't^t^ti^^^ff 'Tj gL^-j oil 7-\ ajnrnfll Earn SrlfDnl SJibrarg Cornell University Library KD 1554.P77 1921 Principles of contract :a treatise on th 3 1924 017 141 361 The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924017141361 PRINCIPLES OF CONTRACT: A TREATISE ON THE GENEEAL PEINCIPLES CONCEENING- THE VALIDITY OF AGREEMENTS IN THE LAW OF ENGLAND. NINTH EDITION. BY THE SAMjE AUTHOR. THE LAW OF T0ET8: fA TEEATISEfON THE PRINCIPLES OF OBLIGATIONS ARISING FROM CIVIL WRONGS IN THE COMMON^ LAW. ELEVENTH EDITION, 1920. Price 82s. A DIGEST OF THE LAW OF PABTNEESHIP. WITH FORMS. ELEVENTH EDITION, 1920. Price 15s. THE EXPANSION OF THE COMMON LAW. 1904. Price 63. THE LEAGUE OF NATIONS. 1920. Price 10s. net PRINCIPLES OF CONTRACT A TEEATISE ON THE GENEEAL PEINCIPLE8 CONCEENING THE VALIDITY OF AGEEEMENTS IN THE LAW OP ENGLAND. BY THE EIGHT HONOUEABLE Sir FEEDERICK l^OLLOCK, Bt., K.G., D.C.L., of LINCOLN'S INN ; COBEBSPONDENT OF THE INSTITUTE OF FEANOE ;• ABSOOIATK OF THE EOTAL ACADEMY OF BELGIUM: ; HONOBAEY FELLOW OF TRINITY COLLEOB, OAMBEIDQE, AND COEPUS CHEISTI COLLEGE, OXFOED HONOEAEY DOCTOE OF LAWS IN THE UNIVEESITIES OF PABIS, EDINBUEGH, DUBLIN, HABTAED AND CHEISTIANIA. NINTH EDITION. " This notion of Contract is part of men's common stock even outside the field of legal science, and to men of law so familiar and necessary in its various applications that we might expect a settled and just apprehension of it to prevail everywhere. Nevertheless we are yet far short of this."— Saviont, System des heutigen romischen Bcchts, S 140. LONDON: STEVENS AND SONS, LIMITED, 119 & 120, CHANOBEY LANE, 1921. /^/jScT^ ;/. ^''/-N, DEDICATE!) TO MT MASTEE :^ THE"'rrA.W, ' THE BIGHT HONOURABLE NATHANIEL LORD LINDLEY. { vii ) PREFACE TO THE NINTH EDITION. CoNSiDEKABLE changes will be found in the present edition. The remarks ,on the formation of contracts by corre- spondence at pp. 38 — 42 are recast. I have come to regard this formerly vexed question as belonging to the class where, in the presence of conflicting and indecisive reasons of convenience (for I do not now think there is any decisive one), it is best to follow out elementary principles and not be alarmed if some of the minor consequences have a look of paradox. As Parke B. said, in a classical opinion given to the House of Lords in 1833 {Mirehouse V. Bennett, 1 CI. & F. at p. 546): "For the sake of attaining uniformity, consistency and certainty, we must apply those rules [which we derive from legal principles and judicial precedents], where they are not plainly un- reasonable and inconvenient, to all oases which arise." This precept is eminently appropriate where the rule to be laid down is only supplementary to the expressed inten- tion of parties and can be modified at their will. A certain and fairly simple rule with known consequences, leaving it free to the parties to make other provision if they think fit, is better than an elaborate scheme which aims at a complete solution for aU possible events but, as experience has shown, may well fail to exhaust them. In the case Vlll PREFACE TO THE NINTH EDITION. in hand the law settled by the Court of Appeal has been in force these forty years, and does not appear to have been found inconvenient. Moreover, so far as there are signs of approach to a prevailing opinion in the doctrine and legislation of other jurisdictions, they point in the same direction notwithstanding some very learned dissents. In the fidvertisement to the eighth edition I said in effect that I should like to recast the chapter headed " Im- possible Agreements " and abolish its heading. What then seemed a counsel of perfection hardly worth the pains of executing has been made a necessity by the rapid development of the "frustration of the adventure" doc- trine in cases arising out of the war of 1914. Promises of a performance which at the time is ob- viously not possible do not occur in practice, for the plain reason that no man of ordinary sense will offer or accept such a promise. It is likewise plain that such a promise, if given, could not be treated in any rational system of jurisprudence as creating an enforceable duty; for in all contracts the promisee's rights and remedies are founded on and measured by his reasonable expectation, and the purpose of the law is to protect and forward reasonable men's business. Rules for excluding nonsense may have to be formulated for the sake of visible completeness, but search for the neatest way of doing so is a matter of merely speculative interest. On the other hand a performance that reasonably seemed possible at the time of making the promise may become impossible in divers ways. But sheer impossi- bility is only an extreme case of the hindrances that super- vening accident may oppose to the fulfilment of a contract PKEFACE TO THE NINTH EDITION. ix according to its true intention; and the modern conception of "frustration" as the subject of express or implied exceptions, conditions and reservations goes far beyond this, and belongs to a constructive activity of our law which has not yet reached its final shape. Accordingly Impossibility has definitely ceased to be an adequate or useful category, and I have embodied the contents of the suppressed chapter, so far as they appear still material, in the new chapter on Conditions. With regard to the formerly current phrase " legalh- impossible," it has been used in many different cases, but in none of them does the word " impossible," even if not improper in the context, give us much help. Every system of law has its own forms, and moreover sets its own limits in substance to the extent and variety of disposing power which it allows to owners of property. Courts of justice cannot recognize acts purporting to contradict the terms or disregard the limits prescribed by the law they ad- minister, nor any agreement purporting to provide for such acts. A grant of an estate unknown to the law and a covenant to grant it are alike nullities. These may well enough be called " legal impossibilities," but that does not make us any wiser for dealing with the only question that really matters, a question that may be of any degree oi' difficulty, namely whether in the given case a particular disposition falls on the right or the wrong side of the line; whether, for example, it does or does not contravene the rule against remoteness. When we hear of the performance of an agreement becoming impossible in law, the propriety of such a phrase is more doubtful. Here the meaning is that the perform- X PREFACE TO THE NINTH EDITION, ance has been made unlawful by some subsequent opera- tion of law. This, if the performance contracted for was to be outside the jurisdiction having cognizance of the matter, may be a foreign law. The distinction between domestic and foreign law is material. Prohibition in terms may or may not be coupled with efiectual execu- tion. A court of justice, however, will not recognize or encourage in any case an act or agreement contravening the law of its own jurisdiction, so that here it is a secondary question, if relevant at all, whether performance was in fact prevented or not. In other words, not impossibility but illegality is likely to be the appropriate category. But where performance out of the jurisdiction becomes unlawful by the local law (of which, of course, the Court here has not judicial notice), the case is presented under a rather different aspect, and the points of legal prohibi- tion and actual prevention, or legal and practical impossi- bility, are merged in one and the same inquiry in matter of fact. Our Courts have rightly perceived the difference. Learned Americans are still engaged from time to time in valiant efforts to reduce the common-law rules of con- tract, and the doctrine of consideration in particular, to strict logical consistency. That quest is, in my humble judgment, misconceived. Legal rules exist not for their own sake, but to further justice and convenience in the business of human life; dialectic is the servant of their purpose, not their master. Reasonableness, no doubt, is the ideal of the Common Law; and the words "reason" and " logic " go back to Latin and Greek words of like or nearly like original import; nevertheless the field of reason, as we understand it in English, includes many PREFACE TO THE NINTH EDITION. xi things outside strict logical deduction. One could say more of this, but it would be superfluous for the gr^eater part of English readers. The foremost champion of the logical method in America was my lamented friend Ames of Harvard. His logic drove him to maintain frankly that the virtue of promise as a consideration lies not in the contents or expected fulfilment of the promise but in the act of pro- mising. Thus considered, it is as good as any other act. It did not occur to Ames, it seems, that acceptance of any promise is no less an act; and accordingly the express acceptance of a gratuitous promise would make a perfectly good bilateral contract (not that the distinction between unilateral and bilateral agreements would mean much in a world where acting and promising were all one) . Thus we should come round by a highly artificial road to the modern civilian conception that the giving and acceptance of any serious promise whatever suffice to create an obliga- tion. Subject to the rules of procedure and evidence with which it has to be guarded, I believe this is very good Scots law, but it is certainly not the doctrine of the Common Law. As in the current edition of my book on Torts, the present cost of printing has entailed the omission of side- notes, but their substance is preserved in the Table of Contents. Reported cases are noted down to June, 1921. The Index is again revised by Mr. Edward Potton. F P Lincoln's Inn, June, 1921 ( xiii ) TABLE OF CONTENTS. CHAPTEE I. Agkeement, Peoposal, and Acceptance. PAGE Nature of contract 1 Definitions of agreement 2 Agreement: nature of consent required 3 Obligation 4 Ways of declaring consent 5 Promise 7 Contract 8 Void agreements 9 Voidable contracts 9 Rules as to proposal and acceptance 11 Express and tacit contracts, and quasi-contracts 11 Proposals to unascertained persons (contracts by offer of reward, &:c.) 15 Discussion of cases 17 Difficulties considered 20 Theory of floating obligation inadmissible 22 Performance in fact 22 Other kinds of general proposal 24 Statute of Frauds and contracts by advertisement 25 Acceptance by act when complete 26 Contract by indirect communication 27 Only offerees can accept 28 Revocation of offer 28 Determination of offer 30 Communication of revocation 31 Tacit revocation : x^'e/cmsoM v. Dodds considered 33 Can there be double acceptance? 34 Communication of acceptance 36 Contracts by correspondence 38 State of English authority 40 Effect of death of proposer 42 Certainty of acceptance 43 Cases of insufficient acceptance 44 Cases where acceptance sufficient 45 XIV TABLE OF CONTENTS. PAGE Agreements in terms where consent not final 46 Certainty of terms of agreement 48 Illusory promises .■ 49 Absurd promises 51 Repugnancy in law 52 Construction of tacit acoeptances 52 Promises by deed may bind without acceptance 54 CHAPTER II. Capacity of Parties. Variations in personal capacity 56 Artificial persons 57 Limitations of capacity 58 1. Infants. General statement 58 Contracts roidable, not void 69 Supposed distinction between void and voidable now exploded 60 Avoidance of infant's contract 64 Infants' Relief Act, 1874 65 liability on obligations incident to property 70 On beneficial contract 71 For necessaries 74 Sale of Goods Act, 1893, s. 2 74 What are necessaries 74 Certain contracts of infants binding by custom 79 By statute 79 Liability of infants on wrongs collateral to contract 80 In equity, on representations of fuU age 81 Subsequent contract after fuU age prevails 84 2. Married Women. Can contract only as to separate property 84 lus mariti and survivorship 86 Cannot revive barred debt by acknowledgment 86 Exceptions at common law 87 Custom of London as to married woman trading alone 88 Agreements for separation between husband and wife alone . 88 Statutory exceptions: Judicial separation, &c 89 Equitable doctrine of separate estate 90 Married Women's Property Act, 1882 92 3. Lunatics and Drunken Persons. Old law , 96 Modem law: contract not void but voidable 98 4. Convicts and Alien Enemies 101 'i'ARLE OF CONTENTS. XV PAGE Extension of capacity 102 1. Agency 102 Authority of agent 103 Contracts by authorized agents 104 When agent known to be such, there is contract with principal 104 If principal named, prima facie no contract with agent 104 If principal not named, prima facie there is contract with ag«nt 105 These rules subject to evidence of contrary intention lOR When a^nt not known to be such, there is generally contract with undisclosed principal 108 Exceptions to and limits of the rule 108 Eights of other contracting party 110 Professed agent not having authority cannot sue on the con- tract if a responsible principal has been named Ill Nor be sued on it 114 But may be sued on implied warranty of authority 114 Where no principal named, or one who could not be respon- sible, profeffied agent is treated as principal 115 2. Artificial Persons 119 Nature of artificial persons 119 Corporations: common law doctrine 121 Capacities of corporations in themselves 123 As limited by positive rules 129 As determined by purposes of incorporation 130 Application of partnership law 131 Public policy and interests of the public 133 Decision of House of Iiords on Companies Act, 1862 137 Corporations cannot bind themselves by negotiable instru- ments: explanations of this 138 Exceptions 139 Conflicting theories in U. S 140 Corporations bound by estoppel, &c 141 CHAPTER III. Form of Contract. Formality in Early English Law 142 Modern principles as to requirements of form 142 Position of informal contracts in ancient law 143 Formal and informal contracts in Roman law 144 Archaic modes of proof 144 The deed in English medieval law 145 XVI TABLE OF CONTENTS. PAGE Remedies on contracts: debt on covenant or simple contract 146 Action of covenant 147 Action of account 148 II. The Action of Assumpsit 150 Introduction of assumpsit to supply remedy on executory agreements 150 III. Modern Requirements of Form 154 Modem law: requirements of form exceptional 154 Contracts of record 154 Contracts subject to special forms 154 1. Contracts of Corporations 155 Old law: requirement of seal 156 Modem exceptions 157 Trading corporations: contracts in course of business 158 Non-trading corporations: contracts neoessary and incidental to corporate purposes 160 Municipal corporations, &o 161 Appointments of officers 162 Executed contracts with corporations 165 Statutory forms of contract 165 Summary 165 2. Negotiable Instruments 166 3. Statutory Forms 167 A. Statute of Frauds 167 Guarantees 167 Agreements upon consideration of marriage 169 Interests in land 170 Agreements not to be performed within a year 171 Sale of goods 172 The "note or memorandum" 172 Sale of horses 175 B. Marine Insurance 176 C. Acknowledgment of Barred Debts 176 CHAPTER IV. CONSIDEEATION. Meaning of the term \'j>j Gratuitous promises ". jyg Early history of the doctrine 279 Assumpsit 2gl Causa in Roman law 282 TABLE OF CONTENTS. xvii I'AGE Benefit to promisor 185 Adequacy of consideration 186 Disallowed and doubtful exceptions 190 Past considei-ation ineffectual 191 Acknowledgment of barred debts 193 Mutual promises I93 Certainty of promise 19g Promises to perform duties already existing 196 Performance of obligation to tliird person 197 Consideration for discTiarge of contract: rule in Pinnel's case. 202 For variation of contract 204 Forbearance to sue 204 Compromises 206 Contracts under seal 207 Treatment of gratuitous contracts under seal in equity 208 Imperfect gifts 209 CHxiPTEE, V. Peksons affected by CIontkact. Preliminary 211 Definitions and rules 212 1. Parties must be certain 215 2. Third persons not bound 216 Apparent exceptions 217 Novation 218 3. Third persons not entitled by the contract itself 220 Apparent exceptions 220 Trusts 222 Exception of certain provisions for children 223 Statutory exceptions 224 Contract for benefit of third person gives him no right of action at law 226 Authorities in equity 227 Third person cannot be empowered to sue for convenience of parties 230 Negotiable instruments payable to holder of office 231 4. Assignment of contracts 231 Notice to debtor 233 Assignment "subject to equities " 238 Assignment free from equities by agresment of parties: transferable debentures 239 P. — c. b XVni TABLE OF CONTENTS. PAGE Transferable debentures 241 Negotiable instruments 244 Rights of boiia fide holder 245 What instruments may be negotiable 246 Negotiability by estoppel 248 How instruments may cease to be negotiable 249 Transfer of burd'en as well as benefit 249 Transferable shares 249 Obligations attached to property 251 Covenants running with land '. 252 Bills of lading 256 Conflict between common law and equity as to burden of covenants running with the land 256 The foundation of the equitable doctrine 260 CHAPTER VI. DniIBS UNDEE COnteaot. 1. Interpretation generally 262 Necessity of interpretation 262 Effect of promise 263 Agreements in writing: rule against parol variations 265 Apparent exceptions 267 Extrinsic evidence: special sense of words 269 Customary terms 271 Customs of the country 272 Trade usages, &c 273 Construction: pieference of general intention 274 Special rules of construction 276 2. Order atid Mutuality of Performance 278 Order of performance in executory contracts 278 Modern authorities look to general intention of contract 279 Common terms 279 EfEect of default 282 Agreements presumed tot be entire 284 3. Default in first or other instalments of Discontinuous Per- formance 286 Sales for delivery by instalments 286 Effect of default in instalments 286 Sale of Goods Act 291 4. Repudiation 292 Refusal to perform contract: (anticipatory breach) 293 TABLE OF CONTENTS. XIX CHAPTER VII. Conditions, and heubin of Feusteation. PAGE What promises are conditional 297 Conditions precedent and subsequent 298 Partial or alternative conditions 300 Express and implied conditions 300 Exceptions implied according to presumed intention 301 Express conditions 302 Condition attached to description 303 Promisee's right to have description satisfied 304 Implied conditions 304 Rule in Paradine v. Jane 305 Modem principles 306 Discharge by frustration 307 Unqualified promises generally 307 Impossibility no certain test 310 Still less difficulty of performance 311 Act of God, vis major, &c 314 Special cases of excuse 315 A. Contracts for personal services 316 Quaire as to contract to marry 319 Limits of exception 320 B . Destruction or failure of subject-nia,ttea? 321 Extension, of the rule in Taylor v. Caldwell; the corona- tion cases 324 Failure must be in something known and contemplated. 325 C. Failure of assumed conditions at date of contract 327 Express exceptions in commercial contracts 329 D. Extraordinary interference 330 Restrictive covenant discharged by compulsory purchase. 331 Interruption by war requisition or acts of enemy 331 Frustration must be total 333 Construction of conditions in bonds 334 CHAPTER VIII. Unlawful Ageeements. Of unlawful agreements in general, and their classification ... 337 A. Contrary to positive law 340 ■Agreements to commit an oifence 340 Agreements wrongful against third persons 342 62 XX TABLE OF CONTENTS. PAGBT Fraud on creditors 34S Fraud on third persons 347 Suretyship: dealings between creditor and principal debtor to prejudice of surety 347 Agency: dealings by agent, executor, &c., against his duty . 350 Settlements in fraud of marital right 354 Married Women's Property Act, 1882 354 Marriages within prohibited degrees 354 Agreements illegal by statute 35fi Eules for construction of prohibitory statutes 357 When agreements may be not void though forbidden, or void without being illegal 363 Wagers 364 B. Agreements contrary to morals or good manners 367 Agreements in consideration of illicit cohabitation 369 Validity of separation deeds 372^ Agreement for future separation void 376 Publication of immoral or seditious works is not merely immoral but an offence 378 C. Agreements contrary to public policy 370 Connection of the doctrine with the common law as to wagers 380 Modem extent of the doctrine: Egerton v. Brownlow 382 Public policy as to external relations of the State 385 Trading with enemies 386 Effect of war on subsisting contracts 387 Negotiable instruments between England and hostile country . 389 Hostilities against friendly States 390 Trade with belligerents not unlawful 391 Foreign revenue laws 391 Foreign laws as to stamps 392' Public policy as to internal government: attempts to influence legislation, &c., by improper means 393 Sale of offices, &c 396 Assignment of salaries 397 "Stifling prosecutions" and compounding offences 398 Compromise of election petition 400 Secret agreement as to conduct of winding-up 401 Ousting the jurisdiction: agreements for reference to arbitra- tion 402 Maintenance and champerty 404 Rules as to champerty 407 Commission on recovery of property 408 Purchase of subject-matter of suit by solicitor 410 Purchase of things in litigation in general 41]^ Statute of Henry VIII. against buying pretended titles ... 413 Maintenance in general 41(5.- TABLE OF CONTENTS. XXI PAGE Public policy as to duties of individuals 417 Agreements as to custody of children 418 Discretion of equity 418 Custody of Infants Act 419 Insurance of seamen's wages 420 Agreements against social duties 420 Public policy as to freedom of individual action 420 Marriage brokage contracts 421 Agreements in restraint of marriage 422 Dispositions by will: agreements to influence testators 423 Agreements in restraint of trade 424 General principles 424 Early history of the doctrine 426 Freedom of trade upheld by the common law 427 Modern applications of rule 428 Partial exceptions: particular restraint admitted 430 Restrictive covenants in 17th century 431 Limits of space 432 Modem rule as to limits 432 Table of decisions since 1854 436 Measure of distances 440 Contracts to serve for life or exclusively 441 D. Judicial treatment of unlawful agreements in general 442 Independent promises, where some lawful and some not ... 442 Where consideration or immediate object unlawful 444 Unlawful ulterior intention 444 Agreements continuous with precedent unlawful purpose ... 447 Securities for payment under unlawful agreement are void ... 450 Duty of Court to take notice of apparent illegality 451 Extrinsic evidence of illegality 451 Specific unlawful intention, how shown or contradicted ... 452 When payments can be recovered: rule as to party in pari delicto 455 Exceptions: duty of agents to principal unaffected 467 Money recoverable where agreement not executed 460' Where the payment was compulsory 461 In equity where circumstances of fraud, &c., as between the parties 462 Final statement of the rule and qualification 463 Conflict of laws in space 463 (Generally lex looi solutionis prevails 463 Exceptions — when a prohibitory municipal law is not merely local 464 When agreement is immoral iure gentium 465 Treatment of slave contracts in English courts: Santos v. lllidge 466 XXll TABLE OF CONTENTS. PAGE Other instances of conflict of laws as to validity of agree- ment considered 468 Agreements against interests of the local sovereign 4:72 Supervening illegality of contract 472 Where validity determined by law at date of agreement ... 473 Rules as to knowledge of parties collected 474 CHAPTEE IX. Mistake. Part I. — Of Mistake m General. Classification of conditions affecting validity of consent in agreement: Mistake, Fraud, &c 476 A. Mistake in general 479 Generally it is in itself inoperative either to avoid civil liabilities 479 (Except in certain special cases, and exoeipt so far as in the case of purchase for value without notice, ignorance is a condition of acquiring rights) 482 Or to take away or alter existing rights 487 Or to alter construction of contract 488 Saving as to variation by mutual consent 489 Special cases where mistake important 490 B. Mistake of Fact and of Law 491 Limits of the distinction: where certainly or probably not applicable 492 Common mistake and rectification of instruments 492 Renunciation of rights 494 Recovering back money paid 495 Part II. — Mistake as exolwdwig true Ooiumit. Division of cases under this head 498 A. Error as to nature of transaction 500 Thoroughgood's case gOO Foster v. MacJcvrmon gOl CompEcation with fraud in equity 504 Total and partial misapprehension distinguished 504 Error as to legal character of transaction 506 TABLE OF CONTENTS. XXUl PAfiE B. Error as to the person of the other party 507 Analogous doctrines: application to deeds 309 Satisfaction by stranger 510 Assignment of contracts 311 Personal contracts not transferable 512 Agency 5U C. Error as to the subject-matter 513 With regard to identity of specific thing 517 Inclusion of parcels by mistake on sale of land 518 Contracts to take shares exceptional 521 Error with regard to kind, quantity, &c 522 Error in price 524 Error as to quality inoperative unless material and common to both parties 525 Even if error of one party known to, but not caused by, the other ." 527 Oases distinguished where misdescription of ©state on sale entitles purchaser to rescind 529 Error as to existence of subject-matter 530 Purchase or lease of one's own property 534 Herein of ignorance of law: Cooper v. Phibbs 535 Assignments of leases for lives 536 Where only one party is ignorant of the material fact 537 Where fundamental error produced by fraud or misrepresen- tation 538 Eemedies of party to void agreement 539 Election to adopt agreement 540 Paet III. — Mistake in expressing tn<-e Consent. Correction of mistake in expressing intention 541 1. Rules of construction common to law and equity 542 Effect given to general intent 542 2. Peculiar rules of construction in equity 544 A. Restriction of general words 544 B. Stipulations as to time 546 Where time of essence of contract 547 Indian Contract Act thereon 548 C. Relief against penalties 549 3. Peculiar defences and remedies derived from equity 552 A. Defence against specific performance 552 Effect of Statute of Frauds herein 554 B. Rectification of instruments 554 Oral evidence how far admissible 556 XXIV TABLE OF CONTENTS. PAGE Heal intention must be distinctly proved, and common to all parties 55" Quasi estoppel of one party acting as other's agent in framing instrument 5S9 Reformation of settlements 560 WIio is entitled to have deed rectified 562 Rectification as alternative to cancellation 562 Disentailing deeds 563 Agreement executed by Court cannot be rectified 563 Mistake in wiUs 563 Consent orders 563 Unilateral acts 564 CHAPTER X. IMlSEEPEESENTATION AND FeAUD. Pakt I. — Generally. Of misrepresentation in general 565 As to innocent statements 565 Deceit in relation to contract 566 Judicial language as to " constructive fraud " formerly ambiguous 567 Estoppel 567 Representation as term of contract 568 The doctrine of "making representations good" 569 Paet II. — Misrepresientatkm mid Non-disclosure. No general positive duty of disclosure 570 But such duties implied in certain contracts 570 Classes of contracts specially treated 571 Representations amounting to Warranty or Condition 572 Distinctions between warranty and condition on sale of goods 573 Cases specially treated: A. Insurance 574 Marine Insurance 574 Life Insurance 575 Fire Insurance 577 Miscellaneous risks 577 TABLE OF CONTENTS. XXV PAGE B. Suretyship and Guaranty 578 Extent of creditor's duty to surety 579 -C. Sales of land 581 Specific performance and compensation: three classes of cases distinguished 582 Recovery of deposit 588 General duty of vendor to describe property correctly ... 589 Special conditions as to title 591 Wilde V. Gibson considered 592 D. Family Settlements 594 -E. Partnership, contracts to take shares in companies, and contracts of promoters 594 The Companies Act, 1908 597 Contract to marry not exceptional 598 Voluntary gifts 599 Pakt III. — Fraud or Beceit. Eraud genei-ally but not always includes misrepresentation. . . 599 Right of rescission 601 Eraudulent representation or concealment 601 "Active concealment" 602 Eraud as actionable wrong 603 Reckless ignorance equivalent to knowledgie of untruth 604 Representation of expectation as present fact 605 Special rule as to sales by auction 605 Marriage an exception: not avoided by fraud 606 But knowledge of nature of ceremony essential 606 Consent of third person procured by fraud is voidable 607 CHAPTER XI. The Right of Rescisssion. General rules as to rescission for misrepresentation or fraud... 608 The representation relied on must be of fact 609 N"ot of mere matter of opinion 611 The representation must be such as to induce the contract . . . 612 Effect of party misled having means of knowled'ge 613 Materiality of representation 615 Contracts connected with previous fraud 617 Representation must be by a party to the contract 618 XXVI TABLE OF CONTENTS. PAGE- Eepresentations of agents and liability of principals 618 Statements of directors and promoteirs 620 Agent always liable for hia own wrong 621 Representation must be in same transaction 622 -Eights of party misled: option to rescind 624 Election how to be made 626 Eight exerciseable by and againat represemtatives 630 No rescission where the former state of things cannot be restored 630 No rescission against innocent purchasers for value 634 Distinction in cases of obtaining goods by fraud where no property passes 635 Eepudiation of shares 636 Eescission must be within reasonable time, i.e., a time not such as to show acquiescence 638 Special duties of sha'reholders in companies 641 Limitation of period for rescission in Indian and other jurisdictions 642 Eesult of unfounded charges of fraud 642 Cancellation of instruments 643- OHAPTEE XII. D0EESS AND Undue Influence. I. Duress at Common Law 644 Eecovery of money paid under compulsion 646 II. The equitable doctrine of Undue Influence 648 Presumption of influence from confidential relations 649 Eules as to burden of proof 653 Eules as to voluntary settlements 654 Presumptions against and duties of persons in fiduciary relations 655 Family arrangements 659 Particular cases where influence presumed: Eolations analogous to parent and child 66] To solicitor and client 662 Spiritual influence 663 Evidence: undue influence without fiduciary relation 664 Duty of trustees 664 Undervalue material only as evidence 665 Not in itself a ground for refusing specific performance ... 669 Exceptional protection of expectant heirs and reversioners. . . 670 Old law as to sales of reversions 673. TABLE OF CONTENTS. XXVll PAGE Act of 1867 675 Rules of equity as to " catoliing- bargains" not affected ... t;7(> What are "catching bargains" 677 Burden of proof 678 Terms of relief 679 The Money-Lenders Act, 1900 681 Sales of reversionary interests 682 " Surprise " and " improvidence " not substantive ground of relief against contracts, but only evidence of fraud, &c.... 68a Eight of rescission for undue influence 685 Confirmation and acquiescence 687 Special questions as to relation of solicitor and cUent 688 CHAPTER XIII. AgeeejMents op Imperfect OBUOATioisr. Nature of Imperfect Obligations: Right without remedy 69'0 1. Remedy lost. Statutes of Limitation 691 Rights of creditor notwithstanding loss of remedy by action . 69S Acknowledgment 694 What is sufficient acknowledgment 695 Statutes of limitation belong to lex fori 696 2. Conditions precedent to remedy not satisfied. A. Statute of Frauds, s. 4 698 A law of procedure only, not of substance 701 Results of informal agreement: Where money paid 702 Where agreement executed 703 Part performajice in equity 705 Informal ante-nuptial agreements, and confirmation by post-nuptial writing 707 Informal agreement as defence 707 Distinction of equitable estoppel 709 B. The " Slip " in marine insurance 710 Recognition of it for collateral purposes by modern deci- sions 711 Of stamp duties in general 714 C. Statutes regulating professions 715 Costs of uncertificated solicitors 716 Medical practitioners 716 Medical Act, 1886 717 Apothecaries Act 717 Special questions on Medical Act 718 XXVIU TABLE OF CONTENTS. PAGE 3. No remedy at all. Arbitrators : 719 Counsel's fees 719 As to non-litigious business, or account witb solicitor, gu. ... 720 Judicial recognition of counsel's fees 721 Certain contracts of infants since Infants' Relief Act 722 Tippling Act 722 Trade Union agreements 723 A converse case on repeal of usury laws 724 Treatment of equitable obligations at Common Law 725 Summary of results of this chapter 725 APPENDIX. Note A. Terminology and fundamental conceptions of contract . 727 Note B. Authorities on contract by correspondence 728 Note C. History of the equitable doctrine of separate estate ... 733 Note D. Authorities on limits of corporate powers 739 Note B. Classification of contracts in Koman and Medieval Law 747 Note F. Early authorities on assignments of choses in action ... 751 Note G. Braoton on fundamental error 754 NoteH. Mistake in wUls 755 Note I. On the supposed equitable doctrine of "making repre- sentations good" 757 NoteK. French law on "inofficious" gifts and captation 765 ( xxix ) TABLE OF CASES. PAGE Aabon's Ekefs V. Twi8s 632 Abbott V. Doane 200 Abbott V. Sworder 670 Aberaman Ironworks Co. v. Wickens 588 Abrahams v. Dimniock 681 Ackroyd v. Smith 257 Adams v. Lindsell 728, 731 Adams v. Thrift 604 Addison v. Cox 237 Agar V. Atheneeum Life Ass. Soo 744 Aggs V. Nicholson 247 Aguilar r. Aguilar 738 Ahearne v. Hogau 651, 662 Aiken v. Short 496 Ains worth v. Wilding 482 Albion Steel and Wire Co. v. Martin 351 Alderson «). Maddisou. . ..757, 761 Alexander v. Crosbie 557 Alexander v. Steinhart Walker &Co 42 Alger V. Thaoker 430 Alison, JEx parte 532 AUcard v. Skinner . .649, 652, 653, 663, 687, 689 AUcard v. Walker 493 Allcock V. Moorhouse , 253 Allen V. Allen 61 Alliance Bank v. Broom 205 AUianoe Bank of Simla v. Carey 697 Allkins V. Jupe 454 AIlsopp V. Wheatcroft 437 Alton V. Midland B,y. Co 79 Alvanley v. Kinnaird 521 Alvarez de la Rosa «;. Prieto. . 718 Amalgamated Society of Eail- way Servants ». Osborne .. 131 Anderson's OaHe 488 Anderson v. Fitzgerald 576 Anderson v. Radclifte .... 407, 410 Andrews, He 418 PAOE Andrews v. Belfield 50 Andrews v. Mookford 623 Andrews ». Salt 41& Angell V. Duke ' 170, 269, 764 Anglo-Egyptian Navigation Co. %. Rennie 323 Antoine v. Morshead 389 Appleby v. Johnson 44 Appleby r. Meyers 322 Arbuthnot d. Norton 397, 398 Archer ». Hudson .. .651, 656, 661 Ardglasse v. Muschamp 673 Arkansas Smelting Co. v. Bel- den Co 512, 513. Armstrong v. Armstrong .... 462 Armstrong v. Jackson 633 Armstrong v. Lewis 462 Armstrongs. Stokes .105, 111 Armstrong i>. Toler 445, 448 Amhold, Karberg & Co. v. Blythe cfe Co 38a Arnold v. Arnold 586 Arnold v. Mayor of Poole.. 156, 162 Arthur v. Wynne 320 Arundel's Case 123 Ashbury Ry. Carriage Co. v. Riche 130, 135, 137, 543, 744, 746 Ashley's Case 628 Ashling V. Boon 715 Asiatic Banking Corporation, Ex parte 24, 240' Aspden v. Seddon 254 Athenaeum Life Assurance Soe. V. Pooley 242, 243 Atherfold v. Beard 380 Atkinson v. Denby 461, 647 Atkinson «!. Ritchie 310 Atlee V. Backhouse 645 Attenborough v. St. Katha- rine's Dock Co 636 Attorney-General D. Churchill's Vet. Sanatorium 127 XXX TABLE OF CASES. PAGE Attorney-General r. G. E. Ry. Co 130, 135, 136, 747 Attorney- General v. Jacobs Smith 224 Attorney-General v. London County Council 747 Attorney-General v. Mersey Ry. Co 130, 747 Attorney-General v. Ray .... 576 Attorney-General i>. Sitwell. . 557 Attorneys and Solicitors Act, Ee 407 Att"WOod V. Lamont 425, 434, 436, 440 Attwood V. Small 612, 614 Austerberry v. Corporation of Oldham 254, 255 Austin V. Bethnal Green Guardians : 156, 163 Austin V. G. W. Ry. Co 485 Australian Royal Mail. &c. Co. V. Marzetti 160 Austria (Emperor of) v. Day and Kossuth 379 Avery «. Langford 436 Axford V. Reid 93 Ayerst v. Jenkins 370, 371, 446, 457 Ayles V. Cox 686 Aylesford (Earl of) v. Morris. .671, 672, 674, 675, 676, 677, 678, 680 Ayr Harbour Trustees v. Oswald 134 Azemar». Casella. ...527, 572, 573 Babcook v. Lawson 634, 635 Bache v. BUlingham 404 Bagge V. Slade . ; 198 Bagnall i). Carlton 697 Bagot V. Chapman 50.t Bagshaw v. Seymour 623 Bagster v. Earl of Portsmouth 97 Bahia and San Francisco Ry. Co., Re 242 Bailey v. Harris 363 Bailey v. Piper 587 Bailey v. Stephens 257 Baillie v. Oriental Telephone Co 741 Baillie's Case 509 Baily's Case 31 Baily v. De Crespigny . . . 306, 308, 330, 331 Bain v. FothergUl 530 Bainbridge v. Firmstone 187 PAGE Bainbridge v. Postmaster General 122 Bainbrigge r. Browne 660 Baines v. Geary 435 Barnes i\. WoodfaU 46 Baird's Case 132 Baker i>. Bradley 660 Baker v. Cartwright 698 Baker v. Hedgecock 435 Baker v. Loader 662 Baker v. Monk 667, 684 Baker i). Read 659 Balfour v. Ernest . . . .247, 742, 743 Ball V. Storie 555, 558 Bamfield v. Rogers 599, 653 Bankart v. Bowers 280 Bank Line v. Capel 333, 334 Bank of Australasia v. Breillat, 132, 443 Bank of Australasia «;. Palmer, 268, 269 Bank of Columbia v. Patter- son 158 Bank of ^England v. Ander- son 360 Bank of Hindustan v. Alison. . 632 Bank of Ireland v. Evans' Charities 141, 167 Bank of Montreal v. Stuart . . 651 Bank of New Zealand v. Simp- sou 270 Bank of United States v. Daniel 493, 496 Bank of United States v. Owens 360 Banks v. Crossland 702 Banner v. Johnston 222 Bannerman v. White .... 303, 304, 527, 528, 571, 588 Barclay v. Pearson 365, 469 Barden i>. Keverberg 88 Barker v. Cox 586 Barker v. Hodgson 313 Barkwoi-th v. Toung .... 294, 708 Barnard ». Faber 577, 762 Bamardo v. MeHugh 419 Barnett, Ex parte 509 Bamett v. Howard 91, 95 Barrett v. Hartley 668 Barron v. Willis 1 68, 688 Barrow v. Isaacs 490 Barry v. Croskey 617 Bartlett v. Welis 81 Barton v. Muir 358 Barton v. Piggott 362 Barwick r. English Joint Stock Bank gig Baskcomb v. Beckwith 588 TABLE OF CASES. XXXI PAGE Bate V. Hooper 497 Bateman v. Couiitess of Koss . 88 Bateman v. Fabei' 95 Bateman v. Mid-Wales Ey. Co 140 Bateman v. Binder 694 Bates, Hx parte 84 Bateson v. Gosling 348 Bath (Earl of) and Montague's Case 684 Batson v. Newman 365 Batty V. Chester 370 Baudains v. Richardson .... 651 Baxendale v. Seals 520 Baxter v. Earl 97 Beaohey v. Brown 475, 598 Beale v. Kyte 519, 563 Beanland v. Bradley 660 Beard v. "Webb 88 Beattie «. Lord Ebury ... .114, 609 Beauchamp (Earl) ■». "Winn . . 479 Beaumont v. Dukes 762 Beaumont v. Keeve 369 Beavan v. M'Donnell 99 Bechervaise v. Lewis 349 Beohuanaland Exploration Co. V. London Trading Bank . . 138, 242, 247, 248 Beck V. Pierce 96 Beckham «). Drake ..106, 108, 109 Bedford v. Bagshaw 023 Bedford (Duke of) v. Trustees of British Museum 261 Beeston v. Beeston 457 Begbie v. Phosphate Sewage Co 457 Behn V. Burness 302, 304, 571 BeU P. Balls 173 Bell V. Eeid 385 Bellairs v. Tucker 612 Bellamy v. Debenham 585 Bellamy v. Sabine 660 Belshaw r. Bush 611 Bence v. Shearman 237 Bennett (Doe d.) v. Hale .... 720 Bensley v. Bignold 359 Bentley v. Mackay 489, 558, 562, 687 Bentley v. "\^ilmont 636 Benwell v. Inns 437 Benyon v. Nettlefold 370 Berdoe v. Dawson 687 Berea College 4'. Kentucky ., 120 Besaut, He 419 Besant v. "Wood 374 Beswick v. Swindells 334, 336 Bettini v. Gye 283 TBetts V. Buroh 561 PAGE Bett.s-Merrell Co. v. Straus . . 252 Beverley's Case 97 Beverley v. Lincoln Gas Co. . . 159 Beynon v. Cook 672, 676, 679, 680 Bhugwaudass r. Netherlands, &c. Insurance Co 24 Bickerton t). Burrell. .112, 113, 118 Bidder v. Bridges 203, 204 Bifan V. Bignell 646 Biggar v. Rook Life Ass. Co.. 577 BiggerstafE v. Rowatt "Wharf. 743 BUlage V. Southee 662, 662 Bindley v. Mulloney 377 Bingham v. Bingham . . . .493, 534 Bird's Trusts 275 Birkmyr v. Darnell 169, 173 Birmingham and District Land Co. v. Allday 259 Birrell v. Dryer 263, 271 Biss r. Hygate 705 Blachford v. Preston 397 Blackburn Bobbin Co. v. Allen 326 Blackburn v. Haslam 575 Blackburn v. Smith 633 Blackburn v. "Vigors , 575 Blaokie v. Clark 559, 661, 663, 662 Blacklock v. Dobie 346 Blacksmith's Case, The 427 Blackwood v. London Char- tered Bank of Australia . . . .483 Blades v. Free 42, 103 Blaiberg v. iCeeves 689 Blake v. MoCleary 120 Bloomer v. Spittle 519, 563 Bloxam v. Metrop. Ry. Co. . . 413, 740 Bljrth & Co.'s Case 713 Boast «). Krth 316,319 Bobbett V. Pinkett 246 Bold V. Hutchinson 661 Bolitho V. Gi'dley 91 Bolton (Duke of) v. "Williams.. 734, 738 Bolton I'. Lambert 47, 104 Bolton V. Madden 188 Bolton V. Salmon 348 Bonar v. Maedonald 347 Bone r. Ekless 459 Bonhote v. Henderson. . . .559, 562 Bonnard v. Dott 681 Bonner r. G. W. By. Co 134 Bonne well r. Jenkins 47 Booth V. Bank of England . . 360 Borries v. Imperial Ottoman Bank ^ no Bosanquet v. "Wray 725 XXXll TABLE OF CASES. PAGE Bostook V. N. Staffordshire Ry. Co 134 Boston V. Boston 170 Boston Ice Co. v. Potter .... 508 Boulton V. Jones 28, 508 Boussmaker, Ex parte 387 Bowden v. London, Edin- burgh and Glasgow Assur- ance Co 577 Bower V. Cooper 264 Bowes V. Shand 270, 284 Bowman v. Secular Society . . 378 Boyd, Ex parte 93 Boyse i>. Rossborough 477, 649, 6ol Braoewell v. Williams 207 Bradford r. Romney 267 Bradford v. Roulston 19';i Bradfi^rd v. Symondson 534 Bradford v. Williams 279 Bradlaugh v. Newdegate..406, 417 Bradshaw, Re 423 Bradshaw v. Bradshaw 345 Bradshaw v. Lanes. and Torks. Ry. Co 214 Bragg V. Stanner 431 Bramah v. Roberts 139 Brampton v. Beddoes 440 Braudao v. Bamett 245 Brandon v. Nesbitt 390 Brandt's (William) Sons & Co. V. Dunlop Rubber Co 235 Braunstein v. Accidental Death Insurance Co 51 Breton v. WooUven 210 'Bvett. Ex parte 601 Brewer v. Brown 5«6 Bridger v. Savage 458 Bridgman v. Green 661, 6-<4 Briggs, Ex parte 626 BrigifS V. Ryan 94 Bright V. L^fferton 639 Brisco V. Baillie- Hamilton . . 755 Bristfiw V. Secqueville 393 Britain v. Rosaiter . .699. 705, 7U6 British and American Tele- graph Co. V. Colson. . . .730, 731 British Linen Co. v. Drum- mond ,. 696 British S. Africa Co. v. De Beers Consolidated Mines . . 129, 463 British Waggon Co. v. Lea & Co 214 Broad v. JoUyfe 431 Broxd t>. Muntnn 591 Brockwell v. Bullojk 97 Brogden v. Metrop. Ry. Co. . . 47 PAGE Bromley v. Smith 680' Bromley v. Smith ([1909] 2 K. B. 235) 74 Brook V. Brook 354, 365, 356 Brookman's Trust, Ee 423 Broome v. Speak 60 Brothtrhood's Case 745 Broughton v. Hutt 493, 536 Broughton v, Manchester Waterworks Co 138 Broun v. Kennedy 662, 662 Brown v. Brine 401 Brown V. Byers 139 Brown ;;. Dale 128 Brown V. Dimbleby ........ 94 Brown I). Guarantee Trust Co 290- Brown r. Mayor of Loudon . . 331, 336 Brown v. Royal Insurance Co. 311 Browne v. Barber 716 Browning v. Wright .... 543, 545 Brownlie v. Campbell . . . .568, 764 Bruntou's Claim 243 Bryan (Doe d.) v. Bancks .... 60- Bryant and Barningham's Contract, Ee 514 Bryant v. Flight 60 Bryant v. Herbert 146 Buckland v. Buckland 92 Bnlkley v. Wilford 353 Bult V. Morrel 139 BurcheU i\ Clark 275 Burge 1!. Ashley and Smith . . 459 Burges.s's Ca,-e 638 Burgess v. Eve 349 Burghart i>. Hall 76 Burke v. S. E. Ry. Co 53 Burland v Earle 741 Burn V. Carvalho 235 Burnard v. Haggis. 81 Burrell. Ex parte 344, 610 Burroughes v. Bayne 1,'io Burrow v. Soammell 587 Burton v. Sturgeon 89 Bute (Marquis of) v. Thomp- son 328 Butler and Baker's Case .... 56 Butler V. Butler g^ B«lch-y-Plwm Lead Mining Co. V. Bajnes 628 Byrne v. Van Tienhoven .... 32 Caballero v. Henty 590 Cahill V. Cabin \\\ 89 Caird D. Moss .'.'."." 663 TABLK OF CASES. XXXIU PAGE Caldeoott, Ex parte 400, 456 Calderi). Dobell 102, 104, 105 Calverley v. Williams 518 OamberweU and S. London BuildingSociety«.Holloway 686 Cambridge (Mayor of) v. Dennis 348 Cameron and Wells, lie 224 Campanari *'. Woodburn . 42 Campbell's Case 742,746 Campbell, Ex parte 632 Campbell v. Fleming 627 Campbell v. Frenob 756 Canbam t>. Barry 308, 309, 601 Cannam v. Farmer 85 Cannan v. Bryce 446 Canning i'. Farquhar 21, 47 Gargill v. Bower 621 Cargo ex Argus 357 Carington (Lord) v. Wycombe Ry. Co 134 Carlill V. Carbolic Smoke Ball Co 16, 21, 23, 36 Carlisb v. Salt 589 Carlisle & Cumberland Bank- ing Co. D. Bragg 503 Carmarthen (Mayor of) c. Lewis 164 Carney v. Plimmer 366 Carr v. Jack-on 107, 118 Carr v. Lynch 173 Carrington v. Roots 700 Carrol v. Blencow 87 Carter v. McLaren 480 Cartwright v. Cartwright .... 376 Cartwright v. Hately 513 Casborne v. Barsbam 656 Ca-itle «;. Wilkinson 585 Catling V. King 173 Cato «i. Thompson 267 Caton V. Caton 706, 707 Catt V. Tourle 437 Caudell v Shaw 88 Cavendish t) Geaves 240 Central Ry. Co. of Venezuela V. Kisch 595, 596,614, 641 Chadwiek w. Manning 759 Challis's Case 521 Chamberlain 1). Williamson . . 319 Chambers v. Manchester and Milford Ry. Co 359 Champion f. Rigby 688 Chandler v. Web.-ter 324 Chanter «!. Hopkins 572 Chanter v. Leese 230 Chapin »>. Freeland 709 Chapleo «. Brunswick Build- ing Society 744 PAGE Chapman v. Cole 607 Chapman 4). County of Douglas 364 Chapman t). Michaelson 681 Chapman v. Smethurst 107 Chappie V. Cooper 78 Ghaproniere v. Lambert .... 709 Charlesworth v. Holt 375 Charter v. Charter 756 Charter v. Trevelyan..351, 630, 639 Chasemore v. Turner 695 Chavasse, Ex parte 391 Cheale v. Kenward 189 Ohemin de fer du Dauphine V. Clet 323 Cherry v. Colonial Bank of Australasia 114 Cherry v. Heming 171, i75 Chesteriield v. Janssen 671, 672, 673 Chetti V. Chetti 356 Chicago and G-. E. Ry. Co . v. Dane 190 Chilton V. Corporation of Lon- don 226 Chlnnock v. Marchioness of Ely 46 Cholmondeley v. Clinton. .414, 415 ChoAej , Ex parte 242 Church V. Imperial Gaslight, &c. Co 156, 159 Citizens' Bank of Louisiana v. Firi-t National Bank of New Orleans 709, 761 City Bank, Ex parte. . 139, 140, 242 City of Memphis v.' Brown . . 462 City of San Juan v. St. John's Gas Co 203 Civil Service Co-operative Society v. General Steam Navigation Co 324 Clack V. Holland 238 Clapham SS. Co. v. Naamlooze Vennootschap, &c 386 Clare v. Lamb 496 Clark, Se 79 Clark V. Clark 374 Clark V. Girdwood 560 Clark V. Malpas 669 Claiket). Birley 348 Clarke v. Cobley 82 Clarke v. Cuc^kfield Union. ... 161 Clarke v. Dickson 631, 632 Clarke v. Dunraven (Earl of). 7, 27 Clarke v. Grant 268 Clarke v. Martin ; 191 Clarkson «;. Edge 437 Clay V. Ray 450 Clayton (Joseph) , lie 482 C XX XIV TABLE OF CASES. PAGE Clayton v. Adams 85 Clayton v. Corby 267 Cleprg «. Clegs' 403 Clements v. L. & N. W. Ey. Co 72 Clemontson v. Blessig 387 Cleve V. Financial Corporation 189 Clifford V. Watts 309, 310, 328 Clinan v. Cooke 554 Clinch V. Financial Cornora- tion t 643 Clive V. Beaumont 45 Close V. Close 349 Clongh V. L. & N. W. Ey. Co. 600, COl, 618, 626, 628, 629, 631, 642 Clowes V. Higginson . . . .266. 519, 620, 653 Clubb V. Hutson 399 Clugas V. Penaluna 392 Coaks V. Boswell 690, .'iOl Coates V. Collins 636 Cobbett v. Brook 686, 687 Cochrane i>. Willis 533,534 Cock V. Eic.hards 422 Cockell V. Taylor 666 Cooker's Case 220 Cocking V. Ward. 704 Cogan «. UufEeld 561 Cohen V. Kittell 468 Colljorne and Strawbridge, Sx parte 242 Coldcot V. Hill 644 Cole !■. Gibbons 672 Cole V. Gibson 421 Coles <: Pilkington 178. 760 Coles o. Treoothick 670 Coles and Ravenshear, Se 482 CoUen «. Wright 114 Collins V. Blantern 398, 461 Collins !). Locke 404,430 Collyer v. Fallon 397 Colman v. E. 0. Ry. Co 740 Colyear v. Mulgrave 224, 227 Comfort V. Betts 233 Commissioners of Sewers v. Eeg 315 Commonwealth v. Lane 355 Comptoir Commercial Anver- sois V. Power 301 Conquest's Case 218 Consolidated Exploration and Finance Co. c Musgrave . . 400 Cookjj. Field 415 Cook V. Lister 249, 51 1 Cooke V. Cboke (4 D. J. S. 704) 414 Cooke!;. Cooke (L.E. 4 Eq. 77) 402 Cooke V. Eshelby 110 Cooke V. Lamotte 652, 653 Cooke t>. Oxley 29, 35 PAGE Coomber, Ee 652, 660 Coombs ». Wilkes 173 Coope V. Eidout 44 Cooper V. Evans 580 Cooper V. Joel 681 Cooper V. Kendall 695 Cooper ^;. Phibbs 479,493, 496, 535 Cooper V. Simmons .... 72, 78, 513 Cooper ■!>. Vesey 485, 510 Cope V. Eowlands 359 Cope V, Thames Haven, &o. Co 163 Copper Miners of England v. Fox 160 Coppook V. Bower 400, 462 Cordingley f. Cheesebrongh. . 583 Cork and Bandon Ey. Co. ■!>. CazenoTe 70 Cork and Youghal Ey. Co., He 369 Corley v. Lord Stafford 363 Corn V. Matthews 73 Cornelius v. Phillips 681 Cornfoot v. Fowke 619 Comford v. Carlton Bank .... 126 Cory V. Gertcken 82 Cory V. Patton 712 Cory & Son v. Harrison 440 Coi-ta Eica Ey. Co. v. For- wood 353 Cote, Ex parte 488 Cottage Street Church v. Ken- dall 179 County Life Assurance Co., Re 742 County of Gloucester Bank v. Eudry Merthyr, &c Co. . . 743 Courtenay v. Williams 693 Coutts V. Acworth 686 Couturier v. Hastie. .327, 631, 766 Coverdale v. Eastwood . .760, 761 Cowan V. O'Connor 36 Coward and Adam's Purchase, Re 90 Coward v. Hughes 496, 676 Cowern v. Nield 69, 73, 81 Cowdry v. Day 550 Uowen r. Truefitt, Ltd 275 Cox V. Prentice 528 Coxhead'D. MnUis 66 Cragoe v. Jones 348 Crampton v. Eidley 719 Crampton v. Varna Ey. Co. . . 163 Crears v. Hunter 205 Creed ^ . Henderson, Re Hud- son 179 Cripps V. Hartnoll 168, 169 Croft V. Graham 675 TABLE OF CASES. XXXV PAGE Crofts V. Middleton 357 Crook V. Corporation of Sea- ford 141 Crookshank v. Rose 723 Cropton V. Davies 275 Crosby «. Wadsworth 700 Crosfield & Sons v. Manchester Ship Canal Co 40i Crossley v. Mayoook 44 Crouch 1-. Credit Foucier of England 242, 246, 247, 248 Crow V. Eobinson 239 C alien v. Thompson' s Trustees and Kerr 622 Cumber e. Wane 203 Cumming v. Ince GJS Cundy V. Lindsay 509, 636 Cunningham ». Dunn 313 Cuno, Se, Mansfield v. Mans- field 92 Currie v. Goold 498 Gurrie v. Misa 177 Curson v. Belworthy 684 Curtice i). London City and Midland Bank 12 Curtis V. Williamson Ill Cutter V. Powell 286 Cutting i). Williams 191 D. C. i\ Gallaher 275 Dabowski v. Goldstein 438 Da Costa v. Jones 384 Dacre v. Gorges 618 Dagenham Dock Co., Se .... 551 Dahlt). Neleon 300, 301, 326 Daimler Co. v. Continental Tyre Co 386 Dale V. Hamilton 706 Dally V. Wonham 659 Dalton V. Angus 257 Daltonj). Gib 77 Dalton V. Midland Ey. Co. . . 85 D' Angibau, He 224 Daniell v. Sinclair 493, 496 Daniel's Settlement 275 Daniels v . Tref usis 174 Darrell f . Tibbitts 577 Dash wood v. Jermyn 760 Daubuz V. Morshead 389 Dauglish V. I'ennent 344 Dauphine, Chemin de fer du, V. Clet 323 Davenport v. Bishopp 227 Davenport v. Keg 60 Davey v. Shannon 437 Davies v. Davies (9 Eq.) 64,67 PAGE Davies v. Davies (36 Ch. Div.) 435 Davies ». Fitton 566,657 Davies «!. Jenkins 736 Davies v. London and Provin- cial Marine Insurance Co. . . 578 Davies p. Makuna 717, 718 Davis (. Duke of Marlborough 397 Davis V. Thomas 550 Davys v. Buswell 168, 169 Dawes v. Harness 628 Dawson v. Ellis 705 Dawson v. Fitzgerald 404 Dawson V. G. N. and City Ry. Co 234, 411 Deacon v. Gridley 196 Deare v. Soutten 69 Dearie v. Hall 235 De Beil v. Thomson 423, 757 Debenham v. Ox 423 Debtor, A, He 681 De Bussche «). Alt 351,640 De Francesco v. Barnum .... 73 Defries v. Milne 234 De Hoghton v. Money 218, 408, 412 De la Bere v. Pearson 187 De LassaUe v. Guildford .... 170, 269, 764 De La Touohe's Settlement, Jie 542 De Mattos «!. Gibson 251 Dendy v. Henderson 436 De Nicholls v. Saunders .... 512 Denn v. Wilfi.rd 543 Dennett v. Athertou 258 Denny v. Hancock 620 Dent V. Bennett 651, 652, 653, 662, 663 Denton v. G. N. Ey. Co 17, 20, 21 Denton v. Peters 245 Deposit Life Assurance Co. v. Ayscough 628 Derry v. Peek .• 566, 698, 604 Devonshire's (Earl of) Case . . 149 Dew )-. Parsons 647, 648 De Wahl •». Braune 101 Dewar v. Goodman 252 Dewar «). Mintoft 173 Dewes v. Fitch 433, 438 De Wiitz v. Hendricks 390 Dey V. Pullinger Engineering Co 743 Diamond Match Co. v. Roeher 437 Dibbina v. Dibbins 104 Dickinson v. Burrell 411 Dickinson v. Dodd3..30, 33, 35, 42 Dickinson r. Valpy 139 c2 XXXVl TABLE OF CASES. PAGE Dickson V. Eeuter's Telegram Co 226, 227 Dickson v. Swansea Vale Ky. Co 242 Diggle V. Higgs 366, 459 Diggle V. London and Black- waURy. Co 159 Dimmock v. Hallet 584 Ditcham v. Worrall 66 Dixon, Ex parte 109 Dixon V. Bovill ^47 Dobell V. Stevens 613 Dobson V. Collis 171 Dodd V. Churton 312 Doe d. Bennett v. Hale V20 Doe d. Bryan v. Bancks .... 60 Doe d. Garnone v. Knight . . 8, 55 Doe d. Leach v. Mioklem .... 275 Doe d. Pennington v. Taniere. 164 Doe d. Williams v. Evans. 414, 415 Doleman v. Ossett Corporation 402 Don V. Lippmann 697 Donaldson v. Farwell 601, 630 Douglas i). Culverwell 550 Douglass V. Rhyl Urban Coun- cil 160 Dowden and Pook v. Pook . .435, 439 Downes v. Jennings 354 Drake v. Beckham 106 Drayoott v. Harrison 94 Dresser v. Norwood 105, 110 Drew V. Nunn .... 43, 98, 101, 103 Driefontein Consolidated Gold Mines v. Janson 385, 387 Drughom (Fred) v. Rederiak- tiebolaget Transatlantic . . 108 Druiff V. Lord Parker 268, 655, 688 Drummond v. Van Ingen .... 304, 672 Dublin and Wicklow Ry. Co. V. Black 70 Duckett V. Gover 741 Dudgeon v. Pembroke 447 Dugdale v. Lovering 13 Duncan v. Cashin 733 Duncan v. Dixon 64, 67 Duncan v. Topham 730 Duncan, Fox & Co. v. N. & S. Wales Bank 350 Dundas v. Dutens 708 Dnnlop «). Higgins 730,731 Dunlop Pneumatic Tyre Co. i>. New Garage and Motor Co ^ 552 Dunlop Pneumatic Tyre Co. V. Selfridge & Co 177 PAOK Dunmore (Countess of) i-. Alexander 729 Dunn V. Macdonald 114 Dunnage v. White 666 Dunne v. English 363 Dunston v. Imperial Gas Light Co 163 Durant w. Roberts & Co 109 Durham v. Durham 9T Durham (Earl of) tJ.Legard . . 529, 586 Dutton 1). Marsh 247 Dutton V. Poole 226- Dutton V. Thompson 654 Duvergier v. Fellows 461 Dyer v. Hargrave . .583, 587, 613 Dyer's Case, The 426 Dyson r. Forster 263 Eagle Insurance Co., Ex parte li'i Eaglesfield v. Marquis of Lon- donderry 493, 516 Earle v. Hopwood 409 Earle v. Kingscote 86 Earle v. Oliver 191 East London Waterworks Co. V. Bailey 159' Eastern Counties Ry. Co. ■!>. Hawkes 746 Eastes v. Russ 433, 439 Eastwood r. Kenyon 168, 191 Eaton V. Basker 165 Ebbw Vale Co.'s Case 160 Ebsworth and Tidy's Con- tract 689' Ecclesiastical Commissioners v. Merral 164 Edelstein v. Schuler & Co. . . 138, 242, 248 Eden v. Ridsdales, &c. Co. . . 652 Edgcomb v. Dee 146, 150, 180 Edgelow V. M»cElwee 681 Edgington v. Fitzmaurice. . . . 611 Edgware Highway Board v. Harrow Gas Co 177, 463 Edmunds v. Bushell 106 Edmunds v. Merchants' De- spatch Transport Co. . . 509, 636. Edmundson v. Render 732 Edwards, lie 418 Edwards v. Aberayron, &c. Society 404 Edwards v. Brown 502 Edwards v. Burt 680 Edwards v. Carter 64 Edwards v. Meyrick G59 Edwards v. West , 305 TABLE OP CASES; XXXVU PAGE Egan V. Guardians of Ken- sington Union 720 Egerton r. Earl of Brownlow. 380, 381, 382, 393 Ehrman v. Bartholomew 439 Eitel Bieber & Co. v. Rio Tinto Co 388 Elbinger Actien-G-esellsohaft V. Claye 105 Eley f . Positive Assurance Co. 228 Eliaaon v. Henshaw 31 Ellen v. Topp 296 Elliman, Sons & Co. v. Car- rington & Son 434 -EUiot V. Ince 100 Elliott V. Cratohley 325 Elliott V. Richardson 401 Elliott c. Royal Exchange Assurance Co 404 Ellis V. Barker 664, 687 Ellis V. Torrington 411 EUiston V. Reach 2S9 Elphinstone (Lord) v. Monk- land Iron and Coal Co 552 Eltham v. Kingsman 380 Emmerson's Case 632 Emmet r. Tottenham 673 Empress Engineering Co. 116, 228 England r. Davidson 196 England v. Downs 354 English and Colonial Produce Co.'sCase 617 English and Foreign Credit Co. -o. Arduin 45 EnoD. Dunn 378 Equitable Fire and Accident Office V. The Ching Wo Hong 46 Equitable Insurance Co. . O'Brien 203 Goddard v. Snow 354. Godwin V. Francis II4 GoldsoU r. Goldman 438- TABLE OF CASES. XXXIX P-AGE Groldatein v. Sanden 2o2 GoOL-h'f Case ,62, 63 Good !'. Cheeseman 204 Good (.'. Elliott 380 Goode V. Harrison 62 Goodman r. Harvey 24 6 Goodman v. Sayers 497 Goodson V. Grierson 206 Goodwin r. Robarts 247, 248 Goi-don r. Gordon 594 Gordon i\ Street 510, 616 Gore r. Gibson 98 Gorfrier v. Mieville 248 Govett ('. Kichmond 218 Gozney i'. Bristol Trade and Provident Society 429 Grasme r. Wroughton 4 50 Graham v. Johnson. .240, 242, 243 Grain's Case 219, 220 Grand Trunk Ry. Co. v. Robinpon 53 Grant's Case 41, 353 Grant v. Gold Exploration, &e. Syndicate of British Columbia 361 Grant v. Maddox 270 Gravely v. Barnaocd. .189, 432, 437 Graves r. Legg 283 Gray v. Eowler 626, 627 Gray v. Gibson 230 Gray V. Lewis 157 741 Gray v. Mathias 369, 370, 371 Gray r. Pearson 230 Gray r. Warner 352 G. N. Ry. Co. V. Palmer 54 G. N. Ry. Co. V. Witham . . 190 Green v. Baverstook 1 605 Green r. Duekett 646 Green v. Sevin 5l8 Green v. Thompson 73 Green v. Wyim 348 Greenwood v. Greenwood .... 275 Gregory v. Williams 227 Grellr. Levy 407,471 Gresley D. Mousley 630,651, 686, 688 Griffin ii. Deveuille 66 1 Griffith u. Tower Publishing Co 513 Griffith V. Young 702 Griffiths r. Jones 521 Griffiths I.'. Robins 661 Grindell «. Bass 174 Griswold v. Waddington .... 388 Grosveuor v. Sherratt . . . .658, 661 GuHrdhouse v. Blackburn. .268, 7^6 Guest V. Smythe ■''■'>l Guild & Co. V. Conrad 168 lUCH Guinness v. Laud Corporation of Ireland 746 Gunn's Case 37 Gurney v. Behrend 256 Gurney v. Womersley 527 Gutliing V. Lynn 48 Guy !). Churehill 408, 411, 417 Gwynne v. Heaton 6tJ6 H. <-. W 376 Hack r. London Provident Building Society 403 Hadley 1'. Clarke 388 Hadsley v. Dayer-Smith .... 410 Haigh V. Brooks 187 Haigh i\ North Bierley Union 161 Haines v. Busk 4 53 Halbot V. Lens 115 Hall'ord ■('. Cameron's Coal- brook, &c. Co 247 Halhead v. Young 266 ?Iall, Mo 721 Hall V. Bainbridge 230 Hall'i). Coiider 527 Hall r. Dyson 345 Hall i'. Ewin 255, 260 Hall «. Hall (L. R. 1 P. & D. 482) Ool Hall V. H:all (L. R. 8 Ch. 430) 655 Hall v. Old Talargoch Lead Mining Co 637 Hall V. Palmer 55, 371 Hall «). Swansea, Mayor of .. 164 Hall V. Warren 97 Hall i: Wright 316, 318, 319, 422 Hall-Dare v. Hall-Dare 663 Hallows V. Fernie 612 Halsey v. Grant 582 Hamilton v. Grainger 362 Hamilton f. Hector 419 Hamilton v. Vaughan-Sherrin &Co 65 Hamilton v. Watson 579 Hamlin v. Great Northern Ry. Co 18 Hamlyn & Co. e. Talisker Dis- tillery 402, 463 Hammersley v. Baron de Beil. 423, 757, 768, 759, 760 Hammond v. Messenger .... 233 Hampden v. Walsh 459 Hanau v. Erlich 171 Hanauer v. Doane 390, 447 Hancock r. Hancock 92 TABLE OF CASES. PAGE Hancock r. Peaty 97 Hanington v. Du Chastel .... 396 Hanley v. Pearson 561 Hanson v. Waller 481 Harben v. Phillips 741 Harburgr India Rubber C(jmb Co. V. Martin 168 HardinfT, In the Goods of . . . . 86 Hardman v. Booth .509, 636 Hardy !'. Metropolitan Laud and Finance Co 486 Hare's Case .521, 628, 629 Harman's Case 220 Harms v. Parsons 437 Harrington r. Long 408, 412 Harris' Case 731 Harris v. Brisco 407 Harris v. G. W. Ry. Co 53 Harris v. Niokerson 17, 20 Harris v. Pepperell 518, 563 Harris r. Quine 697 Harris v. Tremenheere 662 Harris v. Wall 64 Harrison v. Cage 194, 195 Harrison v. Good 2.55 Harrison v. Guest 666, 668 Harrison v. Harrison (13 P. Div. ISO) 94 Harrison f. Harrison ([1910] 1 K. B. 35) 377 Harrison c. Seymour 348 Harrison r. Walker 293 Harse v. Pearl Life A.ssurance 456, 463 Hart f. Hart 49 Hart V. Miles 188 Hart V. Mills 523 Halt 1'. Swaine 593 Harter ■». Harter 766 Hartley v. Cummings 442 Hartley i>. Ponsonby 197 Hartley v. Rice 422 Harvey v. Faoey 45 Harvey v. Merrill 366 Harvey v. Mount 061 Hastelow v. Jackson .... 459, 461 Hastings (Lady), Se 738 Hatch !•. Hatch 6.51, 660 Hatzfeldt- Wildenburg f. Alex- ander 44 Hawke i). E. Hulton & Co. . . 127 Hawkaworth f.Hawksworth.. 418 Hay's Case 351 Hayoraft v. Creasy 611 Haygarth n. Wearing 590, .593, 683 Haynes v. Doman 435, 438 PAGE Haywood v. Brunswick Build- ing Society 265, 258 Head v. Diggon 29 Heartley r. Nicholson 210 Heath v. Crealock 485 Hebb'sCaae 36, 730 Heffield r. Meadows 271 Heilbutt V. Buckleton 574 Heilbutt (■ Hickson 304 _ "Helen," The 391 Helps V. Clayton 78 Hemingway p. Hamilton .... 600 Henderson v. Australian Roy al Mai:, &c. Co 160 Henderson v. Stevenson ...... 53 Henkel v. Pape 523 Henkle v. Royal Exoh. Assoe. Co 558 Henry v. Armstrong 653 Henthorn «'. Fraser ... .32, 34, 37, 39, 41 Hepworth Manufacturing Co. V. Ryott 440 Hereford and South Wales Waggon and Engineering Co., He 617 Herman v. Jeuchner .... 400, 460 Hermann v. Charlesworth .... 42 J Herman o v. Mildred 106 Herne Bay Steamboat Co. c. Hutton 325 Hesse v. Stevenson 543 Hey wood v. Mallalieu. . . .591, 594 Heyworth v. Hutchinson .... 573 Hick V. Raymond 313 Hickman ». Berens 622 Hickman v. Kent or Romney Marsh Sheep Breeders' As- sociation 137, 740 Higgins V. Pitt 345 Hisrgins v. Samels 615 Higgins V. Scott 693 Higgins V. Senior 105 Higginson v. Clowes . . . .620, 553 Higginson v. Simpson 457 Higgs «. Northern Assam Tea Co 242 Hillp. Boyle 412 Hill V. Cooper 90 Hill V. Gray 602 Hill V. Peters 236 Hill V. Tupper 256, 258 Hill 1!. Walker 693 Hill V. Wilson 266, 606 Hilliard v. Eiffie 643 Hills V. Rowland 559 Hills V. Snell 607 Hills V. Sughrue 311, 329 TABLE OF CASES. xli PAGE Hilton ,-. Eckersley 42S Hindley's Case 31 Hindlev f. Marquis of West- meath 377 Hindton v. "Weatherill 651 Hipweli V. Knight 548 Hirschfield v. Loudon, Brigh- ton and South Coast Ey. Co. 609 Hislop V. Leokie 269 Hitchcock V. Coker . .427, 432, 433 Hitchcock r. Giddings 632 Hoadly r. McLaine 172 Hoare v. Bremridge 643 Hoare v. Kingsbury U. C. . . 1 60 Hoare ». Rennie. . 286, 287, 288, 289 Hobart v. Butler 719, 720 Hoohster r. De la Tour . .293, 294 Hodgson, iJc 736 Hodson'a Settlement, He 64 Hodson V. Heuland 706 Hoggins 4'. G-ordon 719, 720 Hoghtun V. Hoghton 501, 662, 660 Hole V. Bradbury 613 Holland, Ss 708 Holland v. Bennett 732 Holland V. Hall 454 Hollinsr. Fowler 481,509, 636 HoUoway Bros. v. Hill 255 Holman v. Johnson 391, 456 Holmau v. Loynes 651, 656, 659, 686 Holme V. Brunskill 347 Holme v. Guppy 296 Holmes v. Blogg 65 Holmes v. Jaques 231 Homersham v. Wolverhamp- ton Waterworks Co 159 HoDck V. Miiller 287 -Honeyman v. Marryat 44 Hood 1'. Anchor Line S3 Hood of Avalon (Ladjr) v. Mackinnon 477, 564 Hood-Barrs v. Oathcart 95 Hood-Barrs v. Heriot 91 , 95 Hoole V. G. W. E.y. Co 740 Hope V. Hope 374, 401, 470 Hopkins v. jpresoott 396 Hopkinson v. Foster 738 Horlock V. Beal 326, 332 Home's Case 254 Horrneks t). Rigby 687 Horsf all v. Fauntleroy Ill Horsf all «). Thomas 615 Hort'sCase 219, 220 Hotson V. Browne 266 Hough i>. Manzanos 107 PAQB Houldsworth v. City of Glas- gow Bank '. 623 Houldsworth v. Evans 745 Household Fire Insurance Co. V. Grant 40, 41, 731 Howard v. Brownhill 725 Howard v. Harris 550 Ploward v. Patent Ivory Manu- facturing Co 141 Howarth v. Brearley 718 Howatsoni). Webb.. 501, 502, 505 Howden v. Haigh 346 Howden (Lord) v. Simpson . . 452 Howes V. Bishop 651 Howell r. Coupland 324 Howke V. E. Hulton & Co. . . 127 How ley v. Knight 123 Howood r. Millar's, &c. Co. . . 441 Hoyle,JJp 52, 169 Huber V. Steiner 697, 698 Huddersfield Banking Co. v. Lister 634, 664 Hudson, He, Creed r. Hender- son 179 Hudson V. Cook 586 Hughes, «<■ 90, 736 Huffhes V. Done 723 Hughes i). Jones .... 583, 684, 589 Hughes V. Pump House Hotel 233 Huguenin v. Baseley . . . .662, 662, 664, 686 Hulmer. Coles 349 Hulme V. Tenant 733 Hulse, ISx parte 649 Humble v. Hunter 108, 609 Hume V. Pocock 615 Humfrey v. Dale 107, 273 Humphreys v. Green 706 Humphries v. Humphries .... 700 Humphrys v. Polak 419 Hunt, In the Goods of 504 Hunt «. Hunt 368, 372, 373, 374, 376 Hunt ■•!. Rousmaniere's Ad- ministrators 493, 639 Hunt «;. Silk 634 Hunt V. Wimbledon Local Board 141, 161,165 Hunter v. Atkins 686 Hunter «i. Daniel 407, 412 Hunter *•. Walters 605, 510 Hussey V. Horne-Payne .... 44, 47 Huti'heson v. Eaton 106 Hutchinson v. Tatham . . . 102, 107 Hutley J). Hutley 407, 417 Hutton J). BuUo-h 105 Hutton V. Warren 273 Hyams e. Stuart King . . . 340, 366 dii TABLE OF CASES. PAGE Hybart v. Parker 230 Hyde v. Hyde & Woodmansee 466 Hyde v. Wrench 32 Hydraulic Engineering Co. v. MoHaffie 548 Imperial Bank of Canada v. Bank of Hamilton 492 Imperial Loan Co. v. Stone . . 97, 98, 100 Ind'sCase 522 Ind, Coope & Co. t. Emmer- son 485 Inman v. Inman 84 lonides v. Pacific Insurance Co 712 lonides v. Pender 574, 575, 617 Ipswich Tailors' Case 427 Imham (Lord) v. Child 494 Irvine v. Watson Ill Irwin V. Williar 366 Isberg V. Bowden 109 Ives V. Brown 259 Jackson and Haden's Case.. . . 684 Jackson, Ex parte 361 Jackson v. Duchaire 343 Jackson v. Union Marine In- surance Co 298, 326, 330 Jacobs V. Credit Lyounais . . . 313, 314 Jacobs V. ReveU 584 Jacobs V. Seward 487 James, Tix parte 497 James v. Gouchman 655 James v. Isaacs 611 James v. Eerr 407 James v. Smith 699 Janson r. Driefontein Con- solidated Mines 385, 387 Janvier «. Sweeney 611 Jaquegs v. Thomas, iju Thomas 409 Jared v. Clements 235 Jarratt v. Aldham 689 Jarrett v. Hunter 173 Jee V. Thurlow 376 Jefferson v. Paskell 319 Jeflerys v. Gurr 164 Jeffrey v. Bamford 340, 367 Jenkin v. Pharmaceutical So- ciety 740 Jenkins u. Jones 414 Jenkins v. Morris 101 Jennings v. Broughton 612 Jennings «. Johnson 409 Jennings v. Rnndall 80 PAGB Jervis v. Berridge 268- Jervis r. Tomkinson 329 Johnasson v. Bonhote 699- Johnson v. Bragge 557 Johnson v. G-allagher 735, 737, 738. Johnson v. Lansley 457 Johnson v. Pie 80 Johnson v. Eaylton 271 Johnston v. Boyes 20- Johnstone p. Marks 76 Johnstone v. Milling 293 Joliffe V. Baker 693 Jones, Ex parte (12 Ch. Div.) . 736 Jones, Ex parte (18 Ch. Div.) . 83 Jones V. Barkley 280' Jones i>. Broadhurst 245, 511 Jones V. Clifford 534 Jones V. Daniel 44 Jones /'. Gibbons 253 Jones r. Gordon 246 Jones r. Harris 734, 738 Jones V. Holm 329 Jones V. Jones (6 M. & W.) . . 703 Jones V. Jones (1 Sim.) 237 Jones V. Just 572 Jones D. Lane 246- Jones V. Lees 436 Jones U.Merionethshire Build- ing Society 400 Jones V. North 4j0, 4 75- Jones «!. Eioketts 675 Jones V. Kimmer 690 Jones V. Robinson 230- Jones V. St. John's College, Oxford 312 Jones V. Victoria Graving Dock 174 Jones V. Waite. . 188, 198, 376, 444 Jorden v. Money 706, 758, 759, 761 Josephs r. Pebrer 250 Joyce V. Swann 45 Jureidini v. National Millers' Insce Co 404 Karberg's Case 217, 597 Kaufman v. Gersou 399, 468- Kay V. Smith 661 Kearley v. Thomson 460 Kearon v. Pearson oil Kearsley v. Cole 348 Keates v. Earl Cadogan . .593, 602 Keates r. Lyon 255, 258 Kedar Nath Bbattacharji v. Gorie Mahomed 179- Keech v. Sandford 352 TABLE OF CASES. liii xlm PAGE Keenan v. Handley 207 Keighley, Maxsted & Co. v. Durraut 109 Keir v. Leeman 398 Kekewich v. Manning 208 Kelly ('. Solari 492 Kelner f. Baxter 115, 116, 117 Kemp V. Baerselman 233 Kemp V. Falk 487 Kempson v. Ashbee 661, 688 Kennedy v. Broun . . .719, 720, 722 Kennedy v. Green 504 Kennedy v. Lee 29 Kennedy v. Lyell 414: Kennedy r. Panama, &e. Mail Co 615, 525, 526 Kent f. Freehold Land Co. . . 521, 628 Keppelli'. Bailey 258, 261 Kershaw f. Kelsey 386 Kettle V. Eliot 70 Kibble, Ex parte 66 Kidderminster (Mayor of) ;-. Hardwiok 156, 161, 162 King r. Hamlet 678 King V. Kemp 470 King V. Victoria Insurance Co. 234 Kingsford v. Merry.. 507, 509, 636 Kingston r. Preston 280 Kingston-upon-Hull (Gover- nors) V. Hull 48 Kintrea, JEx parte 607, 616 Kirchner & Co. v. Gniban . . 402 Kirk V. Bromley Union 163 Kitchen v. Hawkins 495 Knight V. Bowyer . .408, 410, 412 Knight V. Lee 458 Knight V. Majoribanks 667 Knight V. Simmons 259 Knox V. Gye 223, 691 Knye v. Moore 370 Konski V. Peat 435 Krellf. Henry 324 Kronheim v. Johnson 174 Kunwar Kam Lai v. Nil Kanth 416, 679 Lacey, Ex parte 350 Lachlan r. Reynolds 590 Lagunas Nitrate Co. v. Lagunas Syndicate 597 Laidlaw v. Organ 570 Lake, Re 235 Lakeman «;. IVIountstephen .. 168 Lamave v. Dixon 762. 763 liamb's Case 308,335 PAGE Lampet's Case 232 Lampleigh r. Braithwaite .. 15, 178, 192 Lamprell v. Billericay Union . 161 Langrish v. Watts 695 Lassence ik Tierney 707 Laughter's Case 335, 336 Laver r. Dennett £62 La very e. Pursell 170 Lavery c. Turlej^ 704 Lawes v. Purser 188 Lawford v. Billericay Rural Council 160- Lawrance r. Norreys 642 Lawrence v. Smith 378 Lazarus v. Cowie 249 Leach (Doe d.) v. Micklem . . 276 Leach r. MuUett 522 Leak v. Driffield 94 Learoyd r. Brook 296 Leask v. Scott 611 Leather Cloth Co. v. Hieroni- mus 174 Leather Cloth Co. v. Lorsont. 431, 434,437 Lebel v. Tucker 245 Lebeaupin v. Crispin 314 Le Bret v. Papillon 101 Lee, Ex parte 387 Lee V. Bude, &c. Ry. Go 358 Lee >:. Gaskell 171 Lee r. Jones 579, 603 Leeds v. Cheetham 305 Leeds and Hanley Theatres of Varieties 597 Leptham & Sons v. Johnstone White 436,439, 440 Legge V. Croker 692 Leggott V. G. N. Ry. Co 214 Lehigh Zinc and Iron Co. r. Bamford 604 Leicester v. Rose 345 Leifuhild's Case 209- Leiston Gas Co. v. Leiston U. D. C 333 Leman v. Fletcher 718 Leman v. Houseley 362, 718 Lempriere v. Lange 82 Leng & Co. r. Andrews ..72,439 Lennard v. Robinson 106 Lennon v. Napper 547, 649 Leroux V. Brown 700, 701 Leslie V. Fitzpatrick 61, 72 Leslie v. Reliable Advertising Agency 452 Leslie (R.) v. Sheill 69, 83 Letchford. Rr 79 Lever v. Koffler 173. xl IV TABLE OF CASES. PAGE Levy V. Grreen 523 Lewis f. Alleyne b9 Lewis r. Brass 48 Lewis V. Bright 364 Lewis V. Browning 42 Lewis V. Jones 609 Lewis V. Nicholson 114 -Leyland v. Illingworth . .519, 583 Lichfield v. Baker 497 Life Association of Scotland ''. Siddal 639 Liles V. Terry 657 Lincoln College Case 60 Lindo V. Lindo 645 Lindsay v. Cundy 509 Lindsay Petroleum Co. V. Hurd 611, 639 Lindus «i. Brad well 106 Lishman v. Northern Maritime Insurance Co 712 Lifter v. Hodgson 562 Lister f. Piokford 487 Litchfield v. Dreyfus 081 Litt r. Cowley 487 -Livingston v. Ralli 402 Llanelly Ry. and Dock Co. v. L. & N. W. Ey. Co. . .209, 403 Lloyd r. Attwood 639 Lloyd V. Banks 237 Lloyd V. Clark 662 Lloyd V. Cuote 667 Lloyd ». Crispe ; 308 Lloyd V. Grace, Smith & Co. . 620 Lloyd V. Guibert 276 Lloyd V. Nowell 44 Lloyds Bank, Ltd. v. Bullock. 505 Load V. Green . .600, 630, 634, 639 Lodge V. National Union .... 681 Loflft ». Dennis 305 Liiflfus V. Maw 759, 760 Lohre i>. Aitchison 278 London and Northern Bank, Se 41 London and Northern Estates Co. V. Schlesinger 333, 334 ' London and N. W. By. Co. r. M'Michael 65, 70, 71 London and Provincial Insur- ance Co. V. Seymour 643 London and S. W. Ry. Co. v. Blackmore 545 London and S. W. Ry. Co. «. Gomm 255 London Assurance Co. v. Mansel 575, 576 London Chartered Bank of Australia v. Lempriere..643, 735 London County Council ». Allen 259 PAQE London Dock Co. v. Sinnott. . 159 London General Omnibus Co. ■i). HoUoway 578, 580 London Joint Stock Bank v. Mayor of London 125 London Joint Stock Bank v. Simmons 24 8 London Land Co. r. Harris . . 643 London (Mayor of) c. Cox . . 482 Longmate v. Ledger . . . .666, 668 Lound V. Grimwade 401 Loveridge v. Cooper 235 Lovesy v. Smith 560 Lowe V. L. & N. W. Ry. Co. 160, 164 Lowe V. Peers 422 Lowis V. Eumney 693 Lowther v. Lowther 351 Lucas ». Dixon 175 Lucas «. Wilkinson 511 Ludera v. Anstey 75 Luddy's Trustee v. Peard .... 657 Ludlow (Mayor of) t. Charl- ton) 156, 161 Luker v. Dennis 258 Lumsden's Case 63 Luna, The 54 Lush's Trusts 710 Luxon & Co. (No. 2) 70 Lyall V. Edwards 545 Lyddon v. Moss 656 Lynch, £x parte 83 Lynde v. Anglo-Italian Hemp Spinning Co 621 Lyon V. Haynes 251 Lyon V. Home 663, 766 Lyons ». Blenkin 418 Macbeath v. Haldimand .... 107 MoBlair !;. Gibbes 390,448 Macbryde v. Weeks 549 M'Callan v. Mortimer 457 Maclean's Trusts 398 M'Clean v. Clydesdale Bank- ing Co 246 McClean v. Kennard 489 McConnell v. Hector 390 Maocord v. Osborne 695 M'CuUooh i>. Gregory 593 Maodonald v. Law TJnion In- surance Co 576 Macdonald ». Longbottom .. 270 MacDougall v. Gardiner .... 741 McEllistrim «. Ballymacelli- gott Co-op. Soc 429,439 Maogregor v. Dover and Deal Ry. Co 136 TABLE OF CASES. xlv PAGE McGregor i-. MoG-regor .... 89, 171, 373 MoGrather v. Pileher 251 McHenry v. Daviea 737, 738 Maok&y, Hx parte 361 Mackay v. Commercial Bank of New Bruuawick 619 Mackay v. Dick 296 Maokenzie ;'. Coulson 559 McKenzie v. Hesketh . . . .519, 524 McKewan v. Sanderson ..34i, 345 McMauus V. Bark 204 McManus v. Cooke 705 McNiell's Case 629 McPherson v. Watt 657 Maddison v. Alder8on . .669, 699, 700, 705, 709, 760 Maddon v. White 62, 72 "Madras," The 322 Magdalen Hospital (Governors of) V. Knotts 60 Magee v. Lavell 552 Stagnhild r. Mclntyre 544 Mahony v. East Holyford Mining Co 742 Mainprice v. Westley 20 Maitland v. Backhouse 687 Maitland v. Irving 651, 661 Malins v. Freeman (4 Bing. N. C. 395) 60 Malins v. Freeman (2 Keen, 25) ; ■. . 518 Mallalieu v. Hodgson 196, 344 Mallett V. Bateman 169 Manby v. Scott 735 Maach ester (Mayor of) v. Wil- liams 125 Manchester Brewery Co. v. Coombs 234 Mangles v. Dixon 239 Mann ». Stephens 258 Mansfield v. Mansfield, Jte Cuno 92 Marohant v. Morton 233 Margrett, £x parte, Re Solty- koff 79 Marlow i>. Pitfield 69 Marriot v. Hampton 647 Maraden v. Reid 711 Marsh and Earl Granville, Re. 582 Marsh v. Rainsford 192 Marsh v. Whitmore 352 Marshall v. Baltimore and Ohio Railroad Co 120, 393 Marshall v. Berridge 489 Marshall v. OoUett 486 Marshall «. Green 170 Marshall v. Marshall 374 PAOE Marshall v. Rutton 85 Martin's Claim 714 Martin i!. Gale 79 Martin v. L. C. & D. Ry. Co.. 218 Martin v. Pycroft 265, 653 Martiudale v. Falkner 207, 491 Martingell, Ex parte 206 Maskell v. Horner 646 Mason f. Harris 741 Mason v. Provident Clothing and Supply Co 439 Massey v. Davies 352 Mather v. Lord Maidstone . . . 205 Matheson I'. Ross 714 Matthews v. Baxter lOO' Matthews v. Wallwyn 253 Mauusell v. Hedges White . . 758, 760 Maw V. Topham 587 Mawson v. Fletcher 584 Maxim-Nordenfelt Co. v. Nor- denfelt 433, 434, 435 May V. O'Neill 437 May 1!. Piatt 519, 556, 563 Mayd v. Field 735, 736 Mayhew v. Crickett 349 Maynard v. Eaton 629 Mayor of Nashville v. Ray . . 140 Mead v. Young 485 Mearing v. Hellings 461 Measures Bros. v. Measures . . 425 Meguire v. Corwine 395 Melbourne Banking Corpora- tion V. Brougham 141 Melhado v. Porto Alegre Ry. Co 229 Memphis (City of) v. Brown . . 462 Menier v. Hooper's Telegraph Works 741 Mercantile Bank of London v. Evans 233 Merchant Banking Co. of London & Phoenix Bessemer Steel Co 243, 247 Merchants of the Staple v. Bank of England 141 Mercier v. Campbell 170 Mersey Steel & Iron Co. v. Naylor 286, 288, 289 Metcalfe's Trusts 686 Metropolitan Coal Consumers' Association, Re 217, 697 Metropolitan Water Board ». Dick, Kerr & Co 331 Meyrick's Settlement 377 MeyerhofE v. Frohlich 695 Middleton ii. Brown 679 Midgley v. Midgley 693 xlvi TABLE OF CASES. PAQE Midland G. "W. Ey. Co. of Ireland v. Johnson 489 Midland Ry. Co. «. Pye 90 Miles 1/. N. Z. Alford Estate Co 206 Mill V. Hawker 128 Millar v. Craig 646 Miller & Aldworth v. Sharp . . 705 Miller's Case 219 Miller v. Cook 675 Miller, Gibb & Co. u. Smith & Tyrer 105, 106 Mills V. Dunham 435, 438 Mills V. Fowkes 693 Mills «;. Fox 761 Mills V. Scott 224 MiUward v. Littlewood . . U5, 342, 355, 356 Milner, Jlx parte 344 Miltenber(»er v. Cooke 448 Mineral Water Bottle Co. v. Booth 429 Mirams, Se 398 Mitohel «;. Reynolds 427, 430, 431 Mitchell's Claim 695 Mitchell V. Homfray 688 Mitchell V. Lancashire and Torkshire Ry. Co 486 Mitchell V. Lapage 509 Mitchell-Henry v. Norwich Union Ins. Society 37 Mody V. Gregson 572 Mogul S.S. Co. V. McGregor, Gow & Co 343, 428 Mohori Bibee v. Bharmodas Ghose 99 Mollett V. Robinson 351 Molony V. Keman . .658, 662, 686 Molton V. Camroux 98, 99, 100 Molyneux v. Natal Land, &c. Co 99 Mondel v. Steel 573 Monkman v. Shepherdson .... 203 Monopolies, Case of 428 Montague v. Forward 110 MonteSore d. Monday Co. . . . 395, 451 " Moorcock," The 302 Moore & De La Torre's Case.. 596, 625 Moore v. Johnson 80 Moore v. Moore 210 Moorhouse v. Colvin 50 Moran v. Pitt 175 Morgan v. Griffith . .170, 269, 764 Morgan v. Malleson 210 Morgan v. Ravey 12 PAOE Morgan v. Rowlands 696 Morison v. Thompson 352 Morley v. Loughnan 664 Morphett v. J-jues 706 Murrell v. Cowan 736 Morrell v. Morrell . . .- 755 Morrell ». Studd & Millington 173 Morris v. Baron 266, 699, 709 Morris v. Hunt 721 Morris v. Saxelby . ..424, 425, 439 Morrison v. Universal Marine Insurance Co 574, 576, 631, 642, 713 Morse v. Royal 687, 688 Mortara v. Hall 76 Mortimer «. Bell 606 Mortimer v. fehortall 557 Morton v. Lamb 282 Mortlock V. BuUer 583 Morton v. Bum 202 Moss V. Moss , 598, 606 Mostyn v. Mostyn 720, 721 Mostyn v. West Mostvn Coal and Iron Co 639, 594 Mouflet V. Cole 440 Moulis V. Owen < 470 Moult V. Halliday 272 Mountstephen «>. Lakeman .. 168 Moxon V. Payne 662, 688 Moyo« V. Newington 636 Mozley v. Tinkler 36 MuUer v. Traflord 252 Mullinerv. Midland Ry. Co... 134 Mumford v. Gething 437 Municipal Building Society v. Kent 404 Murphy v. Boese 175 Murray v. Barlee 734 Murray v. E. India Co 138 Murray v. Flavell 228 Murray v. Parker 556 Murray v. Pinkett 238 Myers v. Sari 270, 271 Myers «. Watson 761 Naden, Hx parte 372 Nantes v. Corrock 734 Naah v. Hodgson 693 Nash ('. Inman 59, 76 Nashville (Mayor of) v. Ray. . 140 National Phonograph Co. v. Edison Bell Co 217 National Provincial Bank of England, Ex parte 558 National Provincial Bank of England v. Jackson 605 TABLE OP CASES. xl VII PAGE Neale v. Gordon Lennox .... 522 Neale v. Turton 139 Neill i\ Duke of Devoushii'e. . 276 Neilson, Ex parte 369 Nelson v. Stocker 83 NeUhorpe i). Holgate 583 Nesbitt ■)'. Berridg-e 675 Nevanas v. "Walker 439 -Nevill I. Suelling 677, 678, 679, 680 Neville v. Dominion of Canada News Co 417 Newbig-ging v. Adam 603, 630 New Brunswick, &c. Co. v, Conybeare 614, 621 New Brunswick, &c. Co. v. Mugiferidge 696 New Sombrero Phosphate Co. t. Erlanger 351,596 New York Life Ins. Co. v. Statham 388 New Zealand Banking Corpo- ration, ^.i; p«}-<« 242 New Zealand Land Co. ■.•. "Watson 105 Newburgh v. Newburgh 766 Newcomb v. De Roos 732 Newell V. Radford 173 -Newry and Enniskillen Ry. Co. V. Coombe 64, 70 Nichol V. G-odts 266 NichoUs V. Evans 366 Nichols V. Marsland 319 Nichols V. Raynbred 194 Nicholson V. JBradfield Union.. 161 ISTickalls v. Merry 273 NickoU V. Ashton 325 Nicol *'. Nicol 376 Niell V. Morley 99 -Nisbet and Potts, Ee 254, 257, 259, 260 Noakes & Co. v. Rice 560 -Noble V. "Ward 266, 709, 714 Nordenfelt v. Maxim-Norden- felt, &o. Co.. .424, 433, 438, 440 Norringtou v. Wright 280, 289, 291 North V. Loombes 174 North V. Percival 44 North British Insurance Co. V. Lloyd 578, 579 North -"Western Salt . Co. v. Electrolytic Alkali Co 451 Northampton (Marquess of) i). Pollock 560 ^Northumberland Avenue Hotel Co., Re 116 Norton v. Relly 663 PAGE Norwich (Mayor of) v. Norfolk Ry. Co 136, 340, 474 Norwood V. Read 216 Nottidge V. Prince 663 Nottingham Brick Co. v. Butler 268, 259, 591 Nugent v. Smith 315 Nunn V. Fabian 705 Nutt V. Easton 687 Nuttall V. Bracewell 267 Oakeley v. PasheUer 348, 349 Oakes v. Turqaand. .477, 821, 625, 636, 641 Oakley v. Port of Portsmouth and Ryde Steam Packet Co. 315 O'Connor v. Ralston 340, 367 Odessa Tramways Co. v. Men- del ■ 443 Offord V. Davies 30, 190 Ogilvie ». Jeaffreson 504 Ogle, Ex parte 481 Oglesby V. Yglesias 107 Oldershaw v. King 205 Oliver, Ex parte 344 Oliver v. Bank of England ... 114 Oliver v. Hunting 175 OUey V. Pisher 657 Omerod v. Hardman 266 Onward Bailding Society v. Smithsou 264, 505 Orient Insurance Co. v. Daggs 120 Oriental Bank Corporation v. Fleming 604, 505 Oriental Financial Corporation V. Overend, Gurney & Co. . . 348 Ormes v. Beadel 627, 665 O'Rorke v. Bolingbroke .... 676, 676, 682 Osborn v. Nicholson 331 Osborne v. Amalgamated Soc. of Ry. Servants, [1910] A. C. 87 131 Osborne v. Amalgamated Soo. of Ry. Servants, [1911] I Ch. 540 429 Osborne v. Bradley 259 Osboi-ne v. Rogers 16 Osborne v. Williams .... 397, 462 Osoanyan v. Arms Co 465 O'Rhea, lie 445 O'SiiUivan v. Thomas 459 Oswald V. Mayor of Berwick- on-Tweed 348 Overton v. Banister 82 xlviii TABLE OF CASES. PAGE Owen D. Davies 98 Owen V. Homan 604 Owens ». Dickenson 734 Oxford (Mayor of) v. Crow . . 162 Pacaya, &c. Co., Re 596 Page V. Cox 228 Paget V. Marshall 619 Paioe V. Walker 105, 106, 107 Paine v. Strand Union 161 Pakenham's Case 254 Palmer v. Johnson 586, 693 Palyart v. Leekie 460 Panama and S. Pacific Tele- graph Co. ( . India Rubber Co 353 Panmnre, Ex parte 114 Paquin v. Beauclerk 87, 93 Paradine v. Jane 305 Parfitt V. Lawless 651 Paris Skating Kink Co., £e . . 412 Parker v. Butcher 677 Parker v. G. W. Ey. Co 647 Parker v. MoKenna 352, 643 Parker «.-. S. E. Ry. Co 53 Parkes v. White 734 Parkin v. Thorold . . . 546, 517, 549 Parry v. Liverpool Malt Co. . . 403 Partington i). Att.-G-en 86 Partridge v. Strange 414 Patman v. Harland 255 Patrick «). Bowman 33 Patrick v. Miller 647 Pattle V. Hornibrook 267 Pauling «. L. & N. W. Ry. Co. 160 Pawle's Case 629 Pawley v. Pawley 95 Payne's Case 607 Payne v. Cave 16 Peacock v. Evans 666, 672 Peacock D. Monk 733 Peacock v. Penson 763 Pearce v. Brooks 445, 446 Pearce «. GrHrdner 175 Pearce v. Watts 48 Pearks 4>. Ward 127 Pearl Life Assurance Co. o. Johnson 46 Pears v. Laing 690 Pease v. Gloahec 635 Pechell V. Watson 406 Pecke f. Redman 194 Peek V. Gurney 602, 605, 623 Peeters v. Opie 546 Peiroe v. Corf 174 PAGE-. Pellecatt v. Angell 391 Pelton Bros. v. Harrison 94 Pence v. Langdon 640- Pender v. Lushington 741 Pennington (Doe d.) v. Taniere 164 Percival v. Dunn 234 Perham v. Kempster 484 Perls V. Saalfield 435- Perrett's Case 521 Perry v. Barnett 458 Perry v. National Provincial Bank of England 219- Perry v. Suffield 47 Persse v. Persse 416- Peruvian Rys. Co., iJe 139 Peter V. Compton 171 Peters v. Fleming 74 Pharmaceutical Soc. r. London & Provincial Supply Assoc. 126 Phelps «. Lyle 230- Phillips' Trusts 238 Phillips «. BistoUi 617,541 Phillips V. Brooks 509, 636- PhiDips V. Caldoleugh . . .529, 630, 582, 584 Phillips V. Clagett 545 - Phillips V. Foxall 349 - Phillips V. Homfray 591 Phillips V. Hull Alhambra Palace Co 214 Phillips V. Mailings 652 Phillips V. Phillips 483, 484- Phillips V. Probyn 371 Philpott ». Jones 723 Phipps V. Lovegrove .... 237, 239 • Phosphate of Lime Co. v. Green 746 ■ Picard v. Bine 735, 736 Pickard v. Sears 568 ■ Picker v. London and County Banking Co 248 Pickering's Claim 106 Pickering c. Ilfracombe Ry. Co 239, 443 Pickering i;. Stephenson .... 739- Pideook v. Bishop 679 Pieroy v. Young 403 Piggott V. Stratton 706, 761 Pigot's Case 442, 443 Pigott V. Thompson 225- Pike V. Fitzffibbon 737 Pike V. Ongley 107 Pilcher v. Rawlings 483 Pilkington v. Scott 441 Pillans V. Van Mierop 190 Pinchon's Case 160, 216 Piukett V. Wright 238 Piunel's Case 202, 203- TABLE OP CASES. XllX PAGE Pisani v. A.-G.for Gibraltar.. 667 Pittam V. Foster 86 Plant V. Bovirne 173 Plating Co. V. Farquharson . . 416, 417 Piatt V. Bromage 496 Playford v United Kingdom Electric Telegraph Co 226 Pledge*'. BussT 350, 678, 579 Plews V. Baker 402 Polhill V. Walter 605 Police Jury (.. Britton .... 140, 141 Popham V. Brooke 668 Poplett V. Stockdale 342 Pordage v. Cole 281 Port of London Co.'s Case . . . 743 Porter's Case 453 Porter v. Freudenberg 386 Potter V. Sanders 730 Potts v. Bell 386 Poussard v. Spiers and Pond .. 318 Powell V. Elliot 584 Powell V. Hemsley 260 Powell V. Powell 655, 656 Powell V. Smith 489 Powell V. I'homas 707 Power V. Banks 123 Pratt V. Barker 662 Press «. Coke 667 Prentice v . London 404 Prested Mines Co. v. James . . 172 Preston v. Dania 335, 551 Preston v. Luck 489 Price V. Berringtou 100 Price V. Dyer 266 Price V. Easton 226, 228 Price V. Hewett 80 Price f. Ley 554 Price V. Macaulay 613 Pride v. Bubb 733, 73B Prideaux v. Lonsdale . . . .354, 654 Priestley v. Fernie Ill Prince v. Haworth 401 Prince of Wales Assoe. Co. v. Harding 744 Printing and Numerical Regis- tering Co. V. Sampson. .384, 437 Pritohard v. Merchants' Life Insurance Society 533 Produce Brokers' Co. v. Olym- pia, &c. Co 272 Prole V. Soady 759 Prosser v. Edmonds 405, 408, 411, 412 Proudfoot «;. Montefiore 575 Prugnell f . Gosse 431 Pryse v. Pryse 414 Puckett and Smith's Contract. 582 P. — C. PAGE Prdbrook v. Lawes 703 Pulsford V. Richards 625 Purcell r. Macnamara 665 Pybus V. Gibb 348 Pyke, £.1- parte 366 Pym ». Campbell 267 Quarrier r. Colston 469, 470 Queen-Empress ». Marottam Das Morira.m 365 Quinoey v. Sharpe 695 Quinu ('. Leathenk 343 Radenhurst v. Bates 229 Raffles p. Wichelhaus 517 Railton v. Matthews 578, 580 Rrtiabow v. Hawkins 20 Rajah Mokham Singh «>. Rajah Rup Singh 679 Ralli Bros. v. Compania Naviera 313, 391, 472 Ram Coomar Coondoo u. Chun- der Canto Mookerjee 416 Ramloll Thackoorsej^dass ■t-\ SoojumnuU Dhoudmull. ... 381 Ramsden v. Brearley 90 Ramsden ik Dyson 707 Ramsgate Hotel Co. v. Gold- smid 31 Ramsgate Hotel Co. v. Monte- fiore 31 Randall v. Morgan 700 Randegger v. Holmes 402 Randell, Saunders & Co. v. Thompson 403 Randell v. Trimen 115 Rankin v. Potter 318 Rann v. Hughes 191 Raphael v. Bank of England.. 246 Rashdall v. For.l 609 Rawley v. Rawley 66 Rawlings i>. General Trading Co 430 Rawlins v. Wickham 602, 604, 626 Raymond v. Minton 296 Rayner D. Grote 113,118 Read v. Anderson 458 Read v. Legard 98 Keade v. Lamb 699, 700 Redfern v. Bryning 275 Redgrave » Hurd ..603,613,614 Reed v. Deere 714 Rees V. Be Bernardy 409, 683 d TABLE OF CASES. PAGE Reese River Silver Mining Co. V. Smith 596, 604, 628 Reeve v. Jennings 171 R. V. Ashwell 607 — V. Aspinall 343 — V. Cumberland (Justices of) 162, 163 — «. Demers 190 — V. Doutre 721 — V. G. N. of Eng. Ry. Co. . . 125, 126 - f. Hammond (J. G.) & Co.. 125 — V. Holmes 732 — v. Kupfer .» 387 — 21. Lord 61 — 0. McDonald 68 — V. Middleton 507 — V. Porter 400 — V. Prince 480 — V. Rowlands 343 — V. Stamford (Mayor of) . . 162 — v. Warburton 343 Reid V. Biokerstaff 259 Reid V. Reid 92 Reidpath's Case 730 Renals v. Gowlishaw . . . .255, 259 Reuss «!. Pii-.ksley 173 Reuter v. Electric Telegraph Go 160 Reuter v. Sala 288, 290, 548 Reversion, &c. Co. v. Maison Cosway 69, 746 Reynard v. Arnold 305 ReyneU v. Sprye 406, 407, 451, 462, 602, 603, 613, 616 Rhodes, Se 98 Rhodes v. Bate 655, 662, 689 Rhodes v. Swithenbank 73 Rice V. Gordon 580, 666 Richards ». Delbridge 210 Richards t>. Home Assurance Association 37 Riohar^leon v. Richardson. . . . 210 Richardson v. Rowntree .... 53, 54 Richardson v. "Williamson. ... 114 Riche V. Anhbury Ry. Carriage Go. ..130, 135, 137,543,744,746 Ricketts v. Enfield Church- wardens 253 Eidifnay v. Sneyd 328 Ridgway v. Wharton 47 Ritchie v Smith 362 Rivaz ». Gerussi 675 River Wenr Commissioners v. Adamson 357 Roberts, Re 494 Roberts v. Berry 547 Roberts v. Brett 282 PAGE Roberts v. Bury Commis- sioners 295 Roberts v. Gray 78 Roberts v. Security Co 46 Roberts v. Smith 49, 50 Robinson v. Bland . .465, 468, 470 Robinson v. Davison. .214, 317, 510 Robinson t;. Mollett 351 Robinson v. Nesbltt 239 Robinson v. Ommanney .... 423 Robinson v. Page 266 Robinson v. Pickering. , , .734, 736 Robinson & Co., Ltd. v. Heuer 438 Robiuson, King & Co. v. Lynes 93 Robson V. Dodds 740 Robson V, Drummond 214, 218, 509 Rochefoucauld v. Boustead . . 640 Roddam v. Morley 692, 696 Roe V. R. A. Naylor 54 Roe V. Tranmarr 644 Roehm v. Horst 293 Rogers v. Hadley 269 Rogers v. Hosegood. .254, 255, 260 Rogers ». Ingham 495, 497 Rogers v. Maddocka 438 Rogers v. Parry 431 Rolfe V. Flower 219 Romford Canal Co 742 Rooke V. Dawson 20 Rooke V. Lord Kensington . . 643, 559 Roper V. Doucaster 735, 736 Roper ». Holland 725 Rcscorla v. Thomas 192 Rose V. Gould 693 Rosewame v. Billing 365 Rosher v. Williams 196, 668 Rossiter «j. Miller 46,173 Rossiter v. Walsh 662 Rotherham Alum and Chemi- cal Co., Re 228 Rouse V. Bradford Banking Co. 349 Rousillon V. Rousillon 437 Rowley v. Rowley 89 Rownson, Re 693, 703 Royal British Bank v. Tur- quand 159,741,742,744 Royal Exchange Assurance Corporation v. Sjorforsak- rings Aktiebolaget Vega . . 443 Ruben v. Great Pingall Con- solidated 141 Rufkmaboye v. LuUoobhoy . . 696 Rudd V. Lascelles 585 Ruds-e V. Bowman 532, 538 Ruffles V. Alston 376 RumbaU v. Metropolitan Bank 247 TABLE OF CASES. _ , PAGE Kussell V. Amalgamated Soc. of Carpenters and Joiners . . 429 Russell V. Da Bandeira 29B Russell V. Russell 403 Russell V. Shoolbred ' .[ 350 Russell V. Thornton 36 Russell V. Wakefield Water- works Co 74 1 Rutherford v. Acton-Adams .. 583 Ryall V. Eowles 398 Ryan v. Oceanic S. N. Co. . .'53, 54 Ryder ti. Wombwell .... 74, 75, 77 Sackvllle-West ■n. Viscount Holmesdale 661 Said 1). Butt 510 St. Alban v. Harding ...... 674 St. George v. Wake 354 St. John 41. St. John 373 St. Leonard's, Shoreditch (Guardians of) !). Franklin. . 127 Salter v. Bradshaw 674 Salton ('. New Beeston Cycle Co 103, 115 Salvesen & Co. i<. Rederi Ak- tiebolaget Nordstjernan .. 114 Samuel v. Newbold 6S1 Sanders v. St. Neot's Union. . 161 Sanderson r. Aston 347, 349 Sander.son r. Graves .704, 714 San Juan (City of) v. St. John's Gas Co 203 Santos V. lUidero 465, 467, 468 "Satanita," The 7,27 Savage v. Tyers 275 Savery v. King 656, 660, 687 Saviu V. Hoylake Ry. Co 367 Saxby V. Fulton 470 Savers r. CoUyer 261 Scaltock V. Hartson 253 Scarf V. Jardine 642 Scarpellini v. Atcheson 692 Sohaffenius v. Goldberg 101 Schmaltz v. Avery 117, 118 Soholefield v. Templer . . . 638, 640 Scholey v. Central Ry. Co. of Venezuela 626 Schott, In the Goods of 755 Scotson V. Pegg 198, 199, 200 Scott V. Avery 404 Scott «.'. Corp of Liverpool .... 404 Scott V, Coulson 634 Scott «). Ebury (Lord) 116 Scott V. Gillmore 723 VAOE Scott V. Littledale 519 Soott r. Pilkington 25 Scott V. Seabright 598, 644 Scottish Petroleum Co., lie 596, 629, 762 Scriven r. Hindley 523 Seager v. Aston 693 Seaton v. Burnand 674, 678, 579, 581 Seaton v. Grant 740 Seaton v. Heath 574, 578 Seaton v. Seaton 79 Seddon v. North Eastern Salt Co 593 Seear v. Lawson 408, 412 Seligmann r. he Boutiilier . . . 402 Selsey (Lord) v. Rhoades 662 Seton V. Slade 547 Sewell V. Burdiek 256 Sewell V. Royal Exchanire As- surance Co 453 Seymour p. Bridge 458 Shadwell v. Shadwell 198, 199 Shand v. Du Buisson 738 Shardlow v. Cotterell 173 Sharington v. Strotton 183 Sharman v. Brandt 118, .361 Sharp 0. Leach 661 Sharp V. Taylor 392, 453, 458 Sharpe r. Foy 710 Sharpley j. Louth and East Coast Ry. Co 626 Shattock V. Shattock 734, 738 Shaw's Claim 367 Shaw ('. Foster 223 Shaw r. Jeffery 346 Sha-w «. Woodcock 647, 702 Sheffield, &c. Building Society, lie 120 SheffieldNiokelCo. J). Unwin.. 633 Sheffield (Earl of) v. London Joint Stock Bank 248 Shepherd v. Croft 589 Sheppard r. Oxenford 468 Shillito V. Hobson 209 Shoolbred v. Roberts 469 Shrewsburv (Earl of) v. N. Stafford.shire Ry. Co 396 Shuey V. United States 24, 26 Shulter's Ca=e 500 Sidenham v. Worlington .... 192 Silber Light Co. v. Silber .... 741 Sillem V. Thornton 577 Silliman v. United States .... 645 Simmonds, Ex parte 497 Simons v. G. W. Ry. Co 503 Simons v. Patchett 114 d2 Hi TABLE OF CASES. PAGE Simpson «. Crippin 287, 288 Simpson v Denisou 739 Simpson v. Egginton 511 Simpson v. Lamb. . . .407, 410, 411 Simpson v. Lord Howden. . . . 370, 396 Sims V. Bond 109 Sismey v. Ely 371 Skeate v. Beale 645 Skeet V. Lindsay 695 Skidmore v. Bradford 760 Skilbeck v. Hilton 646, 633 Skillett V. Fletcher 348 Skottowe V. Williams 640 Skyring v. G-reenwood 496 Slade's Case 152 Slator V. Brady 61 Slator V. Trimble 65 Sloman w. Walter 551 Smart v. West Ham Union ... 162 Smethurst v. Mitchell Ill Smith's Case (L. E. 2 Ch. 604) 596, 604, 618, 621 Smith's Case (L. E. 4 Ch. 611) 711 Smith V. Bromley 461 Smith V. Brown 611 Smith V. Cartwright 162 Smith V. Chadwick 612, 616 Smith v. Clarke 606 Smith V. Colbouriie 260 Smith V. Cuff 461 Smith V. Eggington 252 Smith V. Gold Coast and Ashanti Explorers 171 Smith V. Hughes . . .263, 499, 527, 537, 670, 615 Smith V. Iliffe 561 Smith V. Kay . .612, 616, 648, 650, 661, 665 Smith V. King 68 Smith V. Land and House Pro- perty Corporation 589 Smith V. Lindo 363 Smith V. Lucas 64, 274 Smith V. Mawhood 363 Smith V. Neale 171, 173 Smith V. Webster 45 Smith V. Wheatoroft 607 Smith V. White 446 Smith V. Wilson 269 Smout V. Ilbery 115 Smurthwaite v. Wilkins 256 Smythe v. Griffin 370 Society of Practical Know- ledge V. Abbott 128 Solicitor. In ie 407 i , PAGE SoltykoflE, ne, Ex parte Mar- grett 79 Somersett's Case 441,467 Soper V. Arnold 593 Sottomayor v. De Barros .... 356 Souch V. Strawbridge 704 South African Breweries v. King 474 South Hetton Coal Co. v. Has- well Coal Co 45 South Hetton Coal Co. v. N.E. News Association 1 26 South of Ireland Colliery Co. ». Waddle 158 South Yorkshire, &c. Co. v. G. N. Ey. Co 739 Southall V. Eigg 496, 676 Southampton (Lord) v. Brown 106, 225 Southern Deyelopment Co. v. Silva 608 Southey «. Sherwood 378 Southwell t>. Bowditoh 107 Spackman v. Evans 745 Sparenburgh v. Bannatyne . . 390 Spears v. Hartly 693 Spedding v. Nevell 114 Spence J!. Chodwick 313 Spencer's Case 251, 252 Spencer v. Harding 16, 20 Spicer v. Martin 255, 259 Spiller V. Paris Skating Eink Co 116 Splidt o. Bowles 251 Sprange v. Lee 96 Sprott V. United States . .390, 447 Sprye v. Porter. .405, 407, 409, 410 Spurr V. Cass 118, 229 Squire 4). Whitton 215,579 Stafford (Mayor of) v. Till 164 Stahlschmidt v. Lett 69S Stanley i>. Dowdeswell 45 Stanley v. Jones 407, 408 Stanton v. Tattersall 529, 588 Starkey v. Bank of England. . 114 Stedman v. Hart 97 Steed V. Galley , 661 Steedman v. Drinkle 548 Steel Wing Co., Re 233 Steele v. Harmer 139 Steele v. Williams 647 Stephens v. Dudbridge Iron- works Co 72 Stephens v. Venables 240 Stephenson (E. & Co.), Se.... 252 Sterry v. Clifton 396 Stevens v. Benning 214, 513 Stevens v. Biller 109 TABLE OF CASES. liii PAGE Stevens v. Q-ourley 362 Stevenson v. McLean ... 29, 32, 35 Stevenson v. Mewnham . .634, 635 Stewart's Case (Agriculturists' Cattle Ins. Co.) 746 Stewart v. AUiston 620 Stewart v. Casey 192 Stewart v. Eddowes 174, 540 Stewart v. Kennedy 490 Stewart v. Stewart 494, 534 Stewart i'. Wyoming Ranche Co 602 Stickney «'. Keeble 548 Stikeman v. Dawson 80, 82 Stilwell V. Wilkins 666 Stirling v. Silbum & Pyman. . 681 Stockdale v. Onwhyn 378 Stocks V. Dobson 237 Stocks V. Wilson 68, 83 Stoddart r. Union Trust 240 Stogdon V. Lee 93, 735 Stone V. City and County Bank 636 Stone V. Godfiey 494 Stonor's Trusts 92 Storey v. Waddle 539, 563, 643 Strange v. Brennan 407, 409 Stray v. Russell 309 Street r. Blay 516 Street v. Rigby 402 Stribley v. Imperial Marine Insurance Co 575 Strickland r. Turner 532 Stuart r. Diploek 440 Stubbs V. Holywell Ry. Co. . . 320 Studds V. Watson 1 74 Stump V. Gaby 687 Sturge jj. Starr 618 Sturge V. Sturge 666 Sturlyn ». Albany 187 Summers v. GrifiSths 666 Sumpter v. Hedges 285 Surcome v. Pinniger 707 Surman v. Wharton 96 Sussex Peerage Case 356, 357, 360 Sutton's Hospital Case . . 121, 130 Sutton V. Grey 169 Swaisland v. Dearsley '686 Swan, Hx parte 249 Swan ». North British Aus- tralasian Co 245, 502 Swansea Friendly Society, Sx parte 126 Sweet f. Lee 702 Sweet V. Sweet 374, 375 Swift V. Jewsbury 620 Swift V. Kelly 606, 607 Swift 4). Swift 419 PAGE Swift V. Tyson 245 Swift 4). Winterbotham 622 Swindon Waterworks Co. ei. Wilts and Berks Canal Navigation Co 134 Swire ('. Francis 620 Sydney & Co. v. Bii-d 597 Sykes v. Chadwick 188 Symes v. Hughes 460 Synge v. Synge 294 Taddy & Co. r. Sterious & Co. 251 Taite ?>. Gosling 264 Talbot V. Staniforth 660 Tampliu v. James . .518, 519, 520, 521, 524, 625, 669 Tamplin SS. Co. v. Anglo- Mexican Petroleum Co 325, 332, 333, 334 Tancred v. Delagoa Bay and East Africa Railway Co. . . 233 Tappenden v. Randall 460 Tasker J,'. Small 218 Tatam v. Reeve 366, 458 Tate r. Williamson. .650, 667, 662 Tayloe v. Merchants' Fire In- surance Co 731 Taylor, JSx parte 65 Taylor v. Ashton 603 Taylor v. Bowers 460 Taylor v. Brewer 49 Taylor?). Caldwell .. 3 1 3, 321, 324, 326, 335 Taylor v. Chester 456 Taylor v. Chichester and Mid- hurst Ky. Co 135, 474 Taylor v. Crowland Gas Co. . . 362 Taylor v. G. E. Ry. Co 699 Taylor v. Johnston 60, 661 Taylor v. Jones 732 Taylor v. Manners 189 Taylor v. Meads 733 Taylor v. Parry 218 Taylor v. Portington 49 Taylor i). Pugh 355 Taylor v. St. Helens (Corpora- tion of) 276 Taylor ». Smith 172 Tenant v. Elliott 467 Tennent i>. City of Glasgow Bank 638 Tennent v. Tennents 666 Terry and White's Contract, Re 584 " Teutonia," The 329 li^ TABLE OF CASES. PAGE Texas v. White 390 Thames Haven, &c. Co. v. Hall 162 Thiedman v. G-oldsohmidt . . . . 246 Thiisr. Byers 311 Thomas, Re, JaquesB v. Thomas 409 Thomas v. Brown 702 Thomas v. Davis 544 Thomas v. Thomas 178, 185 Thompson v. Adams 710 Thompson v. Hictman 556 Thompson v. Hudson 551 Thompson v. Powles .... 3i)0 Thompson v. Universal Sal- vage Co 139 Thompson v. Whitmore . . 559, 562 Thomson «. Davenport 104 Thomson t>. Eastwood 643 Thomson v. Weems 576 Thorn v. Mayor of London . . 312 Thornborow «;. Whitacre .... 309 Thornton v. Kempster 522 Thoroughgood's Case 500 Thursby v. Plant 262 Thurstan v. Nottingham Per- manent Benefit Building Soo 69, 71 Thwaites v. Coulthwaite .... 453, 458 Tiohener, Be 234 Tiedmann, Re 104 TiUey v. Thomas 547 Toker v. Toker 653 TolhuTst V. AssooiatedPorfcland Cement Manufacturers 213, 233, 509, 512 Tctoison ». Judge 688 Topham v. Morecraf t 725 Torkington v. Magee 234 Torrance v. Bolton. .529, 530, 584, 588, 589 Torre v. Torre 561 Tottenham v. Emmet 672 Tottenham v. Green. .679, 680, 687 TotterdeU v. Fareham Brick Co 742 Touche V. Metropolitan Ry. Warehousing Co 228 Townsend's Case 731 Towusend v. Crowdy 492 Townsheiid v. Stangroom..553, 558 Traill v. Baring 617,762 Trigge v. Lavaliee 207 Trimble r. Hill 365, 459 Trist ». Child 395 Trueman v. Loder 103 Trumper v. Trumper 352 PAGE Trustees v. Thacker 2til Tucker v. Linger 273 Tu-ker v. Vowles 259 Tulk V. Moxhay 258, 259 TuUett V. Armstrong 736 Turner v. Collins . . . .662, 651, 687 Turner v. Goldsmith 323 Turner v. Green 570 Turner f. Harvey 537 Turner v. Reynall 718 Turnock v. Sartoris 403 Tweddell v. Tweddell 660 Tweddle v. Atkinson 226 Twistleton ». Griffiths .... 672 Two SicUies (King of) r. Wil- ' cox 127 Tyler v. Yates 675, 677 Udell V. Atherton 601 Underbill «. Horwood 666 Underwood v. Barker 4 38 Underwood v. Underwood . . 204 Ungley v. Ungley 625, 706 Unity Bank, Ex parte 84 Universal Life Assurance Co., Ex parte 242 Universal Stock Exchange v. Straohan 366,469,460 Upperton v. Nicholson 549 Upton V. Tribilooek 493, 606 Urquhart v. Macpherson .... 633 Utermehle v. Norment 491 Valentine v. Canali 68 VaUance v. Blagden 371 Van Praagh v. Everidge .... 518 Vansittart v. Vansittart .... 89, 374, 419 Varley v. Whipp 573 Vaughan v. Vanderstegen . .91, 733 Veitch V. Russell 717, 719 Vernon «). Keys 610, 611 Vickery v. Ritchie 13 Viditz V. O'Hagan 64 Vigors V. Pike 633 Voisey, Ex parte 361 Vorley «>. Cooke 504 W. «). B 463 Waoe V. Allen ' 268 Waddell v. Blockey 632 Wain v. Warlters 173 Waite V. Morland 90 TABLE OF CASES. PAGE Wake V. Harrop 267 Wakefield «. Newbon 646 "WaUy V. Gray 485 Walker, Se 97 Walker v. Armstrong 555 Walker v. Perkins 370 Walker v. Smith 661 Walkers, Winser & Hamm and Shaw, Son & Co 273 Wall's Case 731 Wallace's Case 21 Wallace v. Gibson 169 Wallace v. Wallace 660 Wallis r. Day 434,441 Wallis V. Pratt 304, 574 Wallis i\ Smith 277, 652 Walter v. Everard 78, 79 Ward v. Bnnk of New Zealand 350 Ward V. Duneombe 236, 238 Warden v. Jones 708, 710 Waring's Case 222 Warlow (.. Harrison 19, 20, 22 Wame v. Roiitledge 737 Warner v. Willington 52 Warrender r. Warrender .... 373 Warriuer v. Rogers 210 Warwick v. Bruce 60, 63 Warwick v. Richardson .... 343 Wasateh Mining Co. v. Cres- cent Mining Co 567 Wasdale, Se 237 Wason V. Ware'ng 496 Waterhouse r. Jamieson .... 637 Watford and Riokmansworth Ry. Co. o. L. & JSf. W. Ry. Co 404 Watkins v. Rymill 53 Watkins v. Nash 268 Watliug V. Lewis 117 Watson, £x parte 84 Watson V. AUcock 349 WatSDn V. Earl of Charlemont 616 Watson V. Marston 562, 6fi9 Watson V. Mid- Wales Ry. Co. 240 Watteaii v. Fenwick 108 Watts V. Porter 239 Waugh V. Morris 453, 473, 474 Way V. East 453 Way V. Hearn 581, 623 Wavmell v. Reed 392 Webb V. Heme Bay Commis- sioners 141,241,241 Webb V. Hewitt 349 Webbi!. Hno-hes 548 Webb V. Whiffin 250 Webster v. Bosunquet 552 Webster v. Cecil 524 Webster v. Cook 677 PAGE Webster v. De Tastet 420 Weeks v. Propert 114 Weidner v. Ploggett 108 Weir V. Barnett 620 Weir«. Bell 619, 620 Weldon V. Winslow 92 Wells v. Kingston-upon-HuU, 162, 170 Wells t.Malbou 89 Wells t>. Wells 721 Welman v. Welman 558 Wenlock (Baroness) v. River Dee Co 129, 130 Wennall v. Adney 191 West London Commercial Bank V. Kitson 117, 609 Western Bank of Scotland v. Addie 620, 622, 632 Western Suburban, &c. Co. r. Martin 404 Western Wagon and Property Co. V. West 234 Westlake v. Adams 186 Westmeath v. Salisbury . . 372, 376 Westmeath (Marquis of) v. Marchioness of Westmeath. . 373, 376, 377 Weston V. Metropolitan Asy- lum District 552 Wharton v. Mackenzie 75 Whatman ». Gibson 258 Wheatley «. Lane 231,232 Wheatley v. Slade 687 Wheeler, He 93 Wheeltonj;. Hardisty 676, 618 Whelan «!. Palmer 268 Whelpdale's Case 644 Whichcote v. Lawrence 351 Whincup «). Hughes 320 Whitcomb v. Whiting 695 White «i. Bluett 196 White V. Cuddon 585 White V. Garden 600, 634 White V. White 563 Whitechurch, Ltd. v. Cava- nagh 759 Whitehead v. Anderson 487 Whitehorn Bros. «. Davidson.. 634 Whiteman «. Sadler 681 Whitfley's Case 596,629 Whitel^y v. Delaney 638, 660 Whitelev v. Edwards 91 Whiting's Settlement 423 Whittaker, Ex parte 601 Whittaker v. Kershaw 92, 95 Wliittemore v. Whittemore . . 587 WMttington «. Seale-Hayne. . 630 Widgery v. Tepper 86 Ivi TABLE OP CASES. PACE Wigglesworth v. Dallison. . . . 272 Wilby V. Elgee 205, 207, 695 Wild V. Harris 115 Wilde V. Gibson 592 Wildes «). Dudlow 169 Wilding V. Sanderson . . . .490, 564 Wilkes V. Spooner 260 Wilkinson v. Clements 285 Wilkinson v. Gibson 89 Wilkinson v. Loudonsack .... 474 Willan V. Willan 543 Wille V. St. John 259 Willesford v. Watson 402, 403 Williams' Case 607, 616 Williams, Se 234 WOliams, Hx parte 361 Williams v. Bavley . .398, 648, 664 WilUamR v. Byrnes 25, 26, 173 Williams v. Carwardine .... 16, 22 Williams (Doe d.) v. Evans . . 414, 415 Williams v. Glenton 548 Williams v. Hathaway 117 Williams 1). Hedley 462 Williams v. Jordan 173 Williams v. Moor .' . 64 Williams v. Owen 550 Williams v. Protheroe 412 Williams v. Went worth .... 97 Williams, app., Wheeler, resp. 701 Williams v. WiUiams 660 Williamson v. Gihon 421 Willingale v. Maitland 225 Willison V. Patteson 389 Willmott D. Barber 707 Willson V. Love 652 Wilson V. Camley 356 Wilson V. Hart 254 Wilson V. Lloyd 219 Wilson V. Rankin 447 Wilson V. Ray 462 Wilson V. West Hartlepool Ry. Co 141 Wilson D. Wilson . . . 275, 373, 374, 376, 542 Windhill Local Board v. Vint. 399 Winn V. Bull 47 Wiseman v. Beake 672 Withers v. Reynolds.. 283, 286, 289 Witt V. Corcoran '. 403 Wolverhampton Banking Co., i:x parte 400 Wood V. Abrey 666, 667, 668 Wood V. Barker 344 Wood V. Downes 407, 410, 416 PAGE Wood »;. Fenwick 61,72 Wood V. Griffith 583 Wood V. Lewis 91 Wood V. Scarth 521, 553 Wood*. Tate 163 Woodall V. Clifton 252 Woodbridge v. Bellamy 440 Woolf V. Woolf 82 Woolfe V. Home 105 Worrall v. Jacob 373 Worthing Corporation v. Heather 385 Worthington v. Curtis 459 Wright's Case 596,618,629 Wright V. Carter 657 Wright V. Chard 738 Wright V. Leonard 85 Wright V. Monarch Invest- ment Building Society .... 403 Wright V. Proud . .' 661 Wright V. Snowe 82 Wright V. Tallis 378 Wright V. Vanderplank 640, 656, 687 Wrigley v. Swainson 354 Wulff «;. Jay 349 Wyatt r. Hertford Ill Wycombe Ry. Co. v. Don- nington Hospital 489 Wylson V. Dunn 174 Wynn v. Shropshire Union, &c. Co 473 Wythes ». Labouchere ...506, 678 XenoB V. Wiokham . .8, 54, 65, 711 Yarborough v. Bank of Eng- land 165 Teomans v. Williams 710 Young & Co. V. Mayor of Leamington 165 Yonge V. Toynbee 115 Yzquierdo v. Clydebank En- gineering Co 230 Zouch V. Parsons 61 ( Ivii ) REFERENCES AND ABBREVIATIONS. Benjamin on Sale. Sixth edition, 1920. Finch Sel. Ca. A Selection of Cases on the English Law of Contract by Gerard Brown Pinch. Second edition, 1896. Harvard Law Review. Cambridge, Ma£s., 1887 — , Cited by volume and page. 1. O. A. means the Indian Contract Act (IX. of 1872); ed. PoUock & MuUa, 4th ed., 1919, and in Dr. Whitley Stokes's Anglo-Indian Codes. L. Q. E. Law Quarterly Review. London, 1885 — . Cited by volume and page. Langdell. A Summary of the Law of Contracts, by 0. O. L. Second edition. Boston, Mass., 1880. I/aw Journal. Always cited by the number of the vol. in the New Serie^. Law Reports (1875 — 90). The Scotch Appeals to the House of Lords and appeals to the Judicial Committee of the Privy Council reported in the Appeal Cases series, if not expressly mentioned to be such in the context, are distinguished by the additions (So.) and (J. C.) respectively. Cases in the Court of Appeal are distinguished by the abbreviation of " Division " in the form " Div." • The current series of Law Reports, 1891 — , is cited thus: Im'pmrial Loan Oo. v. Stone [1892] 1 Q. B. 599, C. A. Lindley on Partnership, 8th ed., 1912; Lindley on Companies, 6th ed., 1902. R. E. The Revised Reports. Saunders' Reports, notes to, by the late Serjeant Williams (Wms. Saund.). Ed. 1871. Cited by the paging of that edition. Savigny, System des heutigen romischen Rechts (Savigny, or Sav. Syst.). Berlin, 1840—1849. Savigny, Das Obligationenrecht (Sav. Obi.). Berlin, 1851 — 3. Sm. L. C. Smith's Leading Cases. Twelfth edition, 1915. Prof. Williston's exhaustive treatise on the Law of Cbmtraots (New York, 1920, 4 vols.) could not be adequately examined in due time, and I have therefore not made any specific references to it. P. — c. e ( Hx ) YEAR BOOKS CITED. PAGE 22 Ass. 101, pi. 70 169, 170 50 Ass. 323, pi. 3 413 20 & 21 Ed. I., 320 65 21 & 22 Ed. I., 456 216 21 & 22 Ed. I., 458 149, 153 21 & 22 Ed. I., 600 147 30 Ed. I., 238 215 33 Ed. I., 355 753 17 & 18 Ed. III., 430—434 . . 87 12 Ed. III., 587 147 19 Ed. III., ed. Pike, 1906 .. 413 21 Ed. ni., 10, pi. 33 149 25 Ed. III., 83, pi. 9 153 30 Ed. III., 314 502 42 Ed. III., 3, pi. 14 '254 44 Ed. III., 21, pi. 23 153 45 Ed. III., 24, pi. 30 170 2 Hen. IV., 3 J, pi. 9 150 2 Hen. IV., 6, pi. 25 254 3 Hen. IV., 8, pi. 34 751 11 Hen. IV., 33, pi. 60 152 12 Hen, IV., 23, pi. 3 153 14 Hen. IV., 26a, pi. 33 .... 150 ' PAGT, 2 Hen. v., 5, pi. 26 42d 3 Hen. VI., 36, pi. 33 152 9 Hen. VI., 64, pi. 17 753 10 Hen. VI., 5, pi. 10 502 14 Hen. VI., 18, pi. 58 152 19 Hen. VI., 49, pi. 5 152 34 Hen. VI., 30, pi. 15 753 37 Hen. VI., 8, pi. 18 147, 170, 186 37 Hen. VI , 13, pi, 3 ... 751, 754 39 Hen. VI., 26, pi. 36 752 17 Ed. IV., 4, pi. 4 170 20 Ed. IV., 2, pi. 7 123 21 Ed. IV., 6, pi. 17 79 21 Ed. IV., 54, pi. 26 294 21 Ed. IV., 84, pi. 38 751 22 Ed. IV., 26 308, 336 2 Hen. VII., 8, pi. 25 762 15 Hen. VII., 2, pi. 3 754 15 Hen. VII., 10, pi. 17 .... 279 20 Hen. VII., 10, pi. 20 .... 183 2 Hen. VIII., 11, pi. 3 216 27 Hen. VIII,, 23, pi, 21 216 I Ix ) ADDENDUM. p. 54, note (/). Gibaud\. G. E. S. Co. is reported on appeal [1921} 2 K. B. 426. The only question pursued before the C. A. was whether the goods had been put in a, proper place of custody. PRINCIPLES OF CONTRACT. CHAPTER I. Agreement, Proposal, and Acceptance. The law of Contract may be described as the endeavour of public authority, a more or less imperfect one by the nature of the case, to establish a positive sanction for the expecta- tion of good faith (a) which has grown up in the mutual dealings of men of average right-mindedness. Accordingly the most popular description of a contract that can be given is also the most exact one, namely that it is a promise or set of promises which the law will enforce. The specific mark of contract is the creation of a right, not to a thing, but to another man's conduct in the future. He who has given the promise is bound to him who accepts it, not merely because he had or expressed a certain intention, but because he so expressed himself as to entitle the other party to rely on his acting in a certain way. This is apt to be obscured in common cases, but is easily seen to be true. Suppose that A. agrees to sell to B. a thing of which not he but C. is the true owner. C. gives the thing to B. Here, though B. has got the thing he wanted, and on better terms than he («) The modem tendency to look Consideration in Equity, Wigmore to "the realization of reasonable Celebration Essays, 1919, at p. 469 ; expectations" as the ground of just cp. Williston, Mutual Assent in the claims rather than an artificial Tormation of Contracts, ib. 525, equation of wills or intentions is with whom also I mainly agree, well declared by Prof. Roscoe Pound, P.— C. 1 2 AGREEMENT, PROPOSAL, AND ACCEPTANCE. expected, A. has not kept his promise; and, if the other requisites of a lawful contract were present as between him- self and B., he has broken his contract. The primary ques- tions, then, of the law of contract are first, what is a promise? and next, what promises are enforceable? The importance and difficulty of the first of these ques- tions depend on the fact that men can justly rely on one another's intentions, and courts of justice hold them bound to their fulfilment, only when they have been expressed in a manner that would convey to an indifferent person, reason- able and reasonably competent in the matter in hand, the sense in which the expression is relied on by the party claim- ing satisfaction. Judges and juries stand in the place of this supposed indifferent person, and have to be convinced that the dealings in the particular case contained or amounted to the promise alleged to have been made and relied upon. Our first business must therefore be to separate and analyse the elements which, generally speaking, must concur in the formation of a contract. A series of statements in the form of definitions, though necessarily imperfect, may help to clear the way. Agreement and Promise. 1. Every agreement and promise enforceable by law is a contract. 2. An agreement is an act in the law whereby two or more persons declare their consent as to any act or thing to be done or forborne by some or one of those persons for the use of the others or other of them (6). 3. Such declaration may take place by (a) the concurrence of the parties in a spoken or written form of words as expressing their common intention, or ; ' • I (i) This statement was adopted (1887) 36 Ch. D. 695, 698, 57 L. J. by Kekewioh J. Foster v. Wheeltr Oh. 149. CONSENT. 3 (b) an offer made by some or one of them, and accepted by the others or other of them. 4. The declaration of any party to an agreement, so far as relates to anything to be done or forborne on his part, is called a promise. The expression of a person's willingness to become, according to the terms expressed, a party to an agreement, is called an offer or proposal. An offer may become a promise by acceptance, but is not a promise unless and until it is accepted (c) . 5. An agreement which has no legal effect is said to be void. An agreement which ceases to have legal effect is said to become void or to be discharged. 6. An agreement is said to be a voidable contract if it is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others. We proceed to develop and explain these statements, so far as appears convenient at the outset of the work. 1. Definition of Agreement.— The first and most essential element of an agreement is the consent of the parties. But in order that their consent may make an agreement of which the law can take notice, other conditions must be fulfilled. The agreement must be, in our old English phrase, an act in the law: that is, it must on the face of the matter be capable of having legal effects. It must be concerned with ■duties and rights which can be dealt with by a court of justice. And it must be the intention of the parties that the matter in hand shall, if necessary, be so dealt with, or at least they must not have the contrary intention. An appointment between two friends to go out for a walk or to (c) This does not imply that every Bynonymous terms: "proposal" is •o£Eer is revocable until acceptance. often convenient as allowing " pro- Ho-w far that is so is a question not poser " to be used as a correlative of definition but of substantive term rather than the legitimate but law. " OfEer" and "proposal" are clumsy "offeror." 1(3) 4 AGEEEMENT, PROPOSAL, AND ACCEPTANCE. read a book together is not an agreement in the legal sense: for it is not meant to produce, nor does it produce, any new legal duty or right, or any change in existing ones (d). Again, there must not only be an act in the law, but an act which determines duties and rights of the parties. A consent or declaration of several persons is not an agreement if it affects only other people's rights, or even if it affects rights or duties of the persons whose consent is expressed without creating any obligation between them. The verdict of a jury or the judgment of a full Court is a concurrent declaration of several persons affecting legal rights; but it is not an agreement, since the rights affected are not those of the judges or jurymen. If a fund is held by the trustees of a will to be paid over to the testator's daughter on her marriage with their consent, and they give their consent to her marrying J. S., this declaration of consent affects the duties of the trustees themselves, for it is one of the elements determining their duty to pay over the fund. Still it is not an agreement, for it concerns no duty to be performed by any one of the trustees towards any other of them. There is a common duty to the beneficiary, but no mutual obli- (d) Nothing but the absence of a right of action ? Only because no intention seems to prevent a contract legal bond was intended by the from arising in many oases of this parties. It might possibly be said kind. A. asksB. to dinner. Here is that these are really cases of con- proposal of something to be done by tract, and that only social usage and B. at A.'s request, namely, coming the trifling amount of pecuniary inte- to A.'s house at the appointed time. rest involved keep them out of courts If B. accepts, there is in form a of justice. But I think Savigny's contract by mutual promises. If view, which is here adopted, is the acceptance is not required," the better one. There is not a contract trouble and expense of coming to which it would be ridiculous to en- A.'s house are ample consideration force, but the original proposal is for A.'s promise to provide a dinner, not the proposal of a contract. One Why is A. not legally bound to have or two modern writers think it meat and drink ready for B., so that enough to say De minimis rum curat if A. had forgotten his invitation lex. But purely honorary engage- and gone elsewhere B. shoiJd have meuts are often of great importance. EXPRESSION OF CONSENT. 5 gation. By obligation we mean the relation that exists between two persons of whom one has a private and peculiar right (that is, not a merely public or official right, or a right incident to ownership or a permanent family relation) to control the other's actions by calling upon him to do or forbear some particular thing (e) . An agreement might be defined, indeed, as purporting to create an obligation; and the mark which distinguishes an obligation so created from any other kind of obligation is that its contents are wholly determined by the will of the parties (/) . But for the pur- poses of English law we prefer to say (what is in effect the same) that an agreement contemplates something to be done or forborne by one or more of the parties for the use of the others or other. The word use (representing the Latin opus through an Anglo-French form oeps, not usus) is familiar in English law-books from early times in such a connexion as this. The common intention of the parties to an agreement is a fact, or inference of fact, which, like any other fact, has to be proved according to the general rules of evidence. When it is said, therefore, that the true intent of the parties must govern the decision of all matters of contract, this means such an intent as a court of justice can take notice of. If A., being a capable person, so bears himself towards B. that a reasonable man in B.'s place would naturally understand A. to make a promise, and B. does take A.'s words or conduct as a promise, no further question can be made about what was passing in A.'s mind. "Mental acts or acts of the will," it has been well said, "are not the materials out of which promises are made " (^r). Under such (e) Savigny, Syst. i. 338—9 ; pretation, not neoessarUy a will Obi. i. 4, seq. completely expressed on the face (/) That is, their wiU as ascer- of the transaction, tained by the proper rule-s of inter- {f/} Langdell, Summary, § 180. 6 AGREEMENT, PROPOSAL, AND ACCEPTANCE. circumstances, as well as in certain other more special cases, the law does not allow a party to show that his intention was not in truth such as he made or suffered it to appear. But in the common and regular course of things the consent to which the law gives effect is real as well as apparent. 2. Ways of declaring Consent.— Two distinct modes of the formation of an agreement are here specified. It is possible, however, to analyse and define agreement as consti- tuted in every case by the acceptance of a proposal. In fact this is done in the Indian Contract Act. And it is appro- priate to most of the contracts which occur in daily life, buying and selling, letting and hiring, in short all transac- tions which involve striking a bargain. One party proposes his terms; the other accepts, rejects, or meets them with a counter-proposal: and thus they go on till there is a final refusal and breaking off, or till one of them names terms which the other can accept as they stand. The analysis is presented in a striking form by the solemn question and answer of the Roman Stipulation, where the one party asked (specifying fully the matter to be contracted for) : That you will do so and so, do you covenant? and the other answered with the same operative word: I covenant (^). Yet the importance of proposal and acceptance as elements of con- tract has, until of late years, been much more distinctly brought out in the Common Law than by writers on the- modern civil law. It seems overstrained to apply this analysis to a case in which the consent of the parties is declared in a set form, as where they both execute a deed or sign a written agroe- (A) No doubt the formula Spondea ? effect. But it was necessary that spondeo, originally the only binding the stipulator should hear the pro- one, and almost certainly of re- misor's answer. Cp. Palgrave, ligious origin, was in early times Commonwealth of England, 2 supposed to have a kind of magical cxxxvii. cxli. CONSENT. 7 ment. Some say that, although there is no proposal or acceptance in the final transaction, the terms of the document must have been settled by a process reducible to the acceptance of a proposal ; but this hardly sufEces : for the formal instrument has a force apart from and beyond that of the negotiation which fixes its terms. And it may well be, and sometimes is the case, that the parties intend not to be legally bound to anything until their consent is formally declared. In such a case it cannot be said that the proposal and accept- ance constitute the final and legal agreement. Take the common case of a lease. There is generally an enforoeable a/greement, constituted by letters or memorandum, before the lease is executed. But the lease itself is (besides its effect as a transfer of property) a new contract or series of contracts. In this who is the proposer and who the acceptor? Are we to say that the lessor is the proposer because in the common course he executes the lease before the lessee exe- cutes the counterpart? Or are we to take the covenants Beverally, and say that in each one the party with whom it is made is the proposer, and the party bound is the acceptor ? What, again, if two parties are discussing the terms of a contract and cannot agree, and a third indifferent person suggests terms which they both accept? Shall we say that he who accepts them first thereby proposes them to the other ? And what if they accept at the same moment? The case of competitors in a race who, by accepting rules laid down by the managing committee, become bound to one another to observe those rules (i), is even stronger. The truth is, as I venture to think, that the exclusive pursuit of the analytical method in dealing with legal conceptions always (t) Clarke v. Earl of Bunrmen (The say that every party is both a pro- " Satanita") [1897] A. 0. 59, 66 poser and an acceptor. Cp. p. 27, L. J. P. 1. Here we are driven to below. 8 AGREEMENT, PKOPOSAL, AND ACCEPTANCE. leads into some strait of this kind, and if the pursuit be obstinate, lands us in sheer fictions. 3. Promise. — Except in the case of simultaneous decla- ration just mentioned, a promise is regularly either the acceptance of an offer or an offer accepted. AVhere the pro- mise is embodied in a deed, there is an apparent anomaly; for the deed is irrevocable and binding on the promisor from the moment of its delivery by him, even before any accept- ance by the promisee (k). But this depends on the peculiar nature pf a deed in our law. The party who seals and delivers a deed witnessing his promise does not, strictly speaking, thereby create an obligation, but rather declares himself actually bound, and .that declaration is conclusive, as agg-inst himself, under normal conditions. In fact it is only in modern times that special defences, on the ground of fraud and the like, have been allowed to avail a man against his own deed. Thus the questions of consent and acceptance are 'not open, as ordinary questions of fact, to any discussion. The party has recorded his own promise in solemn form, and cannot require proof that any other positive condition was satisfied. As matter of history, the very object of the Anglo-Norman writing under seal was to dispense with any other kind of proof, and to substitute the authenticated will of the parties themselves for an appeal to the hazards of oath, ordeal, or judicial combat. It is .not that an^ anomalous liability is created; the contracting 'party is estopped (special and exceptional causes excepted) from disputing that he is liable. Not the promise, but the. deed itself, is irrevocable and operative without need of external confirmation. Whether it is convenient, on the (/c) Xenos T. Wiekham (1886) L. E. R. R. 355, aud see Pref. to 29 R. R. 2 H. L. 2-96, 323 ; Doe i. Garnons v. v— ix. Xniffht (182&) 5 B. & C. 671; 29 DEFINITION OF CONTRACT. 9 whole, for the purposes of modem law to retain the deed with its ancient qualities is a question beyond our present limits (I) . 4. Definition of Contract. —The term contract is here con- fined to agreements enforceable by law. This restriction, suggested perhaps by the Roman distinction between con- tractus and pactum, is believed to have been first introduced in English by the Indian Contract Act. It seems a manifest improvement, and free from the usual drawbacks of innova- tions in terminology, as it makes the legal meaning of the words more precise without any violent interference with their accustomed use. 5. Void Agreements. — The distinction between void and voidable transactions is a fundamental one, though it is often obscured by carelessness of language. An agreement or other act which is void has from the beginning no legal effect at all, save in so far as any party to it incurs penal consequences, .as may happen where a special prohibitive law both makes the act void and imposes a penalty. Otherwise no person's rights, whether he be a party or & stranger, are affected . A voidable act, on the contrary, takes its full and proper legal effect unless and until it is disputed and set aside by some j)erson .entitled so to do. The definitions of the Indian Contract Act on this head are simpler in form than those given above: but certain peculiarities of English law prevent us from adopting the whole of them as they stand. It is Jiot correct as an universal proposition in England that "an agreement not enforceable by law is said to be void," for we iiave agreements that cannot be sued upon, and yet are recog- Jiized by law for other purposes and have legal effect in other ways (m) . \l) The old law has been altered States. in various ways in many American (m) See Ch. XIII. below. 10 AGREEMENT, PROPOSAL, AND ACCEPTANCE. 6. Voidable Contracts. — The definition here given is from the Indian Contract Act. Tihe idea is not an easy one to express in terms free from objection. Perhaps it would be better to say that a voidable contract is an agreement such that one of the parties is entitled at his option to treat it as never having been binding on him. The Anglo-Indian definition certainly covers rather more than the ordinary use of the terms. Cases occur in English law where, by the effect of peculiar enactments, there is a contract enforceable by one party alone, and yet we should not naturally call it a voidable contract. An example is an agreement required by the Statute of Frauds to be in writing, which has been signed by one party and not by the other. Here the party who has signed is bound and the other is free. "Voidable contract" seems not exactly the appropriate name for such a state of things. And it may even be said that a contract which has- been completely performed on one side is literally " enforce- able by law at the option of one of the p.arties " only. But the definition as it stands cannot practically mislead (n) . Consideration is sometimes treated as if it were among the necessary elements of an agreement (o). But the con- ception, in the generality with which we use it, com.bined with its restriction within the limits of exchangeable value of some kind, is peculiar to the Common Law. It does not exist in the jurisprudence of the Continent or of Scot- land. In our law we require, for the validity of an informal contract, not merely agreement or deliberate intention, but bargain; a gratuitous promise is not enforceable unless (m) There is a similar but slighter rather than of completed effect, difficulty about the use of the word Hence in the fifth definition I have- void. A contract when it is fully introduced the word discharged as an performed ceases to have legal effect ; alternative. it is discharged, but there is some- (o) Thus it is defined in the inter- thing harsh in saying that it becomes pretatiou clause , of the Indian Con- void, a term suggestive of ineffioaoy tract Aoi . COMMUNICATIONS IN GENERAL. 1 1 included in the higher obligation of a deed. The rules as to proposal and acceptance cannot be fully understood without bearing this in mind; stiU the requirement of consideration is a condition imposed by positive law and has nothing uni- versal or necessary about it. Hereafter a fuller discussion will be given : for the present it may serve to describe consideration as an act of f or^bearance, or the promise thereof, which is offered by one party to an agreement, and accepted by the other, as an inducement to that other's act or promise. Proposal and acceptance, though not strictly necessary parts of the general conception of Contract, are in practice the normal and most important elements. When agreement has reached the stage of being embodied in a form of words, adopted by both parties, the contents of the document and the consent of the parties are generally simple and easily proved facts: and the only remaining question (assuming the other requirements of a valid contract to be satisfied) is what the words mean. The acceptance of a proposal might seem at first sight an equally simple fact. But the com- plexity of human affairs, the looseness of common speech, the mutability of circumstances and of men's intentions, and the exchange of com m unications between parties at a dis- tance, raise questions which have to be provided for in detail. We may have to consider separately whether the offer of a contract was made; what the terms of that offer were; whether there was any acceptance of it; and whether the acceptor was a person to whom the offer was made. CommunicqUons in general. The proposal or acceptance of an agreement may be com- municated by words or by conduct, or partly by the one and partly by the other. In so far as a proposal or acceptance is 12 AGREEMENT, PROPOSAL, AND ACCEPTANCE. conveyed by words, it is said to be express. In so far as it is conveyed by conduct, it is said to be tacit (p) . Tacit promise. — It would be as difficult as it is needless to adduce distinct authority for this statement. Cases are of constant occurrence, and naturally in small matters rather than in great ones, where the proposal, or the acceptance, or both, are signified not by words but by acts. For example, the passenger who steps into a ferry-boat thereby requests the ferryman to take him over for the usual fare, and the ferryman accepts this proposal by putting off. In the case of obtaining a chattel from an automatic machine (where putting in our coin is the acceptance of a standing offer made by the owner of the machine) there is no possibility of accepting in words. A promise made in this way is often said to be implied: but this tends to obscure the distinction of the real though tacit promise in these cases from the fictitious promise " im- plied by law," as we shall immediately see, in certain cases where there is no real contract at all, but an obligation quasi ex contractu, and in others where definite duties are annexed by rules of law to special kinds of contracts or to relations arising out of them. Sometimes it may be difficult to draw the line. "Where a relation exists between two parties which involves the performance of certain duties by one of them, and the payment of reward to him by the other, the law will imply [fictitious contract] or the jury may infer [true contract] a promise by each party to do what is to be done by him" (g). It was held in the case cited (p) We shall see that communica- sion to take it out and deal with it tion of an acceptance may be dis- be negligent : Curtice v. London City pensed with in some oases. But the and Midland Bank [1908] 1 K. B. law knows nothing of constructive 293, 77 L. J. K. B. 341, C. A. communication. A document lying (y) Per Our. Morgan v. Ravey unexamined in a letter-box is not (1861) 6 H. & N. 265, 30 L. J. Ex. jet communicated, even if the omis- 131. TACIT PROMISE. IS that an innkeeper promises in this sense to keep his guests' goods safely. The case of a carrier is analogous. So where A. does at B.'s request something not apparently illegal or wrongful, but which in fact exposes A. to an action at the suit of a third person, it seems to be not a proposition of law, but an inference of fact which a jury may reasonably find, that B . must be taken to have promised to indemnify A . (r) . If A. with B.,'s knowledge, but without any express re- quest, does work for B. such as people as a rule expect to be paid for, if B. accepts the work or its result, and if there are no special circumstances to show that A. meant to do the work for nothing or that B. honestly believed that such was his intention, there is no difficulty in inferring a promise by B. to pay what A.'s labour is worth. And this is a pure inference of fact, the question being whether B.'s conduct has been such that a reasonable man in A.'s position would; understand from it that B . meant to treat the work as if done to his express order. The doing of the work with B.'s knowledge is the proposal of a contract, and B.'s conduct is the acceptance. This holds even if A. and B. both believe that the work is being done under an express contract, whereas, by the fraud of X. on whom they both relied to draw up the terms, A. and B. have signed writings naming different prices and there is no express contract at all. For at all events they intended the work to be fairly paid for, and the only solution is to assess the sum payable at what i£ is reasonably worth (s). The like inference cannot be made if the work is done without B.'s knowledge. For by the hypothesis the doing of the work is not a proposal, (r) Dugdale v. Levering (1875) here to talk of mistake: the first L. K. 10 C. P. 196, 44 L. J. C. P. elements of an express contract were 197_ lacking, as there was no real com- (s) Yiekery v. Sitehie (1909) 202 munioation between the parties of Mass. 247, a curious and it is believed the terms on which they were wiUing^ a singular case. It is quite needless to contract. 14 AGREEMENT, PROPOSAL, AND ACCEPTANCE. not being communicated at the time: B. has no opportunity of approving or countermanding it, and cannot be bound to pay for it when he becomes aware of the facts, although he may have derived some benefit from the work; it may be impossible to restore or reject that benefit without giving up his own property (i). If A. of his own motion sends goods to B. on approval, this is an offer which B. accepts by dealing with the goods as owner. If he does not choose to take them, he is not bound to return them; nor indeed is he bound to take any active care of them till A. reclaims them (u) . Implied or constructive promise. — But it does not follow that becaus^ there is no true contract, there may not be cases falling within this general description in which it is just and expedient that an obligation analogous to contract should be imposed upon the person receiving the benefit. In fact there 3,re such cases: and as the forms of our common law •did not recognise obligations quasi ex contractu in any dis- tinct manner, these cases were dealt with by the fiction of an implied previous request, which often had to be supple- mented (as in the action for money had and received) by an equally fictitious promise. The promise, actual or fictitious, was then supposed to relate back to the fictitious request, so that the transaction which was the real foundation of the matter was treated as forming the consideration in a fictitious contract of the regular type. Here, as in many other in- stances, the law was content to rest in a compromise between the forms of pleading and the convenience of mankind. These fictions have long ceased to appear on the face of our (t) Cp. dicta of Pollock C.B. 25 («) It is prudent, however, to in- I/. J. Ex. at p. 332. The ejBtect of a form the sender that the goods sent subsequent express promise to pay without request are at his disposal for work already done comes under and risk, the doctrine of Consideration. GENERAL OFFEES. 15 pleadings, but they have become so established in legal language that it is still necessary to understand them (a;). The Indian Act provides for matters of this kind more simply in form and more comprehensively in substance than our present law, by a separate chapter, entitled "Of certain Relations resembling those created by Contract" (ss. 68—72, ■op. s. 73). The term constructive contract may properly be applied to these obligations; it is exactly analogous to "constructive possession" and "constructive notice." It is adopted, we believe for the first time, in the comprehensive work on the Laws of England which bears Lord Halsbury's name. The term Quasi-Contract is now generally recog- nized. A corollary from the general principle of tacit acceptance, which in some classes of cases is of considerable importance, is thus expressed by the Indian Contract Act (s. 8): — " Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal." General offers. — This rule, though it might have been moje aptly worded, substantially contains the true legal theory of offers of reward made by public advertisement for the procuring of information, the restoration of lost property, and the like. On such offers actions have many times been brought with success by persons who had done the things required as the condition of obtaining the reward. It appears to have been once held that even after perform- ance an offer thus made did not become a binding promise, because "it was not averred nor declared to whom the pro- mise was made" (y). But the established modern doctrine (x) For detaUs see notes to lamp- Saund. 357. high V. Brathwait in 1 Sm. L. C, iy) Noy, 11 ; 1 RoUe Ab. 6 M. and Osborne t. Rogers, 1 Vims. pi. 1. 16 AGREEMENT, PROPOSAL, AND ACCEPTANCE. is ithat there is a contract with any person who performs the condition mentioned in the advertisement (z) . That is, the advertisement is a proposal which is accepted by per- formance of the conditions. It is an offer to become liable to any person who happens to fulfil the contract of which it is the offer (a) . Until some person has done this, it is a proposal and no more. It ripens into a promise only when its conditions are fully satisfied. As Sir W. Anson has well put it, " an offer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person "(&). In the same manner each bidding at a sale by auction is a proposal; and when a particular bid is accepted by the fall of the hammer (but not before), there is a complete contract with the particular bidder to whom the lot is knocked down (c) . The principle is sufficiently clear, but its application is not wholly free from difficulties. These are partly reducible to questions of fact or of interpretation, but partly arise from decisions which appear to give some countenance to a fallacious theory. Offer and invitation of offers. — First, we have to consider in particular cases whether some act or announcement of one of the parties is really the proposal of a contract, or only an invitation to other persons to make proposals for («) Williams v. Carwardine (1833) posal thus made "by way of general 4 B. & Ad. 621, 38 R. R. 328. request or invitation to all men to (a) Per Willes J. Spencer t. Hard- -whoee knowledge it comes. The ing (1870) L. R. 5 C. P. 562. See Germans call it ^m«ZoJm«^. too Carlill v. Carlolic Smoke Ball Co. (c) Payne t. GaA)e (1789) 3 T. R. [1893] 1 Q. B. 256, per Lindley L.J. 148, 1 R. R. 679. Prof. Langdell at p. 262, per Bowen L.J. at p. 268, (Summary, § 19) thought it would 62 L. J. Ch. 257. have been "better to hold that every (*) Principles of the English Law bid constitutes " an actual sale, sub- of Contract, p. 63, 14th ed. We Ject to the condition that no one else have no special term of art for a pro- shall bid higher." PROMISKS I^Y ADVERTISEMENT. 17 his consideration. This depends on the intention of the parties as collected from their language and the nature of the transaction, and the question is one either of pure fact or of construction. Evidently it may be an important one, but duo weight has not always been given to it. The proposal of a definite service to be done for reward, which is in fact a request (in the sense of the ordinary English law of contract) for that particular service, though not addressed to any one individually, is quite different in its nature from a declaration to all whom it may concern that one is willing to do business with them in a particular manner. The person who publishes such an invitation does indeed contemplate that people who choose to act on it will do whatever is necessary to put themselves in a position to avail themselves of it. But acts so done are merely incidental to the real object; they are not elements of a contract but preliminaries. It does not seem reasonable to construe such preliminaries into the consideration for a contract which the parties had no intention of making. Yet there are some modern decisions which seem to disregard the distinction between mere invitations or declarations of intention and binding contracts (d). We shall now examine these cases. Doubtful cases. — In Denton v. G. N. Railway' Co. (e), the facts were shortly these: The plaintiff had come from London to Peterborough, had done his business there, and wanted to go on to Hull the same night. He had made his arrangements on the faith of the company's current time- tables, and presented himself in due time at the Peterborough station, applied for a ticket to Hull by a train advertised in those tables as running to Hull at 7.20 p.m., and offered to {d) Compare the judgmentB in (e) (1856) 5 E. & B. 860, and Barris y. Niekerson (1873) L. E. better in 25 L. J. Q. B. 129, where 8 Q. B. 286, 42 L. J. Q. B. 171. the case stated is given at length ; 105 K. K. 335. P.-C. 2 18 AGKKKSIENT, PKOPOSAL, AND ACGKPTANCE. pay the proper fare. The defendant company's clerk re- fused to issue such a ticket, for the reason that the 7.20 train no longer went to Hull. The fact Avas that beyond Milford Junction the line to Hull belonged to the North Eastern Railway Company, who formerly ran a train corre- sponding with the Great Northern train, for which the Great Northern Railway Company issued through tickets by arrangement between the two companies. This correspond- ing train had now been taken off by the N. E. R. Co., but the G. N. R. time-table had not been altered. The plaintiff was unable to go further than Milford Junction that night, and so missed an appointment at Hull and sustained damage. The cause was removed from a County Court into the Queen's Bench, and the question was whether on the facts as stated in a case for the opinion of the Court the plaintiff could recover (/) . Lord Campbell C.J. and Wightman .7. held that when anyone offered to take a ticket to any of the places to which the train was advertised to carry passengers the company contracted with him to receive him as a passenger to that place according to the advertisement. Lord Campbell treated the statement in the time-table as a conditional promise which on the condition being performed became absolute. This proposition, reduced to exact language, amounts to saying that the time-table is a proposal, or part of a pro- posal, addressed to all intending passengers and sufficiently accepted by tender of the fare at the station in time for the advertised train. Crompton J. (^r) did not accept this view, nor was it necessary to the actual decision: for the Court had only to say whether on the given facts the plaintiff (/) As to the measure of damages, been taken there was an unquestion- which here was not in dispute, see able contract) . Samlin v. G. N. R. Co. (1856) (^) The fuller report of his judg- 1 H. & N. 408, 26 L. J. Ex. 20, j^ent is that in 5 E. & B. 105 R. R. 649 (where a ticket having PROMISES BY ADVERTISEMENT. 19 could succeed in any form of action, and they were unani- mously of opinion that there was a good cause of action in tort for a false representation; an opinion itself questionable, but not in this place {h) . In Warloiv v. Harrison (i), a sale by auction was announced as without reserve, the name of the owner not being disclosed. The lot was put up, but in fact bought in by the owner., iThe plaintiff, who was the highest real bidder, sued the auctioneer as on a contract to complete the sale as the owner's agent. The Court of Queen's Bench held that this was wrong; the Court of Exchequer Chamber affirmed the judg- ment on the pleadings as they stood, but thought the facts did show another cause of action. Watson and Martin BB. and Byles J. considered that the auctioneer contracted with the highest bona fide bidder that the sale should be without reserve. They said they could not distinguish the case from that of a reward offered by advertisement, or of a statement in a time-table, thus holding in effect (contrary to the general rule as to sales by auction) that where the sale is without reserve the coiitract is completed not by the acceptance of a bidding, but by the bidding itself, subject to the condition that no higher bona fide bidder appears. In other words, every bid is in such a case not a mere proposal but a condi- tional acceptance. Willes J. and Bramwell B. preferred to say that the auctioneer by his announcement warranted that he had authority to sell without reserve, and might be sued for a breach of such warranty. The result was that leave was given to the plaintiff to amend and proceed to a new trial, which, however, was not done(/c). The opinions ex- pressed by the judges, therefore, are not equivalent to the {h) See Pollock on Torts, llth ed. 29 L. J. Q. B. U ; 117 E. R. 219. 299, and preface to 105 E. R. {k) The parties agreed to a stet {i) (1858-9) 1 E.&E. 295, 28 L.J. processus; see note in the L. J. Q. B. 18, in Ex. Ch. 1 E. & E. 309, report. 3 (2) 20 AGREEMENT, PROPOSAL, AND ACCEPTANCE. actual judgment of a Court of Error, and have been in fact regarded with some doubt in a later ease where the Court of Queen's Bench decided that at all events an auctioneer whose principal is disclosed by the conditions of sale does not contract personally that the sale shall be without re- serve (^). Later, again, the same Court held that when an auctioneer in good faith advertises a sale of certain goods, he does not by that advertisement alone enter into any contract or warranty with those who attend the sale that the goods shall be actually sold (m) . In an analogous case {n) it was decided that a simple offer of stock in trade for sale by tender does not amount to a contract to sell to the person who makes the highest tender. The doctrine of these cases, though capable, as we have seen, of being expressed in a manner conformable to the normal analysis of contract, goes to the utmost limit war- ranted by sound principle, and is not likely to be extended. If a man advertises that he has goods to sell at a certain price, does he contract with any one who comes and offers to buy those goods that until further notice communicated to the intending buyer he will sell them at the advertised price? (o). Again, does the manager of a theatre contract with every one who comes to the theatre and is ready to pay for a place that the piece announced shall be performed? (?) Mainprice x. Westley (1866) tiaot from the contract of sale. The 6 B. & S. 420, 34 L. J. Q. B. 229. plaintiff failed on another point, (See further Rainbow v. Sowlcins (m) Harris v. Niekerson (1873) [1904] 2 K. B. 322, 73 L. J. K. B. L. R. 8 Q. B. 286, 42 L. J. Q. B. 641, which adds nothing on the 171. point hefore us.) But in /oAms«o« v. («) SpeKcej- v. Ifardiw^ (1870)L. R. Soyes [1899] 2 Ch. 73, 68 L. J. Ch. 5 C. P. 561, 39 L. J. C. P. 332. 425, Cozens-Hardy J. was prepared In each of these cases we have the to hold on the authority of Warlow v. unanimous decision of a strong Karrison that there is a contract by Court. Cp. Sooke v. Dawson [1895] the vendor with the highest bidder 1 Ch. 480. that he shall be the purchaser, dis- (o) See per Orompton J. in Denton V. G. N. S. Co., supra. WHAT AMOUNTS TO OFFER. 21 or do directors or committee-men who summon a meeting- contract with all who come that the meeting shall be held? Offers to negotiate, in other words expressions of willingness to consider offers, must not be confounded with offers to be bound (p) . , The distinction between the proposal of a contract and the mere preliminaries is clearly brought out by a later decision of the Court of Appeal. A "proposal " in the usual form was made to a life assurance society; the actuary wrote a letter stating that the proposal had been accepted at a certain premium, but adding this note: " No assurance can take place untn the first premium is paid." Afterwards, and before the time limited for that payment, an accident hap- pened to the assured which affected his health, and the society, being informed of this, refused the premium when tendered. It was held that they were entitled to do so. The letter of acceptance did not conclude a contract, first, because the amount of premium was then first specified, and the assured had therefore not consented to that material term of the agreement; next, because of the express declaration of con- trary intention (g) . Another matter for remark is the effect of notice of revo- cation. Suppose the traveller in Denton's case had seen and read a new and correct edition of the time-table in the booking-office immediately before he .offered to take his ticket. This would clearly have been a revocation of the proposal of the company held out in the incorrect time-table, and ac- cordingly no contract could arise. Similarly if on putting up a particular lot the auctioneer expressly retracted as to that lot the statement of the sale being without reserve, {p) See per Bowen L.J. Carlill v. op. Wallace's ease [1900] 2 Ch. 671, Carbolic Smoke JBall Co. [ISSS] I Q.B. 69 L. J. Oh. 777 (application for 2.56, 268. shares under an amalgamation agree- (}) Canning v. Farquhar (1886) 16 ment by a shareholder in the old Q. B. Div. 727, 55 L. J. Q. B. 225 ; company). 22 AGREEMENT, PROPOSAL, AND ACCEPTANCE. there could be no such contract with the highest bona fide bidder as supposed in Warlow v. Harrison (r): yet the traveller's or bidder's grievance would be the same. There is also difficulty in determining what are the con- tents of the contract supposed to be made. In the case ofi the time-table, for example, we have a contract said to be concluded by the mere demand of a ticket and tender of the fare, ,a contract not to carry the passenger but to issue a ticket. So in the case of the auction we have a contract alleged to be complete not on the acceptance but on the making of a bid. Another difficulty (though for English lawyers hardly a serious one) is raised by the suggestion that in these cases the first offer or announcement is not a mere proposal, but constitutes at once a kind of floating contract with the un- ascertained person, if any, who shall fulfil the prescribed condition. Savigny quite justly held that on this theory the right of action could not be supported: there cannot be a vinculum iuris with one end loose; but he strangely missed the true explanation (s) . To a certain extent, how- ever, this notion of a floating obligation is countenanced by the language of the judges in the cases above discussed, and also in the much earlier case of Williams v. Carwardine (t). There ,a reward had been offered by the defendant for in- formation which should lead to the discovery of a murder. A statement which had that effect was made by the plaintiff, but not (as the jury found) with a view to obtaining the {r) The Continental doctrine that see s. o. in Ex. Oh. L. R. 7 Ex. at the revocation must be so communi- p. 117. cated as to amount to reasonable (s) Obi. 2, 90. Yet within a few notice is not admissible in our law ; pages he does give the true analysis see note to Frost v. Knight (1870) for the not dissimilar case of a sale L. E. 5 Ex. at p. 337, and pp. 28 — 30, by auction. below. As to the somewhat ana- (<) (1833) 4 B. & Ad. 621, s. c. at logons suggestion made in that case, N. P. 5 C. & P. 566, 38 E. R. 328. PROMISES BY ADVERTISEMENT. 2S reward; it does not appear to whom it was made, or whether with any knowledge that a reward had been offered. The Court held, nevertheless, that the plaintiff had a good cause of action, because "there was a contract with any person who performed the condition mentioned in the advertise- ment," and the motive with which the information was given was immaterial: but on this it must be observed that the question is not of motive but of intention. The decision seems to set up a contract without any privity between the parties. Such a doctrine cannot now be received (u), though the decision may have been right on the facts. There cannot be an acceptance constituting a contract without any com- munication of the proposal to the acceptor. Performance in fact: — The question may arise whether the party claiming the reward has in fact performed the required condition according to the terms of the advertisement. In Carlill V. Carbolic SmoJce Ball Co. (x), it arose in a curious manner. The advertisement of a remedy for influenza and similar diseases offered a sum of money to any one who should contract such disease " after using " the remedy according to the directions supplied with it, and for a certain time. A buyer who used the remedy as directed, and caught influenza while still using it, was held entitled to the sum offered, not- withstanding the argument strenuously urged for the de- fendant that the offer was too vague to be taken seriously, and the performance could not be verifled. The Supreme Court of the United States has held that a general proposal made by public announcement may be effectually revoked by an announcement of equal publicity, such as an advertisement in the same newspaper, even as against a person who afterwards acts on the proposal nofc (m) Cf. Lang-dell, § 3. The soli- not law as reported, tary modem case of Gibbons \. Proc- {x) [1893] 1 Q. B. 256, 62 L. J. tor (1891) 6i L. T. 594, is clearly Q. B. 257, C. A. 24 AGREEMENT, PROPOSAL, AND ACCEPTANCE. knowing that it has been revoked. For "he should have known," it is said, "that it could be revoked in the manner in which it was made " {y). In other words, the proposal is treated as subject to a tacit condition that it may be revoked by an announcement made by the same means. There does not appear to be any English ailthority. Other kinds of general proposals have also been dealt with as capable of acceptance by any one to whose hands they; might come. In Ex parte Asiatic Banking Corporation {z), the follow- ing letter of credit had been given by Agra and Masterman's Bank to Dickson, Tatham and Co. "No. 394. You are hereby-authorized to draw upon this bank at six months' sight, to the extent of £15,000 sterling, and such drafts I undertake duly to honour on presentation . This credit wiU remain in force for twelve months from this date, and parties negotiating bills under it are requested to indorse particulars on the back hereof. The bills must specify that they are drawn under credit No. 394, of the 31st of October, 1865." The Asiatic Banking Corporation held for value bills drawn on the Agra and Masterman's Bank under this letter; the Bank stopped payment before the bills were, presented for acceptance, and Dickson, Tatham and Co. were indebted to the Bank in an amount exceeding what was due on the bills: but the Corporation claimed nevertheless to prove in the winding-up for the amount, one of the grounds being "that the letter showji to the person advancing money con- stituted, when money was advanced on. the faith of it, a contract by the Bank to accept the bills." Cairns L.J. adopted this view, holding that the letter did amount to " a .general invitation " to take bills drawn by Dickson, Tatham and Co. on the Agra and Masterman's Bank, on (y) Shuey v. United Slates (1875) App. Ca. (J. C.) 83, decided on the 92 U. S. 73. ground that the "open cover" (z) (1867) L. K. 2 Ch. 391, 36 was a proposal of insurance ad- L. J. Ch. 222. Cp. Bhugwandass v. dressed to any one having iosur- Netherlands, ^-e. Insre. Co. (1888)14 able interest in the cargo. PROMISES BY GENERAL OFFER. 25 the assurance that the Agra and Masterman's Bank would accept such bills on presentation; and that the acceptance of the offer in this letter by the Asiatic Banking Corpo- ration constituted a binding legal contract against the Agra and Masterman's Bank (a). The difficulties above discussed do not seem to exist in this case. From an open letter of credit (containing too in this instance an express request to persons negotiating bills under it to indorse particulars) there may be inferred without any violence either to law or to common reason a proposal or request by the author of the letter to the mercantile public to advance money on the faith of the undertaking expressed in the letter. This undertaking must then be treated as addressed to any one who shall so advance money: the thing to be performed by way of consideration for the undertaking is definite and substantial, and is in fact the main object of the transaction. If anj question arose as to a revocation of the proposal, it would be decided by the rules which apply to the revocation of proposals made by letter in general (b). The bearing of the Statute of Frauds on contracts made by advertisements or general offers was once incidentally discussed in the Judicial Committee of the Privy Council (c). (a) In Scott V. Filkingtnn (1862) opinion was expressed by the Court 2 B. & S. 11, 31 Ij. J. Q. B. 81, on as to what should have been the the other hand, an action was decision on the same facts in a, case brought on a judgment of the governed by the law of England, it Supreme Court of New York, on a was against any right of action at very similar state of facts. The law being acquired by the bill- decision of the English Courts was holders. This however was by the that the law applicable to the case way, and as a concession to the was the law of New York, and that defendants, and is therefore no posi- the judgment having been given tive authority. by a court of competent jurisdiction [b) See however Shuey v. United in a case to which the local law was States, p. 24, above, properly applicable, there was no (c) Williams v. Byrnes (1863) 1 room to question its correctness in Moo. P. C. N. S. 154, 138 E. R. an English court. So far as any 487. 26 AGREEMENT, PROPOSAL, AND ACCEPTANCE. It is settled that the requirements of the statute in the cases where it applies are generally not satisfied unless the written evidence of the contract shows who both the contracting parties are. But it had been suggested in the Colonial Court that in the case of a proposal made by advertisement, where the nature of the contract {e.g., a guaranty) was such as to bring it within the statute, the advertisement itself might be a sufficient memorandum, the other party being indicated as far as the nature of the transaction would admit {d) . The Judicial Committee, however, showed a strong inclination to think that this view is not tenable, and that in such a case the evidence required by the statute would not be complete without some further writing to show who in particular had accepted the proposal. It was observed that as a matter of fact the cases on advertisements had been of such a kind that the statute did not apply to them, and it was a mere circumstance that the advertisement was in writing (e). We are not aware of the point having arisen in any later case. The speculative question has been asked at what point of time acceptance by an act is complete, and it is suggested that A. may request B. to do something, say to move a piece of furniture, for reward which A. names, that B. may do a substantial part of the work, and A. may revoke his offer any time before the work is complete, leaving B . without remedy or at least any remedy on a contract. But surely the acceptance is complete as soon as B . has made an unequivocal beginning of the performance requested, a "commencement d'execution," to use the term familiar in French law. [d) Per Stephen C.J. (N. S. W.) gestion in the judgment of any such at pp. 167, 184. proposition of law as that the Statute (e) See 1 Moo. P. C. N. S. at of Frauds is not applicable to oon- p. 198. The language of the head- tracts made in this manner. note is misleading ; there is no sug- FORMATION BY INDIRECT COMMUNICATION. 27 Whether anything is payable before the whole of the work is done depends on the terms express or implied of A.'s offer on which B. acts. As a matter of fact A.'s offer will almost always be a conditional offer, and will become, on acceptance^ a promise conditional on the work being done within a reason- able time and otherwise competently. Such a conditional promise is still a promise, and wholly different from a revocable offer (/) . It is possible for a contract to be formed without any direct communication between the parties or any persons who in an ordinary sense are their agents. Where com- petitors enter for a club race under express rules prescribed or adopted by the managing committee, and those rules declare that any competitor breaking them shall be liable for damages arising therefrom, this is sufficient to create a mutual contract between the competitors to be liable for and discharge any such damages {g) . Here the secretary of the club who receives the entries may be regarded as an agent to receive, as between the competitors, the ofifer of every competitor to be bound by the rules, and the acceptance of every other competitor; and his authority to do so is implied in the nature of the transaction. There may be cases of this (/) Clarence D. Ashley, The Law undertaking whether there is a con- of Contraot.s, Boston, 1911, p. 78, tract or not ; this responsibility " Consideration in Unilateral Con- attaches to the actor as soon as he tracts." The learned author assumes does anything, and would be held, that the act which is sufficient to if necessary, to be consideration constitute acceptance must be co- enough. In short. Prof. Ashley is extensive with the whole performance too clever. requested. Now acceptance is one (g) Olarlce\. Barl of Dunraven (The thing and consideration quite another. " Satanita") [1897] A. C. 69, 66 A more plausible query is whether L. J. P. 1. The only question the beginning of performance in seriously argued in the H. L. was acceptance of a request implies any on the construction of the rules. It promise to complete the performance would seem the contracts must all be (p. 80). But here note that an action referred to the date when the entries lies for misfeasance in a voluntary are completed. Cp. p. 7, above. 28 AGREEMENT, PROPOSAL, AND ACCEPTANCE. tind in which it would be hard, if the question were raised, to determine whether the parties intended to create a legal or a merely honorary obligation. Only offerees can accept. — Having seen that it is possible for oSers to be addressed not only to persons not named, but to persons wholly unascertained at the time, we note by way of caution that nevertheless an offer, in order to become a promise, must be accepted by some one to whom it is in substance and in fact addressed. This principle is elemen- tary, but may sometimes be disguised by peculiar facts. A. sends an order for goods addressed to X., a tradesman. X. has in fact sold the business to Z., of which A. is ignorant. Z. sends the goods to A., who receives them as coming from X. As A. never offered to buy from Z. no contract is formed between A. and Z., and Z. cannot recover the price of the goods from A. {h). :Even this, the simplest case, could not happen without an element of misunderstanding. Less simple ones cannot well be separated from those commonly treated (in part for reasons belonging to the technical history of equitable jurisdiction) under the head of Mistake. In that connexion we shall return to them later. / Revocation. An offer may be revoked at, any time before acceptance, but not afterwards. For before acceptance there is no agreement, and there- fore the proposer cannot be bound to anything (i) . So that even if he purports to give a definite time for acceptance, he is free to withdraw his proposal before that time has elapsed. He is not bound to keep it open unless there is a (h) Boulton V. Jonei (1887) 2 H. & (») The same rule applies to a pro- N. 564, 27 Ij. J. Ex. 117, 115 R. R. posal to vary an existing agreement: 695. Gilkes v. Leonino (1858) 4 C. B. N. S. 485. REVOCATION. 2& distinct contract to that effect, founded on a distinct con- sideration. If in the morning A. offers goods to B. for sale at a certain price, and gives B. till four o'clock in the afternoon to make up his mind, yet A. may sell the goods to C. at any time before four o'clock, so long as B. has not accepted his offer (/c). But if B. were to say to A.: "At present I do not know, but the refusal of your offer for a definite time is worth something to me; I will give you sot much to keep it open till four o'clock," and A. were to agree to this, then A. would be bound to keep his offer open, not by the offer itself, but by the subsequent independent con- tract (l). If A. on Wednesday hands to B. a memorandum offering to sell a house at a certain prioe, with a postscript stating that the offer is to be " left over " till nine o'clock on Friday morning, A. may nevertheless sell the house to C. at any time before the offer is accepted by B. If B., with notice of A.'s dealing with C, tenders a formal acceptance (i) Admitted in CooJce v. Oxley (1790) 1 E. R. 783, 3 T. R. 653; affd. in Ex. Ch., see note; Finch Sel. Ca. 2nd ed. 85. The decision goes farther, and has been the sub- ject of much criticism. For the conflicting "views see Benjamin on Sale, oth ed. 66, 117, and Langdell's Summary, § 182. I adhere to Langdell's view that it cannot be supported in any sense. If the defendant's offer had been revoked before the plaintiff's acceptance, it was for the defendant to plead and prove it. The decision would have been right if the action had been on a promise to keep the offer open, as seems to be supposed by Lush J. in Stevenson v. McLean (1880) 5 Q. B. D. at p. 351, 49 L. J. Q. B. 701. But the action was for not delivering goods, as on a complete bargain and sale ; and this was insisted upon in the argument. The Court may possibly have supposed that accept- ance of an offer made any appreciable time before was not complete without a fresh sign of consent from the propo-er. Cp. Kennedt/ t . Lee (l^il) 3 Mer. 441, 17 R. R. 110; Eeadw. Diggon (1828) 3 M. & R. 97, showing- that this fallacy was current much later. {t) We find something like this in early Germanic law, where earnest on a sale was not payment on account of a completed contract, but the price of the seller's forbearance to sell to any other person for a limited time. Heusler, Inst, des D. P. R. ii. 236, cp. Glanv. x. 14, showing the- law to be then still doubtful in England. 450 AGREEMENT, PROPOSAL, AND ACCEPTANCE. -to A., this is inoperative (m) . It is different in modera Roman law. There a promise to keep a proposal open for a definite time is treated as binding, as indeed there appears no reason why it should not be in a system to which the doctrine of consideration is foreign : nay, there is held in effect to be in every proposal an implied promise to keep it open for a reasonable time(w). In our own law the effect -of naming a definite time in the proposal is simply negative and for the. proposer's benefit; that is, it operates as a warning that an acceptance will not be received after the lapse of the time named, not as an undertaking that if given sooner it shall be(o). In fact, the proposal so limited comes to an end of itself at the end of that time, and there is nothing for the other party to accept. This leads us to the next rule, namely: — Conditions of Offer. The proposer may prescribe a certain time within which the proposal is to be accepted, and the manner and form in which it is to be accepted. If no time is prescribed, the acceptance must be communicated to him within a reasonable time. In neither case is the acceptor answerable for any ■delay which is the consequence of the proposer's own default. If no manner or form is prescribed, the acceptance may be communicated in any reasonable or usual manner or form. This is almost self-evident, standing alone; we shall see the importance of not losing sight of it in dealing with the diificulties to be presently considered. Note, however, that though the proposer may prescribe a form or time of aecept- ()») Dickinson v. Botldn (1876) 2 ()i) See L. R. 5 Ex. 337, a. Ch. Div. 463, 45 L. J. Ch. 777. (o) See Offord v. Davies (1862) 12 The case suggests, but does not C. B. N. S. 748, Finch Sel. Ca. 87, decide, another question, which will where the only arguable question was be presently considered. Centra whether the defendant's guaranty Langdell, Summary, p. 244 ; and limited in time was a contract, or on principle perhaps rightly. only a standing offer so limited. REVOCATION. 31 mice, he cannot prescribe a form or time of refusal, so as to fix a contract on the other party if he does not refuse in some particular way or within some particular time (p). Among other conditions, the proposal may prescribe a particular place for acceptance, and if it does so, an acceptance elseAvhere will not do (g). The question in cases of this kind is whether the condition as to time, place, or manner of acceptance was in fact part of the terms of the proposal. There is direct authority for the statement that the pro- posal must at all events be taken as limited to a reasonable time(r); nor has it ever been openly disputed. The rule is obviously required by convenience and justice. It may be that the proposer has no means of making a revocation tnown (e.g., if the other party changes his address without notice to him, or goes on a long journey), and he cannot be expected to wait for an unlimited time. Words of present obligation (but not capable of operating to that effect) have been held to constitute an offer with limit of time (.s). Limits of Revocation. A proposal is revoked by communication to the other party of the proposer's intention to revoke it, and the revo- cation can take effect only when that communication is made before acceptance. The communication may be either express or tacit, and notice received in fact, whether from the proposer or from any one in his behalf or otherwise, is a sufficient communi- cation. (p) Felthouse v. Bindley (1862-3) Ca. 56. 11 C. B. N. S. 869, 875, 31 L. J. (»•) Baily'scase (1868) L. R. 5 Eq. C. P. 204, 132 E. R. 734, affd. very 4?8, L. R. 3 Ch. 592, 37 L. J. Ch. shortly in Ex. Ch. 11 W. R. 429, 255; Ramsgate Hotel Co. v. Mouie- see Preface to 135 R. R. fiore ; same Co. v. Goldsmid {1S66) {q) Eliasony. Sertshaw _{1S19) (Sup. L. R. 1 Ex. 109, 35 L. J. Ex. 90. Ct. U. S.) 4 Wheat. 225, Langdell (.s) HindUifs cane (1896) 2 Ch. 121, .Sel. Ca. on Cont. 48, Einoh Sel. 65 L. J. Ch. 591, C. A. 32 AGREEMENT, PROPOSAL, AND ACCEPTANCE. A person who has made an offer must be considered as continuously making it until he has brought to the knowledge of the person to whom it was made that it is withdrawn (t). But that person's refusal or counter-offer puts an end to the original offer (u) . The first point under this head is that an express revo- cation communicated after acceptance, though determined upon before the date of the acceptance, is too late. This was decided in 1880 in two distinct cases (x). It will suffice to give shortly the facts of the earlier one (y). The defendants, at Cardiff wrote to the plaintiffs at New York on the 1st of October, 1879, offering for sale 1000 boxes of tinplates on certain terms. Their letter was received on the 11th, and on the same day the plaintiffs accepted the offer by telegraph,, confirming this by a letter sent on the 15th. Meanwhile the defendants on the 8th of October had posted a letter with- drawing their offer of the 1st: this reached the plaintiffs on the 20th. The plaintiffs insisted on completion of the con- tract; the defendants maintained that there was no contract, the offer having been, in their view, withdrawn before the acceptance was either received or despatched. Lindley J. stated as follows the questions to be considered: " 1 . Whether a withdrawal of an offer has any effect until it is communi- cated to the person to whom the offer has been sent ? 2. Whether posting a letter of withdrawal is a communi- cation to the person to whom the letter is sent? " The first he answered in the negative, on the principle "that a state of mind not notified cannot be regarded in dealings between (t) Lord Hersohell, Henthorn t. Einch Sel. Ca. 104 ; Stevenson v. Fraser [1892] 2 Ch. 27, 31, 61 L. J. McLean (1880) 5 Q. B. D. 346, 49 Ch. 373, 66 L. T. 439. L. J. Q. B. 701 ; Senthorn v. Frasei- («) Sydey. Wrench {ISiO) 3 Beav. [1892] 2 Ch. 27, 61 L. J. Ch. 373, 334, 52 E. E. 144. fully confirms these decisions. (x) (1880) Byrne v. Van Tienhoven, {y) Byrne v. Van Tienhoven, last .5 C. P. D. 344, 49 L. J. C. P. 316, note. HEVOOATION. 83 man and man, and that an uncommunicated revocation is for all practical purposes and in point of law no revocation at all." The second he likewise answered in the negative, on grounds of both principle and convenience, and notwith- standing an apparent, but only apparent, inconsistency with the rule as to acceptances by letter which will be presently considered. This doctrine has been accepted by the Supreme Court of the United States (z) . Tacit revocation. — It seems impossible to find any reason in principle why the necessity for communication should be less in the case of a revocation which is made not by words but by conduct, as by disposing to some one else of a thing offered for sale. Nor does it seem practicable in the face of the decisions just cited, though they do not actually cover such a case, to say that any such difference is recognized by the law of England. The authority most in point, Dickinson v. Dodds (a), is not of itself decisive. The facts were these. A. offered in writing to sell certain houses to B., adding a statement that the offer was to be " left over '' until a time named; which statement, as we have already seen, could have no legal effect unless to warn B. that an acceptance would not be received at any later time. B. made up his mind the next morning to accept, but delayed communicating his acceptance to A. In the course of the day he heard from a person who was acting as his agent in the matter that A. had meanwhile offered or agreed to sell the property to C. Early on the following day (and within the time limited by A.'s memorandum) B. sought out A. and handed a formal acceptance to him; but A. answered, "You are too late. I have sold the property." It was held in the first instance by Bacon V.O. that A. had made to (z) TqitficJc V. Bowmm (1893) 149 L. J. Ch. 777. One or two imma- U S 411 424. terial details are omitted in stating (a) (1876) 2 Oh. Div. 463, 45 the facts. P.— C. 3 84 AGREEMENT, PROPOSAL, AND ACCEPTANCE. B. an offer which up to the time of acceptance he had not revoked, and that consequently there was a binding contract between A. and B. But in the Court of Appeal it was said that, although no " express and actual withdrawal of the offer " had reached B., yet by his own showing B., when he tendered his acceptance to A., well know that A. had done what was inconsistent with a continued intention of contracting with B . Knowing this, B . could not by a formal acceptance force a contract on A. (6). It does not appear that the knowledge which B. in fact had was conveyed to him or his agent by or through A., or any one intending to communicate it on A.'s behalf. Yet the Court held that knowledge in point of fact of the proposer's changed inten- tion, however it reaches the other party, will make the pro- poser's conduct a sufficient revocation. But what if B. had communicated his acceptance to A. without knowing any- thing of A.'s dealings with C. ? This question remains open, and must be considered on principle. Suppose that A. offers to sell one hundred tons of iron to B., not designating any specific lot of iron, and that B. desires time to consider, and A. assents. Then A. meets with C, they talk of the price of iron, and C. offers A. a better price than he has asked from B., and they strike a bargain for a hundred tons. Then B. returns, and in igno- rance of A.'s dealings with C. accepts A.'s offer formerly made to him. Here are manifestly two good contracts. A. is bound to deliver 100 tons of iron to B. at one price, and 100 tons to C. at another. And if A. has in fact only 100 tons, and was thinking only of those hundred tons, it makes (5) The headnote says: " Semhle, ledge of the sale." Bat this seems that the sale of the property to a unwarranted by the judgments. See third person would of itself amount the remarks of James L.J. at p. 472, to a withdrawal of the offer, even and of Mellish L.J, at p. 475, and although the person to whom the per Lord HersoheU, Senthorn v. offer was first made had no know- Fraser [1892] 2 Ch. at p. 33. COMMUNICATION OF REVOCATION. 35 no difference. He would be equally bound to B. and C. if be bad none. He must deliver them iron of the quantity and quality contracted for, or pay damages. How then will the case stand if, other circumstances being the same, the dealing is for specific goods, or for a house? Here it is impossible that A. should perform his agreement with both B. and C, and therefore they cannot both make him perform it; but that is no reason why he should not be answerable to both of them. The one who does not get performance may have damages. It remains to ask which of them shall have the ■option of claiming performance, if the contract is otherwise such that its performance can be specifically enforced. The most convenient solution would seem to be that he whose acceptance is first in point of time should have the priority: for the preference must be given to some one, and the first acceptance makes the first complete contract. There is no reason for making the contract relate back for this purpose to the date of the proposal. This is consistent with every thingi that was really decided in Dickinson v . Dodds (c) . The reasons given for that decision cannot, it is submitted, be Telied on. It is right to add that Cooke v. Oxley (d) may be so read as to support the opinion that a tacit revocation need not be communicated at all. But the apparent inference to this effect is expressly rejected in Stevenson v. McLean (e). If Cooke v. Oxley be still authority for anything, it is not) authority for that. (c) 2 Ch. Div. 463, 45 L. J. Ch. damages, but apparently nothing 777. Note that the suit was for was said about it. specific performance, and cp. Lang- (d) (1790) 1 R. R. 783, 3 T. R. 653. dell, Summary, 245-6, and Anson, («) (1880) 5 Q. B. D. at p. 351, 42-44. There was also a claim for 49 L. J. Q. B. 701. 3(2) 36 AGREEMENT, PROPOSAL, AND ACCEPTANCE. Limits of Acceptance or of its Revocation. There is a material distinction, though it is not fuUj- recognized in the language of our authorities, between the- acceptance of an offer which asks for a promise, and of an offer which asks for an act, as the condition of the offer be- coming a promise. Where the acceptance is to consist of a promise, it must be communicated to the proposer (/) . But where the acceptance is to consist of an act — as despatching goods ordered by post — it seems that no further communica- tion of the acceptance is necessary than the performance of the proposed act, or at any rate the proposer may dispense with express communication, and an intention to dispense with it may be somewhat readily inferred from the nature of the transaction (g). In the former case the proposed con- tract is called bilateral, in the latter unilateral; these terms have long been current in America but are little used in England. In America the presumption in the case of an unilateral contract is against any communication being needed beyond the performance of the act requested. Further, even when the acceptance consists of a promise,^ and therefore must be communicated, any reasonable means of communication prescribed or contemplated by the proposer are deemed suiEcient as between the acceptor and himself. If an acceptance by means wholly or partly beyond the sender's control, such as the public post or telegraph {h)y is contemplated by the parties, then an acceptance so de- spatched is complete as against the proposer from the time of its despatch out of the sender's control; and, what is more, (/) Mozlet/ T. Tinkler (1835) 1 C. L.J. at pp. 262-3, Bowen L.J. at M. & E. 692, 40 R. E. 675 ; Rmsell p. 269 ; cp. Lord Blackburn's dicta T. Ihornton (1859) 4 H. & N. 788, cited below. 798, 804, 29 L. J. Ex. 9 ; Sebb's case (A) As to the telegraph being on (1867) L. E. 4 Eq. 9. the same footing as letter post, ig) Carlill v. Carbolic Smoke Ball Coi«a» v. O'CoWKor (1888) 20 Q. B. D. Co. [18931 1 Q. B. 256, per Lindley 640, 57 L. J. Q. B. 401. COMMUNICATION OF ACCEPTANCE. 37 is effectual notwithstanding any miscarriage or delay in its transmission happening after such despatch. The parties are presumed to contemplate acceptance by post ■or telegraph whenever the circumstances are such as to make such acceptance reasonable in the usual course of business (i) . It should seem obvious that an uncommunicated mental -assent, since it is neither the communication of a promise nor an overt act of performance, cannot make a contract in •any class of cases; though so late as 1877 it was found need- ful to re-assert this principle in the House of Lords (/c) . At the same time a proposer who prescribes a particular manner of communication may preclude himself from after- wards showing that it was not in fact sufficient. In Lord Blackburn's words, "when an offer is made to another party, and in that offer there is a request express or implied that he must signify his acceptance by doing some particular thing, then as soon as he does that thing there is a complete contract." The most important application of this exception will come before us immediately. But it is not true "that a simple acceptance in your own mind, without any intima- tion to the other party, and expressed by a mere private act, such as putting a letter into a drawer," will, as a rule, serve to conclude a contract (l). (i) Henthorn v. Fraser [1892] 2 in the case of agreements to take Ch. 27, 61 L. J. eh. 373. As to shares under the Companies Act, the limits of the usual course in 1862, see Gunri'a case (1867) L. R. sending money by post, Mitchell- 3 Ch. 40, 37 L. J. Ch. 40. There Henry v. Norwich TInion, ^c. Society need not be formal notice of allot- [1918] 2 E. B. 67, 87 L. J. K. B. ment ; acting towards the applicant •695, C. A. on the footing that he has got the {k) Brogden t. Metropolitan Ry. Co. shares, e.g. appointing him to an (1877) 2 App. Ca. at p. 688 (Lord office under the company for which Selborne), at p. 691 (Lord Blackburn) the shares are a necessary qualitica- and at p. 697 (Lord Gordon). The tion, is enough. This of course is judgments in the Court below which quite in accordance with general g'ave rise to these remarks are not principles. Richards v. Home As- reported. surance Association (1871) L. R. 6 {I) As to a different rule formerly C. P. 591, 40 L. J, C. P. 290. ^supposed to have been introduced 38 AGREEMENT, PEOPOSAL, AND ACCEPTANCE, Contracts by correspondence. — We now come to the special rules which, after much uncertainty, have been settled by our Courts as to contracts entered into by correspondence between persons at a distance. Before dealing with autho- rities it may be useful to show the general nature of the- difficulties that arise. We start with the principle that the proposer is bound from the date of acceptance. Then we- have to consider what is for this purpose the date of accept- ance, a question of some perplexity. It appears just and, expedient, as concerning the accepting party's rights, that the acceptance should date from the time when he has done all he can to accept, by putting his affirmative answer in a determinate course of transmission to the proposer. From that time he must be free to act on the contract as valid, and disregard any revocation that reaches him afterwards. Hence- this must be the one point, if there is only one (as the common law theory of the formation of contracts in general seems. to require), at which the contract is irrevocable and absolute. Still, are we to hold it absolute for all purposes? Shall the proposer be bound, though, without any default of his own,, the acceptance never reach him? Shall the acceptor remain, bound, though he should afterwards despatch a revocation which arrives with or even before the acceptance? The first question is answered by our Courts in the affirmative; the- second is still open. At first sight a negative answer to both, appears the more reasonable. The proposer cannot, at alL events, act on the contract before the acceptance is communi- cated to him; as against him, therefore, a revocation should be in time if it reaches him together with or before the original acceptance, whatever the relative times of their- despatch. On the other hand, it seems hard tharf; he should be bound by an acceptance that he never receives. He has COJSTEACTS BY CORRESPONDENCE. 39 no means of making sure whether or when his proposal has been received (to), or whether it is accepted or not, for the other party need not answer at all. The acceptor might more reasonably be left to take the more avoidable risk; or, to iput it another way, it might have been held to be an implied condition in proposals by correspondence that ac- ceptance shall be actually received. This, however, would not be applicable where the proposal was a request for an act to be immediately done. On the whole our Courts have thought it best not to depart from the common law doctrine that an agreement is finally concluded at some one point by exchange of a promise either for an act or for a reciprocal promise, leaving the parties to guard themselves in their own way. A man may, if he think fit, make his offer expressly conditional on actual receipt of an acceptance, or reserve in his acceptance liberty of revo- cation by any communication arriving earlier or at the same time. It is clear that the proposer may specify the mode, at least any reasonable mode, of acceptance; but in most agreements by correspondence the post or telegraph is used as a matter of course; it appears simpler to say that the usual means of communication between parties at a distance are deemed to be authorized by him who opens the correspondence (w) than to call the post-office, as some of the earlier cases do, the common agent of both parties. Further, it would seem, though nothing yet laid down goes beyond suggestion, that even a revocation despatched after the acceptance and arriving before it would be inoperative, (mj It is possible to obtain an have actually come to the knowledge official acknowledgment of the due of the addressee, delivery of a registered letter; but (n) Sentfiornv. Frasei'llSdijiGh. this does not prove that the contents 27, 61 L. J. Oh. 373. 40 AGREEMENT, PKOPOSAL,'' AND ACCEPTANCE, ■unless liberty to revoke in this manner had been reserved in the terms of acceptance. In the extreme case of the accept- ance wholly miscarrying, so that the revocation were the only notice received by the proposer that there ever had been an acceptance, this may be thought a startling consequence, but, as we have said, parties can take their own precautions when they know for certain what the rule is. What really matters in business is to have a settled rule and not make it doubtful by refined exceptions. Turning to the authorities, we need not dwell much on the earlier cases, of which an account is given in the Appen- dix (o) . They established that an acceptance by post, de- spatched in due time as far as the acceptor is concerned, concludes the contract notwithstanding delay in the despatch by the proposer's fault (as if the offer is mis-directed), or accidental delay in the delivery; and that the contract, as against the proposer, dates from the posting, so that he cannot revoke his offer after the acceptance is despatched. Until 1879 it was uncertain whether a letter of acceptance- that miscarried altogether was binding on the proposer. In that year the point came before the Court of Appeal (p) . An application for shares in the plaintiff company, whose office was in London, was handed by the defendant to a country agent for the company. A letter of allotment, duly addressed to the defendant, was posted from the London office, but never reached him. The company went into liquidation, and the liquidator sued for the amount due on the shares . It was held by Thesiger and Baggallay L.J J. that "if an offer is made by letter, which expressly or impliedly authorizes (o) See Note B. For Continental codes and of the Indian Contract opinions see Prof. J. Kohler, Vertrag Act are not, in my opinion, appre- nnter Abswesenden, in ArchiT fiir ciably better than our rules. biirgerl.Recht, March, 1889; Valery, {p) Household Fire Inaurance Co. Den Contrats par Correspondanco, v. Grant (1S79) 4 Ex. Div. 216, 48 Paris, 1895; Albert Cohen, Paris, L. J. Ex. S77, Finch Sel. Ca. 133. 1821. The provisions of Europeau CONTRACTS BY COREESPONUENCK. 41 the sending of an acceptance of such offer by post, and a letter of acceptance is posted in due time, a complete contract is made at the time when the letter of acceptance is posted, though there may be delay in its delivery " (q); that, on the grounds and reasoning of the authorities, this extends to the case of a letter wholly failing to reach its address; that in the case in hand the defendant must under the circumstances be taken to have authorized the sending by post of a letter of allotment; and that in the result he was bound. They were disposed to limit the rule " to cases in which, by reason of general usage, or of the relations between the parties to any particular transactions, or of the terms in which the offer is made, the acceptance of such offer by a letter through ■the post is expressly or impliedly authorized" (r). Cases outside these limits, however, are not likely to be frequent; and in Henthorn v. Fraser (s) it is decided that an offer delivered by hand may authorize, or, in the terms preferred by the Court, contemplate, an acceptance by post(i). In Grant's case Bramwell L.J. delivered a vigorous dissenting judgment, in which he pointed out among other things the absurdity of treating a revocation which overtakes the accept- ance as ineffectual, but relied mainly on the broad ground that a letter not delivered at all is not a communication (?<) . In Henthorn v. Fraser, Kay L.J. did not conceal his dis- satisfaction with the reasoning of the authorities by which the Court was bouiid. However, as will be seen by reference to the Appendix, the decisions of the Court of Appeal con- firm that sense in which a previous decision of the House of {q) Baggallay L.J. 4 Ex. Div. at (d) Pelivery to a postman who is -p. 224. not authorized to receive letters for (?) Baggallay L. J. 4 Ex. Div. at the post is not equivalent to posting : p. 228 ; the same limitation seems Me London and Northern Bank [1900] admitted by Thesiger L.J. at p. 218. 1 Ch. 220, 69 L. J. Ch. 24. (s) [1892] 2 Ch. 27, 61 L. J. Ch. („) 4 Ex. Div. at p. 234. 373. 42 AGEEEMENT, PROPOSAL, AND ACCEPTANCE . Lords was generally understood. An offer may, of course^, be expressly conditional on actual receipt of an acceptance ■within some definite time. In sucTi case an acceptance- which either wholly miscarried or arrived later than the speci- fied time could not be effective (a?) . We have seen that in general the contract dates from the acceptance; and though the acceptance be in form an acknow' ledgment of an existing agreement, yet this will not make the contract relate back to the date of the proposal, at all events not so as to affect the rights of third persons {y) . There is believed to be one positive exception in our law to the rule that the revocation of a proposal takes effect only when it is communicated to the other party. This exception is in the case of the proposer dying before the proposal is- accepted. This event is in itself a revocation, as it makes- the proposed agreement impossible by removing one of the persons whose consent would make it (z) . There is no dis- tinct authority to show whether notice to the other party is material or not; but in the analogous case of agency the death of the principal in our law, though not in Roman law.,, puts an end ipso facto to the agent's authority, without regard to the time when it becomes known either to the agent or to third parties (a). It would probably be impossible not {x) See per Theaiger L.J. 4 Ex. 72 L. J. K. B. 490. Div. at p. 223, and per Bramwell (j/) Felthofise v. Bindley (1862) L.J. at p. 238. Held aoo. in Mas- p. 31, above. sachusetts (where, however, the (a) Per Mellish L.J. in Dickinson v.. general d&trine that an acceptance Dodds (1876) 2 Ch. Div. at p. 475, by post concludes the contract from 45 L.J. Ch. 777. the date of posting is not received) ; (a) Blades v. Free (1829) 9 B. & Zewia V. Browning (1880) 130 Mass. C. 167, 32 R. B. 620 ; Campmarl 173. There is now a tendency to v. Woodburn (1854) 16 C. B. 400, hold that even in one-sided com- 24 L. J. C. P. 13, 2 Kent Comm. munioations by letter the rights of 646, D. 46, 3, de solut. at liberat.. parties are fixed at the date of post- 32. The Indian Contract Act, o. 208, ing: see Alexander v. Steinhardt illust. (c), adopts the Roman rule. Walher # Co. [1903] 2 K. B. 208, CERTAINTY OF ACCEPTANCE. 43 to follow the analogy of this doctrine. The Indian Contract Act makes the knowledge of the other party before acceptance a condition of the proposal being revoked by the proposer's death. As for insanity, which is treated in the same way by the Indian Act, that would not in general operate as a revocation by the law of England, for we shall see that the contract of a lunatic (not so found by inquisition) is only voidable even if his state of mind is known to the other party. But it has been said that "if a man becomes so far insane as to have no mind, perhaps he ought to be deemed dead for the purpose of contracting " (&). Certainty of Acceptance. The next rule is in principle an exceedingly simple one. It is that " In order to convert a proposal into a promise the accept- ance must be absolute and unqualified" (c). For unless and until there is such an acceptance on the one part of terms proposed on the other part, there is no expression of one and the same common intention of the parties, but at most expressions of the more or less different intentions ,of each party separately — in other words, pro- posals and counter-proposals. Simple and obvious as the rule is in itself, the application to a given set of facts is not always obvious, inasmuch as contracting parties often use loose and inexact language, even when their communications are in writing and on important matters. The question whether the language used on a particular occasion does or does not amount to an acceptance is wholly a question of construction, and generally though not necessarily the con- struction of a written instrument. The cases in which such {b) Bramwell, L.J. Drewy.Nunn {c) Indian Contract Act, s. 7, (.1879) i Q. B. Div. at p. 669, 48 sub-s. 1. L. J. Q. B. 691. 44 AGREEMENT, PROPOSAL, AND ACCEPTANCE. questions have been decided are numerous (d), and we shall here give by way of illustration only a selection of modern ones. i 1 Acceptance insufficient. — In Honeyman v. Marryat [e], before the House of Lords, a proposal for a sale was accepted " subject to the terms of a contract being arranged" between the vendor's and purchaser's solicitors: this was clearly no contract. Compare with this Huasey v. Sorne-Fayne (/), from which it seems that the acceptance of an offer to sell land " subject to the title being approved by our solicitors " is not a qualified or conditional acceptance, but means only that the title must be investigated in the usual way ; in other words, it expresses the conditions annexed by law to contracts of this class, that a good title shall be shown by the vendor. In Appleby v. Johnson (g), the plaintiff wrote to the defendant, a calico- printer, and offered his services as salesman on certain terms, among which was this: "a list of the merchants to be regularly called on by me to be made." The defendant wrote in answer : " Tours of yesterday embodies the substance of our conversation and terms. If we can define some of the terms a little clearer, it might prevent mistakes ; but I think we are quite agreed on all. We shall therefore expect you on Monday. (Signed) — J. Appleby. — P.S. — I have made a list of customers which we can consider together." It was held that on the whole, and especially having regard to the postscript, which left an important term open to discussion, there was no complete contract. In Crossley v. Maycock [h), an offer to buy certain land was accepted, but with reference to special conditions of sale not before known to the intending purchaser. Held only a conditional acceptance. In Lloyd v. Nowell (J), an agreement " subject to the preparation by my solicitor and completion of a formal contract" was held (1) to exclude the formation of a binding agreement ; (2) not to be a condition which the vendor could waive as being only for his benefit. An offer " subject to title and contract" signifies refusal to be bound without a formal contract in writing, and approval of a draft will not do : Coope v. Midout (k). [d) For collected authorities, see Ch. 379, followed in Jones v. Daniel (inter alia) Fry on Specific Perform- [1894] 2 Ch. 332, 63 L. J. Ch. 562. ance, u. 2. (i) [ISg."!] 2 Ch. 744, 64 L. J. Ch. (e) (1857) 6 H. L. C. 112, 26L. J. 744. Ch. 619, byLordWensleydale. The [k) [1921] 1 Ch. 291, 90 L. J. Ch. case was not argued, no one appear- 61, C. A. : North v. Fereival [1 ing for the appellant. 2Ch.l28, 67 L. J. Ch. 321, is wrong, (/) (1879) 4 App. Ca. 311, 322, seepeiPa.T'keTj.Eaizfeldt-Wildenbury 48 L. J. Ch. 846. y. Alexander [1912'] I Gh.28i, 81 L.J. iff) (1874) L. R. 9 C. P. 158, 43 Ch. 184, and Pvussell J. and C. A. L. J. C. P. 146. Rossdale v. Denny [1921] 1 Ch. 57, (A) (1874)L.R.18Eq. 180,43L.J. where authorities are reviewed. CERTAINTY OF ACCEPTANCE. 45 In Stanley v. Dowdeswell (I) an answer in this form : "I have decided on taking No. 22, Belgrave Eoad, and have spoken to my agent, Mr. C, who will arrange matters with you," was held insuflaoient to make a contract, as not being complete and unqualified, assuming (which was doubtful) that the letter of which it was part did otherwise sufficiently refer to the terms of the proposal. A. telegraphs to B. : "Will you sell us Whiteacre ? Telegraph lowest cash price, answer paid." B. telegraphs in reply: "Lowest price for "Whiteacre 900?." This is an answer only to the second question asked, and does not amount to an offer to sell, but only to a statement that an offer below 900/. will not be considered, and therefore a telegram from A. pur- porting to agree to the purchase at 900/. is itself only an offer {m). Where a seller undertook to accept the highest net money tender made by either of two competitors for the purchase, and one of them offered such sum as would exceed by 200/. the sum (unknown) which might be offered by the other : this was held no acceptance of the seller's terms, and incapable of constituting a contract [n) . Aeceplonce sufficient. — In Filby v. Hounsell (o) an acceptance by a purchaser "subject to contract as agreed," i.e. a form set out on the vendor's own conditions of sale, was held without difficulty to be absolute. An acceptance may be complete though it expresses dissatisfaction at some of the terms, if the dissatisfaction stops short of distent, so that the whole thing may be described as a " grumbling assent " {p}. Again, an acceptance is of course not made conditional by adding words that in truth make no difference ; as where the addition is simply im- material (q), or a mere formal memorandum is enclosed for signature, but not shown to contain any new term (r). And further, if the person answering an unambiguous proposal accepts it with the addition of ambiguous words, which are capable of being construed consistently with the rest of the document and so as to leave the acceptance absolute, they will if possible be so construed (s) . (I) (1874) L. E. 10 C. P. 102. (p) Jotjce^. Swann (\?,U) n CB. Cp. Smith V. Webster (1876) 3 Ch. N. S. 84 ; cp. per Lord St. Leonards, DiT. 49, 45 L. J. Oh. 528. 6 H. L. C. 277-8 (in a dissenting (m) Barvey v. Facey (J. C.) [1893] judgment). A. C. 552, 62 L. J. P. C. 127. This (?) Clive v. Beaumont (1847) 1 case does not seem to be generally De G-. & S. 397, 75 R. R. 144. approved. (»") Oibbins v. N. E. Metrop. (n) South Setton Coal Co. v.Saswell, Asylum District (1847) 11 Beav. 1, ^e. Coal Co. [1898] 1 Ch. 465, 67 83 R. R. 101. L. J. Ch. 238, C. A. («) English and Foreign Credit Co. ip) [1896] 2 Ch, 737, 65 L. J. t. Arduin (1870-1) L. E. 5 H. L. Ch. 852. 64, per Lord Westbury, at p. 79, 40 L. J. Ex. 108. 46 AGREEMENT, PROPOSAL, AND ACCEPTANCE. Again, tlie unconditional acceptance of a proposal is not deprived of its effect by the existence of a misunderstanding between the parties in the construction of collateral teims which are not part of the agreement itself (t). An acceptance on condition may be absolute if expressed in a manner ■which estops the acceptor from denying that the condition has been per- formed, or that he has waived its performance (k) . A formal acceptance of an alleged proposal may estop the acceptor from denying that any such proposal was in fact made, at any rate if he has taken any benefit under the expressed agreement («). One further caution is needed. All rules about the forma- tion and interpretation of contracts are subject to the implied proviso, " unless a contrary intention of the parties appears." And it may happen that though the parties are in fact agreed upon the terms — ^in other words, though there has been a proposal sufficiently accepted to satisfy the general rule — yet they do not mean the agreement to be binding in law till it is put into writing or into a formal writing. If such be the understanding between them, they are not to be sooner bound against both their wills. " If to a proposal or offer an assent be given Subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipula- tion " (y). Whether such is in truth the understanding is a question which depends on the circumstances of each par- ticular case; if the evidence of an agreement consists of written documents, it is a question of construction (not sub- ject to any fixed rule or presumption) whether the expressed -agreement is final (z) . For this purpose the whole of a continuous correspondence must be looked at, although part it) JBames Y. Woodfall (1859) 6 [1907] A. C. 96, 101, 76 L. J. P. C. C. B. N. S. 657, 28 L. J. C. P. 338. 31. The facts unfortunately do not admit (x) Fearl Life Assurance Co. v. of abridgment. Johnson [1909] 2 K. B. 288, 78 («) Soberts v. Security Co. [1897] L. J. K. B. 777. 1 Q. B. Ill, 66 L. J. Q. B. 119, {y) Chinnock v. Marchioness of Eh/ C. A., but qu. as to the actual de- (1865) 4 D. J. S. 638, 646. •cision there, see Equitable Fire and (z) Rossiter v. Miller (1878) 3 App. Accident Office v. The Ghing Wo Bong Ca. 1124, 1162, 48 L. J. Ch. 10. FINALITY OF ACCEPTANCE, 47 of it, standing alone, might appear to constitute a complete •contract (a) . But this does not mean that a complete accept- ance, including aU the terms agreed on down to its date, can be undone by further correspondence short of a new agree- ment (6). It is not to he supposed, "because persons wish to have a formal agreement drawn up, that therefore they cannot be bound by a previous agreement, if it is clear that such an agreement has been made; but the circumstance that the parties do intend a subsequent agreement to be made is strong evidence to show that they did not intend the previous nego- tiations to amount to an agreement" (c). Still more is this the case if the first record of the terms agreed upon is in so many words expressed to be " subject to the preparation and ■approval of a formal contract" (d): or where a certain act, «uch as payment of the first premium of insurance, is expressly mentioned to fix the commencement of the con- tract (e). But again: "it is settled law that a contract may be made by letters, and that the mere reference in them to a future formal contract will not prevent their constituting a binding bargain" (/). And in Brogden v. Metropolitan By. Co. (g), the House of Lords held that the conduct of the parties, who in fact dealt for some time on the terms of a draft agreement which had never been formally executed, was inexplicable on any other supposition than that of an actual though informal consent to a contract upon those terms. (e) Miissey v. Morne-JPmjne (1879) [d] Winn v. Bull (1877) 7 Ch. D. 4 App. Ca. 311, 48 L. J. Ch. 846. 29. (J) Perry v. Suffields [1916] 2 Ch. («) Canning v. Farquhar (1886) 16 187, 85 L. J. Ch. 460, C. A. Q. B. Div. 727, 55 L. J. Q. B. 225. W{o) Midgimy v. Wharton (1856-7) (/) James L.J. in Bonnewell v. € H. L. C. 238, 264, 268, per Lord Jenkins (1878) 8 Ch. Div. 70, 73, Cranworth C, and Sfe per Lord 47 L. J. Ch. 758 ; Bolton v. Lambert Wensleydale at pp. 305-6, 27 L. J. (1889) 41 Ch. Div. 295, 305. Ch. 46. [g) (1877) 2 App. Ca. 666 ; see Lord Cairns' opinion. 48 AGKEEMENT, PROPOSAL, AND ACCKPTANCE. The tendency of recent authorities is to discourage all attempts to lay down any fixed rule or canon as governing these cases. The question may often be made clearer by putting it in this way — whether there is in the particular case a final consent of the parties such that no new term or variation can be introduced in the formal docu- ment to be prepared (h). But clear requirement of a formal contract is not dispensed with by the fact, if it be so, that all the terms are agreed (hh). Certainty of Terms. An agreement is not a contract unless its terms are certain or capable of being made certain. For the Court cannot enforce an agreement without know- ing what the agreement is. Such knowledge can be derived only from the manner in which the parties have expressed their intention (i) . It is their business to find such expres- sions as will convey their meaning with reasonable certainty to a reasonable man conversant with affairs of the kind in (which the contract is made. The question then is whether such certainty be present in the particular case. One or two instances will serve as well as many. A promise by the buyer of a horse that if the horse is lucky to him, he will give 5L more, or the buying of another horse, is " much too loose and vague to be considered in a court of law." " The buying of another horse " is a term to which the Court cannot assign any definite meaning (fc) . An agreement to sell an estate, reserving " the necessary land for making a railway," is too vague (i). An agreement to take a house "if put into (A) Lord Blackburn, 3 App. Ca. (i) Cp. the remarks and references at p. 1151. In addition to cases of MeCardie J. [1918] 2 K. B. at already cited seei«m«T.5rass (1877) p. 262. 3 Q. B. Dir. 667 ; Kmgttm-upon- (A) Guthing v. Lynn (1831) 2 B. & Bull [Governors ^e.) v. Fetch (1854) Ad. 232. 10 Ex. 610, 102 R. E. 728. {I) Pearce v. Watts (1875) L. E. {hh) Coope T. Ridout [1921] 1 Ch. 20 Bq. 492, 44 L. J. Ch. 492. 291, 90 L. J. Ch. 61, C. A. ILLUSORY PROMISES. 49 thorough repair," and if the drawing-rooms were " hand- somely decorated according to the present style," has been dismissed as too uncertain to be specifically enforced (to) . A statement by a parent to his daughter's future husband that she will have " a share " of his property cannot be con- strued as a promise of an equal share (ra) . On the other hand an agreement to execute a deed of separation containing ''usual covenants" is not too vague to be enforced (o). Illusory promises. — To this head those cases are perhaps best referred in which the promise is illusory, being dependent on a condition which in fact reserves an unlimited option to the promisor. " Nulla promissio potest consistere, quae ex voluntate promittentis statum capit"(p). Thus where a committee had resolved that for certain services " such remu- neration be made as shall be deemed right," this gave no right of action to the person who had performed the' services; for the committee alone \\evc to judge whether any or what recompense was right (g) . Moreover a promise of this kind, though it creates no enforceable contract, is so far effectual as to exclude the promisee from falling back on any contract to pay a reasonable remuneration which would be inferred from the transaction if there were no express agreement at all. In Roberts v. Smith (r) there was an agreement between A. and B. that B. should perform certain services, and that in one event A. should pay B. a certain salary, but that in another event A. should pay B. whatever A. might think reasonable. That other event having happened, the Court held there was no contract which B. could enforce. (ms) Tatjlor v. Fortinglan (1835) 7 (o) Hart v. Hart (1881) 18 Ch. D. D. M. & G. 328, 109 R. R. 147. 670, 68), 50 L. J. Ch. 697. This of conree did not decide that an [p) J). 45, 1. de verb. ohl. 108, § 1. action for damages would not lie. (j) Taylor y. Brewer (1813) 1 M. («) Re Fiokm [1900] 1 Ch. 331, & S. 290, 21 R. R. 831. 69 L. J. Ch. 161. M (1859) 4 H. & N. 315, 28 L. J. P.— C. Ex. 164, 113 R. R. 462. 4 50 AGRKEMKNT, PKOHOSAL, AND ACCEPTANCE. Services had indeed beeii rendered, and of the sort for which people usually are paid and expect to be paid; so that in the absence of express agreement there would have been a good cause of action for reasonable reward. But here B. had expressly assented to take whatever A. should think reasonable (which might be nothing), and had thus precluded himself from claiming to have whatever a jury should think reason- able. It would not be safe, however, to infer from this case that under no circumstances whatever can a promise to give what the promisor shall think reasonable amount to a promise to give a reasonable reward, or at all events something which can be found as a fact not to be illusory. The circumstances of each case (or in a written instrument the context) must be looked to for the real meaning of the parties; and " I leave it to you " may well mean in particular circumstances (as in various small matters it notoriously does), " I expect what is reasonable and usual, and I leave it to you to find out what that is," or, " I expect what is reasonable, and am content to take 3'our estimate (assuming that it will be made in good faith and not illusory) as that of a reasonable man" (s). Again, there may be a good promise conditional on the promisor being satisfied with the work done for him, or with the proof of a fact. This is not an arbitrary jDower but a discretion to be exercised in good faith (i). Another somewhat curious case of an illusor}' promise (though mixed up to some extent with other doctrines) is Moorhou-se v. Colvin (m). There a testator, having made a {«) Such a case (if it can be sup- Jlde, would or ought to have ported, see the remarks on it in awarded. Roberts v. Smith, and per Buckley, {t) Andrews %. Belfleld (1857) 2 L.J., in Broome v. Speah [1903] C. B. N. S. 779, 109 R. R. 885 1 Ch. 686, 599) was Bryant v. Might, (goods) ; Braunstein v. Aeeidental (1839) 5 M. & W. 114, where the Death Insce. Go. (1861) 1 B. & S. majority of the Court held that it 782 (proof of claim), was for the jury to ascertain how («) (1851) 15 Beav. 341, 348, affd. much the defendant, acting bona by L.JJ. 21 L.J. Ch. 782, 92 R. R. 452, 458. CERTAINTY OF TERMS, 51 will by which he left a considerable legacy to his daughter, wrote a letter in which he said, after mentioning her other expectations, " this is not all: she is and shall be noticed in my will, but to what further amount I cannot precisely say." The legacy was afterwards revoked. It was contended on behalf of the daughter's husband, to whom the letter had with the testator's authority been communicated before the marriage, that there was a contract binding the testator's estate to the extent of the legacy given by the will as it stood at the date of the letter. But it was held that the testator's language expressed nothing more than a vague intention, although it would have been binding had it referred to the specific sum then standing in the will, so as to fix that sum as a minimum to be expected at all events . A promise to enter into a certain kind of agreement with a third person is obviously dependent for its performance on the will of that person, but is not thereby rendered so un- certain as not to afford a cause of action as between tbe parties to it. The consent of a third person is not more uncertain than many other things which parties may and do take on themselves to warrant (a;). Absurd promises. — A promise might conceivably be illu- sory in another way, namely if on the face of its terms it were so absurd that it could not be taken as the expression of any serious dealing. Extreme cases of fraudulent and oppressive agreements may be said, perhaps, to come near this as a limit. But for such cases there are special and more certain rules. We do not know that an agreement has ever been sued on and held void on the sole ground of being irrational. Questions as to the possibility of performance are for all practical purposes questions of construction, as we shall see later. {x) Foster V. Wheeler (1888) 38 Ch. Div. 130, 57 L. J. Ch. U9, 871. 4(2) 52 AGREEMENT, PROPOSAL, AND ACCEPTANCE. Repugnancy in law. — If a promise obviously purported to aim at a result incompatible with the law of property, such as the sale of something not alienable, or the creation of an estate not known to English conveyancing, it would fall within the same class. But this does not occur in fact. What does often happen is that it is not obvious even to learned persons whether a given disposition of property (and consequently an agreement to make it) will or will not stand with some of the more refined rules in our law, such as the rule against remoteness . In such cases there may be a double question, first of construing the disposition whose validity is in doubt, and then of interpreting the rule, and either or both of them may be difficult. These difficulties are outside our present scope . It is possible, however, for slips in drafting to produce such legally absurd results as purporting to make a man covenant with himself {y) . Mishaps of this kind may be remediable by the jurisdiction to rectify instruments (of which we shall speak elsewhere) or even by a context sufficiently manifesting the true intention {z) . Acceptance by Conduct. Conduct which is relied on as constituting the acceptance of a contract must (no less than words relied on for the same purpose) be unambiguous and unconditional (a) . Where the proposal itself is not express, then it must also be shown that the conduct relied on as conveying the proposal was such as to amount to a communication to the other party of the proposer's intention. Difficult questions may arise (y) A promise by A. to pay A. («) Fiteh v. Jmts (1856) 5 E. & B. and B. jointly is no Isss repugnant 238, 24 L. J. Q. B. 293, 103 R. R. than if it were to pay himself alone : 455. Faulkner v. Zoice (1848) 2 Ex. 595, («) Warner v. Willington (1856) 76 R. R. 697, and see per Bowen 3 Drew. 523, 533, 25 L. J. Ch. 662, L.J., Ite Hoyle [1893] 1 Oh. 84, 99. 106 R. R. 416. ACCEPTANCE OF CONDITIONS. 53 on this point, and in particular have arisen in cases where public companies entering into contracts for the carriage or custody of goods have sought to limit their liability by special conditions printed on a ticket delivered to the passenger or depositor at the time of making the contract. The tendency of the earlier authorities is to hold that (apart from the statu- tory restrictions of the Kail way and Canal Traffic Act, 1854, which do not apply to contracts with steamship companies, nor to contracts with railway companies for the mere custody as distinguished from the carriage of goods) such conditions are binding. A strong opposite tendency is shown in Render son v. Stevenson {h), where the House of Lords decided that in the case of a passenger travelling by sea with his luggage an indorsement on his ticket stating that the shipowners will not be liable for loss does not prevent him from recovering for loss caused by their negligence, unless it appears either that he knew and assented to the special terms, or at any rate that he knew there were some special terms and was content to accept them without examina- tion (c) . Since this there have been reported cases arising out of the deposit of goods, for safe custody or otherwise, in exchange for a ticket on which were indorsed conditions limiting the amount of the receiver's liability {d) . The result (4) (1875) L. R. 2 So. & D. Parher v. -S. E. R. Co. (1876); 470. Lord Chelmsford's and Lord Gahell v. S. E. R. Co. (1877) 2 C. P. Hatherley's dicta (pp. 477, 479) go Div. 416, 46 L. J. C. P. 768, revers- farther, and suggest that the con- ing in Parker's case the judgment tract is complete before the ticket is of the C. P. Div. 1 C. P. D. 618, 46 delivered at all, so that some other L. J. C. P. 768 ; TTatkins v. Eymill communication of the special terms (1883) 10 Q. B. D. 178, 52 L. J. would have to be showTi. But the Q. B. 121, where the former cases later oases have not adopted this are fully reviewed by Stephen J. : TJew. G. T. R. Co. v. Robinson [1915] A. C. ic) Followed in Richardson ^ Co. 740, 184 L. J. P. C. 194 ; Bood v. v. Rowntree [1894] A. C. 217, 63 Anchor line [1918] A. C. 837, 87 L. J. Q. B. 283. L- J- P- C. 156 ; 'where the law is (d) Harris v. G. W. R. Co. (1876) summed up ; Burke v. S. E. R. Co. 1 Q. B. D. 515, 45 L. J. Q. B. 729 ; (1879) 5 C. P. D. 1, 49 L. J. C. P. 54 AGKEEMENT, PKOPOSAL, AND ACCEPTANCE. appears to be that it is a question of fact whether the notice given in each case was reasonably sufficient to inform the party receiving it at the time of making the contract that the party giving it intended to contract only on special terms. A person who, knowing this (e), enters into the contract, is then deemed to assent to the special terms; but this, again, appears to be subject to an implied condition that the terms are relevant and not manifestly unreasonable (/). It has already been pointed out that the ordinary rules of proposal and acceptance do not apply to promises embodied in a deed. It is established by a series of authori- ties which appear to be confirmed by the ratio decidendi of 1 07, is a rather special case ; Jii/a» v. Oceanic Steam Navigation Co. [1914] 3 K. B. 731, 83 L. J. K. B. 1553, C. A. was decided on other gronnds. («) Knowledge that there are special conditions must be found as a fact. It may he inferred from reasonable means of knowledge ; in deciding whether the means offered are reasonable all the circumstances, such as the class of persons to whom the notice is addressed, are properly taken into account : Richardson ^ Co. V. Sowntree [1894] A. 0. 217, 63 L. J. Q. B. 283. Compare Ulpian's remarks on a fairly analogous ease, D. 14, 3, de inst. act. 11, ^ 2, 3. De quo palam proscriptum f uerit, ne cum eo contrabatur, is praepositi loco non habetur. . . Proscribere palam sic aocipimus : olaris litteris, nnde de piano recte legi possit, ante tabernam scilicet, Tel ante eum locum, in quo negotiatio exercetur, non in loco remoto, sed in evident! .... Certe si quis dicat ignoiasse se litteras, vel non observaase quod propositum erat eum multi legereut, cumque palam esset propositum, non audietur. Formerly the conditions printed by railway companies on their tickets, and the corresponding notices exhibited by them, were not often, they are stiU not always, " Claris litteris, unde de piano recte legi possit," or " in loco evidenti." As to conditions on passenger tickets see per Wills and Wright J J. in (?. N. B. Co. V. Palmer [1895] 1 Q. E. 862, 64 L. J. Q. B. 316, where the point whether there was sufficient notice of the condition was not open. As to conditions in a sold note. Roe V. R. A. Naylor [1917] 1 K. B. 713, 86 L. J. K. B. 771. As to the master of a ship signing conditions of towage. The Luna [1920] P. 22, 89 L. J. P. 109. (/) That is, not " so irrelcTant or extravagant that the party tendering the ticket must have known that the party receiving it could never have intended to be bound by such a con- dition" : Bray J., Gibaud v. G. E. S. Co. [1920] 3 K. B. 689, 699 (affid. Feb. 17, 1921, this point not touched, see Addenda). PROMISES BY DEED. 55 Xenos V. Wichham (g) in the House of Lords, that a promise so made is at once operative without any question of accept- ance; and this because it derives its force not from anything passing between the parties, but from the promisor's — or, in the regular language of conveyancing, covenantor's — solemn admission that he is bound. Thus an obligation is created which whenever it comes to the other party's know- ledge affords a cause of action without any other significa- tion of his assent, and in the meanwhile is irrevocable. But if the promisee refuses his assent when the promise comes to his knowledge, the contract is avoided. "If A. make an obligation to B., and deliver it to C. to the use of B., this is the deed of A. presently; but if C offers it to B., then B. may refuse itinpais " {i.e., without formality) " and thereby the obligation will lose its force "(A). (ff) (1866) h. E. 2 H. L. 296. The previous cases were Doe d. Garnms v. Knight (1826) 5 B. & C. 671, 29 R. R. 355 (a mortgage); Bxton T. Scott (1833) 6 Sim. 31, 38 R. R. 72 (the like) ; Hall v. Palmer (1844) 3 Hare, 532, 13 L. J. Ch. 352, 64 R. R. 399 (bond to secure annuity after obligor's death) ; Fletcher v. Fletcher (1844) 4 Hare, 67, 14 L. J. Ch. 66, 67 R. R. 6 (covenant for settlement to be made by executors). Xenos v. WicTcham might have been decided on the ground that the company's execu- tion of the policy was the acceptance of the plaintiffs' proposal, and the plaintiffs' broker was their agent to receive communication of the acceptance. But that ground is distinctly not relied upon in the opinions of the Lords: see L. R. 2 H. L. at pp. 320, 323. [h) Butler and Baker's case, 3 Co. Rep. 26, quoted by Blackburn J. L. R. 2 H. L. at p. 312. " Obli- gation ' ' here, as always in our older books, means the special form of deed otherwise, and now exclu- sively, called a bond. 66 CAPACITY OF PAKTIES. CHAPTEE II. Capacity of Parties. All statements about legal caiDacities and duties are taken, unless the contrary be expressed, to be made with reference to "lawful men" (a), citizens, that is, who are not in any manner unqualified or disqualified for the full exercise of a citizen's normal rights. There are several ways in which persons may be or become incapable, wholly or partially, of doing acts in the law, and among other things of becoming parties to a binding contract. All persons must attain a certain age before they are adihitted to full freedom of action and disposition of their property. This is but a necessary recognition of the actual conditions of man's life. The age of majority, however, has to be fixed at some point of time by positive law. By English law it is fixed at twenty-one years; and every one under that age is called an infant (Co. Lit. 1716). Every \\'oman who marries has to sustain, as incident to her new status, technically called coverture, a loss of legal capacity in various respects; a loss expressed, and once sup- posed to be sufficiently explained, by the fiction that husband and wife are one person . Both men and women may lose their legal capacity, per- manently or for a time, by an actual loss of reason. This we call insanity when it is the result of distinctly mental (a) In the Latin it is " legalis homo," not " Tir." Our medieval ancestors, not foreseeing the enfranchisement of women, wrote better Latin than they knew. AGKNCY. 57 disease, intoxication when it is the transient effect of drink or narcotics. Similar consequences, again, may be attached by provisions of positive law to conviction for criminal offences. Deprivation of civil rights also may be, and has been in England in some particular cases, a substantive penalty; but it is not thus used in any part of our law now in practical operation. On the other hand, the capacity of the "lawful man " re- ceives a vast extension in its application, while it remains unaltered in kind, by the institution of agency. One man may empower another to perform acts in the law for him and acquire rights and duties on his behalf. By agency the individual's legal personality is multiplied in space, as by euccession it is continlied in time. The thing is now so familiar that it is not easy to realize its importance, or- the magnitude of the step taken by legal theory and practice in its fuU recognition. We may be helped to this if we re- member that in the classical Roman system there is no law of agency as we understand it. The slave, who did much of what is now done by free servants and agents, was re- garded as a mere instrument of acquisition for his owner, except in the special classes of oases in which either slaves or freemen might be in a position analogous, but not fully equivalent, to that of a modern agent. As between the prin- cipal and his agent, agency is a special kind of contract. But it differs from other kinds of contract in that its legal consequences are not exhausted by performance. Its object is not merely the doing of specified things, but the creation of new and active legal relations between the principal and third persons. Hence it may fitly have its place among the conditions of contract in general, though the mutual duties of principal and agent belong rather to the treatment of agency as a species of contract. While the individual citizen's powers are thus extended 58 CAPACITY OF PARTIES. by agency, a great increase of legal scope and safety is given to the conjoint action of many by their association in a corporate body or artificial person. The development of cor- porate action presupposes a developed law of agency, since a corporation can execute its intentions only through natural persons generally or specially authorized to act on its behalf. And as a corporation, in virtue of its perpetual succession and freedom from all or most of the disabilities which may in fact or in law affect natural persons, has powers exceeding those of a natural person, so those powers have to be defined and limited by rules of law, partly for the protection of the individual members of the corporation, partly in the interest of the public. We proceed to deal with these topics in the order indicated : and first of the exceptions to the capacity of natural persons to bind themselves by contract. PAET I. I. Infants. An infant is not absolutely incapable of binding himself, but is, generally speaking, incapable of absolutely binding himself by contract (6). His acts and contracts are voidable at his option, subject to certain statutory and other exceptions. By the common law a contract made by an infant is generally voidable at the infant's option, such option to be exercised 'either before (c) his attaining his majority or within a reasonable time afterwards. Where the obligation is incident to an interest (or at all events to a beneficial interest) in property, it cannot be avoided while that interest is retained. Some agreements are, exceptionally, not voidable but void- (4) Stated in this fonn by Hayes J. (c) As to this see p. 64 below. 14 Jr. C. L. Eep. at p. 356. C0NT1{ACT« OF INFANTS. 5!> By the Infants' Relief Act, 1874, loans of money ta infants, contracts for the sale to them of goods other than neceesaries, and accounts stated with them are absolutely void; and no action can be brought on a ratification of any contract made during infancy. On the other hand an infant is bound to pay a reasonable price for necessaries sold and delivered to him; where *' neces- saries " mean goods suitable to his condition in life and his actual requirements at the time {d) . An infant's express contract may be valid if it appears to> the Court to be beneficial to the infant. In certain other cases infants are enabled to make binding contracts by custom or statute. An infant is not liable for a wrong arising out of or immediately connected with his contract, such as a fraudu- lent representation at the time of making the contract that he is of full age. But an infant who has represented himself as of full age is bound by payments made and acts done at his request and on the faith of such representations, and is liable to restore any advantage (e) he has obtained by such representations to the person from whom he has obtained it. 1 . Of the contracts of infants in general at common laio, and as affected by the Act of 1874. It was once commonly said that an agreement made by an infant, if such that it cannot be for his benefit, is not merely voidable, but absolutely void; though in general his {d) Sale of Goods Act, 1893, a. 2. the observations of the Lords Jus- This confirms the opinion that an tices in iVasA v. /««a«[1908] 2 K. B. infant's obligation to pay for ne- 1, 77 L. J. K. B. 626, and note cessaries is not created by agree- thereon in L. Q. R. xxiv. 237. ment but imposed by law ; in other («) Not to repay a loan of money : words, that there is not a true £. Leslie v. Sheill [1914] 3 K. B. contract but a quasi contract. See 607, 83 L. J. K. B. 1145, C. A. 60 CAPACITY OF PARTIES. contracts are only voidable at his option (/) . But this dis- tinction is in itself unreasonable, and the weight of all modern authority is against it. The use of the word void proves nothing, for it is to be found in cases where there has never been any doubt that the contract is only voidable. And as applied to other subject-matters it has been held to mean only voidable in formal instruments {g) and even in Acts of Par- liament {h) . Actual decision is the only safe guide; and as early as 1813 it was clearly laid down in the Exchequer Chamber, as the general rule of law, that the contract of an infant may be avoided or not at his owti option. The Court refused to recognize any variation of the rule as generally applicable to trading contracts (^) . There is nothing to set against this in any reported case of co-ordinate authority. Dicta in cases of inferior autho- rity to the efiect that trade contracts of infants are void (as distinct from voidable) could not prevail against a decision of the Exchequer Chamber even if they were necessary to the judgments in which they occur. Examination shows that they were superfluous in every case cited for the formerly current doctrine; but it seems needless to repeat what was (/) An infant's deed is generallj- (1821) 4 B. & Aid. 401, 23 R. R. Toidable, JLitt. s. 259, but it is said 318 ; Malins -7. Freeman (1S38) iBing. that if it is not such as to take effect N. C. 395, 44 R. R. 737. " by the delivery of his own hand," (A) Compare Davenport v. Sep. it is void: Perk. 12, Shepp. Touch. (1877) (J. C. from Queensland) 3 232-S, Co. Lit. 51 b, n., 3 Burr. 1805, App. Ca. at p. 128, 47 L. J. P. C. 8, 2 Dr. & W. 340. It is assumed in with Governors of Magdalen Hospital modem practice that an infant's sale v. Knotts (1879) 4 App. Ca. 324, or gift of personal chattels with 48 L. J. Ch. 679, in which case actual delivery is good: Taylor v. this latitude has at last been Johnston (1880) 19 Ch. D. 603, 608. restrained. According to the old books it would (i) Warwick \. Bruce, 6 Taunt. 118, seem to be voidable. affg. s. c. 2 M. & S. 206, 14 R. R (y) Lincoln College' s case (1595) 3 Co. 638. Eep. 59 b ; Doe d. Bryan v. Bancks CONTRACTS OF INFANTS. 61 said in earlier editions, as that doctrine is now, I believe, abandoned everywhere. In a modern case, indeed, the following opinion was given bv the Court of Queen's Bench on the conviction of a servant for unlawfully absenting himself from his master's em- ployment: — " Among' many objeotions one appears to us clearly fatal. He was an infant at the time of entering into the agreement, which authorizes the master to stop his wages when the steam engine is stopped working for any cause. An agreement to serye for wages may be for the infant's benefit (k) ; but an agreement which compels him to serve at all times during the term but leaves the master free to stop his work and his wages whenever he chooses to do so cannot be considered as beneficial to the servant. It is inequitable and wholly void. The conviction must be quashed " {!). But this is laxity of language at most. The Court decided only that the agreement was not enforceable against the in- fant; this does not mean that if the master had arbitrarily refused to pay wages for the work actually done the infant could not have sued him on the agreement. Again, it is said that a lease made by an infant without reservation of any rent' (or even not reserving the best rent), is absolutely void. But this opinion was disapproved by Lord Mansfield, whose judgment Lord St. Leonards adopted as good law, though the actual decision was not on this particular point in either case (m) . And in a modern Irish case (n) it ^\■as (7r) It seems that prima faeie it is (»») Zuich v. Parsons (1765) 3 Burr. so, even if it contains clauses im- 1794 (where the decision was that posing penalties, or giving a power the reconveyance of a mortgagee's of dismissal, in certain events . infant heir, the mortgage being pro- Wood-v. Fmwiei (1842) 10 M. & W. perly paid off, could not be avoided 195; Leslie v. Fitzpatrick (1877) by his entry before full age) ; ^^fe» 3 Q. B. D. 229, 47 L. J." M. 0. 22, v. AlUn (1842) 2 Dr. & W. 307, 340, distinguishing Reg. v. Lord (next 59 K. R. 696, 715. note). " («) S^<^to^' V. Brady (1863) 14 Ir. (I) Reg. v. Lord (1848) 12 Q. B. C. L. Rep. 61. The Court inclined 757 17 L. J. M. C. 181,' where the to think that some act of notoriety headnote rightly says ' ' void against by the lessor would be required,. the infant" ; IQU.R.ilh. such as entering, bringing eject- '62 CAPACITY OF PARTIES. expressly decided that at all events a lease made by an infant reserving a substantial rent, whether the best rent or not, is not void but voidable; and further that it is not well avoided by the infant granting another lease of the same property to another person after attaining his full age. There is good English authority for the proposition that if a lease made by an infant is beneficial to him he cannot avoid it at all (o) . It appears to be agreed that the sale, purchase (p), or ex- •change {q) of land by an infant is both as to the contract and as to the conveyance only voidable at his option. Again, there is no doubt that an infant may be a partner 'Or shareholder (though in the latter case the company may refuse to accept him) (r) ; and though he cannot be made liable for partnership debts during his infancy, he is bound by the partnership accounts as between himself and his part- ners and cannot claim to share profits without contributing, to losses. And if on coming of age he does not expressly disaffirm the partnership he is considered to affirm it, or at any rate to hold himself out as a partner, and is thereby liable for the debts of the firm contracted since his majority (s). The liability of an infant shareholder who does not re- pudiate his shares to pay calls on them rests, as far as existing •authorities go, on a somewhat different form of the same principle (of which afterwards). As to contribution in the ment, or demanding possession (note I. 3 (4, 360). that a freehold estate for the life of iq) Co. Lit. 51 b. the lessor or twenty-one years had (»•) But the company cannot dis- passed by the original lease) ; how- pute the validity of a transfer to an ever there was another reason, infant after the infant has transferred namely, that the second lease might over to a person sui iitris : Goooh^s be construed as only creating a case (1872) L. K. 8 Ch. 266, 42 L. J. future interest to take effect on the Ch. 381. And see Lindley, 90-92. determination of the first. (s) Lindley on Companies, 5th {o) Maddonw. White ill &1) 21. '&. ed. 811, 828; Goode v. Harrison 159, 1 E. R. 453. (1821) 6 B. & Aid. 147, 24 R. R. (p) Co. Lit. 2 J, Bac. Ab. Infancy, 307. CONTHACTS OF INFANTS. 63 winding up of a company, Lord Lindley {t) " is not aware of any case in which an infant has been put on the list of contributories. Upon principle, however, there does not appear to be any reason « hy he should not, if it be for his benefit; and this, if there are surplus assets, might be the case." Otherwise he cannot be deprived of his right to re- pudiate the shares, unless perhaps by fraud; but in any case if he " does not repudiate his shares, either while he is an infant or within a reasonable time after he attains twenty- one, he will be a contributory," and still more so if after that time he does anything showing an election to keep the shares. On the whole it is clear on the authorities (notwith- standing a few expressions to the contrary), that both the transfer of shares to an infant and the obligations incident to Ms holding the shares are not void but only voidable {ii). Marriage is on a different footing from ordinary con- tracts (x), and it is hardly needful to say that the possibility of a minor contracting a valid marriage has never been doubted in our Courts {y) . As to promises to marry and marriage settlements, it has long been familiar la^^' that just as in the case of his other voidable contracts an infant may sue for a breach of promise of marriage, though not liable to be sued [z) . An infant's marriage settlement is not binding on the infant unless made under the statute (see -post, pp. 78, 79), and the Court of Chancery has no power to make it binding in the case of a ward (a) . Particular covenants in an infant's settlement may [t) On Companies, 809. (y) For details see Enoycl. Laws (») Lumsden's case (1868) L. E. 4 of England, s.v. Marriage. Ch. 31 ; Gooch's case, last page ; cp. (z) Bacon, Abr. Infancy and Age, ■p. eS, infra. 1.4(4.370). Per Lord EUenborough, (a:) Continental writers have wasted Warwick y . Bruce [Mli) 2 M. & S. much ingenuity in debating with 205, 14 R. R. 634. which class of contracts it should be (a) Field v. Moore (1855) 7 D. M. i-eckoned. G. 691, 710, 2.5 L. J. Ch. 66. 64 CAPACITY OF PARTIES. be valid (b). In any case the settlement is not void but only voidable; it may be confirmed by the subsequent conduct of the party when of full age and sui iurifi (c), and can be repudiated only within a reasonable time after attain- ing full age (d) . Again an infant's contract on a bill of exchange or promissory note was once supposed to be wholly void, but is now treated as only voidable (e) . The same holds at common law of an account stated (/'). There is one excejjtion to the rule that an infant may enforce his voidable contracts against the other pafty during his infancy, or rather there is one way in which he cannot enforce them. Specific performance is not allowed at the suit of an infant, because the remedy is not mutual, the infant not being bound [g~) . An infant may avoid his voidable contracts (with practi- cally few or no exceptions) either before or within a reason- able time after coming of age: the rule is that "matters in fait [i.e., not of record] he shall avoid either within age- or at full age," but matters of record only within age (Co. Lit. 380 h) (h). Subject to the general rule, established for (*) Smiihv. Lucas (1881) 18 Ch. D. Edwardu v. Carter [1893] A. C. 360, 531, not OTerruled on this point by 63 L. J. Ch. 100 ; Carnen\. Sarriton Bdwards v. Carter [1893] A. C. 360, [1916] 1 Ch. 328, 85 L. J. Ch. 321, 63 L. J. Ch. 100. C. A. And election must be made (c) Dames t. Davies (1870) L. E. once for all, not separate elections 9 Eq. 468, 39 L. J. Ch. 343. This for each acquisition— see Viditz t. 'is not affected by the Infanta' Relief O'Bagan [1899] 2 Ch. pp. 569, 576. Act,- 1874: Duncan v. Dixon (ISflO) («) Undisputed in Harris v. Wall' 44 Oh. D. 211, 59 L. J. Ch. 437. (1847) 1 Ex. 122, 16 L. J. Ex. 270. A woman married under age is not foil. In re Sodson's Settlement [1894] disabled by the coverture from con- 2 Ch. 421, 63 L. J. Ch. 609. firming an ante-nuptial settlement (/) Williams \. Moor {18iZ) 11 M. after she is of age: He Hodsm's Sc'W. 256, 264, 266, 12 L.J. Ex. Settlement [1894] 2 Ch. 421, 63 L. J. 253. Ch. 609. iff) Flight v. JSolland (1828) 4 Euss. {d) Without regard to the date 298, 28 E. E. 101. at which any particular interest (A) See per Parke B. Newry and affected may fall into possession : Enniskillen Ry. Co. v. Coomhe (1849) CONTRACTS OF INFANTS. 65 the benefit of innocent third persons, that voidable transac- tions are not invalid until ratified but valid until rescinded (i), an infant cannot deprive himself of the right to elect at full age, and only then can his election be conclusively deter- mined (k) . If an infant pays a sum of money under a contract, in consideration of which the contract is wholly or partly performed by the other party, he can acquire no right to recover the money back by rescinding the contract when he comes of age. Such is the case of a premium paid for a lease (Z), or of the price of goods (not being necessaries) sold and delivered to an infant and paid for by him : and so if an infant enters into a partnership and pays a premium, he cannot either before or after his full age recover it back, nor therefore prove for it in the bankruptcy of his partners (m). We must now consider the Act of 1874 (37 & 38 Vict. c. 62), which enacts as follows: — 1. All contracts whether by specialty or by simple contract henceforth entered into by infants for the repayment of money lent or to be lent, or for goods supplied or to be supplied (other than contracts for necessaries), and all accounts stated with infants, shall be absolutely void : provided always that this enactment shall not invalidate any contract into which an infant may by any existing or future statute or by the rules of common law or equity enter, except such as now by law are voidable. 2. No action shall be brought whereby to charge any person upon any promise made after full age to pay any debt contracted during infancy, or upon any ratification made after full age of any promise or contract made 3 Ex. 665, 18 L. J. Ex. 325 ; per supra, note (/») ; Slator v. Trimble Cur. i. # N. W. R. V. M'Michael (1861) 14 Ir. C. L. Eep. 342. (1850) 5 Ex. 114, 20 L.J. Ex. 97, , (;) Solmes y . Blogg [l%ll) % Timnt. 82 E. R. 898. As to an infant being 35^ 508, s. c. 1 Moore, 466, 2 Moore, bound when he comes of age by an 552 19 R. E. 445. acknowledgment made in a Court of ^^'^j ^^ ^^^.^^ y^^^^^ ^^ggg^ g ^ Record, see T. B. 20 & 21 Ed. I. jj ^ 254, 258. But if the infant P' has received no consideration at all (i) Per Lord Colonsay, L. R. 2 he csm lecovei : Hamilton v. Vaugjian- H. L. 375. Sherrin, ^c. Co. [1894] 3 Ch. 589, {k) Z. ^ N. W. B. V. M'Michael, 63 L. J. Ch. 795. P. — c. 5 66 CAPACITY OF PARTIES. during infancy, whether there shall or shall not be any new consideration for such promise or ratification after full age. 3. This Act may be cited as The Infants' Belief Act, 1874. The 2nd section (w) forbids an action to te brought on, any promise or ratification of a contract made during infancy, an^ it applies to a ratification since the Act of a .promise made in infancy before the passing of the Act (o), whether the agreement is or is not one of those included in s. 1 {p). It probably also prevents the ratification from being available by way of set-off (g'). This, however, is a different thing from depriving the ratification of all effect. For it may have other effects than giving a right of action or set-off, and these are not touched. While the matter was govetned by Lord Tenterden's Act (r) there were many cases where a contract made during infancy might be adopted or confirmed without any ratification in writing so as to produce important results. Thus in the case of a marriage settlement the married persons are bound not so much by liability to be sued (though in some cases and for some purposes the hus- band's covenants are of importance) as by inability to inter- fere with the disposition of the property once made and the execution of the trusts once constituted: and so far as concerns this an infant's marriage settlement may, as we have seen, be sufficiently confirmed by his or her conduct after («) The Act of 1874 supersedes is held, however, that in a case the 5th section of Lord Tenterden's which would before the Act have Act (9 Geo. 4, 0. 14), by which no been one of ratification it may be ratification of such a contract could left to the jury to say whether the be sued upon unless in writing and conduct of the parties amounts to a signed by the party to be charged, new promise : Diteham v. Worrall since expressly repealed by the (1880) 5 C. P. D. 410, 49 L. J. C. P. Statute Law Revision Act, 1875 (38 688, by Lindley and Denman JJ., & 39 Vict. u. 66). diss. Lord Coleridge C.J. [o) Ex parte Kibble {WIS)!,. 'R.W {q) Rawley -v. .RawUy (1876) 1 Ch. 373, 44 L. J. Bk. 63. Q. B. Div. 460, 45 L. J. Q. B. 675. (p) Goxhead v. Mullis (1878)' 3 C. (r) See note («),' above. P. D. 439, 47 L. J. C. P. 761. It RATIFICATION BY INFANT. 67 full age (s) . Again an infant partner who does not avoid the partnership at his full age is, as between himself and his partners, completely bound by the terms on which he entered it without any formal ratification; and in taking the partner- ship accounts the Court would apply the same rule to the time of his minority as to the time after his full age. Again an infant shareholder who does not disclaim may after his full age, at any rate, be made liable for calls without any express ratification; on the contrary, the burden of proof is on him to show that he repudiated the shares within a reason- able time (t). And as Lord Tenterden's Act did not formerly stand in the way of these consequences of the affirmation or non-repu- diation of an infant's contract, so the Act of 1874 will not stand in the way of the same or like consequences in the future. In fact the operation of the present Act seems to be to reduce all voidable contracts of infants ratified at full age, whether the ratification be formal or not, to the position of agreements of imperfect obligation, that is, which cannot be directly enforced but are valid for aU other purposes. Other examples of such agreements and of their legal effect will be found in the chapter specially assigned to that subject. A collateral result of this enactment appears to be that one who has made a contract during his infancy is not now able to obtain specific performance of it after his full age, for the same reason that he cannot and formerly could not do so sooner (m). (a) Davies v. Davies (1870) li. R. be read as including all contracts D Bq. 468, 39 L. J. Ch. 343, supra, -whatever. The Act is not quite p. 64. In Duncrm v. Dixon (1890) so ill-drawn as to admit this oon- 44 Ch. D. 211, 59 L. J. Ch. 437, struction. an attempt was made to bring an (t) See pp. 62, 70. infant's marriage settlement within («() Flight v. BoUand (1828) 4 Russ. 8. 1, on the ground that it must 298, 21 R. R. 101, p. 6i, supra^ 5(2) 68 • CAPACITY OF PARTIES. Th© proviso as to new consideration meets such cases as that of an attempt to set up as a new contract the compromise of an action brought on the original promise (x) . It is re- inforced by s. 5 of the Betting and Loans (Infants) Act, 1892, which absolutely avoids all agreements and instruments ' (even negotiable ones) made for the payment of money repre- senting or connected with a loan advanced during infancy («/) . In the first section of the principal Act, the words con- cerning the purchase of goods are not free from obscurity. If we might construe the Act as if it said " for payment for goods supplied," &c., it would be clear enough: but it is not BO clear what is the precise operation of an enactment that contracts " for goods supplied or to be supplied," other than necessaries, shall be void. It seems to follow that no pro- perty will pass to the infant by the attempted contract of sale, and that if he pays the price or any parti of it before delivery of the goods he may recover it back; as indeed he might have done before the Act, for the contract was void- able, and he was free to rescind it within reasonable time. But it is now settled that if the goods are delivered the pro- perty passes {z) ; and an infant who has paid for goods and received and used them cannot recover the money back (a). The policy of the statute is to protect infants from running into debt, not to disable them from making purchases for ready money. Moreover it has been held that an infant may be guilty of larceny as a bailee though the goods were delivered to him on an agreement void under the Act (b). On the whole it seems that the- contract is void- able, but that goods actually delivered can be returned, and the price recovered back, only so far and so long as complete (») Smith V. Xing [1892] 2 Q. B. 23S, 82 L. J. K. B. 598. 543, 67 L. T. 420. (a) Valentini v. Canali (1889) 24 {y) 56 Vict. c. 4. The rest of the Q. B. Div. 166, 59 L. J. Q. B. 74. Act is criminal. (i) B. v. McDonald (1885) 15 Q. B. (z) Stocks T. Wilton [1913] 2 K. B. D. 323, 52 L. T. 583. infants' relief act. ? 69 1 xestitution -is possible. In the converse case of an infant agreeing to sell goods, receiving the price, and failing to •deliver, the bujer cannot recover unless there are special iacts showing a cause of action independent of contract (c). It has been suggested that the exception of " contracts for necessaries " may include loans of money advanced and in iact used for the purpose of buying necessaries. The point is not known to have been judicially considered. It was ■an old rule in equity that a person so advancing money was entitled to stand in the legal creditor's place to the extent of what was actually spent on necessaries (d); and so it is as to advances for the support of a deserted wife (e). It is doubtful whether a bond, bill of exchange, or note given by a man of full age, for which the consideration was in fact the supply of goods not necessaries during his infancy, would be void under s. 1 (/). But s. 2 (which indeed seems altogether more useful than s. 1) would no doubt effectually prevent it from being enforced as between the immediate parties, though perhaps the words are not the most apt for that purpose. The Building Societies Act, 1874, enables an infant to be ■ai member, but this does not imply any exemption from the disability to mortgage his real estate created by the Infants' Eelief Act: for that is not the sole purpose or a necessary purpose of membership (g). (c) Cowern v. Nield [1912] 2 K. B. (money borrowed to pay company's 419, 81 L. J. K. B. 865. debts by director, lender having (d) Marlow v. Pitfield, 1 P. Wms. notice of his want of authority). -568, and see Lewis v. AlUyne (1888) . (/) Cp. Flight v. Reed (1863) 1 H. 4 Times L. E. 560. & C. 703, 32 L. J. Ex. 265. (e) Deare v. Soutten (1869) L. R. (y) Thurstan v. Nottingham, ^e. « Eq. 151. Cp. Revenion, ^c. Co. Building. Soe. [1902] 1 Ch. 1, 71, V. Maism Coswag [1913] 1 K. B. L. J. Ch. 83, [1903] A, 0. 6. 364, 82 L. J. K., B. 512 C. A. 70 CAPACITY OF PARTIES, 2. Of the liability of infants on obligations incident to^ interests in permanent property. In an old case reported under various names in various books (h) it was decided that an infant lessee who continues to occupy till he comes of full age is after his full age liable for arrears of rent incurred during his infancy. In like- manner a copyholder who was admitted during his minority and has not disclaimed is bound to pay the fine (i) . The same principle is applied to the case of infant shareholders in railway companies. An infant is not incapable of being a shareholder (k), and as such is prima facie liable when he comes of age to be sued for calls on his shares . He can avoid the liability (which, though regulated by statute, has the general incidents of contract) only by showing that he repu- diated the shares either before attaining his full age (l), or in a reasonable time afterwards (m) . A railway shareholder is not a mere contractor, but a purchaser of an interesfi in a subject of apermanent nature with certain obligations attached to it; and those obligations he is bound to discharge, though they arose while he was a minor, unless he has renounced the (A) Kettle v. MM (1614) Eolle £y. Co. v. Slack (1852) 8 Ex. 181^ Ab. 1, 731, K., Oro. Jao. 320, 22 L. J. Ex. 94, 91 K. E. 422. At. Brownlow, 120, 2 Bulst. 69, See one time it seems to have been the judgment of the Court of Ex- thought that even an infant share- chequer in Z. S; N. W. Uy. Co. v. holder was made absolutely liable if'ifjcAarf (1850) 5 Ex. 114, 20 L. J. by the general form of the enact- Ex. 97, 82 R. R. 898. ment in the Companies Clauses Con- (i) Evelyn v. Chichester (1765) 3 solidation Act defining the liability Burr. 1717. of shareholders. See per Lord (A) He can subscribe a memo- Denmau C.J. and Patteson J. in randum of association : Luxon ^ Co. Cork ^ Bandon By. Co. v. Cazenove (No. 2) (1891) 40 W. R. 621. (1847) 10 Q. B. 935. This view was. (t) Newry ^ Mnmskillen Ey. Co. afterwards abandoned as inconsistent V. Goombe (1849) 3 Ex. 565, 18 with the established rule that general L. J. Ex. 325. words in statutes are not to be (m) A plea which merely alleged construed so as to deprive infants, repudiation after full age was there- lunatics, &c., of the protection given fore held bad in Dublin % Wicklow to them by the common law. INFANTS : BENEFICIAL CONTRACTS. 71' interest. A mere absence of ratification is no sufficient defence, even if coupled with the allegation that the defendant has derived no profit from the shares. For if the property is unprofitable or burdensome, it is the holder's business to disclaim it on attaining his full age, if not before; and perhaps he could not exonerate himself even during his minority by showing that the interest was not at the time beneficial, unless he actually disclaimed it {n). Comparing the analogous case of a lease, the Court said: — " We think the more reasonable view of the case is that the infant, even in the case of a lease which is disadvantageous to him, cannot protect himself if he has taken possession, and if he has not disclaimed, at all events unless he stiU be a minor " (o) . Similarly an infant member of a building society who has purchased land by means of an advance from the society cannot claim to hold the property free from the society's charge for the money advanced (p) . In all the decided eases the party appears to have been of full age at the time of the. action being brought, but there is nothing to show that (except possibly in the case of a disadvantageous contract) he might not as well be sued during his minority. The same results, except perhaps as to suing the share- holder while still a minor, would follow from the , general principles of the law of partnership even if the company in which the shares were held had not any permanent property. 3. Of the liability of an infant when the contract is for his benefit, and especially for necessaries. It has been laid down in general terms that if an agree- ment be for the benefit of an infant at the time, it shall («) It is submitted that in sudh a M'Michuel (1850) 5 Ex. lU, 20 L. J. case the disclaimer H made would Ex. 97, 101, 82 E. R. 699. conclusively determine his interest {p) Thurston v. Nottingham Her- and not merely suspend it. manent Benefit Building Soc. [19(J3] (o) L. # N. W. My. Co. v. A. 0. 6. t2 CAPACITY OF PARTIES. bind him (g), or even that the contract is binding unless manifestly to the infant's prejudice (r). An infant's con- tract of apprenticeship (s), or an ordinary contract to work for wages, will, if it be reasonable, be considered binding on the infant, so that he may no less than an adult incur the statutory penalties for unlawfully absenting himself from his master's employment (^). An infant entered the service of a railway company and, as a condition of the service, became a member of an insurance society established by the company; the funds were augmented by the company to the extent of five-sixths of the premiums payable by the members. The rules provided for compensation in all cases of accident not due to the member's own wilful act or gross negligence, and bound the members to accept the benefits of the society in lieu of any claims under the Employers' Liability Act. The Court of Appeal held that the infant was bound by this agreement as being on the whole for his benefit (m) . But an action will not lie against an infant on a covenant in appren- (}) Maddonv. White {n 81)2 T.\R. able apart from infancy. As to 159, 1 R. R. 453. infant apprentices in London, see (/■) Cooper V. Simmons (1862) 7 p. 79, «., below. H. & N. 707, 721, 126 R. R. 653, («) Clements v. L. # iV. IF. Ey. 663, per Wilde B. Not so strongly Co. [1894] 2 Q. B. 482, 63 L. J. Q. B. pmintheL. J.report, 31L. J.M.C. 837. It seems, though it -was not IS-*, 144. necessary to decide the point, that (■) (Food V. Fenwick (1842) 10 the principle of an infant's contract M. & W. 195. being vaUd when the Court is satis- (*) In Leslie v. Fitspatrick (1877) fied that it was for his benefit is 3 Q. B. D. 229, 47 L. J. M. C. 22, not confined (as was argued for the a case of summary proceedings under plaintiff) to contracts of apprentice- the Employers and Workmtn Act, ship or labour : see especially the 1?75, it may be collected that the judgment of Kay, L.J. Note as to facts were of the same kind, though the Workmen's Compensation Act the employer's plaint was in terms that there is nothing in it to make a for a breach of contract. Cp. Sir statutory agreement for oompensa- W. C. Leng ^ Co. v. Andrews [1909] tion binding on an infant if not for 1 Oh. 763, 78 L. J. Ch. 80, C. A., his benefit: Stephens v. Dudbridge where however the restrictive cove- Ironworks Co. [ 1904] 2 K. B. 225, nant in question was held unenforce- 73 L. 3. K. B. 739, A. C. INFANTS. 73 ticeship indentures ^x) ; and if the terms are not reasonable the agreement is void for all purposes, so that an action will not lie against a stranger for enticing away the appren- tice {y). Again there are many conceivable cases in which it might be for an infant's benefit, or at least not manifestly ±0 his prejudice, to enter into trading contracts, or to buy goods other than necessaries: one can hardly say for example that it would be manifestly to the disadvantage of a minor ■of years of discretion to buy goods on credit for re-sale in A rising market; yet there is no doubt whatever that such a •contract would at common law be voidable at his option {z). Nor has it ever been suggested that an infant partner or shareholder is at liberty to disclaim at full age only in case ihe adventure has been unprofitable or is obviously likely to become so. However, inasmuch as since the Infants' Relief Act, 1874, an infant's contract, if not binding on him from the first, can never be enforced against him at all, it seems quite possible that the Courts may in future be disposed to extend rather than to narrow the description of contracts which are considered binding because for tlie infant's bene- -fit (a) . A contract may be for an infant's benefit as a whole though particular terms are bad as being in excessive restraint (x) Be Francesco v. Barnum (No. 1) when the business should be at a (1889) 43 Ch. D. 165, 59 L. J. Ch. standstill by accidents beyond the 151, following old authority which control of the master. Tnust now be regarded as anomalous. (a) Indeed, it seems the distinction (.v) De Francesco v. Barnum (No. 2) in question is not appUoable to any (1890) 46 Ch. D. 430, 63 L. T. 438. trading contract: Cowern \. Nield A clause enabling the master to [1912] 2 K. B. 419, 81 L. J. K. B. suspend the apprentice's wages in 865. an event which may be due to the (a) In an action brought by an master's own act, say a lock-out, is infant, an undertaking given by the not reasonable ; Corn v. Matthews infant's next friend is not binding if [1893] 1 Q. B. 310, 62 L. J. M, C. the circumstances are such that it 61, 0. A., dist. Green v. Thompson cannot be for the infant's benefit: ([1899] 2Q. B. 1, 68L. J Q.B. 719, Rhodes v. Swithenbank (1889) 22 "where the exception was of days Q. B. Div. 677, 58 L. J. Q. B. 287. 74 CAPACITY OF PARTIES. of trade or the like (6). A contract whereby an infant agrees.' with a railway company, in consideration of being allowed' to make a certain habitual journey to and fro on special terms, to waive all claims for accident to himself or his property, is detrimental to the infant and not binding on him (c) . 3a. Contracts for necessaries. By the Sale of Goods Act, 1893, s. 2— . . . " Where necessaries are sold and delivered to an infant . . . or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reason- able price therefor. Necessaries ' in this section mean goods suitable to the condition in life of such infant ... .or other person, and to his actual requirements at the time of the sale and delivery." . This enactment is a legislative declaration of the law as- settled by a series of authorities, of which the judgment of the Exchequer Chamber in Ryder v. Womhwell is the chief: — "The general rule of law is clearly established, and is that an infant is generally incapable of bin'ling himself by a contract. To this rule there is an exception introduced, not for the benefit of the tradesman who may trust the infant, but for that of the infant himself. This exception is that he may make a contract for necessaries, and is accurately stated by Parke B. in Titers t. Fleming {d). 'From the earliest time down to the present the word necessaries is not confined in its strict sense to such articles as were- necessary to the support of life, but extended to articles fit to maintain the patticular person in the state, degree and station in life in which he is ; and therefore we must not take the word necessaries in its unqualified sense, but with the qualification above pointed out '"(e). What in any particular case may fairly be called necessary in this extended sense is what is called a question of mixed (i) Bromley T. Smith [1909] 2 {d) (1840) 6 M. & W. at p. 46. K. B. 2.35, 78 L. J. K. B. 745. («) (1«68) L. R. 4 Ex. 32, 38 ; in. (c) Flower v. L. % N. W. My. Co. the Court below L. R. 3 Ex; 90, [1894] 2 Q. B. 65, 63 L. J. Q. B. 38 L. J. Ex. 8. 547, C. A. infants: necessaries. 75 fact and law: that is, a question for a jury, subject to the Court being of opinion that there is evidence on which the jury may not unreasonably find for the plaintiff. The staition and circumstances of the defendant and the particulars of the claim being first ascertained, it is then for the Court to say whether the things supplied are •prima facie such as a jury may reasonably find to be necessaries for a person in the defendant's circumstances, or "whether the case is such as to cast on the plaintiff the onus of proving that the articles are within the exception [^.e., are necessaries], and then whether there is any sufficient evidence to satisfy that onus." In the latter case the plaintiff must show that although the articles would generally not be necessary for a person in the defendant's position, yet there exist in the ' case before the Court special circumstances that make them necessary. Thus articles of diet which are otherwise mere luxuries may become necessaries if prescribed by medical advice (/) . It is said that in general the test of necessity is usefulness, and that nothing can be a necessary which cannot possibly be useful: but the converse does not hold, for a useful thing may be of unreasonably costly fashion or material. It is to be borne in mind that the question is not whether the things are such that a person of the defendant's means may reasonably buy and pay for them, but whether they can be reasonably said to be so necessary for him that, though an infant, he must obtain them on credit rather than go without. For the purpose of deciding this question the Court will take judicial notice of the ordinary customs and usages of society (g) . If the Court does not hold that there is no evidence on which the supplies in question may reasonably be treated (/) See Wharton v. Mackenzie B., L. R. 3 Ex. at p. 96. (1844) 5 Q. B. 606, 1.3 L. J. Q. B. (g) L. R. 4 Ex. at p. 40. 130, 64 E. R. 584, and per Bramwell 76 CAPACITY OF PARTIES. as necessaries, then it is for thejury to say whether they were in fact necessaries for the defendant under all the circum- stances of the case. The Act has laid down, in accordance with the weight of authority (A), that the buyer's actual requirements must be considered. If the goods supplied are necessary, the trades- man will not be the less entitled to recover because he made no inquiries as to the infant's existing supplies; but if the infant is already so well supplied that these goods are in truth not necessary, the tradesman's ignorance of that fact will not make them necessary, and he cannot recover. There is no rule of law casting on him a positive duty to make inquiries, but he omits to do so at his peril, and the burden of proof is on him to show that the infant was not sufficiently supplied (i) . But the defendant having an income out of which he might keep himself supplied with necessaries for ready money is not equivalent to his being actually supplied, and does not prevent him from contracting for necessaries on credit (fe). Since the Act, at all events, the infant buyer can be liable only for the reasonable price of the goods, and it seems that this was always the law, though before the Infants' Relief Act he could at full age ratify a contract for an agreed price, whether for necessaries or not (Z) . Juries, if not warned against it, would be apt to test the necessary character of supplies, not so much by what the means and position of the buyer actually were, as by what (/() See Johnstone v. Marku (1887) Mortara v. Hall (1834) 6 Sita. 465. 19 Q. B. D. 609, 57 L. J. Q. B. 6, The doctrine ttere laid down seems decided by members of the C. A. superfluous, for the supplies there sitting as a Divisional Court. claimed for (such as 209 pairs of (i) Nash V. Inman [1908] 2 K. B. gloves in half a year) could not have I, 77 L. J. K. B. 626, C. A. How been reasonably found necessary in the plalntifl' is to obtain this informa- any case, tion does not appear. {[) Judgment of Fletcher Moulton (k) Bur^hart v. Hall (1839) 4 M. L.J. [1908] 2 K. B. at p. 8. & W. 727, 51 R. R. 788. Contra infants: necessaries. 77 they appeared to be to the seller, and such a view was not altogether without countenance from authority (m) . It is conceived, however, that the knowledge or belief of the trades- man has nothing to do with the question whether the good's are necessary or not. It may be said that the question for the Court will, as a rule, be whether articles of the general class or description were prima facie necessaries for the defendant, and the question for the jury will be whether, being of a general class or description allowed by the Court as necessary, the particular items were of a kind and quality necessary for the defendant, having regard to his station and circumstances. For instance, it would be for the Court to say whether it was proper for the defendant to buy a watch on credit, and for the jury to say whether the particular watch was such a one as he could reasonably afford. But this will not hold in extreme cases. In Ryder v. Wombtvell (n) the Court of Exchequer Chamber held, reversing the judgment of the majority below on this point, that because a young man must fasten his wristbands somehow it does not follow that a jury are at liberty to find a pair of jewelled solitaires at the price of 251. to be necessaries even for a young man of good fortune. Hitherto we have spoken of a tradesman supplying goods, this being by far the most common case. But the range of possible contracts for "necessaries" is a much wider one. " It is clearly agreed by all the books that speak of this matter that an infant may bind himself to pay for his necessary (»i) In Dalton v. Gib (1839) 5 sary in fact. Bing. N. C. 128, 50 H. E. 758, and («) (1868) L. R. 4 Ex. 32, 38 Preface ; 7 Scott, 117, much TVeight L. J. Ex. 8. And an entire contract is given to - the apparent rank and for goods of which a substantial part oircumstanees of the party. This are not necessary will not be saved amounts to supposing that an infant by some of them being necessary : may be liable, by a kind of holding Stocks v. Wilson [1913] 2 K. B. 235,. out, for goods which are not ueces- 82 L. J. K; B. 598. 78 CAPACITY OF PARTIES. meat, driiak,, apparel, physic [including, of course, fees for medical attendance, &c., as well as the mere price of medi- cines], and such other necessaries and likewise for his good teaching and instruction, whereby he may profit himself .afterwards" (o). Thus learning a trade may be necessary, and on that principle an infant's indenture of apprenticeship , may be binding on him {p) . A contract for necessary in- struction is not the less binding for being executory {q). The preparation of a settlement containing proper provisions for her benefit has been held a necessary for which a minor about to be married may make a valid contract, apart from any question as to the validity of the settlement itself (r) . A more remarkable extension of the definition of neces- saries is to be found in Chappie v. Cooper (s), where an infant widow was sued for her husband's funeral expenses. The Court held that decent burial may be considered a neces- sary for every man, and husband and wife being in law the same person, the decent burial of a deceased husband is there- fore a necessary for his widow. It would perhaps have been better to adopt the broader ground that a contract entered into for the purpose of performing a moral and social, if not legal, duty, which it would have been scandalous to omit, is of as necessary a character as any contract for personal service or purchase of goods for personal use. The supply of necessaries to an infant creates only a lia- bility as on simple contract, and it cannot be made the ground (o) Bac. Abr. Infancy and Age, I. stands, not as a covenant, see pp. 72, (4.335). And see Chappie v. Cooper 73, supra). (1844) 13 M. & W. 252, 13 L. J. Ex. (?) Roberts v. Gray [1913] 1 K. B. 286, 67 R. B. 586. As to instruction 520, 82 L. J. K. B. 362, C. A. in trade, &o., Walter v. Everard {r) Helps v. Clayton (1864) 17 [1891] 2 Q. B. 369, 60 L. J. Q. B. C. B. N. S. 563, 34 L. J. 0. P. 1, 738, C. A. see the pleadings, and the judgment (p) Cooper T. Simmons (1862) 7 of the Court ad fin. H. & N. 707, 31 L. J. M. C. 138, (s) (1844) 13 M. & W. 252, IS per Martin B. (but, as authority L. J. Ex. 286, 67 R. R. 586. INFANTS : NECESSARIES. 79 of any different kind of liability. Coke says: "If he bind himself in an obligation or other writing with a penalty for the payment of any of these, that obligation, shall not bind him " (t). Similarly his negotiable instruments are voidable even if given to pay for necessaries (m). A fortiori, a deed given by an infant to secure the repayment of money advanced to buy necessaries is voidable (x) . But in these and similar cases the infant's liability on simple contract, or rather quasi- contract, is not affected (^y) . Some particular dealings of infants are or were valid by custom. By custom incident to the tenure of gavelkind an infant may sell his land of that tenure at the age of fifteen, but the conveyance must be by feoffment, and is subject to other restrictions (z) . This, however, is not really a capacity of contracting, for there is no reason to suppose that an action could be brought against the infant for a breach of the con- tract for sale, or specific performance of it enforced (a). Statutory powers as to leases are given to infants or their guardians by 11 Geo. 4 & 1 Wm'. 4, e. 65, ss. 12, 16, 17 (&), and as to marriage settlements by 18 & 19 Vict. c. 43 (c). {t) Co. Lit. 172 u, cp. i T. R. aa if he were of full age," and may 363. be sued upon in the superior courts (u) Se Soltykoff, Ex parte Margrett as well as in the city courts. Bacon, [1891] 1 Q. B. 413, 60 L. J. Q. B. Abr. Infancy, B. 4, 340 ; 21 E. IV. 339, C. A. 6, pi. 17. See other local customs (x) Martin v. Gale (1876) 4 Ch. D. colleoted, Bateson, Borough Cus- 428, 46 L. J. Ch. 84. toms (Seld. Soc. 1906) ii. 157—160. (y) Walter v. Hverard [1891] 2 (J) See Dan. Ch. Pr. 2. 1917 ; Q. B. 369, 60L. J. Q. B. 738,C.A. Se Clark (1866) L. R. 1 Ch, 292, (s) Robinson on Gavelkind, 194. 35 L. J. Ch. 314; Se Letehford (a) "Also by the custom of (1876) 2 Ch. D. 719, 45 L. J. Ch. London an infant unmarried and 530. (The provisions as to renewals above the age of fourteen, though of leases extend also to married under twenty-one, may bind him- women.) self apprentice to a freeman of {c) This Act does not affect cover- London by indenture with proper ture or any disability other than ■covenants; which covenants by the infancy: Seaton v. Seaton (188S) 13 custom of London shall be. as binding App. Ca. 61, 57 L. J. Ch. 661. And 80 CAPACITY OP PARTIES. 4 . Of an infant's immunity as to virongs connected with contract. An infant is generally no less liable than an adult for wrongs committed by him, subject only to his being in fact of such age and discretion that he can have a -vyrongf ul inten- tion, where such intention is material; but he cannot be sued for a wrong, when the cause of action is in substance ex contractu, or is so directly connected with the contract that the action would be an indirect way of enforcing the contract — which, as in the analogous case of married women (d), the law does not allow. Thus it was long ago held that an infant innkeeper could not be made liable in an action on the case for the loss of his guest's goods (e). There is another old case reported in divers books (/), where it was decided that an action of deceit will not lie upon an assertion by a minor that he is of full age. It was said that if such actions were allowed aU the infants in England would be ruined, for though not bound by their contracts, they would be made liable as for tort; and* it appears in Keble's report that an infant had already been held not liable for representing a false jewel not belonging to him as a diamond and his own. The modern case usually cited for this rule is Jennings v. Bundall {g), where it was sought to recover damages from an infant for overriding a hired mare. But if an infant's wrongful act, though concerned with the subject-matter of qu. -whether it applies to post-nuptial v. Dawson (1847) 1 De G-. & Sm. settlements. It does apply to core- 113, 16 L. J. Ch. 205, 75 E. R. 47 ; nant« to settle after- acquired pro- and see other cases collected 1 De Or. perty: Moore \. Johnson [1891] 3 & Sm. at p. 110, where "the case Ch. 48, 60 L. J. Ch. 499. mentioned in Keble " is that which, {d) See p. 84, infra. as stated in the text, occurs in his (e) RoUe Ab. 1. 2, Action sur report of Johnson v. Pie. Case, D. 3. iff) 8 T. R. 335, 4 E. E. 680. It (/) Johnson V. Fie (1666) Sid. 258, is also recognized in Price t. Sewett 1 Lev. 169, 1 Keh. 913, fully cited (1852) 8 Ex. 146 (not a decision on by Knight Bruce V.C. in Stikeman the point). infant's immunity for wrongs. 81 a contract, and such that but for the contract there would have been no opportunity of committing it, is nevertheless inde- pendent of the contract in the sense of not being an act of the kind contemplated by it, then the infant is liable. The distinction is established and well marked by a modern case where an infant had hired a horse for riding, but not for jumping, the plaintiff refusing to let it for that purpose; the defendant allowed his companion to use the horse for jumping, whereby it was injured and ultimately died. It was held that using the horse in this manner, being a manner positively forbidden by the contract, was a mere trespass, for which the defendant was liable {h). An infant can be made liable quasi ex contractu (as for money received) only when the real cause of action is a wrong independent of contract (^) . 5. Liability in equity on representation of full age. When an infant has induced persons to deal with him by falsely representing himself as of full age, he incurs an obli- gation in equity, which, however, in the case of a contract is not an obligation to perform the contract, and must be care- fully distinguished from it (fc). Indeed it is not a con- tractual obligation at all. It is limited to the extent we have stated above (p. 59), and the principle on which it is founded is often expressed in the form: "An infant shall not take advantage of his own fraud." A review of the principal cases (h) Biirnard v. Saggis (1863) 14 Declaration for goods sold, &o. Plea, C. B. N. S. 45, 32 L. J. C. P. 189. infancy. Equitable replication, that A bailment at will would have been the contract was induced by defen- determined, as where a bailee com- dant's fraudulent representation that mits theft at common law by he was of age. The replication was " breaking bulk." held bad, as not meeting the defence, (t) Cowern y. Nield [1912] 2 K. B. but only showing a distinct equitable 419, 81 Ij. J. K. B. 866, C.A. right collateral to the cause of action {k) Ace. JBartUtt v. Wells (1862) 1 sued upon. B. & S. 836, 31 L. J. Q. B. 57. P. — c. I 6 82 CAPACITY OF PARTIES. will show the correct doctrine. In Clarke v. Cobley (I) the defendant being a minor had given his bond to the plaintiff for the amount of two promissory notes made by the de- fendant's wife before the marriage, which notes the plaintiff delivered up. The plaintiff, on discovering the truth, and after the defendant came of age, filed his bill praying that the defendant might either execute a new bond, pay the money, or deliver back the notes. The Court ordered the defendant to give back the notes, and that he should not plead to any action brought on them the Statute of Limitation or any, other plea which he could not have pleaded when the bond was given; but refused to decree payment of the money, holding that it could do no more than take care that the parties were restored to the same situation in which they were at the date of the bond. In Lempriere v. Lanffe, a quite modern case, •it was held that an infant who had obtained the lease of a furnished house by representing himself of full age could not be made liable for use and occupation, although the lease could be set aside and the infant ordered to pay the costs of the action (m) . Cory v. Qertcken{n) shows that when an infant by falsely representing himself to be of full age has induced trustees to pay over a fund to him, neither he nor his representatives can afterwards charge the trustees with a breach of trust and make them pay again. Overton -v. Banister (o) confirms this: it was there held, however, that the release of an infant cestui que trust in such a case is bind- ing on him only to the extent of the sum actually received by him (jp). In Stikeman v. Dawson (q) the subject of infants' [1) (1789) 2 Cox, 173, 2 R. R. 25. Ch. 82. It must be taken, though it is not («) (1816) 2 Madd. 40, 17 R. R. clear by the report, that the defen- 180. dant falsely represented himself as (o) (1844) 3 Ha. 503. of full age. {p) Cp. Wright v. Smwe (1848) 2 (m) (1879) 12 Ch. D. 675. Pol- De G. & Sm. 321, 79 R. R. -220, lowed on the question of costs, Woolf V. Woolf [1899] 1 Ch. 343, 68 L. J. {q) See next page. INFANTS : EEPEESENTATION OF AGE. 83 liability for wrongs in general is discussed in an interesting judgment by Knight Bruce V.-C. and the important point is decided that in order to establish this equitable liability it must be shown that the infant actually represented himself to be of full age; it is not enough that the other party did not know of his minority. And as there must be an actual false representation, so no claim for restitution can be sus- tained unless the representation actually misled the person, to whom it was made. No relief can be given if the party was not in fact deceived, but knew the truth at the time; and it makes no difference where the business was actually conducted by a solicitor or agent who did not know (r) . An infant has been held liable to account for the proceeds of goods obtained by a false representation that he was of full age (s); this on the principle of following the property and not otherwise. The most express and fraudulent representation of full age will not enable a lender to an infant to recover his money either as a debt or as money had and received {t). A minor cannot be adjudicated a bankrupt in the absence of an express representation to the creditor that he was of full age. The mere fact of trading cannot be taken as a constructive representation {u). But if a minor has held himself out as an adult, and so traded and been made bank- rupt, he cannot have the bankruptcy annulled on the ground where the first paragraph of the (t) R. Leslie v. Sheill [1914] 3 headnote seems to go beyond any- K.B.607,83L. J. K. B. 1145, C. A., thing really decided. where authorities are critically re- {q) (1847) 1 De G-. & Sm. 90, 16 viewed. Some doubt is thrown on L. J. Oh. 205, 75 R. E. 47. Stocks v. Wilson, but that case, it is (>•) Nelson v. Stacker (1859) 4 De submitted, is clearly distinguishable G. & J. 458, 28 L. J. Ch. 751. As and correct. to a married woman's similar fraud, («) JEx parte Jones (1881) 18 Ch. see p. 83, below. Div. 109, 50 L. J. Oh. 673, over- («) Stocks v. WiUon [1913] 2 K. B. ruling Ex parte Lynch (1876) 2 Oh. D. 235, 82JL. J. E. B. 598. 227, 46 L. J. Bk. 48. 6(3) 84 CAPACITY OF PARTIES. of his infancy (x); and a loan obtained on the faith of an express representation that he is of full age is a claim prov- able in bankruptcy (y). A transaction of this kind cannot stand in the way of a subsequent valid contract with another person made by the infant after he has come of age; arid the person who first dealt with him on the strength of his representing himself as of age acquires no right to interfere with the performance of the subsequent contract (z) . This is another proof that the infant's false representation gives no additional force to the transaction as a contract. II. Married Women. Common-law disability. — A married woman is capable of binding herself by a contract only " in respect of and to the extent of her separate property " (a) . This limited capacity is created by a statute founded on the practice of the Court of Chancery, which for more than a century had protected married women's separate interests in the manner to be presently mentioned. Except as to separate property the old common law rule still exists, though with greatly dimi- nished importance. That rule is that a married woman cannot bind herself by contract at all. If she attempts to do so " it is altogether void, and no action will lie against her husband or herself for the breach of it"(&). And the same consequence follows as in the case of infants, namely, that although a married woman is answerable for wrongs committed by her during the cover- {x) Bx parte Watson (1809) 16 Ves. (s) Inman v. Inman (1873) L. E. 265 ; Bx parte Bates (1841) 2 Mont. 16 Eq. 260. D. & D. 337. («) Married Women's Property [y) Ex parte Unity Bank (1858) Act, 1882, 45 & 46 Vict. c. 75, s. 1. 3 De G. c& J. 63, 27 L. J. Bk. 33 ; {b) Per Cur. Fairhurst v. Liverpool see observations of Jesael M.R. Adelphi Loan Association [ISbi) 9 "Et.. thereon 18 Ch. D. at p. 121. 422, 429, 23 L. J. Ex. 164. MARRIED WOMEN : COMMON LAW. 85 ture, including frauds, and maj be sued for them jointly with her husband, or separately if she survives him, yet she cannot be sued for a fraud where it is directly connected with a contract with her, and is the means of effecting it and parcel of the same transaction, e.g., where the wife has obtained advances from the plaintiff for a third party by means of her guaranty, falsely representing herself as sole (&); but this does not seem to extend the case of a false representation by which credit is obtained without any appearance of contract on the wife's part (c) . For the same reason — that the law will not allow the contract to be indirectly enforced— a married woman is not estopped from pleading coverture by having described herself as sui iuris (d) . The fact that a married woman is living and trading apart from her husband does not enable her at common law to contract so as to give a right of action against herself alone (e). Nor does it make any difference if she is living separate from her husband under an express agreement for separation, as no agreement between husband and wife can change their legal capacities and characters (/). But "a married woman, though incapable of making a contract, is capable of having a chose in action conferred upon her, which will survive to her on the death of the husband, unless he shall have interfered by doing some act to reduce it into possession": thus she might, before the Married Women's Property Act, buy railway stock, and become en- titled to sue for dividends jointly with her husband (g^). (i) See previous page. («) Clai/imt v. Adams (1796) 6T. B.. {e) Wright v. Leonard (1861) 11 605. C. B. N. S. 258, 30 L. J. C. P. 365, (/) Marshall v. Sutton (1800) 8 132 E. R. 564, where the Court was T. R. 545, 5 R. R. 448. divided ; cp. Earlev. Kingscote [1900] (^) Per Cur. Balton v. Midland Ry. 2 Ch. 585, 69 L. J. Ch. 726, C. A. Co. (1853) 13 C. B. 474, 22 L. J. 0. P- (d) Cannam v. Farmer (1849) 3 Ex. 177. And see 1 Wms. Saund. 222, €98. 223. On the question what amounts 86 CAPACITY OF PARTIES. When a third person assents to hold a sum of money at the wife's disposal, but does not pay it over, this is conferring on her a chose in action within the meaning of the rule Qi) . During the joint lives of the husband and wife the husband is entitled iure mariti to receive any sum thus due; " but if the wife dies before the husband has received it, the husband, although his beneficial right remains the same, must in order to receive the money take out administration to his wife; and if he dies without having done so, it is necessary that letters of administration should be taken out to the wife's estate (for such is stiLL the legal character of the money), but the wife's administrator is only a trustee for the representative of the husband "(i). Accordingly the Court of Probate cannot dispense with the double administration, even where the same person is the proper representative of both husband and wife, and is also beneficially entitled (fc) . Inasmuch as according to the view established by modern decisions a promise to pay a debt barred by the Statute of Limitation does not operate byway of post-dating the original contract so as to "draw down the promise" then made, a married woman's general incapacity to contract prevents such ' a promise, if made by her, from being effectual; and where before the marriage she became a joint debtor with another person, that person's acknowledgment after the marriage is also ineffectual, since to bind one's joint debtor an acknow- ledgment must be such as would have bound him if made by himself (I) . to reduction into possession, see v. Att.-Gen. (1869) L. R. 4 H. L. ■Williams on Executors, 641 sqq. 100, U9. (10th ed. 1905) Widgery v. Tepper (A) In the Goods of Harding (1872) (1877) 5 Ch. D. 516, 7 Oh. Div. L. R. 2 P. & D. 394. 423, 47 L. J. Ch. 550. (I) Pittam v. Foster (1823) 1 B. & (h) Fleet v. Perrins (1869) L. R. C. 248, 25 R. R. 385 ; 1 Wms. 3 Q. B. 536, 4 Q. B. 500, 38 L. J. Saund. 172. As to the correct ex- Q. B. 257. planation of the general rule, see (i) Per Lord Westbury, Partington p. 694, below. MARRIKD WOMKN : COMMON LAW. 87 The rules of law concerning a wife's power to bind her husband by contract, either as his actual or ostensible agent {m) or, in some special circuni"stances, by a peculiar authority independent of agency, do not fall within the pro- vince of this work. Exceptions at common law. — The wife of the King of •England may sue and be sued as a feme sole (Co. Litt. 133 a). This was settled as early as the fourteenth century (n). The wife of a person civiUy dead may sue and be sued alone (Ih. 132 b, 133 a). The cases dwelt on by Coke are such as practically cannot occur at this day, and it seems that the only persons who can now be regarded as civilly dead are persons convicted of felony, and not lawfully at large under any licence (o). It appears to be the result of the authorities that the wife of an alien husband who has never been or at least never ()«) See Faquin v. Beauclerk [1906] religious order in England] and is A. C. 14S, 75 L. J. K. B. 395. professed" • in that case he could («) Y. B. 17 & 18 Ed. III., ed. make a will and appoint executors Pike, 430 — 434, where Queen Phi- (who might be sued as such for his lippa sued the Abbot of Cirencester debts, F. N. B. 121, 0), and if he and another in a quare impedit. did not, his goods could be adminis- (o) Transportation was considered tered {Litt. s. 230, Co. Litt. 131 b). as an abjuration of the realm, which Bracton, however, speaks of out- conld be ' determined only by an lawry (426 b) as well as religious actual return after the sentence had profession (301 b) as mors civilis. A expired : Carrol t. Blencoic (1801) 4 person under the penalties of prae- Esp. 27. The analogy to Coke's munire, which include being put out " Civil Death " is discussed, arg. in of the King's protection, would. Ex parte Franks (1831) 7 Bing 762. I suppose, be in the same plight As to alien enemies and their wives as an outlaw. The Roman mors seep. 101, below. It may be doubted civilis was a pure legal fiction, in- whether "civil death" was ever troduced not to create disabilities, really appropriate as a term of art but to obviate the inconvenient re- in English courts except "when a suits of disabilities otherwise created, man entereth into religion \_i.e. a (Sav. Syst. 2. 164.) 88 CAPACITY OF PARTIES. resided in England may bind herself by contract if she pur- ports to contract as a feme sole (p). " By the custom of London, if a feme covert, the wife of a freeman, trades by herself in a trade with which her husband does not intermeddle, she may sue and be sued as a feme sole, and the husband shall be named only for con- formity; and if judgment be given against them, she only shall be taken in execution." (Bacon, Abr. Customs of London, D.) This custom applies only to the city courts {q), and even there the formal joinder of the husband is indis- pensable. But if acted upon in those courts it may be pleaded as matter of defence in the superior courts (r), though they do not otherwise notice the custom (s) . In certain exceptional cases in which the wife has an adverse interest to her husband she is not incapable of contracting with him. Where a wife had instituted a suit for divorce, and she and her husband had agreed to refer the matters in dispute to arbitration, her next friend not being a party to the agreement, the House of Lords held that under the circumstances of the case she might be re- garded as a feme sole, that the agreement was not invalid, and that the award was therefore binding {f). The real object of the reference and award in this case having been to fix the terms of a separation, it was later held that the Court would not refuse to enforce an agreement to execute a deed of separation merely because it was made between the husband and wife without the intervention of a (p) Burden v. Keverberg (1836) 2 seems to be that a married woman M. & W. 61, 6 L. J. Ex. 66. But trading in the City of London may the question is now of little interest. be subject to greater personal (q) Caudell v. Shmv (1791) 4 T. E. liability than elsewhere. 361. («) Caudell v. Shaw, 4 T. R. 361. ()•) Beard v. Webb (1800) 2 Bos. [t) Bateman v. Countess of Ross & P. 93. Since the Act of 1882 the (1813) 1 Dow, 235, 14 R. R. 55. only effect of the custom, if any. MARRIED WOMEN : STATUTES. 89 trustee (^ it). In the simpler case of an agreement to live apart, ^vith incidental provisions for maintenance, the agree- ment does not require the intervention of a trustee, and the wife (apart from the Married "Women's Property Act, which does not apply) can sue the husband for arrears of mainten- -ance due under it (a?) . It does not follow that in such trans- actions a married woman has all the powers of a feme sole. She has only those which the necessity of the case requires. She is apparently competent to compromise the suit with her liusband {y) : but she cannot, as a term of the compromise, bind her real estate (not being settled to her separate use) without the acknowledgment required by the Fines and Recoveries Act{z). Statutory exceptions other than Married Women's Pro- perty Act. By the Act constituting the Court for Divorce and Matri- monial Causes, 20 & 21 Vict. c. 85, a wife judicially separated from her husband is to be considered whilst so separated as a feme sole for the purposes of (inter alia) contract, and suing and being sued in any civil proceeding (s. 26) (a); and a wife deserted by her husband who has obtained a pro- tection order is in the same position while the desertion con- tinues (s. 21). This section is so worded as when taken (m) Vamitiart v. Vamittart (1858) (a) The same consequences follow 4 K. & J. 62, 27 L. J. Ch. 222 ; but a fortiori on a dissolution oi marriage, the agreement not enforceable for though there is no express enactment other reasons ; affirmed on appeal, that they shall : Wilkinson v. Gibson 2 De G. & J. 249 ; 27 L. J. Ch. 289 ; (1867) L. R. 4 Eq. 162, 36 L. J. Ch. but no opinion given on this point. 646 ; see also, as to the divorced (x) McGregor v. McGregor (1888) wife's rights, Wells v. Malbon {\S62) 21 Q. B. Div. 424, 57 L. J. Q. B. 31 Beav. 48, 31 L. J. Ch. 344 ; .591. Fitzgerald v. Chapman (1875) 1 Ch. (g) Sowletj V. ItotDleg (1866) L. R. D. 563, 45 L. J. Ch. 23 ; Burton t. 2 Sc. &D. 63. Sturgeon (1876) 2 Ch. Div. 318, 45 (s) Cahill V. Cahill (1883) 8 App. L. J. Ch. 633. ■Ca. 420. 90 CAPACITY OF PARTIES. alone to countenance the supposition that the protection order relates back to the date of desertion. It has been decided^ however, that it does not enable the wife to maintain an action commenced by her alone before the date of the order (&). Her powers of disposing and contracting apply only to property acquired after the decree for separation or' the desertion (or protection order?) as the case may be(c). These provisions are extended by an amending Act in certain particulars not material to be noticed here (21 & 22 Vict, c. 108, ss. 6 — 9); and third parties are indemnified as to payments to the wife, and acts done by her with their per- mission, under an order or decree which is afterwards dis- charged or reversed (s. 10). The words as to "suing and being sued " in this section are not confined by the context to matters of property and contract, but are to be liberally construed: a married woman who has obtained a protection order may sue in her own name for a libel {d) . Equitable doctrine of separate estate . In the eighteenth century, if not earlier, the Court of Chancery recognized and sanctioned the practice of settling property upon married women to be enjoyed by them for their separate use and free of the husband's interference or control. To this was added, towards the end of that century, the curious and anomalous device of settling property in trust (i) Midland Ey. Co. v. Pye (1861) power assets for the payment of 10 C. B. N. S. 179, 30 L. J. 0. P. her debts, see £e Hughes [1898] 1 Ch. 314. 529, 67 L. J. Ch. 279, C. A. [c) Waite v. MorlanA (1888) 38 (d) Samsden v. BrearUy (1875). Ch. Div. 136, 57 L. J. Ch. 655 ; Hill L. R. 10 Q. B. 147, 44 L. J. Q. B. V. Cooper [1893] 2 Q. B. 85, 62 46. She can give a valid receipt L. J. Q. B. 423, C. A. As to the for a legacy not reduced into poa- combined efEect of this Act and s. 4 session before the date of the order : of the Married Women's Property Re Coward S; Adam's purchase (1875), Act, 1882, in making property sub- L. R. 20 Eq. 179, 44 L. J. Ch. 384. ject to a married woman's disposing MARRIED WOMEN : SEPARATE USE. 91 for a married woman " without power of anticipation," so that she cannot deal in any way with the income until it is actually payable. During the nineteenth century a 'doctrine was elaborated, not without difficulty and hesitation, under which a married woman having separate property at her disposal (not subject to the peculiar restraint just mentioned) might bind that property, though not herself personally, by transactions in the nature of contract (e). Some account of this doctrine is given for reference in the Appendix, as being useful, if not necessary, for the full understanding of the modern law. It should be observed that restraint on anticipation, being aUo■^^•ed only for the purpose of protecting the fund as capital, does not apply to income of the fund -when it reaches the married woman's hands, or the hands of some person from whom she can immediately demand it. The income so paid or payable is ordinary separate propertj', and therefore on principle not exempt from the subsequent claims, equitable or statutory, of the married woman's creditors (/) ; but it cannot be made liable to a previous judgment {g) . (e) Before the Act of 1882, where 48, 6.5 L. J. Q. B. 457, C. A. ; this a married woman obtained credit by principle seems to have been over- falaely representing herself as a looked by the C. A. in construing ■widow, and a fund was settled on the Act of 1893 in Barnett v. Howard her for her separate use for Ufe, with [1900] 2 Q. B. 784, 69 L. J. Q. B. a general power of appointment by 965, which however has been followed will, the creditor was held, in the and confirmed: Wood r. Lewis [I91i'] administration of her estate, to have 3 K. B. 73, 83 L. J. K. B. 1046, a good claim on that fund as against C. A. appointees : Vaughan v. Vanderategen [g) For the effect of this would (1854) 2 Drew. 363, 408, 100 E. E. be to make the restraint on anticipa- 173, 199. tion inoperative : Bolitho v. Gidley (/) See Hood Bam v. Seriot [1905] A. 0. 98, 74 L. J. K. B. 430, [1896] A. C. 174, 65 L. J. Q. B. 362 ; approving WhiteUy v. Edwards, note Whiteley y. Edwards [1896] 2 Q. B. (/) above. 92 CAPACITY OF PARTIES. The Married Women's Property Act. The provisions of the Married Women's Property Act, 1882, extended by an amending Act of 1893, are so much wider that they may be described as a new body of law^ consolidating and superseding the results of many eases in equity as well as the previous Acts of 1870 and 1874, which this Act repealed. The law, as now declared, is to this effect: Separate property is (i) Property acquired by any married woman after January 1, 1883, including earnings (A): (ii) Property 'belonging at the time of marriage to a woman marrying after January 1, 1833 {i}. Special trusts created in favour of a married woman by will, settlement or otherwise, are not affected by the Act (fc) . Subject to any settlement {I), a married woman can bind herself by contract " in respect of and to the extent of her separate property," and can sue and be sued alone (m) . Damages and costs, if recovered by her, become her sepa- rate property; if against her, are payable out of her separate property and not otherwise {n). A married womaiftrading (A) Ss. 5, 25. Property falling Ch. D. 1 96, 62 L. J. Ch. 776. into possession since the Act under (m) As to the retrospective opera- a title acquired before it is not in- tion of the Act with regard to power eluded: Eeid t, Meid (1886) 31 Ch. to sue on a cause independent of Div. 402, 55 L. J. Ch. 294. contract, see Weldon v. Winslow (i) S. 2. (1884) 13 Q. B. Div. 784, 53 L. J. (A) S. 19, ■which " prevents the Q. B. 528. As to liability on causes previous enactment from interfering independent of contract, Whittaker ■with any settlement ■which ■would v. Kershaw (1890) 45 Ch. Div. 320, have bound the property if the Act 60 L. J. Ch. 9. The general ■words had not passed " : CottonL.J. San- of s. 1 (1) do not give any greater •coek V. Scmcock (1888) 38 Ch. Div. power of disposal than is given by 78, 90, 57 L. Ch. 396. This pro- the specific words of ss. 2 and 5, vision covers both s. 2 and s. 5. See -with which s. 1 must be read: Se £itckland v. Buckland [1900] 2 Ch. Ctmo, Mansfield v. Mansjield (1889) 534, 69 L. J. Ch. 648. 43 Ch. Div. 12, 62 L. T. 15. (?) See Stonor's Trusts (1883) 24 («) S. 1, sub-s. 2. MARRIED women's PROPERTY ACT. 93 alone can be made bankrupt in respect of her separate pro- perty (o). A contract made by a married woman otherwise than as agent (p) (i) Is deemed to be made with respect to and to bind her separate property (q), and, if made since 5 Dec, 1893, whether or not she has any separate property at the date of the contract (r) : (ii) If so made and binding, binds her after-acquired separate property (s) . A married ANoman's separate property is liable for her ante-nuptial debts and obligations (t). She is also liable at common law for such debts, and judgment may go against her personally (u) . She cannot avoid this liability by settling the property on herself without power of anticipation (x). (o) S. 1, sub-8. 5. An unexecuted general power of appointment is not " separate property," and a married woman cannot be compelled to exe- cute such a power for the benefit of her creditors : Ss; parte Gilchrist (1886) 17 Q. B. Div. 521, 55 L. J. Q. B. 578. S. 19 does not prevent property to which she is entitled imder a settlement, without re- straint on anticipation, from passing to the trustee in bankruptcy : Hx parte Boyd (1888) 21 Q. B. Div. 264, 57 L. J. Q. B. 553. ( p) These words do not afEect the authority of a married woman living with her husband to pledge his credit, or the presumption that she deals on his credit alone : Faquin v. BeaueUrk [1906] A. C. 148, 75 L. J. K. B. 395 ; and the other party's knowledge is immaterial if there is no misrepresentation : %b. The H. L. was equally divided. {q) Formerly there was no such presumption unless she was living apart from her husband. See Ap- pendix, Note C. ()■) 56 & 57 Vict. c. 63. A con- tract made before the Act cannot be brought within it by subsequent acknowledgment: Be Wheeler [1904] 2 Ch. 66, 73 L. J. Ch. 576. (s) 56 * 57 Vict. c. 63, ss. 1, 4. Provided as to contracts of earlier date than 5 Dec, 1893, that there was some separate property at the date of the contract : Stogdon v. Lee [1891] 1 Q. B. 661, 60 L. J. Q. B. 669, 0. A. {t) S. 13. This liability is at least doubtful in cases not under the Act : see Note C. As to the Act of 1870, Axford V. Reid (1889) 22 Q. B. Div. 548, 58 L.J. Q. B. 230. [u) Robinson, King S; Co. v. Lynes [1894] 2 Q. B. 577, 63 L. J. Q. B. 759. {x) S. 19. 94 CAPACITY OF PARTIES. As to women married before January 1, 1883, such liability applies only to separate property acquired by them under the Act It/). The Act contains other provisions as to the effect of the execution of general powers by will by married women (z), the title to stocks and other investments registered in a married woman's name either solely or jointly (a), the effect- ing of life assurances by a married woman, or by either hus- band or wife for the benefit of the family (&), procedure for the protection of separate property (c), and other matters which belong more to the law of Property than to the law of Contract. It is not expressly stated by the principal Act whether on the termination of the coverture by the death of the husband, or by divorce, a married woman's debts contracted during the coverture with respect to her separate property do or not become her personal debts; but it has been assumed that they do (d), and the Act of 1893 expressly makes this the rule for contracts subsequent to its date (e). If not, the only remedy would be against her separate property which existed as such during the coverture, and was not subject to restraint on anticipation (/), so far as it could still be identi- fied and followed. The Act does not remove the effects of a restraint on antici- pation. A married woman's creditor is not enabled to have execution or any incidental remedies against property sub- ject to such restraint {g); though this affects only the remedy, (i/) See note (s). 24 Q. B. D. 98. [z) Se FieUwicTc [1909] 1 Ch. 1, (e) 56 & 67 Vict. u. 63, ». 1 (c). 78 Ii. J. Ch. 153, C. A. (/) PeltmBros. v. Harruon [1891] {a) Ss. 6-10. 2 Q. B. 422, 60 L. J. 4- B. 74, C. A. (5) S. 11. df) Uraycott v. JTarrison (1886) (c) S. 12. 17 Q. B. D. 147. But be may when {d) Sarrison v. Harrison (1888) 13 the restraint is removed by the P. Div. 180 : ie«i T. -Dri^eirf (1889) husband's death: Briggs v. Myan MARRIED women's PROPERTY ACT. 95 not the cause of action {h) . But the Act of 1893 gives power to order costs to be paid out of such property (i) in any action ■or proceeding instituted by or on behalf of a married woman Qc). It was settled under the Act of 1882, after some difference •of judicial opinions, that income of separate property sub- 'ject to restraint on anticipation is, when paid or accrued ■due, " free money " and liable to satisfy a judgment not of prior date to the date of such income becoming payable {I) . It is now held that s. 1 of the Act of 1893 has the effect of abrogating this rule, and protecting the income actually pay- able from separate property which was subject to restraint on anticipation at the date of the contract, even if the restraint on the capital has been removed by the cessation of the cover- ture before the date of the judgment (m) . This result seems to be foreign to the intention of the Act. A married woman cannot free herself from a restraint on anticipation attached to any property beld for her separate use by any act of her own, whether in the nature of admis- sion, estoppel, or otherwise {n). [1899] 2 Ch. 717, 68 L. J. Ch. 663 Cathcart [1895] 1 Q. B. 873, 64 L. 3. — at any rate a trustee in bankruptcy Q. B. 5^20. The burden is on the may: ib. married woman to show why such (h) WTiittaker v. Kershaw (1890) an order should not be made, but it 45 Ch. Div. 320, 327, 60 L. J. Ch. 9. is not a matter of course : Pawley v. (i) 56 & 57 Vict. u. 63, ». 2. S. 1 Pawley [\90b'\ 1 Ch. 593, 74L. J.Ch. does not make such property liable 344. to satisfy a contract. See the [l) Sood Barrs v. Seriot [1896) pro-nso. A. C. 174, 65 L. J. Q. B. 352. {k) Hood Parrs v. Cathcart [1894] (m) Barnett v. Howard [1900J 2 3 Ch. 376, 63 L. J. Ch. 793, C. A., Q, B. 784, 69 L. J. Q. B. 955 ; TFood approved, Bood Barrs v. Seriot v. Xewis [1914] 3 K. B. 73, 83 L. J. [1897] A. C. 177, 66 L. J. Q. B. K. B. 1046, C. A., see p. 91, above. 356. This does not apply to motions, (n) Bateman v. Faber [1S98] 1 Ch. appeals, or other steps taken in a 144, 67 L. J. Ch. 130, C. A. But cause by a married woman who is she can bind her free separate pro- a defendant ; but it does apply to a perty by a covenant not to sue in counterclaim by her: Hood Barrs v. respect of dealings with her re- 96 CAPACITY OF PARTIES. Where the surviving husband of a married woman takes her separate estate iure mariti, he is at once her " legal per- isonal representative " for the purposes of the Act, and liable to her creditors to the extent of that separate estate (o) . On the other hand the Act does not exclude such equitable rights and remedies against a married woman's separate estate as were previously recognized. Where a married woman carries on a separate business, her husband can sue her for advances made during the coverture for the purposes of that business {p), on the general principle that in respect of her separate estate she is treated as a feme sole. And it may still be possible in some cases not within the Act to enforce a married woman's contract by means of the equitable doctrine of imperfect exercise of a power (q). With regard to a husband's liability for his wife's ante- nuptial debts, the Court of Appeal has decided in a con- sidered judgment that, it is distinct, and not merely a joint liability with the wife's separate estate; but that, for the purposes of the Statute of Limitation, there is not a distinct cause of action accruing against the husband at the date of the marriage (r) . III. Lunatics and Drunken Persons. It will be convenient to consider these causes of disability together, since in our modern law drunken men (so far as their capacity of contracting is affected at all) are on the same footing as lunatics. strained property, and the measure 1 Q. B. 491, 60 L. J. Q. B. 233. of damages in a counterclaim on her (p) Sutler v. Butler (1885) 16 covenant may be the exact sum she Q. B. Div. 374, 55 L. J. Q. B. 65. would recover on the principal claim: (q) See per Fry, L. J. Hx parte Sprange v. Lee [1908] 1 Oh. 424, 77 Gikhrist (1886) 17 Q. B. Div.] at L. J. Ch. 274. p. 532. (o) S. 23 of the principal Act, as (r) Beck v. Pierce (1889) 23 Q. B. applied in Surman v. Wharton [1891] Div. 316, 68 L. J. Q. B. 516. LUNACY AND DRUNKENNESS. 97 The old law as to a lunatic's acts was that he could not be admitted to avoid them himself, though in certain cases the Ci^own, and in other cases his heir could (s). The fact of a defendant having been found lunatic by inquisition was not conclusive, as regards acts done before the date of the inquisi- tion, as against a plaintiff who was not there present (t) . But a lunatic so found by inquisition cannot deal with his property by deed, even in a lucid interval, while the inqui- sition is in force (m) . A lunatic not so found is capable of contracting (among other acts) during any lucid intervals {z) . The marriage of a lunatic is void, and the same degree of sanity is required for marriage as for making a will or for any other purpose, though the burden of proof is on the party alleging insanity (?/) . It is equally settled that a lunatic or his estate may be liable quasi ex contractu for necessaries supplied to him in good faith (z); and this applies to all expenses necessarily incurred for the protection of his person or estate, such as the cost of the proceedings in lunacy {a). A person who supplies necessaries to a lunatic or provides money to be expended in necessaries knowing him to be such can have an action against the lunatic if he incurred the expense with the intention, at the time, that it should be repaid. The (s) Seethe judgment of Fry L.J. on this point. The statute 15 Geo. 2, in Imperial Loan Co. v. Stone [1892] u. 30, is rep. by the Stat. Law Ee- 1 Q. B. at p. 601. vision Act, 1873. (t) Sail V. Warren (1804) 9 Ves. (z) Brockwell v. Bullock (1889) 605, 609, 7 E. K. at p. 308. 22 Q. B. Div. 567 ; Bagster v. Earl («) Re Walker [1905] 1 Ch. 160, of Portsmouth (1826) 6 B. & 0. 170, 74 L. J. Ch. 86, C. A. s. c. more fully, nom. Baxter v. (x) Beverley's ease (1603) 4 Co. Earl P., 7 D. & R. 614. As to Rep. 123 b ; Sail v. Warren, note [t) goods sold and delivered, Sale of above. Goods Act, 1893, s. 2. («/) Sancoek v. Featy (1867) L. E. (a) Williams v. Wentworth (1842) 1 P. & D. 335, 341, 36 L. J. Mat. S Beav. 325; Stedman v.Sart (1854) S7 ; with which Durham v. Durham Kay, 607, 23 L. J. Ch. 908, 101 (1886) 10 P. D. 80 does not conflict R. R. 764. P.- -c. 7 98 CAPACITY OF PARTIES. circumstances must be such as to justify the Court in imply- ing an obligation to repay; there is no doubt that such an obligation may exist in a proper case (6). A husband is liable for necessaries supplied to his wife while he is lunatic ; for the wife's authority to pledge his credit for necessaries is not a mere agency, but springs from the relation of husband and wife and is not revoked by the husband's insanity (c). In the same way drunkenness or lunacy would be no answer to an action for money had and received, or for the price of goods f urnislied to a drunken or insane man and kept by him after he had recovered his reason: in this last case, however, his conduct in keeping the goods would be evidence of a new contract to pay for them\d). There is also express authority (which one would think hardly necessary) to show that contracts made by a man of sound mind who afterwards becomes lunatic are not invali- dated by the lunacy (e) . It seems that an agency is deter- mined by the principial becoming insane, except as to persons who deal in good faith with the agent in ignorance of the principal's insanity (/). The general rule as to the contract of a lunatic (at all events if not so found by inquisition) or drunken man who by reason of lunacy or drunkenness is not capable of under- standing its terms or forming a rational judgment of its effect on his interests is that such a contract is voidable at his option, but only if his state is known to the other party. The defendant who sets up his own incapacity as a defence must prove not only that incapacity but the plaintiff's know- ledge of it at the date of the contract (g) . (b) Re Shades (1890) 44 Ch. Div. (e) Owen v. Davies, 1 Ves. Sr. 82. 94, 59 L. J. Ch. 298. (/) See Drew v. Nunn (1879) 4 (c) Read v. Legard (18.'>1) 6 Ex. Q. B. Div. 661, 48 L. J. Q. B. 59J. 636, 20 L. J. Ex. 309, 86 R. R. 418. [g) Molton v. Camroux, in Ex. Ch. (d) Gore v. Gibson (1845) 13 M. & (1848) 2 Ex. 487, 4 Ex. 17, 18 L. J. W. 623, 14 L. J. Ex. 151, 67 R. R. Ex. 68, 356 ; Imperial Loan Co. v. 762. Stone [1892] 1 Q. B. 599, 61 L. J. LUNACY AND DRUNKENNESS. 99 In Molton v. Camroux (g) the action was brought by ad- ministrators to recover the money paid by the intestate to an assurance and annuity society as the price of two annuities determinable with his life. The intestate was of unsound mind at the date of the purchase, but the transactions were fair and in the ordinary course of business, and his insanity- was not known to the society. It ^A'as held that the money could not be recovered; the rule being laid do\^1l in the Exchequer Chamber in these terms: " The modern cases show that when that state of mind was unknown to the other con- tracting party, and no advantage was taken of the lunatic, the defence cannot prevail, especially where the contract is not merely executory but executed in the A\'hole or in part, and the parties cannot be restored altogether to their original positions." The context shows that the statement was considered equally applicable to lunacy and drunkenness, and the law thus stated involves though it does not expressly enounce the proposition that the contract of a lunatic or drunken man is not void but at most voidable. The general rules as to the rescission of a voidable contract are then applicable, and among others the rule that it must be rescinded, if at all, before it has been executed, so that the former state' of things cannot be restored : which is the point actually decided . The decision itself was fully accepted and acted on (h), though Q. B. 449, C. A. The same prin- " Lunacy in relation to Contract, ciple had long before been acted Tort, and Crime," L. Q. R. xviii. upon in equity, bat without deciding 21. As to the Roman-Dutch law of ■whether there was a contract at law: Natal, Moli/neu.r v. A^aial Land, &c. Niell V. MorUy (1804) 9 Ves. 478. Go. [1905] A. C. 555. In British The rule is apparently peculiar to India a person of unsound miud is the Common Law, and is impugned incapable of contracting: I. C. A. by a learned civilian as unjust to the ss. 10, 11, 12 ; MoJiori Bibee v. Dlmr- lunatio: Prof. Goudy, "Contracts modas Ghose (1903) L. R. 30 I. A. by Lunatics," L. Q. R. xvii. 147. 114. See contra Mr. Rankine Wilson, (A) Beavan v. M'Donnell (1864) 9 7(2) 100 CAPACITY OF PARTIES. the merely voluntary acts of a lunatic, e.g., a voluntary dis- entailing deed (a class of acts with which we are not here concerned) remain invalid (i). The complete judicial inter- pretation of the result of Molton v. Oamroux (fc) was given in Matthews v. Baxter (I). The declaration was for breach of contract in not completing a purchase: plea, that at the time of making the alleged contract the defendant was so drunk as to be incapable of transacting business or knowing what he was about, as the plaintiff well knew: replication, that after the defendant became sober and able to transact business he ratified and confirmed the contract. As a merely void agreement cannot be ratified, this neatly raised the question whether the contract were void or only voidable: the Court held that it was only voidable, and the replication therefore good. In Imperial Loan Co. v. Stone (m) a defendant sued on a promissory note set up the defence of insanity at the time of making the note. The jury found that he was insane when he signed the note, and could not agree whether the plaintiffs' agent, then present, knew of his insanity or not. It was held that this could not be taken as a verdict for the defendant, but there must be a new trial. The Court was unanimous, and the decision may be taken as finally settling the law if there was still any room for doubt. It also shows that a distinction formerly suggested between executed and executory contracts is not tenable. The special doctrine of our Courts with regard to partner- ship (which is a continuing contKact) is quite in accordance Ex. 309, 23 L. J. Ex. 94; Friee v. {1} (1873) L. E. 8 Ex. 132, 42 Serrington (1850-1) 3 Mao. & G. L. J. Ex. 73. 486, 495, revg. s. o. 7 Ha. 394, 87 (m) [1892] 1 Q. B. 599, 61 L. J. E. R. 157; Elliot v. Ince (1857) Q. B. 449, C. A. It does not 7 D. M. Gr. 475, 488, 26 L. J. Ch. appear from the argument as re- 821 . ported how counsel for the defendant (i) Elliot V. Ince, last note. dealt with Molton v. Oamroux, which {k) Note {si) last page. was binding on the Court. CONVICTS AND ALIEN ENEMIES. 101 With this: it has long been established that the insanity of a partner does not of itself operate as a dissolution of the partnership, but is only a ground for dissolution by the Court. It is to be noted that the existence of partial delusions does not necessarily amount to insanity for the purposes of this rule. The judge or jury, as the case may be, must in every ease consider the practical question whether the party was incompetent to manage his own affairs in the matter in hand (w) . IV. Convicts; Alien Enemies. At common law convicted felons (as also outlaws) could not sue, hut remained liable to be sued, on contracts made by them during outlawry or conviction' (o). Since the Act to abolish forfeitures for treason and felony, convicts are in- capable of suing or making any contract, except while they are lawfully at large under any licence {p) . An alien enemy is disabled from suing in our English Courts during the state of war without licence from the Crown; such licence is implied in permission to reside here, given in regular course, and extends (as to her own rights) to the wife of an enemy resident abroad if she is duly registered here (g). But there is nothing to prevent enemies from binding themselves by contract during war between their country and England (r), nor from enforcing such a contract after the war has ceased (s) . («) Jenkins v. Morris (1880) 14 Ch. disability being personal : Ze Bret Div. 674; compare remark of Bram- v. Papillon (1804) 4 East, 502, 7 R. well L. J. in Drew v. Nunn (1879) E. 618. Internment does not dimi- 4 Q. B. Div. at p. 669, 48 L. J. nish the beneficial efieot of regis- Q. B. 591 . tration : Schaffenitis v. Goldberg [1916] (o) Dicey on Parties, 4. 1 K. B. 284, 85 L. J. K. B. 374, C. A. (p) 33 & 34 Vict. u. 23, as. 8, 30. (r) And being sued thereon : Hal- {q) Aliens Restriction Act, 1914 ; sey v. Lowenfeld [1916] 1 K. B. 143, Tlmrn and Taxis (Frincess) v. Moffltt 85 L. J. K. B. 323, affirmed [1916] [1915] 1 Ch. 33. It is immaterial 2 K. B. 707, 85 L. J. K. B. 1498. when the cause of action arose, the («) De Wahl v. Braune (1856) 1 102 CAPACITY OF PAKTIES. PAET II. We now come to the extensions by special institutions of the ordinary power of making contracts. And first of agency. I. Agency. We have not here to do with the relations created between principal and agent by agency regarded as a species of con- tract, but only with the manner in which rights and duties accrue to the principal through the dealings of the agent. We must also distinguish cases of real agency from those where the agency is apparent only, and we shall further notice, for the sake of completeness, the position of the true or apparent agent as regards third persons. A person who contracts or professes to contract on behalf of a principal may be in any one of the following positions : 1. Agent having authority (whether at the time or by subsequent ratification) to bind his principal. (A) known to be an agent (a) for a principal named; (/3) for a principal not named. (B) not known to be an agent {t). 2 . Holding himself out as an agent, but not having autho- rity to bind his principal. (A) where a principal is named {a) who might be bound, but does not in fact authorize or ratify the contract; (/3) who in law cannot be bound. (B) where the alleged principal is not named. H. &N. 178, 25 L J. Ex. 343. The Dobell, Fleet t. Murton and Hutchin- sunuise. there that the Statute of son v. Tatham (see following notes) , Limitation continues to run during the true leading distinction seems to the war time does not seem well be whether the agent is known to be founded, see L, Q. R. xx. 168. an agent or not, rather than whether {t) Since the cases of Calder v. the principal is named or not. AGENCY. 103 1. As a rule an agent may be appointed without any special formality; though an agent to execute a deed must himself be appointed by deed, and in certain cases the appointment is required by the Statute of Frauds to be in writing. Revocation of an agent's authority takes place either by the principal's actual withdrawal of his «ill to be represented by the agent (\\hich may be known either by express declaration or by conduct manifesting the same inten- tion) or by his dying or ceasing to be sui iuris, and thus becoming incapable of continuing it. In these last cases the authority is said to be revoked by the act of the law. " The termination of the autiiority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them " (m). It is held in England, but anomalousl)-, that this rule does not apply to revocation by the death of the principal {x) . It does apply in the case of the principal becoming insane, and it may perhaps yet be decided that in the case of death the principal's estate is liable to tho other party for the actual loss incurred by the principal's repre- sentation — w^hich, as regards him, was a continuing one at the date of the contract — that the agent was authorized {y) . Ratification must in every case be within a reasonable time, and where a time is expressly limited within which an act must be done, and an unauthorized person purports to do (m) I. C. A. 208, cp. Story on to the dissolution of a company in Agency, § 470 ; Trueman v. Loder Saltan v. New Bceston Cycle Co. [1900] (1840) 11 A. & E. 589, 52 E. R. 1 Ch. 43, 69 L. J. Ch. 20. But the 451. agent may be liable on an implied {x) Blades v. Free (1829) 9 B. & C. warranty of his authox-ity, seep. 114, 167, 32 R. R. 620. Contra, I. C. A. ^'^low. s. 208 (Illust. c). Code Nap. 2008, (y) Drew v. Nunn (1879) 4 Q. B. 2009, and German Civil Code, Div. 661; see per Brett L.J. at ss. 167 — 171; and see Kent, Coram. p. 668. 2. 646. The same rule was applied 104 CAPACITY OF PARTIES. it on behalf of the principal within that time, a ratification after the time has expired will not serve {z) . Authority conferred by ratification relates back, as against the other party as well as the principal, to the date of the act done by the agent (a) . In all cases where there is an authorized agent dealing on behalf of a real principal, the intention of the parties determines whether the agent, or the principal, or both, are to be liable on the contract and entitled to enforce it. The question is to whom credit was really given (&). And the general rules laid down on the subject furnish only pro- visional answers, which may be displaced (subject to the rules as to admissibility of evidence) by proof of a contrary intention . A. When the agent is known to be an agent, a contract is made, and knowingly made, by the other party with the principal, on which the principal is the proper person to sue and be sued . And when the principal is named at the time, then there is prima facie no contract with the agent: but when the principal is not named, then prima facie the agent, though known to be an agent, does bind himself personally, the other party not being presumed to give credit exclusively to an unknown principal (c) . (;) Dibhins v. Dibbins [1896] 2 Ch. pp. 108—109, below. 348, 65 L. J. Ch. 724. (4) Story on Agency, ^ 279, aqq. (a) Bolton Partners y. Lambert 288. Thomson v. Davenport (1829) (1889) 41 Ch. Div. 295, .58 L. J. 9 B. & C. 78, 32 E. R. 578 ; Calder Ch. 425 (see, however, the note on v. Bobeli (1871) L. R. 6 C. P. 486, this case in Fry on Specific Per- 40 L. J. C. P. 224. formance, and Fleming v. Bank (c) But one who dealt with an of New Zealand [1900] A. C. agent known to be such cannot set 577, 587, 69 L. J. P. C. 120; Re off against the principal's claim a Tiedemnnn [1899] 2 Q. B. 66, 68 debt due to him from the agent. If L.J.Q.B.852. As to ratiti cation he has employed an agent on his by an undisclosed piinoipal, see own part, that agent's knowledge CONTKACTS OF AGENTS. 105 But when the agent would not prima facie be a contracting party in person he may become so in various ways. Thus he is personally liable if he expressly undertakes to be so {d) : such an undertaking may be inferred from the general con- struction of a contract in \vTiting, and is always inferred when the agent contracts in his own name without quali- fication (e), though the principal is not the less also liable, A\'hether named at the time or not (/), or if he himself has an interest in the subject-matter of the contract, as in the case of an auctioneer {g) . And when the agent is dealing in goods for a merchant resident abroad, it is held on the ground of mercantile usage and convenience that without evidence of express authority to that effect the commission agent cannot pledge his foreign constituent's credit, and therefore con- tracts in person {h) . When a deed is executed by an agent is for this purpose treated as the employer's own : and this even though the knowledge was not ac- quired in the coiirse of the particular employment! Dresser v. Norwood <1864) Ex. Ch. 17 C. B. N. S. 466, 34 L. J. C. P. 48, revg. s. c. 14 C. B. N. S. 574, 32 L. J. C. P. 201. Contra, I. C. A. s. 229. Qu. by design or accident ? (rf) Story on Agency, ^ 269, Smith Merc. Law, 158. {e) See Fairlie v. Fenton (1870) X. E. b Ex. 169, 39 L. J. Ex. 107; Faice Y. Walker (1870) L. R. 5 Ex. 173, 39 L. J. Ex. 109. The latter case, however, goes too far ; see note (■;«), p. 106, below. (/) Higgins v. Senior (1841) 8 M. & W. 834, 68 B. K. 884 ; the law there laid down goes to superadd the liability of the agent, not to take away that of the principal : Calder v. Bobell (1871) L. R. 6 C. P. 486, 40 I.. J. C. P. 224. {p) 2 Sm. L. C. 399. As to an auctioneer's personal liability for non-delivery to a purchaser of goods bought at the auction : Woolfe v. Some (1877) '2 Q. B. D. 355, 46 L. J. Q. B. 634 ; New Zealand Land Co. V. Watson (1881) 7 Q. B. Div. 374, 50 L. J. Q. B. 433. (A) Armstrong v. Stokes (1872) L. R. 7 Q. B. 698, 606, Ace. Elbingtr Actien-Gesellschaft v. Claye (1873) L. R. 8 Q. B. 313, 41 L. J. Q. B. 253 (affirmed on another point, L. R. 9 Q. B. 473, 43 L. J. Q. B. 211) showing that the foreign principal cannot sue on the contract : Sutton V. Jiulloch (1873) L. R. 8 Q. B. 331, affirmed in Ex. Ch. L. R. 9 Q. B. 572, that he cannot be sued : Neiv Zealand Land Co. v. Watson (1881) 7 Q. B. Div. 374, 60 L. J. Q. B. 433. Accordingly the customary rule does not apply where the foreign principal is liable by the express terms of the contract : Miller, 106 CAPACITY OF PARTIES. as such but purports to be the deed of the agent and not of the principal, then the principal cannot sue or be sued upon it at law, by reason of the technical rule that those persons only can sue or be sued upon an indenture who are named or described in it as parties («). And it is also held that a party w ho takes a deed under seal from an agent in the agent's own name elects to charge the agent alone (k) . A similar rule has been supposed to exist as to negotiable instruments: but modern decisions seem to show that when an agent is in a position to accept bills so as to bind his principal, the prin- cipal is liable though the agent signs not in the principal's name but in his own, or, it would appear, in any other name. It is the same as if the principal had signed a wrong name with his own hand (I). Again, an agent who would otherwise be liable on the contract made by him may exempt himself from liability by contracting in such a form as makes it appear on the face of the contract that he is contracting as agent only and not for himself as principal (m) : but even then he may be GM i- Co. V. Smith ^- Tyrer [1917] 2 R. E. 798. Cp. Edmunds v. BuiheU K. B. 141, 86 L. J. K. B. 1259, C. A. (1865) L. R. 1 Q. B. 97, 35 L. J. In Maspons y Hermano v. JHHdred Q. B. 20. (1883) 9 Q. B. Div. 530, 53 L. J. Q. B. («) Words in the body of a doou- 33, the Court of Appeal refused to ment Trhich amount to a personal extend it to a case where the com- contract by the agent are not de- mission agent as well as the prin- prived of their efEect by a qualified cipal was foreign ; the decision was sigzia.tu.ie: Zeimard v. Sobinson {1855) affirmed in H. L., 8 App. Ca. 474, 5 E. & B. 125, 24 L. J. Q. B. 275, but this point not discussed. 103 R. R. 402; Sutchesonv. Eaton (i) Lord Southampton v. Brown (1884) 13 Q. B. Dir. 861, see per (1827) 6B. & C. 718, 30 R. R. 511 ; Brett M.R. at p. 865; and the Beckham v. Drake (1841) 9 M. & W. description of him as agent in the at p. 95, affirmed sub nom. Drake v. body of the document may under Beckham, 11 ih. 315, 12 L. J. Ex. special circumstances not be enough 486, 60 R. R. 691. to make him safe: Paiee v. Walker {k) Pickerimfs claim (1871) L. R. (1870) L. R. 5 Ex. 173, 39 L. J. Ex. 6 Ch. 525. 109 ; see the remarks on that case (I) Lindus v. Bradwell (1848) 5 in Oadd v. Houghton (1876) 1 Ex. C. B. 583, 17 L. J. C. P. 123, 75 Div. 357, 46 L. J. Ex. 71, which CONTKACTS OF AGENTS. 107 treated as a contracting party and personallj- bound as «elL as his principal by the custom of the particular trade iu « hioh he is dealing {n) . Or he may limit his liability by special stipulations, e.g., when a charter-party is executed by an agent for an unnamed freighter, and the agent's signature is unqualified, but the charter-party contains a clause providing that the agent's responsibility shall cease as soon as the cargo is shipped (o) . It is also a rule that an agent for a government is not personally a party to a contract made by him on behalf of that government by reason merely of having made the con- tract in his own name (p) . In some cases the agent, though prima facie not a party to the contract as agent, can yet sue or be sued as principal on a contract which he has made as agent. These will be mentioned under another head of this subject {q). Where an undertaking is given in general terms, no promisee being named, to a person who obviousl}- cannot be a principal in the matter, it may be inferred as a fact from the circumstances that some other person interested is decides that a contract " on account 42 L. J. C. P. 260 ; fi/.e v. Onrjleif of " a named principal conclusively (1887) 18 Q. B. Div. 708, 56 L. J. discharges the agent. Paice v. Q. B. 373. On the general question Walker is nearly but not quite over- of the construction of contracts made ruled : see Hough v. Manzanos (1879) by brokers for their principals, see 4 Ex. D. 104, 48 L. J. Ex. 398. Southwell v. Bowditeh (1876) 1 C. P. Signature of » managing director, Div. 374, 45 L. J. 0. P. 374, 630. aodescribed, followingthecompany's (o) Oglesby v. Tglesias (1858) E. name, does not bind him personally : B. & E. 930, 27 L. J. Q. B. 356 ; Chapman V. Smethurst\\^O^l'S..'B. Carr v. Jackson (1852) 7 Ex. 382, 927, 78 L. J. K. B. 654, C. A. 21 L. J. Ex. 137, 86 R. E. 699. (n) Humfreij v. Sale (1857) 7 (p) Macbeath v. Haldimand (1186) E. & B. 266, E. B. & E. 1004, 26 1 T. R. 172, cp. ib. 674, 1 K. R. L.J. Q. B. 137; Fleet v. Murton 177; Gibley y . Lord Palmerston {19,22) (1871) L. R. 7 Q. B. 126, 129, 41 3 Brod. & B. 275, 24 R. R. 668. L. J. Q. B. 49; Hutchimon v. (q) /«/)», pp. 116— 117. Tatham (1873) L. R. 8 C. P. 482, 108 CAPACITY OF PARTIES. the real unnamed principal, and that person may recover ■on the contract (?•) . B . When a party contracts with an agent whom he does not know to be an agent, the undisclosed principal is gener- ally bound by the contract and entitled to enforce it, as well as the agent with whom the contract is made in the first instance (s). It has been held that an undisclosed principal is as much liable as a known one for contracts made by the agent within the general apparent authority of agents in that business (t) . But the limitations of this rule are important. In the first place, it does not apply where an agent for an undisclosed principal contracts in such terms as import that he is the real and only principal. There the principal cannot after- wards sue on the contract (m) . Much less, of course, could he do so if the nature of the contract itself (for instance, part- nership) were inconsistent with a principal unknown at the time taking the place of the apparent contracting party. Likewise, " if the principal represents the agent as principal he is bound by that representation. So if he stands by and allows a third person innocently to treat with the agent as principal he cannot afterwards turn round and sue him in his own name " (x) . It was long undecided whether an agent for an undis- closed principal must have authority at the time, or a man (r) Weidner v. Boggett (1876) 1 Partnership, 134 />., and L. Q. R. C. P. D. 533. ix. m. («) The rule is not excluded by the («) Humble v. Hunter (1848) 12 contract being in writing (not vmder Q. B. 310, 17 L.J. Q. B. 350, 76 seal) and signed by the agent in his E. R. 291, dist. Fred. Drughorn v. own name: Beckham -n . Drake (\%i\) JSederiaktiebolaget Transatlantic [1919^ 9 M. &W. at p. 91, 60 R. R. p. 684. A. C. 203 (description of agent as See pp. 105, 106, supra. " charterer " not enough) . («) Watteau t. Fenuiick [1893] 1 {x) Ferrand v. Siechoffsheim {IS58) Q. B. 346; sed qu., see Lindley, 4 C. B. N. S. 710, 716, 27L. J. C.P. 302. UNDISCLOSED PRINCIPAL. 10&' might adopt as principal an act not purporting at the time to be done on behalf of any principal, and not then autho- rized hj him. A majority of the Court of Appeal once held that such ratification was possible, but this was reversed by the House of Lords as contrary to such authority as there- was (with one obscure exception) and to the general reluct- ance of the Common Law to give effect to alleged intentions which were not disclosed or recorded at the time when, if at all, thej^ were material {y) . Again, in the cases to which the rule does apply, the rights of both the undisclosed principal and the other contracting party are qualified as follows : The principal " must take the contract subject to all equities in the same way as if the agent were the sole principal " (z) . Accordingly if the principal sues on the con- tract the other party may avail himself of any defence which would have been good against the agent (a) : thus a purchaser of goods through a factor may set off a claim against the factor in an action by the factor's principal for the price of the goods (6). " Where a contract is made by an agent {!/) Dtirant v. Roberts ^ Co. [1900] principal a party to the action by 1 Q. B. 629 69 L. J. Q. B. 382, counter-claim and have the whole diss.A..'L. Smith L.J., revd. nom. matter disposed of . KeighUy, Maxsted ^ Co. v. Durant ib) George v. Clagett {]797) T T.R. [1901] A. C. 240, 70 L. J. K. B. 662. 359, 4 R. R. 462 ; Sims v. Bond (z) Story on Agency, § 420 ; per (1833) o B. & Ad. 389, 393, 39 R. R. Parke B. Beckham v. Drake (1841) Sll, 515. Per Cur., Isberg t. Bow- 9 M. & W. at p. 98, 60 R. R. p. 689. den, 8 Ex. at p. 859. It does not P. 106 supra. matter whether the factor is or is (a) If the agent sues in his own not actually authorized by his prin- name the other party cannot set off cipal to sell in his own name with- a debt due from the principal whom out disclosing the agency : Ex parte he has in the meantime discovered, Dii:on (1876) 4 Ch. Div. 133, 46 there being no mutual debt within L. J. Bk. 20 ; nor what restrictions the statute of set-off; Isberg v. may, as between himself and the Bowden, (1853) 8 Ex. 852, 22 L. J. principal, be imposed on him as to Ex. 322. Under the Judicature the price he is to sell at : Stevens v.. Acts, however, he can make the Biller (1883) 25 Ch. Div. 31. 110 CAPACITV OF PARTIES. for an undisclosed principal, the princii^al may enforce per- formance of it, subject to this qualification, that the person who deals ivith the agent shall he put in the same position •as if he had been dealing ivith the real principal, and conse- quently he is to have the same right of set-off which he would have had against the agent " (c) . And his claim to be allowed such set-off is not effectually met by the reply that when he dealt with the agent he had the means of knowing that he was only an agent. The existence of means of know- ledge is not material except as evidence of actual know- ledge {d) . On the other hand this equity against an un- disclosed principal depends (so the House of Lords has held) ■on the third person's actual belief that he was dealing with .a principal in that particular transaction. Mere absence of knowledge or belief whether the agent is dealing as an agent or on his own account is not enough (e). It has been said that conversely the right of the other contracting party to hold the principal liable is subject to the qualification that the state of the account between the principal and the agent must not be altered to the prejudice of the principal. But this doctrine has been disapproved by the Court of Appeal as going too far. The principal is discharged as against the other party by payment to his ■own agent only if that party has by his conduct led the principal to believe that he has settled with the agent, or, perhaps, if the principal has in good faith paid the agent at a time when the other party stiU gave credit to the agent (c) Per Willes J., Brener\. Nor- Montagu t. Forwood [1893] 2 Q. B. wood (1863) 14 C. B. N. S. 574, 589, 350, C. A. 32 L. J. C. P. 201, 205. The rever- {d) Barries v. Imperial Ottoman sal of this case in the Ex. Ch. 17 Bank (1873) L. R. 9 C. P. 38, 43 C. B. N. S. 466, 34 L. J. C. P. 48, L. J. C. P. 3. does not afieet this statement of the («) Oooke v. Eskelby (1887) 12 App. general law. The principle is not Ca. 271, 56 L. J. Q. B. 505. It is ■confined to, the sale of goods, e.g. useless to criticize the decision in England ; hut see L. Q. R. iii. 358. UNDISCLOSED PKINCIPAL. HI alone, and -would naturally, from some peculiar character of the business or otherwise, be supposed by the iDrincipal to do so (/) . Again, the other party may choose to give credit to the agent exclusively after discovering the principal, and in that ease he cannot afterwards hold the principal liable; and statements or conduct of the party which lead the principal to believe that the agent only will be held liable, and on the faith of which the principal acts, will have the same result {g) . And though the party may elect to sue flie prin- cipal, yet he must make such election Avithia a reasonable time after discovering him {K) . When it is said that he has a right of election, this means that he may sue either the principal or tlie agent, or may commence proceedings against both, but may only sue one of them to judgment; and a judgment obtained against one, though unsatisfied, is a bar to an action against the other. Such is the rule as to principal and agent in general, and there is no exception in the case of a shipowner and freighter {i) . The mere commencement of proceedings against the agent or his estate after the principal is discovered, although it may possibly be evidence of an election to charge the agent only, does not amount to an election in point of law(fc). 2. We have now to point out the results which follow ■\A'hen a man professes to make a contract as agent, but is (/) Irvine y. TT'ntson (ISSO) 5 Q. B. the other party's conduct so as to Div. 414, 49 h. J. Q. B. 531, which change his position : Wijatt v. Rert- seems on this point to reduce the /ort? (1802) 3 East, 147. authority of Armstrong v. Stokes [h) Smethurst v. Mitehell (1859) 1 (1872) L. R. 7 Q. B. 698, 41 L. J. E. & E. 622, 28 L. J. Q. B. 241, ■Q. B. 313, to that of a decision on 117 R. E. 374. peculiar facts. (') Priestleij v. Femie (1865) 3 H. (g) Story on Agency, §§ 279, 288, & C. 977, 983, 34 L. J. Ex. 173 ; op. 291 ; Sorsfall v. Fauntleroy (1830) L. R. 6 C. P. 499. 10 B. & C. 755 ; but the principal is [k) Curtis v. Williamson (1874) not discharged unless he has actually L. R. 10 Q. B. 57, 44 L. J. Q. B. 27. ■dealt with the agent on the faith of 112 CAPACITY OF PARTIES. in truth not an agent, that is, has no responsible principal. We may put out of consideration all cases in which the professed agent is on the face of the contract personally bound as well as his pretended principal: for his own con- tract cannot be the less valid because the contract he professed at the same time to make for another has no effect. But when the contract is not by its form or otherwise such as. would of itself make the professed agent a party to it there are several distinctions to be observed. First, let us take the cases where a principal is named. The other party prima facie enters into the contract on the faith of that principal's credit. But credit cannot be pre- sumed to be given except to a party who is capable of being bound by the contract: hence it is material whether the alleged principal is one who might authorize or ratify the contract, but does not, or is one who could not possibly do so . a. The more frequent case is where the party named as. principal is one who might be responsible. It is settled law that there, subject to the qualifications, which will appear, the pretended agent has not either the rights or the liabilities of a principal on the contract. First, as to his rights. In Bickerton v. Burr ell {I) the plaintiff had signed a memorandum of purchase at an auction as agent for a named principal. Afterwards he sued in hi& own name to recover the deposit then paid from the auctioneer, and offered evidence that he was really a prin- cipal in the transaction . But he was non-suited at the trial,, and this was upheld by the full Court, who laid down; that " where a man assigns himself as agent to a person named,, the law will not allow him to shift his position, declaring- himself principal and the other a creature of straw. . . {1} (1816) 5 M. & S. 383. PROFESSED AGENT UNAUTHORIZED. 113 A man who has dealt with another as agent (m) is not at libertj' to retract that character mthout notice and to turn round and sue in the character of principal. The plaintiff misled the defendant and was bound to undeceive him before bringing an action." This leaves it doubtful what would have been the precise effect of the plaintiff giving notice of his real position before suing: but the modern cases seem to show that it would only have put the defendant to his election to treat the contract as a subsisting contract between himself and the plaintiff or to repudiate it at once (w) . The doctrine under consideration was further defined in Rayner v. Grote{o). There the plaintiff sued to recover a balance due upon the sale by him to the defendants of a quantity of soda ash according to a bought note in this form: — " I have this day bought for you the following goods from J d T. Johnson — 50 tons soda ash, . . J. H. Rayner." It was proved that the plaintiff was the real owner of the goods, and 13 tons out of the 50 had been delivered to the defendants and accepted by them at a time when there was strong evidence to show that they knew the plaintiff to be the real principal. The law was stated as follows (p): " In many such cases [_vh. where the contract is wholly unperiormed] such as for instance the case of contracts in which the skill or solvency of the person who is named as the principal may reasonably be considered as a material ingredient in the contrast, it is clear that the agent cannot then show himself to be the real principal and sue in his own name ; and perhaps (m) I.e. for a named and respon- judgments cannot be regarded as sible principal. good law, nor can any reason he («) Fellowes v. Lord Owydyr found for a difference between oom- (1826-9) 1 Sim. 63, 1 Rues. & M. mon law and equity on the point. 83, 32 R. R. 148, in which Bicker- (o) (1846) 15 M. & W. 359, 16 ton V. Burrell was not cited, can be L. J. Ex. 79, 71 R. R. 709. supported, if at all, only on the [p) Per Cur. 15 M. AW. at p. 365 ; ground that the facts brought the and see the remarks on Bickerton v. ease within the principle of Mayner Burrell, ad Jin. v. Grote (see next paragraph) . The P.— c. 8 114 CAPACITY OF PARTIES, it may be fairly urged that this, in all executory contracts, if wholly unper- formed, or if partly performed without the knowledge of who is the real principal, may be the general rule." But here part performance had been accepted by the de- fendants with full knowledge that the plaintiff was the real principal, and it was therefore considered that the plaintiff was entitled to recover. Next, as to the pretended agent's liability. It was at one time thought that an agent for a named principal who turned out to have no authority might be sued as a principal on the contract {q) . But it has been determined that he is not liable on the contract itself (r). He is liable, however, on an implied warranty of his authority to bind his principal. This was decided in Collen v. Wright (s), and is now finally established by the authority of the House tof Lords {t). In the rare case of a person purporting to con- (y) Cp. Pothier, Obi. § 75. (r) Lewis v. Niehohon (1852) 18 Q. B. 603, 21 L.J. Q. B. 311. (s) (1857) 7 E. & B. 301, 26 L. J. Q. B. 147 ; in Ex. Ch. 8 E. & B. 647, 27 L. J. Q. B. 215 ; UO R. R. 602. (t) Richardson Y . Williamson {MTV) L. R. 6 Q. B. 276, 40 L. J. Q. B. 145 ; Cherry t. Colonial Bank of Aus- tralasia (1869) L. R. 3 P. C. 24, 31 ; Starkey v. Bank of England [1903] A. C. 114, 72 L. J. Ch. 402. But the representation of the agent that he has authority must be a repre- sentation of matter of fact and not pf'law : Beattie v. Lord Ebury (1872) L. R. 7 Ch. 777, 7 H. L. 102, 41 L. J. Ch. 804, 44 ib. 20 ; Weeks v. Fropert (1873) L. R. 8 C. P. 427, 437, 42 L. J. C. P. 129. And the rule cannot be applied to make a public servant acting on behalf of the Crown personally liable : Bimn T. Maedonald [1897] 1 Q. B. 555, 66 L. J. Q. B. 420, C. A. As to the measure of damages, Simons v. Fatehett (1857) 7 E. & B. 668, 26 L. J. Q. B. 195, 110 R. R. 730; Spedding v. Nevell (1869) L. R. 4 C. P. 212, 38 L. J. C. P. 133 ; God- win T. Francis (1870) L. R. 6 C. P. 295, 39 L. J. C. P. 121 ; Ex parte Panmure (1883) 24 Ch. Div. 367. The rule in Collen v. Wright is not confined to cases wrhere the assumed authority is to enter into a contract : Starkey \. Bank of England, in C. A. nom. Oliver v. Bank of England [1902] 1 Ch. at p. 622. See further, Salvesen Sf Co. v. Sederi Jktiebolaget Nordstjernan [1906] A. C. 302, 7-t L. J. P. C. 96, where an attempt to extend the rule to an agent's report to his own principal faUed ; an erro- neous report as to the other party's intentions may be a breach of duty, but it is not a warranty. agent's warranty of authority. 1 15 tract as agent for a named principal, and at the same time expressly disclaiming any present authority, the implied war- ranty is excluded, for the other party does not rely on the existence of authority and is not misled, but is content to take the chance of ratification for what it may be worth (m). The pretended agent is also generally liable to an action in tort if he did not believe that he had authority {x). The liability on implied warranty is not affected by the supposed agent's good faith where he does so believe, and it is now decided that the rule applies even where a real authority has been determined, unknown to the agent, by the death or lunacy of the principal (y) . /3. The rules last stated are applicable only where the alleged principal was ascertained and existing at the time the contract was made, and might have been in fact principal. Here the doctrine of ratification is important. When a principal is named or described, but is not capable of autho- rizing the contract so as to be bound by it at the time, there can be no binding ratification: for "ratification must be by an existing person on whose behalf a contract might have been made at the time " {z). («) Salbot V. Lens [1901] 1 Ch. 899. Here, however, there is not 344, 70 L. J. Ch. 125. It would properly a warranty, for the pro- seem arguable that in such a case misor'e undertaking that he is there is nothing capable of ratifioa- legally capable of marrying the pro- tion. misee is a term in the principal [x) Randell v. Trimen (1856) 18 contract itself. See Chap. VII. C. B. 786, 25 L. J. C. P. 307, 107 below, ad Jin. B. R. 516. The main object of (y) Fonye v. Toywiec [1910] 1 K.B. establishing the liability ex eontraetu 215, 79 L. J. K. B. 208, C. A. This was to have a remedy against exe- overrules Smout v. Iliery (1843) 10 outers. M. & W. 1, 62 R. R. 510, at any For a somewhat similar doctrine rate as a general authority, and applied to the contract to marry, see other cases which followed it, such Jfillward v. LitlUwood (1850) 5 Ex. as Saltan v. New Beeslon Cycle Co. lib, 20 L. J. Ex. 2, 82 R. R. 871. [1900] 1 Ch. 43, 69 L. J. Ch. 20. and Wild v. Harris (1849) 7 C. B. (z) Per WOles J. and Byles J. 999, 18 L. J. C. P. 297, 78 R. R. Kelne^Y. Baxter (1866) L. R. 2 C. P. 8 (2) 116 CAPACITY OF PARTIES. There fall under this head contracts entered into by professed agents on behalf of wholly fictitious persons, or uncertain persons or sets of persons with whom no contract can be made by the description given, persons in existence but incapable of contracting, and lastly (which is in practice the most important case) proposed companies which have not yet acquired a legal existence {a) . Now when a principal is named who might have authorized the contract, there is at the time of the contract a possibility of his being bound by subsequent ratification. But when the alleged principal could not have authorized the contract, then it is plain from the beginning that the contract can have no operation at all unless it binds the professed agent. It is construed accord- ingly ut res magis valeat quam pereat, and he is held to have contracted in person (6). This principle has been carried so far that in a case where certain persons, churchwardens and overseers of a parish, covenanted " for themselves and for their successors, churchwardens and overseers of the parish," and there was an express proviso that the covenant should not bind the covenantors personally, but was intended to bind the churchwardens and overseers of the parish for the time being as such churchwardens, &c., but not otherwise, it was held that since the funds of the parish could not be 174, 185, 36 L. J. C. P. 94 ; Scott t. Co. (1878) 7 Ch. D. 368. Companies Zord Ehiry (1867) L. B.. 2 C. P. 255, have been held in equity to be bound 267, 36 L. J. C. P. 161. When by the agreements of their pro- ratification is admitted, the original moters, but on grounds independent contract is imputed by a fiction of of contract. Action upon such an law to the person ratifying ; and the agreement by the company, under fiction is not allowed to be extended the mistaken belief that it is binding, beyond the bounds of possibility. cannot be treated as evidence of a, (a) Kelner v. Baxter (1866) L. E. 'lew agreement: Re Northumberland 2 C. P. 174, and authorities there Avenue Botel Co. (1886) 33 Oh. Div. referred to: Scott v. Xoi-d Ebury 16, .54 L. T. 777. (1867) i*. 255 ;. Empress Engineering [b) Kelner v. Baxter (1866) L. R. 2 Co. (1880) 16 Ch. DiT. 128, over- C. P. at pp. 183, 185. ruling Spiller v. Paris Skating, Rink WHEN AGENT BECOMES PRINCIPAL. 117 bound by the instrument in the manner intended, the effect of the proviso- was "to make no one liable on the covenant at all, and therefore the proviso was repugnant and void, and the covenantors were personally liable (c) . Accordingly the proper course for the other contracting party is to sue the agent as principal on the contract itself, and he need not resort to the doctrine of implied warranty (d) . And as the agent can be sued, so it is apprehended that, in the absence of fraud, he might sue on the contract in his own name. A slightly different case is where a man professes to con- tract as agent, but without naming his principal. He is then (as said above) prima fade personally liable in his character of agent. But even if the contract is so framed as to exclude that liability (and therefore any correlative right to sue), he is not precluded from showing that he himself is the principal and suing in that character. This was decided in Schmaltz v. Avery (e). The action was on a charter-party. The charter-party in terms stated that it was made by Schmaltz & Co. (the plaintiffs) as agents for the freighters; it then stated the terms of the contract, and (c) Furnivall v. Cooinbes (1843) 6 In Kelner v. Baxter oral evidence M. & Gr. 736, 12 L. J. C. P. 265, was offered that such was the inten- 63 R. K. 455, followed in a similar tiou, but was rejected as contrary to case of covenant " as trustees," the terms of the writing sued upon. Watling v. Leivis [1911] 1 Ch. 414, [d) Kelner v. Baxter, note [b), last 80 L. J. Ch. 242. But the doctrine page. Cp. West London Commercial will certainly never be extended Bank v. Kitson (1884) 12 Q. B. D. (see Williams v. Hathaivay (1877) 6 157, where a bill was accepted by Ch. D. 544) ; and qu. whether it directors on behalf of a company would apply to an instrument not which had no power to accept bills ; under seal. It is clearly competent the liability was put on the ground to the parties to such an instrument of deceit in 13 Q. B. Div. -j60, 53 to make its operation as a contract L. J. Q. B. 345. conditional on any event they please ; («) (1851) 16 Q. B. 645 (the state- and in such a case as this why may ment of the facts is taken from the they not agree that nobody shall be judgment of the Court, p. 658), 20 bound if the principal cannot be? L. J. Q. B. 228, 83 R. R. 663. 118 CAPACriY OF PARTIES. concluded, in these words: " This charter being concluded on hehalf of another party, it is agreed that all responsi- bility on the part of G. Schmaltz & Co. shall cease as soon as the cargo is shipped." T4iis clause was not referred to in the declaration, nor was the character of the plaintiff as agent mentioned, but he was treated as principal in the contract. At the trial it wasj)roved that the j)laintiffi was in point of fact the real freighter. Before the Court in banc Bickerton v. Burr ell and "Bayner v. Grdte (f) were relied on for the defence, but it was pointed out that in those cases the agent named a principal on the faith of whose personal credit the other party might have meant to contract. Here " the names of the supposed freighters not being inserted, no inducement to enter into the contract from the supposed solvency of the freighters [could] be surmised. . . The plaintift might contract as agent for the freighter, whoever the freighter might turn out to be, and might still adopt that character of freighter himself if he chose " {g) . And conversely, a man who has contracted in this form may never- theless be sued on the contract as his own undisclosed prin- cipal, if the other party can show that he is in truth the principal, but not otherwise {h) . In the same manner it is open to one of several persons with whom a contract was nominally made to show that he alone was the real principal, and to sue alone upon the contract accordingly (i) . (/) See pp. 112 — 114, above. sary for the decision. Moreover {g) In a later case in the Ex- Schmaltz v. Avery was not cited. chequer Chamber (Sharman v. Brandt [h) Carr v. Jackson (1852) 7 Ei. (1871) L. R. 6 Q. B. 720, 40 L. J. 382, 21 L. J. Ex. 137, 86 E. E. 699. Q. B. 312), there are some expres- (i) Spurr v. Cass (1870) L. R. 6 sions not very consistent with this, Q. B. 656, 39 L. J. Q. B. 249. hut they were by do means neces- COKPOKA1"I0NS. 119 II. Artificial Persons. JSlature of corporate bodies. —In a complex state of civili- zation, such as that of the Roman Empire, or still more of the modern Western nations, it constantly happens that legal transactions have to be undertaken, rights acquired and exercised, and duties incurred by or on behalf of persons who are for the time being charged with offices of a public nature involving the tenure and administration of property for public purposes, or interested in carrying out a common enterprise or object. This enterprise or object may or may not be of a kind likely to be worked out within a definite time, and ma^- or may not further involve purposes and interests of a public nature. The rights and duties thus created as against the '\\'orld at large are wholly distinct from the rights and duties of the particular pci'sons immediately concerned in the transactions. Those persons deal with interests beyond their own, though in many cases including or in- volving them, and it is not to their personal responsibility that third parties dealing with them are accustomed to look. This distinction (the substantial character of which it is important to bear in mind) is conveniently expressed in form by the Roman invention, adopted and largely developed in modern systems of law, of treating the collective persons who from time to time hold such a position — or, in some cases and according to some opinions, the property or office itself — as a single and continuous artificial person (fc) or ideal subject of legal capacities and duties . It is possible to regard the artificial person as a kind of fictitious substance con- (k) Fr. cm-ps or elre moral, personne person," but it has not been gene- morale (but this does not necessarily rally adopted by English writers, import capacity to sue or be sued in Observe that the English term a coi'porate name) ; Germ. yMvw^McAe "artificial" is not the same as Terson ; Ital. ente morale. Kent, "fictitious." Comm. 2. 268, uses the term '• moral 120 CAPACITY OF PARTIES. ceived as supporting legal attributes; and in fact this was, until lately, the prevailing theory of modern civilians on the Continent (I) . But it is equally possible, and it seems not only more philosophical but more businesslike, to hold that what we call the artificial identity of a corporation is within its own sphere and for its own purposes just as real as any other identity (m) . The corporation becomes, within the lirhits assigned to its existence, " a body distinct from the members composing it, and having rights and obligations distinct from those of its members." This is often called a fiction: but it represents a class of facts not confined to legal use or legal purposes. In the case of an ordinary partnership the firm is treated by mercantile usage as an artificial person, though not recognized as such by English law; and other voluntary and unincorporated associations are constantly treated as arti- ficial persons in the language and transactions of everyday life. An even more remarkable instance is furnished by the artificial personality^ which is ascribed to the public journals by literary custom or etiquette, and is so familiar in writing and conversation that its curiosity most commonlj' escapes attention. The existence of these artificial persons by pri- [l) See F. W. Maitlaiid's Intro- enables the Federal courts to enter- duction to Gierke's Political Theories tain suits between citizens of dif- of the Middle Age, Cambridge 1900 ; ferent states. See Marshall w. Balti- further references there, at p. xxvi. more and Ohio Railr. Co. (1853) 16 The latest exposition is by Prof. K. Howard, 314. But it is not a citizen Saleilles, of Paris, " De la person- for all purposes, nor entitled to all nalite juridique," Paiis, 1910. the constitutional immunities of in- ()«) " A corporation is a legal ?;«■- dividuals: Blake y. Mc(Jleary (1898) .soKa just as much as an individual" : 172 U. S. 239, Orient Insee. Co. v. per Cave J. Re Sheffield, §c. Build- Bagga (1899) ih. .557 ; Berea College v. ing Sooy. (1889) 22 Q. B. D. at Kentucky (1908) 211 U. S. 46. In p. 476. In the United States a cor- Germany the State, as an owner of poratiou duly created by the laws of property, is specially personified as any state is treated as a person " the Fisc," after Roman precedent, dwelling in, and therefore a citizen and has not only the rights but the of, that state within the meaning of liabilities of any private owner, see the constitutional provision which L. Q. R. xxiii. 13. COKPPRATIONS. . 121 vate convention, if we may so call them, shows that, if indeed then? be any fiction in the matter, it is not superfluous or arbitrary (w) . In the Common Law no speculative opinion on the subject has been definitely adopted (o), though it seems likely that onlj' Coke's incapacity for grasping any general theory, good or bad, saved us from what is now known as the " fiction theory" among Continental publicists (p) . In our authorities and practice the necessary marks of legal corporate existence are a recognized collective name (which however need not be expressly conferred at the out- set), and capacity to sue, be sued, and do other acts in the law, in that name. Perpetual succession, that is, the existence of a body inde- pendent of the natural life of any one or more memilbers, and a common seal to authenticate the corporate acts, ar^ consequences or incidents of incorporation rather than primary constituents . A corporation legally qualified to act as such can exist only with the sanction of the State,, which may be expressed in England by a royal charter (g) or by (n) " The orthodox doctrine of the Co. Rep. at fo. 29 b, suggests that, common law, which recognizes only if any theory had been formulated, individuals and corporations as en- it would have been the then received titles, undoubtedly lags far behind one of the civilians. The case itself the ordinary conceptions of lay- is incompatible with one logical oon^ men"- Harv. Law Rev. xv. 311. sequence of the Action theory, that The ingenious Dr. Baty, tnore suo, a corporation has only such powers admits the reality, but denies it a as are expressly conferred upon it. personal or legal character : Harv. (g) The want of this has to be Law Rev. xxxiii. 359. supplied in some cases by the fiction (o) Hobbes gives an admirable ex- of a lost grant : Blackst. Oomm. i. position of the purely individualist 473. See the whole chapter (Book 1 , view in the 16th chapter of his ch. 18) for a literary exposition of Leviathan, but of course without the Common Law doctrine as it regard to authority. As to the au- stood in the latter pait of the 18th thorities see discussion by the present century. He likens the continuous writer in L. Q. R. xxvii. 219. existence of a corporation to that of (p) The slight reference to Roman the river Thames. I;aw in the Sutton's Hospital ease, 10 ■ , , 122 CAPACITY OF PARTIES, statute. The statutory sanction may take the form — as in the familiar case of the Companies Acts — of authorizing persons who are so minded to constitute themselves into cor- porations by fulfilling specified general conditions. In this class of cases, at any rate, it would seem that the operative registration, or other appointed formality, is not properly considered as involving fiction of any kind, but is the official recognition and regulation of substantial matters of fact. With us the official sanction is a matter of procedure and public convenience. In the Roman law of the Empire it ^\as an offence to form any kind of association without public authority; thus the early Christian churches were exposed to penalties by the mere fact of being collegia illicita. This principle has largely survived in the modern public law of the Continent; only the faintest signs of any attempt to imitate it occur in ours (r) . The holders of ecclesiastical benefices and dignities are said, by an analogy which is of no great antiquity, to be " corporations sole." Little or no useful result seems to be attained, for the alleged corporate character of a parson does not prevent the freehold of the church from being in abey- ance when he dies, though a grant to an existing parson and his successors is effectual. By a still more doubtful extension of the analogy, the Crown is said to be a cor- poration sole (s); and the same description has been applied hy statute to the holders of a certain number of public offices {t). It may be sufficient to observe, so far as the (/■) It is said to be an offence to (<) See F. W. Maitland, The Cor- " assume to act as a corporation," poration Sole, L. Q. E. xvi. 33.5 ; but this is far short of the Roman The Crown as Corporation, ib. xvii. prohibition. 131. The notion of a corporation (a) The theory of the King's sole appears to date only from the "body politic" is given at some 16th century. As to the Postmaster- length in Plowd. 213. It would G-eneral see per Mathew L.J., Bain- seem to have been a fashionable bridge v. JPoatmaHer- General [1906] 1 novelty at the time. K. B. at p. 193. CORPORATIONS. 12S principle, is concerned, that for many centuries the Vatican and its contents — to say nothing of the spiritual powers and other former temporal possessions of the Holy See — have been held under an absolutely unique system of succession, but it has never occurred to any one to call the Pope a corporation sole. At any rate, the persons whom we have to call cor- porations sole in England can do very little in their corporate capaeit}', and in particular cannot bind or even benefit their official successors by contract, except in one or two peculiar cases {u) . We therefore have nothing to learn in that quarter for the purposes of this work, and we may practically' con- fine our attention to corporations aggregate. We have to ascertain what contracts corporate bodies can make, and how they are to be made. The second of these questions is reserved for the following chapter on the Form of Contracts. The first cannot be adequately treated except in connection with a wider view of the capacities, powers, and liabilities of corporations in general. Limits of corporate capacity. — The capacities of corpora- tions are limited (i) By natural possibility, i.e., by the fact that they are artificial and not natural persons: (ii) By legal possibility, i.e., by the restrictions which the (m) Generally " bishops, deans, in Blaokst. Comm. ii. 431 — 433, who parsons, vicars, and the like cannot attempts to find reasons. A curious take obligation to them and their modern case where a fund of stock successors, but it will go to the was vested in certain rectors and executors." Arundel's case, Hob. 64 ; their successors by a private Act is 20 E. IV. 2, pi. 7; Rowley. y.Xnij/ht Fower v. Banks [1901] 2 Ch. 487. (1849)14 Q.B. 240, 19 L.J. Q.B. 3, 70 L. J. Ch. 700. In truth, as 80R. E. 262. "Regularly no chattel Prof. J. C. Gray said (The Nature can go in succession in a case of a and Sources of the Law, 1909, § 135), sole corporation"- Co. Litt. 46 i; a corporation sole " is simply a series it was otherwise in the case of the of natural persons, some of whose head of a reUgions house, as he could rights are different and devolve in a not make a will, Ro. Abr. 1. 515. different way from those of natural See the old authorities summed up persons in general." 124 CAPACITY OF PARTIES. power creating a corporation inaj impose on the legal exist- ence and action of its creature. First, of the limits set to the powers and liabilities of cor-: porations by the mere fact that they are not natural pgrsons . The requirement of a common seal (of which elsewhere) is sometimes said to spring from the artificial nature of a cor- poration. The fact that it is not known in Scotland is, however, , enough to. show that it is a mere positive rule of Englisl^ law. The correct and comprehensive proposition is that a corporation can do no executive act except by an agent; and a corporate seal is only one way of showing that the person entrusted witji it is an authorized agent of the cor- porate body . We say that executive acts of a corporation must be done by an agent. It does not seem necessary or plausible to, extend the proposition to deliberate acts and resolutions. When, for example, the assembled Fellows of a .College resolve to grant a lease of certain college land, their resolution, whether unanimous or by the statutable majority, would seem to be the act not of agents but of the College itself. For if the Fellows voting are agents, who authorized them, and when? But when they proceed to order the affixing of the College seal to the lease, then the officer of the College who is directed to affix it is an appointed agent, whether he is himself a member of the governing body or not. There seem also to be cases in which the permanent autho- rity of the head or other acting member of a corporation is derived not from any authority specifically conferred on him, but from the original constitution of the corporation . Here, however, the conception of an implied agency is convenient and fairly applicable. Indeed, the Common Law doctrine of agency is so wide and flexible that we practically tend to regard all acts whatever done in the name of a corporation as derived from some authority, general or special, vested in the natural persons by whom they are done. This may CORPORATIONS. 125 not be a strictly correct view, but it has largely saved us from the speculative questions which have vexed Continental jurists ever since the thirteenth century, and probably also, from much more serious errors. A corporation obviously cannot be subjected to death, corporal punishment, or imprisonment, though it can be fined (a-) or made to pay damages as easily as a natural person. Further, it is understood that a corporation is- incapable of committing the graver kinds of crime, such as treason, felony, perjury, or offences against the person («/),. as well as of being punished for them. There can be no real authority to commit such acts. Any or all of the mem- bers or officers of a corporation who should commit acts of this kind {e.g., should levy war against the King) under cover of the corporate name and authority would be indi- vidually liable to the ordinary consequences. " Offences, cer- tainly offences of commission, are the offences of individuals, not of corporations " {z) . Nor can a corporation undertake duties which, though it might be strictly possible for a (;<:) E.g. for contempt : R. v. J. 0. Mai/or of London (1875) 1 C. P. D. 1, Hammond ^ Co. [1914] 2 K. B. 866, 45 L J. C. P. 213, in C. A. chiefly 83 L. J. K. B. 1221 (objection as to on other grounds, 6 C. P. Dlv. 494 ; form of rule nisi overruled) . afiBrmed on this point in the House (.(/) Rkj. v. G. N. of Eng. Kg. Co. of Lords, 6 App. Ca. 393. We are (1846) 9 Q. B. 315, 326, 16 L. J. not aware that anj English writer M. C. 16, 72 E. R. 262 ; nor, it is has thought it necessary to state in said, can it be excommunicated, for terms that a corporation cannot b& it has no soul: 10 Co. Rep. 32 J; married or have any next of kin. the ultimate authority for this was The statement is to be found in a decree of Innocent IV. at the Savigny, Syst. 3. 239 ; but is in part Council of Lyons in 1245; but other- not quite so odd as it looks, as in wise as to interdict : Gierke, Deutsche Roman law patria potestas and all Genosseneohaftsreoht, iii. 348-9. So the family relations arising therefrom a corporation cannot do homage: might be acquired by adoption. Co. Litt. 66 b. Nor can it be subject («) Bramwell L.J. 5 Q. B. D. at to the jurisdiction of a customary p. 313. Cp. Mayor of Manchester v. court whose process is exclusively Williams [1891] 1 Q. B. 94, 60 personal: London Joint Stock Bank y. L J. Q. B. 2:<. 126 CAPACITY OF PARTIES, corporation to perform them by its officers or agents, are on the whole of a personal kind (a) . On the other hand, it is subject to the same liabilities as any other employer for the acts, neglects, and defaults of its agents done in the course of their employment (h) ; and conversely it may sue in its corporate capacity for a libel reflecting on the manage- ment of its business (c) . And the same principle is extended to make it generally subject to all liabilities incidental to its corporate existence and acts, though the remedy may be in form ex delicto or even criminal. Although it cannot commit a real crime, " it may be guilty as a body corporate of commanding acts to be done to the nuisance of the com- munity at large," and may be indicted for a nuisance pro- ■duced by the execution of its works or conduct of its business in an improper or unauthorized manner, as for obstructing a highway or navigable river {d) . A corporation may even be liable by prescription, or by having accepted such an obligation in its charter, to repair highways, &c., and may be indictable for not doing it (e) . A corporation carrying on business may likewise become liable to penalties imposed by any statute regulating that business, unless a contrary intention appears from the language of the Act or the nature of the case (/) . A steamship company has been held (on the (a) Ex parte Swansea Friendfy lians : Gierke, op. cit. 402. Society (1879) 11 Ch. D. 768, 48 (e) South Helton Coal Co. v. .V. E. L. J. Ch. 577. News Assoc. [1894] 1 Q. B. 133, 63 (i) DifSculties, formal and mate- L. J. Q. B. 293, C. A. rial, -which used to be entertained [d) Meg. v. G. N. of Eng. Sy. Co. on this head are nowremoved. Even (1846) 9 Q. B. 315, per Cur. p. 326, malicious prosecution is not now 16 L.J. M. C. 16, 72 R. R. 262, 269. thought to be an exception ; see (e) See G-rant on Corporations, 277, Oornfori \. Carlton Bank [1900] 1 283 ; Angell & Ames on Corpora- Q. B. 22, 68 L. J. Q. B. 1020, C. A. tions, §§ 394-7 ; "Wms. Saund. 1. In the Middle Ages the possibility 614, 2. 473. of a corporation committing a delict (/) Pharmaceutical Society y. London ■was disputed by the canonists but and Provincial Supply Association generally maintained by the civi- (1880) 5 App. Ca. 857; see per Lord CORPORATIONS. 127 terms of the particular statute, as it seems) to bo not indictable under the Foreign Enlistment Act of Geo. 3, and therefore not entitled to refuse discovery which in the case of a natural person would have exposed him to penalties under the Act [g) . As to the difficulty of imputing fraudulent intention to a corporation, which has been thought to be peculiarly great, it may be remarked that no one has over doubted that a corporation may be relieved against fraud to the same extent as a natural person. There is exactly the same difficulty in supposing a corporation to be deceived as in supposing it to deceive, and it is equally necessary for the purpose of doing justice in both cases to impute to the corporation a certain mental condition — of intention to produce a belief in the one case, of belief produced in the other — which in fact can ■exist only in the individual mind of the member or servant 'of the corporate body who acts in the transaction (h) . Lord Langdale found no difficulty in speaking of two railway com- panies as " guilty of fraud and collusion," though not in an ■exact sense {i) . However, the members of a corporation can- not even by giving an express authority in the name of the corporation make it responsible, or escape from being individually responsible themselves, for a wrongful act which though not a personal wrong is such that if lawful it could Blackburn at p. 869 ; Interpretation ■without special statutory authority : Act, 1889, o. 2, sub-.s. 1; Pearks v. Ouardiam of St. Leonard's, Shorediteh Ward [1902] 2 K. B. 1, 71 L. J. v. Franklin (1878) 3 C. P. D. 377. K. B. 656 ; as to summary jnrisdio- {g) King of Two Sicilies t. Willcox -tion, Svans ^ Co. v. L. C. C. [1914] (1850) 1 Sim. N. S. 335, 19 L. J. Ch. 3 K. E. 315, 83 L. J. K. B. 1264. As 488, 89 R. R. 104. to remedy by injunction, A.-G. v. [h) See per Lord Blackburn, 3 ChurchilVs Vet. Sanatorium [1910] 2 App. Ca. 1264. A company may Ch. 401. But this does not extend "feel aggriered," Companies Act, to making a corporation punishable 1908, s. 242, sub-s. 6 (re-enacting a as a rogue and vagabond, Rawke v. provision of the former Act of E. Hulton f Co. [1909] 2 K. B. 93, 1880). 78 L. J. K. B. 633. A corporation (i) 12 Beav. 382, 85 R. R. 129. ■cannot sue as a common informer 128 CAPACITY 0^ PARTIES. not have been a corporate act (fc) . Such is a trespass in removing an obstruction of an alleged highway. For the right by which the act has to be justified is the personal right to use the highway, and a corporation as such cannot Use a highway. Likewise it is not competent to the govern- ing body or the majority, or even to the whole of the members for the time beiilg, of a corporation constituted by a forznal act and having defined purposes, to appropriate any part of the corporate funds to their private use in a manner not distinctly warranted by the constitution; for it is not to be supposed that all the members of the corporation are equiva- lent to the corporation so that they can do as they please with corporate property. A corporation does not exist merely for the sake of the members for the time being. Lord Langdale held on this principle that the original members of a society incorporated by charter, who had bought up the shares of the society by agreement among themselves, were bound to account fo the society for the full value of them (Z) . The fallacy of the assumption that a corporation has no rights as against its unanimous members is easily exposed by putting the extreme case of the members of a corpora- tion being by accident reduced till there is only one left, who- thereupon unaiiimously appropriates the whole corporate pro- perty to his own use (m) . [k) Milt T. Hawker (1874) L. R. 283, 335. But it may be otherwise 9 Ex. 309, 318, 44 L. J. JSx. 49 ; no if the corporation has no definite- judgment on this part of the case in constitution and no rules prescribing Ex. Ch. L. R. 10 Ex. 92. It might the application of its property, be, by statute, the right or duty of a Such cases are sometimes met with : corporation to remove obstructions, Brown v. Dak (1878) 9 Ch. D. 78. and the real question hero was (^^ g^y, gygt, 3 329 j^^ ^ 97. whether a highway board had such qq_ jhe illustration iu our text is a power or duty. gi^en at p. 350, note, with the {}) Society of Practical Knnwledge remark, "Hier ist gewiss Einstim- T. Abbott (1840) 2 Beav. 559, 567, migkeit vorhanden." 50 R. R. 288, 294. Cp. Sav. Syst. 3. eOKPORATIONS. 129 The powers of a corporation are necessarily limited in some directions by the nature of things. There remains the question whether there are any general rules of law limiting them farther and otherwise. If our law had committed itself to the doctrine that the personality of a corporation is a mere fiction of the sovereign power, it might have been held as a natural consequence that a corporation could in no case have any powers except such as were conferred on it, expressly or by necessary implication, by the same act which created it. But this did not happen, and the judicial discussion of the subject has been evoked by the rapid growth of incor- porated commercial and industrial societies in modern times, and guided by reasons founded not in the nature of a cor- poration in itself, but in the need for safeguarding the interests partly of the individual members of companies, regarded as substantially partners in a joint undertaking, and partly of outside creditors dealing with companies, and looking to their corporate funds and credit, on the faith of apparently authorized acts and promises of their directors or agents. These two classes of interests are to some extent • opposed, and the law has not reached the fairly settled condi- tion in which it now stands without considerable fluctuations of opinion. On these, however, it is no longer needful to dwell at length. " At common law a corporation created by the King's charter has ... the power to do with its property all such acts as an ordinary person can do, and to bind itself to such contracts as an ordinary person can bind himself to " {n), (n) Bowen L.J. in Baroness Wen- 34,5, affirmed [1910] 2 Ch. 502, C. A. hek V. Eiver Bee Co. (1883) 36 Ch. D. Cp. the Swiss Civil Code, art. 53 : 675,685, n. Semble this applies to "Lea personnea morales peuvent chartered companies of the modern acquerir tous les droits et assumer politico-commercial type : British S. toutes les obligfations [sind aJler Africa Co. v. De Beers Consolidated Eechte und Pflichten fahig, German ifi«cs [1910] 1 Oh. 354, 79 L. J. Ch. text] qui ne sont pas inseparables P. — C. 9 1-30 CAPACITY OF PARTIES. (subject to the corporate acts being sufficient in form, which we are not considering in this place). This rests on autho- rity which, though it seems at times to have been forgotten, has never been disputed (o). Special ^purposes of incorporation. — But when a corporation is created directly by special statute, or indirectly by a statute authorizing the formation of a class of corporations on speci- fied conditions, for purposes declared by the statute, or which the founders of the corporation are required to declare, then the question is different. As to powers expressly conferred on the corporation, or clearly authorized by general provi- sions, there can be no doubt; when farther powers are claimed, it must be considered what was the intention of the Legis- lature, and only such powers can be attributed to the corporation as are necessary or reasonably incident to the fulfilment of the purposes for which it is established. Members of the company have the right to rely on those purposes not being exceeded; the public can ascertain them, and have not any right to hold the company liable for under- takings outside them. On the whole, " where there is an Act of Parliament creating a corporation for a particular ' purpose, and giving it powers for that particular purpose, what it does not expressly or impliedly authorize is to be taken to be prohibited " (p) — prohibited in the sense not that des conditions naturelles de I'homme, (1875) L. E. 7 H. L. 653, Ai L. J. telles que le sexe, 1'S.ge ou la Ex. 185, a leading case on the Coin- parents." panies Act, 1862, but not confined to (o) Sutton'i Hotpital case (10 Co. the construction of that Act. See Eep., where it is said (at p. 30 b) Baroness Wenlook v. River Dee Co. that when a corporation is duly (1885) 10 App. Ca. 354, 360, 54 created, all other incidents are tacite L. J. Q. B. 577. As to railway annexed. companies under special Acts, see (jo) Lord BlackHurn in A.-G. v. A.-G. v. Mersey Ry. Co. [190'] A. C. O. E. Ry. Co. (188") 5 App. Ca. 473, 416, 76 L. J. Ch. 668. Cp. as to the 481, stating the effect of Ashbury limited powers of a trade union Ry. Carriage and Iron Co. v. Eiche which is a peculiar kind of statutory CORPORATIONS. 131 , penalties or disabilities follow on suoh an act if done, but that the attempt to do it can from the first have no kind of validity as a corporate act, The reasons for this rule, as we have hinted, are derived (1) from the law of partnership; (2) from principles of public policy. 1. In trading corporations the relation of the members or shareholders to one another is in fact a modified (q) con- tract of partnership, which in the view of courts of equity, is governed by the ordinary rules of partnership law so far as •they are not excluded by the constitution of the company. Now it is a well-settled principle of partnership law that no majority of the pa,rtners can bind a dissenting minority, or even one dissenting partner, to engage the firm in transactions beyond, its original scope. In the case, there- fore, of a corporation whose members are as between them- selves partners in the business carried on by the corporation, any dissenting member is entitled to restrain the governing body or the majority of the company from a'ttempting to involve the company in an undertaking which does not come within its purposes as defined by its original constitution. Courts of equity have been naturally called upon to look :at the subject chiefly from this point of view, that is, as giving rise to questions between shareholders and directors, or between minorities and majorities. Such questions do not require the court to decide whether an act which dissentients may prevent the agents of the company from doing 'in its name might not nevertheless, if so done by them with -apparent authority, be binding on the corporate body, or a quasi-corporation, Amalgamated Socy, of shareholders, and other things of Sy. Servants v. Osborne [1910] which cannot (at least with con- A. 0. 87, 79 L. J. Ch. 87. venience or completeness) be made iq) Namely by proyisions for incident to a partnership at common iiransfer of shares, limited liability law. 9 (2) 132 CAPACITY OF PARTIES. contract so made be enforceable by the other party who had contracted in good faith. This distinction was not always- kept in sight. But further, according to the law of partner- ship a partner can bind the firm only as its agent: his authority is prima facie an extensive one (r), but if it is specially restricted by agreement between the partners, and the restriction is known to the person dealing with him, he cannot bind the firm to anything beyond those special limits. Limits of this kind may be imposed on the directors or other officers of a company by its constitution; and if that constitu- tion is embodied in a special Act of Parliament, or in a deed of settlement or articles of association registered in a public- office under the provisions of a general Act, it is considered that all persons dealing with the agents of the corporation must be deemed to have notice of the limits thus publicly set to their authority. The corporation is accordingly not bound by anything done by them in its name when the transaction is on the face of it in excess of the powers thus defined. And it is important to remember that in this view the resolutions of meetings however numerous, and passed by however great a majority, have of themselves no more power than the pro- ceedings of individual agents to bind the partnership against the will of any single member to transactions of a kind tO' which he did not by the contract of partnership agree that it might be bound. Irregularities in the conduct of the internal affairs of the body corporate, even the omission of things which as betweea shareholders and directors are conditions precedent to the exercise of the directors' authority, will not, however, invali- date acts which on the face of them are regular and (r) James L.J. Baird's case(\V10) Breillat (1847) 6 Moo. P. C. 152, 193,. L. E. 5 Ch. 733 ; Story on Agency, 79 E. R. 24, 53 ; Partnership Act,. §§ 124, 126, adopted by the Judicial 1890, ss. 5—8. Committee in Bank of Australasia v. CORPORATIONS. 133 authorized: third parties dealing in good faith are entitled to assume that internal regulations (the observance of which it may be difficult or impossible for them to verify) have in iact been complied with. But it is to be observed that in the ordiaary law of partner- ship there is nothing to prevent the members of a firm, if they are all so minded, from extending or changing its business without limit by their unanimous agreement. As a matter of pure corporation law, the unanimity of the members is of little importance : it may supply the want of a formal act of the governing body in some cases (s), but it ■can in no case do more. As a matter of mixed corporation and partnership law this unanimity may be all-important as being a ratification by all the partners of that which if any one of them dissented would not be the act of the firm: for although the corporate body of which they are members is in many respects different from any ordinary partnership, it is treated, and justly treated, as a partnership for this purpose. It appears, then, that the unanimous assent of the members will remove all objections founded on the principles of partnership, and A\ill so far leave the corporation in full possession of its common law powers. There are neverthe- less many transactions which even the unanimous will of all the members cannot make binding as corporate acts. For the reasons which determine this we must seek farther. 2. Most corporations established in modern times by special Acts of Parliament have been established expressly for special purposes the fulfilment of which is considered to be for the benefit of the public as well as of the proprietors of the undertaking, and for this reason they are armed with (s) Even this is in strictness successors by the name of X, then liardly consistcsnt with the principle A -|- B + C -f- . . . &c. are that if A, B. C &c., not = X. are incorporated to them and th«ir 134 CAPACITY O^ PARTIES. extraordinary powers and privileges. Whatever a corpora- tion may be capable of doing at common law, there is no doubt that unusual powers given by the Legislature for a fecial purpose must be employed only for that purpose. If Parliament empowers either natural persons or a corpora- tion to take J. S.'s lands for a railway, J. S. is not bound to let them take it for a factory or to let them take an exces- sive quantity of land on purpose to re-sell it at a profit (t). If Parliament confers immunity for the obstruction of a navigable river by building a bridge at a specified place, that will be no excuse for obstructing it in the like manner elsewhere. Moreover we cannot stop here. It is impossible to say that an incorporation for special objects and with special powers gives a restricted right of using those powers, but leaves the use of ordinary corporate powers without any restriction. The possession of extraordinary powers puts the corporation for almost all purposes and in almost all trans- actions in a wholly different position from that which it would have held without them; and apart from the actual (t) See Galloway v. Mayor of (1879) 11 Cli. D. 611, 622, 48 L. J. London (1868) L. E.. 1 H. L. at Ch. 258. But a statutory corpora- p. 43, 35 L. J. Ch. 477; Lord tion acquiring property takes it with. Carington \. Wycombe £y. Co. {IS6S) all its rights and incidents as against L. R. 3 Ch. 377, 381, 37 L. J. Ch. strangers, subject only to the duty 213. Nor may a company hold of exercising those rights in good regattas or let out pleasure-boats to faith with a view to the objects oJE the inconvenience of the former incorporation : Swindon Waterworks owner on a piece of water acquired Co. v. Wilts and Berks Canal Naviga- by them under their Act for a tion Co. (1875) L. R. 7 H. Ii. 697, reservoir : Bostock v. N. Staffordshire 704, 710, 45 L. J. Ch. 638 ; Bonner Ry. Co. (1856) 3 Sm. & G. 283, 292, v. G. W. £y. Co. (1883) 24 Ch. 25 L. J. Ch. 325, 90 R. E. 169, in Div. 1 ; and a corporation cannot Q. B. on a case sent by Parker V.C. bind itself not to use in the futmre (1856) 4 E. & B. 798, 99 R. R. 758, special powers which have pre- with some difEerenoe of opinion ; nor sumably been conferred to be used alienate land similarly acquired for the public good : Ayr Barbour except for purposes authorized by Trustees v. Oswald (1883) 8 App. Ca. the Act : MuUiner v. Midland Sy. Co. 623. CORPORATIONS. 135 exercise of them it may do many things which it was other- wise legally competent to do, but which without their exis- tence it could practically never have done. Any substantial departure from the purposes contemplated by the Legislature, whether involving on the face of it a misapplication of special powers or not, would defeat the expectations and objects with which those powers were given. When Parliament, in tht public interest and in consideration of a presumed benefit to the public, confers extraordinary powers, it must be taken in the same interest to forbid the doing of that which will tend to defeat its poUcy in conferring them; and to forbid in the sense not only of attaching penal consequences to such acts when done, but of making them wholly void if it is attempted to do them. Accordingly contracts of railway companies and corporations of a like public nature which can be seen to import a substantial contravention of the policy of the incorporating Acts are held by the courts to be void, and are often spoken of as mala prohibita, and illegal in the same sense that a contract of a natural person to do anything contrary to the provisions of an Act of Parliament is illegal (m). Others prefer to say that the Legislature, acting indeed on motives of public policy, has simply disabled the corporation from doing acts of this class; " to regard the case as one of incapacity to contract rather than of illegality, and the corporation as if it were non-existent for the purpose of such contracts " (x) . This appears the sounder, and is («) Blackburn J. in Taylor v. (.r) Archibald J., L. R. 9 Ex. 293 ; Chichester ^ Midhurst Ry. Go. (1867) Lord Cairns, L. K. 7 H L. at L. R. 2 Ex. at p. 379, 39 L. J. Ex. p. 672 ; Lord Selborne, ib. 694. 217 ; and (Brett and Grove JJ. con- And Bramweil L.J. rather strongly curring) in Riche v. Ashhury Ry. disapproved of calling such acts Carriage Co. (1874) L. R. 9 Ex. at illegal, pointing out that if they pp. 262, 266, 43 L. J. Ex. 177. were properly so called there -would LordHatherley, B. c. nom. Ashbury have been some means of restraining Ry. Carriage Co. y. Riche (1875) them in a court of common law at L. R. 7 H. L. at p. 689. the instance of the Crown: A.-Q. JS6 CAPACITY OF PARTIES. now the more generally accepted view {y) . However best expressed, the principle has not always been observed in usage {z). There is another consideration of a somewhat similar kind which applies equally to what may be called public com- panies in a special sense — i.e., such as are invested with special powers for carrying out defined objects of public interest — and ordinary joint-stock companies which have no such powers. The provisions for limited liability and for the easy transfer of shares in both sorts of companies must be considered, in their modern form and extent at least, as a statutory privilege. These provisions also invest the com- panies with a certain public character and interest apart frorn the nature of their particular objects in each case, but derived from the fact that they do professedly exist for particular objects. By far the greater part of their capital represents the money of shareholders who have bought shares in the market without any intention of taking an active part in the management of the concern, but on the faith that they know in what sort of adventure they are investing their money, and that the company's funds are not being and will not be applied to other objects than those set forth in its constitution as declared by the act of incorporation, memorandum of asso- ciation, or the like (a) . This is not a mere repetition of V. G. E. My. Co. (1880) 11 Ch. Div. ance impossible in law. at pp. 501-3. (s) In the earUer part of the {y) The agreement of a third eighteenth century chartered com- person to procure a company to do panies embarked freely on specula- something foreign to its proper tions wholly foreign to their pre- purposes is plausibly called illegal : scribed objects. The Sword-blade MaeGregor v. Dover ^ Deal Ry. Co. Company was a flagrant case : Select (1852) 18 Q. B. 618, 22 L. J. Q. B. Charters of Trading Companies ed. 69 ; and see per Erie J. in J/ayor »/ Carr (Seld. Soo. 1913), Introd. Norwich v. Norfolk My. Co. (1855) p. cziii. 4 E. & B. 397, 24 L. J. Q. B. 105, (a) Held, on full consideration of 90 E.. R. 518; but it is, really void authorities, that the articles of a AS being the promise of a perform- company under the Companies Act CO KPO RATIONS. i;i7 the objections grounded on partnership law; the incoming- shareholder may protect himself for the future, but the mis- chief may be done or doing at the time of the purchase: moreover persons other than shareholders deal with the com- pany on the faith of its adhering to its defined objects. They are entitled to " kno\\' that thcv are dealing with persons who can only devote their means to a given class of objects, and who are prohibited from devoting their means to any other purpose "(6). The assent of all those who are shareholders at a given time will bind them individually, but it will not bind others (c) . If I buy shares in a company which professes to make railway plant in England I have a right to assume that its funds are not pledged to pay for making a railway in Spain or Belgium, and it is the same if ■dealing with it as a stranger I lend money or otherwise give credit to it. Accordingly the provisions of the Companies Act, 1862, are to be considered as having been enacted in the interests of "in the first place, those who might become sliareholders in succession to the persons who were share- holders for the time being; and secondly, the outside public, and more particularly those who might be creditors of com- panies of this kind" (d). Accordingly it is settled that a company registered under the Companies Act is forbidden to enter, even with the unanimous assent of the shareholders for the time being, into a contract foreign to its objects as •defined in the memorandum of association (e). are a contract not only between the («) Aihbury Ry. Carriage f Iron members but between the company Co. t. Riche (1875) L. E. 7 H. L. -and its members: Hickman v. Kent 663, 44 L. J. Ex. 185. See note D. or Romney Marth Sheepbreeders' Asso- in Appendix for some further ao- cia^toM [191-5] 1 Ch. 881, 84L. J. Ch. count of the authorities by which 688. the rules were settled in the latter (A) Lord Hatherley, L. R. 7 II. L. part of the nineteenth century. It at p. 684. is hardly needful to add that the (c) See L. E,. 9 Ex. 270, 291. consolidating Act of 1908 has made no (rf) Lord Cairns, L. R. 7 H. L. change in the principles of the law. -at p. 667. 138 CAPACITY OF PARTIES. It is not within our scope to discuss the particular contracts which particular corporate bodies have been held incapable of making. One class of contracts, however, is in a some- what peculiar position in this respect, and requires a little separate consideration. We mean the contracts expressed in negotiable instruments and governed by the law merchant. As a general rule a corporation cannot bind itself by a negotiable instrument (/) . This is not because a corporation cannot be presumed to havp power to do so, but, in the iirst place, because of the general rule of form that the contracts of a corporation must be made under its common seal {g) . It follows from this that a corporation cannot generally be bound by negotiable instruments in the ordinary form. The only comparatively early authority which is really much t» the point was argued and partly decided on this footing {h) . But the corporate seal may now take the place of signature in bills and notes («), and transferable debentures under a company's seal have been held to be negotiable (fc) . Thus, the objection of form does not seem of great importance in. modern practice. The question of authority to bind the com- pany in substance is more serious. It may be asked, why should not the agents who are authorized to contract on T)ehalf of a company in the ordinary course of its business (/) As to the United States, see posed of in the course of argument : pp. 140—141, below. 5 B. & Aid. 210, 24 B. R. 330. (y) See more as to this in the f ol- Other cases at first sight like these lowing chapter. relate to the authority of particular (A) Broughton v. Manchester Water- agents to bind a corporate — or unin- works Co. (1819) 3 B. & Aid. 1, 22 oorporated — association irrespective- R. R. 278. The chief point was on of the theory of corporate liabilities, the statutes giving the Bank of See note (t) next page. England exclusive rights of issuing (i) Bills of Exchange Act, 1882',. notes, &c. , within certain limits. In 8.91. Murray'''^. E. India Co. (1821) 5 [k) Beehuanaland Exploration Co. B. & Aid. 204, 24 K. R. 325, the v. London Trading Bank [1898] 2. statutory authority to issue bills was Q. B. 658, 67 L. J. Q. B. 987 ;. not disputed ; a difficulty was raised Edehtein v. Sohuler ^ Co. [1902] 2. as to the proper remedy, but dis- K. B. 144, 71 L. J. K. B. S72. CORPORATIONS. 139 be competent to bind the company by their acceptance or indorsement on its behalf, just as a member of an ordinary- trading partnership can bind the firm? There is a twofold answer. First, the extensive implied authority of an ordinary partner to bind his fellows cannot be applied to the case of a numerous association, whether incorporated or not, whose members are personally unknown to each other, and it has- been often decided that the managers of such associations cannot bind the individual members or the corporate body, as the case may be, by giving negotiable instruments in the name of the concern, unless the terms of their particular authority enable them to do so by express words or necessary implication (l). In the case of a corporation this authority must be sought in its constitution as set forth in its special Act, articles of association, or the like . Secondly, the power of even a trading corporation to contract without seal is limited to things incidental to the usual conduct of its busi- ness. But, as was pointed out by a judge who was certainly not disposed to take a narrow view of corporate powers, a negotiable instrument is not merely evidence of a contract, but creates a new contract and a distinct cause of action, and " it would be altogether contrary to the principles of the law which regulates such instruments that they should be valid or not according as the consideration between the original parties was good or bad;" and it would be most inconvenient if one had in the case of a corporation to inquire " whether the consideration in respect of which the acceptance is given («) As to unincorporated joint stock (1845) 14 M. & W. 831 (in Ex. Ch. companies: Jti'eale v. Turtm (1827) 4 4 Ex. 1, not on this point) ; Thomp- Bing. 149, 29 E. R. 531 ; Dickinson son v. Universal Salvage Co. (1848) 1 V. Valpy (1829) 10 B. & 0. 128, 34 Ex. 694, 17 L. J. Ex. 118 ; Re Peru- R. R. 348 ; Bramah v. Roberta (1837) vian Rys. Co. (1867) L. R. 2 Oh. 617, 3 Bing. N. C. 963; Suit t. Morrel 36 L. J. Ch, 864; cp. M parte City (1840) 12 A. & E. 746, 54 E. R. 681 ; Sank (1868) L. R. 3 Ch. 758, per Srwjon T. Syert (1 847) 16 M. & W. Selwyn L.J . The two last cases go 252, 16 L. J. Ex. 112. As to incor- rather far in the direction of imply- porated companies : Steele v. Manner ing such a power from general words. 140 CAPACITY OF PARTIES. is sufRciently connected with the purposes for which the acceptors are incorporated " (m). The result seems to be that in England a corporation caa be bound by negotiable instruments only in the following cases: — 1 . When the negotiation of bills and notes is itself one of the purposes for which the corporation exists — " within the very scope and object of their incorporation " (w) — as with the Bank of England and the East India Company, and (it is presumed) financial companies generally, and perhaps even all companies whose business wholly or chiefly consists in buying and selling (n). 2. When the instrument is accepted or made by an agent for the corporation whom its constitution empowers to accept bills, &c., on its behalf, either by express words or by neces- sary implication. The extent of these exceptions cannot be said to be very precisely defined, and in framing articles of association and similar instruments it is therefore desirable to insert express and clear provisions on this head. In the United States the Supreme Court has decided that local authorities having the usual powers of administration and local taxation have not any implied power to issue nego- tiable securities \\hich will be indisputable in the hands of a bona fide holder for value (p), and has been equally divided on the question whether municipal corporations have such power (p) . It seems, however, that in American Courts a (m) Per Erie C.J. JBateman v. Mid 1 C. P. 512 ; Ex parte City Bank Wales Ry. Co. (1866) L. R. 1 G. P. (1868) L. B. 3 Ch. 768. 499, 509, 36 L. J. C. P. 205. Rail- (o) Folice Jury v. Britton (1872) way companies are expressly for- 15 Wallace, 566, 672. bidden to issue negotiable or assign- (p) The Mayor v. Ray (1873) 19 able instruments without statutory Wallace, 466. " The weight of au- authority, on pain of forfeiting the thority is against their having such nominal amount of the security : 7 power " (Prof. Wjlliston's note to & 8 Vict. c. 86, 8. 19. third American edition ot this work, h,) Per Montague Smith J. L. R. 1906). CORPORATIONS. 141 power to borrow money is held to carry with it as an incident the power of issuing negotiable securities (g), and it is held everyT\'here as settled law that in general a corporation may issue negotiable promissory notes for any of the legitimate purposes for which the company is incorporated (?•) . The common law doctrine of estoppel (s), and the kindred equitable doctrine of part performance (t), apply to corpora- tions as well as to natural persons. Even when the corporate seal has been improperly affixed to a document by a person who has the custody of the seal for other purposes, the cor- poration may be bound by conduct on the part of its govern- ing body which amounts to an estoppel or ratification, but it will not be bound by anything less(M). The principles applied in such cases are independent of contract, and there- fore no difficulty arises from the want of a contract under the corporate seal, or non-compliance with statutory forms. But it is conceived that no sort of estoppel, part performance, or ratification can bind a corporation to a transaction which the Legislature has in substance forbidden it to undertake, or made it incapable of undertaking. (q) Police Jury v. Brition, 15 Wal- an individual is capable of being- lace, 666. bound by his own contract in (r) Prof. Williston's note, op. cit. writing : " per Cotton L.J. Hunt v. at p. 144. Wimbledon Local Board (1878) 4 C. P. («) Webb V. Herne Bay Cmnmis- Div. at p. 62, 48 L. J. 0. P. 207. sioners (1870) L. R. 5 Q. B. 642, 39 See further Hoivard v. Fatmit Ivorjf L. J. Q. B. 221. Manufachtring Go. (1888) 38 Ch. D. {t) Wilson T. West Hartlepool Sy. at pp. 162, 163, and cases collected Co. (1864-5) 2 D. J. S. 475, 493, per in Lindley on Companies, 6th ed. Turner L.J. 34 L. J. Ch. 241 ; i. 272. Crook V. Corporation of Seaford (1861) («) Banlc of Ireland w. Evans' Chari- L. R. 6 Ch. 551 ; Melbourne Banking ties (1855) 5 H. L. C. 389, 101 R. R. Corporation v. Brougham (1878-9) 4 218; Merchants of the Staple y. Bank App. Ca. at p. 169, 48 L. J. 0. P. of England (1887) 21 Q. B. Div. 160, 12. This must be confined however 67 L. J. Q. B. 418 ; Ruben v. Great to cases where the corporation is Fingall Consolidated [19061 A. C. iS9, "capable of being bound by the 75 L. J. K. B. 843. written Contract of its directors as 142 FORM OF CONTRACT. CHAPTER III. Form of Contract. I. Formality in Early English Law. The law of contract exists chiefly for the security of men in their daily business, conducted in many different modes from hour to hour, and in whatever mode suits the circum- stances, by word of mouth (nowadays including telephone), written agreement, letter, or telegraph. Hardly any limit can be -set to the diversity of forms in which men bargain with one another; but business, in the commercial sense, has this common feature in all its branches, that it depends on bargain of some kind. Therefore the Common Law does not, as a general rule, require any particular form in con- tracts, provided that there is a bargain intended to be binding, though in certain cases evidence in writing is required for special reasons of precaution, or by mercantile custom embodied in the law, and in some cases formalities are imposed for the protection of the revenue. Transactions of bounty, on the other hand, are not in the ordinary way of business, and if a man wants to bind himself without bar- gain, or to dispense with proof of a bargain, he must do so with a certain amount of solemnity (reduced, however, to a matter of no great trouble or necessary cost in modern practice) by expressing his promise in a deed. Accordingly, ■agreements made for valuable consideration are subject to conditions of form only by way of exception in particular cases, but solemn form is necessary to make a gratuitous promise binding. In some such words as the foregoing the EARLY ENGLISH LAW. 143 broad principles of our modern law, and the reasons which make us fairly content with it as it stands, may be stated with tolerable accuracy. But such a statement would be mis- leading if taken as implying the assertion that the law came to be what it is by any such logical process. English law started from a groundwork of archaic Germanic ideas not unlike those of the early Eoman law, and quite unrelated' to the common sense of a modern man of business. Form and ceremony were everything, substance and intention were nothing or almost nothing. Only those transactions were recognized as having legal efficacy which fulfilled certain conditions of form, and could be established by one or other of certain rigidly defined modes of proof. The proof itself was formal and, when once duly made, conclusive. The history of this branch of our law, through the Middle Ages and even later, consists of the transition from the ancient to the modern way of thinking. Taking English courts and the remedies they administered as they were about the middle of the thirteenth century (for it is needless to go farther back for our present purpose) (a), we find that what we should call elaborate contracts or cove- nants, and of sufficiently varied kinds, can be annexed to grants of land and interests in land, but there is very little independent law of contract, and, if by a law of contract we mean a law which enforces promises as such, it can hardly be said that there is any at all. StiU less is there any theory or system of the law. Those who aim at having one must go to the now rising Continental science of Koman law, and gather crumbs from the tables of the renowned glossators. Bracton, so far as he has a system, copies Azo of Bologna (a) There was practically no Norman Conquest," by the present secular law of contract before the writeir, L. Q. E. xiv. 291, 303, Norman Conquest. See Pollock & reprinted as appendix to " The Maitland, Hist. Eng. Law, i. 57, Expansion of the Common Law," 2nd ed.; " English Law before the Lond. 1904, at p. 155. 144 FORM OF CONTRACT, with variations due partly to misunderstanding and partlj to the impossibility of contradicting the actual English prac- tice ( b) . But the only classification for which the practical English lawyer cares is a classification of forms of action, process, and remedies. Bracton was largely read and used, and was more or less closely followed by the unknown authors of the books called Britton and Fleta, but his Roman or Romanized arrangements of legal topics never acquired any authority, and produced no effect whatever on the registers of writs or on the technical vocabulary of pleaders. English lawyers would not believe — and on the whole were right in not believing — that an English charter had anything to do with the Roman rules about the verbal contract by stipu- lation, or an appeal of felony with an action under the Lex Aquilia (c) . The only modes of proof known to early Germanic law were oath and ordeal. The archaic oath is not a confirma- tion of testimony open to discussion, but a one-sided oath of the party and his helpers. It may be preliminary, for the purpose of giving him a standing before the Court, or final and decisive. One regular form of deciding issues on the Continent, but not in England until it was introduced from Normandy, was trial by battle, not material in the history of this part of the law, but still theoretically possible in an action of debt as late as the time of Henry II. (d). Ordeal, abolished in the thirteenth century, was confined to criminal matters. Proof by writing is ultimately of Roman origin, but was adopted by the Germanic nations of the Continent at an early time. Duel and writing are the two normal modes of proof in the King's Court in the twelfth century (e) . The (6) See F. W. Maitland's " Brac- hominibus per feloniam oooigis vel ton and Azo," S«lden Society, vulneratis": Bracton, fo. 103 6. 1895. ((f) Glanv. x. 12. (e) "Actio legis AquUiae de (e) Glanv. x. 17. EARLY ENGLISH LAW. 145 charter or deed of medieval Englisli law was not a continua- tion of the Anglo-Saxon " book," but a Norman importa- tion, representing the Frankish branch of what we may call Roman conveyancing tradition (/) . Now the old Eoman formal contract, the stipulation by question and answer, had been practically transformed into a written contract even before the legislation of Justinian (^); and stipulatio or adstipulatio had long since, in Continental conveyancing, become a name for the signing or execution of a written instrument (h) . Thus the charter came to us with all the historical dignity of the most solemn form of obligation known to Roman law(^); and if this was not enough, its authority was com- pleted by the fact that all proof was formal in Germanic law, and was conclusive when once made in due form. " Proof was what satisfied the la^v, not what satisfied the Court " (/c). A deed was, and, subject to grounds of exception admitted only at a later time, still is binding, not because it records this or that kind of transaction, but b_y the form of the record itself. And, when a promise to pay money was recorded in a deed, the action which the promisee could bring was not an action on the promise. (/) The English charter of example, see Kemble, O. I), feoffment and memorandum of No. 623. livery of seisin are really the carta («) The summary view of the and notitia familiar in Continental Roman classification of contracts practice as early as the ninth formerly given in this chapter was century. As to the history of the written at a time when English evidential value of writing see text-books on Roman law were few Prof. J. H. Wigmore in Columbia and trustworthy ones fewsr. It is Law Rev. iv. 338. now, perhaps, needless, but is pre- (^) Brunner, Zur Rechtsgesch. served in the Appendix (Note E) der romisehen und germanischen in case it may be sometimes useful Urkunde, 63; Moyle'a Justinian, for immediate reference. 4th ed. 401, 416. (A) Salmond, Essays in Juria- (A) Brunner, Rom. u. Germ. prudence, &c., p. 16. Urkunde, 220 sqq. Eor an English P.— C. 10 146 FORM OF CONTRACT. The remedy to recover money secured by deed was the action of debt, which retained its essential form and char- acters through the whole history of common law procedure, so long as the forms of action were preserved at all. This was a writ of right for chattels, an action, not to enforce a promise, but to get something conceived as already belong- ing to the plaintiff: it was called an action of property as late as the Restoration (Z), a conception which lingers even in some of Blackstone's language. A promise, where it was operative at all, operated not by way of obligation, but as a grant of the sum expressed (m) , It was a good defence that the party's seal had been lost and affixed by a stranger Tvithout his knowledge, at least if the owner had given public notice of the loss (n) : but not if it had been misapplied by a person in whose custody it was; for then, it was said, it was his own fault for not having it in better keeping. An action of debt (o) might also be brought, without proof by deed, for such things as money lent, or the price of goods sold and delivered, and an action of detinue (which was but a species of debt) for chattels bailed (_p), the cause of action being still (f) The action of assumpsit was 1. 6, c. 33, § 2; o. 34, § 4. The said hy Vaughan C.J. to be " much practice of publishing formal inferior and ig^obler than the notice in case of loss really ex- action of debt, which by the isted: Blount's Law Dictionary, Register is an action of Pro- s. v. SigUlum (18 Eic. II.). In perty": Edgcomh v. Dee, Vaugh. modern law such questions, when at p. 101. they occur, come under the head (w) Harv. Law Rev. vi. 399; of estoppel. " contracts of debt are reciprocal (o) For fuller statement see grants," Edgcomb v. Dee, last Pollock & Maitland, Hist. Eng. L. note. ii. 210. (») GlanviU (L. 10, c. 12) has (p) Detinue proper lay only for not even this: Britton, 1, 164, 166, specific chattels: a claim for de- as in the text. " Pur ceo qe il ad* livery of goods not yet identified oonu le fet estre seen en partie, was " debt in the detimet " : per soit agardfi pur le pleyntif; et s© Maule J. 15 C. B. 303. The de- purveye autre foiz le defendaunt oiaion of the C A. in Bryant v. de meinour gardeyn." Op. Fleta, Herbert (1878) 3 O. P. Div. 389, MEDIEVAL FORMS OF ACTION. 147 ^^ot any promise by the defendant but his possession of the plaintiff's money (so it was conceived) or goods. The first thing needful to found the action of debt was, as it still is in jurisdictions where the old forms of action persist, that a certain sum of money should be payable by the defendant to the plaintiff. In debt and detinue the text-Avriters could profess to recognize the Roman contractus innominati {do ut des, &c.) which Bracton, carrying out the medieval notion that a promise to pay or deliver is a grant immediate in execution and only suspended in operation, put under the head, strange to us nowadays, of conditional grants (g) . In the course of the next two centuries we find it quite clear that an action of debt, provided the sum be liquidated, will lie (as we should now say) on any consideration executed, and also that on a contract for the sale of either goods or land an action may be maintained for the price before the goods are delivered or seisin given of the land (r). In 1294 it was said that money paid as the price of land might be recovered back in debt if the seller would not enfeoff the buyer pursuant to his covenant (s) . Other remedies applicable to contracts were of limited scope and utility. The action of covenant, of which we do not 47 L. J. O. P. 670, that an action (r) Y. B. 12 Ed. III. (RoUs for wrongful detention is " founded ed.) 587 [A.D. 1338] ; Mich. 37 on tort " within the meajiing of the H. VI. [A.D. 1459], 8, pi. 18, by- County Court Acts ie,and prof esses Prisot C.J., where it is added that to be, beside the historical question. in the case of goods sold, though (?) Bracton 18 6, 19 a; Fleta not of land, the buyer may take 1. 2, u. 60, § 23. In Bracton fo. the goods: this follows from the 19 a, lines 14, 15, in ©d. 1569, s* theory of " reciprocal grant." (the second), possunt and ut re^pe- («) y. B. 21 & 22 Ed. I. 600, per tere possim are corrupt. The true Metingham. The principal action readings, conjecturally restored ^as apparentiy a quite regular long ago by Guterbock, and in fact action of debt on covenant; the Igiven almost identically by the ao-gument is curious but on points best MSS., a,Fe sed . . . possum outside the present subject. . . . non ut repetere possim. 10(2) 148 FORM OF CONTRACT. hear before the thirteenth century, was grounded on agree- ment, conventio, both in form and in fact, but it was prac- tically confined to agreements relating to interests in land. Attempts at extending it were cut short by the establish- ment, after some vacillation, of the rule that writing under seal was the only admissible proof; so that in the modern common law covenant is the proper name of a promise made by deed. The writ of covenant remained a solitary and barren form of action, ^vithout influence on the later develop- ment of the law(f). The action of account (m) was a remedy of wider applica- tion (sometimes exclusively, sometimes concurrently with debt) to enforce claims of the kind which in modern times have been the subject of actions of assumpsit for money had and received or the like . It covered apparently all sorts of cases where money had been paid on condition or to be dealt with in some way prescribed by the person paying it {x). One must not be misled by the statement that " no man shall be charged in account but as guardian in socage, bailiff or receiver " {y) : for it is also said " a man shall have a writ of account against one as bailiff or receiver where he was not his bailiff or receiver: for if a man receive money for my use I shall have an account against him as receiver;; or if a man deliver money unto another to deliver unto me, I shall have an account against him as my receiver " (z) . This action may be brought by one partner against (0 See Pollock & Maitland, ii. («) 52 Hen. III. (Stat. Mailb.) 216, Harv. I^w Eev. vi. 399-401. u. 17, 13 Ed. I. (Stat. Wesfcm. 2) The Statutum Walliae [A.D. 1284] o. 23. For more history and de- ■ 3 the most instructive document. tails see LangdeU in Harv. Law The suggestion in Blaokstone, Bev. ii. 243, 251. Oomm. iii. 158, that Assumpsit is (x) See cases in 1 Rol. Abr. 116. an action on the case analogous to (y) 11 Oo. Hep. 89, Co. Litt. the writ of covenant, is quite un- 172 a. historical, though ingenious. («) F. N. B. 116 Q. MEDIEVAL FORMS OF ACTION. 149 another (a) . At common laAV it could not be brought by executors, except, it seems, in the case of merchants, nor against them unless at the suit of the Crown (&): but it was made apiplicable both for and against executors by various statutes to Avhich it is needless to refer particularly (c) . In modern times this action was obsolete except as between tenants in common {d) . Like the action of debt, it was in the nature of a writ of right, and founded not on a promise, but on the duty — in this case not of paying a sum certain but of rendering an account — attached by law to the •defendant's receipt of the plaintiff's money. On informal executory agreements there was in general no remedy in the King's Courts (e). The Ecclesiastical Courts, however, enforced them freely in suits pro laesione fidei, within (and sometimes, it would seem, not within) (/) the limits set by the Constitutions of Clarendon, and defined later by the ordinance or so-called statute of Circumspecte €,gatis. Executory mercantile contracts were also recognized in the special courts i^-liich administered the law merchant. But we cannot here attempt to throw any light on that which Lord Blackburn found to be one of the obscurest passages in the history of the English law {g) . We read of exceptions (a) lb. 117 D. Langdell dis- (/) Hai-v. Law Rev. vi. 403; piites tliis, but Fitzherbert is clear Pollock & Maitland, H. E. L. ii. and express on the point. 200. Neither the authority nor the (S) Co. litt. 90 b, and see Earl actual text of Ciroums-p^cte wgatis ■of DevonsMrfi's case, 11 Hep. 89. is certain. See the remarks of two (e) The action is given against judges in Y. B. 19 Ed. III., ed. «xecutora by 4 & 5 [Ann. c. 3 (Etev. Pike, Wm-.—" Eillary : That ia .Stat. ; 4 Ann. c. 16 in BufEhead) not a statute sealed. Willoughby : 3. 27. No, the Prelates made it them- (d) See Lindley on Partnership, selves." 547, note o. (ff) Blackburn on the Contract of (e) See further Ames, "Parol Sale, 207-208. In addition to' the Contracts prior to Assumpsit," quotation there from the Year Book Harv. Law Rev. viii. 252, repr. of Ed. IV., see Y. B. 21 & 22 Essays in Anglo- Amer. Legal Ed. I. , p. 458. And see Sir John History iii. 304. Macdonell's introduction to 150 . FORM OF CONTRACT. by local custom in London and Bristol, but one may guess that the allegation of such customs was only a device tO' bring the rules of the law merchant within the jurisdiction of the King's Court (A). II. The Action of Assumpsit. In the later middle ages a general remedy became indis-. pensable; but it was introduced from a different branch of the law, and by a device which at first was thought too bold to succeed. This was a new variety of action on the case,, framed, it seems, as often on the writ of deceit {i) as on that of trespass, and it ultimately became the familiar action of assumpisit and the ordinary way of enforcing simple contracts . Failure to perform one's agreements did not create a. debt (y), but it was found to be a wrong in the nature of deceit for which there must be a remedy in damages. The final prevalence of assumpsit over debt, like that of trover pver detinue Qc), was much aided by the defendant not being able to wage his law and by the greater simplicity and lati- tude of the pleadings: but the reason of its original intro- duction was to supply a remedy where no other action would lie. This was not effected without dispute and dissent. In the first recorded case (J,), the action was against a Smith's Mercantile !Law, 10th ed. a breach of piromise, but must lie- 1890; A. T. Carter, History of repaired in damages": Vaughan English IJegal Institutions, 3rd ed. C.J. in Edgcomb t. See, Vaughan 1906, p. 260. at p. 101. (A) F. N. B. 146 a. Liber Albus (Je) See per Martin B. Bur- ial a, 14 H. IV. 26 a, pi. 33, Godb. roughes v. Bayna (1860) 5 H. & 49, 336, Sty. 145, 198, 199, 228, N. at p. 301, 29 L,. J. Ex. 188. Latch. 134, 1 Leo. 2, 4 Leo. 105. (0 Mich. 2 H. IV., 3 J, pi. 9. (j) " The breach of promise is The full and careful historical dis- alleged to be mixed with fraud and cussion of the whole subject by the- deceit to the special prejudice of late Prof. Ames of Harvard in the plaintiff, and for that reason Harv. Liaw E^ev. ii. 1, 53, super- it is called trespass on the case": sedes all previous reseajrahes. Ac- Pmehon's case, 9 Co. Bep. 6-9 a. tions of trespass on the case had (/) "No man hath property by pireviously been allowed for mal- HISTORY OF ASSUMPSIT. 151 carpenter for having failed to build certain houses as he had contracted to do. The writ ran thus: " Quare cum idem [the defendant] ad quasdam domos ipsius Laurentii [the plaintiff] bene et fideliter infra certum tempus de novo con- struend' apud Grimesby assumpsisset, praedictus tamen T. domos ipsius L. infra tempus praedictum, &c., construere non curavit ad dampnum ipsius Laurentii decern libr', &c." The report proceeds to this effect: — " Tirwit. — Sir, you see well that his count is on a covenant, and he shows no such thing: judgment. Gascoigne. — Seeing that you answer nothing, we ask judg- ment and pray for our damages. Tirmt. — This is covenant or nothing {ceo est merement un covenant) . Brencheslei/ J . — It is so : perhaps it would have been other- wise had it been averred that the work was begun and then by negligence left unfinished. (Hankford J. observed .that an action on the Statute of Labourers might meet the case.) Bickhill J . — For that you have counted on a covenant and show none, take nothing by your writ but be in mercy." The word fideliter in the writ is significant. It seems to denote a deliberate competition with the jurisdiction of the Courts Christian in matters of fidei laesio. We will show you, the pleader says in effect, that the King's judges too know what belongs to good faith, and will not let breach of faith go without a remedy. It may also have been intended to show that there was a bargain and mutual trust (to) . feasance by the negligent perfoim- feasance was a novelty. An ex- anoe of cooitraots (for ■which it is oellent continuous narrative is now still held that there is an alterna- given by Dr. Holdsworth, Hist, tive remedy in contract and in Eng. Law, iii. 329-349. tort), but an action for 'mere non- (m) Modem pleading would re- 152 FORM OF CONTRACT. This adverse decision was followed by at least one like it {n), but early in the reign of Henry VI. an action was brought against one Watkins for failure to build a mill within the time for which he had promised it, and two out of three judges (Babington C.J. and Cockaine J.) were decidedly in favour of the action being maintainable and called on the defendant's counsel to plead over to the merits (o) . Martin J. dissented, insisting that an action of trespass would not lie for a mere non-feasance: a difficulty by no means frivolous in itself. " If this action is to be maintained on this matter," he said, " one shall have an action of trespass on every agree- ment that is broken in the world." This, however, was the very thing sought, and so it came to pass in the two following reigns, when the general application of the action of assumpsit was well established. But only in 1596 was it conclusively decided that assumpsit was admissible at the plaintiff's choice where debt would also lie (p) . The fiction of the action being founded on a tort was abolished by the Common Law Procedure Act. Meanwhile the relation between the parties which was assumed as the foundation of the duty violated by the defendant, and which involved the plaintiff's having in some way changed his position for the worse on the faith of the defendant's undertaking (g), was transformed into the modern quire, of course, a much more dis- — ^the point remained open for tinct averment of consideration: many yeais, see 19 H. VI. 49, pi. 5. but the doctrine was not yet (_p) Slade's ease-, 4. Co. Rep. formed. 91 a, in Ex. Ch. It was still later («) Mich. 11 H. IV. 33, pi. 60. before it was admitted that the And see Bigelow L.O. on Torts, substantial cause of action in as- 587. sumpsit was the contract. 0. W. (o) HU. 3 H. VI. 36, pi. 33. Holmes, The Common Law, 2S4— There is some doubt as to the date 287. For the earlier history see of this case, see L. Q. R. xxiv. Ames, Harv. Law Rev. ii. 16, and 384. Notwithstanding the favour- Holdsworth, ub. sup. able view taken by several judges (g) " In all these oases there is further, 14 H. VI. 18, pi. 58 an undertaking and matter of fact TALLIES. 153 •doctrine of Consideration, coalescing on the waj', in fact if not in strict theory, with the existing requirements of the -actions of debt and account. Of this we shall speak •separately. It is stated in several books of authority [e.g., Shepp. Touchst. 54) that a deed must be written on parchment or paper, not on wood, &c. This seems to refer to the then common use of wooden tallies as records of contracts. Fitzherbert in fact says (?■) that if such a tally is sealed and delivered by the party it will not be a deed; and the Year Books afford evidence of attempts to rely on sealed tallies .as equivalent to deeds, and it appears that by the custom of London they '^verc so (s) . These tallies were no doubt written upon as well as notched, so that nothing could be laid' hold ■of to refuse them the description of deeds but the fact of their being wooden: the writing is expressly mentioned in one case {t), and the Exchequer tallies used tiU within recent times were likewise written upon (ii) . "beyond that which sounds in Hall, Antiquities of the Exchequer, -covenant": Newton in 14 H. VI. 118 sqg.; H. Jenkinson in Proo. 18. Soc. Antiq. 2d S. xxv. 29, xxvi. 36, (r) F. N. B. 122 I. Archseol. 2d S. xii. 367. The («) "Un taille do dette enseaJe French (art. 1333) and Italian par usage de la cites est auxi fort (axt. 1332) Civil Codes expressly- come une obligacoun " : Liber admit tallies as evidence between Albna 191 w. traders who keep their accounts in (t) Trin. 12 H. IV. 23, pi. 3. this way; nor is the use of them The other citations we have been unknown at this day in England, able to verify are Pasoh. 25 Ed. By the courtesy of Mr. J. B. III. 83 (wrongly referred to as 40 Matthews, K.C., formerly of in the last case and in the margin Worcester, I have a specimen of •of Fitzh.), pi. 9, where the re- the tallies with which the hop- porter notes it is said to be other- pickers in Herefordshire stiU keep wise in London; and Trin. 44 Ed. account of the quantities picked. III. 21, pi. 23. For a case where They were used in the Kentish hop the Court was favourable to a mer- country within living memory, and •chant's tally see Middleseix Iter, in Hampshire not very kmg ago, :22 Ed. I. 458. and I am informed that they axe (j«) See account of them in still known in oo. Galway. Bakers' 154 FOEM OF CONTRACT. III. Modern requirements of form. Formal contracts. — We have seen how in the ancient vie^r no contract was good (as indeed no act in the law was) unless^ it brought itself within some favoured class by satisfying particular conditions of form, or of evidence, or both. The- modern view to which the law of England has now long come round is the reverse, namely that no contract need be- in any particular form unless it belongs to some class in which a particular form is specially required. Before we say anything of these classes it must be men- tioned that contracts under seal are not the only formal contracts known to English law. There are certain so-called. " contracts of record " which are of a yet higher nature than contracts by deed. The judgment of a Court of Record is treated for some purposes as a contract: and a recognizance,. i.e., "a writing obligatory acknowledged before a judge or other officer having authority for that purpose and enrolled in a Court of Record," is strictly and properly a contract entered into with the Ctown in its judicial capacity. The statutory forms of security known as statutes merchant,, statutes staple, and recognizances in the nature of a statute staple, were likewise of record, but they have long since fallen out of use (x). The kinds of contract subject to restrictions of form are- these: (1). At common law, the contracts of corporations. The- rule that such contracts must in general be under- seal is earlier than the time when the modern doc- taUies are oommon thioughout and sayings of LSoi--fcsu (tr. L. France. Specimens of English Giles, " Wisdom of the East " iallies both ancient and recent series), p. 29. may- be seen in the medieval room (a;) As to Contracts of Record, of the British Museum, and at the see Anson, p. 66, 14th ed., and for- Record Office. Op. Col. Yule's an account of statutes merohaiit,. note on Marco Polo, ii. 78, 2nd ed.; &e., 2 Wms. Saund. 216-222. OONTEACTS OP CORPORATIONS. 15-'> trine of contracts was formed. Of late years great encroachments have been made upon it, which have hardly reached their final limits; the law is still I unsettled on some points, and demands careful con- sideration. Both the historical and the practical reason lead us to give this topic the first place. (2). Partly by the law merchant (now codified in many jurisdictions) and partly by statute, the peculiar contracts expressed in negotiable instruments. (3). By statute only — A. The various contracts within the Statute of Frauds. C'ertain sales and dispositions of property are regulated by other statutes, but mostly as transfers of ovraership or of rights good against third persons rather than as agreements between the parties. B. Marine insurances. C. Transfer of shares in companies (generally). D . Acknowledgment of debts barred by the Statute of Limitation of James I. E. Marriage: This, although we do not mean to enter on the subject of the Marria,ge Acts, ,> must be mentioned here to complete the list. 1. As to contracts of corporations. The doctrine of the common law was that corporations could bind themselves only under their common seal, except in small matters of daily occurrence, as the appointment of household servants and the like (y) . The principle of these (y) 1 Wms. Saund. «15, 616, and O. P. 97, 61 E. B. 664; and Fish- aee old authorities oolleoted in mongers' Gotnpany v. Mobertion notes to Arnold v. Mayor of Paole (1843) 5 M. & Gr. 131, 12 L. J. (1842) 4 M. & Gr. 860, 12 L. J. C. P. 185, 63 R. R. 242. 156 FORM OF CONTRACT. exceptions being, in the words of the Court of Exchequer Chamber, " convenience amounting almost to necessity " (2), the vast increase in the extent, importance, and variety of corporate dealings which has taken place in modern times has led to a corresponding increase of the exceptions. Before considering these, however, it is well to cite an approved judicial statement of the rule, and of the reasons that may be given for it: — ' ' The seal is required as authenticating tlws concurrenee of the whole body corporate. If the legislature, in erecting a body corporate, invest any mem- ber of it, either expressly or impliedly, with authority to bind the whole body by his mere signature or otherwise, then undoubtedly the adding a seal would be matter purely of form and not of substance. Everyone becoming a member of such a corporation knows that he is liable to be bound in his corporate character by such an act ; and persons dealing with the corporation know that by such an act the body will be bound. But in other cases the seal is the only authentic evidence of what the coiporation has done or agreed to do. The resolution of a meeting, however numerously attended, is, after all, not the act of the whole body. Every member knows he is bound by what is done under the corporate seal and by nothing else. It is a great mistake, therefore, to speak of the necessity for a seal as a relic of iguorant times. It is no such thing : either a seal or some substitute for a seal, which by law shaO be taken as conclusively evidencing the sense of a whole body corporate, is a necessity inherent in the very nature of a corporation " (a). It is, no doubt, a matter of " inherent necessity " that when a natural person acts for a corporation, his authority must be shown in some way; and .the common seal in the agent's custody, when an act in the law purports to be the act of the corporation itself, or his authority under seal, when it purports to be the act of an agent for the corporation, is in English law the recognized evidence for that purpose. (z) Church V. Imperial Gaa liardwick (1873) L. R. 9 Ex. at lAgU Company (18380 6 A. & E. p. 24, 43 L. J. Ex. 9; and see 846, 861, 45 R. R. 638, 643. per Keating J. Austm v. Gxmr- (a>) Mayor of Ludlow v. Charl- dians of Bethnal Graen (1874) ton (1840) 6 M. & W. 615, 823, 56 L. R. 9 C. P. at p. 95, 43 L. J. R. R. 794, adopted by PoJlock B. O. P. 100. in Mayor of Kiddermin^ier v. TRADING CORPORATIONS. 157 But there is no reason in the nature of things why his autho- rity should not be manifested in other ways: nor is the seal of itself conclusive, for an instrument to which it is in fact affixed without authority is not binding on the corpora- tion (&). On the other hand, although it is usual and desir- able for the deed of a corporation to be sealed with its proper corporate seal, it is laid down by high authorities that any seal will do (c) . A company under the Companies Act must have its name engraved in legible characters on its seal, and any director, &c., using as the seal of the company any seal on which the name is not so engraved is subject to a penalty of 50^ (d) : but this would not, it is conceived, prevent instru- ments so executed from binding the company (e). We now turn to the exceptions . According to the modern authorities it is established that the " principle of convenience amounting almost to necessity " will cover all contracts which can fairly be treated as necessary and incidental to the pur- (&) Bank of Ireland v. Evaivs' that there had been no time to Charities (1865) 5 H. L. C. 389, make a proper seal, Gray y. Le-ims 101 E. E. 218. (1869) L. E. 8 Eq. atp. 531. The (o) 10 Oo.' Eep. 30 b, Shepp. like direction and penalty are con- Touchst. 57. Yet the rule is tained in the Industrial and Pro- doubted, Grant on Corp'. 69, but vident Societies Act, 1893, «. 66 only on the ground of convenienoe (repeating an earlier enactment) . and without any authority. The As to execution of deeds abroad by like rule as to sealing by an indi^. companies under the Acts of 1862 ■vidual is quite clear and at least and 1867, see the Companies (Con- as old as Bracton: Non multum solidation) Act, 1908, ss. 7&, 79; in lefert utrum [carta] proprio vel Scotland, the Conveyancing (Scot- alleno sigiUo sit signata, cum siemel land) Act, 1874 (37 & 38 Vict, a donatore coram testibus ad hoo c. 94), s. 56. The seal of a build- vooatis recog'nita et concessa fuerit, ing society incorporated under the fo. 38 a. Cp. Britton, 1. 257. Building Societies Act, 1847 (37 & («0 Ck)nBoMation Act, 1908, 38 Vict. o. 42), s. 16, sub-s. 10, s. 63, (1) b, (3) = 1862, ss. 41, 42. " shall in all oases bear the regis- (e) Notwithstanding the statu- tered name thereof," but no tory penalty, there is a reported penalty or other consequence is instance of the private seal of a annexed to the non-observanoe of director being used when the com- this direction. pi^y had been so recently formed 158 FORM OF CONTRACT. poses for which the corporation exists: and that in the Case of a trading corporation all contracts made in the ordinary course of its business or for purposes connected therewith fall within this description . The same or even a wider con- clusion was much earlier arrived at in the United States. As ■long ago as 1813 the law was thus stated by the Supreme Court: — " It would seem to be a sound rule of law that wherever a corporation is acting within the scope of the legitimate purposes of its institution all parole contracts made by its authorized agents are express promises of the corporation, and all duties imposed on them by law, and all benefits con- ferred at their request, raise implied promises for the enforcement of which an action may well lie " (/) . In England this rule cannot be so broadly laid down, as there is still a distinction between trading corporations and corporations created for any other purpose. As to the latter class there was a serious conflict of decisions until a few years ago. Trading corporations.- — As concerns trading corporations the law was settled by the unanimous decisions of the Court of Common Pleas and of the Exchequer Chamber in South of Ireland Collier y Co. y. Waddle {g). The action -was brought by the company against an engineer for non-delivery of pumping machinery, there being no contract under seal. Bovill C.J. said in the Court below that it was impossible to reconcile all the decisions on the subject: but the exceptions oreated by the recent cases were too firmly established to be questioned by the earlier decisions, which if inconsistent with" them must be held not to be law:^ — ' ' These exceptionB apply to all contracts by trading corporations entered into for the purposes for which they are incorporated. A company can only (f) Bwnh of Cclwirifna v. Pat- officer, or attorney meed not be Urson (1813) 7 Oranoh, 299, 306. under seal. It is also held by the American (jr) (1868) L. E. 3 0. P. 463, in authorities that the appointment Ex. Oh. 4 C. P. 617, 38 L. J. O. P. by a corporation of an agemti, 338. Most if not all of the previous authorities are there referred to. TRADING AND NON-TRADING CORPORATIONS. 159 •cany on business by agents, — managers and others ; and if the contracts made by these persons are contracts which relate to objects and purposes of the lompany, and are not inconsistent with the mles and regulations which govern their acts (A), they are valid and binding upon the company, though not under seal. It has been urged that the exceptions to J;he general rule are still limited to matters of frequent occurrence and small importance. The ■authorities, however, do not sustain the argument. ' ' The decision was affirmed on appeal without hearing counsel for the plaintiffs, and Cockburn C.J. said the ■defendant was inviting the Court to reintroduce a relic of barbarous antiquity (i) . (A) This qualification is itself subject to the rule established by Royal British Bank v. Turguand (1856) 6 E. & B. 327, 25 L. J. Q. B. 317, 103 R. R. 472, and simi- lar cases, and mentioned at p. 134 above. For details see Note D. in. Apipendix. (i) The following earlier cases may be considered as overruled: — - East London Waterworks v. Baaley (1827) 4 Bing. 283. Action fwr non-deUviery of iron pipes prdeired for the company's works. The directors were authorized by the incorporating Act of Parliament to make contracts; but it was held that this only meant they might afSx the seal without calling a meeting. See L.. R. 3 C. P. 475. Bomersham v. Wolverhampton Waterworks Co. (1851) 6 Ex. 137, 20 L. J. Ex. 193. Contract under seal for erection of machinery: price of extra work done with approval of the company's engineer and accepted, but not within the terms of the sealed contract, held not recoverable. Diggle v. London ^ BUtckwall Ry. Go. (1850) 5 Ex. 442, 19 L. J. Ex. 308. Work done on railway in alterations of per- manent way, &c. Finlay v. Bristol # Exeter Ry. Co. (1852) 7 Ex. 409, 21 L. J. Ex. 117, 86 R. R. 704, where it was held that against a. corporation tenancy could in no case be inferred from payment Of rent so as to admit of an action for use and occupation without lactual occupation. London I^och Co. v. Sinnott (1857) 8 E. & B. 347, 27 L. J. Q. B. 129, 112 R. R. 593, where a contract for scavenging the company's docks for a year was held to riequiro the seal, as not being of a mercantile nature nor with a customer of the company, can now be of little or no autho- rity beyond ita own special cir- cumstances: see per BoviU C.J. L. R. 3 O. P. 471. The following cases are affirmed or not contradicted. Some of them were decided at the time on narrower or more particular grounds, and in one or two the trading character of the corpora- tion seems immaterial : — Beverley V. Lincoln Gas Co. (1837) 6 A. & E. 829, 45 R. R. 626. Action against the company for price of gas meters supplied. Church v. Imperial Gas Co. (1838) 6 A. & E. 846, 45 R. R. 638 in Ex. Ch. Action by the company for breach 160 FORM OF CONTRACT. As concerns non-trading corporations, the modern rule is- " that where work is done or services rendered at the request of the corporation in respect of matters for the doing of which it was created, and the benefit of the work or services is accepted by the corporation, so that a contract to pay would be implied in the case of a private person, a similar impli- cation should be made in the case of a corporation " (fc). So- it has been laid down in the Court of Appeal, confirming of contract to accept gas. A supposed distinction between the liability of corporations on exe- cuted and on executory contracts was exploded. Coppm- Miners of England v. Fox (1851) 16 Q. B. 229, 20 L. J. Q. B. 174, 83 R. R. 439. Action (in effect) for non- acceptance of iron raUs ordered from the company. The company had in fact for many years given up copper mining and traded in iron, but this was not within the scope of its incorporation. Lowe V. L. i N. W. Ry. Co. (1852) 18 Q. B. 632, 21 L. J. Q. B. 361, 88 R. R. 726. The company was held liable in an action for use and occupation when there had been an actual occupation for corporate purposes, partly on the ground that » parol contract for the occu- pation was within the statutory powers of the directors and might be presumed: cp. the next case. Pauling v. L. ^ N. W. Ry. Co. (1853) 8 Ex. 867, 23 L. J. Ex. 106, 91 R. R. 807. Sleepers sup- plied to an order from the engi- neer's office and accepted: there was no doubt that the contract could under the Companies Clauses Consolidation Act be made by the directors without seal, and it was held that the acceptance and use weire evidence of an actual con- tiract. Senderson v. Austrnlian Royal Mail Co. (1855) 5 E. & B. 409, 24 L. J. Q. B. 322, 103 R. R. 638. Action on agreement to pay for bringing home one of the com- pany's ships from Sydney. Aus- tralian Royal Mail Co. v. MarzetU (1865) 11 Ex 228, 24 L. J. Ex. 273. Action by the company on agreement to supply provisions for its passenger ships. Renter v. Eleotric Telegraph Co. (1856) 6 E. & B. 341, 26 K J. Q. B. 46, 106 R. R. 625: where the chief point was as to the ratification by the directors of a contract made origi- nally with the chairman alone, who certainly had no authority to make it. Ebbw Vale Company's casii (1869) L. R. 8 Eq. 14, decides that one who sells to a company goodsi of the kind used in its business need not ascertain that the comv pany means so to use them, and is not prevented from enforcing the contract even if he had notice of an intention to use them otherwise. (yt) Lawford v. Billerioay Rural Council [1903] 1 K. B. 772, 786, per Mathew L.J. ; op. Joyce J.'s rather more guarded statement: Douglass v. Rhyl Urban Council [1913] 2 Ch. 407, 415, 82 L. J. Ch. 537. MUNICIPAL CORPORATIONS. 161 earlier but not uncontradicted authority to the like effect {I). There still does not seem to he any authority for holding a non-trading corporation liable on a parol agreement not yet executed by the promisee. With regard to municipal co]:porations (and it is presumed other corporations not created for definite public purposes) the ancient rule seems to be still in force to a great extent. An action will not lie for work done on local improve- ments (m), or on an agreement for the purchase of tolls by aiiotion («), or for the grant of a lease of corporate pro- (?) Sanders v. St. Neots Union (1846) 8 Q. B. SIO, 15 L. J. M. C. 104, 70 E. R. 663. Iron gates for worthouse supplied to order with- out seal and accepted. Paine v. Strand Union (1846) 8 Q. B. 326, 15 L. J. M. O. 89, 70 R. R. 503, is really the same way, though lat first sight contra: the decision being on the ground that making a plan for rating purposes of one parish within thie union was noti incidental to the purposes for which the guardians of the nnknv were incorporated: they had nothing to do with either making or coUocting rates in the several parishes, nor had they power to a. .1. Ex. 282. Building contract under seal, pro- viding for extra works on written directions of the architect. Extra work done and accepted, but without such direction. Held, action would not lie. This appears to be now overruled. Hunt v. Wimbledon Local Board (1878) 4 C. P. Div. 48, 48 L. J. O. P. 207. Whether the pi-eparation of plans for new offices for an incorporated local board, which plans were not acted on, is work incidental and necessary to the purposes of the board, gumre. The actual decision was on the ground that contracts above the value of 60Z. were im- peratively reqiured by statute to be under seal. (m) Mayor of Ludlow v. Chart- ton (1840) 6 M. & W. 815, 55 R. R. 794. («) Mayor of Kidderminster v. lUrdwioh (1873) L. R. 9 Ex. 13, 43 L. J. Ex. 9. 11 162 FOKM OF CONTRACT. perty (o), without an agreement under seal. Where a muni- cipal corporation owns a graving dock, a contract to let a ship have the use of it need not be under the corporate seal; but this was said to fall within the ancient exception of conve- nience resting on the frequency or urgency of the transaction . The admission of a ship into the dock is a matter of frequent and ordinary occurrence and sometimes of urgency (p) . Appointments to offices. — There has also been little dispo- sition to relax the rule in the case of appointments to offices, and it seems at present that such an appointment, if the office is of any importance, must be under the corporate seal to give the holder a right of action for his salary or other remuneration. This appears by the following instances: — Appointment of attorney : Arnold t. Mayor of Poole (1842) 4 M. & Gr. 860, 12 L. J. C. P. 97, 61 E. R. 664. It is true that the Corporation of London appoints an attorney in court without deed, but that is because it is a matter of record : see 4 M. and Gr. pp. 882, 896. But after an attorney has appeared and acted for a corporation the corporation cannot, as against the ether party to the action, dispute his authority on this ground : Faviell v. E. G. My. Co. (1848) 2 Ex. 344, 17 L. J. Ex. 223, 297, 76 R. R. 615. Nor can the other party dispute it after taking steps in the action : Thames Haven, ^c. Co. V. Hnll (184 3) 5 M. & Gr. 274. Cp. Reg. v. Justices of Cumberland (184S) 17 L. J. Q. B. 102, 5 Dowl. & L. 431, 79 R. R. 869, n. Grant of military pension by the East India Company in its political capacity : Gibson y. E. I. Co. (1839) 5 Bing. N. C. 262, .50 R. R. 688. Increase of town clerk's salary in lieu of compensation : Reg. v. Mayor of Stamford (1844) 6 Q. B. 433, 66 R. R. 449. Office with profit annexed (coal meter paid by dues) though held at the pleasure of the corporation : Smith t. Cartwright (1851) 6 Ex. 927, 20 L. J. Ex. 401. (The action was not against the corporation, but against the per- son by whom the dues were alleged to be payable. The claim was also wrong on another ground.) Collector of poor rates: Smart v. West Ham Z7«io«(1865) 10 Ex. 867, 24 L. J,. Ex. 201 ; but partly on the ground that the guardians had not undertaken to pay at all, the salary being charged on the rates ; and wholly on that ground in Ex. Ch., 11 Ex. 867, 25 L. J. Ex. 210, 105 R. R. 834. (o) Mayor of Oxford v. Crow (p) Wells v. KingUon-wpon- [1893] 3 Ch. 535, where the corpo- Kvll (1875) L. R. 10. C. P. 402, ration sought to enforce the agree- 44 L. J. C. P. 257. ment. CONTRACTS OF CORPORATIONS. 163 Clerk to master of workhouse : Austin v. Guardians of Bethnal Green (1874) li. R. 9 C. P. 91, 43 L. J. C. P. 100. Dunston v. Imperial Gas Light Co. (1832) 3 B. & Ad. 125, 37 R. R. 352, as to directors' fees voted by a meeting ; but chiefly on the ground that the fees were never intended to be more than a gratuity. Cope V. Thames Haven, fc. Co. (1849) 3 Ex. 841, 18 L. J. Ex. 345, 77 R. R. 859 ; agent appointed for a, special negotiation with another company not allowed to recover for his work, the contract not being under seal nor in the statutory form, vie, signed by three directors in pursuance of a resolution, although by another section of the special Act the directors had full power to " appoint and displace ... all such managers, officer.^, agents . as they shall think proper." It seems difficult to support the decision ; this was not like an appointment to a continuing office ; and cp. Eeg. v. Justices of Cumber- land (1848) 17 L. J. Q. B. 102, 5 Dowl. & L. 431, 79 R. R. 859, «., where under very similar enabling words an appointment of an attorney by directors without seal was held good as against third parties. It has been decided (as indeed it is obvious in principle) that inability to enforce an agreement with a corporation at law by reason of its not being under the corporate seal does not create any jurisdiction to enforce it in equity (g). The rights of corporations to sue upon contracts are some- what more extensive than their liabilities. When the cor- poration has performed its own part of the contract so that the other party has had the benefit of it, the corporation may sue on the contract though not originally bound (r) . For this reason, if possession is given under a demise from a corporation which is invalid for want of the corporate seal, and rent paid and accepted, this will constitute a good yearly tenancy (s) and will enable the corporation to enforce any term of the agreement which is applicable to such a (?) Kii-k V. Bromley Union " Even if . . against them- <1846) 2 Ph. 640, 78 R. K. 232; selves," pp. 192-3 (extending the Cramptmi v. Varna Uy. Co: (1872) right to sue without limit) is now L. R. 7 Ch. 562, 41 L. J. Ch. 817. overruled. See May-or of Kidder^ (r) Fisk/mmigers' Co. v. Robert- minster v. KarAwick (1873) L. R. son (1843) 5 M. & Gr. 131, 12 9 Ex. 13, 21, 43 L. J. Ex. 9. L. J. C. P. 185. The judgment on (s) Wood v. Tate (1806) 2 Bos. this point is at pp. 192-6; but the & P. N. R. 247, 9 R. R. 645. dictum contained in the passage 11 (2) 164 FORM OP CONTRACT. tenancy (t), and a tenant who has occupied and enjoyed corporate lands without any deed may be sued for use and occupation (u) . Conversely the presumption of a demise from year to year from payment and acceptance of rent is the same against a corporation as against an individual landlord: "where the corporation have acted as upon an executed contract, it is to be presumed against them that everything has been done that was necessary to make it a binding contract upon both parties, they having had all the advantage they would have had if the contract had been regularly made " (x). And a person by whose permission a corporation has occupied lands may sue the corporation for use and occupation '(«/') . In the case of a yearly tenancy the presumption is of an actual contract, but the liability for use and occupation is rather quasi ex contractu {z) . It is settled that in general a cause of action on a quasi-contract is as good against a corporation as against a natural person . Thus a corporation may be sued in an action for money received on the ground of strict necessity; "it cannot be expected that a corporation should put their seal to a promise to return moneys which they are wrongfully receiving "'(a). (i) Ecdes. Commrs. v. MerraJ- (1852) 18 Q. B. 6S2, 21 L. J. Q. B, (186«) L. E. 4 Ex. 162, 38 L. J. 361, 88 B. B. 726. Ex. 93. By Kelly C.B. this ia (») The liability existed at oom- correlative to the tenant's right to mon law, and the statute 11 Geo. 2, enforce the agreement in equity on c. 19, s. 14, made the remedy by the ground of part performance, action on the case oo-extensive with sed qu. that by action of debt, see Gibson («) M.yor. of Stafford v. TUl l' f^^^'ofP I ^^ i" ^^4 ^^ (1827) 4 Bing. 75, 29 R. R. 511. ^-f- ?• ^- ^^J- S^"«« ^^ ^- ^- ?■ —, i-i i i. 11 IT J rt Act the statute seema in fact The uke as to tolls, Mayor of Om"- martlien v. Lewis (1834) 6 O. & P. superfluous. 608, but see Serj. Manning's note, , ^"^ ^"^l '^ ^^"^^ "^ ^«'««'«« 2 M & ar 249 ^1^^*) ^ Q- ^- ^^' S*"' ^^ L- J- Q. B. 107, 64 R. E. 564. The like ix) Doe d. Pennington v. „f ^ ^,^^ corporation empowered Tar^iere (1848) 12 Q. B. 99«, 1013, ^ sue and b© sued by an officer, 18 L. J. Q. B. 49, 76 R. R. 460. Jefferys v. Gurr (1831) 2 B. & Ad! (y) iowe V. L. f N. W. Ry. Co, 833, 36 E. R. 769. CONTRACTS OF CORPORATIONS : SUMMARY. 165 It was held much earlier that trover could be maintained against a corporation — a decision A\'hich, as pointed oat in the case last cited, was analogous in principle though not in form (6). Sometimes it is stated as a general rule that corporations are liable on informal contracts of which they have iu fact had the benefit: but the extent and existence of the supposed rule are doubtful (c) . Forms of contracting otherwise than under seal are pro- vided by many special or general Acts of Parliament creating or regulating corporate companies, and contracts duly made in those forms are of course valid. But a statute may, on the other hand, contain restrictive provisions as to the form of corporate contracts, and in that case they must be strictly followed . Enactments requiring contracts of local corporate authorities exceeding a certain value to be in writing and sealed with the corporate seal are held to be imperative, even if the agreement has been executed and the corporation has had the full benefit of it (d) . The general result seems to stand thus: — In the abeence of enabling or restrictive statutory provi- sions, which will now be found to exist in the case of almost every corporation engaged in commercial afiairs : A trading corporation rnay make without seal any contract (b) Yarhorough v. Bank of Eng- Young ^ Co. v. Mayor of Learning- land (1812) 16 East, 6, 14 E. E. ton (1863) 8 App. Oa. 617, 52 L. J. 272. See early eases of trespass Q. B. 713; Hoare v. Kingsburtf against corporations cited by Lord Urban Council [1912] 2 Oh. 452, Ellenborough, 16 East, at p. 10, 81 L. J. Ch. 666. In Eaton v. 14 R. E. 275, 276. Basher (1881) 7 Q. B. Div. 529, 50 (c) Hunt V. Wimbledon Local L. J. Q. B. 444, it was decided that Board (1878) 4 C. P. Div. at pp. a provision of this kind in the 53, 57, 48 L. J. C. P. 207. Public Health Act, 1875, appliea id') Frend v. Dennett (1858) 4 only to contracts known at the time O. B.N. S. 576, 27 L. J. C. P. 314; of making them to exceed the H^mt V. Wimbledon Local Board specified " value or amount " of (1878) 3 O. P. D. 208, in C. A., 4 50?. C. P. Div. 48, 48 L. J. C. P. 207; 166 FORM OF CONTRACT. incidental to the ordinary conduct of its business; but it cannot bind itself by negotiable instruments unless the making of such instruments is a substantive part of that business, or is provided for by its constitution (e). A non-trading corporation, so far as it is incorporated for special purposes, may make without seal any contract incidental to those purposes; but if it has no such purposes, or not any now practically subsisting, it apparently cannot contract without seal except in cases of immediate necessity, constant recurrence, or trifling importance. In any case where an agreement has been completely executed on the part of a corporation, it becomes a contract on which the corporation may sue. The rights and obligations arising from the tenancy or occupation of land without an express contract apply to cor- porations both as landlords and as tenants or occupiers in the same manner (/) and to the same extent as to natural persons. A corporation is bound by an obligation implied in law whenever under the like circumstances a natural person would be so bound. 2. Negotiable instruments. The peculiar contracts undertaken by the persons who issue or endorse negotiable instruments must by the nature of the case be in writing. Part of the definition of a bill Df exchange is that it is an unconditional order in: writing {g) . The acceptance of a biU of exchange, though it may be verbal as far as the law merchant is concerned, is required by statute to be in writing and signed (h) . (e) See pp. 138, 140, supra. (g) Bills of Exchange Act, 1882 (/) Assuming Fimlay v. Bristol (45 & 46 Vict. u. 61), s. 3. So of # Exeter Ry. Co. (1852) 7 Ex. 409, promisBory notes, b. 83. 21 L. J. Ex. 117, 86 R. R. 704, {K) lb. s. 17. not to be now law. STATUTE OF FRAUDS, 167 3. As to purely statutory forms. A. Contracts within the Statute of Frauds (i). We shall here state, so far as contracts are concerned, the contents of the statute, and some of the leading points esta- blished on the construction of it. Section 4. — The statute (29 Car. 2, c. 3) enacts that no action shall be brought on any of the contracts specified iu the 4th section " unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed bj the party to be charged there- with or some other person thereunto by him lawfully autho- rized." The contracts comprised in this section are — a. Any special promise (k) by an executor or administrator " to answer damages out of his" own estate." No difficulty has arisen on the words of the statute, and the chief observa- tion to be made is the almost self-evident one (which equally applies to the other cases within the statute) that the existence of a written and signed memorandum is made a necessary condition of the agreement being enforceable, but will in no case make an agreement any better than it would have been apart from the statute. A good consideration, a real consent of the parties to the same thing in the same sense, and all other things necessary to make a contract good at common law are still required as much as before (Z) . b. " Any special promise to answer for the debt default or miscarriages of another person." On this the principal points are as follows. A promise (») As to its authorship, see assumpsit. See Prof. Crawford D. Prof. Crawford D. Hening in Hening in 57 Univ. Pa. Law Eev. Univ. of Pennsylv. L.aw Eev., 611. Maorch, 1913. (0 As to these contracts of exe- (/t) " Special promise ' meant, cutors, 1 Wme. Exors. Pt. 2,,Bk. 2^ for the lawyers of the Restoration, o. 2. special (as opposed to indebitatus) 168 FORM OF CONTRACT. is not within the statute unless there is a debt, &c., of some other person for which that other is to remain liable (though the liability need not be a present one): for there can be no contract of suretyship or guaranty unless and until there is an actual principal debtor. " Take away the foundation of principal contract, the contract of suretyship would fail " (m) . Where the liability, present or future, of a third person is assumed as the foundation of a contract, but does not in fact exist, then, independently of the statute, and on the principle of a class of cases to be explained elsewhere, there ' is no contract. On the other hand a_j)romise to be primarily liable, or to be liable at all events, whether any third person is or shall become liable or not, is not within the statute and need not be in writingT) It may be an indemnity, it is not a guaranty (n) . But if the promise is substantially dependent on a third person's default it is within the statute (o) . Whether particular spoken words, not in themselves conclu- sive, e.g., " Go on and do the work and I will see you paid," amount to such a promise or only to a guaranty is a question of fact to be determined by the circumstances of the case (p). Nor is a promise within the statute unless it is made to the principal creditor: " The statute applies only to promises made to the person to whom another is answerable " (q) or is to become so. A mere promise of indemnity is not within the statute (r), (m) MownUtepli. J. Oh. 182, C. A. Wallace v. Gibson [18951 A. C. (s) Cripps V. IlartnoU, note {q) 354, on the Mercantile Law (Scot- ^upra. land) Amendment Act. (0 Suttmi V. Grey [1894] 1 (y) Such promise may be sued on Q. B. 286, 63 L. J. Q. B. 633. in the King's Court if by deed, 22 («) Davys v. Buswell, note (o) Ass. 101, pi. 70; otherwise if he abo\'e. had promised Wl. iinth his 170 FORM OF CONTKAGT. d. " Any contract or sale of lands, tenements, or heredita- ments, or any interest in or concerning them." This clause is usually and convenient!}' considered as belonging to the topic of Vendors and Purchasers of real estate ; and the reader is referred to the well-known works which treat of that sub- ject {z) . Ques'tions have arisen, however, whether sales of growing crops and the like were sales of an interest in lands within the 4th section or of goods within the 17th {a). A sale of tenant's fixtures, being a sale only daughter in marriage, then it should be in the Court Christian, Trin. 45 Ed. III. 24, pi. 30; action good without specialty where tho marriage had taken place, Mich. 37 H. VI. 8, pi. 18; contra (not without dissent), Trin. 17 Ed. IV. 4, pi. 4. In Bracton's time the exclusive jurisdiction of the spiri- tual courts appears to have been admitted : " ad forum seculare trahi non debet per id quod minus est et non principale id quod primum et jMrincipale eat in foro ecolesiastico, ut si ob ca.usam matrimonii pecunia promittatur, licet videatur prima facie quod cognitio super catallis eb debitis pertineat ad forum seculare, tamen propter id quod mains est et dignius trahitur cognitio pecuniae promissae et debitae ad forum eccleaiasticmn, et ubi [? ibi] locum non habet prohibitio, cum debitum sit de testamento vel matri- moniio: " folio 175 a. It should be remembered that throughout the Middle Ages ordinary debts wer© indirectly enforced in the spiritual courts by the imposition of pen- ance: e.g. 22 Ass. ubi sup. The so-called statute of Circumapecte agatis appears to have been con- strued as allowing this if the spiri- tual court did not directly order payment of the debt. (z) As to an agreement ool- latornl to a demise of land not being within the statute, see Morgan v. Griffith (1871) L. E. 6 Ex. 70, 40 I>. J. Ex. 46; Erslcine v. Adea.ne (1873) L. R. 8 Ch. 756, 42 L. J. <3h. 635; Angell V. S-wke (1875) L.. R. 13 Q. B. 174, 44 L. J. Q. B. 78; J>e Lmstdle v. Guildford [19011 2 K. B. 215, 70 L. J. K. B. 533, C. A. A promise by A. to Bi. that if B. buys White- acre A. will repay B. the price is not within s. 4: Boston v. BostOfi^ [1904] 1 K. B. 124, 73 L.. J. K. B. 17, C A. As to a more than doubtful extension of this class of authorities in Ontario, Mercier v. Campbell (1907) 14 0. L. R, 639, see L. Q. R. xxyi. 194. As to the distinction be^jween a demise and a. mere licence or agreement for the us© of land without any change of W-ells v. Kingston- Sull. (1875) L. E. 10 O. P. 402, 44 L. J. C. P. 257. (a) MarsJmll v. Grepn (1875) 1 C. P. D. 36, 45 £.. J. O. P. 153. As to building materials to be severed from the soil, Lavery v. Pursell (1886) 39 Ch. D. 608, 57 L. J. Ch. 570. And see 1 Wms. Saund. 395. STATUTE OF FEAUDS. 171 of the right to sever the iixtures from the freehold during- the term, is not within either section (&). By the 1st and 2nd sections of the statute leases for more than three years, or reserving a rent less than two -thirds of the improved value, must be in writing and signed by the parties or their agents authorized in writing, and now by 8 A' 9 Vict. 0. 106, s. 3, they must be made by deed. But an informal lease, though void as a lease, may be good as an agreement for a lease (c) . e. " An}- agreement that is not to be performed within the space of one year from the making thereof." "Is not to be," not "is not" or "may not be." This means an agreement that on the face of it is not to be per- formed within a year, and includes an agreement purport- ing to extend over a longer term, notwithstanding that it may be determinable by an option or other given contingent event within a year (d) . An agreement capable of being performed within a year, and not showing any intention to put off the performance till after a year, is not within this clause (e). Nor is an agreement within it which is completely performed by one party within the year (/) ; nor an agreement not expressed to be for any certain term, and determinable on a contingency which may happen within a year {g) . An agreement for service for one year " from " the day next following is not within the statute (h) . (&) iae V. Gaskell (1877) 1 (/) Cherrif v. Honing (1849) 4 Q. B. D. 700, 45 L. J. Q. B. 540. Ex. 631, 19 L. J. Ex. 63, 80 E. R. (c) Dart, V. & P. 1, 198-. 733. See notes to Peter v. Comp- (d) HoMaa V. Ehrlich [1912] torn., 1 Sm. L. C. 316. A. C. 39, 81 L. J. K. B. 397, ap- proving Sobson .. CollU (1856) 1 (^) McGregor v. MeGreg ^^ Q- B- D^v. 424, 57 I>. J. -D Ti .(.„ Q. B. 591, apparently not over- , ^ a '., >T , /ioc>rN o ruled by Hanau v. Ehrlio/i; above. (e) Smith V. NeaXe (1857) 2 •' ' C. B. N. S. 67„ 26 L. J. C. P. 143, (A) Smith v. Gold Coast and 109 R. R. 611. But see Reeve v. Ashanti Explorers [1903] 1 K. B. Jennings [19101 2 K. B. 522. 285, in C. A. ib. 838; for the laat 172 FORM OF CONTRACT. Sect. 17. — This section of the statute (sixteenth in the Sevised Statutes) (i) was extended by Lord Tenterden's Act, 9 Geo. 4. c. 14, s. 7, so as to include all executory sales of goods of the value of 101. and upwards, whether the goods be in existence or not at the time of the contract . In England these enactments are superseded and consolidated by the Sale of Goods Act, 1893 (fc) . " Note or memorandum." — There is a curious difference in the judicial interpretation of the " agreement " of which a memorandum or note is required by s. 4, and the " bargain " of which a note or memorandum was required by s. 17 The "agreement" of s. 4 includes the consideration of the con- tract, so that a writing which omits to mention the considera- tion does not satisfy the words of that section: but the " bargain " of s. 17 includes the price of the goods as a material term only where it has been specifically agreed upon (l) . So far as regards guaranties, however, this con- struction of s. 4 having been found inconvenient is excluded by the Mercantile Law Amendment Act, 1856, 19 & 20 Vict. c. 97, s. 3, which makes it no longer necessary that the consideration for a " special promise to answer for the debt default or miscarriage of another person " should appear in writing or by necessary inference from a written docu- ment (w) ■ day of the service will be tha is Taylor v. Smith, 0. A. [1893] '2 anniversary of the day on which Q. B. 69, 61 L. J. Q. B. 331. If the contract is made. a contract for sale within s. 17 is (i) The difference arises from also within s. 4, acceptance and the preamble and the enacting receipt without writing will not part of a. 13 being separately make it actionable: Prested Miners numbered as 13 and 14 in other Co. v. Garner [1910] 2 K. B. 776. editions. The section is commented (A) 56 & 57 Vict. e. 71, s. 4. on in detail in Blackburn on Sale, (Z) Hoadly v. MoLaine (1834) Benjamin on Sale, and Sir M. 10 Bing. 482, 38 R. R. 510. Ohabneirg on the Sale of Goods Act, (m) See also an article by the 1893 (7th ed. 1910). A recent case late Sir James Steiphen and the of some importance on acceptance present writer in the Iaw Quar- STATUTE OF FRAUDS. 173 The note or meniorandum under the 4th as well as the 17th section (or Sale of Goods Act) must show what is the contract and who are the contracting parties (re), but it need be signed only b}' the party to be charged, whether under the 4th or. the 17th section, and indeed it need not be signed in the common meaning of the word, for the party's name inserted by his authority in the body or at the head of the memorandum may suffice (o) . It is no answer to an action on a contract evidenced by the defendant's signature to say that the plaintiff has not signed and therefore could not be sued, and if a \\Titten and duly signed proposal is accepted by word of mouth the contract itself is completed by such acceptance and the writing is a sufficient memorandum of it (p) . It has also been decided that an acknowledgment terly Review, i. 1, and the notee to BirTiiinjr v. Darnell (1705) and Wi,in V. IVaHters (1804) 7 K. R. 645, in 2 Sm. E. 0. 266. («) Williams v. Byrnes (186.3) 1 Moo. P. C. N. S. 154; Newell v. Radiord (1867) L. K. 3 C. P. 52, 37 li. J. C. P. 1; Williams v. Jordan (1877) 6 Ch. D. 517, 46 L. J. Oh. 681; Beivar v. Minloft [1912] 2 K. B. 373 ; and as to suffi- ciency of descriptiom otherwise than by name, Rossitcr v. Miller (1878) 3 App. Oa. 1124, 48 L. J. CJhi. 10; Catling v. King (1877) 5 Ch. Div. 660, 46 L. J. Ch. 384; Jarreti v. Hunter (1886) 34 Oh. D. 182; Cootnbs v. WilJcos [1891] 3 Oh. 77, 61 L. J. Oh. 42; Filhy v. Hounsell [1896] 2 Oh. 737, 65 L. J. Oh. 852 (name of agent for nndisclosed vendor sufficient) ; Carr V. Lynch '[1900] 1 Oh. 613, 69 Ij. J. Oh. 345 (peferemce to pay- ment made by purchaser without name). As to what is sufficient description of the property sold under s. 4, Shardlow v. Cotter ell (1881) 20 Oh. Div. 90, 51 L. J. Oh. 353; PUmt v. Bourne [1897] 2 Oh. 281, 66 L. J. Oh. 643^ O. A. ; Auer- hach V. Nelson [1919] 2 Oh. 383, 88 L. J. Ch. 493. (o) Evans v. Iloare [1892] 1 Q. B. .593, 61 L. J. Q. B. 470. As to the authority of an auctioneer to sign as agent for a purchaser, and its duration, see Bell v. BaU» [1897] 1 Oh. 663, 66 L. J. Ch. 397. (p) Smith V. Nealr (1857) 2 C. B. N. S. 67, 26 L. J. O. P. 143, 109 R. R. 611; Reuss v. PicJcsley (1886) in Ex. Ch. L. R. 1 Ex. 342, 35 L. J. Ex. 218, 143 R. R. 797. And where alternative offers are made by a signed writing, parol acceptance of one alternative has been held sufficient: Lever v. Kofflei- [1901] 1 Oh. 543, 70 L. J. Oh. 395; Morrell v. Studd and ilillingtoH [1913] 2 Ch. 648, 88 L. J. 114, is a peculiar case, cp. L. Q. R. XXX. 4, 151. 174 FORM OF CONTRACT. of a signature previously made by way of proposal, the docu- ment having been altered in the meantime and the party having assented to the alterations, is equivalent to an actual signature of the document as finally settled and as the record of the concluded contract. The signature contemplated by the statute is not the mere act of writing, but the writing <30upled with the party's assent to it as a signature to the contract: and the effect of the parol evidence in such a case is not to alter an agreement made between the parties but to show what the condition of the document was when it became an agreement between them {q) . Moreover it matters not for what purpose the signature is added, since it is required only as evidence, not as belonging to the substance of the contract . It is enough that the signature attests the document as that which contains the terms of the contract (r) . Nor need the particulars required to make a complete memorandum be all contained in one document: the signed document may incor- porate others by reference, but the reference must appear from the writing itself and not have to be made out by oral evidence: for in that case there would be no record of a contract in writing, but only disjointed parts of a record pieced out with unwritten evidence (s). The reference, how- ever, need not be in express terms. It is enough if it appears on the documents that they are parts of the same agree- ment (i). One who is the agent of one party only in the (?) Stewart V. Eddowes (1874) .378, 88 E. J. Ch. 217; GrindeU v. L. R. 9 0. P. 311, 43 L. J. C. P. Bass [1920] 2 Ch. 487, 89 L. .T. 204. Ch. 591. (r) Jones V. Victoria Graving (s) See Peiroe v. Corf ,(1874) Doole Co. (1877) 2 Q. B. Div. 314, L. R. 9 Q. B. 210, 43 L. J. Q. B. 323, 46 L. J. Q. B. 219. Accord- 52; Kronheim.\. Johnson (1877) 7 ingly it does not matteir, in th« case Ch. D. 60, 47 L. J. Qi. 132; of an agent signing, whether he Leather Cloth Co. v. Hieronimus was or was not authorized to con- (1875) L. R. 10 Q,. B. 140, 44 L. J. elude a contract: Daniels v. Tre- Q. B. 54. fusis [1914] 1 Ch. 788, 83 L. J. Ch. (0 Btudds v. Watson (1884) 28 579; North v. Loomes [1919] 1 Ch. Oh. D. 305; Wylson v. Dunn (1887) STATUTORY FORMS. 175 trausaction may be also the agent of the other part\- for the purpose of signature (i/). The memorandum must exist at the time of action brought (,r) . It seems that the Statute of Frauds does not apply to deeds . Signature is unnecessary for the validity of a deed at common law, and it is not likely that the Legislature meant to require signature where the higher solemnity of sealing (as it is in a legal point of view) is ah-eady present (2/). But as in practice deeds are always signed as well as sealed, and dis- tinctive seals are seldom used except hy corporations, the absence of a signature would nowadays add considerablj' to the difficulty of supporting a deed impeached on an>' other ground . Sale of horses. — There is " An Act to avoid Horse-steal- ing " of 31 Eliz. c. 12, which prescribes sundry forms and conditions to be observed on sales of horses at fairs and markets: and "every sale gift exchange or other putting away of any horse mare gelding colt or filly, in fair or market not used in all points according to the true meaning afore- said shall be void " (0), and an earlier Act on the same subject, 2 & 3 Phil. & Mary, c. 7, which only deprives the buyer of the benefit of the rule of the common law touching sales in market overt. These Acts are not touched by the Sale of Goods Act, 1893 (s. 22) (a). 34 Ch. D. 569; OHvey v. Htinlinr/ B. Div. 357, 58 L. J. Q. B. 161 {1890) 44 Ch. D. 205, 59 L. J. (defendant's affidavit on interlocu- Oh. 255, ^Aere the judgment states tory proceedings in the action will that the old rule was different; not do). Pmrce v. Gardner [1897] 1 Q. B. («/) Cherry v. Heming (1849) 4 688, 66 L. J. Q. B. 457, C. A. Ex. 631, 19 L. J. Ex. 63, 80 R. E. (envelope and letter proved to have 733. Blackstone (ii. 306, and see been enclosed in it may be taken note in Stephen's Comni., 1. 510, as one document to identify ad- 6th ed.) assumed signature to be dreasee). necessary. («) As to this. Murphy v. Boese («) Moran v. Pitt (1873) 42 (1875) L. E. 10 Ex. 126, 44 L. J. L. J. Q. B. 47. Ex. 40. (a) See Oliphant on the Law of (x) Lucas V. Dixon (1889) 22 Q. Horses, 5th ed. 57, 58; Benjamin 176 FORM OF CONTRACT. In a general treatise of the present kind it would be of no practical use to consider the forms imposed on the transfer of various kinds of property (so far as contracts for such transfer arc affected) by the provisions of special statutes. The most important of such statutes are the Bills of Sale Acts and the Mercliant ShippingAct. Transfers of shares in com- panies are, with few exceptions if any, subject to require- ments of form, but executory agreements therefor need not as a rule be in writing. B. Marine Insurances. By the Marine Insurance Act, 1906, " a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act; " it must specify prescribed particulars and be signed by or on behalf of the insurer (&); by the Stamp Act, 1891, which the Marine Insurance Act does not affect (c), a contract for sea insur- ance (with a limited exception) is not valid unless expressed in a policy. 0. Acknowledgment of barred debts. The operation of the Statute of Limitation, 21 Jac. 1, e. 16, in taking away the remedy for a debt may be excluded by a subsequent promise to pay it, or an acknowledgment from which such f)romise can be implied. The promise or acknowledgment if express must be in writing and signed by the debtor (9 Geo. 4, c. 14, s. 1) or his agent di^ autho- rized (19 & 20 Vict. c. 97, s. 13). We say more of this under the head of Agreements of Imperfect Obligation, Chap. XIII. below. on Sale, 25, and for the text of the which itself superseded earlier Acts, Chalmers on the Sale of enactments; M. I. A. s. 91. As to Goods Act, 7th ed. 171. the recogniti(»n of the "slip" for (&) Sa. 22 — 24. collateral purposes, see p. 710, Ch. (c) 64 & 55 Vict. u. 39, s. 93, XIII., below, superseding 30 Vict. i;. 23, s. 7, CONSIDERATION. 177 CHAPTER IV. Consideration. The following description of Consideration was given by the Exchequer Chamber in 1875: " A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other " {a). The second jtt|nch of this judicial description is really the more imporrant one. Consideration means not so much that one party is profited as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first. It does not matter whether the party accepting the considera- tion has any apparent benefit thereby or not: it is enough that he accepts it, and that the party giving it does thereby undertake some burden, or lose something which in con- templation of law may be of value. An act or forbearance of the one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforce- able (6). (a) Currie v. Misa (1875) L. K. 92, 95, 44 L. J. Q. B. 1; and for 10 Ex. at p. 162, 44 L. J. Ex. 94 ; the historical distinotion between per Cur. referring to Com. Dig. debt and assumpsit in this respect, Action on the Case, Assumpsit B. Langdell, Summary, §§ 64, 65. 1 — 15. Cp. Evans, Appendix to (S) This statement is adopted by Pothier on Obligations, No. 2 ; and Lord Dunedin, Bunlop Pneumatio Edgware Highway Board v. Har- Tyre Co. v. Selfridge ^ Co. [1915] row Gas Co. (1874) L. E. 10 Q. B. 847, 855. P.— C. 12 178 CONSIDERATION. A consideration, properly speaking, can be given only for a promise. Where performance on both sides is simulta- neous, there may be agreement in the wider sense, but there is no obligation and no contract. It may be amusing and not uninstructive to consider the distinctions to be observed in the legal analysis of such common dealings as being ferried across a river and paying on the other side, buying a news- paper on a railway platform, obtaining a box of matches from an automatic machine. The reader may multiply examples at his pleasure. A consideration which is itself a promise is said to be executory. A consideration which consists in performance is said to be executed. It is important to remember that in the former case "it is the counter-promise and not the performance that makes the consideration jHc) . Consideration is that which is actually given and accepted in return for the promise. Ulterior motives, purposes, or expectations may be present, but in a legal point of view they are indifferent. The party seeking to enforce a promise has to show the actual legal consideration for it, and he need not show anything beyond {d) . Gratuitous promises. — An informal promise made without a consideration, however strong may be the motives or even the moral duty ou which it is founded, is not enforced by English courts of justice at all. Even a formal promise, that is a promise made by deed, or in the proper technical language a covenant, is deprived, if gratuitous, of some of the most effectual remedies administered by them. A promise to con- tribute money to charitable purposes is a good example of (c) Hobart in Lnmpleir/h v. a bad clerical slip in the original Brathvmit (1616) 1 Sra. L. C. 155. report). In Coles v. PilJcimgton (rl) Thomcui v. Thmnan (1842) 2 (1874) L. B. 19 Eq. 174, 44 L. J. . B. 851, 90 E. E. 903, Einch Sel. Ch. 381, this ease waa strangely Ca. 263 (see correotion at p. 281 of overioolced. Y. HISTORY OF CONSIDERATION. 179 the class of promises which, though they may be laudable and morally binding, are not contracts (e). The early history of the law of Consideration is still some- what obscure, but some acquaintance with it is necessary for understanding the fluctuations on certain points which lasted well into the nineteenth century, and one or two anomalies which have survived. History of the term .■ — The name of Consideration appears ■only late in the fifteenth century (/), and we do not know by what steps it became a settled term of art. The word seems to have gone through the following significations: first, contemplation in general; then deliberate decision on a disputed question (hence the old form of judgments in the Common Law Courts, "It is considered ") (5'); then the grounds as well as the act of deliberation; and lastly, in particular, that which induces a grant or promise. If we wish to form a probable opinion as to the origin or origins of this final modification, we must inquire how far anything like the thing signified was to be found in the old action of debt, or was involved in the necessary elements of the new action of assumpsit. We must also remember that the (e) Cottage Street Church v. Clos« Roll of 20 Ed. IV. by Miss Kendall (1877) 121 Mass. 528; Ee Cora L. Scofield in E. H. R. xxvii. 'Hudson, Creedy. H&nderson (1885) 323: "and the consideraoion of the 54 L. J. C!h. 811. A contract may makying of the forseyde estate, as arise, however, if the subscriber was rehersed atte that time, was authorizes a definite expenditure this,'' &c. Here we see the term ■which is incurred in reliance on his almost in the act of transition to making it good: see Kedar Nath its technical appropriation. Bhattackarji v. Gorie Mahomed ((7) Altered to " adjudged " by (1886) I. L. R. 14 Cal. 64; qu. if the Judicature Act for no obvious right on the facts. reason, unless it were that the word (/) It is used to signify the " adjudge " was equally unknown reason for which a conveyance is to the operative forms of common made in a memorandum of a settle- law and equity, though it was cur- ment executed by Sir John Eor- rent with text-writers from the "teecue in 1461, published from the sixteenth century onwards. 12 (2) 180 CONSIDERATION. demand was for an extended remedy on business agreements, and, from the pleader's point of view, for an action which would enable him to rescue an increasing and lucrative branch of practice from the monopoly of ecclesiastical jurisdiction in matters of breach of faith {h), and at least to compete on equal terms with the Court of Chancery. Nobody wanted merely fanciful or gratuitous promises to be made binding without form, and there was no need for haste in defining exactly where the line should be drawn. The action of debt assumed that the defendant had money or chattels (i) which belonged to the plaintiff; either because thedefendant had actually received so much from the plaintiff, or because he (or, in the later doctrine, a third person at the defendant's request (it) had received from him something — it might be money, goods, or services — admitted to be equiva- lent .to the money or goods claimed. As the buyer of goods had acquired property in the goods, so did a sum of his money measured by the agreed price- become, in the medieval view,. the property of the seller. There was a change of property by "reciprocal grants "(Z). Thus the debt could not be established without showing that the debtor had received some equivalent or "recompense." In the fifteenth century this (A) It is said that the King's (Jc) Harv. I/aw Bev. viii. 262: judges had the remedy of prohi- Boot. & St. ii. 24: "after divers bition in. their hands. No doubt that be learned in the laws of tlie the spiritual courts often might realm ... if he to whom the pro- have beem prohibited, and some- mise is made have a charge by times were; but one has only to reason of the promise, which he look at Hale's Precedents and hath also performed, then in that Proceedings, representing a small case he shall have an action for part of what went on. all over the that thing that was promised, country, to see that in fact they though he that made the promise got the business; and the repeated have no worldly profit by it." I protests of Common Iiaw judges agree with Sir Paul VinogradofE, show that the secular jurisdiction L. Q. R. xxiv. 353, that this relates failed to check them: Holdsworth, to Debt, not Assumpsit. H. E. L. ii. 252. (V) Edgcomb v. Dea, p. 146,. (») Harv. Law Bev. viii. 260. above. HISTORY OF CONSIDERATION : ASSUMPSIT. 181 equivalent -w as called Quid ptv quo, a peculiarly English term(m). The words bargain and contract, especially the latter, also came to be associated with the action of debt in the fifteenth and sixteenth centuries. In fact contract meant a " real contract," a transaction on which an action ■of debt might be brought (w). Mere one-sided speech could no more pass property in money than in goods. The action of assumpsit was not to recover any thin ;^ supposed to be the plaintiff's, or for restitution, but to recover damages for the breach of an active duty towards the plaintiff which had been expressly " assumed " by the defendant, or was attached by law to the exercise of his calling. If the defendant's " assumption " had not induced the plaintiff to incur risk or trouble in some way to his own detriment, there ^\'as no wrong done and no ground of action. Here again bare words of promise, as such, would create no duty; nor u Cange or his later editors. (o) This is " indebitatus " as dis- («) See H. L. E. viii. 253 ; the tinot from " special " assumpsit, title of Debt in the Abridgments; (p) Prof. Ames in Harv. Law and even later. Termes de la Ley, Rev. ii. 18. 182 CONSIDERATION. Meanwhile the canonists o£ Europe, in opposition to the more technical views of the civilians, had been generalizing^ the Roman law of contract and breaking down 'its formalities . The causa which made a pact actionable was no longer one of a limited set of circumstances or "vestments" applicable,, according to their nature, to particular and limited classes of transactions; it might be any reason for making a promise which appeared serious enough to be the foundation of a moral duty to fulfil the expectation created. Some English canonists, perhaps, used the word " consideration " with the same or nearly the same meaning as this extended sense of causa before it was familiar to the common lawyers . At any rate St. German, in his well-known Dialogue, first published in English in 1530 (q), puts this word in the mouth not of the Student but of the Doctor. The Student in the laws of England, explaining " what is a nude contract or naked pro- mise in the laws of England, and where an action may lie- thereupon, and where not" (r) speaks of recompense, of "a nude contract .... where a man maketh a bargain, or a sale of his goods or lands, without any recompense appointed for it," and of " nude or naked promise .... where a man promiseth another to give him certain money such a day, or to build an house, or to do him such certain service, and nothing is assigned for the money, for the build- ing, nor for the service; " in which cases no action lies (s). / (?) The Latin ed. pr. (1523, re- Dial. 2, o. 23, ad fin. The discus- printed 1528) contained only the sion follows in c. 24. first Dialogue; and this also is (s) It is not manifest whether amplified in the English version. the author means to allude to the On the other hand the Latin text action of assumpsit or not. I has a considerable amount of think he was more Ukely to regard scholastic authorities and discussion it as a remedy for a wrong ind«- omitted in the English: Vinogra- pendent of contract, and not to doff, Reason and Conscience in have it before his mind at all in Sixteenth-century Jurisprudence, this place. The action on the case L. Q. B. xxiv. 373. for negligenoe, which was one (»•) Question put by the Doctor, origin of assumpsit, is recognized: CONSIDERATION " : RELATION TO CAUSA. 183 It is the Doctor of Divinity who takes up the distinct question of what promises are binding in conscience, and distinguishes " promises made to a man upon a certain consideration . . . . as if A. promise to give B. xx^. because he hath made him such a house or hath lent him such a thing " — which is generally binding — from a promise which is "so naked that there is no manner of consideration why it should be made," and does not even create a moral obligation. Here the language is not technical, but is rather a literary explanation addressed to the Student, who is presumed not to know civil or canon law, and would not understand the Romanist term causa. The word " consideration " had already been used in English Courts in discussing the validity not of promises but of uses; there is nothing to show any connection with the learning, civilian or canonist, of causa, but on the con- trary " consideration " in this context is rather analogous to the quid pro quo of debt, though wider. On the whole the transitional view of the early sixteenth century seems to have been that a use was created by the will of the grantor, but his will could not be known by the Court without sufficient proof oi his intent; and such proof might consist in the mutuality of the transaction (including the creation of a tenure as well as actual value received), or in the existence of a natural duty towards the cestui que use . Either kind of reason was called consideration. It is common learning that the mere solem nity of a deed was never held sufficient in this connexion {t] . On the whole the Doctor, who represents the canonist half of "if I take [goods to keep safely], later than St. German's book, but and after they be lost or impaired practically contemporary.) In through my negligent keeping, Sharingtcm v. Strotton (1565), there an action lieth." Plowd. 302, the analogy of quid (0 Y. B. 20 H. Vn. 10, pi. 20; pro quo was relied on in the Bro. Ab. Feoffements and Uses|, unsuccessful argument for th« pi. 40. (This is dated 1533, a little plaintiff. 184 CONSIDERATION.. St. German's extraordinary learning, appears to use "con- sideration " as a semi-popular word, which will dispense him from going into technical details, and be sufficiently accurate for his purpose. As the book rapidly became well known for its merits as an exposition of the Common Law, it may well be that this very passage contributed to the current use of the word among the Serjeants and apprentices at West- minster, and suggested its application to actions on promises, of which no earlier example has been found. There is nothing to show that it was so applied by common lawyers with any conscious reference to either the civilian or the canonist interpretation of the Eoman causa; nor had they any need to call in such notions. The quid pro quo which the defendant in debt must have received, and the damage which the plaintiff in assurnpsit must have suffered by relying on the defendant's undertaking, were sufficient to form the notion of Consideration without any extraneous matter. In fact the Romanist conception could not have been fitted into the English legal categories. In its later canonical form it was too wide for the common lawyer's purposes (u), as in its ancient classical form it was too narrow (x) . . (u) Save in the point, unknown alii detur nihil interest mea, D. 45, to English la-w, that a plaintiff 1. de v. o. S8, § 17. Braoton seems suing on a promise must show that not to have accepted the Roman its performance was of some value doctrine, seeMaitland, Eracton and to himself: Pothier, Obi. §§ 54, 35, Azo, 154-155. It is far h-om cer- 60, Code Nap. 1119. It is said tain that caiisa was really a current that a promise by A. to B. to do term in the early part of the 16th something useful to Z., but not to oentury among any canonists or B., is binding in conscience only. civilians from whom EngUahmen Z. cannot sue because he is not were likely to borrow, party to the contract, nor B. be- (a;) Ulpian in one place, D. 19. cause he has no interest in its per- 5. de praeser. verbis, 15, goes near formanoe. So the modern civilians to a generalization when he says of interpreted the rule alteri stipulari the promise of a reward for infor- nemo potest and IJlpian's gloss, ut mation of a runaway slave: "Oon- CONSIDERATION : BENEFIT TO PROMISOR. 185 No one ever argued before an English temporal Court that deliberate bounty or charitable intention will support -a formless promise; but such was undoubtedly the canonical view, and is to this day, in theory, the rule of legal systems which have followed the modern Roman law {y) . There was no room within the common law scheme of actions for turning natural into legal obligation {z) . The Modern Doctrine. Benefit to promisor not material. — We may now trace the ■characteristic points of the English doctrine. It was under- :stood as early as the third quarter of the fifteenth century, with reference to the quid pro quo of Debt, that apparent benefit to the promisor is immaterial. In 1459 we have this case. Debt in the Common Pleas on an agreement between ■ventio ista uon est nuda, ut quis dicat ex paoto actionem non oriri, -sed habet ia se negotium aliquod." (jy) Potiiier, Obi. § 42; Sirey .and Gilbert on Code Nap. 1131; Demolombe, Coure du Code Nap. XXI7. 329 sqq.; Langdell, Sel. Ca. ■Gout. 169; so in Germany from the 17th century onwards, with ■only theoretical differences as to the reason of the rule: Seuffert, 'Zur Gesch. der abligatorischem Vertrage, 130 sqq. (z) The view here given is sub- .stantially that of the late Prof. Ames of Harvard (The History of Assumpsit, Harv. Law Rev. ii. 1, 53, now reprinted and revised in ■Select Essays in Anglo- Am er. Legal History, iii. 259), who put the whole subject on a new footing. Mr. Justice Holmes's ingenious ■earlier attempt to make the quid pro quo of debt cover th« whole -ground, and connect it with the functions of the secta in Anglo- Norman procedure, does not seem acceptable: see Pollock and Mait- land, Hist. Eng. Law, ii. 214. As toi civilian influence, it is impossible to prove that there was none, but for the reasons in the text I think very little of it reached the minds of pi-actising common lawyers. Sir John Salmond's learned arg-ument (Essays in Jurisprudence and Legal History, No. iv.) faUs to reconvert me to my own former opinion. One may almost say tliat, if there had been any real borrowing, there must have beeji more misunder- standing. The repetition of the one phrase Bx mudo paoto non oritur actio, caught np from the civilians, was, on the whole, harm- less. As late as 1842 a desperate attempt was made by the late E. V. Williams J., when at the bar, to mix up the civUian causa with the doctrine of consideration: Thomas v. Thomas, p. 178, above. 186 CONSIDERATION. the plaintiff and defendant that plaintiff should marry one- Alice, the defendant's daughter, on which marriage defendant, would give plaintiff 100 marks. Averment that the marriage- had taken place and the defendant refused to pay. Danvers J said: " The defendant has quid pro quo : for he was charged with the marriage of his daughter and by the espousals he- is discharged, so the plaintiff has done what was to be) paid for. So if I tell a man, if he will carry twenty quarters- of wheat of my master Prisot's to G., he shall have 40s., and thereupon he carry them, he shall have his action of debt, against me for the 40s.; and yet the thing is not done for me, but only by my command : so here he shows that he has performed the espousals, and so a good cause of action has- accrued to him: otherwise if he had not pierformed them " (a) . Moyle J.: " If I tell a surgeon, if he will go to one J. who- is ill, and give him medicine and make him safe and sound, he shall have '100s.; there "if the surgeon does cure J. he shall have a good action of debt against me for the 100s.,. although the thing was done for another and not for the defendant himself; if there is not quid pro quo, there is what comes to the same", (a). Prisot C.J. and Danby J. thought such an action not maintainable except on a specialty (though Prisot was impressed by Danvers's and Moyle's- instances), and an objection was also taken to the jurisdiction on the ground of marriage being a spiritual matter: the case was adjourned and the result is not stated. But the point is quite clearly taken that what a man chooses to bargain for must be conclusively taken to be of some value to him. Adequacy not material. — It is really by a deduction from. this that our Courts have in modern times laid it down as an " elementary principle that the law will not enter into an, inquiry as to the adequacy of the consideration" (&). The- («) M. 37 H. VI. S, pi. 18. O. B. N. S. 248, 265. 27 L. J. C. P. (&) WestlaJce v. Adams 08.58) 5 271, per Bylea J. ADEQUACY. 187 idea is characteristic not only in English positive law but in the English school of theoretical jurisprudence and politics. Hobbes says: "The value of all things contracted for is measured by the appetite of the contractors, and therefore the just value is that which they be contented to give " (c). And the legal rule is of long standing, and illustrated by many cases. " When a thing is to be done by the plaintiff, be it never so small, this is a sufficient consideration to ground an action " {d). A. is possessed of Blackacre, to which B. has no manner of right, and A . desires B . to release him all his right to Blackacre, and promises him in consideration thereof to pay him so much money; surely this is a good consideration and a good promise, for it puts B. to the trouble of making a release " (e). The following are modern examples. If a man who owns two boilers allows another to weigh them, this is a good consideration for that other's promise to give them up after such weighing in as good condition as before. " The defendant," said Lord Denman, " had some reason for wishing to weigh the boilers, and he could do so only by obtaining permission from the plaintiff, which he did obtain by promising to return them in good condition. We need not inquire what benefit he expected to derive " (/) . If the owner of a newspaper offers to give advice on financial matters to any one who will send his inquiry to the city editor, ■writing to the city editor is good consideration for a promise to use reasonable care in giving the advice {g) . So parting with the possession of a document, though it had not the value the j)arties supposed it to have {h), (e) I«viathan, pt. 1, c. 1.5. 1 K. B. 280, O. A., 77 L. J. K. B. (d) Sturlyn v. Albany, Cro. Eliz. SSO, 0. A. But perhaps the cause 67, and see Cro. Car. 70, and mar- of action is better regarded as ginal references there. arising from default in the per- (e) Holt O.J. 12 Mod. 459. formance of a voluntary under- (/) Bainbridge v. Firtn-stone taking independent of contract. ■(1838) 8 A. & E. 743, 53 E. E. 234. (A) Suigh v. BroaJcs (1839—40) {g) BelaBerey. Pearson [1908] (Q. B. and Ex. Ch.), 10 A. & E. s 188 CONSIDERATION,. and the execution of a deed (i), though invalid for want of statutory requisites (k), have been held good considerations. In like manner a licence by a patentee to use the patented invention is a good consideration though the patent should turn out to be invalid (Z). In the Supreme Court of the United States a release of a supposed right of dower, which the parties thought necessary to confirm a title, has been held a good consideration for a promissory note (m) . The modern theory of the obligation incurred by a bailee who has no reward is that the bailor's delivery of possession is the consideration for the bailee's promise to keep or carry safely. The bailor parts with the present legal control of the goods; and this is so far a detriment to him, though it may be no benefit to the bailee, and the bailee's taking" the goods is for the bailor's use and convenience (n) . The determination of a legally indifferent option in a particular way, as voting for a particular candidate for a charity where there is not any duty of voting for the candidate judged fittest, is legal " detriment " enough to be a good considera- tion (o) . It has been held in equity, to the same effect, that a transfer of railway shares on which nothing has been paid 309, 320, 334, 50 E. R. 399, 407, («) 0. W. Holmes, The Common 417. Or letting the promisor retain Law, 291 sqg. Hiatordcally, the possession of a document to which explanation is that the action the promisee is entitled: Hart v. sounded in tort until quite modern M^iles (1858) 4 0. B. N, S. 371, 27 times, ib. 196. The bailor parts L. J. O. P. 218. with very little, for, if the bail- (j) Op. Jones V. Waits (1842) 9 ment is at will, he as well as the CI. & P. 101. bailee can sue a trespasser. The (Ic) See note (S), p. 186. The real difficulty, however, is that in defendant had in fact had the full such cases, for the moat part, the benefit of the consideration, the bailor does not deliver possessioa deed having been acted on. at the bailee's request, but requests (J) Lawes v. Purser (1856) 6 E. the bailee to take it. One of the & B. 930, 26 L. J. Q. B. 25, 106 necessary elements is therefore R. E. 868. fictitious. Cp. Langdell, § 68. (ot) SyTces v. Chadwick (1873) (o) Bolton v. Madden (1873) 18 Wallace. 141. L. R. 9 Q. B. 55. ADEQUACY. 189 is a good consideration (p) ; and that if a person indebted to a testator's estate ipays the probate and legacy duty on the amount of the debt, this is a good consideration for a release of the debt by the residuary legatees [q) : a strong case, for this view was an afterthought to support a transaction which was in origin and intention certainly gratuitous, and in sub- stance an incomplete voluntary release; the payment was simply by way of indemnity, it being thought not right that the debtor should both take his debt out of the estate and leave the estate to pay duty on it. The consent of liquidators in a voluntary winding-up to a transfer of shares is a good consideration for a guaranty by the transferor for the pay- ment of the calls to become due from the transferee (r) . An agreement to continue — i.e., not to determine imme- diately — an existing service terminable at will, is likewise a good consideration (s). The principle of all these cases- may be summed up in the statement made in so many words by the judges in more than one of them, that the promisor has got all that he bargained for. The law will be satisfied that there was a real and lawful bargain, but it leaves parties to measure their bargains for themselves. It has been suggested that on a similar principle the consideration for a promise may be contingent, that is, it may consist in the future doing of something by the promisee which he need not do unless he chooses, but which being done by him, the contract is complete and the promise binding. But this cannot be. A consideration must be either a present act or forbearance or a promise. If a tradesman agrees to supply on certain terms such goods as a customer may order during a future (p) Cheale v. Kenward (1858) 3 (r) Cleve v. Financial Corpora- De G. & J. 27, 27 L. J. Oh. 784. tion (1873) K R. 16 Eq. 363, 375, (?) Taylor v. Manners (1865) 43 L. J. Ch. 54. L. B. 1 Ch. 48, 35 L. J. C!h. 128, (s) Gravely v. Barnard (1874> by Turner L.J. dttb. Knight Bruce L. E. 18 Eq. 518, 43 L. J. Ch. 669. L.J. 190 CONSIDEEATION. period, this is not a promise, but an offer. He cannot sue the customer for not ordering any goods, but if, while the offer stands, the customer does order any, the condition of the offer is fulfilled, and the offer being thus accepted, there is a complete contract which the seller is bound tq perform {t). Great inadequacy of consideration may, however, be material in cases of fraud and the like, though material as evidence only. This will be dealt with hereafter. Disalloived and doubtful exceptions. — In the interesting eighteenth-century case of Pillans v. Van Mierop{u) the actual decision was on the principle that " any damage to another or suspension or forbearance of his right is a founda- tion for his undertaking, and will make it binding, though no actual benefit accrues to the party undertaking ": (a;). But Lord Mansfield threw out the revolutionary suggestion (which Wilmot J . showed himself inclined to follow, though not wholly committing himself to it) that there is no reason why agreements in writing, at all events in commercial affairs, should not be good without any consideration. "A nudum pactum does not exist in the usage and law of mer- chants . I take it that the ancient notion about the want of consideration was for the sake of evidence only .... in ,(<) G. N. Rf. Co. V. Witham seems to have been overlooked in (1873) L. B(. 9 0. P. 16, 43 L. J. Ford v. N(ncith [1901] 1 K. B. 683, C. P. 13. Op. CMoaffo # G. E. Ry. 70 L. J. K. B. 459. Offord v. Co. V. Bane (1873) 43 N. Y. (4 Savies (1862) 12 C. B. N. S. 748, Hand.) 240, -where it was rightly Finch, Sel. Ca. 37, the case of a held that a general assent to an giiaranty, limited to twelve months, offer of this kind (not undertaking of bills which the plaintiff might to order, or as Ln the partioular discount at the request of the de- case tender to be carried, any defi- fendants, involves the same prin- nite quantity of goods) did not of oiple; for the so-called guaranty, itself constitute a contract. Cp. as explained by the judgment, was S. v. Bemers [1900] A. C. 103, 69 in truth only a standing offer. L. J. P. 0. 5; under French («) (1765) 3 Burr. 1664, and Canadian law, but no difference Finch Sel. Ca. 269. in principle is suggested. This (») Per Yates J. at p. 1674. PAST CONSIDERATION. 191 ■commercial cases amongst merchants the want of considera- tion is not an objection " {y). The anomalous character of this dictum was rightly seen at the time, and it has never been followed {z) . It was too late to set up a new class of Formal Contracts, which was really the effect of Lord Mansfield's proposal. But if it had occurred a century or two earlier to a judge of anything like Lord Mansfield's authority, the whole course of the English law of contract might have been changed, and its principles might have been substantially assimilated to those of the modern civil law as adopted by the law of Scotland. Past Consideration. — Another doctrine made current by Lord Mansfield and some of his colleagues with more success (a) was that the existence of a previous moral obli- gation constituted such a relation between the parties as would support an express promise. The Exchequer Chamber finally decided as late as 1840, that " a mere moral obligation arising from a past benefit not conferred at the request of the defendant" is not a good consideration (5). It is still not quite settled whether a past benefit is in any case a good consideration for a subsequent promise. On our modern (^y) 3 Burr. 1669 — 70. negotiable instrument is a specialty («) In 1778 it was distinctly (cp. Holt C.J.'s observations in contradicted by the opinion of the ClarTce v. Martin, 2 Ld. Eaym. 758, judges delivered to tlis House of and Cutting v. Williams, 7 Mod. Lords in Rami v. Hughes (1778) 7 155). It might have been better so. T. E. 350, n.: "All contracts are, In this country one caji only say «?/« by the laws of England, distin- aliter visum. guished into agreements by spe- («) See the note to TFennall v. cialty and agreements by parol; Adney, 3 B. & P. 252, 6 E. E. 782, nor is there any such third class, and in Finoh Sel. Ca. at p. 358, as some of the counsel have en- which is approved by Parke B. in deavonred to maintain, as contracts Earle v. Oliver (1848) 2 Ex. 71, at in writing." Langdell ingeriously p. 90, and has long been regarded argued (Summary, §§ 49, 50), that as classical on the whole question contracts governed by tVe law of past consideration, merchant need on principle no (&) Eastwood v. Kenyan (1840) consideration; in short, that a 11 A. & E. 438, 446, 52 E. E. 400. 192 CONSIDERATION. principles it should not be (c), and it is admitted that it generally is not {d) . For the past service was either ren- dered without the promisor's consent at the time, or with his- consent but without any intention of claiming a reward as of right, in neither of which cases is there any foundation for a contract (e); or it was rendered with the promisor's consent and with an expectation known to him of reward as justly due, in which case there were at once all the elementsi of an agreement for reasonable reward. It is said, however, that services rendered on request, no definite promise of reward being made at the time, are a good consideration for a subse- quent express promise in which the reward is for the first time defined . But there is no satisfactory modern instance of this- doctrine, and it would perhaps now be held that the subse- quent promise is only evidence of what the parties thought the service worth (/) . It is also said that the voluntary doing by one party of something which the other was legally bound to do is a good consideration for a subsequent promise of (c) Cp. Langdell, op. cit. § 91. 246 — 249. At an earlier tiin« it ((Z) Sosoorla v. Thomas (1842) 3 was held that a past oonsiderataom Q.. B. 324, 61 E. R. 216, Pinch Sel. would mot stipport an action of Oa. 340. debt, but was enough for assumpsit, (e) " It is not reasonable that Marsh v. Rainsford (1388) 2 Leon, one man should do another a kind- 111; Sidenham v. Warlington nesa, and then charge him with a (1595) ib. 224; Pinch Sel. Ca. 837: recompense." 1 Wms. Sauad. 356. 0. W. Holmes, The Common Law, (/) Lampleigh v. BrathvMif 286,297. The theory was still that (1616) Hob. 105, and 1 Sm. L. C. ; the breach of promise was an action- see per Erie C.J. 13 C. B. N. S. at able wrong because of an existing p. 740. The Irish case of Bradford relation between the parties which V. Roulston (1858) 8 Ir. O. L. Rep. created a special duty, not that an 468, will, for English lawyers at executory contract, as such, created least, hardly outweigh this dictum ; an obligation ; and on that theory and the doctrine seems to be open there was no reason why the pro- to examination in the C. A., see mise and the consideration should per Bowen I».J. Stewart v. Casey be simultaneous. But Lord Mans- [1892] 1 Qh. at p. 115, 61 L. J. field cannot be supposed to have Ch. 61. See Anson, pp. 121 — 126, known anything of this, and op. dark Hare on Contracts, MUTUAL PROMISES. 193 recompense. But the authority for this proposition is like- wise found to be unsatisfactory. Not only is it scanty in quantity, but the decisions, so far as they did not proceed on the now exploded ground that moral obligation is a suffi- cient consideration, appear to rest on facts establishing an actual tacit contract independent of any subsequent promise. Another exceptional or apparently exceptional case which certainly exists is that of a debt barred by the Statute of Limitation, on which the remedy may be restored by a new promise on the debtor's part. It is said that the legal remedy is lost but the debt is not destroyed, and the debt subsisting in this dormant condition is a good consideration for a new promise to pay it. This is not logically satisfying, and in fact it belongs to the now discredited view of past considera- tion. There is no real equivalent for the new promise, and the only motive that can generally be assigned for it is the feeling that it would be morally wrong not to pay . It seems better at this day to say that the law of limitation does not belong to substantive law at all, but is a special rule of procedure made in favour of the debtor, who may waive its protection if he deliberately chooses to do so {g) . Mutual promises. — The most characteristic rule in our law of consideration, and the most important for the business of life, is that mutual promises are sufficient consideration for one another. When the subject was still novel it would not have been difficult, one would think, to frame plausible argu- ments to the contrary. In fact there is no conclusive reason, other than the convenience of so holding (h), for the rule (g) See more on this point in formation of contracts by mutual Ch. XIII. promises; this formality would (A) The only result of holding have become inextricably confused otberwise would have been to with the archaic but not extinct impose a nominal executed con- popular custom of giving earnest. sideration, such as delivery of a The stretching of principle is quite nut, a pin, or a farthing, on the analogous to the allowanoe of mere P.— c. 13 194 CONSIDERATION. that a promise and counter-promise will make one another binding: for neither of them, before it is known to be binding in law, is in itself any benefit to the promisee or burden to the promisor. If it be suggested that the mere utterance of words of promise is trouble enough to be a consideration, the answer is that such is not the nature of the business. Moving of the lips to speak or of the fingers to write is not what the promisor offers or the promisee accepts. How- ever, there is very little trace of discussion in our books. As early as 1555, the validity of reciprocal promises passed without question in a case reported on another point (i) . In 1615 it was disputed (we are not told on what grounds), and finally afiirmed (fc) . The promises must be exchanged for one another at the same time (Jc), and each of them must be binding on the face of it, that is, must not be unenforceable for any intrinsic reason. A promise which purports to be merely honorary, or which is invalidated by any rule of general policy or special provision of positive law, is no con- sideration (Z). It is true that the promise itself, not the non-feasanoe as a cause of action because it is promisie for promiae. in assuirpait. Ames' (" Two iii«m.«B Note here the promisea must be at of Consideration ") maintained that one instant, for else they wiU be the promise is an act, and as good both fKida pacta." See intermediate consideration as any other act; cases collected by Prof. Ames in which I cannot admit for the Harv. Law Rev. xiii. 32, n. reason givem in the text. See more (I) Harrison y. Oage, 5 Mod. in the Pirefaoe. 411 ; Langdell, " Mutual Promises (j) Peeks V. Bedman, Dyer, 113. as a Consideration for each other," (Jc) Nichols V. Raynbred, Hobart, Harv. Law Bev. xiv. 496, 504. 88, Finch Sel. Oa. 336. "Nichols Somo very learned persons add the brought ajx assumpsit against further condition that the per- Eaynbred, declaring that in con- formance of the promise must be sideration, that Nichols promised such as wUl or may impose a legal to deliver the defendant to his own detriment upon the promisor:, use a cow, the defendant promised Prof. WilUstom's note here in 3rd to deliver him fifty shillings: ad- Amer. edn. Contra, Langdell, judged for the plaintiff in both Harv. Law Rev. xiv. 505, with Courts, that the plaintiff need not whom I agree, to aver the delivery of the cow, MUTUAL PROMISES. 195 "Obligation thereby created, is the consideration (m) ; still, the Talue of a promise does not consist in the act of promising, any more than the value of a negotiable instrument consists in a piece of paper with writing on it, but in the assurance ■of the performance to which the promisor obliges himself, ■or, at worst, of damages for his default. A promise may be incapable of being sued on (n), and therefore incapable of being a consideration for a counter-promise, for various reasons which we have examined or shall examine under their proper heads. Such reasons do not form part of the doctrine •of Consideration, as is shown by the fact that the same or similar reasons exist and are applied in the modern Roman law and national bodies of law derived from it, where the ■Common Law rules of Consideration are unknown (o) . In many cases a promisor has the option of avoiding his contract for some cause existing at the date of the promise. But in aU such cases the contract is valid until rescinded, and the right to rescind it may be lost by events beyond the promisor's control; so there is no difficulty in treating his promise as a :good consideration. (m) Ames, "Two theories of is inconsistent ■with the existence •Consideration," Hary. Law Rev. of equitable remedies and with the ^iii. 29, 32. But when Prof. Ames modem common law doctrine that /suggests, at p. 34, that a promise premature refusal to perform may which is and is known ■to he merely be treated at once as a breach. See honorary may be a good considera- 163 U. S. at p. 600; Harriman, -tion, he seems ia overlook the un- § 552. •disputed authority of Harrison v. (») In many cases a promise ^age (last note). Certainly some may be actionable tliough not men's honorary promises are in fact capable, in fact or in law, of worth more than some men's l^al performance. promises, but the law cannot esti- (o) Thus the question of the mate or regard this. Mi. Justice performance being possible la O. W. Holmes's earlier suggestion irrelevant here. In any case the that every legal promise is really language of 2 Wms. Saund. 430 in the alternative to perform or and of the dicta tiere relied on is to pay damages can only be re- much too wide, garded as a brilliant paradox. It i 13 (2) 196 CONSIDERATION, Certainty of promise. — Since a promise which is to be- a good consideration for a reciprocal promise must be such as can be enforced, it must be not only lawful but reason- ably definite. Thus a promise by a son to his father to leave off making complaints of the father's conduct in family affairs is no good consideration to support an accord and satisfaction, for it is too vague to be enforced (p) . And upon a con- veyance of real estate without any pecuniary consideration a covenant by the grantee to build on the land granted such' a dwelling-house as he or his heirs shall think proper is toa vague to save the conveyance from being voluntary within 27 Eliz. c. 4:{q). Promise or performance of existing duty. — Similarly, neither the promise to do a thing nor the actual doing of it will be a good consideration if it is a thing which the party is already bound to do either by the general law or by a sub- sisting contract with the other party (r) . It seems obvious, that an express promise by A. to B. to do something which B. can already call on him to do can in contemplation of law produce no fresh advantage to B . or detriment to A . (s) . But the doing or undertaking of anything beyond what one is already bound to do, though of the same kind and in the same transaction, is a good consideration. A promise of reward to a constable for rendering services beyond his ordinary duty in the discovery of an offender is binding (t): (p) White V. Bluett (1853) 23 Gridley (1854) 15 O. B. 295, 24 L. J. Ex. 36, 98 E. R. 492; thia L. J. 0. P. 17, 100 R. R. 357; and seems the ratio decidendi, though the judgment on the 7th plea in so expressed otnly by Parke B., who Mallalien v. Hodgson (1851) 16 asked in the course of argument, Q. B. 689, 20 L. J. Q. B. 339, 83 " Is an agreement by a father in R. R. 679 . consideration that his son will not (s) Some American courts, how- bore hira a binding contract? " ever, hold otherwise: Harriman on (q) Sosher v. Williams (1875) Contracts, § 117. L. R. 20 Eq. 210, 44 L. J. Ch. 419. (<) England v. Davidson (1840> (r) See Leake, 436; and besides 11 A. & E. 856, 52 R. R. 522. authorities there given. Deacon v. PROMISES TO PERFORM EXISTING DUTY. 197 BO is a promise of extra pay to a ship's crew for continuing a voyage after the number of hands has been so reduced by accident as to make the voyage unsafe, so that the crew are not bound to proceed under their original articles {u) . So, it is conceived, would be a promise in consideration of the promisee doing at a particular time, or in a particular way, something which otherwise he must do, but has the choice of doing in more than one way, or at any time within certain limits. Again, there will be consideration enough for the promise if an existing right is altered or increased remedies given. Thus an agreement to give a debtor time in con- sideration of his paying the same interest that the debt already carries is inoperative, but an agreement to give time or accept reduced interest in consideration of having some new security would be good and binding. The common proviso in mortgages for reduction of interest on punctual payment — i.e., payment at the very time at which the mortgagor has covenanted to pay it — seems to be ^^ithout any considera- tion, and it is conceived that if not under seal such a proviso ©ould not be enforced {x) . Again, the rule does not apply if the promise is in the nature of a compromise, that is, if a reasonable doubt exists at the time whether the thing promised be already otherwise due or not, though it should be afterwards ascertained that it was so . We shall return to this when we speak of forbearance as a consideration. Difficult questions arise when we have a promise made in consideration of the promisee doing or promising to do something which a subsisting contract with a third person has already bound him to do. Such cases are not frequent, and there has not yet been any full or satisfying judicial («) Sartlet/ v. Ponsonby (1857) fixing' the times for " punctual 7 E. & B. 872, 26 L. J. Q. B. 322, payment " a single day earlier than 110 E. E. 867. those named in the mortgagor's (x) This could be provided covenant, against, however, if so desired, by 198 CONSIDEEATION. discussion of them. It would seem that, being infrequent and; of no great importance in current affairs, they should be dis- posed of by the strict application of settled principles, and that, even if such application should lead to apparently fine dis- tinctions, the principles ought not to be tampered with merely to avoid that result. From this point of view, Andrew's performance of his binding promise to Peter does not appear capable of being a consideration for a new promise by John to Andrew; not because it cannot be beneficial to John, for this it may very well be, but because in contemplation of law the performance is no new detriment to Andrew, but on the contrary is beneficial to him, inasmuch as it discharges him of an existing obligation. Therefore the necessary element of detriment to the promisee is wanting {y) . It seems there- fore that if a promise is given in exchange merely for the performance of the promisee's duty under an existing con- tract with a third person, it is not binding. Authority, however, is the other way so far as it goes. Performance of this kind appears to have been held a sufficient considera- tion in three English reported cases {z), one from the early seventeenth and two from the middle part of the nineteenth century. In the first of these (a) the plaintiff and defendant were jointly liable as sureties on a bond, long before the (_y) In point of fact there may 341, 9 CI. & E. 88, 50 R. R. 705, be some, for it may be that he 717, but the argxtment and decision might have omitted the perform- were on other grounds. Note that anee -srith impunity. But this is in both Shadwell y. Shadwell and like the case of a merely honorary Scotson v. Pegg it is by no means, promise. The law is made to fit easy to be sure whether the Court the normal conditions of men's thought the consideration was per- affairs. If every man's word were formanoe or promise, or whether as good as his bond, or nobody the performance was exactly the cared to enforce his rights, there performance of an existing obliga- wonld be mo place for any law of tiou. See Harv. Law Rev. xvii. 76. contract at all. (o) Saffgre v. Slade (1616) i (z) The point might peiihaps Bnlst. 162. This decision was have been considered in Jones v. apparently forgotten until Prof. IFaite (1839, 1842) 5 Bing. N. C. Ames lately called attention to it. PERFORMANCE OF EXISTING DUTY. 199 modern equitable doctrine of contribution between co-sureties was established . In consideration of the plaintiff paying the whole debt, the defendant promised to repay him half. The promise was held binding, but the real difficulty does not appear to have been dealt with (b) . In the second case (c) the plaintiff, being engaged to be married, did (on the facts as assumed) proceed with the marriage on the faith of a promise by his uncle, the defendant's testator, to pay him an annuity during the promisor's life. The plaintiff suc- ceeded in an action for arrears of the annuity. To the majority of the Court it appeared sufficient to say that the marriage took place at the testator's request. But this (whether rightly said or not) does not answer the question whether the simple fulfilment of a promise of marriage already binding on him could be any legal detriment to the promisee. The third case (d), in an entirely different sub- ject-matter, also goes on the ground of the performance being, in point of fact, both a benefit to the promisor and a detriment to the promisee. Here the defendant's promise was to unload a cargo of coal at a certain rate in consideration of the plaintiff delivering the coal to him, which the plaintiff was already bound to do under a prior contract with the shippers of the coal, from whom the defendant liad bought it. There is a suggestion in the course of the argument that the performance requested by the defendant may have (6) It is certainly not touched ground that there was really no by the statement, perfectly correct animus contrahendi, but only an act in itself , of Dodderidge J. : "If the of bounty, cp. Langdell, § 68. If consideration puts the other to there were any animiis contrahendi, chajg'e, though it be no ways at all an acceleration of the marriage at profitable to him who made the the testator's request would no promise, yet this shall be a good doubt have made a good considera- consideration to raise a promise." tion, but that was not averred. (c) Shadwell v. Shadwell (1860) ((f) Scotson v. Pegg (1861) 6 H. 9 O. B. N. S. 159, 30 L. J. O. P. & N. 295, 30 L. J. Ex. 225. 145, Byles J. diss, chiefly on the 200 CONSIDERATION. added new terms, as to time and manner of delivery, to that which the plaintiff was already bound to do, and it may be that the plaintiff was entitled to succeed on that point, if properly raised. But there is nothing of the kind in the judgments. It seems to be assumed that the rule must be the same whether the consideration relied upon is a perform- ance already due to a third party or a new promise thereof to the defendant. And so the Supreme Court of Massachu- setts thought not very long ago (e) . The validity of this assumption must, however, be examined. Let us now take the case of a promise by John to Peter to do something which he has already promised William to do. Such a promise may obviously create a moral obligation; for Peter may in many ways have a just and reasonable interest in being assured that John will perform his contract with William. Then is there any reason why it should not create a legal obligation, if supported by a sufficient con- sideration on Peter's part ? The promise is a new and distinct promise, creating, on the face of it, a new and distinct duty to a new party. Duties to several parties to perform the same thing are simultaneously created in many quite common forms of covenants. Why should they not be created by successive and independent acts? Will any one deny that John's promise to Peter will be binding if given in exchange for a performance — say immediate payment of money — by Peter? If it is not, this must be the result of some special rule of legal policy, for no other objection seems possible. But (e) Abbott V. Doane (1895) 163 the seeming paradox vanishes when Mass. 433: and see the judgment we bear in mind that the true teat of WUde B. in Scotson v. Pegg. of consideration is not benefit to At first sight it looks impossible, the promisor but detriment to the as at one time it did to myself, promisee. As this waa wholly that a promise Can be a good eon- ignored in Soofson v. Pegg the sideration if performance of the judgments in that case are unin- thing promised would not. But struotive. PROMISES TO PERFORM EXISTING DUTY. 201 •of any such rule of policy there is no trace. If then the promise is binding when given for a performance, why should it be less binding when it is given in exchange for Peter's promise? There is no reason in the nature of the case for making any difference. If there were a positive rule of laAV, founded on reasons of policy, for not allowing John's promise to Peter to perform his contract with William to be good, .then John's promise would be no consideration; but only because, even though supported by sufficient consideration on the other side and satisfying all ordinary requisites, it was deprived of validity by the positive rule, and therefore made incapable of having any value in contemplation of Jaw. But again, no such positive rule can be produced. It -has been said that John's promise is a good consideration only if it is binding, and we have no right to assume that it is binding. The answer to this objection is that, if John's promise can be binding, it is made ,so by the counter-promise, and it is for the objector to show that it cannot be. The objection, in truth, if good for anything, is equally good to prevent mutual promises from ever being a consideration for each other; for in every such case neither promise, taken by itself, is of any legal force or value (/) . There is no objection, in any case, to a promise by John -to Peter not to rescihd a subsisting contract with William, or not to accept a waiver or release of it; andl a promise in that form would certainly be a good consideration. No direct decision has been made in England on the validity of a promise to perform an existing contract with a third person. A negative solution could not be given, it is apprehended, without overruling the cases in which, ap- (f) Prof. Williston, upholding posed to meet the difficulty by oon- the objection originally raised by structing an entirely new theory of Sir W. Anson (now at p. 117, mutual promises: Harv. Law Rev. 14th ed.), perceived this, and pro- vui. 27. Cp. pp. 193 — 194, above. 202 CONSIDERATION. parently, performance tas been held sufficient; while at. positive one, if the argument above submitted be sound, might be given for independent reasons. Not that 1 am at all desirous of upholding the authority of the cases in question. I venture to submit, on the contrary, that they were wrongly decided, or at any rate not on satisfactory grounds. What is here maintained is that a promise made for valuable consideration, and otherwise good as between, the parties, is not the less valid because the performance will operate in discharge of an independent liability of tha promisor to a third person under an independent contract already existing. This was the opinion of W. M. Lealce [g),. a most accurate lawyer, and of Prof. Langdell of Harvard(A) . Rule in Pinnel's Case, dc. — The doctrine of Considera- tion has been extended with not very happy results beyond its proper scope, which is to govern the formation of (gf) It may be worth while to cite the language of his iirst edition, 1867, p. 321. "If a man has already contracted with another to do a certain thing, he cannot make the performanjoe of it a con- sideration for a new promise to the same individual; but where there has been a promise to one person to do a certain thing, it is possible to make a promise to another to do the same thing, which may form a valid consideration in a contract with that other." In later editions the wording is altered and simpli- fied but the substance is the same (5th ed. by A. E. Randall, p. 437). As to Morton v. Bum (1837) 7 A. & B. 19, cited by Leak© in support, see L. Q. R. xxii. 323. Leake's opinion was overlooked throughout a prolonged discussion of the point some years ago. • (h} There has been extra- ordinary divergence of learned opinions. Anson and Prof. Willis- ton (note (/) last page) hold neither performance nor promise a, good consideration in this class of cases. Ames (Harv. Law Rev. xii. 516,. xiii. 29, 35) and Prof. Harriman (Contracts, p. 67) admit both. Leake (last note), Langdell, Sum- mary, §§ 54, 84, Harv. Law Rev. xiv. 496, and Prof. Joseph H. Beale, jr., Harv. Law Rev. xvii. 71 , disallow performance and allow promise, and with them, for the reasons given in the text, I agree But if such cases were common there would be no great liarm in allowing performance as well on the ground of convenience. In America the negative opinion of Sir W. Anson and Prof. Williston, is said to prevail. ACCORD AND SATISFACTION. 203 contracts, and has been made to regulate and restrain the discharge of contracts. For example, where there is a contract of hiring with a stipulation that the wages due shall be forfeited in the event of the servant being drunk, a promise not under seal to pay the wages notwithstanding a forfeiture is not binding without a new consideration (^) . It is the rule of English law (now referred to the same reason, though reaUy older) (k) that a debt of 100?. may be perfectly well discharged by the creditor's acceptance of a beaver hat or a peppercorn, or of a negotiable instrument for a less sum (l), at the same time and place at which the lOOZ. are payable, or of ten shillings at an earlier day or at another place, but that nothing less than a release under seal will make his acceptance of 991. in money at the same time and place a good dis- charge (w) : although modern decisions have confined this absurdity within the narrowest possible limits (w) . A judg- ment creditor agreed in writing with the debtor to take no proceedings on the judgment in consideration of immediate payment of part of the debt and payment of the residue by certain instalments; here there was no legal consideration for the creditor's promise, and he was entitled to claim interest on the debt though the whole of the principal was (») Monhman v. Shepherdsmi 605, 54 L. J. Q. B. 130, Lord (1840) 11 A. & E. 411, 52 E. R. Blackburn all but dissenting. The 390. Indian Contract Act (s. 63, illust. (A) SeeHarv. LawEev. xii. 521. 5.) is accordingly careful to express (T) Qoddard v. O'Brien (1882) 9 the contrary. The rule in Pinnel's Q. B. D. 37; Bidder v. Bridges ease, it may be noted, though para- (1887) 37 CJh. Div. 406, 57 L. J. doxical, is not anomalous. Its Oh. 3O0. Or a less sum 'in a numerical logic may be archaio, different currency: Oity of San but it is strictly logical. The Court Juan V. St. John's Gas Co. (1904) does not know judicially what a 195 U. S. 510. beaver hat may be worth, but it (>m) Pinnel's case (1602) 5 Co. must know that 10?. are not worth Eep. 117, confirmed with reluct- 201. anoe by the House of Lords in (») See the notes to Cumber v. FoaJiies y. Beer (1884) 9 App. Ca. Wane (1719) in 1 Sm. L. C. 204 CONSIDBKATION* paid according to the agreement (o). This rule does not touch the ordinary case of a composition between a debtor and several creditors; for every creditor undertakes to accept the composition in consideration of the like undertaking of the other creditors as well as of the debtor's promise to pay it(p). If it is agreed between creditor and debtor that the duty shall be performed in some particular way different from that originally intended, this may well be binding: for the debtor's undertaking to do something different though only in detail from what he at first undertooTs; to do, or even relinquishing an option of doing it in more ways than one, would be consideration enough, and the Court could not go into the question whether it gave any actual advantage to the^ creditor. But if the new agreement amounts to saying that the debtor shall at his own option perform the duty as at first agreed upon or in some other way, it cannot be binding without a new consideration: as where an entire sum is due, and there is an agreement to accept payment by instalments, this would be good, it seems, if the debtor undertook not to tender the whole sum; but in the absence of anything to show such an undertaking, the agreement is a mere voluntary indulgence, and the creditor remains no less at liberty to demand the whole sum than the debtor is to pay it (g) . Forbearance as consideration. — The loss or abandonment (o) Foakes v. Beer (1884) 9 App. and the defendant was not iillowed Ca. 605, 44 L. J. Q. B. 130, foil. to issue execution for the interest: in Underwood w.'Vnderv.'ood [1894] Bidder v._ Bridges (1887) 37 Ch. P. 204, 63 L. J. P. 109. But Div. 406,'57 L. J. Oh. 309. where the solicitor of a defendant (p) Good v. Cheesman (1831) 2 entitled to taxed costs accepted B. & Ad. 328, Finch Sel. Ca. 343,, from the plaintiff's solicitor a 36 R. E. 574. cheque for the amount of costs (?) McManus v. BarJe (1870) (nothing being said about interest), L. E. 5 Ex. 65, 39 L. J. Ex. 65. this was held to be an accord and Cp. Foahes v. Beer, note (o),, satisfaction for everything due, above. ' ' COMPROMISE. 205 of any right, or the forbearance to exercise it for a definite or ascertainable time, is for obvious reasons as good a considera- tion as actually doing something. In Mather v. Lord Maidstone (r) the loss of collateral rights by the promisee supported a promise notwithstanding that the main part of the consideration failed. The action was on a bill of exchange. This bill was given and indorsed to the plaintiff as in renewal of another bill purporting to be accepted by the defendant and indorsed to the plaintiff. The plaintiff gave up the first bill to the defendant; thirty days afterwards it was discovered that it was not really signed by the defendant, yet it was held that he was liable on the second bill, for the plaintiff had lost his remedy against the other parties to the first bill during the time for which he had parted with the possession of it, and that was consideration enough. As to forbearance, the commonest case of this kind of consideration is forbearing to sue. Forbearance for a reasonable time is enough, on the principle of certum reddi potest: and terms in themselves vague, such as "forbearing to press for immediate payment," may be construed by help of the circumstances and context as meaning forbearance for a reasonable time. A promise to guarantee a debt if the creditor will give time to the principal •debtor is in the first instance an offer; it becomes a binding promise when the condition of giving the specified time, or a reasonable time, has been performed. It is a question of fact what is reasonable time in a given case (s) . Forbear- (r) (1856) 18 O. B. 273, 25 L. J. (1864) 2 Br. & Sm. 289, 34 L. J. O. P. 310, 107 E. R. 290. Oh. 956, approved in Fullerton v. (s) OldersJiaw v. Kinff (1857) Promneial Bank of Ireland [1903] (Ex. Oh.) 2 H. &N. 517, 27 L. J. A. 0. 309. Op. Wilb^ v. El^ee Ex. 120, and see 1 Wms. Saund. (1875) L.E. 10 C. P. 497. In Crears 225. Actual forbearance at the v. Htmter (1887) 19 Q. B. Div. defendant's request, though not for 341, 56 L. J. Q. B. 518, which any specified time, may be auffi- has been criticized as ambiguous, cient: Alliance BanJc v. Broom L. Q. R. iii. 484, it must be taken, 206 CONSIDERATION. anoe of proceedings to enforce a " debt of honour " by purely conventional sanctions has more than once been held a good consideration (t) . That which is forborne must also be the exercise or enforce- ment of some legal or equitable right which is honestly believed to exist. This is simply the converse of a rule already given. As a promise by A. to B. is naught if it is only a promise to do something A. is already bound, either absolutely or as against B., to do, so it is equally, worthless if it is a promise riot to do something which B . can already,, as a matter either of public or of private right, forbid A. to do. So far we assume the existing rights of the par£ies to be known: but as in practice they often are not known, but depend on questions of law or of fact, or both, which could not be settled without considerable trouble, common sense and convenience require that compromises of doubtful rights should be recognized as binding, and they constantly are so recognized. " If an intending litigant iona fide for- bears a right to litigate a question of law or fact wTiich it is not vexatious or frivolous to litigate, he does give up some- thing of value " (m); and such forbearance is good considera- tion for a promise even though the claim is not well founded, provided it is honestly believed in and the promisee does not conceal from the promisor any fact which to his know- ledge would affect its validity (x) . ■with the head-note, that the con- (1885 — 6) 32 C!h. Div. at p. 289. eideration was actual forbearance. (<) ^x parte Martingell 1|1904] The promise lieing in the form of a 2 K. B. 133, 73 L. J. K. B. 446; promissory note, i.e., easientiaUy 6-oodson v. Grierson [1908] 1 unconditional, certainly makes a K. B. 761, 77 IJ. J. K. B. 507, difficulty, for it would seem there O. A. was a complete promise before the (u) Mile) v. New Zealand Alford consideration, viz., forbearing to Estate Co. (1885 — 6) 32 Oh. Div. sue for a reasonable time, was or 266, Bowen L.J. at p. 291, review- could be executed. On the prin- ing previous cases and dicta, ciple see per Bowen L.J. in Miles (x) Ck>ttoii L.J. 32 Oh. Div. at T. Sew Zealand Alford Estate Co. p. 284. COMPROMISE. 207 The real consideration and motive of a compromise, as ■well in our law as in the civil law and systems derived from it, is not the sacrifice of a right (of which the existence or Bon-existence is unknown until it has been judicially deter- mined) but the abandonment of a claim [y) . The same rule applies in the case where the claim given up is on a disputed promise of marriage (z) . A partial compromise in which the undertaking is not simply to stay or not to commence legal proceedings, but to conduct them in some particular manner or limit them to some particular object, may well be good: but here again the forbearance must relate to some- thing within the proper scope of such proceedings. A promise to conduct proceedings in bankruptcy so as to injure the debtor's credit as little as possible is no consideration, for it is in truth merely a promise not to abuse the process of the Court (a). Contracts under seal. — The main end and use of the doc- trine of Consideration in our modern law is to furnish us with a comprehensive set of rules which can be applied to all informal contracts without distinction of their character or subject-matter. Formal contracts remain, strictly speaking, outside the scope of these rules, which were not made for them, and for whose help they had no need. But it .was impos- sible that so general and so useful a legal coiiception as that of Consideration should not make its way into the treatment of formal contracts, though with a different aspect. The ancient validity of formal contracts could not be amplified, but it (!/) Triffffe V. LavaZlee (1864) 15 O. B. at p. 719, 69 E. E. at p. 611, Moo. P. C. 271, 292 (a case from are still profitable. Lower Canada, then under old («) Keenan v. Handley (1864) 2 Fr. law). Wilby v. FAgee (1875) D. J. S. 283. L. E. 10 O. P. 497, 44 L. J. O. P. (a) Bracewdl v. Williams (1866) 254. The remarks of Maule J. in L. E. 2 O. P. 196. Martindale v. Faulkner (1846) 2 208 CONSIDERATION, might be restrained: and in fact both the case-law and the- legislation of modern times show a marked tendency to cut short if not to abolish their distinctive privileges, and to- extend to them as much as possible the free and rational treat- ment of legal questions which has been developed in modern times by the full recognition of informal transactions. This result is mainly due to the action of the Court of Chancery. A merely gratuitous contract under seal is- enforceable at common law* (with some peculiar exceptions) unless it can be shown that behind the apparently gratuitous, obligation there is in fact an unlawful or immoral considera- tion. Courts of equity did not, in the absence of any special ground of invalidity, interfere with the legal effect of formal instruments: but they would not extend their special pro- tection and their special remedies to agreements, however formal, made without consideration. A voluntary covenant,, though under seal, " in equity, where at least the covenantor is living (&), or where specific performance of such a cove- nant is sought .... stands scarcely, or not at all, on a better footing than if it were contained in an instrument unsealed" (c). And this restriction is not affected by the union of legal and equitable jurisdiction in the High Court of Justice. The rule that a court of equity will not grant specific performance of a gratuitous agreement is so well settled that it is needless to cite .further authorities for it: and it is not to be overlooked that whereas the other rules- that limit the application of this peculiar remedy are of a more or less discretionary kind, and founded on motives of convenience and the practical requirements of procedure (b) We shall see \inder the head if the donor, or even his representa- of undue influenoe that a system of tives, choose -within any reasonable presumptions has been establiBhed time afterwards to dispute it. which makes it difficult in many (c) Per Kjiight Bruce L.J. /iTeSe- cases for persons claiming under a moh y. Manning (1851) 1 D. M. Gr. voluntarydeed to uphold its validity 176, 18S, 91 E. R. 53, 57. EULES OF EQUITY. 209 rather than on legal principle, this is an unqualified sub- stantive rule. It is the practice of equity, however, at all events when the want of consideration is actively put forward as an objection (and the practice must be the same, it is conceived, when the objection is made by way of defence in an action for specific performance), to admit evidence of an agreement under seal being in fact founded on good consideration, where the deed expresses a nominal consideration {d) or no consideration at all (e), though (save in a case of fraud or illegality) a con- sideration actually inconsistent with that expressed in the 'eed could probably not be shown {d). Closely connected with this in principle is the rule of equity that, although no consideration is required for the validity of a complete declaration of trust (/), or a complete transfer of any legal or equitable interest in property, yet an incom- plete voluntary gift creates no right -w-hich can be enforced. Thus a voluntary parol gift of an equitable mortgagee's security is not enforceable; and, since his interest in the deeds deposited with him, where the mortgage is by deposit, is merely incidental to his security, delivery of such deeds by the mortgagee to his donee makes no difference, and does not entitle the donee to retain them against the mortgagee's representatives {g) . Certain modern decisions have indeed shown a tendency to infringe on this rule by construing the circumstances of an incomplete act of bounty into a declara- tion of trust, notwithstanding that the real intention of the donor was evidently not to make himself a trustee, but to {d) Leif child's case (1865) L. R. {g) ShilUto v. Ilobnon (1885) 30 1 Eq. 231. Ch. Div. 396, 55 L. J. Ch. 741. (e) Llanelly Ry. and SocJc Co. The delivery over seems to be V. L. ^ N. W. Ry. Co. (1873) a wholly unauthorized act deter- Ii. R. 8 Ch. 942. mining the bailment at common (/) Qa. whether this was origin- law, and therefore a trespass ally right on principle. against the depositor. P. — C. 14 2]0 CONSIDERATION. divest himself of all his interest (h) . But these have been disapproved in later judgments which seem entitled to more weight (i). (A) Richardson v. Miohardson (1867) L. B. 3 Eq. 386, 38 L. J. Ch. 653; Morgcm v. Malleson (1870) L. E. 10 Eq. 475, 39 L. J. Ck. 680. («■) Wnrriner v. Rogers (1873) L.E. 16 Eq. 340, 42 L. J. Ch. 581; Richards v. Delbridge (1874) L. E. 18 Eq. 11, 43 L. J. Oh. 459; Moore V. Moore (1874) L. E. 18 Eq. 474, 43 L. J. Ch. 617; Seartley v. Nicholson (1874) L. E. 19 Eq. 233, 44 L. J. Oh. 277. Op. Breton v. Woollven (1881) 17 Ch. D. at p. 420, 50 L. J. Oh. 369. GENERAL RULES. 211 GHAPTEE V Persons affected by Contract. General Rules as to Parties. The original and simplest type of contract is an agreement creating an obligation between certain persons. Those per- sons are ascertained by their description as individuals, and not by their satisfying any general class description: or, more shortly, they are denoted by proper names and not by class names (a) ; and the persons who become parties in the obligation created by the agreement are the persons who actually conclude the agreement in the first instance, and those only. The promisee looks to the promisor for satis- faction, and to him alone. It is true to this day in England as a general rule that no one can be party to a contract who ■does not in some way stand in the place of an original party. Succession upon death is the oldest and most familiar of such ways, but even the executor's place in the Common Law was an afterthought. The law merchant was the next great innovator, making commercial debt and credit instruments of currency. Then, in a quite different region, we find con- tractual rights of action attached or attachable to estates and interests in land under certain conditions. The object of this chapter is to exhibit the nature and connexion of these ■developments. The ideal strictness of ancient contract law (we call it (a) Savigny, Obi. § 53 (2. 16), general!}', ib. §§ 53—70, pp. 17— cp. on the subject of this chapter 186. ' 14 (2) 212 PERSONS AFFECTED BY CONTKACT. ideal because there is no proof that it was ever realized in an unqualified form) may be stated thus: The legal effects of a contract are confined to the contracting- parties. Before going into the modern departures from it in detail it may be useful to show their nature in the shape of general rules; and for that purpose it Avill be convenient to use certain terms in extended or special senses. A contract creates an obligation between the contracting- parties, consisting of duties on the one part and the right to demand the performance of them on the other. Any party fro a contract, so far as he becomes entitled to- have anything performed under the contract, is called the creditor. So far as he becomes bound to perform anything- under the contract he is called the debtor. Representation, representatives, mean respectively succes- sion and the person or persons succeeding to the general rights and liabilities of any person in respect of contracts, whether by reason of the death of that person or otherwise. A third person means any person other than one of the parties to the contract or his representatives (b) . "Rules. 1. The original parties to a contract must be- persons ascertained at the time when the contract is made. 2. The creditor can demand performance from the debtor or his representatives. He cannot demand nor can the debtor require him to accept performance from any third person: but the debtor or his representatives may perform the duty by an agent. 3. A third person cannot become entitled by the contract itself to demand the performance of any duty under the- contract (c) . (&) Contractsfor the sale of land treafedas attached to the particular are enforceable in equity by and property. against the heirs or devisees of the (c) As to real or apparent ex- parties. But here the obligation is ceptions, see pp. 223, 224, below. GENERAL RULES. 213 4. Persons other than the creditor may become entitled by representation, or by assignment if nothing remains to be done by the assignor under the contract {d), to stand in the creditor's place and to exercise his rights under the contract. Explanation 1 . Title by assignment is not complete as against the debtor Avithout notice to the debtor, and a debtor who performs his contract to the original creditor without notice of any assignment by the creditor is thereby discharged. Explanation 2. The debtor is entitled as against the representatives, and, unless a contrary intention appears by the original contract, as against the assignees of the creditor to the benefit of any defence which he might have had against the creditor himself. The following exceptions given here in order to complete the general statement are connected in principle with the cases of a contract for personal services or the exercise of personal skill becoming impossible of performance by in- evitable accident, of which we speak in Chapter VII. below. Exception 1. If it appears to have been the intention of the parties that the debtor should perform any duty in person, he cannot perform it by an agent, nor can performance of it be required from his representatives. Such an intention is presumed in the case of any duty which involves personal confidence between the parties, or the exercise of the debtor's personal skill. Exception 2. If it appears to have been the intention of the parties that only the creditor in person should be entitled to have any duty performed, no one can become entitled by representation or assignment to demand the performance of it, nor can such performance be required from the debtor's representatives. ((f) See per Collins M.E. in Cement Manufacturers [1902] 2 Tolhurst V. Associated Portland K. B. 660, 668, 71 L. J. K. B. 949. 214 PEKSONS AFFECTED BY CONTEACT. Such an intention is presumed if the nature of the transac- tion involves personal confidence between the parties, or is otherwise such that "personal considerations" are of th& foundation of the contract (e). Exception 3. The representatives of a deceased persott cannot sue for a breach of contract in a case where the breach of contract was in itself a. merely personal injury,, unless special damage to the estate which they represent has resulted from the breach of contract. But where such damage has resulted the representatives may recover com- pensation for it, notwithstanding that the person whose estate they represent might in his lifetime have brought an action of tort for the personal injury resulting from the same act (/) . These propositions are subject to various qualifications and exceptions. Most of the exceptions are of modern origin, and we shall see that since their establishment many attempts have been made to extend them, some of which have been successful, and some have been disallowed after being accepted for a time. We stall now go through the rules thus stated in order, pointing out under each the limits within which exceptions are admitted in the present state of the law. The decisions which limit the exceptions are (as commonly happens in our (e) Op. Indian Contract Act, (1880) 5 Q. B. D. 149, 152, 49 88. 37, 40. See Stevens v. Benninff L. J. Q. B. 321, and will not be C1854) 1 K. & J. 168, 24 L. J. Ch. extended: Phillips v. Bull Alham- 153, 106 E. E. 90; Farrow v. bra Palace Co. [1901] 1 Q,. B. 59,. Wilson (1869) L. R. 4 C. P. 744, 70 L. J. Q. B. 26. 746, 38 L. J. C. P. 326 ; Robinson (/) See 1 Wms. Exora. 709, 9tli V. Davison (1871) L. R. 6 Ex. 269, ed., and Bradshaw v. Lancashire 40 L. J. Ex. 172; Finlaij v. Chirney ^ YorksUre Ry. Go. (1875) L. R. (1888) 20 Q. B. Div. 494, 57 L. J. 10 0. P. 189, 44 L. J. O. P. 148 Q. B. 247; Robson v. Brummond (since questioned in Leggott v. (1831) 2 B. & Ad. 303, 36 R. R. ff. N. Ry. Co. (1876) 1 Q. B. D. 569; but this case goes v«ry far: 599, 45 L. J. Q. B, 557). British Wooqon Co. y. Lea f Co. PARTIES MUST BE ASCEKTAINED. 215 books) for the most part the chief authorities to show the existence of the rules. Our iirst rule is that the original parties to a contract must he persons ascertained at the time when the contract is made. It is obvious that there cannot be a contract without at least one ascertained party to make it in the first instance; and it is also an elementary principle of law that a contracting party cannot bind himself by a floating obligation to a person unascertained. "A party cannot have an agreement with the whole world; he must have some person with whom the contract is made""'(^). There is no exception to this rulo in such cases as those of promises or undertakings addressed to the public at large by advertisements or the like, and sales by auction. For, as we have already seen, the contract formed in any such case is formed between two ascertained persons by one of them accepting a proposal made to him by the other, though possibly made to him in common with all other persons to whose knowledge it may come. Ejfeets of Contract as to Third Persons. The affirmative part of our second rule, namely: The creditor can demand performance from the debtor or his representatives, is now and long has been, though it was not always, elementary (h). (^) Squire v. Whitton (1848) 1 truth an innovation. See the form H. L. O. 333, 358. of writ for or against executors, (h) As to the liability of personal ^leta, 1. 2, c. 62, § 9 ; and cp. F. N. representatives on the contracts of B. 119 M, 121 (the latter passage the testator or intestate see 1 Wmsi. is curious : if a man has entered Saund. 241 — 2. The old rule that into religion his executors shall be an action of debt on simple contract sued for his debt, not the abbot would not lie against executors who accepted him into religion: where the testator co'uld have see p. 87, n. (o), supra, and Y. B. wag^d his law (though it is said 30 Ed. I. p. 238. It is said, how- tho objection could be taken only ever, that " Quia executores non by demurrer) seems to have been in possunt facere legem pro defuncto, 21 6 PERSONS AFFECTED BY CONTRACT, The negative part of it states that the creditor cannot demand, nor can the debtor require him to accept, perform- ance from any third person. This is subject to the explana- tion that the debtor or his representatives may perform the duty by an agent, ^^■hich again is modified by the exception of strictly personal contracts as mentioned at the end of the rules. On this we need not dwell at present. It is obvious on principle that it is not competent to con- tracting piarties to impose liabilities on other persons without their consent. Every person not subject to any legal incapacity may dispose freely of his actions and property within the limits allowed by the general law. Liability on a contract consists in further limitation of this disposing power by a voluntary act of the party which places some definite portion of that power at the command of the other party to the contract. So much of the debtor's individual freedom is taken from him and made over to the creditor (i) . When there is an obliga- tion independent of contract, a similar result is produced without regard to the will of the party; the liability is annexed by law to some wrongful act or default in the case of tort, and in the case of contracts " implied in law " to another class of events which may be roughly described as involving the accession of benefit through the involuntary loss of another person; but when an obligation is founded petens prohabit talliam suam, vel a cause of action in assumpsit was Bi habeat seotam seota doiiet exa- for a tort, and therefore died with minard; et hoc est verum sive sit the defendant's person), and Nor- meroator sive non ": Y. B. 22 mood v. Read (1557 — 8) in B. E., Ed. I. p. 456). For the conflict of Plow. 180. In Pinchon's case opinion as to the remedy by as- (1612) in Ex. Oh. 9 Co. Rep. smnpsit, see Reeves 3. 403, Y. B. 86 b, this dictum was overruled, Mich. 2 H. VIII. 11, pi. 3, the authorities reviewed and explained, strange dictum contra of Pitzher- and the common law settled in bert, Trin. 27 H. VIII. 23, pi. 21, substance as it now is. who said there was no remedy at (J) Op. Savigny, Obi. § 2. all (apparently on the ground that STRANGERS NOT BOUND. 217 upon a real contract, the assent of a jjerson to be bound is at the root of the matter and is indispensable (fc) . The ordinary doctrines of agency form no real exception to this. For a contract made by an agent can bind the principal only by force of a previous authority or subsequent ratification; and that authority or ratification is nothing else than the assent of the principal to be bound, and the contract which binds him is his own contract. Under certain condi- tions there may be a contract binding on the agent also, as we have seen in Chapi. II., but with that we are not here concerned. Another less simple apparent exception occurs in the cases in which companies have been held bound by agree- ments or representations (l) made by their promoters before the companies had any legal existence. These cases, how- >ever, proceed partlj^ on the ground of a distinct obligation iaving either been imposed on the company in its original constitution, or assumed by it after its formation (m), partly on a ground independent of contract and analogous to ■estoppel, namely, that when any person has on certain terms assisted or abstained from hindering the promoters of a company in obtaining the constitution and the powers sought by them, the company when constituted must not exercise its powers to the prejudice of that person and in violation of those terms. The doctrine as now established probably .goes as far as this, but certainly no farther (n) . In one case of a suit in equity for specific performance of (k') It is now settled law that a of that land, is a duty under the ■stranger may be liable in tort for contract of sale or the conveyance, procuring the breach of a contract: (?) Re Metrop. Coal Consumers' National Phonograph Co. Y.Edison- Assocmiion, Karberg's case [1892] Bell Co. [1908] 1 Ch. 335, 11 L. J. 3 Ch. 1, 61 L. J. Oh. 741, C. A. Ch. 218, C. A. But this is not an (m) Lindley on Companies, 146, •obligation under the contract, any 149. more than when A. sells his land to (») Lindley on Companies, 152. B. the duty of all men to respec* tha As to ratification by companies, see lights of B. instead of A., as owner p. 116, above. 218 PERSONS AFFECTED BY CONTRACT. an award a third person interested in the suhject-matter was made a party, and was held to he bound by the award, though he had not been a party to the reference and had in no way assented to it, but simply knew of it and remained passive (o) . But it has been held by higher authority (p) that in a suit f or the specific performance of a contract third persons claiming an interest in the subject-matter are not even proper parties: and even without this it seems obvious that A. and B. have no business t^ submit C.'s rights to the arbitration of D. It is apprehended accordingly that this exception may be treated as non-existent. Another branch of the same general doctrine is that the debtor cannot be allowed to substitute another person's liability for his own without the creditor's assent. A con- tract cannot be made except with the person with whom one intends to contract (g) . When a creditor assents at the- debtor's request to accept another person as his debtor in the place of the first, this is called a novation. Whether there has been a novation in any particular case is a question of fact, but assent to a novation is not to be inferred from conduct unless there has been a distinct and unambiguous, request (r) . Such questions are especially important in ascertaining who is liable for the partnership debts of a firm , when there has been a change in the members of the firm,, or on contracts made in a business which has been handed (o) Govett V. Richmond (1834) 7 My. & Cr. 63, 45 R. R. 212, fol- Sim. 1, 40 R. E. 56, doubted in lowed in De 'JSoghton v. Moneij Martin v. L. C. # B. Ry. Co. (1866) L. R. 2 Cli. 164. (1866) L. R. 1 Ch. 501, 507, 35 (?) Robson v. Brummond (1831) L. J. Ch. 795. In Taylor v. Parry 2 B. & Ad. 303, 36 R. R. 569, see- (1840) 1 Man. & Gr. 604, the Court note (e), p. 214, above. Other cases relied on positive acts of the/ parties bearing on the same point are con- as showing that they adopted the sidered for anothea: purpose in reference and were substantially, Ch. IX. below, parties to it. (r) Conquest's ease (1875) 1 Ch_ (p) TasJeer v. Small (1837) 3 Diy. 334, 341, 45 L. J. Oh. 336. NOVATION. 219' over by one firm (whether carried on by a single person, a partnership, or a company) to another. A series of cases which were, or were supposed to be, of this kind arose about 1875 out of successive amalgamations of life insurance com- panies (s) . The question may be resolved into two parts : Did the new firm assume the debts and liabilities of the old? and did the creditor, knowing this, consent to accept the liability of the new firm and discharge the original debtor? (^). It would be beyond our scope to enter at large on this subject (m). There exist, however, exceptions to the general rule. In certain cases a new liability may without novation be created in substitution for or in addition to an existing liability, but where the possibility exists of such an exceptional transfer of liabilities it is bound up with the correlated possibility of an exceptional transfer of rights, and cannot be considered alone. For this reason the exceptions in question will come naturally to our notice under Rule 4, when we deal with the peculiar modes in which rights arising out of certain classes of contracts are transferred. Apart from novation in the proper sense, the creditor ma.y bind himself onoe for all by the original contract to accept a substituted liability at the debtor's option. Such an arrangement is in the nature of things unlikely to occur in the ordinary dealings of private persons among themselves. But where the deed of settlement of an insurance company contained a power to transfer the business and liabilities to («) It is doubtful whether some 246 sgq., and as to the general of these ■were really oases of nova- principle of novation, see Wilson v. tion: see Eort's case and Grain's Lloyd (1873) L. E. 16 Eq. 60, 74, case (1875) 1 Ch. D. 307, 322, 45 42 L. J. Oh. 559; for a, later Ii. J. Ch. 321. instance of true novation. Miller's (0 See Molfe v. Flower (1865) case (1876) 3 Oh. Div. 391. The li. E;. 1 P. 0. 27, 44, 35 L. J. P. latest authority is Perry w. National O. 13. Prov. Bmtk of England [1910] I («) See Lindloy on Partnership, Ch. 464. 220 PERSONS AFF-ECTEU BY CONTRACT. another company, a transfer made under this power was binding on the policy-holders and they had no claim against the original company (a?) . In the case of a policy-holder there is indeed no subsisting debt (a?), but he is a creditor in the A\ider sense above defined. Rule 3. A third person cannot become entitled by the con- tract itself to demand the performance of any duty under the contract. Before we consider the possibility of creating arbitrary exceptions to this rule in any particular cases, there are some extensive classes of contracts and transactions analogous to contract which call for attention as offering real or apparent anomalies. A. Cbntracts made by agents. Here the exception is only apparent. The principal acquires rights under a contract which he did not make in person. But the agent is only his instrument to make the contract within the limits of the authority given to him, however extensive that authority may be: and from the beginning to the end of the transaction the real contracting party is the principal. Consider the following series of steps from mere service to full discretionary powers: 1. A messenger is charged to convey a proposal, or the acceptance or refusal of one, to a specified person. 2. He is authorized to vary the terms of the proposal, or to endeavour to obtain a variation on the other party's pro- posal {i.e., to make the best bargain he can with the par- ticular person), within certain limits. 3. He is not confined to one person, but is authorized to conclude the contract with any one of several specified ix) Hort'B case and Grain's ease Div. 326, 45 L. J. C5h. 332 ; Cooker's C1875) 1 C!h. D. 307, 45 L. J. Ch. case (1876) 3 Oh. Div. 1, 45 L. J. 321; Barman's case (1875) 1 Oh. Ch. 882. NOVATION. 221 persons, or generally with any one from whom he can get the best terms. 4. He is not confined to one particular contract, but is authorized generally to make such contracts in a specified Kne of business or for specified purposes as he may judge best for the principal's interest {y) . The fact that in many cases an agent contracts for himself as well as for his principal, and the modifications which are introduced into the relations between the principal and the other party according as the agent is or is not tnown to be an agent at the time when the contract is made, do not prevent the acts of the agent within his authority from being for the purposes of the contract the acts of the principal, or the principal from being the real contracting party. Again when the agent is also a contracting party there are two alternative contracts with the agent and with the principal respectively. As for the subsequent ratification of unauthorized acts, there is no difference for our present purpose between a con- tract made with authority and one made without authority and subsequently ratified. The consent of the principal is referred back to the date of the original act by a beneficent and necessary fiction. B . There are certain relations created by contract, of which that of creditor, principal debtor, and surety may be taken as the type, in which the rights or duties of one party may be varied by a new contract between others. But when a surety is discharged by dealings between the creditor and the principal debtor, this is the result of a condition annexed by law to the surety's original contract. There is accord- ingly no real anomaly; nor indeed is there even any verbal inconsistency with any of the definite rules we have stated. These cases are mentioned only because they have beea (y) Op. Savigny, Obi. 2. 57—60. r222 PERSONS AFFECTED BY CONTRACT. considered as real exceptions by writers of recognized authority {z) . Insolvency and bankruptcy, again, have various conse- quences which affect the rights of parties to contracts, but which the general principlefs of contract are inadequate to explain. We allude to them in this place only to observe that it is best to regard them not as derived from or inci- dental to contract, but as results of an overriding necessity and beyond the region of contract altogether (a) . Even those transactions in bankruptcy and insolvency which have some resemblance to contracts, such as statutory compositions with •creditors, are really of a judicial or quasi-judicial character. It is obvious that if these transactions were merely contracts no dissenting creditor could be bound. C. Trusts are sometimes regarded as deriving their origin from a contract between the author of the trust and the trustee. This point of view may for some purposes be useful. The Scottish institutional writers (who follow the Roman arrangement in the learning of Obligations as else- where) consider trust as a species of real contract coming under the head of depositation (&) . Conversely deposits, bailments, and the contract implied by law which is the foundation of the action for money received, are spoken of in English books as analogous to trusts (c). It is certain that by the creation of a trust duties are often imposed on and undertaken by the trustee which persons not piarties to the transaction, or even not in existence at its date, may afterwards enforce. And the relation of a trustee to (s) See Pothier, Obi. § 89. Johnston (1871) L. E. 5 H. I/, at («) A strUdng instance is fur- p. 174, 40 L. J. Oh. 730. Tiished by the rule in Waring's case (6) Sic, though no such abstract (1815) 19 Ves. 345, 13 R. E. 217; term is known in Roman iaw. See see per Ijord Oairns, Banner v. Erekine, Inst. Bk. 3, Tit. 1. s. 32. (o) Blackston«, Comm. iii. 432. TRUSTS AND MARRIAGE SETTLEMENTS. 223 his cestui que trust is in some ways analogous to that of a debtor to his creditor. Thus the transfer of equitable rights of any kind is subject, as regards the perfection of the transferee's title, to precisely the same conditions as the transfer of rights under a contract. And the true way to understand the nature and incidents of equitable ownership is to start with the notion not of a real ownership which is protected only in a court of equity, but of an obligation of the legal owner which (in the case of trusts properly so called) cannot be enforced at all, or (in the case of constructive trusts, such as that which arises on a contract for the sale of land) cannot be enforced completely, except in a court of equity (d) . However, although every trust may be said in this sense to include a contract, it includes so much more, and the pur- poses for which the machinery of trusts is employed are of so different a kind, that trusts are distinct in a marked way not merely from every other species of contract, but from all contracts as a genus. The complex relations involved in a trust cannot be reduced to the ordinary elements of con- tract. Trust, in fact, is a legal category sui generis and found only in English-speaking communities or under the influence of English law (e) . D. Closely connected with the cases covered by the doctrine of trusts, but extending beyond them, we have the rules of equity by which special favour is extended to pro- visions made by parents for their children. In the ordinary case of a marriage settlement the children of the contemplated marriage itself are said to be " within the consideration of (d) See per Lord Westbury, L. J. C!h. 49. Knoo! V. Gi/e (1871—2) L. E. 5 (e) See F. W. Maitland's fuU H. L. at p. 675, 42 L. J. Ch. 234; exposition, Collected Papers, Camb. 8/iaw V. Foster (1872) L. R. 5 1911, iii. 321. There is no con- H. L. at p. 338 (Lord Cairns) and nexion with the Roman fiiloioom- at p. 356 (Lord Hatherley); 42 missiim. 224 PERSONS AFFECTED BY CONTRACT. marriage " (/) and may enforce any covenant for their benefit contained in the settlement {g) . Such rules, however, are in truth remote from the proper field of contract law; they are incidental to dispositions of property. Apart from those dispositions "the Court will not enforce a contract as distinguished from a trust at the- instance of persons not parties to the contract " {h) . E. There is also a class of statutory exceptions (though of decreasing importance) in cases where companies and public bodies, though not incorporated, are empowered tO' sue and be sued by their public officers or trustees. Such provisions are not real exceptions to the principle, for they do not in substance introduce third parties but only enable the parties concerned to act in one name instead of many {i) . (/) It is even said that con- sideration moves, or is assumed to move, from them. But it must not be inferred from this that equity regards " la peine de nattre " as a legal detriment. (jr) Where a settlememt made on the marriage of a widow provides for her chQdren by a former mar- riage, such ohildrem, though in the technical language of equity volun- teers, or persons having no part in the consideration, have been held entitled to enforce the provisions for their benefit; but this exten- sion has been doubted in the Court of Appeal: Gale v. Gale (1877) 6 Ch. D. 144, 152, 46 L. J. Ch. 809, criticized per Lindley L.J. A.-G. V. Jacobs Smith [1895] 2 Q. B. 341, 349; and see Se Cameron and Wells (1887) 37 Ch. D. 32, 57 L. J. Ch. 69. The question how far limitations in a marriage settle- ment to persons other than children can be supported by the considera- tion of marriage, so as not to be defeasible under 27 Eliz. o. 4, against subsequent purchasers, is a distinct and wider one, not falling^ within the scope of the present work. See Gale v. Gale for references to the authorities. (K) Cotton Ij. J. in Re B'Anffibaw (1880) 15 Ch. Biv. at p. 242, re- ferring to Colyear v. Mulgravet (1836) 2 Keen 81, 44 R. R. 191. (j) See like provisions ' in Friendly Societies Act, 1875 (38 & 39 Vict. c. 60), s. 21 ; Ti'ade Union Act, 1871 (34 & 35 Viet. o. 31), s. 9. It is the same with building- societies formed before the Act of 1874 and not incorporated under it. A statute enabling a local autliority to recover expenses, and not speci- fying any remedy, has been held to make the local authority a quasi- corporation for the purpose of suing: Mills v. Scott (1873) L. E. THIRD PERSON CANNOT SUE. 225 By 8 & 9 Vipt. c. 106, s. 5, a person, who is not a party to; an indenture may nevertheless take the benefit of a cove- nant in it relating to real property This enactment has not, so far as we know, been the subject of any reported decision (/) . Having disposed of these exceptions, whether real or apparent, we proceed to examine the rule in its ordinary application, which may be expressed thus: — The agreement of contracting parties cannot confer on a third person any right to enforce the contract. There are two different classes of cases in which it may seem desirable, and in which accordingly it has been attempted to effect this: (1) where the object of the con- tract is the benefit of a third person: (2) where the parties are numerous and the persons really interested are liable to be changed from time to time. It was for a long time not clear whether a contract between A. and B. that one of them should do something for the benefit of C. did or did not give C. a right of action on the contract (k) . And there was positive authority that at all events a contract made for the benefit of a person nearly related to one or both of the contracting parties might 8 Q. B. 4%, 42 L. J. Q. B. 234., 6 B. & C. 718, 30 R. R. 511, where And the grant of a right by the the person who was really inte- Crown to a class of persons may rested in the payment of rent on a have the effect of incorporating demise made by trustees and with them to enable them to exercise the whom jointly with the trustees the right: Willingale v. Maitland covenant for payment of rent was (1866) L. R. 3 Eq. 103, 36 L. J. expressed to be made, was held Oh. 64, explained by Jessel M.R. in incapable of joining in an action Chilton V. Corporation of London on the covenant. (1878) 7 C5h. D. at p. 741, 47 L. J. Qc) See Viner, Abr. Assumpsit, Ch. 433. Z. (1. 333—7); per Eyre C.J. Co. (/) For an example of the inoon- of Feltmakers v. Bavies (1797) 1 venience provided against by it, see Bos. & P. 98; note to Pigott v. Lord Southampton y . Brotim (1821) Thompson (1802) 3 Bos. & P. 149. P. — c. 15 226 PKRSONS AFFECTED BY CONTRACT. be enforced by that person (Z) . However, the rule is now settled that a third person cannot sue on a contract madei by others for his benefit even if the contracting parties have agreed that he may, and also that near relationship makes no difference as regards any common law right of action. The final decision was in Tweddle v. Atkinson (m) . The fol- lowing written agreement had been entered into. "Memorandum of an agreement made this day between William Gny, &o., of the one part, and John Tweddle of the other part. Whereas it is mutually agreed that the said William Guy shall and will pay the sum of £200 to William Tweddle his son-in-law, railway inspector, residing iu Thornton, in the county of Fife in Scotland, and the said John Tweddle father to the aforesaid William Tweddle shall and will pay the sum of £100 to the said William Tweddle each and severally the said sums on or before the 21st day of August, 1855 ; and it is hereby further agreed by the afore- said William Guy and the .said John^Tweddle that the said William Tweddle has full power to sue the said parties iu any Court of law or equity for the aforesaid sums hereby promised and specified." William Tweddle, the son of John Tweddle, brought an action against the executor of William Guy on this agree- ment, the declaration averring his relationship to the parties, and their intention to carry out a verbal agreement made before the plaintiff's marriage to provide a marriage portion. The action was held not to be maintainable. The Court did not in terms overrule the older cases to the contrary, con- sidering that their authority was already sufficiently disposed of by the effect of modern decisions and practice {n) . (I) Sutton V. Poole (1677) (Ex. estopped from disputing his Cai.) 2 Lev. 213, Vent. 318, 322. authority. Approved by Lord Mansfield («) See also Price v. Boston Cowp. 443. There appears to have (1833) 4 B. & Ad. 433. Much less been much difference of opinion at can a stranger to a contract who the time. has suffered damage by the non- {m) (1861) 1 B. & S. 393, 30 performance of it sue the default- L. J. Q. B. 265, 124 E. B. 610. ing party as on the contract: Play- It would seem that if the plaintiff ford v. United Kingdmn Electric had sued in John Tweddle's name Telegraph Co. (1869) L. R. 4 Q. B. tlie defendant would have been 706, 38 L. J. Q. B. 249; Dickson J' HIED PERSON CANNOT SUE. 227 The doctrines of equity are at iirst sight not so free from doubt. There is clear and distinct authority for these pro- positions: When two persons, for valuable consideration as between themselves, contract to do some act for the benefit of another person not a party to the contract — (i) That person cannot enforce the contract against either of the contracting parties (o) . Exceptions are only apparent (pp. 320—224, above). (ii) But either contracting party may enforce it against the other although the person to be benefited had nothing to do with the consideration (p) . On the other hand the case of Gregory v. Williams {q) shows that a third person for whose benefit a contract is made may sometimes join as co-plaintiff Avith one of the actual contracting parties against the other, and insist on tlie arrangement being completely carried out. The facts of that case, so far as now material, may be stated as follows ; Parker was indebted to Williams and also to Gregory; Williams, being informed by Parker that the'de'bt to Gregory was about 900Z., and that there were no other debts, undertook to satisfy the debt to Gregory on having an assignment of certain property of Parker's. Gregory was not a party to this arrangement, nor was it communicated to him at the time- The property having been assigned to Williams accordingly, the Court held that Gregory, suing Jointly with Parker, was entitled to call upon Williams to satisfy his debt to the extent of 900Z. (but not farther, although the debt was in fact greater) out of the proceeds of the property. It was V. Renter's Telegram Co. (1877) 2 of Torts, Uth ed. 558 sqq. 0. P. D. 62, in C. A. 3 C. P. Div. (o) Colyear v. Mulgrave (1836) 1, 47L. J. 0. P. 1. It is a distinct 2 Keen, 81, 44 R. R. 191. question wliethor these decisions (p) Davenport v. Bishop}] (1843) riglitly denied that there was any 2 Y. & C. 451, 460, 1 Ph. 698, 704. cause of action at all. See the {q) (1817) 3 Mer. 582, 17 E. E. present writer's book on the Law 136. 15(2) 228 PERSONS AFFECTED I5Y CONTRACT. not at all suggested that he could have sued alone in equity, any more than at law (r), and the true view of the case appears to be that the transactions between Williams and Parker amounted to a declaration o'f trust of the property assigned for the satisfaction of Gregory's claim to the specified extent (s). Another seeming exception occurs in Page v. Cox (t)^ where it was held that a provision in partnership articles that a partner's widow should be entitled to his share of the business might be enforced by the widow. But the decision was carefully put on the ground that the provision in the articles created a valid trust of the partnership property in the hands of the surviving partner . The result is that there is no real and allowed authority for holding that rights can in general be acquired by third parties under a contract, unless by the creation of a trust. The general principle has been re-affirmed of late years. "A mere agreement between A. and B. that B. shall pay C. (an agreement to which C. is not a party either directly or indirectly) will not prevent A . and B . from coming to an agreement the next day releasing the old one " (m) . "An agreement between A. and B. that B. shall pay Cv gives C. no right of action against B.f (v). (r) For an attempt of a third (v) Lindley L.J. He Sotherham person to sue at law under very Altim and Chemical Co. (1883) 25 similar circumstances, see Price v. Ch. Div. at p. 111. These state^ Hasten (1833) 4 B. & Ad. 433, ments overrule what is said in showing clearly that A. cannot sue Touche v. Metrop. Uailway Ware- on a promise by B. to C. to pay hoiising Co. (1871) L. E. 6 Ch. C.'sdebttoA. 671, 677, 40 L.. J. Ch. 496 (the (s) Empress Engineering Co. decision may be supported on the (1880) 16 Ch. Div. 125, 129, 130, ground of trust, Lindley on Com- by Jessel M.R. and James L.J. panics, 148). Compare further (<) (1851) 10 Ha. 163, op. Mur- EUy v. Positive, fc. Life Assnr- ray v. Flavell (1883)- 25 Ch. Div. ance Co. (1876) 1 Ex. Div. 88, 45 89, 53 L. J. Ch. 185. L. J. Ex. 451 (a provision in (m) Jessel M.E. Empress En- articles of association that A. shall gin-eering Co., 16 Ch. Div. I'i5, 129. be solicitor to the company and THIRD PERSON CANNOT SUE. 229 Different rules prevail in American jurisdictions, but, although none of them are so strict as the English rule, they varj' greatly from one another (.r ) . In India third parties from -whom consideration mo\'ed have been allowed, on the construction of s. 2 of the Con- tract Act, to sue in their own names, but the extent and authority of these decisions are not clear {y) . We now come to the class of cases in which contracting parties have attempted for their own convenience to vest the right of enforcing the contract in a third person. Except within the domain of the stricter rules applicable to parties to actions on deeds and negotiable instruments, there appears to , be no objection to several contracting parties agreeing that one of them shall have power to sue for the benefit of all except the party sued. Thus where partners create by agreement penalties to be paid by any partner who breaks a particular stipulation, they may empower one partner alone to sue for the penalty {z) . The application of the doctrines of agency may also lead to similar results (a) . It seems transact all its legal busineas is as great respect, can be of practical regards A. res inter alios acta and interest only in jurisdictions where gives him no right against the com- the old forms of action are still in pany) ; Melhado v. Porto Alegre. use. %. Co. (1874) L. R. 9 C. P. 503, (?/) See the Act, edited by the 43 L. J. C. P. 253. present writer and Mr. D. F. (x) Harriman, 212 sqq. ; Prof. Mulla, 4th ed. 1919, pp. 20--25. Williston in Harv. Law Rev. xv. (2) Uadenlnirst v. Bates (1826) 3 767; this article is in part em- Bing. 463, 470, 28 R. R. 659. Of bodied in an excursus to the third course they must taie care to make American edition of this book. See the penalty payable not to the further Prof. Crawford D. Heming', whole firm, but to the members of "History of the Beeeficiary's the firm minus the offending part- Action in Assumpsit," Essays in ner. Whether under the .present Anglo-American Legal History Rules of Coui-t the other partners (1909) iii. 339, showing that the could use the name of the firm to reasons for the modern English rule sue for the penalty, qucere. do not apply to the actions of debt (a) Spurr v. Cass (1870) L. R. 5 and account, which were not actions Q. B. 656, 39 L. J. Q. B. 249. on pH>mises at all. This, with ^30 PERSONS AFFKCTED BY CONTKACT. doubtful whether a promise to several persons to make a payment to one of them will of itself enable that one to sue alone (b). But it is quite clear that the most express agreement of contracting parties cannot confer anj right of action on the contract on a person who is not a party. Various devices of this kind have been tried in order to evade the difficulties that stand in the way of unincorporated associations enforcing their rights, but have always failed when attention was called to them. This has happened in the case of actions brought by the chairman for the time being of the directors of a company (c), by the directors for the time being of a company (d), by the purser for the time being of a cost- book company (e), and by the managers of a mutual marine insurance society (/) . It wiU not be necessary to dwell on any instance other than the last. In Gray v. Pearson the (J) Chanter v. Leese (1839) 4 M. & W. 295, in Ex. Ch. 5 M. & W. 698, 51 R. R. 584, where both Courts incliaed to think not, but gave no deoisdon; In Jones v. Robinson (1847) 1 Ex. 454, 17 L. J. Ex. 36, an action was brought by one of two late partners against the purchaser of th« business on a promise to pay the plaintiff what was due to him from tlie firm for advances. This was declared on as a separate promise in addition to a general promisie to the two partners to pay the partnership debts, and tlie only question was wherther there was any separate consideration for the promise sued on. (e) Hall V. Bainbridge (1840) 1 Man. & Gr. 42. {d) Phelps V. Lyle (1839) 10 A. & E. 113, 50 R. R. 353. (f) Hyba.ri v. Parlccr (1858) 4 C. B. N. S. 209, 27 L. J. C. P. 120, 114 R. R. 675; where Willes J. suggested that it was trenching on the prerogatives of the Crown to make a new species of corporation sole for the purpose of bringing actions. (/) &ray v. Pearson (1870) L. R. 5 C. P. 568; in the earlier case of Gray v. Gibson (1866) L. R. B C. P. 120. 36 L. J. C. P. 99, a similar action succeeded, the ques- tion of the manager's right to sue not being raised. In Scotlaud there seems to be no similar diffictilty, at all events where the contract is with an official representative of a foreign government: see Tzguierdo V. Clydebank Enginearing Co. [1902] A. 0. 524, 71 L. J. P. C. 94. ASSIGNMENT OF (JONTKACTS. 2;U reasons against allowing the right of action are well given in the judgment of WiUes J.:— " I am of opinion that this action cannot be maintained, and for the simple reason, — a reason not applicable merely to the procedure of this country, but one affecting all sound procedure, — that the proper person to bring an action is the person whose right has been violated. Though there are certain exceptions to the general rule, for instance in the case of agents, auctioneers, or factors, these exceptions are in tru,th more apparent than real. The persons who are suing here are mere agents, managers of an assurance association of which they are not members ; and they are suing for premiums alleged to have become payable by the defendant in respect of policies effected by the plaintiffs for him, and for his share and coutributions to losses and damages paid by them to other members of the association whose vessels have been lost or damaged. The bare statement of the facts is enough to show that the action cannot be maintained. ... It is in eifect an attempt to substitute a person as a nominal plaintiff in lieu of the persons whose rights have been violated." At common law the payee of a negotiable instrument must, on the same principle, be a person who can be ascertained at the time of accepting the bill or making the note. But bj" the Bills of Exchange Act, 1882, s. 7, a biU (and it seems by ss. 73 and 89 also a cheque or a promissory note) may be made payable to the holder of an office for the time being {g) . Assignment of Contracts. Rule 4. We now come to the fourth rule, which we have expressed thus: — Persons other than the creditor may become entitled by representation or assignment to stand in the creditor's place and to exercise his rights under the contract. We need say nothing here about the right of personal representatives to enforce the contracts of the person they represent, except that it has been recognized fronj the earliest period of the history of our present system of law^ {h) . With (g) On the former law see (.%) Subject to some technical Holmes v. Jaques (1866) L. E. 1 exceptions which have now disap- Q. 13. 376, 35 L. J. Q. B. 130. peared: see notes to Wheatley v. 232 PERSONS AFFECTED BY CONTRACT. regard to assignment, the benefit of a contract cannot be assigned (except by the Crown) at common law so as to enable the assignee to sue in his own name (i) . The origin of the rule was attributed by Coke to the " wisdom and policy of the founders of our law " in discouraging maintenance and litigation (;): but it is better explained as a logical conse- quence of the archaic view of a contract as creating a strictly personal obligation between the creditor and the debtor (fc) . That same rule is stated by Gains as jirevailing in the Roman law (l) . Anyhow it has been long established that tha proper course at common law is for the assignee to sue in the name of the assignor. It appears from the Year Books that attempts were sometimes made to object to actions of this kind on the ground of maintenance, but without success. In equity the right of the assignee was pretty soon recognized and protected, that is, if the assignor refused to Lane C1667) 1 Wins, Saund. 240 sgq. and for early instances of actions of debt brought by exe- cutors, r. B. 20 & 21 Ed. I. pp. 304, 374. («) Tprmos de la Zeij, tit. Chose in Action. (/) Lampet's case (1613) 10 Co. Eep. 48 I/,. For exposition of the rule in detail, see Dicey on Parties, 115. (i) Spence, Eq. Jurisd. of Chy. 2. 850. An examination of the earlier authorities has been found to confirm this view. The rule is assumed as unquestionable, and there is no trace of Coke's reason for it. The objection of mainten- ance was set up, not against the assignee suing in his own name, which was never attempted so far as we can find, but againSt his suing in the name of the assignor: see Note F in Appendix. (I) Gai. 2, 38, 39. Quod mihi ab aliquo debetur, id si velim tibi deberi, nuUo eorum modo quibus res corporales ad alium transfemin- tur, id efficere possum : sed opus est, utiubente me tu ab eo stipuleris: quae res efficit ut a, me liberetur et incipiat tibit teneri, quae dicitur novatio obligationis. Sine hac vero novatione non poteris tuo nomine agere, sed debes ex persona mea quasi cognitor aut procurator meus experiri. In later times the trans- feree of a debt was enabled to sue by utilis aotio in his own name. This seems to have been first intro- duced only for the benefit of the purchaser of an inheritance: D. 2. 14 de pactis, 16 pr., 0. 4. 39. de .hered. vel act. vend. 1, 2, 4 — 6; and a.fterwards extended to all cases: 0. eod. tit. 7, 9. See too C. 4. 10. de obi. et act. 1, 2, C. 4. 15. quando fiscus, 5. ASSIGNMENT OF CONTRACTS. 233 empower the assignee to sue in his name at law. " Ordinary choses in action were not assignable at law, but were, generally speaking, assignable in equity whether themselves legal or equitable choses. In the former case equity com- pelled the assignor to allow his name to be used for their recovery in legal proceedings, in the latter case the assignee could sue in equity in his own name" (to). Where the assignee had an easy remedy hy suing in the name of the assignor, the Court of Chancery would not interfere (h\ But equity also regarded the protection of the debtor; the modern law still does so, and therefore will not enforce an assig-nment by which the debtor's burden is increased (o) or his remedies diminished (p) . The Supreme Court of Judicature Act, 1873 (s. 25, -sub-s. 6), creates a legal right to sue in the assignee's own name, but confined to cases where the assignment is abso- lute (g), and by writing under the hand of the assignor, (m) Parker J. Olegg v. Bromley (?) Tuncred v. JDelagoa Bay and ;[1912] 3 K. B. at p. 489. E. Africa Ey. Co. (1889) 23 Q. B. (m) Hammond v. Messenger D. 239, 58 L. J. Q. B. 459. An {1838) 9 Sim. 327, Spence, 2. 854, absolute assignment may be sub- Harv. Law Rev. i. 6 — 7. ject to a trust in respect of the (o) Tolhursi V. Assocd. Portland moneys recovered : Comfort v. Betts Cement Manufacturers [1901] 2 [1891] 1 Q. B. 737, 60 L. J. Q. B. K. B. 811, reversed in C. A. and 656, C. A. The sub -section does not H. L., see [1903] A. C. 414, 72 apply to an assignment of part of li. J. K. B. 834, but onlj' on the an entire debt; the assignee be- ground that the original contract comes only a creditor in equity as was still in force and extended to to the part assigned : Re Steel Wing assigns. See per Lord Lindley Co. [1921] .1 Ch. 349, 90 L. J. Ch. [1903] A. C. at p. 423. 116. See further as to what amounts Qp) Kemp v. Baerselman [1906] to an absolute assignment, Mer- 2 K. B. 604, 75 L. J. K. B. 873, cantile Bank of London v. Evans C. A., where the assignor had [1899] 2 Q. B. 613, 68 L. J. Q. B. turned his business into a limited. 921, C. A.; Marclumt v. Morton, company, and part of the original Down ) Hill V. Tupper (1863) 2 H. L. J. Oh. 357. & O. 121, 32 L. J. Ex. 217. («) (1881) 8 Q. B. Div. 403, 51 (?) WfMtman v. Gibson (1838) 9 L. J. Q. B. 73. RESTRICTIVE COVENANTS AS TO LAND. 259 V. Butler {u). When a vendor sells land in building lots and takes restrictive covenants in identical terms from the several purchasers, not entering into any covenant himself, it is a question of fact whether these covenants are meant to operate for the protection of purchasers as bet\^■een them- selves, or as against the vendor in his dealings with parcels retained hj' him (a?) . Where such is the intention, any pur- chaser can enforce the restriction against any other purchaser, or his assigns having notice, or the vendor as the case may be, nor can the vendor release the covenant to anj^ purchaser or his successors in title without the consent of all the rest {i/) . An intruder who acquires a statutory title by adverse posses- sion is in no better position than a purchaser w'ith notice (2) . («) (1886) 16 Q. B. Div. 778. For the corresponding Scottish doctrine, see Hlslop v. LecTcie (1881) 6 App. Ca. 560. (a;) Be Birminglmm and District Zand, Co. v. Allday [1893] 1 Ch. 342, 62 L. J. Cai. 90. As to what is sufficient evidence of a " huilding scheme," Tucker v. Vowles [1893] 1 Ch. 195, 62 L. J. Ch. 172; Osborne v. Bradley [1903] 2 Ch. 446, 73 L. J. Ch. 49, .Reid v. Biclcerstaff [1909] 2 Ch. 305, 78 L. J. Ch. 753, C. A.; jrUU v. St. John [1910] 1 Oh. 325, 79 L. J. Oh. 239, C. A. The vendor's taking restrictive covenants and not re- serving any part of the propeirty is strong affirmative evidence, but his reservation of part is by no means conclusive the other way. (y) See Spicer v. Martin (1888) 12 App. Oa. 12, 23, 58 L. J. Ch. 309, per Lord Macnaghten approv- ing the statement of Hall V.O. in Senals v. Cowlishaw, 9 Ch. D. 125, 129; Elliston v. Reach [1908] 2 Ch. 374, in C. A. ib. 665, 77 L. J. 17 Oh. 619, 78 L. J. Oh. 87; Ives v. Brown [1919] 2 Ch. 314, 88 L. J. Ch. 373. Note that the equitable obligation between different pur- chasers is independent of the dates of their respective purchases. Aa to the effect of a purchaser of lots in a building estate under a, re- strictive scheme forming a " sub- scheme " by re-selling portions under new conditions, see Knight v. Simmons [1896] 2 Oh. 294, 65 L. J. Oil. 583, C. A. But the rule in Tiillt. V. Moxhay does not extend to a case where the covenantee had no possession or other interest in any land in respect of which the benefit of the covenant could be enjoyed: L. 0. C. v. Allen [1914] 3 K. B. 642, 83 L. J. K. B. 1695, C. A. (authorities discussed). (z) Nishet and Potts' contr. [1906] 1 Ch. 386, 75 L. J. Ch. 238, 0. A. In this case an equitable restriction is enforced against one who is in no way party or privy to the transaction which created the original equity, and thus, as F. W. (2) 260 PERSONS AFFECTED BY CbNTKACT. The result of the equitable doctrine is in practice to enable a great number and variety of restrictions to be imposed on the use of land for an indefinite time, subject to the contingency of a purchase for value without notice of the restriction (a) . But equity does not profess to enforce a restrictive covenant on a purchaser with notice as being a constructive party to the covenant; it only, restrains him from using the land in a manner which would be unconscien- tious as depriving the coveifentee of his effectual remedy (&). So far as common law remedies go, covenants of this kind can be always or almost always evaded; if the equitable remedy by injunction were confined to the original covenantor, that also could be evaded by a collusive assignment. On this principle, however, an assign cannot be and is not made answerable for the active performance of his predecessor's covenant: he can only be expected not to prevent its per- formance. Hence the decisions to that effect which have been cited (c) . The jurisdiction is a strictly personal and restraining one. No rule of the law of contract is violated, for the assign with notice is not liable on the contract but on a distinct equitable obligation in his own person. Lord Maitland said in one of th« latest who takes with notice of a covenant additions made by himself to his is bound by it ": Eigby L.J. iSo^ers lectures, "a curious class of nega- v. KosegooA [1900] 2 Oh. 388, 401, tive easement is here created": 69 L. J. Oh. 652; but in Nisbet ^ Maitland, Equity, etc., Camb., Potts' contr., note («) above, it is 1909, p. 170. Nevertheless the said that a negative covenant of decision seems inevitable. this kind does in some sense bind (a) Where there has once been the land in equity, see [1906] 1 Oh. ench a purchase, a subsequent pur- at pp. 401, 405. chaser cannot be affected by notice. (o) See a note in L. Q. R. iv. See per Lindley L.J. 16 Q. B. Div. 119 (not by the present writer) on at p. 788; WilTces v. Spooner [1911] Sail v. Ewin, 36 W. R. 84, 37 Ch. 2 K. B. 473, 8i0 L. J. K. B. 1107, Div. 74, 57 L. J. Oh. 95, where the 0. A. doctrine is well explained; Powelt (b) " Idomot think any covenajit v. Eemsley [1909] 2 Oh. 252, 78 runs with the land in equity. The L. J. Oh. 741, O. A.; Smith v> equitable doctrine is that a person Colbourne [Idli] 2 Ch. 533, O. A. RESTRICTIVE' COVENANTS AS TO LAND. 261 Brougham fell into the mistake of supposing that the cove- nant must be operative in equity, if at all, by way of giving effect to an intention to impose permanent burdens unknown to the law. Equity does not trouble itself to assist inten- tions which have no legal merits, and any such action. Lord Brougham rightly saw, was beyond its proper province . The la\^- laid down in Keppell v. Bailey (d) was erroneous on this point, not from any defect of reasoning in the judgment, but because the reasoning piroceeded on an erroneous assumption. The true principle is further illustrated by the rule that even with notice an assign is not liable " where an alteration takes place through the acts or permission of the plaintiff or those under whom he claims, so that his enforcing his covenant becomes unreasonable " (e) . Were the liability really on the covenant, nothing short of release or estoppel would avoid it. (rf) 2 M. & K. 57, 39 K. R. 264. British Museum (1822) 2 M. & K. Other reasons with which we are 552, 39 R. R. 288; Osborne v. not eonoerned here were given; Bradley [1903] 2 Oh. 446, 73 L. J. tlie actual decision was perhaps Ch. 49. In New York this limita- also right on the ground that the tion seems not to be recognized: covenant in question was not uiei-ely Trustees v. Thaoher (1882) 87 negative: see 39 R. R. 264, «. N. Y. 311, wtei-e tlie residential (<■) Fry L.J. in Sayers v. Collyer amenity of a street having been de- (18«4) 28 Oh. Div. 103, 109, 52 sti-oyed by tlie elevated railway, the L. J. Ch. 770, explaining the limits Court refused to enforce a covenant of the rule as originally laid down against using the house for trade, in DuTce of Bedford v. Trustees of 262 DUTIES UNDER CONTRACT. CHAPTER VI. Duties under Gontkact. 1. Interpretation generally. We have now gone through the general and necessary elements of a contract, and shall hereafter consider the further causes which may annul or restrain its normal effect. But disputes as to the validity of an agreement can- not be determined without first determining what the sub- stance of the agreement is; and a dispute as to the original substance and force of a promise may often be resolved into a conflict on the less fundamental question of what is a suffi- cient performance of a promise admitted to be binding. A summary view of the leading rules of interpretation seems therefore desirable at this stage. We suppose an agreement formed with all the positive requisites of a good contract; and we proceed to ascertain what are the specific duties created by this agreement. If there be not any special cause of exception, the promisor must fulfil the obligation which his own act has created. He must perform his promise according to its terms. Here there are "^two distinct elements of which either or both may be more or less difficult to ascertain : first the terms in which the promise was made, and then the true sense and effect of those terms. The former must be determined by proof or admission, the latter by interpretation, which, however, may have to take account of specific facts other than those by which the promise itself is established. We assume the terms to be reduced to a form in which the Court can under- KFFECT OF PROMISE. 263 stand them, as for example by translation from any language of which the Court does not assume judicial knowledge, or by explanation of terms of art in sciences other than the law, which is really a kind of translation out of the language of specialists. Effect of promise . — The nature of a promise is to create an expectation in the person to whom it is made. And, if the promise be a legally binding one, he is entitled to have that expectation fulfilled by the promisor. It has, therefore, to be considered what the promisor did entitle the promisee to expect from him. Every question which can arise on the interpretation of a contract may be brought, in the last resort, under this general form. In order to ascertain what the promisee had a right to expect, we do not look merely to the words used. We must look to the state of things as known to and affecting the parties at the time of the promise, including their information and competence with regard to the matter in hand, and then see what expectation the promisor's words, as uttered in that state of things, would have created in the mind of a reason- able man in the promisee's place and with the same means of judgment (a). The reasonable expectation thus deter- mined gives us the legal effect of the promise. Now this measure of the contents of the promise will be found to coincide, in the usual dealings of men of good faith and ordinary competence, both with the actual intention of the promisor and with the actual expectation of the promisee. But this is not a constant or a necessary coincidence. In exceptional cases a promisor may be bound to perform some- thing which he did not intend to promise, or a promisee may not be entitled to require that performance which he understood to be promised to him. The problem has been (rt) See per Blackburn J. Smith 607, 40 L. J. Q. B. 221; Birrell v. y. Hughes (1811) 'L.H. 6 Q.B. 591, Dryer (1884) 9 App. Ca. 345. 264 DUTIES UNDKR CONTRACT. dealt with by moralists as well as by lawyers. Paley's. solution is well known, and has been quoted by text-writers and in court (b): " where the terms of promise admit of more senses than one, the promise is to be performed in that sense in which the promisor apprehended at the time that the promisee received it." But this does not exactly hit the mark. Reflection shows that without any supposition of fraud, Paley's rule might in peculiar cases (and only for such cases do we need a rule) give the promisee either too much or too little. Archbishop Whately, a A\riter of great acuteness and precision within the limits he assigned to him- self, perceived and corrected the defect: " Paley," he says, " is nearly but not entirely right in the rule he has here laid down. . . Every assertion, or promise, or declaration of whatever kind, is to be interpreted on tlie principle that the right meaning of any expression is that which may be fairly presumed to be understood by if' (c). And such is the rule of judicial interpretation as laid down and used in our Courts. " In all deeds and instruments " — arid not less, when occasion arises, in the case of spokeji words — " the language used by one party is to be construed in the sense in which it would be reasonably understood by the other " (d), All rules of construction may be said to be more or less direct applications of this principle. Many rules of evidence involve it, and in particular its development in one special direction, extended from words to conduct, constitutes the law of (i) L. R. 8 Q. B. 600, 610. with useless subtilty, that a pro- (o) Paley, Moral Phil. bk. 3, misor who has by his own fault pt. 1, 0. 5; Whately thereon in caused the promisee to expect more notes to ed. 1859. I am indebted than was meant is bound "non ex to my learned friend Mr. A. V. vi promissionis sed ex damno per Dicey for calling my attention to oulpam dato." Whately's amendment. Austin's (d) Blackburn J. in Fowkes v. attempt (Jurisprudence, i. 456, Manchester and London Assurance ed. 1869) is nothing to the purpose. Association (1863) 3 B. & S. 917, Some modern civilians have said, 929, 32 L. J. Q. B. 153, 159. CONSTRUCTION : PAROL VARIATIONS. 265 estoppel in pais, which under somewhat subtle and technical appearances is perhaps the most complete example of the power and flexibility of English jurisprudence. Pm'ol variations. — We have already seen that the terms ■oi an offer or promise may be expressed in words written or spoken, or conveyed partly in words and partly by acts, or signified wholly by acts without any use of words (e) . For the purposes of evidence, the most important distinction is not betv^■een express and tacit significations of intention, but between writing and all other modes of manifesting one's intent. The purpose of reducing agreements to writing is to declare the intention of the parties in a convenient and permanent form, and to preclude subsequent disputes as to what the terms of the agreement were. It would be contrary to general convenience, and in the great majority of cases to the actual intention, of the parties at the time, if oral evidence were admitted to contradict the terms of a contract as expressed in writing by the parties. Interpretation has to deal not with conjectured but with manifest intent, and a supposed intent which the parties have not included in their chosen and manifest form of expression cannot, save for exceptional causes, be regarded. Our law, therefore, does not admit evidence of an agreement by wol'd of mouth against a written agreement in the same matter. The rule is not a technical one, and is quite independent of the peculiar qualities of a deed. "The law prohibits generally, if not universally, the introduction of parol evidence to add to a written agreement, whether respecting or not respecting land, or to vary it" (/). "If A. and B. make a contract in ■writing, evidence is not admissible to show that A. meant something different from what is stated in the contract (e) P. 11, above. 94, 95 E. R. 324, 330. For the (/) Martin v. Pycroft (1832) 2 earlier history see Wigmore, ' in D. M. G. 785, 795, 22 L. J. Oh. Col. Law Rev. iv. 338. 266 DUTIES UNDER CON'J'RACT, itself, and that B. at the time assented to it. If that sort of evidence were admitted, every written document would be at the mercy of witnesses that might be called to swear anything "(^). Under normal conditions the same rule prevails in equity, and this in actions for specific performance as well as in other proceedings, and whether the alleged variation is made by a contemporaneous {h) or a subsequent (^) verbal agreement. " Variations verbally agreed upon . . are not sufficient to. prevent the execution of a written agreement, the situation of the parties in all other respects remaining unaltered " (/<;).. Here variation must not be confused with rescission . There is no rule that an agreement in writing can be discharged only in writing or by the special form (if any) required by the Statute of Frauds or the like for the principal agree- ment. Parol rescission even by an agreement which, as such,, is unenforceable for a defect of form will be good if {I) — though only if (m) — there appears a clear intention to rescind at all events. Correction of an admitted error in detailed matter of Cor) Per Pollock C.B. Nichol v. Page (1826) 3 Euss. 114, 121, 27 Godts (1854) 10 Ex. 191, 194, 23 R. R. 26. L. J. Ex. 314, 102 R. E. 523, 526. (^) p^ee v. By&r (1810) 17 Vee.. See also Hotson v. Browne (1860) 9 at p. 3«4, 11 E. R. 107; Clowes v. C. B. N. S. 442, 30 L. J. 0. P. Higgimon (1813) 1 Ves. & B. 524,. 106; Salhead v. Young (1856) 6 12 R. R. 284, whore it was held E. & B. 312, 25 L. J. Q. B. 290, (i) that evidence waa not admis- 106 E. E. 615. sible to explain, contradict, or (A) Omerod v. Kardman (1801) vary the written agreement, but 5 Ves. 722, 730. Lord St. Leonards (2) that the written agreement was- (V. & P. 163) says this cannot be too ambiguous to be enforced. deemed a general rule: but sea q-^ Morris v. Baron [19181 Hill V. Wilson, L. R. 8 Ch. 888 ; ^ c j 87 L J. K B 145 per Mellish L.J. at p. 899, 42 L. J. "' ' ' ,, ' '„ "'„„„' „ p. „ ^ ' 0») iVo6Ze V. 7F«r(e (1867) L. E. 2 Ex. 135, Ex. Ch. as explained (»•) Bnce V. Byer (1810) 17 Ves. ;„ Morris v. Baron. 356, 11 E. E. 102; Robinson v. CONSTKUCTION : PAROL VARIATIONS. 267 description, such as the number of a house, is not a varia- tion {n) . Similarly, when a question arises as to the construction of a -wTitten instrument as it stands, parol evidence is not admissible (and was always inadmissible in equitj' as well as at law) to show what was the intention of the parties. A vendor's express contract to make a good marketable title cannot be modified by parol evidence that the purchaser knew there were restrictive covenants (o) . It is otherwise where it is sought to rectify the instrument under the peculiar equit- able jurisdiction ^^'hich will be described in a later chapter. And therefore the Court has in the same suit refused to look at the same evidence for the one purpose and taken it into account for the other (p) . It is no real exception to this rule that though " evidence to \a.rj the terms of an agreement in writing is not admis- sible," yet " evidence to show that there is not an agreement at all is admissible," as where the operation of a writing as an agreement is conditional on the approval of a third person {q) or on something to be done by the other party (r) . " A written contract not under seal is not the contract itself, but only evidence — the record of the contract. When the parties have recorded their contract, the rule is that they cannot alter or vary it by parol evidence. They put on paper what is to bind them, and so make the written document conclusive evidence between them. But it is always open to the parties to show whether or not the written document is the binding record of the contract " (s) . (») Forgione v. Lewis [1920] 2 9 Q. B. Div. 620. Ch. 326, 89 L. J. Oh. 510. (?) Pym v. Campbell (1856) 6 (o) Cato V. Thomp^n (1882) 9 E. & B. 370, 374, 25 L. J. Q. B. Q. B. Div. 616. In such a case the 277, 106 R. R. 632, 635. true intention may well be that the (?•) Battle v. Sornibrooh [1897] vendor shall remove the defect. 1 Ch. 25, 66 L. J. d. 144. (p) Bradford v. Romney (1862) (s) Per BramweU B. Wake y. 30 Beav. 431, cp. per Lindley L.J. Harrop (1861—2) 6 H. & Ni at ^68 DUTIES UNDEK CONTRACT. " The rules including parol evidence have no place in anj inquiry in which the Court has not got before it some ascer- tained paper beyond question binding and of full effect " (t). It may even be shown that what appears to Idc a deed was delivered as an escrow, notwithstanding that a deed once fully delivered is conclusive (a) . Still less does the rule apply to proof of the circumstances in which a document was signed which was not really part of the agreement at all, but only a memorandum made at the same time or imme- diately after (x) . So in Jervis v. Berridge [y) it was held that a document purporting to be a written transfer of a contract for the purchase of lands " was . . . not a contract valid and opera- tive between the parties but omitting (designedly or other- wise) some particular term which had been verbally agreed upon, but was a mere piece of machinery . . subsidiary to and for the purposes of the verbal and only real agree- ment." And since the object of the suit was not to enforce the verbal agreement, nor " any hybrid agreement com- pounded of the written instrument and some terms omitted therefrom," but only to prevent the defendant from using the written document in a manner inconsistent with the real agreement, there was no difhoulty raised by the Statute of Frauds, " which does not make any signed instrument a. valid contract by reason of the signature, if it is not such p. 775, 30 L. J. Ex. at p. 277; see L. R. 20 EcJ. 262; Whelan v. S. C. va. Ex. Oh. 130 R. E. 461, Palmer (1868) 39 Oh. D. Ui, 655, and cp. Wace v. Allen (1888) 128 57 L. J. Oh. 784. U. S. 590. (x) Bank of Australasia v. (<) Gimrdhouse v. BlaehJmrn Palmer [1897] A. O. 540, 66 L. J. (1866) L. B. 1 P. & D. 109, 115, 35 P. C. 105, J. O. L. J. P. 116. And see per Page {y) (1873) L. R. 8 Oh. 351, 369, ;Wood V.-C. in Druiff v. Lord 360, 42 L. J. Oh. 518; Clmke v. Parker (1868) L. E. 5 Eq. 131, Grant (1807) 14 Yea. 519, 9 E. E. 137, 37 L. J. Oh. 241. 336, appears really to belong to («) See Watkins v. Nash (1875) this class. CONSTRUCTION ; EXTRINSIC EVIDENCE. 26R according to the good faith and real intention of the parties." If it appears that a document signed by the parties, and apparently being the record of a contract, was not in fact intended to operate as a contract, then " whether the signa- ture is or is not the result of a mistake is immaterial " {z) .; Again it has been held, arid that by Courts of common law not having equitj^ jurisdiction, that even where there is an agreement by deed a collateral agreement not incon- sistent with the written terms may be shown. For such a collateral agreement, moreover, the promisee's execution of the principal writing or deed is consideration enough («)» in the same way as on a sale of goods no distinct consideration is required for a simultaneous collateral warranty. Evidence as to special sense of words. — Another class of cases in which an apparent, or sometimes, perhaps, a real exception occurs, is that in which external evidence is admitted to explain the meaning in which particular terms in a con- tract were understood by the parties, having regard to the language current in that neighbourhood or among persons, dealing in that kind of business. Witnesses have been allowed, in this way, to prove that by local custom " a thousand " of rabbits was 1,200 (i.e., ten long hundreds of six score each, the old " Anglicus numerus " of Anglo- Norman surveys) (6); to show what was meant by "weekly (a) Per Bramwell B. Rogers v. Morgan v. Griffith (1871) ti. R. 6' Hadley (1863) 2 H. & O. 227, 249, Ex. 70, 40 L. J. Ex. 46 (agreement 32 L. J. Ex. 241 ; 133 R. R. 652. by lessor to keep down rabbits) ; In this case there was " a real con- jt.ngell v. I)u7ce (1875) L. R. 10 tract not in writing and a paper Q. B. 174 (agreement to do repairs prepared in order to comply with and send in furniture); see [1901] some form, which was stated at the 2 K. B. at p. 223; Be Lassalle v. time to contain a merely nominal Gxiildford [1901] 2 K. B. 215, 70 price." Cp. Batik of Australasia L. J. K. B. 533, C. A. (warranty V. Palmer, note (x), above. of drains in good order). (o) ErsHne v. Adeane (1873) (ft) Smith v. Wilson (1832) 3; L. R. 8 CSi. 756, 42 L. J. Oh. 835; B. & Ad. 728, 37 R. R. 536. 270 DUTIES UNDER CONTRACT. accounts" among builders (c) ; to define "year," in a theatrical contract to pay a weekly salary for three years, as meaning only the part of the year during which the theatre was open (d); to identify the wool described as " your wool " in a contract to buy wool (e). The theory is that such evidence is admitted "not to con- tradict a document, but to explain the words used in it, supply, as it were, the mercantile dictionary in which you -are to find the mercantile meaning of the words which are used " (/) (or other meaning received by persons in the con- dition of the parties, as the case may be) . The process, may be regarded as an extension of the general rule that words shall have their primary meaning. For when words are used by persons accustomed to use them technically, the technical meaning is for those persons at any rate the primary meaning (g). It is a question not of adding or altering, but of identifying the subject-matter. " Suppose that I sell ' all my wool which I have on Dale Farm,' evidence must always be admissible to show that the wool which was delivered was the wool on Dale Farm " (h) . The terms thus explained need not be ambiguous on their face (i) . Parol evidence is equally admissible to explain words in themselves ambi- guous or obscure and to show, as in the case of "a thousand of rabbits," that common words were used in a (e) Myers v. Sari (1860) 3 E. & and Sir Howard Elphinstone on E. 306, 30 L. J. Q. B. 9. " The Limits of Rules of Con- (d) Grant v. Maddoio (1846) 15 struction," L. Q. R. i. 466. M. & W. 737, 16 L. J. Ex. 227, 71 (K) Erie J. in Macdonald v. R. R. 815. Longhattom (1859 — 60) 28 L. J. (e) Macdonald v. Longhottom, Q. B. at p. 297; cp. Bank of New Ex. Ch. 1859—60, 1 E. & E. 977, Zealand v. Simpson [1900] A. C. 28 L. J. Q. B. 293, 29 ib. 256. 182, 69 L. J. P. 0. 22, J. O. (/) Lord Cairns, Bowes v. Shand (i) See the judgment of Black- (1877) 2 App. Ca. 455, 468. bum J. in Myers v. Sari, note (c), {g) See Elphinetone, Norton and above. Clark on Interpretation, 48, 57; INTERPEETATION : CUSTOMAEY TERMS. 271 spiecial sense. " The duty of the Court . is to give effect to the iiiteution of the parties. ... It has always been held . . that A\here the terms in the particular con- tract have, besides their ordinary and popular sense, also a scientific or peculiar meaning, the parties who have drawn up the contract w ith reference to that particular department of trade or business must fairly be taken to have intended that the words should be used not in their ordinary but in their peculiar sense " (k). This kind of special interpretation must be kept distinct from the general power of the Court to arrive at the true construction of a contract by taking account of the material facts and circumstances proved or judicially known. The words "warranted no St. Lawrence" in a time policy of marine insurance have been decided, by reason of the known facts of geography and the nature and risks of the naviga- tion, to include the Gulf of St. Lawrence as well as the river, notwithstanding the failure of an attempt to prove that such was the customary meaning (Z) . In another modern case the Court found no difficulty in holding that, in the circumstances of the transaction, a guaranty for the price of goods to be supplied, definite as to the amount but other- wise loosely worded, must be read as a continuing guaranty and not as a guaranty confined to a single sale then about to be made (w). Customary terms. — The Courts have taken yet a further step in this line of interpretation by reference to unexpressed matter. Not only particular terms may be explained, but (k) Cockbum C.J. in Myers v. warranty alleged to be customary ^■arl (1860) 30 L. J. Q. B. at p. 12. was decided to be part of the (I) Birrell v. Dryer (1884) 9 general law. App. Oa. 345. In Johnson v. Baylton (1881) 7 Q. B. Div. 438, (m) Heffield v. Meadows (1869) 50 L. J. Q. B. 753, an implied L. R. 4 O. P. 595. 272 - DUTIES UNDER CONTEACT. whole new terms (provided they be not inconsistent with the- terms actually expressed in writing) may be added by proving those terms to be an accustomed part of such contracts, made between such persons, as the Court (n) has before it. Custom,, when the word is used in these cases, does not necessarily imply either antiquity or universality or any definite local range. It is merely a usage so general and well understood in fact, with reference to the business, place, and class of persons, that the parties are presumed to have made their contract with tacit reference to it, and to have intended to be governed by it in the same way and to the same extent as other like persons in like cases. The Court may act, it seems, on a proved change of usage within recent memory (o) . It might perhaps be better not to use in this connexion the word " custom," which has a perfectly distinct meaning in the law of tenure and rights over land, or at least to speak by preference of " usage," except where the phrase " custom of trade " has become too familiar to be easily dropped. It would take us too far to enlarge upon this class of cases; it must suffice to indicate them and refer to a few leading authorities . Eights allowed to agricultural tenants by the " custom of the country," siich as to take the away-going crop after the expiration of the term, to receive compensation for particular kinds of improvement, and the like, have been held for more than a century (pi) not to be excluded by anything short of actual contradiction in the terms expressed between the parties, and this even w"here the contract is («) An arbitrator authorized (o) See per CJhannell J. in Moult generally to decide disputes arising v. Balliday [1898] 1 Q. B. at out of a contract has power to p. 130. decide any question as to the exist- (-^^ fjig earliest case commonly eeoe of an applicable custom of cited is Wigglesworth v. DalUaon trade: Produce Brokers' Co. v. (yj-j^ — 81) Dougl. 201, 1 Sm. L. O. OlympM, ^c. Co. [1916] 1 A. O. 523^ where see the notes. 314, 85 L. J. K. B. 160. INTERPRETATION : CUSTOMARY TERMS. 273 under seal. In modern cases of this class (g) the question has generally been whether something in the express terms was or was not so inconsistent with the usage as to exclude the presumption that " the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but to contract with reference to those known usages "(/•)• Within the last century there have been a great number of decisions arising out of the usages current in trades and in various kinds of mercantile dealings and public employ- ments. One strong application of the principle now before us has been to make agents or brokers in certain trades and markets personally liable (unconditionally or in some par- ticular event) notwithstanding that they contracted only as agents (s) . This has been thought to go too far, as adding to the written contract not merely a new term as between the same parties, but a new party. But the point is settled by an unbroken current of authority (t) . Some important groups of eases have turned on particular rules and usages of the Stock Exchange, with regard especially to the determi- nation of the persons on whom they were binding without individual assent or notice (m) . As it is not always easy to say where the ordinary con- struction of the language used in affairs ends, and explana- tion of special terms and senses by a " mercantile dictionary " (g) As in Tuc/eer v. Linger (s) Humfrey v. Dale (1857) (1883) 8 App. Ca. 508, 52 L. J. CSi. E. B. & E. 1004, 26 L. J. Q. B,. 941. See per Lord Blackburn, 8 137, followed in Fidd v. Ldean App. Oa. at p. 511. (1861) 6 H. & N. 617, 30 L. J. (r) Parke B., in Button v. Ex. 168, itself a pretty strong Warren (1836) 1 M. & W. 466, 475, case; and other eases cited pp. 106, 46 R. E. 368, 377. For a recent 107, above. example not without difficulty, see (f) See 1 Sm. L. 0. 543 — 545. Walkers Winser ^ Hamm and (a) See Nickalls v. Merry (1875) Shaw. Son # Co. [1904] 2 K. B. L. E. 7 H. L. 530. 152, 73 L. J. K. B. 325. P.— C. . 18 274 DUTIES UNDER CONTRACT. as Lord Cairns called it {x), begins, so there is a more or less fluctuating boundary line, even now that the law merchant is part of the general law, between the establish- ment, by evidence of usage, of particular incidents of particular mercantile contracts, and the general development of mercantile law bj the judicial recognition of universal custom. I Construction according to general intention. — Supposing the terms of the contract, express or incorporated by refer- ence, to be finally established, there remains the task of construction in the stricter sense; namely of deciding, where the terms are capable of more than one meaning, which meaning is to be preferred. On this head there are few rules, if any, which are confined to contracts, or are more applicable to them than to instruments in writing generally. The one universal principle is that effect is to be given to the intention of the parties collected from their expression of it as a whole. It must be collected from the whole; that is, particular terms are to be construed in that sense which is most consistent with the general intention {y) . It must also be collected from what is expressed, not from a mere con- jecture of siome intention which the parties may have had in their minds, and would have expressed if they had been better advised {z) . This caution, however, does not prevent the correction of mistakes which are obvious on the face of the document. In, such cases the general intent, as expressed by the immediate context, or collected from the whole scope of the instrument, is clear enough to overcome the difficulty arising from erroneous or defective expression in some part. (ic) Page 270, above. (a) Jessel M.R. Smith v. Lucas (i/) See F(yrd v. SgfoA (1848) (1881) 18 Oh. D. 531, 542; and see (Ex. Ch.) 11 Q. B. 852, 17 L. J. other authorities in Elphinstonel, Q. B. 114. Norton and Clajk on Interpreta- tion, p. 37. CONSTRUCTION: GENEEAL INTENTION. 275 •Mere verbal blunders have always, in modern times at any fate, been corrected without difficulty by the ordinary juris- ■diction even of courts of common la^^^ (a) . Mala grammatica non vitiat chartam (&). In construing instruments of well- known types, such as family settlements, even omitted clauses have often been supplied by aid of the context (c) . For the rest, our Courts are now much less disposed to liold themselves bound by canons of construction than they were even one or two generations ago. " They were framed "with a view to general results, but are sometimes productive ■of injustice by leading to results contrary to the intention of the parties " (d); and the recent tendency is to pay less attention to any such rules and more to all admissible indica- tions of what the intention actually was in the case in hand, including the practical construction of the contract by the conduct of the parties themselves (e) . It will be remembered that a rule which does not yield to sufficient evidence of contrary intention is not a rule of construction at all, but a Tule of law (/) . Again, many rules of construction are in (a) See peir Lord Mansfield, 3 on conflict in the terms of a lease Butt. 1635, and Doe d. Leach v. by reference to the counterpart, MicUem (1805) 6 East, 486; Lord Bwchell v. Clark (1876) 2 O. P. St. Leonards, Wilson v. Wilson Div. 88, 46 L. J. C. P. 115. Some- (1854) 5 H. I/. O. 40, 66, 23 L. J. timea it is not easy to decide CSh. 697, 101 E. E. 25, 41, Sugd. V. whether the doctrine of falsa 6 P. 171. demonstratio sufBcea, or recourse (V) See Sh«pp. Touohst. 55, 87, must be had to the equitable jurid-, 369. diction to rectify an instrument (o) Oropton v. Davies (1869) on the ground of common mistake li. B. 4 0. P. 159, 38 L. J. O. I\ (Ch. IX. pt. iii. below): sea Cowen 159; Savaffe v. Tj/ers (1872) L. R. v. Truefitt, Ltd. [1899] 2 Ch. 309, 7 Ch. 356; Daniel's Settlement '68 L. J. Oh. 663, 0. A. (1875) 1 Oh. Div. 375, 45 L. J. Ch. (rf) Cockburn C.J. 2 C. P. Div. 105; In re Bird's Trtists (1876) 3 at p. 93. Ch. D. 214; Oreermood v. Green- (e) See D. C. v. Gallaher (1888) wood (1877) 5 Ch. Div. 954, 47 124 U. S. 505. L. J. Ch. 298 ; Bedfern v. Bryning (/) P. V. Hawkins on the Con- (1877) 6 Ch. D. 133; as to deciding struction of Wills, Preface. 18 (2) 276 DUTIES UNDER CONTEACT. truth more auxiliary than explanatory; their purpose is to supply the guidance required for dealing with events for which the parties have omitted to provide. In the language- of Willes J. " disputes arise not as to the terms of the con- tract, but as to their application to unforeseen questions- which arise incidentally or accidentally in the course of performance, and which the contract does not answer in terms,, yet which are within the sphere of the relation established thereby, and cannot be decided as between strangers " (5^) . The parties may really have taken no thought, and therefore- had no intention at all with respect to those events, and yet something must be done. In such cases any rule not incon- sistent with justice is better than uncertainty, and it matters little whether the reasons originally assigned for an established rule be convincing or not. Among rules or maxims of construction some are much weaker than others,, and are entitled, as it were, only to a casting vote. Suc"h is that which says that words are to be taken, in case of doubt,, against the person using them; a maxim to which Sir G. Jessel denied even a subsidiary value (h), but which is in substance classical (^) and seems reasonable, and on the whole stands approved on condition of being used to turn the scale where there is real doubt, not to force a less natural meaning on words which have a more natural one (Jc) . Artificial rules. — There are artificial rules of construction in particular cases which stand apart from the ordinary (g') Lloyd v. Gmbert (1865) obscuram v«l ambiguam venditori,. (Ex. CJh.) L. B. 1 Q. B. 115, 120, -et qui locavit, .nooeira, in quorum 35 L. J. Q. B. 74. See the next fuit potestate legem apertius con- chapter for the modern extension scribere. of this principle to conditions (A) Blphinstone, Norton and affecting the whole of the contract. dark, op. cit. 93. Lord Selborne (A) Taylor v. Corporation of St. in NeiU v. Bulce of Devonshire Selens (1877) 6 Oh. Div. 264, 270. (1882) 8 App. Ca. at p. 149, states. (•i) Papinian in D. 2, 14, de pao- lit in a guarded form. tis, 39. Veteribus placet paetionem SPECIAL RULES OF CONSTKUCTION. 277 pdnciples; they are derived chiefly, but not wholly, from the jurisdiction of the Court of Chancery, and in their origin did not profess to be consistent with the expressed intention of the parties. To some extent they went upon a presumed real intention, but the presumption was rather of what the Court thought the parties ought to have intended than of what it thought they did intend (I) . They were in truth rules of positive restriction, imposed by a policy which was then in the hands of the judges, but is now held to be in the exclusive competence of the Legislature, and for the pur- pose of making the sutstanoe of the transaction conform to the requirements of fair dealing as understood by the Court. Our Courts have long ceased to dictate to parties of full age and with the means of independent judgment on what terms they shall contract, but certain forms and terms have had an artificial meaning firmly impressed on them. The modern justification of such rules is that they are well known, and parties using the accustomed forms do in fact know and expect that their words will be construed in that sense which, bj' the standing practice of the Courts, has become a received and settled technical sense (m) . Policies of marine insurance are to this day made in a form which on the face of it is clumsy, imperfect, and obscure. But the effect of every clause and almost every word has been settled by a series of decisions, and the common form really implies a whole body of judicial rules, "which ori^nated either in decisions of the Courts upon the construction or on the mode of applying the policy, or in customs proved before the Ctourts so clearly or so often as to have been long recognized by the Courts without further proof. Since those decisions, and the recognition of those (0 Cp. Lindley L..J. 21 Ch. Div. (m) See per Jessel M.B. Wallis at p. 274. V. Smith (1882) 21 Oh. Div. 243. 254, 52 L. J. Oh. 145. 278 DUTIES UNDER CONTEACT. customs, merchants and underwriters have for many years continued to enter into policies in the same form. Accord- ing to ordinary principle, then, the later policies must be held to have been entered into upon the basis of those, decisions and customs. If so, the rules determined by those decisions and customs are part of the contract " (n) . The rules applied to restrain the effect of releases in general terms, of stipulations as to time, and of penal clauses, had a different origin, but have been brought round to rest on similar reasons . They are now admitted to be rules of con- struction which the parties can supersede, if so minded, by the adequate expression of a different intention. Still, they preserve traces of their history, and so lead up to the methods by which equity jurisdiction has dealt, and still deals, with eases of real mistake in expressing an agreement; and in that connexion we shall find it useful to return to them. 2. Order and Mutuality of Performance. LWhen a contract consists in mutual promises which on one or both sides are not to be completely performed at one time, and a party who has not performed the whole of his own obligation complains of a failure on the other side, questions arise which may be of great difficulty. How far is the plaintiff bound to show performance of the contract on his own part, or readiness and willingness to perform? Or, to look at it from the other side, how far will a failure of one party to fulfil some part of his duties under the con- tract have the effect of discharging the other party from further performance or the offer thereof on his part? Such eases have been of increasing frequency and importance in recen,t times; especially with regard to contracts for delivery and payment by instalments. To a certain extent the diffi- . (») Cur. per Brett L.J. Lohre v. AitcMson (1878) 3 Q. B. Div. 558. 562. ORDER OF PERFORMANCE, 279 culty is one of interpretation, for the modern decisions at any rate endeavour to find a solution in accordance with the true intent of the parties, although the difficulty is much increased by the general want of any specific evidence of that intent. Most contracts are originally made in good faith, and the parties do not necessarily, perhaps they do not usually expect that all or any, of the promises contained in the contract will be broken, or contemplate in any distinct way what will be the consequences of a breach. From Lord Mansfield's time to the present attempts have been made to lay down rules for determining, in the absence of express provisions or other clear indication of intent (o), the relation of the one party's obligation to the other as regards the order of performance of mutual promises and the extent to which either is bound to accept performance of part, notwithstanding failure to perform other part. In the earlier decisions the Courts inclined to treat the several terms of a contract, unless expressed to be dependent on the other party's performance (p), as separate and inde- pendent promises, paying little regard to the effect which default in some or one of them might produce in defeating the purpose of the contract as a whole. At this day the ten- dency is the other way. The Court looks to the purpose and effect of the contract as a whole as a guide to the probable intentions of the parties (g), and the presumption, if any there be, is that breach or default in any material term of a contract between men of business amounts to default in the whole. Common terms. — Certain terms which constantly recur in the authorities must be well understood and distinguished. (o) Op. Leake, 6th ed. 466, and (_p) 15 H. VII. 10, pi. 17. th« chapter on "The Promise" {q) Bradford v. Williams (X&IT) generaUy. L. R. 7 Ex. 259, 41 L. J. Ex. 259, see judgment of Martin B. " 280 DUTIES UNDER CONTRACT. Promises or covenants are said to be independent when, although they be mutual, breach of any of them gives the other party a right of action without showing performance on his own part (r) . They are said to be dependent where " the performance of one depends on the prior performance of another, and, therefore, till this prior condition is performed, the other party is not liable to an action on his covenant." Where one party cannot sue for breach of the other's promise without showing on his own part performance of some promise made by himself, or at least readiness and willingness to perform it, there, if the performance on his part was due before the other party's, it is said to be a condition precedent to his right of action (s) . If the fulfilment of mutual promises is due at the same time, and so that the party suing must be at least ready and willing to perform his part, it may be said that these are concurrent conditions. " Neither is a condition pre- cedent," but " the performance of each is conditional upon the other's being performed at the same time" {t). A contract which can be fulfilled only as a whole, so that failure in any part is failure in the whole, is said to be entire. A contract of which the performance can be separated, so that failure in one part affects the parties' rights as to that part only, is said to be divisible. It must always be understood that questions of this kind are possible only where a contract consists of mutual pro- mises. For if performance itself is the consideration for a promise, there is no contract at all without performance. But when there is a contract made by mutual promises, we (?•) Lord Mansfield in Kingston («) See Bankart v. Bowers (1866) V. Preston (1773) cited in Jones v. L. B. 1 0. P. 484; Norrington v. Barldey, Doug. 689; Pinch, Sel. Wright (1885) 115 U. S. 189. Oa. 73S. (0 Langdell, Summary, § 132. DEPENDENT AND INDEPENDENT PROMISES. 281 may have to enquire whether, in addition to each promise or set of promises being the consideration for the other, the performance thereof on the one side is not a condition, pre- cedent or concm-rent, of the right to claim performance on the other. There is no logical reason why it should not be so, or why express words should be required to manifest an intention that it should. Each party's promise is the consideration for the promise of the other, not for the per- formance which is due by reason of the promise. What are the terms and conditions of the duty created by the promise is another matter. In an executory contract of sale the promise to deliver is the consideration for the promise to pay; but this need not be a promise to pay before or without delivery. However, the earlier line of decision was biassed by rules laid down in cases on promises bj- deed before the law of executory simple contracts A^as developed; and for a long time it was supposed that promises which were the consideration for each other must, as a matter of law, be indepeiident (m) . Late in the eighteenth century this view was abandoned, and it was held that " whether covenants be or be not independent of each other must depend on the ^ood sense of the case, and on the order in which the several things are to be done," so that " if one party covenant to do •one thing in consideration (x) of the other party's doing another, each must be ready to perform his part of the (jt) See Langdell, § 140, and the (a;) The word " consideration " is ■whole title of " Dependent and here used in an elliptical manner. Independent Covenants and Pro- and not quite accurately. The mises," and notes to Fordage v. promises are the consideration, and Cole, 1 Wms. Saund. 549. A re- the only consideration, for each vised version of liajigdeU's rules other. But if the substance of the may be seen in Ashley on Con- promisee is that performance shall tracts, Boston, Mass. 1911, at be exchanged for performance^ pp. 164, 2^2. neither party can demand perform- ance on any other terms. 282 DUTIES UNDER CONTKACT. contract at the time he charges the other with non-perform- ance" {y). Generally " the order in which the several things are to be- donc " is the test most readily applicable {z) ; accordingly it is said that "if a day be appointed for payment of money, or- part of it, or for doing any other act, and the day is to happen, or may happen, before the thing which is the consideration, of the money (or other act) is to be performed, an action may he brought for the money (or for not doing such other act) before performance " (a) . But this is really no more than a rule of interpretation; it "only professes to give- the result of the intention of the parties" (b); the reason given for it is that " it appears that the party relied upon his remedy, and did not intend to make the performance a. condition precedent." Therefore the rule, like all rules of its kind, must yield to evidence of a different intention,, and " where it is clear that the intention was to rely on the performance of the condition and not on the remedy, the performance is a condition precedent " (&). Another test often applied is whether the term of the contract in which default has been made " goes to the whole- of the consideration," or only to part; in other words, whether the importance of that term with regard to the contract as a whole is or is not such that performance of the residue would be, not a defective performance of that which was- contracted for, but a total failure to perform it. Can it be said that the promisee gets what he bargained for, with some shortcoming for which damages will compensate him? or is the point of failure so vital that his expectation 'is in (y) Morton v. Lamb (1797) 7 (a) Wms. Saund. 561; Jervi* T. R. 12S, 4 E. E. 39S, per Lord C.J. in Hoberts v. Brett (1866) 18- Kenyon C.J. and Grose J. O. B. 373, 25 L. J. O. P. 280, 286- (z) Cp. dark Hare on Contracts, (6) Jervis C.J. loa. oit. 589. ORDER OP PEEFORMANCE. 283: substance defeated ? The necessity of dealing flitli this ques- tion as a whole was perhaps obscured to some extent bj the requirements of formal pleading (c), but it has been strongly asserted in all the recent authorities. " 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 'prima facie a condition precedent, is not really vital, and may be compensated for in damages, and if they sufficiently express such an intention, it will not be a condition precedent. " And in the absence of such an express declaration, we think that we are to look to the whole contract, and applying the rule stated by Parke B. to be acknowledged (d), see whether the particular stipulation goes to the root of the matter, so that a failure to perform it would render the per- formance of the rest of the contract by the plaintiff a thing different in substance from what the defendant has stipu- lated for; or whether it merely partially affects it and may be compensated for in damages. Accordingly, as it is one or the other, we think it must be taken to be or not to be intended to be a condition precedent " (e) . The agreement sued on in the case where the principle was thus declared was an opera singer's engagement. The singer, who was plaintiff in the cause, was to sing in concerts as well as operas, and during a period of a year, beginning (o) It caimot be said that it was (d) In Graves v. Legg (1854) overlooked: see Withers v. liey- 9 Ex. at p. 716, 23 L. J. Ex. 228, nolds (1831) 2 B. & Ad. 882, 36 96 E. E. 936. E. E. 782; Franklin v. MUler (e) Blackburn J. Bettini v. Gye (1836) 4 A. & E. 599, both long (1876) 1 Q. B. D. 183, 187, 188; before th« Coaim on Law Procedure Finch Sel. Oa. 742, 745. Act. 284 DUTIES UNDER CONTRACT. three months before the active duties of the engagement, he was not to sing out of the theatre in the United Kingdom (in the opera season, or within iifty miles of London) without the defendant's permission. He was also to be in London for rehearsals six days before the commencement of the engagement. This last term was not fulfilled, but it was held that, having regard to the whole scope of the agree- ment, it did not go to the root of the matter so as to justify the defendant in determining the engagement and refusing to employ the plaintiff. Matter of excuse was alleged by the plaintiff for his failure to arrive at the time stipulated, but nothing turned upon this. On the other hand wrongful dismissal of an employee is a total repudiation of the con- tract of service, and discharges him not only from further service but from an undertaking restraining his right to carry on a similar business after the termination of the contract (/) . If, however, there be any presumption either way in the modern yiew of such cases, it is that, in mercantile contracts at any rate, all express terms are material. " Merchants are not in the habit of placing upon their contracts stipula- tions to which they do not attach some value and import- ance "(^r). In a case not mercantile, where the contract before the Court was held on its terms to be divisible, the late Lord Justice Mellish said: — " I quite agree that as a general rule aU agreements must be considered as entire. Generally speaking, the considera- tion for the performance of the whole and each part of an agreement by one party to it is the performance of the whole of it by the other, and if the Court is not in a position to compel the plaintiff, who comes for specific performance, to perform the whole of it on his part, the Court will (f) General Billposting Co. v. (^) Liord Cairns ia Bowes v. Atkinson [1909] A. C. 118, 78 L. J. Sfumd (1877) 2 App. Ca. 455, 463. Ch. 77. BREACH OF ENTIRE CONTRACT. 28.'> not compel the defendant to perform his part or any part of the agTeement. As a general rule, therefore, an agreement is entire. I can also conceive that a court of equity might treat an agreement as entire oven in cases where a court of law would say that the performance of one part is not a condition precedent to the performance of the other part,, because the Court might see that those rules as to conditions precedent, which to a certain extent are technical, might not meet the real justice of the case. But, on the other hand, 1 do not find it laid down anywhere that it is impossible for the parties so to frame an agreement that there may be a;, specific performance of part"(^). The question to what extent, if at all, a party is bound to accept performance of less than all that was promised him is to be distinguished from the question, not to be pursued here, of the duty incurred by one who does accept. and in fact has some benefit from a partial performance. It may be the intention of a contract that the promise of one party shall be conditional on the actual performance of the other's promise, so that nothing less than complete per- formance shall found any claim to payment. If such is * really the parties' intention effect will be given to it; the condition, if they choose to make it, is good enough, and ' an imperfect performance, from whatever cause remaining^ imperfect, affords no ground of action. The express terms are not fulfilled, and a term or new contract to pay what the benefit received is reasonably worth cannot be introduced where the express terms exclude it (i) . In its results, though not in its form, such a case resembles that of a reward offered by advertisement to the first person who procures certain (A) Wilkinson v. Clements (1872) a fresh contract to pay for what ho L. E. 8 Ch. 96 110. has actually done: see Sumpter v. (i) Where performance has been Sedges [1898] 1 Q. B. 673, 6T defective by the plaintifl's own L. J. Q. B. 545, C. A. fault, the burden is on him to show 286 DUTIES UNDER CONTEACT. information. A person who brings the information, but is not the first to bring it, evidently has no claim on the adver- tiser, whatever amount of trouble and expense he may have incurred, and although the delay may be due to inevitable accident (fc) . 3. 'Default in First or other Instalments of Discontinuous Performance. Peculiarly troublesome questions have arisen upon con- tracts for the sale of goods to be delivered and paid for by instalments. It is not yet settled whether failure to deliver the first or any subsequent instalments is or is not presumed, in the absence of any special indication of the parties' inten- tion, to go to the whole of the consideration and entitle the buyer to refuse acceptance of any further deliveries. It seems to be admitted that failure on the buyer's part to pay according to the terms of the contract for the first or any particular instalment as delivered is not of itself a breach of the entire contract (Z) ; but such default or refusal may by the reason assigned for it, or because of other particular circumstances, manifest an intention to repudiate the con- tract as a whole, in which case the seller may justly refuse in his turn to go on with the contract (m) . In Hoare v. Bennie {n), a case decided on pleadings, the contract appeared to have been to sell about 667 tons of iron of a specified kind, to be shipped in June, July, "August and September, in about equal portions each month. The Qc) See Cutter v. Powell (1795) 2 B. & Ad. 882, 36 B. R. 782; 6 T. R. 320, 3 R. R. 185, and notes Freeth v. Burr (1874) L. R. 9 thereto in 2 Sm. L. O. O. P. 208, 43 L. J. C. P. 91; and (2) Mersey Steel and Iron Com- see per Lord Blackburn, Mersey pany v. Naylor (1884) 9 App. Oa. Steel and Iron Co. v. Naylor, 434, 439, 444, 53 L. J. Q. B. 497; Benzon ^ Co. (1884) 9 App. Ca. at Freeth v. Burr (1874) L. R. 9 p. 442. O. P. 208, 43 L. J. O. P. 91. («) (1859) 5 H. & N. 19, 29 (m) Withers v. Reynolds (1831) L. J. Ex. 73. DEFAULT IN INSTALMENTS. 287 action was by the sellers for non-acceptance, and for wrong- ful repudiation of the contract. The buyers pleaded, in effect, that a June shipment of 21 tons only was offered by the plaintiffs, who were never ready and willing to deliver a proper June shipment according to the contract, and that the defendants thereupon refused to receive the portion shipped and tendered, and gave notice that they would not receive the residue. The plaintiffs demurred, and the pleas were upheld, as showing that the plaintiffs had not been ready and willing to perform the substance of their contract within the appointed time. In the judgments almost exclusive attention is paid to the question whether the defendants were bound to accept the first shipment: in only one of them (o) is it stated in general terms that the defendants were at liberty to rescind the contract, but the decision evidently involves this (p) . In Simpson v. Crippin (q) the contract was to supply about 6,000 to 8,000 tons of coal, to be delivered into the buyers' waggons, in " equal monthly quantities during the period of twelve months from the 1st of July next." During the first month of the contract the buyers, though pressed by the sellers to send waggons, took only 158 tons. The sellers thereupon gave notice to the buyers that they cancelled the contract. It was held that the breach did not justify rescis- sion, and great doubt was thrown upon Hoare v. Eennie. In HoncJc v. Muller (r) the contract was to deliver 2,000 tons of iron, " November, 1879, or equally over November, December, and January next, at 6d. per ton extra." The (o) Channel! B. 5 H. & N. at ii. 281; and per Bowen L.J. in p. 29. Mersey Steel and Iron Co. v. Naylor (p) Much of the language of the (18B4) 9 Q. B. Div. at p. 671 ; and judgments would certainly have per Jesael M.E. ib. at p. 658. been more appropriate if the action (§■) (1872) L. E. 8 Q. B. 14. liad been for non-aceeptanoe of the (r) (1881) 7 Q. B. Div. 92, 50 first shipment only. Of. L. Q. R. L. J. Q. B. 529. 288 DUTIES UNDER CONTRACT. buyer failed to take any of the iron in November, but near the end of the month offered to " take delivery of all in December and January " (s) . On December 1 the seller cancelled the contract, and was held by the majority of the Court of Appeal to have been entitled to do so, even on the supposition that in the circumstances the buyer could and did elect to take delivery in three portions in the three months named. "I think," said Bramwell L.J. "where- no part of a contract has been performed, and one party to- it refuses to perform the entirety to be performed by him, the other party has a right to refuse any part to be performed by him . 1 think if a man sells 2,000 tons of iron, he ought not to be bound to deliver l,333j only, if it can be avoided "(^). Meanwhile it had been held in Freeth v. 'Burr (m) that refusal by a buyer to pay for a much delayed delivery of the first instalment (under a mistaken claim to set off loss arising from any future default in delivering the residue) did not entitle the seller to rescind the contract. It was- suggested that, " in cases of this sort, where the question is whether the one party is set free by the action of the other,, the real matter for consideration is whether the acts or con- duct of the one do or do not amount to an intimation of an intention to abandon and altogether to refuse performance of the contract," or, in other words, " evince anintention no- longer to be bound by the contract" («). (s) See 7 Q. B. Div. at p. 94 performed. Brett L.J. dissented, (not one-third in Deoember and thinking Simpson v. Crippin right, one-third in January, aa stated in and Hoare v. Rennie wrong; cp. the head-note). his dissenting judgment in Renter (i) 7 Q. B. Div. 98. Baggallay v. Sala (1879) 4 0. P. Div. 239, 48 L.J. to the same effect, approvir^ L. J. C. P. 492. Eoare v. Bennie, and disapproving («) (1874) L. B. 9 C. P. 208, 43 Simpson v. Crippin, -which Brajn- L. J. 0. P. 91. ■well L.J. endeavoured to diatin- (a;) Lord Coleridge C.J. atp. 213; guish on the ground that the con- Keating and Denman JJ. con- tract had in that case been partly ourred jn affirming this principle. DEFAULT IN INSTALMENTS. 28t> The later case of the Mersey Steel mid Iron Company {y), where there was only a postponement of payment, in peculiar circumstances, under erroneous advice, confirms Freeth v. Burr, so far as it goes (z) . As a positive test, the rule of Freeth v. Burr is doubtless correct; that is, a party who, by declaration or conduct, " evinces an intention no longer to be bound by the contract " entitles the other to rescind, and this whether he has or has not, apart from this, com- mitted a breach of the contract going to the whole of the consideration. But it seems doubtful whether the test will hold negatively. Can an intention to repudiate the con- tract be necessary as well as sufficient to constitute a total and irreparable breach? Can there not be, without any such intent, a failure in a vital part of the performance which destroys the benefit of the contract as a whole? Must it not depend on the nature of the contract and the order and apparent connection of its terms? All that the authorities require of us is not to presume delay in payment, as dis- tinguished from delivery, to be in itself a total breach. In other words, non-payment will not as a rule justify refusal to perform on the other side, unless there be something more in the circumstances by which it is shown to amount to repu- diation, as in Withers v. Reynolds {a), where there was a deliberate and wilful refusal to pay for the successive deliveries according to the terms of the contract. In 1885 the Supreme Court of the United States (b\ had to deal with a case very like Hoare v. Bennie. The contract was for 5,000 tons of iron rails to be shipped from Europe "at the rate of about 1,000 tons per month, beginning (y) (1884) 9 App. Ca. 434, 53 App. Oa. at p. 438, and per Lord L. J. Q. B. 497. The House of Blackburn at pp. 442 — 3. Lords seems to have thought (a) (1831) 2 B. & Ad. 882, 36 criticism of Soare v. Rennie not E. R. 782, Finch Sel. Oa. 749. relevant. (&) Norrington v. Wright (1885) (a) See per Lord Selborne, 9 115 U. S. 189. P. -c. 19 290 DUTIES UNDER CONTEACT. February, 1880: but whole contract to be shipped before August 1, 1880." The action was for non-acceptaace. A few passages from the judgment of the Court will best shotv the view taken by them. " In the contracts of merchants, time is of the essence (c). The time of shipment is the usual and convenient means of fixing the probable time of arrival, with a view of providing tunds to ]Day for the goods, or of fulfilling contracts with third persons . . . " The contract sued on is a single contract for the sale and purchase of 5,000 tons of iron rails, shipped from a European port or ports for Philadelphia. The subsidiary provisions as to shipping in different months, and as to payment for each shipment upon its delivery, do not split up the contract into as many contracts as there shall be shipiments or deliveries of so many distinct quantities of iron . . . " '^he seller is bound to deliver the quantity stipiulated, and has no right either to compel the buyer to accept a less quantity, or to require him to select part out of a greater quantity; and when the goods are to be shipped in certain proportions monthly, the seller's failure to ship the required quantity in the first month gives the buyer tlie same right to rescind the whole contract that he would have had if it had been agreed that all the goods should be delivered at once. "The plaintiff, instead of shipping about 1,000 tons in February and about 1,000 tons in March, as stipulated in the contract, shipped only 400 tons in February, and 885 tons in March. His failure to fulfil the contract on his part in respect of these first two instalments justified the (c) This hai! already been laid Ootton L.J. at p. 249, 48 L. J. down in Enf^liuid: Reuter v. Sola C. P. 492. Cp. Brown v. Guarantee (1879) 4 C. P. Div. 239, see per Trust Co. 128 U. S. 403, 414. DEFAULT IN INSTALMENTS : SALE OF GOODS ACT. 291 defendants in rescinding the whole contract, provided they distinctly and seasonably asserted the right of rescission." The Court went on to review the English cases, which did not in their opinion establish any rule inconsistent with the decision arrived at in the case at bar. All will agree with them that " a diversity in the law as administered on the two sides of the Atlantic, concerning the interpretation and effect of commercial contracts of this kind, is greatly to be deprecated" {d). And although the decision is not autho- ritative in this country, we may expect that an opinion of such weight, and so carefully and critically expressed, will receive full consideration whenever the point is again before the Court of Appeal or the House of Lords. It is a notable addition of force to the modern tendency to eschew stiff and artificial canons of construction, and to hold parties who have made deliberate promises to the full and plain meaning of their terms. The Sale of Goods Act, 1893, has now declared as follows: — Sect. 10. — (1.) Unless a different intention appears by the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the con- tract or not depends on the terms of the contract. Sect. 31. — (1.) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. (2.) Where there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case, whether the breach of contract is a repudiation (f?) 115 U. S. at p. 206. 19(2) ^92 DUTIES UNDER CONTRACT. of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not tq a right to treat the whole contract as repudiated. The apparent intention arid effect of these enactments is to put on record the existing state of the authorities without deciding any question that stiU remains fairly open. What is said as to repudiation is obviously derived from Freeth v. Burr (p. 288, above), but does not seem to amount to a legisla- tive approval of everything that was said in that case: for the Act does not say " shows an intention to repudiate," but " is a repudiation." Indeed, the opinion that the real question is not of intention but of result seems to be rather strengthened than otherwise by this language. In the foregoing discussion we have once or twice come very near the problems incidental to the interpretation of conditions and exceptions expressed or implied in contracts: an exception to the duty of performance in case of some future contingent event is, we need hardly say, in the nature of a condition subsequent. The disturbance of business by unforeseen restraints and hindrances in the course of the late war has not only magnified the practical importance of such problems but led the Courts to a general review of the doc- trine and considerable extension of the governing principles, as we shall see in the following chapter. 4. Repudiation. The test laid down for one class of cases by the Sale of Goods Act, as we have just seen, is an application of the wider principle that a contract may be broken or discharged by repudiation, that is, by conduct manifestly repugnant to the due fulfilment of the terms. The good faith of agree- ments requires that, so long as anything remains to be done, each party should do what is reasonably necessary for carry- ing out the intention and should not do anything to hinder REPUDIATION. 39S completion (e) . There are three definite ways in which a party to a contract may violate this obligation, namely by an express refusal to perform his part, even if the perform- ance is not yet due; by disabling himself from performance; and by preventing the other party from performing what is due from him. Refusal {anticipatory breach) . — It is now well settled that if a promisor under a contract, even before the time for per- formance has arrived, declares his intention of not performing it, the promisee may treat this as an immediate breach of contract if he thinks fit, and bring his action accordingly(/.) . The reason for the rule may be put in various ways, but the really decisive ground is convenience. The alternative doctrine which appeared tenable till the middle of the nine- teenth century was that the promisee's only election is to rescind the contract, thereby renouncing any claim for damages, or to ignore the refusal and await the time for performance, thereby remaining bound to show himself ready and willing to perform at that time though he knows the promisor will not be. The refusal which under the modern rule may be treated as a present breach must, of course, be total, and the promisee's choice whether to treat the contract as rescinded by consent (which might sometimes though seldom be for his advantage) or proceed as for a breach must be clear and final {g) . Apparently the rule was un- welcome to some of the judges, and its generality was affirmed only when, nearly twenty years after the leading decision, it was held applicable to the contract to marry (h) . (e) See Harrison v. Wal/cer Q. B. 455, 95 R. R. 747. Followed [1919] 2 K. B. 453, 89 L. J. K. B. in America, Roehm v. Ilorst (1900) 105, where a rather adventurous 178 U. S. 1. attempt to enforce this duty in ig) Johhwto-ne v. Milling (1886) unusual circumstances failed. 16 Q. B. D. 460, 55 L. J. Q. B. (/) Hochster v. Be la Tour 167. (1853) 2 E. & B. 678, 22 L. J. (A) Frost v. ICnigKt (1872) L. B. 29i DUTIES "UNDER .CONTRACT. Pfomisor disabling himself. — Where the promisor disables himself by his own default from performing his promise, not only is he not excused (for which indeed authority would be superfluous) but his conduct is equivalent to a breach of the contract, although the time for performance may not have arrived, and even though in contingent circumstances it may again become possible to perform it: so says an old authority (i) . In a quite modern case (A;), Z. promised A., his future wife, in consideration of marriage, to leave her Whiteacre for life. Some time after the marriage A. conveyed White - acre to Q. Held, a breach of contract immediately action- able. It is obvious that if a man has the cTioioe of performing his promise in more ways than one, and by his own fault is debarred from one of them, he remains bound to the other. Moreover there is no general rule that he is discharged if one alternative is excluded without his fault: in such a case the Court has to decide what the parties intended, and it is an open question of construction (I) . But if the same thing should happen by the promisee's fault, it would seem that the promisor would be discharged. Prevention by promisee. — Where a promisor is prevented from performing his contract or any part of it by the 7 Ex. Ill, 41 L. J. Ex. 79, re- feofEment," per Choke J. This versing the judgmeat below. really involves th« principle of (i) 1 Ro. Ab. 448, B., citing 21 Hoohster v. De la Tour. E. IV. 54, pi. 26: "If you are (;!-) Synge v. Synge [1894] 1 bound to enfeoff me of the manor Q. B. 466, 63 L. J. Q. B. 202, of D. before such a feast, and you C. A., purporting to follow Frost mak« a feoffment of that manor to v. Knight; the earlieir direct autho- another before the feast, you have rity seems to have been overlooked, forfeited the bond notwithstanding (J) See BarJiworth v. Young that you have the land back before (1856) 4 Drew. 1, 24, 26 L. J. the feast, having once disabled Ch. 153, il3 R. R. 297. yourself from making the said DEFAULT OF I'EOillSEE. -295 default or refusal of the promisee, the performaucc is to that extent excused; and moreover default or refusal is a cause of action on which the promisor may recover any loss he has incurred thereby (to), or he may rescind the contract and recover back any money he has already paid under it (n) , Default may consist either in active interruption or inter- ference on the part of the promisee (o), or in the mere omis- sion of something without which the promisor cannot perform his part of the contract (p) . The principle, in itself well settled, is illustrated by several modern cases. Where the failure of a building con- tractor to complete the works by the day specified is caused by the failure of the other parties and their architect to supply plans and set out the lands necessary to enable him to commence tTie works, " the rule of la\\ applies which exonerates one of the two contracting parties from the performance of a contract when the performance of it is prevented and rendered impossible by the wrongful act of the other contracting party " (q), and the other party cannot take advantage of a provision in the contract making it deter- minable at their option in the event of the contractor failing in the due performance of any part of his undertaking (g) . So where it is a term of the contract that the contractor sliall pay penalties for any delay in the fulfilment of it, no penalty becomes due in respect of any delay caused by the refusal (m) As in the famUiar case of an performed only in the obligee's action for non-acceptance of goods, presence, his absence is an excuse, for not furnishing a cargo, &c. ; so 1 Ro. Ab. 457, U. A covenant to with a special contract, e.g., make within a year such assurance Roberts v. Bury Cammissioners as the covenantee's counsel shall (1869) L. E. 4 0. P. 755, in Ex.Qi. devise is discharged if the cove- 5 C. P. 310, 39 L. J. C. P. 129. nantee does not tender an assurance (ra) Giles V. Edwards (1797) 7 within the year, ib. 446, pi. 12. T. E. 181, 4 E. E. 414. (?) Roberts v. Biiri/ Commis- (o) 1 Eo. Ab. 453, N. sioners (1869) L. E. 5 C. P. 310, (p) Where a condition can be 329. 296 DUTIES UNDER CONTRACT. or interference of the other party (r) . Where a machine is ordered for doing certain work on the buyer's land, on the terms that it is to be accepted oiily if it answers a certain test; there, if the buyer fails to provide a fit place and occasion for trying the machine, and so deals with it as to prevent a fair test from being applied according to the contract, he is bound to accept and pay for the machine (s) . In Raymond v. Minton (t) it was pleaded to an action of covenant against a master for not teaching his apprentice that at the time of the alleged breach, the apprentice would not be taught, and by his own wilful acts prevented the master from teaching him. This was held a good plea, for " it is evident that the master cannot be liable for not teach- ing the apprentice if the apprentice will not be taught." An earlier and converse case is Illlen v. Topp (m), referred to by the reporters. There a master undertook to teach an apprentice several trades; it was held that on his giving up one of them, ajid thus disabling himself from complete performance of his own part of the contract, the apprentice was no longer bound to serve him in any. " If the master is not ready to teach in the very trade which he has stipulated [promised] to teach, the apprentice is not bound to serve." (»•) Holme V. G-wppy (1838) 3 M. broker's apprentice is a iiabitual & W. 387, 49 R. R. 647; liussell thief: Learoyd v. Brook [1891] 1 V. Da Bandeira (1862) 13 C. B. Q. B. 431, 60 L. J. Q. B. 373. N. S. 149, 32 L. J. C. P. 68. («) (1851) 6 Ex. 424, 442, 20 (s) Maclcay v. Bich (1881) in L. J. Ex. 241, 86 R. R. 353. For H. L. (Sc.) 6 App. Ca. 251. this too there is good authority (0 (1866) L. R. 1 Ex. 244, 35 much earlier, see per Choke J. 22 T.. J. Ex. 153. So if a oawn- Ed. IV. 26. 297 CHAPTER VII. Conditions {a), and herein of Frustration. Conditional promises. — A promise is called unconditional when the promisor binds himself to performance in any event; conditional when performance is to be due only if some state of facts not within the promisor's knowledge now exists, or is to be demandable or not according to some uncertain event in the future. A condition may be annexed to the promise either by its express terms, or by a tacit common under- standing of the parties. A familiar example of conditional promise is the insurer's undertaking in a contract of marine, fire or accident insurance. Every guaranty of whatever kind is likewise a conditional promise. Heciprocal promises may both be conditional, as in the common case of a wager, which is an agreement com- plete in form though for reasons of substance not enforceable. Some very learned writers include in the class of conditional promises those which are to be performed only after the lapse of a certain time. But this does not appear to be correct; for, in the world of space and time in which we live, the lapse of time is not contingent but certain. Thus the insurer's promise in a contract of life assurance is not con- ditional, since human life must come to an end sooner or later; this is not the less so because there may be conditional incidents, such as the addition of bonuses to the original sum insured in a mutual society. On the other side no one (a) As to the various and for- used in our books, see a profitable merly not always well defined note in the Appendix to Chalmers senses in which the words " condi- on the Sale of Goods, tion " and " warranty " have been 298 CONDITIONS, AND HEREIN OP FRUSTRATION. would call the promise of a lessee for lives, or a term deter- minable on lives, conditional, though the number of times rent vifill be due depends on the uncertain length of the lives named. The fact that the extent of a promisor's obligation can be determined only by future events does not make the obligation itself conditional. We may add that, if lapse of time were of itself a condition, the acceptor of a bill of exchange at six or three months would be a promisor on condition; but to call him so would contradict the settled elementary definition of a negotiable instrument as an un- conditional order in writing. On the other hand the conception of conditional acts in the law was formerly limited in the usage of learned authors to those which depend on a future contingent event assigned by the will of the parties {b) . This restriction is incompatible with the language and doctrine of our modern authorities, and is not acceptable on its merits. " Any present fact which is unknown to the parties is just as uncertain for the purposes of making an arrangement at this moment as any future fact" (c). The difference between a condition and an ordinary term of an agreement must be carefully borne in mind. Non- performance of a term gives a right of action for the breach; failure of a condition acts as a release of the corresponding duty {d) . Conditions precedent and subsequent. — In the case of a conditional promise properly so called,' namely where the promisor's obligation becomes effective only if some state of -(6) "Une condition est le cas. (e) Holmes, The Gommon Law, d'un evenement futur et incertain, 304, cp. 329. qui.peut arriver oii ne pas arriver, (d) See per Bramwell B. Jack- duquel on fait dependre I'obliga- son v. Union M. I. Co.^ L. R. 10 tion ": Potliier, Obi. § 199. Simi- C. P. at p. 143. larly Savigny, Syst. 3. 121. it-jr _,/,,; CONDITIONS SUBSEQUENT. 299 facts exists or if and when some further eveiit happens, his agreement is said to be subject to a condition precedent. There is another very important class of promises in which the promisor's duty is perfect in its inception, but later events, according to express or unexpressed terms of the agreement^ may dispense him from performance wholly or in part. In such oases the agreement is said to be subject to a condition subsequent. Events interfering with the performance of a promise may or may not operate as conditions subsequent according to the intention of the parties and the nature of the case. The simplest case occurs where the parties have both contemplated and specified such events; less simple, but still in the region of ascertainable fact, is that where they contemplated them and had a common understanding but did not express it in words (a known trade custom, for example, being assumed to be applicable); more serious difficulties arise where the parties had no such event in their mind at all, and the Court has to decide what they would, as reasonable men, have agreed upon or understood if they had contemplated that which in fact has happened. Questions under the last head, as inte- resting as they are hard, have become prominent in our time. Perhaps the best example in form of a condition subsequent is to be found in a bond, an instrument under seal applied to many kinds of contracts in the Middle Ages (e), but now in use only for securing payment of official dues and the like. The obligor, as the promisor is called, declares himself bound to pay a sum of money; but by the terms of the condition following, his obligation is to be void if he pays a less sum (usually half of the first-named or penal sum) at a certain date, or, as the case may be, performs a specified act or a (e) Accordingly the clues to the , Sunder the title of Condition in the medieval doctrine and practice of old Abridgments, contracts are mostly to be found 3U0 CONDITIONS, AND HEREIN OE EEUSTBATION. continuing series of duties. A bond might well enough, in point of form, be conditioned on the happening of something independent of the obligor's action; but this does not occur in practice. Here the only real object is the performance or satisfaction of the condition. The equitable interpretation of the penalty will be mentioned in another place. Partial conditions. — Particular terms of an agreement may be conditional, or there may be alternative promises according to different possible events. Terms of this kind are often expressed by way of exception from the general effect of the principal undertaking; this does not affect their substantial character. A party's promise is conditional as a whole only when it does not oblige him to any immediate duty whatever unless or until some condition is satisfied. Express and implied. — Conditions are either express or implied. The effect of express conditions has to be deter- mined by the ordinary rules of construction or by special rules belonging to the learning of particular classes of con- tracts. The existence and effect of implied conditions depend on the nature of the contract and the Court's estimate of what provision the parties would have made as reasonable men (/) if they had contemplated events that in fact were beyond their foresight. Rules arrived at in this way go far beyond the regular process of judicial construction, and are prevented from being positive rules of law only by the reservation that they are always in aid of the presumed intention of the parties, and there is no place for them where the actual intention can be ascertained. Some recent judicial statements even say that the Court must find an actual though unexpressed intention that the agreement should not be applicable to the new state of facts on which the question arises. But, with all respect, a rule so stated will either be (/) BaM V. Nelson (1881) 6 App. Ca. 38, 59, p©v Lord Watson. CONDITIONS EXPRESS AND IMPLIED. 301 too narrow or, as is more likelj', will develop into something- very lite legal fiction; and fictions are not to be called in without necessity, least of all in matters of current business. It seems better to avoid language capable of leading that way, and rather to ask whether the parties would have regarded the present emergency as a fatal impediment to the fulfilment of their intention if its possibility had been suggested to them at the time of making the contract {g) . As Lord Watson said forty years ago, though with reference at the time only to a special class of contracts, " there may be many possibilities within the contemplation of the contract . . which were not actually present to the minds of the parties at the time of making it, and, when one or other of those possibilities becomes a fact, the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it), but that which the parties, as fair and reasonable men, would presumably have agreed upon if, having such possi- bility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence" (y^) . Lord * Bowen's statement as to the nature of implied warranties or covenants, made by him as a member of the Court of Appeal before the recent extensions of the doctrine, will be found no less applicable to conditions. The implica- tion, he says, is founded on the presumed intention of the parties, and the object aimed at is " to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have I (g) See per Bailhache J. Comp- L. J. K. B. 849. toir Commercial Anversois v. (A) Dahl v. Nelson (1881) 6 Power [1920] 1 K. B. 868, 879, 89 App. Ca. at p. 59. 302 CONDITIONS, AND HEBEIN 0^ FRUSTRATION. been in the contemplation of both parties that he should be responsible for in respect of those perils or chances" {i). Express conditions. — No special words are necessary to create an express condition. In contracts of sale a term expressed to be a warranty may still operate as a con- dition (&) ; in such case there are the distinct alternative courses of maintaining the contract and relying on the warranty or insisting on the condition and disowning the contract. More generally, it may be a question whether a descriptive statement is a mere representation or a substantive part of the contract, and, if it be a substantive part, whether it amounts to a condition; such points are for the Court to decide as matter of construction with the aid of the circum- stances found as matter of fact. Thus in a charter-party {I) where it was agreed that the plaintiff's ship, " now in the port of Amsterdam," should go to an English port and load a cargo of coals to be provided by the defendant, it was held that the situation of the ship was not mere matter of description, but an essential term or condition of the agreement. The Court considers not only the language of the instrument, but the circumstances under which, and the purposes for which it was made. So far the leading case of Behn v. Burness (m!). Further, a statement about the subject-matter of an agree- ment made in the course of the preliminary negotiation by the party within whose knowledge it is or ought to be may amount to a condition if such appears to be the intention of the parties, though the agreement itself does not embody it as part of the description ; and this eSect will not be excluded, as matter of law, by the inclusion in the agreement as con- (i) The 3Ioorcoc/c (1889) 14 P. ' Ch. 3 B. & J. 751, 124 R. R. 794, Div. 64, 68, 48 L. J. P. 73. 32 L. J. Q. B. 204, revg. the judg- (k) P. 572, below. raent in Q. B. (I) Behn v. Burness (1863) Ex. (hj) See last note. EXPRESS CONDITIONS. -303 eluded of a warranty of iiiore or less similar content. In this class the most striking example is Bannerman v. White (n). The case arose on the sale of a year's growth of hops by the grower to hop merchants. It was known that many brewers would not buy hops that had been treated with sulphur. When samples were produced the buyers' representative asked if any sulphur had been used that year, which was denied; and according to the findings of the jury as accepted by the Court, he added that he would not even ask the price if any sulphur had been used. The price being agreed on, the seller gave an express guarantee " against any loss . through the mode of treatment on the poles or curing." It turned out that sulphur had been experimentally applied to a small part of the crop (5 acres out of 300). The seller had honestly forgotten this, in the view of the jury, who expressly negatived wilful misrepresentation. The buyers received the hops, but on discovering that some part was sulphured, and the whole mixed together, refused to accept them. The Court held that there was only one question of substance, namely, what the parties intended; " the inten- tion of the parties governs in the making and the construction of all contracts"; and on the facts as found the intention appeared to be " that the contract should be null if sulphur had been used," and accordingly the buyer was entitled to repudiate the agreement. In the particular case the result may be thought hard on the seller, for his express warranty was to all appearance meant to provide for just such an accident as happened. But this only makes the example more instructive. Promisee's primary right. — We have to remember here that a promisee's first and paramount claim is to fulfilment of the contract according to its terms as reasonably under- {n) (1861) 10 C. B. N. S. 8*4, 128 B. R. 953. 304 CXDNDITIONS, AND HEREIN OP FRUSTEATION. stood; this is best exemplified in a buyer's right to have merchantable goods answering the description in the contract, but the principle is not confined to the contract of sale. In the case of sale it makes no difference that a defect rendering the goods unmerchantable exists in a sample by which they were sold, if that defect is not discoverable by the usual and appropriate inspection (o) ; neither is the general duty cut down by an express warranty of less extent (p) or by a refusal to give any warranty at all (q) . It may be, however, that the description of the thing or performance contracted for is not all in one piece (as where there is a previous declara- tion (p)) or, so far as the words of description go, is sever- able (r) ; and in these cases the satisfaction of it in all points is almost necessarily spoken of as a condition. From this point of view we may consider it not very material whether an essential requirement is laid down as a preliminary condition or embodied in the agreement as a term thereof; but the consideration of such requirements in the light of paramount general intention makes the transition from express to implied conditions easier. Implied conditions. — Formerly our Courts were averse to going beyond the strict letter of instruments, and would only in extreme cases imply terms that were not expressed or at least imported by some generally understood custom. Thus it was decided near the end of Charles I.'s reign that a lease- hold tenant's obligation to pay rent is not affected by the (o) Drummond v. Fan Ingeii (p) Baiinerman v. White, -p. ZQZ, (1887) 12 App. Ca. 284, 56 L. J. above. Q. B. 563; cp. Eeilbutt v. Eickwn (q) Wallis v. Pratt [1911] A. C. (1872) L. K. 7 C. P. 438, 41 394, 80 L. J. K. B. 1058, adopting L. J. C. P. 228, which seemed a Fletcher Moulton L.J.'s dissenting peculiar case at the time, but now judgment below [1910] K. B. 1003, falls quite naturally into its place 1011. under the principles consolidated in (r) Behn v. Burness, p. 302, sect. 15 of the Sale of Goods Act. above. IMPLIED CONDITIONS. 305 destruction of a building demised, or other inevitable accident interrupting his occupation, not even in the extreme case of eviction by public enemies. It was said that supervening disahilitr without the party's fault will excuse him if the duty or charge is created by law and there is no remedj*" over; "but when the party by his own contract creates a duty or charge upon himself, he is bound to make it good if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract" (s). This rule appears to be peculiar to the common law. In the Roman law (t) and in the law of Scotland (m), and pre- sumably in all systems where Roman doctrine jircvails, it is otherwise; and it may be doubtful what an English court would hold at this day if the question were open. But it is concluded here by authority, and modern decisions add (which is only a logical consequence) that it does not matter whether the le^or is insured or not (x), this being merely collateral to the contract between landlord and tenant. The medieval canons of strict construction were perhaps not irrational in their time; there was much to be said for them so long as the superior courts were mostly concerned with solemn and formal instruments. But they became in- (s) Poradine v. Jane, Aleyn, 26. potest") is at the lessor's risk; the Reservation of rent creates the ca^e of hostile eviction — " si in- same duty that an express covenant cursus hostium fiat" — is expressly by the lessee (absent in this case) included. would: ih. Neither the date of the («) Bell, Principles, § 1208. decision nor the reporter's standing («) Leeds v. Cheetham (1827) 1 (see Wallace on the Reporters) can Sim. 146, 27 B. B. 181 ; Loft v. be said to recommend it, but it is Lennis (1859) 1 B. & E. 474, 28 typical of the views then current L. J. Q. B. 168, 117 E. B. 292. and has been uniformly followed. On the effect of special agreements, (t) D. 19. 2. locati conducti, 15. Reynard v. Arnold (1875) L. E. Extraordinary accident in general 10 Ch. 386; Edwards v. West ("oranem vim cui resisti non (1878) 7 Ch. D. 858. -C. 20 ;30B COXDITTONS, AND HEREIN OF FRUSTRATION. convenient when the King's judges took over the common affairs of mankind from the decajdng local and customary jurisdictions; and a series of exceptions was introduced which have grown at an increasing rate since the middle of the nineteenth century, and now, since the notable examples added by cases arising out of the war of 1914, can be regarded as branches of a comprehensive principle. That principle may be broadly stated, without any pretence to exact verbal accuracy, to the following effect. Where the fulfilment of a contract according to the parties' true meaning and intent demands not only their action in conformity with the terms, but the occurrence of events in the normal order contemplated, or the existence or continuance of a normal state of things at the due time of performance, and the material circum- stances are so radically changed by unforeseen accident that the purpose of the contract as a whole is frustrated, there a performance which has become impossible, or though literally possible would be futile, is excused, and both parties are discharged. This, however, is not a rule of positive law, but a canon of interpretation; it is in aid of the parties' presumed reasonable intention and must yield to any sufficient indication of what in fact they intended. There is nothing new in the test of the unforeseen event being " of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made." That was laid down more than half a century ago by Hannen, J., afterwards Lord Hannen, delivering the judgment of the Court of Queen's Bench (t/,). But it was then supposed that the test was applicable only in case of the performance having become actually impossible. Recent authority shows that the application is wider, and gives us an enlarged view by which the real difference between (y) Baily v. Be Crespigny (1869) L. E. 4 Q. B. 180, 185, 38 L. J. Q. B. 98. DISCHARGE BY FRUSTRATION, 307 the archaic rules of construction and the modern endeavour to give effect to the genuine intention is marked. The Indian Contract Act attempted to generalize the doctrine as long ago as 1872. Sect. 56, par. 2, reads:— A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. This is unsatisfactory both in excess and in defect. It purports to lay down a positive rule of law regardless of the parties' intention, and therefore is too wide; yet it fails in terms to include the case of literal performance being possible but useless, and in that respect is too narrow. It does not appear, however, that there has in practice been any material ■divergence from English doctrine. Discharge by Frustration. We shall now proceed to show the application of the principle of discharge by frustration in its several branches, after stating first, for the sake of clearness, the normal rule of positive obligations. Unqualified promises in general. — Generally speaking, a man who makes an unqualified promise thereby not only declares his willingness but vouches for his ability to perform it. Especially this is so where the promise is to pay money or to furnish a known marketable article of commerce. A man may owe a sum certain and have neither ready money nor credit; but, as a great master has said, " There is plenty of money in the world, and it is a matter wholly personal to the debtor if he cannot get the money he has bound himself to pay" (z). Neither is a man excused if he chooses to (z) Saviffny Obi. 1. 384, cp. D. natural! et respiciunt ad facultatem 45. 1. de v.o. 137 § 4 (Venuleius): dandi." '• haec recedunt ab impedimento 20 (2) 308 CONDITIONS, AND HEREIN OF FRUSTRATION. make himself answerable for the acts or conduct of third persons, though beyond his control; or even, it seems, for a contingent event in itself possible and ordinary but beyond the control of man. It has been said that a covenant that it shall rain to-morrow might be good (a), and that " if a man is bound to another in 201. on condition quod pluvia debet pluere eras, there si pluvia non pluit eras the obligor shall forfeit the bond, though there was no default on his part, for he knew not that it would not rain. In like manner if a man is bound to me on condition that the Pope shall be here at Westminster to-morrow, then if the Pope comes not there is no default on the defendant's part, and yet he has forfeited the obligation " (6). "Generally if a condition is to be performed by a stranger and he refuses, the bond is forfeit, for the obligor took upon himself that the stranger should do it"(c). "If the condition be that the obligor shall ride with I. S. to Dover such a day, and I. S. does not go thither that day; in this case it seems the condition is broken, and that he must procure I. S. to go thither and ride with him at his peril " (d). Where the condition of a bond was to give such a release as by the Court should be thought meet, it was held to be the obligor's duty to procure the judge to devise and direct it (e). If a lessee agrees absolutely to assign his lease, the lease containing a covenant not to assign without licence, the contract is binding and he must procure the lessor's consent (/). (a) By Maule J. Canham v. (b) Per Brian C. J. Mich. 22 Barry (1855) 15 C. B. at p. 619, Ed. IV. 26. The whole discussion 24 L. J. 0. P. at p. 106, 101 R. R. there is curious, and well worth at p. 513. Per Oar. Baily v. Be perusal in the book at large. Note Cres-pigny (1869) L. R. 4 Q. B. at Brian's change of opinion as to p. 185. The probability of any the plea in the case at bar, ad fin. such agreement being in fact a (o) Ro. Ab. 1. 452, L. pi. 6. wager (as in the sport of "rain- {d') Shepp. Touehst. 392. gambling,'' well known in India) is (e) Lamb's case, 5 Co. Rep. 23 b. irrelevant to the general principle. (/) Lloyd v. Crispe (1813) 5 UNQUALIFIED PROMISES, 309 Again, there is no reason why a man should not make himself answerable, if he chooses to do so with his eyes open, for accomplishing something very difficult or not known to be practicable. Conceivably a promise might be so extrava- gant or absurd " that the parties could not be supposed to have so contracted " (gr), but I know of only one case in our books that comes anywhere near this description (h) ; nor is it necessary to consider in this country what would be the correct way of dealing with an agreement that appeared on the face of it absurd to the Court but not to the parties (i). In a case of that kind it is not unlikely that the promisee might believe in the possibility of the performance nominally promised, while the promisor did not; this would reduee the matter to a question of fraud, with its usual consequences. As to what may be possible or not in any exact sense, the less said about it the better when we go beyond the impossi- bility of a proposition and its contradictory being both true under identical conditions. In the early editions of this book it was suggested with some diffidence that an agreement to make a practicable flying machine need not be regarded as Taunt. 249, 14 R. R. 744; cp. Holt to be "only impossible with Canheim v. Barry (1855) 15 C. B. respect to the defendant's ability," 597, 24 L. J. C. P. 100, 100 R. R. though it was urged for the defeii- 50a. Otherwise as to sale of shares dant tliat " all the rye in the world in a company for which the was not so much." No judgment) director's assent is required, on the was given, the ease being settled. Stock Exchange at all events: The point that the parties could Stray v. Russell (1859) Q. B. &; not have been in earnest was not Ex. C!h. 1 E. & E. 188, 196, 28 made. L. J. Q. B. 279, 29 L. J. Q. B. («) "A. agrees with B. to dis- 115; Lindley on Companies, 491. cover treasure by magic. The (<7) Brett J. in GUford v. Watts agreement is void ": I. C. A. s. 56, (1870) L. R. 5 C. P. at p. 588. ill. (a). An agreement in that {K) In Thornborow v. Whitacre form would hardly occur; if A. did (1706) 2 Ld. Raym. 1164, a promise discover the treasure, with or with- to deliver two grains of rye on a out performance of magic rites, it certain Monday, and four, eight, would probably be held that the sixteen &c.,on alternate Mondays specification of means was. not following for a year, was said by material. 310 CONDITIONS, AND HEREIN OP FRUSTRATION. absolutely impossible. At this day many supposed immut- able verities of physics and even mathematics have come to be allowed only a relative validity sufficient for usual pur- poses. Definition of " quod natura fieri non concedit " is no such easy matter as it appeared to the Roman jurists (fc) or to our own ancestors. Putting the hypothetical case of obvious absurdity aside, a thing is not to be deemed impossible merely because it has never yet been done, or is not known to be possible. " Cases may be conceived," said WiUes J. (Z), " in which a man may undertake to do that which turns out to be impossible, and yet he may still be bound by his agreement. I am not pre- pared to say tha?t there may not be cases in which a man may have contracted to do something which in the present state of scientific knowledge may be utterly impossible, and yet he may have so contracted as to warrant the possibility of its performance by means of some new discovery, or be liable in damages for the non-performance, and cannot set up by way of defence that the thing was impossible. But, before we arrive at such a conclusion, we must be satisfied, if no other reasonable construction suggests itself, that the party really did intend to warrant that to be possible which was impossible." If a man may bind himself to do something which is only not known to be impossible, much more can he bind himself to do something which is known to be possible, however expensive and troublesome; and it will make no difference, provided that his promise was really unqualified, if perform- ance turns out not to be practicable in the manner contracted for, or at all. Nor does it matter whether the impediment exists at the date of the contract, or arises from events which happen afterwards (m). Thus an absolute contract to load (/fc) D. 45. 1. de v.o. 53 pr. (»«) Atkinson v. Ritchie (1809) (0 Clifford V. Watts (1870) 10 East, 530, 10 E. R. 372. L. R. 5 0. P. 577, 585. DIFFICULTY NO EXCUSE. 311 a full cargo of guano at a certain island was not discharged by there not being enough guano there to make a cargo (n): and where a charter-party required a ship to be loaded with usual despatch, it was held to be no answer to an action for delay in loading that a frost had stopped the navigation of the canal by which the cargo would have been brought to the ship in the ordinary course (o). Still less will unexpected diiEculty or inconvenience short of impossibility serve as an excuse. Where insured premises were damaged by fire and the insurance company, having an option to pay in money or reinstate the building, elected to reinstate, but before they had done so the whole was pulled down by the authority of the Commissioners of Sewers as being in a dangerous con- dition; it was held that the company were bound by their election, and the performance of the contract as they had elected to perform it was not excused (p). So again if a man contracts to do work according to orders or specifications given or to be given by the other contracting party, he is bound by his contract, although it may turn out not to be practicable to do the work in the time or manner prescribed. Plaintiffs contracted to erect certain farm buildings according to plans and specifications furnished to them, together with (n) Hills V. Sughrue (1846) 15 E. E. 473. So where a given num- M. ifc W. 253, 71 E. E. 651. This ber of days is allowed to the case turned in part on the unusual charterer for unloading, he is held , incident of the charter-party pro- to take the risk of any ordinary viding that the cargo was to be vicissitudes which may cause delay: found by the owner. "He is to Thiis v. Byers (1876) 1 Q,. B. D. receive freight at a high rate, and 244, 45 L. J. Q. B. 511. it looks very much like a contract (jo) Brown, v. Royal Insurance for supplying guano at that Co. (1859) 1 E. & B. 853, 28 L. J. price: " Parke B. at p. 261. Q. B. 275, 117 E. E. 492, diss. Whether it can be reconciled with Erie J. who thought suoh a rein- lafcer authorities or not (see Anson, statement as was contemplated by 382) it is too peculiar to be a safe the contract (not being an entire guide. rebuilding) had become impossible (o) Kearon v. Pearson (1861) 7 by the act of the law. H. & N. 386, 31 L. J. Ex. 1, 126 312 CONDITIONS, AND HEREIN OP PEUSTRATION. any alterations or additions within specific limits which the defendants might prescribe, and subject to penalties if the work were not finished within a certain time. And they expressly agreed that alterations and additions were to be completed on the same conditions and in the same time as the .works under the original contract, unless an extension of time were specially allowed. It was held that the plaintiffs, ■having contracted in such terms, could not avoid the penalties for non -completion by showing that the delay arose from alterations being .ordered by the defendants which were so mixed up with the original work that it became impossible to complete the whole within the specified time (g). A con- tractor undertook to execute works according to specifications prepared by the engineer of a corporation. It turned out that an important part of the works could not be executed in the manner therein described, and after fruitless attempts in which the plaintiff incurred much expense, that part had to be executed in a different way. It was hold that no warranty could be implied on the part of the corporation that the plans were such as to make the work in fact reasonably practicable, and that the plaintiff could not recover as on such a warranty the value of the work that had been thrown away (r). The judgments in the House of Lords leave it an open question whether, assuming the extra work thus caused not to liave been extra work of the kind contemplated by the contract itself and to be paid for under it, the plaintiff might not have (g) Jones i. St. John's CoUeffe^ (>■} T/wrn v. Mai/or of London Oxford (1870) L. R. 6 Q. B. 115, (1&76> L. R. 9 Ex. 163, in Ex. C]j. 124, 40 L. J. Q. B. 80. The case 10 Ex. 112, affd. in H. L, 1 was argued on demurrer, so that App. C'a. 120, 45 L. J. Ex. 487. the agreement was admitted as Qu. whether, assuming the extra pleaded. Such an agreement will work not to have been of a kind not be implied, or inferred from contemplated by the contract itself, ambiguous terms: Dodd v. CJmrton the plaintiff might have recovered [1897] 1 Q. B. 563, 66 L. J. Q. B. for it on a quantum meruit : sea ill, C. A. 1 App. Ca. 128, 135. PROHIBITION ABROAD. 313 recovered for it as on a quantum meruit. In short, it is admitted law that generally where there is a positive contract to do a thing not in itself unlawful, the contractor must perform it, or pay damages for not doing it, although in consequence of unforeseen accidents the performance of his contract has become unexpectedly burdensome or even impossible (s). In Barlcer v. Hodgson (t) intercourse with the foreign port to which a ship was chartered was prohibited on account of an epidemic prevailing there, so that the freighter was pre- vented from furnishing a cargo; but it was held that this did not dissolve his obligation. So where the goods are confiscated at a foreign port that was held no answer to an action against the shipowner for not delivering them (ii). The authority of these cases, however, is now doubtful (x). But where the act of a foreign local authority prevents both parties from performing their respective parts of the contract, both are excused (y). It may be useful, even if superfluous for experienced readers, to note that cases of the last-mentioned class are apt (s) Taylor v. Caldwell {\W6Z) 3 portation of the cargo contracted B. & Si. 826, 833, 32 L. J. Q. B. for was forbidden by local law. 164, 166. This rule does not ex- (u) Spence v. Chodwick (1847) tend beyond express contracts. An 10 Q. B. 517, 16 L. J. Q. B. 313, undertaking to be answerable for 74 E. R. 417. delay caused by vis maior, or othea- {x) See [1920] 2 K. B. 291, 297, causes beyond the contractor's con- 303. trol and apart from any default (j/) Cunningham v. Dunn (1878) on his part, cannot be made part 3 C. P. Div. 443; Rcdli v. Cia. ■of an implied contract: Ford v. Naviera [1920] 2 K. B. 287, 89 L. J. Cotesworth (1870) (Ex. Ch.) L. E. K. B. 999, C. A. If the making 5 Q. B. 544, 39 L. J. Q. B. 188; or execution of an agreement is HicJc V. Raymond [1893] A. C. 22, forbidden by the law of the juris- ^2 L. J, Q. B. 98. diction, performance, whether {i) (1814) 3 M. & S. 267, 15 practicable or not, is unlawful, and E. R. 485, cp. Jacobs v. Credit the case oomea under a different Lyonnais (1884) 12 Q. B. Div. 589, head: see next chapter. 53 L. J. Q. B. 156, where the ex- 314 CONDITIONS, AND HEREIN OF FRUSTRATION. to be complicated with other questions, and especially with doubts as to the proper law of the contract {z). Where a contract is to be performed abroad, the existence at the place of performance of a ground of excuse recognized by the local law, but not by English law, will be no discharge here unless it otherwise appears that the local law was intended to govern the parties' obligations (a). Act of God, dc. — Generally it is still true that in our law (subject to the special incidents of certain contracts such as those of common carriers and bailees) " a person who expressly contracts absolutely to do a thing not naturally impossible is not excused from non-performance because of being prevented by vis major" (fe). With regard to the term " vis major " and the English equivalent, " act of God," it is idle, especially in the light of recent authorities, to seek for a general definition (c) . Such terms, and also the French " force majeure," now not uncommon in English commercial contracts, which is wider {d), have to be construed when parties make use of them by way of express exception, but their effect varies with the nature of the transaction (e). At all events the act of God does not include all inevitable accidents; contrary winds, for example, are not within the meaning of the term in a charter-party, for the risk of con- trary winds, though inevitable, is one of the ordinary risks which the parties must be understood to have before them and to take upon them in making such a contract: therefore (z) As to this see further, p. 463 W Cp. Cod* Civ. § 1148 (in- sgq. below. crease of the promisor's burden (a) Jacobs v. Credit Lyonnais, under a contract, short of impossi- note (0, p. 313, above. bility, is not " force majeure," see (6) lb. 12 Q. B. Div. at p. 603 note in ed. Dalloz) ; Lebeaupin v. (Our. per Bowen L.J.). Crispin [1920] 2 K. B. 714, 719, (c) Vis maior quam Graeci SeoD 89 L. J. K. B. 1024. g;«» appellant: D. 19. 2. locati, (e) [1920] 2 K. B. 720. 25 §6. ACT OF GOD. 315 it is said that the event must be not merely accidental, but overwhelming (/). But on the other hand the term is not confined to unusual events: death, for example, is an " act of God " as regards contracts of personal service, because in the particular case it is not calculable. Yet the fact that this very event is not only certain to happen, but on a sufficiently large average is calculable, and therefore in one sense can be guarded against, is the foundation of the whole system of life annuities and life insurance {g). Again, death is inevitable sooner or later, but may be largely prevented as to particular causes and occasions. The effects of tempest or of earthquake may be really inevitable hj any precaution whatever. But fire is not inevitable in that sense. Precautions may be taken both against its breaking out and for extinguishing it when it does break out. We cannot arrive, then, at any more distinct conception than this: An event which, as between the parties and for the purpose of the matter in hand, cannot be definitely foreseen or controlled. In other words, we are thrown back upon the nature and construction of the particular contract Qi) to ascertain what risks each party was content to bear. Special Exceptions. We now come to the exceptions. They are found in the following kinds of circumstances: — A. Where the performance is required to be in person, death or disablement of the promisor. (/) Per Majtin B. Oahley v. to a duty imposed not specially by Portsmouth ^- Ryde Steam Packet contract but by the general law, Co. (1856) 11 Ex. 618, 22 L. J. Ex. see Nichols v. Mardand (1876) 2 99, 105 B. E. 684, 688. Ex. Div. 1, 46 L. J. Ex. 174; (gr) As the medieval adage puts Nugent v. Smith (1876) 1 C. P. it, "Nihil morte certius, nihil in- Div. 423, 444, 45 L. J. O. P. 6^7; certius hora mortis." Commissioners of Sewers v. Seff. (A) As to what is such an "act (1886) 11 App. Ca. 449. of God " as will make an exccDtion 316 CONDITIONS, AND HEREIN OF PRUSTEATION. B. Destruction, or failure of production, of the subjectr matter. C. Failure of assumed essential state of facts. D. External interference of an extraordinary nature. In such cases, with certain limitations and subject to a few peculiar survivals of narrower rules, a promisor is not pre- sumed to take the risk of inevitable accident frustrating the purpose of the contract. A. Contract for personal services conditional on continuing ability. A contract which can be performed only by the pro- misor in person is subject to the implied condition that he shall be alive to perform it, so that if he dies with the contract unperformed, his executor is not therefore liable to au action. This is long settled law (i). Conversely, if a contract for personal service does not mention assigns, and the master dies during the _ service, the servant is thereby discharged, and cannot treat the contract as in force against the master's personal representatives, for " personal con- siderations are of the foundation of the contract" (fc). The passage now cited goes on to suggest the extension. Later authorities have extended the principle to the case of the party becoming, without his own default, incapable of fulfilling the contract in his lifetime. In Boast v. Firth (l) a master sued the father of his apprentice on his covenant in the apprenticeship deed that the apprentice should serve him, the plaintiff, during all the term. The defence was that the apprentice was prevented from so doing by permanent illness arising after the making of the indenture. The Court held (0 Pollock C.B. in Hall v. L. R. 4 C. P. 744, 38 L. J. C. P. JFright (1858) E. B. & E. at 326. p. 793, 29 L. J. Q. B. at p. 51, (I) (1868) L. Ei. 4 O. P. 1, 38 113 K. R. 891. L. J. C. P. 1. (k) Fnrrmv v. JVilson (1869) PERSONAL SERVICES. 317 that " it must be taken to have been in the contemplation of the parties when thej- entered into this covenant that the prevention of performance by the act of God should be an excuse for non-performance " (to), and that the defence was a good one. In Robinson v. Davison (n) the defendant's wife, an eminent pianoforte player, was engaged to play at a concert. When the time came she was disabled by illness. The giver of the entertainment sued for the loss he had incurred by putting off the concert, and had a verdict for a small sum under a direction to the effect that the per- former's illness was an excuse, but that she was bound to give the plaintiff notice of it within a reasonable time. The sum l-ecovered represented the excess of the plaintiff's expenses about giving notice of the postponement to the public and to persons who had taken tickets beyond what he would have had to pay if notice had been sent him by telegraph instead of by letter. The Court of Exchequer upheld the direction on the main point. The reason was thus shortly put by Bramwell B. " This is a contract to perform a service which no deputy could perform, and which in case of death could not be performed by the executors of the deceased: and I am of opinion that by virtue of the terms of the original bargain incapacity either of body or mind in the performer, without default on his or her part, is an excuse for non- performance " (o). The same judge also observed, in effect, that the contract becomes not voidable at the option of the party disabled from performance, but wholly void. Here the player could not have insisted " on performing the engagement, however ineffectually that might have been," when she was really unfit to perform it. The other party^s right to treat the contract as annulled was afterwards estab- (■«) Per Montague Smith J. at (») (1871) L. B. 6 Ex. 269, 40 p_ 7_ L. J. Ex. 172. (o) (1871) L. R. 6 Ex. at p. 277. 318 CONDITIONS, AND HEREIN OF FEUSTBATION. lished by a direct decision (p) . No positive opinion was expressed on the other point as to the duty of giving notice, but it may be taken as correct that it is the duty of the party disabled to give the earliest notice that is reasonably practicable, not necessarily notice reasonable in itself, for the disabling accident may be at the last moment, and the duty must be limited to cases where notice can be of some use (q). It further appears from the case that the effect of an omission of this duty is that the contract remains in force for the purpose only of recovering such damage as is directly referable to the omission; and further, if express authority be required for it, that it matters not whether the disability be permanent or temporary, but only whether it is such as to prevent the fulfilment of the particular contract. In the event of the disabled party having suffered from the breach of contract or negligence of a third person, and being entitled to a remedy against that person, a question of subrogation might possibly arise, but this does not appear to have been j udicially considered . In the earlier and very peculiar case of Hall v. Wi'iffht (r) a majority of the Exchequer Chamber refused to apply this principle to the contract to marry. The question of substance was thus stated: "Is it a term in an ordinary agreement to marry, that if a man from bodHy disease cannot marry with- out danger to his life, and is unfit for marriage from the cause mentioned at the time appointed, he shall be excused (p) Poussard v. Spiei-s # Fond L. J. Q. B. 345; in Ex. Ch. E. B. (1876) 1 Q. B. D. 410, 45 L. J. & E. 765, 29 L. J. Q. B. 43, 113 Q. B. 621, where the only difficulty E. E. 861, 874, by Watson B., waa on the findings of fact. Willes J., Crowder J., Williams J. {q) Cp. the doctrine as to giving (with Lord Campbell C.J. and notice of abandonment to under- Crompton C.J. in the Q. B.) writers, Itanlcin v. Potter (l&'ti-Z) against Pollock C.B., Bramwell B. L. E. 6 H. L. 83, 121, 157, 42 and Watson B. (with Wightman J. L. J. C. P. 169. and Erie J. below). (y) (1858) E. B. & E. 746, 27 CONTRACT TO MARRY. 319 marrving then? " (s) or in other words: " Is the continuance, of health, of such a state of health as makes it not improper to marry," an implied condition of the contract? (t). The majority relied upon two reasons: that if the man could not marrjr without danger to his life, that did not show the performance of the contract to be impossible, but at most highly imprudent; and that at any rate the contract could be so far performed as to give the woman the status and social position of a wife. It was not disputed that the contract was voidable at her option (m) . The canon law as to impediments was also discussed. With great respect, this does not seem to aSord any safe or useful analogy in an action at common law for damages. It is not easy to reconcile the decision with the principle affirmed in Geipel v. Smith (x), that when the main part of a contract has become impossible of performance by an excepted cause, it must be treated as having become impossible altogether. Moreover impossibility is not the real test, as now appears in the other classes of exceptional cases. Hall V. Wright " has been much observed upon " (t/) and has not been followed in American courts. At this day its (s) Per Bramwell B. E. B. & E. tract to marry is so far personal 777. that executors, in the absence of («) Per Pollock O.B. ib. 794. special damage to the personal (w) "TEe man, though he may estate, cannot sue upon it: Cham- be in a bad state of health, may herlain v. Williamson (1814) 2 nevertheless perform his contract M. & S. 408, 15 R. R. 295. And to marry the woman, and so give they cannot, except perhaps for her the benefit of social position special temporal damage, be sued: so far as in his power, though he Firday v. Chirney (1888) 20 Q. B. may be unable to fulfil all the Div. 494, 57 L. J. Q. B. 247. obligations of the marriage state; (k) (1872) L. R. 7 Q. B. 404, 41 and it rests with the woman to L. J. Q. B. 153. say whether she will enforce or (,y) Phillimore L.J., Jef arson renounce the contract." The case v. Pashcll [1916] 1 K. B. 57, 70, is thus explained and distinguished 85 L. J. K. B. 398, C. A., a case by' Montague Smith J. in Boast v. mainly on the special facts, where Mrth (1868) L. R. 4 C. P. 8. It the plaintiff was the temporarily has long been settled that the con- disabled party. 320 CONDITIONS, AND HEREIN OF FRUSTRATION. authority here extends only to what it actually decided. To that extent it can be reviewed only in the House of Lords. The rule now before us applies only to contracts for actual personal services. A contract of which the performance depends less directly on the p»romisor's health is not pre- sumed to be conditional. If a man covenants to insure his life within a certain time, he is not discharged by his health becoming so bad before the end of that time as to make his life uninsurable (z) . It has never been supposed that the current contracts of a manufacturing firm are affected in law by the managing partner being too ill to attend to business, though there are many kinds of business in which the proper execution of an order may depend on the supervision of a particular person. And in general terms it may be said that no contract which may be performed by an agent can be discharged by a cause of this kind, unless the parties have expressly so agreed. Further, it is a rule not confined (as we shall see) to contracts for personal services that the dis- solution of a contract by frustration of its purpose does not affect any specific right already acquired under it. Where there is an entire contract of this kind for work to be paid for by instalments at certain times, any instalments which have become due in the contractor's lifetime remain due to his estate after the contract is put an end to by his death (a) . In like manner where a premium has been paid for appren- ticeship, and the master duly instructs the apprentice for a part of the term and then dies, his executors are not bound to return the premium or any part of it as on a failure of, consideration (b). (a) Arthur v. Wynne (1880) 14 value of the work actually done Ch. D. 603, 49 L. J. Ch. 557. was due). (ffl) Stubbs V. Holywell Ry. Co. (b) Whincup v. Hughes (1871) (1867) L. R. 2 Ex. 311, 36 L. J. L. R. 6 O; P. 78, 40 L. J. C. P. Ex. 166 (consulting engineer: the 104; ?e™s v. Carr (1885) 28 Ch. D. company contended that only the 409, 54 h. J. Ch. 578. EXISTENCE OF SPECIFIC THING. ^21 B. Destruction or failure of subject-matter. The leading case on this head is Taylor v. Caldwell {c). The defendants agreed to let the plaintiffs have the use (c) of the Surrey Gardens and Music-hall on certain days for the purpose of giving entertainments. Before the first of those days the music-hall was destroyed by fire so that the entertainments could not be given, and without the fault of either party. The Court held that the defendants were excused, and laid down the following principle: "Where from the nature of the contract it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfilment of the con- tract arrived, some particular specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what was to be done ; there in the absence of any express or implied {d) warranty that the thing shall exist, the contract is not to be considered a positive contract, but subject to the implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor " (e). (e) (1863) 3 B. &; S. 826, 32 (e) The Court referred to the L. J. Q. B. 164, 129 E. E. 573. Roman law as to obligations " do There were words sufficient for an oerto oorpore," D. 45. 1. de v. o. actual demise, but the Court held 23, 33. Cp. also D. 46. 3. de solut. that the mamfe3t general intention 107. Verborum obligatio aut natu- prevailed over them. The plaintiffs raliter resolvitur aut civiUter; were to provide the " stars," such naturaUter, veluti solutione, aut as " Mr. Sims Eeeves, God's will cum res in stipulationem deducta permitting,'' and the defendants sine culpa promissoris in rebus the minor usual entertainments of humanis esse desiit. Pothier, Obi. which the reader may find a list § 149, ib. Part 3, ch. 6, §§ 649, in the report. sqq., and Contrat de Vente, § 308, (rf) That is, understood in fact sqq. translated in Blackburn on between the parties: the whole Sale, 173 (249 in 2d ed. by- scope of the passage being that it Graham). is not to be implied by law. 31 322 CONDITIONS, AND HEREIN OF FRUSTRATION. It is put more shortly near the end of the judgment: " In contracts in [? of] which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance." In Appleby v. Myers (/) the plaintifis agreed with the defendant to erect an engine and other machinery on his premises, at certain prices for the separate parts of the work, no time being fixed for payment. While the works were proceeding, and before any part was complete, the premises, together with the uncompleted works and materials upon them, were accidentally destroyed by fire. In the Common Pleas it was held that the plaintiffs might recover the value of the work already done as on a term to that effect to be implied in the nature of the contract. In the Exchequer Chamber the judgment of the Common Pleas was reversed. It was admitted that the work under the contract could not be done unless the defendant's promises continued in a fit state to receive it. It was also admitted that if the defendant had by his own default rendered the premises unfit to receive the work, the plaintiffs might have recovered the value of the work already done. But it was held that the Court below were wrong in thinking that there was an absolute promise or warranty by the defendant that the premises should at all events continue so fit. "Where, as in the present case, the premises are destroyed without fault on either side, it is a misfortune equally affecting both parties, excusing both from further performance of the contract, but giving a cause of action to neither." Another argument for the plaintiffs was that the property in the work done had passed to the (/) (1867) I/. R. 2 C. P. 651, in that the tag earned nothing when Ex. Ch. revg. s. c. 1 C. P. 615, 36 the vessel was accidentally stranded Xi. J. 0. P. 331: applied in a before the end of the journey: towage case where it was held The Madras [1898] P. 90. DESTRUCTION OF SUBJECT-MATTER. 323 defendant and was therefore at his risk (g). To this the Court answered that it was at least doubtful whether it had; and even if it had, the contract was still that nothing should he payable unless and until the whole work was completed. A. contractor for work to be paid for in a lump sum can recover for part only if he has been prevented from com- pleting the work by the other party's default, or if there is a new contract to pay for what has been done (h) . Where there is an entire contract for doing work upon specific property, as fitting a steamship with new machinery, for a certain price, but the price is payable by instalmenta, and the ship is lost before the machinery has been delivered, but after one or more of the instalments has been paid, the further performance of the contract is excused, but the money already paid, though on account not of a part, but of the entire contract, cannot be recovered back (^) . The same doctrine has been applied whore the subject- matter of the contract is a future specific product or some part of it. In March A. agreed to sell and B. to purchase 200 tons of potatoes grown on certain land belonging to A. {ff) In the case cited in argu- (A) See Forman 4- Co. v. Ship ment from Dalloz, Jurisp. G^n. " Liddesdale " [1900] A. C. 190, 1861, pt. 1. 105, Ch-emin de fer du 202, 69 L. J. P. C. 44. In Dauphine v. Clet (1861) where America, however, recovery for the railway works in course of con- work done is generally allowed: struotion had been spoilt by floods, see Prof. WilUston's note here in the Court of Cassation relied on the the American edition, distinction that they were not such (») Anglo-Egyptian Navigation as remained in the contractor's Co. v. Sennie (1875) L. E. 10 disposition till the whole was C. P. 271, U L. J. C. P. 130. It finished, but '-'des constructions dont would seem the same on principle les mat^rianx et la main d'oeuvre where the whole price is paid in etaient fonrnis par I'entrepreneur advance. The destruction of a et qui s'incorporaient au sol du place of business does not discharge propri6taire," as excluding the ap- a continuing contract to carry on plication of articles 1788-1790 of the business if it is capable of the Code OivU, which lay down a being resumed elsewhere: Turner rule similar to that of the prin- v. Goldsmith [1?,91] 1 Q. B. 544, cipal case. 60 L. J. Q. B. 247, C. A. 21(2) 324 CONDITIONS^ AND HEREIN OP FEUSTRATION. In August the crop failed by the potato blight, and A. was unable to deliver more than 80 tons: the Court held that he was excused as to the rest. " The contract was for 200 tons of a particular crop in particular fields . . . not 200 tons of potatoes simply, but 200 tons off particular land . . and therefore there was an implied term in the contract that each party should be free if the crop perished" (fc). Extension to failure of essential conditions without material destruction. — The rule in Taylor v. Caldwell is now extended to cases where, without the destruction of any material object, a state of things contemplated by the parties as essential for performance according to their true intent fails to exist when the time for performance arrives, and this whether it is expressly mentioned in the terms of the contract or not(Z). The principal group of cases arose out of the postponement, by reason of King Edward VII. 's illness, of the coronation procession appointed to take place in Juty, 1902. As in other cases of frustration by matter subsequent, the contract is not avoided ah initio when the failure of the condition assumed as its foundation is ascer- tained, but all outstanding obligations under it, and those only, are discharged; that is, payments already made cannot be recovered back, and any payment actually accrued due is still recoverable (m) . If, on the other hand, the parties have contemplated and provided for any such contingency, no (K) Howell V . Coupland (1876) Service Co-operative Society v. 1 Q. B. D. 258, 43 L. J. Q. B. General Steam Navigation Co. 201, O. A. [1903] 2 K. B. 756, 72 L. J. K. B. (Z) In Krell v. Henry [1903] 2 933, is an intermediate case. K. B. 740, 72 D. J. K. B. 794, the (m) Per Collins M.R. [1904] 1 agreement was for the hire of K. B. atp. 499, per Homer L.J. ii. rooms, in fact to view the proces- at p. 501; the rule is admitted to sion, but in terms it was unoon- be to some extent arbitrary, and ditional: in Chcmdler v. Webster justifiable only because a perfect [1904] 1 K. B. 493, 73 L. J. K. B. adjustment of rights is impraetic- 401, it was expressly "to view the able. It is not clear that a less first coronation procession "; Civil arbitrary one could not be devised. CORONATION CASES. 323 general rule is necessary or applicable, and there is nothing for the Court to do but to construe the special contract on an ordinary business footing (w). Similarly, a contract for the delivery of cargo to be shipped at Alexandria in a named ship during a certain month was held to be discharged by an accident to the ship which stranded her in the Baltic before the time for performance; in other words the contract was conditional on that ship continuing to exist as a cargo-carrying ship available for the performance of the contract (o). But in a later case the Court of Appeal would not be persuaded that a ship chartered in the summer of 1902 for the purpose of conveying passengers to see the naval review intended to take place at Spithead had failed to exist " as a review-visiting ship," and that the charterer was discharged on that ground. It was the charterer's own venture and risk, and this was not altered by the nature of the intended voyage being specified (j?) . In fact, the intended object, including as it did a cruise round the fleet, was not wholly frustrated, but this consideration does not seem necessary for the decision. Where the condition alleged to be of the essence of the contract is not the definite fact of a specific thing existing or not existing, the application of the general principle becomes more difficult, as Lord Parker observed (q) . But the Court will not in any case entertain mere conjectures. It will not impute to the parties reliance on particular facilities for the performance of the contract of which they; or one of them knew nothing at the time, although they were in fact material aiid were displaced by inevitable accident. (») JElliott V. Crutchley [1906] v. Eutton [1903] 2 K. B. 683, 72 A. C. 7, 75 L. J. K. B. 147. L. J. K. B. 379. (o) Nicholl V. Ashton [1901] 2 (?) Tamplin S. 8, Co. v. k. B. 126, "70 L. J. K. B'. 600, Anc/lo-Mexiixin Petrolwm Co.. A. C. [19i6]'2 A. C. at p. 423. (ju) Heme Buy Steamboat Co. 326 CONDITIONS, AND HEREIN OP FRUSTRATION. Parties cannot be deemed to contemplate conditions as essential of which they were not aware at all; for example,; a seller's method of procuring the goods he undertakes to deliver, when the buyer neither knows nor concerns himself about it (r) . Such a case is quite different from the failure; of a mode of transport or the like, specially contemplated by the contract. Many years ago it was decided, though the wide bearing of the reasons was not yet apparent, " that a delay in carrying out a charter-party, caused by something for which neither party was responsible, if so great and so long as to make it unreasonable to require the parties to go on with the adventure, entitled either of them, at least while the contract was executory, to consider it at an end " (s). This is impor- tant with reference to the impediments due to exercise! of: paramount public authority within or outside the jurisdiction which we shall presently consider. In Horlock v. Beal.(t)^ for example, the opinions of the majority of the Lords expressly rely on this line of authority. Only in our owhi day it has converged with that which is derived from Taylot V. Caldwell. In the earlier maritime cases we find, as a recent able writer has observed, " a definitely maritime flavour " as of rules in special matter, and but little reference to the larger common law principles (m) . (r) Blackburn Bobbin Co. v. as analogous, and to whioh, if to Allen [1918] 2 K. B. 467,-87 L. J. any one source, the doctrine of K. B. 1085, C. A. frustration may be traced; it is (s) Lord Blackburn in Dahl v, expressly approved by Lord Black- Nelaon (1881) 6 App. Ca. 38, S3, burn, ubi sup. See fiirtlier citing Geipel v. Smith (1872) MoCardie J.'s critical survey of the L. R. 7 Q. B. 404, 41 L. J. Q. B. authorities in Blackburn Bobbin 153; Jackson v. Union Marine In- Co. v. Allen [1918] 1 K. B. 540. surance Co. (1874) L. R. 10 C. P. {t) [1916] 1 A. C. 486, 85 L. J. 125, 44 L. J. C. P. 27, Ex. Ch., K. B. 602. , see especially the judgment of («) MoNair on Legal EfEeets of Bramwell B. which does refer War, 1920, p. 86. to the case of personal service MISTAKE AS TO EXISTING CONDITIONS. 327 C. Failure of assumed conditions at date of contract. Like results may be produced by the uoix-existence at the date of the contract oE a thing or state of things assumed to exist by the parties. In such cases performance is excused to the same extent and for the same reasons as if the failure of the assumed conditions had supervened. The simplest case is where the subject-matter of the agreement is some specific property or interest in property, but at the date of the contract there is nothing answering the description. This may be due to accident of which the parties are not yet informed, or merely to wrong information accepted by both. Either way there is a common mistaken assumption, and hence it has been usual to refer this class of cases to Mistake, or from a common law point of view to include them in the capacious rubric of Failure of Consideration. Neither way, however, is adequate or wholly correct. It was useful for equity practitioners, in the time of divided jurisdiction, to enlarge their borders under cover of a name already recog- nized in the Court of Chancery; but the only rational purpose of mentioning mistake in this connection is to exclude the supposition of fraud, which would introduce new elements and call for a different mode of treatment. We proceed to give some tj^pical examples. In Couturier v. Hastie {x) a bought note had been signed for a cargo of Indian corn described as "of fair average quality when shipped from Salonica." Several days before the sale, but unknown to the parties, the cargo, then on the voyage, was found to be so much damaged from heating that the vessel put into Tunis, where the cargo was sold. The only question seriously disputed was what the parties really meant to deal with, a cargo supposed to exist as such, or a mere expectation of the arrival of a cargo, subject to whatever might have happened since it was shipped. Lord Cranworth. (x) (1856) 5 H. L. C. 673, 25 L. J. Ex. 253, 101 E. E. 329. 328 CONDITIONS, AND HEREIN OF FRUSTRATION. ill the House of Lords, in accordance with the opinion of nearly all the judges, held that "what the parties contem- plated, those who sold and those who bought, was that there was an existing something to be sold and bought." No such thing existing, there was no contract which could be enforced. When a lessee under a mining lease covenants in unqualified terms to pay a fixed minimum rent, he is bound to pay it («/), though the mine may turn out to be not worth working or even unworkable. But it is otherwise with a covenant to work the mine or to raise a minimum amount. Where a coal mine was found to be so interrupted by faults as to be not worth working, it was said that the lessor might be restrained from suing on the covenant to work it on the terms of the lessee paying royalty on the estimated quantity of coal which remained unworked (z). A similar question was fully dealt with in Clijford v. Watts (a). The demise was of all the mines, veins, &c. of clay on certain' land. There was no covenant by the lessee to pay any minimum rent, but there was a covenant to dig in every year of the term not less than 1,000 tons nor more than 2,000 tons of pipe or potter's clay. An action was brought by the lessor for breach of this cove- nant. Plea (6), to the effect that there was not at the time of the demise or since so much as 1,000 tons of such clay under the lands, that the performance of the covenant, had always been impossible, and that at the date of the demise the defendant did not know and had no reasonable means of knowing the impossibility. The Coiart held that upon tlie natural construction of the deed the contract was that tlie lessee should work out whatever clay there might be under the land, and the covenant sued on was only a subsidiary (y) Marqus of Biiie v. Thonip- («) (1870) L. R. 5 C. P. 577, son (1844) 13M. & W. 487, 17 40 L. J. C. P. 36. L. J. Ex. 95, 67 E. R. 688. So (6) It was pleaded as an equit- in equity, Ridgirriy v. Sneyd able plea under the C. Xi. P. Act, (1854), Kay, 627, 101 R. p. 776. but the Court , treated the defence (z) Ridffway \-. Sneyd, last-dote. as a legal one. EXCEPTIONS IN COMMERCIAL CONTEACTS. 329 provision fixing the rate at which it should be worked. The tenant could not be presumed to warrant that clay should be found: and " the result of a decision in favour of the plaintiff would be to give him a fixed minimum rent Avhen he had not covenanted for it" (c). Exceptions in commercial contracts. — Express exceptions providing against such events as we are considering are usual in several kinds of commercial and especially mari- time contracts. The terms of those exceptions, however, are archaic and general, and the Court has in substance to appeal to principle to settle their application. On the questions thus arising, which are really not ordinary questions 6f construc- tion, certain points have been decided which have become part of the wider doctrine. Where the principal part of the con- tract becomes impracticable by an excepted risk, the parties are also discharged from performing any other part which remains possible, but is useless without that which has become impossible (d) . It is a general principle that a con- tract is not to be treated as having become impossible of performance if by any reasonable construction it is still capable in substance of being performed (e): but on the other hand special exceptions are not to be laid hold of to keep it in force contrary to the real intention. Thus where the contract is to be performed " with all possible despatch," saving certain impediments, the partj^ for whose benefit the (c) Per Montague Smith J. alovc, was decided on its peculiar L. E. 5 C. P. at p. 587. Cp. and facts. See L. E. 5 C. P.' at dist. Jenis v. Tomkiiinon (1856) pp. 586, 589. 1 H. & N. 195, 26 L. J. Ex. 41, (d) Geipel v. Smith (1872) 108 S. E. 516, where the covenant L. E. 7 Q. B. 404, 411, 41 L. J. was not only to get 2,000 tons of Q. B. 153. rock salt per annum, but to pay (e) The Teutonia (1872) L; R. 6d. a ton for every ton short, and 4 P. C. 171, 182, 41 L. J. Ad. the lessees knew of the state of 57. Cp. Jones v. Molm (1867) the mine when they executed, the L. E. 2 Ex. 335.. lease. Hills v. Siighi'ue, p.. 311, 330 CONDITIONS, AND HEREIN OF FRUSTRATION. saving is introduced cannot force the other to accept perform- ance after a delay unreasonable in itself, though due to an. excepted cause, if the manifest general intention of the parties is that the contract shall be performed within a reasonable time, if at all. The saving clause will protect him from liability to an action for the delay, but that is all: the other party cannot treat the contract as broken for the purpose of recovering damages, but he is not prevented from treating it as dissolved (/) . D. Extraordinary interference. Perhaps there is no very substantial distinction between frustration of an adventure by the exercise of human power* or authority not contemplated by the contract and frustration by other kinds of inevitable accident. But " restraint of princes and rulers" is a familiar rubric among the express exceptions of mercantile instiruments, and has now found, its parallel in the modern doctrine of implied conditions. This development seems important enough to deserve a heading of its own. Its prominence dates only from the late general war, but its origin goes back more than half a century. In Baily v. De Crespigny (g) a lessor covenanted with the lessee that neither he nor his heirs nor his assigns would allow any building (with certain small exceptions) on a piece of land of the lessor's fronting the demised premises. Afterwards a railway company purchased this piece of land under the compulsory powers of an Act of Parliament, and built a station upon it. The lessee sued the lessor upon his covenant; but the Court held that he was discharged by the subsequent Act of Parliament, which put it out of his power to perform it. And this was agreeable to the true intention, for the railway company coming in under compulsory powers, (/) Jackson v. Union Marine i/. J. C. P. 27. Insurance Co. (1874) in Ex. Ch. (?> (1869) L. R. 4 Q. B. 180, I.. R. 10 C. P. 125, 144 sqq., 44 38 L. J. Q. B. 98. IMPOSSIBILITY IN LA>V. 331 " whom he [the covenantor] could not bind by any stipulation, as he could an assignee chosen by himself," was " a new kind, of assign, such as was not in the contemplation of the parties when the contract was entered into." Nor was it material that the company was only empowered by Parliament, not required, to build a station at that particular place {h) ■ As the American phrase concisely puts it, a covenant of warranty does not extend to the State in the exercise of its eminent domain (i) . If a subsequent Act of Parliament making the performanoe of a contract impossible were a private Act obtained by the contrfeicting party himself, he might perhaps remain bound by his contract as if he had made the perform- ance impossible by his own act: but where the Act is a public one, its effect in discharging the contract cannot be altered by showing that it was passed at the instance of the party originally bound (Ar) . Note that the decision in Baily, v. De Crespigny was expressly based on broad grounds of principle (Z). In recent years not only the operations of war (already a regular subject of express exception ever since the framework of mercantile contracts was settled in its current form), but domestic acts of executive authority conferred for war purposes have had like effects. In Metropolitan Water Board v. Dick, Kerr d Co: (to) the defendants had contracted with the plaintiff Board in 1914-5 to construct a reservoir, providing all necessary plant and labour. The Minister of Munitions, in exercise of authority conferred by the Defence of the Eealm Acts and Eegulations, ordered the work to bo stopped in 1916, and directed the (A) (1869) L. E. i Q. B. 186. C. P. 225, in Ex. Ch. 13 C. B. («■) See Osborn v. Nicholson N. S. 828, 31 L.. J. C. P. 280. (1871) 13 Wall, at p. 657. {V) See the passag-e cited p. 306, (A) Bro-pon v, Mayor of London above. , (1861) 9 C. B. N. S. 726, 30 L. J. (w) [1917] 2 K. B. 1, 86 L. J. K. B. 675, C. A. • 332 CONDITIONS, AND HEEEIN OP FKUSTBATION. removal and sale to munition factories of a large part of the plant. In 1916 the Water Board sued for (inter alia) a declaration that the contract was still binding. The Court of Appeal held that the interruption was clearly beyond the contemplation of the parties and, being for an undefined and unascertainable length of time, must be regarded as a total frustration of the undertaking. The contract was therefore dissolved and not merely suspended. In Horlock v. Beal (n) the question was whether the owner of a British ship was liable for the seamen's wages after the ship had been detained at Hamburg and the crew interned in Germany, of which events the first happened on the declaration of war (August 4, 1914) and the second about two months later. The House of Lords held, against a majority in the Court of Appeal, that the further perform- ance of the service became impossible in a commercial sense as from August 4 (o), and thenceforth no more wages were due. Soon after this decision the House, agreeing with the Court of Appeal by a majority of three to two (p), held that a time charter-party for sixty months from December, 1912, the charterers being free to sublet for Admiralty or other service, was not determined or suspended when the Admiralty requisitioned the vessel for transport purposes. In the view of the majority there was no substantial frustration of the parties' common purpose by a cause outside their contempla- tion, nor indeed any definite common adventure at all; the owners were not concerned in the charterers doing any specific (n) [1916] 1 A. C. 486, 85 L. J. the decisive date was Nov. 2. K. B. 602. Lord Parmoor dis- (i») TampUn S. S. Co', v. aented for reasons confined to this Anglo-Mexican, ^e. Co. [1916] 2 pai-tioular species of contract. A. C. 397, 85 L. J. K. B. 138^. (o) So Lord Atkinson, Lord Lord Buckmaster, Lord LortSbin-n Shaw of Dunfermline, and Lord and Lord Parker; tord Haldane Wrenbury; Lord Loreburn thought and Lord Atkinson dissenting. IMPOSSIBILITY IN LAW. 333 thing beyond payment of freight, and the charterers were not bound to use the ship at all. Doubtless the Admiralty requisition was a restraint of princes, but by the express terms of the contract that was not enough to suspend the payment of freight (q) . The principle of frustration, however, maj apply to a time charter in more appropriate circumstances, and has been so applied by the House of Lords itself (r) . Further, it is to be observed that the disturbing cause must go to the extent of substantially preventing the performance of the whole contract. Interference leaving a considerable part capable of performance will not be an excuse. A gas company's contract with the local authority for provision and maintenance of lamps and burners and lamplighting, as well as the supply of gas, was not determined when the lighting of the lamps was forbidden, for military reasons, by an order under the Defence of the Realm Regulations (s). The terms of the contract provided for a fixed quarterly pay- ment calculated according to the number of lamps, but covering the whole of the company's undertaking, so that it was not possible to say what proportion of it was intended to be in respect of actual gas consumption. Moreover, full performance of the contract could be resumed as well as ever on the removal of the military restriction. On much the same principle the lessee of a residential flat who became an alien enemy during the tenancy, and under the war regulations was forbidden to live there, was not discharged from his obligation to pay rent. He remained free to, sub-let, and continuance of his liberty to use the flat in person was not an essential condition of the contract (t) . (?) See especially Lord Parker's (s) Leiston &as Co. v. Leiston judgment [1916] 2 A. Cat p. 426. V. iJD. C. [1916] 2 K. B. 428, (r) Bank Line v. Capel [1919] 85 L. J. K. B. 1759, 0. A. Details A. C. 435 88 L. J. K. B. 211, of the contract are in the report where the charter was for twelve below [1916] 1 K. B. 912. months only. (*) London ^ Northern Estates 334 CONDITIONS, AND HEEBIN OF PEUSTRATION. It is not practicable here to discuss at large the facts proper to classes of cases, or peculiar to individual cases, on which the decisions have turned, nor to criticize the many and various forms in which the doctrine has been judicially expressed in different cases and sometimes in one and the same case. A collection of these utterances was made by Lord Sumner in the Bank Line case (u) . It is certain that some of the dicta even in the House of Lords are in their literal terms too wide (x). Only beginners in the law need to be warned that the wording of even the most learned judicial expositions must not be treated as authoritative without careful attention to the context and to the questions actually decided. Construction of conditions in bonds. — This kind of instru- ments being archaic, their construction is still governed by peculiar and archaic rules, which however there is no occasion to apply in practice at this day, as such questions cannot well occur upon any form of bond still in use. It is however thought proper to retain the statement of these rules for reference at need, and it does not seem useful (even if it would be safe) to attempt any revision of the language, the subject-matter itself being antiquated. A bond is in form a contract dependetnt on a negative ooindition (cp. p. 299, above). First the obligor professes to be bound to the obligee in a sum of a certain amount. Then follows the condition, showing that if a certain event happens (generally something to be done by the obligor) the bond shall be void, but otherwise it shall remain in force. " The condition is subsequent to the legal obligation; if the condition be not fulfilled the obligation remains " (y) . This is in terms a promise, stated in a singularly involved way, to pay a sum of money if the event men- tioned in the condition does not happen. But this, as everybody knows, is not the true nature of the contract. The object is to secure the per- Co. v. Schlesinger [1916] 1 K. B. Tamplin's case [1916] 2 A. C. at 20, 85 L. J. K. B. 369. p. 405. (u) [1919] A. C. at p. 457. (y) Sir W. W. Follett, arg. (a;) E.g. Ix)rd Loreburn's in Beswiok v. Swindells (1835) 3 A. & E. 873, 53 R. R. 200. CONDITIONS IN BONDS. 335 formanee of the condition, and the real meaning of the parties is that the obligor contracts to perform it under the conventional sanction of a penal sum. This view is fully recognized by the modern statu te.3 regulating actions on bonds, by which the penalty is treated as a mere security for the performance of the contract or the payment of damages in default (a) . On principle, therefore, a bond with an impossible condition, or a condi- tion which becomes impossible, should be dealt with just as if it were a direct covenant to perform that which is or becomes impossible. , In the former case the bond should be void, in the latter the rule in Taylor v. Caldwell (a) would determine whether it were avoided or not. We shall see (Ch. VIII. below) that where the condition is illegal.ouT Courts have found no difficulty in considering the bond as what in truth it is: an agreement to do the illegal act. But in the case of impossibility the law has stuck at the merely formal view of a bond as a contract to pay the penal sum, subject to be avoided by the performance of the condition ; accordingly if the condition is impossible either in itself or in law the obligation remains absolute. "If a man be bound in an obligation. Sac, with condition that if the obligor do go from the church of St. Peter in Westminster to the church of St. Peter in Home within three hours, that then the obligation shall be void. The condition is void and impossible and the obligation standeth good." So, again, if the condition is against a maxim or rule in law, as " if ,a man be bound with a condition to enfeoff his wife, the condition is void and against law, because it is against the maxim in law, and yet the bond is good " (5). In the same way, " when the condition of an obligation is so insensible and incertain that the meaning cannot be known, there the condition only is void and the obligation good" (c). On the point of subsequent impossibility, however, the strictly formal view is abandoned, and an opposite result arrived at, but still in an artificial way. The condition, it is said, is for the benefit of the obligor, and the performance thereof shall save the bond; therefore he shall not lose the benefit of it by the act of God {d), and where the 'condition is possible at the date of the instrument, " and before the same can be .per- formed the condition becomes impossible by the act of God, or of the law, or of the obligee, there the obligation is saved " (e) ; or as another book has it, "the obligation and the condition both are become void " (/). (z) As to these, see Preston v. more usual phrase in the old books Bania (1872) L. E. 8 Ex. 19, 42 is three days, which is now in- I.. J. Ex. 33. applicable. (ffl) (1863) 3 B. & S. 826, supra, (c) Shepp. Touohat. 373. p 321 (d) This reasoning appears both (S) Co. Lit. 206 b (some of the in Laughter's case, 5 Co. Eep. 21 b, &c.'s in Coke's text are omitted). and Lamb's case, ib. 23 b. To the same effect Shepp. Touohst. (e) Co. Lit. 206 a. 372. As to going to Home the (/) Shepp. Touchst. 372. 336 CONDITIONS, AND HEREIN OF FRUSTRATION. '■ Generally if a condition that was possible when made is become impos sible by the act of God, the obligation is discharged" {if). As to th' acts of the law and of the obligee this agrees with the doctrine of con tracts in general: as to inevitable accident it establishes a different rule The decision in Laughter's case (A) was an application of the sam( view, and it therefore appears that there should never have been anj question of extending it to direct covenants or contraoti. The peculiar law thus laid down is distinctly recognized by moderr authorities («). However, if a bond appears on the face of it to b( given to secure the performance of an agreement which it recites, the condition will take effect according to the true intention of the agree- ment rather than the technical construction resulting from the form of the instrument Qc). Alternative conditions, at any rate as to immediate impossibility, and conditions made impossible by the default of the parties, or otherwise than by the " act of i God," are treaited in the same way as direct promises. " When a condition becomes impossible by the act of the obligor, such impossibility forms no answer to an action on the bond " (?) . " When the condition of an obligation is to do two things by a day, and at the time of making the obligation both of them are possible, but after, and before the time when the same are to be done, one of the things is become impossible by the act of God, or by the sole act and laches of the obligee himself ; in this case the obligor is not bound to do the other thing that is possible, but is discharged of the whole obligation. But if at the time of making of the obligation one of the things is and the other of the things is not possible to be done, he must perform that which is possible. Ahd if in the first case one of the things become impossible afterwards by the act of the obligor or a stranger, the obligor must see that he do the other thing at his peril." " If the condition be thai A. shall marry B. by a day, and before the day the obligor himself doth marry her; in this case the condition is broken. But if the obligee marry her before the day, the obligation is discharged " (m) . "If a man is bound to me in 20?. on condition that he pay me 10?., in that case if he tender me the money and I refuse he is altogether excused from the obligation, because the default is on my part who am the obligee " («) . (?) Ro. Ab. 1. 449, G, pi. 1; Ex. Oh. 3 A. & E. 868, 53 R. R. repeated on p. 451, I, pi. 1. 196. (A) Note ((?) above. (?) Per Cur. Beswick v. 8win- (0 1 Wms. Saund. 238; per dells, 3 A. & E. at p. 883, 53 R. R. Williams J. Brawn v. Mai/or of 207. London (1861) 9 C. B. N. S. 726, (m) Shepp. Touchst. 382, 392. 747, 30 L. J. C. P. 225, 230. ^ («) Brian C. J. 22 Ed. IV. 26. (X;) Begwick V . Swindells (1S35) 337 CHAPTER VIII. Unlawful Agreements. Division of the subject. — ^We have already seen that an agree- ment is not in any case enforceable by law without satisfying sundry conditions: as, being made between capable parties, being sufficiently certain, and the like. If it does satisfy these conditions, it is in general a contract which the law commands the parties to perform. But there are many things which the law positively commands people not to do. The reasons for issuing such commands, the weight of the .sanctions by which they are enforced, and the degree of their apparent necessity or expediency, are exceedingly various, but for the present purpose unimportant. A mur- der, the obstruction of a highway, and the sale of a loaf otherwise than by weight, are all on the same footing in so far as they are all forbidden acts. If the subject-matter of an agreement be such that the performance of it would either consist in doing a forbidden act or be so connected therewith as to be in substance part of the same transaction, the law cannot command the parties to perform that agree- ment. It will not always command them not to perform it, for there are many cases where the performance of the agreement is not in itself an offence, though the complete execution of the object of the agreement is: but at all events it will give no sort of assistance to such a transaction. Agreements of this kind are void as being illegal in the atrict sense. 22 338 UNLAWFUL AGREEMENTS. Again, there are certain things which the law (a) does not forbid in the sense of attaching penalties to them, but which are violations of established rules of decency, morals, or good manners, and of whose mischievous nature in this respect the law so far takes notice that it will not recognize them as the ground of any legal rights. Agreements whose subject-matter falls within this description are void as being immoral. Further, there are many transactions which cannot fairly be brought within either of the foregoing classes, and yet cannot , conveniently be admitted as the subject-matter of valid contracts, or can be so admitted only under special restrictions. They seem in the main to fall into the follow'- ing categories: Matters governed by reasons outside the regular scope of municipal law, and touching the relations of the common- wealth to foreign states: Matters touching the good government of the common- wealth and the administration of justice: Matters affecting particular legal duties of individuals whose performance is of public importance: Things lawful in themselves, but such that individiia,! citizens could not without general inconvenience be allowed to set bounds to their freedom of action with regard to those things in the same manner or to the same extent as they may with regard to other things (&) . Agreements falling within this third description are void as being against public policy. (a) I.e. the common law. But (b) We have already seen that gu. whether the common law could the specific operation of contraiCt is take notice of anything as immoral none other than to set bounds to which would not constitute an the party's, freedom of action as offence against either common or regards the subject-matter of the ecclesiastical law. contract. CLASSIEIGATION. 'i ;i'd9 We have then in the main three sorts of agreements which ai'e unlawful and void, according as the matter or purpose of them is— A. Contrary to positive law. {Illegah) B. Contrary to positive morality recognized as such by law. {Immoral.) C. Contrary to the common weal as tending (a) To the prejudice of the State in external relations. (b) To the prejudice of the State in internal relations. (c) To improper or excessive interference with the lawful actions of individual citizens. {Against public policy.) The distinction here made is in the, reasons which deter- mine the law to hold the agreement void, not in the nature or operation of the law itself: the nullity of the agreement itself is in every case a matter of positive law. Bearing ,this in mind, it is a harmless abbreviation to speak of the agreement itself as contrary to positive law, to morality, or to public policy, as the case may be. The arrangement here given is believed to be on the whole the most convenient, and to represent distinctions which are in fact recognized in our Courts. But like all classifica- tions it is only approximate; and where the field of judicial discretion is so wide as it is here (for nowhere is it wider) we must expect to find many cases which may nearly or quite as well be assigned to one place as to another. The authorities and dicta are too numerous to admit of any detailed review. Some positive rules for the construction of statutes have been worked out by a regular series of decisions. Bilt with this exception we find that tTie cafec- law on most of the branches of the subject presents itself as a clustered group of ahalogies rather than a linear chain of authority. We have then to select from these groups a €ertain number of the mpre central instances. The state- ly : :■■ y ■ '.. - '. ^ 22(2)" •> . '■■ --■ ■ '-.v^' 340 UNLAWFUL AGREEMENTS. ment of the general rules which apply to all classes of unlaw- ful agreements indifferently will be reserved, so far as practicable, until we have gone through the several classes in the order above given. A. Agreements contrary to positive law. 1. Criminal. — The simplest case is an agreement to com- mit a crime or indictable offence : " If one bind himself to kill a man, burn a house, maintain a suit, or the like, it is void " (c) . With very few exceptions, obviously criminal agreements do not occur in our own time and in civilized countries, and at all events no attempt is made to enforce them. In the eighteenth century a bill was filed on the Equity side of the Exchequer by a highwayman against his fellow for a partnership account. The bill was reported to the Court both scandalous and impertinent, and the plaintiff's solicitors were fined and his counsel ordered to pay costs {d) . Qucere whether the law will recognize a partnership even in an occupation which is discouraged by law though not actually punish- able, such as bookmaking (e). The question may arise, however, whether a particular thing agreed to be done is or is not an offence, or whether a particular agreement is or is not on the true construction of it an agreement to commit an offence. In the singular case of Mayor of Norwich v. Norfolk By. Co. (/), the defendant company, being autho- rized to make a bridge over a navigable river at one par- ticular place, had found difficulties in executing the statutory plan, and had begun to build the bridge at another place. (o) Shepp. Touchst. 370. K. B. at p. 718, 77 L. J. K. B. 794, (d) Lindley on Partnership, 101. followed, O'Connor v. Balston See L. Q. E. ix. 197,, for an acoount [1920] 3 K. B. 451, 90 L. J. K. B. of the case (Everet v. Williams') 261 ; not followed by McCardie J., verified from the originals In the Jeffrey v. Bamford [1921] 2 K. B. Eecord Office. 351. (e) Meteher Moulton L.J. in (/) (1855) 4 E. & B. 397, 24 Eyams v. Stuart King [1908] 2 L. J. Q. B. 105, 99 B. B. 518. CRIMINAL AaEEEMKNTS. 341 The plaintiff corporation took steps to indict the company for a nuisance. The matter was compromised by an arrangement that the company should— not discontinue their works, but- complete them in a particular manner, intended to make sure that no serious obstruction to the navigation should ensue: and an agreement was made by deed, in which the company covenanted to pay the corporation £1000 if the works should not be completed within twelve months, whether au Act of Parliament should within that time be obtained to authorize them or not. The corporation sued on this covenant, and the company set up the defence that the works were a public nuisance, and therefore the covenant to com- plete them was illegal. The Court of Queen's Bench was divided on the construction and effect of the deed. Erie J. thought it need not mean that the defendants were to go on with the works if they did not obtain the Act. "Where a contract is capable of two constructions, the one making it valid and the other void, it is clear law the first ought to be adopted." Here it should be taken that the works con- tracted for were works to be rendered lawful by Act of Parliament. Coleridge J to the same effect: he thought the real object was to secure by a penalty the speedy reduc- tion of a nuisance to a nominal amount, which was quite lawful, the corporation not being bound to prosecute for a nominal nuisance. Lord Campbell C.J. and Wightman J. held the agreement bad, as being in fact an agreement to continue an existing unlawful state of things. The per- formance of it (without a new Act of Parliament) would have been an indictable offence, and the Court could not presume that an Act would have been obtained. Lord Campbell said: — " In principle I do not see how the present case is to be distinguished from an action by A . against *B . to recover £1000, B. having covenanted with A. that within twelve calendar months he would murder C, and that on failing to do so he would forfeit and pay to A. £1000 as ^42 UNLAWFUL AGREEMENTS. liquidated damages, the declaration alleging that although B. did not murder C. within the twelve calendar months he had not paid A. the £1000 " {g). It seems impossible to draw any conclusion in point of law from such a division of opinion {h) . But the case gives this practical warning, that whenever it is desired to con- tract for the doing of something which is not certainly lawful at the time, or the lawfulness of which depends on some event not within the control of the parties, the terms of the contract should make it clear that the thing is not to be done unless it becomes or is ascertained to be lawful. Moreover a contract may be illegal because an offence is contemplated as its ulterior result, or because it invites to the commission of crime. For example, an agreement to pay money to A.'s executors if A. commits suicide would be void ii) ; and although there is nothing unlawful in printing, no right of action can arise for work done in printing a criminal libel {]) . But this depends on the more general considerations which we reserve for the present. 2. Fraudulent. — Again an agreement will generally be illegal, though the matter of it may not be an indiitable offence, and though the formation of it may not amount to 'the offence of consjDiracy, if it Contemplates (fc) any civil injury to third persons (Z). Thus an agreement to divide ig) 4 E. & B. 441. (J) It A. contracts with B. to do {h') Not only wa.s the Court something which in fact, bnt not equally divided, but a, perusal of to Bl'S knowledge, would involve the judgments at large will show a breach of contract or trust, .V. that no two members of it really cannot lawfully perform his pro- looked at the case in the same way. raise, but yet ma.y well be liable in The reporters (4 E. & B. 397) damages for the breach. MiUw^rd added not without reason to the v. Littlewood (1850) 5 Ex. 775, 20 headnote: H't q-umre lude. L. J. Ex. 2, 82 B,. R. 871. See (t) Per BramweU L.J. 5 C. P. D. further at end of this chapter, at p. 307. (I) iVpproved by Loid Dunedin, (;■) Poplelt 1. Stor.hdale (1825) Farme,^' Mart v. Milne [,1915] 'K. is Jt. 337, 2 C. & P. 198, 31 A. C. 106, 113, 84 L. J. P. C. 3S. •R. R. 662. ' The law of Scotland is similar;: si. FRAUDULENT AGREEMENTS. 343' the profits of a fraudulent scheme, or to carry out some object in itself not unlawful by means of an apparent tres- pass, breach of contract, or breach of trust is unlawful and void(m). A. applies to his friend B. to advance him the price of certain goods which he wants to buy of C . B . treats with C. for the sale, and pays a sum agreed upon between them as the price. It is secretly agreed between A. and C. that A. shall pay a further sum: this last agree- tnent is void as a fraud upon B., whose intention was to relieve A. from paying any part of the price (w). Again, A. and B. are interested in common with other persons in a transaction the nature of which requires good faith on all hands, and a secret agreement is made between A. and B. to the prejudice of those others' interest. Such are in fact the cases of agreements "in fraud of creditors"; that is, where there is an arrangement between a debtor and the general body of the creditors, but in order to procure the consent of some particular creditor, or for some other reason, the debtor or any person on his behalf, or with his know- ledge (o), secretly promises that creditor some advantage over (m') An agreement to commit a ship Co. \ . llcGregor, &ow 4' Oo. civil injury is a conspiracy in many, [1892] A. O. 25, 61 L. J. Q. B. 295 ; but it is still unoertain precisely Quinit. v. Leathern [1901] A. O. in what, cases. See Mr. Craies' 395, 70 L. J. P. G. 76. Before the article on Conspiracy in Encyel. O. L. P. Act a, court of common Laws of England, 2d ed. An agree- law could not take notice of an ment to commit a trespass likely agreement being in breach of trust to lead to a breach of the peace, so as to hold it illegal: Warwick Reg. V. Rovilands (1851) 17 Q. B. v. RiuJutrdson (1842) 10 M. & W. 671, 686, 21 L. J. M. O. 81, 85 284, 62 E. R. 608, and agreements B.. R. 615 — or to commit a civil to indemnify trustees against wrong by fraud and false pre- formal breaches of trust arc iii' tences, Reg. v. Warhurton (1870) practice constantly assumed to be L. R. 1 C. C. R. 274, 40 L. J. M. C. valid in equity as well as law. 22. cp. Reg. v. Asvinall (1876) («) JaoTeson v. Duchaire (1790) 2Q. B. Div. atp. 59, 46L. J. M. 0. 3T. E. 551. 145 — is a conspiracy. An agree- (o) Equality among the creditors ment to commit a simple breach of is of the essence of the tranjsaction. Contract is not a conspiracy. See Any agreement to give a ^v^&t- on the whole subject, l/Of/??? /^^raw- enoe, made with the debtor's pri- 344 UNLAWFUL AGREEMENTS. the rest. All such secret agreements are void: securities given in pursuance of them may be set aside, and monej paid under them ordered to be repaid (p). Moreover, the other creditors who know nothing of the fraud and enter into the arrangement on the assumption "that they are contract- ing on terms of equality as to each and all " are under such circumstances not bound by any release they give (q). And it will not do to say that the underhand bargain was in fact for the benefit of the creditors generally, as where the pre- ferred creditor becomes surety for the payment of the com- position, and the real consideration for this is the debtor's promise to pay his own debt in full; for the creditors ought to have the means of exercising their own judgment (r). But where one creditor is induced to become surety for an instalment of the composition by an agreement of the prin- cipal debtor to indemnify him, and a pledge of part of the .assets for that purpose, this is valid: for a compounding debtor is master of the assets and may apply them as |ie wilUs). The principle of these rules was thus explained by Erie J . in Mallalieu v. Hodgson (t): — " Each creditor consents to lose part of his debt in consideration that the others do the same, and each creditor may be considered to stipulate ■with the others for a release from them to the debtor in consideration of vity, strikes at the root of the (p) McKewan v. Sanderson deed. It is immaterial whether the (1873) L. R. 15 Eq. at p. 234, per arrangement is under a statute or Malins V.-C, 42 L. J. Ch. 296. not, and whether the preferential (g') SaiigKsh v. Tennent (1866) payment is to come out of the L. R. 2 Q. B. 49, 54, 36 L. J. Q. B. 'debtor's funds or not. Ex parte 10. Milner (1885) 15 Q. B. Div. 605, (r) Wood v. Barker (1866) L. R. 54 L. J. Q. B. 425. In Farmers' 1 Eq. 139. Mart V. Milne [1915] A. C. 106, (s) JSx parte Burrell (1876) 1 84 L. J. P. C. 33 (Sc), there was Ch. Div. 537, 45 L. J. Bk. 68. a specially ingenious attempt to {t) (1851) 16 Q. B. 689, 20 L. J. .disguise a contrivance for pre- Q. B; 339, 347, 83 R. R. 679. See ferring a particular oreditoir. further Mx parte Oliver (1849-51) 4 Pe G. & Sm. 354. AGREEMENTS IN FRAUD OF CREDITORS. 345 the release by hira. Whoi-o any creditor, in fraud of the agreement to accept the composition, stipulates for a preference to himself, his stipu- lation is altogether void — not only can he take no advantage from it, but he is also to lose the benefit of the composition (ii). The requirement of good faith among the creditors and th^ preventing of gain by agree- memtB for preference have been uniformly maintained by a series of cases from Zelcmter ^. Rose (_x) to Ilowden v. Jlnlgh (u) and Bradshaw v. Bradshaw " (y). From the last cited ease (y) it seems probable, though it is not decided, that when a creditor is induced to join in a composition by having an additional payment from a stranger without the knowledge of either the other creditors or the debtor, the debtor on discovering this may refuse to pay him more than with such extra payment will make up his proper share under the composition, or may even recover back the excess if he has paid it involuntarily, e.g. to bona fide holders of bills given to the creditor under the composition. A debtor who has given a fraudulent preference can claim no benefit under the composition even as against th; creditor to whom the jDreference has been given (z). A secret agreement by a creditor to withdraw his opposi- tion to a bankrupt's discharge or to a composition is equally void, and it does not matter whether it is made with the debtor himself or with a stranger (a), nor whether the con- sideration offered to the creditor for such withdrawal is to come out of the debtor's assets or not (&) ; and this even if it is part of the agreement that the creditor shall not prove against the estate at all(c). In like manner if a debtor («) (1840) 11 A. & E. 1033; 52 312, 18 L. J. Ex. 488, 80 R. E. 566. R. R. 579. C") Higgins v. Pitt, last note. {x) (1803) 4 East, 372: showing (J) Rail v. Dysof,. (18-52) 17 that the advantage given to the Q. B. 785, 21 L. J. Q. B. 224, 85 preferred creditor need not be in R. R. 682. money. (c) McKewan v. Sanderson iy) (1841) 9 M. & W. 29. (1875) L. R. 20 Eq. 65, 42 L. J. Iz) Biggins v. PiU^ (1849) 4 Ex. Ch. 296. P.— c. 23 346 ['NLAWFUL AGREEMENTS. executes an assignment of his estate and effects for the tenefit of all his creditors upon a secret agreement with the trustees that part of the assets is to be returned to him, this agreement is void (d) ■ We have here at an early stage of the subject a good instance of the necessarily approximate character of our classification. We have placed these agreements in fraud of creditors here as being in effect agreements to commit civil injuries. But a composition with creditors is in most cases something more than an ordinary civil contract; it, is in truth a quasi -judicial proceeding, and as such is to a certain extent assisted by the law (e). Public policy, there- iore, as well as private right, requires that such a proceeding should be conducted with good, faith and that no transaction which interferes with equal justice being done therein should be allowed to stand. The doctrine of fraud on third parties, as it may be called, is however not to be extended to cases of mere suspicion or conjecture. A possibility that the per- formance of a contract may injure third persons is no ground for presuming that such was the intention, and on the strength of that presumed intention holding it invalid between the parties themselves. " Where an instrument betweem two parties lias been entered into for a purpose which may be considered fraudulent as against some third person, it may yet be binding, according to the true consiruction of its language, as between themselves." Nor can a supposed fraudulent intention as to third persons (inferred from the general character and circum- stances of a transaction) be allowed to determine what the true construction is (/) . , , (d) Blaekloch v. DaUe (1876) 1 17 (from the superseded Act of O. P. D. 265, 45 L. J. C. P. 498. 1883). (e) Bantniptcy Act, 1914, ss. 16, {f) Shaw v. Jefery (1860) 1 13 Moo. P. C. 432, 455. ' > FRAUD ON THIRD PERSONS. 347 3. Fraud on third persons .^There are; certain cases analo- gous enough to the foregoing to call for mention here, though not for any full treatment. Their general type is this: There is a contract giving rise to a continuing relation to which certain duties are incident by law; and a special sanc- tion is provided for those duties by holding that transactions inconsistent with them avoid the original contract, or are themselves voidable at the option of the party whose rights are infringed. We have results of this kind from (a) Dealings between a principal debtor and creditor to the prejudice of a surety: (b) Dealings by an agent in the business of the agency on his own account: (c) Voluntary settlements before marriage " in fraud of marital rights." In the first case the improper transaction is as a rule valid in itself, but avoids the contract of suretyship . In the second it is voidable as between the principal and the agent. In the third it is (or was) voidable at the suit of the husband. (a) Suretyship. — "Any variance made without the surety's consent in the terms of the contract between the principal debtor and the creditor discharges the surety as to transactions subsequent to the variance " {g), unless it is evident to the Court " that the alteration is unsubstantial, or that it cannot be otherwise than beneficial to the surety " {h). The surety is not the less discharged " even though the original agree- ment may notwithstanding such variance be substantially, performed " (z) . An important application of this rule is (<7) Indian Contract Act, s. 133. v. Jslun (1873) L. R. 8 Ex. 73, 42 (A) Solmey. BrunsMl (1877) 3 L. J. Ex. 64. ' ' Q. B. Div. 495 (diss. Brett L.J.), (i) Per Lord Oottenliam, ' 5o««r overruling on this point Sanderson v. Maodanald (185,0) 3 H. L. C. 226, 239, 88 Jl. R. 68. . 23 (2) 848 UNLAWFUL AGREEMENTS. that " where there is a hond of suretyship for an officer, and by the act of the parties or by Act of Parliament the nature of the office is so changed that the duties are materially altered, so as to affect the peril of the sureties, the bond is avoided" (A;). But when the guaranty is for the perform- ance of several and distinct duties, and there is a change in one of them, or if an addition is made to the duties of the principal debtor by a distinct contract, the surety remains liable as to those which are unaltered (l) . The following rules rest on the same ground: " The surety is discharged by any contract between the creditor and the principal debtor by which the principal debtor is released, or by any act or omission of the creditor the legal consequence of which is the discharge of the principal debtor " (m). " A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to or not to sue the principal debtor, discharges the surety, unless the surety assents to such contract" (re), or unless in such contract the creditor reserves his rights against the surety (o), in which case the surety's right to be (A) Oswald V. Mayor of Ber- tends to any security given by the wick-on~Tive.ed (1856) 5 H. L. C. surety: Bolton v. Salmon [1891] 2 856, 25 L. J. Q. B. 383; Pybiis v. Ch. 48, 60 L. J. Ch. 239. Gibb (1846) 6 E. & B. 902, 911, 26 (>0 I. C. A. e. 135. OaTedey v. L. J. Q. B. 41; Mayo-r of Cam- Pmheller (1836) 4 a. & F. 207, Srw^ffev. 7)e»«w (1858) E. B. & E. 10 Bli. N. S. 548, 42 R. E. 1; 660, 27 L. J. Q. B. 474. OrienlM Financial Corporation v. (T) Harrison v. Seymour (1866) Overend, Gurney ^ Co. (1874) L. E. 1 C. P. 518, 35 L. J. C. P. L. R. 7 H. L. 348; Green ». Wynn 264; S?Mlett v. Fletcher (1866) (1869) L. E. 4 Oh. 204, 38 L. J. L. R. 1 O. P. 217, 224, in Ex. Ch. Oh. 220; Bateson v. Gosling 2 0. P. 469, 36 L. J. C. P. 206. (1871) L. R. 7 0. P. 9, 41 L. J. (m) T. C. A. B. 134. Kearsley v. C. P. 53. It must be a binding Cole (1846) 16 M. & W. 128, 16 contract with the principal debtor : L. J. Ex. 115, 73 R. R. 436; Crttgoe Clarke v. Birley (1889) 41 Ch. D. V. Jones (1873) L. R. 8 Ex. 81, 42 422, 434, 68 L. J. Oh. 166. L. J. Ex. 68. The discharge ex- (o) Whether the surety knows of DEALINGS TO PREJUDICE OF SURETY. ;M9 indemniiiod by the principal debtor continues (p). One reported case constitutes an apparent exception to the general rule, but is really none, as there the normal giving of time had in substance the effect of accelerating the creditor's remedy (g). The rule applies as against a creditor of two principal debtors of whom one has become primarily liable as between themselves, whether the creditor assents to the arrangement or not, provided he has notice of it (r) . " If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the suretj" himself against the principal debtor is thereby impaired, the surety is discharged " (s). " A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses or without the consent of the surety parts with such security, the surety is discharged to the extent of the value of the security " {t). Not only an absolute parting it or not: Webb ^ . Ileiritt (1857) 3 (1872) L. R. 13 Eq. 450, 41 L. J. K. & J. 438, 442, 112 R. R. 224, Ch. 515; Philli'ps v. Foxall (1872) 227; and see per Lord Hatherley, L. R. 7 Q. B. 666, 41 L. J. Q. B. L. R. 7 Oh. 150. 293; Sanderson v. Astmt (1873) (io) Close V. Close (1853) 4 L. R. 8 Ex. 73, 42 L. J. Ex. 64. D. M. G. 176, 185. (0 I- 0. A. », 141. Mayhew v. ^g) Bui me v. Coles (1827) 2 CrjcAa;;* (1818) 2 Swanst. 185, 191, Sim. 12, 29 R. R. 52. 19 R. R. 57, 61; Wttlff v. Jay (»•) Oaheley v. Pasheller (note (1872) L. R. 7 Q. B. 756, 762, 41 (m) above) as discussed and ex- L. J. Q, B. 322; Beahervaise v. plained in Rouse v. Bradford Bhg. Lewis (1872) L. R. 7 C. P. 372, 41 Co. [1894] 2 C!h. 32, 63 L. J. Cli. L. J. C. P. 161; securities now 337, C. A. ; affirmed [1894] A. 0. subsist notwithstanding payment 586, 63 L. J. Oh. 890. of the debt for the benefit of a («) I. 0. A. s. 139 {= Story^ Eq. surety who has paid, Merc. Law Jur. § 325 nearly) ; Watson y. Amendment Act, 1856, 19 & 20 Alloock (1853) 4 D. M. G. 242, Viet, <^. 97, s. 6. A right to dis- 102 R. R. 109; Burgess v. Eve train for rent is not a security or 350 UNLAWFUL AGREEMENTS. with the security, but any dealing -with it, such that the surety cannot have the benefit of it in the same condition in which it existed in the creditor's hands, will have this effect (u). For the same reason, if there be joint securities, and the debtor releases one, it is a release to all; otherwise if the sureties are several (a;) . (b) Agency. — " If an agent deals on his own account in the business of the agency without first obtaining the consent of his principal and acquainting him with all material cir- cumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction " (y). " If an agent without the knowledge of his principal deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction " (z). These rules are well known and established and have been over and over again asserted in the most general terms. The commonest case is that of an agent for sale himself becoming the purchaser, or conversely: " He who undertakes to act for another in any matter shall not in the same matter act for remedy within this enaotmant: (x) Ward v. Bank of Nexo Zea- Massell v. Shoolbred (1885) 29 Ch. land (1883) (J. O.) 8 App. Ca. 755, Div. 254, ,53 L. T. 365. During 52 L. J. P. 0.65. the currency of a bill of exchange (y) I. C. A. is. 215. The TnitiiiTi an indorser ia not a surety for the Act goes on to add, " if the caae acceptor. But after notice of dis- show either that any material fact honour he is entitled in like majmer has been dishonestly concealed fnom as if he were a surety to the be(njefit him by the agent, or that the of all payments made and securities dealings of the a^jent have bean dis- given by the acceptor to the holder: advantageous to him," but these Dutican, Fox ^ Co. v. North f qualifications are not recognized in South Wales Bank (1880) 6 App. English law. See Story on Agency Ca. 1, revg. s. c. in C. A. 11 Ch. § 210; ISx parte Looey (1S02) 6 Div. 88, 50 L. J. Ch. 355. Vea. 626, 6 B. E. 9. («) Pledge v. Buss (1860) Johns. (z) I. C. A. s. 216. ,. . VVl 663. '■■- ■: -ifJ)) DEALINGS BY AGEXT A(iAINST DUTY. 351 himself. Therefore a trustee for sale shall not gain any advantage by being himself the person to: buy." " An agent to sell shall not convert himself into a purchaser unless lie can make it perfectly clear that he furnished his employer with all the knowledge which he himself possessed " («). " It is an axiom of the law of principal and agent that a broker employed to sell cannot himself become the buyer, nor can a broker employed to buy become himself the seller, without distinct notice to the principal, so that the latter ma}' object if he think proper "(b). Similarly an. agent for sale or purchase must not act for the other part}- at the same time or take a secret commission from him (c) . If the local usage of a particular trade or market contravenes this axiom by " converting a broker employed to buy into a principal selling for himself," it cannot be treated as a custom so as to bind a principal dealing in that trade or market through a broker, but himself ignorant of the usage (d). The rule is not arbitrary or' teclmical, but rests on the principle that an agent cannot be allowed to put himself in a position in which his interest and his duty are in conflict, and the Court will not consider " whether the principal did (a) Whichcote \. iMwr&nce British Columbia [1900] 1 Q. B. (1798) 3 Ves. 740; Lmother v. 233, 69 L.. J. Q. B. 150, 0. A. Lmvther (1806) 13 Ves. 95, 103; {d) Robimo:i w. MoUett (181 i-5) and see Charte,' v.Treveli/an (ISU) L. R. 7 H. L. 802, 838, 44 L. J. 11 Ca. & P. 714, 732, 65 E. R. 305. C. P. 362; and further as to alleged (6) Per Willes J. in Mollett w. customs of this kind Be Bmsehe v. Mobimon (1870) L. E. 5 C. P. at Alt (1877) 8 Ch. Div. 286, 47 L. J. p. 655, 39 L. J. C. P. 290. Cp. Ch. 386. l?or the special applica- Guesi V. Smythe (1870) L. E. 5 tion of the rule to the duty of Ch. 551, per Giffard L.J. 39 L. J. directors of companies. Hay's case Ch. 536; Sharman v. Brandt (1875) L. R. 10 Ch. 593, 44 I,. J. (1871) L. R. 6 Q. B. 720, 40 L. J. Ch. 721; Albion Steel Wire Co. v. Q. B. 312. Mm-tin (1875) 1 Ch. D. at p. 585, (c) The latest case, which, if per Jessel'M.R. 45 L. J. Ch. 173; anything, increases the wholesome as to promoters. New Sombrero etrictneas of the law, is Grant v. Phoxpliate Co. v. Erlanger (1877) Gold Exploration #c. Syndioale of 5 Ch. Div. 73, 46 L. J. Cli. 425. 352 UNLAWFUL AGREEMENTS. or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an enquiry as that." It is a corollary from the main rule that so long as a contract for sale made by an agent remains executory he cannot re-purchase the property from his own purchaser except for the benefit of his principal (e). A like rule applies to the case of an executor purchasing any part of the assets for himself. But it is put in this somewhat more stringent form, that the burden of proof is on the executor to show that the transaction is a fair one. This brings it very near to the doctrine of Undue Influence, of which in a later chapter. It makes no. difference that the legatee from whom the purchase was made was also co-executor (f). Another branch of the same principle is to be found in ^the rules against trustees and limited owners renewing leases or purchasing reversions for themselves (gr). Again: " It may be laid down as a general principle that in all cases where a person is either actually or constructively an agent for other persons, all profits and advantages made by him in the business beyond his ordinary compensation are to be for the benefit of his employers " Qi). " If a person makes any profit by being employed contrary to his trust, the employer has a right to call back that profit " (i) . And it is not enough for an agent who is himself interested in the matter of the agency to tell his principal that he has some (e) Parker v. MoKetma (1874) On the general rule see also Marsh L. R. 10 CSh. 96, 118, 124, 125, 44 v. Whitmore (1874) (Sup. Court, L. J. Ch. 425. U. S.) 21 Wall. 178. (/) Gray v. Warner (1873) L. R. (h) Story on Ag-ancy, § 211, 16 Eq. 577, 42 L. J. Ch. 556. adopted by the Court in Morison v. ig) Notes to Keech v. Sandford Tlwmpson (1874) L. R. 9 Q. B. (1726) in 1 Wh. & T. E. C. The 480, 485, 43 L. J. Q. B. 215, where laat case on the subject is Trumper several eases are coUeoted. V. Trumper (1873) L. R. 14 Eq. (J) Massey v. Bavies (1794) 2 295, 8 Ch. 870, 42 L. J. Ch. 641. Ves. 317, 320, 2 R. R. 218. DEALINGS BY AGENT AGAINST DUTY. 353 interest: lie must give full information of all material facts (fc). Even this is not all : an agent, or at any rate a professional advisor^ cannot keep any benefit which may happen to result to him from his own ignorance or negligence in executing his duty. In such a case he is considered a trustee for the persons who would be entitled to the benefit if he had done his duty properly (l). In this class of cases the rule seems to be that the transac- tion improperly entered into by the agent is voidable so far as the nature of the case admits. Where it cannot be avoided as against third parties, the principal can recover the profit ironi the agent. But where there are a principal, an agent, and a third party contracting with the principal and cog- nizant of the agent's employment, and there are dealings between the third party and the agent which give the agent an interest against his duty, there the principal on discovering this has the option of rescinding the contract altogether. Thus when company A . contracted to make a telegraph cable for company B., and a term of the contract was that the work should be approved by C, the engineer of company B., and G. took an undisclosed sub-contract from company A. for doing the same work; and further it appeared that this arrangement was contemplated when the contract was entered into; it was held that company B. might rescind the contract (to). (k) See authorities collected, and (?) Bulkl&y v. Wilford (1834) 2 observations of the Court thereon, 01. & F. 102, 37 R. R. 39. Cp. Dunne v. English (1874) L. R. 18 Corley v. Lord Staford (1857) 1 Eq. 524, 534. The developments De G. & J. 238, 118 R. E. 104. of the principle in modern company As to alternative remedies, see law cannot be followed hero. For Grant's case, p. 351, above. a recent exposition of its limits, see (m) Panama ^ S. Pnoiflc Tele- Costa Rica R. Co. v. Forwood graph Co. v. India Rubber, ^c. Co. [1901] 1 Ch. 746, 70 L. J. Ch. 385, (1875) L. R. 10 Ch. 515, 45 L. J. C. A. Oh. 121. 354 UNLAWFUL AGREEMENTS. (c) Marital right. — The rule as to settlement " in fraud of marital right" was thus given by Lord Langdale (w): — " If a woman entitled to property enters into a treaty for marriage, and during the treaty, repreeentis to her intended husband that she is so en- entitled, that upon the marriage he will become entitled jure mariti, and if during the same treaty she clandestinely conveys away the property in Bueh manner as to defeat his marital right and seenre to herself the separate use of it, and the concealment continues till the marriage tahes place, there can be no doubt but that a fraud is tlius practised on the husband and he is entitled to relief " (o) . Moreover — " If both the property and the mode of its conveyance, pending the marriage treaty, were concealed from the intended husband,, as was the case of Goddard v. Bnow (p), there is still a fraud practised on the husband. The non-acquisition of property of which he had no notice isi no disappointment, but still his legal right to property actually existing is defeated " (i/). The Married Women's Property Act, 1882, has made the subject obsolete in this country as regards all marriages con- tracted after its- commencement, and there has been no reported decision for many years. It is now thought advis- able to omit the details given in former editions . 4. Prohibited degrees. — Marriages within the prohibited, degrees of kindred and affinity are another class of transac- tions contrary to positive law. For although no direct tem- poral penalties are attached to them, they have been made the subject of express arid definite statutory prohibition (r). (») Op. on this subject Dav. (1849) 3 De G. & Sm. 458; 84 Conv. vol. 3, pt. 2, 707. E. R. 370; Prideaux v. Lo-mdale (») England v. Downs (1840) 2 (1863) 4 Giffi. 159, on appeal, 1 D. Beav. 522, 528, 50 B. E. 268, 272, J. S. 433, 438, no decision on this 273. part of tlie case.; Taylor y.:Pugh (p) (1826) 1 Euss. 485, 25 R. E. (1842) 1 Hare, 608, 58 R. R. 214. 111. See the earlier authorities (r) 32 H. 8, c. 38, and earlier there discussed. repealed statutes of the same reign. (q) England v. Down.i, 2 Beav. It is the better supported opinion 629; 50 E. R, 273. Op. Downes v. that 5 & 6 Wm. 4, c. 54, does not Jennings (1863) 32 Beav. 290, 294. contain any, new substantive prohi- See further St. George v. Wahe bition. See Brook v. Brool; (1861) (1831-3) 1 My. & K. 610, 625, 36 9 H. L. 0. 193. R. R. 389; Wrigley v. Swainson MARRIAGE: PROHIBITED DEGREES. 365 They formerly could not be treated as void unless declared so by an ecclesiastical Court in the lifetime of the parties: but by a modern statute (5 & 6 Wm. 4, c. 54) they are now absolutely void for all purposes. An executory contract to marry within the prohibited degrees is of course absolutely void also (s), and would indeed have been so before the statute. These rules are not local, like other rules of muni- cipal law prescribing the solemnities of the marriage cere- mony, requiring the consent of particular persons, or the like: the legislature has referred the prohibition to public grounds of a general nature (speaking of these marriages as " contrary to God's law") (t), and it concerns not the form but the substance of the contract; it therefore applies to the marriages of domiciled British subjects, in whatever part of the world the ceremony be performed, and whether the particular marriage is or is not of a kind allowed by the local (s) It seems from MiUward v. Littlewnod (1850) 5 Ex. 775, 20 L. J. Ex. 2, 82 R. R. 871, that in the barely possible case of the re- lationship being- known to only- one of the parties, by whom it is fraudulently conoealed from the other, the innocent party may sue as for a breach of contract, though the performance of the agreement would be unlawful. Here the ground of liability is either es- toppel or, better, implied warranty of ability to perform the promise lawfully. (<) The use of these particular words eeems of little importance. It would certainly appear bold to apply them to marriages which are permissible by dispenimtion in the Canon law, and allowed uncon- ditionally by the German Civil Code. The true reason is shortly put by Savigny, Syst. 8. 326: " die liier einschlagenden Gesetze, die auf sittlichen Riicksiohten beruhen, haben eine streng positive Natur." Savigny's authority is perhaps sufficient to defend the doctrine of Brook v. Brook against the caustic criticism passed upon it by the Cliief Justice of Massachusetts in Commonwealth v. Lane (1873) 113 Mass. at p. 473: — " The judgment proceeds upon the ground that an Act of Parlia- ment is not merely an ordinance of man but a conclusive declaration of the law of God; and the result is that the law of God, as declared by Act of Parliament, and expounded by the House of Lords, varies according to the time, place, length of life of parties, pecuniary in- terests of third persons, petitions to human tribunals, and teshnical rules of statutory construction and judicial procedure.'' 356 UNLAWFUL AGREEMENTS. law (m). a promise by a married man whose wife is living to marry another woman after his wife's death is void as being against public policy if the fact is known to the promisee (a;). Where a marriage has been contracted in England between foreigners domiciled abroad, English Courts will recognize disabilities, though not being iuris gentium, im- posed by the law of the domicil of both parties (if) : but a marriage celebrated in England is not held invalid by English Courts on the ground that one of the parties is sub- ject by the law of his or her domicil to a prohibition not recognized by English law, at all events where the other party's domicil is English (2:). 5. Statutory restraint. — Moreover a great variety of deal- ings of which contracts form part, or to which the}- ai'e incident in the ordinary course of affairs, are for extrenn-ly various reasons forbidden or restricted by statute. In the eighteenth century, in particular, Acts of Parliament regu-. lating the conduct of sundry trades and occupations were in) Brook \. Brook (1861) 9 (1877) 3 P. Div. 1, « L. J. P. 23. H. L. C. 193. See per Lord Camp- (z) Sottonmyor v. Di> Barros bell at p. 220. He also doubted (1879) 5 P. D. 94, diseeaiting Irom whether a marriage allowed by the some dicta in the previous judg- law of the place, but contracted by mesnt of the C. A., which however Engligli subjests who had come went on a supposed different state there on purpose to evade tho of the facts. See further, on this English law, would be recognized perplexed topic, Sir Howajjd even by the local courts. Cp. Elphinston«'s "Notes on the Eng- Sottomayor v. De Barros, infra. lish Law of Marriage " in L. Q. E. {x) Wilsofi. V. Carnleij [1908] 1 v. 44, the chapter on Marriage in K. B. 729, 77 L. J. K. B. 594, C. A. Dioey, " Conflict of Laws "; Chetti According to earlier authority v. Chetti [1909] P. 67, 78 L. J. which is quite consistent with this P. 23, and Mr. Dioey thereon in the promisee has a right of action L. Q. R. xxv. 202. Aato the peou- if she believed the promisor to be liar personal disabilities imposed unmarried: Millward v. Litfl.j- by the Royal Marriage Act, see wood, note (s), last page. the Sussex Peerage ease (1814) 11 (.!/) Soitomayor v. Be Barros CI. & P. 85; 65 R.'R.. 11.- m PROHIBITORY STATUTES. 367 strange!}" multiplied. Most of these are now repealed, but the decisions upon them established principles on which our Courts still act in dealing with statutes of this kind. The question whether a particular transaction comes within the meaning of a prohibitory statute is manifestly one of construction. So far as we have to do with it here, we have in each case to ask, Does the Act mean to forbid this agree- ment or not? And in each case the language of the par- ticular Act must be considered on its own footing. Decisions on the same Act may afford direct authority. But decisions on more or less similar enactments, and even on previous enactments on the same subject, cannot as a rule be regarded as giving more than analogies. Attempts have indeed been made at different times to lay down fixed rules, nominally of construction, but really amounting to rules of law which would control rather than ascertain the expressed intention of the legislature. But in recent times our Courts have fully and explicitly disclaimed any such powers of interpretation. " The only rule for the construction of Acts of Parliament is that they should be construed according to the intent of the Parliament wliich passed the Act;'' provided that the words be "sufficient to accomplish the manifest purpose of the Act " («). The effect of plain and unambiguous words is not to be limited by judicial construction even though anomalous results should follow (b). (a) Opinion of the Judges in the (b) Cargo ex Argos, cfo. (1872-3) Siissex Peerage case 11 CI. & F. at L. R. 5 P. C. at pp. 152-3. The p. 143, 65 R. R. 51, per TindaJ doctrine formerly current (in C.J. ; per Lord Brougham at accordance with the prevailing p. 150, 65 R. R. 55. And see per speculative opinion on the Con- Knight Bruce L.J. Crofts v. Mid- tinent), that statutes might be dleicm (1856) 8 D. M. G. at p. 217, disregarded if the Courts thought 110 R. R.. 186; per Lord Black- them contrary to reason, common burn, in River Wear Commrs. v. right, or natural equity (all Adamson (1877) 2 App. Ca. at synonymous terms for this pur- p. 764, 47 L. J. Q. B. 193. pose), has long been repudiated: ;358 UNLAWFUL AGREEMENTS. On the other hand the general intention is to be regarded, and may if necessary prevail over particular expressions, no less than in the interpretation of private instruments < But it must also be an intention collected from what the legislature has said, not arrived at by conjectures of what the legislature might or ought to have meant (c). A trans- action not in itself immoral is not to be held unlawful on a conjectural vievir of the policy of a statute (cZ). , The .true policy of a statute is for a court of justice neither more nor less than its true construction. The Courts no longer underv take either to cut short or to widen the effect of legislation according to their views of what ought to be the law. " Before we can make out that a contract is illegal under a statute, we must make out distinctly that the statute has provided that it shall be so " (e). The cases in which acts of corporate bodies created for "special purposes have been held void as " contrary to the policy of the legislature " and tending to defeat the objects of the incorporation have already been considered in Oh. II. These principles, when applied to the more limited subject-matter of prohibitory statutes, give the following corollaries: (a). When a transaction is forbidden, the grounds of the prohibition are immaterial. Courts of justice cannot take note of any difference between mala prohibita (i.e. things .which if not forbidden by positive law would not be immoral) and mala in se {i.e. things which are so forbidden as being immoral) . (b). The imposition of a penalty by the legislature, on see p«r WiJles J. Lee v. Sitde, fc. (c) Cp. pp. 274, 275, above. Sy. Co. (1871) L. R. 6 C. P. 576, (d) Bartcm v. Muir (1874) L. R. 582, 40 L. J. C. P. 285; op. Joum. fi P. O. 134, 44 L. J. P^ C. 19. ■ . Soe. Comp. Leg. for 1900 at p. 423. (e) Field J. 4 Q. B. D. at p. 224. PIIOHIBITORY STATUTES. 869 Any specific act or omission is prima facie equivalent to an express prohibition. These rules are established by the case of Bensley v. Big- nold (/), which decided that a printer could not recover for his work or materials when he had omitted to print his name •on the work printed, as then required by statute {g) . It was argued that his right under the contract was untouched by the Act, which contained no specific prohibition, but only A direction sanctioned by a penalty. But the Court held unanimously that this was untenable, and a party could not be permitted to sue on a contract where the whole subject-: matter was "in direct violation of the provisions of an Act ■of Parliament." And Best J. said that the distinction between mala prohibita and mala in se was long since ex- ploded. The same doctrine has repeatedly been enounced in later cases. Thus, for example, by the Court of Exchequer: " Where the contract which the plaiutiff seeiks to enforce, he it express or implied, is expressly or by implication forbidden by the common ov statute law, no Court will lend its assistance to give it effioot. It is equally clear that a contract is void if prohibited by a statute though "the statute inflicts a penalty only, because such a, penaJty implies a prohibition " (^). ' It is needless to discuss the " policy of the law " when it is distinctly enunciated by a statutory prohibition (i) . (c). Conversely, the absence of a penalty, or the failure of a penal clause in the particular instance will not prevent (/) (1882) S B. cfe Aid. 335, 24 539. Op. Chambers v. Manchester R. R. 401. Presumably the defen- # Milford Ry. Co. (1864) 5 B. & S. dant could have sued on the con- 588, 33 li. J. Q. B. 268; Se Cork tract if he waa not a party to the f Youghal My. Co. (1869) L. B: 4 transgression. Ch. 748, 758, 30 L. J. Oh. 277. (^) See now 32 & 33 Vict. c. 24. (i) See per Lord Cranworth, Ex (K) Cope V. Ro-wlmids (1836) 2 parte NeAlson (1853) 3 D. :M. )G. M. & W. 149, 157, 46 B. B. 532, 556, 566. 360 UNLAWFUL AGREEMENTS. the Court from giving effect to a substantive prohibi- tion Ck). (d). What the law forbids to be done directly cannot b& made lawful by being done indirectly. In Booth V. Bank of England (I) a joint-stock bank pro- cured its manager to accept certain bills on the understanding that the bank would find funds, these bills being such as the bank itself could not have accepted without violating the- privileges of the Bank of England. It was held by the House of Lords, following the opinion of the judges, that this proceeding " must equally be a violation of the rights, and privileges of the Bank of England, upon the principle- that whatever is prohibited by lav\' to be done directly cannot legally be effected by an indirect and circuitous con- trivance; " for the acceptor was merely nominal, and the bills, were in fact meant to circulate on the credit of the bank . In Bank of United States v. Owens (m) (Supreme Court,. U.S.) the charter of the bank forbade the taking of a greater rate of interest than six per cent., but did not say that a contract should be void in which such interest was taken. A note payable in gold was discounted by a branch of the bank in a depreciated local paper currency at its nominal value, so that the real discount was much more than six per cent. The Court held this transaction void, though there was no express prohibition of an agreement to take higher- interest, and though the charter spoke only of taking, not of rese?"i/'OT^ interest. Parts of the judgment are as follows: "A fraud upon a statute is a violation of the statute." "It cannot be permitted by law to stipulate for the reservationi (A) Suesex Peerage ease (1844) England v. Anderson (1836) 2 11 Ca. & F. at pp. 148-9, 65 R. R. Keen 328, 3 Bing. N. C. 589, 44 54, 56. R. R. 271. (Z) (1840) 7 CI. & F. 509, 540, (m) (1829) 2 Peters 527. 51 R. B. 36, upholding Bank of PROHIBITORY STATUTES. 3()1 of that which it is not permitted to receive. In those in- stances in which Courts are called upon to inflict a penalty it is necessarily otherwise; for then the actual receipt is generally necessary to consummate the offence. But when the restrictive policy of a law alone is in contemplation, we hold it to be an universal rule that it is unlawful to contract to do that which it is unlawful to do." " There can be no civil right where there can be no legal remedy, and there can be no legal remedy for that which is itself illegal . . . there is no distinction as to vitiating the contract between malum in se and malum prohibitum " (n). The cases are similar in principle in which transactions have been held void as attempts to evade the bankruptcy law: thus, to take only one example, a stipulation that a security shall be increased in the event of the debtor's bank- ruptcy, or any provision designed for the like purpose and having the like effect, is void (o). When conditions are prescribed by statute for the conduct of any particular business or profession, and such conditions are not observed, agreements made in the course of such business or profession — (e). are void if it appears by the context that the object of the legislature in imposing the condition was the main- tenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed: («) 2 Peters 536, 539. Div. 725. It must be shown, to (o) Ex parte MacJcay (1873) vitiate a transaotdon on this ground, Ij. R. 8 Oh. 643, 42 L. J. Bk. 68; that the provision was inserted in Ex parte Williams (1877) 7 Ch. contemplation of bankruptcy and Div. 138, where the device used was for the purpose of defea.tLng the the attornment of the debtor to bankruptcy law: Ex parte Voisey his mortgagee at an excessive rent: (1882) 21 Ch. Div. 442, 461, 52 Ex parte Jacksmt (1880) 14 Oh. L. J. Ch. 121. 24 362 UNLAWFUL AGREEMENTS. (f). are valid if no specific penalty is attached to the specific transaction, and if it appears that the condition was imposed for merely administrative purposes, e.g. the con-r venient collection of the revenue. The following are instances illustrating this distinction: — Agreement Void. Ritchie V. Smith (1848) 6 C. B. 462, 18 L. .1. O. P. 9, 11 E. K. 369. The owner of a lieenaed house underlet part of it to another person, in order that he might there deal in liquor on his own account under colour of his lessor's licence and without obtaining a separate lioanoe. This agreement was void, its purpose being to enable one of the parties to infringe an Act passed for the protection of pubUo morals: (the lioesnsing Acts are of this nature, and not merely for the benefit of the revenue, for this reason, that Hoenoes are not to be had as a matter of right by paying for them). For the same reason and also because there is a specific penalty for each offence against the licensing law, it seems that asale of liquor in an unlicensed house is void. Bamilton v. Grninger (1859) 5 H. & N. 40. Taylor v. Crowland Gas Co. (1854) 10 Ex. 293, 23 L. J. Ex. 254, 102 R. R. 58'6. A penalty being imposed by statute on unqualified persons acting as conveyanoers (jw), the Court held that the object was not merely the gain to the revenue from the duties on certificates, but the protection of the public from unqualified practitioners; an unqualified person was therefore not allowed to lecover for work of this nature. Cp. Leman v. Homeley (1874) L. R. 10 Q. B. 66, 44 L. J. Q. B. 22. Fergusson v. Nm-man (1838) 5 Bing. N. C. 76, 50 R. R. 613. When a pawnbroker lent money without complying with the require- ments of the statute, the loan was void and he had no Hem on the pledge (?). In Stevens v. Gourley (1859) 7 C. B. N. S. 99, 29 L. J. O. P. 1, a builder was not allowed to recover the price of putting up a wooden shed contrary to the regulations imposed by the Metropolitan Building Act, 18 & 19 Vict. c. 122. The only question in the case was whetlieir the structure was a building within the Act. But note that here the prohibition was for a public purpose, namely, to guard against the risk of fire. Barton v. Piggott (1874) L. R. 10 Q. B. 86. By 5 & 6 Wm. 4, o. 50, (?>) Now by 33 & 34 Vict. c. 97, Act by a pawnbroker, not being s. 60. an offence against any proivisian, (?) The present Pawnbrokers Act relating to licences, shall not avoid (1872; 35 & 36 Vict. c. 93, s. 51), the contract or deprive him of his enacts that an offence against the lien. PROHIBITOEY STATUTES. 3fi3 e. 46, a penalty is imposed on any surveyor of highways who shall have an interest in any contract, or sell materials, &o. for wdrk on aaiy high- way under his care imless he first obtain a licence from two justices. The effect of this is that an unlicensed contract by a surveyor to per- form work or supply materials for any highway under his care is absolutely illegal, and there is no discretion to allow payments in respect of it. Contract not Avoided. Bailey v. Sarris (1849) 12 Q. B. 905, 18 L. J. Q. B. 115. A contraat ef sale is mot void merely because the goods are liable to seizure and forfeiture to the Orown under the excise laws. Smith V. Mmuhood (1845) 14 M. & W. 452, 15 L. J. Ex. 149, 69 E. R. 724. The sale of an exeiseable article is not avoided by the seller having omitted to paint up his name on the licensed premises as required by 6 Geo. 4, c. 81, s. 25. Probably this decision would govern the con- struction of the similar current enactment in the Licensing (Consolida- tion) Act, 1910, s. 74. Smith V. Lindo (1858) 4 0. B. N. S. 395, in Ex. Oh. 5 C. B. N. S. 587, 27 L. J. 0. P. 196, 335. One who acts as a broker in the CSty of London without being licensed under 6 Ann. c. 68 (Eev. Stat.: al. 16) and 57 Geo. 3, c. Ix. (r) cannot recover any commission, but a purchase of shares made by him in the market isi not void: and if he has to pay the purchase- money by the usage of the market, he can recover from his principal the money so paid. And in general an agreement which the law forbids to be made is void i£ made. But an agreement forbidden by statute may be saved from being void by the statute itself, and on the other hand an agreement made void or not en- forceable by statute is not necessarily illegal. An agree- ment may be forbidden without being void, or void without being forbidden. (g). Where a statute forbids an agreement, but says that if made it shall not be void, then if made it is a contract which the Court must enforce. By 1 & 2 Vict. c. 106, it is unlawful for a spiritual person (r) These Acts are repealed as to the somewhat obscurely framed the power of tie city court to make' London Brokers' Eelief Act, 1870, rules, &c., but not as to the neoes- 33 & 34 Vict. c. 80. sity of brokers being admitted, by 24 (2) 364 UNLAWFUL AGREEMENTS. to engage in trade, and the ecclesiastical Court may inflict penalties for it. But by s. 31 a contract is not to be void by reason only of being entered into by a spiritual person contrary to the Act. It was contended without success in Lewis V. Bright (s) that this proviso could not apply when the other party knew with whom he was dealing. But the Court held that the knowledge of the other party was im- material; the legislature naeant to provide against the scandal of such a defence being set up. And Erie J. said that one main purpose of the law was to make people perform their- contracts, and in this case it fortunately could be carried out. (h). Where no penalty is imposed, and the intention of the legislature .appears to be simply that the agreement is not to be enforced, there neither the agreement itself nor the performance of it is to be treated as unlawful for any- other purpose (t). Modern legislation has produced some very curious results of this kind. In several cases the agreement cannot even be called void, being good and recognizable by the law for some purposes or for every purpose other than that of creating a right of action. These cases are reserved for a special chapter (u) . In the case of wagers the agreement is null and void by 8 & 9 Vict. c. 109, s. 18, and money won upon a wager cannot (s) (1855) 4 E. & B. 917, 24 pressed in Eoman law by the tenna Li. J. Q. B. 191, 99 R. E. 823. minus qtiam perfeota lex and per- (i) Adopted by the Supreme feoia lex. Ulp. Beg. 1 § 2, cp. Court, U. &. OJijccpman v. County of Sav. Syst. 4. 550. A constitutioil Douglas (1882) 107 U. S. 348, 356. of Theodosius and Valentinian (?<) See Ch. XIII., On Agree- (Cod. 1. 14. de leg. 5) enjoined that ments o£ Imperfect Obligation. all prohibitory enactments were t» The distinction between an enact- be construed as avoiding the trans- ment which imposes a pemalty actions prohibited by them (that is, without making the transaction as leqes . Xpwm-nii (1876) Motlrdm (1889) I. L. H. 13 Bom. 1 C. P. Div. 573. Nor a so-called 681, a curious case on the common competition where the event is Indian sport of " rain-gambling." determined by chance or by a choice (a) Fitch v. Jonm (18.35) 5 E. & so arbitrary as to be equivalent to B. 238, 24 L. J. Q. B. 293, 103 chance: Barclay v. Pearson (the H. R. 455, see judgments of Lord " missing word " case) [1893] 2 Campbell C.J. and Erie J. Ch. 154, 62 L. J. Ch. 636. (i) Rosewarne v. Billing (1863) (y) Difigle V. Sif/fjs (1877) 2 15 0. B. N. S. 316, 33 L. J. C. P. Ex. Div.' 422, 46 L. J. Ex. 721; 55. 366 UNLAWFUL, AGREEMENTS. coverable (c), as also a loan of money to be used for a wager, and to be repaid only if the borrower wins {d) . Attempts have been made to evade the operation of the principal Act in gambling transactions for "differences" in stocks by colourable provisions for the completion of purchase and delivery or receipt of the stocks. Whether the intention of the parties was really to buy and sell, or to wager on the price of the stocks, is a question of fact on which the verdict of a jury will not be disturbed if on the agreement as a whole there is evidence of a gambling intention (e). Nor will .pro- visions of this kind validate an agreement which is otherwise a gambling agreement on the face of it (/) . Under another modern statute (5 & 6 Wm. 4, c. 41, s. 1) securities for money won at gaming or betting on ganies, or lent for gaming or betting, are treated as given for an illegal consideration {g) . Hence it has been said not to be a lawful (o) 55 Vict. c. 9, Tatam v. Reeve, [1893] 1 Q. B. 44, 62 L. J. Q. B. 30. (d) Carney v. Plimmer [1897] 1 Q. B. 634, 66 L. J. Q. B. 415, C. A. It is doubtful whether the Act afflects loans of money to be used in betting generally or for paying bets already lost: see pp. 445, 446, below. (e) Universal Sfook Exchange, Ltd. V. Stmohan [1896] A. C. 166, 65 L. J. Q. B. 429. (/) Re Giem [1899] 1 Q. B. 794, 68 L. J. Q. B. 509, C. A. (^) The statute does not affect a loan of mooiey to pay a debt pre.- viously lost: Ex 'parte Pyhe (1878) 8 Ch. Div. 754, 47 L. J. Bk. 100. It does not prevent forbearance to sue on a Beourity of this kind, or to enforce it by conventional sanc- tions, from being a good considera- tion for a new promise: Ryams v. Stuart King [1908] 2 K. B. 696, 77 L. J. K. B. 694, C. A., diss: Fletcher Moulton L.J. As the re- sult stands bookmakers at any rate consider that a method has been discovered of recoveiring by action money won on a wager: see Prof. Dicey, K.C. in L. Q. E. xxv. 76, 80. In the United States it is generally held that wagering agree- ments are not only void but illegal: see Irwin v. Williar (1883) 110 U. S. 499, 510; Harvay v. Merrill (1889) 150 Mass. 1. As to recover- ing money deposited with a stake- holder or agent, see p. 459, below. The payee of a cheque given in payment of a bet is not a " holder " within the Act, nor is his banker, if the cheque is sent to him merely for collection, an "indorsee, holder;, or assignee ": NiohoUs v. Evans [1914] IK. B. 118, 83 L. J. K. B. 301. WAGERS AND GAMING. 367 occupation, though it is not actually punishable, to make a business of betting or gaming (/i); but the latest judicial opinion is otherwise {hh) . Lotteries are forbidden by penal statutes (i). It would be inappropriate to the general purpose of this work, as well as impracticable within its limits, to enter upon the contents or construction of the statutes which prohibit or affect various kinds of contracts by regulating particular professions and occupations or otherwise (/). The rules and principles of law which disallow agreements whose object is to contravene or evade an Act of Parliament do not apply to private Acts, so far as these are in the nature of agreements between parties. If any of the persons inte- rested make arrangements between themselves to waive or vary provisions in a private Act relating only to their own interests, it cannot be objected to such an agreement that it is in derogation of, or an attempt to repeal the Act (k) . B. Agreements contrary to morals or good manners. It is not every kind of immoral object or intention that will vitiate an agreement in a court of justice. When we call a thing immoral in a legal sense we mean not only that it is morally wrong, but that according to the common under- Qi) O'Connor v. Ralston [1920J are too well known to the pro- 3 K. B. 451, 90 L. J. K. B. 261. fession to need enumeration; some {hJi) Jeffrey v. Bumford [1921] are merely incidental to criminal, 2 K. B. 351, McCardie J. revenue, or other public law; some (i) 8 & 9 Vict. c. 74, and several are better found in monographs on earlier Acts. Various innocent and the lines of business which they not uncommon ways of raising affect; some are neither necessary money for charitable objects are to be known in ordinary practice probablj' within the letter of these nor of any profit for the under- Acta. standing of the law. (7) The list of such statutes (k) Savin v. Hoylake My. Co. formerly given in the appendi.x is (1865) L. R. 1 Ex. 9, 35 L. J. Ex. not now reprinted, as it is not 52. Cp. and dist. SImw's claim thought that it can be of practical (1875) L. E. 10 Oh. 177, 44 L. J. use at this day. Some of them Ch. 670. 368 UNLAWFUL AGREEMENTS. standing of reasonable men it would be a scandal for a court of justice to treat it as lawful or indifferent, though it may not come within any positive prohibition or penalty. What sort of things fall within this description is in a general way obvious enough. And the law might well stand substantially as it is, according to modern decisions at any rate, upon this ground alone. Some complication has been introduced, how- ever, by the influence of ecclesiastical law, which on certain points has been very marked, and which has certainly brought in a tendency to treat these cases in a peculiar manner, to mix up the principles of ordinary social morality with con- siderations of a different kind, and with the help of those considerations to push them sometimes to extreme conclu- sions. Having regard to the large powers formerly exercised by spiritual Courts in the control of opinions and conduct, and even now technically not abolished, it seems certain that everything which our civil Courts recognize as immoral is an offence against ecclesiastical law. Perhaps, indeed, the converse proposition is theoretically true, so far as the ecclesi- astical law is not directly contrary to the common law (1). But this last question may be left aside as merely curious. As a matter of fact sexual immorality, which formerly was and in theory still is one of the chief subjects of ecclesiastical jurisdiction, is the only or almost the only kind of immoralitj^ of which the common law takes notice as such. Probably drunkenness would be on the same footing. It is conceived, for example, that a sale of intoxicating liquor to a man who then and there avowed his intention of making himself or others drunk with it would be void at common law. The actual cases of sale of goods and the like for immoral pur- poses, on ^\'hose analogy this hypothetical one is put, depend on the principles applicable to unlawful transactions in general, and are accordingly reserved for the last part of this {I) Cp. Lord Westburj-'s remarks in Hunt v. Sant (1861-2) 4 D. F. J. at pp. 226-8. 233. IMMORAL AGREEMENTS. 369 chapter. Putting apart for the present these cases of in- directly immoral agreements, as they may be called, we lind that agreements are held directly immoral in the limited sense above mentioned, on one of two grounds; as providing for or tending to illicit cohabitation, or as tending to disturb or prejudice the status of lawful marriage ("in derogation of the marriage contract," as it is sometimes expressed). Illicit cohabitation. — With regard to the first class, the main principle is this. The promise or expectation of future illicit cohabitation is an unlawful consideration, and an agree- ment founded on it is void. Past cohabitation is not an unlawful consideration; indeed, there may in some circum- stances be a moral obligation on the man to provide for the woman: but the general rule applies (to) that a past executed consideration, whether such as to give rise to a moral duty or not, is equivalent in law to no consideration at all. An agreement made on no other consideration than past cohabita- tion is therefore in the same plight as any other merely voluntary agreement. If under seal it is binding and can be enforced (ra), otherwise not (o). The existence of an express agreement to discontinue the illicit cohabitation, which is idle both in fact (as an agreement which neither party could break alone) and in law — or the fact of the defendant having previously seduced the plaintiff, which " adds nothing but an executed consideration resting on moral grounds only," — can make no difference in this respect (o). (h«) But the mle is modern (^Cli. comes from this period. Pmemium IV. pp. 191, 192, above), and the pudoris, however, was used in a earlier cases on this subject belong perfectly innocent sense in the old to a time when a different doctrine law of dower: Co. Lit. 31a. prevailed; they therefore discuss (m) Gray v. Mathias (1800) 5 matters which in the modern view Ves. 286, 5 R. R. 48. are simply irrelevant, e.g. the (o) Beaumont v. Reeve (1846) 8 previous character of the parties. Q. B. 483, 15 L. J. Q. B. 141, 70 The phrase praemium pwdicitiae R. R. 552. 370 UNLAWFUL AGREEMENTS. The manner in which those principles are applied has been thus stated by Lord Selborne: — " Most of the older authorities on the subject of oontraota founded on immoral oonsidetration are collected in the note to Benyon v. Nettle- fold (j>). Their results may be thus stated: 1. Bonds or oovemante founded on past cohabitation, whether adulterous (j), incestuous, or simply immoral, are valid in law and not liable (unless there are other elements in the case) to be set aside in equity. 2. Such bonds or covenants, if given in consideration of future cohabitation, are void in law (r), and therefore of course also void in equity. 3. Belief cannot be given against any such bonds or covenants in equity if the Ulegal consideration appears on the face of the instrumient (a). 4. If an illegal oonsideratiooi does not appear on the faoe of the instrument the objection of particeps criminU will not prevail against a bill of discovery in equity in aid of the defence to an action at law {t), [this is of no consequence in England since the Judicature Acts]. 5. Under some (but not under all) circumstances when the consideration is unlawful, and does not appear on the face of the instrument, relief may be given to a particeps crimims in equity " («). The exception alluded to in the last sentence is probably this: that "where a party to the illegal or immoral purpose comes himself to be relieved from the obligation he has con- tracted in respect of it, he must state distinctly and exclu- sively such grounds of relief as the Court can legally attend to" (a;). He must not put his case on the ground of an immoral consideration having in fact failed, or complain that the instrument does not correctly express the terms of an immoral agreement {y). (j7) (1850) 3 Mac. & G. 94, 100, one: Simpson v. Lord Howden 87 E. R. 23. (1837) 3 My. & Cr. 97, 102, 45 iq) Kmje v. Moore (1822) 1 Sim. R. R. 225, 226. & St. 64. (i!) Benyon v. Nettlefotd (1830) (>■) WaUer v. Perkins (1764) 3 3 Mac. & G. 94, 87 R. R. 25. Burr. 1568. («) Ayerst v. Jenkins (1873) (s) Gray v. Mathias (1800) 5 L. R. 16 Eq. 275, 282, 42 L. J. Ves. 286, 5 R. R. 48; Smyth v. Ch. 690. Griffin (1842) 13 Sim. 245, 14 L. J. (a;) Batty v. Chester (1842) 5 Ch. 28, appears to be really nothing Beav. 103, 109. else than an instance of the same (y) Semble, relief will not be rule. The rule is or was a general given if it appears that the immoral IMMORAL AGREEMENTS. 371 Where a security is given on account of past cohabitation, and the illicit connection is afterwards resumed, or even is never broken off, the Court wiU not presume from that fact alone that the real consideration was future as well as past cohabitation, nor therefore treat the deed as invalid (z). There existed a notion that in some cases the legal personal representative of a party to an immoral agreement might have it set aside, though no relief would have been given to the party himself in his lifetime: but this has been pro- nounced "erroneous and contrary to law" (a). An actual transfer of property, which is on the face of it " a completed voluntary gift, valid and irrevocable in law " and confers an absolute beneficial interest, cannot be afterwards impeached either by the settlor or by his representatives, though in fact made on an immoral consideration (b). But it by no means follows that the Court will enforce the trusts. It may have to direct the trustees whom to pay, and will then disregard any disposition which is in fact founded on an immoral con- sideration (c) . Thus a settlement in the form of an ordinary marriage settlement in contemplation of a marriage (as for- merly with a deceased wife's sister) not allowed by English law is treated, as regards trusts for the so-called wife, as made on an immoral consideration, and the Court will pro- nounce such trusts invalid if applied to by the trustees for directions, though it would not set aside the settlement at the instance of the settlor (d). Where parties who have been living together in illicit consideration has been executed: Ch. D. 353. Sisme^j v. JEley (1849) 17 Sim. 1, 18 (a) Ayerst v. Jenldns (1873) L. J. Oh. 350, 83 R. R. 276: but L. R. 16 Eq. 275, 281, 284, 42 the ease is hardly intelligible. L. J. Ch. 690. (z) Crrmj V. Mathlas (1800) 5 (6) Ayerst v. Jenkins, last note. V€8. 286, 5 R. R. 48; Hall v. (c) Phillips v. Probyn [1899] 1 Palmer (1844) 3 Ha. 532, 64 R. R. Oh. 811, 68 L. J. Oh. 401. 399; Vallance v. Blagden (1884) 26 (d) Phillips v. Probyn, last note. 372 inSTLAWFUL AGEEEMENTS. cohabitation separate, and the man covenants to pay an annuity to the woman, with a proviso that the annuity shall cease or the deed shall be void if the parties live together again, there the covenant is valid as a simple voluntary cove- nant to pay an annuity, but the proviso is AvhoUy void. It makes no difference if the parties, being within the pro- hibited degrees of affinity, have gone through the form of marriage, and the deed is in the ordinary form of a separation deed between husband and wife (e). When the parties are realh'- married such a proviso is usual but superfluous, for the deed is in any case avoided by the parties afterwards living together (/). This brings us to the second branch oP this topic, namely the validity of separation deeds and agreements for separation. Agreements for separation. — The history of the subject will be found in Lord Westbury's judgment in Hunt v. Hunt (g). From the canonical point of view marriage was a sacrament creating an indissoluble relation. The duties attaching to that relation were " of the highest possible religious obligation" and paramount to the will of the parties. In ecclesiastical Courts aji agreement or provision for a voluntary separation present or future was simply an agreement to commit a continuing breach of duties with which no secular authority could meddle, and therefore was illegal and void. For a long while all causes touching marriage even col- laterally were claimed as within the exclusive jurisdiction of those courts. The sweeping character and the gradual (e) Esc parte leaden (1874) L. R. {g) (X861-2) 4 D. F. J. 221. The 9 Ch. 670, 43 L. J. Bk. 121. case was taken to the House of (/) W estmeath v. Salisiury or Lords, but the proceedings came to Westmeath (1820-1) 5 Eli. N. S. an end without any decision by the 339, 1 Dow & CI. 519, 35 E. R. death of the liusband: see per Lord 54. Selborne, 8 App. Ca. at p. 421. SEPARATION DEEDS. 375 decay of such claims have already been illustrated by cases we have had occasion to cite from the Year Books in other places. In later times the ecclesiastical view of marriage was still upheld, so far as the remaining ecclesiastical juris- diction could uphold it {h), and continued to have much influence on the opinions of civil Courts; the amount of that influence is indeed somewhat understated in Lord Westbury's exposition. But the common law, when once its jurisdiction in such matters was settled, never adopted the ecclesiastical theory to the full extent. A contract providing for and fixing the terms of an immediate separation is treated like any other legal contract, only the ordinary rule that the wife cannot contract with her husband without the intervention of a trustee is dispensed with in these cases (^) . Being good and enforceable at law, the contract is also good and enforce- able in equity, nor is there any reason for refusing to enforce it by any of the peculiar remedies of equity. In Hunt v. Hunt the husband was restrained from suing in the Divorce Court for restitution of conjugal rights in violation of his covenant in a separation deed (;'), on the authority of the decision of the House of Lords (fc) which had already estab- lished that the Court may order specific performance of an agreement to execute a separation deed containing such a covenant. The case may be taken as having put the law on a consistent and intelligible footing, though not without over- ruling a great number of pretty strong dicta of various judges in the Court of Chancery and even in the House of Lords {l) ; (A) See4D. E. J. 235-8. (/«) Wilsmi v. WiUi>n (1848) 1 (0 P. 88, above, McGregor v. H. L. O. 538, 73 R. R. 158. McGregor (1888) 21 Q. B. Div. Q.) In 8t. John v. St. John 424, 57 L. J. Q. B. 268. (1803-5) 11 Ves. 526, &n., West- (/) This covenant oould not then meatk v. Westmeath (1820-1) 1 bo pleaded in the Divorce Court, Jac. 142 (Lord Eldon) ; Worrall which held itself bound by the v. Jacob (1816-7) 3 Mer. 268 (Sir former ecclesiastical practice to W. Grant) : Warrender v. War- take no notice of separation deeds. render (1835) 2 d. & F. 527 (Lord 374 UNLAWFUL AGREEMENTS. and it has been repeatedly followed (m) . But an agreement by the wife not to oppose proceedings for a divorce pending at the suit of the husband is void, being not only in derogation of the marriage contract, but a collusive agreement to evade the due administration of justice (w). Wo have seen that when it is sought to obtain the specific performance of a contract the question of consideration is always material, even if the instrument is under seal. Generally it is part of the arrangement in these cases that the trustees shall indemnify the husband against the wife's debts, and this is an ample consideration for a promise on the hus- band's part to make provision for the wife, and of course also for his undertaking to let her live apart from him, enjoy her property separately, &c. (o). But this particular considera- tion is by no means necessary. The trustee's undertaking to pay part of the costs of the agreement will do as well. But if the agreement is to execute a separation deed containing all usual and proper clauses, this includes, it seems, the usual covenant for indemnifying the husband, so that the usual consideration is in fact present (p). In the earlier cases, no doubt, it was supposed that the contract was made valid in substance as well as in form only by the distinct covenants betAveen the husband and the trustee as to indemnity and payment, or rather that these were the only valid parts of the contract. But since Wilson v. Wilson (g) and Hunt v. Hunt Brougham), 561-2 (Lord Lynd- 5 P. D. 19, 48 L. J. P. 49. A like hurst). Mofit of these are to be covenant on the wife's behalf by a found cited in the argument in trustee is binding on her, Clark v. Wilson V. Wilson. And even since Clark, 10 P. Div. 188. that case Vansittart v. Vansittart (n) Hope v. Hope (1857) 8 D. (1858) 2 De G. & J. at p. 255 M. G. 731, 745, 26 L. J. Ch. 417. (Lord Chelmsford). (o) See Dav. Conv. 5, pt. 2, 1079. (m) Besani v. Wood (1879) 12 (p) Qihbis v. Harding (1870) Ch. B. at p. 623; Sweet v. Sweet L. R,. 5 Ch. 336, 39 L. J. Ch. 374. [1895] 1 Q. B. 12, 64 L. J. Q. B. {q) On the effect of that case see 108; Marshall v. Marshall (1879) the remarks in the House of Lords SEPARATION DEEDS. 375 such a view is no longer tenable: in Lord Westbury's words " the theory of a deed of separation is that it is a contract between the husband and wife through the intervention of a third party, namely the trustees, and the husband's contract for the benefit of the wife is supported by the contract of the trustees on her behalf" (r). A covenant not to sue for restitution of conjugal rights cannot be implied, and in the absence of such a covenant the institution of such a suit does not discharge the other party's obligations under the separa- tion deed (s). Subsequent adultery does not of itself avoid a separation deed unless the other party's covenants are expressly qualified to that effect (i). A covenant by the husband to pay an annuity to trustees for the wife so long as they shall live apart — or, since the Married Women's Property Act, to the wife herself — remains in force notwith- standing a subsequent dissolution of the marriage on the ground of the wife's adultery (m); but it seems it would be void if future adultery were contemplated at the time (x). The concealment of past misconduct between the marriage and the separation may render the arrangement voidable, and so may subsequent misconduct, if the circumstances show that the separation was fraudulently procured with the present intention of obtaining greater facilities for such misconduct (y). A separation, or the terms of a separation, between bus- in a subsequent appeal as to the (u) Charlesworth v. Holt (1873) frame of the deed, Wilson \. Wilson L. E. 9 Ex. 38, 43 L. J. Ex. 25; (1854) 5 H. L. C. 40, 101 E. E. 25; Siveet v. Sweet [1895] 1 Q. B. 12, and by Lord Westbury, 4 D. F. J. 64 L. J. Q. B. 108. 234. (x) Fearon v. Earl of Aylesford (r) 4 D. E. J. 240. (1884) 14 Q. B. Div. 792, 53 L. J. («) Jee V. Thurlow (1824) 2 B. Q. B. 410. & 0. 547, 26 E. E. 453. (2/) Evans v. Oarrington, note (t) lb.; Evans v. Carrington (t), and per Cotton L.J. 14 (1860) 2 D. F. J. 481, 29 L. J. Ch. Q. B. D. at p. 795. 3.30, 129 R. R. 158. 376 UNLAWFUL AGREEMENTS. band and wife cannot lawfully be the subject of an agree- ment for pecuniary consideration between the husband and a third person. But in the case of Jones v. Waite (z) it was decided by the Exchequer Chamber and the House of Lords that the husband's execution of a separation deed already drawn up is a good and lawful consideration for a promise by a third person. A separation deed, as we have above said, is avoided by subsequent reconciliation and cohabitation (a) . If it were not so, but could remain suspended in order to be revived in the event of a renewed separation, it might become equiva- lent to a contract providing for a contingent separation at a future time: and such a contract, as will immediately be seen, is not allowable. However, a substantive and absolute declaration of trust by a third person contained in a separation deed has been held not to be avoided by a reconciliation (b). As to all agreements or provisions for a future separation, whether post-nuptial (c) or ante-nuptial (d) (e), and whether proceeding from the parties themselves or from another per- son (e), it remains the rule of law that they can have no effect. If a husband and wife who have been separated are reconciled, and agree that in case of a future separation the («) (1842) 1 Bing. N. O. 656, in L. B. 19 Eq. 539, 44 L. J. Ch. 388. Ex. Ch. 5 Bing.N. C. 341, in H. L. (c) Marquis of Westmeath v. 9 01. & F. 101, 50 R. R. 705. In Marchioness of rFestmeath (1820-1) the Ex. Ch. both Ixwd Abinger and 1 Dow & CI. 519, 541 ; Westmeath Lord Denman dissented. v. Salisbury (1831) 5 Bli. N. S. (a) See also Westmeath v. Salis- 339, 35 R. R. 54. hury (1831) 5 Bli. N. S. 339, 35 (^ (Z) . There need not be an express agreement not to prosecute. An understanding to that effect, shown by the circumstances to be part of the transaction, will be enough. And, since ((/) Ace. in Cliibb v. Ilutson (A) 9 Q. B. at p. 392. (1865) 18 C. B. N. S. 414, held that (0- If'indhill Looal Board v. forbearance to pro,4eoute a charge Vint (1890) 45 Oh. Div. 351, 59 of obtaining money by false pre- L. J- Oh. 608. tences is an illegal consideration. (/c) Fisher cj- Co. v. ApoUinaris What if there is no real ground for Co. (1875) L. R. 10 Ch. 297, 44 a prosecution, the supposed offence L. J. Oh. 500. being an act not criminally punish- Q) Kaufman \ . Gerson [1904] able? See per Pry J. 8 Ch. D. at 1 K. B. 591, 73 L. J. K. B. 320, p. 477. It is submitted that the C. A., see L. Q. R. xx. 227, and agreement would be void for want p. 468, below, of consideration. 400 UNLAWFUL AGREEMENTS. the defence of illegality in cases of this kind is allowed on public grounds, it must be allowed even if the Court thinks it discreditable to the party setting it up (m). It is not compounding felony for a person whose name has been forged to a bill to adopt the forged signature and advance money to the forger to enable him to take up the bill. It is doubtful whether a security given by the forger for such advance is valid: but he cannot himself actively dispute it (on the principle potior est conditio defendontis, of which afterwards), nor can his trustee in bankruptcy, who for this purpose is in no better position than himself, as there is in any case no offence against the bankrupt laws (n) . An agreement by an accused person with his bail to in- demnify him against liability on his recognizances is illegal, as depriving the public of the security of the bail (o): and so is the like agreement of a third person (p) . The compounding of offences under penal statutes is expressly forbidden by 18 Eliz. c. 5, s. 5. An election petition, though not a criminal proceeding, is a proceeding of a public character and interest which may have penal consequences; and an agreement for pecuniary consideration not to proceed with an election petition is void at common law, as its effect would be to deprive the public of the benefit which would result from the investigation (q) . In like manner an agreement for the collusive conduct of (m) Jones v. Merionethshire (o) Herman v. Jeuchner (1885) Building Society [1892] 1 Ch. 173, 15 Q. B. Div. 561, 54 L. J. Q. B. 61 L. J. Oh. 138, C. A. 340. It is an indictable con- (») Otherwise where, after an spiracy: Jl. v. Porter [1910] 1 act of bankruptcy, the bankrupt's K. B. 369, 79 L. J. K. B. 241. money has been paid for stifling a (p) Consolidated Explorationand prosecution: there the trustee can Finance Co. v. ilusgrave [1900] 1 recover it: Ex parte Wolverhamp- Ch. 37, 69 L. J. Ch. 11. ton Banking Co. (1884) 14 Q. B. D. {q) Coppock v. Bower (1838) 4 32; Ex parte Caldeeott (1876) 4 M. & W. 361, 51 R. R. 627. Ch. Dlv. 150, 46 L. J. Bk. 14. COMPOUNDING OFFENCES. 401 a divorce suit is void (r), and agreements not to expose im- moral conduct (s), and to conduct criminal proceedings against a third person in such a way that the name of a partj' who was in fact involved in the transaction should not be mentioned {t), have been held void as against public policy. There is nothing illegal in an agreement between parties in a probate action that costs shall come out of the estate whether the Court so order or not; and a party who makes such an agreement jointly with an infant may be per- sonally liable on it if, by the Court not sanctioning the agreement on the infant's part, it cannot be specifically per- formed (m) . A shareholder in a company which was in course of compulsory winding-up agreed with other shareholders, who were also creditors, in consideration of being indemnified by them against all future calls on his shares, that he would help them to get an expected call postponed and also support their claim; it was held that " such an agreement amounts to an interference with the course of public justice ": for the clear intention of the Winding-up Acts is that the proceed- ings should be taken with reasonable speed so that the com- pany's affairs may be settled and the shareholders relieved; and therefore any secret agreement to delay proceedings to the prejudice of the other shareholders and creditors is void (x) . This comes near to the cases of secret agreements with particular creditors in bankruptcy or composition: and those cases do in fact rest partly on this ground. But the direct fraud on the other creditors is the chief element in (r) Hope V. Tlope (1857) 8 39 Ch. D. 605, 57 L. J. Ch. 725. D. M. G. 731, 20 L. J. Oh. 417, 114 („) Prinoe v. Eaworth [1905] 2 R- H- 306. K. B. 768, 75 L. J. K. B. 92. (s) Brown v. Brine (1875) 1 Ex. (a;) Elliott v. Richardson (1870) D. 5, 45 L. J. Ex. 129. L. E. 5 0. P. 744, 748-9, per (0 Lound V. Grimwade (1888) WUleg J., 39 L. J. O. P. 340. 402 UNLAWFUL AGREEMENTS. them, and we have therefore spoken of them under an earlier- head (pp. 343, 344, above). Ousting the jurisdiction-— arbitration . — Agreements to. refer disputes to arbitration are, or rather were, to a certain extent regarded as encroachments on the proper authority of courts of justice by the substituting of a "domestic forum " of the parties' own making. At common law such an agree- ment, though so far valid that an action can be maintained for a breach of it {y), does not " oust the ordinary jurisdiction of the Court " — that is, cannot be set up as a bar to an action brought in the ordinary way to determine the very dispute which it was agreed to refer. Nor could such an agreement be specifically enforced {z), or used as a bar to a suit in equity (a). It is said however "that a special covenant not to sue may make a difference" (a). And the law has not been directly altered (a); but the Common Law Procedure Act, 1854, now superseded by the Arbitration Act, 1889 (52 & 53 Vict. c. 49), gave the Courts a discretion to stay pro- ceedings in actions or suits on the subject-matter of an agree- ment to refer, which amounts in practice to enabling them to enforce the agreement: and this discretion has as a rule been exercised by Courts both of law (&) and of equity (c) (y) Livingston v. Ralli (1855) 5 named arbitrators, see Hnntlijn ^ E. & B'. 132, 24 L. J. Q. B. 2.69,,, Co. v. Taliskm- TUsWlery [1894] 103 R. B. 406. A. C. 202. (s) Street v. liirih]/ (1802) 6 (6) Randegger v. Holmes (1866> Ves. 815, 818. L. R. 1 C. P. 679; Seligmnnn v. (a) Cooke V. Coofce (1867) L. R. Le BoutiUier (1866) ih. 681. 4 Eq. 77, 86-7, 30 L. J. Ch. 480. (e) WiUesford v. Wation (1873> Therefore an award made pending L. R. 14 Eq. 572, 8 Ch. 473, 42 an action and without previous Tj. J. Oh. 447; Pleivs \. Baker application to the C!ourt under the (1873) L. R. 16 Eq. 564, 43 L. J. Arbitration Act is no bar: Bol&man Ch. 212. As to reference to the V. Ossetl Cprp-n. [1912] 3 K. B. decision of a foreign Court, see- 257, 81 L. J. K. B. 1092, C. A. Kirchner & Co. v. Gruban [1909], By Scots law a reference excludes 1 Ch. 413, 78 L. J. Ch. 117. the jurisdiction only if it is ;to ARBITRATION HOW FAR ENFORCEABLE. 403 ill the absence of special circumstances, such as a case where a charge of fraud is made, and the party charged with it desires the inquiry to be public {d), or where the defendant appeals to an arbitration clause not in good faith, but merely for the sake of vexation or delay (e), or is otherwise not really read;^- and willing to arbitrate (/) . A question whether on the true construction of an arbitration clause the subject- matter of a particular dispute falls within it is itself to be dealt with by the arbitrator, if it appears from the nature of the case and the terms of the provisions for arbitration that such was the intention of the parties. Otherwise it must be decided by the Court (^r) . And when the question is whether an agreement contain- ing an arbitration clause is or is not determined, that question is not one for arbitration, since the arbitration clause itself must stand or fall with the whole agreement Qi). Certain statutory provisions for the reference to arbitra- tion of internal disputes in friendly and building societies have been decided (after some conflict) to be compulsory and to exclude the ordinary jurisdiction of the Courts (?'). The id) Mussell ,. Russell (1880) 14 44 Ch. Div. 200, 59 L. J. Ch. 520. Ch. D. at p. 476 (Jessel 3I.R.). (/) See the principle and limits (e) L. R. 14 Eq. 578; IVitt \. of the exeeptioin explained in the Corcoran (1871) L. R. 8 Ch. 476, C. A.. Parry \. Liverpool Malt n., L. R. 16 Eq. 571. The enact- Co. [1900] 1 Q. B. 339, 69 L. J. meait applies only where there is Q. B. 161. at the time of action brought an (y) Pieroy v. Young (1879) 14 existing agreement for reference Ch. Div. 200, 208, per Jessel M.R. which can be carried into effect: qualifying the apparent effect of Harndell, Saunders^ Co. v. Tlwmp- Willesford v. Watson (1873) 1.. R. son (1876) 1 Q. B. Div. 748, 45 8 Ch. 473. L. J. Q. B. 713. Not where the (A) Per James L.J. in Llauelly arbitration clause does not cover Ry. f Book Co. v. L. S; N. W. Ry. the whole subject-matter: Turnock Co. (1873) L. R. 8 Ch. at p. 948. V. Sartoris (1889) 43 Ch. Div. 150, (») Jt'rif/ht v. Monarch Invest- 62 L. T. 209. Nor when the ment Building Society (1877) 5 Ch. matter in difference is a question D. 726, 46 L. J. Oli. 649; Each v. of pure law: Glegg v. Clegg (1890) London Provident Building Society 404 UNLAWFUL AGREEMENTS. Railway Companies Arbitration Act, 1859, is also com- pulsory (k) . Moreover parties may if they choose make arbitration a condition precedent to any right arising at all, and in that case the foregoing rules are inapplicable: as where the con- tract is to pay such an amount as shall be determined by arbitration or found due by the certificate of a particular per- son (Z). Whether this is in fact the contract, or it is an absolute contract to pay in the first instance, with a col- lateral provision for reference in case of difference as to the amount, is a question of construction on which there have been more or less conflicting opinions (m) ■ Maintenance and champerty. — We now come to a class of transactions which are specially discouraged, as tending to pervert the due course of justice in civil suits. (1883) 23 C!h". Div. 103, 52 L. J . C!h. 542: Municipal Building Society V. Kent (1884) 9 App. Ca. 260, 53 L. J. Q. B. 290: Bache v. Billing- ham [1894] 1 Q. B. 107, 63 L. J. M. C. 1, C. A. (an improper award, otherwise witliin the Act, cannot be treated as a mere nullity). Not so where the real question is whether -a, party claiming against the society is a member of the society at all: Prentice v. London (1875) L. R. 10 C. P. 679, 44 L. J. C. P. 353. See the Building Societies Act, 1884, 47 & 48 Vict. c. 4], and Western Suburban, ^c. Co. V. Martin (1886) 17 Q. B. Div. 609, 55 L. J. Q. B. 382. (K) Watford ^ liickmarusworth Ry. Co. V. L. f N. W. Sy. Co. (1869) L. R. 8 Eq. 231, 38 L. J. Ch. 449. Similar questions may arise under special and private Acts: Joseph Crosfield ^ Sons v. Mnnehester Ship Canal Co. [1904] 2 Ch. 123, 73 L. J. Ch. 345, C. A. (0 Soott V. Avery (1855-6) 5 H. L. 0. 811, 25 L. J. Ex. 303, 101 R. R. 392, which does niot overrule the former genesral law on the subject, see the judgments of Brett J. and Kelly C.B. in Ex. Ch. in Edwards v. Aberayron, Sjo. Society (1875-6) 1 Q. B. D. 563; Soott v. Corporation of Liverpool (1858) 3 De G. & J. 334, 28 L. J. Ch. 236. Cp. Collins v. Locke (1879) (J. C.) 4 App. Ca. 674, 689, 48 L. J. P. O. 68. But a clause of this kind cannot be relied on along with a defence going to the root of the contract: Jureidini v. National Millers Insce. Co. [1915] A. 0. 499, 84 L. J. K. B. 640. (ni) Elliott V. Royal Exchange Assurance Co. (1867) L. R. 2 Ex. 237, 36 L. J. Ex. 129; Dawson v. Fitzgerald (1876) 1 Ex. Div. 257, revg. B. 0. L. R. 9 Ex. 7, 45 L. J. Ex. 893. MAINTENANCE AND CHAMPERTY. 405. These are the dealings which are held void as amounting- to or being in the nature of champerty or maintenance. The principle of the law on this head has been defined to be " that no encouragement should be given to litigation by the intro- duction of parties to enforce those rights which others are not disposed to enforce " (n). Maintenance is said to be a general term of which champerty is a species; but this appears to be a recent notion. The main object of the old law was rather to put down the mischief of speculating in doubtful titles, for which practice the complicated rules as to disseisin and its results offered much temptation (o). The most usual meanings (together with certain additions and distinctions now obsolete) are thus given by Coke: — " First, to maintain to have part of the land or anything out of the land or part of the debt, or any other thing in plea or suit; and this is called cambipartia [champart, campi partitio], champertie." The second is " when one main tain eth the one side without having any part of the thing in plea or suit " (p). Cham- perty may accordingly be described in modern practice as " maintenance aggravated by an agreement to have a part of the thing in dispute" (q). Agreements falling distinctly within these descriptions are punishable under certain statutes (r). It has always been considered, however, that champerty and maintenance are (») By Lord Abinger in Prosser Porter (1856) 7 E. & B. 58, 26 V. Edmonds (1835) 1 Y. & C. Ex. L. J. Q. B. 64. 481, 497, 41 E. R. 322, 334. (r) 3 Ed. 1 (Stat. Westm. 1), (o) See Percy H. Winfleld, The c. 25; 13 Ed. 1 (Stat. Westm. 2), History of Maintenance and Cham- ^, 49; 28 Ed. 1, st. 1, c. 11; Stat, perty, L. Q. R. xxxv. 59. de Conspiratoribus, temp, incert. ; (p) Co. Lit. 368 6. Every cham- 20 Ed. 3, c. 4; 1 Ric. 2, c. 4; 7 perty is maintenance, 2 Eo. Ab. Ric. 2, c. 15; and 32 H. 8, o. 9, 119 R. of which more presently. (q) Bovill, arff. in 8prtfe y. 406 UNLAWFUL AGREEMENTS. oSences at common law, and that the statutes only declare the common law with additional penalties (s). Whether by way of abundant caution or for other reasons, the law was in early times applied or at any rate asserted with ■extreme and almost absurd 'severity (t). It was even con- tended, as we have already seen (p. 232, above), that the absolute beneficial assignment of a contract was bad for main- tenance. The modern cases proceed not upon the letter of the statutes or of the definitions given by early writers, but upon the real object and policy of the law, which is to repress that which Knight Bruce L.J. spoke of as " the trafiic of merchandising in quarrels, of huckstering in litigious dis- cord," which decent people hardly require legal knowledge to warn them from, and which makes the business and profit of " breedbates, barretors, or counsel whom no Inn will own, and solicitors estranged from every roll " (u). On the other hand the Courts have not deemed themselves bound to permit things clearly within the mischief aimed at any more than to forbid things clearly without it. They have in fact taken advantage of the doctrine that the statutes are only in affirmance of the common law to treat them as giving indica- tions rather than definitions ; as bearing witness to the general " policy of the law " but not exhausting or restricting it. It is not considered necessary to decide that a particular transaction amounts to the actual offence of champerty or maintenance in order to disallow it as a ground of civil rights : it will be void as " savouring of maintenance " if it clearly tends to the same kind of mischief. Of maintenance pure and simple, an important head in the •old books, there are very few modern examples (x); almost (s) Peohell v. Watson (1841) 8 (ii) Reyiiell v. Sprye (1852) 1 M. & W. 691, 700, 58 R. K. 843, D. M. G. at pp. 680, 686, 91 850, 2 Ro. Ab. 114 D. R. R. 245, 249. (t) See Bacon's Abridgment, (x) One U Bradlaugh v. Newde- Maintenance, A. (5, 250). gate (1883) 11 Q. B.D. 1, 52 L. J. MAINTENANCE AND CHAMPERTY. 407 all the decisions illustrate the more special rule against cham- perty, namely that " a bargain whereby the one party is to assist the other in recovering property, and is to share in the proceeds of the action, is illegal" {y). On this head the Tules now established appear to be as follows: — (i) An agreement to advance funds or supply evidence with or without professional assistance, or indeed professional assistance only {z), for the recovery of property in considera- tion of a remuneration contingent on success and proportional to or to be paid out of the property recovered is void (ja) . (ii) A solicitor cannot purchase the subject-matter of a pending suit from his client in that suit (&); but he may take a security upon it for advances already made and costs already due in the suit (c). (iii) Except in the case last mentioned, the purchase of propertj^ the title to which is disputed, or which is the subject of a pending suit, or an agreement for such purchase, is not in itself unlawful {d) : but such an agreement is unlawful Q. B. 454. More lately it has been K. B. 302, 312, 81 L. J. K. B. 245, decided that charity ia excuse removes any doubt. Cp. Grell v. enough for mainiainLng a stranger's' Levy (1864) 16 C. B. N. S. 73, and action even without reasonable Strange v . Hrennan (184j6) cited ■ground. Harris v. Brisoo (188. 115 G. (1883) 11 Q. B. D. 1, 52 L. J. (r) Hutley v. Hutley (1873) Q. B. 454. L. R. 8 Q. B. 112, 42 L. J. Q. B. (0 Hutl&y v. Rutley, >.upra. 52. But the interest of a bank- See 2 Eo. Ab. 115, 116. rupt's creditors is more than " col- («) Neville v. Dominion, of lateral ": Guy v. Churchill (1888) Canada News Co. [1915] 3 K, B. 40 Ch. D. 481, 56 L. J. Ch. 670. 556, 84 L. J. K. B. 2105, C. A. 418 UNLAWFUL AGREEMENTS. father cannot by contract deprive himself of the right to the custody of his children (x) or of his discretion as to their education. He "cannot bind himself conclusively • by con- tract to exercise in all events in a particular way rights which the law gives him for the benefit of his children and not for his own." And an agreement to that effect — such as an agreement made before marriage between a husband and wife of different religions that boys shall be educated in the religion of the father, and girls in the religion of the mother — cannot be enforced as a contract (y) . After the father's death the Court has a certain discretion. The children are indeed to be brought up in his religion,, unless it is distinctly shown by special circumstances that it would be contrary to the infant's benefit (z) . When such circumstances are in question, however, the Court may in- quire "whether the father has so acted that he ought to be held to have waived or abandoned his right to ;have his children educated in his own religion"; and in determin- ing this the existence of such an agreement as above men- tioned is material (a). The father's conduct in giving up the maintenance, control, or education of his children to others may not only leave the Court free to make after his- death such provision as seems in itself best; it may preclude him even from asserting his rights in his lifetime (6). Clauses in separation deeds or agreements for separation,, purporting to bind the father to give up the general custody of hi? children or some of them, have for the like reasons been held void; and specific performance of an agreement to («) Se Amlreics (1873) L. E. 8 (z) Hawlcsworih v. Ilawksworth Q. B. 153, sub notn. Re Edwards, (1871) L. R. 6 Ch. 539, 40 L. J. 42 L. J. Q. B. 99, and authorities Oh. 634. there collected. (a) Andrews v. Salt (1873) L. R. \(,y) Andrews V. Salt (1813)^. 'R. 8 Ch.' at p. 637. 8 Ch. 622, 636.' ' (b) Lyons v. Blenhin (1820-1) Jac. 245, 255, 263, 23 R. R. 38. CUSTODY OF CHILDEEN. 419 execute a separation deed containing such clauses has been refused (c) . In one case, however, such a contract can be enforced; namely, where there has been such misconduct on the father's part that the Court would have interfered to take the custody of the children from him in the exercise of the appropriate jurisdiction and on grounds independent of contract. The general rule is only that the custody of chil- dren cannot be made a mere matter of bargain, not that the husband can in no circumstances bind himself not to set up his paternal rights (d) . The law on this point is now modified by the Act 36 & 37 Vict. c. 12, which enacts (s. 2) that " No agreement oontained in any separation deed between the father and motlier of an infant or infants shall be held to be invalid by reason only of its providing that the father of such infant or infants sihall give up the custody or control thereof to the mother: Provided always, that no Court shall enforce any such agreement if the Court shall be of opinion, that it will not be for the benefit of the infant or infants to give effect thereto." This Act does not enable a father to delegate his general rights and powers as regards his infant children (e) . The mother of an illegitimate child has parental duties and rights recognized by the law (/) and cannot deprive herself of them by contract (g) . The objections formerly entertained (as we have seen) first against separation deeds in general, and afterwards down to quite recent times against giving full effect to them in (e) VansiUart v. Vansittart 394, and see the remarks in L. It. (1858) 2 Be G. & J. 249, 259, 27 6 Oh. 705, L. R. 13 Eq. 520. L. J. Ch. 222. As to the validity (e) Re Besant (1879) 11 Oh. Of partial restrictions of the hus- Div. 508, 518, 48 L. J. Oh. 497. band's right, Hamilton v. Heetor (/) Barnardo v. McBugh [1891] (1871) L. R. 6 Oh. 701, L. R. 13 A. O. 388, 61 L. J. Q. B. 721. Eq. 511, 40 L. J. Oh. 692. {g) Bumphrys v. Polak [1901] (•) (1768) 4 Burr. 2225, in Ex. amount (though with an expres- Ch. Wilm. 3-64. sion of general disapproval) by a («) But of this gu. : for a refusal constitution preserved only in a by A. B. tomarry onrequeat within Greek epitome: 0. 5. 1. desponsa- a reasonable time would surely libus, &c. 6. discharge the promisor on general (p) Lowe v. Peers (1768) Wil- principles. Cp. Cook v. Richards mot, 371: wheire it is said that it is (1805) 10 Ves. 429, 8 B. R. 23. a contract to omit a moral duty, (0 4 Burr. 2230; per Martin B. and '< tends to depopulation, the IlaU v. Wright (1858) E. B. & E. greatest of all political sins." at p. 788, 29 L. J. Q. B. at p. 49, (?) Hartley v. Sice (1808) 10 113 R. R. 8i88. East. 22, 10 R. R. 228 (a wager). (m) Wilm. 371. DISPOSITIONS BY WILL. 423 covenant not to revoke the will in any other way it is good; but the party's marriage gives no ground of action as for a breach {x). In the absence of any known express decision, it may be gathered from the analogy of the cases on conditions in restraint of marriage that a contract not to marry some par- ticular person, or any person of some particular class, would be good unless the real intention appeared to be to restrain marriage altogether; and that a contract by a widow or widower not to marry at all would probably be good {y) . (ii) Dispositions by ivill. — An agreement to use influence with a testator in favour of a particular person or object is void (0). On the other hand, it is well established that a man may validly bind himself or his estate by contract to make any particular disposition (if in itself lawful) by his own will (a) . Such contracts were not recognized by Roman law (b), and even a gift inter vivos of all the donor's after^ acquired property would have been bad as an evasion of the rule: but in the modern law of Germany, as with us, a contract of this sort (Erbvertrag) is good (c). («) Sobinson v. Ommanney covenant to exercise a special (ISSS) 21 Ch. D. 780, 23 Oh. Div. power of testamentary appointment 285, 52 L. J. Oh. 440. in a particular way is bad, for such (y) See Be WhUinf/'s Settlement '^ P°^^^ ^^ °* ^ fiduciary nature: [1905] 1 Ch. 96, 74 L. J. Ch. 207, ^^ Bradshmr [1902] 1 Oh. 436, 0. A. There is no distinction ^^ ^- J- ^- 230. between a will and a settlement (5) Stipulatio hoc modo oon- for this purpose: ibid. c«pta: Si heredem me non feceriB, (s) Debenham v. Ox (1749) 1 tantum dare spondes? inutilis est, Ves. Sr. 276. quia contra bonos mores est haec («) De Beil v. ThMmp^on (1841) stipulatio. D. 45. 1. de v. o. 61. 3 Beav. 469, s. c. nom. Hammers- (e) Savigny, Syst. 4, 142-5; and ley V. Baron Be Beil (1845) 12 now by German Civil Code, s. 2274 01. & F. 45, 69 B. K. 18; sqq., subje?t to requirements 'of Broohman's trusis (1869) L. R. form. ' 5 Ch. 182,. 39 L. J. Oh. 138.. A 424 UNLAWFUL AGREEMENTS. (iii) Agreements in restraint of trade. — This class of cases presents a singular example of the common law, without aid from legislation and without any manifest discontinuity, having practically reversed its older doctrine in deference to the changed conditions of society and the requirements of modern commerce. The original principle is that a man ought not to be allowed to restrain himself by contract from exercising any lawful craft or business at his own discretion and in his own way. It is still true that "all interference with individual liberty of action in trading, and all re- straints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void." So the rule is expressed by Lord Macnaghten in what is now the governing decision (di) . "But," he continues, "there are exceptions: restraints of trade and interference with indi- vidual liberty of action may be justified by the special cir- eumstanoes of a particular case." The exceptions were introduced with much hesitation, and were long supposed to be confined within inflexible limits. But the former attempts at strict definition have proved inapplicable. As the law is now laid down, " it is a sufficient justification, and indeed the only justification, if the restriction is reasonable — reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public." Observe that the Court has to consider the interests of the parties (not that of the promisee alone) and of the public: "regard must be had to the interest of the covenantor, and not solely to the interest of the covenantee" (e). In the (d) Nordenfelt v. Maxim-Nor- (e} Lord Cozens- Hardy M.B. denfelt, ^o., Co. [1894] A. O. 535, Morris v. Saxdhy [1916] 2 Ch. «65. 57, 77, 84 L. J. Ch. 521. RESTRAINT OF TRADE. 425 case of an extensive restriction it is material whether the covenantor, and therefore also the public, would lose the benefit of his special skill and experience for an unreasonable time. An employee leaving the service of a firm is not to be treated like the vendor of a goodwill who must not dero- gate from his grant (/) . Indeed, it is now laid down as following from the latest decisions in the House of Lords that an employer cannot in general reasonably require an em- ployee to undertake to abstain from competing with him after the employment is over. All the world may compete, and whj" not he? This distinction is admitted to be novel. Nothing is said against the validity of a covenant to keep trade secrets or not to solicit the_employer's customers (^r). No universal test can be assigned for ascertaining what is reasonable, not even the rule formerly accepted that the restraint contracted for must be limited in space, or in some sense not in " general restraint of trade." The precise object of the contract, and the nature and extent of the business interest to be protected, must be considered in every case The kinds of contracts involving restraint of trade which usually occur in modern practice are agreements by the seller of a business not to compete with the buyer, by a partner or retiring partner not to compete with the firm, and by a servant or agent Qi) not to compete with his master or em- ployer after the termination of the service or employment (/) lb. per Joyce J. (in C. A.) ought to be a lowering of managers' [1915] 2 Ch. 90, 84 L. J. Ch. 521; salaries. Phillimore L.J. dissented. (A) Note that wrongful dismissal, {g) Aitwood V. Lamont [1920] 3 being a repudiation of the whole K. B. 571, 90 L. J. K. B. 121, contract, cancels a stipulation of C. A. ; Morris v. Saxelby so inter- this kind: General Bill-posting preted by Younger, L.J., Atkin Co. v. Atkinson [1909] A. C. 118, L.J. agreeing. According to nine- 78 L. J. Ch. 77; Measures Bros. teetath-century economic doitrine v. Measures [1910] 1 Ch. 336, 2 the effect of this new departure Ch. 248, not put on quite the same ijround in C. A. P. — C. 426 UNLAWFUL AGEEEMENTS. (which last, as we have just seen, is the least favoured). Obviously the measure of reasonable restrictions to protect the buyer, continuing partners, or employer in the case of a business with national or world-wide connections will be larger than in the case of a merely local trade or practice. What is reasonable in the particular case is a question of law for the Court. Examples will be given presently. Meanwhile something must be said of the early history and intermediate forms of the doctrine. Early rules. — In the middle ages there was a general feel- ing, apparently popular and not derived from learned sources, against all agreements which tended to monopoly or keeping up prices. At the end of the thirteenth century all the chandlers in a leet of Norwich were presented by the court " pro quadam convencione inter eos facta videlicet quod nuUus eorum venderet libram candele minus quam alter " (i). In the well-known Dyefs case in 2 H. V 5, pi. 26, the action was debt on a bond conditioned that the defendant should not use his craft of a dyer in the same town with the plaintiff for half a year: a contract which would now be clearly good if made upon valuable consideration. The defence was that the condition had been performed. To this Hull J said: "To my mind you might have demurred to him that the obligation is void, because the condition is against the common lav/; and per Dieu if the plaintiff were here he should go to prison till he had made fine to the King"(A;). This was not and could not be more than a dictum (l), and the jjarties proceeded to issue on the question («) Leet Jurisdiction of the City ports. In the earlier Year Books of Norwich, Seld. Soc. 1892, p. 52. judicial asseverations of this kind (/c) This Hill or Hull, .Justice of are not uncommon. Hervey of O. P., is to be distinguished from Stanton ("the hasty") swore by Huls, who sat in K. B. till 3 H. V. le sang que Dieu saigna. His expletive has been wrongly (I) Nowadays the Court may supposed to be unique in the re- take an objection of this kind on its RESTRAINT OF TRADE. 427 whether the condition had in fact been performed or not. Hull's opinion, however, was approved by all the Justices of the C. P in a blacksmith's case in 29 Eliz., of which we have two reports (to). It does not appear in either case what was the real occasion or consideration of the contract. For aught the reports show it maj' have been the ordinary transaction of a sale of goodwill or the like (ra) . It has been plausibly suggested by a learned American writer that the medieval doctrine is connected with the rules and customs forbidding a man to exercise any trade to which he had not been duly apprenticed and admitted: so that if he covenanted not to exercise his own trade, he practically covenanted to exercise none — in other words, not to earn his living at all (o) . Indeed, by the statute 5 Eliz . c . 4, which consolidated earlier Acts of the same kind, not only the common labourer, but the artificer in any one of various trades, was compellable to serve in his trade if unmarried or under the age of 30 years, and not a forty-shilling free- holder or copyholder or " worth of his ow^n goods the clear value of ten pounds." An agreement by a person within the statute not to exercise his own trade might therefore be deemed, at any rate if unlimited, to amount to an agree- ment to omit a legal duty. At the same time absolute free- dom of trade is positively asserted as the normal state .o£ things always assumed and upheld by the common law. It was resolved in the Ipsmeh Tailors' case (p) that at the own motion (see e.y. p. 395, above). and Sir W. Eollett arg. in Hitch- Suck was not the medieval practice. cocTc v. CoJcer, 6 A. & E. at p. 4i7, (m) Moore, 242, pi. .379, fuller ^5 B. B. at p. 529, are merely con- in 2 Leo. 210. Moore's report jectural attempts to find in the makes the odd mistake of putting '^^^ ^^°^^ ^ modern point of view South Mimms in Surrey. which is not there. (to) The explanations offered by (") -Parsons on Contracts, 2. 255. J^rd Macclesfield in MitoheX v. (jo) (1615) 11 Co. Rep. 53 a, Reynolds, 1 Sm. L. C. at p. 399, 54 b. 28 (2) 428 UNLAWFUL AGREEMENTS. common law no man could be prohibited from working in any lawful trade: and it was said that " The statute of 5 Eliz. e. 4, which prohibits every person from using or exercising any craft mystery or occupation, uattass he has baen an apprentice by the space of seven years, was not enacted only to the intent that workmen should be skilful, but also that youth Should not be nourished in idleness, but brought up and educated in lawful soieaioes and trades; and thereby it appears, that without an act of parliament ( Xordenfelt [1893] 1 Oh. 630, 62 X,. J. Oh. 273. In the C. A. Bowen L.J. endeavoured, in an elaborate judgmeoit, to show that the com- mon law rule in its old form was still in force, though the exceptions were extended. In the 11. L. Lord Herscliell, thinking this historicilly correct, concluded on the whole that the old rule had become " inap- plicable to the altered conditions which now prevail," [1894] A. 0. at p. 548. Lord Macnaghten tliought Ix>rd Bowen's distinctions too refined, justified the deKisiDnp in equity which Lord Bowen lad ■criticized for disregarding the com- mon law rule, and denied that there had ever really been a hard and fast rulei of law. Down toi a recent time there was a strong presumption in iact against a restriction without limit of space being reasonably required for the protection of the promisee, but there was no decision or principle to make that presump- tion applicable to the different state of facts produced Dy the nature of modern trade and traffic. Lord Watson, Lord Ashbourne, and Lord Morris, without precisely concurring in this, appear vo have agreed in substance with Lord Macnaghten. («■) Eitchaook v. Coker (1837) 6 A. & E. 438, 45 R. R. 522, Ex. Oh., followed, Deioes v. Fitch [1920] 2 Ch. 159, 89 L. J. Ch. 499, 0. A. (where the restriction in space was very moderate). (/!;) Bastes v. Buss [1914] 1 Ch. 468, 83 L. J. Ch. 329, C. A. 434 UNLAWFUL AGREEMENTS. servant in a trade bind himself absolutely not to compete- with the master during his time of service (I). But competi- tion after the service is determined will not, it now appears,, be restrained unless for special reasons. " An employer may not, after his servant has left his employment, prevent that servant from using his own skill and knowledge in his trade or profession, even if acquired when in the employer's service. That skill and knowledge are only placed at the employer's disposal during the employment. . . Accordingly cove- nants against competition by a former servant are as such not upheld": they are admissible only so far as "reasonably necessary for the protection of the proprietary rights of the covenantee," that is, rights in the nature of trade secrets or trade connexion (m) . A contract not to divulge a trade secret need not be qualified, and a man who enters into such a con- tract may to the same extent bind himself not to carrj' on a manufacture which would involve disclosure of the process intended to be kept secret {n) . Indeed it has been said that " sales of secret processes are not within the principle or the mischief of restraints of trade at all" (o). An undertaking by a tradesman purchasing goods from the manufacturers not to sell them below specified prices, and not to sell to any retail trader without taking a similar agreement from him> is not in restraint of trade; for the manufacturers, not being bound to make or sell their goods at all, or to sell to this or that person, are entitled to sell on their own terms (p). Whether the restriction contracted for in any particular case be reasonable is a question not of fact but of law (g), (l) WalHs V. Say (1837) 2 M. & (o) Bowsn L.J. Maxim-N orden- W. 273, 46 R. R. 602. fdt Co. v. Nordenfelt [1893] 1 Oa.. (m) Younger L.J. Attwood v. 630, 660: but qu. whetber this dis- Lamont [1920] 3 Ch. 571, 90 L. J. tinotion be now necessary; Cb. 121. (p) JEUiman, Sons # Co. v. Car- («) LeaLher Cloth Co. \.Lorsont rington ^ Son [1901] 2 Ch. 275. (1869) L. R. 9 Eq. 345, at p. 353. (?) A bold but hopeJess attempt KESTRAINT OF -TRADE. 43 & aud evidence oi persons in the trade as to what they think reasonable is not admissible (r) . A covenant not to carry on " any business whatsoever," within however narrow limits of time and space, is manifestly unreasonable. Nor will the- Court construe it as if limited to the particular business wliich is really in question (s). But a covenant not to "deal or transact business" with customers of the covenantees or of their successors may be confined by the context to business of the same kind as that carried on by them at the date of the agreement (t). A covenant to retire, without expressed limit in space or time, from a partnership, and " so far as the law allows, from the trade or business thereof in all its branches," is bad for unreasonableness if the words "so far as the law allows" are surplusage, and bad for uncertainty if they are not; the parties cannot throw on the Court the task of settling their agreement for them(t(). A restrictive clause is not reasonable if it has the effect of making the covenantee the sole judge whether a new business undertaken by the cove- nantor competes with his own or not (x). A restrictive cove- nant which contains or may be read as containing distinct undertakings bounded by different limits of space or time,. or different in subject-matter, may be good as to part and bad as to part (y) . But this does not mean that a single was made to dispute this in Dowden to those who were customers during and PooTc v. Pook [1904] 1 K. B. the covenantor's employment, and 45, 73 L. J. K. B. 38, O. A. is too wide: Konski v. Feat [1915] (»•) Haynes v. Doman [1899] 2 1 Ch. 530, 84 L. J. Ch. 513. Oh. 13, 68 L. J. C3h. 419, O. A. (?<) Savies * . Bavies (1887) 36. (s) Baker v. Eedgeooik (1888) Oh. Div. 359, 56 L. J. Ch. 962. 39 Oh. D. 520, 57 L. J. Oh. 8S9; {x) Perls v. Smlfeld [1892] 2 Perls V. SaalfeU [18-92] 2 Ch. 149, Ch. 149, 61 L. J. Ch. 409, C. A. 61 L. J. Oh. 409, 0. A. (y) See Baines v. Geary (1867) (t) Mills V. Dunham [1891] 1 35 Ch. D. 154, and authorities there Oh. 576, '60 L. .J. Oh. 362, 0. A. collected: Maccim-Nordenfelt Co. An unqualified covenant not to v. Nord&nfelt [1893] 1 Ch. 630, 62 solicit such customers wiU not be L. J. Ch. 273, C. A. (no further construed, without more, as limited appeal on this point). 436 UNLAWirUL AGBEEMENTS. covenant may be artificially split up in order to pick out some part of it that can be upheld. Severance is permissible only in the case of a covenant which is in effect a combination of several distinct covenants {z) . Notwithstanding what may have been said in earlier cases, the burden of proof is on the covenantee, ^asserting an exception from the general rule, to make it good by showing that the restraint is reasonable (a) . As regards an employee's covenant, the measure of reason- ableness is the protection of the very trade in which he has contracted to serve and in fact serves ( 6') • The tabular statement of cases subjoined to the report of Avery v. Langford (1854)(c) shows what amounts of restric- tion were held reasonable or not for the circumstances of different kinds of business down to that date. It may be convenient to add the later decisions in the same form. Restriction held Reasonable. Name and Date of 1855. Detidy v. Hen- dtrson, 11 Ex. 194, 24 L. J. Ex. 324, 105 E. E. 488(d). 1856. Jones v. Lees, 1 H. & N. 189, 26 L. J. Ex. 9, 108 E. R. 612. Extent of Trade or Business. Eestriotion in Time. Eestriotion m Space. Solicitor. Manufacture or sale of slabbing and roving frames not fitttd wit£ plaintiff's patent in- vention. 21 years from deter- mination of defen- dant's employment as managing clerk to plaintiff. Continuance of de- fendant's licence from plaintiff to use and sell the patented invention. Extent of 21 miles from parish of Tormoham, Torquay. England ? (not li- mited in terms). (z) Younger L.J. (Atkin L.J. agreeing) Attwood v. Lamont [1920] 3 Ch. 571, 90 L. J. Ch. 121. (a) lb. 587. (6) It cannot be extended to cover the protection of other associated employers whom he has not in fact served, though under the special contract of service he may be bound to do so if required: H, Leetham ^ Sons i. Johnatone- White [1907] 1 Ch. 322, 76 L. J. Oh. 304, C. A. The real question was on the construction of the (c) Kay, 667, 23 L. J. Ch. 837, 101 R. E. 800. (rf) Whether an agreement not to reside at a given place as well as not to carry on business be good, qucere. RESTRAINT OF TRADE. 437 Restriction held Reasonable. Name and Date of Trade or Business. 1857. Bejiweli v. Cowkeeper, milkman, Innn, 24 Beav. 307, milk-seller, or milk- 26 L. J. Ch. 663. carrier. 1859. Mumford v. Gething, 7 t. B. N. S.305,29L. J.C.P. 105. 1861. Harms v. Pai- sons, 3-2 Beav. 328, 32 L. J. Ch. 247. 1863. Glarkson v. Edge, S3 Beav. 227, 33 L. J. Ch. 443. 1869. Catt V. TourJe, L. E.. 4 Ch. 654, 38 L. J. Ch. 665. 1869. Leather Cloth Go. V. Lorsont, L. E. 9 Eq. 345. 39 L. J. Uh. 86(e). 1874. Gravely v. Barnard, L. R. 38 Eq. 518, 43 L. J. Ch. 659. 1875. Printing and Numerical Register- ing Co. V. Sampson, L. E. 19 Eq. 462, 44 L. J. Ch. 705. 1875. May V. O'Neill, "W.N. 179, 44 L. J. Ch. 660. 1879. Daveyy. Shan- non, 4 Ex. D. 81,48 li. J. Ex. 459 (no objection taken). 1880. Roiisillon v. Rousillon, 14 Ch. D. 351, 49 L. J. Ch. 339(A). Travelling in lace trade for any house other than plaintiffs' . Horse-hair manufac- turer. Ga-i meter manufac- turer and gas engineer. Covenant by purchaser of land that vendor should have exclusive right of supplying beer. Manufacture or sale of patent leather cloth. Surgeon. Agreement by vendor of patent to assign to purchaser all after- acquired patent rights of like nature. Solicitor (covenant in clerk's articles). Outfitter and tailor. Travelling in cham- pagne trade ; setting up or entering into partnership in same trade. Extent of Eestriction in Time. Continuance of de- fendant's service with plaintiff and 24 months after. Unlimited. Unlimited. Ten years. Unlimited. Unlimited. So long as plaintiff or his assigns should carry on business. Lifetime of vendors. Unlimited. Unlimited (taken by the Court as for joint lives of plain- tiff and defendant). Two years after leav- ing plaintiff's ser- vice aa^to travelling: ten as to dealing on own account. Extent of Eestriction in Tlu-ee miles from Charles Street, Grosvenor Sq. "Any part of the same ground."' /.«., the district in which defendant was employed as traveller for plain- tiffs. 200 miles from Bir- mingham. 20 miles from Great Peter St., West- minuter. Any public house erected on the land. Em-ope : but to be construed as = Great Britain, or United Kingdom, semble, see L. R. 9 Eq. atp. 351 (/). Parish of Newiek and ten miles round, excepting the town of Lewes. Europe (,9). London, Middlesex and Essex ; and unlimited a-t to acting for clients of plaintiff's firm, or any one who had been such client duriog the term of the articles. Five miles from Devonport. Unlimited. (e) See p. 434, above. (/) Cp. Diamo^id Matf^h Co. v. Roeber (1887) 106 ^T. Y. 473, 60 Am. Rep. 464, where a restriction covering the whole territory of the United States except Montana and Nevada was held not too wide. " The boundaries of the States [i.e. the municipal jurisdictions of New York or other individual States] are not those of trade and commerce, and business is re- strained within no such limit." (^) See last note. (A) Allsopp V. Wheatcroft (1872) L.. R. 15 Eq. 59, 42 L. J. Ch. 12, a 438 UNLAWFUL AGREEMENTS. Restriction held Reasonable. Name and Date of Trade or Business. Extent of Extent of Case. Restriction in Time. Resti'iction in Space. 1891. Mills V. Dun- Travelling in food, Unhmited. Unlimited ham, [1891] 1 r:h. antiseptic business. {= England and 576, 60 L. J. Ch. Wales, see per 362, C. A. Lindley L. Z. [1891]lCh.5S5). 1892. Bogersv. Mad- Travelling in beer, &c. Two years. 100 miles from Car- docks, [i892] 3 Ch. diff. 346, 62 L. J. Ch. 219. 67 L. T. 329, C. A.. i892. Nordenfelt v. Manufacture of guns, 25 years from the in- Unlimited: the Maxim - Nordenfelt gun mountings and corporation of the breach assigned Guns and Ammuni- carriages, gunpowder, company. was in Belgium. tion Co., [180 1^ explosives and am- ■ A. C. 535. munition [and, -with certain exceptions, any other business carried on by the com- pany: 5em&;e, this was too wide]. 1896. Dahowski v. Dairymen. Indefinite time : con- No definition of Goldstein, [1896] 1 tinuance of service space, but held Q. R. 478 65 L. J. and r.fttr. limited by context Q. B. 397. to actual locality of business. 1898. W. Robinson Enamelled hollowware Three years from 15 miles from & Co., Ltd. V. dealers. time of dismissal Wolverhampton. Hmer, [1898] 2 Ch. from company's ■451, 67 L. J. Ch. service. 644, C. A. 1899. Underwood & Hay and Straw mer- One year : carrying United Kingdom, Son V. Barker, chants. on, serving, or being France, J^elgium, [1899] 1 Ch. 30'S agent in business. Holland, Canada. 6S L. J. Ch. 201, C. A. 1899. Haynes V. Hardware manufac- Unlimited : working Radius of 25 miles. Domanf '1899] 2 turer. or serving in same Ch. 13, 68 L. J. Ch. kind of business. .419, C. A. 1914. Goldsoll T. Imitation pearls and Two years. United Kingdom Goldman, [1916] 1 other jewellery (sale and Isle of Man Ch. 292, 84 L. J. of business). (words extending Ch. 228, C. A. to United States and several places in Europe held too wide but sever- able (i). Seven miles from 1920. Bewes v. Fitch, Solicitor's managing Unlimited. [1920] 2Ch.l59, 89 clerk. Tam worth. L. J. Ch. 499, C. A. contrary deoiaion on closely similar facts, was disregarded; it seems against the current of authority •©yen before the Nordenfelt case. (s) The covenant was also held good only as to dealing in imitation jewellery. RESTRAINT OF TRADE. 439 Uestrietion held Unreasonable. Name and Date of Extent of Extent of Case. Trade or Business. Traveller for wine Eeatriction in time. Restriction in Spaee. 1S93. Ehrvian v. Terms as to time and BartholomPAO,\\S^S'] merchant. place not in ques- i 1 Ch. 67i, ti7 L.J. tion : the under- Ch. 319. taking was not to "ena-affe or employ himself in any other business" during the continuance of the agreement, which was not neces-iarily confined to the continuance of the service. 1903. Dow den i Cider merchant in S. Pive years. Unlimited, Pnokv.Pooh.\_\%W\ Devon. IK. B. 46, 73 L.J. K. B. 38, C. A. 1907. B. Leetham & Millers in N. of Five years. UnitedKingdom(/c). Sons; see p. 436, England. above. 1908. Sir W. C. Leng Newspaper reporter. No limit. Radius of twenty & Co. V. Andrews, miles from Shef- [1909] 1 Ch. 763, 78 , field. L. J. Cli. 80. 1913. M ison Y. Provi- Canvasper in the com- Three years after 25 miles from Lon- dent Clothing <& pany's Islington termination of em- don. Supply Go. [1913] branch district. ployment. A. C. 724. 82 L. J. K. B. 1153. 1913. N Kvanas v. Manager of meat im- One year after deter- United Kingdom. Walker, [1914] 1 porting business. mination of agree- Ch. 413, 83 L. J. Liverpool (mainly N. ment. Ch. 380. England and Mirl- lands). Assistant raicvoscopist 1913. Eastes v. Ptiss, Unlimited (construed Tea miles from em- [1914] 1 Ch. 468, 83 in pathological labora- as for covenantor's ployer's labora- L.J.Ch.329,C. A. tory. life). tory. 1915. Morris v. Pulley blocks and Seven years from United Kingdom. Saxelhv, [1916] 1 lifting machinery, cessation of em- A. C. 688, 85 L. J. draughtsman and ployment. Ch. 210. branch manager. 1917. Evans & Qo.Y. Both parties members tJnlimitecl, in the No question of space Heathcote, [1917] 2 of an association of sense that there was limit. K B. 336. 86 L. J. manufacturers of no provision for K. B. 1524, [1918]! "cased tubes" under voluntary with- K. B. 418, 87 L. J. agreement for regula- drawal from the K. B. 593. in C. A- tion of prices and out- association. reversing^ the judg- put and sale only to ment belDW on a certainapproved different point. firms. 1919. McE'listrimy. Malting dairy products As in last case above ; Produce of specified Ballymacelligott from milk supplied by considered to be townships in co. Co-op. Sac , [1919] members of the so- prartically for each Kerry. A. C. 548, 88 L. J. ciety from their farms: member's life. P. C, 59. the society taking the milk at price fixed by committee, members not to sell to outside customers without • committee's consent. (h) The question in dispute was whether the special contract ex- tended to the protection of other associated concerns whose business did practically cover the United Kingdom. 440 UNLAWFUL AGREEMENTS, Restriction held Unreasonable. Name and Date of Case. 1919. S ep w o rih Man^fg.Oo.v. Hyott, [1920] 1 Ch. 1, 89 L. J. Ch. 69, C. A. 1920. AUivood V. Lament, [1920] 3 K. B. 671, 90 L. J. K. B. lai, C. A. Trade or Business. Extent of Eestriction ia time. Apparently promisor. life of Actor for hinema i51m producers under pseudonym. A^ee- ment not to use ihe same pseudonym for any ptirpose after de- termination of agree- ment, and (in effect) not to allow it to be advertised by any future employer. Draper, tailor and general outfitter; manager of tailoring department. Held that the covenant could not be severed so as to confine it to the tailoring business, and that even if it could be so confined,, the covenant would be bad. Unlimited. Extent of Restriction in Space. No limit expressed. Ten miles from Kidderminster. It is now settled, after some little uncertainty, that dis- tances specified in contracts of this kind are to be measured as the crow flies, *.e., in a straight line on the map, neglecting curvature and inequalities of surface. This is only a rule of construction, and the parties may prescribe another measurement if they think fit, such as the nearest mode of access {I) . A certain number of recent decisions are only on the construction of words describing the business to be restricted (m) . It will be seen that the denial of hard and fast rules in the Nordenfelt case has not led to judicial laxity in dealing with restrictive agreements, but rather to more careful weigh- (0 Mouflet V. Cole (1872) L. R. 7 Ex. 70, in Ex. Ch. 8 Ex. 32, 42 L. J. Ex. 8. Aa to what amaunts to a breach of covenant not to carry on business within certain limits, see Brampton v. Becldoes (1863) 13 C. B. N. S. 538. (m) Such are Stuart v. Diplock (1889) 43 Ch. Div. 343, 59 L. J. Ch. 142; Fitz v. lies [1893] 1 Ch. 77, 62 L. J. Oh. 258; William Cory # Son V. Harrison [1906] A. C. 274, 75 L. J. Ch. 714; and to Bom& extent II. Leetham ^ Son's case^ above; Woodbrid(/e v. Bellamy [1911] 1 Ch. 326, 80 L. J. Ch. 265; Haddeij v. Bayer-Smith [1914]^ A. C. 979, 83 L. J. Ch. 770. EESTEAINT OF TRADE. 441 ing, in the particular circumstances of each case, of what is allowable in the interest of the parties and of the public. In British India the Contract Act unfortunately copied a wilfully narrowed version of the Common Law rule, as under- stood more than half a century ago, from the draft Civil Code of New York (n) . It is clear law that a contract to serve in a particular business for an indefinite time, or even for life, is not void as in restraint of trade or on any other ground of public policy (o). It would not be competent to the parties, how- ever, to attach servile incidents to the contract, such as un- limited rights of personal control and correction, or over the servant's property (p) . Short of this, indeed, a lender of money cannot impose on the borrower terms that forbid him to change his employment or residence or dispose of his property without the lender's consent (g) . It is undisputed that an agreement by A. to work for nobody but B. in A.'s particular trade, even for a limited time, would be void in the absence of a reciprocal obligation upon B. to employ A. (r). But a promise by B. to employ A. may be col- lected from the whole tenor of the agreement between them, and so make the agreement good, without any express words to that effect (s) . («) Act ix of 1872, s. 27, see t«nninee: so the Italian Code, commentary in ed. Pollock and 1628. The German Civil Code re- Mulla, 4th ed. 1919, for the results. cognizes them, o. 624; but a oon- (o) Wallis V. Bay (1837) 2 M. & tract for personal service for any W. 273, 46 R. R. 602. The law of term over five years may after the Scotland is apparently the same ao- first five years be determined by the cording to the modern authorities. employer by six months' notice. Qp) See Hargrave's argument in (y) Horwood v. Millar's, #c. Co. Sommersett's case (1771-2) 20 St. [1917] 1 K. B. 305, 86 L. J. K. B. Tr. 49, 66, and Bowen L.J. 36 Ch. 190, 0. A. Div. at p. 393. By the French law (»■) See next note, and cp. the indefinite contracts of service are similar doctrine as to promises of not allowed: Cod. Civ. 1780: On marriage, supra. ne pent engager ses services qu' ^ (s) Pilkington v. Soott (1846) 15 temps, ou pour une ontreprise d6- M. & W. 657, 15 L. J. Ex. 329 71 P.— c. 29 442 UNLA^^■FUL AGKEEMENTS. D. The judicial treatment of unlawful agreements in general. Thus far of the various specific grounds on which agree- ments are held unlawful. It remains for us to give as briefly as may be the rules which govern our Courts in dealing with them, and which are almost without exception independent of the particular ground of illegality. The general prin- ciple that an unlawful agreement cannot be enforced is not a sufficient guide. We still have to settle more fully what is meant by an unlawful agreement. For an agreement is the complex result of distinct elements, and the illegality must attach to one or more of those elements in particular. It is material whether it be found in the promise, the con- sideration, or the ultimate purpose. There are questions of evidence and procedure for which auxiliary rules are needed within the bounds of purely municipal law. More- over, when the jurisdictions within which a contract is made, is to be performed, and is sued upon, do not coincide, it has to be ascertained by what local law the validity of the con- tract shall be determined, or there may be a "conflict of laws in space": again, if the law be changed between the time of making the contract and the time of performance there may be "conflict of laws in time." This general division is a rough one, but will serve to guide the arrangement of the following statement. Unlawfulness of agreement as determined by particular elements. 1. A lawful promise made for a lawrful consideration is not invalid by reason only of an uhlawful promise being made at the same time and for the same consideration. In Pigot's case (t) it was resolved that if some of the R. B. 781. Op. E/m-tley i. Cum- O. P. 84, 75 E. R. 722. mings (1847) 5. 0. B.,247, 17 L. J. (<) (1615) 11 Oo. Bep. 27 6. AaREEMENTS WHEN SEVERABLE. 443 covenants of an indenture or of the conditions indorsed upon a bond are against law, and some good and ;law!ful, the covenants or conditions which are against law are void ah initio and the others stand good. Accordingly " from Pigofs case (m) to the latest authorities it has always been held that when there are contained in the same instrument distinct engagements by which a party binds himself to do certain acts, some of which are legal and some illegal at common law, the performance of those which are legal may be enforcedl, though the performance of those which are illegal can- not " (x). And where a transaction partly valid and partly not is deliberately separated by the parties into two agree- ments, one expressing the valid and the other the invalid part; there a party who is called upon to perform his part of that agreement which is on the face of it valid cannot be heard to say that the transaction as a whole is unlawful and It was formerly supposed that where a deed is void in part by statute it is void altogether: but this is not so. " Where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void; but where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the gooi"(z). 2. If any part of a single consideration for a promise or set of promises is unlavsrful, the whole agreement is void. (a) Referred to in the report as L. J. Oh. 505. i6Co. Rep. 26; it is really in foZ. 6, (s) Per Willes J. Pickering v. ed. 1826, which contains fKirts 11, Ilfmcombe Ey. Co. (1968) L. R. 3 12, and 13. C. P. at p. 250; and see Roj/al (a;) Bank of Atistralasia v. Tixchange Assurance Corporation ii. Broillat (1847) 6 Moo. P. C. 152, SjorforsaTerings Aktiebolaget Fp.ga 201, 79 R. R. 24, 58. [1901] 2 K. B. 567, 573, 70 L. J. * (jy) Odessa Tramways Co. v. K. B. 874. Mendel (1878) 8 Ch. Div. 235, 47 29 (2) 444 UNLAWFUL AGREEMENTS. This rule assumes the consideration not to be severable, and in such a case it is impossible to assign a lawful considera- tiofi to the promise or any of the promises induced by it (a) . In other words, where independent promises are in part law- ful and in part unlawful, those which are lawful can be enforced; but where any part of an entire consideration is unlawful, all promises founded upon it are void. 3. When the immediate object of an agreement is un- lawful the agreement is void. This is an elementary proposition, for which it is never- theless rather difficult to find unexceptionable words. We mean it to cover only those cases where either the agree- ment could not be performed without doing some act unlaw- ful in itself, or the performance is in itself lawful, but on grounds of public policy is not allowed to be made a matter of contract. The statement is material chiefly for the sake of the contrasted class of cases under the next rule. 4. When the immediate object or consideration of an agreement is not unlawful, but the intention of one or both parties in making it is unlawful, then— If the unlawful intention is at the date of the agreement common to both parties, or entertained by one party, to the knowledge of the other, the agreement is void. If the unlawful intention of one party is not known to the other at the date of the agreement, there is a contract voidable at the option of the innocent party if he discovers that intention at any time before the contract is executed. Here it is necessary to consider what sort of connection of the sutject-matter of the agreement with an unlawful plan or purpose is enough to show an Unlawful intention that will vitiate the agreement itself. This is not always (a) See Jones v. Waite, 5 Bing. N. C. 341, 356, 50 R. R. at p. 707. GENERAL KULE : UNLAWFUL CONSIDEEATION, ETC. 145 easy to determine. In the words of the Supreme Court of the United States: — " Questions upon illegal contracts have arisen very often both in England and in this country; and no principle is better settled than that no action can be maintained on a contract the consideration of which is either wicked in itself or (prohibited by law. How far this principle is to affect subsequent or collateral contracts, the direct and immediate consideration of which is not immoral or illegal, is a question of considerable intricacy "(b). We have in the first place a well-marked class of transac- tions where there is ,an agreement for the transfer of pro- perty or possession for a lawful consideration, but for the purpose of an unlawful use being made of it. All agreements incident to such a transaction are void; and it does not matter whether the unlawful purpose is in fact carried out or not (c) . The later authorities show that the agreement is void, not merely if the unlawful use of the subject-matter is part of the bargain, but if the intention of the one party so to use it is known to the other at the time of the agreement (d) . Thus money lent to be used in an unlawful manner cannot be aiecovered (e). It is true that money lent to pay bets could be recovered at common law (/), but that was because there is nothing unlawful in either making a bet or paying (6) Armstrong v. Tol&r (1826) actually made in respect of wager- 11 Wheat, at p. 272. Ing agreements. There are no (o) Gas Light and Coke Co. v. words which hit the case of (1) a Turner (1839) 5 Bing. N. C. 666, loan to a person who to the lender's in Ex. Ch. 6 ib. 324, 54 R. R. 808. knowledge means to bet and to use ((f) Pmroe v. Brooks (1866) the money in paying any bets he L. R. 1 Ex. 213, 35 L. J. Ex. 134. loses, or even (2) who to the (e) Carman v. Bryee (1819) 3 lender's knowledge means to use B. & Aid. 179, 22 R. R. 342. the money in paying bets already (/) See now the Gaming Act, lost. See A. V. Dicey in L. Q. R. 1892. The Act does not appear to xx. 436; Re O'Shea [1911] 2 K. B. extend beyond invalidating pro- 981, 81 L. J. K. B. 70, 0. A. mises to reimburse payments 446 UNLAWFUL AaEEEMBNTS. it if lost, though the payment cannot be enforced. If goods are sold by a vendor who knows that the purchaser means to apply them to an illegal or immoral purpose, he cannot recover the price: it is the same of letting goods on hire (g). If a building is demised in order to be used in a manner for- bidden by a Building Act, the lessor cannot recover on any covenant in the lease (h).. And in like manner if the lessee of a house which to his knowledge is used by the occupiers for immoral purposes assigns the lease, knowing that the assignee means to continue the same use, he cannot recover on the assignee's covenant to indemnify him against the covenants of the original lease (i). It does not matter whether the seller or lessor does or does not expect to be paid out of the fruits of the illegal use of the property (7c) . An owner of property who has contracted to sell or let it, but finds afterwards that the other party means to use it for an unlawful purpose, is, of course, entitled (if not bound) to rescind the contract. But a completely executed transfer of property or an interest in property, though made on an unlawful consideration, or, it is conceived, for an unlawful purpose known to both parties, is valid, and cannot after- wards be set aside (I) . And an innocent party who discovers the unlawful intention of the other after the contract has been executed is not entitled to treat the transaction as void and resume possession (m) . As with contracts voidable on other grounds, this rule appUes, it is conceived, only where (fir) Pmrce v. Brooks (1866) As to chattels, contra per Martiu L. R. 1 Ex. 213, 35 L. J. Ex. 134. B. in Pearcev. Brooks (1866) L. E. (A) Qas Light cmd CoTce Go. v. 1 Ex. 217; but this seems vmsap- Turner (1839) 5 Bing. N. C. 666, ported: see L. B. 4 Q. B. 311, 315. in Ex. Ch. 6 ib. 324, 54 B. B. 808. (m) Feret v. Hill (1854) 15 C.B. (j) Smith V. White (1866) L. B. 207, 23 L. J. O. P. 185, 100 B. B. 1 Eq. 626, 35 L. J. Oh. 454. 318, where an interest in realty (A) See note (jf), ante. had passed and the re-emtiy was (l) Ayerst v. Jenkins (1873) forcible; but semble, tlie lease was L. E. 16 Eq. 275, 42 L. J. Oh. 690. voidable in equity. UNLAWFUL USE OF SUBJECT-MATTER. 447 ian interest in possession has been given by conveyance or delivery. The vendor who has sold goods so as to pass the general property, but without delivery, or the lessor who has executed a demise to take effect at a future day, might rescind the contract and stand remitted to his original right of possession on learning the unlawful use of the property designed by the purchaser or lessee. On the same principle an insurance on a ship or goods is void if the voyage covered by the insurance is to the knowledge of the o"\Aner unlawful (which may happen by the omission of the statutory requirements enacted for the protection of seamen and passengers, as well as i«i the case of trading with enemies or the like). "Where the object of an Act of Parliament is to prohibit a voyage, the ille- gality attaching to the illegal voyage attaches also to the policy covering the voyage," if the illegality be known to the assured. But acts of the master or other persons not knovm to the owner do not vitiate the policy, though they may be such as to render the voyage illegal {n) . Agreements continuous with precedent unlawful purpose. — ^An agreement may be made void by its connection with an unlawful purpose, though subsequent to the execution of it. To have that effect, however, the connection must be some- («} Wilson V. Rankin (1865) emment, knowing- that the pur- L. E.. 1 Q. B. 162, 35 L. J. Q. B. chase-money would be applied 203 (Ex. Ch.) ; I>iidgeon \ . Pern- support of the rebellion, could no. broke (1874) L. R. 9 Q. B. 581, at be recognized by the U. S. Courts p. 585, 43 L. J. Q. B. 220, per as owner of the cotton: diss. Field Quaiu J. and authorities there re- J, on the grounds (which seem f erred to. Cp. further, on the right) that it was a, question not of general head of agreements made contract but of own ejship, and that wiih an unlawful purpose, Ilanauer in deciding on title to personal V. Doane (1870) 2 Wallace, 342. property the de facto government In Sjyrott v. V . S. (1874) 20 ib. existing at the time and place of 459, it was held that a buyer of the transaction must bn rofifarded. cotton from the Confederate Gov- 448 UNLAWFUL AGREEMENTS. thing more than a mere conjunction of circumstances into which the unlawful transaction enters so that without it there would have been no occasion for the agreement. It must amount to a unity of design and purpose such that the agree- ment is really part and parcel of one entire unlawful scheme. This is well shown by some cases decided in the Supreme Court of the United States, and spreading over a considerable time. They are the more worth special notice as they are unlike anything in our own books. In Armstrong v. Toler{o) the point, as put by the Court in a slightly simplified form, was this: "A. during a war contrives a plan for importing goods on his own account from the country of the enemy, and goods are sent to B. by the same vessel. A. at the request of B. becomes surety for the payment of the duties [in fact a commuted payment in lieu of confiscation of the goods themselves] which accrue on the goods of B., and is compelled to pay them; can he maintain an action on the promise of B. to return this money? " The answer is that he can, for the "contract made with the government for the payment of duties is a substantive independent contract entirely distinct from the unlawful importation." But it would be otherwise if the goods had been imported on a joint adventure by A. and B. In McBlair v. Gihhes {p) an assignment of shares in a company was held good as between the parties though the company had been originally formed for the unlawful purpose of supporting the Mexicans against the Spanish Government before the independence of Mexico was recog- nised by the United States. In Miltenberger v. CooTce (g) the facts were these. In 1866 a collector of United States revenue in Mississippi took bills in payment when he ought to have taken coin, his reason being that the state of the country made it still unsafe to have much coin in hand. In (o) (1826) 11 Wheaton, 258, 269. (?) (1873) 18 Wallace, 421. Cp) (1854) 17 Howard, 232. TRANSACTION UNLAWFUL AS WHOLE. 449 account with the government he charged himself and was charged with the amount as if paid in coin. Then he sued the acceptors on the bills, and it was held there was no such illegality as to prevent him from recovering. If the mode of payment was a breach of duty as against the Federal government, it was open to the government alone to take any objection to it. We return to our own Courts for a case where on the other hand the close connection with an illegal design was estab- lished and the agreement held bad. In Fisher v. Bridges (r) the plaintiff sued the defendant on a simple covenant to pay money. The defence was that the covenant was in fact given to secure payment of part of the purchase-nionej^ of certain leasehold property assigned by the plaintiff to the defendant in pursuance of an unlawful agreement that the land should be resold by lottery contrary to the statute (s). The Court of Queen's Bench held unanimously that the covenant was good, as there was nothing wrong in paying the money, even if the unlawful purpose of the original agreement had in fact been executed: and the case was likened to a bond given in consideration of past cohabitation. But the Court of Ex- chequer Chamber unanimously reversed this judgment, holding that the covenant was in substance part of an illegal transaction, whether actually given in pursuance of the first agreement or not. "It is clear that the covenant was given for payment of the purchase-money. It springs from and is a creature of the illegal agreement; and as the law would not enforce the original contract, so neither will it allow the parties to enforce a security for the purchase-money which by the original bargain was tainted with illegality." They further pointed out that the case of a bond given for past (/) (1853-4) 2 E. & B. 118, 22 B. 642, 23 L. J. Q. B. 276, 97 L. J. Q. B. 270; in Ex. Oh. 3 B. & E. R. 701. (s) 12 Geo. 2, c. 28, s. 1. 450 UlsTLAWFUL AGREEMENTS. cohabitation was hot analogous, inasmuch as past cohabitation, is not an illegal consideration but no consideration at all. But "if an agreement had been made to pay a sum of money in consideration of future cohabitation, and after cohabita- tion, the money being unpaid, a bond had been given to secure that money, that would be the same case as this; and such a bond could not under such circumstances be enforced." Some of the language used may have been "vague in itself and dangerous as a precedent " (t). The decision, how-, ever, does not appear to require anything wider than this — that where a claim for the payment of money as on a simple contract would be bad on the ground of illegality, a sub- sequent security for the same payment, whether given in pursuance of the original agreement or not, is likewise not enforceable: or, more shortly — 5. Any security for the payment of money under an un- lawful agreement is itself void, even if the giving of the security was not part of the original agreement. To this extent at least the principle of Fisher v. Bridges has been repeatedly acted on(M). In Geere v. Mare(u) a policy of assurance was assigned by deed as a further security for the payment of a bill of exchange. The bill itself was given to secure a payment by way of fraudulent preference to a particular creditor, and accepted not by the debtor himself but by a third person. It was held, both on principle and on the authority of Fisher v. Bridges, that the deed could not be enforced. Again in Clay v. Ray (x) two promissory notes were secretly given by a compounding debtor to a creditor for a sum in excess of the amount of the composition. Judgment was obtained in an action on one of these notes. (<) 1 Sm. L. C. 436. H. & C. 339, 33 L. J. Ex. 50; Olay^ («) Gr■). The test for the application of the rule is whether the plaintiff can make out his case otherwise than " through the medium and bj the act of an illegal transaction to which he was himself a party " (s). In an action brought to recover back premiums paid on policies of life insurance alleged to- be void for want of insurable interest, it was held that, assuming them to be so, the position of the parties was equal even though the assured had relied on a mistaken statement of the law made in good faith by the insurance company's agent, and the premiums could not be recovered (i). The rule is not confined to the case of actual money payments, though that is the most common. Where the plaintiff had deposited the half of a bank note with the defendant by way of pledge to secure the repayment of money due for wine and suppers supplied by the defendant in a brothel and disorderly house kept by the defendant for the purpose of being con- sumed there in a debauch, and for money lent for similar purposes, it was held that the plaintiff could not recover, as it was necessary to his case to show the true character of the deposit (m). (r) Holman v. Johnson, (IITS) half-note to be re-delivered on re- Cowp. 341, 343. quest, and in detinue. Pleas, in (s) Taylor v. Chester (1869) efEect, that it was deposited by way L. R. 4 Q. B. 309, 314, 38 L. J. of pledge to secure money due. Q. B. 225. Replication, the immoral character (f) liarse v. Pearl Life Assur- of the debt as above. The Court ance Co. [1904] 1 K. B. 558, 73 inclined also to think, but did not L. J. K. B. 373, 0. A. Otherwise decide, that the plaintiff's case must if the statement had been fraudu- fail on the more general ground lent, see per Collins M.R. [1904] that the delivery of the note was an 1 K. B. at p. 563. executed contract by which a special (it) Taylor v. Chester, note (s), property passed, and that such pro- above. This is apparent by the perty must remain. Compare Ex course of the pleadings; the decla- parte Caldeoott (1876) 4 Ch. Div. ration was on a bailment of the 150, 46 L. J. Bk. 14, p. 400, above; WHEN PAYMENTS CAN BE EBCOVEEBD. 457 The rule is not even confined to causes of action ex con- tractu. An action in tort cannot be maintained when the cause of action springs from an illegal transaction to which the plaintiff was a party, and that transaction is a necessary part of his case (w) . Independently of the special grounds of this rule, a com- pletely executed transfer of property, though originally made upon an unlawful consideration or in pursuance of an un- lawful agreement, is afterwards valid and irrecoverable (y) . The rule is not applicable in the following classes of cases, most of which, however, cannot properly be called exceptions. ■ An agent is not discharged from accounting to his prin- cipal by reason of past unlawful acts or intentions of tho jDrincipal collateral to the matter of the agency. If A. pays money to B. for the use of C, B. cannot justify a refusal to pay over to C. by showing that it was paid under an unlawful agreement between A. and C. (z). Again, if A. and B. make bets at a horse-race on a joint account and B. receives the winnings, A. can recover his share of the money or sue on a bill given to him by B. for it: here indeed there is no illegality in the proper sense (a) . For the same reason Beghie v. Phospliate Sewage Co. B. uses moneys of his own and A. 's <1875) L. B. 19 Q. B. 491, 500, in betting, on the terms of dividing affd. in C. A. 1 Q. B. Div. 679. winnings in certain proportions, A. (^) Fivaz V. yichoUs (1846) 2 can sue B. on a cheque given for O. B. 501, 513, 15 L. J. O. P. 125, his share of winnings: Beeston v. 69 B. R. 514, a peculiar and appar- Beeston (1875) 1 Ex. D. 13, 45 ently solitary example. L. J. Ex. 230. Qutsre whether (y) Ayersi v. Jenhins (1873) either of these oases is touched by L. R. 16 Bq. 275, 42 L. J. Ch. 690. the Gaming Act, 1892. Op. and Cp. iVCallan v. Mortimer (1842) dist. Iliggimon v. Simpson (1877) (Ex. Ch.) 9 M. & W. 636. 2 O. P. D. 76, 46 L. J. O. P. 192, (a) Tenant v. Elliott (1797) 1 whore the transaction in questio.T B. & P. 3 4 R. R. 755. was held to be in substance a mere {a) Johm-on v. Land&y (1852) 12 wager. A fine distinction has C. B. 468, 92 R. R. 766. And where been taken in two cases of pur- P. — C. 30 458 UNLAWFUL AGREEMENTS. an agent employed to bet and collect winnings is bound to account to his principal for what he collects, though the losers could not have been compelled to pay (&). But, by statute, such an agent cannot recover from his principal either any money paid by him in respect of losses or any reward or commission for his services; nor can one who pays bets at the loser's request recover the money, whether he was em- ployed in making the bets or not (c) . In like manner the right to an account of partnership profits is not lost by the particular transaction in which they were earned having in- volved a breach of the law (d) . Nor can a trustee of pro- perty refuse to account to his cestui que trust on grounds of this kind: a trust was enforced where the persons interested were the members of an unincorporated trading association, though it was doubtful whether the association itself was- not illegal (e). So, if A. with B.'s consent effects a policy chase of bank shares through brokers, where the contract note omitted to specify the numbers of the shares as required by Leeman's Act, 30 & 31 Vict. 0. 29, s. 1. The brokers, if they had not completed the -contracts, might have been declared defaulters and expelled from the Stock Exchange. In Seymour v. Bridge (1885) 14 Q. B. D. 460, Mathew J. held that the principal could not repudiate; in Perry v. Barnett (1865) 15 Q. B. Div. 388, 54 L. J. Q. B. 466, it was held that, if he did not know the usage of the Stock Exchange, he could. (J) Bridcjer v. Savage (1884) 15 Q. B. Div. 363, 54 L. J. Q. B. 464: the contract of agency is not a gaming or wagering contract. This does not seem to be affected by the Gaming Act, 1892. But he cannot be liable for failing to make bets or collect winnings, for the collection is precarious: Cohen v. Kittell (1889) 22 Q. B. J>. 681, 58 L. J. Q. B. 241. (o) The Gaming Act, 1892, 5& Vict. c. 9, amending 8 & 9 Viet, c. 109, as interpreted {gu. whether rightly) by Read v. Anderson (1884) 13 Q. B. Div. 779, 53 L. J. Q. B. 532; TaUim v. Reeve [1893] 1 Q. B. 44, 62 L. J. Q. B. 30. Semble the plaintiff could not re- cover even if he did not know that the payments h© made at the defen- dant's request were for bets. The- Act is not retrospective: Knight v. Zee [1863] 1 Q. B. 41, 62 L. J. Q. B.,28. ((?) Sharp V. Taylor (1849) 2 Ph. 801. Of course it is not so where the main object of the partnership is unlawful: Thioaifei v. Coul- ihwaite [1896] 1 Ch. 496, 65 L. J. Ch. 238. (e) Sheppard v. Oxcnford (1855) 1 K. & J. 491, 103 R. R. 203. WHEN PAYMENTS CAN BE RECOVERED. 459 for his own benefit on tiie life and in the name of B., having himself no insurable interest, the policy and the value of it belong, as between them, to A. (/). If a man entrusts another as his agent with money to be paid for an unlawful purpose, he may recover it at any time before it is actually so paid; or even if the agent does pay it after having been warned not to do so {g) ; the reason is that whether the in- tended payment be lawful or not an authority may always be countermanded as between the principal and agent so long as it is not executed {h) . It is the same where the agent is authorized to apply in an unlawful manner any part of the moneys to be received by him on account of the principal; he must account for so much of that part as he has not actually paid over [Ji). The language of the statute 8 & 9 Vict. c. 109, s. 18, which says that no money can be recovered "which shall have been deposited in the hands of any person to abide the event upon which any ■« ager shall have been made" does not prevent either party from re- pudiating the wager at any time either before or after the event and before the money is actually paid over and recover- ing his own deposit from the stakeholder {i) . Also it does not apply to money or other valuables deposited by ^\a,J of security or " cover " for performance of a wagering agreement (/<;) . (/) ^Vorthingto)^ v. Curtis (1875) (J. O.) or. n colonial statute in the 1 Ch. Div. 419, 45 L. J. Ch. 259. same terms, 5 App. Ca. 342, 49 (<7) Ilastdow V. Jackson (1828) L. J. P. O. 49. Cp. Barclay v. 8 B. & O. 221, 226, 32 R. R. 369, Pearson [1893] 2 Ch. 154. This ia 373. not afEeeted by the Gaming Act, (A) Bone v. Ekless (I860) 5 H. 1892: 0' Sullivan v. Tlwmas [1895] & N. 925, 29 L. J. Ex. 438. 1 Q. B. 698, 64 L. J. Q. B. 398; (») Higgle v. Iliggs (1877) 2 Ex. Shoolbred v. Roberts [1899] 2 Div. 422, 46 L. J. Ex. 721 ; Samp- Q. B. 560, 68 L.. J. Q. B. 998; con- den V. Walsh (1876) 1 Q. B. D. firmed by 0. A. in Surge v. Ashley 189; 45 E. J. Q. B. 238, whea-e and Smith [1900] 1 Q. B. 744, 69 former authorities are collected and L. J. Q. B. 538. coneid«red: Trimble v. Sill (1879) (/c) Universal Stock Exchange 30 (2) ' 460 UNLAWFUL AGREEMENTS. Where money has been paid under an unlawful agree- ment, but nothing else done in performance of it, the money may be recovered back . But in the decision wbich establishes this exception it is intimated that it probably would not be allowed if the agreement were actually criminal or immoral (Z). In general, "if money is paid or goods delivered for an illegal purpose, the person who has so paid the money or delivered the goods may recover them back before the illegal purpose " — or rather, before any material part of it — (ot) "is carried out; but if he waits till [some material jDart of] the illegal purpose is carried out, or if he seeks to enforce the illegal transaction, in neither case can he maintain an action " (ra). And the action cannot be main- tained by a party who has not given previous notice that he repudiates the agreement and claims his money back (o). In Taylor v. Boirers (n) A. had delivered goods to B. under a fictitious assignment for the purpose of defrauding A.'s creditors. B. executed a bill of sale of the goods to C, who was privy to the scheme, without A.'s assent. It was held that A. might repudiate the whole transaction and demand the return of the goods from C. In Symes v. Hughes (p), a case somewhat of the same kind, the plaintiff had assigned certain leasehold property to a trustee with the intention of defeating his creditors; afterwards under an arrangement with his creditors he sued for the recovery of the property, having undertaken to pay them a composition in case of success. The Court held that, as the illegal purpose had not been executed, he was entitled to a reconveyance. It Ld. V. Strachcm (No. 1) [1896] Q. B. 340. A. C. 166, 65 L. J. Q. B. 428. («) Per Mellish L.J. Taylor v. (Z) Tapp&ndon v. RanAall (1801) Bowers (1876) 1 Q. B. Div. 291, at 2 B. & P. 467, 5 R. R. 662. p. 300. ()») Xmrley w. Thomson (1890) (o) Palyart v. Leokie (1817) 6 24 Q. B. Div. 742, 59 L. J. Q. B. M. & S. 290, 18 R. R. 381. 288; cp. Herman v. Jenchner (p) (1870) L. R. 9 Eq. 475, 39 (1885) 15 Q. B. Div. 561, 54 L. J. L. J. Oh. 304. WHEN PAYjMENTS CAN BE EECOVERED. 46I will be observed, however, that the plaintiff was in effect suing as a trustee for his creditors, so that the real question was whether the fraud upon the creditors should be continued against the better mind of the debtor himself. The cases above mentioned as to recovering money from agents or stake- holders are also put partly on this ground, which, however, does not seem necessary to them (g). In certain cases the parties are said not to be in pari delicto, particular!}- where the unla^vful agreement and the payment takes place under circumstances practically amount- ing to coercion. The chief instances of this kind in courts of law have been payments made by a debtor by way of fraudulent preference to purchase a particular creditor's assent to his discharge in bankruptcy or to a composition. The leading modern case is Atkinson v . Denhij (r) . There the defendant, one of plaintiff's creditors, refused to accept the composition, unless he had something more, and the plaintiff paid him 501. before he executed the composition deed. It was held that this money could be recovered back. "It is true," said the Court of Exchequer Chamber, "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 the power to dictate, the other no alternative but to submit." On the same ground money paid for compounding a penal action contrary to the statute of Elizabeth may be recovered (g) liastelow v. Jackson (1828) at all events recover his own B. & C. 221, 32 R. R. 369. Mmr- stake. Allegans contraria non est inff V. HelUngs (1845) 14 M. & \V. audiendns. 711, 15 L. J. Ex. 168, where that (;■) (1860) 6 H. & N. 778, 30 case was doubted, decide? only thh: L. J. Ex. 361, in Ex. Ch. 7 H. & N. A man cannot sue a stakeholder for 934, 31 L. J. Ex. 362 : the chief the whole of the sweepstakes he has earlier ones are Smith v. Bromley wion in a lottery, and then reply to (1760) 2 Doug. 695; Smith v. Cuff the objection of illegality that if (1817) 6 M. & S. 160, 18 R. R. the whole thing is illegal he must 340. 462 UNLAWFUL AGEEEilEXTS. back(s). But where a bill is given by way of fraudulent preference to purchase a creditor's assent to a composition, and after the composition the debtor chooses to pay the amount of the bill, this is a voluntary payment which cannot be recovered {t). In equity the application of this doctrine has been the same in substance, though more varied in its circumstances. The rule followed by courts of equity was thus described by Knight Bruce, L. J. : " Where the parties to a contract against public policy or illegal are not in pari delicto (and they are not .always so) and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the transaction, relief is given to him, as we know from various authorities, of which Osborne v. Williams [see below] is one" (a;). On this principle relief was given and an account decreed in Osborne v. Williams (y), where the unlawful sale of the profits of an office was made by a son to his father after the son had obtained the office in succession to his father and upon his recommendation, so that he was wholly under his father's control in the matter. In Reynell v. Sprye {z) an agreement bad for champerty was set aside at the suit of the party who had been induced to enter into it by the other's false representations that it was a usual and proper course among men of business to advance costs and manage litiga- tion on the terms of taking all the risk and sharing the property recovered. In a later case a mortgage to secure a loan of money which in fact was lent upon an immoral consideration was set aside at the suit of the borrower on the (s) Williams V. Eedley (1807) 8 D. M. G. 660, at p. 679, 91 E. E. East, 378, 9 R. E. 473. 228, 244. (y) (1811) 18 Vo5. 379, 11 E. E. (0 Wilson V. Bay (1839) 10 gis A. & E. 82, 50 E. E. 341. ^^^ ^ j^ jj- ^ ^g^^ g^ ^ ^ {x) Kei/nell v. S^rye (1852) 1 228. CONFLICT OF LAWS. 463 ground that the interest of others besides parties to the corrupt bargain was involved (a). A wider exception is made, as wo have seen above, in the case of agreements of which the consideration is future illicit cohabitation between the parties. Apart from this particular class of cases, it is submitted that the rule and its qualifications may be stated to this effect: 7 Money paid or property delivered under an unlawful agreement cannot be recovered back, nor the agreement set aside at the suit of either party — unless nothing has been done in the execution of the un- lawful purpose beyond the payment or delivery itself (and the agreement is not positively criminal or immoral?); or unless the agreement was made under such circumstances as between the parties that if otherwise lawful it would be voidable at the option of the party seeking relief (6); or, in the case of an action to set aside the agreement, unless in the judgment of the Court the interests of third persons require that it should be set aside. 8. Where a difference of local laws is in question, the lawfulness of a contract is to be determined by the law governing the substance of the contract (c). fa) W. V. B. (18«3) .32 Beav. fixed rules of law, are that "the 574. proper law of a contract ia inderad (b) This form of e.-cpression prima facie the law of the country soema justified by Harse v. Pearl where it is made (lex loci con- Life Assurance Co., -p. i5&, ahove. tractiis)"; — see British S. Africa (o) According to our modern Co. v. Be Beers Consolid. Mines authorities (see espe;ially Hamlyn [1910], 1 Oh. 354, 381, 382, 79 L. J. # Co. V. Talisher Distillery [1894] Oh. 345, affirmed [1910] 2 Oh. 502, A. C. 202) the question is really 0. A. — " yet when a contract is by what law the parties intended made in one country, but is wholly theoontract to be governed: Dicey, or partially to be performed in Conflict of Laws, 547. The auxi- another, then great weight will be liary rules for ascertaining that given to the law of the place of intention, and so fixing the " proper performance (lex loci solutionis)^ law of the contract," which, how- as being probably the proper law ever, are presumptions, and not of the contract, in regard, at any 464 UNLAWFUL AGREEMENTS. Exception 1. — An agreement entered into by a citizen in violation of a prohibitory law of his own state cannot in any case be enforced in any court of that state. Exception 2. — An agreement contrary to common prin- ciples of justice or morality, or to the interests of the state, cannot in any way be enforced. What we here have to do with is in truth' a fragment of a much larger subject, namely, the consideration of the local law governing obligations in general (d). The main proposition is well established, and it would be idle to attempt in this place any abridgment or restatement of what is said upon it by writers on the Conflict of Laws. The first exception is a simple one. The municipal laws of a particular state, especially laws of a prohibitory kind, are as a rule directed only to things done within its jurisdiction. But a particular law may positively forbid the subjects of the state to undertake' some particular class of transactions in any part of the world: and where such a law exists, the courts of that state must give effect to it. A foreigner cannot sue in an English court on a contract made with a British subject, and itself lawful at the place where it was made, if it is such that British subjects are forbidden by Act of rate, to acts to be done there": op. dt. chaps. 24, 25. Westlake, Dicey, op. cit. 565. The framing Priv. Inteirn. Law, 3rd ed. 259, of a oontraxjt in terms exclusively 260, states the rules thus; Where appropriate to a particular system a contract contemplated the viola- of law is a strong indication of tion of English law, it cannot he intention to make that the govern- enforced here, notwithstanding that ing law. Eor American judicial it may have been valid by its doctrines, among which there is proper law. Where a contract still great divergence, see Prof. conflicts with what are deemed in Joseph H. Beale's articles in Harv. England to be essential public or Law. Ii«v. xxiii. 79, 194. moral interests, it cannot be en- (rf) For the treatment of it in this forced here, notwithstanding that connexion, see Savigny, Syst. 8. 269 it may have been valid by its —276 (§ 374 C!) ; Story, Conflict of proper law. Laws, §§ 243 sqq., 258 sqq. ; Dicey, CONFLICT OF LAWS. 465- Parliament to make it anywhere (e). It may be doubted wlicther such a contract would be recognized even by the courts of the state where it was made, unless the prohibition- were of so hostile or restrictive a character as between the two states as not to fall within the ordinary principles of comity {e.g., if the rulers of a people skilled in a particular industry should forbid them to exercise or teach that industry abroad). The authorities already cited (pp. 354, 355, above)- as to marriages within the prohibited degrees contracted abroad hj British subjects va&j also be usefully consulted as illustrating this topic. The second exception is by no means free from difficulties touching its real meaning and extent (/) . There is no doubt that an agreement will not necessarily, though it will generally, be enforced if lawful according to its proper local law. The reasons for which the court may nevertheless refuse to enforce it have been variously expressed by judges and text-writers, and sometimes in very wide language. It may be taken for granted that the courts of a civilized state cannot give effect to rights alleged to be valid by some local law, but arising from a transaction plainly repugnant to the ius gentium in its proper sense — the principles of law and morality common to civilized nations. In other words a local law cannot be recognized, though otherwise it would be the proper law to look to, if it is in derogation of all civilized laws (g) . This indeed seems a fundamental assump- («) Santos V. Illidge (1860) in Wilmot J. Robinson v. Bland Ex. Oh., 8 C. B. N. S. at p. 874, (1760) 2 Burr. 1083. 29 L. J. O. P. at p. 350, 25 R. E. ( L. J. Oh. 322. L. B. 2 O. P. 22. (c) Note (h), p. 492, supra. 496 MISTAKE. law cannot in any case be recovered (h). Nor does anything like the qualification laid down by Lord Westbury in Cooper V. Phibbs (i) appear to be admitted. Ignorance of particular rights, however excusable, is on the same footing as ignorance of tho general law (Jc). . An important decision of the American Supreme Court appears to assume that giving a negotiable instrument is for this purpose equivalent to the payment of money, so that a party who gives it under a mistake of law has no legal or cquita'ble defence (l). But, according to later English doctrine, inasmuch as "want of consideration is altogether independent of knowledge either of the facts or of the law," the defence of failure of consideration is available as between the parties to a negotiable instrument, whether the instru- ment has been obtained by a misrepresentation of fact or of law (m) . A covenant to pay a debt for which the covenantor wrongly supposes himself to be liable is valid in law, nor will equity give any relief against it if the party's ignorance of the facts negativing his liability is due to his own negligence (??). (A) But as to re-opening accounts if it be regarded as the purchase in equity, see Baniell v. Sinclair of a security, itis an application of (J. O.) (1881) 6 App. Ca. 181. the rryAe caveat emptor, as to which (»■) (1867) L. B. 2 H. L. at cp. Clare v. Lamb (1875) L. R. 10 p. 170. C. P. 334, 44 L. J. C. P. 177. (Jc) See Skyring v. Greenwood (V) Bank of U. 8. v. Daniel (1823) 4 B. & C. 281, 28 K. R. 264; (1838) 12 Peters, 32; but this was and cp. Piatt v. Br R. 33-. 5 D. M. G. 340, 104 B. R. 148; EXCLUDING CONSENT. 499 made by both parties as to some matter of fact essential to the agreement. In this case the common intention must stand or fall with the assumption on which it is founded. If that assumption is wrong, the intention of the parties is from the outset incapable of taking effect. But for their common error it would never have been formed, and it is treated as non-existent. Here there is in some sense an agreement: but it is nullified in its inception by the nullity of the thing agreed upon. The result is the same as if the jjarties had made an agreement expressly conditional on the existence at the time of the supposed state of facts: which state of facts not existing, the agreement destroys itself. Indeed there is in most if not all cases of this class no difficulty in holding that the contract did include a tacit condition to this effect. In the former class of cases either one party or both may be in error: however, that which prevents any contract from being formed is not the existence of error but the want of true consent. " Two or more persons are said to consent when they agTee upon the same thing in the same sense: " this consent is essential to the creation of a contract (m), and if it is wanting, and the facts be not otherwise such as to preclude one party from denying that he agreed in the sense of the ,other (x), it matters not whether its absence is due to the error of one party only or of both. In the latter class of oases the error must be common to both parties. They do agree to the same thing, and it would be in the same sense, but that the sense they intend, though possible as far as can be seen from the terms of the agree- ment, is in fact nugatory. As it is, their consent is idle; the sense in which they agree is, if one may so speak, insensible. (m) Haimen J. in Smith v. (») Hannen J. ?.e., Blackburn J. Eughes (1871) L. E. 6 Q. B. 609; at p. 607. Indian Contract Aot, 1872, s. 13. .J 00 MISTAKE, In both sets of cases we may say that the agreement is nullified by fundamental error; a term it may be convenient to use in order to mark the broad distinction in principle from those cases where mistake appears as a ground of special relief. We proceed to examine the. different kinds of fundamental error relating: A. To the nature of the transaction. B. To the person of the other party. C. To the subject-matter of the agreement {y). A. Error as to the nature of the transaction. On this the principal earl}- authority is Thoroughgood's case (z). In that case the plaintiff, who was a layman and unlettered, had a deed tendered to him which he was told was a release for arrears of rent only. The deed was not read to him. To this he said, "If it be no otherwise I am con- tent "; and so delivered the deed. It was in fact a general release of all claims. Under these circumstances it was adjudged that the instrument so executed was not the plain- tiff's deed. The effect of this case is " that if an illiterate man have a deed falsely read over to him, and he then seals and delivers the parchment, it is nevertheless not his deed " (a); it was also resolved that " it is a,ll one in law to (y) The Grerman Oivil Code has read to a Hind man), taken a new and much simplified (a) Per Our. L. B. 4 C. P. 711. course on the whole matter. Any It had been long before said, in 21 Icind of " declaration of intention " Hen. VII., that " if I desire a man is voidable om the ground of f unda- to enfeoff me of an acre of land in mental error, even if the mistake is Dale, and he tell me to make a deed unilateral ; but voidable only, and for one acre with letter of attorney, .subject to the duty of compensating and 1 make the deed for two acres, any party for damage incurred by and read and declare the deed to relying on the validity of the act: him as for only one acre, and he B. G. B. ss. 119-122. seal the deed, this deed is \itterly (3) 2 Co. Eep. 9 6. Cp. Shutter's void whether the feoffor be lettered cane, 12 Co. Rep. 90 (deed falsely or not, because he gave oredenc* to AS TO NATURE OF TRANSACTION. 501 read it in other words, and to declare the effect thereof in other manner than is contained in the writing: " but that a party executing a deed without requiring it to be read or to have its effect explained would be bound (&). Agreeably to this the law is stated in Sheppard's Touchstone, 56. But atpresent the mere reading over of a deed without an explana- tion of the contents, to a person incapable of reading it for himself, would hardly be thought sufficient to show that the person executing it understood what he was doing (c) . The doctrine was expounded and confirmed by the luminous judgment of the Court of Common Pleas in Foster v. Mac- hinnon (d). The action was on a bill of exchange against the defendant as indorser. There was evidence that the acceptor had asked the defendant to put his name on the bill, telling him it was a guaranty; the defendant signed on the faith of this representation and without seeing the face of the bill. The Court held that the signature was not binding, on the same principle that a blind or illiterate man is not bound by his signature to a document whose nature is wholly misrepresented to him. A signature so obtained " Is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signa- ture; in oiher words, that he never intended to sign, and therefore in me and I deceived him." (Keilw. (o) Roghton v. Hoghton (1852) 70, 5, pi. 6): but qu. whether this 15 Beav. 278, 311, 92 E. R. 421, can be accepted to the full extent 435. In the case of a wiU the since Sowatson v. Webb [1908] 1 execution of it by a testator of Ch. 1, 77 L. J. Oh. 32. Keilwey is sound mind after having had it in fact only a commonplace book, read over to him- is evidienoe, but though it seems generally accurate. not conclusive evidence, that he Andi see the older authorities re- understood and approved its con- ferred to in note (/) next page, tents: Fulton v. Andrmo (1875) (6) I.e. to this extent, that he L. R. 7 H. L. 448, 460, sqq. 472, could not say it was not his deed, 44 L. J. P. 17. apart from any question of fraud (rf) (1869) L. R. 4 C. P. 704, or the like. 711, 38 L. J. C. P. 310. o02 MISTAKE. contemplation of law never did sign the contract to which his name is appended (e). . . . The position that if a grantor or covenantor be deceived or misled as to the actual contents of the deed, the deed does not bind him, is supported by many authorities: see Com. Dig. Fait (B. 2) (/), and is recognized by Bayley B. and the Court of Exchequer in the case of Edwards v. Brown (jr). Accordingly it has recently been decided in the Exchequer Chamber that if a deed be delivered, and a blank left therein be afterwards improperly filled up (at least if that be done without the grantor's negligence), it is not the deed of the grantor: Swan v. North British Australasian Co. (Ji). These cases apply to deeds; but the principle is equally applicable to other written contracts." The judgment proceeds to notice the qualification of the general rule in the case of negotiable instruments signed in blank, when the party signing knows what he is about, i.e., that the paper is afterwards to be filled up as a negotiable instrument (i). But here the defendant "never intended to (c) The same rule is laid down, and for the same reason, in a, re- script oi Diocletian and Maximian ; Si falsum iustrumentum emptionia conscriptum tibi, velut locationis quam fieri mandaveras, subscribere te non relecto sed fidem habemtem suasit, neutrum contractum, in utroque alterutrius consensu defi- ciente, oonstitisse procul dubio est. C. i. 22. plus valere, 5. (/) Cited also by Willes J. 2 C. B. N. S. 624, and see 2 Ro. Ab. 28 S: the cases there referred to (30 E. III. 31 i; 10 H. VI. 5, pi. 10) show that the principle was recog- nized in very early times. Cp. Pleta 1. 6, o. 33 § 2. Si autem vocatus dicat quod carta sibi nocere non deb eat .... vel quia per dolum adveoit, ut si cartam de feaflaraento sigillatam [ga. sigil- lavit or sigillaverit] cum scriptam de termino annorum sigillar© ore- diderit, vel ut si carta fieri debuit ad vitam, illam fieri fecit in feodo et huiusmodi, dum tamen nihil sit quod imperitiae vel negligentiae suae possit imputari, ut [sd] sigil- lum suum senescallo tradiderit vel uxori, qnxjd cautius debuit cus- todivisse. Qucere whether the old authorities as to " non est factum " are applicable to educated and seeing persons, 'See Howatson v. Webb [1908] 1 Ch. 1, 3, 4. But at all events it would be rash to dispute the authority of Foster v. MacMnnon. ig) (1831) 1 C. & J. 307, 312, 35 E. R. 720, 725. {h) (1863) 2 H. & C. 175, 32 L. J. Ex. 273, 126 R. R. 580. The suggestion there made that mere negligence will not estop a man from showing that a deed i.? not really his deed is now confirmed by the C. A., see note (I), below. (i) Whether this is a branch of the general principle of estoppel or a positive rule of the law merchant ^"as much doubted in Swan v. l^orth British Australasia^n Co. (1863) in the Court below, 7 H. & AS TO NATURE OF TRANSACTION. 503 endorse a bill of exchange at all, but intended to sign a contract of an entirely different nature." He was no more bound than if he had signed his name on a blank sheet of paper, and the signature had been afterwards fraudulently misapplied (/<;). This decision shows clearly that an instru- ment executed by a man who meant to execute not any such instrument hut something of a different kind is in itself a mere nullity; and that, notwithstanding the importance constantly attached by the. law to the security of bo7ia fide holders of negotiable instruments, the only exception made in their favour is that a party who knows he is executing something negotiable may be estopped by negligence. Apart from the case of a negotiable instrument no such exception is allowed (l). N. 603, 31 L. J. Ex. 425. In the present judgment the Ckjurt of C P. seems to incline to the latter view. (S) L. -R. i C. P. at p. 712. (Z) Carlisle and Cumberland ■Banking Co. v. Bragg [1911] 1 K. B. 489, 80 L. J. K. B. 472, C. A. The decision was severely criticized by Sir W. Anaon, L. Q. R. xxviii. 190, but his in- genious attempt to distinguish Swan'st case cannot stand against th« unanimous decision of a strong Court affirming the judgment of Lord Sterndale, now M.R. (then Piokford J.). Here the docu- ment before the Court was a guaranty to a bank, fraudulently stated to the defendant to be a duplicate of a spoilt insurance form, which it appears he had signed earlier, and signed by him without examination on the faith of that statement. Estoppel was re- lied on for the plaintiffs (the jury having found as a fact tliat the defendant was negligent), but the Court held that the defendant was under.no such duty to the plaintiffs as could create an estoppel. Cp. Simons v. G-reat Western Sy. Co. (1857) 2 C. B. N. S. |620, 109 R. R. 806, where the plaintiff was held not bound by a paper of special conditions limiting the com- pany's responsibility as carriers, which he had signed witliout reading it, being in fact unable at the time to read it for want of his glasses, and being assured by the railway clerk that it was a mere form. " The whole question was whether the plaintiff signed the re- ceipt.knowing what he was about "; per Cockburn C.J. at p. 6'24. The clerk's statement distinguishes this from the class of eases cited at pp. 52, 53, above. Where a person intending to execute his will has by mistake executed a wrong docu- ment, that document cannot be admitted to probate even if the real intention would thereby be 504 MISTAKE. The existence of a fundamental error of this sort, not merely as to particulars, but as to the nature and substance of the transactions, has seldom been considered by courts of equity except in connection with questions of fraud from which it is not always practicable to disentangle the previous question whether there was any consenting mind at all: and a just zeal to restrain fraudulent practices has now and then led to the utterance of dicta not wholly according to know- ledge (m). Evidently there cannot be such a thing as a peculiar doctrine of equity as to the passing of legal estates or the creation of legal obligations. An instrument, then, may be wholly void as against a party who has executed it under a total misapprehension of its nature, being put off inquiry by fraud or, it may be, other plausible cause (n); but misapprehension of the effect or contents, when the party knows what he is dealing with, is not enough; and it seems that a man of ordinary education and competence, if, knowing so much, he chooses to execute partially carried out: In the goods understood that a purchaser for of Hunt (1875), L. R. 3 P. & D. valuable consideration without 250, 44 Ij. J. P. 43. no-tioe asks nothing of a court of (m) Kennedy v. Green (1834) 3 equity but to leave him alome. M. & K. 699, 41 E,. R. 176 (Lord (m) In Orie^ital Bank Corpora- Brougham); Vorle;/ v. Cooke tion v. Fleming (1879) I. L. R. (1857) 1 Giff. 230, 2? L. J. Ch. 3 Bom. 242, a oomposi-tion deed 185, 114 R. R. 413; Ogilrie ,v. including a release which was not JeafreHon (1860) 2 Giff. 333, 29 authorized was executed on behalf I>. J. Ch. 905, 128 R. R. 148 of creditors; time was pressing (Stuart V.-C). Neither of those and examination of the deed was judges ia a safe warrantor for waived on the debtor's affluranoe speculative extensions of either that all was as agreed; the High legal or equitable doctrine; but the Court decreed that it was not the real ground of all these decisions deed of the plaintiffs so far as it was constructive notice of the purported to operate as a rdeaae. fraud, though in Vorley v. Cooke Fraud was not alleged, but no this appears only from the Law right had been acquired by any Journal report, which differs ma- third party on the faith of the terially from Giffard's. Lord release. Brougham seems never to have AS TO NATURE OF TRANSACTION. 505 an instrument without informing himself of its general purport and effect, does so at his peril as regards innocent third persons, whatever remedies he may have against any other party to the transaction (o). " \^'Tien a man knows that he is conveying or doing something with his estate, but does not ask what is the precise effect of the deed, because he is told it is a mere form, and has such confidence in his solicitor as to execute the deed in ignorance, then a deed so executed, although it may be voidable upon the ground of fraud, is not a void deed " (p) . Accordingly a man who executes a mortgage containing the usual covenants, and knows that he is transferring the property but assumes that it is an out and out conveyance, is liable on the covenant for pajanontof principal and interest to a transferee for value (q). A conveyance from A. to B., purporting to grant that which A. has already conveyed by deed, and being obtained by B.'s fraud, is not void as a deed, and may create an estate by estoppel if it contains sufficiently clear averments (r) . A contractor must stand by the words of his contract, and, if he will not read what he signs, he alone is responsible for (o) Hunter v. Wallers (1871) Swinfen Eady J. in Bagot x. L. R. 7 Ch. 75; Tlowatson v. Webb Chnpnmn [1907] 2 Ch. 222, 227, 76 [1908] 1 Ch. 1, 77 L. J. Ch. 32, L. J. Ch. 523, where the actual C. A. decision wa.s on the ground of total ^ {p) Hunter v. Walters (1871) misrepresentation: see [1908] 1 Ch. L. R. 7 Ch. 75; per Mellish L.J. at pp. 2, 3; and qu. tlierefore at p. 88; op. JVai. Prov. Bank of whether in Oriental Banh Corpora- England V. Jackson (1886) 33 Ch. Wore v. Kerning', note (h) above, the Div. 1 ; and Lloyd's Banh, Ltd. v. sufficient alternative ground of de- Bullock [1896] 2 Ch. 192, 196, 65 cision, that the debtor's misrepre- L. J. Ch. 680. sentation even if innodeint made (j) Bowatson v. Webb, note (o), the deed voidable, was not the above. The C. A. did not approve sounder. of a distinction between the effects (r) Onward Bmlding Soc. \ . of conveyance and covenant in Smith.soii [1893] 1 Ch. 1, 62 L. J. such circumstances suggested by Ch. 138, 0. A. P. — c. 33 506 MISTAKE his omission (s). And it may be said generally that a man of business who executes " an instrument of a short and intelligible description cannot be permitted to allege that he executed it in blind ignorance of its real character " (t). Strictly this may be an inference of fact rather than a rule of law; but under such conditions the inference is irresistible. It may be observed, however, that a prudent man who has examined and approved the draft of a deed to which he is a party does not, as a rule, insist on verifying with his own eyes the exact correspondence of the engrossment with the draft; and it would surprise both branches of the profession in England if it were held to be negligence for a man to trust his solicitor to that extent (m). .4s to character of transaction. — There may also be a fundamental error affecting not the whole substance of the transaction, but only its legal character. It is apprehended that on principle a case of this kind must be treated in the same way as those we have alread}" considered; that is, if the two parties to a transaction contemplate wholly different legal effects, there is no agreement; but this will not prevent an act done by either party from having any other effect which it can have by itself and which it is intended to have by the party doing it. Thus if A. gives money to B. as a gift, and B. takes it as a loan, B. does not thereby become A.'s defctor (x), but' (s) Upton V. Trihiloock (1875) A. his intention of treating the 91 U. S. 45, 50. money as a loan, and A. assents, (f) Per Lord Chelmsford C. then there is a good contract of Wythes v. Labcmohere (1858-9) 3 loan. See Mill v. Wilson (1873) Be G. & J. 593, 601. L. R. 8 Ch. 888; per Mellish L.J. («) Cp. per Malins V.C. (who at p. 896; where it was held that knew the common course of busi- an advance at first intended to be ness very well, if his law was a gift had in this v>-ay been f.urned sometimes adventurous) L. R. 9 into a loan, and was a good oon- Eq. at p. 603. sideration for a promissory note (s) But if B. communicates to subsequently given for the amount. AS TO PKKSON. 507 the money is not the less effectually delivered to B. {y). So, if a baker who has ordered flour of A.'s receives by a warehouseman's mistake flour of B.'s, which is more valu- able, and consumes it in good faith, he is not liable to B. for the true value {z). We have seen however (pp. 488, 489), that mistake as to any particular effect of a contract depending on its true con- struction does not discharge the contracting party or entitle him to act upon his own erroneous construction. B. Error as to the person of the other party. Another kind of fundamental error is that which relates to the person with whom one is contracting. Where it is material for the one party to know who the other is, this prevents any real agreement from being formed (a). Such knowledge is in fact not material in a great part of the (y) Savigny, Syst. 3. 269; Paulua, D. U. 7. de. o. et a. 3 § 1. Xon satis aiitein est dantis esse niimos «t fieri accipientia, ut obli- gatlo naacatur, sed etiam hoc animo dari et accipi ut obligatlo oonsti- tuatur. Itaque si quis peouniam suam donandi causa dederit mihi, quamquam et donantis fuerit, et mea fiat, tamen non obligabor ei, quia non hoc inter nos actum est. Ab to the transfer of the property being effectual (notwithstanding- Ulpian's opinion in D. 12. 1. de reb. cred. 18 pr.) op. Julianus, D. 41. 1. de acq. rer. dom. 36. The reason is that to that extent there is an intention free from error on the one part and an assent on the other. But a wholly mistaken, handing over of money or goods passes no property: S. v. Middle- ion (1873) L. R. 2 O. O. K. 38, 33 44, 42 L. J. M. 0. 73; Kingsford V. Merry (1856) (Ex. Ch.) 1 H. & N. 503, 26 L. J. Ex. 83, 108 E. R. 694; and see Chapman v. Cole; (1858) 12 Gray (Mass.) 141; M. V. Ashwdl (1885) 16 Q. B. D. 190, 55 U J. M. O. 65. (z) inih V. Snell (1870) 104 Mass. 173; cp. the somewhat similar case put by Bramwell B. in R. V. Middl&ton (1873) L. R. 2 O. O. R. at p. 56. (a) Savigny, Syst. 3. 269; Po- thier, Obi. § 19, adopted by Pry J. in Smith v. TFhmtoraft (1878) 9 Ch. D. at p. 230, 47 L. J. Ch. 745. I"5 I take a loan from A. thinking he is B.'s agent to lend me the money when he is in truth O.'s there is no oonti-aot of loan, though C. may get back his money by condictio: D. 12. 1. de reb. cred. 32. (2) 508 MISTAKE duily transactions of life, as for instance when goods are sold for ready money, or when a railway traveller takes his ticket: and then a mere absence of knowledge caused by complete indifference as to the person of the other party cannot be considered as mistake, and there can be no question of this kind. In principle, however, the intention of a con- tracting party is to create an obligation between himself and another certain person, and if that intention fails to take its proper effect, it cannot be allowed to take the different effect of involving him without his consent in a contract with some one else. In other words, an offer made to one man cannot be accepted by another. In Boulton v. Jones (b) an order for goods had been addressed by the defendants to a trader named Brocklehurst, who without their knowledge had transferred his business to the plaintiff Boulton. The plaintiff supplied the goods without notifying the change, and after the goods had been accepted sent an invoice in his own name, whereupon the defendants said they knew nothing of him. It was held that there was no contract, and that he could not recover the price of the goods. Possibly the person for whom the order was meant might have adopted the transaction if he had thought fit. But with the plaintiff there was no express contract, for the defendant's offer was not addressed to him; nor yet An implied one, for the goods were accepted and used by the defendants on the footing of an express contract with the person to whom their offer was really addressed. The (6) (1857) 2 H. & N. 564, 27 of business for the supply of goods I/. J. .Ex. 117, 115 B. R. 695. And in the way of that business be not, see Boston Ice Co. v. Potter (1877) in the absence of anything showing 123 Mass. '28, where Boulton v. special personal considerations, a Jones was followed in its full ex- proposal to whoever is carrying on tent. Qu. however whether accord- the same business continuously at ing to general usage a proposal the same place and under the same addressed to a trader at his place name. AS TO PERSON. .509 defendants might have had a set-off against the person with whom they intended to contract (c) . Again, if A. means to sell goods to B., and C. obtains delivery of the goods by pretending to be B.'s agent to make the contract and receive the goods (d), or if C, who is a man of no means, obtains goods from A. by writing for them in the name of B., a solvent merchant already known to A., or one only colourably differing from it (e), there is not a voidable contract between A. and C, but no contract at all; no property passes to C, and he can transfer none (save in market overt) even to an innocent purchaser. The pretended sale fails for want of a real buyer. There is only an offer on A.'s part to the person with whom alone he means to deal and thinks he is dealing. It appears doubtful whether any analogous doctrine applies to deeds, so that the insertion of a wrong party, if material, would have the same (c) Op. MUcJwll V. Lapage (1816) Halt N. P. 253, 17 R. R. 633, a somewhat similar case, where the purchaser, after notice, had treated the contract as subsisting. Analogous in some ways, but really having nothing to do with any rule specially relating to mistake, is the class of cases showing that a subsisting contract cannot bfe performed by a person with whom it was not made: Rohson v. Drum- mond (1831) 2 B. & Ad. 303, 36 S,. R. 669; MumMe v. Ilwnter (1848) 12 Q. B. 310, 17 L. J. Q. B. 350, 76 B.. R. 291. See further per Collins M.R. in Tolhurst v. Assocd. PorUand C&nient Man/ufrs. [1902] 2 K. B. 660, 668, 71 L. J. K. B. 949. ;.(0 Hardtnan v. Sooth (1863) 1 H. & C. 803, 32 L. J. Ex. 105; cp. Kitigsford v. Merry (1856) 1 H. & N. 503, 26 L. J. Ex. 83, 108 R. R. 694; Hollins v. Fowler (1874-5) L. R. 7 H. L. 757, 763, 795. (e) Lindsay v. Cundy, Cundy V. TAndsay (1878) 3 App. Ca. 459, 47 L. J. Q. B. 481; Ex parta Barnett (1876) 3 Ch. D. 123, 45 L. J. Bk. 120; Edmunds v. Mer- cJimits' Despatch Transport Co., 135 Mass. 283, decides that if A. in person obtains goods by pre- tending to be B., then, as A. is " identified by sight and hearing," property does pass; followed here, Phillips V. Brooks [1919] 2 K. B. 243, 88 L. J. K. B. 953: contra Pothier, Obi. § 19. So, if a man is persuaded to join a new company by fraudulently representing it to be identical with an older company of similar name, he does not become a shareholder: Baillie's case [1898] 1 Ch. 110, 67 L. J. Oh. 81. 510 MISTAKE result as the insertion of wrong parcels, and that if a man executes a conveyance of White'acre to A. as and for a con- veyance of the same estate to B. it is equally not his deed.. But neither Hunter v. Walters (/) nor the later authorities already- mentioned encourage such an extension. Conversely, if Z. knows that A. for some reason, good or bad, is minded to except Z. from his general willingness to do business with all comers who satisfy the conditions — as where A., the manager of a theatre, refused to let Z. book a seat for a first night, on the ground that Z . had made un- founded charges against the staS of the theatre — there Z. cannot make himself a contracting party as the undisclosed principal of an indifferent agent: as in the actual case by employing an unsuspected person to take the seat in his own name (g) . On the same principle (as it was decided earlier) wilful concealment of a party's identity even in a contract in which personal considerations are usually irrelevant may, in special circumstances (such as that party having acquired in his own name a reputation that makes people unwilling to deal with him), amount to fraud, making the contract voidable (h). It is on the same principle that a party to whom anything is due under a contract is not bound to accept satisfaction from any one except the other contracting party, in person where the nature of the contract requires it (i)^ or otherwise (/) (1871) L. E. 7 Ch. 75; supra, answer by B. or any one claiming p. 505. On the other hand, " if A . through him": Cooper v. Vesetf personating B. executes a deed in (1882) 20 Ch. Div. 611, 623, 51 the name of B. purporting to con- L. J. Ch. 862. (Kay J. ; a£Ed. in vey B.'s property, no right or in- C. A. 20 Ch. Div. 627.) terest can possibly pass by such an (j?) Said v. Butt [1920] 3 K. B. instrumaut. It is not a deed. It 497, 90 L. J. K. B. 239. makes no difference in law that A. (A) Gordon v. Street [1899] 2 had the same name as B. if the K. B. 641, 69 L. J. Q. B. 45, 0. A. false personation is established; (j) See Bobinson v. Damson atill the instrument is not a deed, (1871) L. E,. 6 Ex. 269, 40 L. J. and that plea would be a complete Ex. 172. AS TO PERSON. 611 by himself, his personal representatives, or his authorized agent: and it has even been thought that the acceptance of satisfaction from a third person is not of itself a bar to a subsequent action upon the contract. It seems that the satis- faction must be made in the debtor's name in the first instance and be capable of being ratified by him (j), and that if it is not made with his authority at the time there must be a subsequent ratification, which however need not be made before action (Jc) . But these refinements have not been received without doubt (I) : and it is submitted that the law cannot depart in substance, especially now that merely technical objections are so little favoured, from the old maxim "If I be satisfied it is not reason that I be again satisfied " (m). So far the rule of common law. The power of assigning contractual rights (n) does not constitute an exception. For we are now concerned only to ascertain the existence or non- existence of a binding contract in the first instance. But the limits set to this power (which we have already con- sidered under another aspect) (o) may here be shortly referred to as illustrating the same principle. (/) James v. Isomcs (1852) 12 law being the other way expressly, C. B. 791, 22 Ij. J. C. P. 73, 92 and mercantile law by analogy: at E. R. 883; Lucas v. WUl^inson the least assent ought to be pre- i(1856) 1 H. &N. 420, 26 L. J. Ex. eumed (op. L. K. 10 Ch. 416). 13, 108 K. E. 657. (»») JFitzh. Ab. tit. Barre, pi. (Jc) Sim'jyxon v. Egg'mglov (1856) 166, repeatedly cited in the modern 10 Ex. 845, 24 L. J. Ex. 312, 102 ca.ses where the doctrine is dis- E. E. 867 (ratification by plea of cussed. See in addition to those payment or at the trial may be already referred to, Jones v. ^road- good). h^rst (1850) 9 C. B. 173, 82 E. E. (0 See per Willes J. in Cook \. 336; BeWww v. Bush (1851) 11 X^ie/- (1863) 13 C. B. N. S. 594, C. B. 191, 267, 22 L. J. C. P. 24, 32 L. J. C. P. 121, who considered 87 E. E. 639. the doctrine laid down in Jones v. («) Legal as well as equitable Braadhurst (next note) that pay- since the Judicature Act, 1873, ment by a stranger is no payment s. 25, sub-s. 6. tm assent, as contrary to a well- (o) Ch. V,, suin-a, p. 231, sqq. known princiide of law: the civil 51^; MISTAKE. Generally speaking, the liability on a contract cannot be transferred so as to discharge the person or estate of the original contractor, unless the creditor agrees to accept the liability of another person instead of the first (p). The benefit of a contract can generally be transferred with- out the other party's consent, yet not so as to put the assignee in any better position than his assignor (g) . Hence the rule that the assignee is bound by all the equities affecting what is assigned. Hence also the "rule of general jurisprudence, not confined to choses in action . . that if a person enters into a contract, and without notice of any assignment fulfils it to the person with whom he made the contract, he is discharged from his obligation " (r), and the various con- sequences of its application in the equitable doctrines ag to priority being gained by notice. Again, rights arising out of a contract cannot be trans- ferred if they are coupled with liabilities, or if they involve a relation of personal confidence such that the party whose agreement conferred those rights must have intended them to be exercised only by him in whom he actually confided (s) . Thus one partner cannot transfer his share so as to force a new partner on the other members of the firm without their (j)) See p. 218, above. The ex- (?) Or the other party in a oeptions to this are but partial. worse one than he was before: Thus the assignor of leaseholds Tolhurst v. Associated Portland remains liable on his express cove- Cement Manufacturers [1901] 2 1 Wms. Saund. 298. A K. B. 811, 70 L. J. K. B. 1036 stronger case is the transfer of (reversed on grounds not affecting shares in a. company not fully paid the general principle [1902] 2 up: but the special statutory law K.B.660, [1903] A. C. 414, 71 L.J. governing these transactions has K. B. 949, 72 L. Ji K. B. 834); not altogether lost sight of the (r) Per Willes J. De Nicholls v. principles of the general law: for Saunders (1870) L. R. 6 C. P. 589 (1) the transferor is not imme- at p. 594, 39 L. J. C. P. 297. diately discharged: (2) the com- (s) This statement wag approved pany is not always bound to re- by the Supreme Court of the U. S. gister the transfer. in Arkansas Smelting Co, v. BeMen Co. (1888) 127 U. S. 379j 388. RIGHTS FOIINDKU ON PERt*ONAL LOJSKIDENCE. 513 *ousout; all he can give to an assignee is a right to receive what may be due to the assignor on the balance of the part- nership accounts, and if the partnership is at will, the assignment dissolves it; if not, the other partners may treat it as a ground for dissolution. And a sub-partner has no rights against the principal firm. '■ At the present day, no doubt, an agreement to pay money, or to deliver goods, may be assigned by the person to whom the money is to be paid or the goods are to be delivered, if there is nothing- in the terms of the contract, whether by requiring something to be afterwards done by him, or by some other stipulation, which manifests the intention of the parties that it shall not be assignable. But every one has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his •consent" {t). In the same way a contract of apprenticeship is prima facip a strictly personal contract with the master; this con- struction may be excluded however by the intention of the parties, e.g. if the master's executors are expressly named (ji), or by custom {v) . So if an agent appoints a sub-agent without authority, the sub-agent so appointed is not the agent of the principal and cannot be an accounting party to him {x) . On the same principle it was held in Stevens v. Benning {y) that a pub- lisher's contract with an author was not assignable without the author's consent. The plaintiffs, who sought to restraia (0 Cur. per Gray J. Arkansas tract Aut, 1872, a. 193. Smeltiiiff Co. V. Seidell Co. (1888) (y) (1854-5) 1 K. & J. 168, 6 127 U,. S. 379, 387. D.M. G. 223,106 E. E. 90; followed («) Cooprr V. Simmons (1862) 7 in Hole v. Bradbury (1879) 12 H. & N. 707, 31 L. J. M. C. 138. Oh. D. 886, and applied to an (r) Bac. Abr. JTaster and Ser- incorporated company, Griffith v. vant, E. ' TOicer Publishing Co. [1897} 1 {x) Cartwright v. Hatdey (1791) Ch. 21, 66 L, J. Ch. 12. 1 Ves. jun. 292. Cp. Tndiait Con- 514 MISTAKE the publication of a new edition of a book, claimed under instruments of which the author knew nothing, and which purported to assign to them all the copyrights, &c., therein riientioned (including the copyright of the book in question) and all the agreements with authors, &c., in which the assignors, with whose firm the author had contracted, were interested. It was decided that the instrument relied on did not operate as an assignment of the copyright, because on the true construction of the original agreement with the publishers the author had not parted with it: also that it did not operate as an assignment of the contract, because it wa& a personal contract, and it could not be indifferent to the author into whose hands his interests under such an engage- ment were entrusted. In the plaintiffs, however trustworthy,, the author had not agreed or intended to place confidence: with them, however respectable, he had not intended to associate himself (2;). Similarly where persons contract to sell land as trustees, and it appears that their power to sell arises only on the death of a tenant for life who is still living, they cannot require the purchaser to take a conveyance from the tenant for life, from whom he never agreed to buy. This would be not merely adding a party to the conveyance, but forcing a wholly new contract on the purchaser (a). The law of agency, which we have already had occasion to consider (b), presents much more important and peculiar exceptions. Here again we find that the limitations under which those exceptions are admitted show the influence of the general rule; thus a party dealing with an agent for an undisclosed principal is entitled as against the principal to the benefit of any defence he could have used against the agent. {z} See 6 D.M.G. at p. 229, 106 Contract (1890) 44 Ch. Div. 218, E. R. 93, 94. 59 L. J. Ch. 636. (a) Bryant and Barninghum's (6) Ch. II., p. 102, above. AS TO SUBJECT-MATTER. 515 G. Error as to the subject-matter. There ma}- be fundamental error concerning: A. The specific thing supposed to be the subject of the transaction. E. The kind or quantity by which the thing is described, or some quality which is a material part of the description of the thing, though the thing be specifically ascertained. The question however is in substance always the same, and may be put in this form: It is admitted that the party intended to contract in this way for something; but is this thing that for which he intended to contract? The rule governing this whole class of cases is fully explained in the judgment of the Court of Queen's Bench in the case of Kennedy v. Panama, do. Mail Company {c). There were cross actions, the one to recover instalments paid on shares in the company as money had and received, the other for a call on the same shares. The contention on behalf of the shareholder was "that the effect of the prospectus was to warrant to the intended shareholders that there really was such a contract as is there represented {d), and not merely to represent that the company bona fide believed it, and that the difference in substance between shares in a company with such a contract and shares in a company whose supposed contract was not binding was a difference in substance in the nature of the thing ; and that the shareholder was entitled to return the shares as soon as he discovered this, quite in- dependently of fraud, on the ground that he had applied for one thing and got another" (e). The Court allowed it to be good law that if the shares (e) (1867) L. U: 2 Q. B. 5»0, 36 turned out to be beyond his autho- L. J. Q. B. 260. rity. (d) A contract with the post- (e) Per Cur. L. R. 2 Q. B. at master-general of New Zealand on p. 586. behalf of the Grovernment, which 516 MISTAKE applied for were really different in substaace from those allotted, this contention would be right. But it is an important part of the doctrine (/) that the difference in sub- stance must be complete. In the case of a fraud, a fraudulent representation of any fact material to the contract gives a right of rescission; but the misapprehension which prevents a valid contract from being formed must go to the root of the matter. In this case the misapprehension was not such as to make the shares obtained substantially different from the shares described in the prospectus and applied for on the faith of that description (gr) . It was at most like the purchase of a chattel with a collateral warranty, where a breach of the warranty gives an independent right of action, but in the absence of fraud is no ground for rescinding the contract {h) . In the particular case of taking shares in a company the contract is not in any case void, but only voidable at the option of the shareholder if exercised within a reasonable time : this, although in strictness an anomaly, is required for the protection of the company's creditors, who are entitled to rely on the register of shareholders {i) . We reserve for the present the question how the legal result is affected when the error is due to a representation made by the other party. The exposition of the general principle, however, is not the less valuable: and we now (/) In Roman law as well as in pany had no power to give to it, the Common Law, ibid, at p. 588, this does not amount to a generib citing D. 18. 1. de oont. empt. 9,10, difference between the thing con- 11. By a clerical error the state- traoted for and the thing purchased: raent of Ulpian(A. !■. 14) "Siautem Eaglesfield v. Marquis of Zondon- aes pro auro veneat, non valet,' is derry (1876) i Ch. Div. 693. ascribed to Paulus in the report. Qi) Street v. Bluy (1831) 2 B. & {g) So, where new stock of a Ad. 456, 36 R. E. 626. ' company is issued and purchased' on (i) See cases cited p.' 521, the supposition that it will have a infra. preference which in fact the com- ' - AS TO SPECIFIC THING. 517' proceed to give instances of its application in the branches already mentioned. A. Error as to the specific thing {in corpore). — A singular modern case of this kind is Raffles v. Wichelhaus {j). The declaration averred an agreement for the sale by the plaintiff to the defendants of certain goods, to wit, 125 bales of Surat cotton, to arrive ex " Peerless " from Bombay, and arrival of the goods by the said ship: Breach, non-acceptance. Plea, that the defendants meant a ship called the " Peerless," which sailed from Bombay in October, and that the plaintiff offered to deliver, not any cotton which arrived by that ship, but cotton which arrived by a different ship also called the "Peerless," and which sailed from Bombay in December. The plea was held good, for " The defendant only bought that cotton which was to arrive by a particular ship; " and to hold that he bought cotton to arrive in any ship of that name would have been "imposing on the defendant a con- tract different from that which he entered into" (k). Mis- understanding of an offer made by word of mouth might conceivably have a like effect, but obviously is, and ought to be, difficult to prove (I). Unconditional acceptance of an offer which in fact is ambiguous and has been misunderstood will not make the acceptor liable for not having acted on the proposer's intention; nor can the acceptor hold the pro- poser liable on a construction which he did not intend (m) . (;•) (1864) 2 H. & O. 906, 33 out showing in which of thosfv Tu. J. Ex. 160. meanings either party used them, (/t) Per Pollock C.B.and Martin so that we have a case of equivoca- B. 2H.&C.atp. 207. The further tion": Sir H. W. Elphinstone in questions which might have arisen I/. Q. E. ii. 110. on the facts are of course not dealt (I) Phillips v. BistoUi (1824:) 2 with. Such a case can occur only B. & 0. 511, 26 R. R. 433. where "the ordinary evidence as to (m) FalcTc v. Williams [1900] the primary meanings of the words" A. C. 176, 69 L. J. f. C. 17, a very used "shows that the words may peculiar case of a code tel^ram bear more than one meaning, with- wrongly construed. •518 MISTAKE In Malins v. Freeman (n) specific performance was refused against a purchaser who had bid for and bought a lot different from that he intended to buy: but the defendant had acted ■with considerable negligence, and the question was left open whether there was not a valid contract on which damages might be recovered. In a recent similar case of Yan Praagh V. Everidge (o) the Court of Appeal, went on the ground that there was no signed memorandum of the contract, owing to a variance from the real date in the printed form which the auctioneer, on the defendant refusing to sign, purported to sign as his agent, but at least one member of the Court thought there was no real agreement. In Calverley v. WiUiaw,s (p) the description of an estate sold by auction included a piece which appeared not to have been in the contemplation of the parties, and the purchaser was held not to be entitled to a conveyance of this part. " It is impossible to say, one shall be forced to give that price -for part only, which he intended to give for the whole, or that the other .shall be obliged to sell the whole for what he intended to be the price of part only. . . . The question is, does it appear to have been the common purpose of both to have conveyed this part? " A mistake as to the contents of a lot put up for sale, arising from mere want of attention to the particulars and a plan therein referred to and exhibited in the sale room, is no defence against an action for specific performance (q) . There remains a peculiar group of cases where the Court has seen its way to a middle course. In Harris v. Pepperell (r) the vendor had actually executed a -conveyance including a piece which he had not intended to (k) (1836-7) 2 Keen 25,44 R. R. 72 L. J. Ch. 260. nS; Dacrev. Goi-ffes (1825) 2 S.&c {p) (1790) 1 Ves. jun. 210, 1 St. 454, 25 R. R. 246, appears to R. R. 118. belong to the same class. (?) Tamplin v. James (1880) 15 (o) [1902] 2 Ch. 266, 71 L. J. Oh. Div. 215. Ch. 698, reversed [1903] 1 Ch. 434, (r) (1867) L. R. 5 Eq. 1. AS TO SPECIFIC THING. 519 sell, but which the defendant maintained he had intended to buy: Lord Romilly, acting in accordance with his own former decision in Garrard v. Frarikel (s), gave the defendant an option " of having the whole contract annulled or else of taking it in the form which the plaintiff intended." The con- verse case occurred in Bloomer v. Spittle {t), where a reserva- tion had been introduced by mistake . The Court, it seems, will not hold the plaintiff bound by the defendant's acceptance of an offer which did not express the plaintiff's real intention, and which the defendant could not in the circumstances have reasonably supposed to express it (m) ; nor yet require the defendant to accept the real offer which was never effectually communicated to him, and which he perhaps would not have oonsented to accept: but will put the parties in the same position as if the original offer were still open («) . The Court having come to the conclusion that the parties did not rightly {s) (1862) 30 Beav. 445, 31 L. J, €h. 604. (f) (1872) L. R. 13 Eq. 427, 41 T,. J. Oh. 369. («) This limitation is material: -cp. Paget \. Marshall (1884) 28 Ch. Div. 255, 54 L. J. Ch. 575, with Tainplin v. James (1880) 15 Oh. Div. 215. Lord Romilly'a judg- ments do not, in terms at any rate, sufficiently attend to the principle enforced in Tamplin v. James. More lately it has been said that these decisions can be supported' only on the ground of fraud, per Farwell J. May v. Flatl [1900] 1 Ch. 616, 69 L.J.Ch.357; Bloomer V. Spittle has been said by Neville J. to be unintelligible as reported, though not exactly on this point: Beale v. Kyte [1907] 1 Ch. 664, 565, 76 L. J. Ch. 294. (j)) For the principle (whether it actually justifies the particular •decisions or not) compare Clowes V Itirjffinson (jicxt note) and Ley- land V. lllingworth (1860) 2 D. F. ,T. 252-3. McKenziey.IlesTceth (1877) 7 Ch. D. 675, 47 L. J. Oh. 231, well shows the distinction between this class of cases and those where a, true contract is carried out with fibatement or compensation. In Scott V. Zittledale (1858) 8 E.&B. 815, 27 L. J.Q. B. 201, 112 E. R. 791 (a case on an equitable plea under the C. L. P. Act), the point of mistake (mz. the vendors of a specific cargo showing the pur- chaser a sample which in fact was of a different bulk) did not go to the essence of the contract: the correspondence of the bulk to the sample was only a collateral term which the purchaser might waive if he chose. The vendors, there- fore, were at all events not entitled to rescind the contract uncon- ditionally. 520 MISTAKE understand each other, "it is not possible without consent to make either take what the other has offered'" (w). This does not mean that a party who has accepted in good faith and in its natural sense a proposal made in explicit terms can be deprived of his right to rely on the contract merely because the proposer failed to express his own intention. In such a case the proposer is estopped from showing that his reasonably apparent meaning was not his real meaning (x) . Similarly, " where the terms of the contract are ambiguous, and where, by adopting the construction put upon them by the plaintiff, they would have an effect not contemplated by the defendant, but would compel him to include in the con- veyance property not intended or believed by him to come within the terms of the contract," and the plaintiff refuses to have the contract executed in the manner in which the defendant is willing to complete it, specific performance cannot be granted {y) . When a purchaser, being naturally misled by the vendor's plan even after a view, supposes a portion of property to be included which is of no considerable quantity, but such as to enhance the value of the whole, this is a " mistake between the parties as to what the property purchased really consists of " so material that the contract will not be enforced {z) . In this class of cases a simple misunderstanding on the buyer's part of the description of the property sold, if such as a reasonable and reasonably diligent man might fall into, may be enough to relieve him from specifically performing (mj) Clowes y. Iliffginson (1S13)1 33, 16 E. R. 81; and per Sir W. Ves. & B. S24, 535, 12 E. R. 284. Grant, Higginsoti v. Clowes (1808) (a:) Tamplm V. James, see note 15 Ves. 516, 524, 10 R. R. 112. (s), p. 518, above. (z) Denny v. Hancock (1870) (y) Baxendrde v. Seale (1854) L. R. 6 Ch. 1, 14. Note that here 19 Beav. 601, 24 L. J. Ch. 385, 105 there was negligent misrepresenta- E. E. 261. Cp. per Lord Eldon, tion going, in the opinion of the- Stewarlv . Alliston (ISlo) 1 Mer. 26, Court, to the verge of fraud. AS TO SPECIFIC THING. 521 the contract, though not from liabilitj' in damages (a) . A vendor is in the same position if his agent has by ignorance or neglect included in a contract for sale property not intended to be sold (&). But, although the authorities admit the possi- bility that a mistake to which the vendor did not contribute, and which he could not be expected to perceive, may in circumstances of special hardship be a bar to specific per- formance (c), it is certain that such cases are rare. One-sided mistake, we repeat only by way of abundant caution, will never of itself prevent the formation of a contract on which an action for damages will lie. Variance between the objects of a company as described in the prospectus and in the memorandum of association does not entitle a person who has taken shares on the faith of the prospectus to say that the concern actually started was not that in which he agreed to become a partner, and to have his name removed from the register. The reason is that " persons who have taken shares in a company are bound to make themselves acquainted w^ith the memorandum of asso- ciation, which is the basis upon which the company is established" {d). It has been attempted to dispute the (a) TampKn v. James (1880) 15 hold Land Co. (1868) L. R. 3 Ch. Ch. Div. 215. 493; Hares case (1869) L. E. 4 (J) Alvanley v. Kinnaird (1849) Ch. 503; Challis's case (1870-1) 2 Mao. & G. 1, 8, 86 E. R. 1. Cp. L. E. 6 Ch. 266, 40 L. J. Ch. Griffiths V. Jones (1873) L. E. 15 431; all showing that the contract Eq. 279, 42 L. J. Ch. 468. is in such cases not void, but only (c) Wood V. Scarih (1855) 2 voidable at the option of theshare- K. & J. 33, 110 E. R. 88, is the holder, which must be exercised only authority which appears to within a reasonable time. So, a have actually decided so much: qu. person who applies for shares in how far it would now be followed. a company not described as limited (d) Per Ix)rd Chelmsford, Oakes cannot afterwards be heard to say V. Turquand (1867) L. R. 2 H. L. that he did not mean to take shares 325, 351, 36 L.. J. Ch. 949, over- in an unlimited company: Perrett's ruling some former decisions to the case (1873) L. R. 15 Eq. 250, 42 contrary. See ace. Kent v. Free- L. J. Ch. 305. -C. 34 522 MISTAKE validity of a transfer of shares because the transferor had not the shares corresponding to the numbers expressed in the transfer, although he had a sufficient number of other shares in the company; but it was held that the transferee, who had in substance agreed to take fifty shares in the com- pany, could not set up the mistake as against the company's creditors (e). " The numbers of the shares are simply direc- tory for the purposes (/) of enabling the title of particular persons to be traced; but one share, an incorporeal portion of the profits of the company, is the same as another, and share No. 1 is not distinguishable from share No. 2 in the same way as a grey horse is distinguishable from a black horse" {g). A compromise of an action has been avoided^ where by misapprehension of counsel it extended to matters which his client and he thought were not in dispute (/;.). B. Error as to kind, quantity, or quality of the thing. A material error as to the kind, quantity, or quality of a subject-matter which is contracted for by a generic descrip- tion (whether alone or in addition to an individual descrip- tion) may make the agreement void, either because there was never any real consent of the parties to the same thing, or because the thing or state of things to which they consented does not exist or cannot be realized. In Thornton v. Kempster (i) the common broker of both (e) Ind's case (1872) L. E. 7 Ch. 638, 64 L. J. Ch. 785, O. A.; Ch. 485, 41 L. J. Ch. 564. Neale v. Gordon Lennox [1902] (/) Sic in the report. A. C. 465, 71 L. J. K. B. 939, does (^) Or house No. 2 in a street not belong to this head, as it was from house No. 4 in the same street, decided on the ground not of mis- though of the same description and take but oi want of authority from in equally good repair: Leach v. the client. Mullett (1827) 3 Car.&P. 115, 33 (i) 5 Taunt. 786, 15 R. R. 658. R. R. 657. So where by an oversight in pre- (Ji) Hickman v. Serena [1895] 2 paring an auctioneer's catalogue the AS TO QUANTITY. 523 parties gave the defendant as buyer a sale note for Riga Whine hemp, but to the plaintiff as seller a note for St. Petersburg clean hemp. The bought and sold notes were the only evidence of the terms of the sale. The Court held that " the contract must be on the one side to sell and 'on the other side to accept one and the same thing ": here the parties so far as appeared had never agreed th9,t the one should buy and the other accept the same thing; consequently there was no agreement subsisting between them. In a case of this kind however there is not even an agree- ment in terms between the offer and the acceptance. — A curious case of error in quantity happened in Henhel v. Pape (k), where by the mistake of a telegraph clerk an order intended to be for three rifles only was transmitted as an order for fifty. The only point in dispute was whether the defendant was bound by the message so transmitted, and it was held that the clerk was his agent only to transmit the message in the terms in which it was delivered to him. The defendant had accepted three of the fifty rifles sent, and paid the price for them into Court: therefore the question whether he was bound to accept any did not arise in this case. It is settled however by former authority that when goods ordered are sent together with, goods not ordered, the buyer may refuse to accept any, at all events "if there is any danger or trouble attending the severance of the two " (I). descriptions and samples of hemp 28 ib. 319; per Byles J. 1 E. & E. and tow were mixed, and the de- at p. 976; ana op. Bart v. Mills fendants made a bid for tow in the (1846) 15 M. & W. 85, 15 L. J. belief that it was hemp: Scriven Ex. 200, 71 R. R. 578, where a V. Hindley [1913] 3 K. B. 564, new contract was implied astopart 83 L. J. K. B. 40. of the goods which was retained; (Jt) (1870) I/. R.6 Ex. 7,40 L. J. but in that case the quality as well Ex. 15. as the quantity of the goods sent (Z) Jeiiy V. ff»-«eM(1857)8 E.& B. was not in conformity with the 575, 112 R. R. 699, in Ex. Ch. 1 order. E. & E. 969, 27 L. J. Q. B. Ill, 34(2) 524 MISTAKE Price. — The priaciple of error in quantity preventing the formation of a contract is applicable to an error as to the price of a thing sold or hired (to) . As there cannot be even the appearance of a contract when the acceptance disagrees on the face of it with the proposal, this question can arise onlj'^ when there is an unqualified acceptance of an erroneously expressed or understood proposal. If the proposal is mis- understood by the acceptor, it is for him to show that the misunderstanding was reasonable. "Where there has been no misrepresentation, and where there is no ambiguity in the terms of the contract, the defendant cannot be allowed to evade the performance of it by the simple statement that he has made a mistake" (n). A. makes an offer to B. to take a lease of a named farm, specifying as its contents land amounting to 250 acres; B.'s agent, who meant to invite offers for only 200 acres, accepts A.'s offer without examining its particulars. Here there is a contract binding on B., and A. is entitled to specific performance to the extent of B.'s power to give it, with a proportionate reduction of the rent (o). If, on the other hand, the proposal is by accident wrongly expressed, the proposer must show that the acceptor could not reasonably have supposed it in its actual form to convey the proposer's real intention. This occurred in Webster v. Cecil (p), where the defendant sent a written offer to sell property and wrote 1,100Z. for 1,200Z. by a mistake in a hurried addition of items performed on a separate piece of paper. This paper was kept by him and produced to the (m) D. 19. 2. locati, 52. Si decern (») Tamplin v. James (1880) 15 tibi locem fundum, tu autem exis- Ch. Div. 215, 217 (Baggallay times qiiinque te conduoere, nihil L.J.). agitur. Sed et 8i ego minoris me (o) McKenziey.IIesketh(lST!) 7 locare sensero, tu pluris te con- Ch. D. 675, 47 L. J. Ch. 231. ducere, utique non pluris erit con- (p') (1861) 30 Beav. 62, 132 duotio quam quanti ego putavi. E. E. 185. AS TO ESSENTIAL QUALITY. 525 Court. On receiving the acceptance he discovered the mis- take and at once gave notice of it. It appeared that the plaintiff had reason to know the full value of the property. Under the circumstances specific performance was refused. The case is explained by James L.J. as one " where a person snapped at an offer which he must have perfectly well known to be made by mistake" (q). But sometimes, even when the thing which is the subject- matter of an agreement is specifically ascertained, the agree- ment may be avoided by material error as to some attribute of the thing. For some attribute which the thing in truth has not may be a material part of the description by which the thing was contracted for. If this is so, the thing as it really is, namely, without that quality, is not that to which the common intention of the parties was directed, and the agreement is void. An error of this kind will not suifioe to make the transaction void unless — (1) It is such that according to the ordinary course of dealing and use of language the difference made by the absence of the quaKty wrongly supposed to exist amounts to a difference in kind (r) ; (2) and the error is also common to both parties. Thus we read " Mensam argento coopertam mihi ignoranti pro solida vendidisti imprudens ; nulla est emptio, peouniaque eo nomine data condioetur" (s). Again, "Si aes pro auro veneat, non valet" (t). This, however, is not to be taken too largely. What does pro auro, as and for gold, imply as here used? It implies that the buyer thinks he is buying, (g') Tampiin v. James (1880) 15 (i) D. eod. tit. 14, cited and Ch. D. at p. 221. adopted by tlie Court of Q. B. in (r) Savigny, Syst. § 137 (3. 283). Kennedy v. Panama, §c. Mail Co., (s) D. 18. 1. de cont. empt. 41 p. 515, supra. B. 1. 526 MISTAKE and the seller that he is selling', a golden vessel; and further, that the object present to the minds of both parties as that in which they are trafficking — the object of their common intention — is not merely this specific vessel, but this specific vessel, being golden. Then, and not otherwise the sale is yoid. If the seller fraudulently represents the vessel as golden, knowing that it is not, the sale is (as between them) not void but voidable at the option of the buyer. For if both parties have been in innocent and equal error it would be unjust to let either gain any advantage: but a party who has been guilty of fraud has no right to complain of having been taken at his word; and it is conceivable that it might be for the interest of the buyer to afiirm the transaction, as if the vessel supposed by the fraudulent seller to be of worthless base metal should turn out to be a precious antique bronze. Probably the results are the same if the buyer's belief is founded even on an innocent representation made by the seller. This saems to be assumed by the language of the Court in Kennedy v. Panama, dc. Mail Company (x). We shall recur to this point presently. Or in an ordinary case the buyer may choose to treat the seller's afiirmation as a warranty, and so keep the thing and recover the difference in value. Again, if the sale of the specific vessel is made in good faith with a warranty of its quality, the vendor must com- pensate the purchaser for breach of the warranty, but the ' sale is not even voidable. For the existence of a separato warranty shows that the matter of the warranty is not a condition or essential part of the contract, but the intention of the parties was to transfer the property in the specific chattel at all events. Whether a particular affirmation as (a;) (1867) L. R. 2 Q. B. 580, 587, 36 L. J. q'. B. 260, p. 515, supra. AS TO QUALITY. 527 to the quality of a specific thing sold be only a warranty, or the sale be " conditional, and to be null if the afhrmation is incorrect," is a question of fact to be determined by the circumstances of each case {y) . Accordingly, when the law is stated to be that "a party is not bound to accept and pay for chattels, unless they are reallj' such as the vendor professed to sell, and the vendee intended to buy " (z), the condition is not alternative but strictly conjunctive. A sale is not void merely because the vendor professed to sell, or the vendee intended to buy, some- thing of a different kind. It must be shown that the object was in fact neither such as the vendor professed to sell nor such as the vendee intended to buy. And so in the case supposedl the sale will not be invalidated by the mistake of the buyer alone, if he thinks he is buying gold; not even if the seller believes him to think so, and does nothing to remove the mistake, provided his conduct does not go beyond passive acquiescence in the self-deception of the buyer. In a case (a) where the defendant bought a (y) See per Wightman J. Gur- actual transfer of property in goods netf f. Womersley (1854) 4 E. & B. sold (as to which, see Blackburn 133, 142, 24 L. J. Q. B. 46, 99 on the Contract of Sale, Part 2, R. E. 390, 397; Bannermmi v. Ch. 3) must not be overlooked. White (1861) 10 C. B. N. S. 844, But this does not aflfeot the useful- 31 L. J. C. P. 28, Finch Sel. Ca. ness and importance of the general 531, p. 303 above ; Azemar v. Casella analogies. (1867) L. R. 2 C. P. 431, 677, 36 (z) Per Cur. Hall v. Condm- L. J. C. P. 124. TIhe Eoman lawiis (1857) 2 C. B. N. S. 22, 41, 26 the same as to a sale with war- L. J. C. P. 138, 143, 109 R. E. ranty: D. 19. 1 de act. empt. 21 590, 600. ' ^ 2. expld. by Savigny, Syst. 3. (a) Smith v. Hughes (19,^1)'L.'B.. 287. The whole of Savigny's ad- 6 Q. B. 597, 40 ~L. J. Q. B.221; per mirable exposition of so-called Cockburn C.J. L.E. 6 Q.B. p. 603; error in substantia in §§ 137, 138, per Hannen J. p. 610. The some- (3. 276 sqq.), deserves careful what refined distinction here taken study. Of course the conclusions in does not seem to exist in the civil detail are not always the same as law. D. 19. l.de act.empt. 11 § 5: in our law; and the fundamental Savigny, 3. 293, aceordingto whom difference in the rules as to the it makes no difference whether 62S MISTAKE. parcel of oats by sample, believing them to be old oats, and sought to reject them when he found they were new oats, it was held that "a belief on the part of the plaintiff that the defendant was making a contract to buy the oats of which he offered him a sample under a mistaken belief that they were old would not relieve the defendant from liability unless his mistaken belief was induced by some misrepresentation of the plaintiff or concealment by him of a fact which it became his duty to communicate. In order to relieve the defendant it was necessary that the jury should find not merely that the plaintiff believed the defendant to believe that he was buying old oats, but that he believed the defen- dant to believe that he, the plaintiff, was contracting to sell old oats." " 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" (6); and therefore the question is whether we have to do merely with a motive operating on the buyer to induce him to buy, or with one of the essential conditions of the contract (c). " Videamus, quid inter emen- tem et vendentem actum sit" (d): "the intention of the parties governs in the making and in the construction of all contracts" (e); this is the fundamental rule by which all questions, even the most refined, on the existence and nature of a contract must at last come to be decided. Another curious case of this class is Cox v. Prentice (/). The declaration contained a count in assumpsit as on a warranty, and the common money counts. The nature of the there beon the part of the vendor (d) Julianus in D. 18. 1. de cont. ignorance, passive knowledge, or empt. 41 pr. even actual fraud: the sale being (g) Per Cur. Bannermanv. White wholly void in any case. (iggi) 10 C. B. N. S. 844, 860, 31 (6) Per Blackburn J., L. E. 6 I/. J. C. P. 28, 32. Q. B. at p. 607. ' ^y (-igis) 3 m. & s. 344, 16 R. (0) Ihid., per Cocltburn C.J. E. 288. MISDESCEIPTION IN SALE. 529 material facts will sufficiently appear by the following extract from the judgment of Bay ley J.: — " What did the plaintiffs bargain to buy and the defendants to sell ? They both understand [^sicl that the one agreed to buy and the other to sell a bar containing such a quantity of silver as should appear by the assay, and the quantity is fixed by the assay and paid for; but through some mistake in the assay the bar turns out not to contain the quantdty represented but a smaller quantity. The plaintiff therefore may rescind the contract and bring money had and received, having offered to i-eturn the bar of silver." And by Dampier J.: — ■" The bargain was for a bar of silver of the quality ascertained by the assay -master, and it is not of that quality. It is a case of mutual error." These judg- ments went farther than was necessary to the decision (g), for a verdict had been taken only for the difference in value. It would seem that the sale was good, and the mistake affected only the fixing of the prioe; the contract being to pay for the real quantity of silver, not for the quantity found by a particular assay. It is important to distinguish from the cases above con- sidered another class where persons who have contracted for the purchase of real property or interests therein have been held entitled at law (h) as weE as in equity (^) to rescind the contract on the ground of a misdescription of the thing sold in some particular materially affecting the title, quantity, or enjoyment of the estate. In some of these cases language is used which, taken alone, might lead one to suppose the (?) And certainly farther tJian 4 Q. B. 159, 38 L. J. Q. E. 68. the civil law: see D. 18. 1. de cont. (i) Stanton v. Tattersall (1853) empt. 14, where though a bracelet 1 Sm. & G. 529; JSnrl of Dur/mm "quae aurea dicebatur" should be v. Legard (1865) 34 Beav. 611, 34 found "magna ex parte aenea," L. J. Ch. 589; Torrance v. Bolton, yet "venditionem e.-ee constat ideo, (1872) L. B. 8 Ch. 118, 42 L. J. quia auri aliquid habuit." Ch. 177. The details of the subject (A) Flight V. Sooth (1434) 1 belong to the law of Vendors and Bing. N. C. 370, 41 E. E. 599; Purchasers. Phillips V. Caldcleugh (1868) L. E. 630 MISTAKE agreement absolutely void; and in one or two (e.gr., Torrance V. Bolton) there is some real difficulty in drawing the line. But they properly belong to the head of Misrepresentation, or else (which may be the sounder view where applicable) (;') are cases where the contract is rather broken than dissolved. A man is not bound to take a house or land not corresponding to the description by which he bought it any more than he is bound to accept goods of a different denomination from what he ordered, or of a different quality from the sample. Mistake or no mistake, the vendor has failed to perform his contract. The purchaser may say: "You offered to sell me a freehold: that means an unincumbered freehold, and I am not bound to take a title subject to covenants " (Jc): or, " You offered to sell an absolute reversion in fee simple: I am not to be put off with an equity of redemption and two or three Chancery suits (J) . I rescind the contract and claim back my deposit." Cases of this kind, therefore, are put aside for the present. Non-existent subject-matter. — Again, an agreement is void (or better, perhaps, fails to become a contract) if it relates to a subject-matter (whether a material subject of ownership or a particular title or right) contemplated by the parties as existing but which in fact does not exist. Herein, as before, everything depends on the intention of the parties, and the question is whether the existence of (/) The difference is purely theo- of title. One cannot compare a retioal; for if it be an actual specific sale of land to a non- breaoh of contract the purchaser specific sale of goods: but the can recover only nominal damages: contract is not merely to sell spe- Bain V. Fothetrgill (1873-4) L. E, oiflc land, but to give a certain 7 ■ H. L. 158, 43 L. J. Ex. 243-, kind of title. confirming Flureau v. Thornhtll. (/c) Phillips v. Caldcleuyh (1868) (1776) 2 W. Bl. 1078. The ana- L. R. 4 Q. B. 159, 38 L. J. Q. B. logy suggested in the text should 68. perhaps be confined to cases where Q) Torranoe v. Bolton (1872) the misdescription goes to matter L. R. 8 Ch. 118; see at p. 124. AS TO EXISTENCE OF SUBJECT-MATTEE. 531 the thing contracted for or the state of things contemplated was or was not presupposed as essential to the agreement. Such is presumed to be the understanding in the case of sale(m). We may conveniently use the illustrations given on this point in the Indian Contract Act (n) . a. A. agrees to sell to B. a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void. This was assumed in the House of Lords and by all the judges in Couturier v. Hastie (o), where the only question in dispute was on the effect of the special terms of the contract . b. A. agrees to buy from B. a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void (p) . We may add a like example from the Digest. A. agrees with B. to buy a house belonging to B. The house has been burnt down, but neither A. nor B. knows it. Here there is ndt a contract for the sale of the land on which the house stood, with compensation or otherwise, but the sale is void (q). (m) Since 1893 tlie common law done, ignorant que mon cheval est is declared in England by the Sale mort, je le vends a quelqu'un, il of Goods Act, ss. 6, 7. n'y aura pas un contrat de vente, (m) S. 20; the rule is rather faute d'une chose qui en soit I'ob- widely stated: Wliere both the jet." Cp. Code Civ. 1601. "Si parties to an agreement are under au moment de la vente la chose a mistake as to a matter of fact vendue etait p6rie en totalite, la esaeniial to the agreement, the vente serait nulle'': and so Italian agreement is void. Code, 1461. (o) (1856) 5 H.1,.C.673, 25 L.J. (qj Paulus in D. 18. 1. de cont. Ex. 253, 101 R. R. 329. For a empt. 57, pr. Domum emi cum fuller account of the case see pp. earn et ego et venditor oombustam 327, 328, above. ignoremus ; Nerva, Sabinua, Cas- (p) Pothier, Contrat de Vente, sins, nihil venisse quamvis area § 4, cited 5 H. L. C678,says: "Si maneat, peouniamque solutam con- 532 MISTAKE In like manner a sale of shares in a company will not be enforced if at the date of the sale a petition for winding-up has been presented of which neither the vendor nor the pur- chaser knew (r) . But the ignorance of the buyer only in similar circumstances does not of itself invalidate the sale. It seems however that the sale would be voidable on the ground of fraud if the seller knew of the buyer's ignorance, but that such knowledge should be distinctly and completely alleged (s) . An agreement to take new shares in a company which the company has no power to issue is also void, and money paid under it can be recovered back (if). c. A. being entitled to an estate for the life of B. agrees to sell it to C. B. was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void. This was so held at law in Strickland v. Turner (u) . There, at the date when the sale of a life annuity was completed, the life had dropped unknown to both vendor and purchaser; it was held that the purchase money might be recovered back as on a total failure of consideration. So in Hitchcock V. Giddings (v) a remainderman in fee expectant on an estate dici posse aiunt. Cp. Papinian, continuation of the passages above eod.tit.58. Arboribus quoque vento cited. deiectis vel absumptis igne dictum (i) Sank of Hindustan v. Alison est emptionem fundi non videri esse (1870) Tii. B. 6 C P. 54, in Ex. Ch. contraotam si contemplatione ilia- ib. 222, 40 L. J. C. P. 1, 117; Es; rum arborum, veluti oliveti, fundus parte Alison (1874) L. R. 15 Eq. compaTabatur, sive seiente sive ig- 394, 9 Ch. 1, 24; Sx parte Camp- norante venditore. bell (1873) L. R. 16 Eq. 417, L. R. (r) Emmerson's case (1866) L.R. 9 Ch. 1, 12, 42 L. J. Ch. 771. 1 Ch. 433, expld. L. R. 3 Ch. 391, («) (1852) 7 Ex. 208, 22 L. J. per Wood L.J. Ex. 115, 86 E. R. 619. The only (s) liudge v. Bowman (1868) L. question in dispute was when the R. 3 Q. B. 689, 697. The Roman vendor's interest was intended to lawyers seem to have treated the presumption of dolus as absolute if (v) (1817) 4 Pri. (Ex. in Eq.) the seller knew the facts. Sec the 135, and better in Dan. 1, 18 R. R. 725. AS TO EXISTENCE OF SUBJECT-MATTER. 533 tail had sold his interest, a recovery having been already suffered unknown to the parties: a bond given to secure the purchase money was set aside. "Here is an estate which if no recovery had been suffered was a good one. Both parties, being equally ignorant that a recovery had been suffered, agree for the sale and purchase of the estate, and the pur- chaser is content to abide the risk of a recovery being subsequently suffered. He conceives however he is purchasing something, that he is purchasing a vested interest. He is not aware that such interest has already been defeated . . [The defendant] has sold that which he had not — and shall the plaintiff be compelled to pay for that which the defendant had not to give?"(x). More recently, in Cochrane v. Willis (y), an agreement had been made between a remainder- man and the assignee of a tenant for life of a settled estate, founded on the assignee's supposed right to cut the timber. The tenant for life was in fact dead at the date of the agree- ment. The Court refused to enforce it, as having been entered into on the supposition that the tenant for. life was alive, and only intended to take effect on that assumption. So a life insurance cannot be revived by the payment of a premium within the time allowed for that purpose by the original contract, but after the life has dropped unknown to both insurers and assured, although it was in existence when the premium became due, and although the insurers have waived proof of the party's health, which by the terms of renewal they might have required: the waiver applies to the proof of health of a man assumed to be alive, not to the fact of his being alive (2) . An agreement to sell a policy (x) Dan. at p. 7, 18 E. E. 729. E. E. 777. For the somewhat (f) (1865) L. E. 1 Ch. 58, 35 different treatment of the contract L. J. Ch. 36, 145 E. R. 548. of marine insurance, where at the (2) Pritchard v. Merchants' Life date of effecting the policy the risk Assurance Society (1858) 3 C. B. has been determined without the N". S. 622, 27 L. J. C. P. 169, 111 knowledge of the parties, see 534 MISTAKE. on the life of a person supposed to be living, who is in fact dead, is not binding, and the subsequent execution of an assignment in pursuance of the agreement, the fact being still unknown to the vendor, makes no difference (a) . The old case of Bingham v. Bingham (&), which was relied on in Cochrane v. Willis, belongs to this class. As in Cochrane v. Willis, the substance of the facts was that a purchaser was dealing with his own property, not knowing that it was his. There is therefore no ground for criticizing the decision as having given relief against a mere mistake of law (c) . It does not rest on mistake as a ground of special relief at all, but on total failure of the supposed subject- matter of the transaction. The one party could not buy what was his own already, nor could the other (in the words of the judgment as reported) be allowed "to run away with the money in consideration of the sale of an estate to which he had no right" (d). So we find it treated in the Eoman law quite apart from any question of mistake, except as to the right of recovering back money paid under the agreement. A stipulation to purchase one's own property is " natural! ratione inutilis" as much as if the thing was destroyed, or not capable of being private property (e) . Such an agreement is naught both at law and in equity, without reference to the belief or motive which determined it. :Bractforct v. Symondson (1881) 7 Clifford (1876) 3 Cli. D. 779, 790, Q.B.Div.456, 50 L.J. Q. B. 582. 45 L. J. Ch. 809, and of Lindley (a) Scott Y. Ootdson [1903] 2 Ch> L.J. in Uuddersfield Banking Co. 249, 72 L,. J. Gh. 600, C. A. v. 11. Lister i Son, Ltd. [1895] 2 (5) (1748) 1 Ves. Sr. 126, Belt's Ch. 273, 281. Supp. 79. (e) Gaius in D. 44. 7. de obi. et (c) Story, Eq. Jurisp. § 124, tools act. 1 § 10. Suae rei emptio non this objection. valet, sive soiens, sive ignorans (d) The ease is considered, among emi ; sed si ignorans emi, qubd other authorities, and upheld on the solvero repetere potero, quia nulla true ground, in Steivart v. Stewart obligatio fuit: Pomponius, D. 18. (1839) 6 CI. &.¥. at p. 968; op. the 1. de cont. empt. 16 pr. remarks of Hall V.-C. in Jones v. BUYING one's own PROPERTY. 636 Lord Westburv gave the correct rule in a case exactly similar in principle. In Cooper v. Phibbs (f) A. agreed to take a lease of a fishery from B., on the assumption that A. had no estate and B. was tenant in fee. Both parties were' mistaken at the time as to the effect of a previous settlement; and in truth A. was tenant for life and B. had no estate at all. It was held that this agreement was invalid. Lord Westbury stated the ground of the decision as follows: — " The result therefore is that at the time of the agreement for the lease which it is the object of this petition (g) to set aside, the parties dealt with one another under a mutual mistake as to their respective rights. The petitioner did not suppose that he was, what in truth he was, tenant for life of the fishery. The other parties acted under the impression given to them by their father that he (their father) was the owner of the fishery and that the fishery had descended to them. In such a state of things there can be no doubt of the rule of a court of equity with regard to the dealing with that agreement. It is said ' Ignorantia iuris hand excusat ' ; but in that maxim the word ' ius ' is used in the sense of denoting general law, the ordinary law of the country. But when the word ' ius ' is used in the sense of denoting a private right, that maxim has no application. Private right of ownership is a matter of fact; it may be the result also of matter of law; but if parties contract under a mutual mistake and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake. Now that was the case with these parties — the respondents believed them- selves to be entitled to the property, the petitioner believed* that he was a stranger to it, the mistake is discovered, and the agreement cannot stand" (h). (/) (1867) L. R. 2 H. L. 149. Court of Chancery. (?) A Cause Petition in the Irish (/») L. R. 2 H. L. 170. 536 MISTAKE. The principle here laid down also covers Broughton v. Hutt (i) . There the heir-at-law of a shareholder in a com- panj' joined with several other shareholders in giving a deed of indemnity to the directors, believing that the shares had descended to him as real estate, whereas they were personal estate. The deed was held to be void as against him in equity at all events, and probably at law. " The plaintiff never intended to be bound unless he was a shareholder, and the defendants never intended him to be bound unless he was so." Here the mistake was plainly one of fact within Lord Westbury's definition, namely as to the character of the shares by the constitution of the particular company. It is submitted, however, that an erroneous fundament.al assumption made by both parties even as to a general rule of law might well prevent any valid agreement from being formed. In the same way an agreement to assign a lease for lives would be inoperative if all the lives had dropped unknown to the parties. But the only thing which the parties can hero bo supposed, in the absence of expressed condition or warranty, to assume as essential is that the lease is subsisting, that is, that at least one of the lives is, not that they all are still in existence. Where the assignor of a lease for the lives of A., B., and C, expressly covenanted with the assignee that the lease was a subsisting lease for the lives of A., B., and C, and the survivors and survivor of them, this was held to be only a covena;nt that the lease was subsisting, and not that all the lives were in being at the date of the assign- ment (-fc) . That is, his contract was interpreted, according to the general practice and understanding of conveyancers, as a contract to transfer an existing lease for three lives, not necessarily a lease for three lives all existing. (j) (1858) 3 De G. & J. 501. 6 Q. B. 469, in Ex. Ch. 7 Q. B. (A) Coatesy. Collins (1871) L. R. U4, 41 L. J. Q. B. 90. IGNORANCE OF ONE PARTY. 537 If in any state of things otherwise resembling those just now discussed we find, instead of ignorance of the material fact on both sides, ignorance on the one side and knowledge on the other, then the matter has to be treated differently. Suppose A. and B. are the contracting parties; and let us denote by X. a fact or state of facts materially connected with the subject-matter of the contract, which is supposed by A. to exist, but which in truth does not exist, and is known by B. not to exist. Then we have to ask these questions ; — 1. Does A. intend to contract only on the supposition that X. exists? which may be put in another way thus: K A.'s attention were called to the possibility of his belief in the existence of X. being erroneous, would he require the contract to be made conditional on the existence of X.? 2. If so — Does B. know that A. supposes X. to exist? 3. If B. knows this — Does he also know that A. intends to contract only on that supposition? If the answer to any one of these questions is in the negative, it seems there is a binding contract (I). But it is to be observed that a negative answer to the second question will generally require strong evidence to establish it, and that if this question be answered in the affirmative, an affirmative answer to the third question will often follow by an almost irresistible inference. Thus if a purchaser of a reversionary interest subject to prior life interests knows that one of these has ceased, and nothing is said about it at the time of the contract, then the purchaser can hardly expect anybody to believe either that he himself overlooked the material importance of the fact, or that he was not aware of the vendor's ignorance of it, or that he supposed that the vendor would not treat it as material (m) . So in the case (I) Smith V. Hughes (1871) L. E. (m) See Turner v. Harvey (1821) 6 Q. B. 697, supra,, p. 527. Jac. 169, 23 R. R. 15. P. — C. 35 538 MISTAKE. already cited (n) of the sale of shares after a petition for the winding up of the company had been presented, a distinct allegation in the pleadings that the seller knew of the buyer's ignorance of that fact, would, it seems, have been sufficient to constitute a charge of fraud. If the questions above stated be all answered in the affirma- tive, either by positive proof or by probable and uncontra- dicted presumption from the circumstances, then it may be considered either that the case becomes one of fraud, or at least that the party who knew the true state of the facts, and also knew the other party's intention to contract only with reference to a supposed different state of facts, is precluded from denying that he understood the contract in the same sense as that other, namely, as conditional on the existence of the supposed state of facts (o) . On a similar principle (as we have already mentioned incidentally) it is certain that where fundamental error of one party is caused by a fraudulent misrepresentation, and probable that where it is caused by an innocent misrepresenta- tion on the part of the other, that other is estopped from denying the validity of the transaction if the party who has been misled thinks fit to affirm it. Does it follow that the contract is in its inception not void, but voidable at the option of the party misled? Not so: for the fraud or negligence of the other must not put him in any worse position as regards third persons. These, if the transaction be simply voidable, are entitled to treat it as valid until rescinded, and may acquire indefeasible rights under it: if it be void they can acquire none, however blame- less their own part in the matter may be(p). Thus there («) Uudge v. Boioman (1868) mon mistake was due to a third L.. R. 3 Q. B. 689, 37 I>. J. Q.. B. person's fault. 193. {p) Foster v. Maekinnon (1869) (o) Cp. Whiteley- v. Delanm/ L. E. 4 C. P. 704, 38 L. J. C. P. [1914] A. C. 132, S3 L. J. Oh. 349, 310, snpra, p. 501. a very peculiar case where a com- FUNDAMENTAL ERROR : REMEDIES. 539 is a real difference between a contract voidable at the option of one party and a void agreement whose nullity the other is estopped as against him from asserting. In the case of contracts to take shares in companies an anomaly is admitted, as we have seen, for reasons of special necessity, and the contract is treated as at most voidable. But even here there must be an original animus contrahendi to this extent, that the shareholder was minded to have shares in some company. An application for shares signed in absolute ignorance of its true nature and contents, like the bill in Foster v . Mac- Icinnon (p), could not be the foundation of a binding contract to take shares. An allotment in answer to such an applica- tion would be a mere proposal, and whether it were accepted or not would have to be deteirmined by the ordinary rules of law in that behalf (see Ch. I.). It appears from the authorities which have been adduced that a party to an apparent agreement which is void by reason of fundamental error has more than one course open to him. He may wait until the other party seeks to enforce the alleged agreement and then assert the nullity of the transac- tion by way of defence. If he think fit he may also take the opportunity of seeking by counterclaim to have the instru- ment sued on set aside (g) . Or he may right himself, if he prefers it, by coming forward actively as plaintiff. When he has actually paid money as in performance of a supposed valid agreement, and in ignorance of the facts which exclude the reality of such (p) See last note. Iron Co. (1876) 1 C. P. D. 145, 45 (?) Sioreif v. Waddle (1879) 4 L. J. C. P. 401, that it is needful Q. B. Div. 289, seems to overrule for this purpose to obtain a trans- yirtually the doctrine asumed in fer of the action to the Chancery Mostyn v. West Mostyn Coal and Division. 35 (2) 540 MISTAKE agreement, he may recover back his money as having been paid without any consideration (the action "for money received" of the old practice). He paid on the supposition that he was discharging an obligation, whereas there was in truth no obligation to be discharged. Moreover he may sue in the Chancery Division (r), whether anything has been done under the supposed agreement or not, to have the transaction declared void and to be relieved from any possible claims in respect thereof. On the other hand, although he is entitled to treat the supposed agreement as void, and is not as a rule prejudiced by anything he may have done in ignorance of the true state of the facts, yet after that state of facts has come to his knowledge he may nevertheless elect to treat the agreement as subsisting: or, as it would be more correct to say,' he may carry into execution by the light of correct knowledge the former intention which was frustrated by want of the elements necessary to the formation of any valid agreement. It is not that he confirms the original transaction (except in a case where there is also misrepresentation, see p. 538), for there is nothing to confirm, but he enters into a new one. It might be thought to follow that in cases within the Statute of Frauds or any other statute requiring certain forms to be observed, we must look not to the original void and improperly so-called agreement, but to the subsequent election or confirmation in which the only real agreement is to be found, to see if the requirements of the statute have been complied with. No express authority has been met with on this point. But analogy is in favour of a deliberate adoption of the form already observed being held sufficient for the purpose of the new contract (s) . (r) Judicature Act, 1873, a. 34. L. E. 9 C. P. 311, 43 L. J. C. P («) Steuiart v. Eddowes (1874) 204, mpra, p. 174. IN EXPRESSION. 541 A note on Bracton's treatment of the subject of funda- mental error will be found in the Appendix {t). Part III. Mistake in expressing true Consent. This occurs when persons desiring to express an intention which when expressed carries with it legal consequences have by mistake ,used terms which do not accurately represent their real intention. As a rule it can occur only when the intention is expressed in writing. It is possible to imagine similar difficulties arising on verbal contracts, as for example if the discourse were carried on in a language imperfectly understood by one or both of the speakers. But we are not aware that anything of this kind has been the subject of judicial decision (m). The general result of persons talking at cross purposes is that there is no real agreement at all. This class of cases has already been dealt with. We are now concerned with those where there does exist a real agreement between the parties, only wrongly expressed. Such mistakes as we are now about to consider were not wholly disregarded at common law; but they are fully and adequately dealt with only by the jurisdiction which was formerly peculiar to courts of equity. We shall see that this jurisdiction is exercised ,with much caution and within carefully defined limits. On the whole the cases of mistake in expressing intention fall into three classes: — 1. Those which are sufficiently remedied by the general rules of construction. 2. Those which are remedied by special rules of construc- tion derived from the practice of courts of equity. (t) Note G. This passage is not («) See however Phillips v. included in the portions edited by Bistolli (1824) 2 B. & C. 511, 26 Maitland in "Bracton and Azo." R. R. 433, which comes near the supposed case. 642 MISTAKE 3 . Those which require peculiar remedies administered by the Court in its equitable jurisdiction. We proceed to take the classes of cases above mentioned in order. 1. O&neral Rules. We have already seen that the more obvious forms of mistaken expression, mechanical errors as we may call them, can be dealt with in the ordinary course of interpretation (a;). A few more authorities may now be added. In a case in the House of Lords the rule was laid down and acted upon that "both courts of law and of equity may correct an obvious mistake on the face of an instrument with- out the slightest difficulty" (y). Here a draft agreement for a separation deed had by mistake been copied so as to contain a stipulation that the husband should be indemnified against his own debts: but it was held that the context and the nature of the transaction clearly showed that the wife's debts were meant, and that in framing the deed to be executed under the direction of the Court in pursuance of the agree- ment the mistake must be corrected accordingly. So the Court may presume from the mere inspection of a settlement that words which, though they make sense, give a result which is unreasonable and repugnant to the general intention and to the usual frame of such instruments, were inserted by mistake (z) . An agreement has even been set aside chiefly, if not entirely, on the ground that the unreasonable character of it was enough to satisfy the Court that neither party could have understood its true effect: such at least appears to be (a:) Chap. VI., p. 274, above. (2) Ee De la Touche's settlement {y) WUaon v. Wilson, 5 H. JL. C. (1870) L. R. 10 Eq. 599, 603, 40 40, 66, 101 R. R. 25, 42, per Lord L. J. Ch. 85 ; where however the St. lieonardfl, and see hia note, mistake was also estabKahed by V. & P. 171. evidence. IN EXPRESSION : GENERAL WORDS. 5ii the meaning of Lord Eldon's phrase, "a surprise on both parties" (a). The agreement itself purported to bind the tenant of a leasehold renewable at arbitrary (and in fact always increasing) fines at intervals of seven years to grant an underlease at a fixed rent with a perpetual right of renewal. The lessor was in his last sickness, and there was evidence that he was not fit to attend to business. Charges of fraud were made, as usual in such cases, but not sustained: the decision might, however, have been put on the ground of undue influence, and was so to some extent by Lord Redesdale. Again, there is legal as well as equitable jurisdiction to restrain the effect of general words both in matter of covenant and in matter of conveyance, if it sufiiciently appears by the context that they were not intended to convey their apparent unqualified meaning (6) .^ When there is a specific description of a particular kind of property, followed by words which prima facie would be sufficient to include other property of the same kind, it has been held that those words do not include the property not specifically described, on the principle expressio unius est exclusio alterius (c). But cases of this (a) Willan v. Willan (1809-10) same principle applies to general 16 Ves. 72, 84; affirmed in Dom. words in the statement of a oom- Proc. 2 Dow, 275, 278. But the pany's objects in its memorandum facts were very peculiar, and the of association: Ashhury, ^-c. Co. v. case has been seldom cited for a, Riche (1875) L. R. 7 11. L. 653, 44 generation or more. L. J. Ex. 185. (6) Browning v. Wright (1799) (c) Denn v. Wilford (1826) 8 2 B. & P. 13, 26, 5 R. R. 521; but Dowl. & Ry. 549. The case was a, it was also thought the better con- curious one. A fine had been levied Btruotion to take the clause in ques^ of (inter alia) twelve messuagesand tion as being actually part of a twenty acres of land in Chelsea, special covenant, and so no general The conusor had less than twenty covenant at all; Ilesse v. Steven- acres of land in Chelsea, but nine- sow (1803) 3 B. & P. 565, 574; teen messuages. It was decided Booke V. Zord Kensington (1856) that although all the messuages 2 K. & J. 753, 771, 25 L. J. Ch. would have passed under the 795, 110 R. E. 456, 468. The general description of land if no 544 MISTAKE kind, like those on which the ejusdem generis rule or pre* sumption (d) is founded, fall under normal principles of construction and have nothing to do with any suggestion of mistake. 2. Peculiar Rules of Construction in Equity. Such rules have been introduced by courts of equity in dealing with: A. General words. B. Stipulations as to time. C. Penalties. » A. Restriction of General Words. We have seen that courts both of law and of equity have assumed a power to put a restricted construction on general words when it appears on the face of the instrument that it cannot have been the real intention of the parties that they should be taken in their apparent general sense. Courts of equity went farther, and did the like if the same conviction could be arrived at by evidence external to the instrument. Thus general words of conveyance (e) and an unqualified covenant for title (/), though not accompanied leea number of messuages liad been v. Tranmarr (1758) 2 Sm. L. C. mentioned, yet the mention of (rmUe [1916] 1 A. C. 275, 85' (w) Webbv.Huffhes (1870) L,. :R. L. J. P. C. 79. 10 Bq. 281, 39 L. J. Ch. 606, and (v) This is the true and only see note (a), admissible meaning of the state- («) Per Cotton, L.J. Renter v. meut that time can be made of the Sala (1879) 4 C. P. Div. at p. 249, essence of a contract by subsequent 48 L. J. C. P. 492. express notice. Per Fry J. Green (y) Hydraulic Engineering Co. V. Sevin (1879) 13 Ch. D. 589, v. Mcliaffie (1878) 4 Q. B. Div. 599; per Turner L.J. Williams v. 670, 673. Glenton (1866) L. E. 1 Ch. 200, IN EXPRESSION : RELIEF AGAINST PENALTIES. 549 time be specified for its completion, that time was intended to be of its essence to this extent, that the contracting party is bound to use the utmost diligence to perform his part of the contract] (z). If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time: but the promisiee is entitled to compensation from the promisor for any loss occasioned to him by such failure. If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts per- formance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non- performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so (a). C. Relief against Penalties. In like manner penal provisions inserted in instruments to secure the payment of money or the performance of con- tracts will not be literally enforced, if the substantial per- formance of that which was really contemplated can be otherwise secured (b). The most important application of this principle is to mortgages. A court of equity treats the contract as being in substance a security for the repayment of money advanced, and that portion of it which gives the estate to the mortgagee as mere form, "and accordingly, in direct violation of the [form of the] contract," it compels the mortgagee to reconvey on being repaid his principal, interest and costs (c) . Here again the original ground on which equity interfered was to carry out the true intention (z) Macbryde v. Weekes (1856) 1022, 43 L. J. Ch. 261. 22 Beav. 633, 111 R. R. 471 (con- (c) Per Romilly M.R. Parkin v. tract for a lease of working mines). Thorold (1852) 16 Beav. 59, 68, 96 (a) "It constantly happens that R. R. 32, 37; and see Lord Redes- an objection is waived by the con- dale's judgment in Lennon v. Nap- duct of the parties," per James per, p. 547, swpra. As to the old L.J. Vpperton v. Nicholson (1871) theory of an "equity of redemp- 6 Ch. at p. 443, 40 L. J. Oh. 401. tion" being not an estate but a And see Dart, V. & P. 424. merely personal right,and its conse- (S) In addition to the authoritiea quences, see Lord Blackburn's cited below, see the later case of remarks, 6 App. Ca. at p. 714. Ex parte Hulse (1873) L. R. 8 Ch. 550 MISTAKE of the parties. But it cannot be said here, as in the case of other stipulations as to time, that everything depends on the intention. For the general rule " once a mortgage, and always a mortgage " cannot be superseded by any express agreement so as to make a mortgage absolutely irredeem- able (d) . However, limited restrictions on the mutual remedies of the mortgagor and mortgagee, as by making the mortgage for a term certain, are allowed and are not un- common in practice. Also there may be such a thing as an absolute sale with an option of repurchase on certain con- ditions; and if such is really the naturiC of the transaction, equity will give no relief against the necessity of observing those conditions (e). " That this Court will treat a transaction as a mortgage, although it was made so as to bear the appearance of an absolute sale, if it appear that the parties intended it to be a mortgage, is no doubt true (/) ; but it is equally clear, that if the parties intended an absolute sale, a contemporaneous agreement for a repurchase, not acted upon, will not of itself entitle the vendor to redeem " {g). The manner in which equity deals with mortgage transac- tions is only an example of a more general rule: — " Where there is a, debt aotoally due, and in respect of that debt a security is given, be it by way of mortgage or be it by way of stipula- (d) Howard v. Harris, 1 Vern. L. J. Ch. 139. 190; Cowdry v. Bay (1859) 1 Giff. (e) Davis v. Thomas (1830) 1 316, see reporter's note at p. 323; Euss. & M. 506, 32 R. E. 257. 1 Ch. Ca. 141, 29 L. J Oh 39, 114 (/) See Douglas v. Culvenvell R. R. 464. TheC. A. was divided, (1862) 31 L. J. Ch. 543; and so in a peculiar case,a3 to the applica- also at common law, Gardner v. tion of this principle: Marquess of Cazenove (1856) 1 H. & N. 423, Northampton v. Pollock (1890) 45 435, 438, 26 L. J. Ex. 17, 19, 20, Ch. Div. 190, 59 L. J. Ch. 745; 108 R. R. 659, 665, 666—667. the opinion of the majority was (^) Per Lord Cottenham C. Wil- upheld in H. L. [1892] A. C. 1, liams v. Owen (1840) 5 M. & Cr. 61 L. J. Ch. 49. See now Noakes 303, 306, 12 L. J. Ch. 207, 48 E. R. # Co. V. Sice [1902] A. C. 24, 71 322, 324. IN EXPRESSION : RELIEF AGAINST PENALTIES. 551 tion that in case of its not being; paid at the time appointed a larger sum shall become payable, and be paid, in either of those cases Equity regards the security that has been given as a mere pledge for the debt, and it will not allow either a forfeiture of the property pledged, or any augmenta- tion of the debt as a penal provision, on the ground that Equity regards the contemplated forfeiture which might take place at law with reference to the estate as in the nature of a penal provision, against which Equity wUl relieve when the object in view, namely, the securing of the debt, is attained, and regarding also the stipulation for the payment of a larger sura of money, if the sum be not paid at the time it is due, as a penalty and a forfeiture against which Equity will relieve" (A). This applies not only to securities for the payment of ■money but to all cases " where a penalty is inserted merely to secure the enjoyment of a collateral object" (*'). In all such cases the penal sum was originally recoverable in full in a court of law, but actions brought to recover penalties stipulated for by bonds or other agreements, and land con- veyed by way of mortgage, have for a long time been governed by statutes (k). It would lead us too far beyond our present object to discuss the cases in which the question, often a very nice one, has arisen, whether a sum agreed to be paid upon a breach of contract is a penalty or liquidated damages. It may be noted however in passing that " the words liquidated damages or penalty are not conclusive as to the character of the sum stipulated to be paid." This must be determined from the matter of the agreement (i). (A) Per Lord Hatherley C. Revision Acts) are collected andre- Thompson v. Hudson (1869) L. R. viewed in Preston v. Smiia (1872) 4 H. L. 1, 15, 38 L. J. Ch. 431. L. B). S Ex. 19, 42 L. J. Ex.33. A (j) Per Lord Thurlow,iS'Zom«» v. mortgagee suing in ejectment^or on Walter (1784) 1 Bro. C. C. 418. a bond given as collateral security, iJe Bagenham Dock Co. (1873) may be compelled by rule of Court L. R. 8 Ch. 1022, is a good modern to reconvey on payment of princi- example. pal, interest, and costs: 7 Geo. II. {k) As to common money bonds c. 20, C. L. P. Act 1852 (15 & 16 4 & 5 Anne, e. 16 (3 in Rev. Stat.) Vict. c. 76) s. 219. Bonds of the a. 13. As to other bonds and kind last mentioned hardly occur agreements 8 & 9 Will. III. c. 11, in modern practice, o. 8. The statutes (some of which (I) Per Bramwell B. in Betts v. have been repealed by Statute Law Bureh (1859) 4 H. & N. 506, 511, 552 MISTAKE 3. Peculiar Defences and Remedies derived from Equity. A. Defence against Specific Performance. When by reason of a mistake {e.g., omitting some terms whicli were part of the intended agreement) a contract in writing fails to express the real meaning of the parties, the party interested in having the real and original agreement adhered to {e.g. the one for whose benefit the omitted term was) is in the following position. If the other party sues him for the specific performance of the contract as expressed in writing, it will be a good defence if he can show that the written contract does not represent the real agreement: and this whether the contract is of a kind required by law to be in writing or not. Thus specific performance has been refused where a clause had been introduced by inadvertence into the contract (m) . It is sometimes said with reference to cases of this class that the remedy of specific performance is discretionary. But this means a judicial and regular, not an arbitrary discretion. The Court " must be satisfied that the agreement would not have been entered into if its true effect had been under- stood " {n). On the other hand a party cannot, at all events where tha contract is required by law to be in writing, come forward 28 L. J. Ex. 267, 271. The later Pneumatic Tyre Co. v. N^ew oases on this subject are — Magee v. Garage ^ Motor Co. [1915] A. C. Lavell (1874) L.. R. 9 C. P. 107, 43 79. Cp. Weston y.Metrop. Asylum L. J. C. P. 131 (authorities dis- District (1882) 9 Q. B. Div. 404, cussed by Jessel M.E.); Lord 51 L. J. Q. B. 399, on the similar Elphinstone v. Monjcland Iron and question of a penal rent. In the Goal Co. (1886) 11 App. Ca. (Sc.) Indian Contract Act the knot i» 332; Wallis v. Smith (1882) 21 out by aboHahing the distinction Ch. Div. 243, 52 L. J. Ch. 145; altogether: see s. 74. WUlsony. Love [1896] 1 Q. B. 626, (m) Watson v. Marston (1853) 4 65 I>. J. Q. B. 474, C. A; Webster D. M. G. 230, 102 E. R. 100. T. Sosamquet [1912] A. C. 394, («) Ibid, i D. M. G. at p. 240, 81 L. J. P. O. 205; Ihml^ 102 R. R. 108. IN EXPRESSION : SPECIFIC PEEFORMANCE. 553 as plaintiff to claim the performance of the real agreement which is not completely expressed by the written contract. Thus in the case of Townshend v. Stangroom (o) (referred to by Lord Hatherley when V -C. as perhaps the best illustra- tion of the principle (p)), there were cross suits (g), one for the specific performance of a written agreement as varied by an oral agreement, the other for specifio performance of the written agreement without variation ; and the fact of the parol variations from the written agreement being established, both suits were dismissed. And the result of a plaintiff attempting to enforce an agreement with alleged parol varia- tions, if the defendant disproves the variations and chooses to abide by the written agreement, may be a decree for the specific performance of the agreement as it stands at the plaintiff's cost (r) . But it is open to a plaintiff to admit a parol addition or variation made for the defendant's benefit, and so enforce specific performance, which the defendant might have success- fully resisted if it had been sought to enforce the written agreement simply. This was settled in Martin v. Pycroft (s): (o) (1801) 6 Ves. 328, 5 R. E. "what the Court, upon hearing all 312. I the circumstances, should be pf (p) Wood V. Scarth (1855) 2 K. opinion was the agreement." See & J. 33, 42, 110 E. E. 88. the notes to the case in 9 E. E. 220. (?) Under the Judicature Acts But after a plaintiff has failed to there would be an action and support his own construction of an counter-claim. agreement which the Court thinks (r) See Bigginson \ . Clowes ambiguous, he cannot take advan- (1808) 15 Ves. 516, 525, 10 E. E. tage of such an offer contained in 112; and such appears to be the real his own pleadings "to take up the effect of Vije v. Clayton (1807) 13 other construction which the de- Ves. 546, 9 E. R. 220, S. C. more fendant was at one time willing to fully given, with the decree, 1 C. P. have performed": Clowes v. Hig- Cooper (temp. Cottenham) 351. In ginson (1813) 1 Ves. & B. 524,535, this case ILord Eldon laid hold on 12 E. E. 284. the plaintifE^s offer in general terms (s) (1852) 2 D. M. G. 785, 22 ' to perform the agreement as L. J. Ch. 94, 95 E. E. 324. amounting to an offer to perform 36 5S4 MISTAKE " Tho decision of the Court of Appeal proceeded on the ground that an agreement by parol to pay 200Z. as a premium for a lease [for which there was a complete agree- ment in writing not mentioning the premium] was no ground for refusing specific performance of the written agreement for the lease, where the plaintiff submitted by his bill to pay the 2001. That case introduced no new principle as to the admissibility of parol evidence" (t). It is to be observed (though the observation is now familiar) that these doctrines are in principle independent of the Statute of Frauds {u). What the fourth section of the Statute of Frauds says is that in respect of the matters comprised in it no agreement not in writing and duly signed shall be sued upon. This in no way prevents either party from showing that the writing on which the other insists does not represent the real agreement; the statute interferes only when the real agreement cannot be proved by a writing which satisfies its requirements. Then there is nothing which can be enforced at all. The writing cannot, because it is not the real agreement; nor yet the real agreement, because it is not in writing. A good instance of this state of things is Price v. Ley (x). The suit was brought mainly to set aside the written agreement, and so far succeeded. It appears not to have been seriously attempted to insist upon the real agreement which had not been put into writing. B. Rectification of Instruments. When the parties to an agreement have determined to embody their common intention in the appropriate and con- clusive form, and the instrument meant to effect this purpose is by mistake so framed as not to express the real intention (i) Per Stuart ~V. -C.Price v. iejr Lef. 22, 33-39, 9 R. E. 3, 7-10. (1863) i Giff. at p. 253. («) (1863) 4 Giff. 235, affirmed. («) See per Lord Eedesdale in on appeal, 32 L. J. Ch. 534, 141 Climm V. Cooke (1802) 1 Sch. & E.. E. 186. IN EXPRESSION : RECTIFICATION. 55S which it ought to have expressed, it is possible in many cases to correct the mistake by means of a jurisdiction formerly peculiar to courts of equity and still reserved, as a matter of procedure, to the Chancery Division. Courts of equity " assume a jurisdiction to reform instru- ments which, either by the fraud or mistake of the drawer, admit of a construction inconsistent with the true agreement of the parties {y). And of necessity, in the exercise of this jurisdiction, a court of equity receives evidence of the true agreement in contradiction of the written instrument." Eelief will not be refused though the party seeking relief himself drew the instrument; for " every party who comes to be relieved against an agreement which he has signed, by whom- soever drawn, comes to be relieved against his own mis- take " {z). The jurisdiction is a substantive and independent one, so that it does not matter whether the party seeking relief would or would not be able to get the benefit of the true intention of the contract by any other form of remedy (a) . It would be neither practicable nor desirable to discuss in this place the numerous cases in which this jurisdiction has been exemplified. The most important thing to be known about a discretionary power of this kind is Avhether there is any settled rule by which its exercise is limited. In this case there are ample authorities to show that there is such a rule, and they expound it so fully that there is very little left to be added by way of comment. The manner in which the Court proceeds is put in a very (y) The Court need not decide ment of Knight Bruce L.J. is enter- the point of construction: it is taining as well as profitable, enough that serious doubt exists (z) Ball v. Storie (1823) 1 Sim. whether the terms express the true & St. 210, 219, 24 E. R. 170. intention: Walker v. Armstrong (a) Druiff v. Lord Parker (1868) (1856) 8 D. M. G. 531, 25 L. J. L.. R. 5 Eq. 131, 37 L. J. Ch. 241. Ch. 738, 114 E. R. 234. The judg- 36 (2) 656 MISTAKE clear light by the opening, of Lord Eomilly's judgment in the case of Murray v. Farher (.6): " In matters of mistake, the Court undoubtedly has jurisdiction, and though this jurisdiction is to be exercised with great caution and care, still it is to be exercised in all cases where a deed, as executed, is not according to the real agreement between the parties. In all cases the real agreement must be established by evidence, whether parol or written ; . . if there be a previous agreement in writing which is unambiguous, the deed will be reformed accordingly; if ambiguous, parol evidence may be used to express it, in the same manner as in other cases where parol evidence is admitted to explain ambiguities in a written instrument." In the case of " a previous agreement in writing which is unatnbiguous " the Court cannot admit parol evidence to rectify the final instrument executed in accordance with such agreement any more than it could allow the party to maintain a suit, while the agreement was yet executory, first to rectify the agreement by parol evidence and then to execute it as rectifiied — which, as we have seen, it will not do. For this would be to " reform [the instrument] by that evidence, which if [the instrument] rested in fieri, would be inadmissible to aid in carrying it into execution" (c). If there be no previous agreement in writing, the modern rule is that a deed may be rectified on oral evidence of what was the real intention of the parties at the time, if clear andl uncontradicted. But if the alleged mistake is positively denied by any party to the instrument, parol evidence alone is inadmissible to prove it. The rule is contained in two judgments given by Lord St. Leonards in the Irish Court of Chancery. (*) (1854) 19 Beav. 305, 308, well J., May v. Plait [1900] 1 Ch. 105 R. R. 153, 154. 616,69 L. J.Ch.357. These anthori- (c) Per Lord St. Leonards, -Dairies tiesare criticized but admitted tobe V. Fitton (1842) 2 Dr. & War. 225, binding by Neville J. in Thompson 233,90 Ii,.R.885, 889; fol. by Tar- v. Hickman [1907] 1 Ch. at p. 661. IN EXPRESSION : KECTIFICATION. 557 He said in Alexander v. Orosbie (d): " In all the cases, perhaps, in which the Coiirt has reformed a settle- ment, there has been something beyond the parol evidence, such, for instance, as the instructions for preparing the conveyance or a note by the attorney, and the mistake properly accounted for; but the Court would, I think, act where the mistake is clearly established by parol evidenoa, even though there is nothing in writing to which the parol evidence may attach." What is here meant by " clearly established " is shown by his later statement in Mortimer v. Sh.ortall (e), applying the general rule of equity practice that the Court will not act merely on " oath against oath ": " There is no objection to correct a deed by parol evidence, when you have anything beyond the parol evidence to go by. But where there is nothing but the recollection of witnesses, and the defendant by his answer denies the case set up by the plaintiff, the plaintiff appears to be without a remedy. Here I am not acting upon parol evidence alone; the documents in the cause, and the subsequent transactions, corroborate the parol evidence, and leave no doubt in my mind as to a mistake having been made." Again, it was said in a ease on the equity side of the Court of Exchequer, where the whole subject was considerably discussed: " It seems that the Court ought not in any case, where the mistake is denied or not admitted by the answer , to admit parol evidence, and upoe that evidence to reform an executory agreement " (J) . On the other hand, when the mistake is admitted, or not (d) (1853) LI. & G. temp. Sug- D. 367, 56 L. J. Ch. 208, seemp den, 146, 150, 46 R. R. 183, 185. to put this rule wholly on the Cp'. JDavies v. Fitton (1842) 2 Dr. Statute of Frauds: but it has & War. 233, 90 B. B. 889. since been decided that the statute (e) (1842) 2 Dr. & War. 363, does not apply to an action for 374, 69 R. R. 730. rectification of a marriage settle- (/) Per Alderson B. Att.-Gen. ment: Johnson v. Bragge [1901] T. Sitwell (1835) 1 Y. & C. Ex. 559, 1 Ch. 28, 70 L. J. Ch. 41. 683; Olley v. Fisher Q.S86) 34 Ch. 558 MISTAKE positively denied, written instruments have repeatedly been reformed on parol evidence alone (g) . Thus far as to the nature of the evidence required; next let us see what it must prove. It is indispensable that the evidence should amount to " proof of a mistake common to all the parties " (h), i.e. a common intention different from the expressed intention and a common mistaken supposition that it is rightly expressed: it matters not, as we have seen, by whom the actual oversight or error is made which causes the expression to be wrong. The leading principle of equity on the head of rectification, — that there must be clear proof of a real agreement on both parties different from the expressed agreement, and that a different intention or mistake of one party alone is no ground to vary the agreement expressed in writing, — was distinctly laid down by Lord Hardwioke as long ago as 1749 (i) . The same thing was explicitly asserted about a century later by the modern Court of Appeal: " The power which the Court possesses of reforming written agree- ments where there has been an omission or insertion of stipulations contrary to the intention of the parties and under a mutual mistake, is one which has been frequently and most usefuUy exercised. But it is also one which should be used with extreme care and caution. To substitute a new agreement for one which the parties have deliberately subscribed ought only to be permitted upon evidence of a different inten- tion of the clearest and most satisfactory description. ... It is oleaj that " person who seeks to rectify a deed upon the ground of mistake must be required to establish, in the clearest and most satisfaotory (p') Townshend v. Stanffroom power of recovation appearing (1801) 6 Ve8.328,334,6 E. R. 312; in the first draft had been struck Ball V. Storie (1823) 1 Sim. & St. out in the instrument as it finally 210, 24 R. E. 170; Druiff v. Lord stood, and there was nothing to Fnirlcer (1868) L. R. 5 Eq. 131, 37 show how this had happened. L. J,. Ch. 141; Ex parte National (^) Per Lord Romilly M.R. Provincial Bank of England (1876) Bentley \.Maokay (1869) 31 Beav. 4 Ch. D. 241, 46 L. J. Bk. 11; at p. 151. Welman v. Welman (1880) 15 Ch. (j) Henkle v. Soyal Exch. Asace. D. 570, 49 L. J. Ch. 736, where a Co. 1 Vee. Sr. 318. IN EXPRESSION : RECTIFICATION. 559 manner, that the alleged intention to which he desires it to be made con- formable continued concurrently in the minds of all parties down to the time of its execution, and also must be able to show exactly and precisely the form to which the deed ought to be brought. For there is a material difierence between setting aside an instrument and rectifying it on the ground of a mistaie. In tlie latter ease you can only act upon the mutual and concurrent intention of aU parties for whom the Court is virtually making a new written agreement " (Jc) . So' it has been laid down by the American Supreme Court that Equity may compel parties to perform their agreement, but has no power to make agreements for parties, and then compel them to execute the same (I) ; to the same effect in BooJce V. Lord Kensington {m) by Lord Hatherley when V.-C; and more recently by James L.J. when V.-C. in Mackenzie v. Coulson (n). On this principle, as we have already seen, the jurisdiction to rectify instruments does not extend beyond particular expressions. The Court cannot alter that form of instrument which the parties have deliberately chosen (o) . The Court therefore cannot act on proof of what was intended by one party only (p). And when an instrument contains a variety of provisions, and some of the clauses may have been passed over without attention, " the single fact of there being no discussion on a particular point will not justify the Court in saying that a mistake committed on one side must be taken to be mutual " (q). The Court will not rectify an instrument when the result of doing so would be to affect interests already acquired by third parties on the faith of the instrument as it stood (r) . (k) Fowler v. Fovjler (1859) 4 [1895] 2 Ch. 202, C. A. De G. & J. 250, 264. (o) See note Q). (l) Hunt V. Sousmaniere's Adm. (??) Hills v. Rowland (1853)4 D. (1828) 1 Peters, 1, 14. M. G. 430, 436. (m) (1856) 2 K. & J. 753, 764, (?) Thompsonv.WMtmore (1860) 25 L. J. Ch. 795, 110 E. R. 456. 1 J. & H. 268, 276. («) (1869) L. R. 8 Eq. 368, 375. (?•) Blackie v. Clark (1852) 15 Cp. Bonhote v. Henderson [1895] 1 Beav. 595, 92 R. R. 570. Ch. 742, 64 L. J. Ch. 556, afEd. 560 MISTAKE Without derogation from the above general rules, a con- tract of insurance is liberally construed for the purpose of reforming the policy founded upon it in accordance with the true intention (s) . There exists a rare class of cases in which the rule that a common mistake must be shown may admit of modification. The principle to be collected from the latest decision in the House of Lords, so far as the results of that decision, which was on complicated facts, are material in this place, appears to be as follows. Where one party to an instrument, or series of instruments forming one transaction, by his own default, whether consisting in executive negligence, suppres- sion of facts, or otherwise, causes a disposition to be so framed as to frustrate the intention of another party or parties as known to himself, he cannot be heard to deny that his own intention was the same (t). The most frequent application of the jurisdiction of equity to rectify instruments is in the case of marriage and other family settlements (m), when there is a discrepance between the preliminary memorandum or articles and the settlement as finally executed. As to marriage settlements, the distinc- tion was formerly held that if both the articles and the settlement were ante-nuptial, the settlement should be taken in case of variance as a new agreement superseding the articles, unless expressly mentioned to be made in pursuance of the articles; but that a post-nuptial settlement would always be reformed in accordance with ante-nuptial articles. The modern doctrine of the Court has modified this as follows, (s) Equitable InsuranceCompany 4tl L. J. Ch. 116; Lovesy v. V. Ilearne (1874) 20 Wallace (Sup. Smith (1880) 15 Ch. D. 655, 49 Ct. U. S.) 494. L. J. Ch. 809 (marriage settlement (t) Wkiteley v. Delaney [1914] hastily and improperly prepared A. C. 132, 83 L. J. Ch. 349 (sup- by husband's instructions alone), pression of an incumbrance) ; Clark («) See further on tliis subject Y. Girdwood (1877) 7 Ch. Div. 9, Dav. Conv. 3, pt. 1 Appx. No. 3. IN EXPRESSION : RECTIFICATION. 561 30 far as regards settlements executed after preliminary articles but before the marriage: 1. When the settlement purports to be in pursuance of articles previously entered into, and there is any variance, the variance vs^ill be presumed to have arisen from mistake. 2. When the settlement does not refer to the articles, it will not be presumed, but it may be proved, that the settle- ment was meant to be in conformity with the articles, and that any variance arose from a mistake. ' In the first case the Court will act on the presumption, in the second on clear and satisfactory evidence of the mistake (v). A settlement may be rectified even against previous articles on the settlor's uncontradicted evidence of departure from the real intention, if no further evidence can be obtained (x) . The fact that a provision inserted iu a settlement {e.g. restraint on anticipation of the income of the wife's pro- perty) is in itself usual and is generally coA^idered proper is not a ground for the Court refusing to strilie it out when its insertion is shown to have been contrary td'the desire of the parties and to the instructions given by thefh («/) . There is however a general presumption, in the absfeiice of distinct or complete evidence of actual intention, th^t the parties intend a settlement to contain dispositions and provisions of the kind usual under the circumstances (2).''' (y) Bold V. Hutchinson (1855) 5 ville-West' v: Visoount liolmescUde D. M. G. 558, 567, 568, 104 R. R. (1870) L. E. i H. L. 543, 555, 196,202. In reforming a settlement 565, 39 L. J. Ch. 505. the intent rather than the literal (x) Smith v. lliffe (1875) L. R. words of the articles wUl be fol- 20 Eq. 666, 44 L. J. Ch. 755; lowed: for a modern instance see Hartley v. Pearson (1879) 13 Ch. Corjan v. Duffield (1876) 2 Ch.Div. D. 545. 44, 45 L. J. Ch. 307. As to the (j/) Torre v. Torre (1853) 1 Sm. general principles on which courts & ft. 518, 96 E. E. 464. of equity construe instruments (s) See p. 542, above, creating executory trusts, see Sack- t 562 MISTAKE It is not neoessary that a person claiming to have a settle-, ment rectified should be or represent a party to the original contract, or be within the consideration qf it (a) . But a deed ■which is wholly voluntary in its inception cannot be reformed if the grantor contests it, but must stand or fall in its original condition without alteration (&) ; the reason of this has been explained to be that an agreement between parties for the due execution of a voluntary deed is not a contract which the Court can interfere to enforce (c) . The Court has power^ however, to set aside a voluntary deed in part only at the suit of the grantor if he is content that the rest should stand {d) . The Court will exercise caution in rectifying a voluntary settlement at the instance of the settlor alone and on his own evidence (e). An agreemeiit will not be cancelled at the suit of one party when he has rejected a proper offer to rectify it. It was agreed between A. and B. that A. should give B. the ejcolusive right of using a patent in certain districts: a docu- ment was executed which was only a licence from A. to B. Some time afterwards B. complained that this did not carry out the intention, and A., admitting it, offered a rectification. B. refused this and sued for cancellation. Held that the relief prayed for could not be granted (/) . In certain cases already mentioned for another purpose {g) the plaintiff sought to reform an instrument, and satisfied the Court that it did not represent what was his own intention at the time of execution, but failed to establish that the other (o) Thompson r. Whitmore Bentley \.Mttckay (1869) 4 D. F. (1860) 1 J. & I-I. 268, 273. J. 286. (J) Broun v. Kennedy (1863) 33 («) Bonhote y. Henderson [1895 J Beav. at p. 147. 1 Ch. 742, 64 L. J. Ch. 556, affd. (c) Lister v. Hodgson (1867) [1895] 2 Ch. 202, O. A. L. E. 4 Eq. at p. 34. (/) Lm>er v. Dennett (1883) 109 (rf) Turner v. Collins (1871) U. S. 90. L. R. 7 Ch. 329, 342, 41 L. J. Ch. {g) Swin-a, pp. 518—520. 558 ; and see per Turner L.J. IN EX PRESSION : KECTIFICATION. 563 party's intention was the same; and the Court gave the defendant his choice of " having the whole contract annulled, or else of taking it in the form which the plaintiff intended" {h). The anomalous character of these cases has already been pointed out. The Court is not prevented by the Fines and Recoveries Act, ss. 40, 47, from exercising its ordinary jurisdiction to rectify the resettling part of a disentailing assurance (i). An agreement cannot be rectified after it has been adjudi- cated upon by a competent Court and performed under the direction of that Court (fc). It was formerly sometimes said, but inexactly, that in certain cases wills may be rectified on the ground of mistake {Vj . Actions for the rectification of instruments must be assigned to the Chancery Division; but where a statement of defence to an action brought in another Division is accom- panied by a counterclaim for rectification, this is not a sufficient reason for transferring the action {m) . When a conveyance is rectified the order of the Court is sufficient without a new deed . A copy of the order is indorsed on the deed which is to be rectified {n) . A consent order, being founded on agreement of the parties, may be set aside for mistake if the facts would justify setting aside an agreement on any of the grounds considfered in the (A) Harris v. Pepperell (1867) (1886) 31 Ch. Div. 251, 55 L. J. L. E. 5 Eq. 1, 5; Garrard v. Ch. 15i. Frankel (1862) 30 Beav. 445, 31 (7,;) Caird v. Moss (1886) 33 Ch. L. J. Ch. 604; Bloomer v. Spittle Div. 22, 55 L.J. Ch. 854. (1872) L. E. 13 Eq. 427, 41 L. J. Q) On this point, see the Ap- Ch. 369. See May v. Piatt [1900] 1 pendix, Note H. Ch. 616, 69 L. J. Ch. 357; Bealey. (m) Storey v. Waddle (1879) 4 Kyte [1907] 1 Ch. 564, 76 L. J. Q. B. Div. 289. Ch. 294. («) White v. White (18712) L. R. («•) Hall-Dare v. Hall-Dare 15 Eq. 247, 42 L. J. Ch. 288. 064 MISTAKE. foregoing discussion (o). So where the mistake as to the effect of the order is on one side only, but induced, however innocently, by the act of the other {p) . The Court may not only rectify but rescind unilateral acts, such as appointments under a settlement or will, which have been executed under a misapprehension of material facts {q) . But this is outside the field of contract. (o) Iludderafield Banking Co. v. 2 Ch. 534, 66 L. J. Ch. 684, 0. A. Lister # Son [1895] 2 Ch. 273, 64 (?) Hood of Avalon {Lady) t. L. J. Ch. 523, C. A. Machinnon [1909] 1 Ch. 476, 78 (p) Wilding v. Sanderson [1897] L. J. Ch. 300. ( , 565 ) CHAPTER X. Misrepresentation and Fraud. Part .1 . — GiJnerally . The consent of one party to a contract may be caused by a misrepresentation made by the other of some matter, such that, if he had known the truth concerning it, he would not have entered into the contract. Putting off for a while the closer definition of the term, we see at once that there is a broad distinction between fraudulent and innocent misrepre- sentation. A statement may be made with knowledge of its falsehood and intent to mislead the other party, or with reckless ignorance as to its truth or falsehood. In either of these cases the making of such a statement is morally wrong and also wrongful in a legal sense, and the conduct of the party making it is called Fraud or Deceit, and may be a substantive wrong giving rise to a claim for redress in damages, independent of any contract. The present writer has endeavoured to discuss this aspect of it elsewhere (a) . On the other hand a man is generally safe, for the purpose now being considered, in stating as true that which he believes to be true. Still more is he safe in giving his opinion, as an opinion, for what it may be worth. If he communicates at the same time the grounds on which he formed his opinion, or reasonable means of access to those grounds, he has done all that an honest man can do. (fl) In "The law of Torts," Gh. viii. 566 MISEEPKESENTATION AND FRAUD. Whenever consent to a contract is obtained by deceit, the contract is voidable at the option of the party deceived, subject to the conditions to be presently mentioned. The other party cannot take advantage of his own wrong. We shaU. see that the working of this rule involves careful definition and distinction; but the substance of the law now rests on fairly broad and simple grounds. A man who makes positive state- ments to the intent that others should act upon them is bound, at least, to state only what he believes to be true (6). The combination of this principle with the still wider principle of responsibility for the acts and defaults of agents in the course of their employment gives rise to difiicult questions, and in some cases to consequences of apparent hardship. A man who had no fraudulent intention, or who has not even been personally negligent, may be liable as for fraud. The ground of liability in such cases is tecTinically •described as "constructive fraud," or, less aptly, "legal fraud " (c). The word " constructive " negatives actual fraud, but affirms that the actual conditions will have similar con- sequences. " Constructive possession " signifies, in the same way, that an owner out of possession has certain advantages originally given only to possessors; "constructive delivery" is a change of legal possession without change of physical custody; and we speak of "constructive notice" where the ■existence of means of knowledge dispenses with the proof of actual knowledge. It must be remembered that for a long time equity judges and text writers thought it necessary or prudent for the (6) The House of Lords decided statements intended for other peo- in Derry v. T?eeh (1889) 14 App. pie to act on. Ca. 337, 58 L. J. Ch. 864, that (c) At this day we seldom if ever there is no general duty to use any hear of "legal fraud," and "con- degree whatever of diligence in struotive fraud" is not of frequent ascertaining facts, as distinct from oocurrence. tare belief, in making positive REPRESENTATIONS AND ESTOPPEL. 567 support of a beneficial jurisdiction to employ the term "Fraud" as nomen generalissimum (d) . "Constructive fraud " was made to include almost every class of cases in which any transaction is disallowed, not only on grounds of fair dealing between the parties, but on grounds of public policy (e). This lax and ambiguous usage of the word was confusing in the books and not free from confusion in practice. Plaintiffs were too apt to make unfounded charges of fraud in fact, while a defendant who could and did indig- nantly repel such charges might sometimes divert attention from the real measure of his duties. Cases in which there was actual fraud or culpable recklessness of truth were not sufficiently distinguished from cases in which there was only a failure to fulfil a special duty. But it seems needless at this day to pursue an obsolete verbal controversy. Innocent representations are not necessarily harmless to the person making them. They may give rise to liability, or, as it is more exact to say, representations may give rise to liability without any need for determining whether they are innocent or otherwise (a matter sometimes far from easy to determine) (/), in various ways. A statement made on quite reasonable grounds may nevertheless be defamatory and actionable; but this is remote from our subject. The rule of estoppel oomes nearer to it. "Where one by his words or conduct wilfully causes another to believe the existence of (d) James L.J. L. E. 8 Ch. at which is complained of was oeca- p. 124. sioned by intentional fraud or by (e) See Story's Eq.Jurisp.ch vii. mere inadvertence or mistake. (/) Cp. Wasateh Mining Co. v. Indeed, upon the very same state Crescent Mining Co. (1893) 142 U.S. of facts an intelligent man, actings 293, 298, per Cur.: — " In equitable deliberately, might weU be regarded remedies given for fraud, accident as guilty of fraud, and an ignorant or mistake, it is the facts as found and inexperienced person might be that give the right to relief, and it entitled to a more charitable view. is often difficult to say, upon ad- Yet the injury to the complainant mitted facts, whether the error would be the same in either case." 568 MISEEPRESENTATION AND FRAUD. a certain state of things and induces him to act on that belief, so as to alter his own previous position, the foarmer is con-< eluded from averring against the latter a different state of things as existing at the same time " (^r). And " whatever a man's real intention may be," he is deemed to act wilfully " if he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it" {h). The rule is not a rule of substantive law, in the sense that it does not declare any immediate right or 'claim. It is a rule of evidence, but capable of having the gravest effects on the substantive rights of parties. Again, the existence of a certain state of facts, or the truth of a certain assertion, may be made a condition or term of a contract, apart from any question of good faith, so that if the fact be otherwise the proposed contract may never become binding, or else there may be a non-performance or breach of the contract, with the usual consequences. Such conditions or terms are in some important kinds of contracts implied by special rules of law. It will be observed that these possible qualities of a repre- sentation are not mutually exclusive. One and the same statement may well be a deceit and a breach of contract and capable of operating by estoppel (i) . During a certain time some judges in the Court of Chancery seem to have thought that under certain conditions a representation which is not operative as part of a contract, or by way of estoppel, or as amounting to an actionable (g) PicJcard v. Sears (1837) 6 A. Caapersz (Calcutta, 1909). The dates & E. 469, 45 R. R. 538. are those of the current editions. (h) Freeman v. Cooke (1848) 2 («) See per Lord Blackburn in Ex. 654, 18 L.J. Ex. 114, Finch Sel. Brownlie v. Campbell (1880) 5 Ca. 483, 76 R. R. 711. See further App. Ca. 925, 953. A hint of thia the modern writers on Estoppel, was already given by Parke B. in Bigelow (1886), Ewart (1900), a Freeman v. Cooke, last note: see- Tery learned and original work, the end of the judgment. EEPRESENTATIONS AND ESTOPPEL. 569 wrong, may still be binding on the person making it. But, when these three effects are duly considered, it appears that there is no other way in which it can be binding. To say that a man is answerable for the truth of his statement is to say that it is his legal duty to see that it is borne out or to make compensation for its not being borne out. We need not here dwell on cases of deceit, or of estoppel independent of contract. Then, if the statement is of a fact, and made as an inducement to another person to enter into a contract, the substance of the duty can only be that the person making the statement undertakes that it is true. In that case must not his undertaking be a contract or a term in the contract? For if not, why should it bind him? It might peradventure work an estoppel also, but for all practical intents the estoppel is merged in the contract. If, on the other hand, the statement is of something to be performed in the future, it must be a declaration of the party's intention unless it is a mere expression of opinion. But a declaration of intention made to another person in order to be acted on by that person is a promise or nothing. And if the promise is binding, the obligation laid upon its utterer is an obligation by way of contract and nothing else: promises de futuro, if binding at all, must be binding as contracts (j). There is no middle term possible. A state- ment of (Opinion or expectation creates, as such, no duty. If capable of creating any duty, it is a promise. If the promise is enforceable, it is a contract. The description of promise or contract in a cumbrous and inexact manner will not create a new head of law. " There must be a contract in order to entitle the party to obtain any relief" (fc). (/) Lord Selborne, Maddison v. Ficleus [1900] 1 Ch. 331, 334, 69 Alderson (1883) 8 App. Ca. at p. L.J.Ch.l61. Earlier authorities on 473. ! the supposed equitable doctrine of (Je) Per Cozens-Hardy, J. Me "making representations good" aro P. — C. 37 570 misrepkeskntation and fraud. Part 2. — Misrepeese'ntation and Non-disclosure. So fai- nothing has been said of any affirmative duty to tell the whole truth in relation to the matter of a contract, as distinct from the negative duty of telling nothing but the truth, or at least what one honestly holds for truth. In general one is not bound in law to disclose in the treaty for a contract all known facts which may be material to the other party's judgment, nor even to remove a mistake not induced by one's own act (l) . Non-disclosure of a material fact which one was not specially bound to disclose is no defence to an action for specific performance (m). And if one party asks a question which the other is not bound to answer, and it is not answered, he is not entitled to treat the other's silence as a representation («) ; that is, when there is really nothing beyond silence. ^V very slight departure from passive acquies- cence might be enough to convert a lawful though scarcely laudable reserve into an actionable deceit. This must in every case be a question of fact. There are several kinds of contracts, however, such that the one party must in the ordinary course of business take from the other, wholly or to a great extent, the description of the subject-matter of the contract. Now the parties may if they please make any part of that description a term or even a preliminary condition (o) of the contract. Whether they discussed in the Appendix, Note I, (») Laidlaw v. Organ (1817) 2 which is now preserved, not so much Wheat. 178: a sale of tobacco; the foranyprobable use to practitioners buyer knew, and the seller did not, as far the sake of students who that peace had been concluded be- may still be perplexed by some of tween the U. S. and England; the these cases. No such doctrine, I seller asked if there was, any news understand, has ever become affecting the market price; the current in America. buyer gave no answer, nor did the (V) Smith \. Hughes (1871) L. E. seller insist on one. Held that the 6 Q. B. 597, 40 L.. J. Q. B. 221. buyer's silence was not fraudulent. (m) Tiirner v. Oreen [1895] 2 Cp. I. C. A. s. 17, illustration (d). Ch. 205, 64 L. J. Ch. 539. (o) In such a case it bas been DUTY OF DISCLOSUEE. 571 have done so is, as we have seen, a question of construction (p). But therein the nature of the contract, and the extent to which an erroneous description or material omission may deprive either party of the benefit to be reasonably expected, will justly count for much. More than this, fixed rules on this point have been established as to particular classes of con- tracts, and in some of these they go to the extent of a positive duty of disclosure; not only that all information given shall be true, but that all material information shall be fully as well as truly given. The character and stringency of the duties thus imposed varies according to the specific character and risks of the contract. It will be convenient to take a view of the classes of contracts thus treated before we examine in detail the universal rules as to Deceit. These classes are believed to be the following. It is by no means certain, however, that the same principle may not be applicable in other forms. The development of modern commerce may bring into prominence new kinds of transactions in which the subject-matter of the contract, or a material part of it, is within the peculiar knowledge of one party, and the other has to rely, in the first instance at all events, on the correctness ■of the statements made by him. (A) Insurance. (B) Suretyship and guaranty (as to certain incidents ■only). ■ (C) Sales of land. (D) Family settlements. (E) The contract of partnership, and thence, by analogy, said that there is not a conditional (?:>) Behn v. Btiniess (1863) Ex. promise, but either an absolute Ch. 3 B. & S. 751, 32 L. J. Q. B. promise or no promise at all: Lang- 204; Bannerman v. White (18^1) dell, § 28. But see Holmes, "The 10 C. B. N. S. 844, 31 L. J. O. P. Common Law," 304. 28, Finch Sel. Ca. 473; p. 304, above. 37 (2) 672 MISREPRESENTATION AND FRAUD. contracts to take shares in companies and contracts of promoters. We proceed to follow out these topics in order. And first we shall say something in general of representations which' amount to a condition or a warranty. Representations amounting to Warranty or Condition. The law on this subject is to be found chiefly in the deci- sions on the sale of goods; the principles however are of genera] importance, and not without analogies, as we shall presently see, in other doctrines formerly treated as peculiar to equity. We therefore mention the leading points in this place, though very briefly. In the flrst place a buyer has a right to expect a merchantable article answering the descrip- tion in the contract (g) ; but this is not on the ground of warranty, but because the seller does not fulfll the contract by giving him something different. " If a man offers t& buy peas of another and he sends him beans, he does not perform his contract; but that is not a warranty; there is no loarranti/. that he should sell him peas; the contract is tO' sell peas, and if he sends him anything else in their stead it is a non-performanoe of it" (r). So that, even if it be- a special term of the contract that the buyer shall not refuse to accept goods bought by sample on the score of the quality not being equal to sample, but shall take them with an allow- ed) Jones V. Just (1868) L. R. 3 C. P. 677, 679, 36 L. J. C. P. 263. Q. B. 197, 204, 37 L. J. Q. B. 89; There ia a class of oases, however,. Drummond v. Van Ingen (1887) 12 in which it is commonly, and per- App. Ca. 284, 56 L. J. Q. B. 563; haps conveniently, said that therfr Sale of Goods Act, 1893, ss. 13, 14. is a warranty that the goods shall (r) Lord Abinger C.B. in Chan- be merchantable besides the con- ter V. SopJcins (1838) 4 M. & W. dition that they shall answer the at p. 404, 51 R. R. 654, 655; description: Mody v. Gregson "as sound an exposition of the law (1868) L. E. 4 Ex. 49, 38 I/. J. aa can be," per Martin, B. Azemar Ex. 12. v. Casella (1867) (Ex. Ch.) L. E.2 WARRANTY AND CONDITION. 573 anoe, he is not bound to accept goods of a difierent hind (s) . It is open to the parties to add to the ordinary des(!riptioa of the thing contracted for any other term they please, so as to make that an essential part of the contract: a term so added is a condition. If it be not fulfilled, the buyer is not bound to accept the goods. " Condition " is purposely not defined by the Sale of Goods Act, though " warranty " is (f). On a bargain and sale of specific goods with a war- ranty the buyer cannot reject them (m), but he may obtain compensation by way of deduction from the price, or by a cross action (v) . No small confusion has been caused by the use of the word warranty' where the thing meant in the first instance is really a condition. The proper meaning of warranty. appears to be an agreement which refers to the subject-matter of a contract, but, not being an essential part of the contract either by the nature of the case or by the agreement of the parties, is " collateral to the main purpose of such con- tract" (a;). The so-called implied warranties of quality, fitness, and condition of goods sold are really conditions; if the goods tendered in performance of the contract do not satisfy those conditions, they may be rejected. But the buyer may, if he thinks fit, accept the goods and claim damages for the defect; in other words, he may treat the breach of condition as a breach of warranty. And after goods have (s) Azemar v. CaselUi (1867) v. Whi/pp [1900] 1 Q. B. 513, 69 L. E. 2 C. P. 431, in Ex. Ch. 677, L. J. Q. B. 333. 36 L. J. O. P. 124, 263. (v) The reduction of the priM (<) Sect. 62, and see App. II., can be only the actual loss of value: Note (A), in Sir M. Chalmers' edi- any further damages must be the tiion of the Act. subject of a counter-claim (under (m) Sale of Goods Act, s. 53; the old practice a separate action): Beyworth v. JBufchinson (1867) Mondel v. Steel (1841) 8 M. & W. L. R. 2 Q. B. 477, 36 L. J. Q. B. 858, 871, 10 L. J. Ex. 426, 58 R. R. 270 ; see the application of the rule 890. in the particular case discussed in {x) See note (t) above. Benjamin, p. 1124, and cp. Farley 574 MISEEPBESENTATION AND FRAUD. been accepted, or the property in specific goods contracted for lias" passed to the buyer, "the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect'' («/). Conditions of this kind include a warranty from the first, and may be reduced to a warranty if the buyer does not take advantage of them in time. But a condition and a warranty are not therefore the same thing (0) . There is no rule of law that every assertion by a seller of a fact unknown to the buyer is a warranty (a) . We pass on to the contracts above mentioned as being Under exceptional rules. A. Insurance. Concealment of material facts will avoid a contract of insurance of any kind (6). As to marine insurance, not only misrepresentation but concealment (c) of a material fact, " though made without any fraudulent intention, vitiates the policy " (d), that is, makes it voidable at the underwriter's election (e). For this purpose a material fact does not, on the one (y) Sale of Goods Act, 1893, nom. Seaton v. Burnand [1900] 8. 11. A, C. 135, ©9L. J. Q, B, 409), (z) Accordingly a term in the (o) This is the usual word, but Contract excluding warranty does non-disolosure would be more ao- not exclude the seller's, liability in curate. da,mages if after acceptance the (d) lonides v. Pender (1874) gopds are found not to be of the L. K. 9 Q. B. 531, 537, 43 L. J. description contracted for. WalUs Q. B. 227, 2 Wma. Saund. 555-9. V. Pratt [1911] A. C. 394, 80 L. J. (e) See Morrison v. Universal K. B. 1058. Marine Insurance Co. (1873) L. E. , (a) Heilhut v, -SueUeton [1913] 8 Ex. 197, 205, 42 L. J. Ex. 115. A. C. 30, 82 L. J. K. B. 245. The settled rules are now codified (6) Seaton v. Heath [1899] 1 in the Marine Insurance Act, 1906, Q. B. 782, 792, 68 L. J. Q. B. 631, sB. 17—20. C. A. (reyd. in H. L. on facts only, LIFE INSURANCE. 575 hand mean only such a fact as is "material to the risks considered in their own nature "; nor on the other hand does it include everything that might influence the underwriter's judgment: the rule is "that all should be disclosed which Mould affect the judgment of a rational underwriter govern- ing himself by the principles and calculations on which underwriters do in practice act"(/). The only exception is that the insured is not bound to communicate anything which is such matter of general knowledge that he is entitled to assume the underwriter knows it already {g) : and the obligation extends not only to facts actuallj^ within the knowledge of the assured, but to facts which in the ordinary course of business he ought to know, though by the fraud or negligence of his agent he does not know them (h) . As regards life insurance, the assured is bound to disclose all material facts within his knowledge affecting the life on which the insurance is made (i). But where that life is not (/) Parsons on Insurance, adopted per cur. lonides v. Pender (1874) L. E. 9 Q. B. at p. 539. What falls within this description is a question of fact: Stribley v. Imperial Marine Insurance Co. (1876) 1 Q, B. D. 507, 45 L. J. Q. B. 396. And the policy will be vitiated by concealment of a fact material to guide the underwriter's judgment, though not material to the risk insured against in itself: mvaz V. Gerussi (1880) 6 Q. B. Div. 222, 50 L. J. Q. B. 176. (jr) Morrison v. Universal Ma- rine Insurance Co. (1873) L. B. 8 Ex. 40, 42 L. J. Ex. 115. (A) Proiidfoot V. Montefiore (1867) L. B. 2 Q. B. 511, 36 L. J. Q. B. 225. This applies only to the agent through whom the in- surance was actually effected: Plachburn v. Vigors (1887) 12 App. Ca. 531, 57 L,. J. Q. B. 114; unless there is a continuous nego- tiation by more than one agent: Blackburn v. Ilaslam (1888) 21 Q. B. D. 144, 57 L. J. Q. B. 479. Non-disclosure by an agent of the assured, without fraudulent inten- tion, has been held to avoid the policy only to the extent of the loss or risk arising from the par- ticular facts so withheld: Stribley V. Imperial, (fc. Co., note (/), supra: but see per Lord Watson, 12 App. Ca. at p. 540: and qu. whether this exceptional rule is not abrogated by the Marine In- surance Act. (j) See authorities collected in London Assurance v. Mansel (1879) 11 Ch. D. 363, 48 L. J. Ch. 331. 576 MISKEPKESENTATION AND FRAUD. his own but some other person's, that person is not his agent, and if " the life " or his referees make false statements which are passed on in good faith by the assured, their falsehood will not of itself avoid the contract (fc). Practically life policies are almost always framed with some sort of express reference to the statements made by the assured as to the health and circumstances of " the life." Not unfrequently it is provided that the declaration of the assured shall be the basis of the contract; and if the declara- tion thus made part of the contract is not confined to the belief of the party, but is positive and unqualified, then the contract is avoided by any part of the statement being in fact untrue (I), though not to the knowledge of the assured (m), or by the concealment of any material fact (re). On the same ground the grant of a life annuity by the Commissioners for the Reduction of the National Debt was set aside at the suit of the Ctown, the age of the life having been mis-stated; not so much on the ground of misrepre- sentation simply, as because, considering the statutory powers and duties of the commissioners, " it was an essential part of the contract itself that the representation should be true"(o). (A) Wheelton v. Uardisty (1857) (So.) 9 App. Ca. 671. 8 E. & B. 232, in Ex. Ch. 285, (m) Macdonald v. Law Union 26 L. J. Q. B. 265, 27 ib. 241, Insurance Co. (1874) L. R. 9 Q. B. 112 R. R. 535. The judges 328, 43 L. J. Q. B. 131. appear to have been inclined to (n) London Assurance v. Mansel restrict the view taken before and (1879) 11 Ch. D. 363, 48 L. J. Ch. sinae oi the uberrima fides genexaWj 331. Probably a material fact required in this contract, unless means for this purpose a fact the dicta (which in any ceise decide such that its concealment makes nothing) can be taken as limited the statement actually furnished, to the special case before them. though literally true, so misleading (J) It need not be shown that as it stands as to be in effect un- the particular mis-statement was true. material: Anderson v. Fitzgerald (o) A.-ff. v. Say (1874) L. R. 9 (1853) 4 H. L. C. 484, 94 R. R. Ch. 397, 407, 43 L. J. Ch. 321,per 202. Cp. Thomson v. Weems (1884) MeUish L.J. expressly comparing FIKE INSURANCE. 577 The principles applicable to insurance against accidents •are the same (p) . The contract of fire insurance is treated in somewhat the same way as that of marine insurance (which it resembles in being a contract of indemnity) (g), though not to the same extent. . The description of the insured premises an- nexed to a fire policy amounts to a warranty (or rather a ■condition) that at the date of the policy the premises corre- spond to the description, or at least have not been altered so as to increase the risk; and also that during the time specified in the policy the assured will not voluntarily make any alteration in them such as to increase the risk. The ■description must be the basis of the contract, for the terms ■of insurance can be calculated only on the supposition that the description in the policy shall remain substantially true -while the risk is running (^). Where an insurance is ex- pressed to be " on same rate terms and identical interest" as -other existing insurances on the same property, this is a ■condition of the contract (s) . The principles applicable to insurance against miscel- laneous risks appear to be the same. Only those facts need the case of a life policy where the (?) Darrell v. Tibbiils (1880) 5 representations of the assured are Q. B. Div. 560, 50 Li. J. Q. B. 33. made the basis of the contract. (r) Sillem v. Thornton (1854) 3 (p) Bowden v. London, Edin- E. & B. 868', 23 L. J. Q. B. 362, 97 burgh ^ Glasgow Assce. Co. [1892] E.E.808; where it was held^aocord- .2 Q. B. 534, 61 L. J. Q. B. 792, ing-ly that the addition of a third C. A., a curious example of the' story to a house described as being insurers being bound by their of two stories was a, material -agent's knowledge. Cp. Biggar v. alteration, and discharged the in- Rock Life Assce. Co. [1902] 1 surer: and see further, as to what K. B. 516, 71 L. J. K. B. 79, amounts to material misdescription, where the applicant allowed the Forbes ^ Co.'s Claim (1875) L. S,. -company's local agent to flU in 19 Eq. 485, 44 L. J. Ch. 761. a form for him and signed it (s) And the use of the word -wittiout examination, and falsity " warranted " makes no difference : in some of the statements so signed Barnard v. Faber [1893] 1 Q. B. •was held to avoid the poUoy. 340, 62 L. J. Q. B. 159, C. A, ■>'0 MISKEPRKSENTATION AND FRAUD. be disclosed which are material to the risk actually under- taken (i). B. Sure ffj ship and Guaranty. The contract of suretyship " is one in which there is no- universal obligation to make disclosure " (m),; but it has peculiar incidents after it is formed, which bring it within our present scope. A surety is released from his obligation by an J' misrepresentation, or concealment amounting to mis- representation, of a material fact on the part of the creditor (.« ) . The language used in different cases is hardly consistent: the later decisions establish however that the rule is not parallel to that of marine insurance. The creditor is- not bound to volunteer information as to the general credit of the debtor or anything else which is not part of the transaction itself to which the suretyship relates: and on this point there is no difference between law and equity (y). But the suretj' is entitled to kno^^' the real nature of the transaction he guarantees and of the liability he is under- taking: and he generally and naturally looks to the creditor for information on this point, although he usually is acting at the debtor's request and as his friend, and so relies on him for collateral information as to general credit and the like. In that case the creditor's description of the transaction amounts to, or is at least evidence of, a representation that (*) Thus an insurer of a surety's (1878) 8 Ch. D. at p. 475, 47 L. J. solvency is not entitled to be Ch. 511. informed of all the circumstances (j^) Kennedy L.J. in Z. G. 0. and conditions of the principal Co. v. BoUoway [1912] 2 K. B. 72, debt: Beaton v. Burnand [1900] 87, 81 L. J. K. B. 603, adopting A. C. 135, 69 L. J. Q. B. 409. the statement in the text; Pledge («) Railton -v. Mathews (1844) 10 v. Buss (1860) Johns. 663; Wythes CI. & F. 934, 59 E. B. 308; and v. Labouchere (1858-9) 3 De G. Bee per Romer L.J. Seaton v. ic J. 593, 609, approving North Heath [1899] 1 Q. B. 782, 792. British Insurance Co. v. Lioyd {x) Fry J, Bavies v. London and (1854) 10 Ex. 523, 24 L. J. Ex. 14, Provincial Marine Insurance Co. 102 R. R. 686. SURETYSHIP AND GUARANTY. 57!> there is nothing further that might not naturally be expected to take place between the parties to a transaction such as described. Whether a circumstance not disclosed is such that by implication it is represented not to exist depends on the nature of the transaction and is generally a question of fact (2) . Thus where the suretyship was for a cash credit opened with the principal debtor by a bank, and the cash credit was in fact applied to paj- off an old debt to the bank, the House of Lords held that the bank was not bound to dis- close this, no actual agreement being alleged or shown that the money should be so applied, and the thing being one which the surety might naturally expect to happen (a) . vSa the creditor is not bound to tell the surety that the proposed guaranty is to be substituted for a previous one given by another person (6). But the surety is not liable if there is a secret agreement or arrangement which substantially varies- the nature of the transaction or of the liability to be under- taken: as where the surety guarantees payment for goods to be sold to the principal debtor, but the real bargain, concealed from the surety, is that the debtor shall pay for the goods a nominal price, exceeding the market price, and the excess shall be applied in liquidation of an old debt (c) : or where the loan to be guaranteed is obtained not in the ordinary way, but by an advance of trust funds of which the prin- cipal debtor himself is a trustee (iZ). In Lee v. Jones {e) (s) Zee V. Jones (1863) 14 C. B. v. Lloyd (1854) 10 Ex. 523, 24 L.J, N. S. 386, in Ex. Ch. 17 C. B. Ex. 14, 102 R. R. 686. Ci). Beaton N. S. 482, 603, 34 L. J. C. P. 131, v. Bunumd, note (J), p. 574, 138, 142 R. E. 467, which may be above. taken as a judicial commentary on (c) Pidcook v. Bishop (1825) 3 the rule given in Hamilto^i v. B. & C. 605, 27 R. R. 430; I. C. A. Watsoii (1845) 12 CI. & F. 109, § 143, illust. b. 69 R. R. 58. id) Squirey.Whitton (1884) IH. (a) Hamilton v. Watson (1845) L. 0. 333, decided however chiefly 12 01. & F. 109, 69 R. R. 58; aec. Pledge v. Buss (1860) Johns. 663. (e) (1863) 17 C. B. N. S. 482, (b) North British Itisuranoe Co. 34 L. J. C. P. 131. -380 MISREPRESENTATION AND FRAUD. there was a continuing guaranty of an agent's liabilities in ■ •account with his employers. He was in fact already in- debted to them beyond the whole amount guaranteed by the surety's agreement, which was so worded as to cover •existing as well as future liabilities. The surety was not informed of this, and the recitals in the agreement, though not positively false, were of a misleading and dissembling character. The majority of the Court of Exchequer Chamber held that there was evidence of " studied effort to conceal the truth" amounting to fraud. On the whole it appears from this case and Mailton v. Mathews (/) that the conceal- ment from the surety of previous defaults. of the principal debtor, when there is a continuing guaranty of conduct or solvency, is in itself evidence of fraud, and the Ctourt of Appeal has applied this principle to the case of a surety for the fidelity of a servant, although the non-disclosure was in fact not fraudulent (g) . Where a person has become a surety on the faith of the creditor's representation that another will become co-surety, he is not bound if that other person does not join; and in equity it makes no difference that the guaranty was under seal (h) . Where a guaranty was given to certain judgment creditors in consideration of their post- poning a sale under an execution already issued against the principal debtor, but in fact they did not stop the sale, being unable to do so without the consent of other persons in- on the broader ground that there Beav. 265, 83 R. R. 153; Evans y. cannot be a contract of suretyship Sremridge (1866) 2 K. & J. 174, 8 in blank, for no creditor was ever D. M. G. 100, 25 L. J. Oh. 334, named or specified to the surety. The rule does not apply if the (/) (1844) 10 01. & F. 934, |59 surety's remedies are not really di- R. E. 308. minished: Cooper v. Uvans (1867) (g) Z. G. 0. Co. V. Eolloway L. R. 4 Eq. 45, 36 L. J. Oh. 431, [1912] 2 K.B.72, 81 L. J. K.B.603, where the principal debtor had not where the difference between such executed the bond, but had exe- a case and that of a guaranty to a outed a, separate agreement under bank is considered. seal. (A) Mce V. Gordon (1847) 11 SALES OF LAND. 581 terested, it was held that the guaranty was inoperative (i) ; but perhaps this case is best accounted for as one of simple- failure of consideration; for the consideration for the guaranty was not merely the credit given to the principal debtor, but the immediate stopping of the sale. The authorities, taken as a whole, establish that as between creditor and surety there is in point of law no positive duty to give information as to the relations between the creditor and the principal debtor, but the surety is discharged if there is actual misrepresentation, and that silence may in a particular case be equivalent to an actual representation, whether it is so being a question of fact (j) . So far as these rules attach special duties to the creditor they do not apply to a mere- contract of indemnity (fc) . C. Sales of Land. A misdescription materially affecting the value, title, or character of the property sold will make the contract void- able at the purchaser's option, and this notwithstanding special conditions of sale providing that errors of descrip- tion shall be matter for compensation only. Flight v. Booth (l) is a leading case on this subject. The contract was for the sale of leasehold property, and the lease imposed restrictions against carrying on several trades, of which the particulars of sale named only a few: it was held that the purchaser might rescind the contract and recover back his («) Cooper V. Joel (1859) 1 D.,F. (k) Way v. Hearn (1862) 13- J. 240. C. B. N. S. 292, 32 L. J. O. P. 34, (/) Cp. I. C. A. ss. 142—144. S. 134 E. E. 538; but the point pf 143: "Any guarantee which the that case is rather that there was creditor has obtained by means of no misrepresentation dans locum keeping silence as to a material cir- contractui. Cp. Seaton v. Burnand' onmstance is invaUd" is probably [1900] A. C. 135, 69 L. J. Q. B. not intended to go beyond the 409. EngUsh law. (0 (1834) 1 Bing. N. C. 370,. 377, 41 R. E. 599, 604. 582 MISREPRESENTATION AND FRAUD. deposit. Tindal C.J. put the reason of the case on exactly the same grounds which, as we shall immediately see, have been relied on in like cases by courts of equity. "Where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far aiiecting the subject-matter of the •contract that it may reasonably be supposed that but for such misdescrip- "tion the purchaser might ne"ver have entered into the contract at all, in such case the contract is avoided altogether, and the purchaser is not bound to resort to the clause of compensation. Under such a state of facts the purchaser may be considered an not having purchased the thing which was really the subject of the sale." The rule so stated has been unanimously approved in the Court of Appeal (m). So in Phillips v. Calddeugh {n), where the contract was for the sale of "a freehold residence" — which means free of all incumbrances (o) — and it appeared that the property vv'as subject to restrictive covenants of some kind, the pur- chaser was held entitled to rescind, though the covenants were in a deed prior to that fixed by the contract as the com- mencement of the title. Questions of this kind arise chiefly in suits for specific performance between vendors and purchasers of real estate, when it is found that the actual tenure, quantity, or descrip- tion of the property varies from that which was stated in the contract. The effect of the conditions of sale in the par- ticular instance has almost always to be considered, and the result of the variance may be very different according to these, and according to the amount and importance of the discrepance between the description and the fact. A com- plete or nearly complete system of rules has been established by the decisions. (m) Me Fawcett mid Holmes («) (1868) L. R. 4 Q. B. 159, (1889) 42 Ch. Div. 150, 58 L. J. 161, 38 L. J. Q. B. 68. Ch. 763. For a later example see (o) Ealsey v. Grant (1806) l3 Puchett and Smith's oontr. [1902] Ves. 73, 77, 9 R. R. 143, 145. 2 Ch. 258, 71 L. J. Ch. 666, 0. A. SALES OF LAND : COMPENSATION. 583 (i.) "If the failure is not substantial, equity will inter- fere " and enforce the contract at the instance of either party with proper compensation (o) . The purchaser, "if he gets substantially that for which he bargains, must take a com- pensation for a deficiencj' in the value " (p) . Here the con- tract is valid and binding on both parties, and the case is analogous to a sale of specific goods \'\'ith a collateral warranty . (ii.) There is a second class of cases in which the contract is voidable at the option of the purchaser, so that he cannot be forced to compete even with compensation at the suit of the vendor, but may elect either to be released from his bar- gain or to perform it with compensation. "Generally speaking, every purchaser has a right to take what he can get, with compensation for what he cannot get " (q), even where he is not bound to accept what the other has to give him (r) . However a purchaser's conduct may amount to an affirma- tion of the contract and so deprive him of the right to rescind, but without affecting the right to compensation (s) ; again, special conditions may exclude the right to insist on -compensation and leave only the right to rescind (t) . (o) See last note. sell the fee he cannot compel the (jo) Z)i/er V. Hargrave (1805) 10 purchaser to take, but the pur- ees. 506, 508, 8 E. E. 36, 37. The chaser can compel him to convey ■deficiency must be in the subject- the term." Per Lord Eldon, Wood matter described : misrepresentation v< Griffith (1818) 1 Swanst. at in a collateral agreement is no p. 54, 18 R. R. 27 (though in this ground for specific performance case not with compensation, see "with compensation: Uutherford t. next page): and see Mortlooh v. Acton-Adams [1915] A. C. 866, 84 Suller (1804) 10 Ves. 292, 315, L. J. P. 0. 238. 7 R. R. 417; Nelthorpe v. Kolgate (?) BugJies v. Jones (1861) 3 (1844) 1 Coll. C. O. 203; 66 R. R. D. F. J. 307, 315, 31 L.J.Ch.83; 46. Leyland v. lllingworth (1860) 2 (s) Hughes v. Jones, note (^q) D. F. J. 248, 252. above. (r) "If a person possessed of a (0 Cordingley v. Cheesebrough term for 100 years oontracti to (1862)3 Giff.496, 4 D. F. J. 379, 584 MISREPRESENTATION AND FRAUD. Under this head fall cases of misdescription affecting the- value of the property, such as a statement of the existence of' tenancies, not showing that they are under leases for lives at a low rent (u); or an unqualified statement of a recent occu- pation at a certain rent, the letting value of the property having been meanwhile ascertained to be less, and that occu- pation having been peculiar in its circumstances (x) ; or the description of the vendor's interest in terms importing that it is free from incumbrances — such as "immediate absolute- reversion in fee simple " — where it is in fact subject to un- disclosed incumbrances (y) . The treatment of this class of cases in equity is analogous to the rules applied at common law to the sale of goods not specifically ascertained by sample or with a warranty: see p. 572, above. The doctrine that a vendor who has less than he undertook to sell is bound to give so much as he can give with an abate- ment of the price applies, it is to be understood, only where the vendor has contracted to give the purchaser something 31 L. J. Ch. 617, where the pur- specific performance with oompen- ohaser claiming specific perform- sation notwithstanding the usual ance with compensation, and condition empowering the vendor having rejected the vendor's offer to rescind if unable to remove a to annul the contract and repay defect of title. the purchaser his costs, was made («) Hughes v. Jones (1861) 3 D. to perform the contract unoon- F. J. 307, 31 L. J. Ch. 83. s ditionally. See further as to the (x) Dimmock v. JSallett (1866) 2- effect of conditions of this kind Ch. 21, 36 L. J. Ch. 146. Mawson v. Fletcher (1870) L. E. Qy) Torrance v. Bolton (1872) 8 6 Ch. 91, 40 L. J. Ch. 131; Me Ch. 118, 42 L. J. Ch. 177. Of the^ Terry ^ White's Contract (1886) peculiar character of the non-dis- 32 Ch. Div. 14, 55 L. J. Ch. 345'. closure in that case presently. Cp. The authorities were reviewed by Phillips v. Caldcleugh (1868) L. E. Buckley 3., Jacobs -v.Mavell [1900] 4 Q. B. 159, 38 L. J. Q. B. 68, 2 Ch. 858, 69 L. J. Ch. 879. The p. 582, above. As to the proper same judge in Jackson and Iladen's mode of assessing compensation in eontr. [1905] 1 Ch.603, 74 L. J. Ch. a case of mis-statement of profits, 389, where there was a total failure see Powell v. Elliot (1875) L. R. of title as to minerals, ordered 10 Ch. 424. SALES OF LAND : WHERE NO COMPENSATION. 585 -\vhieh he professed to be, and the purchaser thought him to be, capable of giving. Where a husband and wife had -agreed to sell the wife's estate (her interest being correctly described and known to the purchaser), and the wife would not convey, the Court refused to compel the husband to -convey his own interest alone for an abated price (2) . Specifia performance with compensation is granted only where the compensation is capable of assessment: for ■example, not where the defect consists of undisclosed restrictive covenants (a) . Also the Court will not order vendors who sell as trustees to perform their contract with ■compensation, on account of the prejudice to the cestui que ■trust which might ensue (6). It is now settled (after many conflicting decisions and ■dicta) that a purchaser otherwise entitled to compensation can recover it after he has taken a conveyance and paid the purchase-money in f uU (c) . (iii.) But lastly the variance may be so material (either in quantity, or as amounting to a variance in Jcind) as to avoid the sale altogether and to prevent not merely the general jurisdiction of the Court as to compensation, but even special provisions for that purpose, from having any appli- cation. " If a man sells freehold land, and it turns out to be ■copyhold, that is not a case for compensation (d) ; so if it (z) Castle V. Wilkinson (1870) 6 348. See the former cases there 'Ch. 534, 39 L. J. Ch. 843; in, discussed. Barker v. Cox (1876) 4 Ch. D. 464, (d) Specific performance refused 46 L. J. Ch. 62, the full purchase- ■w^here the land was enfranchised money had been paid and the facts copyhold and the minerals were were otherwise peculiar. reserved to the lord: Bellamy v. (a) Rudd V. Lascelles [1900] 1 i)eS0«^«m [1891] 1 Ch. 412,60L. J, Ch. 815, 69 L. J. Ch. 396, Ch. 166, C. A. And conversely, a (6) White y. Cuddon (1842) 8 CI. man who buys an estate as copy- & F. 766, 54 E. E. 176. hold is not bound to accept it if it (0) Palmer v. Johnson (1884) 13 is in fact freehold. For "the mo- ■Q. B. Div. 351, 53 L. J. Q. B. tives and fancies of mankind are P.-C. 38 586 MISREPRESENTATION- AND FRAUD. turns out to be long leasehold, that is not a case for com- pensation; so if one sells property to another who is particu- larly anxious to have the right of sporting over it, and it turns out that he cannot have the right of sporting because it belongs to somebody else . . in all those cases the Court simply says it will avoid the contract, and will not allow either party to enforce it unless the person who is prejudiced by the error be willing to perform the contract without compensation" (e). A failure of title as to a part of the property sold which, though small in quantity, is important for the enjoyment of the whole, may have the same effect (/). This class of cases agrees with the last in the contract being voidable at the option of the party misled, but it differs from it in this, that if he elects to adopt the contract at all he must adopt it unconditionally, since compulsory perform- ance with compensation would here work the same injustice to the one party that compulsory performance without com- pensation would work to the other. Such wa& the result in the case now cited of the real quantity of the property fall- ing short by nearly one-half of what it had been supposed to bo (g) . But in a later case where the vendors were found infinite; and it is unnecessary for D. 754, 49 Ti. J. Ch. 361. a, man who has contracted to pur- (e) Sari of Durham v. Legard chase one thing to explain why he (1865) 34 Beav. 611, 34 L. J. Ch. refuses to accept another": Ayles ^9. V. Cox (1852) 16 Beav. 23, 96 E.R. (/) Arnold v. Arnold (1880) 14 13. But on a sale of mixed freehold Ch. Div. 270. Where particulars and copyhold a, variance in the re- of sale were misleading as to boun- speotive amounts does not avoid the daries and frontage, the purchaser contract: Hudson v. Cooh (1872) was held entitled to rescind nncon- L.R.13 Eq.at p. 420. As to lease- ditionaUy: 5»-eM)e?- v. S»-o«;« (1884) holds, it is a settled though perhaps 28 Ch. D. 309, 54 L. J. Ch. 605. not a reasonable rule that a contract (^) The price asked had been to sell property held under a lease fixed by reference to the rental ia prima facie a contract to show alone. Qu. how the case would title to an original lease: Camber- have stood could a price propor- well and 8. London Building tional to the area have been arrived Society \. Ilolloway (1879) 13 Ch. at. And see Swaislandy . Deardey SALES OF LAND : WHERE NO COMPENSATION. 587 to be entitled only to an undivided moiety of the property which they had professed to sell as an entirety, the Court found no difficulty in ordering specific performance with an abatement of half the price at the suit of the purchaser, as no injustice would be done to the vendors, who would be fully paid for all they really had to sell {Ti) . The real question is whether the deficiency is such as to be fairly capable of a money valuation (i) . It is said that where it is in the vendor's power to make good the description of the property, but not by way of money compensation, he can enforce the contract on condition of doing so, but not otherwise. A lot of building land (part of a larger estate intended to be sold together) was sold under restrictive conditions as to building, and in particular that no public-house was to be built; the purchaser assumed from the plan and particulars of sale^ and in the opinion of the Court with good reason, that the (1861) 27 Bearv. 430 (where it is left doubtful whether the purchaser could or could not have enforced the contract with compensation). Cp. D. 18. 1. de cont. empt. 22— 24, enunciating precisely the same principle as that applied by oujr courts of equity. Hanc legem Venditionis: 8i quid sacrl vel reli- ffiosi est, eius venit nihil, superva- cuam non esse, sed ad modica loca pertinere: ceterum si omne reli- giosum, vel sacrum, vel publicum venierit, nullam esse emptionem: and see eod. tit. 18, 40 pr. In Whittemore v. Whittemore (1869) L. R. 8 Eq. 603, a case of material deficiency in quantity, it was held that a condition of sale providing generally that errors of description should be only matter of compen- sation did apply, but another ex- cluding compensation for errors in quantity did not; so that on the 38 whole the purchaser could not re- scind, but was entitled to compen- sation . (^) Bailey v. Piper (1874) L. R. 18 Eq.683,43 L. J. Ch. 704; Hor- roehs v. Righy (1878) 9 Ch. D. 180, 47 L. J. Ch. 800, whez-e the moiety was so incumbered that the vendor in the result got nothing but an indemnity: Wheatley v. Slade (1830) 4 Sim. 126, 33 R. R. 100, is practically overruled by these cases. Similarly as to leasehold: Burrow v. Scammell (1881) 19 Ch. D. 175, 51 L. J. Ch. 296, where apparently Bailey v. Piper was overlooked. Maw v. Topham (1854) 19 Beav. 576, is distinguishable!, as there the purchaser knew or ought to have known that a good title could not be made to the whole. (i) See Dyer v. Margrave (1805) 10 Ves. at p. 507, 8 R. R. at p. 38. (2) 588 MISREPRESENTATION AND FRAUD. whole of the adjoining property would be subject to like restrictions. One small adjacent plot had in fact been reserved by the vendor out of the estate to be sold, bo that it would be free from restrictive covenants; but this did not sufficiently appear from the plan. The vendor sued for specific performance. It was held that he was entitled to a decree only on the terms of entering into a restrictive cove- nant including the reserved plot (fc) . But it is submitted that this and like cases might as well or better be dealt with by applying the older and simpler rule that the framer of an ambiguous description is justly held to the construction least favourable to himself. This third class of cases may be compared (though .not exactly) to a sale of goods subject to a condition or " war- ranty in the nature of a condition," so that the sale is " to be null if the affirmation is incorrect" (I). A purchaser who in a case falling under either of the last two heads exercises his option to rescind the contract may sue in the Chancery Division to have it set aside, and recover back in the same action any deposit and expenses already paid under the contract (w). And it seems that there is an independent right to sue in equity for the return of the deposit and expenses, at all events if there are any accom- panying circumstances to afford ground for equitable jurisdiction, such as securities having been given of which the specific restitution is claimed (n) . (Jc) Bashcomh \ . BecTcwith (l^^) (1853) 1 Sm. & G. 529; Torrance L. R. 8 Eq. 100, 38 L. J. Ch. v. Bolton (1872) L. R. 8 Ch. 118, 536. It does not appear that the 42 L,. J. Ch. 177. defendant objected to performance (») Aberaman Ironworks Co. v. on the terms he had undeiratood and Wickens (1868) L. R. i. Ch. 101, accepted. where the contract having been (J) Bannerman v. White (1861) rescinded by consent before the suit 10 C. B. N. S. 844, 31 L. J. C. P. was held not to deprive the Court 28, 128 E. R. 953. of jurisdiction.. (m) E.g. Stanton v. Tattermll SALES OP LAND : DUTY OF VENDOR. 589 To return to the more general question, it is the duty of the vendor to give a fair and unambiguous description of his property and title. He is therefore bound to disclose any material defect in the title or the property which is within his exclusive knowledge and not likely to be discovered by the purchaser with ordinary care (o) . And, notwithstanding the current maxim about simplex commetidatio, language of general commendation — such as a statement that the person in possession is a most desirable tenant — is deemed to include the assertion that the vendor does not know of any fact inconsistent with it. A contract obtained by describing a tenant as " most desirable " who had paid the last quarter's rent in instalments and under pressure has been set aside at the suit of the purchaser (p) . If the vendor does not intend to offer for sale an unqualified estate, the qualifica- tions should appear on the face of the particulars (g). In Torrance v. Bolton (r) an estate was offered for sale as an immediate reversion in fee simple. At the auction condi- tions of sale were read aloud from a manuscript, but no copy given to the persons who attended the sale. One of these conditions showed that the property was subject to three mortgages . The plaintiff in the suit had bid and become the purchaser at the sale, but without having, as he alleged, distinctly heard the conditions or understood their effect. (o) S,uoh as the existence of an Properti/ Corporation (1884) 28 award under a Building Act which Ch. Div. 7, 51 L. T. 718. imposes a future liability on the (?) Hughes v. Jones (1861) 3 D. owner: Carlish v. Salt [1906] 1 F. J. 307, 314, 31 L. J. Ch. 83. Aa Ch. 335, 75 L. J. Ch. 175. If a to the duty of disclosing restrictive defect of this kind is not so covenants: Ebsworth and Tidy's material as to be within the prin- Contract (1889) 42 Ch. Div. 23, 47, eiple of Flight v. Booth (p. 529, 51, 58 L. J. Ch. 665. above) non-disclosure is only mat- if) (1872) L. B. 8 Ch. 118, 42 ter for compensation: Shepherd v. L. J. Ch. 177; dist. Blaiberg v. Croft [1911] 1 Ch. 521, 80 L. J. Keeves [1906] 2 Ch. 175, 75 L. J. Ch. 170. ^^- 464, where a, genuine question (p) Smith V. Land and House of title was fairly disclosed. 590 MISREPRESENTATION ANb' FRAUD. The Court held that the particulars were misleading; that the mere reading out of the conditions of sale was not enough to remove their effect and to make it clear to the mind of the purchaser what he was really buying; and that he was entitled to have the contract rescinded and his deposit returned. Mere silence as to facts capable of influencing a buyer's judgment, but not such as the seller professes .or undertakes to communicate, is not of itself any breach of duty (s). A misleading description may be treated as a misrepresen- tation even if it is in terms accurate: for example, where property was described as "in the occupation of A." at a certain rental, and in truth A. held not under the vendor, but under another person's adverse possession (t), or where immediate possession is material to the purchaser, and the tenant holds under an unexpired lease for years which is not disclosed (u). A misleading statement or omission made by mere heedlessness or accident may deprive a vendor of his right to specific performance, even if such that a more careful buyer might not have been misled (v) . All this proceeds on the supposition that the vendor's property and title are best known to himself, as almost ■always is the case. But the position of the parties may be reversed: a person who has become the owner of a property he knows very little about may sell it to a person well acquainted with it, and in that case a material misrepresenta- tion by the purchaser makes the contract voidable at the vendor's option (x) . So it is where the purchaser has done (s) Ooahs V. Boswell (1886) 11 Ch. Div. 588, 49 L. J. Ch. 775. App. Ca. 232—235. (a;) Haygarth v. Wearing (1871) (0 Lachlan v'. Reynolds (1853) L. E. 12 Eq. 320; 40 L. J. Ch. Kay 52, 23 L. J. Ch. 8, 101 E. E. 775 (where an executed conveyance 523. was set aside, but as to this see pp. («) Cahallero v. Henty (1874) 592, 593, below). Cp. the Indian L. E. 9 Ch. 447, 43 L. J. Ch. 635. Transfer ot Property Act, 1882, s. («) Jones V. Rimmer 1880) 14 55. SALES OF LAND : DUTIES OF VENDOR AND PURCHASER. 591 acts unknown to the vendor which alter their position and rights with reference to the property: as where there is a coal mine under the land and the purchaser has trespassed upon it and raised coal without the vendor's knowledge; for here the proposed purchase involves a buying up of rights against the purchaser of which the owner is not aware {y) . On a sale under the direction of the Court a person offer- ing to buy is not under any extraordinary duty of disclosure . It is not the law " that, because information on some mate- 'rial point or points is offered, or is given on request, by a purchaser from the Court, it must therefore be given ion all others as to which it is neither offered nor requested, and \concerning which there is no implied representation, positive or negative, direct or indirect, in what is actually stated " {z). Vendors of land may, and constantly do in practice, sell under conditions requiring the purchaser to assume particular states of fact and title. But such conditions must not be misleading as to any matter within the vendor's know- ledge (a). "The vendor is not at liberty to require the purchaser to assume as the root of his title that which docu- ments within his possession show not to be the fact, even though those documents may show a perfectly good title on another ground:" and if this is done even by a perfectly innocent oversight on the part of the vendor or his advisers, specific performance will not be enforced (6). A special {y) PkUlips V. Eom/rny (1871) thinks them unfounded). Jj. R. 6 Ch. 770, 779. (*) Sroad v. Munton (1879) 12 ' (-) Coaks V. Bosv)ell (1886) 11 Ch. Div. 131, per Cotton L.J. at p. App. Ca. 232, 440, 55 L. J. Ch. 149, 48 L. J. Ch. 837: whether this 761, revg. s. o. 27 Ch. Div. 424, would be suiEoient ground for re- mainly on the facts. soinding the contract, qumre, per (ff) Heywood v. MaltaJAeu (1883) Jessel M,.R. 12 Ch. Div. at p. 142; 25 Ch. D. 357, 53 L. J. Ch.,492 Nottingham Brick do. v. Butler (definite adverse claims known to a (1886) 16 Q. B. Div. 778, 55 L. J. vendor must be disclosed even if he Q. B. 280, where the vendor's 692 MISREPRESENTATION AND FRAUD. condition limiting the time fol" which title is to be shown must be fair and explicit, and "give a perfectly fair description of the nature of that which is to form the root of title "(c). The House of Lords decided in Wilde v. Gibson (d) that the vendor's silence as to a right of way over the property, of the existence of which he was not known to be aware, was no ground for setting aside the contract. This reversed the decision of Knight Bruce V.-C. (e), who held that the silence of the particulars taken together with the condition of the property (for the way had been enclosed) amounted to an assertion that no right of way existed. In any view it seems an extraordinary, not to say dangerous, doctrine to say that a vendor is not bound to know his own title, so far at least as with ordinary diligence he may know it; and the case was severely criticized by Lord St. Leonards (/). The Irish case relied on by the Lords as a direct authority may be distinguished on the ground that the representation there made by the lessor that there was no right of way was made not merely with an honest belief, but with a reasonable belief in its truth (g). Lord Campbell said that a court of equity will not set aside solicitor erroneously denied the (e) S. C. nom. Gibson v. D'Este existence of restrictive covenants (1843) 2 Y. & C. 542, 60 R. R. 262. contained ifl. deeds prior to those (/) Sugd. Law of Property, 614, which he had read. Cf. L. Q. R. 637, &c. ii. 414, 415. (gr) Indeed the Court seems to (c) Re Marsh and Earl GranvUle have thought it was true, notwith- (1883) 24 Ch. Div. 11, 22, 53 L. 3. standing the adverse result of an Ch,. 81, where the purchaser was indictment for stopping the alleged held not bouhd to accept as the public way. Leggev.Crolcer (1811) commencement of title a voluntary 1 Ball & B. 506; 12 R.R.49i, Sugd. deed not stated in the contfact to op. oit. 657. In Wilde v. Oihsdn be such. the purchaser's case was unfortu- (rf) (1848) 1 H. L. C. 605, 73 nately prejudiced by the introduc- R. R. 191, and see note on S. C. tion of a charge of actual fraud below, nom. Gibson v. D'Este, 60 which was abandoned in argument. R. R. 263. SALES OF LAND: DUTIES OP VENDOK AND PURCHASER. 593^ an executed conveyance on the ground of misrepresentation or concealment, but only for actual fraud Qh) : this dictum has not been uniformly followed, but the latest authority {i) does follow it. As a general result of the authorities there seems to be no- doubt that on sales of real property it is the duty of the party acquainted with the property to give substantially correct information at all events to the extent of his own actual knowledge (k), of all facts material to the description or title of the estate oSered for sale, but not of extraneous facts affecting its value: the seller, for example, is not bound to tell the buyer what price he himself gave for the property (I) . The general rule seem's not applicable as between lessor and lessee, where the letting is for an occupation by the lessee himself, and so far as concerns any physical fact which can be discovered by inspection ; for in ordinary circumstances the landlord is entitled to assume that the tenant will go and look at the premises for himself, and therefore is not bound to tell him if they are in bad repair or even ruinous (w). (A) 1 H. L. C. 632. because of his neglect; not, there- (j) Seddon v. North Eastern Salt fore, by reason of any such sweep- Co. [1905] 1 Ch. 326, 74 L. J. Ch. ing rule as asserted by Lord Camp- 199, and see per Cotton L.J. in bell: 1 K. & J. 291. 8(yper v. Arnold (1887) 37 Cli. Div. (A) ^eeJoUfe M.Baker (1883) 11 96, 102, 57 L. J.Ch. 145. May garth Q. B. Div. 255, 52 L. J. Q. B. 609, V. Wearing (1871) L.E. 12 Eq. 320, but that case is of little authority,, 40 L. J. Ch. 577, and Hart v. if any, on the question of contract ; Swaine (1877) 7 Ch. D. 4|2, 47 L. J. see per A. L. Smith J. in Palmer Ch. 5, are oomira. In M'Culloch v. v. Johnson (1884) 12 Q. B. D. at Gregory (1855) 1 K. & J. p86, p. 37, explaining his own part in 24 L. J. Ch. 246, 103 E. E. 86, Jolife v. Baher. Neither vendors where a will was misstated in the nor their solicitors are bound to abstract so as to conceal a defect of answer a general inquiry as to non- title, but the purchaser omitted to apparent incumbrances: He Ford examine the originals. Wood V.-C. and Hill (1879) 10 Ch. Div. 365. said that "if the conveyance had (I) 3 App. Ca. 1267. been executed, the purchaser must (m) Keates v. Earl Cadogan have taken all the consequences" (1851) 10 C. B. 591, 20 L. J. C. P. 594 MISREPRESENTATION AND FRAUD. D. Family Settlements. In the negotiations for family settlements and compromises it is the duty of the parties and their professional agents not only to abstain from misrepresentations, but to com- municate to the other parties all material facts within their knowledge affecting the rights to be dealt with.; The omission to make such communication, even without any wrong motive, is a ground for setting aside the transaction. " FuU and complete communication of all material circumstances is what the Court must insist on"(ra). "Without full disclosure honest intention is not sufficient," and it makes no difference if the non-disclosure is due to an honest but mistaken opinion as to the materiality or accuracy of the information withheld (o). The operation of tliis rule is not affected by the leaning of equity, as it is called, towards supporting re-settlements and similar arrangements for the sake of peace and quietness in families {p) . E. Partnership, Contracts to take Shares in Oompanies, and Contracts of Promoters. The contract of partnership is always described as on,a in which the utmost good faith is required. So far as this principle applies to the relations of partners after the partner- ship is formed, it belongs to the law of partnership as a/ special and distinct subject; and in fact the principle is worked out in definite rules to such an extent that it is seldom 76, 84 R. R. 715. The general rule gossip on the chance of there being does apply as to matters of title: something in it. Probably the test Mostyn v. We^t Mostyn Coal, $c. is (as in the case of marine insur- Co. (1876) 1 C. P. D. 145, 45 ance, pp. 574, 575, above) whether L. J. C. P. 401. the judgment of a reasonable maji («) Gordon v. Gordon (1816-9) would be afjented. Cp. Eeywood 3 Sw. 400, 473, 19 R. R. 241, 242. ■ v. Mallalieu (1883) 25 Ch. D. 357, (o) lb. 477, 19 R. R. 244. How 53 L. J. Oh. 492. far does this go? It can hardly (p} lb.; Fane v. Fane (1876) be a duty to communicate mere L. R. 20 Eq. 698. PARTNERSHIPS AND COMPANIES. 595 ai^pealed to in its general form. But it also applies to the transactions preceding the formation of a partnership, or rather its full and apparent constitution. For example, an intending partner must not make a private profit out of a dealing undertaken by him on behalf of the future firm (g). There is little or no direct authority to show that a person inviting another to enter into partnership with him is bound ■ not only to iibstain from mis-statement, but to disclose every- thing within his knowledge that is material to the prospects of the undertaking. But the existence of such a duty (the precise extent of which must be determined in each case by the relative position and means of knowledge of the parties) is postulated by the stringent rules which have been laid down as binding on the promoters of companies. These are expressed with the more strictness, inasmuch as the public to whom promoters address themselves are for the most part not versed in the particular kind of business proposed, but are simply persons in search of an investment for their money, and with slight means at hand, if any, of verifying the statements made to them. " The public," it is said, " who are invited by a prospectus to join in any new adventure, ought to have the same opportunity of judging of everything which has a material bcuring on its true character as the promoters themselves possess " (r): and those who issue a prospectus inviting people to take shares on the faith of the representations therein contained are bound " not only to abstain from stating as fact that which is, not so, but to omit no one fact, within their knowledge the existence of which might in any degree affect (?) Lindley on Partnership, 377 ; tract of partnership there would be Fatvcett v. Trhitehouse (1829) 1 no duty at all. Euss. &M. 132,, 32 E. E. 163. Yet (r) Lord Chelmsford in Central the duty is incident, not precedent, i?y. Co. of ' Venezuela v. Kiseh to the contract of partnership; for (1867) L. R. 2 H. L. 99, 113, 86 if there were not a complete con- L. J. Ch. 849. 696 MISREPRESENTATION AND FRAUD. the nature or extent or quality of the privileges and advan- tages which the prospectus holds out as an inducement to take shares" (s). Therefore if untrue or ^misleading repre- sentations are made as to the character and value of the property to be acquired by a company for the purposes of its operations (t), the privileges and positions secured to it, the amount of capital (m), or the amount of shares already subscribed for (a;), a person who has agreed to take shares on the faith of such representations, and afterwards discovers- the truth, is entitled to rescind the contract and repudiate the shares, if he does so within a reasonable time and before a winding-up has given the company's creditors an inde- feasible right to look to him as a contributory. For full information on this subject the reader is referred to Lord Lindley's treatise (y) . There is likewise a fiduciary relation between a promoter and the company in its corporate capacity, which imposes on the promoter the duty of full and fair disclosure in any trans- action with the company, or even with persons provisionally representing the inchoate company before it is actually formed (2) . Promoters who form a company for the purpose (s) Kindersley \.-C. New Brans- 7 Ch. 55, 41 L. J. Ch. 1; lloore ^■ wick, 4-c. Co. V. Mugfferidge (1860) Se la Torre's case (1874) L. R. 18 1 Dr. & Sra. 363, 381, 30 L. J. Ch. Eq. 661, 43 L. J. Ch. 751 242, adopted by Lord Chelmsford, (y) Lindley on Companies, 72, I. c. 589, sqq. Mere communioation to (0 Reese River Silver Mining the company is not a, sufficient re- Co. V. Smith (1869) L. R. 4 H. L. pudiation. The shareholder must 64, 39 L. J. Ch. 849, affg. s. c.nom. do something to alter his status Smith's Case (1867) L. R. 2 Ch. as a member: per lindley L.J. 604. As to a company's responsi- Re Scottish Petroleum Co. (1883) 23 bility for statements made in good Ch. Div. 435. The critical date is faith in express reliance on an ex- that of the petition, not the order, pert report see Re Pacaya, ^c. Co. in the winding-up: Whiteley's case [1914] 1 Ch. 542, 83 L. J. Ch. 432. [1899] 1 Ch. 770, 68 L. J. Ch. 365. (m) Central Ry. Co. of Venezuela («) Neiv Sombrero Phosphate Co. V. Kisch, supra. v. Erlanger (1877) 5 Ch. Div. 73, {x) Wright's Case (1871) L. R. per James L.J. at p. 118, 46 L. J. COMPANIES ACT, 1908. 597 ■of buying their property are not entitled to deal with, that company as a stranger (a) . They must either provide it with " a board of directors who can and do exercise an independent and intelligent judgment on the transaction " (&) or give full notice that the directors are not independent; there may be cases in which all the original members of the company necessarily have such notice (c). " The old familiar principles of the law of agency and of trusteeship have been ■extended and very properly extended to meet such cases" (d). A shareholder may be entitled to rescind his contract with the company on the ground of a material misrepresentation in a preliminary prospectus issued by promoters before the company was formed (e). The Companies (Consolidation) Act, 1908, repealing and superseding the Companies Act, 1900, enacts that every company prospectus " must state " a number of specified particulars . It would, therefore, seem that any mis-statement or omission, with knowledge of the facts (/), of any of these particulars will be treated as fraudulent, and that all and every of them are conclusively declared to be material. Any liability under the general law is expressly saved (g), so that the established case-law remains fuUy applicable. It would be useless to enter upon further details here; nor are Ch. 425; affd. in H. L. nom. Phosphate Co. (ISIS) Z App. Ca. at Brlanger v. New Sombrero Phos- p. 1268. phate Co. (1878) 3 App. Ca. 1218, (S) lb. at pp. 1229, 1236, 1255. 48 L. J. Ch. 73; Bagnall v. Carlton (e) Lagun-as Nitrate Co. v. La- (1877) 6 Ch. Div. 371, 47 L. J. Ch. ywws Synd. [1899] 2 Ch. 392, 68 30; and see the whole subject (the L. J- Ch. 699, O. A details of which belong to company («?) Sydney, %o. Co. v. Bird law) discussed in Lagunas Nitrate (1886) 33 Ch. Div. 85, 94. Co. V. Lagunas Synd. [1899] 2 Ch. (e) Re Metropolitan Coal Oon- 392 68 ~L. J. Ch. 699, C. A; Leeds .Humers' Assn.,Karberg's case[1892] and Hanley Tlieatres of Varieties 3 Ch. 1, 61 L. J. Ch. 741, O. A. [1902] 2 Ch. 809, 72 L. J. Ch. 1, (/) See the exception in s. 81, ,Q ^ sub-s. 6. (a) Erlanger v. New Sombrero (ff) Sub-8. 9. 598 MISREPRESENTATION AND FRAUD. we concerned with the question whether a right of action in tort is given by implication to persons who may suffer damage from the directions of the Act not being regarded. The Companies (Consolidation) Act, 1908, s. 84 (h),, imposes a special responsibility on directors and promoters for the accuracy, to the extent of their means of knowledge, of statements made in prospectuses. This however is rather ex delicto than ex contractu. Contract to marry. — Thus much of the classes of contracts to which special duties of this kind are incid'ent. The absence bf any such duty in other cases is strongly exemplified by th3 contract to marry. Here there is no obligation of dis- closure, except so far as the woman's chastity is an implied condition. The non-disclosure of a previous and subsisting engagement to another person (i) 6r of the party's own pre- vious insanity (fc), is no answer to an action on the promise. If promises to marry are to give a right of action one would think the contract should be treated as one requiring the utmost good faith: but such are the decisions. Marriage itself is not avoided even by actual fraud (Z), but the reasons for this are obviously of a different kind: nor is a m&riage settlement rendered voidable by the wife's non- disclosure of previous misconduct (m) . (A) Replacing the Directors' Lia- "procurics the appearance without bility Act, 1890, passed to mitigate the reality oi consent," per Sir the mischievous consequences of F.H.Jeune. Some of thelanguage Serry i. Feeh (1889) 14 App. Ca. used in S'Oott v. Sebriffht (1886) 12 337, 58 L. J. Ch. 864. P. D. 21, 23, a decision on very (*) Beachey v. Brown (1860) peculiar facts held to come within E. B. & E. 796,, 29 L. J. Q. B. 105, this last-mentioned category^ can- 113 R. R. 892. not be supported. (Jc) Bakery. Cartwriffht(l?iGV) 10 (m) Evans v. Carringttm (1860) C. B. N. Si. 124, 30 L. J. C. P. 364, 2 D. P. J. 481, 30 L. J. Ch. 364, 128 R. R. 640. 129 R. R. 158. It is there said (J) Moss V. Moss [1897] P. 263, however that non-disclosure of 269, 66 L. J. P. 154. Fraud is adultery would be enough to avoid material only when it is such as a separation- deed. FRAUD OR DECEIT. 599 Some recent writers are of opinion that, according to the modern rule of equity, contracts of evevy kind are liable to be avoided by innocent misrepresentation of any material fact, whether or not within the knowledge of the party making the representation more than of the other. With unfeigned respect for those learned authors, we have been unable to find any positive authority which goes that length (n) . It is conceived however that their wider form of statement would lead to very little difference in practical results. As to voluntary- gifts the rule is that a gift obtained by a misrepresentation of fact made, however innocently, by the donee, may be recovered back by the donor on the discovery of the mistake. Such gifts must be regarded as conditional on the truth of the representation (o) . Pakt 3. — Fraud or Deceit. Fraud generally includes misrepresentation. Its specific mark is the presence of a dishonest intention on the part of him by whom the representation is made or of recklessness equivalent to dishonesty. In this case we have a mistake of one party caused by a representation of the other, which representation is made by deliberate words or conduct with the intention of thereby procuring consent to the contract, and without a belief in its truth. («) Anson, p. 188: "Innocent ject-matter. Harriman,p.252: "A misrepresentation which brings false representation by one party about a contract is now a ground in regard to a material fact made for setting the contract aside, and for the purpose of inducing the this rule applies to contracts of other party to enter into a con- every description," cp. p. 191. tract, and actually inducing the But we know of no reported case in latter to enter into the contract, which such a rule has been applied renders the contract voidable: " to a contract outside the special No authority is given, classes dealt with above, and the (o) ReGlubb,Bttmfieldir. Rogers dicta cited by Sir W. Anson must [1900] 1 Ch. 354, 69 L. J. Ch. 278, be taken as qualified by their sub- C. A. 600 MISREPRESENTATION AND FRAUD. There are some instances of fraud, however, in which one can hardly say there is a misrepresentation except by a forced use of language . It is fraudulent to enter into a contract with the design of using it as an instrument of wrong or deceit against the other party. Thus a separation deed is fraudu' lent if the wife's real object in consenting or procuring the husband's consent to it is to be the better able to renew a former illicit intercourse which has been concealed from him. " None shall be permitted to take advantage of a deed which they have fraudulently induced another to execute that they may commit an injury against morality to the injury and loss of the party by whom the deed is executed " {p). So it is fraud to obtain a contract for the transfer of property or possession by a representation that the property wiU be used for some lawful purpose when the real intention is to use it for an unlawful purpose {q) . It has been said that it is not fraud to make a contract without any intention of performing it, because peradventure the party may think better of it and perform it after all: but this was in a case where the question arose wholly on the form of the pleadings, and in a highly technical and now happily impossible manner (r) . And both before and since it has repeatedly been considered a fraud in law to buy goods with the intention of not paying for them (s). Here it is obvious that the party would not enter (p) Evans v. Carrington (1860) trespass by the party defrauded. 2 D. F. J. 481, 501, 30 L. J. Ch. (r) Hemingway v. Hamilton, 364, 129 R. R. 158; cp. Evans v. (1838) 4 M. & W. 115, 51 E. R. Edmonds (1853) 13 0. B. 777, 22 497. It is by no means clear that L. J. C. P. 211, 93 R. R. 732, the Court really meant to go so far : where, however, express represen- see Pref. to 51 R. R. tation was averred. (s) Fergusonv. Carrington (1829) (?) Feretv.Hill (1854) 15 C. B. 9 B.&C.59; Load v. Green (1846) 207, 23 L. J. C. P. 185, 100 R.R. 318, 15 M. & W. 216, 15 L. J. Ex. 113, concedes this, deciding only that 71 E. R. 627; White v. Garden possession actually given under the (1851) 10 C. B. 919, 923, 20 L. J. contract cannot be treated as a mere 0. P. 166, 84 E. R. 846, 849 ; Clough FRAtID OR DECEIT. 601 into the contract if he knew of the fraudulent intention : but the fraud is not so much in the concealment as in the character of the intention itself. It would be ridiculous to speak of a duty of disclosure in such cases. Still there is ignorance on the one hand and wrongful contrivance on the other, such as to bring these cases within the more general description of fraud given above (p. 477). The party defrauded is entitled, and in modern times has always been entitled at law as well as in equity, to rescind the contract. " Fraud in all courts and at all stages of the trans- action has, I believe, been held to vitiate all to which it attaches " (t). We shall now consider the elements of fraud separately: and first the false representation in itself. It does not matter whether the representation is made by express words or by conduct, nor whether it consists in the positive assertion or suggestion of that which is false, or in the active concealment of something material to be known to the other party for the purpose of deciding whether he shall enter into the contract. These elementary rules are so fully settled that it wiU suffice to give a few instances. There may be a false statement of specific facts: this seldom occurs in a perfectly simple form. Canham v. Barry (u) is a good example. There the contract was for the sale of a leasehold. The vendor was under covenant with his lessor not to assign without licence, and had ascer- tained that licence would not be refused if he could find an v.i. # N. W. liy.Co. (1871) L.E. of the Debtors Aot, 1869: Ex parte 7 Ex. 26, 41 L. J. Ex. 17; Exparte Brett (1875) 1 Ch. Div. 151, 45 L. Whittaker (1875) L. R. 10 Ch. 446, J. Bk. 17. 449, per MelUsh I>.J. 44 L. J. Bk. (0 Per Wilde B. Udell v.Ather- 91; Donaldson v. Farwell (1876) 93 ton (1861) 7 H. & N. at p. 181, 30 U. S. 631. But it is not such L. J. Ex. 337, 126 E. R. 390. a "false representation or other («) (1855) 15 C. B. 597, 24L,.J. fraud" as to constitute a mis- C. P. 100, 100 R. R. 503. demeanor under s. 11, sub-a. 19 602 MISEEPEESENTATION AND FRAUD. eligible tenant. The agreement was made for the purpose of one M. becoming the occupier, and the purchaser and M. represented to the vendor that M. was a respectable person and could give satisfactory references to the/ landlords, which was contrary to the fact. This was held to be a fraudulent misrepresentation of a material fact such as to avoid the contract. A more frequent case is where a person is induced to acquire or become a partner in a business by false accounts of its position and profits (x). Or the representation may be of a general state of things: thus it is fraud to induce a person to enter into a particular arrangement by an incorrect and unwarrantable assertion that such is the usual mode of conducting the kind of business in hand (y) . How far it must be a representation of existing facts will be specially considered. " Active concealment " seems to be the appropriate de- scription for the following sorts of conduct: taking means appropriate to the nature of the case to prevent the other party from learning a material fact — such as using con- trivances to hide the defects of goods sold : or making a state- ment true in terms as far as it goes, but keeping silence as to other things which if disclosed would alter the whole effect of the statement, so that what is in fact told is a half truth equivalent to a falsehood (z) : or allowing the other party to proceed on an erroneous belief to which one's own acts have contributed (a) . It is sufficient if it appears that the one («) JE.g. Mawlms v. Wickham 6 H. L. 392, 403, 43 L.J.Ch. 19; (1858) 3 De G. & J. 304, 28 L. J. Stewart v. Wyoming Ranche Co. Ch. 188, 121 R. R. 134. The cases (1888) 128 U. S. 383, 388. where contracts to take shares have (a) Hill v. Gray (1816) 1 Stark. been held voidable for misrepre- 434, 18 B. R. 802, as explained in Bentation in the prospectus are of Keates v. Barl Cadogan (1851) 10 the same kind. 0. B. 591, 600, 20 L. J. C. P. 76, {y) ReyneUy.SpryeiV&hl^XT). 84 R. R. 715, 718; qu. if the M. G. at p. 680, 21 L. J. Ch. 633, explanation does not really over- 91 R. R. 244. rule the particular decision, per (z) Peek V. Gurney (1873) L. R. Lord Chelmsford,L. R.6 H. L. 391. FRAUD OR DECEIT : KNOWLEDGE OF UNTRUTH. 603 party knowingly assisted in inducing the other to enter into the contract by leading him to believe that which was known to be false (b). Thus it is where one party has made an innocent misrepresentation, but on discovering the error does nothing to undeceive the other (c) . If, when he has better knowledge, he does not remove the error to which he con- tributed in excusable ignorance, he is no longer excused. In effect he is continuing the representation with knowledge of its falsity. That which gives the character of fraud or deceit to a representation untrue in fact is that it is made without positive belief in its truth; not necessarily with positive knowledge of its falsehood. Where a false representation amounts to an actionable wrong, it is always in the party's choice, as an alternative remedy, to seek rescission of the contract, if any, which has been induced by the fraud: and it is settled that a false representation may be a substantive ground of action for damages though it is not shown that the person making the statement knew, it to be false . It is enough to show that he made it as being true within his own know- ledge, with a view to secure some benefit to himself, or to deceive a third person, and without believing it to be true (d) . Mere ignorance as to the truth or falsehood of a material assertion which turns out to be untrue must be treated as equivalent to knowledge of its untruth. "If persons take upon themselves to make assertions as to which they ara ignorant whether they are true or untrue, they must in a (6) Per Blackburn J. ieev.7o»es equity and common law see per (1863) 17 C. B. N. S. at p. 507, 34 Bowen L.J. in Newbigffingr v. Adam L. J. 0. P. at p. 140, 142 R. R,. (1886) 34 Ch. Div. at p. 594, 56 at p. 484. L. J- Ch. 275. (c) Meynell y.Sprye (1852) 1 D. {d) Taylory.Ashton (IMS) 11 M. M. G. at p. 709; liedr/ravev.IIurd & W. 401, 12 L. J. Ex. 363, 63 (1881) 20 Ch. Div. at pp. 12, 13, R. R. 635; Hvans v. Edmonds 51 L. J. Ch. 113, but aa to tha (1853) 13 C. B. 777, 22 L. J. C. P. difference there assumed between 211, 93 R. R. 732. 39 (2) 604 MISEEPRESENTATION AND FRAUD. civil point of view be held as responsible as if they had asserted that which they knew to be untrue " (e). In other words, wilful ignorance may have the same consequences as fraud (/) . So may ignorance which, though not wilful, is reckless: as when positive assertions of fact are made as if founded on the party's own knowledge, whereas in truth they are merely adopted on trust from some other person. The proper course in such a case is to refer distinctly to the authority relied upon {g) . However it is now settled in England that the want of any reasonable grounds for belief in one's assertion is evidence, but only evidence, that it was uttered without any real belief (A). (e) Per Lord CaiTuaReese River Silver Mining Co. v. Smith (1869) L. E. 4 H. L. 79; Rawlins v. TVickham (1858) 3 De G. & J. 304, 316, 28 L. J. Ch. 188. At common law the same rule was given hy Maule J. in Evans v. Edmonds (1853) 13 C. B. 777, 786, 22 L.J. C. P. 211, 93 E. E. 732, 739. "I conceive /tliat if a man having no knowledge whatever on the sub- ject takes upon himself to repre- sent a certain state of facts to exist, he does so at his peril; and if it be done either with a view to secure some benefit to himself or to deceive a third person, he is guilty of a fraud, for he takes upon himself to warrant his own belief of the truth of that which he so asserts." In Lehigh Zino and Iron Co. v. Bamford (1893) 150 U. S. 665, 673, the Supreme Court of the United States ap- proved a statement of the Court below which was, "in substance, that a person who makes represen- tations of material facts, assuming or intending to convey the impres- sion that he has actual knowledge of the existence of such facts, when he is conscious that he has no such knowledge, is as much responsible for the injurious consequences of such representations to one who believes and acts upon them as if he had actual knowledge of their falsity; that deceit may also be predicated of a vendor or lessor who makes material untrue repre- sentations in respect to his own business or property for thepurpose of their being acted upon, and which are in fact relied upon by the purchaser or lessee, the truth of which representations the vendor or lessor is bound aijd must be presumed to know." (/) Owen v. lioman (1853) 4 H. L. C. at p. 1035, 94 E. E. 530. {g) Rawlins v. Wiohham (1858) 3 De G. & J. at p. 313, Smith's case (1867) 2 Ch. at p. 611. {h) Berry V. Peek (1889) 14 App. Ca. 337, 68 L. J. Ch. 864. As to the criterion of reasonable belief see Adams v. Thrift [1915] 2 Ch. 21, 84 L. J. Ch. 729, C. A. FRAUiD OE DECEIT : KNOWLEDGE OF UNTRUTH. 605 Silence is equivalent to misrepresentation for these purposes if "the withholding of that which is not stated makes that which is stated absolutely false," but not otherwise (i). If a man expects, however honestly, that a certain state of things will shortly exist, he is not thereby justified in asserting by words or conduct that it does now exist, and any such assertion, if others have acted on the faith of it to their damage, ought to be a ground of action for deceit, and is of course ground for rescinding any contract .obtained by its means. A stranger who accepts a bill as agent for the drawee on the chance of his ratifying the acceptance (j) acts at his peril. But we have learnt from the House of Lords that directors of a tramway company may say they have statutory authority to use steam power when they only expect to obtain a consent which the statute requires (fc). Repre- sentations of this kind, which deliberately discount the future, seem to be of a different kind from statements honestly made on erroneous information of existing facts; for they are in their nature incompatible with belief in the truth of the assertion which is actually made. This distinction is not always clearly brought out in the authorities. The application of the doctrine of fraud to sales by auction is peculiar. The courts of law held the employment of a puffer to bid on behalf of the vendor to be evidence of fraud in the absence of any express condition fixing a reserve price or reserving a right of bidding; for such a practice is incon- sistent with the terms on which a sale by auction is assumed to proceed, namely that the highest bidder is to be the purchaser, and is a device to put an artificial value on the thing offered for sale (^). There existed, or was supposed («) Peek V. Gurnev (IS/S) L. E. B. & Ad. 114, 37 E. E. 344. 6 H. L. 377, 390, 403, 43 L. J. {k) See note (A), last page. Ch. 19. (0 Green v.Baverstock (1863)14 (/) PolhiU V. Walter (1832) 3 C. B. N. S. 204, 32 L. J. C. P. 181. 606 MISREPRESENTATION AND FRAUD. to exist (m), in courts of equity the different rule that the employment of one puffer to prevent a sale at an undervalue was justifiable {n), with the extraordinary result that in this particular case a contract might be valid in equity which a court of law would treat as voidable on the ground of fraud. The Sale of Land by Auction Act, 1867 (30 & 31 Vict. c. 48), assimilated the rule of equity to that of law (o) . Marriage is to some extent an exception to the general rule: but marriage, though including a contract, is so much more than a contract that the exception is hardly a real one. The English rule is that " unless the party imposed upon has been deceived as to the person and thus has given no consent at all [or is otherwise incapable of giving an intelligent consent], there is no degree of deception which can avail to set aside a contract of marriage knowingly (p) made " {q). Still less is a marriage rendered invalid by the parties or one of them having practised a fraud on the persons who performed the ceremony or the authorities of the State in whose jurisdiction it was performed. Where a marriage had been celebrated in due form by Roman ecclesiastics at Rome between two Protestants, who had previously made a formal abjuration (the marriage not being otherwise possible by the law of the place as it then was), it was held immaterial whether the abjuration had been sincere or not, (ni) Doubt waa thrown upon it that it is not a marriage but a in Mortimer \.Bell (1865) L. E. 1 betrothal; though in this country Ch. 10, 16, 35 L. J. Ch. 25. such a case must obviously be very («) Smith V. Olarhe (1806) 12 rare: Ford: v. Stier [1896] P. 1, Ves. 477, 483, 8 R. R. 359, 363; 65 L. J. P. 13. Here there is no Flint V. Woodin (1852) 9 Ha. 618, such knowledge as is required for 89 R. R. 602. real consent. (o) The Indian Contract Act (s. (?) Stvift v. Kdly (1835) 3 123) adopted the rule of the com- Knapp, 257, 293, 40 R. R. 22, 48; mon law some years later. Moss v. Moss [1897] P. 263, 66 {p) A ceremony of marriage may L.J. P. 154, and as to the diiEferent be inoperative if the woman is views held in America and else- tricked into it by representations where, see [1897] P. 273 sqq. FRAUD IN RELATION TO THIRD PARTIES. 607 though as to the woman there was strong evidence to show that it was not (r) . We may observe in this place that when the consent of a third party is required to give complete effect to a transaction between others, that consent may be voidable if procured by fraud, and the same rules are applied, so far as applicable, which determine the like questions as between contracting parties . Thus where the approval of the directors is necessary for the transfer of shares in a company, a false description of the transferee's condition, such as naming him " gentleman " when he is a servant or messenger, or a false statement of a consideration paid by him for the shares, when in truth he paid nothing or was paid to execute the transfer, is a fraud upon the directors, the object being to mislead them by the false suggestion of a real purchase of the shares by a man of independent position ; and on a winding-up the Court will replace the transferor's name on the register for the purpose of making him a contributory (s). (»-) Swift V. Kelly (1835) 3 case (1869) and Williams' case Knapp, 257, 40 R. R. 22. (1869) L. R. 9 Eq. 223; Lindley («) Ex parte Kintreci.i\%&^yh.'^. on Companies, 827. 5 Ch. 95, 39 L.J.Ch.l93; Payne's ( 608 ) CHAPTEE XI. The Right of Eescission. We have now to examine a class of conditions which apply indifferently, or very nearly so, to cases of simple misrepre- sentation (that is, where the truth of a representation is in any way of the essence of a contract) and cases of deceit. Some of them, indeed, extend to all contracts which are or have become voidable for any cause whatever. The questions to be dealt with may be stated as follows: What must be shown with regard to the representation itself to. give a right to relief to the party misled ? What is the extent of that right, and within what bounds can it be exercised ? In 1888 the Supreme Court of the United States (a) thus summed up the points which a plaintiff in an action for the rescission of a contract must establish: — 1. That the defendant has made a representation in regard to a material fact; 2. That such representation is false; 3. That such representation was not actually believed by the defendant (6) to be true; 4. That it was made with intent that it should be acted upon; 5. That it was acted on by complainant to his damage; (a) Southern Development Co. v. as we have seen (pp. 604, 605, Silva, 125 U. S. 247, 250. above), has decided otherwise for (6) The Court adds, on reason- England, able grounds. The House of Lords, REPRESENTATIONS OF FACT OR OTHERWISE. 609 6. That in so acting on it the complainant was ignorant of its falsity and reasonably believed it to be true . 1. As to the representation itself. A. It must (except, it would seem, in a case of actual fraud) be a representation of fact, as distinguished on the one hand from matter of law, and on the other hand from a matter of mere opinion or intention. As to the first branch of the distinction, there is authority at common law that a misrepresentation of the legal effect of an instrument by one of the parties to it does not enable the other to avoid it (c) . And in equity there is no reason to suppose that the rule is otherwise, though the authorities only go to this extent, that no independent liability can arise from a misrepresentation of what is purely matter of law (d) . But this probably does not apply to a deliberately fraudulent mis-statement of the law(e). The circumstances and the position of the parties may well be such as to make it not imprudent or unreasonable for the person to whom the state- ment was made to rely on the knowledge of the person making it: and it would certainly work injustice if it were held necessary to apply to such a case the maxim that every one is presumed to know the law. The reason of the thing seems to be that in ordinary cases the law is equally accessible to both parties, and statements about it are equally verifia!ble by both, or else are in the region of mere opinion. But there is no need to extend this to exceptional cases. At all events (c) Lewis V.Jones (1825) 4 B.& 102, 130, 41 L. J. Ck. 804, 44 ib.lO C. 506, 28 R. R. 360. Not so if (the House of Lords held there was the actual contents or nature of the no misrepresentation at all) . instrument are misrepresented, as (e) Hirschfeld y. London, Brigh- we saw in Ch. IX. ton, ^- South Coast Ry. Co. (1876) {cT) Rashdall v. Ford (1866) 2 Q. B. D. 1, 46 L. J. Q. B. 1; L. R. 2 Eq. 750, 35 L. J.Ch. 769; Bowen L.J. in West London Com- Beattie v. Lord Ebury (1872) meroial Bank v. Kitson (1884) 13 L. R. 7 Ch. 777, 802, L, R. 7 H. L. Q. B. Div. at p. 363. 610 THE EIGHr OP RESCISSION. the rule applies only to pure propositions of law. The existence and actual contents of e.g. a private Act of Par- liament are as much matters of fact as any other concrete facts (/). As to the second branch, we may put aside the cases already mentioned in which the substance of the fraud is not misrepresentation, but a wrongful intention going to the whole matter of the contract. Apart from these it appears to be the rule that a false representation of motive or intention, not amounting to or including an assertion of existing facts, is inoperative. " It is always necessary to distinguish, when an alleged ground of false representation is set up, between a representation of an existing fact which is untrue and a promise to do something in future " {g) . On this ground was put the decision in Vernon v. Keys (h), where the defendant bought a business on behalf of a partnership firm. The price was fixed at 4,5001. on his statement that his partners would not give more: a statement afterwards shown to be false by the fact that he charged them in account with a greater price and kept the resulting difference in their shares of the purchase-money for himself. It was held that the vendor could not maintain an action of deceit, as the statement amounted only to giving a false reason for not offering a higher price. The case also illustrates the principle that collateral fraud practised by or against a third person does not avoid a contract. Here there was fraud, and of a gross kind, as between the buyer and his partners; but we must dismiss this from consideration in order to form a correct estimate of the decision as between the buyer and seller. It (/) Bowen L.J. ubi sup. to the effect that the buyer's liberty {g) Mellieh L.J. Ex parte Bur- must be co-extensiv© with the rell (1876) 1 Ch. Div. at p. 552. seller's, which ia to "tell every (Ji) (1810) 12 East, 632, in Ex. falsehood he can to induce a buyer Ch. 4 Taunt. 488, 11 R. E,. 499. to purchase,'' is of course not to The language used in the Ex. Ch. be literally accepted. REPRESENTATIONS OP FACT OR OTHERWISE. 611 must be judged of as if the buyer had communicated the whole thing to his partners and charged them only with the price really given . Still the decision can hardly be supported unless on the ground of failure to prove damage. For the buyer was the agent of the firm, and in substance made a wilfully false statement as to the extent of his authority. The Judicial Committee has held that it is clearly fraudu- lent for A. and B. to combine to sell property in B.'s name, B. not being in truth the owner but only an intermediate agent, and the nominal price not being the real price to be paid to the owner A., but including a commission to be retained by B . (?) . And under particular conditions a state- ment of intention, such as the purpose to which a proposed loan is intended to be applied, may be a material statement of fact(fc). On principle A.'s existing intention seems to be as much a fact for B. as anything else. It needs no authority to show that a statement of what is merely matter of opinion cannot bind the person makirug it as if he had warranted its correctness. And it is said that if a man makes assertions, as of matter of fact within his own knowledge, concerning that which is by its nature only matter of more or less probable repute and opinion, he is not legally answerable as for a deceit if the assertion turns out to be false (I) . But it seems doubtful if this could be upheld at {i) Lindsay Tetroleum Co. v. [1919] 2 K. B. 316, 88 L. J. K. B. Hurd (1874) L.R. 5 P. G. 221,243. 1231, 0. A. This no doubt cannot actually (Jc) Edgirtgton v. Fitzmaurice overrule the reasons given for the (1885) 29 Ch. Div. 459, 480, 483, decision in Vernon v. Keys : for 55 L. J. Ch. 650. decisions of the Judicial Committee, Q) liaycraft v. Creasy (1801) 2 though they carry great weight, are East, 92, 6 R. R. 380. Here the not binding in English Courts: see defendant had stated, as a fact Leask v. Scott (1877) 2 Q. B. Div. within his own knowledge, that a 376, 46 L. J. Q. B. 576, where the person was solvent who appeared C. A. refused to follow the Judicial to have ample means, but turned Committee; Smith v. Brown (1871) out to be an impostor. The ma- . L. R. 6 Q. B. at p. 736, 40 L. J. jority of the Court seem to have Q. B. 214; Janvier v. Sweeney thought that the plaintiff must in 612 THE EIGHT OF RESCISSION. the present day. For surely the affirmation of a thing as within my own knowledge implies the affirmation that I have peculiar means of knowledge: and if I have not such means, then my statement is false and I shall justly be held answer- able for it, unless indeed the special knowledge thus claimed is of a kind manifestly incredible. Statements which in themselves are ambiguous cannot be treated as fraudulent merely because they are false in some one of their possible senses. In such a case the party who complains of having been misled must satisfy the Court that he understood and acted on the statement in the sense in which it was false (m) . B. The representation must be such as to induce the contract (dans locum contraetui) (n) . Eelief cannot be given on the ground of fraud or misrepre- sentation to a party who has in fact not acted on the state- ments of the other, but has taken steps of his own to verify them, and has acted on the judgment thus formed by himseK (o) . " The Court must be careful that in its anxietj to correct frauds it does not enable persons who have joined with others in speculations to convert their speculations into certainties at the expense of those with whom they have joined" (p). the circumstances have known the Lord Blackburn leaves it as an defendant to be expressing only an unsettled question what would opinion founded on that which happen if the defendant could in appeared to all the world. So a turn prove the falsehood or am- statement of confident expectation biguityto be due toamere blunder, of profits must be distinguished (k) Lord Brougham, Attwood v. from an assertion as to profits Small (1835-8) 6 01. & F. 444, 49 actually made: Sellairs v. Tucker R. R. 137; Lord Wensleydale, (1884) 13 Q. B. D. 562. Smith v. Kay (1859) 7 H. L. C. (m) Smith v. Chadwick (1884) 9 775-76, 115 R. R. 383. App. Ca. 187, 51 L. J. Ch. 597,see (o) See for a recent example, especially per Lord Blackburn at Farrar v. ChurchMl (1890) 135 pp. 199 — 201. The language used U. S. 609. in ^fflSows v.FerKJe (1868) L. R. 3 (j>) Jennings v. Sroughton Ch. at p. 476, seems to go too far. (1853-4) 5 D. M.' G. 126, 140, 22 EFFECT OP MEANS OF KNOWLEDGE. 613 It is not perfectly free from doubt whether in any, and if in any, in what cases the possession of means of knowledge which if used would lead to the discovery of the truth will bar the party of his remedy. In the case of active misrepresentation it is no answer in proceedings either for damages or for setting aside. the con- tract to say that the party complaining of the misrepresenta- tion had the means of making inquiries. " In the case of Dobell V. Stevens (?)••• which was an action for deceit in falsely representing the amount of the business ■done in a public house, the purchaser was held to be entitled to recover damages, although the books were in the house, and he might have had access to them if he had thought proper "(r). The rule was the same in the Court of Chancery. It was said of a purchaser to whom the state of the property he bought was misrepresented: — "Admitting that he might by minute examination make that discovery, he was not driven to that examination, the other party having taken upon him to make a representation. . . . The purchaser is induced to make a less accurate examination by the representation, which he had a right to believe "(s). The principle is that " No man can complain that another has too implicitly relied on the truth of what he has himself stated" (t). And it is not enough to show that the party misled did make some examination on his own account ; proof ■of cursory or ineffectual inquiries will not do (m) . In order to bar him of his remedy, it must be shown either that he knew L. J. Ch. 584, 99 R. R. 136; Di/er Ves. at p. 509, 8 R. R. at p. 39. V. Eargrave (1805) 10 Ves. 505, (0 Reynell v. Sprye (1852) 1 D. 8 R. R. 36. M.G.at p. 710, 91 R. R. 266; PHce (g) (1825) 3 B. & C. 623, 27 R. y.Macaulay (1852) 2 D.M.G. 339, E. 441. 346, 95 R. R. 129, 134. (r) Per Lord Chelmsford, L,. R. («) Redgrave v. Hurd (1881) 20 3. H. L. 121. Ch. Div. 1, 51 L. J. Ch. 113. (») Dyer v. Eargrave (1805) 10 614 THE RIGHT Olj' RESCISSION. the true state of the facts, or that he did not rely on the facts as represented (x) . In 1867 the same principle was affirmed in the House of Lords {y). The suit was instituted by a shareholder in a railway company to be relieved from his contract on the ground of misrepresentations contained in the prospectus. Here it was contended that the prospectus referred the intending shareholder to other documents, and offered means of further information: besides, the memorandum and articles of association (and of these at all events he was bound to take notice) sufficiently corrected the errors and omissions of the prospectus. But the objection is thus answered: — " When once it is established that there has been any fraudulent mis- representation or wilful oonoealment by which a person has been induced to enter into a contract, it is no answer to his claim to be relieved from it to tell him that he might have known the truth by proper inquiry. He has a right to retort upon his objector, ' You at least, who havejstated what is untrue, or have concealed the truth for the purpose of drawing me into a contract, cannot accuse me of want of caution because I relied implicitly upon your fairness and honesty.' " This doctrine appears, on the same authority, not to apply to the case of mere non-disclosure, without fraudulent intention, of a fact which ought to have been disclosed. " When the fact is not misrepresented but concealed [or rather not communicated] {z) and there is nothing done to induce the other party not to avail himself of the means of knowledge within his reach, if he neglects to do so he may have no right to complain, because his ignorance of the fact is attributable to his ovrai negligence " {a). (x) Redgrave v. Hurd (1881) 20 115, see now Redgrave v. Kurd Ch. Div. 1, 21 (Jessel M.R.). (1881) 20 Oh. Div. at p. 14, 51 (y) Central Ry. Co. of Venezuela L. J. Ch. 113. V. Kiseh (1867) L. R. 2 H. L. 99, (z) See L. R. 2 H. L. 339. 120, 36 L.J. Ch. 849 (Lord Chelms- (o) New Brunswick, ^c. Co. v. ford). As to the earlier and inde- Conybeare (1862) 9 H. L. C. 711, cisive case of Attwood v. Small 742, 31 L. J. Ch. 297, 131 R. E. (1835-8) 6 CI. & P. 232, 49 R. R. 415. KFFKCT OF MEANS OF KNOWLEDGE. 615 It appears also not to apply to a mero assertion of title by a vendor of land (&). In a case before Lord Hatherley, when V.-C, the double question arose of the one party's knowledge that his state- ment was untrue, and of the other's means of learning the truth. The suit was for specific performance of an agree- ment to take a lease of a limestone quarry. The plaintiff made a distinct representation as to the quality of the lime- stone which was in fact untrue: he did not believe it to be false, but he had taken no pains to ascertain, as he might easily have done, whether it was true or not. But then the defendant had not relied exclusively upon this statement, for he went to look at the stone; still he was not a limeburner by trade, and could not be supposed to have trusted merely to what he saw, being in fact not competent to judge of the quality of limestone. The result was that the Court refused specific performance, declining to decide whether the contract was otherwise valid or not (c) . The case of Horsfall v. Thomas (d) was decided on the same principle: there a contrivance was used to conceal a defect in a gun manufactured to a purchaser's order, but the purchaser took it without any inspection, and therefore, although the vendor intended to deceive him, had not been in fact deceived. It might also be given as a rule that the representation must be material. But to make this quite accurate it should he stated in the converse form, namely that a material repre- sentation may be presumed to have in fact induced the con- (J) Sume V. PooocJc (1866) L.E. J. & H. 460, 468, 469, 134 E. R. 1 Ch. 379, 385, 35 L. J. Ch. 731, 304. where however the real contract (d) (1862) 1 H. & 0. 90i, 31 L. J. was to buy up a particular claim of Ex. 322, 130 R. E. 394, dissented title, whatever it might be worth. from by Cookburn, C.J., Smith v. (c) Higgins v. Samels (1862) 2 Hughes (1871) L. R. 6 Q. B. at p. 605: but it seems good law. "616 THE RIGHT OF RESCISSION. tract; for a man who has ob'tained a contract by false repre- sentations cannot afterwards be beard to say that those repre- sentations were not material. The excuse has often been put forward that for anything that appeared the other party might no less have given his consent if the truth had been made known to him, and the Court has always been swift to reject it. When a falsehood is proved, the Court does not require positive evidence that it was successful (e) ; it rather presumes that assent would not have been given if the facts had been known (/) . Those who have made false statements cannot ask the Court to speculate on the exact share they may have had in inducing the transaction {g) : or on what might have been the result if there had been a full communication of the truth (h) ; it is enough that an untrue statement has been made which was likely to induce the party to enter into the contract, and that he has done so (i) . Special circumstances may make a representation material which in ordinary cases of the same kind of contract would not be. If a moneylender who has become notorious for harsh and oppressive dealing -attracts a borrower by advertising in an assumed name, a jury may find that the contract was fraudulent (k). An inference or presumption of this class is of fact, not of law, and is open to contradiction like other inferences of fact (I) . In like manner, if there has been an omission even without fraud to communicate something which ought to have been communicated, it is too late to discuss whether the (e) WUliams' case (1869) L. R. Q. B. 856, 864, 18 L. J. Q. B. 65. 9 Eq. 225, «. To the Uke effect, Jessel M.R. in (/) Ex parte Kintrea (1869) L. Smith v. Chadwich (1884) 20 Ch. R. 5 Ch. at p. 101, 39 L. J. Ch. 193. Div. at p. 44 (see however note (0 {g) Reynell v. Sprye (1852) 1 D. below). M. G. at p. 708, 91 R. R. 265. (A) Gordon v. Street [1899] 2 Q. (A) Smith V. Kay (1859) 7 H. L. B. 641, 69 L. J. Q. B. 45, C. A. C. at p. 759. (I) Lord Blackburn, Smith v. (t) Per Lord Denman C.J. Wat- Chadwich (1884) 9 App. Ca. at ■ son\.Barl of Charlemont (1848)12 p. 196. REPRESENTATION INDUCING CONTRACr. 617 oommunication of it would probably have made any difference (m). If it be asked in general terms what is a material fact, we may answer, by an extension of the language adopted by the Queen's Bench in a case of marine insurance (?^), that it is anything which would affect the judgment of a reasonable man governing himself by the principles on which men in practice act in the kind of business in hand. There is an exception, but only an apparent one, to the rule that the representation must be the cause of the other party's contracting. A contract arising directly out of a previous transaction between the same parties which was voidable on the ground of fraud is itself in like manner voidable. A. makes a contract with B., with the fraudulent intention of making it impossible by a secret scheme for B. to perform the contract. B. ultimately agrees to pay and does pay to A. a sum of money to be released from the contract: if he afterwards discovers the scheme B. can rescind this last agreement and recover the money back (o). " If the promoter of a company procures a company to be formed by improper and fraudulent means, and for the purpose of securing a profit to himself, which, if the company was successful, it would be unjust and inequitable to allow him to retain [in the particular case a secret payment to the promoter out of purchase-money], and the company proves abor- tive and is ordered to be wound up without doing any business, the promoter cannot be allowed to prove against the company in the winding- up, either in respect of his services in forming the company or in respect of his services as an officer of the company after the company was registered " (p). (m) Traill v. Barinff (1864) 4 D. IVales Waggon 4' Engineering Go. J. S. at p. 330. (1876) 2 Ch. Div. 621, 626, 45 L.J. (n) lonides v. Pender (1874) Ch. 461. It must not be assumed L. R. 9 Q. B. 531, 43 L. J. Q. B,. that the company would be liable 227, supra, p. 574. even in the absence of fraud, see (o) Barry v. CrosJcey (186\') 2 J. English and Colonial Produce Co.'s & H. 1, 134 R. R. 91. case [1906] 2 Ch. 435, 75 L. J. Ch. (p^ Per Cur. Hereford. # S. 831, 95 L. T. 580, C. A. P.— c. 40 618 THE RIGHT OF EESCISSION. So it is where the parties really interested, though not the nominal parties, are the same. Thus where a sale of goods is procured by fraud, and the vendors forward the goods by railway to the purchaser's agent, and afterwards reclaim them, indemnifying the railway company, these facts con- stitute a good defence to an action by the purchaser's agent against the railway company, though the re-delivery to the vendors was before the discovery of the fraud and arose out of an unsuccessful attempt to stop the goods in transitu (g). C. The representation must be made by a party to the contract. This rule in its simple form is elementary. It is obvious that A. cannot be allowed to rescind his contract with B . because he has been induced to enter into it by some fraud of C . to which B . is no party (r) . Thus in Sturge v . Starr (s) a woman joined with her supposed husband in dealing with her interest in a fund. The marriage was in fact void, the man having concealed from her a previous marriage. It was held that this did not affect the rights of the purchaser. When we come to deal with contracts made by agents the question arises to what extent the representations of the agent are to be considered as the representations of the principal for the purposes of this rule. And this question, though now practically set at rest by recent decisions, is one which has given rise to some difficulty. A false statement made by an agent with his principal's express authority,, the principal knowing it to be false, is obviously equivalent to a falsehood told by the principal himself; nor can it make (?) Cloughy.L.^N. W. Ry. Co. case (1871) L. R. 7 Ch. 55, 41 (1871) (Ex. Ch.) L. R. 7 Ex. 26, X,. J. Ch. 1. 41 L. J. Ex. 17, an exceedingly in- (r) See per Lord CaiTTis,Smith'e struotive case (see further pp. 641, case, L. R. 2 Ch. at p. 616. 642, below). As to the misoon- («) (1833) 2 My. & K. 195; cp. oeived act being justified by refer- Wheelton v. Hardisty (1857) 8 E.& ence to the true ground of rescission B. 232, 26 L. J. Q. B. 266, 27 t6. afterwards discovered, cp. Wright's 241, 112 E. R. 535. FRAUD OF AGENTS. 619 any difference as against the principal whether the agent knows the statement to be false or not. But we may also have the following cases. The statement may be not expressly authorised by the principal, nor known to be untrue by him, but known to be untrue by the agent; or conversely, the statement may be not known to the agent to be untrue, and not expressly authorised by the principal, the true state of the facts being, however, known to the principal. There is no doubt that in the first case the principal is answerable,- subject only to the limitation to be presently stated (t). In the second case there is every reason to believe that the same rule holds good, notwithstanding a much canvassed decision to the contrary (m), which, if not overruled by the remarks since made upon it (x), has been cut down to a decision on a point of pleading which perhaps cannot, and certainly need not, ever arise again. These distinctions have to be considered only when there is a question of fraud in the strict sense, and then chiefly when it is sought to make the principal liable in damages . Where a non-fraudulent misrepresentation suffices to avoid the con- tract, there it is clear that the only thing to be ascertained is whether the representation was in fact within the scope of the agent's authority. And it is now accepted as the law that this is the only question even in a case of fraud . It was laid down by a considered judgment of the Exchequer Chamber (y), fuUy approved by later decisions of the Judicial Com- mittee (z), that " the master is answerable for every such (<) The rule applies to an agent especially per Willes J. in Barwick who profits by the fraud of a sub- V.English Joint Stock Bank (1861) agent employed by him; Cockbum L. E. 2 Ex. 262. C.J. in Weir Y.Bell (1878) 3 Ex. (y) Barwick v. English Joint D. at p. 249. Stock Bank (1867) L. E. 2 Ex. 259, («) Oornfoot v. Fowke (1840) 6 36 L. J. Ex. 147. M. & W. 358, 55 R. E. 655. (a) Maekay v. Commercial Bank (a;) 2 Sm. L. C. 81, 86: and see of New Brunswick (1874) L. R. 5 40(2) 620 THE EIGHT OF RESCISSION, wrong," including fraud, "of the servant or agent as is committed in the course of the service and for the master's benefit (a), though no express command or privity of the master be proved." Although the master may not 'have authorized the particular act, yet if "he has put the agent in his place to do that class of acts," he must be answerable for the agent's conduct. It makes no difference whether the principal is a natural person or a corporation (b). In two of the cases just referred to, a banking corporation was held to be liable for a false representation made by one of its officers in the course of the business usually conducted by him on behalf of the bank; and this involves the proposition that the party misled is entitled to rescind the contract induced by such representation. The directors and other officers of companies, acting within the functions of their offices, are for this purpose agents, and the companies are bound by their acts and conduct. Con- versely, where directors employ an agent for the purposes of the company, and that agent commits a fraud in the course of his employment without the personal knowledge or sanc- tion of the directors, the remedy of persons injured by the fraud is not against the directors, who are themselves only agents, but against the company as ultimate principal (c) : P. C. 394, 411, 43 L. J. P. C. 31; though apparently intended to be Swire v. Francis (1877) 3 App. Ca. decisive, have not been foUovired. 106, 47 L. J. P. O. 18. Swift v.Jewsbi(rt/(lS7i) (Ex. Ch.) (a) This does not exclude the L. E. 9 Q. B. at p. 312, per IioKt liability of a principal for the act Coleridge C.J. Op. I. O. A. § 238. of an agent who has abused his (e) Weir v. Burnett (1877) 3 authority for his own purposes in a Ex.D.32, affd.in C. A. nom. Weir transaction of an authorized class: y.Bell (1878) i5. 238,47 L.. J. Ex. Lloyd V. Grace Smith ^ Co. [1912] 704. But a direotor who proiited A. C. 716, 81 L. J. K. B. 1140. by the fraud after knowledge of it (6) L. R. 6 P. O. 413-6, dissent- would probably be liable: see ing from the dicta on this point in judgments of Cockbum C.J. and Western Bank of Scotlandv.Addie Brett L. J. And directore who dele- (1867) L. E. 1 So. & D. 145, which, gated their office without authority. FRAUD OF AGENTS. 621 and one director is not liable for fraud committed by another director without his authority or concurrence (d). Reports made in the first instance to a company by its directors, if after^^■ards adopted by a meeting and " industriously cir- culated," must be treated as the representations of the company to the public, and as such will bind it (e) . State- ments in a prospectus issued by promoters before the company is in existence cannot indeed be said with accuracy to be made by agents for the company: for one cannot be an agent even by subsequent ratification for a principal not in existence and capable of ratifying at the time (/) . But such statements also, if afterwards expressly or tacitly adopted, become the statements of the company. It is a principle of general application, by no means confined to these oases, that if A. makes an assertion to B., and B. repeats it to C. in an unqualified manner, intending him to act upon it, and C . does act upon it, B . makes that assertion his own and is answerable for its consequences. If he would guard him- self, it is easy for him to say: " This is what A. tells me, and on his authority I repeat it; for my own part I believe it, but if you want any further assurance it is to him you must look "(5-). It is to be borne in mind that in a case of actual fraud on the part of an agent the responsibility of the principal does not in any way exclude the responsibility of the agent. " All persons directly concerned in the commission of a fraud are to be treated as principals " ; and in this sense it is true so that their delegate did not Ch. 297. See further, as to what become the company's agent, would ' must be shown to bind a company be liable: see the dissenting judg- in respect of misrepresentations ment of Cotton L.J., who took this inducing a person to take shares, view of the facts. Lynde\ . Anglo-Italian Hemp Spin- id) Cargill i. Bower (1878) 10 ning Co. [1896] 1 Ch. 178, 65.L. J. Ch. D. 502, 47 I>. J. Ch. 649. Ch. 96. (e) Per Lord Westbury, New (/) P. 116, above. Brunswick, ^c. Co. v. Conyheare {g) Smith's case (1867) L. ,R. 2 , (1862) 9 H. L. C. 711, 725, 31 L. J. Ch. 604, 611, p. 596, above. 622 THE EIGHT OF RESCISSION. that an agent or servant cannot be authorized to commit a fraud. He cannot excuse himself on the ground that he acted only as agent or servant {h) . D. The representation must be made as part of the same transaction . It is believed that the statement of the rule in this form, though at first sight vague, is really more accurate than that •which presents itself as an alternative, but is in fact included in this — namely, that the representation must be made to the other party or with a view to his acting upon it. The effect of the rule is that the untruth of a representation made to a third person, or even to the party himself on some former occasion, in the course of a different transaction and for a different purpose, cannot be relied on as a ground either for rescinding a contract or for maintaining an action of deceit. Thus in Western Bank of Scotland v. Addie (i) the directors of the bank had made a series of flourishing but untrue reports on the condition of its affairs, in which bad debts were counted as good assets. The shareholder who sought relief in the action had taken additional shares on the faith, as he said, of these reports. But it was not shown that they were issued or circulated for the purpose of inducing existing share- holders to take more shares, or that the local agent of the bank who effected this particular sale of shares used them or was authorized to use them for that purpose. Thus the case rested only on the purchaser having acted under an impression derived from these reports at some former time; and that was not such a direct connexion between the false representation and the conduct induced by it as must be shown in order to rescind a contract (/) . (A) Per Lord Westbury, CaZZew v. (j) (1867) L. E. 1 Sc. & D. 145. Thomson's Trustees and Z'err(1862) (/) This was not the only ground 4 Maoq.424,432; Swift v. Winter- of the deoisiou; its main principle, botham (1873) L. E. 8 Q. B. 244, as explained in a later case in the 254, 42 Ii. J. Q. B. 111. House of Lords, is that a person Ki:PRESENTATI0N8 NOT IN SAME MATTER. 623 In Peek v. Gurney (fc) the important point is decided that the sole office of a prospectus is to invite the public to take shares in the company in the first instance. Those who take shares in reliance on the prospectus are entitled to their remedy if the statements in it are false. But those statements cannot be taken as addressed to aU persons who may here- after become purchasers of shares in the market; and such persons cannot claim any relief on the ground of having been deceived by the prospectus unless they can show that it was specially communicated to them by some further act on the part of the company or the directors. Some former decisions the other way (ZJ are expressly overruled . The proceeding there in hand was in the nature of an action of deceit, but the doctrine must equally apply to the rescission of a contract. It is otherwise, however, if the prospectus is in fact used afterwards, at any rate in conjunction with other fraudulent statements, to induce people to buy shares in the market (m) . In Way v. Hearn (ji) the action was on a promise by the defendant to indemnify the plaintiff against half of the loss he might sustain by having accepted a bill drawn by one R. Shortly before this, in the course of an investigation of R.'s affairs in which the defendant took part, R. had at the plain- who remains a shareholder, either 4 H. & N. 538, 29 L. J. Ex 59;, by having" affirmed his contract Bagshaw v. Seymour (1856) 18 with the company or by being too C.B.903, 29 L. J. Ex. 62, «. Tha late to rescind it, cannot have a authority , of Gerhard v. Bate* remedy in damages against the cor- (1853) 2 E. & B. 476, 22L.J.Q.B. poratB body for representations on 365, 95 R. E. 655, is saved by a the faith of which his shares were rather fine distinction; L. R. 6 taken: Souldsworthv.CUy of Glas- H. L. 399. gmii Bank (1880) 5 App. Ca. 317, (m) Andrewsv.Mockford [1896] 43 L. J. Ch. 19. 1 Q. B. 372, 65 L. J. Q. B. 302', (k) (1873) L. E. 6 H. L. 377, C. A. 395: and see the dase put by Lord (») (1862) 13 0. B. N. S. 292, 32 Cairns as an illustration at p. 411. L. J. 0. P. 34, 134 E. E. 538- (0 Bedford v. Bagshaw (1859) 624 THE RIGHT OF RESCISSION. tifi's request concealed from the accountant employed in the matter the fact that he owed a large sum to the plaintiff ; the plaintifl: said his reason for this was that he did not Avish his wife to know he had lent so much money upon bad security. At this time the bill which was the subject of the indemnity was not thought of ; it was in fact given to get rid of an execu- tion afterwards put in by another creditor . Here a misrepre- sentation as to R.'s solvency was made by R. in concert with the plaintiff, and communicated to the defendant; but it was in a transaction unconnected with the sujbsequent contract between the plaintiff and the defendant, and the defendant was therefore not entitled to dispute that contract on the ground of fraud. 2. As to the right of the party misled. This right is one which requires, and in several modern cases of importance has received, an exact limitation and definition. It may be thus described: The party who has been induced to enter into a contract by fraud, or by concealment or misrepresentation in any matter such that the truth of the representation made, or the disclosure of the fact, is by law or by special agreement of the parties of the essence of the contract, may affirm the contract, and insist, if that is possible, on being put in the same position as if the representation had been true: Or he may at his option rescind the contract, and claim to be restored, so far as may be, to his former positioA within a reasonable time (o) after discovering the misrepresehtatioh, unless it has become impossible to restore the parties to the position in which they would have been if the contract had not been made, or unless any third person has in good faith and for value acquired any interest under the contract. It will be necessary to dwell separately on the several (o.) But qu. whether time is in itself material: see L. R. 7 Ex. 35, 8 Ex. 205. ' ELECTION TO RESCIND OR RATIFY. 625 points involved in this. And it is to be observed that the principles here considered are not confined to any particular ground of rescission, but apply generally when a contract is voidable, either for fraud or on any other ground, at the option of one of the parties; on a sale of land, for example, it is constantly made a condition that the vendor may rescind if the purchaser takes any objection to the title which the vendor is unable to remove; and then these rules apply so far as the nature of the case admits. A . As to the nature of the right in general, and what is an affirmation or rescission of the contract. " A contract induced by fraud is not void, but voidable only at the option of the party defrauded; " in other words, valid until rescinded (p). Where the nature of the case admits of it, the party misled may affirm the contract and insist on having the representa- tion made good. If the owner of an estate sells it as unin- cumbered, concealing from the purchaser the existence of incumbrances, the purchaser may if he thinks fit call on him to perform his contract and redeem the incumbrances {q). If promoters of a partnership undertaking induce persons to take part in it by untruly representing that a certain amount of capital has been already subscribed for, they will themselves be put on the list of contributories for that amount {r) . It is to be remembered that the right of election, and the possibility of having the contract performed with compen- sation, do not exclude the option of having the contract wholly set aside. "It is for the party defrauded to elect ' (p) Oakes v. Turqvand (1867) Cp. Vngley v. Ungley (1877) 5 L. R. 2 H. L. 346, 375, 376. Ch. Div. 887, 46 L. J. Oh. 854. {q) Per Romilly M.R. in Puis- (r) Moore and Be la Torre's ford V. Richards (1853) 17 Beav. case (1874) L. R. 18 Eq. 661, 43 96, 22 L. J. Ch, 559, 99 R. R. 54. L. J. Ch. 751. 626 THE EIGHT OP KESCISSION, whether he will be bound" (s). But if he does affirm the contract, he must affirm it in all its terms. Thus a vendor who has been induced by fraud to sell goods on credit cannot sue on the contract for the price of the goods before the ex- piration of the credit: the proper course is to rescind the contract and sue in trover (f). When the contract is once affirmed, the election is completely determined; and for this purpose it is not necessary that the affirmation should be express. Any acts or conduct which unequivocally treat the contract as subsisting, after the facts giving the right to rescind have come to the knowledge of the party, will have the same eSect (m) . Taking steps to enforce the contract is a conclusive election not to rescind on account of anything known at the time (x) . A shareholder cannot repudiate his share on the ground of misrepresentations in the prospectus if he has paid a call without protest or received a dividend after he has had in his hands a report showing to a reader of ordinary intelligence that the statements of the prospectus were not true («/), or if after discovering the true state of things he has taken an active part in the affairs of the com- pany (z), or has affirmed his ownership of the shares by taking steps to sell them (a) ; and in general a party who voluntarily acts upon a contract which is voidable at his option, having (s) SaivUtie v. WicTcham (1853) 3 Ch.) L. R. 8 Ex. 249, 380, 42 L. J. De G. & J. 304, 322, 28 L. J. Ch. Ex. 161. 188. (y) Scholey v. Central Ity. Co. (t) Fergmony.Carrington{l%2'i) °f Venezuela (1867-8) L. E. 9 Eq. 9 B. & C. 59. The form or formal '^^^' "- cause of action is now immaterial (^) Sharpley v. Louth and East in most jurisdictions, but the C-oa** -By- Co. (1876) 2 Ch.DiT.663, measure of damages may be dif- ^ ■'-'• ^- *-"'• '^^^^ ferent. W E"! parte Brigffs(^86S)'L.'R. ^ '„, , ^ ,. „, „ „ 1 Eq. 483, 35 L. J. Oh. 320; this ,, : ,?"^^:; f-f^-J^- ^^- ^°- Wever was . case not of mis- (1871) (Ex. Ch.) L. E. 7 Ex at ^^^ ^^^^ ^^^^ „f ^^^^^ ■ detparture from the objects of the {x) Gray v. Fowler (1873) (Ex. company as stated in the prospectus. ELECTION TO RESCIND. 627 knowledge of all the facts, cannot afterwards repudiate it if it turns out to his disadvantage (6) . And when the right of repudiation has once been waived by acting upon the contract as subsisting with knowledge of facts establishing a case of fraud, the subsequent discovery of further acts con- stituting " a new incident in the fraud" cannot revive it (c). The exercise of acts of ownership over property acquired under the contract precludes a subsequent repudiation, but not so much because it is evidence of an affirmative election as because it makes it impossible to replace the parties in their former position; a point to which we shall come presently. When the acts done are of this kind it seems on principle immaterial whether there is knowledge of the true state of afiairs or not, unless there were a continuing active conceal- ment or misrepresentation practised with a view to prevent the party defrauded from discovering the truth and to induce him to act upon the contract; for then the affirmation itself would be as open to repudiation as the original transaction. Something like this occurs not unf requently in cases of undue influence, as we shall see in the next chapter. Omission to repudiate within a reasonable time is evidence, and may be conclusive evidence, of an election to affirm the contract; and this is in truth the only effect of lapse of time. Still it will be more convenient to consider this point separately afterwards. If on the other hand the party elects to rescind, he is to manifest that election by distinctly communicating to the other party his intention to reject the contract and claim no interest under it. One way of doing this is to institute proceedings to have the contract judicially set aside, and in that case the judicial rescission, when obtained, relates back (S) Ormes y.Seadel (1860) 2 D. does not apply where a new and V. J. 332, 336, 30 L. J. Ch. 1. distinct cause of rescission arises: (c) Campbell v. Fleming (1834) Gray v. Fowler (1873) L. R. 8 Ex. 1 A. & E. 40, 53 E. R. 194. Thifl 249, 42 L. J. Ex. 161. 628 THE RIGHT OF RESCISSION. to the date of the commencement of such proceedings (d). Or if the other party is the first to sue on the contract, the rescission may be set up as a defence, and this is itself a sufficient act of rescission without any prior declaration of an intention to rescind (e). For the purposes of pleading the allegation that a contract was procured by fraud has been held to import the allegation that the party on discover- ing it disaffirmed the contract (/) ., Where the rescission is not declared in judicial proceedings, no further rule can be laid down than that there should be "prompt repudiation and restitution as far as possible " {g). The communication need not be formal, provided it is a distinct and positive rejection of the contract, not a mere request or inquiry, which is not enough (h). But it seems that if notwithstanding an express repudiation the other party persists in treating the contract as in force, then judicial steps should be taken in order to make the rescission complete as against rights of third persons which may subsequently intervene. Especially this is the case as to repudiating shares in a company. The creditors of a company are entitled to rely on the register of shareholders for the time being, and therefore it is not enough for a shareholder to give notice to the company that he claims to repudiate . A stricter rule is applied than would follow from the ordinary rules of contract («). " The rule (d) Reese Miver Silver Mining are not wholly oonaistent. Co. V. Smith (1869) L. R. 4 H. I>. (^) Per Bramwell B. Bwlch-y- 73-5, 39 L. J. Ch. 849. As to Plwm Lead Mining Co. v. shares in companies, see below. (1867) I>. R. 2 Ex. 326, 36 L. J. (e) Cloughv.L. ^ N. W. My. Co. Ex.' 183 (not that repudiation alone (1871) (Ex. Ch.) L. R. 7 Ex. 36, is enough in the ease of shares in a 41 L. J. Ex. 17. company, see below, and First Nat. (/) Dawes v. Harness (1875) Reins. Co. v. Greenfield [1921] 2 L. R. 10 C. P. 166, 44 L. J. C. P. K. B. 260). 194. The earlier cases there cited, (A) See Ashley's cnse (1870) especially Deposit Life Assurance L. R. 9 Eq. 263, 39 L. J. Ch. 354. Co. V. Ayscough (1856) 6 E. & B. (i) Kent v. Freehold Land, ^c. 761, 26 L.J. Q. B. 29, 106 R.R. 790, Co. (1868) L.R.3 Ch. 493; Hare's ELECTION MUST BE COMMUNICATED. 629 is that the repudiating shareholder must not only repudiate, but also get his name removed, or commence proceedings to have it removed, before the winding-up (fc); but this rule is subject to the qualification that if one repudiating share- holder takes proceedings the others will have the benefit of them if, but only if, there is an agreement between them and the company that they shall stand or fall by the result of those proceedings, but not otherwise " (Z) . Where the ■original contract was made with an agent for the other party, ■communication of the rescission to that agent is sufficient, at all events before the principal is disclosed (m) . And where good grounds for rescission exist, and the contract is rescinded by mutual consent on other grounds, those grounds not being such as to give a right of rescission, and the agent's consent being in excess of his authority, yet the rescission stands good. There is nothing more that the party can do, and when he discovers the facts on which he might have sought rescission as a matter of right he is entitled to use them in support of what is already done. In Wright's case (re) the prospectus of a company contained material misrepresenta- tions. The directors had at a shareholder's request, and on other grounds, professed to cancel the allotment of his shares, which they had no power to do, though they had power ease (1869) L. E. 4 Ch. 503; iJe (ft) I.e. before the presentation Scottish Petroleum Co. (1883) 23 of a winding-up petition on which Ch. Div. 413. But if there are an order is made: Whiteley's case several repudiating shareholders in [1899] 1 Ch. 770, 68 L. J. Ch. 365. a like position, proceedings taken Or before action at latest if he by one of them and treated by is sued for calls: First Nat. ^-c. agreement with the company as Co.'s oase, note (g'), above, representative will enure for the (I) Lindley L.J. 23 Ch. D. at p. benefit of all: Pawle's oase (1867) 437. L. R. 4 Ch. 497, 38 L.J.Ch. 318, (m) Maynard v. Eaton (1874) MoNieU's oase (1870) L. B. 10 Eq. L. E. 9 Ch. 414, 43 L. J. Ch. 641. 503, 39 L. J. Ch. 822, apparently («) (1871) L. E. 7 Ch. 55, 41 rests only on this ground: see L. J. Ch. 1 ; cp. Olough v. L,. ^ N. review of cases per Baggallay L.J. W. Ry. Co., supra, p. 618. 23 Ch. D. at p. 433. 630 THE EIGHT OP RESCISSION. to accept a surrender. Afterwards the company was wound up, and then only was the misrepresentation made known to him. But it was held that as there was in fact a sufficient reason for annulling the contract, which the directors knew at the time though he did not, the contract was effectually annulled, and he could not be made a contributory even as a past member (o) . Inasmuch as the right of rescinding a voidable contract is alternative and co-extensive with the right of affirming it, it follows that a voidable contract may be avoided by or against the personal representatives of the contracting parties (p) . And further, as a contract for the sale of land is enforceable in equity by or against the heirs or devisees of the parties, so it may be avoided by or against them where grounds of avoidance exist {q) . A party exercising his option to rescind is entitled to be restored so far as possible to his former position. This includes a right to be indemnified against obligations incurred under the contract, and in cases of fraud, but in such cases only (r), the right may extend to liabilities which are natural consequences of the contract though not created by the con- tract itself. B. The contract cannot be rescinded after the position of the parties has been changed so that the former state of things cannot be restored. (o) But Wiokens V.-C. thought in next chapter, (h^/i»., and CAarier otherwise in the Court below (L, E. v. Trevelyan (1844) 11 CI. & F. 12 Eq. 331) and the correctness of 714, 65 E. E. 305, where the parties the reversal is doubted by Lord on both sides were ultimately re- Lindley (on Companies, 777). presentatives, and as to the de- (p) Including asaignees in bank- fendants through more than one ruptcy: Load v. Green (1846) 15 succession. M. & W. 216, 15 L. J. Ex. 113^ (?•) WUttington v. Seale-Bayne 71 E. E. 627: Donaldson v. Far- (1900) 82 L. T. 49, per Parwell J. well (1876) 93 U. S. 631. adopting Bowen L.J.'s opinion in (§■) Gresley v. Mousley (1861) 4 Newbigging v. Adam (1886)34 Ch. De G. & J. 78; and see oases cited Div. 582, 56 L. J. Ch. 275. WHERE RESTITUTION IMPOSSIBLE. 631 This may happen in various ways. The party who made the misrepresentation in the first instance may have acted on the faith of the contract being valid in such a manner that a subsequent rescission would work irreparable injury to him. And here the rule applies, but with the important limitation, it seems, that he must have so acted to the knowledge of the party misled and without protest from him, so that his conduct may be said to be induced by the other's delay in repudiating the contract. Thus where a policy of marine insurance is voidable for the non-disclosure of a material fact, but the delay of the underwriters in repudiating the insurance after they know the fact induces the assured to believe that they do not intend to dispute it, and he conse- quently abstains from effecting any other insurance, it would probably be held that it is then too late for the underwriters to rescind (s) . Or the interest taken under the contract by the party misled may have been so dealt with that he cannot give back the same thing he received. On this principle a shareholder cannot repudiate his shares if the character and constitution of the company have in the meantime been altered. This was the case in Clarke v. Dickson {t), where the plaintiff had taken shares in a cost-book mining company. The company was afterwards registered under the Joint Stock Companies Act then in force, apparently for the sole purpose of being wound up. In the course of the winding-up the plaintiff discovered that fraudulent misrepresentations had been made by the directors. But it was by this time im- possible for him to return what he had got; for instead of shares in a going concern on the cost-book principle he had shares in a limited liability company which was being wound (s) Per Cur. Morrison v. Vniver- (1871) (Ex. Ch.) L. R. 7 Ex. at sal Marine Insurance Co. (1873) p. 35. (Ex. Ch.) L. R. 8 Ex. at p. 205; (<) (1859) E. B. & E. 148, 27 op. Clough V. L. # N. W. Ry. Co. L. J. Q. B. 233, 113 R. R. 583. 632 THE RIGHT OP RESCISSION. up (m). It was held that it was too late to repudiate the shares, and his only remedy was by an action of deeeit against the directors personally responsible for the false state- naents (a;). As Crompton, J., put it, "You cannot both eat your cake and return your cake" {y). A similar case on this point is Western Bank of Scotland v. Addie(z). There the company was an unincorporated joint, stock bank- ing company when the respondent took his shares in it. As in Clarke v. Dickson, it was afterwards incorporated and registered for the purpose of a voluntary winding-up. It was held that the change in the condition of the company and of its shares was such as to make restitution impossible, and therefore the contract could not be rescinded (a) . It has been suggested that where goods or securities have been delivered under a contract voidable by the buyer on the ground of fraud, and before the repudiation their value has materially fallen through some cause unconnected' with the fraud, this is such a change in the condition of the thing contracted for as to make restitution impossible in law (&); («) The fact of the winding-up calls in arrear and defends on the having begun before the repudia- ground of fraud. After he is tion of the shares is of itself deci- remitted to the position of a mere sive according to the oases under debtor of the company he is not the later Companies Acts; but here bound to take any active steps: the point was hardly made. Dicta Aaron's JReefsv.Twiss [1896] A.C, in the case going beyond the reason 273, 65 L. J. P. 0. 54. given in the text are not to be' (y) E. B. & E. at p. 152, 113 trusted: per McCardie J. [1917] R. E. 586. 2 K. B. 829. (c) L. E. 1 Sc. & D. 145. (») Which course was accord- (a) It would seem, but it does ingly taken with success: Clarke not clearly appear, that in this case V. Dickson (1859) 6 C.B.N. S. 453, also the misrepresentations were 28 L. J. C. P. 225. These prin- not discovered till after the com- ciples do not apply where a share- mencement of the winding-up. holder, having had his shares (j) Waddell y.Slochey (1879) 4 forfeited for non-payment of calk, Q. b. dj^. 673^ ggs^ 43 L. J. Q. B. and thereby ceased to be a member 52^7 pgp Thesiger L.J. of the company, is sued for the AVHERE RESTITUTION IMPOSSIBLE. 633 but this view has been rejected in a case where a fiduciary relation was abused (c), and it does not seem easy to dis- tinguish this from other kinds of fraud in its consequences. The case is simpler where the party misled has himself chosen to deal with the subject-matter of the contract, by exercising acts of ownership or the like, in such a manner as to make restitution impossible; and it is still plainer if he goes on doing this with knowledge of all the facts; if the lessee of mines, for example, goes on working out the mines after he has full information of the circumstances on which he relies as entitling him to set aside the lease (d) . So a settlement of partnership accounts or a release contained in a deed of dissolution (e) cannot be disputed by one of the parties if in the meantime the concern has been completely wound up and he has taken possession of and sold the partnership assets made over to him under the arrangement (/) ; and an arrange- ment between a company and one of its directors which has been acted upon by the company so as to change the director's position cannot afterwards be repudiated by the company {g) . So a purchaser cannot after taking possession maintain an action to recover back his deposit (h) . The right to recover back money paid under an agreement on the ground of mistake, failure of consideration, or default of the other party is also subject to the same rule. Thus a lessee who has entered into possession cannot recover back the premium paid by him on the ground of the lessor's (a) Armstrong v. Jackson [1917] (?) Sheffield Nickel Co.x. Unwm 2 K. B. 822, 828, 86 L. J. K. B. (1877) 2 Q. B. D. 214, 46 L. J. 1375. Q. B. 299. (d) Viffersv. Pike (184:0-2) 8 CI. (h) Blackburn v. Smith (1848) & F. 562, 6S0, 54 R. R. 114. 2 Ex. 783, 18 L. J. Ex. 187, 76 (e) Vrquhart v. Macpherson R. R. 785 ; but it was also held (1878) 3 App. Ca. 831. that apart from this the objection (/) SMlbeck V. Hilton (1866) came too late under the conditions L. R. 2 Eq. 587. of sale in the particular ease. P. — c. 41 634 THE RIGH'l' OF RESCISSION. default ill executing the lease and doing repairs to be done by him under the agreement (i) : nor can a party recover back an excessive payment after his own dealings have made it impossible to ascertain what was really due (j) . C. The contract cannot be rescinded after third persons have acquired rights under it for value. The present rule is altogether, as the last one is to some extent, a corollary from the main principle that a contract induced by fraud or misrepresentation is as such not void but only voidable. The result is that when third persons have acquired rights under the transaction in good faith and for value, those rights are indefeasible. The rule is also stated to be an application of the principle of convenience " that where one of two innocent parties must suffer from the fraud of a third, the loss should fall on the one who enabled the third party to commit the fraud " (k). Thus when a sale of goods is procured by fraud, the property in the goods is transferred by the contract (l),, subject as between the seller and the buyer to be revested by the seller exercising his option to rescind when he discovers the fraud. A purchaser in good faith (m) from the fraudu- lent buyer acquires an indefeasible title (n) now confirmed (e) Hunt y. Silk (1804) 5 East they elected to rescind and 449, 7 R. E. 739. demanded the s-oods from the (/) Freeman v. Jeffries (1869) assignees. L. R. 4 Ex. 189, 197, 38 L. J. Ex. (m) The burden of proof is on 116. the original seller to show the oon- {K) BabcocJc v. Lawson (1880) 4 trary; s. 23 of the Sale of Goods Q. B. D. at p. 400. Act makes no difference: {I) ioaff V. ereCT7 (1846) 15M.& fiorn Bros. v. Davidson [1911] 1 W. 216, 15 L. J. Ex. 113, 71 R. R. K. B. 463, 80 L. J. K. B. 425, C. A. 627, where it was held that a (n) White ^.Garden (1851) 10 fraudulent buyer becoming banlc- C. B. 919, 20 L. J. C. P. 166, 84 rupt had not the goods in his order R. R. 846 ; Stevenson v. Newnham and disposition with the consent of (1853) (Ex. Ch.) 13 C. B. 285, 303, the true owner; for the vendors 22 L. J. C. P. 110, 115, 93 E. R. became the true owners only when 532, 542; cp. 12 App.Ca.at p. 483. RIGHTS OF THIRD PERSONS. 635 by the Sale of Goods Act, 1893, which abolished a statutory exception (o) . And a person who takes with notice of the fraud is a lawful possessor as against third persons, and as such is entitled to sue them for all injuries to the property, unless and until the party defrauded exercises his right of rescission (p). The same rule holds good as to possession or other partial interests in property. A. sells goods to B., but resumes the possession, by arrangement with B., as a security for the price. Afterwards B. induces A. to re-deliver possession of the goods to him by a fraudulent misrepresentation, and thereupon pledges the goods to C, who advances money upon them in good faith and in ignorance of the fraud. This pledge is valid, and C. is entitled to the possession of the goods as against A. (g). It must be carefully observed that a fraudulent possessor cannot give a better title than he has himself, even to an innocent purchaser, if the possession has not been obtained under a contract with the true owner, but by mere false pretences as to some matter of fact concerning the true owner's contract with a third person. To put a simple case, A. sells goods to B. and desires B. to send for them. C. obtains the goods from A. by falsely representing himself as B.'s servant: now C. acquires neither property nor lawful (o) 24 & 25 Vict. c. 96, a. 100, (?) Pease \ . Gloahec (1866) L.R. extended the re-vesting of property 1 P. 0. 219, 35 L. J. P. C. 66, in tlie true owner upon the thief's 146 R. R. 181. The dealings were oonviotion to cases of obtaining in fact with the bill of lading; but goods by criminal fraud not as this completely represented the amounting to larceny: Bentley v. goods for the purposes of the caSe Vilmont (1887) 12 App. Ca. 471, 57 the statement in the text is simpli- L. J. Q. B. 18, overruling if oycav. iied in order to bring out the Nevnugton (1878) 4 Q. B. D. 32,48 general principle more clearly. A L. J. Q. B. 125; the Sale of Goods later case of the same kind is Bab- Act, s. 24, restores the older law. oocJc v. Lawson (1880) 5 Q. B. Div. (jt)) Stevenson v. Newnham, see 284, 49 L. J. Q. B. 408. note («). 41(2) 636 THE RIGHT OF EESCIS8I0N. possession, and cannot make any sale or pledge of the goods which wiU be valid against A., though the person advancing his money have no notice of the fraud. The result is the same if A. means to sell goods to B. & Co., and C. gets goods from A. by falsely representing himself as a member of the firm and authorized to act for them (r), or if B., a person of no credit, gets goods from A . by trading under a name and address closely resembling those of C . , who is known to A . as a respectable trader (s) . It is also the same in the less simple case of a third person obtaining delivery of the goods by falsely representing himself as a sub-purchaser; for here there is no contract between him and the seller which the seller can affirm or disaffirm; what the seller does is to act on the mistaken notion that the property is already his by transfer from the original buyer. This was in effect the decision of the Exchequer Chamber in Kingsford v. Merry (t), though the case was a little complicated by the special consideration of the effect of delivery orders or warrants as " indicia of title." The decision of the House of Lords in Oakes v. Tur- quand (u), which settled that a shareholder in a company cannot repudiate his shares after the commencement of a winding-up, proceeded to a considerable extent upon the language of the Companies Act, 1862, in the sections defining (>•) Hardman v. Booth (1863) 1 Transp. Co. ]35 Mass. 283; Phillips H. & C. 803, 32 L. J. Ex. 105, v. Brooks [1919] 2 K. B. 243, 88 130 R. R. 784; Hollins v. Fowler L. J. K. B. 953, which go farther. (1874-5) L. R. 7 H. L. 757, 795. (0 (1856) 1 H. & N.503,26L.J. («) Cundy v. Lindsay (1878) 3 Ex. 83 (see per Erie J. at p. 88), App. Ca. 459, 47 L. J. Q. B. 481. 108 R. R. 694, revg. s. «. in Court Otherwise where the fraud stops below, 11 Ex. 577,25 L.J. Ex. 166. short of personation, and is only a («) (1867) L. R. 2 H. L. 325, 36 false representation of the party's L. J. Ch. 949. This principle condition and means: Attenborough applies to a voluntary as weU as a V. St. Katlmrine's Dock Co. (1878) compulsory winding-up: Stone v. 3 C. P. Div. 450, 47 L. J. Ch. City and County Bank (1877) 3 763; op. Edmunds v. McUs. Beap. C. P. Div. 282, 47 L. J. 0. P. 681. COMPANIES : RIGHTS OF SHAREHOLDERS. 637 who shall be contributories. But the broad principles of the decision, or if we prefer to say so, of the Act as interpreted by it, are these. The rights of the company's creditors and of the shareholders are fixed at the date of the winding- up and are not to be afterwards varied. The creditors are entitled to look for payment in the first instance to all persons who are actually members of the company at the date of the winding-up. And this class includes shareholders who were entitled as against the company to repudiate their shares on the ground of fraud but have not yet done so, For their obligations under their contracts with the company, including the duty to contribute in the winding-up, were valid until rescinded, and the creditors in the winding-up must be con- sidered as being, to the extent of their claims, purchasers for value of the company's rights against its members . They are not entitled to any diiferent or greater rights: no share- holder can be called upon to do more than perform his contract with the company (v) . It is now settled law that the same rule applies to joints stock companies not under the Companies Acts. And the date after which it is too late to repudiate shares may be earlier than the commencement of the winding-up . Probably the actual insolvency of the company fixes this date; at all events a shareholder cannot repudiate after the directors have convened an extraordinary meeting to consider whether the company shaU be wound up. For thus, " by holding out to the body of creditors the prospect of a voluntary winding- up," the directors, who are the shareholder's agents as long as he remains a shareholder, stay the hands of the creditors («j) Waterhouse v. Jamieson shareholder after a resolution for (1870) L. R. 2 Sc. & D. 29. In winding-up but in ignorance of it HallY. Old Talargoch Lead Mining was allowed to proceed. Here Co. (1876) 3 Ch. D. 749, 45 L. J. however relief was claimed against Ch. 775, an action for rescission the directors personally as well as and indemnity commenced by a the company. 638 THE RIGHT OF RESCISSION. from compulsory proceedings (jc) . And the rule holds even if there are no unpaid creditors. " The doctrine is, that after the company is wound up it ceases to exist, and rescission is impossible" («/). On the other hand, persons who have taken any gratuitous benefit under a fraudulent transaction, though themselves ignorant of the fraud, are in no better position than the original contriver of it. Thus where a creditor was induced to give a release to a surety by a fraud practised on him by the principal debtor, of which the surety was ignorant, and the surety gave no consideration for the release, it was held that this release might be disaffirmed by the creditor on dis- covering the fraud. But third persons who on the faith of the release being valid had advanced money to the surety to meet other liabilities would be entitled to assert a paramount claim {z) . D. The contract must be rescinded within a reasonable time, that is, before the lapse of a time, after the true state of things is known, so long that under the circumstances of the particular case the other party may fairly infer that the right of rescission is waived. It is believed that the statement of the rule in some such form as this will reconcile the substance and language of all the leading authorities . On the one hand it is often said that the election must be made within a reasonable time, while on the other hand it has several times been explained that lapse of time as such has no positive effect of its own . The Court (a;) Tennent v. City of Glasgow endeavoured to provide for the Bank (1879) i App. Ca. 615. payment of the third persons in (y) Burgess's case (1880) 13 Ch. question (Johns. 171), but tlie Court D. 507^ 609, 49 L. J. Ch. 541 of Appeal varied the decree by (Jessel M.R.). making it simply without prejudice (z) Seholefieldy.Templer (1859) to their rights: 4 De G. & J. 435, Johns. 155, 165, 4 De G. & J. 429, 124 R. R. 324. 28 L. J. Ch. 452. The Court below ACQUIESCENCE. 639 is specially cautious in entertaining charges of fraud or mis- representation brought forward after a long interval of time; it wiU anxiously weigh the circumstances, and consider what evidence may have been lost in consequence of the time that has elapsed (a) . But time alone is no bar to the right of rescinding a voidable transaction; and the House of Lords in one case set aside a purchase of a principal's estate by his agent in another name after the lapse of more than half a century, the facts having remained unknown to the principal and his representatives for thirty-seven years (b) In a later case the Lord Justice Turner stated expressly that " the two propositions of a bar by length of time and by acquies- cence are not distinct propositions." Length of time is evidence of acquiescence, but only if there is knowledge of the facts, for a man cannot be said to have acquiesced in what he did not know (c). Lord Campbell slightly qualified this by adding, that although it is for the party relying on ac- quiescence to prove the facts from which consent is to be inferred, "it is easy to conceive cases in which, from great lapse of time, such facts might and ought to be presumed " (d). The rule has been laid down and acted upon by the Judicial Committee in this form: " In order that the remedy should be lost by laches or delay, it is, if not universally, at all events ordinarily . . necessary that there should be sufficient knowledge of the facts constituting the title to relief" (e). (a) C-p.Briffhtv.Legerton (1861) (1846) 15 M. & W. at p. 217, 71 2 D. F. J. 606, 617. K. E,. 628: "A man cannot permit (S) Charter y.Trevelyan (1844) who does not know that he has s\. UCl. &F. 714, 740, 66 R.E,. 306,320. right to refuse:" and per Jessel (e) Life Associatio7i of Scotland M.R. 1 Ch. D. 528. V. Siddal (1861) 3 D. F. J. 58, 72, (fZ) 3 D. F. J. at p. 77. Theoafle 74: on the point that there cannot was one not of rescinding a contract be acquiescence witliout knowledge ; but of a breach of trust ; but the cp. iZoyti V. ^iiwooa; (1858-9) 3De principles are the same. G. & J. 614, 650, 29 L. J. Ch. 97; (e) Lindsay Petroleum Co. v. per Alderson B. Load v. Green Kurd (1874) L. E. 5 P. C. 241. 640 THE EIGHT OF RESCISSION. To the same effect it has been said in the Supreme Court of the United States: "Acquiescence and waiver are always questions of fact. There can be neither without knowledge." And the knowledge must be actual, not merely possible or potential: " the wrong-doer cannot make extreme vigilance and promptitude conditions of rescission" (/). Acquiescence need not be manifested by any positive act; the question is, whether there is sufficient evidence either from lapse of time or from other circumstances of " a fixed, deliberate and unbiassed determination that the transaction should not be impeached" {g). In estimating the weight to be given to length of time as evidence of acquiescence the nature of the property concerned is material {h) . And other special circumstances may prevent lapse of time even after everything is known from being evidence of acquiescence; as when nothing is done for some years because the other party's affairs are in such a condition that proceedings against him would be fruitless (i) . "In questions of this kind it is not only time but the conduct of the parties which has to be considered " (Jc). If a party entitled to avoid a transaction has precluded himself by his own acts or acquiescence from disputing it in his lifetime, his representatives cannot come forward to dispute it afterwards (J) . (f) Pence v. Langdon (1878) 99 reasonably inferred from it: per U. S. at p. 681. Cur. in Be Bussche v. Alt (1877) (?) Per Turner L.J. Wriijht v. 8 Ch. Div. at p. 314, 47 L. J. Chi. Vanderplanh (1855) 8 D. M. G. 386. 133, 147, 25 L. J. Ch. 753, (A) 8 D. M. G. at p. 150. 114 E. R. 60. The epithets, (i) Scfiolefield v. Tcmpler (1859) however, are more specially appro- 4 De G. & J. 429, 28 L. J. Ch. priate to the particular ground of 452, 124 R. R. 324. rescission (undue influence) then (7c) Rochefoucaidd v. Boustead before the Court. More generally, [1897] 1 Ch. 196, 211, C. A., per the only proper meaning of aoqui- Cur. esoenoe is quiescence under such (I) Skottoioe ^. Williams (1861) circumstances that assent may be 3 D. F. J. 535, 541, 130 R. R. 243. ELECTION WHEN IN TIME. 641 It is said that holders of shares in companies are under a special obligation of diligence as to making their election, but the dicta relate chiefly if not wholly to objections apparent on the face of the memorandum or articles of association. With the contents of these a shareholder is bound to make himself acquainted, and must be deemed to become acquainted, when his shares are allotted (m). But objections which can be taken upon these must proceed on the ground, not of fraud or misrepresentation as such, but of the under- taking in which shares are allotted being substantially a ■different thing from that which the prospectus described and in which the applicant offered to take shares. Nor are we aware of any case in which the rule has been applied to a repudiation of shares declared before a winding-up and on the ground of fraud or misrepresentation not apparent on the articles . Still it seems quite reasonable to hold that in the case of a shareholder's contract lapse of time without re- pudiation is of greater importance as evidence of assent than in most other cases. The authorities thus far cited have been from courts of equity. The same general principle was laid down in the Exchequer Chamber in 1871. "We think the party defrauded may keep the question open so long as he does nothing to affirm the contract . . In such cases the question is, has the person on whom the fraud was practised, having notice of the fraud, elected not to avoid the contract ? or has he elected to avoid it ? or has he made no election ? We think that so long as he has made no election he retains the right to determine it either way, subject to this, that if in the interval whilst he is deliberating an innocent third party has acquired an interest in the property, or if in consequence (m) Central Ry. of Venezuela v. ib. at p. 352; and see Oh. IX., Kisoh (1867) L. R. 2 H. L. at pp. 521, 522, above. p. 125; Oakes v. Turguand (1867) 642 THE EIGHT OF RESCISSION. of his delay the position even of the wrongdoer is affected, it will preclude him from exercising his right to rescind . And lapse of time without rescinding will furnish evidence that he has determined to affirm the contract, and when the lapse of time is great it probably would in practice be treated as conclusive evidence to show that he has so determined " (re). The law of British India (o), France (p) and many of the United States treats the right of having a contract judicially set aside for fraud, &c., as a substantive right of action, and limits a fixed period running from the- discovery of the truth within which it must be exercised. One or two points remain to be mentioned, which we have reserved to the last as being matter of procedure, but which depend upon general principles . Courts of justice are anxious to discover and discourage fraud in every shape, but they are no less anxious to discourage and rebuke loose or unfounded charges of fraud and personal misconduct. The facts relied on as establishing a case of fraud must be distinctly alleged and proved (q). Where such charges are made and aot proved, this will not prevent the party making them from having any relief to which he may otherwise appear to be («) Per Cur. Clonffk ,. Z. ^ N. Soarf v. Jardine (1882) 7 'App.Ca. W. Ry. Co. (1871) L. R. 7 Ex. at at p. 360. p. 34, repeated in Morrison v. (o) The Indian Limitation Act Universal Marine Insurance Co. (XV. of 1877, Sch. 2, No. 114), (1873) L. E. 8 Ex. at p. 203,and three years. cited by Lord Blackburn in Er- (p) Code Civ. 1304, ten years. langer v.New Sombrero Phosphate (?) Thus under the old system Co. (1878) 3 App. Ca. at p. 1277, of equity pleading a charge of see the remarks on delay and fraud in general terms would not acquiescence in the several judg- support a bill on demurrer : Gilbert ments in that case. Note that the y. Lewis (1862) 1 D. J. S. at p. 49, judgment of the Ex. Ch. in Clouffh 32 L. J. Ch. 347, per Lord West- V. L. $■ N. W. Ry. Co. was pre- bury; op. Lawrance v. Norreys pared though not delivered by (1890) 15 App. Ca. 210, 59 L.J. Ch. Blackburn J. as stated by him 681, as to allegations of concealed later when a Lord of Appeal, fraud within the Statute of Limita- tions. CANCELLATION. 643 entitled, but he must pay the costs occasioned by the unfounded charges (r) . And in one case, where the plaintiff made voluminous and elaborate charges of fraud and con- spiracy, which proved to be unfounded, the Court of Appeal not only made him pay the costs of that part of the case, but refused to allow him the costs even of the part on which he succeeded. It was held that he had so mixed up unfounded and reckless aspersions upon character with the rest of the suit as to forfeit his title to the costs which he otherwise would have been entitled to receive (s) . The special jurisdiction of courts of equity to order the cancellation of an instrument obtained by fraud or misrepre- sentation is not affected by the probability or practical certainty that the plaintiff in equity would have a good defence to an action on the instrument, nor is it the less to be exercised even if the instrument is already in his possession. He is entitled not only not to have the contract enforced against him, but to have it judicially annulled (t). (r) Hilliard v. Eiffe (1874) L. R. fore a defendant sued on an instru- 7 H. L. 39, 51, 52; London Char- ment wliioh he allegeatobe voidable tered Bank of Australia v. Lem- may properly add to Ma deftenoe a priere (1873) L. B. 4 P. C. at p. counter-claim for the cancellation 597; Clinch v. Financial Corpora- of the instrument. It may also be tion (1868) L. E. 5 Eq. at p. 483, proper to ask for a transfer to the 38 L. J. Oh. 1; per Lord Cairns, Chancery Division if the action is Thomson v. Eastwood (1877) 2 in the King's Bench Division, but App. Ca. at p. 243. this is not a matter of course. See (s) Parker v. McKenna (1874) Storey v. Waddle (1879) 4 Q. B. L. E. 10 Ch. 96, 123, 125, 44 L. J. Div. 289. Where, conversely, a Ch. 425. purchaser sues for the return of his (i) London # Provincial Insur- deposit, and the vendor counter- ance Co. v. Seymour (1873) L. R. claims for specific performance, a 17 Eq. 85, 43 L. J. Ch. 120 ; and see transfer to the Ch. D. will generally Hoarev. Bremridge (1612)1^. R.% be ordered: London Land Co. v. Ch. 22, 42 L. J. Ch. 1, there ex- Harris (1884) 13 Q. B. D. 540, 53 plained and distinguished. There- L. J. Q. B. 536. 644 DURESS AND UNDUE INFLUENCE. CHAPTER XII. Duress and Undue Influence. If the consent of one party to a contract is obtained by the other under such circumstances that the consent is not free, the contract is voidable at the option of the party whose consent is so obtained . It is quite clear that it is not merely; void so long as there is consent in fact (a) . The transaction might indeed be void if the party were under actual physical constraint, as if his hand were forcibly guided to sign his name; but this would be not because his consent was not free, but because there was no consent at all. What then are the circumstances which are held by English courts to exclude freedom of consent ? The treat- ment of this question has at common law been singularly narrow and in equity singularly comprehensive. I. Duress at Common Law. At common law the coercion which will be a sufHcient cause for avoiding a contract may consist in duress or menace; that is, either in actual compulsion or in the threat of it. In modern books the term duress is used to include both species. It is said that there must be some threatening of (o) Co. 2 Inst. 482, and 2n(l real consent on the woman's part: resolution in Whelpdale's case, 5 Scott v. Sebright (1886) 12 P. D. Co. Rep. 119. In two modern cases 21, 56 L. J. P. 11; Ford -v. a marriage lias been annulled on [1896] P. 1, 65 L. J. P. 13. The the ground that coercion, or a facts of both these cases were most mixture of coercion and fraud, had exceptional. gone to the point of excluding any DURESS. 645 life or member, or of imprisonment, or some imprisonment or Seating itself. Threatening to destroy or detain, or actually detaining property, does not amount to duress (b). And this applies to agreements not under seal as well as to deeds (c) . The reason appears to be that the detainer is a wrong of itself, for which there is an appropriate remedy. Should the party choose to make terms instead of pursuing his rights (at all events when there is nothing to prevent him from so doing), he cannot afterwards turn round' and complain that the terms were forced upon him(d). "It must be a threatening, beating, or imprisonment of the party himseK that doth make the deed, or his wife " (b) or (it seems) parent or child (e) . And a threat of imprisonment is not duress unless the imprisonment would be unlawful. This is illus- trated by two rather curious modern cases, in both of which the party's consent was determined by the fear of confine- ment in a' lunatic asylum. In Cumniing v. Ince (/) the plaintiff had been taken to a lunatic asylum and deprived of the title deeds of certain property claimed by her. Proceed- ings were commenced under a commission of lunacy, but stayed on the terms of an arrangement signed by counsel on both sides, under which the deeds were to be deposited in certain custody. The plaintiff afterwards repudiated this arrangement and brought detinue for the deeds. On an issue directed to try the right to the possession of the deeds as between herself and the other parties the Court held that in any view the defendants were wrong. For if their own proceedings under the commission were justified, they could not say the plaintiff was competent to bind herself, and (6) Shepp. Touch. 61. W SeeSilliman v. United Siatei (1879) 101 U. S. 465. (e) Atlee v. BaoUouse (1838) 3 ^^^ -^ ^i, j 687, pi. 5; Bao. M- & W. 633; iS/ceate v. Seale Ab. Duress (B). (1840) 11 A. & E. 983, 52 B. R. (/) (1847-8) 11 Q. B. 112, 17 558. L. J. Q. B. 106, 75 R. R 295. 'B46 DURESS AND UNDUE INFLUENCE. if not, the agreement was obtained by the fear of a merely unlawful imprisonment and therefore voidable on the ground of duress. And it made no difference that the plaintiff's counsel was party to the arrangement. His assent must be considered as enforced by the same duress: for as her agent he might well have feared for her the same evils that she feared for herself. In Biffin v. Bignell (g), on the other hand, the defendant was sued for necessaries supplied to his wife. She had been in a lunatic asylum under treatment for delirium tremens, and on her discharge the husband promised her 12s. a week to live apart from him, adding that if she would not he would send her to another asylum. The wife was accordingly living apart from the husband under this agreement. It was held that her consent to it was not obtained by duress, for under these circumstances " the threat, if any, was not of anything contrary to law, at least not so to be understood ": consequently the presumption of authority to pledge the husband's credit was effectually excluded, and the plaintiff could not recover (h) . The narrowness of the common law doctrines above stated is considerably mitigated in practice, for when money has been paid under circumstances of practical compulsion, though not amounting to duress, it can generally be recovered back. This is so when the payment is made to obtain the possession of property wrongfully detained (i), or, under protest, to avoid a threatened seizure (fc); and the property need not be goods for which the owner has an immediate pressing necessity, nor need the claim of the party detaining them be manifestly groundless, to make the payment for iff) (1862) 7 H. &. N. 877, 31 (J) Wakefield v. Newbon (1844) L. J. Ex. 189. 6 Q. B. 276, 280, 13 L.J. Q. B. 258; (Ji) Qu. whether in any case he Green v. Duekett (1883) 11 Q. B. could have recovered without show- D. 275, 52 L. J. Q. B. 435. ing that the wife had repudiated Qc) Haskell v. Horner [1915] 3 the arrangement. K. B. 106, 84 L. J. K. B. 1752, C. A. PAYMENTS UNDER COMPULSION. 647 this purpose involuntary in contemplation of law (I) . So it is where excessive fees are taken under colour of office, though it be usual to pay them (to) ; or where an excessive charge for the performance of a duty is paid under protest (n) . The person who actually receives the money may properly be sued, though he receive it only as an agent (o). The case of one creditor exacting a fraudulent preference from a debtor as the price of his assent to a composition (p) is to a certain extent analogous. But in all these cases the foundation of the right to recover back the money is not the involuntary character of the payment in itself, but the fact that the party receiving it did no more than he was bound to do already, or something for which it was unlawful to take money if he chose to do it, though he had his choice in the first instance. Such payments are thus regarded as made without consideration. The legal effect of their being practically involuntary, though important, comes in the second place; the circumstances explain and excuse the conduct of the party making the payment. Similarly in the kindred case of a payment under mistake the actual founda- tion of the right is a failure of consideration, and ignorance of material facts accounts for the payment having been made. The common principle is that if a man chooses to give away his money, or to take his chance whether he is giving it away or not, he cannot afterwards change his mind; but it is open to him to show that he supposed the facts to be otherwise or that he reaUy had no choice. The difference (I) Shaw V. Woodcock (1827) 7 collected in notes to Marriot v. B. & C. 73, 31 E. B. 158. Hampton (1796) 2 Sm. L. C. (m) Dew V. Parsons (1819) 2 B. 421. & Aid. 562, 21 E. E. 404; SteeU v. ^ ^^^^^^ ^_ Willmms. note (m). Williams (1853) 8 Ex. 625, 22 L. J. ^ ' ^ ^ Ex. 225. (p) Atkinson v. Benby (1861) 6 («) Parher v. G. W. By. Co. H. & N. 778, 30 L. J. Ex. 361, in (1844) 7 M. & Gr. 253, 292, 13 L.J. Ex. Ch. 7 ib. 934, 31 L. J. Ex. 362. C.P. 105. And see other authorities Supra, Ch. VIII. p. 461. 648 DURESS AND UNDUE INFLUENCE. between the right to recover money back under circumstances of this kind and the right to rescind a contract on the ground of coercion is further shown by this, that an excessive payment is not the less recoverable if both parties honestly supposed it to be the proper payment (g). We therefore dwell no farther on this topic, but proceed to consider the more extensive doctrines of equity. TI. The equitable doctrine of Undue Influence. In equity there is no rule defining inflexibly what kind or amount of compulsion shall be sufficient ground for avoiding a transaction, whether by way of agreement or by way of gift. The question to be decided in each case is whether the party was a free and voluntary agent (r) . Any influence brought to bear upon a person entering into- an agreement, or consenting to a disposal of property, which, having regard to the age and capacity of the party, the nature of the transaction, and all the circumstances of the case,, appears to have been such as to preclude the exercise of free and deliberate judgment, is considered by courts of equity to be undue influence, and is a ground for setting aside the act procured by its employment. < " The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed " (s). Such cases are thus classified by Cotton L.J. "First, where the Court has been satisfied that the gift wa& the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence (?) Sew Y. Parsons (\U9) 2 B. & L. E. 1 H. L< 200, 210, 35 L. J.Ch. Aid. 562, 21 E. E. 404. 717. (s) Per Lord Kingsdown, Smith (0 WUliams v. Bayley (1866) y.Kay (1859) 7 H.L.C. at p. 779.. DOCTRINE OF UNDUE INFLUENCE, 649 over the donor. In such a case the Court sets aside the volun- tary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result of a free exercise of the donor's wiU. The first class of cases may- be considered as depending on the principle that no one shall be allowed to retain any benefit arising from his own fraud or wrongful act. In the second class of cases the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused " (t). Yet in many cases of the second class the circumstances might, if they could be fully brought out, amount to proof of actual compulsion or fraud (u) ; so that it may perhaps be said that undue influence means an influence in the nature of compul- sion or fraud, the exercise of which in the particular instance to determine the will of the one party to the advantage of the other is not specifically proved, but is inferred from an existing relation of dominion on the one part and submission on the other (x) . Given a position of ge/ieral and habitual influence, its exercise in the particular case is presumed. But again, this habitual influence may itself be presumed to exist as a natural consequence of the condition of the parties, though it be not actually proved that the one habitu- ally acted as if under the domination of the other. There (f) AUcard y.Sldnner (1887) 36 words in a wide sense, all undue Ch. Div. 145, 171, 56 L. J. Ch. influence may be resolved inix) 1052. coercion and fraud: but the case (m) Cp. per I/indley L.J. 36 Ch. tliere considered is that of a will, in Div. at p. 183. which undue influence has a more (x) In Boyse v. Rossborough restricted meaning than in trana- (1856-7) 6 H. L. C. at p. 48, 108 actions inter vivos: see note (i), p. E. E. 11, it is said that, taking the 651, infra. -C. 42 (550 DURESS AND UNDUE INFLUENCE. are many relations of common occurrence in life from which " the Court presumes confidence put " in the general course of affairs " and influence exerted " in the particular trans- action complained of {y) . Persons may therefore not only be proved by direct evidence of conduct, but presumed by reason of standing in any of these suspected relations, as they may be called, to be in a position of commanding influence over those from whom they take a benefit. In either case they are called upon to rebut the presumption that the particular benefit was procured by the exertion of that influence, and was not given with due freedom and deliberation. They must "take upon them- selves the whole proof that the thing is righteous " {z). A stringent rule of evidence is imposed as a safeguard against evasions of the substantive law. " Wherever two persons stand in such a relation that, while it continues, confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the party so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relation had existed " (a). " Nothing can be more important to maintain than the jurisdiction, long asserted and upheld by the Court, in watch- ing over and protecting those who are placed in a situation to require protection as against acts of those who have influence over them, by which acts the person having such influence obtains any benefit to himself. In such cases the Court has always regarded the transaction with (y) Per Lord Kingsdown, Smith been instrumental in preparing or V. Kay (1859) 7 H. L. C. 750, 779. obtaining: Fulton v. Andrew (1875) (z) Gibson y. /eyes (1801) 6 Ves. L.. E. 7 H. L. 448, 472, 44 L. J. 266, 276, 5 R. R. 205, 303. The P. 17. like burden of proof is oast upon (a) Per Lord Chelmsford, Tate those who take any benefit under a v. Williamson (1866) L. il. 2 Ch. will which they have themefelvea 55, 61. PKESUMPTION FROM CONFIDENTIAL RELATIONS. 661 jealousy " (b) — a jealousy almost invincible, in Lord Eldon's words (c) . I " In equity, persons standing in certain relations to one another, such as parent and child (li) [man and wife] (e), doctor and patient (/), attorney and client {g), confessor and penitent, guardian and ward (A), are subject to certain presumptions when transactions between them are brought in question ; and if a gift or contract made in favour of him who holds the position of influence is impeached by him who is subject to that influence, the courts of equity cast upon the former the burthen of proving that the transaction was fairly conducted as if between strangers, that the weaker was not unduly impressed by the natural influence of the stronger, or the inexperienced overreached by him of more mature intelligence " (i). (6) Lord Hatherley, Turner v. Collins (1871) L. Ri. 7 Ch. 329, 338. (c) Hatch V. Batch 9 Ves. at p. 296, 7 R. R. 197. (d) Archer v. Hudson (1844) 7 Beav. 551, 13 L. J. Ch. 380, 64 S.R. 152; Turner v. Collins (1871) L. R. Ch. 329, 41 L. J. Ch. 558. (e) There does not appear to be any real authority for this; the relation of husband and wife is not within the rule: Homes v. Bishop [1909] 2 K. B. 390, 78 L. J. K. B. 796, C. A., see especially per Far- well L.J. ; Bank of Montreal v. Stiuxri [1911] A. C. 120, 80 L. J. P. C. 75. (/) Dent V.Bennett (1839) i My. & Cr. 269, 48 R. E. 94; Ahearne V. Hogan (1844) Dru. 310; s. v. Blaekie v. Clark (1852) 15 Beav. at p. 603, 92 R. R. 575. (?) ffiSsom V. Jeycs(1801)6 Ves. 266,6 R.R. 295; Hoi man Y.Loyn^s (1854) 4 D. M. G. 270, 23 L. J. Ch. 529, 102 R. R. 127; Gresley v. Mousley (1861) 4 De G. & J. 78, 94. (/t) Hatch y. Hatch (1804) 9Ves. 297, 7 R. R. 195 ; Maitland v. Irving (1846) 15 Sim. 437, 74 R. R. 115. («) Per Lord Penzance, Parfitt V. Lmoless (1872) L. R. 2 P. & D. 42 462, 468, 41 L. J. P. 68. It is to be noted that this does not apply to wills, as to which undue influence is never presumed; ib.; Boyse v. Uosshorough (1856-7) 6 H. L. C. 2, 49, followed by Jud. Comm. Bau- dains v. Richardson [1906] A. C. 169, 75 L. J. P. C. 57; Hindson V. Weatherill (1854) 5 D. M. G. 301, 311, 313; though a dis- position by will may be set aside as well as an act inter vivos when undue influence is actually proved; but then, it seems, the influence must be such as to " overpower the volition, without convincing the judgment": Hall v. Hall (1868) L. R. 1 P. & D. 482, 37 L. J. P. 40. See Walker v. Smith (1861) 29 Beav. 394, where between the same parties gifts by will were supported and a gift inter vivos set a.sidei. Lord Penzance added to the list of suspected relations that of pro- moters of a, company to the com- pany which is their creature: Erlanger v. New Sombrero Phos- phate Co. (1877) 3 App. Ca. at p. 1230. Bui is not personal con- fidence essential to make the present doctrine applicable? And ,has any case gone the length of casting on a promoter the burden o^ proving (2) 652 DURESS AND UNDUE INFLUENCE. This and all similar specifications are merely illustrative — " As no Court has ever attempted to define fraud, so no Court has ever attempted to define undue infiuence, which includes one of its many varieties " (;'). The cases in which this jurisdiction has been actually exercised are considered as merely instances of the application of a principle " applying to all the variety of relations in which dominion may be exercised by one person over another " (k) . On the other hand the mere existence of a fiduciary relation of some kind is not enough to raise a presumption of undue influence . A widow whose son is managing the father's estate is not disabled by any rule of law from making a free gift to her son if she thinks fit. Nor is independent advice necessary, in cases outside the specially guarded classes, save so far as it is material to show that the act was not only voluntary b'ut understood (l). It has even been said (m) that in every case where "one person obtains, by voluntary donation, a large pecuniary benefit from another," the person taking the benefit is bound in the first instance that a contract donnance est genfirale, et qu'elle between him and the company was comprend egalement tons oeux qni a fair one? Op. Uden v. Ridsdale's peuvent avoir quelque empire sur Sailway Lamp and Lighting Co. I'esprit dea donateurs, vos arrets (1889) 23 Q. B. Div. 368, 5 L. J. en ont etendu la disposition aux Q. B. 579, where the duty is put on maitres, aux m6deains, aux con- the ground of agency. fesseurs." So Pothier, Tr. des (/) Ldndley L.J. in Allcard v. donations entre-vifs, vol.vii.p.441, Skinner (1887) 36 Ch. Div. at in CEuvres, ed. Dupin, 1825. p. 183. (0 Ee Coomber [1911] 1 Ch. {K) Sir S.'RomiWy, arg.Hwff-uenin 723, 80 L. J. Ch. 399, C. A. v. Baseley (1807) 14 Ves. 285, 9 E. (m) By Lord Romilly in CooJcey. E. 283; adopted by Lord Gotten- Lamotte (1851) 15 Beav. 234, 240, ham, Hent v. Bennett (1839) 4 21 L. J. Ch. 371, 92 E.E. 397, 402; My. & Cr. 269, 277, 48 R. R. and Soghton v. Hoghtcm (1852) 15 94, 102; BUlage v. Southee Beav. 278, 298; 92 E. R. 421, 430; (1852) 9 Ha. 534, 540, 89 R. R. op. per Lord Hatherley in Phillips 564. Cp. D'Agueaseau (Oiluvres, v. jV/««i«<7s'(1871) L. R. 7 Ch. 244, 1.299) "Paroeque la raison de For- 246, 41 L. J. Oh. 211. GIFTS : BURDEN OF PROOF. 653 to show "that the donor voluntarily and deliberately per- formed the act, knowing its nature and effect;" that for this purpose a voluntary donation means any transaction in which one person confers a large pecuniary benefit on another, though it may be in form a contract (n) ; and that such is the rule whether there is any confidential relation or not. But these dicta are not law. There is no general presumption against the validity of gifts as such (o). Where grounds of unfavourable presumption exist, it is easier to set aside a mere gift than a transaction from which the plaintiff has derived some benefit, though not adequate to what was given for it; and attempts to disguise a gift as a dealing for value are almost always fatal (p) . Beyond this, it is conceived, the law does not go. In the absence of any special relation from which influence is presumed, the burden of proof is on the person impeaching the transaction (g), and he must show affirma- tively that pressure or undue influence was employed. Special rules. — Having thus stated the fundamental rules, we may proceed to say something more of — (1.) The auxiliary rules applied by courts of equity to. voluntary gifts in general: (») E.g. Cooke v.Lamotte (1851) Equity Bar ever eince the present 15 Beav. 234, 21 L. J. Ch. 371, writer can remember it. 92 R. R. 397 ; Bent v. Bennett (_p) Also any innocent misrepre- (1839) 4 My. & Cr. 269, 273, 48 aentation by the donee whereby a E. R. 94 99. voluntary gift is obtained is ground (o) If there were, the elaborate in equity for avoiding the gift: discussion which took place, e.g. in Re Glubb, BamfieU v. Rogers Alloard V. Skinner (1887) 36 Ch. [1900] 1 Ch. 354, 69 L. J. Ch. Div. 145, would have been super- 278, C. A. fluous; a.Tii see Henry V.Armstrong (?) Blaokie v. Clark (1852) 15 (1881) 18 Ch. D. 668, which, Beav. 595, 92 R. E. 570; To^et- v. though a decision of only co-ordi- To/cej- (1863) 31 Beav. 629,3 D. J. S. nate authority with Lord EomiUy's, 487, 32 L. J. Ch. 322. expresses the clear sense of the 6^4 DURESS AND UNDUE INFLUENCE. (2.) The like as to the influence presumed from special relations, and the evidence required in order to rebut such presumption : (3 .) What are the continuing relations between the parties from which influence has been presumed: (4.) From what circumstances, apart from any continuing relation, undue influence has been inferred; and herein of the doctrine of equity as to sales at an undervalue and " catching bargains ": (5.) The limits of the right of rescissioif. 1. As to voluntary dispositions in general. (Cp. Dav. Conv. 3, pt. 1. Appx. No. 4.) A voluntary settlement which deprives the settlor of the immediate control of the property dealt with, though it be made not for the benefit of any particular donee, but for the benefit of the settlor's children or family generally, and free from any suspicion of unfair motive, is not in a much better position than an absolute and immediate gift.' It seems indeed doubtful whether the Court does not consider it im- provident to make in general indefinite contemplation of , marriage the same kind of settlement which in contemplation and consideration of a definitely intended marriage it is thought improvident not to make (r) . It is conceived that the ground on which such dispositions are readily set aside at the instance of the settlor's repre- sentatives is not the imprudence of the thing alone, but an inference from that, coupled with other circumstances — such as the age, sex, and capacity of the settlor — that the effect of the act was not really considered and understood at the time when it was done (s) . A voluntary settlement in favour (r) Everitt v. Everitt (1870) (») lb.; Prideaux v. LonadaVa L. B. 10 Eq. 405, 39 L. J. Ch. 777 ; (1863) 1 D. J. S. 433: this ground but here some of the usual provi- is strongly taJcen by Jeasel M.R. gions were omitted. in Sutton v. Thompson (1883) 23 CONFIDENTIAL RELATIONS. 655 of a parent is eminently open to suspicion unless the donor is of mature age and experience (it). The absence of a power of revocation has often been insisted; upon as a mark of improvidence in a voluntary settlement; and it has been even held to be in itself an almost fatal < objection: but the doctrine now settled by the Court of. Appeal is that it is not conclusive, but is only to be taken into account as matter of evidence, and is of more or less weight according to the other circumstances of each case {u) . 2. Presumptions. — Auxiliary rules as to the influence presumed from special relations. The principle on which the Court acts in such cases is not affected either by the age or capacity of the person conferring the benefit, or by the nature of the benefit conferred (x) . " Where a relation of confidence is once established, either some positive act or some complete case of abandonment must be shown in order to determine it: " it will not be considered as determined whilst the influence derived from it can reason- ably be supposed to remain (x). Where the influence has its inception in the legal authority of a parent or guardian, it is presumed to continue for some time after the termination of the legal authority, until there is what may be called a complete emancipation, so that a free and unfettered judgment may be formed, independent of any sort of control (t/) . It is obvious that without this Ch. Div. at p. 281, 52 L. J. Ch. («) Hall v. //«« (1873) L. R. 8 661; James V. Gouchman (1885) 29 Ch. 430, 42 L. J, Ch. 444, where Ch. D. 212, 54 L. J. Ch. 838. So the former cases are reviewed ; and common ignorance or mistake of see Powell v. Powell, last note, both parties as to the effect of an (x) Per Turner, L.J. Rhodes v. instrument may sometimes be in- Bate (1866) L. R. 1 Ch. 252, 257, ferred on the face of it from its 260, 35 L. J. Ch. 267; Ilolman v, unreasonable or unusual character: Loynes (1854) 4 D. M. G. 270,283, see pp. 542, 543, supra. 23 L. J. Ch. 529, 102 R. R. 127, 137. (0 Powell \. Powell [1900] 1 Ch. (y) Archer ». Hudson (1844) 7 243, 69 L. J. Ch. 164. Beav. 551, 560, 13 L. J.Ch. 380,-6^1: 656 DURESS AND UNDUE INFLUENCE. extension the rule would be practically meaningless. It is said that as a general rule a year should elapse from the termination of the authority before the judgment can be supposed to be whoUy emancipated: this of course does not exclude actual proof of undue influence at any subsequent time {z) . With regard to the evidence to be adduced to rebut the presumption in a transaction between a father and a son who has recently attained majority, the father is bound " to show at all events that the son was really a free agent, that he had adequate independent advice . . . that he perfectly understood the nature and extent of the sacrifice he was making, and that he was desirous of making it." ' ' So again, where a solicitor purchases or obtains a benefit from a client, a. court of equity expects him to be able to show that he has taken no advantage of his professional position ; that the client was so dealing with Mm as to be free from the influence which a solicitor must necessarily possess, and that the solicitor has done as much to protect his client's interest as be would have done in the case of the client dealing with a stranger " (a). He must give all the reasonable advice against himself that he would have given against a third person (h). And he must not deal with his client on his own account as an undisclosed principal. "From the very nature of things, where the duty exists that he should give his client advice, it should be disinterested advice; he cannot properly give that advice when he is purchasing himself without telling his R. R. 152; Wright Y. Vanderplanlc seems not quite consistent with (1855) 8 D.M.G.ISS, 137, 146, 25 this: but there the plaintiff was L. J. Ch. 753, 114 R. R. GO, 64; not the client himself, but his Powell V. Powell [1900] 1 Ch. 243, assignee in insolvency, and the 69 L. J. Ch. 164. client's own evidence was rather («) See per Lord Cranworth, 7 favourable to the solicitor. H. L. C. at p. 772. (S) Gibson y. J eyes (1801) 6 Ves. (a) Savery v..S:i«^(1865)5 H.L. 266, 278, 5 R. R. 295, 306. As to C. at p. 655, 26 L. J. Ch. 482, 101 solicitor's charges, , see Lyddon v. E. E. 317; Caaborne v. Barsham Moss (1859) 4 De G. & J. 104. (1839) 2 Beav. 76, 50 R. R. 106, DUTY ATTACHED TO FIDUCIARY RELATIONS. 657 client that he is purchasing " (c) . If the client becomee bankrupt, his trustee is entitled to the benefit of this special duty(d). The result of the decisions has been thus summed up by the Judicial Committee of the Privy Council. " The Court does not hold that an attorney is incapable of purchasing from his client; but watches such a trapsaction with jealousy, and throws on the attorney the onus of showing that the bargain is, speaking generally, as good as any that could have been obtained by due diligence from any other purchaser " (e). He is not absolutely bound to insist on the intervention of another professional adviser. But if he does not, he must not be surprised at the transaction being dis- puted, and may have to pay his own costs even if in the result it is upheld. As to gifts, the rule is that the client must have competent independent advice (/), and the Court must be satisfied that the influence has in fact ceased {g) . The result seems to be that it is all but impossible in law for a gift from client to solicitor to be unimpeachable. Generally — " The broad principle on which the Court acts in cases of this description is that, wherever there exists such a confidence, of whatever character that confidence may be, as enables the person in whom confidence or trust is reposed to exert influence over the person trusting him, the Court will not allow any transaction between the parties to stand unless there has been the fullest and fairest explanation and communication of every particular resting in the breast of the one who seeks to establish a contract with the person so trusting him " (A). (c) McPherson v. Watt (1877) ficial contract: Lloyd v. Coot« (So.) 3 App. Ca. 254, 272. [1915] 1 K. B. 242, 84 L. J. K. B. ((f) Luddy's Trustee v. Peard 567, unless the ciroumstanees (1886) 33 Oh. p. 500. clearly exclude influence, per Row- (e) Pisani V.A.-9. for Gibraltar latt J. [1915] 1 K. B. p. 249. (1874) L. R. 5 P. C. 516, 536, 540. {g) Wright v. Carter [1903] 1 (/) Liles V. Terry [1895] 2 Ch. 27, 72 L. J. Ch. 138, O. A. Q. B. 679, 65 L. J. Q. B.34,C.A. (A) Per Wood V.-C, Tate v. Acknowledgment of statute-barred Williamson (1866) L. R. 1 Eq. at debts from a client to his solicitor p. 536. is on the same footing as a bene- 658 DUKESS AND UNDUE INFLUENCE. In other words, every contract entered into by persons- standing in such a relation is treated as being uierrimae fidei, and may be vitiated by silence as to matters which one of two independent parties making a similar contract would be in no way bound to communicate to the other; nor does it matter whether the omission is deliberate, or proceeds from mere erf or of judgment or inadvertence (i). The rule extends not only to beneficial transactions with the confidential adviser, but to such as confer a benefit on any one closely connected with him (/) . Thus a medical attendant who makes with his patient a contract in any way depending on the length of the patient's life is bound not to keep to himself any knowledge he may have professionally acquired, whether by forming his own opinion or by consulting with other practitioners, as to the probable duration of the life (fc). Perhaps the only safe way, and certainly the best, is to avoid such contracts altogether. In Grosvenor v. Sherratt (l), where a mining lease had been granted by a young lady to her brother-in-law (the son of her father's executor) and uncle, at the inducement of the said executor, " in whom she placed the greatest confidence," it was held that it was not enough for the lessees to show that the terms of the lease were fair; they ought to have, shown that no better terms could possibly have been obtained ; and as they failed to do this, the lease was set aside. (»■) Molony v. Kernan (1842) 2 Ch.609,on the broader ground that Dr. & W. at p. 39. the nature of the transaction was (;■) Barron v. Willis [1900] 2 not understood. Ch. 121, 69 L. J. Ch. 832, 0. A.; (/c) Po-pham v. Brooke (1828) 5 which also shows (if authority be Russ. 8, 53 E. R. 60. needed) that a mere suggestion of Q) (1860) 28 Beav. 659, 663, 126 independent advice, not followed R. R. 284. This is an extreme up, will not validate such a trans- case; but there was some evidence action. This decision was afSrmed of independent offers being dis- in H. L. [1902] A. C. 271, 71 L. J. couraged. DUTY ATTACHED TO FIDUCIAKY RELATIONS. 65i> This comes very near the case of an agent dealing on his own account with his principal, when " it must be proved that f liU information has been imparted, and that the agree- ment has been entered into with perfect good faith." Nor is the agent's duty altered though the proposal originally came from the principal and the principal shows himself- anxious to complete the transaction as it stands (m). The' same rules apply to an executor who himself becomes the purchaser of part of his testator's estate (w). But this obligation of agents and trustees for sale appears (as we have already considered it, pp. 350, 351, above) to be in- cidental to the special nature of their employment, and to be a duty founded on contract rather than one imposed by any rule of law which guards the freedom of contracting parties in general. The duty cast upon a solicitor, or other person in a like position of confidence, who deals on his own account with his client, of disclosing all material circumstances within his knowledge, does not however bind him to communicate a "speculative and consequential" possibility which may affect the future value of the subject-matter of the trans- action, but which is not more in his own knowledge than in, the client's (o) . It must not be forgotten that the suspicion with which dealings between parents and children presumably still under parental influence are regarded by courts of equity is to a certain extent counteracted by the favour with which dis- positions of the kind known as family arrangements are treated. In many cases a balance has to be struck between these partly conflicting presumptions. " Transactions (m) Dally v. Wonham (1863) 33 seventeen years' delay. Beav. 154. (o) Ediuards v.Meyrick (1842) 2 (n) Baker v. Read (1854) 18 Ha. 60, 74, 62 R. R. 23; Holman Beav. 398; affd. 3 W. R. 818, 104 v. Loynes (1854) 4 D. M. G. at R. R. 184; where however relief p. 280,' 102 R. R. at p. 135. wae refused on the ground of 660 DURESS AND UNDUE INFLUENCE. between parent and child may proceed upon arrangements between them for the settlement of property, or of their rights in property in which they are interested. In such cases this Court regards the transactions with favour. It does not minutely weigh the considerations on one side or the other. Even ignorance of rights, if equal on both sides, may not avail to impeach the transaction (p) . On the other hand, the transaction may be one of bounty from the child to the parent, soon after the child has attained twenty-one. In such cases this Court views the transaction with jealousy, and anxiously interposes its protection to guard the child from the exercise of parental influence" (q). It must be observed that the rules concerning gifts, or transactions in the form of contract which are substantially gifts, from a son to a father, do not apply to the converse case of a gift from an ancestor to a descendant: there is no presumption against the validity of such a gift, for it may be made in discharge of the necessary duty of providing for descendants (r) . ip) Perhaps it is safer to say that of family arrangement not applying the "almost invincible jealousy" when a son without consideration of the Court is reduced to "a gives up valuable rights to his reasonable degree of jealousy"; father: Savery v. King (1856) 5 cp.LordEldon's language in Hatch H. L. C. at p. 657, 101 E. E. 318. V. Hatch (1804) 9 Vee. at p. 296, A sale by a nephew to his uncle 7 R. R. at p. 197, and Tweddell v. of his reversionary interest in an TwerftieZ; (1822) Turn. & R. at p. 13, estate of which the uncle is tenant 23 R. R. 168. On the question of for life is not a family arrange- oonsideration see Williams v. Wil- ment: Talbot v. Staniforth (1861) Uams (1866-7) L.R.2 Ch. 294, 304, 1 J. & H. 484, 501, 128 R. R. 484, 36 L. J. Ch. 200. compromised on appeal, see note ib. (?) Baker y. Bradley (1855)7 D. 499. As to the amount of notice M. G. 597, 620, 109 R. R. 245, 259. that will aflfect a purchaser: Bain- See also Wallace v. Wallace (1842) brigge v. Browne (1881) 18 Oh. 2 Dr. & W. 452, 470, 59 E.R.766; D. 188, 50 L. J. Ch. 522. Bellamy ^ . Sabine (lii^b) 2 Ph. 425, (?•) BeanUnd v. Bradley (1854) 439, 78 R. R. 132; liogUon v. 2 Sm. & G. 339, 97 R. R. 228, cp. BoghtoniVihT) 15 Beav. 278,300, 92 Re Coomber [1911] 1 Ch. 723, 80 R.E. 421,431; and on the doctrine L. J. Ch. 399, C. A. RELATIONS WHENCE INFLUENCE PRESUMED. 661 3. Relations between the parties from which influence has been presumed. It would be useless to attempt an exact classification of that which the Court refuses on principle to define or classify: but it may be convenient to follow an order of approximate analogy to the cases of well-known relations in which the presumption is fully established. A'. Relations in which there is a power analogous to that of parent or guardian. Uncle in loco parentis and niece : Archer v. Hudson (1 844) 7 Beav. 551, 13 L. J. Ch. 380, 64 R. R. 152 ; MaitlandY. Irving (1846) 15 Sim. 437, 74 R. R. 115. Step-father in loco parentis and step-daughter: Kempson v. Ashbee (1874) L. R. 10 Ch. 15, 44 L. J. Ch. 195 ; Espey v. Lake (1852) 10 Ha. 260, 90 R. R. 362. Executor of a will (apparently in a like position) and the testator's daughter : Grosvenor v. Sherratt (1860) 28 Beav. 659, 26 R R. 284. Husband of a minor's sister with whom the minor had lived for some time before he came of age: Grijin v. Bevemlle (1781) 3 P. Wms. 131, n. But the mere fact of a minor living with a relative of full age does not raise a presumption of influence ; or the presumption, if any, is rebutted by proof of business-like habits and capacity on the donor's part : Taylor v. Johnston (1882) 19 Ch. D. 603, 51 L. J. Ch. 879. Two sisters living together, of whom one was in all respects the head of the house, and might be considered as in loco parentis towards the other, though the other was of mature years : Harvey v. Mount (1845) 8 Beav. 439, 68 R. R. 146. Brother and sister, where the sister at the age of 46 executed a voluntary settlement under the brother's advice and for his benefit : STiarp V. Leach (1862) 31 Beav. 491. Husband and wife on the one part, and aged and infirm aunt of the wife on the other: Griffiths v. RoUns (1818) 3 Mad. 191, 63 R. R. 34. Distant relationship by marriage : the donor old, infirm, and his sound- ness of mind doubtful ; great general confidence in the donee, who was treated by him as a stm : Steed v. Galley (1836) 1 Kee. 620. This rather than the donor's insanity seems the true ground of the case : see p. 644. Keeper of lunatic asylum and recovered patient : Wright v. Froud (1806) 13 Ves. 136, 53 R. R. 22. There are also cases of general control obtained by one person over another without any tie of relationship or lawful authority : Bridgman v. Green (1755) 2 Ves. Sr. 627, Wilm. 58, where a servant obtained complete control over a master of weak understanding: Kay v. Stnith (1856) 21 Beav. 522, affirmed nam. Smith v. Kay (1S59) 7 H. L. C. 750, where an older man living with a minor in a joint course of extravagance induced him im- ti62 DURESS AND UNDUE INFLUENCE. . mediately on hia coming of age to execute securities for bills previously- accepted by him to meet the joint expenses. In Lloyd v. Clark (1843) 6 Beav. 309, 63 R. R. 85, the influence of an ■officer over his junior in the same regiment was taken into account as , increasing the weight of other suspicious circumstances ; but there is nothing in the case to warrant including the position of a superior officer in the general category of " suspected relations." B. Positions analogous to that of solicitor. Certificated conveyancer acting as professional adviser : Rhodes v. Bate .(1866) L. R. 1 Ch. 252, 35 L. J. Ch. 267. Counsel and confidential adviser : Broun v. Kennedy (1863) 33 Beav. 133, 148, 4 D. J. S. 217, 140 R. R. 47, 62. Confidential agent substituted for solicitors in general management of ' affairs: Buguenin v. Baseley (1807) 14 Ves. 273, 9 R. R. 276 (s). A person deputed by an elder relation, to whom a young man applied for advice and assistance in pecuniary difficulties, to ascertain the state of his affairs and advise on relieving him from his debts : Tate v. Williamson (1866) L. R. 1 Eq. 528, 2 Ch. 55. The relation of a medical attendant and his patient is treated as a confi- dential relation an»logous to that between solicitor and client : Sent v. Bennett (1839) 4 My. & Cr. 269, 48 R. R. 94 ; Billage v. SoiUhee (1852) 9 Ha. 634, 89 R. R. 564 ; Ahearne v. Hogan (1844) Dru. 310; though in Blackie v. Glark (1852) 15 Beav. 695, 603, 92 R. R. 570, less weight appears to be attached to it. It does not appear in the last case whether the exis- tence of " anything like undue persuasion or coercion " (p. 604) was merely not proved or positively disproved : on the supposition that it was disproved there would be no inconsistency with the other authorities. For another unsuccessful attempt to set aside a gift to a medical attendant, see Fratt v. Barker (1826-28) 1 Sim. 1, 4 Russ. 507, 27 R. R. 136 ; there the donor was advised by his own solicitor, who gave positive evidence that the act was free and deliberate. (s) A fortiori, where characters Molony v. Kerrw/n (1842) 2 Dr. & of steward and attorney are com- W. 31 ; Lord Selsey v. Rhoades bined: Earris v. Tremenheere (1824-27) 2 Sim.& St. 41, 1 Bli. 1, (1808) 15 Ves. 34, 10 R. R. 5. A 25 R. E. 150, 30 E. B. 1. In, flagrant case is Baker v. Loader Rossiter v. Walsh (184:3) i Dr. kW. (1872) L. R. 16 Eq. 49, 42 L. J. 485; 65 R. R. 745, where the trans- Ch. 113. Cp. Moxon v. Payne action was between an agent and a (1873) L.R.8 Ch. 81, 43 L.J. Ch. sub-agent of the same principals, 240, where however the facts are the case was put by the bill (4 Dr. not given in any detail. As to a & W. p. 487), but not decided, on land agent purchasing or taking a the ground of fiduciary relation, lease from his principal, see also See p. 658, above. SPIRITUAL INFLUENCE. 663 c. Spiritual influence. It IB said that influence would be presumed as between a clergyman or any person in the habit of imcarting religious instruction and another person placing confidence in him : Dent v. Bennett {I8'i5)l B>im. at p. 546, 48 R. fi.. p. 97. There have been two remarkable modern oases of spiritual influence in which there were claims to spiritual power and extraordinary faculties on the one side, and implicit belief in such claims on the other : it was not neoessai-y to rely merely on the presumption of influence resulting therefrom , for the evidence which proved the relation of spiritual confidence also went far to prove as a fact in each case that a general influence aiid control did actually result : Nottidge v. Frince (1860) 2 GifE. 246, 29 L. J. Ch. 857 ; Lyon v. Hmie (1868) L. R. 6 Eq. 655, 37 L. J. Ch. 674 (i!). In the former cabe at all events there was gross imposture, but the spiritudl dominion alone would have been sufficient ground to set aside th© gift : for the Court considered the influence of a minister of religion over a person under his direct spiritual charge to be stronger than that arising from any other relation («)• There seems to have been also in Norton v. Eelly (1764) 2 Eden, 286, the earliest reported case of this class, a considerable admix- ture of actual fraud and imposition. A peculiar case is Allcard v. Skinner (1887) 36 Ch. Div. 145, 66 L. J. Ch. 1052. The plaintiff, a lady of full age, had joined a religious sisterhood, apparently of her own mere motion and free will. Its rules, known to her before she applied for admission, required the members to abandon all their individual property ; not necessarily to the sisterhood, but the common practice was to give it to the superior for the purposes of the sisterhood. Other rules required strict obedience to the superior, restrained communica- tion with " externs " about the affairs of the convent, and forbade members to " seek advice of any extern without the superior's leave.'' At various times after entering the sisterhood the plaintifE made transfers of consider- able sums of money and stock to the superior, in fact " gave away practically all she could." After some years she left the sisterhood, and after nearly six years more she claimed the return of the funds remaining in the superior's hands. It was held that, having regard to the position of the plaintiff as a member of the sisterhood, and to the rules she had undertaken to obey, especially the rules against communication with "externs," she was not a free agent at the time of making the gifts. But the majority of the Court held that her subsequent conduct amounted to confirmation. A still later case where a weak rich man became a mere puppet in the hands of an amateur spiritual director, who used his ascendency for the (i) In Lyon v. Home there was curastances, it was quite, rightly some evidence that the gifts in held that this, if it were so, made question, were not asked for by the no difference. , defendant but pressed on him by («) 2 Giff. 269, 270. .the plaintiff; but, given the cir- 664 DURESS AND UNDUE INFLUENCE. most grossly selfish ends, is Morley t. Zoiiffhnan [1893] 1 Ch. 736, 62 L. J. Ch. 516. The authority of Suguenin v. Baseley (1807) 14 Ves. 273, 9 R. R. 276, as to this particular kind of influence, is to be found not in the judgment, ■which proceeds on the ground of confidential agency, but in Sir S. Romilly's argument in reply, to which repeated judicial approval has given a weight scarcely if at all inferior to that of the decision itself. 4. Evidence. — Circumstances held to amount to proof of undue influence, apart from any continuing relation. In a case where a father gave security for the amount of certain notes believed to have been forged by his son, the holders giving him to understand that otherwise the eon would be prosecuted for the felony, the agreement was set aside, as well on the ground that the father acted under undue pressure and was not a free and voluntary agent, as because the agreement was in itself illegal, as being substantially an agreement to stifle a criminal prosecution (x). In Ellis V. Barker (y) the plaintiff's interest under a will was practically dependent as to part of its value on his being accepted as tenant of a farm the testator had occupied as yearly tenant. One of the trustees was the landlord's steward, and in order to induce the plaintiff to carry out the testator's supposed intentions of providing for the rest of the family he persuaded the landlord not to accept the plaintiff as his tenant unless he would make such an arrangement with the rest of the family as the trustees thought right. Under this pressure the arrangement was executed: it was practically a gift, as there was no real question as to the rights of the parties. Afterwards the deeds by which it was made were set aside at the suit of the plaintiff, and the trustees (having thus unjustifiably made themselves partisans as between their cestuis que trust) had to pay the costs. (a) Williams v. Saylej/ (1866) (y) (1871) L. R. 7 Ch. 104, 41 L. R. 1 H. L. 200, 35 L. J. Ch. 717 ; L. J. Ch. 64. op. p. 398, above. SPECIAL CASES. 665 These are the most distinct cases we have met with of a transaction being set aside on the ground of undue influence specifically proved to have been used to procure the party's consent to that particular transaction {z) . In Smith v. Kay (a) a young man completely under the influence and control of another person and acting under that influence had been induced to execute securities for bills which he had accepted during his minority without any in- dependent legal advice; and the securities were set aside. There was in this case evidence of actual fraud; but it was distinctly affirmed that the decision would have been the same without it, as it was incumbent on persons claiming under the securities to give satisfactory evidence of fair dealing (h). This comes very near to the peculiar class of cases on "catching bargains" with which we shall deal presently. Undue influence may be inferred when the benefit is such as the taker has no right to demand [i.e. no natural or moral claim] and the grantor no rational motive to give (c). Inadequacy of the consideration. — This, thoufh in itself not decisive, may be an important element in the conclusion arrived at by a court of equity with respect to a contract of sale. The general rule of equity in this matter was thus stated by Lord Westbury: " It is true that there is an equity which may be founded upon gross inadequacy of consideration. {z) Cp. Ormes v. Beadel (1860) 2 R. R. 367. Giff. 166, 30 L. J. Ch. 1, revd. 2 (i) 7 H. L. C. p. 761, 770. The D. F. J. 333, 128 R. R. 77, on the securities given were for an amount ground that the agreement had very much exceeding the whole of afterwards been voluntarily acted the sums really advanced and the upon with a knowledge of all the interest upon them: p. 778. facts. (c) Purcell V. M'Namara (1807) (ffi) (1859) 7 H. L. C. 750, 115 14 Ves. 91, 115. P. — C. 43 ()66 DURESS AND UNDUE INFLUENCE. But it can only be where the inadequacy is such as to involve the conclusion that the party either did not understand what he was about or was the victim of some imposition " (d). The established doctrine is that. mere inadequacy of price is in itself of no more weight in equity than at law (e) . It is evidence of fraud, but, standing alone, by no means con- clusive evidence (/). Even when coupled with an incorrect statement of the consideration it will not alone be enough to vitiate a sale in the absence of any fiduciary relation between the parties (g). But if there are other circumstances tending to show that the vendor was not a free and reasonable agent, the fact of .the sale having been at an under-value may be a material element in determining the Court to set it aside. Thus it is when one member of a testator's family conveys his interest in the estate to others for an inadequate consideration, and it is doubtful if he fully understood the extent of his rights or ,the effect of his act (h)- If property is bought at an inadequate price from an uneducated man of weak mind (i) or in his last ((?) Tennentv. Tennents (ISIO)!,. («) Woody. Abrey (1818) 3 Mad. R. 2 So. & D. 6, 9. For a modern 417, 423, 18 E.E.264,268; PeaaocJe ■instance of such a conclusion being v. Evans (1809) 16 Ves. 512, 517, actually drawn by the Court from 10 E. R. 218, 222; 'SttUwell v. a sale at a gross undervalue, see WilMns (1821) Jao. 280, 282, 23 Rice V. Gordon (1847) 11 Beav. R. E. 56. 265, 270, 83 E. E. 153; cp. Under- (/) CocJcell v. Taylor (1851) 15 JiUl V. Ilonoood (1804) 10 Ves. Beav. 103, 115, 21 L. J. Ch. 645, 92 'at p. 219; Summers v. Griffiths E. E. 328, 336. (1866) 35 Beav. 27, 33, 147 E. E. 6, {g') Harrison v. Guest (1855) 6 and the earlier dictum there re- D. M. G. 424^ 8 H. L. C. 481, 106 ferred to of Lord Thurlow in R. E. 129. Gwynne v. Heaton (1778) 1 Bro. {h) Sturr/e v. Sturge (1849) 12 0. C. 1, 9, that "to set aside a con- Beav. 229, 19 L. J. Ch. 17, 85 E.R. veyance there must be an inequality 77; cp. Dunnage y. White (1818)1 so strong, gross, and manifest, that Swanst. 137, 150, 18 R. R. 33, 41. it njusfc be impossible to state it to (») Longmate y'. Ledger (1860) 2 a man of common sense without Giff. 157, 163 (affirmed on appeal, producing an exclamation at the see 4 D. F. J. 402). inequality of it." UNDERVALUE. 667 illness (k), who is not protected by independent advice, the burden of proof is on the purchaser to show that the vendor made the bargain deliberately and with knowledge of all the circumstances. Nay, more, when the vendor is injBrm and illiterate and employs no separate solicitor, " it lies on the purchaser to show affirmatively that the price he has given is the value," and if he cannot do this the sale will be set aside at the suit of the vendor (I). In 1871 a case in the Court of Appeal was decided on the ground that " if a solicitor and mortgagee . obtains a conveyance [of the mortgaged property] from the mortgagor, and the mortgagor is a man in humble circumstances, without any legal advice, then the onus of justifying the transaction, and showing that it was a right and fair transaction, is thrown upon the mort- gagee " (m). Still more lately the poverty and ignorance of the seller of a reversionary interest has been held enough, without infirmity of body or mind, to throw the burden of proof on the buyer {n) . Similarly if a purchase is made at an inadequate price from vendors in great distress, and without any professional assistance but that of the purchaser's solicitors, "these cir- cumstances are evidence that in this purchase advantage was taken of the distress of the vendors," and the conveyance will be set aside (o). It has even been said that to sustain a contract of sale in equity "a reasonable degree of equality between the con- (k) Clark V. Malpas (1862) 31 banks (1849) 2 Mac. & G. 10, 83 Beav. 80, i D. P. J. 401. R. R. 166; and see Ford v. Olden (I) SaJcer V. Jloiik {lS6i)3S Beav. (1867) L.. R. 3 Eq. 461, 36 L. J. 419, 4 D. J. S. 388, 391. Ch. 651. (m) Lord Hatherley C. Frees v. («) Fry v. Lane (1888) 40 Ch. D. Coke (1870-1) L.R.6 Ch.645, 649: 312, 58 L. J. Ch. 113. though in general there is no rule (o) IFoodv. Abrey (1818) 3 Mad. against a mortgagee buying from 417, 424, 18 R. R. 264, 269. his mortgagor: Knight v.Marjori- 43(2) 668 DURESS AND UNDUE INFLUENCE. traeting parties " is required (p). But such a dictiim can be accepted only to this extent: that when there is a very marked inequality between the parties in social position or intelligence, or the transaction arises out of the necessities of one of them and is of such a nature as to put him to some extent in the power of the other, the Court will be inclined to give much more weight to any suspicious circumstances attending the formation of the contract, and will be much more exacting in its demands for a satisfactory explanation of them, than when the parties are on such a footing as to be presumably of equal competence to understand and protect their respective interests in the matter in hand. The true doctrine is well expressed in the Indian Contract Act, s. 25, expl. 2. "An agreement to which the consent of the promisor is freely given is not void merely because the con- sideration is inadequate; but the inadequacy of the considera- tion may be taken into account by the Court in determining the question whether the consent of the promisor was freely given." A sale made by a person of inferior station, and for an inadequate price, was upheld by the Court of Appeal in Chancery, and ultimately by the House of Lords, when it appeared by the evidence that the vendor had entered into the transaction deliberately, and had deliberately chosen not to take independent professional advice (g) . It was long doubtful whether a degree of inadequacy of (p) Longmate v. Ledger (1860) whether the parties really did meet 2 Griff, at p. 163, by Stuart V.-C; on equal terms; and if it be found op. the same judge's remarks in that the vendor was in distressed Barrett v. Hartley (1866) L. R. 2 circumstances, and that advantage Eq. at p. 794. We have already was taken of that distress, it will seen something of the learned Vice- avoid the contract." Chancellor's adventurous doctrines (g) Harrisonv. Guest(lS&5) 6 D. about Mistake. See the more cor- M. a. 424, 8 H. L. C. 481, 106 rect statement in Wood\. Abrey, 3 R. R. 129; cp. Sosher v. Vi'llams Mad. at p. 423, 18 R. R. p. 268. (1875) L. R. 20 Eq. 210, 44 L. J. "A court of equity will inquire Ch. 419. UNDERVALUE AND SPECIFIC PERFORMANCE. 669 consideration which does not amount to evidence of fraud may not yet be a sufficient ground for refusing specific performance. The general rule as to granting specific per- formance, so far as it bears on this point, is that the Court has a discretion not to direct a specific performance in cases where it would be highly unreasonable to do so: it is also said that one cannot define beforehand what shall be con- sidered unreasonable (r). On principle it seems doubtful whether it should ever be considered unreasonable to make a man perform that which he has the present means of per- forming, and which with his eyes open he has bound himself to perform by a contract valid in law. And it is said in Watson V. Marston (r) that the Court " must be satisfied that the agreement would not have been entered into if its true effect had been understood." Perhaps this may be considered to overrule those earlier decisions which furnish authority for refusing a specific performance simply on the ground of the apparent hardship of the contract. As to the immediate question whether inadequacy of consideration, not being such as to make the validity of the contract doubtful (s), is regarded as making the performance of it highly unreasonable within the meaning of the above rule, it is now settled by general consent in the negative . The opinions of Lord Eldon and Lord St. Leonards were clear. (r) See Watson V. Marston (185S) never decided a legal point when i D.M.G. 230, 239, 240, 102 E. K. they could help it. Now tliat legal 100, 107, and dicta there referred and equitable jurisdiction are to. united, the Court will consider the (s) Doubt as to the validity of question of damages if an action the contract, short of the conclusion for specific performance is brought that it is not valid, has always in a case such that under the old been held a suiEoient ground for practice the bill would have been refusing specific performance. dismissed without prejudice to an Probably this arose from the habit action: Tamplin v. James (1880) or etiquette by which courts of 15 Ch. Div. 215. equity, down to recent times, 670 DURESS AND UNDUE INFLUENCE. " Unless the inadequacy of price is such as shocks the conscience, and amounts in itself to conclusive and decisive evidence of fraud in the transaction, it is not itself a 8ufficien|t ground for refusing a specific performance" (t). " The undervalue must be such as to shock the conscience " [i.e. as to be sufficient evidence of fraud: cp. Lord Eldon's dictum, supra] (m) . Sir Edward Fry already considered this to be " the well established principle of the Court " in the first edition of his •well known treatise on Specific Performance published in 1858, and this is substantially repeated in the subsequent editions (x). There is just one modern case to the contrary, which is now left aside as an aberration . In that case there was something beyond mere inadequacy: the agreement was for a purchase at a valuation, and there was no valuation by a competent person. V.-C. Kindersley however expressed a distinct opinion that specific performance ought to be refused on the ground of inadequacy alone (y) . Sir Edward Fry's book or the earlier editions of the present worji may be consulted, if desired, for a view of the older conflicting authorities, most of which were indecisive. A brief notice of the French law on the head of captation (partly corresponding to our Undue Influence) will be found in the Appendix {z) . Fraud on expectant heirs. — We have still to deal with an important exceptional class of cases. That which may have been a discretionary inference when the discretion of courts of equity was larger than it now is has in these cases become (0 Ooles V. Trecothiek (1804) 9 (a;) 4th ed., 1903, by W. D. Vea. 234, 246, 7 E. E. 167, 175, per Eawlins, K.C., p. 196. Lord Eldon. (y) Falche v. Gray (1859) 4 («) Abbott V. Sworder (1852) 4 Drew. 651, 29 L. J. Ch. 28; US De G. & Sm. 448, 461: per Lord E. E. 493. St. Leonards. (z) Note K. EXPECTANT HEIRS AND REVERSIONERS. 671 a settled presumption, so that fraud, or rather undue influence, is "presumed from the circumstanceis and condition of the parties contracting" (a). The term " fraud" is indeed of common occurrence both in the earlier (a) and in the later authorities: but "fraud does not here mean deceit or cir- cumvt-ntion; it means an unconscientious use of the power arising out of these circumstances and conditions" (b): and this does not come within the proper meaning of fraud, which is a misrepresentation (whether by untrue assertion, suppression of truth or conduct) made with the intent of creating a particular wrong belief in the mind of the party defrauded. Perhaps the best word to use would be " imposition " as a sort of middle term between fraud, to which it comes nearer in popular language, and compulsion, which it suggests by its etymology. The class of persons in dealing with whose contracts the Court of Chancery went beyond its general principles are those who stand, in the words of Sir George Jessel, " in that peculiar position of reversioner or remainderman which is oddly enough described as an expectant heir. This phrase is used, not in its literal meaning, but as including every one who has either a vested remainder or a contingent remainder in a family property, including a remainder in a portion as well as a remainder in an estate, and every one who has the hope of succession to the property of an ancestor — either by reason of his being the heir apparent or presumptive, or by reason merely of the expectation of a devise or bequest on account (a) Lord Hardwicke in Chester- phrase as to presumption is almost ■field Y.Janssen (1750-1), 2 Ves.Sr. literally repeated, and it is obvious at p. 125, classifies this in general that these oases really come under terms as "a third kind of fraud: " his third head. he proceeds (at p. 157) to make a (S) Per Lord Selborne, Earl of separate head of catching bargains, Aylesford v. Morris (1873) L. R. as "mixed cases compounded of all 8 Ch. 484, 491, 42 L. J. Ch. 546. orseveral species of fraud: "but the 672 DURESS AND UNDUE INFLUENCE. of the supposed or presumed affection of his ancestor or relative. More than this, the doctrine as to expectant heirs has been extended to all reversioners and remaindermen, as appears from Tottenham v. Emmet (c) and Earl of Aylesford V. Morris (d). So that the doctrine not only includes the class I have mentioned, who in some popular sense might be called expectant heirs, but also all remaindermen and rever- sioners " (e). The Act 31 Vict. c. 4 modified the practice of the Court of Chancery (which now continues in the Chancery Division) less than might be supposed: it is therefore necessary to give in the first place a connected view of the whole doctrine as it formerly stood. It was considered that persons raising money on their expectancies were at such a disadvantage as to be peculiarly exposed to imposition and fraud, and to require an extraordinary degree of protection (/): and it was also thought right to discourage such dealings on a general ground of public policy, as tending to the ruin of families (g) and in most cases involving " a sort of indirect fraud upon the heads of families from whom these trans- actions are concealed" (h). Moreover laws against usury were in force at the time when courts of equity began to give relief against these "catching bargains" as they are called (i); any trans- (c) (1865) 14 W. E. 3, 141 E. R. 1 P. Wms. at p. 312; Coie v. 804. Gibbons. 3 P. Wms. at p. 293; (d) (1873) L. E. 8 Ch. 484, 42 Chesterfield v. Janssen (1750-1) 2 L. J. Ch. 564. V63. Sr. at p. 158. (e) Beynon v. Cook (1875) L. E. (A) Per Lord Selborne, Earl of 10 Ch. 391, n. Aylesford v. JIform(1873) L.E. 8 (/) "A degree of protection ap- Ch. 484, 492, 42 L. J. Ch. 546;- proaohing nearly to an incapacity Chesterfield v. Janssen (1750-1) 2 to bind themselves by any eon- Ves. Sr. 124, 157. ^ract": Sir W. Grant in Peaoock v. (i) In Wiseman v.Beahe,2 Vern. Evans (1809) 16 Ves. at p. 514, 121, it appears from the statement 10 E. E. 218, 220. of the facts that twenty years or f7) Twisleton v. Griffiths (1716) thereabouts after the Eestoration REVERSIONARY INTERESTS. 673 actions which looked like an evasion of those laws were very narrowly watched, and it may be surmised that when they could not be brought within the scope of the statutes the Courts felt justified in being astute to defeat them on any other grounds that could be discovered (;') . Reversionary interests. — The doctrine which was at lirst introduced for the protection of expectant heirs was in course of time extended to all dealings whatever with reversionary interests. In its finally developed form it had two branches: — 1. As to reversionary interests, whether the reversioner were also an expectant heir or not: A. The rule of law that the vendor might avoid the sale for undervalue alone; B. The rule of evidence that the burden of proof was on the purchaser '()t) to show that he gave the full value. It is this part of the doctrine that is changed by the Act 31 Vict. c. 4. 2. As to "catching bargains" with expectant heirs and remaindermen or reversioners in similar circumstances, i.e. bargains made in substance on the credit of their expectations, this juriadiction was regarded as this head anterior to Chesterfield a novelty: for the defendant's v. Janssen are unfortunately so testator "understanding that the meagre that it is difficult to ascer- Chancery beg-an to relieve against tain whether they proceeded on such bargains'' took certain steps any uniform principle. But the to make himself safe, but without motives above alleged seem on the success, the Court pronouncing whole to have been those which them "a contrivance only to double determined the policy of the Court, hatch the cheat." But in Ardglasse On the gradual extension of the T. Musahamp (1684) 1 Vern. 238, it remedy cp. the remarks of Burnett is said that many precedents from J. inC'/testerfieldv. Janssen (1850-1) Lord Bacon's, Lord EUesmere's 2 Ves. Sr. at p. 145. and Lord Coventry's times were (A) Including mortgagee: Emmet produced. v. Tottenham (1864) 10 Jur. N. S. (;■) The reports of the cases on 1090, 141 R. R. 804. 674 DURESS AND UNDUE INFLUENCE. whether the property in expectancy or reversion be osten- sibly the subject-matter of the transaction or not (I): The rule of evidence that the burden of proof lies on the other contracting party to show that the transaction was a fair one. We use the present tense, for neither the last- mentioned Act nor the repeal of the usury laws, as we shall see presently, has made any change in this respect. The part of the doctrine which is abrogated was intimately connected both in principle and in practice with that which remains; and though it seems no longer necessary to go through the authorities in detail, it may still be advisable to give some account of the manner in which it was applied (to) . The general rule established by the cases was that the purchaser was bound to give the fair market price, and to preserve abundant evidence of the price having been adequate^ however difficult it might be to ascertain what the true value was. It was applied to reversionary interests of every kind, and the vendor was none the less entitled to the benefit of it if he had acted with full deliberation. The presumption originally thought to arise from transactions of this kind had in fact become transformed into an inflexible rule of law, which, .consistently carried out, made it well-nigh impossible to deal with reversionary interests at all. The modern cases almost look as if the Court, finding it too late to shake off the doctrine, had sought to call the attention of the legislature to its inconvenience by extreme instances. Sales were set aside after the lapse of such a length of time as 19 years, and even 40 years (n) . A sub-purchaser who bought at a con- siderably advanced price was held by this alone to have notice (?) Uarl of Aylesjord v. Morris (p. 650, 2nd ed.). (1873) L. R. 8 Ch. at p. 497. («) St. Albyn v. Harding (1859) (m) A digest of the cases was 27 Beav. 11; Salter v. Bradshavr given in the first two editions (1858) 26 Beav. 161, 122 R. E. 68. EXPECTANT HEIRS : " CATCHING BARGAINS." 675 of the first sale having been at an undervalue (o) . In one case where the price paid was 2001., and the true value as estimated by the Court 238Z., the sale was set aside on the ground of this undervalue, though the question was only incidentally raised and the plaintiff's case failed on all other points (p). Finally Parliament found it necessary to interfere, and, in 1867, by the " Act to amend the law relating to sales of reversions," 31 Vict. c. 4, it was enacted (s. 1) that no pur- chase (defined by s. 2 to include every contract, &c., by which a beneficial interest in property may be acquired), made bona fide and without fraud or unfair dealing of any reversionary interest in real or personal estate, should after January 1, 1868 (s. 3), be opened or set aside merely on the ground of undervalue. The Act is carefully limited to its special object of putting an end to the arbitrary rule of equity which was an impediment to fair and reasonable as well as to unconscionable bargains. It leaves undervalue still a material element in cases in which it is not the sole equitable ground for relief (g) . It had already been decided (r) that the repeal of the usury laws (s) did not alter the general rules of the Court of Chancery as to dealings with expectant heirs . This decision was followed in Miller v. Cook (t), and adhered to in Tyler v. Yates (u), and lastly in Earl of Jylesford v. Morris (x) (o) Nesbitt v. Berridge (1863) earlier Acts which it now seems 32 Beav. 280. useless to mention. (jo) Jones V. Micketts (1862) 31 (0 (1870) L. R. 10 Eq. 641, 40 Beav. 130, 31 L. J. Oh. 753. L. J. Ch. 11. (?) Earl of Aylesford v. Morris (u) (1871) L. R. 11 Eq. 265, (1873) li. R. 8 Ch. at p. 490. See L. R. 6 Oh. 665, 40 L. J. Ch. 768. also O'Morlce r . BoUngbroke (1877) {x) h. R. 8 Ch. 484; this may 2 App.Ca. 814; i^ry V. Z(z«e (1888) now be regarded aa the leading 40 Ch. D. 312, 58 L. J. Ch. 113 case on the subject. It should be (r) Croft V. Graham (1863) 2 observed that in Tyler v. Yates a D. J. S. 155. principal and surety made them- («) 17 & 18 Viot. c. 90. Partial selves liable for a bill which the exceptions had been made by principal had accepted during his 676 DUltESS AND UNDUE INFLUENCE. aud Beynon v. Cook {y), and in the two latter cases it has been clearly laid down that the rules are in like manner unaffected by the change in the law concerning sales of reversions. And this was confirmed by all the opinions delivered in O'Rorke v. Bolingbroke (z) in the House of Lords, though the particular transaction in dispute was up- held. Rules as to "catching bargains." — The effect of these rules is not to lay down any proposition of substantive law, but to make an exception from the ordinary rules of evidence by throwing upon the party claiming under a contract the burden of proving not merely that the essential requisites of a contract, including the other party's consent, existed, but also that the consent was perfectly free. The question is therefore, what are " the conditions which throw the burden of justifying the righteousness of the bargain upon the party who claims the benefit of" it "(a). Now these conditions have never been fixed by any positive authority. We have seen that the Court of Chancery has refused to define fraud, or to limit by any enumeration the standing relations from which influence will be presumed. In like manner there is no definition to be found of what is to be understood by a " catching bargain." This being so we can only observe the conditions which have in fact been generally present in the minority, without knowing that cuted a new note under the imprea- there was no existing legal liability siou that she was liable on the old pn the bill, and all the subsequent one, and without any new considera- transaotions were bound up with tion, and the note was set aside ; see this: and the case was rested on Southall v. Miffg (1851) and For- tius ground in the Court of Appeal man v. Wright (1851) 11 C. B. 481, (p. 671). Cp.on this point Coward, 20 I>. J. C. P. 145, 87 K. E. 731. ^.Hughes (1855) 1 K.&J. 443, 103 (y) (1875) JL. E. 10 Ch. 389., R. K. 172, where a widow who dur- (z) (1877) 2 App. Ca. 814. ing her husband's life had joined as (a) Earl of Aylesforct y . Morris •urety in his promissory note exe- (1873) L. E. 8 Oh. at p. 492. " CATCHING BARGAINS." 677 bargains against which relief has been given in the exercise of this jurisdiction. These are: — (i) A loan in which the borrower is a person having little or no property immediately available, and is trusted in sub- stance on the credit of his expectations. Ohn. It is immaterial whether there is or not any actual dealing with the estate in remainder or expression of the oonting'enoy on which the fund for payment of the principal advanced substantially depends. Earl of Ayles- ford V. Morris (1873) L. R. S Ch. at p. 497. It is also immaterial whether any particular property is looked to for ultimate payment. A general e.xpectation derived from the position in society of the borrower's family, the lender intending to trade on their probable fear of exposure, may have the same effect. Nevill v. Snelling (1880) 15 Ch. D. 679, 702, 49 L. J. Ch. 777 (Denman J.). (ii) Terms prima facie oppressive and extortionate (i.e. such that a man of ordinary sense and judgment cannot be supposed likely to give his free consent to them). Ois. An excessive rate of interest is in itself nothing nriore than a dis- proportionately large consideration given by the borrower for the loan : and it is not sufficient, standing alone, to invalidate a contract in equity : Webster v. Cook (1867) L. R. 2 Ch. 642, where a loan at 60 per cent, per annum was upheld. Stuart V.-C. disapproved of the case in Ti/ler v. Tates (1871) L. R. 11 Eq. at p. 276, but on another point. And see Farker v. Butchei- (1867) L. R. 3 Eq. 762, 767, 36 L. J. Ch. 552. (iii) A considerable excess in the nominal amount of the sums advanced over the amount actually received by the borrower. Ohs. This appears in all the modem cases in which relief has been given : deductions being made on every advance, according to the common practice of professed money-lenders, under the name of discount, commission, and the like. The result is that the rate of interest appearing to be taken does not show anything like the terms on which the loan is in truth made : and this may be considered evidence of fraud so far as it argues a desire on the part of the lender to gloze over the real terms of the bargain. A jury could, perhaps, not be directed so to consider it in a trial where fraud was distinctly in issue ; though no doubt such circumstances, or even an ex- orbitant rate of interest, would be made matter of observation. 678 DURESS AND UNDUE INFLUlJNCE. ' (iv) The absence of any real bargaining between the parties, or of any inquiry by the lender into the exact nature or value of the borrower's expectations. Ohs. These oiroumstances are relied on in Earl of Ayhsford v. Morris (1873) L. R. 8 Ch. at p. 496, as increasing the difficulty of upholding the transaction: cp. Nevill t. SnclUtig (1880) 15 Ch. D. at pp. 702-3. This again is the usual practice of the money-lenders who do this' kind of business. Their terms are calculated to cover the risk of there being no security at all ; moreover the borrower often wishes the lender not to make any inquiries which might end in the matter coming to the knowledge of the ancestor or other person from whom the expectations are derived. The concealment of the transaction from the ancestor was held by Lord Brougham in King v. Samlet (1835) 2 M. & K. 456, 39 E,. E. 24, 237, to be an indispensable condition of equitable relief ; but this opinion is not now accepted: Earl of Ayhsford v. Morris (1873) L. E,. 8 Ch. at p. 491. The decision in King v. Samlet (affirmed in the House of Lords, but without giving any reasons, 3 CI. & F. 218, 39 R. R. 24) can be supported on the ground that the party seeking relief had himself acted on the contract he impeached so as to make restitution impossible. It seems safe to assert that in any case where these con- ditions concur the burden of proof is thrown on the lender to show that the transaction was a fair one: it seems equally linskfe to assert that they must all concur, or that any one of them (except perhaps the first) is indispensable. It may then be asked. By what sort of evidence is the lender to satisfy the Court that the borrower was not imposed on ? As there is no reported case in which it was considered that the burden of proof lay upon the lender, and yet he did so satisfy the Court, it is impossible to give any certain answer to this question . It is evidently most improbable that in any case where the above-mentioned conditions are present, any satisfactory evidence should be forthcoming to justify the lender (6). Practically the question is whether in the (J) " No attempt has been made thus imposed on the plaintiff were to show by any independent evi- fair and reasonable," L. R. 8 Ch. denoe (if such u thing could be 496. conceived possible) that the terms " CATCHING BARGAINS." 679 opinion of the Court the transaction was a hard bargain (c) — that is, not merely a bargain in which the consideration is inadequate, but an unconscionable bargain where one party takes an unfair advantage of the other (d) . This jurisdiction is of considerable importance in British India, and especially in the United (formerly North-West) Provinces, which have furnished an interesting line of cases (e). An account stated for the purpose of a contract of this ■description is of no more validity than the contract itself, and a recital of it in the security does not preclude the borrower from re-opening the account even as against pur- chasers or sub-mortgagees of the original lender who have notice of the general character of the transaction. For Such notice is equivalent to notice of all the legal consequences (/) . The borrower who seeks relief against a contract of this description must of course repay whatever sums have been actually advanced, with reasonable interest (according to the usual practice of the Court, 5 per cent.), and the relief is granted only on those terms. Moreover it is held not unjust that he should obtain it at his own expense, since he calls in the assistance of the Court to undo the consequences of his (c) See the judgment of the Sup 8in(fh,ib. 127, ani cp. note (p), M. E. Beynonv. Cook (1875) L.. E. p. 416, above, the present writer's 10 Oh. 391, /«., and Nevill v. Law of Fraud,&c.jin British India SneUinff (1880) 15 Ch.B. at -p. 703. (Tagore Law Lectures 1893-4), (d) Per Jessel M.E. in Middleton pp. 77 — 79, and I. C. A. s. 16 (3) V. Brown (1878) 47 L. J. Ch. 411, and notes thereon in ed. Pollock O. A. ; Nevill v. SnelUng (1880) 15 and Mulla. Ch. D. 679, 49 L. J. Ch. 777, (/) ToUenfmm v. Green (1863) where the lender systematicaUy 32 L. J. Ch. 201, 139 E. E. 326: took advantage of a mistaken a case decided under the old rule as over-payment of interest by the to dealings with reversionary in- borrower. tereats, but the principles seem ap- (e) See Kunwar Ram Lai v. plioable in aU oases where the iVi? /iTawM, L. E. 20 Ind.App. 112; burden of proof is still on the Rajah Mokham Singh v. Rajah lender. 680 DURESS AND UNDUE INFLUENCE. own folly {g) : and accordingly the general rule is to give no costs on either side {h). The rule of evidence casting a special burden of proof on the lender being peculiar to equity, there was generally no defence at law to an action brought by him to enforce a contract of this kind. But since the rule of evidence established in equity now prevails in every branch of the High Court, it seems that when a lender of money (not being a money-lender within the Act to be presently mentioned) sues on a special contract, whether the contract be embodied in a negotiable instrument or not, and the borrower proves facts which bring the contract within the description of a "catching bargain" as understood by courts of equity, the lender must prove the reasonableness of the bargain; and if he fails to do so, he cannot recover on the special contract, but can recover Tiis principal and reasonable interest as on a common count for money lent. This, however, is now of but little practical importance; and the importance of this class of cases is also diminished by the Infants' Relief Act, 1874, which makes loans of money to infants absolutely void and forbids any action to be brought on a promise to pay debts contracted during infancy. See p. 65, supra. (^) Earl of Aylesford v. Morris at p. 676, and costs might be given (1873) I>. R. 8 Ch. at p. 499. against the defendant as to any Qi) In the cases of salea of rever- transaction in which there had been sions under the former law on that misconduct on his part: Tottenham head the practice was for some time v. Green (1863) 32 L. J. Ch. 201, to treat the suit as a redemption 206. In Nevill v. SnelUng (1880), suit, and give the purchaser his note {d) p. 679, the plaintiff having costs as a mortgagee: but the later offered before action brought to rule was to give no costs on either repay the sums actually advanced side, except that the plaintiff had with interest at 5 per cent., the to bear such as were occasioned by defendant was ordered to pay the any unfounded charges of actual costs: 15 Ch. D. at p. 705, cp. fraud: Edwards v. Burt (1852) 2 .B«j/«o« v. Coo^ (1875) L. R. ,101 Ch. D. M. G. at p. 65, 95 R. R. 17: at p. 393, in judgment of Jeaael Sromley v. Srkith (1859) 26 Beav. M.R. MONEY-LENDERS ACT. 681 Money-lenders Act. — The Money-lenders Act, 1900 (63 & 64 Vict. c. 51), imposes special burdens on professional money-lenders (i) by way of registration and otherwise, and enables the Court to set aside an}- terms which it considers " harsh and unconscionable " (the question being for the judge not the jury) (y), without being bound by the former ■practice of courts of equity (fc) . Excessive interest alone may be a sufficient ground for relief (l) ; the question of excess is for the judge (;'). An unregistered money-lender can- not recover at all (m), and a borrower from such a lender who does not seek any special equitable relief is entitled to an unconditional declaration that any security he may have given is void (n) ; but the lender, even an unregistered one, will not be ordered to give up the borrower's securities except on the terms of the actual advances being repaid, according to the practice of the Court in dealing with usurious loans under the old law (o) . Analogous transactions. — The same equitable principles apply, so far as they are applicable to a transaction of sale (j) As to the persona within this Oh. 740, 75 L.J.Ch. 446, C. A. As description, Litchfield v. Dreyfus to the name to be registered, see [1906] 1 K. B. 535, 75 I/. J. K. B, Stirling v. Silburn # P»/mff«[1910] 447; Edgelow v. MncElwee [1918] 1 K. B. 67, 79 K J. K. B 336; 1 K. B. 205, 87 L. J. K. B. 738. Whiteman v. Sadler [1910] A. C. So far as any test can be assigned!, 514. As to "registered address," it is readiness to lend money in a Cornelius v. Phillips [1918] A. C. distinct way of business: occasional 199, 87 L. J. K. B. 246. As to pro- loans incidental to another busi- tection of assignees for value, ness, or to genuine personal ao- Money-lenders Act, 1911, 1 & 2 quaintanoe, do not make a man a Geo. 5, s. 38. Details must be money-lender. sought in special commentaries on (J^ Abrahams V. DimmocTe \l'd\5'\ the Act. IK B 662, 84 L.J. K. B. 802, 0. A. («) Chapman v. Michaelson (A) Re a Debtor [1903] 1 K. B. [1909] 1 Ch. 238, 78 L. J. Ch. 272, 705, 72 L. J. K. B. 382, C. A.; C. A. Samuel v. Neavbold [1906] A. C. (o) Lodge v. National Union 461 75 L. J. Ch. 705'. Investment Co. [1907] 1 Ch. 300, (I) Samuel y. Newbold, last note. 76 L. J. Ch. 187. (m) Bonnard v. Dott [1906] 1 P. — C. 44 682 DURESS AND UNDUE INFLUENCE. as distinguished from loan, to the sale of reversionary- interests by persons who are not in an independent position, as when the sale is made by a man only just of age in pursuance of terms settled while he was stiU an infant. Here the burden is on the purchaser to show the fairness of the transaction. He is not bound to show that the price given was absolutely adequate; but he is bound, notwithstanding the Act of 1867 (31 Vict. c. 4, p. 672, above), to show that it was such as, upon the facts known to him at the time, he might have reasonably thought adequate. Moreover he ought to see, where practicable, that the seller has independent legal advice. These rules seem to be established by O'Rorhe v. BolinghroTce (p), which is remarkable as an almost singular instance of an impeached transaction with an " expectant heir " being upheld. There a father and son negotiated with a purchaser for the sale of the son's reversionary interest expectant on the death of the father. The sale was completed three weeks after the son came of age. The price was agreed to after some bargaining; it was founded on a statement of value furnished by a third person, and would have been adequate if the father's life had been a good one. The purchaser did not know and had no reason to believe any- thing to the contrary, but it was in fact a bad life. The young man took no independent advice, being "penniless, and except for his father friendless" (g). The father died within three months after the sale. Four years later the son sued to have the whole transaction set aside, but failed in the House of Lords after succeeding in the Court of Appeal in Ireland. The majority of the Lords (r) held that the (p) (1877) 2 App. Ca. 814. Cp. (q) Lord Blackburn, 2 App. Ca. fry V. Lane (1888) 40 CIi. D. 312, at p. 837. .58 L. J. Ch. 113, where the seller (r) Lord Blackburn, Lord O'Ha- was poor and ignorant, and the gan, and Lord Gordon, diss. Lord same solicitor purported to act for Hatherley. both parties. " SURPRISE," 683 burden of proof was indeed on the buyer, but that he had satisfied it. In some cases unconscionable bargains of this kind are complicated with champerty. Where this is so the transaction cannot, of course, be upheld (s) . " Surprise." — Another alleged ground of equitable relief against contracts founded on the notion of an inequality between the contracting parties has been " surprise," or "surprise and improvidence." But this seems to be only a way of describing evidence of fraud or of a relation of dependence between the parties. The case of Evans v. Llewellin (i) may be taken as the typical instance. The plaintiff was a person of inferior station and education who acquired by descent a title in fee simple to a share in land in which the defendant had a limited interest. His title was first communicated to him by the defendant, who represented to him (as the fact appears to have been) that the circumstances of the family created a moral obligation in the plaintiff not to insist on his strict rights, and offered to purchase his interest for a substantial though not adequate consideration. The defendant suggested to the plaintiff to consult his friends in the matter, which however he did not do. Three days intervened between the first interview and the conclusion of the business by the acceptance of the defendant's offer. It was considered that the plaintiff was under the circumstances not a free agent and not equal to protecting himself, and was taken by surprise, and the sale was set aside (m) . The case seems (s) JRees v. Be Bernardy [1896] misrepresentation. In Baygarth 2 Oh. 437, 65 L. J. Ch. 656. v. Wearing (1871) L.R. 12 Eq.320, (<) See following note. 40 L. J. Ch. 577, which to some (m) (1787) 2 Bro. C. C. 150, 1 extent resembled this, the ground Cox, 333 (1 E. R. 49), a fuller, of the decision was a positive mis- report, which is here followed; the representation as to the value of other if correct would reduce it to the property, a plain case of fraud or at all events 44(2) .684 DURESS AND UNDUE INFLUENCE. somewhat anomalous, but, according to very high authority, it might still be followed in setting aside a contract as " im- provident and hastily carried into execution " (x), and it has been distinctly approved in the Court of Appeal in Chancery (^). But no judicial authority can make " surprise " or " improvidence " a word of art, or bind lawyers to affirm as a general proposition that haste or imprudence can of itself be a sufficient cause for setting aside a contract, or even that there is any particular degree of haste or impru- dence from which fundamental error, fraud, or undue influence, will be invariably presumed. " The Court will not measure the degrees of understanding " (2) . " Surprise " and " improvidence " are matters from which it may be inferred, as a fact in particular cases, that there was no true consent, or that the consent was not free. What is recorded in such a case as Evans v. LlewelUn (a) is not an enunciation of law, but an inference of fact which may b& useful in the way of analogy but is not binding as an authority. To this effect, indeed, were the observations of the judges in the Earl of Bath and Montague's case as long ago as 1693 (b). In that case Baron Powel said (3 Ch. Ca. at p. 56): " It is said, This is a Deed that was obtained by Surprize and Ciroum- vention. Now I perceive this word Surprize is of a very large and general' Extent. ... I hardly know any Surprize that should be sufficient to. set aside a Deed after a Verdict, unless it be mixed with Fraud, and that expressly proved." [i.«. the verdict in favour of the deed precludes the party from asserting in equity that he did not know what he was about : for he should have set up that case at law on the plea oi^non est factum.^, {x) Lord St. Leonards in Cursryti ground suggested. V. Belworthy (1852) 3 H. L. C. Qy) Per Turner L.J. in Baker v. 742, 88 E. R. 319 ; there the appel- Monh (1864) 4 D. J. S. at p. 392. lant relied on express charges of (z) Bridgman v. Green (1755) fraud, which were not made out: Wilmot, 58, 61. but Lord St. Leonards thought (a) (1787) 1 Cox, 333, 1 E. E. 49^ he might possibly have succeeded (6) 3 Ch. Ca. 55. Cp. Story,. if he had rested his case on the Eq. Jurisp. § 251. " SliufitllSE," ETC. 685 *' It must be admitted that there was Deliberation, and Oonsifleration and Intention enough proved to make it a good Deed at Law, otherwise there would not have been a Verdict for it " ■ per L. C. J. Treby, ib. at p. 74. The judgment of the Lord Keeper Somers is even more decided, and points out clearly the difference between an instrument which is void both at law and in equity, and one which is voidable in equity (p. 108): — " It is true, it is charged in the Bill that this Deed was obtained by Fraud and Surprize. But whosoever reads over the Depositions will see that the End they aimed at was to attack the Deeds themselves as false Deeds and not truly executed ; but that being tried at Law, and the Will and Deeds verified by a verdict, the Counsel have attempted to make use of the same Evidence, and read it all, or at least the greatest Part of it, as Evidence of Surprize and Circumvention. . ... " Now, for this word (Surprize) it is a Word of a general Signification, so general and so uncertain, that it is impossible to fix it ; a Man is surpriz'd in every rash and indiscreet Action, or whatsoever is not done with so much Judgment and Consideration as it ought to be : But I suppose the Gentle- men who use that Word in this Case mean such Surprize as is attended and accompanied with Fraud and Circumvention ; such a Surprize indeed may be a good ground to set aside a Deed so obtain' d in Equity and hath been so in all times ; but any other Surprize never was and I hope never will be, because it will introduce such a wild Uncertainty in the Decrees and Judgments of the Court, as will be of greater Consequence than the Belief in any Case will answer for." Moreover the doctrine thus stated is exactly analogous to the undoubted law concerning inadequacy of consideration. The value of the subject-matter of a contract, and therefore the adequacy of the consideration, which depends on it, is in most cases easier to measure than the degree of deliberation or prudence with which the contract was entered into . 5. Limits of the right of rescission. — The right of setting aside a contract or transfer of property voidable on the ground of undue influence is , analogous to the right of re- scinding a transaction voidable on any other ground, and follows the same rules with some slight modifications in detail. 6«6 DURESS AND UNDUE INFLUENCE. What is said in the last chapter of rescinding contracts for fraud or misrepresentation may be taken as generally appli- cable here . We proceed to give some examples of the special application of the priaciples. The right to set aside a gift or beneficial contract voidable for undue influence may be exercised by the donor's represen- tatives or successors in title (c) as well as by himself, and against not only the donee but persons claiming through him {d) otherwise than as purchasers for value without notice (e). But the jurisdiction is not exercised at the suit of third persons. The Court will not refuse, for example, to pay a fund, at the request of a petitioner entitled thereto, to the trustees of a deed of gift previously executed by the petitioner, because third parties suggest that the gift was not freely made (/) . On the other hand it is not necessary to the support of a claim to set aside a contract on the ground of undue influence to show that the influence was directly employed by another contracting party. It is enough to show that it was employed by some one who expected to derive benefit from the trans- action, and with the knowledge of the other party or under circumstances sufficient to give him notice of it. The most frequent case is that of an ancestor or other person in loco parentis inducing a descendant, etc., to give security for a debt of the ancestor. But if the other party does all he reasonably can to guard against imdue influence being exerted (as by insisting on the person in a dependent (o) E.g. Executor: Hunter- v. 23 L. J. Ch. 529, 102 E. R. 127. Atkins (1832-4) 3 M. & E. 113, 41 ((?) Eugueain v. Baseley (1807) E.R. 30; Coutts t.Acworth (1869) 14 Ves. 273, 289, 9 R. R. 276, 286. L. R. 8 Eq. 558. Assignee in Cp. Jlfoto»y v. £■«»•»«« (1842) 2 Dr. bankruptcy: Ford v. Olden (1867) & W. 31, 40. L. R. 3 Eq. 461, 36 L. J. Ch. 651. (e) Cobbett v. BrocH (1855) 20 Devisee: Gresleyii. Moualey Q.i&V) Beav. 524,528. 4 De G. & J. 78. Heir: Holman (/) Metcalfe's trust (1864) 2 D. V. Loynes (1854) 4 D. M. G. 270, J. S. 122, 33 L. J. Oh. 308. PARTIES : CONFIRMATION AND ACQUIESCENCE. 687 position having independent professional advice), and the precautions he demands are satisfied in a manner he cannot object to at the time, the contract cannot as against him be impeached {g) . It appears to be at least doubtful whether a contract can be set aside on the ground of influence exerted on one of the parties by a 'stranger to the contract who did not expect to derive any benefit from it (Ji) : except where the contract is an arrangement between cestuis que trust claiming under the same disposition, and the trustee puts pressure on one of the parties to make concessions ; the ground in this case being the breach of a trustee's special duty to act impartially (i). The right to set aside a contract or gift originally voidable on the ground of undue influence may be lost by expresis confirmation (Jc) or by delay amounting to proof of acquies- cence (I). But any subsequent confirmation will be inopera- tive if made in the same absence of independent advice and assistance which vitiated the transaction in the begin- ning (m). "Frauds or impositions of the kind practised in this case cannot be condoned ; the right to property acquired {g) Compare Cobbett v. Brock M. G. 623, 22 L. J. Ch. 352, (1855) 20 Beav. 524, 109 E. E. 523, 95 E. E. 257; Morse v. Soyal . with Berdoe v. Dawson (1865) 34 (1806) 12 Vea. 355, 8 R. R. 338. Beav. 603. As to what amounts to (Z) Wright v. Vanderplank notice, Maitland v. Backhouse (1855) 8 D.M.G. 133, 147, 25 L.J. (1847) 16 Sim. 58; Tottenham v. Ch. 753, 114 R. E. 60; Turner v. Green (1863) 32 L. J. Ch. 201. Collins (1871) L. R. 7 Ch. 320, 41 (/t) Bentley v. Mackay {V&fiT) 31 L.. J. Ch. 558; Alloard v. Skinner Beav. 143, 151 (this point not dealt (1887) 36 Ch. Div. 145, see especi- with on appeal). On principle the ally per I/indleyL.J.atp. 187. Cp. answer should clearly be in the A'«« v. £ffS tion; and the comparison is just L. R. 5 H. L. 656, 42 L. J. Ch. to tliis extent, that at common law 234. they might be rendered enforceable (e) This section is not affected in much the same manner, and by the Real Property limitation practically the authorities are Act, 1874, except that proceedinga interchangeable on this point. to recover rent or money charged But an infant's contract is in its on land now have to be taken inception not of imperfect obliga- within 12 years: 37 & 38 Vict. c. tion, but simply voidable. 57, ss. 1, 8. ■692 AGREEMENTS OF IMPERFECT OBLIGATION. of satisfaction after the lapse of twenty years which already obtained in practice-(/), it is enacted that (inter, alia) all actions of covenant or debt upon any bond or other specialty " shall be commenced and sued " within twenty years of the cause of action. The exceptions for disability, and the rules as to the time from which the statutes begin to run, do not concern us here, our object being not to define to what cases the laws under consideration apply, but to observe the general results which follow when they are applicable. Now there is nothing in these statutes to extinguish an obligation once created. The party who neglects to enforce his right by action cannot insist upon so enforcing it after a certain time. But the right itself is' not gone. It is not correct even to say without qualification that there is no right to sue, for the protection given by the statutes is of no avail to a defendant unless he' expressly claims it. Serjeant WiUiams,. after noticing the earlier conflicts of opinion on this point, and some unsatisfactory reasons given at different times for the rule which has prevailed, concludes the true reason to be that " the Statute of Limitations admits, the cause or con- sideration of the action still existing, and merely discharges the defendant from the remedy " (g). This alone shows that an imperfect obligation subsists between the parties after the time of limitation has run out.. In the case of un- liquidated demands that obligation is practically inoperative, since an unliquidated demand cannot be rendered certain except by action or an express agreement founded on the relinquishment of an existing remedy. But in the case of a liquidated debt the continued . existence of the debt after (/) Jioddam v. Morley (1856-7) p. 338, on the technical effect of a 1 De G. & J. 17, 26 L. J. Oh. 438. plea of the statute. The rule oon- (,9) 2 Wms. Saund. 163: cp. tinues under the Judicature Acts, Soarpellhii v. AtrheSon (1845) 7 Order XIX. r. 15 [No. 211]. Q. B. at p. 878, 14 K J. Q.' B.' kt DEBTS BARRED BY STATUTE. 693 the loss of the remedy by action may have other important effects. AlthouglT the creditor cannot enforce payment hy direct process of law, he is not the less entitled to use any other means of obtaining it which he might lawfully have used before. Thus if he has a lien on goods of the debtor for a general account, he may hold the goods for a debt barred by the statute (A). And any lien or express security he may have for the particular debt remains valid (i) . If the debtor pays money to him without directing appropriation of it to any particular debt, he may appropriate it to satisfy a debt of this kind (fc) : much more is he entitled to keep the money if the debtor pays it on account of the particular debt, but not knowing, whether by ignorance of fact or of law, that the creditor has lost his remedy. So an executor may retain out of a legacy a barred debt owing from the legatee to the testator (Z). He may also retain out of the estate such a debt due from the testator to himself: and he may pay the testator's barred debts to other persons (m), though not any particular debt which has been judicially declared to be not recoverable from the estate (?i) : and this even if the personal estate is sufficient (o) . But though a creditor may retain a barred debt if he can, he may not resist another claim of the- debtor against him by a set-off of the barred debt: for the (A) Spears v. Sartli/ (1800) 3 92 R. E. 378. Esp. 81, 6 E. E. 814. (m) Sill v. Walker (1858) 4 K. (i) 'mgginsv. Scott (1831) 2 B. & J. 166; StahUchmidt v. Lett & Ad. 413, 36 E. E. 607; Seagery. (1853) 1 Sm. & G. 415, 96 E. E. Aaton (1857) 26 L. J. Ch. 800 (on 439. the statute of 3 & 4 Will. 4). (») Midgley v. Midgley [1893] (^) MUls V. FowTces (1839) 5 3 Ch. 282, 62 L. J. Ch. 905, C. A. Bing N. C. 455, 50 E. E. 750; (o) Lowis v. Sumney (1867) Nash V. Sodgson (185i5) 6 D. M. G. L. E. 4 Eq. 451. This is a peculiar 474, 25 L. J. Ch. 186, 106 E.E.157. rule. It ia otherwise as to claims (Z) Courienay y. Williams (ISii) not enforceable by reason of the- 3 Ha. 539, 13 L. J. Ch. 461, 15 Statute of Frauds: Jte Eownson I>. J. Ch. 204, 64 E. E. 403; op. (1885) 29 Ch. Div. 358; 54 L. J. Rose V. Gould (1852) 15 Beav. 189, Ch. 950. 694 AGREEMENTS OF IMPERFECT OBLIGATION. right of set-off is statutory, and introduced merely to prevent cross actions, so that a claim pleaded by way of set-off is subject to be defeated in any way in which it could be defeated if made by action (p). This reason applies equally to all other cases of imperfect obligations. Herein our law differs from the Roman, in which compensatio did not depend on any positive enactment, but was an equitable right derived from the ius gentium. Again, the creditor's lost remedy may be revived by the act of the debtor. The decisions on the statute of James I. have established that a renewed promise to pay, or an ac- knowledgment from which a promise can be inferred, excludes the operation of the statute. It was formerly held that the statute rested wholly on a presumption of payment, and therefore that any acknowledgment of the debt being unpaid, even though coupled with a refusal to pay, was sufficient. But this opinion has long since been overruled (q). Again, it has been said that although the original remedy is gone, the original consideration remains as a sufficient founda- tion for a subsequent promise. But this explanation is not satisfying, since the consideration for the new promise is wholly past, and therefore insufficient accord- ing to modern doctrine (r) . The only theory tenable on principle seems to be that the statute is a law merely of procedure, giving the debtor a defence which he may waive if he think fit. Nevertheless it is held that the acknowledg- ment operates as evidence of a new promise, and therefore it is not effectual unless made before action brought (s) . The modern, law was concisely stated by Mellish L.J. " There must be one of three things to take the case out of (p) The defence of set-off must (g) 2 Wma. Saund. 183, 184. be specially met by replying the (r) See p. 191, above, statute of limitation, see 1 Wms. (s) Bateman v. Finder (1842) 3 Saund. 431. Q. B. 574, 11 L. J. Q. B. 281. DEBTS BARRED BY STATUTE. 695 the statute. Either there must be an acknowledgment of the debt, from which a promise to pay is to be 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 per- formed " (t). The promise must be to pay the debt as ex debito iustitiae ; a promise to pay as a debt of honour is insufficient, as it excludes the admission of legal liability (u). When the promise is implied, it must be as an inference of fact, not of law; the payment of interest under compulsion of law does not imply any promise to pay the principal (x). The acknowledgment or promise, if express, must be in writing and signed by the debtor (9 Geo. 4, c. 14, s. 1) or his agent duly authorized (Mercantile Law Amendment Act, 1856, 19 & 20 Vict. c. 97, s. 13). But an acknowledgment may still be implied from the payment of interest or of part of the principal on account of the whole, without any admission in writing (y) . The more recent statute which limits the time for suing on contracts by specialty contains an express proviso as to acknowledgment and part payment (3 & 4 Will. 4, c. 42, (t) Mitchell's claim (1871) L. R. 249; Cooper v. Kendall [1909] 1 6 Ch. at p. 828. And see IVilbtj v. K. B. 405, 78 L. J. K. B. 580, Elffee (1875) L.E. 10 C. P. 497, 44 C. A. A promise to pay what may L. J. C. P. 254; Chasemore v. Tur- be found due on taking an account ner (1874) (Ex. Ch.) L. R. 10 is enough: see Langrishy. Watts Q. B. 500, 506, 510, 520, 45 L. J. [1903] 1 K. B. 636, 72 L. J. K. B. Q. B. 66, and the later case of 435, C. A. Meyerhoff v. Frohlick (1878) 3 C. (u) Macoord v. Osborne (1876) 1 P. D. 333, in C. A., 4 C. P. Div. C. P. D. 568, 45 L. J. O. P. 727 63, 48 L. J. C. P. 43, which also (on Lord Tenterden's Act) . show how much difficulty there {x) Morgan v. Rowlands (1872) may be in determining in a par- L. E. 7 Q. B. 493, 498, 41 L. J. ticular case whether there has been Q. B. 187. an unconditional promise: Quincey {y) 2 Wms. Saund. 181, 187, see V. Sharpe (1876) 1 Ex. D. 72, 45 also the notes to Whitcomb v. L. J. Ex. 347; STceet v. Lindsay Whiting (1781) 1 Sm. L. 0. (1877) 2 Ex. D. 314, 46 L. J. Ex. 696 AGREEMENTS OF IMPERFECT OBLIGATION. s. 5) (z). The cases as to acknowledgment, &c. under the statute of James, and Lord Tenterden's Act, are not applic- able to this proviso . Here the operation of the acknowledg- ment is independent of any new promise to pay, and the action in which the acknowledgment is to be operative must be founded on the original obligation alone (a). The Act for the Limitation of Actions and Suits relating to Real Property (3 & 4 Will. 4, c. 27, s. 34) does not only bar the remedy, but extinguishes the right at the end of the period of limitation. It is therefore unconnected with our present subject. We have seen that by the operation of the statutes of limitation applicable to contracts the right itself is not de- stroyed, but only the conditions of enforcing it are affected. The law of limitation is a law relating not to the substance of the cause of action, but to procedure. Hence it follows that these enactments belong to the lex fori, not to the lex contractus, and are binding on all peisons who seek their remedy in the courts of this country (&). A suitor in an English court must sue within the time limited by the English statute, though the cause of action may have arisen in a country where a longer time is allowed (c) . Conversely, an action brought in an English court within the English period of limitation is maintainable although a shorter period limited by the law of the place where the contract was made (z) See Pears v. Laing (1871) 4, 97 E. R. 1. The only pointi that L. E. 12 Eq. 41, 40 L. J. Oh. 225. gave any real trouble was whether (a) Roddam v. Morley (1856-7) its application to Hindus at Bom- 1 Be G. & J. 1, 26 L. J. Ch. 438, bay was compatible with the opinion of Williams and Crowder terms in which the personal law JJ. at p. 15. of Asiatic suitors was saved by the (J) This principle was approved Charter of the Supreme Court then and applied, after fuU discussion in force. and very long deliberation, by the (e) British Linen Co. v. Drum- Judicial Committee in Ruakmaboye mond (1830) 10 B. & C. 903, 34 V. Zulloobhoy (1853) 8 Moo. P. C. E. E. 595. STATUTES OF LIMITATION. 697 has elapsed, even if a competent court of that place has given judgment in favour of the defendant on the ground of that period having expired (d) . And for this purpose a docu- ment under seal has been treated by an English court as creating a specialty debt, though made in a country where our distinction between simple contract and specialty debts does not exist, and more than six years before action brought (e). The House of Lords, as a Scots court of appeal, has had to decide a similar question as between the law of Scotland and the law of France. It was held that the Scottish law of prescription applied to an action brought in Scotland on a bill of exchange drawn and accepted in France, the right of action on which in France had been saved by judicial pro- ceedings there (/). In the case where the shorter of the two periods of limitation is that allowed by the foreign law governing the substance of the contract, and that period has elapsed, it is of course necessary to ascertain that the foreign law is analogous to our own in its operation, and merely takes away the remedy without making the contract void at the end of the time of prescription. But it is considered that an actual destruction of the right woidd be so inconvenient and unreasonable that it may almost be presumed that such (d) Suber v. Steiner (1835) 2 (e) Alliance Bank of Simla v. Bing. N. C. 202, 42 E..R. 598 (debt Carey (1880) 5 C. P. D. 429, 49 barred by French law): Harris v. L. J. 0. P. 781 (a bond executed Qtiine (1869) L. E. 4 Q. B. 653, in British India). Possibly the use 38 L. J. Q. B. 331 (debt barred by by British subjects of an English Manx law): in the latter case form, unmeaning at the place of Oockburn C.J. expressed some execution, may justify the infer- doubt as to the principle, admitting ence that they at that time in- however that the rule was settled tended the document to operate aa by authority: Savigny too (Syst. 8. an English deed. Otherwise the 273) is for applying that law decision seems not easy to support, which governa the substance of (/) Don v. Lippman (1837) 5 the contract. Op. Dicey, Conflict CI. & F. 1, 47 R. R. 1. See also 2 of Laws, 709. Wms. Saund. 399. -C. 45 698 AGREEMENTS OF IMPERFECT OBLIGATION. is not the operation of the law of any civilized state ; and the English courts would not put such a construction on the foreign law unless compelled so to do by very strong evidence {g) . We shall presently see that analogous questions concerning the lex fori may arise in other cases of imperfect obligations. / 2. Conditions precedent to remedy. — Under the second ^/liead fall the cases of particular classes of contracts where the law requires particular acts to be done by the parties or one of them (in respect of the form of the contract or otherwise) as conditions precedent to the contract being recognised as enforceable . A. Statute of Frauds. — The most important of the enactments thus imposing special conditions on contract is the fourth section of the Statute of Frauds (29 Car. 2, c. 3). The fourth section enacts that after the date there men- tioned " no action shall be brought whereby to charge any exeoutor or adminis- trator upon any special promise to answer damages out of his own estate ; or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriages of another person ; or to charge any person upon any agreement made upon consideration of marriage ; or upon any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them ; or upon any agreement that is not to be performed within the space of one year from the making thereof ; unless the agree- ment upon which such action shall be brought or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized." The terms of the 17th section (now superseded in England by s. 4 of the Sale of Goods Act, 1893) were different, and raised a question whether they did not wholly avoid agree- ments not satisfying its conditions; yet the better opinion (^) Ruber v. Steiner (1835) 2 show that by the French law of Bing. N". C. 202, 42 R. R. 598, prescription the right was abao- where it was in vain attempted to lutely extinguished. INFORMAL AGREEMENTS UNDER STATUTE OP FRAUDS. 699 was that the 17th section, like the 4th, was only a law of procedure {h) ; and the Sale of Goods Act has so settled it for the future by using the words " shall not be enforceable by action." And it seems that the statute does not prevent property from passing on an informal sale (?) . The cases of part acceptance of the goods or part payment of the price are expressly provided for, eitJier of these having the same effect as a duly made memorandum in writing. We now return to the fourth section. For the sake of brevity we shall use the term "informal agreement" to signify any agreement which comes within this section and does not comply with its requirements. For some time it was not fully settled what was the effect of this enactment on informal agreements. There was some authority for saying it made them void. It was never held necessary in the courts of law for a defendant sued on an informal agreement to plead the statute specially, as in the case of the statutes of limitation: and it has been held (before the C. L. P. Act) that a special plea was not only unnecessary but bad as an " argumentative denial " of the contract de- 'clared upon (/). Moreover an action cannot be maintained (/t) Lord Blacklrarn in Jladdison raised on the pleadings. Order v. Alderson (1883) 8 App. Ca. at XIX. r. 15, cp. r. 20. The defen- p. 488; Brett L.J. in Britain v. dant need not specify on which Rossiter (1879) 11 Q. B. D. at section he relics, but if he does, p. 127, 48 L. J. Ex. 362. To the he cannot alter it by amendment: same effect the majority of the James v. Smitli. [1891] 1 Ch. 384, Lords in Morris v. Baron [1913] 63 L.T.524,affd. (on other grounds) A. C. 1,87 L.J. K. B, 145; contra 65 L. T. 544. As to the former Lord Finlay [1918] A. C. at p. 11. practice in equity, see Johnasson (i) Taylor v. G. E. My. Co. v. Bonhote (1876) 2 Ch. Div. 298, [1901] 1 K. B. 774, 70 L. J. K. B. 45 L. J. Ch. 651. Once properly 499, raised the defence is available (/) Reade v.Lo.mb (1851) 6 Ex. without further repetition at any 130, 20 L. J. Ex. 161. Since the subsequent stage of the proceed- .Judicature Acts the defence of the ings: ib. Conversely, a, party statute must always be distinctly who omits to raise it may be 45(2) 700 AGREEMENTS OF IMPERFECT OBLIGATION. when, although it is not brought to enforce any right ex contractu, the right which is the foundation of the plaintiff's claim depends on an informal agreement. In Carrington V. Roots (fc) the plaintiff sued in trespass for seizing his horse and cart: the defendant pleaded that they were in- cumbering and doing damage on his ground: the plaintiff replied a verbal agreement that the defendant should sell the crop and grass growing there to the plaintiff, and that the plaintiff might enter with his horse and cart to take them . It was held that this agreement was for the sale of an interest in land within s. 4, and that the plaintiff could not set it up, though it might have been available as a licence only in answer to an action for trespass (I) . Both here and in the later case of Reade v. Lamb above cited the judges said dis- tinctly enough that informal agreements were not only not enforceable but void. And so Sir W. Grant appears to have thought in Randall v. Morgan (m). These dicta are not consistent with the decisions to be presently mentioned in which the existence of an imperfect obligation is implied. And there had also been judicial expressions of opinion the other way. But it is not necessary to notice these, for the point was expressly decided by the Court of Common Pleas in Leroux v. ^rown (n), where the earlier dicta are also considered. The action was on a contract not to be performed within one year, and made in France, where by the French law the plaintiff might have sued on it. For the plaintiff it was argued that s. 4 of the Statute of Frauds applied to the substance of the contract, and therefore, on general prin- estopped from doing ao in later (1805) 6 East 602, 8 E. R. 566. proceedings upon the same matter: (m) (1805) 12 Ves. at p. 73, 8 Humphries v. Humphries [1910] R. E. at p. 293. 2 K. B. 531, C. A. («) (1852) 12 C. B. 801, 22 L. J. {k) (1837) 2 M. & W. 248, 46 C. P. 1, 92 R. R. 889; and see per R. R. 583. Lord Blackburn in Maddison v. (J) Cp. Crosby v. Wadsworth Alderson, note (K). INFORMAL AGREEMENTS UNDER STATUTE OF FRAUDS. 701 ciples of private international law, did not affect contracts which were made out of England, and which as to their sub- stance were to be governed by the law of the place where they were made. But for the defendant it was answered that this enactment, like the Statute of Limitation, only affected the remedy, and was therefore a law of the procedure of the English courts, and as such binding on all suitors who might seek to enforce their rights in those courts: the agreement might be good enough for any other purpose, but the plaintiff could not sue on it in England . And this view was adopted by the Court. Jervis C.J. said: "The statute in this part of it does not say that unless those requisites are complied with the contract shall he void, but merely that no action shall he brought upon it. . . The fourth section relates only to the procedure and not to the right and validity of the contract itself." It will be observed that the plaintiff was here in the curious position of contending, in order to support his right to recover on a contract made in France, that it would have been absolutely void if made in England (o). If this decision and the reasons given for it are correct, it would seem to follow that a foreign or colonial court ought to enforce an English agreement, notwithstanding that it was informal under s. 4 of the Statute of Frauds, if it had the general requisites of a valid contract in English law, and was not informal according to the local law of procedure. It has even been argued that the words "no action shall bo brought " confine the operation of the statute to civil process, so that an informal agreement for service not to be performed within a year might be enforced by criminal process under the Master and Servant Act, 1867. But the (o) Leroux v. Brown was 270, also takes the opposite view. doubted by Willes J. in Williams The case also took (obiter) a dia- app. Wheeler resp. (1860) 8 C. B. tinotion between s. 4 and a. 17, N. S. 299, 316. Savigny, Syst. 8, which was not generally accepted. 702 AGREEMENTS OF IMPEKFECT OBLIGATION. Court held that such a construction would be too unreasonable, and the statute must mean that informal agreements are not to be enforced in any way (p) . It being established that the, informal agreements we are considering are not void, it follows that they give rise to imperfect obligations. We will now indicate the resiults. We have seen that neither the obligation itself, nor any right immediately founded on it, can be directly enforced. But it is recognized for the purpose of explaining anything actually done in pursuance of it, and anything so done may in many cases be a good consideration for a new obligation on a subsequent and distinct contract, or a sufficient foundation for a new obligation quasi ex coritractu. A . Results : money paid. — Money paid under an informal agreement cannot be recovered back merely on the ground of the agreement not being enforceable. Thus if a respon- sibility has been assumed and executed under a verbal guaranty, the guarantor cannot recover back the money paid by him {q). So a purchaser cannot recover a deposit paid on an inforinal agreement for the sale of land, the vendor re- maining ready and willing to complete (r). And not only can the one party keep money actually paid to him by the other, but if money is paid by A. to B. in order to be paid over to C. in pursuance of an informal agreement between A. and C. which C. has executed, then C. can recover it as money received to his use. In Griffith v. Young (s) the (j>) Banks v. Crossland (1874) spiraoy and Protection of Property L. E. 10 Q.B.97, a L. J. M. C.S. Act, 1875 (38 & 39 Viot. c. 86). The Act is now repealed by the (?) Shaw v. Woodcock (1827) 7 Employers and Workmen Act,1875 B. & C. 73, 83, 84, 31 E. E. 158. (38 & 39 Vict. i;. 90). Q«. whether Gjp. Sweet v. Lee (ISil) S M. k Gr. the decision be applicable to the 452, 60 E. E. 546. malicious breaches of contract in (r) Tltomm v. Brown (1876) 1 particular cases which are made Q. B. D. 714, 45 L. J. Q. B. 811. substantive offences by the Con- («) (1810) 12 East 513, 11 E.E. 478. MONEY PAID UNDER INFORMAL AGREEMENTS. 703 plaintiff was the defendant's landlord . The defendant wished to assign to one P., which he could not do without the plaintift^'s consent. It was verbally agreed that P. should pay the defendant 1001. for goodwill, out of which the defendant was to pay 401. to the plaintiff for his consent to the assignment. P. knowing of this agrcomeut paid the 1001. to the defendant: it was held that the defendant waa liable to the plaintiff for 401. in an action for money received to his use. Lord EUenborough said: " If one agree to receive money for the use of another upon consideration executed, however frivolous or void the consideration might have been in respect of the person paying the money, if indeed it were not absolutely immoral or illegal, the perison so receiving it cannot be permitted to gainsay his having received it for the use of that other." On the same principle, if on the faith of an informal agree- ment money has been paid in advance to a party who after- wards refuses or fails to perform his part of it, or has been expended on his account, it is conceived that proof of the agreement may be admitted to show what was in fact the consideration which has failed (t). But an executor may not pay or retain a debt which by reason of the Statute of Frauds the creditor cannot enforce (m) . B. Execution of informal agreement. — The execution of an informal agreement may be shown as a fact, and the party who has had some benefit from such execution, so as in fact to get what he bargained for, cannot treat the bargain as a nullity. Thus the delivery of possession under an informal agreement for the sale of land is a good consideration for a promissory note for the balance of the purchase-money (x). (0 See Pulhrooh y.Luives (1876) Div. 358, 54 L. J. Ch. 950. 1 Q. B. D. 284, 45 L.. J. Q. B. 178. {x) Jones v. Jones (1840) 6 M. & (j() Ee Rownson (1885) 29 Ch. W. 84, 55 R. R. 521. 704 AGREEMENTS OF IMPERFEOT OBLIGATION. It was held in the case cited that the bargain was for a future conveyance, and that the defendant, who did not deny the plaintiffs' allegation that they were willing to convey, had got all he bargained for. The same holds of an account stated. In Cocking v. Ward {y) there was an oral agreement by an incoming tenant from year to year to pay lOOZ. to the outgoing tenant: it was held that the agreement was within s. 4 of the statute, and the outgoing tenant could not recover the 100?. on the agree- ment itself, but that on an account stated he could. Again, money due simply under an informal agreement from the plaintiff to the defendant cannot of course be set off ; but the performance of an informal agreement by the de- fendant may be good as an accord and satisfaction. In Lavery v. Turley (z) the plaintiff sued for goods sold, &c.: the defendant pleaded an equitable plea showing that in pursuance of an agreement between the parties (which turned out to be verbal) the defendant had given up to the plaintiff possession of a house and premises in satisfaction of the causes of action sued upon. The plea was held good, and it seems it was good enough at law (per Bramwell and Channell BB.). Pollock C.B. said: " It is pleaded as a fact that the defendant performed the agreement and the plaintiff accepted such performance in satisfaction. The objection that the agreement was not in writing is got rid of. The fourth section of the Statute of Frauds does not exclude unwritten proof in the case of executed contracts " (a). This of course does not mean that the agreement itself can in any case be sued upon (a) . (y) (1845) 1 C. B. 858, 15 L. J. C. P. 170, 69 B. R. 615, and re- C. P. 245, G8 R. R. 831. marks on the dictum there in (2) (1860; 6 H. & N. 239, 30 Sanderson v. Graves (187 S) 1..^,. 10 L. J. Ex. 49, 123 R. R. 485. Ex. 234, 238, 241, 44 L. J. Ex. (a) Cp. Souch V. Strawhridge 210. (1846) 2 C. B. 808, 814, 15 L. J. PAKT PERFORMANCE. 705 It is admitted that if A. agrees informally with X. to sell land to him, and afterwards agrees in writing to sell the same land to Z., and then convej's to X. in pursuance of the first agreement, Z. has no equity as against X. (5). c. Fart Performance. — It is a weU-known doctrine of equity that one who has partly performed an informal agree- ment for the purchase or hiring of land (c) is entitled to and can sue for a specific performance at the hands of the other party, if the acts of part performance have been done on the faith of an existing agreement, and have been of such a kind that the parties cannot be restored to their original position, and if the existence of an agreement is reasonably to be inferred from the acts themselves, or they are " unequivocally referable to the contract " {d)\ he is equally liable to be sued (e) . This seems to be the real meaning of the distinctions as to what is or is not a sufficient part per- formance. Payment of money is in itself an equivocal act, and therefore the part payment of purchase-money is not a sufficient part performance (/). But payment of increased rent by a yearly tenant holding over has been held a sufficient part performance of an agreement for a lease {g) . Here the (ft) Dawson v. Ellis (1820) 1 J. p. 479. Nor payment of rent in & W. 524, 21 E. E. 227. advance witlioufc possession: Cha- ise) The doctrine is not extended proniere v. Lambert [1917] 2 Ch. to other transactions, Britain v. 356, 86 L. J. Ch. 726, C. A. Eossiter (1879) 11 Q. B. Div. 123, {cj) Nunn v. Fabian (1865) 131, 48 L. J. Ex. 362. See, how- L. R. 1 Ch. 35, 35 L. J. Ch. 140. ever, per Kay J. MacManus v. See explanation of that case by Cooke (1887) 35 Ch. D. 681, 697, Baggallay U.3. in Eumphroys v. 56 L. J. Ch. 662. Gree>i (1882) 10 Q. B. Div. at p. ((f) Maddison v. Alderson (1883) 156, 52 L. J. Q. B. 140; ^^m. Brett 8 App. Ca. at p. 476; Bell's Prin- L.J. 10 Q. B. Div. p. 160; per <;iples, 479, cited by Lord Selborne, Byrne J. Miller ^ Aldworth v. ib. at p. 477. Sharp [1899] 1 Ch. 622, 624; per (e) Biss V. Hyrjate [1918] 2 Swinfen Eady L.J. [1917] 2 Ch. K. B. 314, 87 L. J. K. B. 1101. 359, 360. (/) Lord Selborne, 8 App. Ca. at 706 AGEEEMENTS OF IMPERFECT OBLIGATION. part performance consists not in the payment itself, but in a possession which, though continuous in time with the old possession of the plaintiff as yearly tenant, is shown to be in fact referable to some new agreement (h). This doctrine of part performance is not in direct contradiction of the Statute of Frauds. It would be erroneous to say that a court of equity accepts proof of an oral agreement and part performance as a substitute for the evidence required by the statute. The plaintiff's right in the first instance rests not on contract but on a principle akin to estoppel; the defendant's conduct being equivalent to a continuing state- ment to some such effect as this : It is true that our agreement is not binding in law, but you are safe as far as I am con- cerned in acting as if it were. A man cannot be allowed to- sot up the legal invalidity of an agreement on the faith of which he has induced or allowed the other party to alter his. position (^). In the law of Scotland such facts are said to "raise a personal exception " (y) . The same principle of equity is carried out in cases of representation independent of contract (see pp. 709, 710, below) and even of mere ac- (h) On the general theory of (i) Caton v. Caton (1865) L. E. possession as constituting part 1 Ch. at p. 148, 35 L. J.Ch. 292; performance see per Jessel JM.E. MorpJiett v.Jones (1318) 1 Swanst. VngleijM.Vngley (1877) 5 Ch.Div. at p. 181, 18 E. E. p. 54; Bale v. at p. 890: "The reason is that Hamilton (1846) 5 Ha. at p. 381, possession by a stranger is evidence 71 E.E. 136; accordingly the cases that there was some contract, and on estoppel at law are compared is such cogent evidence as to compel by Lord Cranworth in Jorden v. the Court to admit evidence of the Money (1854) 5 H. L. C. 185, 213, terms of the contract in order that 23 L. J. Ch. 865, 101 E. E. 116, justice may be done between the 130; and by Lord Campbell in parties"; to same eifect Cotton Piggotty .Stratton (1669) I'D. ¥. 3. L.J. in Britain v. Roasiter (1879) 33, 49, 29 L. J. Ch. 1. It must 11 Q. B. Div. at p. 131. This holds be admitted, however, that the even where the possession was recent authorities do not exhibit taken before the agreement was a very definite or settled theory, concluded: liodson v. Ileuland (;) Bell, cited by Lord Selborne, [1896] 2 Ch. 428, 65 L. J. Ch. 754. 8 App. Ca. 476. AGREEMKNTS IN CONSIDERATION OF MARRIAGE. 707 quiescence. In equity an owner may be estopped by acquiescence from asserting bis rights, although there has not been any agreement at all (k). This also explains why the plaintiff must show part performance on his own side, and part performance by the defendant would be immaterial (I) . When the Court is satisfied that the plaintiff has altered his position on the faith of an agreement, and that the defendant cannot be heard to deny the existence of that agreement, it proceeds to ascertain by the ordinary means what the terms of the agreement were . The proof of this is strictly collateral to the main issue, though the practical result is that the agreement is enforced. D. Ante-nuptial agreements. — The case of an agreement in consideration of marriage presents special difficulties, and has to be treated in an exceptional manner (to). It is thoroughly settled that the marriage itself does not con- stitute such a part performance as to make the agreement binding in equity in the manner just mentioned, though other acts may have that effect (n) . Then, what is the effect of a post-nuptial " note or memorandum " satisfying the requisites of the statute on an ante-nuptial informal agreement? This is a rather com- plicated matter. It is not the Statute of Frauds alone that has to be considered in these cases, but also the statute of 13 Eliz. c. 5, and the extensive application of it by judicial construction to voluntary dispositions of property. Two distinct questions are in fact raised: namely whether an informal ante-nuptial agreement can after the marriage (A) St:eliamsden y. Dyson (1865) ()«) See Dav. Conv. vol. 3, part L. H. 1 H. L. 129, 140, 168; Powell 1, appendix No. 1, for details. V. Thomas (1848) 6 Ila. 300, 77 («) See Lassence v. Tierney E. E.. 116; and the remarks of (1849) 1 M;ic. & G. 551, 571, Fry J. in WUlmott v. Barber 8i H. U. 158; Suroome v. Pinniffer (1881) 15 Ch. B. 96, 105. (1853) 3 D. M. G. 571, 575, 22 (0 Catan v. Caton, note (0, last L. J. Oh. 419, 98 R. R. 229, 232. page. 708 AGREEMENTS OF IMPERFECT OBLIGATION. be rendered valid as against the promisor, and whether a post- nuptial settlement can be made to relate back to such an agreement so as to be deemed a settlement made for valuable consideration and thus be rendered valid as against creditors. The first question is answered in the affirmative by the decision in Barkworth v. Young (o). The case was decided on demurrer, and the facts assumed by the Court on the case made by the plaintiff's bill were to this effect. The testator against whose estate the suit was brought had orally promised his daughter's husband before and in consideration of the marriage that at his death she should have an equal share of his property with his other children. After the marriage the testator made an affidavit in the course of a litigation un- connected with this agreement, in which he incidentally ad- mitted it. It was held that the affidavit was a sufficient note or memorandum of the agreement within the Statute of Frauds, and that as such, although subsequent to the marriage, it rendered the agreement binding on the testator. The second question is answered in the negative by the almost contemporaneous decision in Warden v. Jones (p). That was a creditor's suit to set aside a post-nuptial settle- ment. It was attempted to support the settlement as having been made pursuant to an oral ante-nuptial agreement. This agreement was not referred to in the settlement by any recital (g) or otherwise. Both Eomilly M.E. and Lord Cran worth C. on appeal held that the settlement could not be supported : and Lord Cranworth inclined to think (r) that (o) (1856) 4 Drew. 1, 26 L,. J. ruptoy has no better right than the Ch. 153, 113 R. K. 297. husband himself: ib. (p) (1857) 23 Beav. 487, 2 De G. (?) As to the eflfeot of reciting a & J. 76, 27 L. J. Ch. 190, 119 R. R. previous agreement, see iJe Holland, 29. This is not inconsistent with last note. Barkworth v. Yming, see Ss Hol- (r) Notwithstanding JDimdas v. land [1902] 2 Ch. 360, 71 L. J. Dutens (1790) 1 Ves. jun. 196, 1 Ch. 518, especially per Stirling L.J. R. R. 112. The husband's trustee in bank- EQUITABLE ESTOPPEL, 709 if the settlement had expressly referred to the agreement it would have made no difference. On the whole even if the imperfect obligation arising from an informal ante-nuptial agreement can be made perfect and binding as between the parties by a post-nuptial note or memorandum, it appears that the marriage consideration cannot in this way be imported into a post-nuptial settle- ment made in pursuance of the agreement so as to protect it from being treated as a voluntary settlement and subject to the consequent danger of being set aside at the suit of the settlor's creditors. There seems to be no ground in either case for drawing any distinction between promises made by one of the persons to be married and promises made by a third person to either of them. These doctrines appear to be both reasonable in themselves and not inconsistent with one another, as the Court of Appeal has now declared them' not to be (s) . There is nothing unexampled in a transaction being valid as regards the parties to it and invalid as regards the rights of other persons. E. It is doubtful how far an informal agreement varying a perfect one can Tdo relied on as a defence to an action brought on the original agreement. On principle it would seem that an agreement which will not support an action ought not to support a defence {t), and there is good authority to that effect (m), but none of recent date. There is yet another class of cases, not resting on contract or agreement at all, in which courts of equity have compelled persons to make good the representations concerning existing facts (x) on the faith of which they have induced others to (s) Note (p) above. A. C. 1, 87 L. J. K. B. 145. (t) Cp. C/uipin V. Freeiand (1886) («) Per Lord Selborne, Citizens' 142 Mass. 383. Ban/c of Zouisianav. First National (m) Noble v. Ward (1867) L.R.2 Bank of New Orleans (1873) L.R. Ex. 135, Ex. Ch. But as to the 6 H. L. 352, 360, 43 L. J. Ch. 269; different case of unconditional re- and Maddison \.Alderson (1883) 8 scission see Morris v. Baron [1918] App. Ca. at p. 473. 710 AGREEMENTS OF IMPERFECT OBLIGATION. act. The distinction is pointed out by Romilly M.B.. in Warden v. Jones {y): and the extension of the doctrine to married women shows very forcibly that it has nothing to do with contract or capacity for contracting; for a married woman's interest in property, though not settled to her separate use, has repeatedly been held to be bound by this kind of equitable estoppel (z) . B. "Slip" in Marine Insurance. — Another curious and important instance of an imperfect obligation arising out of special conditions imposed on the formation of a complete contract is to be found in the case of marine insurance. In practice the agreement is concluded between the parties by a memorandum called a slip, containing the terms of the pro- posed insurance and initialled by the underwriters (a). It is the practice of some insurers always to date the policy as of the date of the slip (b). At common law the slip would con- stitute a binding contract. This however is not allowed by the revenue laws. By the Stamp Act, 1891 (54 & 55 Vict, c. 39), s. 93 (c), "A contract for sea insurance (other than such insurance as is referred to in the 55th section of the Merchant Shipping Act Amendment Act, 1862 (d) ) [i.e. (y) (1857) 23 Beav. at p. 493; not any implied condition that a cp. Yeomans v. Williams (1865) policy shall be put forward for L. R. 1 Eq. 184, 186, 35 L. J. Ch. signature within a reasonable time: 283; and see Dav. Conv. 3, Thompsonv. Adams (1889) 23 Q.B. 640 — 646. D. 361. (z) Sharpe v. Foy (1868) L. E. 4 (i) See L. E,. 8 Ex. 199. Ch.35; Lush's trusts (lii&^^ib. 591. (c) As to starnping and produc- ('') For the form of this, see tion in evidence (which does not L. R. 8 Q. B. 471, 9 Q. B. 420. affect our present subject), see In the case of fire insurance, there ss. 95 — 97: there is a special being no statutory reiuirement, penalty of lOOZ. instead of the there is nothing to prevent a, slip usual Wl. for stamping in Court, from forming a complete contract This Act is not affected by the of insurance; the burden of proof Marine Insurance Act, 1906. is on the underwriter to show a (cf) Now ilerohant Shipping Act, contrary intention; and there is 1894, s. 506. '' sup" in marine insurance. 711 against the owner's liability for accidents of the kinds mentioned in s. 54 of that Act] shall be void unless the same IS expressed in a policy of sea insurance." Earlier statutes on the matter now before us were differently worded, and made every contract of insurance "null and void to all intents and purposes " which was not written on duly stamped paper or did not contain the prescribed par'ticulars. (35 Geo. 3, c. 63, ss. 11, 14; 54 G-eo. 3, c. 144, s. 3: the latter statute was expressly pointed, as appears by the preamble, against the practice " of using un- stamped slips of paper for contracts or memorandums of insurance, previously to the insurance being made by regular stamped policies.") It was settled on these statutes that the preliminary slip could not be regarded as having any effect beyond that of a mere proposal (e): and it was even held that the slip could not be looked at by a court of justice for any purpose whatever (/) . The change in the language of the modern statute law, which dates from 1867 {g), has given the Courts the opportunity of adopting a more liberal con- struction without actually overruling any former authorities. It has now for many years been judicially recognized that the slip is in practice and according to the understanding of those engaged in marine insurance the complete and final contract between the parties, fixing the terms of the in- surance and the premium, and neither party can without the assent of the other deviate from the terms thus agreed on without a breach of faith. Accordingly, though the contract expressed in the slip is not valid, that is, not enforceable, (e) See per Willes J. in Xenos v. 3 East 572, 7 R. R. 516. WicJcham (1866), L. R. 2 H.L. 296, {g) 39 & 31 Vict. u. 23, repealed, 314, 36 L. J. C. P. 313; Smith's except two sections not here rele- case (1869) If. R. 4 Ch. 611, 38 vant, and on this point substan- I.. J. Ch. 681. tially re-enacted, by the Stamp (/) See Ma.rsdm v. Reid (1803) Act, 1891. 712 AGREEMENTS OF IMPERFECT OBLIGATION. it may be given in evidence wherever it is, though not valid, material Qi) . In the case referred to the slip was admitted to show whether the intention of the parties was to insure goods by a particular named ship only, or by that in which they might be actually shipped, whatever her name might be. A still more important application of the same principle was made in Cory v. Patton (i), where it was held that the time when the contract is concluded and the risk accepted is the date of the slip, at which time the underwriter becomes bound in honour, though not in law, to execute a formal policy; that the Court, when a duly stamped policy is once before it, may look to the slip to ascertain the real date of the contract; and therefore that if a material fact comes to the knowledge of the assured after the date of the slip and before the execution of the policy, it is not his duty either in honour or in law to disclose it, and the non-disclosure of it does not vitiate the policy. This holds though after the completion of the contract by the slip a new term be added for the benefit of the underwriters (fc) . The same doctrine has been con- sidered, and allowed, though not directly applied, in other cases. In Fisher v. Liverpool Marine Insurance Co. (l) the slip had been initialled but the insurance company had executed no policy. In the case of an insurance with private underwriters it is the duty of the broker of the assured to prepare a properly stamped policy and present it for execution. But in the case of a company the policy is pre- pared by the company, executed in the company's office, and handed over to the assured or his agent on application . It (A) Per Cur. lonides v. Pacifio (Jc) Lisham v. Northern Mari- Insuranoe Co. (1871) L. R. 6 Q. B. time Insurance Co. (1875) L. R. 8 674, 685, affd. in Ex. Ch. 7 Q. B. C. P. 216, affirmed in Ex. Cli. 10 517, 41 L. J. Q. B. 33, 190. C. P. 179, 44 L. J. C. P. 185. (i) (1872) L. R. 7 Q. B. 304, see (0 (1874) L. E. 8 Q. B. 469 further s. o. 9 Q. B. 577, 43 L.. J. (Blackburn J. diss.) affd. in Ex. Q. B. 181. Ch. 9 Q. B. 418, 43 L. J. Q. B. 114. UNSTAMPED INSTRUMENTS. 713 was held that there was no undertaking by the company, distinguishable from the contract of insurance itself, to do that which it would be the duty of a broker to do in the case of private underwriters; that the only agreement of the com- pany with the assured was one entire agreement made by the initialling of the sKp, and that as this Mas an agreement for sea insurance, the statute applied and made it impossible to maintain any action for a breach of duty with regard to the preparation and execution of a policy. In Morrison v. Universal Marine Insurance Co. (m), the question arose of the effect of delivering without protest a stamped policy pursuant to the slip after the insurers had discovered that at the date of the slip a material fact had been concealed. It was held in the Exchequer Chamber, reversing the judg- ment of the Court below, that the delivery of the policy did not preclude the insurers from reljdng on the concealment, but that it was a question properly left to the jury whether they had or had not elected to abide by the contract. This implies not only that the rights of the parties are determined at the date of the slip, but that the execution of the stamped policy afterwards has little or no other significance than that of a necessary formality {n) . In the case of a mutual marine insurance association, a letter by which the assured under- took to become members of the association was admitted as part of one agreement with the stamped policy, to show that the assured were contributories in the winding-up of the association (o). In the winding-up of another such asso- ciation a member has been admitted as a creditor for the amount due on his policy, though unstamped, when the liability was admitted by entries in the minute books of the (m) (1873) L. B. 8 Ex. 40, in B. in the Court below, L. E. 8 Ex. Ex. Ch. ib. 197, 42 L. J. Ex. 115. at p. 60. (o) Bli/th # Co.'s case (1872) (») See the judgment of Cleasby L. R. 13 Eq. 529. P.— c. 46 714 AGREEMENTS OF IMPERFECT OBLIGATION. association, which seem to have been considered equivalent to an account stated (p) . Unstamped Documents generally. — It has already been observed that the general revenue laws as to stamp duties are on a different footing. However their effects may in one or two cases resemble to some extent those which under the present head we have attempted to exhibit. Thus, if an unstamped document combines two characters (as, for instance, if it purports to show both an account stated and a receipt), and if in one of those characters it requires a stamp, and in the other not, it may be given in evidence in the second character for any purpose unconnected with the first (q) . In a case where the parties to an agreement in writing had afterwards varied its terms by a memorandum in writing, and the memorandum was not stamped, the plaintiff joined in his action a count on the agreement in its original form and another on the agreement as varied: and when it appeared by his own evidence that the memorandum did materially alter the first agreement, but was unavailable for want of a stamp, it was held that he could not fall back on the agreement as it originally stood (r) . Neither this decision, nor the earlier authorities on which it rested, were referred to in Noble V. Ward(s). In that case there was a substituted agreement which was unenforceable under sect. 17 of the Statute of Frauds (t) : and it was held that as the parties had no intention of simply rescinding the former agreement, that (p) Martin's claim (1872) L.. R. where the substituted agreement 14 Eq. 148, 41 L. J. Ch. 679. has been executed in part; for this (?) Matheson v. Ross (1849) 2 shows that the old one is gone: H. L. C. 286, 81 R. R. 153. Sanderson v. Graves (1875)L.R.10 (>•) Reed v. Deere (1827) 7 B. & Ex. 234, 44 L. J. Ex. 210. C. 261, 31 R. R. 190. (<) Now repealed and substan- (s) (1867) L. R. 1 Ex. 117, in tially re-enacted by the Sale of Ex. Ch. 2 Ex. 135: but otherwise Goods Act, 1893, s. 4. UNSTAMPED INSTRUMENTS. 715 former agreement remained in force. The two cases, if they oan stand together, must do so by reason of the distinction between a contract the record of which is unavailable for want of a stamp, and an agreement which cannot be sued on at aU if the defendant pleads the statute. In a much litigated case of Evam v. Pr other o (?<), the question arose whether a document purporting to be a receipt for purchase-money on a sale of land, but insufficiently stamped for that purpose, can be admitted as evidence to prove the existence of an agreement for sale. In a series of motions for new trials. Lord Cottenham and Lord St. Leonards took different views. The judges before whom the applications came in the Court of Chancery in the first instance, and those before whom the issues were tried at Cardiff Assizes, were -also divided in opinion. The opinion of Lord St. Leonards, who held the document admissible, has now been recognized as authoritative (x). C. Professions regulated by Statute. — There are many statutes which impose special conditions on the exercise of particular professions and occupations and the sale of par- ticular kinds of goods . Most of these, however, are so framed, -or have been so construed, as to have an absolutely prohibitory effect, that is, not merely to take away or suspend the remedy by action, but to render any transaction in which their pro- visions are disregarded illegal and void. The principles applicable to such cases have been considered under the head • of Unlawful Agreements. In a few cases, however, there is not anything to prevent a right from being acquired, or to (m) (1852) 2 Mac. & G. 319, 1 stamped promissory note could not D. M. Gr. 572, 21 L». J. Chj. 772, be admitted as a receipt for the ■91 K. R. 175. consideration money, this being "of (x) Ashling v. Boon [1891] 1 the very essence of the promissory €h. 568, 60 L. J. Oh. 306, where it note itself." -was held that an insufficiently 46(2) 716 AGREEMENTS OF IMPERFECT OBLIGATION. extinguish it when acquired, but only a condition on which the remedy depends. Of this kind are the provisions of the Act 6 & 7 Vict. c. 73, with respect to attorneys and solicitors,, and of the Medical Act, 1858 (21 & 22 Vict. c. 90), with respect to medical practitioners. By the 6 & 7 Vict. c. 73, s. 26, extended by 37 & 38 Vict, c. 68, it is enacted in substance that an attorney or solicitor practising ia any court without having a stamped certificate then in force (as provided for by ss. 22 — ^25, and now 23 & 24 Vict. c. 127, ss. 18 — ^23) shall not be capable of recovering his fees for any business so done by him while uncertificated. This, however, does not make it unlawful for the client to pay such fees if he thinks fit, nor for the solicitor to take and keep them. A defeated party in an action who has to pay his- adversary's costs is bound by any such payment which has- been actually made, and cannot claim to have it disallowed after taxation («/). But, since the Act of 1874 at all events, a successful party whose solicitor was uncertificated cannot recover costs if the objection is made on taxation (z). Nor can a solicitor retain out of funds advanced by his client (not knowing him to be uncertificated), costs which, as being incurred under those conditions, would not be allowed on taxation (a). Some further details given in earlier editions are now omitted partly as being obsolete and partly as not illustrating any matter of principle (b). Medical Practitioners. — The rights of medical practitioners, now depend on the Medical Acts, 1858 and 1886, and (in (y) FulMove v. Parker (1862) K. B. 553, 82 L. J. K. B. 1006, C. A. 12 C. B. N. S. 246, 31 L.. J. C. P. (6) As to special agreements 239, 240. between solicitor and client, they (z) Votvler v. Monmouthshire are now contracts under special Canal Co. (1879) 4 Q. B. D. 334, regulation as to mode of enforoe- 48 L. J. Q. B. 457. ment and otherwise. See the SoU- (o) Browne v. Barber [1913] 2 citors' Eemuneraticin Act, 1881. MEDICAL PRACTITIONERS. 717 England only) the Apothecaries Act, 55 Geo. 3, c. 194 (c). Before the Medical Act the state of the law, so far as con- cerned physicians (but not surgeons or apothecaries) was this; It was presumed, in accordance with the general usage and understanding, that the services of a physician were honorary, and were not intended to create any legal obliga- tion: hence no contract to pay for them could be implied from his rendering them at the request either of the patient or of a third person. But this was a presumption oidy, and there was nothing contrary to law in an express contract to pay a physician for his services, which contract would effec- tually exclude the presumption (d) . The Medical Act, 1886 (49 & 50 Vict. c. 48), s. 6, enables every registered medical practitioner to recover his expenses, charges, and fees, unless restrained by a prohibitory by-law of a college of physicians of which he is a fellow (e) . Accordi- ingly there is no longer any presumption of honorary employ- ment (/) . It remains competent however for a medical man to attend a patient on the understanding that his attendance shall be gratuitous, and whether such an understanding exists or not in a disputed case is a question of fact for a jury (5')- By the Act 55 Geo. 3, c. 194, s. 21, an apothecary cannot, recover his charges without having a certificate from the (c) This is still in force subject made by the Eoyal College of to certain amendments made in Physicians in London, and (though 1874, 37 & 38 Vict. c. 34, see apparently without compulsory Dames v. Mahuna (1885) 29 Ch. force under the Act) the Eoyal Div. 596, 54 L. J. Ch. 1148. College of Surgeons of England. {d) Veitch V. Russell (1842) 3 (/) Gibbon v. Budd (1863) 2 H. Q. B. 928, 12 L. J. Q. B. 13. No & C. 92, 32 L. J. Ex. 182, 133 R.; such presumption exists in the B. 586 (on the similar provision of United States; and qu. how far, if the Act of 1858, which is repealed at all,it exists in British dominions by the Act of 1886). See judgment beyond seas. of Martin B. («) Such by-laws have been (?) Gibbon v. Budd, last note. 718 AGREEMENTS OF IMPERFECT OBLIGATION. Apothecaries' Society: and this is not repealed by the Medical Acts {h). It seems that a practitioner must have been registered at the time of rendering the services sued for, not merely at the time of suing («), decisively and at all events as to apothe- caries: for an unrepealed section of the Apothecaries Act (55 Geo. 3, c. 194, s. 20) expressly forbids unqualified persons to practise: and in the clear opinion of the Court on the construction and intention of the Medical Act also. A qualified practitioner cannot recover for services rendered by an unqualified assistant who in fact acted vt^ithout his specific direction or advice (fc) . Similarly an agreement by a qualified practitioner to assist an unqualified one is bad, though perhaps an unqualified person might lawfully carry on medical business through qualified assistants if he did not act as a practitioner him- self (Z). 3. Cases where no Remedy allowed. — We now come to the cases in which some positive rule of law or statutory enact- ment takes away the remedy altogether. The only cases known to the writer in which there is a rule (A) See decisions on this Act Reynall (1863) 14 C. B. N. S. 328, collected 1 Wms. Saund. 513-4. 32 L. J. C. P. 164, 135 R. R. 719). S. 31 of the Medical Act of 1858 (A) Alvarez de la Rom v. Prietff' enabled a practitioner to sue only (1864) 16 C. B. N. S. 678, 33 L.J. "according to his qualification," C. P. 262; Ilowarth v. Brearleif and a qualification in one capacity (1887) 19 Q. B. D. 303, 56 L. J. did not entitle him to sue for ser- Q. B. 543. vices rendered in another: Leman (0 Dairies v. MaJeuna (1885) 2* >. Fletcher (1873) L. R. 8 Q. B. Ch. Div. 596, 54 L. J. Ch. 1148. 319, 42 L. J. Q. B. 214. But these The deoiaions on the construction words do not occur in the Act of of the various penal sections of 1886, which on the other hand medical and other like Acts directed requires all practitioners to be against unqualified practitiouera generally qualified. who hold themselves out as quali- (j) Leman v. Houseley (1874) fied are not within the scope of L. R. 10 Q. B. 66, 44 L. J. Q. B. the present work. 22 (notwithstanding Turnei- v. counsel's fees. 719 of law to this effect independent of any statute are those of the remuneration of barristers engaged as advocates in litigation, and (to a limited extent) of arbitrators. With regard to arbitrators the better opinion appears to be that thej- are in the same condition as phj^sicians were at common law. It is said that an arbitrator cannot recover on any implied contract for his remuneration, but this is by no means certain. There is no doubt that he can sue on an express contract (to) . Counsel's Fees. — The position of a barrister is different. It was formerly a current opinion that in the case of counsel, as in that of a physician, there was a presumption of purely honorary employment, derived from the custom of the profession, but that this presumption would be excluded by proof of an express contract (m) . But the decision of thp Courfe-of Common Pleas in Kennedy v. Broun (o) established the unqualified doctrine that "the relation of counsel and client renders the parties mutually incapable of making any legal contract of hiring and service concerning advocacy in litigation." The request and promises of the client, even if there be express promises, and the services of the counse}, " create neither an obligation nor an inception of obligation, nor any inchoate right whatever capable of being completed and made into a contract by any subsequent promise." (»«) Hoggins v. Garden (1842) 3 1889, s. 15. Q. B. i/o^, 11 K J. Q. B. 286, 61 («) So Lord Denman seems to E. R. 257 ; Feitch v. Russell (1842) have been inclined to thinlf in 3 Q. B. 928, 12 L. J. Q,. B. 13. Veitch v. Russell {lUI) 3 Q.B.928, In Crampton v. Ridley (1887) 20 12 L. J. Q. B. 13; and a modem Q. B. D. 48, 52, A. L. Smith J. Irish case of Ilohart v. Butler thought that in mercantile arbitra- (1859) 9 Ir. C. L. 157, though it tions a promise to pay ijor the arbi- did not decide the point, proceeded trator's services might well be im- to some extent on the same plied. When a case is referred by assumption. the Court, the referee's or arbi- (o) (1863) 13 C. B. N. S. 677, 32 trator's remuneration is determin- L. J. C. P. 137, 134 R. R. 696. able by the Court: Arbitration Act, 720 AGEEEMENTS OF IMPERFECT OBLIGATION. On the other hand there is apparently no reason to doubt the validity of an express contract to remunerate a barrister for services which, though to some extent of a professional kind, and involving the exercise of professional knowledge, do not involve any relation of counsel and client between the contracting parties: as when a barrister acts as arbitrator or returning officer {p) . The want of attending to this distinc- tion has led to such cases being cited as authorities for the general proposition that a barrister can recover fees on an express contract. Moreover, it has been argued that an express contract even between counsel and client may still be good as to non -litigious business. A claim of this sort made against an estate under administration was disposed of by Giffard L.J. on the ground, which was sufficient for the particular decision, that at all events a solicitor has no general authority f!S bind his client by such a contract: but he also observed that such applications had never been successful, and expressed a hope that they never would be (g). "And it must be remenibered that although the rule laid down in Kennedy v. Broun is in its terms confined to litigation, and the word advocate, not counsel, is studiously used throughout the judgment, yet the rule is founded not on any technical distinction between one sort of business and another, nor on any mere presump- Qp) Soggins v. Gordon (1842) 3 For instance, Doe d. Bennett v. Q. B. 466, 11 L. J. Q. B. 286, 61 Hale (1850) 15 Q. B. 171, 18 L. J. E. E. 257; JEgan v. Guardians of Q. B. 353, 81 E. E. 540, shows only Kensington Union (1841) 3 Q. B. that there is no absolute rule of law 935, n. that in a civil cause a barrister may (^g) Mostyn v. Mostyn (1870) not be instructed directly by the L.. E. 5 Ch. 457, 459, 39 Li. J. client, and throws no light what- Ch. 780. The oases there referred ever on any question of a right to to in argument in favour of the recover fees. Hobart v. Butleryias counsel's claim seem, with the sole itself really a decision against » exception of JBobart v. Butler similar claim and on an almost (1859) 9 Ir. C. L. 157, irrelevant. identical point. counsel's fees. 721 tion, but on a principle of general convenience supported by unbroken custom. No doubt it may be said that some of the reasons given for the policy of the law do not apply in their fuU extent to non-Utigious business; and it is doubtful whether they apply even to those English colonies where the common law is in force (r) . But there is no reason to suppose that English courts of justice are likely to narrow the scope of a decision called by the late Lord Justice Giffard "a landmark of the law on this subject" (s). There is no express authority to show whether a barrister can or cannot contract with his client's solicitor for payment of his fees any more effectually than with the client himseU; but it seems not; for even when counsel's fees have been received by the solicitor from the lay client they are not debts attachable under a garnishee order against the solicitors at the suit of a judgment creditor of the counsel (t). It is hardly necessary to add that although counsel's fees 'Cannot be recovered in any way by action, the propriety of paying such fees is judicially recognized by the constant practice of the courts in the taxation of costs: and the solicitor needs no authority from the client beyond his general retainer to enable him to retain and pay counsel and charge the fees to his client (m). The payment of counsel's fees may in this manner be indirectly enforced either against the client (r) Jieff. V. Doutre (1884) 9 App. as it involved anything; to the con- Ca. at p. 751, where it was held trary. Other cases in bankruptcy that the case at bar was governed have proceeded on the duty of the by the law of the Province of Que- trustee or assignees as oJEcers of bee: in that law there is nothing to the Court and not on any legal right prevent an advocate from suing for of the barrister: ib. Yet counsel's professional services. voucher for fees requires a receipt (s) Mostyn v. Mostyn, note (§■), stamp: General Council of the Bar last page. v. Inland Sevenue Commissioners (t) Wells V. Wells [1914] P. 157, [1907] 1 K. B. 462, 76 L. J. K. B. 83 L. J. P. 81, C. A. (alimony pen- 212. dente lite in divorce proceedings), («<) See Morris v. Hunt (1819) 1 overruling Re Hall (1856) 2 Jur. Chitty, 544. N. S. 1076, 149 R. E. 803, so far 722 AGREEMENTS OP IMPERFECT OBLIGATION. himself or against an unsuccessful adversary who is liable- for the taxed costs . Notwithstanding the strong expressions, used by the Court in Kennedy v. Broun (x), the judicial notice thus taken of the obligation of a client to pay his counsel seems to show that it is something different from a mere moral obligation. Infants' Contracts. — Since the Infants Relief Act, 1874, any contract of an infant voidable at common law and affirmed by him on attaining his majority must be reckoned as an imperfect obligation of this class, viz. on which there has. not been and cannot be any remedy. The special features of this subject have been already considered {y), and there is nothing to add except that the general principles set forth in the present chapter seem to be applicable to these, so far as they still exist, as well as to other agreements of imperfect obligation. Miscellaneous. — There are sundry other cases of a less important kind in which the remedy naturally attached to a contract is taken away by statute, without the contract itself being forbidden or avoided. By the Act 24 Geo. 2, c. 40, s. 12, commonly known as the Tippling Act, no debt can be recovered for spirituous- liquors supplied in quantities of less than twenty shillings' worth at one time (2). The County Courts Act, 1888, s. 182 (a), similarly enacts th.at no action shall be brought in any court for the price of beer or other specified liquors ejusdem generis consumed on the premises. The Act of Geo. 2 applies whether the person to whom the liquor is. (ic) (1863) 13 C. B. N. S. 677, 32 vered at the purchaser's residenoe L. J. C. P. 137, 134 R. R. 696. in quantities of not leas than a (y) In Chap. II., above. reputed quart. («) By 25 & 26 Viet. c. 38, an (a) Superseding a similar enact- exGeption is mad^ in favour of sales ment in the , County Courts Act^ of spirituous liquor not to be con- 1867. sumed on the premises, and deli- TIPPLING ACT. 728^^ supplied be the consumer or not (6) . As these enactments do not make the sale illegal, money which has been paid for spirits supplied in small quantities cannot be recovered back (c) . A debt for such supplies was once held to be an illegal consideration for a bill of exchange (d) : but this decision seems dictated by an excess of zeal to carry out the policy of the Act, and is possibly questionable. In a later case at Nisi Prius (e) Lord Tenterden held that where an account consisted partly of items for spirituous liquors within the Tippling Act, and partly of other items, and pay- ments had been made generally in reduction of the account,, the vendor was at liberty to appropriate these payments to the items for liquor, so as to leave a good cause of action for the balance; thus treating these debts, like debts barred by the Statute of Limitation of James I., as existing though not recoverable. The writer is not aware of any decision on the modern enactment as to beer, &c., in the County Courts Act. By the Trade Union Act, 1871 (34 & 35 Vict. c. 31), s. 4, certain agreements therein enumerated and relating to the management and operations of trade unions cannot be sued upon, but it is expressly provided that they are not on that account to be deemed unlawful. One curious result of this legislation is that various agreements which at common law would be void as being in restraint of trade are now merely not enforceable, and are capable of having a legal standing^ for example as the foundation of an account stated (/) . The present place seems on the whole the most appropriate one for mentioning a singular case which may be regarded (6) Hughes v. Bone or Boane (d) Scott v. Gillmore (1810) S (1841) 1 Q. B. 294, 10 L. J. Q. B. Taunt. 226, 12 R. E. 641. 65, 55 K. E. 253. (e) Crookshanh v. Uose (1831) (c) Philpott V. Jones (1834) 2 5 0. & P. 19, 38 R. E. 788. i A & E. 41, 41 R. E. 371. (/) ■®^««« ^- Heathoote [1918] 1 K. B. 418, 87 L. J. K. B. 593, C. A. 724 AGREEMENTS OF IMPERFECT OBLIGATION. ■as the converse of those we have been dealing vs^ith. A valuable consideration is given in the course of a transaction which as the law stands at the time is wholly illegal and confers no right of action on either party. Afterwards the law which made the transaction illegal is repealed. Is the consideration so received a good foundation for a new express promise on the part of the receiver ? The question came before the Court of Exchequer in 1863, some years after the repeal of the usury laws. The plaintiff sued on bills of exchange drawn and accepted after that repeal, but in renewal of other bills given before the repeal in respect of advances made on terms Vhich under the old law were usurious. The former bills were unquestionably void : but it was held by the majority of the Court that the original advance was a good consideration for the new biUs. The question was thus stated in the judgment of the majority: — " Whether an advance of money under such circumstances as to create no legal obliga- tion at the time to repay it can constitute a good considera- tion for an express promise to do so." And the answer was given thus: — " The consideration which would have been sufficient to support the promise if the law had not forbidden the promise to be made originally does not cease to be sufficient when the legal restriction is abrogated. A man by express promise may render himself liable to pay ib-ack money which he has received as a loan, though some positive rule of law or statute intervened at the time to prevent the transaction from constituting a legal debt" (g). The debt, therefore, which was originally void by the usury laws, seems to have been put in the same position by their repeal as if it had been a debt once enforceable but barred by the (?) PHgrht V. Seed (1863) 1 H. & on the ground that the bills sued C. 703, 715, 716, 32 L. J. Ex. 265, on were an actual payment of the 269, 130 E. R. 741. LangdelJ; usurious loan. Quod nimium subti- ■{Summary, § 76) supports the case liter diotum videtur. GENERAL RESULTS. 725 Statute of Limitation. But the decision seems wrong, for the consideration was wholly past at the time of the promise . The consideration for accepting a renewed bill of exchange is not the value received which was the consideration of the- original bill, but the abandonment of the right of action thereon . There is one other analogy to which it is worth while to advert, although it was never of much practical importance^ and what little it had has in England been taken away by the Judicature Acts. Purely equitable liabilities have to a certain extent been treated by common law courts as imperfect obligations. The mere existence of a liquidated claim on a trust against the trustee confers no legal remedy. But the trustee may make himself legally liable in respect of such a claim by an account stated (h), or by a simple admission that he holds as trustee a certain sum due to the cestui que trust (^) . A court of law has also held that a payment made by a debtor without appropriation may be appropriated by, the creditor to an equitable debt (k) . Summary of Results. — It may be useful to sum up in a more general form the results which have been obtained in this chapter. An imperfect obligation is an existing obligation which is not directly enforceable. This state of things results from exceptional rules of positive law, and especially from laws limiting the right to enforce contracts by special conditions precedent or subse- quent. When an agreement of imperfect obligation is executory a right of possession immediately founded on the obligation can be no more enforced than the obligation itself. (h) Topham v. Morecraft (1858) (»') Roper v. Holland (1835) 3 A. 8 f!. & B. 972, 983; Howard v. cfe E. 99. BrownhiU (1853) 23 L. J. Q. B. 23. (ft) Bosanquet v. Wray (1816) ft Taunt. 597, 16 E. B. 677. 726 AGREEMENTS OF IMPERB^ECT OBLIGATION. Acts done in fulfilment of an imperfect obligation arfe valid, and may be the foundation of new rights and liabilities, by way of consideration for a new contract or otherwise . A party who has a liquidated and^ unconditional claim under an imperfect obligation may obtain satisfaction thereof by any means other than direct process of law which he might have lawfully employed to obtain it if the obligation had not been imperfect. The laws which give rise to imperfect obligations by, imposing special conditions on the enforcement of fights are generally treated as part of the law of procedure of the forum where they prevail, and as part of the lex fori they are aipplicable to a contract sued upon in that forum wjthout regard to the law governing the substance of the contract (I) ; but on the other hand they are not regarded in any other forum. {I) This (it is conceived) does ancillary to revenue laws, such as not apply to revenue laws, and the provisions relating to mariiiiei -enactments which are merely insurances (p. 711, above). ( ~!^7 ) APPENDIX. Note A. Tei'minology and Fundamental Conceptions of Contract. Isr the first two editions I made use of Savigny's definition of Vertrag (whioh can be translated by Agreement, but in a wider sense than is known to any English writer). It now seems to me out of place in a special treatise on Contract. In the third volume of his System Savigny deals in the most general way with the events capable of producing changes in rights and duties in the field of private law. Such events he calls juristische Thatsachen; an ex- pression to which our own accustomed " acts in the law " seems well fitted to correspond. (Acts in the law must be carefully distinguished from acts of the law, which are really neither acts nor events, but legal consequences of events. But the terms are not common enough for any serious risk of confusion to arise.) To speak, as some writers do, of " juridical facts,'' is to use language which is so far from being English that it becomes intelligible only by a mental re-translation into German. We are free to coin the term " event in the law " for juristische Tliatsache in its widest sense; but, as law has nothing to do with events except so far las they can have legal consequences, this may be superfiuous. It seems better for English purposes, at any rate, to reserve " act in the law " for the species which Savigny proceeds to mark off from the genus, namely, freie Handlung, or better, .perhaps, for the further specified kind of voluntary acts which manifest an intention to bring about particular legal consequences. Such an act is called by Savigny Willenserkldrung . Specifying yet more, we distinguish the acts in which the wiU. of only one party is expressed from those in which the wills of two or more concur. This last species gives the oonoeption of Vertrag. Savigny defines it as the concurrence of two or more persons in the expression of a common intention, whereby mutual rights and duties of those persons are determined. "" Vertrag ist die Vereinigung Mehrerer zu einer iibereinstimmenden 728 . APPENDIX. WiUenserklarung, woduroli ihre Reohtsverhaltuisse beslimmt wer- den." (Syst. 3. 309.) This covers a much wider field than that of contract in any proper sense. Every transaction answering this description includes an agreement, but many transactions answer to it which include far more: conveyances of property, for example, including dispositions inter vivos by way of trust and even gifts, and marriage. A still further specification is needful to arrive at the notion of Contract. A contract, in Savigny's way of approaching it, is an agreement which produces or is meant 'to produce an obligation (oMigatorischer Vertrag). It is thus defined in his. Obligationenrecht § 52 (vol. ii. p. 8): " Vereinigung Mehrerer zu einer iibereingtimmenden Willenserklarung, wodurch unter ihnen eine Obligation entstehen soil." Now the use of the more general notion of Vertrag, as Savigny himself explains, is not to clear up anything in the learning of contracts. It is to bring out the truth that other transactions which are not contracts, or which are more than contracts, have in common with them the character of consent being an essential ingredient. Moreover we should have to consider, before adopting this terminology, the wider question whether the retention of Obligations as a leading division in a modern system of law, and especially English law, be necessary or desirable. On the other hand, this definition leaves aside the somewhat important question whether and in what cases a binding obligation can be produced by a merely unilateral declaration. The distinction between the ideas denoted by dominium and ohligatio is certainly as fundamental in England as anywhere else; and the habit of using " obligation " as a synonym of " duty," though respectable authority may be found for it, is in jbj opinion to be deprecated. But to apply the Eoman tsrminology to the Common Law would be as violent a proceeding, in any case, as to ignore it in Eoman Law. For these reasons Savigny's definition, admirable as it is for its own purposes and in its own context, and instructive as his work is almost everywhere as an example of scientific method, is now reserved for this note. Note B. (p. 40). Authorities on Contract hy Correspondence. The first case of any importance is Adams v. Lindsell, 1 B. & Aid. 681 (1818), Pinch Sel. Ca. 102, 19 E. E. 415. Defendants wrote to plaintiffs, "We now offer you 800 tods of wether fleeces, &c." CONTRACT BY CORRESPONDENCE. 729 (specifying price and mode of delivery and payment), "receiving your answer in course of post." Here, therefore, the mode and time for acceptance were prescribed. This letter was misdirected, and so arrived late. On receiving it, the plain tifis wrote and sent by post a letter accepting the proposal, but the defendants, not receiving an answer when they should have received it if their proposal had not been delayed, had in the meantime (between the despatch and the arrival of the reply) sold the wool to another buyer. The jury were directed at the trial that as the delay was occasioned by the neglect of the defendants, they must take it that the answer did come back by course of post. On the argument of a rule for a new trial, it was oontemded that there was no contract till the answer was received. To this the Court replied: — ■ " If that were so, no contract could ever be completed by the post. For if the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after they had received the noti- fication that the defendants had received their answer and assented to it; and so it might go on ad infinitum. The defendants must be considered in law as making, during every instant of the time their letter was travelling, the same identical offer to the plaintiffs, and then the contract is completed by the acceptance of it by the latter. Then as to the delay in notifying the acceptance, that arises entirely from the mistake of the defendants, and it therefore must be taken as against them that the plaintiffs' answer was received in course of post." I As far as the case goes, it seems to amount to this: An acceptance by letter is complete as against the proposer from the date of post- ing the acceptance if it arrives within the prescribed time, if any, or otherwise within a reasonable time; but if the communication of the proposal is delayed by the fault of the proposer, and the com- munication of the acceptance is consequently delayed, such delay is not to be reckoned against the acceptor. In the Scotch case of iHinmore v. Alexander, 9 Shaw & Dunlop, 109, and Finch Sel. Ca. 120 (1830), the defendant wrote to a friend desiring her to engage a servant on terms which, that friend had already informed the writer, would be agreeable to the servant. A letter revoking this was written the next day; ultimately they were both posted and delivered to the servant at the same time. It was held that no contract was concluded, but it is not clear whether the majority of the Court meant to decide that an acoeptamce sent through the post is neutralized by a revocation arriving at the same time though posted later, or that the first letter was only a proposal. P.— c. 47 730 APPENDIX. Neither is it clear how far and for what purposes they regarded the intermediate person as an agent for either or both of the parties. No distinction was taken between postal and other communications. The French Oourt of Cassation had held in 1813 that when an acceptance and the revocation of it arrive together there is no contract. Merlin, Eepertoire, Vente, § 1, Art. 3, No. 11 bis, Lang- dell Sel. Ca. Cont. loo. But that Oourt has hitherto avoided any general definition, and there is still no settled doctrine : Cohen, De's contrats par correspondance, 1921, p. 43 sqq. In Potter v. Sanders (1846) 6 Ha. 1, 77 E. E. 1, the posting of a letter of acceptance is said to be an act which " unless interrupted in its progress " concludes the contract as from the date of the posting. This seems to imply that a letter not received at all would not bind the proposer. Then comes Ihmlop v. Higgins (1848) 1 H. L. 0. 381, 73 E. E. 96, Knch Sel. Oa. 108, a Scotch appeal decided by Lord Cottenham. Here the proposal did not prescribe any time, but the nature of it (an offer _ to sell iron) implied that the answer must be speedy. The acceptance was posted, not by the earliest possible post, but in business hours on the same day when the proposal was received. The post was then delayed by the state of the roads, so that the acceptance was received at 2 p.m. instead of 8 a.m., the hour at which that post should have arrived. The decision was that the contract was binding on the proposer; and it might well have been put on the ground that the acceptance in fact reached him within a reasonable time. Lord Cottenham, however, certainly seems to have thought the contract was absolutely concluded by the posting of the acceptance (within the prescribed or a reasonable time), and that it mattered not what became of the letter afterwards. It appears to have been so understood in Dunoan v. Topham (1849) 8 0. B. 225, 18 L. J. 0. P. 310, 79 E. E. 470, where, however, the decision was on other grounds. The latter cases arose out of applications for shares in companies being made and answered by letter. Hebb's case (1867) L. E. 4 Bq. 9, decides only that an allotment of shares not duly despatched will not make a man a shareholder; for the letter of allotment was sent to the company's local agent, who did not deliver it to the applicant till after he had withdrawn his application. But the same judge (Lord Eomilly) held in Reidpath's case (1870) L. E. 11 Eq. 86, 40 L. J. Ch. 39, that the applicant was not bound if he never received the letter. In British and American Telegraph Company v. Colson (1871) L. E. 6 Ex. 108, 40 L. J. Ex. 97, it was found as a fact that the letter of allotment was never received. The Court (Kelly C. B., CONTRACT BY CORRESPONDENCE. 731 Pigott B., and Bramwell B.) held that the defendant was not bound, and endeavoured to restrict the effect of Dunlop v. Higgins. In Townsend's case (1871) L. E. 13 Bq. 148, 41 L. J". Oh. 196, the letter of allotment miscarried, and was delayed some days by the applicant's own fault in giving a defective address. By a simple application of Adams v. Lindsell (expressly so treated in the judg- ment, L. E. 13 Bq., p. 154) it was held that the appUoant was bound, and that a withdrawal of his application, posted (and it seems delivered, p. 151) before he actually received the letter of allotment, was too late. In Ha/rris' case, L. E. 7 Oh. 587, the letter of allotment was duly received, but in the meantime the applicant had written a letter withdrawing his application on the ground of the delay (ten days) in answering it. These letters crossed. The Lords Justices (James and Mellish) held that the applicant was bound, on the authority of Dunlop V. Higgins, with which they thought it difficult to recon- cile British and Amer. Telegraph Co. v. Golson (a). On this, how- ever, no positive opinion was given, " because 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 " (per Mellish L.J. at p. 697). In Wall's case (1872) L. E. 15 Eq. 18, 42 L. J. Oh. 372, MaKns V.-O. held that as a fact the letter had been received, inclining, however, to think Harris' case an authority for the more stringent construction of Ihmlop v. Higgins — viz., that the contract is absolute and unconditional by the mere posting. This construction was held by the Oourt of Appeal in Household Fire Insurance Co. v. Grant (1879), 4 Ex. D. 216, 48 L. J. Ex. 577, p. 40, above, to be the correct one. The American case of Tayloe v. Merchants' Fire Insurance Co., 9 How. S. 0. 390 (1850), is of less importance to EngKsh readers than it formerly was, the ground being now fully covered by our own decisions. The insurance company's agent wrote to the plain- tiff offering to insure his house on certain terms. The plaintiff wrote and posted a letter accepting these terms, which was duly received. The day after it was posted, but before it was delivered, the house was burnt. The objection was made, among others, that there was no complete contract before the receipt of the letter, an assent of («f) It seems not to have been was in fact sent within a reasonablci disputed that the letter of allotment time. 47(2) 732 APPENDIX. the company after the aooeptance of the proposed terms being- essential. But the Oourt held that such a doctrine would be contrary to mercaatile usage and understanding, and defeat the real intent of the parties. Thi^ decides that a contract is complete as against the proposer by posting a letter which is duly delivered. It may still be useful to cite part of the judgment: — " The fallacy of the argument, in our judgment, consists in the assumption that the contract cannot be consummated without a knowledge on the part of the company that the offer has been accepted. This is the point of the objection. But a little reflection will show that in all cases of contracts entered into between parties at a distance by correspondence it is impossible that both should have a knowledge of it the moment it becomes complete. This can only exist where both parties are present. ... It is obviously impossible ever to perfect a contract by correspondence, if a know- ledge of both parties at the moment they become bound is an essential element in making out the obligation. ... It seems to us more consistent with the acts and declaratiorLS of the parties to consider it complete on the transmission of the acceptance of the offer in the way they themselves contemplated, instead of post- poning its completion till notice of such acceptance has been received and assented to by the company. " For why make the offer, unless intended that an assent to its terms should bind them? And why require any further assent on their part after an ujiconditional acceptance by the party to whom it is addressed? " (9 How. S. C. pp. 400, 401.) There seems to be a fair consensus of authority, such as there is,, for holding that the place to which a contract made by correspon- dence should be referred is that whence the acceptance is despatehed: Savigny, Syst. 8. 253, 257; Newcomh v. Be Boos (1859) 2 E. & E. 270, 29 L. J. Q. B. 4. Conversely, where an offer to buy goods is made by a letter posted in the City of London, and accepted by sending the goods to the writers' place of business in the City, the whole cause of action arises in the City: Taylor v. Jones (1875) 1 0. P. D. 87, 45 L. J. 0. P. 110. So in criminal law a false pretence contained, in a letter sent by post is made at the place where the letter is posted: Reg. v. Holmes (1883) 12 Q. B. D. 23, 53 L. J. M. C. 37. So of a notice of dismissal: Holland v. Bennett [1902] 1 K. B. 867, C. A. But a solicitor's le^;ter of demand sent by post is, for the purpose of a restrictive covenant binding the writer not to practise within oertaia limits, an act of demand at the place of receipt: Edmwndson v. Bender [1905] 2 Oh. 320, 74 L. J. Oh. 585... SEPAKATE. ESTATE. 733 Note 0. (p. 93). History of the Equitable Doctrine of Separate Estate. When the praotdoe of settling property to the separate use of maxried women first became common, it seems probable that neither the persons interested nor the conveyancers had any purpose in their minds beyond excluding the husband's marital right so as to secure an independent income to the wife. The various forms of circumlocution employed in old-fashioned settle- meats to express what is now sufficiently expressed by the words " for her sepiarate use " will at onoe suggest themselves as con- firming this. In course of time, however, it was found that by recognizing this separate use the Court of Chancery had in eflect created a new kind of equitable ownership, to which it was impos- sible to hold that the ordinary incidents of ownership did not attach. Powers of disposition were accordingly admitted including aJienation by way of mortgage or specific charge as well as absolutely; and we find it laid down in general terms in the latter part of the eighteenth century that a feme covert acting with respect to her separate property is competent to act as a feme sole{c'). Nevertheless the equitable ownership of real estate by means of the separate use, carrying as incidents the same fbll right of disposition by deed or will that a feme sole would have, was fully recognized only by much later decisions {d) . Prom a mortgage or specific charge on separate property to a formal contract under seal, such as if made by a person sui iuris would even then have bound real estate in the hands of his heir, we may suppose that the transition did not seem violent; and instruments expressing such a contract to be entered into by a married woman cEune to be regarded as in some way binding on any separate property she might have. In what way they were binding was not settled for a good while, for reasons best stated in the words of V.-O. Kindersley's judgment in Vaugham v. Vanderstegen {e). " The Courts at first ventured so far as to hold that if " a married woman " made a contract for payment of money by a written (c) Hulme V. Tenant (1778) 1 10 0. P. 554, 44 L. J. C. P. 396. \Vh. & T. L. C. In Pmoock v. {d) Taylor v. Meada (1865) 4 J/<7«/i; (1750-1) 2 V€B. Sr. 190, there D. J. S. 597, 34 L. J. Ch. 203; referred to by Lord Thurlow, no Pride v. Bubb (1871) L. E. 7 Oh. such sreneral rule is expressed. As 64, 41 L. J. Oh. 105. to the recognition of separate pro- (e) (1853) 2 Drew. 165, 180, 100 perty by Courts of Common Law, E. R. 65, 71. see Duncan v. Cashin (1875^ L. E. 734 APPENDIX. instrument with a certain degree of formality and solemnity, as by a bond under her hand and seal, in that case the property settled ta her separate use should be made liable to the p'ayment of it; and this principle (if principle it could be called) was subsequently extended to instruments of a less formal character, as a bill of exchange or promissory note, and ultimately to any written instru- ment. But still the Courts refused to extend it to a verbal agreement or other assumpsit, and even as to those more formal engagements which they did hold to be payable out of the separate estate, they struggled against the notion of their being regarded as debts, and for that purpose they invented reasons to justify the application of the separate estate to their payment without recognizing them as debts or letting verbal contracts. One suggestion was that the act of disposing of or charging separate estate by a married woman was in reality the execution of a power of appointment (/), and that a formal and solemn instrument in writing wouj-d operate as an execution of a power, which a mere assumpsit would not do. . . . Another reason suggested was that as a married woman has the right and capacity specifically to charge her separate estate, the execution by her of a formal written instrujnent must be held to indicate an intention to create such special charge, because otherwise it could not have any operation." Both these suggestions are on the later authorities untenable, as indeed V.-O. Kindersley then (1863) judged them to be (gr). One ' or two other suggestions — such as that a married womaa should have only such power of dealing with her separate estate as might be ex- pressly given her by the instrument creating the separate use — were thrown out about the beginning of the idneteenth century (A), dur- ing a period of reaction in which the doctrine was thought to have C/) U.ff. Duke of Bolton v. Wil- 182, 193, 35 L. J. Oh. 509, but liams (1793) 2 Ves. Jr. at p. 149. this must be regarded as oveirruled: (S') C!p. Mv/rray v. Barlee (1834) Robinson v. Pickering (18S1) 16 3 M'. & K. 209, where the argu- Ch. Div. 660, 50 "L. J. Ch. 527. It ments show the history of the was really discarded by Lord Eldoin doctrine; Owens v. Dickenson in 1803: Nantes v. Corrock, 9Yes. (1840) 1 Or. & Ph. 48, 53, 54 R. E. 182, 7 B. R. 156. at p. 198, wheire the notions of (A) See Jones v. Harris (1804) power and charge are both die- 9 Ves. 486, 497, 7 R. K. 282, 288; missed as inapplicable by Lord Parhes v. White (1804-5) 11 Ves, Cottenham. The theory of specific 209, 220 sqq. ; and oolleotion ol charge was revived as late as 1866: cases 5 Ves. 17, note. Shnttock V. Shattock, L. R. 2 Eq. SEPARATE ESTATE. 735 gone too far, but they did not flad acceptance; and the dangers which .gave rise to these suggestions were and still are provided against in another way by the curious device of the ri>straint on anticipation (i). The modern locu^ classious on the subject is the judgment of Turner L.J. in Johnson v. Gallagher {k), which had the full approval of the Judicial Oommittee (Z) and of the Court of Appeal in Chanoery (m). The general result was to this effect: " Not only the bonds, bills, and promissory notes of married women, but also their general engagements, may affect their separate estates " (3 D. F. J . 514) ; and property settled to a married woman's separate use for her life, with power to dispose of it by deed or will, is for this purpose her separate estate (n). These " general engagements " are subject to the forms imposed by the Statute of Frauds or otherwise on the contracts made in pari materia by persons competent to contract generally, but not to any other form: there is no general rule that they must be in writing. A " general engagement " is not binding on the separate estate unless it appear " that the engagement was made with reference to and upon the faith or credit of that estate " (3 D. P. J. 615). Whether it was so made is a question of fact to be determined on all the circumstances of the case: it is enough "to show that the married woman intended to contract so as to make herself — that is to say, her separate property — the debtor" (L. E. 4 P. 0. 597). Such intention is presumed in the case of debts contracted by a married woman living apart from her husband (3 D. F. J. 521). (This tallies with the rule of common law, which in this case excludes even as to necessaries the ordinary presumption of authority to pledge the husband's credit: see notes to Manby v. 8coti in 2 Sm. L. 0.) («•) See Lord Oottenham's judg- sqg., 30 L. J. Oh. 296. ment in Tullett v. Armstrong (J) Ikmdon Chartered Bank of (1838) 4 My. & Or. 393, 405, 48 Australia v. Lempriere (1873) R. R. 127. Restraint on anticipa- L. R. 4 P. O. 572, 42 L. J. P. C. tion can exist only as incidental to 49. a trust for separate use. Such a (m) Picard v. liine (18'69) L. R. trust cannot be supplied in order 5 Ch. 274. to give effect to a restraint: (») Mayd v. Fidd (187«) 3 Ch. Stogdon v. Lee [1891] 1 Q. B. 661, D. 587, 593, 45 L. J. Ch. 699, 670, 60 L. J. Q. B. 669, C. A. a. i-. Roper v. Dorioaster, note (s) (k) (1861) 3 D. F. J. 494, 509 next page. •36 APPENDIX, The like intention is inferred where the transaction would be otherwise unmeaning, as where a married woman gives a guaranty for her husband's debt (o) or joins him in making a promissory- note (p) . The " engagement " of a married woman differs from a contract, inasmuch as it gives rise to no personal remedy against the married woman, but only to a remedy against her separate property (g). But it creates no specific charge, and therefore the remedy may be lost by her alienation of such property before suit (3 D. P. J. 515, 519, 520-2) (r). On the same principle the exercise by a married woman of a general testamentary power of appointment does not make the appointed fund liable to her engagements, for it is never her separate property (s). In oases where specific performance would be granted as between parties sui iuris, a married woman may enforce specific performance of a contract made with her where the consideration on her port was an engagement binding on her separate estate according to the above rules; and the other party may in like manner enforce specific performance against her separate estate (i). A married woman's engagement relating to her separate property will have the same effect as the true contract of an owner sui iuris (o) Marrell v. Cotoan (1877) 6 Ch. D. 166 (reversed 7 Ch. Div. 151, 47 L. J. CJh. 73, but only on the construction of the document), where no attempt was made to dispute that the guaranty, though not expressly referring to tlie separate estate, was effsotual to bind it. (p) Dames v. Jenkins (1877) 6 Oh. D. 728. ' (?) Henoe, before the Act of 1882, the married woman, not being a real debtor, was not subject to the bankruptcy law in respect of her separate estate: JEx parte Jones (1879) 12 Ch. Div. 484, 48 L. J. Bk. 109. (r) Aco. Rohinson v. Pickering (ISei) 16 Cai. Div. 660, 50 L. J. Oh. 527, which decided that a creditor of a married woman on the faith of her separate estate is not thereby entitled to a charge on her separate property, or to an injunction to restrain her from dealing with it. («) Eoper V. Donoaster (1888) 39 Ch. D. 482, 58 L. J. Ch. 31: qu. how far consistent with Mayd V. Field, note (») last page. As to the effect of s. 4 of the Married Women's Property Act, 18i82, 'see now Re Hughes [18««] 1 Ch. 529, 67 L. J. Ch. 279, C. A.; Re Hodg- son [1899] 1 Oh. 666, 68 L. J. Oh. 313; Re Fieldwiok [1909] 1 Ch. 1, C. A. (f) The oases cited in Sug. V. & P. 206, so far as inoomsistent with the modem authorities (see Pioard v. Him (1869) L. E. 5 Oh. 274, where the form of deeree against the separate estate is given, Pride V. Bubb (1871) L. R. 7 Ch. 64, 41 L. J. Oh. 105), must be considered as overruled. SEPARATE ESTATE. 737 in creating an obligation which, will be binding on the property in the hands of an assignee witk notice (m) . If a married woman becomes sm iuris by the death of the husiband, judicial separation or otherwise, what becomes of the debts of her separate estate? It appears that they do not become legal debts: for this wouJ.d be to create a new right and liability quite different from those originally created by the parties; but that the creditor's right is to follow in the hands of the owner or her representatives the separate estate held by her at the time of contracting the engagement, and still held by her when she became sui iuris, but not any other property. Property subject to a restraint on anticipation cannot in any case be bound(a;). On principle a married woman's engagement with respect to her separate estate, while not bound by any peculiar forms, is on ih© other hand bound in every case by the ordinary forms of con- tract; in other words, no instrument or transaction can take effect as an engagement binding separate estate which could not take effect as a contract if the party were sm iuris. That is to say, the creditor must first produce evidence appropriate to the nature of the transaction which would establish a legal debt against a party sui iuris, and then he must show, by proof or presumption as explained above, an intention to make the separate estate the debtor. There is, however, a decision the other way. In McHenry v. Davies (y), a married woman, or rather her separate estate, was sued in equity on a bill of exchange indorsed by her in Paris. It Tvas contended for the defence, .among other things, that the bill ^was a French bill and informal according to French law. Lord Eomilly held that this was immaterial, for all the Court had to be satisfied of was the general intention to make the separate estate liable, of which there was no doubt. This reasoning is quite intelligible on the assumption that engagements bind separate estate only as specific charges; the fact that the instrument ■creating the charge simulated more or less successfully a bill of exchange would then be a mere accident (z). The judgment bears (u) Per Jessel M.R. Warne v. the husband, see 3 D. F. J. 493, and Routledge (1874) L. K. 18 Eq. 500, the decree appealed from at p. 497. 43 L. J. Ch. 604. The Act of 1882 (modified only as (a;) Pike v. Fitzgihbon (1881) 17 to payment of costs by the Act of Ch. Div. 454, 50 L. J. Oh. 394. 1893) gives no power to touch auoh Earlier cases are indecisive. For property, see pp. 94, 95, above, -the view taken in the Court below (?/) (1870) L. R. 10 Eq. 88. in Johnson v. GalUgher, where the («) Note, however, that in the bUl was filed after the death of case of parties sui iuris a bill of 738 APPENDIX. obvious marks of this exploded theory (a). In Johnson v. Gallagher it is assumed, that a married ■woman's engagements concerning her separate interest in real estate must satisfy the conditions of the Statute of Prauds (6). An engagement which if she were sui iuris would owe its validity as a contract to the law merchant must surely in like manner satisfy the forms and conditions of the law merchant. It is submitted, therefore, that McHenry v. Duvies (c) is not law on this point. The Statute of Limitation, or rather its analogy, applies to claims against the separate estate {d). It is said that a married woman's separate estate cannot be made liable as on an obligation implied in law, as, for instance, to the repayment of money paid by mistake or on a consideration which has wholly failed (e). But the decisions to this eSect belong (with one exception) to what we have called the period of reaction, and are distinctly grounded on the exploded notion that a " general engagement," even if express, is not binding on the separate estate. The exception is the modern case of Wright v. Chard {f), where V.-O. Kindersley held that a married woman's separate estate was not liable to refund rents which had' been received by her as her separate property, but to which she was not in fact entitled. . Bui the language of the judgment reduces it to this, that in the still transitional state of the doctrine, and in the absence of any pre- cedent for making the separate estate liable in any case without writing (this was in 1859, Johnson v. Gallagher not till 1861), the V.-O. thought it too much for a court of first instance to take the new step of making it liable "in the absence of all contract"; and he admitted that " the modern tendency has been to establish the principle that if you put a married woman in the position of a feme sole in respect of her separate estate, that position must be carried to the full extent, short of making her personally liable." The test of liability would seem on principle to be whether the transac- exchange cannot be treated as an {d) Be Lady Hastings (18S7) 35 equitable assignment: Shand v. Ch. Div. 94. Bu Buisson (1874) L. E. 18 Eq. (e) 3 D. F. J. 512, 514, referring 283, 43 L. J. Oh. 508. Nor a to Buke of Bolton v. Williams cheque: BopMnson v. Foster (1793) 2 Ves. Jr. 138; Jones v. (1874) L. R. 19 Eq. 74. Harris (1804) 9 Ves. 486, 493, 7 (a) Cp. ShattocTc v. Shattock, K. R. 282, and Aguilar v. Aguilar supra, p. 734, where Lord Eomilly (1820) 5 Madd. 414. took the same view. (/) (1859) 4 Drew. 673, 685, 29 (6) (1861) 3 D. E. J. at p. 514. L. J. Ch. 82: on appeal, 1 D. P. J. (c) (1870) L. R. 10 Eq. 88. 567, 113 R. R. 501, but not on this. point. LIMITS OF CORPORATE POWERS. 7;^9 tion out of wMcii the demand arises had reference to or was for the benefit of the separate estate. The spirit of the modern authorities is, on the whole, in the direction of holding that a married woman's " engagement " differs from an ordinary contract only in the remedy being limited to her separate property. Her creditor is in a position like that of a creditor of trustees for a society, or the like, who has agreed to look only to a specified fund for payment. And on this view the Married Women's Property Act of 1882 is framed, though it might be wished that the principle had been carried out more thoroughly. Note D. (p. 137 above). Limitation of Corporate Powers hy Doctrines of Partnership and Agency. A case in which this reason appears most clearly is Simpson v. Denison (1852) 10 Ha. 61, 90 E. E. 276. The suit was instituted by dissentient shareholders to restrain the carrying out of an agree- ment between their company (the Great Northern) and another railway company, by which the Great Northern was to take over the whole of that company's traffic, and also to restrain the appli- cation of the funds of the Great Northern Company for obtaining an Act of Parliament to ratify such agreement. The V.-O. Turner treated it as a pure question of partnership : " How ;would this case have stood," he says in the first paragraph of the judgment, " if it had been the case of an ordinary limited partnership? " The Eailways Clauses Consolidation Act became in this view a statutory form of partnership articles, to which every shareholder must be taken to have assented; and the general ground of the decision was that " no majority can authorize an application of partnership funds to a purpose not warranted by the partnership contract.'' For the purposes of the case before the Court this analogy was perfectly legitimate; and the dissent expressed by Parke B. (in South York- shire, &c. Co. V. a. N. R. Co. (1853) 9 Ex. 88, 22 L. J. Ex. 315, 96 E. E. 575) must be considered only as a warning against an unquali- fied extension of it to questions between the corporate body and strangers. In Pickering v. Stephenson (1872) L. E. 14 Eq. 322, 340, 41 L. J. Oh. 493, the same rule is thus set forth by Wickens V.-C. — " The principle of jurisprudence which I am asked here to apply is that the governing body of a corporation that is in fact a trading partnership cannot in general use the funds of the community for any purpose other than those for which they were contributed. By the governing body I do not of course mean exclusively either 740 APPENDIX. directors or a general council (g), but the ultimate authority ■within the society itself, which would ordinarily be a majority at a general meeting. According to the principle in question the special powers given either to the directors or to a majority by the statutes or Other constituent documents of the association, however absolute in terms, are always to be construed as subject to a paramount and inherent restriction that they are to be exercised in subjection to the special purposes of the original bond of association." Nothing is said here on the extent to which a corporation may be bound by the unamimous assent of its members {h). Any dissenting shareholder may call for the assistance of the Coiu-t to restrain unconstitutional acts of the governing body {hh), but he must do so in his proper capacity and interest as a shareholder and partner. If the Oourt can see that in fact he represents some other interest, and has no real interest of his own in the action, it will not listen to him; as when the proceedings are taken by the direction of a rival company in whose hands the nominal plaintiff is a mere puppet, and which indemnifies him against costs: Forrest v. Manchester, &c. By. Co. (1861) 4 D. P. J. 126: so where the suit was in fact instituted by the plaintiff's solicitor on grounds of personal hostility, Rohson v. Dohhs (1869) L. E. 8 Eq. 301, 38 L. J. Oh. 647. But if he has any real interest and is proceeding at his own risk, he is not disqualified from suing by the fact that he has collateral motives, or is acting on the suggestion of strangers or enemies to the company, or even has acquired his interest for the purpose of instituting the suit: Cohnan v. E. G. My. Co. (1846) 10 Beav. 1, 16 L. J. Oh. 73, 76 E. E. 78; Beaton v. Grant (1867) L. E. 2 Oh. 459, 36 L. J. Oh. 638; Bloxam v. Metrop. Ry. Co. (1868) L. E. 3 Oh. 337. Por full collection of cases, see Lindley on Companies, 597. As a rule the plaintiff in actions of this kind sues on behalf of himself and all other shareholders whose interests are identical with his own; but there seems to be no reason why he should not sue alone in those ca^es where the act complained of cannot be ratified at all, or can be ratified only by the unanimous assent of the shareholders: Boole v. O. W. Ry. Co. (1867) L. E. 3 Oh. 262. There is another class of oases in which abuse of corporate powers or authorities is complained of, but the particular act is within the competence of, and may be affirmed or disaffirmed by, " the (j') Eef erring^ to the peculiar pany and its members : BioJemanv. constitution of the company then in Kent, ^c. Assocn. [1915] 1 Ch. 881, question. 84 Iv. J. Ch. 688. (h) The articles of association of (AA) So may a member of a a, company under the Oompaniee chartered company: Jenhim v. Aot are a contract not only between Pharmacewtioal Society [1921] 1 the members, but between the com- Ch. 393, 90 L. J. Ch. 47. LIMITS OF CORPORATE POWERS. 741 ultimate authority within the society itself" (in the words of Wickens V.-O. just now cited), euid therefore the corporation itself is prima facie the proper plaintiff. See Lindley on Companies, 574 sqq.; Gray v. Lewis (1869) L. E. 8 Oh. 1035, 1051; Maodowgall V. Gardiner (1875) L. E. 10 Oh. 606, 1 Oh. D. 13, 21; Russell v. Wakefield Waterworks Go. (1875) L. E. 20 Eq. 474, 44 L. J. Oh. 496. " The majority are the only persons who can complain that a thing which they are entitled to do has been done irregularly " (i). The exception is when a majority have got the government of the corporation into their own hands, and are using the corporate name and powers to mal!;e a profit for themselves at the expense of the minority; then an action is rightly brought by a shareholder on behalf of himself and others, making the company a defendeint: Menier v. Hooper's Telegraph Works (1874) L. E. 9 Oh. 350, 43 L.J. Oh. 330; Mason v. Harris (1879) 11 Oh. Div. 97, 48 L. J. Oh. 589; Baillie v. Oriental Telephone Co. [1915] 1 Oh. 503, 84 L. J. Oh. 409, 0. A. We mention these cases only to distinguish them from those with which we are now concerned. With regard to the doctrine of limited agency, and its peculiar importance in the case of companies constituted by public docu- ments, all persons dealing with them being considered to know the contents of those documents and the limits set to the agent's authority by them, it may be useful to give Lord Hatherley's con- cise statement of the law (when V.-C.) in Fowntaine v. Carmarthen By. Co. (186S) L. E. 5 Eq. 316, 322, 37 L. J". Oh. 429. " In the case of a registered joint stock company, all the world of course have notice of the general Act of Parliament and of the special deed which has been registered pursuant to the provisions of the Act, and if there be anything to be done which can only be done by the directors under certain limited powers, the person who deals with the directors must see that those limited powers are not being exceeded. If, on the other hand, as in the case of Royal British Bank v. Twrquand {k), the directors have power and authority to bind the comp'any, but certain preliminaries are re- quired to be gone through on the part of the company before that (0 MfiUish L.J. 1 Oh. D. at D. 717, 48 L. J. Oh. 385; Harb&n p. 25. Afi to a shareholder's right v. Phillips (1882-3) 23 Ch. D. 14, to nse the company's name as 29, 38; Burland v. Earle [1902] plaintiff, see Pender v. Lnshington A. O. 83, 71 L. J. P. O. 1. (1877) 6 Ch. D. 70, 46 L. J. Oh. (K) 5 E. & B. 248, 6 ibid. 237, 317; Duokett v. Gover (1877) 6 24 L. J. Q. B. 327, 25 ibid. 327, Ch. D. 82, 46 L. J. CJh. 407; Silber 103 R. B. 461. Light Co. v. Silb&r (1879) 12 Ch. 742 APPENDIX. power can be duly exercised, then the person contracting with the directors is not bound to see that all these preliminaries have been observed. He is entitled to presume that the directors are acting lawfully in what they do. That is the result of Lord Oampbell's judgment in Royal British Bank v. Turquand." Por fuller ex- position see Lindley on Companies, 166 sqq. The contrast of the two classes of cases is well shown in Rvyal British Bcmk v. Turquand (k) and Balfour v. Ernest (1859) 5 0. B. N. S. 601, 28 L. J. 0. P. 170. In the former case there was power for the directors to borrow money if authorized by resolution: and it was held that a creditor taking a bond from the directors under the company's seal was not bound to inquire whether there had been a resolution. Jervis O.J. said in the Exchequer Chamber (the rest of the Court concurring): — " We may now take for granted that the dealings with these companies are not like dealings with other p'artnerships, and that the parties dealing with them are bound to read the statute and the deed of settlement. But they are not bound to do more. And the party here on reading the deed of settlement would find not a prohibition from borrowing, but a permission to do so on certain conditions." The same principle has been followed in many later cases {Ex parte Eagle Insurance Co. (1858) 4 K. & J. 54&, 27 L. J. Ch. 829; Campbell's case, &c. (1873) L. R. 9 Ch. 1, 24, 43 L. J. Ch. 1; Tott&r- dell V. Fan-eham Brick Co. (1886) L. E. 1 0. P. 674, 35 L. J. C. P. 278; Re Cmnty Life Assce. Co. (1870) L. E. 5 Ch. 288, 39 L. J. Oh. 471, a very strong case, for the persons who issued the policy were assuming to carry on business as directors of the company with- out any authority at all> Romford Canal Co. (1883) 24 Oh. D. 85, 52 L. J. Oh. 729), and it was decisively affirmed by the House of Lords in Mahony v. East Holyford Mining Co. (1875) L. E. 7 H. L. 869. In that case a bank had honoured cheques drawn by persons acting as directors of the company, but who had never been pro- perly appointed; and these payments were held to be good as against the liquidator, the dealings having been on the face of them regular, and with de facto officers of the oomp'any. Share- holders who allow persons to assume office and conduct the com- pany's business are, as against innocent third persons, no .less bound by the acts of these de facto officers than if they had been duly appointed. It is for the shareholders to see >that unauthorized persons do not usurp office, and that the business is properly done (Z) . (/c) See last note. H. L., at p. 880; per Lord (0 Opinion of judges L. E. 7 Hatherley, at pp. 897-8. LIMITS OF CORPOKATE POWERS. 743 Similarly where the proper quorum of directors fixed by internal regulations of the company was not present: County of Oloucester Bank v. Mudrij Merthyr, &c. Go. [1895] 1 Oh. 629, 64 L. J. Ch. 451. Creditors are entitled to rely on the authority of a managing director pm-porting to exercise powers which under the articles he might have: Biggerstaff v. Bowatt's Wharf [1896] 2 Oh. 93, 102, 65 L. J. Ch. 536; Dey v. Pullinger Engweerivg Co. [1921] 1 K. B. 77, 89 L. J. K. B. 241. In Balfowr v. Ernest the action was on a bill given by directors of an insurance company for a claim under a policy of another company, the two companies having arranged an amalgamation; this attempted amalgamation, however, had been judiciaHy deter- mined to be void: Ernest v. Nicholh, 6 H. L. 0. 401, 108 E. E. 175, revg. S. 0. nom. Port of London Co.'s case (1854) 5 D. M. Q. 465. The directors had power by the deed of settlement to borrow money for the objects and business of the company and to pay claims on policies granted by the company, and they had a power to make and accept bills, &c. which was not restricted in terms as to the objects for which it might be exercised. It was held that, taking this with the other provisions of the deed, they could bind the company by bills of exchange only for its ordinary purposes, and not in pursuance of a void scheme of amalgamation, that the plain- tiffs must be taken to have known of their want of authority, which might have been ascertained from the deed, and that they therefore could not recover. " This bill is drawn by procuration," said WiUes J., " and unless there was authority to draw it the com- pany are not liable (m) . . . this is the bare case of one taking a bill from Company A. in respect of a debt due from Company B., there being nothing in the deed (which must be taken to have been known to the plaintiffs) to confer upon the directors authority to make it." The connection with ordinary partnership law is brought out in the introductory part of Lord Wensleydale's remarks in Ernest v. Nicholls (1857) 6 H. L.. 0. 401, 417, 108 E. E. 175, 182. " The law in ordinary partnerships, so far as relates to the powers of one partner to bind the others, is a branch of the law of principal and agent. Each member of a complete partnership is liable for himself, and, as agent for the rest, binds them upon all contracta made in the course of the ordinary scope of the partnership business. .... Any restrictions upon the authority of each partner, imposed by mutual agreement amongst themselves, could not affect third persons, unless such persons had notice of them; then they (m) In form it was a bill drawn cashier, and sealed with the com- by two directors on the company's pany'a seal. 744 APPENDIX. could take nothing by contract [sc. as against the firm] which thos& restrictions forbade. [The law in this form, i.e., the presumption of every partner being the agent of the firm, being obviously inapplic- able to joint-stock companies.] The legislature then devised the plan of incorporating these companies in a manner unknown to the common law, with special powers of management and liabilities, providing at the same time that all the world should have notice who were the persons authorized to bind all the shareholders by requiring the copartnership deed to be registered . . . and made accessible to all." The continuation of the passage, however, goes too far; in fact, it disregards the distinction established by Boyal British Bank v. Turquand, and the Courts have distinctly declined to adopt it: Agar v. Athenoevm, Life Assce. Soc. (1858) 3 0. B. N. S. 725, 27 L. J. 0. P. 95, 111 E. E. 817; Prince of Wales Assoe. Co. v. Harding (1857) E. B. & E. 183, 27 L. J. Q. B. 297, 113 E. E. 694. See Chapleo v. BrumswicJe Building Society (1881) 6 Q. B. Div. 696, 50 L. J. Q. B. 372, for an example of the society not being bound by a loan contracted beyond its borrowing powers: the directors, hav- ing held themselves out as authorized, were found personally Kable. Transactions in the conduct of a company's affairs which in their inception were invalid as against any dissenting shareholder may nevertheless be made binding on the partnership and decisive of its collective rights, as between the company and its own past or present members, by the subsequent assent of all the shareholders, though such assent be informal and shown only by acquiescence. The leading examples on this head are given by the well-known oases in the Hoizse of Ix)rds which arose in the winding-up of the Agriculturists' Cattle Insurance Company. It is to be observed that these cases turned on the internal con- stitution and affairs of the company, and there was no occasion to consider to what extent or in what transactions the assent of shareholders was capable of binding the company as against strangers. They therefore stand apart from the question of positive statutory limitations of corporate powers as between the company and outsiders. Moreover, the irregular act which was ratified was unauthorized as to the manner and form of it, but belong^ to an authorized class (»). The general nature of the facts was thus: At a meeting of the company an arrangement was agreed to, after- wards called the Chippenham arrangement, by which shareholders who elected to do so within a certain time might retire from the (m) See per Lord Eomilly (L. E. Ashinirt/ Railway Carriage Co. 3 H. li. 244-5). See also the judg- (1875) L. E. 9 Ex. 289, 43 L. J. ment of AroUbald J. in Riohe v. Ex. 177. LIMITS OF CORPORATE POWERS. 745 company on specified terms by a nominal forfeiture of their shares. The deed of settlement contained provisions for forfeiture of shares, but not such as to warrant this arrangement. It vras held — • In Evans v. Sma2lcombe (1868) L. E. 3 H. L. 249, that the Chippenham arrangement could be supported (as having become part of the internal regulations of the company) only by the assent of all the shareholders, but that in fact there was knowledge and acquiescence sufficiently proving such assent. A shareholder who had retired on the terms of the Chippenham arrangement was therefore not liable to be put on the list of contributories. (Op. Brotherhood's case (1862) 4 D. P. J. 366, an earlier and similar decision in the same winding-up.) In Spackman v. Evans (1868) L. R. 3 H. L. 171, 34 L. J. Oh. 321, that a later and distinct compromise made with a smaller number of dissentient shareholders had not in fact been communicated to aU the shareholders as distinct from the Chippenham arrangement, and could not be deemed to have been ratified by that acquiescence which ratified the Chippenham arrangement; and that a sbareholder who had retired under this later compromise was therefore rightly made a contributory. In Houldiworth v. Evans (1868) L. E. 3 H. L. 263, that time was of the essence of the Chippenham arrangement, so that when a shareholder was allowed to retire on the terms of the Chippenham arrangement after the date fixed for members to make their election, this, in fact, amounted to a distinct and special compromise, which ought to have been specially communicated to all the shareholders: this case therefore followed Spacfcman v. Evans (o). Cp. Stewart's case (1866) L. E. 1 Oh. 511. The question of the shareholders' knowledge or assent in each case involved delicate and difficult inferences of fact, and on these the opinions of the Lords who took part in the decisions were seriously divided. It may perhaps also be admitted that on some inferences of mixed fact and law there was a real difference; but it may s'afelv be afiirm'ed that on any pure question of law there was none (p) . These cases appear to establish in substance the following proposi- tions: (1.) For the purpose of binding a company as against its own shareholders, irregular transactions of an authorized class may be ratified by the assentof aU the individual shareholders. (2.) Such assent must be proved as a fact. Acquiescence with knowledge or fuU means of knowledge may amount to proof of assent, and lapse (o) (1868). See also L. R. 7 (?>) See per WiUes J., L. R. 7 C.P. 51, -52, and note the remark of C. P. 60. Wmes J. p. 53, 34 L. J. Ch. 321. P.-C. 48 746 APPENDIX. of tiniie, though not oonclusive, is material. The oonverae proposi- tion that the assent of a particular shareholder will bind him to an irregular transaction as against the company is likewise well established, but does not fall within our present scope. See Campbell's case, &c. (1873) L. E. 9 Oh. 1, 43 L. J. Oh. 1. The later case of Phosphate of Lime Go. v. Qreen (1871) L. E. 7 0. P. 43, was of much the same kind though in a different form. The action was by the company against past shareholders for a debt, and the defence rested on an accord and satisfaction which had been effected by an irregular forfeiture of the defendant's shares, and which in the result was upheld on the ground of the sha.reholder's acquiescence. It was not necessary to consider the distinction between irregular acts which can be ratified and acts contrary to the constitution of the company which cannot be ratified in any way, nor was it brought to the attention of the Court (g). As to the equitable obligation of a company to repay money irregularly borrowed on its behalf and in fact used to pay its legal debts, see Reversion, &c. Co. v. Maison Cosway [1913] 1 K. B. 364, 0. A. With regard to cases in which ratification is impossible by reason of the corporation being absolutely disabled from undertaking the transaction, the existence of such cases has been recognized almost from the beginning of modern corporation law. " A company incor- porated by Act of Parliament for a special purpose cannot devote any part of its funds to objects unauthorized by the terms of its incorporation, however desirable such an application may appear to be "()•). The application of this principle to companies under the Companies Act, 1862 (the most important class of cases in practice), was fixed by the House of Lords in 1876 in Ashbury, &c. Co. v. Siche, pp. 135, 137, above. The House decided that, by the frame and intention of the Act as a whole, the memorandum of association is the fundamental constitution of the company, and the company is incompetent to undertake anything outside its objects as thereby defined. As a consequence of this, any provision in the articles for applying the company's capital to a purpose not warranted by the memorandum is itself invalid: Guinness v. Land Corporation of Ireland (1882) 22 Ch. Div. 349. For some time past it has been the practice of company draftsmen to frame the memorandum in the most comprehensive terms, in order to prevent questions of this {q) See further on tho subject of doctrine by Lord Cranworth ia ratification by companie?, Lindley H. 0. S.y. Co. v. SawTces (1855) 5 on Conipani63, 175-181. H. L. O. 331, 24 L. J. Ch. 601, (r) So laid down as well settled 101 R. E. 183. CONTRACTS IN ROMAN AND MEDIEVAL LAW. 747 kind from arising; but the decisions remain in full force, and the practice and forms in use cannot be adequately understood without reference to tiem. As to when the Attorney-General is entitled to interfere, see A.-G. v. Q. E. By. Co. (1880) 11 Oh. Div. 449; 49 L.J. Oh. 545; A.-G. v. London County Council [1902] A. 0. 165, 71 L. J. Oh. 268: this case also decides that a county council under the Local Government Act, 1888, is a purely statutory body and has not the general powers of a corporation at common law; A.-G. V. Mersey By. Co. [1907] 1 Oh. 81, 0. A. (revd. on the point of substance in H. L. [1907] A. 0. 416, 76 L. J. Oh. 568). Note B. Clasaiflkation of Contracts in Boman and Medieval Law. Formal contracts (legitimae conventiones) gave a right of action irrespective of their subject-matter. In Justinian's time the only kind of formal contract in use was the Stipulation (s), or verbal contract by question and answer, the question being put by the creditor and answered by the debtor (as Dari spondes? spondeo: Promittis? promitto: Facies? faciam). The origin of the Stipula- tion is believed to have been religious (t), though the precise manner of its adoption into the civil law remains uncertain. In our autho- rities it appears as a formal contract capable of being applied to any kind of subject-matter at the pleasure of the parties. Its application was in course of time extended by the following steps. 1 . The question and answer were not required to be in Latin (u) . 1. An exact verbal correspondence between them was not neces- sary (cc). 3. An instrument in writing purporting to be the record of a Stipulation was treated as strong evidence of the Stipulatioii (s) The litterarum obligatio nants made between independent {G-ai. 3. 128) was obsolete. What tribes or families. Of. Gai. 3. 94 appear-s under that title in the lon the use of the word spondeo in Institute? (3. 21) is a general ride treaties. If this were so, one would of evidence unconnected with the expect the oovenanb to be confirmed ancient usage: see Moyle's Jus- by an oath, of which Muirhead (on tinian Exo. viii. Gai. 3. 92) finds a trace on other (0 Savigny's derivation of the grounds in the form prom Mis? Stipulation from the nexuiii is promitto. abandoned, so far as I know, by («) Gai. 3. 93, I. 3. 15, de v. o. all recent writers. It seems quite § 1. possible that the earliest type of {x) 0. 8. 38. de eont. et comm. ^wntract is to be sought in cove- stipul. 10. 48(2) 748 APPENDIX. having actually taken place {y), and it might be presumed that the form of question and answer had been duly observed even without express words to that effect (z). Hence the medieval development of operative writings. Informal agreements (pacta) did not give any right of action without the presence of something more than the mere fact of the agreement. This something more was called causa. Practically the term covers a somewhat wider ground than our modem " con- sideration executed " : but it has no general notion corresponding to it, at least none co-extensive with the notion of contract; it is simply the mark, whatever that may be in the particular case, which distinguishes any particular class of agreements from the common herd of pacta and makes them actionable. Informal agreements not coming within any of the privileged classes were called niida pacta and oould not be sued on (a). The term nuduW pactum, is sometimes used, however, with a special and rather different mean- ing, to express the rule that a contract without delivery will not pass property (&). The further application of this metaphor by speaking of the causa when it exists as the clothing or vesture of the agreement is without classical authority but very common; it is adopted to the full extent by our own early writers (c). The privileged informal contracts were the following: 1. Real contracts, where the causa consisted in the delivery of money or goods: namely, mutui datio, oommodatum, depositum, pignus, cor- (y) C. 8. 38. de cont. et oomm. The contrary rule of the Common stipul. 14, 1. 3. 19. de inut. stipul. Law has not so far been traced to § 12. Probably Greek and provin- an earlier time than the second cial use of written agreements had quarter of the fifteenth century: much to do with this. see Prof. Ames in Essays in Anglo- (z) Paul. Sent. V. 7, § 2. For American Legal Hist. iii. 312, 313. detailed discussion see Seuffert, Op. note (o), p. 750, below. Zur Gesohichte der obligatorisohen (c) " Pactum nudum est non Vertrage, § 3. vestitum stipidatione vol re vel (a) They gave rise however to litteris vel consensu vel contractua imperfect or "natural" obligations cohaerentia": Azo, Summa in Cod. which had other legal effects. ap. Seuffert op. oit. 41 ; Maitland, (&) Traditionibus et usucapion!- Braoton and Azo, 143. " Obliga- bu9 dominia rerum, non nudis tio quatuor species habet quibus pactis, transferuntur. Cod. 2. 3. de contrahitur et plura vestimenta," pactia, 20. But the context is not Bracton, 99a. " Obligacioun deit preserved, and the particular pao- estre vestue de v. maneres de turn in question may have been garnisementz," Britton 1. 156. nudum in the general sense too. i CONTRACTS IN ROMAN AND MEDIEVAL LAW. 749 responding to our bailments. This class was expanded within historical times to cover the so-called innominate contracts denoted by the foi-mula Do ui Aes, &o. (d), so that there was an enforceable obligation re contraota wherever, as we should say, there was a consideration executed: yet the procedure in the different classes of cases was by no means uniform (e). '2. Consensual contracts, being contracts of constant occurrence in daily life in which no causa was required beyond the nature of the transaction itself. Four such contracts were recognized, the first three of them at all events (/) from the earliest times of which we know anything, namely. Sale, Hire, Partnership, and Mandate. (Emptio Venditio, Locatio Conductio, Sooietas, Mandatum.) To this class great additions were made in later times. Subsidiary contracts (pacta adiecta) entered into at the same time and in con- nexion with contracts of an already enforceable class became likewise enforceable: and divers kinds of informal contracts were specially made actionable by the Edict and by imperial constitutions, the most material of these being the constitutum, covering the English heads of account stated and guaranty. Justinian added the pactum donationis, it seems with a special view to gifts to pious uses(gr). Even after all these extensions, however, matters stood thus: "The Stipulation, as the only formal agreement existing in Justinian's time, gave a right of action. Certain particular classes of agree- ments also gave a right of action even if informally made. All other informal agreements {nuda -pacta) gave none. This last proposition, that nuda pacta gave no right of action, may be regarded as the most characteristic principle of the Roman law of Contract" {h). It is desirable to bear in mind that in Eoman, and therefore also in early English law-texts, nudum pactum does not {d') Aut enlm do tibi ut des, aut of minor importance for our present do ut faoias, aut facio at des, aut purpose. facio ut facias; in quibus quaeritur Qi) Sav. Obi. 2, 231. Muirhead, quae obligatio mascatur. D. 19. 5. on Gfai. 3. 134, says that "amongst de praescr. verbis, 5 pr. Black- peregrins a nudum pactum was Btone (Comm. ii. 444) took this creative of action: " which seems formula for a classification of all to be a sHp. Provincial usage, so valuable considerations, and his far as known, was less advanced blunder was copied without reflec- than Roman; thus the contract of tion by later writers. sale was (as in Germanic custom) (a) Dig. 1. o. §§ 1-4. real and not consensual: Gilson, (/) See Muirhead on Gai. 3. 216. L'etude du droit romain compart (^) C. 8. 54, de donat. 35, § 5. aux autres droits de I'antiquit^ The establishment of emphyteusis (1899), p. 217. as a distinct species of contract is 750 APPENDIX. mean an agreement made without consideration. Many nuda pacta, according to the classical Roman law, would be quite good in English law, as being made on sufficient consideration; while in many cases obligations recognized by Bomaa law as fully binding {e.g. from mandate or negotiorum gestio) would be unenforceable, as being without consideration, in the Oommon Law. When the Eioman theory came to be adopted or revived in Western Christendom, the natural obligation admitted to arise from an informal agreement was, under the influence of the canonists, gradually raised to full validity, and the difference between pactum! and legitima conventio ceased to exist ( j) . The process, however, was not completed until English law had already struck out its own line. The identification of Stipulation with formal writing, complete on the Continent not later than the 9th century {k), was adopted, by our medieval authors. In Glaxivill we find that a man's seal is conclusive against him (Z) . Bracton, after sietting forth almost in the very words of the Institutes how " Verbis contrahitur obligatio per stipulationem," &c. adds: "Et quod per soripturam fieri possit stipulatio et obligatio videtur, quia si scriptum fuerit in instru- mento aliquem promisisse, perinde habetur ao si interrogatione praecedente responsum sit " (m) . There is no doubt that he means only a' writing under seal, tihough it is not so expressed: Eleta does say in so many words that a writing unsealed will not do (n) . The equivalent for the Eoman Stipulation being thus fixed, the classes of Beal and Consensual contracts are recognized, in the terms of Roman law so far as the recognition goes: the Consensual contt-aots are but meagrely handled for form's sake, as the Roman rules oould not be reconciled with English practice (o). We hear of (i) Seuffert op. cit. cp. Harv. sity Library (Dd. 7. 6): Differt Law Rev. vi. 390, 391. SeeEsmein, pactum a conventione quia pactum Etudes 3ur les contrats dans le trfes solum consistit in sermonibus, ut in anoieu droit fraugais, Paris, 1883, stipulationibus, conventio tam in fo^r the earlier medieval history. eermone quam in opere, ut cum in (S) Details and authorities in scriptis redigitur. Brunner, Eom. u. German. Ur- (n) Lib. 2. o. 60, § 25. Non Ininde. solum suffioiet soriptura nisi sigilli (Z) L. X. c. 12. munimine stipulantis (see p. 146, (rn) 99 b. 100 «. Later students above) roboretur cum testimonio of Eoman law seem to have been fide dignorum praesentimn. dissatisfied; at any rate the follow- (o) Bracton's law of sale, like ing curious marginal note occurs Glanvill's, is the old Germanic law in an early 14th century MS. of in which the contract is not con- Bracton in the Cambridge Univer- sensual but real: fo. 61 6. Gutcr- ASSIGNMENTS OF CHOSES IN ACTION. 751 nothing corresponding to thie later Roman extensions of the validity of informal agreements. Such agreements in general give no right of action: in Glanvill it is expressly said: " Privatas oonventiones non solet curia domini regis tueri " (p) ; the context makes it douhtful whether even agreements under seal were then recognized by the King's Court unless they had been made before the Court itself. In Bracton too, notwithstanding his elaborate copying of Roman sources, we read: " ludicialis autem esse poterit stipulatio, vel conventionalis: iudicialis, quae iussu iudicis fit vel praetoris. Conventionalis quae ex conventione utriusquo partis concipitur, nee iussu iudicis vel praetoris, et quaruni totidem sunt genera quot paene (q) rerum oontrahendarum, de quibus omnibus omnino curia regis se non intromittit nisi aliquando de gratia" (fo. 100a). Note P. (p. 232). Ea/rl/y Authorities on Assignments of Ghoses in Action. In Mich. 3 Hem. IV. 8, pi. 34, is a case where a grantee of an ann uity from the king sued on it in his own name. No question seems to have been raised of his right to do so. In Hil. 37 Hen. VI. 13, pi. 3, it appears that by the opinion of ail the justices an assignment of debts (not being by way of satis- faction for an existing debt) was no consideration {quid pro quo) for a bond, forasmuch as no duty was thereby vested in the assignee: and the Oaurt of Chancery acted on that opinion by decreeing the bond to be delivered up. The case is otherwise interesting, as it shows pretty fully the relations then existing between the Court of Chancery and the Courts of Common Law, and the cardinal doctrine that the jurisdiction of equity is wholly personal is stated with emphatic clearness. In Hil. 21 Ed. IV. 84, pi. 38, the question was raised whether an bock p. 113. Mandate is still deacon Hale's Series of Precedents unknown to the Common Law. and Prooeedings, where sevesral (p) Lib. X. u. 18, and more fully inatanoes will be found; Harv. ib. u. 8. "Curia domini regis" Law. Rev. vi. 402. is significant, for the eoclesiastieal iq) This is evidently the true courts, and it seems local and reading: the printed book has private courts, did take cognizance poemae, seemingly a mere printer's of breaches of informal agreements misreading of pene. which is given as being against good conscienoe, by the best MSS. Bracton was ib. c. 12°; Blackstone, Comm. 1. 52, copying the language of I. 3. 18, and authorities, there cited; Arch- §3. 752 APPENDIX. annuity for life granted without naming assigns could be granted over; and the dictum occurs that the right of action, whether on a bond lOr on a simple contract, cannot be granted over. Mich. 39 Hen. VI. 26, pi. 36. If the king grant a duty due to him from another, the grajitee shall have an action in his own name: " et issint ne puit nul autre faire." So, Mich. 2 Hen. VII. 8, pi. 25. " Le Boy poit granter sa accion ou chose qui ffist en accion; et issint ne poit nul auter person." In Boll Abr. Action sur Case, 1. 20, pi. 12, this case is stated to have been decided in B. E., 42 EUz., between Mowse and Edney, per curiam: A. is indebted to B. by biU (i.e., the now obsolete form of bond called a single bill), and B. to 0. B. assigns A.'s bill to C. Porbearance on O.'s part for a certain time is mo consideration for a promise by A. to pay 0. at the end of that time (s. v. contra, ib. 29, pi. 60) ; for notwithstanding the assignment of the bill, the pro- perty of the debt remains in the assignor. In none of these cases is there a word about maintenance or public policy. On the contrary, it appears to be assumed through- out that the impossibility of effectually assigning a chose in action is inherent in the legal nature of things. Finally, in Termes de la Ley, tit. Ghose in Action, the rule is briefly and positively stated to this effect: Things in action which are certain the king may grant, and the grantee have an action for them in his own name; but a common person can make no grant of a thing in action, nor the king himself of such as are uncertain. No reason is given. The exception in favour of the Crown may be derived from the universal succession accruing to the Grown on forfeitures. This would naturally include rights of action, and it is easy to understand how the practice of assigning over such rights might spring up without much examination of its oongruity with the legal principles governing transactions between subjects. Direct proof is not forthcoming, but the coniecture seems now to be generally accepted. Before the expulsion of the Jews under Edward I. they were treated as a kind of serfs of the Grown (ipsi ludaei et omnia sua regis sunt, Pseudo-L. Edw. Conf. c. 25; tayllables au Roy come les soens serfs et a ivul autre: Statutes of Jewry, temp, incert., dated by Prynne, 3 Ed. I.), and the king accordingly claimed and exer- cised an arbitrary power of confiscating, releasing, assigning, or licensing them to assign, the debts due to them. Cp. charter of Prederiok II. Pet. de Vineis Epist. lib. 6, no. 12: " onmes etsinguli ludaei degentes ubique per terras nostrae iurisdictioni subiectas Ohristianae legis et Imperii praerogativa servi sunt nostrae Oamerae ASSIGNMENTS OF CHOSES IN ACTION. 753 speciales." And see on this subject Y. B. 33 Ed. I. pp. xli. 355, and Prynne's " Short Demurrer to the Jews," &c. (Lond. 1656, a Tiolent polemic against their re-admission to England), passim. In Hil. 9 Hen. VI. 64, pi. 17, Tliomas Eothewel sues J. Fewer for maintaining W. H. in an action of detinue against him, Eothewel, for " un box ove charters et muniments." Defence that W. H. had granted to Pewer a rentoharge, to which the muniments in question related, and had also granted to Pewer the box and the deeds, then being in the possession of Eothewel to the use of W. H., wherefore Pewer maintained "W. H., as he well might. To this Paston, one of the judges, made a curious objection by way of dilemma. It was not averred that W. H. was the owner of the •deeds, but only that Eothewel had them to his use; and so the property of them might have been in a stranger: " et issint ceo fuU chose em, accion et issint tout void." The precise meaning of these words is not very clear, but the general drift is that, for anything that appe-ared, W. H. had no assignable interest whatever; and it looks as if the strong expression tout void was meant to take a higher ground, distinguishing between a transaction impeachable for maintenanae and one wholly ineffectual from the beginning. It may have been supposed that an assignment by a person out of possession could have no effect. But if W. H. was the true owner, Paston continued, then the whole property of the deeds, &c. passed to Pewer, who ought to have brought detinue in his own name(r). Babington O.J. and Martyn J., the other judges present, were of a contrary opinion, holding that any real interest in the matter made it lawful to maintain the suit. The attempt to assign a chose in action is here compared by the counsel for the plaintiff to the gi'ant of a reversion without attornment; showing that the personal character of the relation was considered the ground of the rule in both cases. In Mich. 34 Hen. VI. 30, pi. 15, Egbert Horn sued Stephen Poster for maintaining the administrators of one Erancis in an action against him, E. Horn: the circumstances being that Horn was indebted to Erancis by bond, and Erancis being indebted to Stephen in an equal sum assigned the debt and delivered the bond to him, authorizing him, if necessary, to sue on it in his (Erancis') name, to which Horn agreed; and now Francis had died intestate, and (r) Another argument put by the rent and the deeds relating to it, plaintifE's counsel, though not very yet he had none in the box, and material, is too quaint to be passed therefore in respect of the box, over: Whatever interest Pewer at all events, there was unlawful might have had by the grant of the maintenance on his part. 754 APPENDIX. Stephen was suiag on the bond in the name of the administrators- with their consent. And this being pleaded for the defendant, was- held good. Prisot, in giving judgment, compared the case of the cestui que use of lands, whether originally or claiming by purchase through him to whose use the feoffment was originally made, taking part in any suit touching the lands. On this Fitzherbert remarks {Mayntenauns, 14) " Nota icy que per ceo il semble que wn dmte fuit estre assiffne pour satisfaction." So it is said in Hil. 15 Hen. VII. 2, pi. 3, that if one is indebted to me, and deliver to me an obligation in satisfaction of the debt, wherein another is bound to him, I shall sue in my debtor's name, and pay my counsel and all things incident to the suit; and so may do he to whom the obligation was made, for each of us may lawfully interfere in the matter. Brooke, Abr. 140 h, observes, referring to the last-mentioned case: " Et sic vide qme chose in accion poet estre assigns oustre pur loyal cause, come iust det, mez nemy pur maintenance,.'''' This form of expression is worth noting, as showing that assignment of a chose in action meant to the writer nothing else than empowering the assignee to sue in the assignor's name. He was at no pains to explain that he did not miean to say the assignee could sue in his own name; for he did not think any one could suppose he meant to assert such a plainly impossible proposition. It was long supposed (as is implied in Pitzberbert's and Brooke's language^ — and see the case in 37 Hen. VI., cited p. 761 -above) that the assig-nment of a debt by way of sale, as opposed to satisfaction of an existing liability, was maintenance. Even under the Restora- tion the Court of Chancery would not protect the assignment of any chose in action unless in satisfaction of some debt due to the assignee: Freem. 0. C. 145, pi. 185, see Prof. Ames in Harv. Law Hev. i. 6, note; and further on the whole matter, the same learned writer in Essays in Anglo-American Legal History, iii. 580 sqq.,. and Dr. Holdsworth in Harv. Law E,ev. xxxiii. 997. Note G. (p. 541). Bracton on Fundaimental Error. De acquirendo rerum dominio, fo. 15 b, 16: "Item non valet donatio, nisi tam dantis quam aooipientis concurrat mutuus con- sensus et voluntas, scilicet quod donator habeat animum donandi et donatarius animum reoipiendi. Nuda enim donatio (s) et nuda (s) nifio MS. Hobhousei, Lincoln's Inn. MISTAKE IN WILLS. 755 pactio non obligant aliquem neo faoiaat aliquem debitorem; ut si dicam, Do tibl talem rem, et non habeam (i) animum donandi neo tradendi neo a traditione incipiam, non valet, ut si dicam, Do tibi istam rem, et illam nolim (m) tradere vel(iO sustinere quod illam tecum feras vol arborem datam sucoidas, non valet donatio quia donator plene non consentit. Item oportet quod non sit error in re data, quia si donator sensorit de una re et donatarius de alia, non valet donatio propter dissensum: et idem erit si dissentio fiat in genere, numero et quantitate. . . [Then follow instances. J Et in fine notandum quod si in corpus quod traditur sit consensum, non nooet, quamvis circa causam dandi atque recipiendi sit dis- sentio: ut si pecuniam numeratam tibi tradam, vel quid tale, et tu eajn quasi creditam {x) accipias, constat ad te proprietatem transire." Note H. (p. 563). ■ Mistake in Wills. Properly speaking, there is no jurisdiction in any court to rectify a wiU. on the ground of mistake. The Oourt of Probate may reject words of which the testator is proved to have been ignorant, whether inserted by the fraud or by the mistake of the person who prepzired the will (2/). But it has no power to insiert words (z) or otherwise remedy a mistake "by modifying the language used by the draughtsman ajid adopted by the testator so as to make it express the supposed intention of the testator. . . Such a mode of dealing with wills would lead to the most dangerous consequences, for it (0 habuoro MS. Hobh. quoting from the Digest, 41. 1. d© (m) MS. Hobh.: edd. nolui, et. acq. rer. dom. 36; cp. Giiterbock, (a) Traditam ed. 1569, followed Henr. de Bracton, p. 83, who as- without remark by Sir T. Twiss, sumed, without cause, as the MSS. 1878, who also gives by a misprint, show, that Bracton misunderstood and translates, tali for tale im- the passage. The corruption, how- mediately above. (See on the ever, is an easy and early one. general character of this edition (j/) E.g. Morrell v. Morrell, 7 "The Text of Bracton," by Sir P. D. 68, 51 L. J. P. 49, following Paul Vinogradoff, L. Q. B. i. 189.) Fnlto-n v. Atidr&w (1875) L. P. 7 But creditam is the reading of a H. L,. 448, 44 L. .J. P. 17; Brisco majority of good MSS. (Lincoln's v. JlaiUie-HomiUon [1902] P. 234, Inn, Camb. Univ., Brit. Mus., 71 L. J. P. 121. - Bibi Nat. Paris) and is evidently («) In the goods of Schott required by the sense. Bracton is [1901] P. 190, 70 L. J. P. 46. 756 APPENDIX. would convert the Oourt of Probate into a court of construction of a very peculiar kind, whose duty it would be to shape the will into conformity with the supposed intentions of the testator" (a). Exactly the same rule has been laid down in equity (6). The cases in which it is said that the Oourt will interfere to correct mistakes in wills ma^ be classified thus: 1. Oases purely of construction according to the general intention collected from the will itself (c). 2. Oases of equivocal description, of words used in a special habitual sense, or of a wrongly given name which may be cor- rected by a sufficient description ((f). 3. Oases of dispositions made on what is called a false cause (e), i.e., on the mistaken assumption of a particular state of facta existing, except on which assumption the disposition would not have been made. These are analogous to the cases of contract governed by Couturier v. Hastie (/), and just as in those cases, the expressed intention is treated as having been dependent on a condi- tion which has failed. 4. An erroneous specification of number in the description of a class of legatees may be disregarded. (Hawkins on Wills, ,ed. Sanger, p. 83.) But the true view of aJl these cases appears to be not that the words are corrected, but that the intention when^clearly ascertained is carried out notwithstanding the apparent difficulty caused by the particular words. (a) Barter v. H/irtor (1873) which applies to only one person L. R. 3 P. & D. 11, 21, 44 L. J. P. may be corrected by a description 1, following Gitaydhouse v. Black- sufficieuitly showing that another burn (1866) Ij. E,. 1 P. & D. 109, person is intended: Charter v. 35 L. J. P. 116. Clwrter (1874) L,. R. 7 H. L. 364. (d) Newburgh v. yewburgh (e) Campbell v. French (1797) (1820) 5 Madd. 364, 21 R. R. 310. 3 Ves. 321, 4 R. R. 5. (o) See Hawkins on Constmction (/) (1856) 5 H. L. C. 673, 25 of Wills, Introduction. L. J. Ex. 253, 101 R. R. 329. (rf) Not only an equivocal name Supra, pp. 327, 531. may be explained, but a name REPKESENTATIONS." 757 Note I. (pp. 569, 570). On the supposed equitable doctrine of "making representations good." This once frequently alleged head of equity, in so far as it pur- ports to establish any rule or principle apart from the ordinary rules as to the formation of contracts on the one hand, and the principle of estoppel by assertion as to existing facts on the other, is now known to be imaginary. In the principal class of cases the " repre- sentation " is of an intention to make a provision by will for persona about to marry, in reliance on which representation the marriage takes place. The leading authority is Hammersley v. De Biel (g), decided by the House of Lords in 1845 on appeal from the Court of Chancery. In the Court below (h) Lord Oottenham had laid down the proposition that " a representation made by one party for the purpose of influencing the conduct of the other party, and acted on by him, will in general be sufficient to entitle him to the assist- ance of the Court for the purpose of realizing such representation." This appears to be the source of all the similar statements which have since been made (i). Taken with its context, however, it need not mean more than that an exchange of proposals and state- ments by which the conduct of parties is determined may, as con- taining all the requisites of a good agreement, amount to a contract, though not to a formal contract. To Mr. Justice Stephen Lord Oottenham's words appeared " to mean only that contracts of this natui'e may be made like other contracts by informal documents, or partly by documents and partly by conduct " (k). And in this sense the rule seems to have been understood in the House of Lords both in the same and in subsequent cases. Lord Brougham and Lord Campbell speak of the transaction in plain terms as a contract. In the Rolls Court it had also been dealt with on that footing (?). Still more pointed is the remark made by Lord St. Leonards in 1854: — " Was it merely a representation in Hammersley v. Be Biel? Was it not a proposal with a condition which, being accepted, was equivalent (ff) (1845) 12 01. & P. 45, 69 purpose. See Evans v. BioJcnell R. R. 18. (1801) 6 Ves. 174, 5 R. R. 245. (A) 12 d. & F. at p. 62. (A) Alderson v. Maddison (1880) (0 The turn of language is in 5 Ex. B. 293, 299, 50 L. J. Q. B. itself not novel. It seems to be 466. modelled on that which had long (I) Nom. Be Beil v. Thomson before been used in cases of a (1841) 3 Beav. 469. different das' and for a different 758 APPENDIX. to a contract? " {m) . In the terms of the Inlian Contract Act, it was the case of a proposal accepted by the performance of the con- ditions. The statement " I will leave you 10,000?. by my will, if you Tciaxrj A.," if made and acted on as a promise, becomes a binding contract (the marriage undertaken on the faith of that promise being the consideration), and so does a statement in less plain language which amounts to the same thing. On the other hand the statement " If you marry A. I think, as at present advissi, I shall leave you 10,000?.," is not a promise and cannot become a contract: neither can it act as an estoppel, for it cannot matter to the other party's interest whether the statement of an intention which may be re- Toked at any time is at the moment true or false. And the same is true of any less explicit statement which is held on its fair con- struction to amount to this and no more. Such was the result of the case where Lord St. Leonards put the question just cited (ra) . And in that case the true doctrine was again distinctly affirmed by Lord Oran worth (o). " By what words are you to define whether a party has entered into an engagem^ent as distinct from a contract, but which becomes a contract by another person acting upon it? Where a man engages to do a particular thing, he must do it; that is a contract; but where there are no direct words of contract, the question must be, what has he done? He has made a contract, or he has not; in the former case he must fulfil his contract; in the latter there is nothing that he is bound to fulfil." Again: "There is no middle term, no tertium quid between a representation so made as to be effective for such a purpose, and being effective for it, and a contract, they are identical." He proceeded to comment on Hammersley v. De Biel, and to express a decided opinion that the language there used by Lord Oottenham was not meant to support, and did not support, the notion that words or conduct not amounting to a true contract may create an ^equitable obligation which has the same effect. " The only distinction I understand is this, that some words which would not amount to a contract in one transaction may possibly be held to do so in another." In the case of J or den v. Money (y), which came before the House of Lords some months later, it was held, (m) Maunsell v. Hedges (1854) (o) At pp. 1055-6, 94 E. E. 4 H. L. 0. at p. 1051, 94 R. E. 542-3. 539; cp. 4 H. L. C. p. 1059, 94 (p) (1854) 5 H. L. O. 185, 23 E. E. 544-5. L. J. Oh. 865, 101 R. E. 116. A (») Maumell v. Hedges (1854) 4 pretty full summary is given by H. L. C. 1039, 94 E. E. 532. Stephen J. 5 Ex. D. at p. 301. " REPRESKNTATIONS." 759 £rst, that th© statement there relied on as binding could not work an estoppel, because it was a statement not of fact but of intention; secondly, that on the evidence it did not amount to a promise, and therefore could not be binding as a contract. Lord St. Leonards dissented both on the evidence and on the law. His opinion seems on the whole to come to this: "My inference from all the facts is that this statement was a promise; but if not, I say it is available by way of estoppel, for I deny the existence of any rule that equit- able estoppel can be by statement of fact only and not of intention." On this point, however, the opinion of the majority (Lord Oranworth and Lord Brougham) is conclusive (q). A promise de future cannot be an estoppel (r) . In a much earlier case of the same class before Lord Eldon (s) the language used is indecisive: " arrangement " and " engage- ment " sieem preferred to " agreement." In two later ones decided by Sir John Stuart (i), an informal statement or p'romise as to a settlement on a daughter's marriage, and an informal promise to leave property by will to an attendant as recompense for services, were held to be enforceable. The Vioe-Ohancellor certainly seems to have adopted the opinion that a " representation " short of con- tract had somehow a binding force. He appears further to have held that, inasmuch as these were not properly cases of contract, it was immaterial to consider whether the Statute of Frauds applied to them, and to have thought that the opinion of Lord Oranworth' in Jordeni v. MoTiey was inconsistent with the decision in Ham- tnesrley v. Be Biel (u). But these opinions are inconsistent with the (q) And see Mr. Justice Stephen's judgments, criticism, 5 Ex. D. at p. 303. («) J^offus v. Maw (18i82) 3 Giff . (r) See per Lord Macmaghten, at pp. 603-4. In Prole v. Soady, Geo. Whitechurch, Ld. v. Oavanagh a strange and entangled case, no [1902] A. O. 117, 130, 71 L. J. point was made on the Statute of K. B. 400, and Chadwick v. Mann- Frauds. But there it appears to ing' [1896] A. O. 231, 65 L. J. P. O. have been eetabliahed as a. fact 42 J. O. that the wife's father represented (s) Luders v. Amtey (1799) 4 to the intended husband, an Ves. 501 4 E. E. 276. Englishman, that a certain trust (0 Prole V. Soacly (1859) 2 GifE. disposition of Scotch land in the 1, 128 R. R. 1; Loffus v. Maw proper Scottish form was irre- (1862) 3 GifB. 592, 133 R. R. 193. vocable. This was, as regards the In Zofus V. Maw there is a sug- person to whom it was made, a gestion that the " representation '- representation of foreign law, and aflfects the specific property as an therefore equivalent to a represen- equitable charge. Similar notions tation of fact. And thus the deoi- oocur in some of Lord RomHly's sion may have been right on the 760 APPENDIX. true meamng and effect of the cases in the House of Lords which have already been cited: and one of them is now expressly over- ruled (a;). Other judicial expressions axe to be found both earlier and later, which in siojne degree countenance them; but these have been, without exception, unnecessary for the decision of the cases in which they occurred. It is remarkable that the authoritative explanation of Hwnmersley v. De Biel (y) given in Maunsell v. Hedges (z) was commonly left unnoticed. Goverdale v. Eastwood (1872) (o) was a case of precisely the same type as Ilamm.ersley v. I>e Biel. Bacon V.-O. decided it on the ground that the transaction amounted to a contract, and so it was expressed in the decree. But he also thought that there existed, and was applicable to the case in hand, " this larger principle, that where a man makes a representation to another, in consequence of which that other person contracts engagements, or alters his posi- tion, or is induced to do any other act which either is permitted by or sanctioned by the person making the representation, the latter cannot withdraw from the representation, but is bound by it con- clusively." Later, in Bnshwood v. Jermyn (&) (1879), which was another marriage case, he held that the connexion between the statement relied on as a promise and the marriage alleged to have taken place on the faith of it was not suflBciently made out. He stated the general rule thus: — "If a man makes a rep'resentation. on the faith of which another man alters his position, enters into a deed, incurs an obligation, the ma:n making it is bound to perform that representation, no matter what it is, whether it is for present payment or for the continuance of the payment of annuity, or to make a provision by will. That in the eye of a Oourt of Equity is a contract, an engagement which the man making it is bound to perform." This appears to qualify to some extent the dicta of the ground of estoppel. But it is far ington (1874) L. E.. 19 Eq. 174, see from easy to discover on what at p. 178, 44 L. J. Ch. 381; it is ground it really proceeded. The now enough to say that it was case went to the Appeal Court, but decided by Malins V.-C. on the was compromised: see L. R. 1 Ch. authority of Loffus v. Maw, which,. 145. The still later case of Skid- if possible, it exceeds In audacity. more v. Bradford (1869) L. E. 8 (?/) (1845) 12 CI. & P. 45, 69 Eq. 134, decided by the same judge E. K. 18. was merely a case of contract. (z) (1854) 4 H. L. C. 1039, 94 (x) Loffus V. Maw is clearly dis- E.. E. 532. approved by Liord Selbome and (a) L. R. 15 Eq. 121, 42 L. J.. Lord O'Hagan in Maddison v. Ch. 118. Alde-rson (1883) 8 App. Ca. at (i) (1879) 12 Ch. D. 776. pp. 473, 483. Of. Cales v. Pillc- "representations." 761 same judge in Coverdale v. Eastwood. Here we read no longer of two distinct kinds of obligation, by contract and by " representa- tion," but of one kind of obligation, and that a contractual oae, arising from the representations made by one party with the intent that they should be acted upon, and the conduct of the other who does act upon them. If the learned judge thought that the same facts might amount to a contract in equity and not at law, he was clearly mistaken. In Alderson v. Maddison (1880) (c) there was an agree- ment to leave property by wiU as a reward for services.' Here' Stephen J. set forth the view that it must be a contract or nothing;, and he held that a contract was proved by tlie facts of the case. The decision was reversed by the Court of Appeal on the ground that, the case being within the Statute of Frauds, tliere was no sufficient part performance: and the same view was taken by the House of Lords. No encouragement whatever, to say the least, was given to the doctrine of " representation." Finally, in Be Fichus {d), where a faint attempt was made to revive it, Cozens-Hardy J. summarily dis- posed of it with a reference to the decisions in the House of Lords. So far the authorities as to direct enforcement of " rep-resenta- tions." We do not count among them Piggott v. Stratton (e), decided by the Oourt of Appeal in 1859, in which Lord Campbell incident- ally took a minimizing view of the effect of Jorden v. Money (/) . That case, so far as it did not proceed on express covenant, was one of equitable estoppel. Mills v. Fox (1887) {g) was also decided expressly on the ground of estoppel by representation of fact. The representation was not of intention at all, but that a certain state of facts with its legal consequences existed and would continue to exist. But another class of decisions now calls for mention. These lay down, or seem to lay down, a rule to the effect that where a contract has been entered into upon the representation of one party that ho will do something material to the other party's interest under it, and he does not make good that representation, he cannot enforce specific performance of the contract: and in one case the contract has even been set aside at the suit of the party misled. It is difficult in these cases to see why the so-called representation does not amount (c) 5 Ex. D. 293, 7 Q. B. Div. seems to adopt the opinion of Lord 174, 8 App. Oa. 467, SOL. J. Q. B. Cranworth to its full extent in 4(56. Citizens' Bank of Louisiana v. {(P) [1900] 1 Ch. 331, 334, 69 First National Bank of Neiv L. J. Ch. 161. Orleans (1873) L. R. 6 H. L. at (e) 1 D. P. J. 33, 29 L. J. Ch. p. 360, 43 L. J. Ch. 269. 1, 125 R. R. 336. (?) 37 Ch. D. 153, 57 L. J. Ch. (/) At p. 51. But Lord Selborne 56. P. — C. 49 762 APPENDIX. to a collateral agreement, or even to a term in the principal contract itself. In the first set of oases, where specific performance was refused, a vendor or lessor had represented that he would do some- thing for the purchaser's or lessee's benefit, either in the way of repair or improvement on the property itself (h), or by executing works on adjoining property as part of a general plan (i) . In these cases it has been thought immaterial, since the remedy of specific performance is " not matter of absolute right," to consider whether the collateral " independent engagement " could or could not have been sued on as a contract or warranty {k). In the one case which goes farther the contract was a partial re-insurance effected by one insurance society (A.) with ajiother (B.) for one- third of the original risk, the secretary of society A. stating, when he proposed the re- insurance, that one-third was to be re-insured in like manner with another office 0., and the remaining one-third retained by A., the first insurers. This last one-third was afterwards re-insured by A. with 0. without communication with B. It was held that society B. was entitled to set aside the policy of re-insurance given by it on the faith that society A. would retain part of the liability. And it was said to make no difference that such an intention was really entertained at the time: for the change of intention ought to have been communicated. " If a person makes a representation by which he induces another to take a particular course, and the circumstances are afterwards altered to the knowledge of the party making the representation, but not to the knowledge of the party to whom the representation is made, and are so altered that the alteration of the circumstances may affect the course of conduct which may be pursued by the party to whom the representation is made, it is the imperative duty of the party who has made the representation to communicate to the party to whom the represen- tation has been made the alteration of those circumstanoes " (l). This case, decided by the Lords Justices in 1864, is that which gives rise to most difficulty. No reason appears why the retaining of the specified part of the risk by the re-insuring office should not have been deemed a term or condition of the contract (to) . Indeed (A) Lamare v. Dixon (1873) N. S. 529; Lord Caims, L. K. 6 L. B. 6 H. L. 414, 43 L. J. Oh. H. L. 42S. 203. (J) Train v. Baring (1864) 4 (i) Beaumont v. Duhes (1822) D. J. S. 318, 329, 146 E. R. 334, Jao. 422, 23 R. R. 110; Myers v. per Turner L.J. approved by Fry WaUon (1851) 1 Sim. N. S. 523, L.J. Scottish Petroleum Co. (1883) 80 R. R. 173. 23 Oh. Div. at p. 438. (Je) Lord Cranworth, 1 Sim. (m) Op. Barnard v. Faber "representations." 763 it seems to have been an integral part of the proposal, and evidence was offered that by the constant usage of insurance offices it was so understood. The judgments, however, certainly do not proceed on that footing. Possibly it might be said that the representation in this case, being of something to be done not in a more or less distant future, but at the same time with and as part of the proposed trans- action, wa^ in the nature of a representation of fact. It might be put thus: "We axe re-insuring one- third with 0.; one-third of the risk we keep; will you, B., take the other third? " And thus put, it might be regarded as an alternative case of contract or estoppel, in which (for some reason not evident from the report) the Oourt preferred the less siraple course. In the other cases it is by no means clear that the existence of a true collateral agreement or warranty is excluded; in at least one similar case (to) the question is treated as one of agreement entirely. In Laxma/re v. Dixon (o), which came before the House of Lords in 1873, the principal agreement was for a lease of cellars to be used as wine vaults. During the negotiations the lessor assured the lessee either that he had already taken, or that he would forthwith take, sufficient measures to keep the cellars dry and fit for a wine merchant's use. It seems most natural to regard this as a warranty; still, so faf as it related to anything already done, it might be regarded as a positive statement of fact. " Tou will find the cellars dry," or any speech to that effect, might mean either: "I under- take to make the cellars dry," or " That has been done which is knovna by competent experience to be sufficient to ensure dryness." The line between warranty and estoppel is here a fine one, and perhaps not worth drawing, but still it is possible to draw it: and when Lord Oaims said " I quite agree that this representation is not a guarantie," he may have meant that he preferred to regard it as a statement of fact operative by way of estoppel. This point occurs only in Lord Oairns's judgmjent; the main question was whether the lessee's conduct amounted to acquiescence. There certainly does run through these cases, however, the idea that specific performance is so far a discretionary remedy that it may be refused to a party seeking it on grounds which do not affect his legal rights under the contract. But it seems a tenable position that equity judges have taken a needlessly narrow view of what is a binding agreement on the principles of the common law (p) . In fact agreements collateral [1893] 1 Q. B. 340, 62 L. J. Q. B. (o) L. E. 6 H. L. 414, 43 L. J. 159, O. A. Oh. 203. («) Peacooh v. Penson (1848) 11 Ci") I* would be CTirious to know Beav. 355 83 R. R. 193. in what proportion of cases under 49 (2) 764 APPENDIX. to leases, and not in writing, have of late years been enforced "without doubt (q) . In all these cases the facts appear undistin- guishable in their character from those which were treated in the Court of Chancery as establishing a right to relief on the ground of " repreS'entation." There remains a class of cases in equity in which it has been held that a statement rnade to a person intended to act upon it by one who, knows it to be false, or is recklessly ignorant whether it is true or false, may create in the person who acts on it to his injury a substantive right to compensation. Here the statement is a wrong,, and the remedy is precisely analogoufi to, and before the Judicature Acts was concurrent with, that which was given at law by the action of deceit, or action on the case in the nature of an action of deceit (r) . It is worth remark that not unfrequemtly a difficulty occurs in drawing the line between contract or warranty and fraud, as we have already seen that there does between contract and estoppel. " Most of the cases . . . when looked at, if they do not absolutely amount to contract, come uncommonly near it. . . . If you choose to say, and say without inquiry, ' I warrant that,' that is a contract. If you say, ' I know it,' and if you say that in order to save the trouble of inquiring, that is a false representation — ^you are saying what is false to induce them to act upon it" (s). Thus cases are- possible, as has been mentioned in the text, in which the legal effect of the facts may equally be considered as warranty, estoppel, or duty ex delicto. And since equity judges, dealing with facts and law together, were not bound to distinguish with precision, and often did not distinguish, on which of two or more possible grounds they the old practice a party left by the Frauds is that the collateral agree- Oourt of Chancery, as the phrase ment is not a "contract or sale was, to make what he could of it of lands," &o.: the effect of the at law, derived substantial or any Statute being as it were exhausted profit from that liberty. by the principal contract; with (q) Morgan v. Griffith (1871) which the collateral one must of L. U. 6 Ex. 70, 40 L. J. Ex. 46; course be consistent. Ershine v. Adeane (1873) I/. R. 8 (?•) See for details the section on Oh. 756, 42 L. J. Oh. 835; Angdl Deceit in Ohap. viii. of my work on V. Bulce. (1875) L. E. 10 Q. B. 174, the Law of Torts. 44 L. J. Q. B. 78; De Lassalle v. (s) Lord Blackburn in Brownlie Gmldfard [1901] 2 K. B. 215, 70 v. Campbell (1880) (Sc.) 5 App. L. J. K. B. 533, C. A. (warranty of Ca. at p. 952: the whole passage drains being in good order). The should be studied, ground taken as to the Statute of " INNOFFICIOUS " GIFTS AND CAPTATION. 765 rested their decisions, it is not surprising that a good deal of ■ambigTiity gathered round the subjects discussed in this note. Note K. (p. 670). French law on " inofficious " gifts and captation. Prench jurisprudence has sometimes been cited in our Courts as affording useful analogies in cases where it was sought to set aside gifts on the ground of imdue influence, especially spiritual influence. (CBuvres d'Aguesseau, 1. 284, 5. 514, ed. 1819; Lyon r. Home, L. E. 6 Bq. 571.) Without denying the instructiveness of the comparison, it may be pointed out that these French cases pro- ceeded on rather different grounds. Charitable bequests in general ■weve imfavourably looked on as being " inofficious " towards the natural successors. This principle is strongly brought out by D'Aguesseau in the case of the Beligieuses du Saint-Saorement (OEuvres, vol. 1, p. 296):— " Oes dispositions universeUcs, contraires aux droits du sang et de la nature, qui tendent eI frustrer les heritiers d'une succession legitime, sont en elles-mSmes peu favorables; non que ce seul moyen soit peut-etre suffisant pour aneantir un tel legs; maiS lorsqu'il est soutenu par les circonstances du fait . lorsque la donation est immense, qu'elle est excessive, qu'elle renferme toute la succession . . . dans toutes ces circonstances la justice s'est tou jours elevee centre ces aotes odieux; elle a pris les h6ri tiers sous sa protection; elle a casse ces donations inoffioieuses, exoes- sives et contraires a I'utilite publique." In modern French practice a will may be set aside for captation or suggestion. But, as with us, the burden of proof is on the ob- jector to show that the testator's will was not free, and something amounting to fraudulent practice must be proved. " La suggestion ne saurait §tre separee," says Troplong, " d'un dol subversif de la libre volonte du testateur . . On a toujours 6te tres difficile en France a admettre la preuve de la suggestion et de la captation." (Droit civil explique, Des donations entre-vifs et des testaments, art. 492.) On the other hand the Code Civil (art. 907, 909-911) contains express and severe restrictions on dispositions by wards in favour of their guardians, and by persons in their last illness in favour of their medical or spiritual advisers. These apply alike to wills and to gifts infer vivos. ( 767 ) INDEX. ACCEPTANCE: by act, when complete, 26. by conduct, 52. by post, though never delivered, effectual, 36, 37, 40. when complete, 36. certainty, necessity of, 48. icoomnunication of, 36. aaunot be constructive, II, •«. means of communication, 36. correspondence, acceptance of contract made by, 38, sqq. English cases, theories in, 39. date of proposal, acceptance wUl not relate back to, 42. double, of same proposal, 34. express or tacit, 11. insufficient, examples of, 44 — 45. of proposal, general but not universal form of agreement, 5, 6. effect of, where proposal misunderstood, 517 — 520. performance of conditions of proposal, 14, 15. special conditions, acceptance by receiving document with, 52. when implied, 54. sufficient, examples of, 45 — 46. tacit, must be unambiguous, 52. unqualified, must be, 43. when in time, 30. with immaterial or ambiguous addition, 45. ACCIDENT: destroying subject-matter of contract, effect of, 304, 305, 311, 321. ACCOUNT: action of, 148. ACCOUNT STATED: with infant, not void but voidable, 64. ACKNOWLEDGMENT of debt barred by Statute of Limitation, 193. 694. And see Limitation. ACQUIESCENCE: estoppel by, 706, 707. knowledge essential to, 485. 768 INDEX. ACQUIESCENCE— eo«ii»«rOR.iTiON. powers of, limited by special purposes of incorporation, 130, 135. promoter, duty of, to company, 596. promoters' agreements, when company bound by, 217. prospectus, Companies Act, 1908, as to, 597, 598. duty of directors to state facts truly in, 595, 596. statements of, addressed only to original share- holders, 623. variance between memorandum and, 521. public, interest of, as investors, 137. ratification of irregular transaction by assent of shareholders, 133, 744. seal of, contracts formerly required to be under, 156, 157. improper use of , 141. non-trading corporation may contract without, 166. trading contracts, seal not necessary in, 158, 159. transferable debentures under, negotiable, 138. whether equivalent to signature in case of bills and notes, 138, 247. shareholders cannot sanction acts outside scope of powers, 133, 137, 740. dissenting, rights of, 133, 137, 740, 741. majority, powers of, 133, 137, 740, 741. unanimity of, when necessary, 133, 137. 776 INDEX. GOMFANY— continued. shares, contract to take, not void, but only voidable on ground of error, 621, n. distinguishing numbers of, error in, not material, 522. repudiation of, vrhen too late, 521, 626, /»., 630, 631, 636, 637, 641. alone insufBoient, 628, 629. rescission of contract to take: misstatement in prospectus, 521. sale of, avoided by petition for winding-up unknown to parties, 532. transfer of, 176, 250. invalid, where directors' consent obtained by fraud, 607. statutory powers, acts in excess of, 129 — 131, 134, 135. suits on behalf of, 224. unincorporated, power of, to sue by public officer, 224. transfer of shares in, 251. winding-up, secret agreement to delay proceedings in, 401. shareholder cannot repudiate his shares after, 636, 637. And see Coepokation. COMPENSATION: conditions of sale, effect of, on right to, 583. for misdescription on sale of land, 582. purchaser can recover after completion, 585. And see Specific Performance. COMPOSITION: avoided by concealed preference, 344, 345. with creditors, consideration for, 203, 204. COMPOUNDING OFFENCES : agreements for, void, 398. COMPROMISE: consideration for, 206. family settlements, duty of disclosure in treaty for, 594. mistake, of counsel, compromise arranged by, 522. mistake or oversight as to particular points of law, compromise cannot be set aside for, 494. of criminal proceedings, when lawful, 399. of election petition, void, 400. CONCEALMENT. See Fraud and Misrepebsentation. CONDITIONS: alternative, where one becomes impossible, 436. express, 302. INDEX. 777 CONDITIONS— continued. implied, 304. impossible conditions in bonds, trciitraont of, 435. in bonds, 334. partial, 300. precedent and subsequent, 298. representations amounting to, their nature and effect, 572 — 574. restraint of marriage, 423. special, on ticket, how far binding on person to whom it is issued, 53. stranger, conditions to be performed by, must be performed at obligor's peril, 308. CONDITION OF SALE: effect of, on right to compensation, 583. CONDUCT: acceptance of proposal by, 52. CONFIRMATION: of infant's marriage settlement, 66. And see Acquiescenck. CONFLICT OF LAWS: as to existence of remedy, 696, 701. lawfulness of agreement, 463, sqq. change of law, effect of, 473. domicil, effect of law of, on validity of marriage, 356. foreign law, how far admissible to decide lawfulness of agreement made abroad, 463, 464. lex loci: by what local law the lawfulness of an agreement is determined, 464. marriage of domiciled British subjects, wherever cele- brated, governed by English law, 355, 356. requirement of stamp, how treated in foreign court, 392. CONSENT: proof of, 5. requisites of, for legal agreement, 3. to contract, questions affecting validity of, 476. ways of declaring, 5. CONSENT OEDER: mistake in, 563. CONSIDERATION: abandonment of rights as, 206, 207. adequacy not material, 186, 432. assumpsit, idea of consideration in action of, 179 — 181. bailment, gratuitous, consideration for, 188. benefit to promisor not material, 185. causa, " consideration " not analogous to, 182. P.- 50 778 INDEX. CONSIDERATION— oo«i!*»«eKf. cohabitation, illicit, if future, an unlawful consideration; if past, no consideration, 369. contingent, doubt as to, 189. debt, laotion of, consideration in, 180, 181. deed, voluntary, no specific performance of, in equity, 208. but levidence of consideration may be admitted, 209. defined, 177. discharge .of contracts, how far consideration required for, 203. " Doctor land Student," consideration in, 182. equity, doctrine in, application to contracts under seal, 207, 208. will pot enforce incomplete gifts, 209. evidence, external, of, 209. evolution pf the word, 179, 183. execution pf informal agreement as, 709. failure pf , the true ground for recovering back compulsory pay- ments, 647. forbearance to sue as, 205. must be definite and of really disputed right, 206. gaming land money lent for betting, an illegal, 366. general character of, 10, 177. gift, imperfect, equity will not enforce, 209. history pf the doctrine of, 179, sgg. immoral, where gift complete and irrevocable, 371. settlement on marriage with deceased wife's sister treated as (made on an, 371. inadequate, as evidence of fraud, 190, 665, 666. modem doctrine, 185. past, ineffectual, 191. Pinnel's Case, rule in, 202. promise must be definite, 196. to perform existing duty, how far consideration,~'196, sqq. ' quid pro quo, consideration analogous to, 183. restraint of trade, partial, consideration necessary for agreement in, 432. separation deed, consideration for agreement for, 374. unlawful, makes whole agreement void, 443, 444. variation of contracts, how far consideration required for, 204. voluntary agreement, no specific performance of, 208. even though under seal, 208. wager, note given for, treated as being without, 365, 366. CONSTRUCTION: of contract, not altered by mistake of parties, 489. peculiar rules of, in equity, 275, 276, 644, sqq. rules of, general intent prevails, 274, 278, 279. their auxiliary character, 275, 276. And see Tntkri^eictation'. INDEX. 779 CONTRACT: acceptance of, tacit, 52. advertisement, legal theory of contract by, 15. performance of conditions of offer made by, 15, sqq. Statute of Frauds, effect of, on contract by, 25. agreement to commit breach of, void, 342, 343. ambiguous, 517. assignment of, 231, 511. difficulties of assignee of ordinary contract, 244. equitable: notice to debtor, 234. free from equities, 241. subject to equities, meaning of, 238. biU of lading, indorsement of, transfers contract, 252, 256. capacity of parties to, 66, sqq. commercial, exceptions in, 329. conclusion of, may be postponed until execution of formal in- strument, 46, 47. condition, implied, of life and health in contract for personal service, 316. conditional on performance being or remaining possible, 321, sqq. consideration for discharge or variation of, 203, 204. construction of, generally, 262, sqq. correspondence, contract by, 36, sqq., 728. definition of, 2, 8. dissolution of, by subsequent impossibility, does not affect ac- quired rights, 320. early use of word, 181. * entire or divisible, 280, 283, 284. forbidden, contract may be, but not void, 363. form of, in early English law, 143. modern principles, 142. no systematic rules in early law, 143. forms, special, contracts subject to, 154, 155. general nature of, 1. impossible in law, 309, 310. intention, representation of, not amounting to contract, has no effect, 558. interpretation of, rules for, 46. letter, contract by, when concluded, 36, sqq. malum prohibitum and mrdmn in se, 358, 359, 378. marriage, agreements in restraint of, 422. mistake in, 476, sqq. property included by, 518. negotiable instruments, qualities of, 246. rights of bma fide holder, 245. parties must be ascertained at date of contract, 212, 215. 50(2) 780 INDEX. CONTRACT— cOT8i5ii««a«. partnership, contract of, 249. personal, cannot be assigned, 512, S13. personal services, contract for, 316, sq^q. persons affected by, 211, sqq. procedure upon, in medieval English law, 146. proof, archaic modes of, 144. quasi-contract, distinguished from tacit but real contract, 12^ fictitious contracts in English law, 14. in I. C. A., how dealt with, 14. term now generally recognized, 14. record, contracts of, 154. repudiation of, 292. restraint of trade, agreements in, 423, sqq. Roman law, classification of contracts in, 747. influence of, on early English law of contract,. 144, sqq. satisfaction by stranger to, 512. shares in partnerships and unincorporated companies, transfer of, 250. special conditions, acceptance of, when implied, 53. stamp duties on, 714. variation of stamped agreement by subsequent unstamped document, 714. stranger cannot sue for damage for non-performance, 226, n. suspension during hostilities, 387, 388. • tacit, distinct from quasi-contract, 12. terms must be certain, 48. third person, authorities in equity, 227. cannot sue at law on contract made for his benefit,. 226. not bound, 212, 216. not entitled by contract itself to demand perform- ance, 212, 220. promise to make contract with, 51. to marry, 318, 319, 598. transfer of, where duties as well as rights transferred, 249. unconditional, not excused by performance being in fact im- possible, 309, 310. ' ' unlawful, 337, sqq. voidable, when, 3, 9. wiU, agreement to make disposition by, 425. CONVICTS: disabilities of, as to contracting, lO'l. COPYHOLD: infant copyholder must pay fine, 70. sale of, as freehold, voidable, 585, 586. INDEX. 781 COPYEIGHT: in seditious and immoral publications, not protected, 378, 379. CORPOEATION: appointments to offices by, must be under seal, 162, 163. agent, corporation can only act by, 124. this rule does not apply to deliberative acts and reso- lutions, 124. corporation liable ex delicto for acta of, 126. artificial person, treatment of corporation as, 119, 120. capacity, limitation of, by positive rules, 129. charter, corporation created by, common law powers of, 129, 130. common law has no theory of, 121. contract, executed, liability of corporation on, 163, 164. implied, 166. statutory forms of, 165, 167. summary of law as to, 165, 166. corporation sole: Crown said to be a, 122. ecclesiastical benefice, holder of, is a, 122. Pope not a, 123. crime, corporation cannot commit, 125, 126. debentures, transferable, of, 241, 242. whether holder of, takes free from equities, 241. deceit, Kability of corporation for, 127. estoppel, doctrine of, applicable to, 141. executed contracts, right of corporation to sue on, though not originally bound, 163, 164. form of corporate contracts, summary of law as to, 165, 166. fraud, UabUity for, 127, 619, 620. indictable for a nuisance, 126. legal corporate existence, necessary marts of , 121. libel, corporation may sue for, 126. malicious prosecution, corporation liable for, 126, «. members, existing, consequences of the distinction of corporation from, 128. members, unanimity of, 133. money received, action for, lies against, 164. municipal contracts of, 161, 162. negligence, corporation liable for, 126. negotiable instruments, when corporation bound by, 138, 140. may now be under seal, 138. nuisance, corporation may be indicted for, 126. officer, power of, to bind corporation by apparently regular acts, 741, 742. official sanction matter of procedure and convenience, 122. pa,rt performance, equitable doctrine of, applicable to, 141. 782 INDEX. COEPOEATION— cowffcwaf?. penalties imposed by statute regulating particular business, lia- biUty for, 126, 127. personal liabilities, corporation cannot incur strictly, 127. powers, limited, of statutory corporation, 129. must not be used to defeat purposes of incorporation, 133, 134. of, modern authorities on, NoteD., 739. public, interests of, as investors, 137. ratification of irregular transaction by assent of all members, 744. rogue and vagabond, corporation not punishable as, 126, n. Eomau law, would not allow formation of, without authority, 122. seal, corporate, contracts formerly required to be under, 156, 157. improper use of, 141. requirement of, a mere positive rule of English law, 124. trading contracts, exception of, 158, 159. transferable debentures under, negotiable, 138, 242. whether equivalent to signature in bUls and notes, 138, .247. shareholders, dissenting, rights of, to restrain acts of governing body, 740. statutory, acts of, void outside of statutory powers, 129 — ^131, 134, 135. trespass, liability of corporation for, 126. And see Company. CORRESPONDENCE : authorities on, 40, Note B., 728. complete by posting acceptance, 36 — 39. contract by, 38, sqq. CORRUPT INFLUENCE: agreements for, 393. COSTS: agreement with client as to, 716, n. fraud, unfounded charges of, visited with, 642, 643. uncertificated solicitor cannot recover, 716. And see SouciTOK. COUNSEL. See Baheister. COVENANT: no action on, where premises used for unlawful purpose, 446. not to revoke wUl, 422. power, covenant to exercise by will, whether good, 423, n. real property, relating to, person not party may take benefit of, 225. INDEX. 783 OOYE^^ANT— continued. restrictive, how enforced in equity, 258, sqg. discharge of, by compulsory purchase, 331. unqualified, to work mines, 328. when covenants run with land, 252, sqq. CREDITORS: agreements in fraud of, 343. CROWN: said to be a corporation sole, 122. CUSTODY OF CHILDREN: agreements as to, how far vaHd 417 418, 470, 471. CUSTODY OF INFANTS ACT, 1873: 419. CUSTOM: arbitrator caji decide question of existence of trade custom, 272, n. London, custom of: as to infant apprentice, 79, ■«. as to married women trading alone, 88. modern, may add to the law merchant, 244, 245. of country or trade, terms added to contract by, 271 — 274. some contracts of infants binding by, 79. DAMAGES: distinguished from penalty, 551. DEATH: civil, 87, «. of principal, revocation of agent's authority by, 102. performance of contract, how affected by chance of. 315. revocation of proposal by, 42. DEBENTURES: company's seal, under, negotiable, 138, 242. negotiable instruments, now recognized as, 247. transferable, form of, 241, 242. whether holder talces free from equities, 241. DEBT: action of, 146, 147. consideration in, 180, 181. trial by battle in, 144. assignment of, 235. not enforced in equity where debtor's burden increased. 233. notice to debtor, 213, 235. DECEIT, ACTION OF: former equity practice analogous to, 764. may lie against corporation, 127. what is ground for. 603. 784 INDEX. DEED: action on, is on deed itself, not on promise, 145, 146. agent, principal not liable on deed of, 106. cannot be written on wood, 153. estoppel by negligence applies to deeds, 502, 503, «. executed in error aa to its contents, not binding, 500. favour of wrong party, whether void, 509, 510. Frauds, Statute of, does not apply to, 175. medieval, in England, of Norman origin, 145. promises made by, peculiarity of, 7, 54. void in part by statute, not necessarily void altogether, 443. DEPOSIT: recovery of. See Money Paid. DETINUE: action of, 146. DIRECTOES: duty of, to state facts truly in prospectus, 595, 596. how far third persons are bound to know whether particular acts aj-e authorized, 741. of public companies, extent of their authority presumed to be known, 132. seal, private, used on behalf of company, 157, n. statements of, when company bound by, 620. And see Company. DISOHAKGE: of contract, by frustration, 307, sqq. DISCLOSUEE: no general positive duty of, 570. but duty implied in special cases, 570, 571, 594. DISENTAILING DEED: may be rectified by the Court, 563. DIVORCE: agreement for collusive conduct of suit void, 400, 401, 471. DOCTOE AND STUDENT: -'consideration" in, 182. DOMICIL: effect of law of, on validity of marriage, 356. DEUNKENNESS: contract of drunken man voidable, not void, 98, 99. effect of, on capacity of contracting, same as of insanity, 57, 96. DURESS: recovery of money paid under compulsion, 646. threats, when it consists in, the threat must be of something' unlawful, 645. what is, at common law, 644. INDEX. 785 EASEMENTS: new kinds cannot bo created, 257. ECCLESIASTICAL LAW: influence of, on legal view of morality 368. •'' ELECTION: to adopt agreement void for mistake, 540. to affirm or avoid contract where misrepresentation, 625, 626. how election shown, 626. to avoid contract made in infancy, 64, 65. to charge principal or agent, 111. ELECTION PETITION: compromise of, 400. "ENGAGEMENT." See Separate Estate. EQUITY: acquiescence, estoppel by, 706, 707. loss of remedies by, 639, 640. agent's contract, undiscloicd principal must take subject to equities, 109. assignment of contract in, 232, sqq. assignee may sue, 233. takes subject to equities, 238, 239. unless rule excluded by special agreement, 240. assignment which increases debtor's burden not enforced, 233. notice to debtor required, 235. auction, sales by, former difference between law and equity, 605, 606. award, whether stranger bound by, 217, 218. cancellation of instruments, jurisdiction of equity as to, 643. "catching bargains,'' rules as to, 675, 676. chUdrem, custody of, rules of equity as to, 419, 420. consideration, good, what is, in equity, 208, 209. construction, peculiar rules of, 275, 276, 544, sqq. copyright, of seditious or immoral publications, equity wiU not protect, 378, 379. covenants running with land, doctrine of equity as to, 258. deceit, suits analogous to actions of, in equity, 604, «. doctrine of, as to unlawful agreements where parties not in pari delicto, 461. "equality" between contracting parties, 667, 668. estoppel by acquiescence or representation, 706, 707, 709, 710. evidence, parol, equity does not admit on questions of construc- tion, 266. expectant heirs, special protection of, 670, sqq. forfeiture, relief against, 550. fraud, contracts voidable on ground of, 478, sqq. gifts, imperfect, treatment of, in equity, 209. 786 INDEX. 'KQUlTY—ccMitmued. infant: liability in equity on false representation of full age, 81^ marriage settlement, treatment of, 63. infant's contract, no specific performance of, 64. lunatic, equity adopts rule of law as to acts of, 98, n. " making representations good," supposed former doctrine of, 568, 569, 757. mistake, payment made by, recovery back, agreement with law,. 497. purchase of party's own property by, 534. restricted construction of general words, 544. mortgages, treatment of, 549, 550. negotiable instruments, equity agrees with common law as to,. 246. equity restrains negotiation, in cases of fraud, 246. obligations, equitable, treatment of, at common law, 725. parol evidence, correction of deed by, 557. part performance in equity, 705. penalties, relief against in, 549. purchase for value without notice, rule of equity as to, 482 — 484. equity will not deprive purchaser of anything he has already- got, 484, n. rectification of instruments in, 554, sgq. release, restricted construction of, 545. representation, estoppel by, 709, 710. sales of land, where parcels included by mistake, decisions in equity, 518. specific performance and compensation on sales of land, 582, sgq. defence against, 552. refusal of, on ground of undervalue, 669. surety, agreement between law and equity as to creditor's duty to, 581. "surprise" as ground for equitable relief, 683. third persons, right of, to enforce contract in equity, 227. time, when of essence of contract in, 647. undue influence, equitable doctrine of, 648, sqg. voluntary covenants, treatment of, in, 208. settlements generally, 653, 654. how set aside, 653 — 655. ESCROW: writing delivered as, 268. ESTOPPEL: acquiescence, estoppel by, 706, 707, 709, 710. corporations bound by, 141. eqxiitable, interests of married women may be bound by, 710» INDEX. 787 ESTOPPEI^eo«i;i«««rf. fraud, relation to, 567. misrepresentation, estoppel of party who has induced fundamental error by, 538. negligence, estoppel by, applies to deeds, 502, 503, ■». of holder of instrument dealing with it as negotiable, 248. representation, estoppel by, 709, 710. statements binding by way of, 566. EVIDENCE: extrinsic, always admissible to show illegality of agreement, 451. subsequent conduct of parties may be evidence of original unlawful intention, 452. to explain particular terms in agreement, 269. of document being agreement or not, admissible, 269. parol, not admitted to vary written contract, 267. of oral variation, admitted as defence to specific perform- ance of written agreement, 553. but not to obtain performance of agreement as varied, 553. inadmissible to rectify instrument where there is pre- vious agreement in writing, 556. but admissible, if uncontradicted, where no written agreement, 556. undue influence, proof of, 664. EXECUTORS: liability and right of, generally, on contracts of testator, 215, «., 231, 232, K. personal service, contracts of, executors cannot sue and be sued on, 213, 214, 317. or on contract to marry, 319, n. EXPECTANCY: sale of; not unlawful, 415. EXPECTANT HEIRS: protection of, by courts of equity, 670, sqq. FAMILY ARRANGEMENTS : exceptional treatment of, 659, 660. FELONS: convicted, disability of, 101. FIDUCIARY RELATION: between icontracting parties, eflject of, 655. instances of, 656 — 659. And see Undue Influence. FORBEARANCE TO SUE: as consideration for promise, 204, 205. 788 INDEX. FOREIGN LAW: agreement forbidden by law of jurisdiction, unlawful, 313, n. agreements lawful by, but not by law of forum, treatment of, 464. subsequent prohibition by foreign law: performance deemed impossible, 472, 473. but .contract rendered impossible of performance by, not discharged, 313. revenue laws of foreign countries formerly said to be disre-- garded, 391. stamps, foreign law as to, effect of, 392. undue influence: French law of captation, Note K., 765. And see Conflict of Laws. FORFEITURE: reUef against, in equity, 550. FORMAL CONTRACT: cases where form specially required, 150, sqq. charter, English medieval, of Norman origin, 145. contracts of record, 154. importance of, in ancient law, 143. modem requirements of form, 154. not dispensed with by fact that aU terms are agreed, 48. Roman law, position of, in, 144, 145. transition from formal to informal proof in English law, 143. dnd see Coepobations ; Frauds (Statute of). FRANCE: law of, on "inofficious " gifts and captation, Note K., 765. FRAUD AND MISREPRESENTATION: acquiescence, passive, in self-deception of other party is not fraud, 527. agent, liability of corporation for fraud of, 127, 619, 620. annuity, grant of, set aside for misstatement of age of life, 576. auction, sales by, special doctrine as to, 605. cancellation of instruments for fraud, 643. company, contract to take shares in; misstatements in prospectus, 595—5.97. provisions of the Companies Act, 1908... 597, 598. oonoealment, fraudulent, what is, 602. consideration, inadequate, as evidence of fraud, 190, 665, 666. " constructive fraud," what is, 566. contract incidental to a fraud is itself fraudulent, 617. corporation, liability for fraud of agent, 619, 620. costs, unfounded charges of fraud visited with, 642, 643. creditors, fraud on, in compositions, 343. error, fundamental, produced by misrepresentation, effect of, 525, sgq. INDEX. TSS' FEAUD AND M.lSREPHES'ENTATlON—conHnued. estoppel, relation of fraud to, 567. expectant heirs, fraud on, 670, sgq. false representation: when an actionable wrong, 570. falsehood, when silence equivalent to, 602, 605. family settlements, misrepresentation in, 594. generally, 565, sqq. gifts, voluntary, 599. goods, delivery to wrong person obtained by fraud, 635, 636. purchase of, with intention of non-payment, is fraud, 600. insurance, special rules as to misrepresentation in contracts of, 574, sqq. knowledge, means of, of party misled, 613, sgq. land, sales of; contract voidable for misdescription, 581. rules of equity as to performance with compen- sation, 582. vendor's duty to describe property correctly, 589. marriage, not avoided by fraud, 598, 606. misrepresentation, non-fraudulent, when affecting validity of con- tract, 567. how fraud distinguished from, 600. mistake distinguished from fraud, 477, 478. negligent ignorance, equivalent to fraud, 603, 604. non-disclosure, misrepresentation distinguished from, 570. partnership, contract of, misrepresentation in negotiation of, 594, 595. "reasonable belief" in truth of assertions, what is, 604. reckless assertions, 603, 604. representation, fraudulent, what is, 603. rights of party misled, 624. separation deed fraudulent where wife's object is renewal of former illicit intercourse, 600. settlements in fraud of marital right, 354. silence, when equivalent to falsehood, 602, 605. suretyship: misrepresentation avoids contract, 578. " surprise " as evidence of fraud, 683, third person, consent of, obtained by fraud, 607. fraud on, makes agreement void, 342, 346, 347. undervalue as evidence of fraud, 665, 666. warranty, relation of fraud to, 568. And see Rescission. FRAUDS, STATUTE OF: as to agreements not to be performed within a year, 171, 700. contracts by advertisement not exempt from, 25, 26. deeds, whether statute applicable to, 175. effect of, where writing does not represent the real agreement,. 554. 790 INDEX. JPRAUDS, STATUTE OF—conlinued. executor, special promise by, 167. guaranties, 167, 168. informal agreements within s. 4, effect of, 702, sgq. not void, 700. land, interests in, contracts as to, 170. leases, 171. marriage, agreements in consideration of, 169. note or memorandum, 172. effect of note signed by one party only, 173. memorandum must exist at time of action brought, 174'. part performance, equitable doctrine of, relation of statute to, 705. sale of goods, 172. settlement, ajite-nuptial agreement for, confirmed by post-nuptial writing, 707. trust, assignment of, 234. FRAUDULENT PREFERENCE: agreements with particular credi- tors by way of, 343—346. FRIENDLY SOCIETY: statutory reference to arbitration of disputes with members, 403. suits by, 224, n. FRUSTRATION: accidents not contemplated by contract, exception of, 301, 314, sgq. subsequent to contract, effect of: analogy of contract to pay rent, where premises destroyed by fire, 304, 305. acquired rights not affected by subsequent impossibility, 320. act of God, meaning of, 314. agreememt impossible on its face, 309, 310. made impossible by law, 331. impossibility at date of, from state of things not con- templated by parties, 327. in fact: no excuse in absolute contract, 309, 310. alternative conditions in bonds, where one impossible, 336. "bonds, conditions in, 334. where condition impossible, obligation is absolute, 335. otherwise where condition sub-equently becomes im- possible, 335. cargo lost at date of contract, sale of, 327. commercial contracts, express exceptions in, 329. conditional contracts where the condition is or becomes impossible, 316, sqg. INDEX. 791 FSUSTUATION— continued. default of promisee discharges promisor, 294, 295. promisor, impossibility by, equivalent to breach of con- tract, 294. destruction pr failure of subject-matter, 321. diflSculty of performance no excuse, 310, 311. discharge by, 307, sgy. impossibility no certain test, 310. still les3 difficulty of performance, 311. enemy, interi-uption by acts of, 331. excuse, classes of, 315. extra,ordinary interference, 330. failure of assumed conditions at date of contract, 327. future specific product contracted to be sold, 323. foreign law, impossibility by, 313. marriage, contract of, anomalous treatment of, 318. mining leases, covenants in, construction of, 328. must be total, 333. performance depending on existence of specific thing, 321. life or health of promisor: implied condition that life or health shall continue, 316. impossible by Defence of Eealm Regulations, 331, 333. performance, means of, promisor not having, is not impossibility, 307, 308. personal services, contracts for, 316. skill, contract depending on made void, not voidable, by subsequent disability, 317. "practical impossibility," 310. supervening disability without promisor's fault, 305. war requisitions or regulations, interruption by, 331. warranty of contingent acts or events, 308. GAMING: not a lawful occupation, although not punishable, 366, 367. securities for money won at, 366. treatment of gaming debts contracted abroad and not unlawful by local law, 468—470. And see Wagees. GAVELKIND: conveyance by infant tenant in, 79 GENERAL WORDS: restrained 1 ing from external evidence. GERMANIC LAW: proof in, 144. GENERAL WORDS : restrained by context or by intention appear- ing from external evidence, 543. 792 INDEX. GIFT: acceptance of, as loan, effect of , 506, 507. from client to solicitor, how far vaJid, 657, 688. imperfect, not aided in equity, 209. voluntary: recoverable, in cases of misrepresentation, 5P" burden of proof, 653. And see TJrrDDE Influence. GOODS: contract cannot run with, 251. delivery of, order for, may be assignable free from equities, but cannot be negotiable, 247, n. to wrong person bj' mistake or fraud does not nass property, 635, 636. And see Sale of Goods. GUARANTY: voidable for misrepresentation or dissimulation to surety, 578. within Statute of Frauds, 167, 168. HORSES: sale of, in mai'ket overt, 175. HUSBAND AND WIFE: doctrine of undue influence does not apply to, 651. And see Married Woman; Separate Estate; Sepaeation Deed; Costody of Children. IGNORANCE: does not in general exclude civil liability, 480, 481. of law, may be material as excluding specific unlawful intention, 454, 473, 474. but is generally no defence to action in contract, 491. reckless or negligent, carries responsibilities of knowledge, 603, 604. where it is a condition of acquiring rights, 482, 483. See also MISTAKE. IGNOSANTIA lURIS: meaning of, explained by Lord Westbury, 535. IMMORAL AGREEMENTS: agreement immoral iure gentium cannot be justified by any local law, 465. void; what are such, and what is immoral consideration, 367 — 369. And see Unlawful Agreements. IMMORAL PUBLICATIONS : punishable by criminal law, and there- fore no ground of civil rights, 378. INDEX. 793 IMPOSSIBLE AGREEMENTS. See Frustration; 309, sqq. IISTDIAN CONTRACT ACT: acceptance must be unqualified under, 43. performance of condition as, 15. agency not terminated by death of principal, 42, «. agent, knowledge of, as knowledge of principal, 104, n. consideration, inadequacy of, 668. discharge of contracts, 203, »., 307. insanity as ground for revocation under, 43. penalty ajid liquidated damages, distinction between, abolished by, 551, 552, n. quasi-contracts dealt with separately in, 14. restraint of trade, 441. sales by auction, employment of puffer at, 606, n. time, when of essence of contract, 548. third parties, suits by, 229. wagers void under, 381, n.. INFANT: account stated, liability on, 64. age, representation as to, 81 — 84. apprenticeship, contract .lof, 72. by custom of London, 79, n. bankrupt, infant cannot be made in absence of false representa- tion as to age, 83. building society, infant may be member of, 69. but hiay not borrow money from society on mortgage, 69. cannot claim to hold land purchased with society's money free from charge for money advanced, 71. contract, avoidance of, time for, 64. beneficial, 59, 71, 72. generally cannot bind himself by, 58. implied in law, 81, 82. of service, 61, 72. of, voidable at common law: no authority for holding it in any case void, 59, 60. custody or education of, agreements between parents as to, 417, 418. custom, what contracts infant can mike by, 59, 79. equity, liable in, for representing himself as of full age, 81. but not to prejudice of subsequent valid con- tract, 84. false representations, liability for, 59, 81 — 84. land, sale or purchase of, 62, 79. larceny by, as bailee, 68. leases by, good if beneficial, 61, 62. P.— c. 51 794 INDEX. INFANT — continued. leases granted under statute, 79. to, voidable, 71. loans to, 59, 83. majriage of, 63. settlements, 63, 64, 66, 78, 79. mistake, common, avoiding agreement, 530, 531. money paid under avoided contract, recovery of, 65. necessarie^i , liability for, 59, 74. liability in simple contract only, 78, 79. deed given to secure repayment of money advanced for, 79. negotiable instrument given for, 79. what are, 74, sgg. negotiable instruments, 64, 79. pajtnership, 62, 67. promise to marry, 63. property, obligations incident to, liability on, 70. sale of goods to, 59. or purchase of land, 62, 79. sejvice, 'contnact of, 61, 72, 78. shareholder, liability for calls on shares, 62, 70. specific performance, infant cannot have, 64, 67. sta,tute, what contracts infants can make by, 79. trading cootraota, 60, 73. wrong, liability for, when connected with contract, 59, 80. INFANTS' BETTING AND LOANS ACT, 1892... 68. INFANTS' RELIEF ACT, 1874: effect of section 1...68. since the Act, of affirming agreement voidable at common law, 722. makes certain agreements of infants void, 65, 68. exception of contracts for necessaries, 69. ratification not wholly inoperative under, 66. INSANITY. See Lunatic. INSTALMENTS: default in deUvery or payment of, 286, sqq. INSURANCE: contract Ibf, liberally construed in favour of true intention, 560. INSURANCE (ACCIDENT): duty of disclosure by assured, 577. INSURANCE (FIRE): contract of insurers to reinstate is unconditional after election made, 311. effect of, as between landlord and tenant, 321. implies condition tha,t property is correctly described, 577. INDEX. 795 INSURANCE (LIFE): duty of disclosure by assured, 575, 576. recovery of premiums where policy void for want of insurable intei-est, 456. INSURANCE (MARINE): Maj-ine Insurance Act, 1906... 176. misrepresentation or non-di^selosure, material, renders policy void- able, 574. policy, common form, result of series of decisions and of long reeognilzed customs, 277. delivery of, by underwriters, 713. insurance must be expressed in, 176. stamped, required by sitatute, 710, 711. seamen's wages not ilisurable at common law, 420. "slip" recognized for collateral purposes, 711, 712. ri,ghts of pajties determined at date of, 712, 713. voyage iilegal to knowledge of owner: insurance void, 447. INTERPRETATION: ambiguous terms construed by conduct of parties, 489, 490. general intention prevails over particular terms, 274, 279. mutual promises: interpretation as regards order of perform- ajice, 280, 281. necessity of, 262. of contracts, rules for, 46. promise in general, 263. terms used in special sense, 269. JUDICIAL SALARY: not a.ssignable, 397. JURISDICTION: ouster of, by agreements for reference, 402. KNOWLEDGE: essentiaj ito acquiescence, 486. how far material on question of unlawfulness of agreement, 474, 475. means of, as affecting right to rescind contract for misrepresenta- tion, 613. LAND: Frauds, Statute of, as to sale of interest in, 170. sale or purchase of, by infant, 62, 79. what covenants run with, 252, sqq. And see Sale of Land. 51 (2) 796 INDEX. LANDLORD AND TENANT: oovenaait, no aotipn on, where premises leased for unlawful pur- pose, 446. covenants running with tenancy on reversion, 252, 253. fire, premises destroyed by, 321. Frauds, Statute of, as to lease, 171. infant, lease of, at common law, voidable, 62. ' statutory powers to make and renew leases, 79. lea^e for lives, effect of contract for sale of, 536. Frauds, Statute of, as to, 171. of premises for unlawful purpose, no action on covenants, 446. lessor not bound to ipform of state of premises, 593. possession, whether lessor ca^ resume, on discovering unlawful purpose of lessee, 446. he may rescind contract where possession has not been delivered, eemble, 447. rent payable though premises accidentally destroyed, 304, 305. rescission of contract for lease where possession not actually delivered, 446. LAW MERCHANT: not invai'iable, 247. peculiarities of, as to negotiable instruments, 245. "LAWFUL MEN," 56, 57. LEASE. See Landlord and Tenant. liEASEHOLDS: non-disclosure of restrictive cpvenants on sales of, 581, 585. sale of as freehold, voidable, 586. LETTER: contract by, 36, sqg. LEX XOCI. See OoNrucT of Laws. LICENSED PREMISES: eflfect of omission to paint seller's nam© on, 363. LICENSING ACTS: attempts to evade, 362. LIMITATION, STATUTES OF: acknowledgment of barred debts, 193, 694. operates as new promise under statute of James I., 694. otherwise if specialty debt under statute of Wills IV., 695, 696. revives right of action, 694. applied according to lex fori not lex contractus, 696, 697. INDEX. 79'f LIMITATION, STATUTES; OF~oontinued. debts not extinguialied, 692. executor may pay barred debt of testator, 693. married woman, promise or acknowledgment by, cannot revive barred debt, 86. statute applies to daims against separate estate, 738. payment by debtor without particular directions: appropriation to satisfy barred debt, 693. Real Property Limitation Act bars right as well aa remedy, 696. set-off, baj-red debt cannot be, 693. but statute must be pleaded in reply to defence of, 694, «. specialty debt, acknowledgment of, under 3 & 4 Will. IV. must be founded on original obligation alone, 696. LIQUIDATED DAMAGES: distinguished from penalty, 551. LONDON: custom of, as to infant apprentice, 79, n. aa to Diarried women trading alone, 88. LOTTERY: forbidden by penal statute, 367. LUNATIC: champerty, rules as to, proceedings in lunacy not within, 415. contracts in lucid intervals good, 97. of, in general voidable, not void, 98: — 100. knowledge of other party to contract, 98. prior to lunacy, 98. delusions, partial, compatible with capacity for contracting, 101. equity, adopts rule of law as to acts of, 98, n. marriage of, vpid, 97. necessaries, liability for, 97. partner: ground foo- dissolution only, 100, 101. revocation of contract by insanity, 43. MAINTENANCE: definition of, 405. equitable assignment, attempt to oppose on ground of, 232. includes champerty, 405. kinship or affinity will justify, 417. old law aimed chiefly against speculation in doubtful titles, 405. shares, purchase of, in order to sue company at one's own risk is not, 412, 413. . statute of Hen. VIII. against buying pretended titles, 413. what dealings are within the statute, 414. unlawful interition essential to, 416, what amounts to, 407, 408, 416. 798 INDEX. MAJORITY: abuse of corporate powers by, 741. MALUM PROHIBITUM and malum in se, 358, 359, 378. MARINE INSURANCE ACT, 1906... 176. MARITAL RIGHT: settlements in fraud of, 354. MARKET: market overt, sale of horses in, 175. MARRIAGE: agreements in consideration of, 169, 226. conditions in restraint of, 422. contract to marry not uberrimce fidei, 598. executors cannot sue on, 319, n. to procure for reward void, 421. domicil, effect of law of, on validity of, 356. fraud, marriag^e not avoided by, 598, 606. illnesa unfitting for, does not avoid contract to marry, 318, 319. infants, of, 63. » promise of marriage, infant may sue but is not liable on, 63. informal agreements in consideration of, how far made valid by post-nuptial settlement, 707. invalid by law of party's domicU, whether valid in England, 356. lunatics, marriage of, void, 97. polygamous, not recognized by English Divorce Court, 466. prohibited degrees, marriage within, void, 354. promise to marry, whether rescinded by iUness unfitting party for marriage, 318, 319. by married man, after wife's death, void, if fact known to promisee, 356. restraint of, agreements in, 422. conditions in, 423. Royal Marriage Act, 356, n. settlement in fraud of marital right, 354. how far in the nature of a contract, 223, 224. infant's, 63, 64, 66, 78, 79. limitations in, to persons otlier than children, 224, n. not affected by wife's non-disclosure of previous mis- conduct, 598. post-nuptial, 707. Married woman: chose in action, acquisition of, 85. contract by, void at common law, 84. debt, barred, renewed promise by married woman cannot revive,. 86. INDEX. 799 MARRIED WOUA'N—contlj, urcl. debts, ante-nuptial, husband's liability for 9fi. equitable enforcement of contracts in cases not within Act, 96. estoppel, ^uteresta of married women may be bound by, 710. incapacity, e.^ceptions to: contracts witii husband us to separation, 88, 89. Queen Consort, 87. trader, custom of London, 88. effect of Act of 1882 thereon, 88, n. wife of aUcn not resident in United Kingdom, 87, 88. person civilly dead, 87. statutory exceptions, 89, sqg. Married Women "s Property Act, 1882... 92, sqg. restraint on anticipation, 94, 95. separate estate, equitable doctrine of, 90, 733. how far married woman's " engagement " bound by ordinary forms of contract, 737. property, contract made as to, binds after-acquired property, 93. is liable for ante-nuptial debts, 93. married woman may contract and be made bankrupt in respect of, 92, 93. what is, by Act of 1882. ..92. settlement of, in fraud of marital right, 35i. lAnd see Separate Estate. MASTER AND SERVANT: exclusive service, contract for, must be mutual, HI. infant's contract of service, 61, 72, 78. life, contract to serve for, good, if mutual, 441. wrongful dismissal of servant discharges both service and re- strictive agreement against future competition, 284. MAXIMS: expressio unius est exclusio alterius, 543. ignOrantia iuris haud exeusat, 535. in pari delicto potior est condicio defendentls, 455. locus regit actum, 472. Eon videntur qui errant consentire, 479. nuUa voluntas errantis est, 485. ut res magis valeat quam pereat, 116. MEDICAL PRACTITIONER: conditions precedent to recovering charges, 717, 718. Medical Act, regulations of, as to right of remuneration, 717. presumption of influence in gifts, &o., from pat'ents, 662. 800 INDEX. MINES: construction of unqualified covenants to work, 328. MISDBSCEIPTION: on sales of land, 629, 681. MISREPRESENTATION. See Fkaud and Misrepresentation. MISTAKE: ambiguous terms of contract, 620. annuity, life not existing at time of sale of, 532. assignment of contracts, mistake as affecting, 612 — 514. auction: mistake as to contents of lot, 518. bankruptcy, money paid to trustee in, repayment of, 497. buyer, error of, not induced by seller, inoperative, 527. clerical errors, correction of, 542. compromise of action arranged by, 522. disputed rights, 494. condition of title, when: purchase for value without notice, 483. ■ consent order, mistake in, 563. true, mistake in expressing, 490, 541, sqq. mistake as excluding, 498. construction, mistake in, by parties, does not alter contract, 489. deed, error as to contents or party, 600, 509, 510. description of property, admitted error in, 266, 267. does not of itself affect validity of contract, 479, 480. or avoid liability of party acting under mistake, 480. draftsman, error of, in drafting instrument, 493. election, to adopt void agreement, 540. error as to existence of subject-matter, 630. nature of transaction, 500. its legal character, 506. person of other pai^;y, 507. subject-matter of contract, 515. fundamental, 500. Bracton's treatment of. Note G., 754. must be common to avoid contract, 527. produced by misrepresentation, 525 — 527, 638. existing rights, mistake does not as a rule alter, 487. fact, mistalce of, 491. forfeiture incurred by, 490. fraud, mistake distinguished from, 477, 478. general words, restriction of, 543. goods, misdelivery of, 487. ignorance of one party only, 537. judicial officers, exceptional rules as to, 481, 482. kind, error as to, 522. land. Bale of: lot, mistake as to contents of, due to purchaser's want of attention to particulars and plan, 518. INDEX. 801 MISTAKE— contintied. land, sale of: misdescription, distinction of cases of, in sales of land, 529. parcels included by mistake, 518. law, mistalce of, 491. lease for lives, assignment of, after lapse of all lives, 536. misapprehension of effect of contents of document by person of ordinary competence not sufficient to avoid instrument, 504, 505. misrepresentation, fundamental error produced by, 526, 538. money paid by, recovery back of, 495, 496. obvious, correction of, by ordinary construction, 274. payment to wrong person, 487. under mistake of fact, 491. person of other party, error as to, 507. price, error as to, 524. purchase of property really one's own, 534. quantity, error as to, 523. rectification of instruments on ground of, 493, 554. And see Eeotification. remedies, of party to void agreement, 539. rights, irenunciation of, 491, 494. sale of goods, 508, 522, 523. settlements, Rectification of mistalces in, 560. shares, purchase of, through fraudulent misrepresentation as to identity of company, 509, n. error as to nature and objects of company, 521. numbers, ,error in, not material, 522. specific •jjerformance, mistake in expression of contract a bar to, 552. wills, jnistake in, 563, 755. MONEY-LENDERS ACT, 1900.. .681. grounds ,of relief against contract with registered money-lender, 681. » unregistered money-lender cannot recover, 681. MONEY PAID: bankruptcy, money paid to trustee in, under mistake of law, 497. compulsion, money paid under, recoverable, 461, 646. deposit, money paid as, on purchase of land, when recoverable, 588, 633. infant, money paid by, under voidable contract, 65. informal agreement within sest. 4 of Statute of Frauds, money paid under, not recoverable, 702. lease, premium paid for, when recoverable by lessee, 633, 634. mistake, money paid by, when recoverable back, 495, 496. 802 INDEX. MONEY V AID— continued. premiums on life policy, recovery where insurance void for vcant of interest, 456. stakeholder, recovery of money paid to, 459, 461. Tippling' Act, money paid for debts within, not recoverable, 722. unlawful agreement, money paid under, when it can be recovered back, 455, sqq., 463. wrong person, payment to, 487. MONEY EECEIVED: action for, lies against corporation, 164. MORTGAGE: the Court will treat nominal sale as, if such is true intention, 550. treatment of, in equity, 549, 550. NECESSARIES: definition of, in Sale of Goods Act, 1893... 74. infant, apparent means of buyer not material, 76, 77. liability for, 73, sqq. is on simple contract only, 78. supply from other sources, 75. what are, confined to goods, 77, 78. question of mixed fact and law, 74, 75. lunatic, liability for, 97. NEGLIGENCE: agent must not profit by his own, 353. of, corporation answerable for as well as natural person, 126. estoppel by, extent of, 502, «., 503, n. misrepresentation, negligence does not exclude right to rescind for, 603. NEGOTIABLE INSTRUMENT: agient, acceptance by: principal bound though not in principal's name, 106. bonds, foreign government, treated as negotiable by English law, 248. corporation, when bound by, 138, 140. debentures are, 247. estoppel, negotiability by, 248. how instruments cease to be negotiable, 249. indorsement, forged, holder cannot make title through, 485. in error as to nature of instrument not binding, 501—503. infants', voidable, 64, 79. must be in writing, 166. office, biUs or notes may be payable to holder of, 231. '■ INDEX. 803 NEGOTIABLE INSTRUMENT— co«^-,z««rf. peouliax qualities of, 245. promissory note given for wager, treated as without considera- tion, 365, 366. scrip, foreig-n government, issued in England is, 248. seal of corporation, whether equivalent to signature, 138, 247. what can be admitted as, 247. And see Bill of ExcHA^TCE. 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