recover because he was not a party to the contract, the members of the Court stating in different forms the same reason for their decision. Lord Denman, C. J., said that the declaration did not ' show any consideration for the promise moving from the plaintiff 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 have been entirely ignorant of the arrangement between X and the defendant :' and Patteson, J., that there was ' no promise to the plaintijf alleged.' not even if It was at one time thought that if the person who was to near of kin , n . ^ , . to the pro- take a benefit under the contract was nearly related by blood ""^'^'^' to the promisee a right of action would vest in him. But I B. & s. 393, this doctrine was finally overruled in the case of Tweddle v. Atkinson by the Court of Queen's Bench. The facts of that case were as follows : — M and N married, and after the marriage a contract was entered into between A and X, their respective fathers, to the effect that each should pay a sum of money to M, and that M should have power to sue, for siu:h sums. After the death of A and X, M sued the executors of X for the money promised to him. It was held that the action would not lie, and 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 ivcmr. 6. 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 a sum of money Chap. I. § 2. LIMITS OF CONTRACTUAL OBLIGATION. 2,Ol if he performed a certain cure. But there is no modern case in which the proposition has been supported. On the con- trary, it is now established that no stranger to the considera- tion can take advantage of a contract, although tnade for his benefit.' i e. & s. 397. Until very recently there was no doubt that a third party The doc- could not sue alone in equity, for benefits intended to be con- equity. ferred upon him by the contract, although there is authority for saying that he could join as co-plaintiff in a suit brought creijory v. by the actual promisee. 3 Mer. 582. The mode in which the question has most commonly been raised of late is in the case of articles of association of a Company, in which the directors are- empowered by the share- holders to pay a sum of money to an original promoter of the Company, or to one who has given labour or money towards the starting of its existence. The Common Law Courts have been unhesitatins; in their Meihadov. ^ Porto Alegre decision that no right of action accrues to the intended bene- l.^'il'/c"?! ficiary under such a provision. But in the Court of Apjieal ^°'' in Chancery it has, in one case, been held that he can sue, and Lord Hatherley is reported to have said that the case xouchev. Metropolitan came ' within the authority that where a sum is payable by warehousing A. B. for the benefit of C. D., C. B. can claim under the''^''''" contract as if it had been made with himself.' But the most recent decision on this subject seems to place the relation of the parties on a footing which makes the above- quoted dictum inapplicable to this class of case. In Eley v. Positive Government Security Life Assurance Company, one of l. r. i^ex. d. the articles of association of the defendant Company provided that the plaintiff should be employed as its permanent solicitor. The action was brought for a breach of contract in not employing the plaintiff. Lord Cairns, in delivering the judgment of the Court of Appeal, says, ' Articles of asso- ciation, as it is well known, follow the memorandum, which ca™fe''cS'v. states the objects of the Company, while the articles state the 7 h.^l. at 302 OPEEATION OF CONTEACT. Part III. arrangement between the members. They are an agreement ifiter socios, and in that view if the introductory words are applied to Article ii8, 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. No doubt he thought that by inserting it he was making his employment safe as against the Company; but his relying on that view of the law does not alter the legal effect of the articles. 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.' This decision appears to be conclusive on this special aspect of the general rule. Nevertheless the breadth of the L. R.6Ch. 671, language used by the Court in Touches case makes it impos- see Pollock on slble to sav that there is no doubt as to the operation of Contracts, 198. "^ ^ the rule in excluding the acquisition by third persons of equitable rights under a contract. Attempts Attempts have been made, but without success, to break third party the general rule in the case of unincorporated companies to sue for ^^^ societies who wish to avoid brineinn- action in the names many joint ° '=' contractors 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. Such a case is that of L^R. s c. p. Qray v. Pearson, where the managers of a Mutual Assurance have uni- Company, not being members of it, were authorised, by failed!^ powers of attorney executed by the members of the Com- pany, to sue upon contracts entered into by them as agents on behalf of the Company. They sued upon a contract so entered into, and the Court of Common Pleas held that they could not maintain the action, ' for the simple reason, — a reason not applicable merely to the procedure of this country, but one affecting all sound procedure, — that the proper Per wiUes, J., person to bring an action is the person whose right has been violated.' And Montague Smith, J., said, ' This is an attempt Chap. I. § 2. LIMITS OF CONTEACTUAL OBLIGATION. 203 to do what has been frequently but fruitlessly attempted before, viz. to get rid of the difficulty of a large number of people suing in their own names, — to appoint a public officer without obtaining an Act of Parliament or a Charter of Incorporation.' The practical inconvenience under which bodies of this Statutory description labour has been met in many cases by the Legis- of the ruk lature. Certain companies and societies are enabled to sue and be sued in the name of an individual appointed in that behalf! ^ Statutes of this nature are — 7 Geo. IV. c. 46, relating to Joint Stock Banking Companies ; 7 WiU. IV. and i Viet. u. 73, relating to companies formed under letters patent; 34 and 35 Vict, c, 31, relatiug to Trades Unions ; 38 and 39 Vict. c. 60, relating to Friendly Societies ; and in many cases companies formed by private Acts of Parliament possess similar statutory powers. 304 OPEEATION OF CONTEACT. Part III. Assignment of contract. CHAPTEE II. The Assignment of Contract. Wb now come to discuss the cases in which the contractual obligation may pass to one who was not a party to the original agreement. We have seen that a contract cannot affect any but the parties to it ; but the parties to it may under certain circumstances drop out and others take their places, and we have to ask, first, how this can take place by the voluntary act of the parties themselves, or one of them. § I. Assignment by act of tJie parties. This part of the subject also falls into two divisions, the assignment of liabilities and the assignment of rights, and we will deal with them in that order. Liabilities cannot be assigned. Assignment of liabilities. A man cannot assign his liabilities under a contract. Or we may present the matter from the point of view of the other party to the contract, and say that a man cannot be compelled to accept performance of the contract from one who was not originally a party to it. The rule seems to be based on sense and convenience. It is not merely that a man is entitled to know to whom he is to look for the satisfaction of his lights under a contract ; but, to use the language of Lord Denman in Humble v. Hunter, ' you have a right to the benefit you contemplate from the character, credit, and substance of the person with whom you contract.' Chap. It. § I. THE ASSIGNMENT OE CONTRACT. 205 The rule is well illustrated by the case of Robson dc Sharpe 2 b. & Ad. 303. V. Drummond. Sharpe undertook to supply the defendant with a carriage and keep it in repair, on certain annual pay- ments, for five years. Eobson was in fact the partner of Sharpe, but the defendant contracted with Sharpe alone. After three years had expired Sharpe retired from business, and the defendant was informed that Eobson was thence- forth answerable for the repair of the carriage, and would receive the payments. The defendant refused to accept the substitution of Eobson for Sharpe, and threw up the con- tract. Upon this Eobson and Sharpe sued him, but tlie Court held that so far as Sharpe was concerned he had put an end to the contract, and that his liabilities could not be transferred to Eobson without the defendant's consent. ' The Reason for defendant,' said Lord Tenterden, ' may have been induced ™ ^' to enter into this contract by reason of the personal confi- dence which he reposed in Sharpe. .• . The latter, therefore, having said it was impossible for him to perform the con- tract, the defendant had a right to object to its being per- formed by any other person, and to say that he contracted with Sharpe alone and not with any other person.' There are however two exceptions to this rule. The first Exceptions is more apparent than real, and occurs when a party liable ,. .... under a contract substitutes another for himself with the substituted consent of the party to whom he is liable. But this is ment ; in effect the rescission, by agreement, of one contract and the S' AaifnT'-^ substitution of a new one in which the same acts are to be performed by different parties. The second arises where an transfer interest in land is transferred, and such contractual obliga- ;„ land. tions as attach to the enjoyment of the interest pass with it from the transferor to the transferee. This however is a matter to be discussed separately, for there are certain features connected with the obligations attached to land which distinguish them from other promises and call for particular attention. 206 OPERATION OF CONTRACT. Part III. Assignment of rights Assignabi- lity of the benefit of a contract : Powles V. Innes, ii M. & W. 10. at common law only by substituted agreement ; Per Lord Ten- terden. C. J., Fairlie v. Denton, 8 B. & C. 400. in cases of debt : Cuxon V. Chadley, 3 B. & C. S9I. (i) At Common Law. At Common Law, apart from the customs of the Law Mer- chant, the henefit of a contract, or a chose in action, cannot be assigned so as to enable the assignee to sue upon it in his own narne. He must sue in the name of the assignor or his representatives ; or rather, the Common Law so far takes cognisance of such equitable rights as are created by the assignment that the name of the assignor may be used as trustee of the benejBts of the contract for the assignee. The only mode by which the rights under a contract can be really transferred is not, strictly speaking, by assignment at all, but by means of a substituted agreement. If A owes M £ioo, and M owes X £ioo, it may be agreed between all three that A shall pay X instead of J/, who thus terminates his legal relations with either party. In such a case the consideration for jl's promise is the dis- charge by M ; for M'^ discharge of A, the extinguishment of his debt to X; for JT's promise, the substitution of ^i's lia- bility for that of M. But there must be ascertained sums due from A io M and from M\ioX\ and it is further essential that there should be a definite agreement between the parties, for it is the promise of each which is the consideration for those given by the others. Thus it is not enough that A should say to X ' I will pay you instead of Jf,' and should afterwards suggest the arrangement to M and receive his assent. Nor is it enough that M should in writing authorise A to pay to X the debt due from A to himself, and that A should write ' acknowledged ' at the foot of the document : X can- not sue A for the money. These were the facts in Liversidge V. Broadhent. M owed money to the plaintiff, who required security for his debt, M thereupon, being owed money by Chap. II. § I. THE ASSIGNMENT OF CONTRACT. 207 the defendant, gave to the plaintiff a paper authorising the defendant to pay the money to him (the plaintiff) ; this paper the defendant ' acknowledged ' in writing ; but on his being sued for the money, the Court of Exchequer held that such an acknowledgment gave no right of action. It will be observed that in neither of these cases was there such an agreement as amounted to a discharge by M of the debt due to him from A ; there was 'therefore no considera- tion for A'a promise to pay X, and on that ground X would be unable to maintain an action against A. In the case last mentioned, Martin, B., thus gave reasons for holding that X could not recover : — ' There are two legal principles 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 per- fectly 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 he 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 he extinguished, — no indulgence to him or detriment to the plaintiff. There was nothing in the nature of a consideration moving from the plaintiff to Per Martin, e., Liversidge v. the defendant, but a mere promise by the defendant to pay f "^"^^'^^^^ another man's debt.' It is thus apparent that a contract cannot be assigned at Common Law except ( i) by an agreement between the ori- ginal parties to it and the intended assignee, which is sub- ject to all the rules for the formation of a valid contract, and 208 OPERATION OF CONTRACT. Part III. which is limited in its operation to the transfer of a debt ; or (2) by the rules of the Law Merchant under circumstances or by cus- mSchants. to ^e noted presently. Assign- ability of contracts in equity (ii) In Equity. Equity will permit the assignment of a chose in action, or the rights which a man possesses under a contract, whenever the contract is not for exclusively personal services ; and a suit in equity may be maintained by the assignee in his own name. is subject to -But certain conditions affect the rights of the assignee, certain con- ^^^ rpjjg assignment will not be supported unless considera- tion has been given by the assignee. (ff) It will not bind the person liable until he has received notice, although it is effectual as between assignor and assignee from the moment of the assignment. (7) 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. 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 illus- tration is furnished in the case of covenants to pay interest on a mortgage debt. If the mortgage be assigned by the mortgagee without notice to the mortgagor, and interest be afterwards paid by the mortgagor to the duly-authorised agent of the mortgagee, the money so paid, though due to the assignee, cannot be recovered by him from the debtor. We may put the case thus : — Money is due at regular inter- vals from A to X, and is ordinarily paid by A to the agent Notice. Williams v. Sorrell, 4 Vesey, sfeg. Chap. II. § I. THE ASSIGNMENT OP CONTEACT. 209 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 : — 'The debtor is liable at law to 4D.M.&C.15. 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 1 If a Court of Equity laid down the rule that the debtor is a trustee for the as- signee, without having any notice of the assignment, it would lie 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 assignment in order to jKrfect the title of the assignee!' And the same case is authority for this further proposition, 4 d. m. & c. that ' equitable titles have priority according to the priority of notice.' The successive assignees of an obligation rank as to their title, not according to the dates at which the credi- tor assigned his rights to them respectively, but according to the dates at which they gave notice to the party to be charged. Title. ' The general rule, both at law and in equity, is that no Assignee " . . , . , , ! . takes sub- person can acquire a title, either to a cnose m action or any ject to other property, from one who has himself no title to it.' '^I""'^^- '■ '- •" Crouch V. And further, ' if ^ man takes an assignment of a chose in ^''^^'sq!b"' action, he must take his chance as to the exact position in Maggies v. which the party giving it stands.' 3 h. "L-c. 735. The facts of the case last cited will afford an apt illustra- tion of this proposition. M chartered half his vessel to X, using the otlier half p 2IO OPERATION OF CONTEACT. Pait III. himself and taking half the risks of the adventure. The form in which the agreement between the parties was ex- pressed was this : — M and X executed a charter party whereby JT appeared as sole charterer ; by a second document a clerk of M undertook the payment of half the freight and half the risks of the adventure ; and by a third document M guaranteed to X the performance by his clerk of the undertaking con- tained in the second document. The whole arrangement was bond fide, and its peculiarities arose from the difficulty created by M being the charterer of a portion of his own vessel. Subsequently M assigned the charter to A for a large sum, without communicating to him the accompanying documents which divided both the profits and the risks between the owner M and the charterer X. A sued at Common Law in the name of M and recovered the whole freight, the Court of Exchequer holding that X was bound on the true con- struction of the agreements to pay over the freight to M in Boydv. the first instance, and afterwards settle the balance of profit Mangles, 3 Ex. 395. ajj(j jQgg X applied to the Court of Chancery to have an account taken in respect of the joint adventure, and to re- strain A from proceeding on the Common Law judgment. It was held by the House of Lords that A must stand in the same position with M as to the whole agreement, that he Diira""' ^^^® ^'^^ entitled to more than a moiety of the freight, and 3 H. L. c. 702. ^^^g liable for half the losses of the adventure. In like manner, if one of two parties be induced to enter into a contract by fraud, and the fraudulent party assign his Graham v. interest in the contract for value to X, who is wholly inno- Johnson, I.. R. 8 Eq. 38. cgut in the matter, the defrauded party may get the con- tract set aside in equity in spite of the interest acquired in it by X. This rule It is possible, however, that two parties to a contract may dudecTby" Stipulate that if either assign his rights under it, such an express assignment shall be 'free from equities;' that is to say, that Chap. II. §1. THE ASSIGNMENT OP CONTEACT. 211 the assignee shall not be liable to be met by such defences E^paru •' Asiatic Bank- as would have been valid against his assignor. It is ques- SfL'^R™" tionable, 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. (iii) By Statute. It remains to consider, so far as mere assignment goes, Assignment the statutory exceptions to the Common Law rule that a by "statute. cliose in action is not assignable. (a) The Judicature Act of 1873 gives to the assignee of36&37Vict. any debt or legal chose in action all legal rights and reme- ^"''■^- '• dies. But (i) the assignee takes subject to equities ; (2) the assignment must be absolute; (3) must be in writing; (4) express notice in writing must be given to the party to be charged, and the title of the assignee dates from notice. It is to be noted that the requirements of this section as to form are far more stringent than those of the Equity Courts, which apparently did not require writing either for the assignment or the notice. (/3) By 30 & 31 Vict. c. 144, policies of life insurance Policies of are assignable in a form specified by the Act, so that the j^„(,g assignee may sue in his own name. Notice must be given by the assignee to the Assurance Company, and he takes subject to such defences as would have been valid against his assignor. (7) By 31 & 32 Vict. c. 86, policies of marine insurance Policies of are similarly assignable ; but this statute contains no re- surance. quirement as to notice. (S) Shares in Companies are assignable under the pro- Shares, visions of the Companies Clauses Act, 1845, and the Com- 1'^.?^"""''^' 25 & 26 Vict. c. panics Act, 1862. 89.5.22. (f) Mortgage debentures issued by Companies under the Mortgage Mortgage Debenture Act are assignable in a form specified ^3 ^ ^^ ^.^^ by the Act. ■=•"■ p 2 213 OPERATION OF CONTRACT. Part III. Negotiability. Assign- So far we have dealt with the assignability of contracts be distin- ^^ Common Law, in equity and by statute, and it would guished 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, from ne- "VV^e now come to deal with a class of promises the benefit of which is assignable in such a way that the promise 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 con- tracts. Features The essential features of negotiability appear to be these. liability. 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. Negotiability would seem to exist partly by custom and partly by statute. Neg:o- Certain contracts are negotiable by the custom of mer- custo'm, ^ chants recognised by the Courts ; such are bills of exchange, foreign and colonial bonds expressed to be transferable by Rumbaiiv. dcUvery, and scrip certificates which entitle the bearer to Metropolitan q'r'd.'S;^ become a holder of such bonds or of shares in a company, by statute. Certain other contracts have been made negotiable by statute, as promissory notes by 3 & 4 Anne, c. 9, and East India bonds by 51 Geo. III. c. 4. Chap. II. §1. THE ASSIGNMENT OF CONTBACT. 213 Bills of lading, wiiich are affected both by the law mer- chant and by statute, possess some characteristics which will is&igvict. call for a separate consideration. Bills of exchange and promissory notes figure so constantly 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 usually takes the form of a written a bill of order addressed by if to X directing X to pay a sum of '^^'^^^'^"S'^- money to A or order, or to A or bearer. M is then called How the drawer of the bill, and by drawing it he 23romises to , or to D or order, the specially, bill may be assigned by B 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 in bianl<. indorsed in blank, and the bill then becomes payable to bearer, that is, assignable by delivery. A has given his order ai4 OPERATION OF CONTRACT. Part III. A promis- sory note. Assign- ability dis- tinguisiied from nego- tiability. Considera- tion pre- sumed. Notice not needed. The as- signee may have a bet- ter tide than the assignor. 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 jl 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 in- dorsement are similar to those relating to a bill of exchange. "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. In the case of an ordinary contract, I) would, at the least, 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, and 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 riglits 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 presumptions of law under these circumstances are, (i) that B did not give value for the bill, but (2) that he was ignorant of the fraud or illegality, for fraud, or participation in an illegal act, is Chap. ri. §1. THE ASSIGNMENT OF CONTRACT. 2l5 never presumed. It will be for D to sliow that he gave value for the bill, but for X to show that D knew that the bill was Byies on Biiii. 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 case of Crouch v. Credit Fancier of England furnishes l. r. s q. b. an illustration both of the nature of negotiability and the limits within which the creation of negotiable instruments is permissible. A debenture assignable under the Companies Act and ex- An instru- pressed to be payable to the bearer was stolen ; the thief sold ^aHsTof^ it to the plaintiff, and he sued the Company for non-payment; negotiable, the jury found that he was a bonAfde holder for value of the debenture, but the Court held that he could not recover, because, in spite of the wording of the debenture, it was an instrument under seal and therefore could not be, what it purported to be, a negotiable instrument assignable by de- livery. 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 in- dorser or deliverer) from whom he took it.' i:%^^'^' But the case further goes to show that a man cannot, by merely making an instrument payable to bearer, make it ' ' thereby negotiable, if the custom of the law merchant does not /■ recognise it as such ; or if, being so recognised by the custom /I of merchants, the character of the instrument preclude its negotiability. For it had been the custom of merchants to treat these debentures as assignable by delivery ; yet when one of them came before the Courts it was at once denied 21(5 OPERATION OF CONTEACT. Part III. the incidents of negotiability as incompatible with its cha- racter of an instrument under seal. Bill of It would not be desirable to go further into the subject of negotiable instruments than is necessary to exhibit the essential features of negotiability. "We may however notice the character of ' bills of lading,' as possessing some peculiar marks. A bill of lading is called ' a document "of title,' ' a symbol of property;' and the meaning of these phrases is Whit it is. this. 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 consignee, 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 ^. Whatrights The assignment of the bill of lading by indorsement by the menrcon- consignee to a holder for value gives to that holder a better fers. right than the consignee himself possessed. He has a title to the goods which overrides the vendor's right of stoppage in transitu, and gives him a claim to them in spite of the insolvency of the consignee and the consequent loss of the LickDarrow ./a j, 2 sm^L.c. 825. price of his goods by the consignor. By law mer- His right however, which in this respect is based upon the prietajy l^-^^ merchant, is a right of property only. The assignment rights. q£ ^jjg y^^YY pf lading gives a right to the goods. It did not at Common Law give any right to sue on the contract expressed in the bill of lading. By 18 & 19 This right is conferred by 18 and 19 Vict. c. iii. By that "Vict. c. Ill , . . contractual' act the assignment of a bill of lading is made to transfer not rights ; ' 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 8 M. & w. 339. to the judgment of Lord Abinger, C. B., in Gibson v. Carrutkers, for its application to Benjamin on Sales, bk. v, part I, Chap. II. § 2. THE ASSIGNMENT OF CONTRACT. 31 7 only the property in the goods, but ' all rights of suit ' and all liabilities in respect of the goods ' as if the contract con- tained in the bill of lading had been made with himself.' As regards the negotiability of a bill of lading, it differs in some important respects from the instruments with which we have just been dealing. 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 liabili- but not in- ties of the assignor, he does not acquire proprietary rights of assi'^n- independently of his assignor's title : a bill of lading stolen, or °'''^ '"'"■ transferred without the authority of the jjerson really entitled, eSS' gives no rights even to a honAfide indorsee. And again, the contractual rights conferred by statute are expressly conferred subject to equities. A bill of lading then may be called a contract assignable without notice, partaking in some respects of the character of conveyance, inasmuch as it gives a title to property, but incapable of giving a better title, whether pro- prietary or contractual, 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 exercised against the original consignee. § 2. Assignment of contractual rights and liabilities hy operation of law. We have hitherto dealt with the mode in which the parties to a contract may by their own acts assign to others the benefits or the liabilities of the contract. There are however certain circumstances in which rules of law operate so as to transfer to one person the rights or the liabilities of another. If A by purchase or lease acquire an interest in land of 2l8 OPEKATION OF CONTRACT. Part III. Marriage. Repre- sentation. Assignment M Upon Certain terms which bind them by contractual in land. obligations in respect of their several interests, the assign- ment by either party of his interest to X will within certain limits operate as a transfer to X of those obligations. Marriage, again, transfers to the husband the rights and liabilities of the wife, not absolutely, but conditionally. Kepresentation, whether in the case of death or bankruptcy, operates to confer in the one case upon the executors or administrators of the deceased, in the other upon the assignees of the bankrupt, his rights and liabilities ; but here the assign- ment of contractual obligations is merely a mechanical con- trivance for continuing up to a certain point and for certain purposes the legal existence of the deceased or the bankrupt. They to whom the contract is assigned take no benefit by it, nor are they personally losers by the enforcement of it against them. They merely represent the original contracting party to the extent of his estate and no more. Covenants affecting leasehold rini with tile land if they con- cern the thing de- mised, See cases col- lected in note to Spencer's case, t Sill. I,. C. I. n. 74- Assignment of obligations upon the transfer of interests in land. u. Covenants affecting leasehold interests. At Common Law these are said to ' run with the land and not with the reversion,' that is to say they pass upon an assignment of the lease, but not upon an assignment of the reversion. If the lessee assigned his lease, the man to whom he assigned it would be bound to the landlord by the same liabilities and entitled to the same rights as his assignor, to this extent : — (i) Covenants in a lease which ' touch and concern the thing demised ' pass to the as.signee of the lessee whether or no they are expressed to have been made with the lessee ' and his assigns.' Such are covenants to repair, or to leave in good repair, or to deal with the land in any specified manner. (2) Covenants in a lease, which relate to something not in Chap. II. §2, THE ASSIGNMENT OP CONTEACT. 319 existence at the time of the lease, are said to bind the assigns only if named, that is to say, if the covenant be expressed as made with heirs and assigns. But although this rule is laid down in the leading case upon the subject, it has been M.nshuUv. so unfavourably commented upon in a modern decision that ="•*•<. sos, its validity is extremely questiouablfe. (3) In any case the assignee of the lessee does not acquire not if pure- benefit or liability from merely personal or collateral covenants ^ P^""^""^ ■ made between his assignor and his landlord. X the lessee covenanted to use his premises as a public-house. A the lessor covenanted not to build or keep any house for the sale Thomas v. ^ *' Hayward. of beer or spirits within half a mile of the demised premises. J^,"*- ■• ^'"''' X assigned his lease to M. It was held that the benefit of A's covenant did not pass to M. The reversioner or landlord does not, at Common Law, by Covenants the assignment of his interest in the land convey his rights .j^itj, (i,e and liabilities to tlie assignee. reversion ° , _ except by It was not till 32 Hen. VIII. c. 34 that the law in this statute. respect was changed, a change probably due to the dissolu- tion of the monasteries. By that act the assignee of the reversion is enabled to take the benefits, and also incurs the liabilities, of covenants entered into with his assignor : and it has been settled that the rules as to the connection of the covenants with the thing demised apply to such as run with the reversion equally with those that run with the land. sm. 1. c.i 69. The act only applies to leases under seal, but in the case of leases from year to year, payment of rent and the acceptance of it is held to be evidence from which a jury may infer ' a c^mkh'vf' ■' ' , , ,1 , ^ c 1 Stubbs, L, R. consent to go on, on the same terms as betore. 5 c. p. 339. /3. Covenants affecting freehold interests. imon Law, covenants entered into with t at is to say, promises under seal made to 1 of land, and for his benefit, pass to his assignees, provided At Common Law, covenants entered into with the owner Covenants of land, that is to say, promises under seal made to the owner o^^gr 220 OPERATION OF CONTEACT. Part III. Dicey, Parties to Actions, 120-5. Covenants by owner. Stockport Waterworlts Co. V. Potter, 3 H. & C. 300. 2 Mylne & Keen, 517. Common Law view. Equitable enforce- ment of restrictive covenants. they touch, and concern the thing demised and are not merely personal. 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. It vfould be othervpise if a covenant ^f ere introduced into the conveyance relating to some matter purely personal between A and X. On the other hand, covenants entered into hy the owner of land which restrict his enjoyment of the land, do not at Common Law bind his assignees, except he thereby create certain well-known interests, such as easements and profits, recognised 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 Keppel v. Baily : — ' It must not be sup- posed that incidents of a novel kind can be devised and attached to property, at the fancy or caprice of the 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 tenements a peculiar character, Avhich should follow them into all hands however remote.' But Courts of Equity have established a class of exceptions to this general rule, and although these have been mainly confined to covenants in the case of land sold for building purposes, it is difficult to see what limitations can be intro- duced to the priaciple on which they are enforced. The view taken by Courts of Equity may be thus illustrated. A sells land to X and covenants that he A, being possessed of adjoining land, will never use it otherwise than in a particular way. A sells his land to M with notice of the covenant, and Chap. II. §2. THE ASSIGNMENT OP CONTRACT. 321 M's enjoyment of the land is then limited ty the terms of the covenant. The principle is thus stated by Lord Cotten- ham : — ' 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 covenarit runs with the land, but v^hether a party shall he permitted to use his land in a manner inconsistent with the contract entered, into by his vendor, and with notice of which he purchased.' if ayN^ii!"??^. Assignment of contractual obligation upon marriage. When a woman marries, having bound herself by contract Leake, pp. 1238-1249. while feme sole, and being entitled thereby to benefits, or contracts subject to liabilities, the effect of her marriage is to disable ^qJ^^""^"^ her from acquiring the benefits of such contracts and to vest dum sola. them conditionally in her husband ; to protect her from the liabilities of such contracts and pass them, with some limita- tions, to her husband. She is disabled from acquiring the benefit of her contracts, for if she sue alone upon contracts made by her before marriage, she may be met by an application to the summary jurisdiction of the High Court. The husband takes the benefit of contracts made by the Husbands wife dum sola, if he does any act which amounts to a reduction "^ into possession of the chose in action. He does this, in the case of a contract executed on the part of the wife, by re- ceiving or authorising another to receive payments due in respect of such contracts. He may do this also by suing jointly with the wife for whatsoever may be due to her upon her contracts. "Whatever is thus obtained passes absolutely to the husband, like all other personal property of which the wife was previously possessed. If the husband do not during |i*|j^= '■ the coverture reduce into possession the choses in action of = '^- * ^''- "5=- 233 OPERATION OF CONTBACT. Part III. Fleet V. Perrin, L. R. 4 Q. B. 500. and liabili- ties. 33 & 34 Vict, c. 93. s. 12. ■Sanger v. Saneer, I.. R, II Eq. 470. 37 & 38 Vict. c. so. the wife, they survive to her if he die first, or pass to her representatives if she die iu his lifetime. The husband acquires the liabilities of the wife to this extent; at Common Law he was liable to be sued jointly with his wife upon any contracts made by her before marriage. The Married Women's Property Act, 1870, exempted him from this liability altogether and limited the creditor's remedy to the separate estate of the wife. But an Act to amend the last-mentioned Act has again fixed upon the husband a liability for his wife's ante-nuptial contracts limited by the amount of such real and personal property of the wife as has been settled on or vested in the hus- band, and of such choses in action as the husband has reduced, or might by reasonable diligence have reduced into possession. Representa- tives acquire all con- tractual rights which affect per- sonal estate, if not de- pendent on personal skill or Baxter V. Burfield, 2 Str. 1266. Assignment of contractual obligation by death. Death passes to the executors or administrators of the deceased all his personal estate, all rights of action which would affect the personal estate, and all liabilities which are chargeable upon it. Thus covenants which are attached to leasehold estate pass, as to benefit and liability, with the personalty to the executor or administrator, while covenants affecting freehold, as covenants for title in a conveyance of freehold property, pass to the heir or devisee of the realty. The rights and liabilities of the executors and administrators are further limited in this way, that performance of such contracts as depend upon the personal services or skill of the deceased cannot be demanded of his executors, nor can they insist upon offering such performance. Contracts of personal service then expire with either of the parties to them : an apprenticeship contract is thus terminated by the death of the master, and no claim to the services of the apprentice survives to the executor. In like manner a breach of contract which involves a Chap. n. § 2. THE ASSIGNMENT OF CONTRACT. 2^3 purely personal loss does not confer a rigbt of action upon executors. In Chamberlain v. Williamson, an executor sued 2 m. & s. 408. for a breach of promise to marry the deceased, the promise having been broken and a right of action having accrued in the lifetime of the testatrix. But the Court held that such an action could not be brought by i-epresentatives of a deceased person, inasmuch as it did not clearly appear that the breach of contract had resulted in damage to the personal estate. 'Although marriage may be regarded as a temporal ad- vantage to the party as far as respects personal comfort, still it cannot be considered as an increase of the transmissible personal estate.' Assignment of contractual obligation hy hankrwptey. The Bankruptcy Act of 1 8 69 provides a machinery whereby 3= & 33 vict. the creditors in the case of bankruptcy or liquidation by Bank- arrangement may appoint a trustee of the property of the ikju'dation bankrupt for the purpose of getting in and dividing the property for the benefit of the creditors. Such a trustee Trastee's acquires ' not only what may in strictness be called the P°*'^''^ ■ property and debts of the bankrupt, but also those rights of action to which he was entitled for the purpose of recovering in specie real or personal property, or damages in respect of Rogers v. Spence, that which has been unlawfully diminished in value or taken J|"-£^''- from him.' The trustee thus acquires, like the representa- tives of a deceased person, rights to the performance of executory contracts and rights of action for contracts broken. The trustee of the bankrupt acquires in a fuller and more their extent, independent manner than the personal representatives, the rights of the person wliose legal character he for the time assumes. In some ways he acquires a wider power than the bankrupt would have possessed in respect of his obligation. He takes all the property, real as well as personal, of the bankrupt, and obligations in respect of each ; and, as his duty is not merely to represent the bankrupt, but to represent him 224 OPERATION OF CONTBACT. Part III. I'j A 33 Vict. and limits. Drake v. Beckham. II M. & \V. 319, witli special reference to the interests of his creditors, he is able to disclaim and so discharge such executory contracts as he thinks -will not be beneficial to the estate. But, like the representative of a deceased person, he is excluded from suing for 'personal injuries arising out of breaches of contract, such as contracts to cure or to marry.' Part IV. INTEEPEETATION OF CONTRACT. 335 PART lY. THE INTEEPEETATION OF CONTEACT. After considering the elements necessary to the formation Interpreta- of a contract, and the operation of a contract as regards ji-act 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 con- in what the sidering the interpretation of contract we require to know ^tg^*^ '^°"' 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- Rules re- dence and rules relating to construction. Under the first head evidmce, we have to consider the sources to which we may go for the ^°ro2Wsition to exonerate on the part of the plaintiff, acceded to hy himself / and this in effect will be a rescission of the contract.' a H. & N. 79. In Dohson v. Espie, the plaintiff sued the defendant for non-payment of deposit money due upon a sale of land. The defendant pleaded that, before breach of his promise to pay, the plaintiff had given him leaife and license not to pay. The Court held that such a plea was inapplicable to a suit for the breach of a contract, 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 of Alderson, B., in King v. Gillett) an exoneration means a promise to exonerate, which like any other promise needs consideration to support it. It is clear that in Dohson V. Espie the plaintiff was to obtain nothing for his alleged Chap. I. § I. BY AGREEMENT. 349 waiver ; neither the relinquishment of a claim, nor any fresh consideration. Finally, we have the express authority of Parke, B., in Foster V. Dawher, for saying that an executed contract, i. e. 6 Exch. 839. a contract in which one of the parties has performed all that is due from him, cannot be discharged by a parol waiver. But this case illustrates another feature of the matter under discussion, to which we will now proceed. To the general rule which we have laid down there is Peculiarity an important exception in the case of bills of exchange and exchange promissory notes. The rights of the holder of such instru- sof,^™!™^ ments may be waived and discharged without any considera- tion for such waiver. The point arose in the case of Foster 6 Exch. 839. V. Dawber. The plaintiff was the executor of one J. C, to whom the defendant had given promissory notes for £1000 as security for a loan of that amount. Afterwards J. 0. had given the defendant a discharge for the promissory note. It was held that the discharge, though rmsupported by con- sideration, was valid. The Court said, ' It is competent for both parties to an executory contract, by mutual agreement, without any satis- faction, to discharge the obligation of that contract. But an executed contract cannot be discharged except by a release under seal, or by performance of the obligation, as by pay- ment, 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 The rule of law has been so often laid down and acted upon, although there is no case precisely on the point as between immediate parties, that the obligation on a bill of exchange may be discharged by express waiver, that it is too late now 6 Exch. 851. to question the propriety of that rule.' And it was further held that the rule as to bills of ex- change, originating in the law merchant by which those instruments are almost entirely governed, would apply to «5o DISCHARGE OF CONTRACT. Part V. promissory notes which derive their negotiable character from statute. The statute 3 & 4 Anne, c. 9, makes the same law applicable to both instruments. Substituted contract, how differ- ent from waiver ; may be an implied discharge ; but the im- plication must be clear. How differ- ent from postpone- ment of per- formance. § 2. Substituted Contract. A contract may be discharged by an alteration in its terms which, in effect, substitutes a new agreement for the old one. The difference between this and the first-mentioned mode of discharge by agreement lies in the fact that the first is a tota.1 obliteration of the contract, the second is a sub- stitution of a new bond between the parties in place of the old one. And it operates as a recission in this way, that if it does not in terms express an intention that the original contract should be waived, it indicates such an intention by the intro- duction of new terms or new parties. The change of rights and liabilities, and consequent extinction of those which before existed, forms the consideration on each side for the new contract. But the intention to discharge the original contract must distinctly appear, from, the inconsistency of the new terms with the old ones. If there be a mere postponement of performance, for the convenience of one of the parties, the contract is not thereby discharged. The 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 alteration of the time of performance ; that a new contract was thereby created, and that the new contract is void for non-compliance with the 1 7th section of the Statute of Frauds. But the Courts have always recognised 'the distinction between a substitution of one agreement for another, and Chap. I. §2. BY AGEEEMENT. 2^1 a voluntary forbearance to deliver at the request of another,' Hickman v. •' . Haynes, L. R. and will not regard the latter as affecting the rights of the "' '■ ^- ^■ parties further than this, that if a man asks to have pei'form- ance 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 earlier date has altered at the later date, the rate of damages may be assessed, as against him, either at the time when the performance should have taken place, ogie v. Eari ^ A ' Vane, L. R. and when by non-performance the contract was broken, I^r^j'^^b. or when he ultimately exhausted the patience of the vendor "'" ' and definitely refused to perform the contract. The contract is discharged by alteration of its terms when (a) what is to be done is so far altered as to be inconsistent with it and to amount to a new contract, or (6) when a new party is substituted for a previous one by agreement of all thi-ee. A good illustration of the first of these modes of discharge (a) Substi- is afforded by the case of Thornhill v. Neats. A undertook g ^ ^ ^^ 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 impossible that the whole of the operations should be concluded within the stipulated time. It was held that the subsequent 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 (b) Substi- parties into the original agreement, whereby a new contract ties. > Willes, J., in giving judgment in the Exchequer Chamber in the case of Oyle v. Earl Vane, holds tliat by the forbearance on the part of L. R. 3 Q. b. 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 fur want of consideration for the for- bearance 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 p. 306. 35a DISCHARGE OF CONTBACT. Part V. is created, in which the terms remain the same but the parties are different. This may be done either by express agreement such as Tif^"'!"' ^^^ described in a previous chapter, or by the conduct of '■ '"''■ the parties, indicating acquiescence in a change of liability. If A has entered into a contract with X and M, and X and M agree among themselves that M shall retire from the contract and cease to be liable upon it, A may either insist upon the continued liability of M, or he may treat the contract as broken and discharged by the renunciation of his liabilities by one of the parties to it. If however A, after he becomes aware of the retirement of M from the contract, continues to deal with X as though no change had taken place, he will be considered to have entered into a new contract to accept the sole liability of X, and will not be entitled to hold M to his original contract. : M. & w, 484. The case of Hart v. Alexaiider illustrates this rule. The plaintiff employed the defendant with other members of a firm as his bankers ; the defendant retired ; notice, in various forms, of his retirement from the firm was shown to have reached, or to have been accessible to, the plaintiff, who nevertheless continued to employ the firm. Finally, the firm became bankrupt : the plaintiff sued the defendant as liable to him upon the original contract, as being one of the members of the firm whom he had retained as his bankers. The jury found that the defendant's retirement was sufficiently brought to the notice of the plaintiff, and as the firm had nevertheless been continuously employed by him, the Court held that a new contract had been formed between the plaintiff and the firm of which the defendant was no longer a member. ' I apprehend the law to be now settled,' said Parke, B., ' that 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.' Thus a change of liabilities, Chap. I. § 3. BY AGREEMENT. 2,^^ accepted by the plaintiff, rescinded the original contract by the creation of a new one to which the defendant was not a party. § 3. Provisions for Discharge. A contract may contain within itself the elements of its own discharge, in the form of express provisions for its determination under certain circumstances. These circum- stances may be the non-fulfilment of a specified term of the contract ; the occurrence of a particular event ; or the exercise by one of the parties of an option to discontinue the contract. In the first of these three cases, that in which the non- Discharge fulfilment of a specified term of the contract gives to one of non^ulfil°" the parties the option of treating the contract as discharged, "i^"' °f ^ we seem to be approaching very near to the subject of the discharge of contract by breach. For this too may arise from the non-fulfilment of a term which the parties consider to be vital to the contract. But there is a marked 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. In the one case the parties have, in the other they have not looked beyond the imme- diate objects of the contract : in the one case the default which is to constitute a discharge is specified by the agree- ment of the parties ; in the other it must always be a ques- tion of fact or of constmction whether or no the default was in a matter vital to the contract, so as to operate as a dis- charge by breach. A good illustration is afforded by the case of ITead v. l. r. 7 Exch. 7. Tattersall of such a condition, or provisional discharge of a contract introduced into its terms. 254 DISCHAKaE OF CONTEACT. Part V. A bought a horse of X. The contract of sale contained, among others, these two terms : that the horse was war- ranted to have been hunted with the Bicester 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. It turned out that the horse did not answer to its descrip- tion and had never been hunted with the Bicester hounds. The horse was returned by the day named, but as it had in the meantime been injured, though by no fault of A, X dis- puted the right of A to return it. It was held that he was 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 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 "?sa1i\^R' "^ ^^ ^^^ person in whom the property revested, and he must 7 Exch, 14. therefore bear the loss.' Occurrence The parties may introduce into the terms of their con- of 3. SOSC]— Bed event, tract a provision that the fulfilment of a condition or the occurrence of an event shall discharge them both from further liabilities under the contract. Condition Such a provision is called a condition subsequent, and is well illustrated by the case of a Bond, which is a promise subject to, or defeasible upon a condition expressed in the Bond. Excepted Such a provision may be further illustrated by the ' ex- charter- cepted risks ' of a charter-party. In a contract of that nature P"'>'- the ship-owner agrees with the charterer to make the voyage on the terms expressed in the contract, ' the act of God, Queen's enemies, restraints of princes and rulers, fire, and all and every other dangers and accidents of the seas, rivers, and navigation, of whatsoever nature or kind, during the said voyage always excepted.' The occurrence of such an Chap. I. § 3. BY AGREEMENT. 25S excepted risk releases the ship-owner from the strict perform- ance of the 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. In Geipel v. Smith, the plaintiff had chartered the de- l. r. 7 q. b. fendant's vessel to go to a spout, load a cargo of coals, and proceed thence to Hamburg : the contract contained the usual excepted lisks. Before anything was done under the con- tract a war broke out between France and Germany, and the port of Hamburg was blockaded by the French fleet. The defendant thereupon, regarding a blockade as a ' restraint of princes,' refused even to load a cargo, and treated the con- tract as being at an end. The plaintiff sued him for not having fulfilled so much of the contract as would not have involved the risk ; but the Court held that as a performance of the main object of the contract had become impossible by the occurrence of an excepted risk, the defendant was not bound to attempt a fulfilment of his preliminary duties. Another illustration may be drawn from the contract Limitations , . , . , . . of carrier's entered mto by a common earner. A common carrier is liability, said to warrant or insure the safe delivery of goods entrusted to him ; and by this we mean that he makes an almost un- qualified promise to bring the goods safely to their desti- nation or to indemnify the owner for their loss or injury. His promise is, however, not wholly unqualified; it is de- feasible 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 qualifioa- N^f="'j^-p tion is an implied term in every contract made with a carrier, ' '^- ^- °- <=3- and the occurrence of the risks exonerates him from liability for loss incurred through their agency. The Act of God is a phrase which needs some explanation, but which has not until very recently received any judicial exposition. 256 DISCHARGE OF CONTKACT. Part V. L. R. I C. P. I 423- Meaning of phrase 'Act of God.' L. R. I C. P. D. Per Brett, J., Per Mellish, I-. J., p. 441. The case of Nugent v. Smith, however, affords a good definition of its meaning, so far as its meaning is susceptible of definition. In that case the defendant, a common carrier by sea, received from the plaintiff a mare to be carried from London to Aberdeen. 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, but the Court of Common Pleas held him to be liable on the ground that the rough weather was not so violent and unusual as to amount to ' the Act of God,' nor was the struggling of the mare alone enough to show that it was from her inherent vice that she was injured. But the Court of Appeal reversed this decision, and endeavoured to frame an intelligible defi- nition of such an ' irresistible cause of loss ' as is described by the term ' Act of God.' The difference between the two decisions comes to this : — The Court of Common Plgas held 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 not be foreseen, or, if foreseen, prevented ; the Court of Appeal held ' that it is not necessary to prove that it was absolutely impossible for the carrier to prevent it, but that it is sufficient to prove that 6y no reasonable precau- tion under the circumstances could it have been 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 dis- tinguished from discharge arising from a subsequent impos- sibility of performance not expressly provided against in the terms of the contract. With this we shall deal hereafter. Discharge Thirdly, a continuing contract may contain a provision with notice, making it determinable at the option of one of the parties Nowian v. upon Certain terms. Such a provision exists in the ordinary 2C.M.'&R. 54, contract of domestic service, the servant can terminate the Chap. I. § 3. BY AGEEEMENT. ^57 contract by a month's notice, the master by a month's notice or the payment of a month's wages. And similar terms may be incorporated with other contracts between employer and employed, either expressly or by the usage of a trade. A was engaged by X to serve him for a year as agent Parker v. in his business of a woollen merchant, hut was dismissed in i^- "^^ '*'^- the course of the year at a month's notice. He sued X for breach of contract. It was proved to be a custom of the trade that all such engagements were determinable at a month's notice. The jury found that the custom existed, but they further found that it did not form a part of the contract. The Court, however, decided that, having been found to exist, the custom must be taken to form a part of the contract, and that it was not for the jury to construe the contract so as to exclude it. X was therefore held to be entitled to determine the contract in virtue of this implied term, although the engagement was to have lasted for a year had he not exercised the option given to him by the custom. It remains to consider the form in which it is necessary Form of to express an agreement purporting to discharge a contract jjl agree- already existing. ment. The general rule is, that a contract must be discharged in the same form as that in which it is made. A contract under seal can only be discharged by agreement if that agreement is also under seal : a contract entered into by parol may be discharged by parol. Parties to a deed cannot therefore discharge their obliga- (1) In case tions by a parol contract; but it is possible for them to un^er seal, make a parol contract which creates obligations separate discharge from, and yet substantially at variance with the deed. under seal ; If M and X enter into a contract under seal, they cannot but a parol meet and by word of mouth or by writing waive their ^°{| j^^^^^ respective rights under the contract. But they may make though at . 1 i^ i_ vanance such a contract as does in effect contravene the terms of the with deed. 258 DISCHARGE OF CONTKACT. Part V. deed, and gives a right of action to which the deed furnishes Nashv. no answer. M and X entered into a contract under seal, Armstrong, 10 c. B. ^.^. jjy -(^iiigii jf 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 the parol contract was an attempt to vary the deed by an instrument not under seal ; and that a perform- ance of this contract, being no discharge of the deed, would leave him liable to his previous obligation. But the Court held that the parol contract created a new obligation^ and was not an attempt to vary an old one ; that a perform- see per wiUcs, aucB of this ucw coutract would furnish a good equitable answer to an action brought upon the contract under seal ; and that therefore A was entitled to bring action upon the parol contract. (2) In case A parol or simple contract may be discharged by writing contracts, or by word of mouth, whether or no the original contract be in writing ; and this follows from what has been said before, that the writing is not the agreement but the evidence of it, and that as the essentials of agreement lie in the expressed intention of the parties and not in the writing which is the instrument of that expression, the contract may be discharged ' eo ligamine quo ligatum est,' by a valid expression of the intention to put an end to it. Under But an exception must be made where a contract is required by Statute to be in writing. In such a case there appears to be authority for saying that an absolute discharge of the contract may take place by word of mouth. But if the discharge be not a simple rescission or cancellation, if it be such an implied discharge as arises from the making of a new agreement inconsistent with the old one, then there 29 Car. II. c. 3. s. 4- Goman v. Salisbury, I Verii. p. 240, Chap. I. § 3. BY AGREEMENT. 259 must be writing such as would satisfy the enactment which governs the original contract. The most recent authority upon this point is the case of Noble V. Ward. There a contract was made for the sale of l. r. 2 excIi. goods upon the 1 8th of August, in which it was agreed that the goods should be delivered within a certain time. This contract was in writing and satisfied the requirements of 29 Car. II. c. 3. s. 17. On the 27th of September a verbal agreement was made extending the time for delivery. An action was brought by the vendors for non-acceptance of the goods, and ' the defendants contended that the effect of the contract to extend the time for delivery was to rescind the contract of the i8th of August.' But the agreement of the 27th of September, being made by woi^d of mouth, was invalid, and could not operate as a new contract for the sale of the goods. The defendants nevertheless contended that though invalid to create a new contract, it was valid to rescind the existing one, but this contention the Court would not allow. It was, in fact, laid down ' that no rescission could take place by an invalid contract.' The same rule has been applied to contracts under the 4th, and contracts under the 1 7th sections of the Statute of Frauds, goss v. Lord and yet it should seem that a different principle might have s b. & Ad. 6s. been applied to the two sections. If A and X make a contract in writing under the 17th section and afterwards attempt to vary it by word of mouth, they make a new and, strictly speaking, a void contract, one which the Statute says shall not ' be held to be good.' A worthless agreement is obviously as incapable of rescinding existing obligations as it is of creating new ones. But a contract made in breach of the 4th section is not invalid, but incapable of proof, and so unenforceable. If therefore A and X make a contract which satisfies the requirements of the 4th section and afterwards attempt to vary it by word of mouth, they make a new contract which, though it cannot be sued upon, is still s 2 26o DISCHAEGE OF CONTRACT. Part V. Leake on Contracts, 302. See ante, P-S7- Williams v. Wheeler, 8 C. B. N.S. 3M5- effectual for some purposes. It is at any rate so far a valid expression of the intention of the parties, as that a part per- formance of it will under certain circumstances give a right to specific performance in equity ; thus it is not easy to see, upon principle, why it should not operate as an agreement which, though unenforceable in regard to the liabilities which it creates, is valid as an expression of intention to rescind an existing contract. However, the law is otherwise, and inasmuch as the distinction which has been made between the effect of the two sections of the Statute of Frauds has been more than once commented upon with disapprobation by the late Mr. Justice Willes, it is not probable that further consequences will be deduced from the diiference between the unenforceability created by the 4th section and the invalidity created by the 1 7th section. Chap. II. BY PEBFOKMANCE. Q,6l CHAPTEK II. Discharge of Contract by Performance. This branch of our subject need not detain us long, but there are some aspects of performance which call for a brief notice. "We must distinguish performance which discharges one Kinds of of two parties from further liabilities under a contract, ance*™' and perfoi-mance which amounts to an extinction of the obligation. Where a promise is given upon an executed consideration, where the performance of his promise by the promisor discharges given for the contract : all has been done on both sides that could be <=^<='=!"^'i considera- required to be done under the contract. tion i Where one promise is given in consideration of another, where performance by one party does not necessarily discharge the g™^ for^ contract, though it dischai'ges him who has performed his promise. part from doing more. Each must have done his part to make performance a solutio ohligationis, and so if one has done his part and not the other, it is still possible that the contract may be discharged in any one of the ways we have mentioned. Whether or no a contract has been performed is a matter which, so far as the person performing the contract is concerned, must be answered by reference to the operatwi of contract; so far as the performance is concerned, must be answered by reference to the construction of contract. If there be a failure of performance, partial or total, then the 262 DISCHARGE OF CONTRACT. Part V. contract is broken ; whether the breach amounts to a dis- charge is a question to be discussed hereafter. But there are two aspects of Performance which we may shortly dwell upon : these are, Payment and Tender. Payment. Payment as In dealing with payment as a form of discharge we must discharge, pl^ce it under the head of performance, although payment is intimately connected with the discharge of contract and of the rights arising from breach of contract, by means of a substituted agreement. If in a contract between A and X the liability of X con- sists 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. If, again, X being liable to perform various acts under his contract, wishes instead to pay a sum of money, or, having to pay a sum of money, wishes to pay it in a manner at vari- ance 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 contract. Pay- ment is then a performance of X's duties under the new agreement, and, so far as he is concerned, a consequent dis- charge. 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 formed by this Sec Part V. right of action may be discharged by accord and satisfaction, p- '306^ ' 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 is Payment, then, is the performance of a contract, whether it be a performance of an original, or of a substituted con- tract, or of a contract in which payment is the consideration perform ance Chap. II. BY PERFORMANCE. 263 for a forbearance to exercise a right of action -which may have arisen from the breach of an agreement. It remains to notice some points which arise when a Negotiable negotiable instrument is given in payment of a sum due, a"spI!tmenV whether as the performance of a contract or in satisfaction for the breach of it. The giving of such an instrument in payment of a liquidated or unliquidated claim is in effect a substitution of a new agreement for the old one, but it may affect the re- lations of the parties in either one of two different ways. If X makes a payment to A either in performance of an existing contract, or in satisfaction of a broken contract, and that payment takes the form of a negotiable instrument, X may be discharged from his previous obligation either absolutely or conditionally. A may take the bill or note, and promise, in consideration may be an of it, expressly or impliedly to discharge X altogether from his existing liabilities. A then relies upon his rights con- sard v. ferred by the instrument, and if it be dishonoured, must sue ■m-^w.isj. on it, and cannot revert to the original cause of action. But the presumption, where a negotiable instrument is taken in lieu of a money payment, is, that the parties intended it to be a conditional discharge. The position of the parties then or con- is this : A having certain rights against X, has agreed to discharge. take a negotiable instrument instead of immediate payment, ^''"v or immediate enforcement of his right of action, and X has ^ ^="- '•^s- so far satisfied A's claim. But if the bill be dishonoured at maturity, the consideration for A's promise has wholly failed and his original rights are restored to him. The agreement is ' defeasible upon condition subsequent;' the payment byX which is the consideration for the promise by A is not abso- lute, 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 364 DISCHAKGE OF CONTBACT. Part V. money; and in this last event the payee may have taken the instrument in discharge of his right absolutely, or sub- seejudsment I'ect to & Condition (which will be presumed in the absence ofPnrkc, B., ■* ^ ^ 1. j. J of expressions to the contrary) that, if payment be not made Robinson V. Read. 9 B. & C. 453. Sayer v. Wagstaffe, 5 Beav. 423. 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. We have dwelt thus upon Payment because it is often so involved with the subject of substituted agreement as to cause some obscurity. Tbndee. Tender. Is of two kinds. Tender by delivery. startup V. Macdonald, 6 M. & G. 593. Benjamin on Sales, bk. iv. part 2, p. 563. Tender of payment. Dixon V. Clarke. S C. B. 376. We now come to an attempted Performance, or Tender. The word is applied to performance of two kinds, and to attempts to perform which are not similar in their results. It is applied to a performance of a promise to do something, and to a performance of a promise to pay something. In each case the performance is frustrated by the act of the party for whom the performance 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 pur- chaser nevertheless refuses to accept the goods, the vendor is discharged by such a tender of performance, and may either maintain or defend successfully an action for the breach of the contract. But where the performance due consists in the pajnnent of a sum of money, a tender by the debtor, although it maj' form a good defence to an action by the creditor, does not constitute a discharge of the debt. If the creditor will not take the money due to him when he has a right to demand it, he puts himself at a certain disadvantage in trying to recover it by action; but the debtor must, in order to defend himself successfully by a Chap. II. BY PEE'FOEMANCE. 26^ plea of tender, continue always ready and willing to pay the debt. Then when he is sued upon it, he can plead that he Dixon v. . . Clarke, 5 C. B. tendered it, but he must also pay the money into Court. 3?^- If he proves his plea, the plaintiff gets nothing but the money which was originally tendered to hira, the defendant gets judgment for his costs of defence, and is so placed in as good a position as he held at the time of the tender. 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. Besides these requirements 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. Legal tender, as regards coinage and notes, is regulated by various statutes '. ' 3 and 4 Will. IV. c. 98. § 6, enacts that Bank of England notes are legal tender for any snm above £5. 29 and 30 Vict. 0. 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 and 34 Vict. c. 10, enacts that the coinage of the mint shall be legal tender as follows : — gold coins, to any amount ; silver coins, up to forty shillings ; bronze coins, up to one shilling. 266 DISCHAEGE OF CONTEACT. Part V. CHAPTER III. Discharge of Contract by Breach. Its result. Breach always gives of action Breach of If one of two parties to a contract breaks through the obligation 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 circumstances under which the breach will discharge the injured party from such performance as may still be due from him. We must, however, bear in mind that, though every breach of the con- ^gjij tractual obligation confers a right of action upon the injured ■i°n. party, every breach does not necessarily discharge him from not always , . , a discharge, 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 sufBciently 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 by the breach. It is often verj' difficult to ascertain whether or no a breach of one of the terms of a contract discharges the party who suffers by the breach. 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 con- tract, — the right to treat the legal relations arising from the contract as having come to an end, and given place to a new obligation, a right of action. Chap. III. § 1. BY BEEACH. 367 The discharge of contract is indicated with some precision Discharge by the pleadings in use before the Judicature Acts. Many jl'^oi^'^'^ of the cases which illustrate this part of the subject turn forms of upon questions of pleading, and we shall find that the under- standing of the remedy, as often happens, is a material as- sistance to the ascertainment of the right. At the risk of a digression we will turn for a moment to this aspect of the question before us. § 1. Position of paeties whbhe a Conteact IS DISCHARGED BY BbBACH. In a contract between A and X, a breach by X might be Exonera- considered to be a discharge of the contract if .4, in bringing perform™ action upon it, was not required to allege that he had per- ance. formed 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. Further, where X made default after A had done all or Right to ■a part of that which he promised, the contract was discharged ^i^^^titatus by such default if A could sue for the value of that which assumpsit. he had done in indebitatus assumpsit, or upon a new and distinct contract arising upon the acceptance of money, goods, or services offered by the plaintiff and accepted by the defendant. This needs a short explanation. Before the Judicature Acts came into operation, where an action was brought upon a contract arising on considera- tion executed, that is a promise, acted or uttered, to pay for money, goods, or services offered and accepted, the plaintiff might state his case in certain short forms known as the indebitatus counts. These, which were an adaptation jf,g Yndebi- of the action of Assumpsit to the subject-matter of the ^"^"^ ■^ counts. a68 DISCHARGE OF CONTKACT. Part V. See App, A. P- 3=-i- When ap- plicable to special contract. Ante, p. 83. Per Cur,. Beverley v. Lincoln Gas Liffht & Coke Co., 6 A. &E. action of Debt, did no more than state a money claim existing for money due, goods supplied, or services rendered. 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 on either side, but they were so applicable only where the contract was discharged by breach. If A had performed all that he had promised in a contract made with X, and there remained only a money payment due from X resulting in a present liability in which X made default by non-payment, A might sue X in the _form of an indebitatus count. This means that A might sue upon a new and distinct contract, arising upon the offer and accept- ance of that which he had performed. The performance of the original contract was so far complete that nothing re- mained to be done l)ut a payment to be made hj X to A: the payment was presently due j default discharged the con- tract, and A might sue, not on the special contract as having been made and broken, but upon a contract arising from conduct, from the offer of an act, its acceptance, and a consequent imjjlied promise to pay its worth, such as we desoiibed in speaking of executed consideration. ' The principle as to the proper form of declaring where the original contract has been executory, but the period of credit has expired, or condition has been performed, is, not that the law alters the mode of declaring; on the original contract and states it not according to the fact, but that it conclusively infers that simple contract to pay the price for goods sold and delivered which would arise upon the facts of a sale and delivery without amy special circumstances accom,- panying them. He who seeks to disturb that inference must not content himself with merely showing conditions, or other special provisions forming part of the contract at the time of its being entered into : he must show them in existence and operation at the time of action brought : if not, they must be Chap. III. § I. BY BEEACH. 269 struck out of consideration and the contract treated as originally simple, unconditional, and executed.' A similar practice prevailed where, A ' having done a A quantum part, though not all that he was bound to do under the "^"^"^ ■ contract, X committed a breach which amounted to a dis- charge. If that which A had done could be represented in a claim for money payment, A 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, / decline takinq Per Best, c. j., 1- ' 'J Mavor v. Pyne, any more, he is at all events entitled to recover against me 3Bing.238. the value of the ten that I have received.' But the right to sue in this form on a quantwm meruit When it is frequently and emphatically stated to depend on the fact ^ed upon. that the contract has been discharged. On the other hand, it «""<: ^• ^ ' Heightman, is laid down ' as an invariably true proposition, that where- " ^'"'' '■'^ ever 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 so, immediately sue on a quantwm 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 performance 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. Thouffh the rules of the Judicature Act make it doubtful order xix. .rule 4. whether under the new system of pleading the short forms of declaration known as the indebitatus counts are any longer 27° DI8CHABGE OF CONTRACT. Part V. See p, 324. admissible, yet the relations of the parties are not thereby substantially altered. Rights of party dis- charged. Behn v. Burness, 3 B. & S. 7S6. Cort V. Am- bergate Rail- way Co., 17 Q. B. 127. Planch^ V. Colburn, 8 Bing. 14, Thus where a contract between A and X is discharged by the default of X, A may — (a) Consider himself exonerated from any further perform- ance which may have been due on his part ; and successfully defend an action brought for non-performance : (;3) 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 : (y) Lastly, 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 deal with such a claim as due upon a different contract arising upon a promise understood from the acceptance of an executed consideration. § 2. FOEMS OF DiSCHAEGE BY BeBACH. "We are now in a position to ask. What are the circum- stances which confer the rights just mentioned 1 Wbat is the nature of the breach which amounts to a discharge ? Modes in A contract may be broken in any one of three ways : rights may ^ party to a contract may (i) renounce his liabilities under arise. j^^ (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, i. e. before either party is entitled to demand a performance by the other of his promise. The last can, of course, only take place at or during the time for the performance of the contract. We will therefore deal first with renunciation and impos- sibility created by the act of one party before performance is due, then with such renunciation and impossibility so Chap. III. § 3. BY BREACH. 37I created in the course of performance, and then with simple failure in performance. (i) Discharge hy renunciation before performance is due. The parties to a contract which is wholly executory have (i) Breach a right to something more than a performance of the foi-mance'^ contract when the time arrives. They have a right to the '^ <*"«. maintenance of the contractual relation up to that time, as well as to a performance of the contract when due. It is now settled that a renunciation of a contract by one by renun- 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. Hochster v. Delatour is the leading case upon this subject. 2 e. & b. 678. A engaged X upon the 12 th April to enter into his service as courier and to accompany him upon a tour ; the employ- ment was to commence on the ist of June, 1852. On the I ith of May A wrote to X to inform him that he should not require his services. X at once brought an action, although the time for performance had not arrived. The Court held that he was entitled to do so. ' Where there is a contract to p. 689. 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. As an example, a man and woman engaged to marry are af&anced to one another during the period between the time of the engagement and the celebration of the mar- riage. In this very case, of traveller and courier, from the day of hiring till the day when the employment was to begin they were engaged to each other; and it seems to be a breach of an implied contract if either of them renounces his engagement.' It seems hardly necessary to have created an implied con- 37a DISCHARGE OF CONTRACT. PartV. tract in order to give the plaintiff in this case a right of action. If X makes a binding promise to A , the obligation comes into existence at once, and consists in X's promise as well as in his performance of that promise. In other words, the contract is a contract from the time it is made, and not from the time that performance of it is due ; and if this is so, it seems hardly in accordance with reason to introduce into every contract an implied promise that, up to a certain period of its existence, it shall not be broken. Frost V. The sense of the rule is very clearly stated by Cockburn, Knight, L. K. . 1 • 1 rr n.'aJdi Cham ^' "'' ^^ ^ ^^^^ which offcrs a somewhat further development a E. & B. 67S. of the rule in Hochster v. Delatour. is a dis- In that case a time was fixed for performance, and be- if perform™ ^'^^^ '^ arrived the defendant renounced the contract. In ance be Frost V. KniqTit performance was contingent upon an event contingent. . , , .,.,,... . , 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. L. R. jExch. 'The promisee,' said Cockbm-n, C. J., 'has an inchoate right to the performance of the bargain, which becomes complete when the time for performance arrives. In the meantime he has a right to have the contract hept open as a subsisting and effective contract. Its unimpaired and unimpeached effi- cacy may be essential to his interests.' The pro- The promisee may therefore treat the contract as broken, treat renun- SO soon as the promisor has announced his intention to break eiation as a j(. . ^^^^ jf i,g -yviH not accept the renunciation, but continues discharge. ' 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 anything occur to discharge it from other causes, the promisor may take advantage of such discharge, s E. & B. 714. Thus in Avery v. Bowden, A agreed with X by charter- party that his ship should sail to Odessa, and there take Chap. III. § 2. BY BKEACH. ^73 a cargo from A"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 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 shij^ 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 Kussia, and the per- formance of the contract became legally impossible. After- wards 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 ex- pired), and as the renunciation of the contract had not been accepted as a breach by A's agent, X was entitled to the ^™^^^- ^ discharge of the contract which took place upon the declara- '^ •*■ ''* tion of war. (2) Imfossibility created by one party before performance is due. If a renunciation of his contract by A discharges X and (2) By gives him a right of action before the time for perform- formance ance has arrived, it would appear that a fortiori a similar impossible. discharge and right of action accrues to X if A , before the time for performance arrives, makes it impossible that he should perform his promise. A promised X that within seven years from the date of the promise lie would assign to X all his interest in a lease which he held. Before the end of seven years A assigned his whole interest to another person. It was held that X could sue at once, without Loveiock v. waiting until the end of the seven years. ' The plaintiff has ^ ^- ^- ^'''■ a right to say to the defendant. You have placed yourself T 374 DISCHAKGE OP CONTRACT. Part V. Lovelock V, Franklyn, 8Q. B. at p. 378. in a situation in whicli 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.' The cases just cited illustrate the rule that a contract may be broken while it is yet executory, and before any performance on either side has fallen due. They are com- paratively simple, because the circumstances leave no doubt of the intention of the party in default ; their interest lies in the enforcement of the principle that performance of a promise is not all that a promisee is entitled to, that the continuous liability of the promisor, until the time for per- formance arrives, is a substantial element in the rights arising from the contract, and that a refusal to maintain this liability is an immediate breach and confers an immediate right of action. (3) Renunciation in the course of performance. The forms of breach with which we have just been dealing may occur at a later stage in the history of the contract. Renuncia- It is possible that in the course of performance one of the perform-"^ parties may by word or act deliberately and avowedly refuse ance. performance of his part. He may do this by renouncing the contract, or by rendering it impossible of performance. The other party is then exonerated from a continued performance of his promise, and is at once entitled to bring action. An illustration of such a discharge by renunciation of the contract is furnished by the case of Cort v. The Amhergate Railway Company. The plaintiffs contracted with the de- fendant Company to supply them with 3900 tons of railway chairs at a certain price. The chairs were to be delivered in 17 Q. B. 127. Chap. III. § 2. BY BREACH. 275 certain quantities at specified dates. The plaintiffs delivered 1787 tons according to contract, the defendants then desired tliem not to deliver more, as they would not be wanted. The plaintiffs sued the defendants upon the contract, averring that they had been ready and willing to perform their part, and had been prevented from doing so by the Company. The plaintiffs having obtained a verdict, a new trial was moved for on behalf of the Company, on the ground that the plaintiffs should have proved not merely readiness and willingness to deliver, but an actual delivery of the chairs ; but the Court of Queen's Bench held that where a contract was renounced bj' one of the parties to it, the other party need not do more than show that he was willing to have performed his part. ' In common sense,' said Lord Campbell, C. J., ' the meaning of such an averment of readiness and willingness must be that the non-completion of the contract was not the fault of the plaintiffs, and that they were disposed and able to complete it, if it had not been renounced by the defendants. What more can reasonably be required by the parties for whom the goods are to be manufactured V And he thus states the principle on which the Court decided in favour of the plaintiff : — ' Upon the whole we think we are justified, on principle and without trenching on any former decision, in holding that, 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 contract, he may, without manufacturing and tendering the rest of the goods, maintain an action against the purchaser for breach of contract; and that he is entitled to a verdict on pleas traversing allegations that he was ready and willing to T 2 276 DISCHA,RGE OF CONTRACT. Part V. AmbJrgate perforiD the contract, that the defendant refused to accept the Company, residue of the goods, and that he prevented and discharged the plaintiff from manufacturing and delivering them. (4) Impossibility created hy one party in the course of performance. Irnpossi- The rule of law is similar in cases where one party has created hy his Own act made the contract impossible of perform- during per- formance. 8 Bing. 14. In Planehe v. Colburn the plaintiff was engaged by the defendants for £100 to write a treatise on ' Costume and Ancient Armour ' to be published in a serial called ' The Juvenile Library.' The plaintiff incurred expense in making researches with a view to his work and actually completed a portion of it, but before it was delivered to the defendants they had abandoned the ' Juvenile Library ' on the ill-success of its first numbers. The plaintiff sued the defendants on the special 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 contract arising from the execution of work upon request, under which he claimed the value of so much work as was done before the contract was put an end to by the plaintiff. It was argued that he could not recover upon this latter aspect of his claim because, his part of the original contract being Ante, p 269. unperformed, that 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 conti'act and affect a dis- charge. ' I agree,' said Tindal, C. J., ' that, when a special con- tract 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 Chap. III. § 2. BY BREACH. 277 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 ; and there is no ground for the application that has been made.' (5) Breach hy failure of •performance. In the two cases of discharge last dealt with it is apparent that X has in word or act so dealt with the contract as to intimate to A that a further performance on his part is need- less. The Courts have been asked in these cases to decide whether A is bound to tender a performance which he well knows that X will not or cannot receive, and they have decided that he is not so bound. But where the breach of contract by X does not make Breach by Ai in- 1 r' ^ • failure of the contract wholly incapable of performance, or is not accom- perform- panied with any overt expression of intention to abandon ^^1^°^^^ his rights, it is not always easy to determine whether A is thereby discharged or whether he merely acquires a right of action from the breach. We have to look to the terms of the contract and endeavour to ascertain the intention of the parties as to the nature of their respective promises : and By iride- ... -rrr pendence the difficulties resolve themselves into this question — Were or condi- the promises of the parties independent of, or conditional racter of upon, one another 1 promises. Independent Promises. A promise may be independent in several ways. An inde- , . 17 7 pendent (a) A promise may be absolute. promise ^'s promise to X may be wholly unconditional upon the ^^^j^^^ performance by X of his promise to A. In such a case a failure of performance by X would not discharge A, but would only furnish ground for an action against X. (6) The performance of a promise may be divisible. respect of 278 DISCHABGE OF CONTEACT. Part V. perform- The promise may be susceptible of more or less complete performance, and the damage sustained by an incomplete performance or partial breach may be apportioned according to the extent of failure. The promise is in fact regarded as a number of promises to do a number of similar acts, and a breach of one of these does not discharge the promisee. Subsidiary. (c) A promise may be subsidiary. The breach committed by one of the parties may be a breach of a term of the contract only, and of a term which the parties have not, upon a reasonable construction of the contract, regarded . as vital to its existence. The injured party is then bound to continue his performance of the con- tract, but may bring action to recover such damages as he has sustained by the default of the 'other. In absolute promises, one party relies on the pro- mise and not its perform- ance by the other. Ware v. Chappell, Style, iS6. Absolute Prmnises. If A make a promise to X in consideration of a promise made by X to A, and A has not, in express terms, or upon a reasonable construction of the contract, made the performance of his promise depend upon the performance of J's promise, a breach of his promise by X will not discharge A. The position of A is this — his promise is given in consideration of X's promise, not in consideration of the performance by X of his promise : in other words, he has been content with X's liability, and has not insisted upon X's performance as a security for his promise. Some of the old cases upon this subject turn upon very technical constructions of terms : if A make a promise to X in consideration of its being ' agreed ' that X do something for A, each promise is regarded as absolute and independent of the other ; if the promise be made ' 2)rovided ' that X do something for A, the promise of A is conditional, and is dis- charged upon breach by X. A case of the year 1649 will furnish a strong illustration of such absolute promises. ' "Ware brought an action of Chap. III. § 2. BY BREACH. 279 debt for £500 against Chappell upon an indenture of cove- nants between them, viz. that Ware should raise 500 sol- diers 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 plaintiif had not raised the soldiers at that time; and to this plea the plaintiff demurs. Eolle, 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 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 style, 186. providing the shipping.' The reason -for holding such promises to be absolute is Reasons thus stated by Holt, C. J. :— ' What is the reason that ^"'f^i^'^ mutual promises shall bear an action without performance ? ^ Holt, One's bargain is to be performed according as he makes it. If he makes a bargain, and rely on the other's covenant or promise to have what he would have done to him, it is his own fault. If the agreement be, that A shall have the horse of B and A agree that B shall have his money, they may make it so ; and there needs no averment of performance to maintain an action on either side ; but if it appear by the agreement that the plain intent of either party was to have the thing to be done to him performed before his doing what he undertakes of his side, it must then be averred ; as where a man agrees to give so much money for a horse, it is plain he meant to have the horse first, and, therefore, xhSr^e/' he sa3's the money shall be given for the horse.' 4ss- And another reason is suggested by Willes, C. J., in by Wiiies, Thomas v. Cadwallader, namely, 'When two covenants in^viuM.igs. a deed have no relation to each other, I was clearly of opinion 38o DISCHARGE OF CONTRACT. Part V. Tendency of modern decisions. 8 T. R. 366. Per Lord Kenyon, C. J., ill Morton v. Lamb, 7 T. R. ,25. 10 A. & E. so. that the non-performanoe of one could not he pleaded in bar to an action brought for the breach of another covenant iu the same deed; and for this plain reason amongst others, that the damages sustained by the breach of one such covenant may not be at all adequate to the damages sustained by the breach of the other \' The cases dating from the close of the last century seem to show a tendency of the Courts not to construe promises to be independent of one another where they form the whole consideration for one another unless there be some very de- finite expression of the intention of the parties to that eifect. ' The older cases,' saj's Grose, J., in Glazebrook v. Woodrow, ' lean to construe covenants of this sort to be independent, contrary to the real sense of the parties and the true justice of the case ; ' and the interpretation of such promises may now be taken to rest upon ' the good sense of the case and the order in which the things are to be done.' The order in which the things are to be done would appear now to be the main test of the existence of such absolute promises. Thus where X makes a promise to A, the date of per- formance not being fixed, and A in consideration thereof promises to pay a sum of money to X at a fixed date, the payment is independent of performance. In March, 1879, A agrees to purchase land of X and cove- nants to pay a sum of money on the ist of April, 1879. X covenants in turn to convey the lands to A, but no day is fixed for the execution of the conveyance. So soon as the 1st of April is passed, X can sue A for the money, and it is no answer to his claim that he has never conveyed, or offered to convey tlie land to X. The reason of the rule is thus stated in the case of Per Gardiner, J., in Grant v. Jotinson, Langdell, Cases on Contract, 620. ' But; this view of tlie matter is certainly open to the criticism passed upon it by an American judge: — 'Courts are not required to speculate upon the inequality of loss to the parties, or to look beyond the ngreement to its pHrformance in order to ascertain its chai'acter as suggested by some judges and commentators.' ittledale, Mattock Chap. III. § 2. BY BREACH. 28 1 Mattock V. Kinglake, the facts of which were similar to those just described : — ' A time being fixed for payment, and none for doing that which was the consideration for the payment, an action lies for the purchase money without averring performance of the Y\^\ consideration.' !» a!°I'S%. But, upon the whole, it may be safe to say that, in the absence of very clear indications to the contrary, promises each of which forms the whole consideration for the other will not be held to be independent of one another. A failure to perform the one will exonerate the promisee from a per- formance on his part-. Promises the i^erforinance of which is divisible. Contracts frequently occur in which the promise of one Where per- , ,1 , • J •, n 1 1 , c formance is or botn parties admits 01 a more or less complete perform- divisible ance ; such would be a contract by way of charter-party to load and deliver a complete cargo ; or a contract for the sale of goods in which delivery and acceptance are to take place by instalments extending over a considerable period of time. In contracts of this nature it may be laid down as a general a partial rule, that a breach, which only deprives the promisee of a diicharge ; part of that to which he was entitled, does not discharge him from such performance as may be due from him. In Ritchie v. Atkinson the plaintiff promised to take his 10 East, 295- ship to St. Petersburgh and there load a complete cargo of hemp and iron, and to deliver the same on being paid freight at specified rates. He came away with an incomplete cargo, under a mistaken impression that an embargo was about to be laid on British ships, and the defendant refused to pay any freight, on the ground that the completeness of the cargo was a condition precedent to any payment being due. Lord EUenborough said that whether it was so, or no, depended ' not on any formal arrangement of words, but on 283 JDISCHAEaE OP CONTRACT. Part V. Ritchie V. Atkinson the reason and sense of the thing as it is to be collected from the whole contract :' and with regard to the promise before us, he held that ' where the freight is made payable upon an indivisible condition, such as the arrival of the ship with her cargo at her destined port of discharge, such arrival must be a condition precedent; because it is incapable of being apportioned : but here 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 de- lo East. 295- fendant to his remedy in damages for the short delivery.' L. R. 8Q.B.14. The case oi /Simpson v. Crippin was decided upon similar grounds. In tliat case A agreed with X to supply him with a given quantity of coal to be delivered in equal monthly in- stalments for twelve months. X agreed to send waggons to receive the coal. X did not during the first month send waggons to receive one twelfth of the coal. A rescinded the contract. It was held that he was not entitled to do so, inasmuch as X was willing to continue the contract as to the remaining instalments, and it did not appear to have been tlie intention of the parties to determine the contract upon the failure of one of the parties to fulfil one of a series of terms. L, R. 9 c. p. And in the case of Freeth v. Burr, in which the same "''•■ . . , point arose, Keating, J., said, ' It is not a mere refusal or omission of one of the contracting parties to do something which he ought to do, that will justify the other in repu- diating the contract; but there must be an absolute refusal to perform his part of the contract.' unless it Thus it will be noted that if a default in one item of to'teeak^"' a continuous contract of this nature be accompanied with an contract, announcement of intention not to perform the contract upon Witliers V. fBi Ad 88s ^"^ agreed terms, the other party may treat the contract as being at an end. And in like manner, if non-payment of one instalment of goods be accompanied by circumbtances which Chap. III. § 2. BY BREACH. 283 give the seller reasonable ground for thinking that the buyer will not be able to iiay for the rest, he may take advantase Bemstein,' ' •' ' ■^ " L. R. 9 c. p. of the one omission to repudiate the contract. ^ss- It must be further noted that the general rule applicable or be made to contracts of this sort may be contravened by express by terms of stipulation. It is always open to the parties to agree that oontract. the entire performance of a consideration, in its nature divisible, shall be a condition precedent to the right to a fulfilment by the other party of his promise. In such a case nothing can be obtained either upon the contract or upon a quantum merwit for what has been performed. Thus in Cutter V. Poivell, a sailor being at Jamaica, took a promissory ^''"•?;,3f^-c"'' note from the master of his ship to the following effect : "hereon*! ""'" ' Ten days after the ship Governor Parry, myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he froceeds, continues and does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1Y93.' The sum agreed to be paid was larger than the ordinary wages of a mate. The ship sailed on the 2nd of August, and reached Liverpool on the 9th of October ; the sailor did his duty as second mate until the 20th of September, when he died. It was held that his representatives could not recover upon the express contract, for its terms were unfulfilled; nor could . they recover upon a quantum meruit for such services as he had rendered, because the terms of the express contract excluded the arising of any such implied contract as would form the basis of a claim upon a quantum meruit. 'It may fairly be considered,' said Grose, J., 'that the parties them- selves understood that if the whole duty were performed the mate was to receive the whole sum, and that he was not to receive anything unless he did continue on board during the whole voyage.' DISCHARGE OP CONTRACT. Part V. Subsidiary promises. Subsidiary We shall have to speak, in a later portion of this chapter, of subsidiary promises, or warranties as we will venture to call them, as distinct from -conditions or terms on which the right to performance depends. But it is desirable to illustrate here the difference which exists be- tween a subsidiary promise the breach of which cannot under any circumstances operate as a discharge, and a pro- mise such as we have just described, which admits of being performed with more or less completeness, but which may be so completely broken as to discharge the promisee. A good instance of such a subsidiary promise is to be found L. R. iQ. B. D. in the case of Betthii v. G-ye. There the plaintiff, a pro- fessional singer, entered into a contract with the defendant, director of the Royal Italian Opera ' in London, for the exclusive use of his services as a singer in concerts and operas for a considerable time and upon a number of terms, one of which was as follows : — '(7.) Mr. Bettini agrees to be in London without fail at least six d'ays before the commencement of his engagement, for the purpose of rehearsals.' The plaintiff broke this term by arriving only two instead of six days before the commencement of the engagement, and the defendant treated this breach as a discharge of the contract. The Court held that in the absence of any express declaration that the term was vital to the contract, it must how dis- ' look to the whole contract, and see whether the particular from stipulation goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract by the plaintiff a thing different in substance from what the defendant has stipulated for ; or whether it merely partially affects it, and may he compensated for in damages' And it was decided that the term did not go to the root of the matter, so as to require to be considered a condition precedent. Conditions. Chap. III. §2. BY BKEACH. 285 And generally it may be said that where a promise is to be performed in the course of the performance of the con- tract and after some of the consideration, of which it forms a part, has been given, it will be regarded as subsidiary, and its breach will not effect a discharge unless there be words expressing that it is a condition precedent, or unless the performance of the thing promised be plainly essential to the contract. ' Where a person has received part of the consideration for which he entered into the agreement, it would be unjust that, because he had not the whole, he should therefore be permitted to enjoy that part without either payment or doing anything for it. Therefore the law obliges him to perform the agreement on his part, leaving him to his remedy to recover any damages he may have r„°Graves'v^" sustained in not having received the whole consideration.' 9 eI^Vis, Another illustration of a subsidiary promise of this nature Warranty is to be found in the warranty of quality in a sale of ^jj^JJ^^Jj^' goods. sidiary. Where a contract of sale is executory, so that the pro- perty in the chattel has not passed to the buyer, and the terms of the sale include a promise that the chattel shall possess a particular quality, the acceptance of the chattel by the buyer is conditional on its possessing that quality. Having promised to take, and pay for an article of a par- ticular sort, he is not obliged to receive one which is not of Benjamin on the sort he bargained for. ^'^"^ j^"- But if the contract of sale be executed, as being in its inception such a bargain and sale, of a specific chattel Ante. p. 56, as was described in an earlier chapter, the promise as ^^"ll'"J;^ ,, ^ to quality becomes subsidiary. For, the property having passed, the buyer can only reject the goods if there be an express condition that he should do so (as in Head v. l- R- 7 ex. ?. Tatter sal), or possibly in the event of the goods being different in description to the terms of the agreement, or wholly worthless in quality. The promise as to quality is ^"=^gP°='' 286 DISCHAKGE OF CONTRACT. Part V. then a warranty in the strict sense of the term, ' a stipula- iriraels, *^°-'^ '^y "^^y °^ agreement, for the breach of which compensa- 3 .&s.p.7ss. j^jgj^ must be sought in damages,' in other words, a promise to indemnify against failure to perform a term in the contract. Conditional Promises. Conditional We now come to deal with conditional promises, and before Promises , . , . . ,, are of three we touch upon the sort 01 condition which is especially con- kinds, nected witli the subject of discharge, it may be well to speak shortly of conditions in general. If A make a promise to X which is not an absolute promise, but subject to a condition, that condition must, as regards its relation to the promise in time, be either subsequent, concurrent, or precedent. Condition In tbe case of a condition subsequent, the rights of X under ^'s promise are determinable upon a specified eyent. The condition does not affect the commencement of X'b rights, but its occurrence brings them to a conclusion. We See ante, havc already dealt with conditions of this nature in speaking of the discharge of contract by agreement. p. ZS4- Condition In the case of a condition concurrent, the rights of X concurren . ^^jgj. ^'^ promise are dependent upon his doing, or being prepared to do, something simultaneously with the perform- ance of his promise by A. Such a condition exists in the case of a sale of goods where no time is specified for the payment of the price ; payment and delivery are concurrent perEayiey.j,, conditious, and the right of the seller to receive the price in Bloxara v, ^ T^'^&c 41 ^^^ "^^^ ^^ *''® buyer to receive the goods are dependent upon the readiness of each, the one to deliver and the other to pay. Chap. III. § 2. BY BREACH. 287 la the case of a condition precedent, the rights of X under Condition A's promise do not arise until something has been done, P'''^'^'^'^'^"'' or has happened, or some period of time has elapsed. But in dealing with conditions of this nature we must note that (i) which they are of two kinds, and that with one of these we are not ^^^^l^ g here immediately concerned. We must distinguish conditions which suspend the opera- Floating or tion of a promise until they are fulfilled, from conditions the condlSras'! non-fulfilment of which is a cause of discharge. It is per- haps permissible to call the former floating conditions, as opposed to conditions the performance of which is fixed by time or circumstances. It may be well shortly to illustrate the character of such conditions. A promise may b^ conditional on the happening of an The hap- uncertain event, as in the case of the underwriter whose a™event liability accrues upon the loss of the vessel insured. Or it may depend upon the act of a third party, as in the case of Morgan v. a promise in a building contract to pay for the work upon ' ^'"^f- '''^ receiving a certificate of approval from the architect. Such promises might be called cordingent rather than conditional, for they depend for their operation on events which are beyond the control of the promisee and which may never happen. Again, a promise may be conditional in the sense that its The lapse operation is postponed until the lapse of a certain time — as in the case of a debt for which a fixed period of credit is to be given — or until the happening of an event that is certain to happen, as in the case of an insurance upon life. Or again, a promise may be conditional in the sense that The act of its operation awaits the performance of some act to be done misee. by the promisee. If no time is specified within which the act is to be done, the non-fulfilment of the condition merely suspends and does not discharge the rights of the promisee. Common illustrations of such conditions are furnished by cases of promises conditional upon demand or notice. A may «88 DISCHAEaE OF CONTEACT. PartV. promise X that he will do something upon demand : he cannot tlien be sued until demand has been made. Or A may promise X that he will do something upon the happening of an event, and he may stipulate that notice shall be given to him of the event having happened. Or it may be that the happening of the event is peculiarly within the Makinv. knowledge of X, and then an implied condition would be L. R. 6 Ex, 25. imported into the contract that notice must be given to A before he can be sued upon his promise. In all these cases it would appear that an action brought upon the promise, before the fulfilment of the condition, would be brought prematurely ; and though neither the non- Paimer v. fulfilment of the condition, nor the action brought before it Temple, 9 A, & E, 521, -^yas fulfilled, would discharge the contract, the condition suspends, according to its terms, the right to the perform- ance of the promise. (2) Condi- But the conditions with which we are concerned effect a precedent discharge of contract by their breach, if not performed at a eff "^f (f'-^ fixed time or within a reasonable time from the making of charge, the contract ; and the breach of such a condition is the breach of a term expressly made, or necessarily imjilied in the con- tract, whereby one party loses either the whole or an essential part of that in consideration of which he made his promise. And so we may say that where .4's promise to X is a conditional and not an absolute promise, he may be dis- cliarged — (i) By the failure of X to perform a ' concurrent con- dition,' i, e. to do something or to be ready to do something which should be simultaneous with the performance of his promise by A. (2) By the fact that there has been a total or substantial failure on the part of X to do that which he was bound to do under the contract — a state of things which we may describe as virtual failure of consideration. Chap. III. § 2. BY BREACH. 389 (3) By the untruth of some one statement or the breach of some one term which the parties considered to be vital to the contract. Breach of Goncwrent Condition. Concurrent conditions seem, in point of fact, to be con- Concurrent ditions precedent ; for the simultaneous performance of his ^^g mutual promise by each party must needs be impossible except in conditions ':•''■ J r r ^ precedent. contemplation of law. But what we mean by the phrase is, that there must be a concurrent readiness and willingness Benjamin on ° Sales, p. 480. to perform the two promises, and that if one is not able or willing to do his part, the other is discharged. This form of condition is more particularly applicable to contracts of sale, where payment and delivery are assumed in the absence of express stipulation to be intended to be contemporaneous. In Morton v. Lamh the plaintiff agreed to buy a certain 7 t. r. ms- quantity of corn of the defendant at a certain price, and the defendant promised to deliver the corn within one month. The plaintiff alleged that he had always been ready and willing to receive the corn, but that it had not been delivered within the month. The Court held that readiness to receive was not a sufficient performance of his obligation by the plaintiff ; that payment of the price was intended to be con- current with delivery of the corn. As the plaintiff did not allege that during the time in which delivery might have been made he had been ready to pay the price, there was nothing, as he had shaped his case, to show that he had not himself broken the contract and discharged the defendant by non-readiness to pay. And so the law is laid down by Bayley, J., in Bloxam «. 4 b. & c. 941- Sanders : — ' "Where goods are sold, and nothing is said as to the time of the delivery or the time of payment, and every- thing the seller has to do with them is complete, the pro- perty vests in the buyer, so as to subject him to the risk of 290 DISCHARGE OF CONTRACT, Pait V. any accident which may happen 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.' Breach hy Virtual Failure of Consideration. SdCTs ■'■* i^ l^i<^ down by high authority that ' where mutual Boone v E re promiscs Or covenants go to the whole consideration on both iH. BL273n. gj^gg^ they are mutual conditions and performance must be averred.' By this we must understand that where 4's promise is the entire consideration for X's promise, then, in the absence of any clear indication that X is to perform his promise first, or that X, as the consideration for his promise, relied solely upon his right of action against A, A will not be able to sue X unless he can aver that he has performed or is ready to perform his promise ; and in the event of it being no longer possible for him to perform it within the terms of the con- tract, X will be discharged. It seems tolerably obvious that a total failure by A in performing that which was the entire consideration for X'i promise, and which should have been antecedent to Xs per- formance of his promise, will exonerate X; but it will be well to note some of the less obvious applications of the rule, and to mark its effect in cases where the performance of a promise has been illusory and consideration for the promise of the other party has consequently failed. In cases of In every executory contract of sale the buyer, if he has contract of Contracted for an article of a particular quality, is entitled to reject the article tendered if it do not correspond in quality with the terms of the contract. This however is a matter of express condition falling under the next and not the present head of conditional promises. But in the absence sale. Chap. III. § 2. BY BREACH. 39 1 of express stipulations of this nature there are certain terms implied in every contract of sale which protect the buyer who has not been able to inspect the goods from the impo- sition upon him of an article different to that which he con- tracted to buy, or practically worthless and unmarketable. ' In every contract to supply goods of a specified descrip- tion which the buyer has no opportunity to inspect, the goods must not only in fact answer the specified description, ^ones v- J>gt. but must also be saleable or merchantable under that de- '''• scription.' Thus the buyer is not bound to accept goods which do not Where correspond to the description of the article sold, even though not answer they do correspond to the sample by which they were bought. *? '^'^^'^"P- In Nichols v^ Godts the plaintiff agreed to sell to the w Exch. ,91. defendant a certain quantity of foreign refined rape oil, war- ranted only equal to samples ; and the action was brought for the refusal by the defendant to accept , oil which corre- sponded to the samples, but which turned out not to be foreign refined rape oil. It was held that he was entitled to be discharged from the contract, inasmuch as the nature A°?marv. of the article delivered was different from that which he had l- r. = c. p. 431 & 677. agreed to buy. On the same principle, in Laing v. Widgeon a contract to « Taunt los. supply saddles was held to be discharged, and the purchaser or are not exonerated from receiving the goods, on the ground that they were not of a merchantable quality. In the case of an executed contract of sale, in which the J"^^^^^ °^ property in the article sold has passed unconditionally to the contract of buyer, there does not seem to be express authority to the ^ effect that the terms, thus imported into every contract of sale in which the buyer cannot inspect the goods, give a right Sfs^^;^'" to return the article bought. But it would seem that if the article the property in which has passed to the buyer prove to be worthless and unmarket- u 2 39a DISCHARGE OP CONTRACT. Part V. able, or different in character from that which he agreed to buy, he can exercise rights closely analogous with the right of return, and such as we have described as flowing from the discharge of contract by breach. (i) He can defend an action successfully for the whole amount of the price. (2) He can, if he has paid the price, recover it back, as money received to his use, on the principle explained above, that where a man has done all or any part of his share of a contract which is afterwards broken by the default of the other party, he may recover as upon a distinct contract arising upon the acceptance by the other of money, goods, or services offered by him. 9 B. & c. =S9. In Poulton v. Lattimore, the plaintiff sued the defendant for the price of seed ; the seed had been sold as new growing seed, but when sown it proved wholly unproductive. The defendant refused to pay anything for the seed, and his de- fence was successful to the whole amount of the price. 3 Einj. N. c. In Toung v. Cole, the defendant employed the plaintiff as a stockbroker, and delivered to him some Guatemala bonds to sell. The plaintiff sold them and paid the price to the defendant. The bonds turned out to be worthless because unstamped, and were returned to the plaintiff, who took them back, repaid to the purchaser their price, and sued the de- fendant for the amount which he had paid, as money received by the defendant for his use. The Court held that he was entitled to recover inasmuch as the purchaser of the bonds was entitled to return them and demand their price back from the broker, and the plaintiff had thus been compelled to make the payment on behalf of the defendant. ' It is not a question of warrant}',' said Tindal, C. J., ' but whether the defendant has not delivered something which, though resembling tlie article contracted to he sold, is of no value.' It follows from what has been said that the buyer under 734. Mody V. " 1, Ex. 49. Chap. III. § 2. BY BKEACH. 393 the circumstances described may always maintain an action for damages sustained by the supply to him of an unmarket- ^^^'"J Jj able article, or of something different in character to that S,^"*- ''■'^• which he agreed to buy. There needs no expressed term in ore™ the contract to enable him to do this. It is somewhat unfortunate that the phrase 'implied warranty' should have been used to describe terms of this nature. A non-compliance with such terms is, in fact, a breach of the entire contract, a substantial failure of con- sideration. If A agrees to buy beef of X, it seems hardly reasonable to say that X impliedly warrants that he will not supply mutton, or that he will not supply an article unfit for human food. The use of the term ' warranty ' in this sense has been fer Lord •' Abinger, C. B., emphatically condemned by eminent judges, but it still exists, SopkSi,"' and tends to obscure the subject of the performance and perManin.^iL: Azemar v. breach of contract. l."r'-'c p 677. The rule further applies to the case of promises which in cases of we have described as capable of more or less complete per- pg^orm- formance, and which may be broken in part without such ^°<=6 which 1 1 r^ • 1 . o , wholly fails, breach afltecting the existence of the contract. Where the performance of a promise is divisible so that a partial breach will not discharge the other contracting party, a total failure of performance will nevertheless operate as a discharge. It is possible therefore that a promise which is independent, so that a partial breach does not affect the contract, may, if wholly broken, change its character and become a condition. Thus in Ritchie, v. Atkinson, cited above, it was admitted 10 East, =95. that though the failure to deliver a complete cargo did not exonerate the charterer, yet that if no cargo had been de- livered he would have been discharged. \i^'^?' ^" And so with a promise which the parties regard as a subsidiary term in the contract in so far as its exact perform- 294 DISCHAKGE OF CONTRACT. Part V. Jackson v. Union Marine Insurance Co., L. R. 10 C. P. p. 148. L. R. I C. P. 643. Per Willes, J. and see L. R. 10 C. P. p. 43. ance is not a condition upon which the rights of the promisor depend : if it be broken in such a way as to frustrate the objects of the contract, it operates as a condition and the breach of it as a discharge. Thus in M'^Andrew v. Chappie, cited above, the promise to use ' all convenient speed ' was held not to be a condition precedent to the rights of the ship-owner. It was laid down that delay or deviation in sending out the ship did not exonerate the charterer from providing a cargo at the port of loading. But if it were ' a delay or deviation which, as it has been said, goes to the whole root of the matter, deprives the charterer of the whole benefit of the contract,' such delay or deviation would effect a discharge. Condition Precedent defined. Conditions Precedent. In the cases with which we have been dealing, one of the parties to a contract has been excused from performance of his promise by reason of the entire failure of the consideration which was to have been given for it. We now come to Conditions Precedent in the narrower and more frequent use of the word, as meaning a single term in the contract, but a term possessing a particular character. We will define a Condition Precedent, in this sense, as a Statement or Promise, the untruth or non-performance of which discharges the contract. The difficulty which has always arisen, and must needs continue to arise with regard to Conditions Precedent, consists in discovering whether or no the parties to a contract regarded a particular term as essential. If they did, the term is a Condition : its failure discharges the contract. If they did not, the term is a Warranty : its failure can only give rise to an action for such damages as have been sus- tained by the failure of that particular term. Warranty and Condition are alike parts, and only parts, of a contract consisting in various terms. We have tried to Chap. III. 5 2. BY BEEACH. 395 define Condition, -we will venture further to try and define Warranty. "Warranty is a more or less unqualified promise of in- Warranty demnity against a failure in the performance of a term in the '^^'^°^''- contract. It is right to say that the word warranty is used in the most confusing manner, and in a great variety of senses S but it is submitted that the definition which has just been given assigns to the term its primary meaning. ' A warranty is an express or implied statement of something which the party Per Lord J. ./ Abinger, C.E., undertakes shall be part of the contract ; and though part gopk™;'"' "• 4 M. & W. 404. ^ It would be a work of some research to enumerate the various senses in which the word warranty is used. The following are some of the commoner uses of the term : — (i) Warranty is used as equivalent to a condition precedent in the sense of a descriptive statement on the truth of which the rights of one of the parties depend. Helm v. Burness, 3 B. & s. 75 (*2) It is used as equivalent to a condition precedent in the sense of a promise with the effect above described. Behn v. Btimess. (3) It is used as meaning a condition the breach of which has been acquiesced in, and which therefore forms a cause of action but does not create a discharge. Behn v. Bumess. (4) It is used as an independent subsidiary promise, collateral to the main object of the contract. Chanter v. Hopkins. This, it is snbmitted, 4 m. & w. 404. is its legitimate meaning. (5) In relation to the contract of sale, warranty is used for an express promise that an article shall answer a particular standard of quality ; and this promise is a condition until the sale is executed, street v. Biay, a warranty after it is executed. 2 b. & Ad. 456. (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 contracting parties. We have mentioned the implied Ante, p. agi. warranty in an executory contract of sale that goods shall answer to their specific description and be of a merchantable quality ; in other Tones v. just, words, that there shall be a substantial performance of the contract. T^jf" ^ ^' Implied warranty of title appears to be a somewhat vexed question : but the better opinion seems to be that on the sale of an article a man Eichqiz v. is supposed to undertake that he has a right to sell it ; in other words, fy^^'B^J; g ' that he sells a chattel and not a lawsuit.' 708. But the strangest applications of the implied warranty are the war- ranty of authority which an agent is supposed to give to a person coiien v. contracting with him as agent, of which more hereafter ; and the war- ?^'^^'b ranty of possibility which a man is said to give, if he omits to intro- s e. & b'. 647! duce into his promise conditions which guard him from being bound Clifford v. by it in the event of its becoming impossible of performance. l^r '5 c. p. S77. 296 DISCHABGE OF CONTEACT. Part V. of the contract, collateral to the express object of it.' The breach of a term which amounts to a warranty therefore will give a right of action, though it will not take away existing liabilities ; it is a mere promise to indemnify. We have called a warranty ' a more or less unqualified promise;' and we will illustrate the meaning of this phrase from the contract between a Eailway Company and its pas- sengers. It is sometimes said that a Railway Company as a common carrier warrants the safety of a passenger's luggage, but does not warrant his punctual arrival at his destination in accordance with its time tables. In truth it warrants the one just as much as it warrants the other. In each case it makes a promise subsidiary to the entire contract, but in the Richards v. casc of the luggage its promise is qualified only by the excepted s."l.''Raii™y risks incident to the contract of a common carrier, in the o., 7 . . 839. ^^^^ ^j ^j^^ ^j^^ table its promise amounts to no more than Le Blanche V. an Undertaking to use reasonable diligence to ensure punctu- l!"r!?'c p! ality. A promise is not more or less of a warranty because a greater or less degree of diligence is exacted or undertaken in the performance of it. That the promises are warranties and not conditions is apparent from the fact that neither loss of luggage nor unpunotuality would entitle the passenger to rescind the contract and recover back his fare. Difficulties The question whether a particular term in a contract is a guishing' Condition Precedent or a "Warranty is one which, as it turns condition upon the construction of each individual contract, need not and war- • 1 ■, ranty. detain US longer here. ' The rule has been established,' said Tindal, C. J., in 3Bing. N.c. Stavers v. Curling, 'by a long series of decisions in modern times, that the question whether covenants are to be held dependent or independent of each other, is to be deter- mined by the intention and meaning of the parties as it appears on the instrument, and by the application of common sense to each particular case ; to which intention Chap. III. § 2. BY BEEACH. 297 when once discovered all technical forms of expression must give way.' And Blackburn, J., puts the matter in the same light in the recent case oi Bettini v. Gye : — Js?^'^'^' ' ' Parties may think some matter, apparently of very little importance, essential; and if they sufficiently express an intention to make the literal fulfilment of such a thing a condition precedent, it will be one ; or they may think that the performance of some matter, apparently of essential importance and jorimd facie a condition precedent, is not really vital, and may be compensated for in damages, and if they sufficiently expressed such an intention, it will not be a condition precedent.' This being the rule as to the ascertainment of a condition precedent, it will be enough to note that a condition precedent may assume the form either of a statement or of a promise. In speaking of Misrepresentation, we pointed out the mode Ante, p. 132. ; in which statements forming the basis of a contract or regarded as essential to it were incorporated into the body of the contract, and were placed upon a level with promises the breach of which would confer a right of action, and in certain cases effect a discharge. But it must be borne in mind that a condition precedent Acqui- 1 ' I ^ I'll Oil p I* CSC6I1CS in may change its character in the course ot the periormance 01 ^ breach of a contract ; and that a breach which would have effected a condition '^ ^ turns It into discharge if treated as such at once by the promisee, ceases a warranty, to be such if he goes on with the contract and takes a benefit under it. This aspect of a condition precedent is pointed out by Williams, J., in Behn v. Burness, where he speaks of the 3 b. & s. 756. 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 goes on to say that if after breach the promisee continues to accept performance. 298 DISCHARGE OF CONTRACT. Part V. 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. An illustration of such a change in the effect of a condition 3=L.j. Q. B. is afforded by the case of Pinst v. Dowie. The defendant 179, 285. •' ri ^ chartered the plaintiff's vessel for a voyage to Sydney, he 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. The charterer had the use of the vessel as agreed upon; but it appeared that she was not capable of holding so large a cargo as had been made a con- dition of the contract. To an action brought for non-payment of the freight the defendant pleaded a breach of this con- dition. The term in the contract which has been described was held to have amounted, in its inception, to a condition. 'It is not easy to see,' said Blackburn, J., 'what is meant by these latter words unless they import a condition in some sense; and 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.' He then quotes with approval the dicta of "Williams, J., in Behn v. Burness, and goes on to say, ' No doubt that principle is adopted from the judgment of Lord "Wensleydale, 9 Exch. 709. in Graves v. Lean, and this distinction will explain many of See p. 285. the cases in which, although there appears to have been a condition precedent not performed, a party having received part of the consideration has been driven to his cross-action. Now is not this a case in which a substantial part of the consideration has been received? And to say that the failure of a single ton (which would be enough to support the plea) is to prevent the defendant from being compelled Chap. III. § 2. BY BREACH. 299 to pay anything at all, would be deciding contrary to the exception put in the case of Behn v. Burness.' But although the acceptance of a part performance sub- but not if sequent to the breach of a condition precedent alters, as a ^e of a sub- general rule, the nature of such a condition and reduces it stantial *^ ' ... . character. to the level of a subsidiary promise, there may be cir- cumstances under which the condition retains its original character. If such a performance as has been accepted be not ' a sub- stantial part of the consideration ' the condition does not lose its force. In Ellen v. Topp action was brought by a master 6 excii. 4=4. against the father of an apprentice upon an apprenticeship deed to which the father was a party, for a discontinuance of service by the apprentice. The apprentice had served for three years out of a term of five. The defendant pleaded that the plaintiff, having agreed to teach the apprentice three trades, had abandoned one of them. It was argued that as the plaintiff had given so much of the consideration as a three years' instruction of the apprentice, the condition that he should practise the three trades which he had origin- ally promised to teach, had ceased to be a condition pre- cedent and that the breach of it did not discharge the apprentice. The Court acknowledged the rule that 'the construction of an instrument may be varied by matter ex fost facto ; and that which is a condition precedent when the deed is executed may cease to be so by the subsequent con- duct of the covenantee in accepting less.' But it was held that the failure to fulfil the condition, although some per- formance had since been accepted, was a failure to fulfil a substantial part of the consideration, that the covenant to teach was, in effect, a continuing condition precedent to the EMen v. Topp, covenant to serve, and that, in consequence, the rule under discussion did not apply. 300 DISCHARGE OF CONTRACT. Part V. Remedies for breach. Damages. Specific perform- ance. § 3. Eembdies poe bebach of Conteact. Having endeavoured to ascertain the rules wliich 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: (i) 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 contract, and based upon a new contract originating in the conduct of the parties ; (3) a right of action upon the contract, or term of the contract broken. But we are now no longer specially concerned with that breach of contract which amounts to a discharge : we may therefore consider generally what are the remedies open to a person who is injured by the breach of a contract made with him. They are of two kinds : he may seek to obtain damages for the loss he has sustained ; or he may seek to obtain specific performance of the contract which the other party has refused or neglected to perform. But there is this difference between the two remedies: every breach of contract entitles the injured party to damages, though they be but nominal ; but it is only in the case of certain contracts and under certain circumstances that specific performance can be obtained. We do not propose to treat of these remedies otherwise than in the most general way, for the matter is one which barely comes within the scope of this work : but it may be well to state briefly some elementary rules which govern the two remedies in question. Chap. III. § 3. BY BREACH. 3OI Damages. When a contract is broken and action is brought upon it, — the damages being unliquidated, that is to say unascertained in the terms of the contract, — how are we to arrive at the amount which the plaintiff, if successful, is entitled to recover ] (i) 'The rule of the Common Law is, that where a party Per parke, b., ^ \ ' r ./ Robinson v sustains a loss by reason of a breach of contract, he is, so far "l^lj', as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.' Thus where no loss accrues from the breach of contract, Damages the plaintiff is nevertheless entitled to a verdict, but for represent nominal damages only, and ' nominal damages, in fact, mean '°^^ ™^" a sum of money that may be spoken of, but that has no P" Mauie, j., ''■'■*■' in Beaumont existence in point of quantity.' And so in action for the Jc b'w"''' 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. § 28 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. (2) The rule laid down by Parke, B., in Robinson v. so far as it Harman must be taken subject to considerable limitations templation in practice. The breach of a contract may result in losses °^*gg which neither party contemplated, or could contemplate at the time that the contract was entered into, and the Courts have striven to lay down rules by which the limit of damages may be ascertained. 3°* DISCHARGE OF CONTKACT. Part V. 9 Exch. 354. So in Hadley v. Baxendale it was decided that ' where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i. e. according to the usual course of things, from such breach of the contract itself, or such as may reasonably be supposed to have been in contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.' Exceptional And where special loss is in contemplation of the parties be matter from the breach of the contract, such loss as would not, of special ;jj ^iig ordinary course of things, follow upon the breach, it is not enough that the loss should be in contemplation of Per Blackburn, the partics in order that it mav be recovered as damages, J„ in Home v. ^ •' * ' way Co"" ^'^' there must be ' evidence of an actual contract to bear the exceptional loss arising from breach of contract.' L. R. 8 c. p. In Home v. Midland Railway Company, the plaintiff being under contract to deliver shoies in London at an unusually high price by a particular day, delivered them to the defend- ants to be carried, with notice of the contract only as to the date of delivery. The shoes were delayed in carriage, were consequently rejected by the intending purchasers, and 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 punctually carried. It was held that these damages were not recoverable, in the absence of any evidence that the Company undertook the increased responsibility arising from the unusual price. Damages (3) Damages in an action for breach of contract are by for breach . „ . , of contract way 01 compensation and not 01 punishment. Hence a dicti™" plaintiff can never recover more than such pecuniary loss as he has sustained, subject to the above rules. To this general rule, however, the breach of promise of marriage is Chap. III. §3- BY BEEACH. 3O3 an exception, for in such cases the feelings of the person Hamiinv. injured are taken into account, apart from such specific Railway co.. ■^ ■'■ I H. & N, 408. pecuniary loss as can be shown to have arisen. (4) The parties to a contract not unfrequently assess the Assessment DV "D3,irtlGS 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, which we have already dealt with in considering the construction see p. 243. of contracts. (k) It follows from the general rule laid down by Baron in Robmson ^ ' ° *' V. Hartnan, Parke, that a difficulty in assessing damages can in no way dis- ' ^"^ ^ss- entitle a plaintiff from having an attempt made to assess them. A manufacturer was in the habit of sending specimens of Difficulty of his goods for exhibition to agricultural shows, and he made a must be met profit by the practice. He entrusted some such goods to a ^^ >^'^^- railway company, who promised the plaintiff, under circum- stances 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 S'^ps"" y.-, difficult and speculative, its difficulty was no reason for not fg.' r^d':°74. 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 con- tract by which the defendant would have profited. Thus v^fhere 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 de- livered, and that the loss arising from the non-delivery 304 DISCHAKGE OF CONTKAGT. Part V. Roper V. of the last instalment must be calculated upon that basis, Johnson, ^ L.^R. 8 c, P. although the time for its delivery had not arrived. Jurisdiction of Chan- cery, as to specific per- formance. How limited. Kekewich t. Manning, I D. M. & G. 176. Flight V. Bolland, 4 Russ. 298. Sjpecific Performance. The jurisdiction, once exclusively possessed by the Court of Chancery, to compel pei-formance of a promise, supple- mented the remedy offered by the Common Law Courts, which was often inadequate or inapplicable to the loss sustained. A promise to do a thing can be enforced by a decree for specific performance, a promise to forbear by an injunction. The exercise of this jurisdiction by the Court of Chancery was limited by several rules, some of which have been al- ready noticed. Defects in the formation of a contract afforded an answer to a claim for specific performance, and in some cases Equity was more guarded than the Common Law in granting its remedy to suitors. A gratuitous promise though under seal cannot be enforced in Equity, nor can an infant obtain specific performance of a contract which cannot be enforced against him. But the substantial limitations on the employment of the remedy were these. The Courts will not decree specific performance — 1. "Where the Common Law remedy of damages is ade- quate to the loss sustained. 2. Where the matter of the contract is such that the Courts cannot supervise its execution. Specific perform- ance only where damage an inadequate remedy. (i) The first of these rules is illustrated by the different attitude which the Court has assumed in this matter towards contracts for the sale of land and contracts for the sale of goods. The objects with which a man purchases a particular piece of land are different to those with which he purchases goods. He may be determined, in making the contract, by the merits of the site or its neighbourhood, and these cannot be repre- sented by a money compensation ; whereas goods of the kind Chap. III. § 3. BY BREACH. 305 and quality that he wants are generally to be purchased. Hence specific performance of a contract for the sale of goods is only decreed in the case of specific chattels the value of Leake o- which, either from their beauty, the interest attaching to them, lH^f'^^' or some other cause, cannot be represented by damages. (2) And the distinction drawn between land and goods And where ... ° the Court Illustrates the second rule also. can insure An agreement for the purchase of land can be performed an*"™" by the doing of a specific act, the execution of a deed or 1== ?=■• Lorf ' Selborne, conveyance. In a contract for the sale and delivery of goods ,I,°Rato™?:'o. performance may extend over some time and involve the Railway co., " L- R- 16 Eq. tulhhnent of various terms, and ' The Court acts only where " p- «5- it can perform the very thing in the terms specifically agreed Ed"Sds, upon.' So. But the second rule is more distinctly illustrated by the refusal of the Courts to grant specific performance of con- tracts involving personal services ; though it will enforce by injunction a promise not to act in a particular way. Thus in Lumley v. Wagner, the defendant agreed with the i d. m. & g plaintiff to sing at his theatre upon certain terms, and during a certain period to sing nowhere else. Subsequently she entered into an engagement with another person to sing at another theatre, and refused to perform her contract with the plaintifi^. The Court declined to enforce so much of the contract as related to the promise to sing at the plaintiff's theatre, but it restrained the defendant by injunction from singing else- where. The remedy has been extended to breach of contract for the sale of specific goods by the Mercantile Law Amend- w&jivict ment Act. And specific performance may now be granted by any Effect of one of the Divisions of the High Court of Justice ; for Xcts?^ ^^^ the Judicature Act has removed the old distinctions of36&37Vict C 66. s. 25. sub-s, 7. 306 DISCHAROE OF GONTEACT. Part V. jurisdiction between the Common Law and Chancery Courts. But to the Chancery Division is still reserved a special jurig- s. 34. sub-s. 3- diction in suits for ' specific performance of contracts between vendors and purchasers of real estate, including contracts for leases.' § 4. DiscHAKGB OF Eight of Action arising FEOM Bebach of Contkact. Discharge The right arising from a breach of contract can only be actimi discharged in one of three ways : — (a) By the consent of the parties. (b) By the judgment of a Court of competent jurisdiction. (c) By lapse of time. (a) Discharge hy consent of the parties. This may take place either by B,elease 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 by Release, 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 person making it, it is necessary tliat it should be made under seal ; other- wise 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 Ante, p. 249. an exception. We have already seen that these instruments admit of a parol waiver before they fall due. It appears to be correct to say that the right of action arising upon a bill Byics on Bills, or uotc cau bc discharged by express, though gratuitous, 12th ed., 198. ^ ^ 00 renunciation. by Accord Accord and Satisfaction is an agreement, which need not faction. he by deed, the effect of which is to discharge the right of Chap. III. § 4. BY BREACH. 3O7 action possessed by one of the parties to the agreement. But in order to have this efifect it is not merely necessary that there should be consideration for the promise of the party entitled to sue, but that the consideration should be executed sayiey, v. Homan, 3 Bingf. m his favour. Otherwise the agreement is an accord with- '^^ '^- "' p- 5"°- out a satisfaction. The promisor must have obtained what he bargained for in lieu of his right of action, and he must have obtained something more than a mere fresh arrange- McManus v. ment as to the payment or discharge of the existing liability. 5 E""" ^s. The satisfaction may consist in the acquisition of a new right against the debtor, as the receipt from him of a negoti- able 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 per- form ; but it must have been taken by the creditor as satis- see sm. i.. c. •^ _ ^ i. 351, note to faction for his claim in order to operate as a valid discharge, cuiober Wane, and cases there cited. (6) Discharge hy 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 described see ch. v. s. i. as a Contract of Record. The result of legal proceedings taken upon a broken con- tract may thus be summarised : — The bringing of an action has not of itself any effect in Effect of discharging the right to bring the action. Another action a™on"^ may be brought for the same cause in another Court ; and though proceedings in such an action would be stayed, if they were merely vexatious, upon application to the summary judicature jurisdiction of the Courts, yet if action for the same cause =• 4. be brought in an English and a foreign Court, the fact that X 2 3o8 DISCHARGE OF CONTRACT. Part V. of judg- ment, by way of estoppel, the defendant is being sued in the latter would not in any- way help or affect his position in the former. When the action is pursued to judgment, a judgment adverse to the plaintiff discharges the obligation by estoppel. The plaintiff cannot bring another action for the same cause so long as the judgment stands. 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 original positions by a rule being obtained for a new trial of the case. But it is important to bear in mind that an adverse judg- ment, in order to discharge the obligation by estopping the plaintiff from reasserting his claim, must have 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 in the case of action brought before a condition of the contract 9 A. & E. 521. IjjJ -jjggjj fulfilled, such as the expiration of a period of credit in the sale of goods, he will not be prejudiced, by a judgment proceeding on these grounds, from succeeding in a subsequent action. If the plaintiff get judgment in his favour, the right of action is discharged and a new obligation arises, a form of the p. 37- so-called Contract of Record. It remains to say that the obligation arising from judgment may be discharged by pay- ment of the judgment debt, under 4 & 5 Anne, c. i6. § 12, or by satisfaction obtained by the creditor from the property of execu- of his debtor by the process of execution. lion. (c) Lapse of Time. Except by express statutory provision, lapse of time does not affect the rights of parties to contracts. The rights Per Lord sei- arising from contract are of a permanent and indestructible borne, Llanelly L.''&"?f w.R. character, unless either from the nature of the contract, or 7 h'. l. 567. from its terms, it be limited in point of duration. But though the rights arising from contract are of this Palmer v. Temple, by way of merger ; Chap. in. § 4. BY BEEACH. 3O9 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. It was enacted by 21 Jac. I. c. 16. § 3, that 'all actions of Simple account, and upon the case . . . and all actions of debt contract, grounded upon any lending or contract without specialty, all actions of debt for arrearages of rent . . . sliall be commenced and sued within ... six years next after the cause of such action or suit and not after.' It will be noted that ' action upon the case' includes actions of Assumpsit, as was explained in an earlier chapter. pi'J"' '"'"■ '"' The Statute 3 & 4 "Wm. IV. c. 42. § 3 limits the bringing Specialties, of actions upon any contract under seal to a period of twenty years from the cause of action arising. These Statutes begin, in the ordinary course of things, to Disabilities take effect so soon as the cause of action arises, but there are operation"of certain circumstances which suspend their operation. The Statutes. Statute of James provided that infancy, coverture, insanity, 21 Jac. i. c 16. imprisonment, or absence beyond seas should, where the plaintiff was affected by any of these disabilities at the time the cause of action arose, suspend the operation of the Statute until the removal of the disability. The Statute of "William the Fourth made the same rule apply, except in 3 & 4 wiiniv. C. 42 S. 4. ease of imprisonment, to actions on specialties. The Mercantile Law Amendment Act provides that neither 19 & 20 via. C. 97. S. 10. imprisonment of the plaintiff nor his absence beyond seas shall operate as a suspensory disability in actions on simple contract or specialty. "Where the defendant is beyond seas at the time the right 3&^4Wiit i\-. of action accrues, the operation of the Statute is suspended t Anne, c 16. until the defendant returns. But where there are two or more defendants, one of whom is beyond seas, the plaintiff may proceed at once against those who are accessible without affecting his rights against the 19 & 20 vict one who is beyond seae. 3IO DISCHABaE OF CONTKACT. Part V. Imperial Gas Co. V. London Gas Co.. lo Hxch. 39. Blair V. Bromley. 5 Hare. SS9. These are the only matters which hinder the Statutes of Limitation from aifecting the plaintiff's remedy. Neither ignorance that a right of action existed, nor, so far as Common Law goes, the concealment of the cause of action by fraud, will prevent the plaintiff from losing his remedy by lapse of time : nor, again, will the operation of the Statute be affected by a disability arising after the period of limitation has begun to run. But in cases where there has been a fraudulent conceal- ment of the existence of a cause of action, Equity dates the commencement of the statutory period from the discovery of the fraud. It is possible that Statutes of Limitation may be so framed as not merely to bar the remedy, but to extinguish the right : such is the case with regard to realty under 3 and 4 "Will. IV. c. 27, but as regards contract the remedy barred by the Statutes of Limitation may be revived in certain Revival of right of action. In case of Where a specialty contract results in a money debt, the specialty. . , ■/ ' right of action may be revived for the statutory period of limitation, (i) 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 piincipal 3 Si 4 wui. IV. 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. Of simple Where a simple contract has resulted in a money debt, the right of action may also be revived by subsequent ac- By promise, knowledgment or promise, and this rule is affected by two gGeo.iv.c. 14. 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 (19 & 20 Vict. c. 97), which provides that such a writing may be signed by the agent of the party chargeable, duly authorised Chap. III. §4- BY BEEACH. 3II thereto, and is then as effective as though signed by the party himself. cf^.'Srs"' The sort of acknowledgment or promise which has been held to be requisite in order that a simple contract debt may be revived for another period of six years, is thus described by Mellish, L. J. : — 'There must be one of three in re mver •^ ' steamer Co.. things to take the case out of the Statute (of Limitation). ^- ^- * '^^- "=*• Either there must be an acknowledgment 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.' This being the principle, its application in every case must turn on questions of construction of the words of the alleged promisor. And as was remarked in the most recent case upon the subject, ' "When the question is, what effect is to be given to particular words, little assistance can be derived PerOeasby.B., from the effect given to other words in applying a principle Yi'to: s";?."^ which is admitted.' The debt, however, admits of revival in another mode than by express acknowledgment or promise. A part payment, By pay- or payment on account of the principal, or a payment of interest upon the debt will take the contract out of the Statute of Limitation. And it is expressly provided in Lord Tenterden's Act that nothing therein contained ' shall alter, or take away, or lessen the effect of any papnent of any principal or interest made by any person.' But the payment must be made with reference to the original debt, IJ'^aKre.v^ and in such a manner as to amount to an acknowledgment = c. m. r. 7^3 of it. 3ia DISCHARGE OF CONTRACT. Part V. CHAPTEK IV. Impossibility of Performance. Unreality of con- sideration. Mistake. Strickland V. Turner, 7 Exch. 217. P- 121. Impossibility of performance arising subsequently to the formation of the contract will, in certain cases, operate as a discharge. But before proceeding to consider and classify these cases, it may be well to say something as to Impossibility in general in its relation to contracts. Obvious physical impossibility, or legal impossibility which is apparent upon the face of the promise, avoids the contract, because, as we have seen, the promise is an unreal 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, as we have seen, on the ground of mistake ; but there are two cases of this sort which, if reconcileable at all, are reconcileable only by a very fine distinction. The distinction, if worth anything, seems to come to this : — If a man makes a promise to do some act, and the pos- sibility of his doing it is dependent on the existence of some thing or state of circumstances, he must make his promise conditionally or he will be bound in any event. But if two parties agree to purchase or otherwise deal with a thing which turns out to be non-existent, then, in the absence of any expressions to show that the promise of either was un- conditional, they will be taken, if the thing be non-existent, to have contracted under mistake. The facts of the two cases are these. Chap. IV. IMPOSSIBILITY OF PEEFORMANCte. 3I3 In Hills V. Sughrue, the defendant agreed with the plaintiff 's m. & w. 253. by charter-party to take his (the defendant'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 per- formance of the defendant's promise to load a complete cargo was impossible. The plaintiff sued him for damages for failure to bring home a cargo, and was held to be entitled to recover : the impossibility of performance being no answer to an absolute promise such as the defendant had made. On the other hand, in Clifford v. Watts the plaintiff and l. r. s c. p. defendant were landlord and tenant, and the plaintiff sued upon a covenant in the lease in which the defendant under- took to dig from the premises not less than 1000 tons of potter's clay annually, paying a royalty of 2S. 6d. per ton. The defendant 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. TJiey agree on the assumption that it is there; and the covenant is applicable only if there he clay.' It is possible that the cases might be distinguishable on the ground suggested above, but it is noticeable that the Judges in the Court of Common Pleas, in distinguishing Hill V. Sughrue from Clifford v. Watts, curiously misappre- ism.&w =53. bended the point of the earlier case ' ; and this makes the 577. fine distinction which we have tried to draw somewhat un- satisfactory. ' It is clear from the language of Willes, J., at p. 586, and of Brett, J., at p. 589, that thcjy thought the action in Hills v. Saghrue was l. k. 5C.P. brought by the shipowner against the charterer for not furnishing a cargo, whereas it was brought by the charterer 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). There is a great difference between a man promising to go and bring home a thing which proves to be non-existent, and a man 3H DiSOHARaE OF CONTRACT. Part V. Subsequent impos- sibility no excuse. Aleyn, 26, "We now come to deal with Impossibility arising subse- quent to the Formation of the Contract, and we may lay it down as a general rule that whether or no such impossibility originates in the default of the promisor, he will not thereby be excused from performance. We have already dealt with 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: in the event of performance becoming impossible, the promisee must bear the loss. If the promisor makes his promise uncon- ditionally, he taljes the risk of being held liable even though performance should become impossible by circumstances be- yond his control. An old case, Paradine v. Jane, illustrates the law upon this subject briefly and perspicuously. The plaintiff sued for rent due upon a lease. The defend- ant pleaded ' that a certain German prince, by name Prince Eupert, 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. 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 promising tiiat, if another will let out his ship on certain terms, he will enable him to earn freight by loadins; a cargo which, when the ship is sent, proves to be non-existent. The writer cannot but think that the Court of Common Pleas unintentionally decided contrary to mils V. Sughrue. Chap. IV. IMPOSSIBILITY OF PERFORMANCE. 315 excuse Mm. As in the case of "Waste, if a house be de- stroyed by tempest, or by enemies, the lessee is excused . . But when a party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, not- withstanding any accident or inevitable necessity, because he might have provided against it by his contract. And there- fore 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.' This being the general rule of law, we must now note a group of exceptions to it. And these must be distinguished from cases in which the Act of God is said to excuse from non-performance of a contract ; for this use of the term ' Act of Grod ' has been condemned by high authority. Psr cunam in There are, as we have seen, certain contracts into which L'^S'fU'B the Act of God is introduced as an express, or, by custom, an "' ^' '^^ implied condition subsequent absolving the promisor. But there are 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 reasonably be supposed to l. r. 4 q b. have contemplated their occurrence, so that the promisor neither excepts them specifically, nor promises uncondition- ally in respect of them. We will deal with them seriatim. (i) Legal imjMssibility arising from a change in the law Except « 7 • where there of our own country exonerates the promisor. ^^ change In Baily v. Be Grespigny, the plaintiff was lessee to the l r ,q b defendant for a term of 89 years of a plot of land : the '^' defendant 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 Railway Company, acting under par- liamentary powers, took the paddock compulsorily, and built a station upon it. The plaintifi' sued the defendant upon the 3l6 DISCHARGE OF CONTEACT. Part V. covenant ; it was held that he was excused from the observ- ance of his covenant by an impossibility arising from the action of the Legislature. ' The word " assigns " is a term of well-known signification, comprehending all those who take either immediately or remotely from or under the assignor, Spencer's case, whether by conveyance, devise, descent, or act of law. 5 Co. Rep. 15. The defendant when he contracted used the general word " assigns," knowing that it had a definite meaning ; and he was able to foresee and guard against the liabilities which might arise from his contract so interpreted. The Legis- lature, by compelling him to part with his land to a railway 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. To hold the defendant responsible for the acts of such an assignee is to make an entirely new contract for the pai-ties.' Destruction (2) Where the continued existence of a S2)ecific thing is of subject- ggggntial to the performajice of the contract, its destruction, matter. 1 j j > > from no default of either party, operates as a discharge. 3 B. & s. 8=6. The leading case upon this subject is Taylor v. Caldwell. There the defendant agreed to let the plaintiff have the use of a Music Hall for the purpose of giving concerts upon certain days : before the days of performance arrived the Music Hall was destroyed by fire, and the plaintiff sued the defendant for losses arising from the consequent breach of contract. The Court held that, in the absence of any express stipu- at p S33. lation on the matter, the parties must be taken ' to have contemplated the continuing existence' of the Music Hall ' as the foundation of what was to be done ;' and that there- fore, ' in the absence of any express or implied stipulation that the thing shall exist, the contract is not to he construed as a positive contract, but as subject to an implied condition- Chap. IV. IMPOSSIBILITY OF PERFORMANCE. 317 that the parties shall he excused in case, before breach, per- formance becomes impossible from the perishing of the thing without default of the contractor.' It will be observed that in this case the Court introduces an ' implied condition ' into the contract, that the subject- matter of it shall continue to exist ; whereas in the later case quoted above, express note is taken of the fact that the impossibility is ' not within the contract,' and has not been made the subject of any condition; and this, it is submitted, is a more satisfactory interpretation of the rule than to introduce a term into the contract which was never present to the mind of either party to it. (3) A contract which has for its object the rendering 0/ incapacity personal services is discharged by the death or incapacitating °l^^^^° illness of the promisor. In Robinson v. Davison, an action was brought for l. r. « Exch. 269, 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 Bram- well, B. : — ' This is a contract to perforin 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 conti-act 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 con- ditional and not absolute.' 3l8 DISCHARGE OF CONTRACT. PartV. CHAPTER V. Discharge of Contract by Operation of Law. There are rules of law which, operating upon certain sets of circumstances, lyill bring about the discharge of a con- tract, and these we will briefly consider. Merger. Merger. The acceptance of a higher security in the place of a lower, that is to say, a security which in the eye of the law is infe- rior in operative power, ipso facto, and apart from the inten- tion of the parties, merges or extinguishes the lower. See p. 307. ^6 have already seen an instance of this in the case of judgment recovered which extinguishes by inerger 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. The rules governing this process may be thus sum- marised :- — (u) The two securities must be different in their legal Higgens case. Operation, the one of a higher efficacy than the other. A 6 Co. Rep. 45 b. , ,.,.,., second security taken in addition to one similar in character will not affect its .validity, unless there be discharge by sub- stituted agreement. Holmes v. Bell, (/3) The subjcct-matter of the two seciu'ities must be 3 M. & G. 213. identical. (y) The parties must be the same. Chap.V. BY OPERATION OF LAW. 319 Alteration of a Written Instrument. If a deed or contract in writing be altered by addition or Rules as to erasure, it is discharged, subject to the following rules : — (a) The alteration must be made by a party to the con- pattinson v. tract, or by a stranger while in his possession and for his ^"^ ■" '^''■ benefit. Alteration by accident or mistake occurring under such wukinson v. •' ° Johnson, circumstance as to negative the idea of intention will not 3 b. & c. 4=8- invalidate the document. ((3) The alteration must be made without the consent of the other party, else it would operate as a new agreement. (y) The alteration must be made in a material part. What amounts to a material alteration must needs depend upon the character of the instrument. But the general principle seems to be this, that a man ' is discharged from his liability if the altered instrument, supposing it to be genuine, would Percunamin operate differently to the original instrument, whether the ^ll'^^' b 3, alteration be or be not to his prejudice.' The loss of a written instrument only affects the rights of or loss. the parties in so far as it occasions a difficulty of proof; but an exception to this rule exists in the case of bills of ex- change and promissory notes. If the holder of the instru- g^[;f„\'^/- ment lose it, he loses his rights under it, unless he offer to the h^rit^^s '"" party primarily liable upon , it an indemnity against possible Parker, 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. 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 Bankruptcy 32 & 33 Vict. Act of 1869. c-?'- APPENDIX A. Contract and Quasi Contract. It is necessary to touch briefly upon certain kinds of legal obligation which, for want of a better name, we call Quasi Contract, and which have been invested with the form of a fictitious or implied agreement. In dealing with Form and Consideration we mentioned that it appears as though both in English and Eoman law we found the rudiments of Contract to originate in the same sources : — (i) A Formal Promise, the Stipulatio ' in Roman, the Deed in English law, seems to be the only mode in which parties can bind themselves where the subject-matter of agreement is wholly future or executory. (2) An informal acquisition of benefit by one party at the expense of another, creating a liability to make a return, seems to be at the root of the contract Ee in Eoman law, and the contract arising upon executed consideration in English law. It is not improbable that the relation which we call quasi contract, or ' contract implied in law,' and the genuine con- Leake on con- . . . 'ract, p. 73. tract arising upon consideration executed, sprang alike from ' The history of Formal Contract seems still obscure, but, so far as the Stipulatio is concerned, Mr. Hunter in bis ' Exposition of Koman Law ' has proved almost conclusively that it does not originate in the Mancipatio ; in other words that Conveyance is not the parent of every pp. 364—363. kind of contract. In fact, the arguments of Mr. Hunter go far to show that the Formal binding promise originated in Treaty rather than Sale, in those international relations of families described by Sir Henry Maine Ancient Law, as existing when the family was the unit of society : in those covenants ^^^' affirmed by oath, of which the Book of Genesis offers frequent and familiar examples. 322 APPENDIX A. this notion of the readjustment of proprietary rights. It may well be that the idea of Agreement expressed in proposal and acceptance was not applied at first to that which we now call contract arising upon consideration executed, and that such genuine contracts were only by degrees disen- tangled from quasi contract. A passage in Gaius points to the blending of the two conceptions. After illustrating the nature of the contract Re, by the instance of Muiuum or loan for consumption, he goes on to say, ' is qui non debitum Gaius, 3, s. 91. accepit ab eo qui per errorem solvit, re obligatur''.' It is true that he immediately points out the difference in character between the two obligations ; but it is significant that they were regarded as so nearly allied. And the appli- cation in English law of the action of Debt indicates a similar connexion, in early law, of the two sources of liability. But it is the change of remedy in English law from Debt to Assumpsit, more than this possible community of origin with certain forms of true contract, which has invested the ' contract implied in law ' with so much of the outward aspect of Agreement. Debt was the remedy for cases of breach of contract upon consideration executed, where such a breach resulted in a See authorities liquidated or ascertained money claim : and later, this action collected in ^ ^ "^ ' t^irpp^iS"' came to be applied to any breach of contract resulting in a similar claim. And Debt was also the remedy in cases where comyn5, statute, commou law, or custom laid a duty upon one to pay '^"' an ascertained sum to another. The action of Assumpsit was primarily an action to recover an unliquidated sum, or such damages as the breach of a promise had occasioned to the promisee, and it was in the first instance inapplicable to legal liabilities arising otherwise than upon a contract springing from mutual promises. But there were certain inconveniences attaching to the ' By the time of Justinian this legal relation had been definitely assigned to the province of Quasi Contract. Institutes, iii. 27. 6. CONTRACT AND QUASI CONTRACT. 333 action of Debt. It admitted of the employment by the de- fendant of a mode of defence termed ' Wager of law.' This Biackstone, ° Comra. iii. 341. determined the result of the action, 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 made it impossible to include in the same suit an action of debt and an action of assumpsit, an action for liquidated and one for unliquidated damages, inas- much as the one was based upon contract real or feigned, the other upon a form of wrong, the non-feazance of an undertaking. And so the history of pleading in relation to contract is in great part the history of the encroachment of the action of Assumpsit upon the field of the action of Debt. It was for some time doubtful whether assumpsit would lie where the action was brought upon a breach of contract resulting in a liquidated claim ; for a debt rather than for damages. But it was decided in Slades case that an action 4 co. Rep. c=. of assumpsit would lie though the contract resulted in a liquidated claim. The next step was this : where the breach of a contract i'esulted iu a liquidated claim, the pleadings in the action of assumpsit were reduced to a short statement of a debt origin- ating in a request by the defendant, and a promise by him to pay. This was still almost a novelty in the reign of Anne, see expres- I^ •' . sionsofHolt, Henceforth the action of assumpsit possessed great practical n^yj^™'^'' '" convenience. It enabled claims arising from contract to be 2 s^Ts's- variously stated in the same suit, in the form of a special agreement which had been brolcen, and in the form of a debt resulting from an agreement and consequently importing a promise to pay it. Such a mode of pleading was called an indebitatus count, or count in indebitatus assumpsit ; the remedy upon a special contract which resulted in a liquidated claim was now capable Moses V. Macferlan, 2 Burr. 1008. 334 APPENDIX A. of being reduced to the shape of an action for debt with the addition of a promise to pay it. In this form it came to be applied to those kinds of legal liability which had given rise to the action of Debt, though devoid of the element of agree- ment, and thence to all cases where A was liable to make good to X a sum gained at X'% expense. The legal liability thus clothed in the form of contract, cannot be omitted from the treatment of our subject if only for the sake of distinguishing feigned from true Proposal and Acceptance. For the convenience of the remedy certain legal liabilities have been made to figure as though they sprang from contract, and have appropriated the form of Agreement. It is enough to say, as regards the later his- 15 i- 16 Vict, tory of the subject, that the Common Law Procedure Act of 1852 practically abolished the distinction between Assumpsit and Debt, by making it no longer needful that a plaintiff should specify the form in which his action is brought, by allowing the joinder of various forms of action in the same suit, and by providing for the omission of the feigned promise 5. 49. 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 requires ' that every pleading shall contain a statement of Order 19. 4.' the material facts upon which the party pleading relies ; ' and thus merely formal pleadings are abolished. Nevertheless, although the form no longer exists, the legal relations of the parties remain unchanged, and the obligation to which the action of Assumfsit conveyed a false air of agreement continues to furnish a cause of action, though that cause of action is now to be stated as it really exists. It is rather in deference to its historical connection with contract, than to actual propi'iety of arrangement, that we briefly notice the kinds of legal relation which once, in the pleader's hands, wore the semblance of proposal and acceptance. c. 76, s. 3. s. 41, CONTRACT AND QUASI CONTRACT. 335 The liability of whicli we speak may arise either 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 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 be sued upon as creating a debt between the parties, whether or no wraiamsv. the court be a Court of Record. 13 m. &W.62S. The acts of the parties may bring about this obligation either (i) from the admission by one of a claim due to the other upon an account stated, or (2) from the payment by one of a sum which the other ought to have paid, or (3) from the acquisition by one of money which should belong to the other. (i) An account stated is an admission by one party who Account is in account with another that there is a balance due from j^,-^,^ him. The admission that a balance is due imports a promise sm.Vw ids. Hopkins V. to pay upon request, which may be sued upon, as though it "-o^*^ ^^ , ^ created a liability ex contractu. (2) It is a rule of English law that no man 'can make Per wnies, j., *• ' in Johnson v. himself the creditor of another by paying that other's debt ^team packet against his will or without his consent.' ^c'.F.'t^' But if A requests or allows JT to assume such a position Money that X may be compelled by law to discharge A'a legal f^^ the^'use liabilities, the law imports a request and promise made by °f ^■ A to X, a request to make the payment, and a promise to repay. The payment by one of several co-debtors of the entirety of the debt will entitle him to 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 assu7njpsit, and he could recover his payment from his co-debtors as money ^SZ' . , ^ ,, . 12M. &'\V 4=3- paid to their use. 336 APPENDIX A. Exall V, Partridge, 3 T. R. 30 And in like manner a lodger, who has paid the rent of his landlord under a threatened distress of his goods, may- recover the amount which he has thus been compelled to pay. But legal liability incurred by X on behalf of A without any concurrence or privity on the part of ^, will not entitle X to recover for money which under such circumstances he may pay to 4's use. The liability must have been in some manner cast upon X by A. Otherwise the mere fact that X has faid under compulsion of law what A might have been compelled to pay, will give to X no right of action against A. X may have been acting for his own benefit and not in consequence of any request or act of A . For instance, X was entitled under a bill of sale to seize A's goods ; he did so, but left them on A's premises till rent fell due to A's landlord. The landlord distrained the goods. X paid the rent and then sued A for the amount paid as having been paid to his use. It was held that the facts gave X no right of action. ' Having seized the goods under the bill of sale, they were his absolute property. He had a right to take them away; indeed it was his duty to take them away. He probably left them on the premises for his own purposes, .... at all events they were not left there at the request or for the benefit of the defendant.' (3) There are a number of cases in which A may be !J°for'the ^ called upon 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, of which payments under contracts induced by fraud, or duress, have afforded us some illustrations ; the second are England v. Marsden, L. R, I C. P. 529. Money X for the iise of A Moses V. Macferlan, 2 Burr. loio. CONTRACT AND QUASI CONTRACT. 327 cases of money paid under such mistake of fact as creates Marriott-v. " '■ Hampton, a belief that a legal liability rests on the payer to make the 1^™;,^^ ' ^^' . 1 thereto. payment . It would not fall within the limits of our subject to deal with cases of this nature. ' To these is sometimes added the liability arising to repay money paid upon a consideration which has whoUy failed, but this it would seem is based upon genuine contract, the breach of which with its con- sequences was thus shortly stated in an indebitatus count. 328 APPENDIX B. APPENDIX B. Agency. Agency is It is hardly possible to avoid dealing with the subject of comract. Agency in a work professing to treat of the general principles of the law of Contract, because the relations of Principal and Agent are involved in many of the cases used by way of illustration, and recur in almost every part of the subject. And yet Agency is, strictly speaking, a special contract, the details of which, like those of Bailment, Partnership, or Sale, are outside of the scope of this work. Not a The relation of Principal and Agent is introduced by writers of great authority into the subject of Parties to Contracts, but we avoid this course and for the following reason. In dealing with parties to contracts it seems right to limit that branch of the subject to the Capacity of Parties as affected by Status, and not to introduce limitations or modi- fications of contracting power, which, as in the case of Agency, spring from contract. For Agency is not a Status. The essential feature of a status is that the rights and liabilities affecting the class wloich constitutes each particular status are such as no member of the class can vary by contract '■ while he remains a member of the class. An infant, for instance, can by no possibility contract himself out of the Infant's Belief Act, ' It is believed that this suggested characteristic of Status is its true differentia from other legal relations. At any rate it cannot be amiss to offer a suggestion which may help the student out \3f the difficulties which Austin's discussion of the subject of status tends to increase rather than to diminish. AGENCY. 329 nor can a soldier contract himself out of the Mutiny Act. A corporation can by no artifice bind itself by a contract ultra vires, nor can a British subject make a valid promise to sell his vote at an election, to abstain from marriage, or to do any other act which is expressly unlawful or held to be contrary to public policy. An agent, on the other hand, may by the terms of his contract vary indefinitely his rights and liabilities in respect of his principal and of the parties whom he brings into relations with his principal. Except in the case of some statutory regulations affecting agents of a certain class, the rules of law which affect Agency are either special rules which admit of variation by contract, or general rules as to the consequences which follow upon conduct or expressions of a certain sort. For instance, it is a general rule of law that an agent standing between a foreign dealer and an English principal is personally liable to his English principal, but he may contract Mahony v himself out of this rule and free himself from liability by "• ^- ^- ' express terms. Similarly it is a general rule of law that if an agent con- tracts as a principal, or contracts for a principal whose name he does not disclose, the party with whom he contracts has an option to proceed against the agent or principal when he has discovered the true position of affairs : in like manner the principal has a right to intervene, and may if he choose take the benefit of the agent's contract. But here it is the conduct of the agent which has made him liable at the option of the third party and which leaves him liable at the option of his principal. In all this there is nothing of Status. The relations of principal and agent, of agent and third party, of principal and third party, all spring from contract and may be modified by contract, unless the conduct of one of the parties has been such as to furnish inference of intention which may not be rebutted. 33° APPENDIX B. Form of appoint- ment. When re- quired. Ratifica- tion. Agency then being a special sort of contract, we only touch upon its main characteristics in deference to the frequency with which it occurs in the general law of the subject. We may group what has to be said on the matter under the following heads. (r) The mode of appointing an agent and the extent of authority conferred by different modes of appointment. (2) The restriction and revocation of authority once given. (3) The rights and liabilities which may arise as between agent, principal, and third parties. An agent need not possess the capacity to contract in order to make a binding contract between his principal and a third party : but if he do not possess such capacity he can acquire no personal rights or liabilities under the contract. In order that an agent may make a binding contract under seal, it is necessary that he should receive his authority under seal. Such a formal authority is called a power of attorney. In order that an agent may make a binding contract relating to leases and interests in land within the meaning of 29 Car. II. c. 3. ss. I, 3, it is necessai-y that the agent should receive an authority in writing. For all other purposes the form in which an agent receives his authority is immaterial : writing, words, or conduct are all modes in which an authority may be conferred. Nor is it necessary that tlie principal should have author- ized the making of the contract before it was entered into by the agent. He may assume its rights and liabilities by a subsequent ratification. But in order that ratification may have this effect the agent must have acted as agent, and on behalf of the •prin- cipal who ratifies, so that there must be a principal in the contemplation of the agent, and the agent must assume to Wilson V. Tumnian, . 6 M. & G. 236. act for him AGENCY. 331 An extension is given to this power of ratification in Exceptions , . to general certain cases. rule. In a contract 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. Per Erie, cj., in Watson v. But then they must be persons who were contemplated at the f^cB, n.s. time the policy was made.' Again, in cases of representation by administrators of an intestate or trustees of a bankrupt, an act done by an agent on behalf of the estate may be ratified by the administrators or trustees when appointed, though they were unascertained f^'^'^y^^",'!!' persons at the time the act was done. Apart from the few cases in which Form or writing is necessary to give an authority, and apart from the rules relating to ratification, the mode in which the relation be- tween principal and agent is created calls for no remark. It is more important to consider the nature of the agent's authority and the extent to which it may be modified by the fashion of its creation or by express restrictions. An authority may be special, or it may be general. A Special special agent is given. a prescribed and definite authority for ^S^'^'^J'- the purposes of a particular transaction. He can only bind hia principal to the extent of the powers assigned to him. Thus where a person, not being a dealer in horses, author- ized his servant to sell a horse, it was held that he was not bound by a warranty of the horse given by his servant to the purchaser : inasmuch as the servant had received no express authority to give a warranty, and was not habitually em- ployed by his master to sell horses so as to confer upon him Eradyv. Totia, the powers of a general agent. 292. A general agent has the full powers which the nature of General his employment might reasonably be supposed to confer, and these cannot be limited by restrictions, imposed by his prin- cipal, but not communicated to the party dealing with him. agency. 333 APPENDIX B. For a general agent represents his principal throughout the various transactions incident to a particular sort of business which the agent is employed to carry on : while a special agent is agent, as it were, incidentally, and represents his principal for the occasion only. How it may A general agent may derive his authority from the fact ^"^^' that business of a certain sort is entrusted to him which involves the exercise of a discretion, or from the fact that he stands in some such relation to his principal as of itself implies an authority to act in certain matters, or from the fact that the principal has habitually sanctioned acts of a particular character done by the agent on his behalf. from the The first of these forms of general agency, that which f™t?lnary arises by entrusting to a man the conduct of business which powers. involves the exercise of discretion, is best illustrated by noting some of the commonest forms of professional or commercial agency. Auctioneer. ifl) ^^ 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 and 17th sections of the Statute of Frauds. 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 prin- wooife V. cipal, he may introduce terms into the contract which he makes Home, L. R. ^ ' ^ 2 Q. B. D. 355. ^j^}j ^]jg ijuyer, go as to render himself personally liable. Factor. (6) A factor is an agent employed to sell goods which are consigned to him by or on behalf of his principal: 'he usually sells in his own name without disclosing that of his principal : the latter, therefore, with full knowledge of these Per Abbott, ciroumstances, trusts him with the actual possession of the C. J., Baring V. ^ ^ ^ ^ ^ 'Mi!tii ^' * goods and gives him authority to sue in his o\vn name.' The power of the factor to deal with the goods is not AGENCY. ^^^ limited by the general discretion as to sale ; he has a lien upon the goods for his commission, he has a discretionary power to insure them, and the Factors Acts have given him a right to l^ ^ ^'"- ^■ pledge them. fst'"^'"' (c) A commission agent is one who buys or sells goods for Commis- a foreign principal. He deals directly and personally with both his employers, and establishes no contractual relation between them. ' There is no more privity between the person supplying goods to the commission agent and the foreign correspondent than there is between the brickmaker who supplies bricks to a person building a house and the owner of that house. The property in the bricks passes from the brickmaker to the builder and, when they are built into the wall, to the owner of that wall : and just so does the property in the goods pass from the country producer to the Per Biackbum. commission merchant, and then, when the goods are shipped {f^jj^ln"'!, from the commission merchant, to his consignee.' '"^' The commission agent in fact promises to find goods for his employer, on the best terms he can, on payment to him of a commission. {d) A broker differs essentially from the kinds of agents Broker. we have described. A factor 7nay, a commission agent must contract in his own name, each has certain rights over the goods which are the subject of sale. But a broker is merely the means of establishing privity of contract between two parties, he has no dealings with the goods or their price and Vinson. no right to sue in his name. 802. ' ' The relations of the parties may confer upon one a general Agency- authority to act on behalf of the other. relation of Thus a partner, acting within the ordinary limits of the Parties, partnership business, has authority to contract on behalf of ship, the firm, that is to say the partners jointly. EoiTrae? '' Thus also a man by marrying a woman, or cohabiting with Cohabita- her as his wife, gives her an implied authority to bind him by "°"- and wife. 334 APPKNDIX B. a Smith, L. c, contract for such things as are suited to the position which notes to ° Manby V.Scott, gjjg jg allowecl bj him to occupy. Agency Again, a course of conduct may create an agency of a general du™.*"""" J^ind : if a man allow a servant constantly to purchase goods Master and upon credit the master will be held liable though the servant Tsho^er 9^ puTchasc thiugs for his own use. But these must be of the same class as those ordinarily purchased for the master. Husband And SO if a man entrust his wife with the management of a trade, or permit another habitually to transact business for him of a certain sort, he will be bound by acts done in pur- suance of a continuous authority presumed from such a course of conduct. (2.) Restriction A special agent has, as we have seen, such authority as is agency, gjjp^gggjy conferred upon him, and no more. A general agent has the authority incident to the scope of his business ; he has such a power of binding his principal to third parties as a reasonable man, having regard to the character of the business, would naturally presume that he possessed. And from this description of the nature of an agent's authority it follows that the principal cannot, by instructions addressed to the agent, restrict his authority in reference to third parties. If he place a man in such a position as invests him with an apparent authority to do certain acts, See judgment and then instructs him privately not to do them, he will ofByles, J., . Marehau,"' neverthclcss be bound if the agent disobey his instructions in j6 C. B. N.S. contracting with a third party who is ignorant of them. Revocation Revocation of the agent's authority by the principal operates to determine the agency as between agent and principal so soon as the revocation is communicated to the story on agent ; as between the principal and third parties so soon as =■ -t?"- the revocation is made known to them. But this last rule is jouy V. Rees, apparently subject to an exception in the case of the implied '='■ authority springing from the relation of husband and wife, Free, 167. AGENc'f?' 335 wLicli may be revoked without notice to those with whom the wife deals. The death of the principal, the marriage of the principal, ^'|^gj- if a woman, or the bankruptcy of the principal, would, in all winsSey, cases it should seem, operate as an absolute revocation of the liinett v, ' Forester, agency, not only as between principal and agent, but as 4 Taunt. 541. between principal and third parties. An agent may not as a rule depute another person to do Delegation 1-111 11 1 of authority, that whicn ne 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, l- R.sch. d. 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 obligation to the principal which he has him- self 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 then goes on to point 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, tlie 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 (3-) The contract of agency as between agent and principal imports a liability on the part of the principal to indem- nify the agent for acts done lawfully in pursuance of his 336 APPENDIX B. . Smith, L. c, authority. It also imports a promise on the part of the note to Coggs V. Bernard. agsnt to act with due diligence m the matter of the agency Adanison v. A i 1 • 1 jarvis, 4 Bing. and withiu the limits of his authority. As regards the right arising from contracts made by the agent on behalf of his principal with third parties, we will state only the most common and established rules. (a) Where the contract is under seal, no one is regarded as a party to the contract who is not named as a party in the deed. (b) Where the contract is in writing, no one contracting as a party can be heard to say that he is not one, but other parties may be shown to exist. So where an agent contracts Higginsv. personally in the matter of his agency, it is open to the Senior, „ . , . - ,, 8 M. & w. 834. party with whom he has contracted to fax him with the Trueman v. coutract, or to show that he merely represented his principal tiAd.&E.ss?. ^jj^ ^.Q g^g ^jjg principal. (c) Where the agent contracts as agent for a principal whom he does not name he binds himself personally, or his principal when disclosed, at the option of the party with whom he contracts. But this general rule must be taken to l)e subject to the usage of the trade in which the agent is employed and the character of the agency, for the contract may be of such a nature that though the agent does not disclose his principal's name he excludes himself from liability upon the contract. Such is the case of a broker acting for buyer and seller, who delivers to the seller a note in terms ' sold for you to my principal ' and signs it as broker. In such a case it has been Mutton, held that the broker is by the terms of the contract excluded from liability to the seller, though he would have been liable had the terms run, ' bought of you for my principal.' (d) If the agent contract as principal, that is to say, if there be not merely a non-disclosure of the name of the principal, but a non-disclosure of the existence of the prin- cipal, the agent is a fortiori liable at the option of the party with whom he contracts. Soutliwell V. Bowditcll, L. R. I C. P. D. 374. 131. R. 5 Q. : AGENCY. 337 In this case and in the case above mentioned the rigKts of Rights of the parties appear to be these. where^xist- The agent is liable at the option of the third party with ence of ..... principal is whom he has contracted, and his principal is not bound to undis- intervene if the third party choose to hold the agent liable "^ °^^ when he is aware of the circumstances of the case. The principal is entitled to intervene and, as against his agent, take the benefit of the contract. ' ^"li'h. l. c, . . . . ''• ^"' The third party, upon the disclosure of the principal, may Thompson v. elect whether he will adopt agent or principal as the party with whom be has contracted. He is thenceforth bound by such election. But in each of these last cases the rights of the parties are limited by circumstances which may make it inequitable that the principal or the third party should deal with one another as though each had been disclosed to the other from the first. If the principal choose to enforce the contract, he must do so subject to the right of the third party to ' be put in the same J^^'^^'f^^' J- position as if he had been dealing with the real principal.' f4°™B'"N,s. Any rights which the third party would have had against ^^'^^^^ ^ the agent in respect of the contract he has against the prin- °'m^% w. gs. cipal. And in like manner the third party in enforcing the suSi°i^i. contract against the principal when discovered must do so sub- '' ' ■ ^ ject to the state of accounts between the agent and principal. («) It is possible for an agent to enter into a contract in Where idea which he so represents himself as principal that the idea excluded of agency is altogether excluded. Thus, where an agent in makinff a charter-party described himself therein as owner of ° t J Humble v. the ship, it was held that the principal could not sue upon H"«'g' ^^^ the contract. (/) If a man contract as agent for an existing principal, where no having no authority to do so, he cannot be sued upon the ay*onty contract so made, or dealt with as though he were the prin- cipal, because there is in point of fact no relation of principal and agent, but only a false representat'on by one party to Nkhoism, o ' " ^ i8 Q. E. 303. 338 APPENDIX B. another that he is acting as an agent and can bring about a contract between that other person and the supposed principal. But ill order to find a remedy ex contractu for the person to whom such a representation has been made, a warranty of authority, or promise that he was an agent, is feigned to have been given by the one party to the other. Such a promise or warranty need never have been, and in the nature of things probably never was present to the minds of parties to the contract ; nevertheless it appears to have been thought to be a reasonable implication from the conduct of the parties, by E. & B. 647. the Court of Exchequer Chamber, in CoUen v. Wright, the leading case upon the subject. The novelty as well as the unreality of the conception formed the ground of a luminous t p. 65S. dissenting judgment by Cockburn, C. J. The point has been already alluded to in the discussion of the nature of War- ranty, and in particular of implied warranties. {g) If a man contract as agent for a non-existent principal he is personally liable on the contract ; he cannot be relieved from liability by any subsequent ratification, for the reason, assigned above, that such persons only can ratify as were ascertained or contemplated when the contract was made. A purchased goods on behalf of a company not in existence at the time. The company was incorporated, it collapsed, and A was sued on the contract. He was held personally liable. ' Both upon principle and authority,' said Willes, J., ' it seems to me that the company never could be liable upon this contract, and construing this document ut res niagis valeat quam pereat, we must assume that the parties con- templated that the persons signing it would be personally liable.' Sec ante, p 295, note. Where no principal exists. Kelner v. Baxter, I-. R. 2 C. P. 184. INDEX. A. Acceptance : of proposal of ooutraot, pp. 10-13. must be absolute and unconditional, 14, rj. its effect in concluding contract, 17, 19, 20, ^i. communication of it, requisite to constitute agreement^ 2, 15, 25. may be made by conduct, 23. rules as to communication in contracts made by correspondence, 18, 21. motive of acceptance immaterial, 26. Accord and Satisfaction ; a form of disobarge of right of action, 306. accord without satisfaction may affect measures of damages, 251. what constitutes accord and satisfaction, 306, 307. Account stated : creates an obligation quasi ex contractu, 325. Acquiescence : how far equivalent to acceptance, 15, 23. in fraud, affirms contract, 154. in breach of condition turns it into a warranty, 136, 297. Act of God : a form of condition subsequent, ■254. an excepted risk in charter-party and carrier's contract, 255. definition of, 256. Act of Parliament : see Statute. Action : of assumpsit, 32, 33, 322, 333. of covenant, 32. of debt, 32, 322, 323, 324. of detinue, 33. of deceit, 129, 145, 153. effect on contractual rights of bringing action, 307. riffht of action, as a form of obligation, 7. arises upon every breach of contract, 266. how discharged, 306. Adequacy : of consideration not regarded in courts of law, 63, 64, 65. of consideration how regarded in equity, 65, 158, 161. Admission : of written contract how made, 228. Advertisement : proposal made by, 25, 26, 27. acceptance of by act, a consideration executed on request, 84. Z 2 340 INDEX. Agency : contract of, no real exception to rule that only the parties have rights and liabilities under a contract, 196. to sign contract under 29 Car, II. c. 3. s. 4., 49, 51. to make payment or acknowledgment of debt barred by lapse of time, 310, 311. does not create a status, 328. personal capacity to contract not needed in agent, 330. mode of giving authority, 330. ratification, rules as to, 331. special and general agency, 331. kinds of professional agency, 332, 333- agency from relation of parties, 333, 334, agency from course of conduct, 334. agent's authority how far capable of restriction, 334. agent's authority how far revocable, 335. rules as to delegation of authority, 197, 335. rights and liabilities of agent and principal inter se, 335, 336. agent when personally liable, 336. rules as to undisclosed principal, 336, 337. warranty of authority, 337. Agent : to sign contract under 29 Car. II. c, 3. s. 4., 49, Si- Agreement : the origin of contract, i. its analysis, 2, 3. its definition, 3. a source of obligation, 7- assignment of contract by, 205, 207- discharge of contract by, 247. waiver, or agreement to cancel a contract, 247, 248. substituted contract discharging a previous one, 250. proviaions for discharge, 253, 256, 257. forms needed for discharge by agreement, 257 sqq. Alien: his capacity to contract, 97. alien enemy, contract with such illegal, 173. Alteration of instrument ; circumstances under which it effects discharge, 319. Ambiguity : latent and patent, 237. Arbitration : agreements to refer to, 177* Artificiality of construction : as limiting powers of corporate bodies to contract, iii, 112. Assignment : a form of operation of contract, 193, 194. of liabilities can only take place by new agreement, 205. or on transfer of interests in land, 205, 2^20. of rights at common law can only take place by new agreement or by custom of merchants, 206, 207. in equity subject to rules as to notice and title, 208 sqq. by statute in certain cases, 211. INDEX. 341 Assignment : of rights of covenants on transfer of interests in land, 218, 219, 220. of contracts of woman on her marriage, 221. of contracts of deceased to his representatives, 222, of contracts of bankrupt to his representatives, 223. meaning of the term, 316. Assumpsit : a form of trespass on the case, 32, 33. history of its encroachment on sphere of action of debt, 3:13. history of its application to rights cfuasi ex contractu, 324. Attestation : if necessary to the validit3' of a deed, witness' evidence is needed to prove the deed, 228, Auctioneer : his liabilities on advertisement, 27, 28. his signature as agent for both parties, 52, 332. his rights and duties as a general agent, 332. Authority : see Agency. warranty of, 337. general and special, 331. B. Bailment : may give rise to action of detinue, 32. nature of consideration for, 70. Bankruptcy : bankrupt's promise after discharge to pay debt in full, 90. its effect in assigning contract, 223. its effect in discharging contract, 319. Barrister : his professional statue, 97. Bill of exchange : must be in writing together with acceptance, 47. burden of proving consideration for it does not he on the holder, 63. may be discharged by waiver, 77, 249, 306. is negotiable by custom, 212. how drawn, accepted, and indorsed, 213. characteristics of, 214, 215. Bill of lading : consideration for its indorsement, 69. is negotiable within certain limits, 213, 217. its assignment confers proprietary rights by custom, 216. and contractual rights by 18 and 19 Vict. 0. iii., 217. Bond: nature of, 43, 44. an illustration of conditions subsequent, 254. Breach of Contract : see Condition, Warranty, Independent Pro- mise. as a form 'of discharge, 266. rights conferred by it, 270, 300. modes in which it may take place, 270. 342 INDEX. Breach of Contract : renunciation of contract before performance, 271, 372. must be treated as a discharge by the other party^ 273. renunciation in the course of performance, 276. impossibility arising from act of party before performance, 273. impossibility arising from act of party during performance, 376. failure in performance ; when a discharge, 277 s^?- Broker : agent for both parties to sign contract under 29 Car. II. u. 3. a. 4., 52. nature of broker's rights and liabilities as agent, 333, 336. C. Carrier : extent of his promise as to safety of goods, 255, 296. Champerty ; is unlawful consideration for a promise, 178. Charter-party : construction of, 134, 238, 281, 294, 298, excepted risks in, 254, 255. Chose in action : cannot be assigned at Common Law, 306. but may be in Equity, 20S. and in certain cases by Statute, 211. Civil death : meaning of term, 108. Cognovit actionem : to confess right of action and empower to sign Judgment, 37. attestation necessary to its validity, 228. Cohabitation : gives to woman an implied authority to contract for necessaries, , 333> 334' illicit, is null as a consideration, 178, 179. Collateral promise: see 'Warran.ty. Commission Agent : deals personally with his principals, 333. Composition with creditors : consideration for the promise of each creditor, 78, 79, 307. fraudulent preference, 173) 191- Compromise of suit : when a good consideration for a promise, 67, 68, 69, Concealment : how different from non-disclosure, 145. Condition : see Breach of Contract. a statement or promise vital to the contract, 133, 134, 135, 294, 295. used sometimes as convertible with "Warranty, 134, 135. condition precedent expressly providing for discharge, 253, 254, condition subsequent, a form of discharge by agreement, 254^ 255. kinds of condition, subsequent, concurrent, precedent, 286. conditions precedent which are only suspensory, 2S7. conditions concurrent, 289. condition broken by virtual failure of consideration, 290. condition precedent distinguished from warranty, 294, 296, 297. INDEX. 343 Consideration : aa element in the formation of contract, lo. essential where contract is not under seal, 12, 34, 36, 62, 248, 249, 306. executed and executory considerations, 13. its origin as the basis of simple contract, 31, 34, 35. must appear in writing required by 29 Car. II. c. 3. s. 4,, 50. though not in case of guarantee, 50, 54. definition of, 61. is universally necessary, 62. negotiable instrument no exception except as to burden of proof, 63. need not be adequate, 63, (14, 65. but must be real, 65, 155, 156. promise or executory consideration, 66, 83. forbearance a consideration, 66-70. bailment a consideration, 70. motive no real consideration, 71. distinction between good and valuable consideration, 72. discbarge of moral duty no consideration, 73. French law, and Indian Contract Act, 74. promise to do an obvious impossibility is no consideration, 74, 75. nor is a promise too vague to be enforced, 75. discharge of existing obligation or legal duty no consideration, 76, 77. 78. 155. 156. promise to perform a contract with a third party, 81. composition with creditors, consideration for it, 80, 81. executed consideration, forms of it, 83, 84. past consideration is null, 85. consideration 'moved by previous request,' 85-87. revived promise for which consideration has been given, 90, 91, 92. voluntary discharge of another s legal obligation, 93, 94, 95. consideration probably necessary to a valid waiver, 247, 248. except in case of bills of exchange, 77' 249, 306, absence of consideration may be given in evidence to show in- validity of a written contract, 230. failure of consideration a form of discharge, 290, 293. Construction : rules as to construction of documents, 225, 241. Contract in writing : when writing is required, 46, 47, 48. See Statute. the writing is only evidence of the contract, 48, 227, 2 28. how proved, 228, 229. admissibility of evidence to show that it depends for its operation upon a condition, 231, 232. of evidence that the writing is not the whole agreement, 233. of evidence as to terms, 233-238. rectification of, in Equity, 239, 240. how it may be discharged by agreement, 258, 259. Contract of Record : see Judgment. a form of obligation, 7, 8. its forms and characteristics, 37, 38. is not a true contract, 38, 39. 344 INDEX. Contract under Seal : proposal under seal irrevocablSj 12, i6, 17. mode of execution, 39. characteristics, 40, 41. consideration not necessary at Common Law, 42. how its absence is regarded in Equity, 43, 158, 161. what contracts must be made under seal, 44, 45. how aftected by illegality of consideration, 186, 187, 188. cannot be negotiable, 215, the instrument is the contract and not evidence of it, 227. how it is proved, 228. can only be discharged by instrument under seal, 257. agent being a party to it contracts personally, 336. Conveyance : in what respects different from contract, 3. executed contract of sale is a conveyance, 58. conveyance not the origin of all contracts, 30, 321. Convict : his incapacity to contract, 97. Copyholder : liable, though an infant, to pay fine, TOO. Corporations : their contracts must be under seal, 44. hence cannot usually make negotiable instruments, ill. exceptions to general rule, 45. necessary limits to their power to contract, ill. express Hmits, 112, 113. Correspondence : contracts made by, 19, 20, 21. Covenant : action of, 31. assignment of covenant affecting leasehold interest, 218, 219. assignment of covenant affecting ireehold interest, 219, 220. Coverture : see Marriage. Custom ; see Usage. Custom of merchants, as to negotiable instruments, 212. Custom of merchants, as to bills of lading, 216, 217. Custom of City of London as to contract of married woman, 108. D. Damages : rules relating to, 300, 301. liquidated and unliquidated damages, 243 n. penalty and liquidated damages, 243, 244. interest by way of damages, 301. Death. : its effect in assigning contract of deceased, 222, 223. civil death, in what it consists, 108. Debt: action of, 32, 33. why supplanted by action of Assumpsit, 323, 324. assignment of, 206, 207. INDEX. 345 Deceit : action of, 129. what amounts to cause of action, 145. Deed : see Contract under Seal. Delivery : of deed, 39. of negotiable instrument transferable by delivery, 213. of goods, a form of tender, or performance, 264. Detinue : action of, whether in contract or tort, 31. Discharge : see Agreement, Breach, Impossibility, Operation of Law, Performance. Divisible performance : partial failure, where performance is divisible, not a discharge, 281. Divorce : its effect on a woman's capacity to contract, 109. Drunken person : contract made with one drunken is voidable at his option, 114. Duress : its characteristics, 155, 156. no duress of goods, 156. Duty: as distinct from obligation, 6. questionable if it is imposed by contract, 198. E. Equity ; refuses specific performance of gratuitous promise not under seal, 43. how it regards absence of consideration, 43. differed from Common Law in its treatment of bonds, 44. breadth of meaning which it attaches to fraud, 156. rules within which it permits assignment of rights, 208, 209, 210. enforces covenants restricting enjoyment of freehold, 220, 221. its rules as to admissibility of evidence, 239, 240. its rules as to rectificatiou of instruments, 239, 240. its rules as to specific performance, 304, 305. Escrow : a deed delivered under condition, 40. evidence as to deed being an escrow, 227, 231. Estoppel : as to statements made in a deed, 40, 41. effect of judgment, by way of estoppel, 308. Estate : specialty creditor's remedies against estate of debtor, 41. administration of, in Chancery, 42. represented by executor or trustee in bankruptcy, 222-224. Evidence : parol, inadmissible to connect documents, under 29 Car. II. c. 3. s. 4., 49, 229. or to supplement its terms, 50. rules relating to evidence, 225. e.xtrinsic evidence admissible to prove document, 227-229. 34^ INDEX. Evidence : to prove or disprove agreement, 227, 230. secondary evidence of contents of document when admissible, 230. of condition suspending operation of contract, 231. of supplementary terms, 233. of collateral terms, 234. explanatory of latent ambiguity, 235. of usage, 237. evidence admissible in equity for purpose of resisting specific per- formance or obtaining rectification or avoidance, 239, 240. Execution : of a deed, 39. upon judgment, 308. Executor : his duties and liabilities^ 52, 222. effect on them of 29 Car. II. u. 3. a. 4., 52, Executory contract : * ' how formed, 13. how it became actionable though not made under seal, 32, 33. consists in mutual promises, 66. can be discharged by waiver of mutual rights, 247, 248! Expectant heir : protected by doctrine of undue influence, 161. P. Factor : a general agent, 332. his rights and liabilities, 332, 333. Failure of Consideration : differs from absence of consideration, 230. a form of discharge, 290. money paid for consideration which has failed is recoverable, 327. Forbearance : to sue or exercise a right is consideration for a promise, 67, 68, 69. Foreign State : its ministers exempt from jurisdiction, 97. its bonds negotiable, 212. Form : its importance in early history of a legal system, 29, 30. contracts valid by reason of their form, 36, 37, 39. in case of Statute of Frauds, s. 4., is merely evidentiary, 48, 49. Fraud : suggested by absence of consideration for contract under seal, 43. relates to formation of contract, 115. gives rise to action ex delicto, 129, may exist without dishonest motive, 130, 150. may exist without certainty of falsehood, 131, 149, 150. definition of, 146. representation an essential element, 145, 146. character of representation, 147, 148, 149. must be intended to deceive party complaining, 151. and must deceive him, 152. INDEX. 347 Fraud : its effect on rights er contractu, 153, 154, 155. how different from undue influence, 157. distinct from illegality as a vitiating element in contract, 174. agreement to commit fraud is illegal, 173. burden of proof lies on him who asserts fraud, 2T4. meaning of phrase ' fraud in law,' 149. Fraudulent preference : promise in consideration of, illegal at Common Law, 173. money so paid recoverable if paid under pressure, ipi. Fruetus industriales : not an interest in land under 29 Car. II. c. 3. s. 4., 55. a. Gift: requires assent of donee, 2. when suggestive of undue influence, 158. Goods : see Sale. Goods, 'Wares, and JVEerchandise : what are, under 29 Car. II. c. 3. s. 17., 55, 59, 60. Gratuitous promise : void unless made under seal, 42, 44, 62. Guarantee : within meaning of 29 Car. II. c. 3. § 4., 52, 53, 54. exception to rule as to consideration appearing in writing, 51. not in its inception a contract uberrimae fidei, 143. but becomes so when made, 143. H. Heir: expectant heir how protected by doctrine of undue influence, 160, 161. Husband and "Wife : see Marriage. I. Ignorance of law: its effect in case of mistake, 121, 122. its effect in case of fraud, 148. Illegality : as an element in the formation of contract, 103. arising from statute, 164, 165. objects of statutory prohibition, 165. arising from rules of common law, 173. distinct from fraud as vitiating formation of contract, 173. arising from rules relating to public policy, 174. contracts injurious to public service, 175, 176. affecting course of justice, 176, 177. encouraging litigatitm, 177, 178. contrary to good morals, 1 78. affecting marriage, I79' in restraint of trade, 184. 34^ INDEX. Illegality : its effect on contract, 180-192. when parties are not in pari delicto, 190, 191. ^ ■when there is a locus poenitentiae, 191, 192. Immorality : effect upon contract of immoral object, 178, 179, 185. Implied promise : of sea-worthiness in contract of marine insurance, 236. of idemnity in contract of employment or agency, 84, 87, 335. of quality in executory sale of goods, 291, 292, 293. of possibility, 295 n. of authority, 295 n., 338. Impossibility : of fact or law on face of the contract, 74, 312. antecedent, unknown to the parties, a form of mistake, 121, 312, 313- created by act of one party, a form of breach, 270, 313. created before performance is due, 273. created in the course of performance, 276. subsequent, arising from act of neither party, sometimes a form of discharge, 314-317. Imprisonmient : a form of duress, 155. Inadequacy of consideration : how regarded in equity, 65, 158. Indebitatus counts : their history, 323, 324. their object, 267, 323, 324. when applicable to special contract, 268, 269, 276. Indemnity : as distinct from guarantee under 29 Car. II. u. 3 s. 4., 52, 53. Indenture : as distinct from deed poll, 40. Independent promises : what are independent promises, 277. absolute promises, 278. promises divisible in respect of performance, 281. subsidiary promises, 284. warranty a subsidiary promise, 296, Indorsee ; rights of, 213. where boneL fide and for value, 214. Indorsement : special, 213. in blank, 213. of biU of lading, 216, 217. Infants : their contracts voidable at common law, 98. Ratification at common law of two kinds, implied and express, 99. implied in case of infant shareholder or partner, 99, 100. as affected by 9 Geo. IV. c. 14. s. 5., 90, loi. as affected by 37 & 38 Vict. c. 62. s. 2., 103, T04. INDEX. 349 Infants : certain contracts of infants made void by 37 & 38 Vict. c. 62. s. 1., 102. liability for necessaries, 104, 105. for wrong, 105. for breach of contract resulting in a wrong, 105. cannot obtain specific performance, 104, 304. Insanity ; see Lunatics. Insurance : Fire insurance how affected by innocent misrepresentation, 140, dealt with by 14 Geo. III. u. 48., 171. Life insurance is not a contract vher^nmae fidei, 141. is a form of wager, 167. how dealt with by 14 Geo. III. c. 48., 171, 172. how different from fire and marine insurance, 172, policy of, assignable, 211. Marine insurance is required to be in writing in the form of a policy, 47. how affected by innocent misre|iresentation, 129, 133, 140. not affected by expression of opinion, 144. is a form of wager, 166. made binding by insurable interest, 167. how dealt with by 19 Geo. II. u. 37., 167. how different from life insurance, 172. policy of assignable, 211. contains implied warranty of sea-worthiness, 236, 237. Intention : distinctness of, necessary to agreement, 2. communication of, 2. when important in cases of contract for unlawful purpose, 183- 186, 191. of the parties to be gathered from construction of whole of con- tract, 242. when ascertained, all technicalities of expression give way to it, 137. 296, 297. Interest : insurable interest, when requisite, 167. interest on debt, when it may be given by way of damages, 301. J. Judgment : a form of contract of record, 7. its nature and characteristics, 37. consideration for, may be inquired into by Court of Bankruptcy, 103. a discharge of right of action, 307. its operation by way of merger, 307. its operation by way of estoppel, 308. how discharged, 308. creates a debt, which might have been sued on in assumpsit, 328. Judicature Act : fee Statute. 350 INDEX. L. Iiand : what is an interest in land within meaning of 29 Car. II. c. 3. B. 4. 54-, 5B- . ,, . contract for sale of interest in land is ubernmae Jklet, 141, 142- assignment of obligations on transfer of interest in, 218, 220. distinction between contracts for sale of land and goods as regards specific performance, 304, 305. Xiease : assignment of, its effect on covenants, 218, 219. Lex fori : determines procedure, 56. Lex loci : determines validity of contract, 56. Licence : license to break contract, a bad plea, 247. Lien : of auctioneer, 332. of factor, 333. Lim.itation of actions : in case of contract under seal, 41. writing required for acknowledgment of barred debt, 47, 310. barred debt a consideration for promise to repay, 90. eflfect of the act 21 Jac. I. c. 16 on right of action arising from simple contract, 309. of 3 & 4 Will. IV. c. 42. s. 4 on specialty, 309. disability to sue, how far a bar to operation of statutes, 309. modes of reviving barred debt, 310, 311. Liquidated damages : as distinguished from ]ienalty, 243, 244, 245, 303. Loss of written instrument : only affects rights in case of bill of exchange and promissory note, 319. Lunatics : their contracts voidable while executory, 113. not so, when executed in part, 1 14. where lunatic so found by commission, presumption is against the validity of his contract, 114. M. Maintenance ; its effect on the lawfulness of contract, 177, 178. Marriage ; a form of agreement differing from contract, 3. promise in consideration of, 54. mutual promises to marry, 66. married woman as a rule incapable of binding herself by contract, 106. common law exceptions, 107. statutory exceptions, 109. INDEX. 351 Marriage : equitable doctrine of separate estate, ixo. agreements affecting freedom of choice in maiTiage, 179. agreements providing for separation of husband and wife, 179- effect of marriage on contract made by wife dum sola, 221. implied authority given to wife by marriage, 108, 333. can be agent for her husband, 108, 334. Master and servant ; law of, how far an exception to general rules of contract, 198, 199. Merchants, Custom of : as to consideration for written contract, 35. as creating negotiability, 213, 215, 216. Merger : of lesser security in a greater, 37, 41. a discharge of contract, 318. a discharge of right of action arising from contract, 306, 307. Misrepresentation : relates to formation of contract, 115. how distinguished from fraud, 1 29. when it affects contract, 129, 133, 133. affects contracts of marine and fire insurance, 140. affects contracts for purchase of interest in land, 141. affects contracts for purchase of shares, 142. does not affect life insurance, 141. or surety-ship, 143. Mistake ; relates to formation of contract, 115. of intention as distinct from mistake of expression, 116. as to nature of transaction, 117. as to person with whom contract is made, 118, TI9. as to subject-matter of contract, does not generally affect contract, 120. as to existence of thing contracted for, 121, 313. as to existence of a right, 122. as to identity of subject of contract, 122. as to quality of subject of contract, 123. its effect upon contract, 127, 128. Money paid : under mistake, recoverable, 127. for an. illegal object, when recoverable, 1S5, 191, 192. to the use of another, when a cause of action, 325, 326. Money received : to the use of another, when a cause of action, 326. Moral obligation . once thought to be consideration for a promise, 72, 73i 9'- settled not to be so, 73, 92. Motive : is no real consideration for a promise, 71, 72, 73, 74. its effect where the object of contract is illegal, 183. Mutual promises : are consideration for one another, 66. performance of one does not discharge the contract, 261. 352 INDEX. N. Necessaries : for an infant, 104. province of judge and jury in deciding what are necessaries, 105. for a married woman, 108. Wegligenee : affects rights of party setting up mistalce. IT7, 118, 240. Negotiable instrument : see Bill of Exchange. bill of exchange and promissory note may be conferred on married woman, 107. cannot be made under seal, it 2, 215. cannot be made by corporation unless part of the business of a trading corporation, 45, 112, as security for payment due on illegal or void contract, t88, 189. how distinct from assignable contract, 212. negotiability by custom and statute, ZI2-217. effect of giving a negotiable instrument as payment, 263. Notice : required in assignment of contract, 208, 209. Nudum pactum : meaning of term in English law, 62. O. Obligation : its definition, 4, 5, distinguished from duty, 6. sources of, 7. limits of, when arising from agreement, 195 sqq. Office : sale of, 176. Operation of Law: discharge of contract by, 31S, 319. P. Par delictum : when it does not exist in cases of illegal contract, 190, 191. Parent : how far bound to support of child, 73. Part performance : when it takes contract out of operation of Statute of Frauds, 37. Parties : see Assignment. in contracts within 29 Car. II. c. 3. ss. 4, 17, their names must appear in writing, 49. only parties to a contract are liable under it, 195, 197, 198. who entitled at Common Law, 199, 200. who entitled in Equity, 200, 201. third parties when allowed to sue, 203. substitution of new for former parties '■escinds a contract by crea- tion of a new one, 252. INDEX. 253 Partner : infant partner, his rights in Law and Equity, loo. change of partners, its eflfeot on contracts made with partnership, 2S2._ as creating a general agency, 333. Patent ambiguity : may not be corrected by parol evidence, 237. Payment : of a smaller sum no good discharge of a greater, 7 7. a form of discharge by performance, 262.^ negotiable instrument as payment, 263. Penalty : rules of Law and Equity as to, 242. penalty and liquidated damages, 243, 244, 303. Pension : assignment of, 1 76. Performance : see Payment, Tender. postponement of, at request of one party, is not a discharge of contract by agreement, 250, 251. discharge of one party by performance distinguished &om discharge of contract by performance, 261. Personal coutraot : does not pass to representatives of deceased or bankrupt, 223, 224. Physician : his professional status, 98. Principal and Agent : see Agency. Promise : under seal : see Contract under Seal. essential to contract, 4. part executed, when a cause of action, 32. implied ; see Implied promise and Warranty. Promissory note : consideration for it presumed until the contrary is shown, 63. negotiable by statute, 212. rights of payee and indorsee, 213. Proposal : must refer to legal relations, 14. must be definite, 14. when binding, 16. how far revocable, 17, 18, 19. how it may lapse, 22, 23. may be communicated by conduct, 23, 24. may be made to persons unascertained, 25, 26, 27, 28. Proposal and Acceptance : a necessary element in agreement and contract, 10. must take form of question and answer, 11. forms which it may assume, 12, 13. Public policy : contracts in breach of it illegal, 163, 174. possible origin of rules respecting, 1 74- limits of its operation, 175. kinds of contract affected by it, 175, 180. A a 354 iNDE?:. Q Quasi Contract ; a source of obligation, 7. kinds of quasi contract assimilated to true contract in pleading, 324. 325- Quantum meruit : when it may be sued upon, 269, 276. E. Railway Company ; nature of its offer to carry, 26. how far liable on its time table, 26, 296. and for passenger's luggage, 296. Eatifioation ; of infant's contract required to be in writing, 48, loi. and signed, loi. a promise based on past consideration, 90. by suffering judgment, lOI. of act of agent, 330, 338. agent must have acted as such, 330, 331. and for a contemplated principal, 331, 338. Keal estate : covenants restricting its enjoyment when assignable, 220, 22T. Eeeognizance : a form of contract of record, 38. Eeotifleation : of instrument in case of mutual mistake, 239, 240. Eelease : a mode of discharge of right of action, 306. Eenunciation of Coutraot : before performance, 271. during performance, 274, 275. Eepresentation ; inoperative unless a term of contract, 128, 133, 138. or unless it occurs in contract uberrimae fidei, 128, 138. reasons for limiting effect of, 138. differs from expression of opinion, 144. differs from mere commendation, 144. differs from promise, 147, 148. of fact essential to fraud, 145, 147. of law, its effect if fraudulent, 148. is fraudulent if known to be false, 130, 150. or made in reckless disregard of truth, 131, 149. to be fraudulent must be intended to be acted upon by party com- plaining, 151. Eequest : when it implies a promise, 86, 87, 88, 89. Eeseission ; see Agreement as a form of discharge. Restraint of trade : see Public policy. consideration required through contract under seal, 42, 180. rules respecting, 1 80. INDEX. 355 Keversion : sale of, how regarded in Equity, 1 60. Kevooation : of proposal, when possible, 17-22. of acceptance, impossible in English law, 20. not so by Indian Contract Act, 22. S. Sale : of goods, if executed operates as a conveyance, 58. executed and executory, 58, 59, 285, 291, 292. Lord Tenterden's Act brings executory contract of sale within 29 Car. II. c. 3. a. 17., 59. contracts of sale, how different from contrt'.ct for work and labour, 59, 60. how aflfected by Infant's Relief Act, 102. how affected by mistake as to party contracted with, 1 19, 155. vendor not bound to inform purchaser of defects, 126, 146, 147. not voidable in case of fraud if third parties have acquired rights, 155. speoifio performance of, not granted in Equity, 304. but by 19 and 20 Vict. c. 97. s. 2., 305. of land, agreementfor sale of land acontract vhenrimaefidei, 141, 142. specific performance of agreement to sell, 305, 306. Satisfaction : payment of a smaller sum for a larger, no discharge, 77- reasons for this rule, 77' 7^' what satisfaction amounts to a discharge of right of action, 307. Seal ; of corporation, why necessary to its contracts, 45. Sea-worthiness : implied warranty of, in contract of marine insurance, 236, 237. Separate estate : of married woman under 33 and 34 Vict. c. 93., 109. of married woman in Equity, 110, 1 1 1 . Separation : agreement between husband and wife, with a view to their separa- tion, when valid, 179. Shares : transfer of, form required, 44, 47, 211. in railway company, not an interest in land under 29 Car. II. u. 3. s- 4-. 55- infant shareholder, 100. contract to purchase, is one uierrimae fidei, 142, 143. Ship: transfer of, 44. Signature : doubtful if requisite to contract under seal, 39. of party or his agent under Statute of Frauds, ss. 4, 1 7., 51, 332. Simple Contract, or Parol Contract : universally requires consideration, 36, 46, 62. when writing required, 47, 48. See Statute of Frauds. A a 2 356 INDEX. Solicitor and Client : a relation which may suggest undue influence, 159- Specialty ; see Contract under Seal. Specific performance : of gratuitous promise under seal, not granted, 43. of part-performed contract under 29 Car. II. c. 3 not in writing, 57. not granted in case of infent's contract, 104. not granted in case of fraud, 154. sometimes "withheld in case of mistake, 128, 239. general rules relating to it, 304. of contract for sale of goods, 305. of contract for sale of land, 306. Statute : Bills of Exchange : acceptance must be in writing, 19 and 20 Vicfc. c. 97. s. 6., 47, 313. signature sufficient, 41 Vict. c. 13., 313. BiUs of Lading Act, 18 and 19 -Vict. c. iii., 216. Common Law Procedure Acts, 15 and 16 Vict. c. 76, and 17 and 18 Vict. c. 125 : as to agreements to refer to arbitration, 177. iis to pleading, 324. Divorce and Matrimonial Causes Act, 20 and 21 Vict. c. 85., 109. Frauds, Statute of, 29 Car. II. c. 3 : affects simple contracts, 47. rules as to form required by s. 4., 48, 49, 50, 51. kinds of contract specified in s. 4., 52-55. position of parties where s. 4. not complied with, 56, 57. form required by s. 17., 58. nature of contract specified in s. 17., 58, 59. effect of non-compliance with, s. 17., 60. connection of documents how to be shown under s. 4., 49, 227. contracts under ss. 4. and 17., how discharged by agreement, 259, 260. Infant's EeHef Act, 37 and 38 Vict. c. 62., 90, loi, 102, 103. Judicature Act, 36 and 37 Vict. c. 66 : as to assignment of contract, 211. as to admission of documents, 228. as to rectification of documents, 240. as to provisions regarding time, 243. as to specific performance of contracts for sale of land and leases, 305. as to pleading, 267, 269, 270, 324. Limitation, Statutes of, ■zi Jac. I. c. 16 ; 3 and 4 Will. IV. c. 42 : as to extinction of remedy, 309, 310. as to revival of claim, 47, 90, 310, 311. Lord Tenterden's Act, 9 Grco. IV. c. 14 : as to executory contract of sale, 59. as to ratification of infant's contract, 101. as to acknowledgment of barred debt, 310. Married Women's Property Acts, 33 and 34 Vict. u. 93; 37 and 38 Vict. o. 50., log, no, 222. INDEX. 357 statute : Mercantile Law Amendment Act, 19 and 20 Viot. c. 97 : as to consideration for guarantee, 51. as to acceptance of bills of exchange, 47, Z13. as to specific performance of sale of goods, 305. as to disabilities to sue in respect of limitation of actions, 309. as to agent's signature of promise to pay barred debt, 310. Stipulatio : analogous in its operation to contract under seal, 30. views as to its origin, 322. Stock-jobbing ; wagera on price of stock dealt with by Sir J. Barnard's Act, 170. Stoppage in transitu : vendor's rights, 69, 216. T. Tender : a form of performance, 264. of goods, 264. of money, 264, 265. Time : of the essence of the contract at Common Law, 242. , rules of Equity as to, 243. rules of Judicature Act, 243. Title : of assignee of contract, 210. See Parties, Trust : how distinct from contract, 8. no exception to rule, that contract only binds parties to it, 196, 197. TT. mtra vires ; contracts uJtra vires relate to capacity of parties, 113, 181, 182. Uncertainty : in proposal or acceptance prevents'the formation of contract, 14, 15. of consideration avoids promise, 75. Undue influence : prevents reality of consent, 116. how distinct from fraud, 156. cases in which it may be presumed, 157-161. rule as to rescission of contracts affected by it, 161. Usage : evidence of, when admissible, 237, 238. Usury laws : promise after their repeal, to repay money lent at usury, 91. their place supplied by doctrine of undue influence, 160. W. "Wager ; definition of, 166, 167. history of legislation respecting, 167-172. in relation to contracts of insurance, 167, 171. agreements to pay differences, 171. 35*^ INDEX. 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